-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FNz23HJw0hNa507rgSqiTOPCu9KWhCikg/xGBy3bxdd8jo+3Qq9bBt/Vfvs5wQEK RgSoZsZoMz//QIoEuFTS2w== 0001005477-97-000974.txt : 19970401 0001005477-97-000974.hdr.sgml : 19970401 ACCESSION NUMBER: 0001005477-97-000974 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIDEX CORP CENTRAL INDEX KEY: 0000047254 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 060682273 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05513 FILM NUMBER: 97571501 BUSINESS ADDRESS: STREET 1: 61 WILTON RD CITY: WESTPORT STATE: CT ZIP: 06880-3121 BUSINESS PHONE: 2032261144 MAIL ADDRESS: STREET 1: 61 WILTON ROAD CITY: WESTPORT STATE: CT ZIP: 06880-3121 FORMER COMPANY: FORMER CONFORMED NAME: HI G INC DATE OF NAME CHANGE: 19840829 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 ----------------------------------------- FORM 10-K ----------------------------------------- (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended: December 31, 1996 or (_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from ___________________ to _______________. ----------------------------------------- Commission File Number: 1-5513 ----------------------------------------- TRIDEX CORPORATION (Exact name of registrant as specified in its charter) Connecticut 06-0682273 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 61 Wilton Road Westport, CT 06880 (Address of principal executive offices) Registrant's telephone number, including area code: (203) 226-1144 Securities registered pursuant to Section 12 (b)of the Act: Title of each class Name of each exchange on which registered - -------------------------------- ----------------------------------------- Common Stock, Without Par Value NASDAQ Securities registered pursuant to Section 12 (g) of the Act: None - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any other amendment to this Form 10-K. [_] As of March 14, 1997 the aggregate market value of the registrant's issued and outstanding voting stock held by non-affiliates of the registrant was $72,500,000. As of March 14, 1997 the registrant had outstanding 5,373,310 shares of common stock, without par value. Exhibit Index appears on page 33 PART I ITEM 1. BUSINESS General Tridex Corporation ("Tridex" or the "Company"), through its wholly-owned subsidiaries Ultimate Technology Corporation ("Ultimate") and Cash Bases GB Limited ("Cash Bases") and its Tridex Ribbons Division, is primarily engaged in the design, development, manufacture, integration and sale of custom-designed terminal devices, customer displays, keyboards, cash drawers and other peripheral devices used in a variety of transactions at the retail point-of-sale ("POS") and ribbon cartridges for specialty dot matrix printers. See Note 2 to the Company's 1996 Consolidated Financial Statements for a discussion of discontinued operations. All amounts within this report, unless otherwise indicated, exclude any results of discontinued operations. (A) General Development of Business since December 31, 1996 As of the date of this report, Tridex owns 5,400,000 shares, or approximately 80.3%, of the outstanding common stock of TransAct Technologies Incorporated ("TransAct"). Tridex has announced that on March 31, 1997 it intends to distribute those shares pro rata to persons who were Tridex stockholders of record on March 14, 1997. In November 1995, the Board of Directors of Tridex approved a plan to combine the business operations of two wholly-owned subsidiaries, Magnetec Corporation ("Magnetec") and Ithaca Peripherals Incorporated ("Ithaca"), under unified management. TransAct was incorporated in Delaware on June 17, 1996 as a wholly-owned subsidiary of Tridex. Following the incorporation, Tridex, TransAct, Magnetec and Ithaca entered into a Plan of Reorganization, pursuant to which: (i) Ithaca merged into Magnetec; (ii) TransAct transferred to Tridex certain assets of Magnetec used in the Tridex Ribbons Division; (iii) TransAct issued 5,400,000 shares of its common stock to Tridex in exchange for all the outstanding shares of Magnetec; (iv) TransAct sold in an initial public offering 1,322,500 shares, or approximately 19.7%, of its outstanding common stock; (v) TransAct repaid $8,500,000 of intercompany indebtedness to Tridex; (vi) Tridex applied to the Internal Revenue Service (the "IRS") for a ruling that the pro rata distribution of the 5,400,000 shares of TransAct owned by Tridex to Tridex stockholders (the "Distribution") would constitute a tax-free reorganization for federal income tax purposes; and (vii) Tridex agreed to effect the Distribution promptly after receipt of a favorable ruling from the IRS and the satisfaction of certain other conditions. Net proceeds from the TransAct's initial public offering were approximately $9 million after payment of approximately $2.3 million of offering expenses. TransAct repaid Tridex $7.5 million of the $8.5 million of intercompany indebtedness in August 1996 and, in February 1997, repaid the balance, plus interest at the rate charged by Tridex's bank under its revolving credit agreement (8.25% at December 31, 1996). On February 12, 1997, Tridex received a favorable ruling from the IRS confirming the tax-free nature of the Distribution and announced that it would effect the Distribution on March 31, 1997. The financial information included in this report consists of, or is derived from, historical financial statements which have been restated to reflect the fact that, upon completion of the Distribution, Tridex will no longer own any of the capital stock of TransAct. See Note 2 to the Company's Consolidated Financial Statement. (B) Financial Information about Industry Segments Tridex operates in one industry segment, the design, development, manufacture, integration and sale of terminal devices, cash drawers, customer displays, keyboards, and other peripheral devices, and ribbon cartridges for specialty dot matrix printers. (C) Narrative Description of Business (i) Principal Products and Services Tridex designs, manufactures and sells customer displays, keyboards, terminal devices and custom cash drawers for POS applications. Tridex manufactures and markets POS customer displays, keyboards and terminal devices for use in Twinax, Unix/Aix and PC-based POS applications. Tridex's terminals and other peripheral products are sold to system integrators, original equipment manufacturers and directly to end users by a direct sales force located in New York, New Hampshire, Illinois, Texas, the United Kingdom, Germany, France, and Spain. The Company's cash drawers, 2 constructed of metal, are high quality, custom products, for use with POS terminals primarily in supermarkets, specialty stores and convenience stores. Cash drawers are fabricated in the United Kingdom and are sold primarily in Western Europe through a direct sales force. Sales by major product line, exclusive of discontinued operations, were:
Year Ended Nine Months Ended Year Ended ---------------------------------------- ---------------------------------- December 31, 1996 December 31, 1995 December 31, 1995 April 1, 1995 ----------------- ----------------- ----------------- ------------- POS Related 58% 58% 60% 53% Cash Drawers 40 39 37 44 Other 2 3 3 3 ----------------- ----------------- ----------------- ------------- 100% 100% 100% 100% ================= ================= ================= =============
(ii) Sources and Availability of Raw Materials The principal raw materials used in the manufacture of custom keyboards and customer displays are injection molded plastic parts, formed metal parts and electronic subassemblies, all of which are readily available from a number of sources. The assembly of POS terminals combines the keyboard and customer display manufactured by the Company with a printer, monitor, cash drawer and other peripheral devices purchased from various suppliers, all of which are readily available from a number of sources. The principal raw materials used in the manufacture of cash drawers are sheet metal, molded plastic parts, fabricated drawer slides, locking mechanisms, wiring harnesses and electronic subassemblies, which are available from several sources. (iii) Patents The Company regards certain hardware designs and software incorporated into its products as proprietary and attempts to protect them with a combination of copyright, trademark and trade secret laws, employee and third party nondisclosure agreements and similar means. It may be possible for unauthorized third parties to copy certain portions of the Company's products or to reverse engineer or otherwise obtain and use, to the Company's detriment, information that the Company regards as proprietary. Moreover, the laws of some foreign countries do not afford the same protection to the Company's proprietary rights as do United States laws. There can be no assurance that legal protections relied upon by the Company to protect its proprietary rights will be adequate or that the Company's competitors will not independently develop products that are substantially equivalent or superior to the Company's. In addition, some of the intellectual property used by Ultimate is not proprietary. No assurance can be given that such intellectual property will not be used by Ultimate's competitors. (iv) Seasonality and Practices Relating to Working Capital Items Sales of the Company's products are not subject to material seasonal variations. As a result, the Company has not historically been required to maintain significant inventories of raw materials or finished goods in order to fill customer orders. (v) Certain Customers Sales to Lowes Companies, Inc. accounted for approximately 13% of net sales for the year ended December 31, 1996. Sales to Advance Stores Company Inc. ("Advance Auto") accounted for approximately 12% of net sales for the nine months ended December 31, 1995. (vi) Backlog The Company's backlog of firm orders was approximately $4,600,000 as of March 14, 1997, approximately $3,100,000 as of February 24, 1996 and approximately $5,200,000 as of May 27, 1995. Tridex expects to fill all of its backlog within the current fiscal year. (vii) Competition Competition is intense in all of the Company's markets. Many of the Company's current and potential competitors are large multi-national enterprises with extensive experience and resources in designing, manufacturing and marketing a wide range of peripheral devices and systems. Ultimate competes with other POS manufacturers and system integrators, including NCR and IBM, as well as distributors 3 of terminals, keyboards and customer pole displays. Cash Bases competes with other manufacturers of cash drawers, primarily in Europe. In certain markets, the Company's competitors can sometimes offer lower prices than the Company because of lower overhead, attributable to higher volume production and off-shore manufacturing locations, which enjoy cheaper sources of labor and raw materials. Many of the Company's domestic competitors, particularly those that are divisions of substantially larger companies, have greater financial and other resources than Tridex. (viii) Research and Development Activities The Company spent approximately $1,040,000 in 1996, $777,000 during the nine months ended December 31, 1995, and $651,000 in fiscal year 1995, on engineering, design and product development efforts in connection with specialized engineering and design to introduce a number of new products and to customize products for the Company's customers. (ix) Environment Allu Realty Trust ("Allu"), a Massachusetts business trust with transferable shares, all of which are owned by Tridex, is the former owner of land improved with a manufacturing-warehouse building located at 100 Foley Street, Somerville, Massachusetts (the "Site"). Although Allu has sold the property to 100 Foley Street Incorporated ("Foley"), an unrelated entity, Allu and Tridex remain responsible for certain environmental problems associated with the Site. During July 1984, Allu and Tridex disclosed to the Massachusetts Department of the Attorney General the existence of chromium, oil and grease at the Site. As a result, the Environmental Protection Division of the Department of the Attorney General and the Massachusetts Department of Environmental Protection ("MDEP") conducted an investigation of the Site. At MDEP's request, the Company retained an environmental engineering firm, which completed a Phase II investigation study of the Site. The Company has conducted further studies to more specifically characterize and assess the Site and to determine appropriate long term clean-up. In January 1993, the Company entered into an agreement with Foley pursuant to which Tridex and Foley agreed to pay 75% and 25%, respectively, of the costs incurred after January 1, 1992 in connection with the investigation and remediation of the Site (the "Site Participation Agreement"). The Site Participation Agreement also provides that, to the extent there are available proceeds from the sale of the Site or, if not sold, from the operation of the Site after January 1, 1997, Tridex shall be reimbursed for all or a portion of the $260,000 it expended in connection with the Site prior to January 1, 1992. Under the terms of an Escrow Agreement entered into by Tridex and Foley simultaneously with the Site Participation Agreement (the "Escrow Agreement"), Tridex and Foley each placed $125,000 in escrow to fund the payment of their obligations under the Site Participation Agreement. Under the terms of the Escrow Agreement, Tridex has provided $85,000 and is obligated to provide an additional $15,000 in escrow at the request of the Escrow Agent and thereafter the amount of any additional funds required by the Escrow Agent shall be contributed 75% by Tridex and 25% by Foley. As of December 31, 1996, approximately $1,000 was being held in escrow, all of which was contributed by Foley. As of December 31, 1996, the Company had spent approximately $664,000 in connection with the Site. Of this amount, approximately $494,000 relates to investigation and remediation costs incurred at the Site. Although it is difficult to distinguish between amounts spent for investigation and remediation, the Company estimates that approximately $394,000 has been spent in connection with investigation and approximately $100,000 has been spent in connection with remediation of the Site. The Company estimates that it will spend approximately $100,000 to $300,000 in connection with the Site during 1997, including expenditures from the escrow account. Based upon preliminary estimates provided by a consulting environmental engineer and based upon the likely future uses of the property, as of December 31, 1996, the Company had accrued $322,000 for the Site, which represents the currently estimated minimum cost of remediation, after considering the cost sharing arrangement discussed above. Accordingly, although no assurances can be given regarding the materiality of the total costs which may be incurred, the Company does not believe at 4 this time that the remediation of the Site is reasonably likely to have a material effect on the Company's financial condition, results of operations or liquidity. The implementation of clean-up measures has commenced, and may be completed in 1997, in which case the entire amount of remediation costs to be borne by the Company would be incurred and paid in 1997. The precise scope and timing of remediation is dependent upon a proposed sale of the property, which is subject to negotiations to which the Company is not a party. The Company expects that, as in the past, funds being held in escrow, cash from operations and the Company's credit facilities will be sufficient to pay the costs of remediation without a material effect on the Company's operations. The Company has also been notified by an adjacent property owner, Cooper Industries ("Cooper"), that certain petroleum products that may have migrated from the Site have been detected in a monitoring well located on Cooper's property. The Company and Foley are investigating possible oil contamination along the border between the Site and the property owned by Cooper. (x) Employees As of March 14, 1997, Tridex and its subsidiaries employed approximately 273 persons, of which 265 were full time and 6 were temporary employees. (D) Financial Information About Foreign and Domestic Operations and Export Sales Prior to fiscal 1995, the Company had no foreign operations and export sales were minimal. Primarily as a result of the acquisition of Cash Bases in June 1994, the Company had approximately $14,713,000 of sales which originated outside the United States during the twelve months ended December 31, 1996 and approximately $8,486,000 during the nine months ended December 31, 1995. For the amounts of revenue, operating profit or loss and identifiable assets by geographic area, see Note 13 to the Consolidated Financial Statements included in this report. In addition, the Company had export sales from the United States of approximately $130,000 in 1996, $100,000 for the nine months ended December 31, 1995, and $731,000 in fiscal 1995, the majority of which was to Canada. (E) Directors and Executive Officers of the Registrant (i) Directors of the Registrant
Director Name Principal Occupation Employer Name Principal Business of Employer ------------- -------------------- ------------- ------------------------------ Seth M. Lukash Chairman of the Board, Tridex Corporation Manufacturer of computer President, Chief peripheral equipment for POS Executive Officer and applications. Chief Operating Officer Paul J. Dunphy Management Consultant Self-employed Management consulting C. Alan Peyser President Country Long Distance Communications Service Thomas R. Schwarz Retired None Personal Investments Graham Y. Tanaka President Tanaka Capital Investment advising Management, Inc.
(ii) Executive Officers of the Registrant Name Age Position ---- --- -------- Seth M. Lukash 50 Chairman of the Board of Directors, President, Chief Executive Officer, Chief Operating Officer and Director George T. Crandall 50 Vice President, Treasurer, Controller and Secretary Dennis J. Lewis 42 President, Ultimate Technology Corporation, a wholly-owned subsidiary of the Company Hugh T. Burnett 57 Managing Director, Cash Bases GB Limited, a wholly-owned subsidiary of the Company 5 Bart C. Shuldman 39 President, TransAct Technologies Incorporated, an 80.3% owned subsidiary of the Company (through March 31, 1997) Seth M. Lukash has been a senior Executive Officer of the Company since 1977 and has been a Director since 1979. He has served as Chairman of the Board of Directors of the Company since November 1988, Chief Executive Officer since August 1987, and President and Chief Operating Officer since June 1989. Mr. Lukash previously served as President of the Company from September 1983 to August 1988 and as Chief Operating Officer from September 1983 to August 1987. Mr. Lukash is the son of Alvin Lukash, a Director Emeritus of the Company. George T. Crandall has been a Vice President of the Company since September 1992, Treasurer since November 1990 and Corporate Controller since March 1989. Prior to joining Tridex in November 1988, Mr. Crandall was a consultant to Northeast Manufacturing Companies, Inc. and was previously employed by Revere Copper and Brass Incorporated. Dennis J. Lewis has been President of Ultimate since its acquisition by the Company on January 20, 1993. Prior to the acquisition, Mr. Lewis had served as Ultimate's President, Chief Executive Officer and a Director since founding Ultimate in 1988. Prior to 1988, Mr. Lewis held senior management positions related to the sales, engineering and service of computer peripherals with Digital Equipment Corporation, Naum Brothers, RS Engineering, Serv Tech and Add Electronics. Hugh T. Burnett was appointed Managing Director of Cash Bases simultaneously with its acquisition by Tridex on June 20, 1994. Prior to the acquisition and since 1991, he was senior marketing executive with Cash Bases. Mr. Burnett previously was Managing Director of Omron Systems UK Ltd. from 1983 to 1991. Bart C. Shuldman was appointed President of the Printer Group in December 1995 and President of Magnetec in July 1993. From 1989 to 1993 he was employed by Mars Electronics International, a division of Mars, Incorporated, in several management positions, most recently as Business Manager for the North American Amusement, Gaming and Lottery operations. Mr. Shuldman previously held manufacturing and sales management positions with General Electric Company from 1979 to 1989. ITEM 2. PROPERTIES The Company's operations are currently conducted at the six facilities described below:
Owned or Location Operations Conducted Size - Approx. Sq. Ft. Leased Lease Expiration Date - -------- -------------------- ---------------------- -------- --------------------- Westport, Connecticut Principal executive offices 5,000 Leased July 31, 2001 Victor, New York Manufacturing facility 57,000 Leased January 31, 2002 Newhaven, England Manufacturing facility 28,000 Leased March 25, 2000 Bloomfield, Connecticut Non-operating facility held 23,000 Owned N/A for sale Wallingford, Connecticut Manufacturing facility 44,000 Leased March 31, 2005 Ithaca, New York Manufacturing facility 36,000 Leased November 21, 2002
The Company believes that its facilities generally are in good condition, adequately maintained and suitable for their present and currently contemplated uses. The Wallingford and Ithaca facilities, which are in TransAct operations exclusively, will cease to be Company facilities upon completion of the Distribution. See Item 1(A). ITEM 3. LEGAL PROCEEDINGS See Item 1(C)(ix) "Environment" set forth above and Note 9(b) of the Notes to Consolidated Financial Statements included in this report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6 No matters were submitted to a vote of security holders during the last quarter of the year covered by this report. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's common stock is traded on the NASDAQ National Market System under the symbol "TRDX." Prior to August 9, 1995, the Company's common stock was traded on the American Stock Exchange. As of March 14, 1997 there were 1,296 holders of record of the common stock. The high and low sales prices of the common stock reported during the years ended December 31, 1996, and December 31, 1995, by quarter, were as follows: Year Ended ------------------------------------------------------ December 31, 1996 December 31, 1995 ----------------- ----------------- High Low High Low ---- --- ---- --- January - March 7 15/16 6 1/4 7 1/2 5 5/8 April - June 12 3/16 7 1/8 6 7/8 5 1/2 July - September 12 1/4 8 1/2 10 1/4 6 1/4 October - December 14 1/8 10 3/4 9 6 3/4 No dividends on the common stock have been declared in more than five years. The Company does not anticipate declaring dividends in the foreseeable future. The Company's credit agreement with Fleet National Bank prohibits the payment of cash dividends for the term of the agreement. ITEM 6. SELECTED FINANCIAL DATA
Year Ended Nine Months Ended Fiscal Year Ended -------------------- -------------------- --------------------------------- December December December December April April April 31, 1996 31, 1995 31, 1995 31, 1994 1, 1995 2, 1994 3, 1993 ------- ------- ------- ------- ------- ------- ------ (A) (B) (Dollars in thousands, except per share amounts) Statement of Operations: Net sales from continuing operations $37,053 $30,756 $22,872 $16,115 $23,999 $12,516 $3,195 ======= ======= ======= ======= ======= ======= ====== Income (loss) from continuing operations $ 5,991 $(1,118) $(1,913) $ (408) $ 382 $ 520 $ (264) ======= ======= ======= ======= ======= ======= ====== Income (loss) from continuing operations per common and common equivalent share $ 1.44 $ (0.28) $ (0.52) $ (0.11) $ 0.10 $ 0.14 $(0.09) ======= ======= ======= ======= ======= ======= ====== Cash dividends per common share None None None None None None None ======= ======= ======= ======= ======= ======= ======
(A) Includes the results of operations of Cash Bases GB Limited since June 20, 1994. (B) Includes the results of operations of Ultimate Technology Corporation since January 20, 1993.
As of ---------------------------------------------------------------------- December December December April April April 31, 1996 31, 1995 31, 1994 1, 1995 2, 1994 3, 1993 -------- -------- -------- ------- ------- ------- Balance Sheet Data: Total assets $38,653 $31,647 $18,663 $21,181 $10,545 $8,611 ======= ======= ======= ======= ======= ======
7 Long term debt $ 809 $ 8,324 $ 6,892 $ 6,185 $ 5,307 $7,298 ======= ======= ======= ======= ======= ======
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Certain statements included in this report, including, but not limited to, statements in this Management's Discussion and Analysis of the Results of Operations and Financial Condition, which are not historical facts may be deemed to contain forward looking statements with respect to events the occurrence which involves risks and uncertainties, including, but not limited to, the Company's expectations regarding net sales, gross profit, operating income and financial condition. (A) Results of Operations As described in Note 2 of the Notes to Consolidated Financial Statements included Item 8 of this report, and in "Business - General Development of Business Since December 31, 1996" in Item 1(A), the Company intends to distribute on March 31, 1997 all of the 5,400,000 shares of common stock of TransAct which it owns, pro rata to the holders of record of the Company's common stock on March 14, 1997. After the Distribution, TransAct will no longer be a consolidated subsidiary of the Company. The Selected Financial Data are derived from the Company's Consolidated Financial Statements, which have been restated from historical financial statements to present the results of operations of TransAct as discontinued operations. The Consolidated Financial Statements may not necessarily reflect what the results of operations or the financial position of the Company would have been if TransAct had been a separate entity during the periods presented. The discussion and analysis set forth below is based upon continuing operations only. (i) Year ended December 31, 1996 compared to year ended December 31, 1995 Consolidated net sales for the year ended December 31, 1996 increased $6,297,000 (20%) to $37,053,000 from $30,756,000 for the prior year. Sales of POS terminal systems and related products into the POS market accounted for approximately $3,500,000 of the increase. The balance of the increase is attributable to increased shipments of custom cash drawers. Consolidated gross profit increased $1,525,000 (18%) to $10,014,000 from $8,489,000 in the prior year, primarily due to the increase in the volume of shipments of both POS terminal systems and custom cash drawers. The gross margin declined slightly to 27.0% from 27.6% in the prior year due to the sales mix of POS terminal systems and to start-up costs of a standardized product line of cash drawers. However, cash drawer manufacturing operations implemented significant productivity improvements to correct production inefficiencies experienced in the prior year. Consolidated engineering, design and product development costs increased $48,000 (5%) to $1,040,000 from $992,000 in the prior year. The increase reflects the ongoing cost of developing new products and enhancing existing products. Consolidated selling, administrative and general expenses decreased $525,000 (6%) to $7,805,000 from $8,330,000 in the prior year. Such expenses in the prior year included $680,000 for the settlement of certain litigation, $339,000 for establishing an unfunded pension arrangement and other non-recurring charges totaling approximately $246,000. During 1995, the Company also recorded a $125,000 provision for restructuring to cover the costs associated with the reduction of levels of employment at Cash Bases and the discontinuance of certain products. Current year expenses include a provision of $320,000 to amend the unfunded pension arrangement established in the prior year. Operating income for the current period was $1,169,000 compared to an operating loss of $958,000 in the prior year. The increase in operating profit reflects increased volume of shipments of POS terminal systems and custom cash drawers and the correction of production inefficiencies experienced in the prior year. Operating profit as a percentage of revenue was 3.2% in 1996 compared to an operating loss of 3.1% in the prior year. Net interest expense decreased $464,000 (35%) to $879,000 from $1,343,000 in the prior year. The decrease in interest expense was due primarily to lower levels of indebtedness under the working capital facility, repayment of bank debt and the conversion of debentures to common stock. 8 Non-operating income includes the non-taxable gain of $6,200,000 on the sale of subsidiary stock. Other non-operating expense, (net) for the current period includes a provision of $163,000 for loss on the anticipated disposal of unused real estate held for sale, and $79,000 for net realized transactional foreign exchange losses. The prior year includes a provision of $135,000 for environmental matters, net realized gains on foreign exchange of $94,000 and an additional provision of $92,000 for loss on the anticipated disposal of real estate held for sale. The provision for taxes for 1996 is $232,000. The effective tax rate for 1996 was 4% compared to a benefit of 54% in 1995. The 1996 provision was benefited by a $6,200,000 non-taxable gain recognized upon the sale of subsidiary stock. The remaining provision is related to state income taxes and non-deductible amortization of goodwill. Income from continuing operations for the current period was $5,991,000 (or $1.44 per share). Exclusive of the one-time gain on the sale of subsidiary stock, the loss from continuing operations was $209,000 (or $.05 per share) compared to a loss of $1,118,000 (or $.28 per share) in the prior year. Discontinued operations reflect the equity in the income of TransAct. Spin-off related expenses consist of professional services and other costs related to the spin-off of TransAct. Net income for the current period was $8,848,000 (or $2.13 per share, $1.98 on a fully diluted basis) as compared to net income of $214,000 (or $.05 per share) in the prior year's period. The average number of common and common equivalent shares outstanding during 1996 was 4,154,000. The average number of common and common equivalent shares outstanding during 1995 was 3,930,000 shares. (ii) Nine months ended December 31, 1995 compared to nine months ended December 31, 1994 Consolidated net sales for the nine months ended December 31, 1995 increased $6,757,000 (42%) to $22,872,000 from $16,115,000 in the comparable period of the prior year. The increase is due to greater volume of shipments of POS terminals, customer displays and other peripherals and to the sales of custom cash drawers by Cash Bases, which was acquired on June 20, 1994 and included in only six and one third months of the nine months ended December 31, 1994. Consolidated gross profit increased $1,253,000 (26%) to $6,029,000 from $4,776,000 in the prior year's period, primarily due to the greater volume of shipments of POS terminals and to the effect of the Cash Bases acquisition. Gross profit in the current period was adversely impacted by the production inefficiencies experienced at Cash Bases. Consolidated gross margin decreased to 26.4% from 29.6% in the prior year's period. The decrease in gross margin reflects a change in sales mix of products and the production inefficiencies. Consolidated engineering, design and product development costs increased $341,000 (78%) to $777,000 from $436,000 in the prior year's period. The increase is primarily the result of the inclusion of such costs for Cash Bases, as well as the cost of developing new products and enhancing existing products, particularly for the POS market. Consolidated selling, administrative and general expenses increased $2,580,000 (65%) to $6,541,000 from $3,961,000 in the prior year's period. The increase in selling expenses is primarily the result of the inclusion of such costs for Cash Bases and the increased staff to support a greater selling effort, in both the United States and the European markets. The increase in general and administrative expenses is primarily the result of the inclusion of such costs for Cash Bases and certain non-recurring charges. Such non-recurring charges include a provision for damages of $680,000 awarded in a lawsuit with a former landlord, the cost of establishing an unfunded pension arrangement of $339,000, and other non-recurring charges totaling approximately $246,000. During the quarter ended December 31, 1995, the Company recorded a provision for restructuring of $125,000 to cover reductions of levels of employment at Cash Bases and the discontinuance of certain products. A substantial portion of the provision relates to employee severance costs. Operating loss for the nine months ended December 31, 1995 was $1,414,000 compared to operating profit of $379,000 in the prior year's period, primarily as a result of the non-recurring charges 9 discussed above and unfavorable results at Cash Bases. Operating profit was adversely impacted by production inefficiencies, increased operating costs at Cash Bases, and temporary softness in the European cash drawer market. Operating income as a percentage of revenue was 2.4% in the prior year's period. Net interest expense increased $176,000 (20%) to $1,035,000 from $859,000 in the prior year's period. The increase in interest expense was due primarily to additional borrowings under working capital facilities and to the indebtedness incurred to acquire Cash Bases. Other non-operating expense, (net) includes a provision of $75,000 for environmental matters, $42,000 for loss on the anticipated disposal of real estate held for sale, and $29,000 for net realized transactional foreign exchange gains. The prior year's period includes realized gains on foreign exchange of $15,000, offset by an additional provision of $120,000 for loss on the anticipated disposal of real estate held for sale. The provision for taxes for the nine-month period ended December 31, 1995 was a credit of $631,000. The effective rate is 24.8%. The provision amount is low relative to the pre-tax loss due to minimum state income taxes and non-deductible amortization of goodwill. The effective tax rate in the prior period was 28.8 %. The loss from continuing operations for the 1995 period was $1,913,000 (or $.52 per share) compared with a loss of $408,000 (or $.11 per share) in the 1994 period. Discontinued operations reflects the equity in the income of TransAct. Net loss for the 1995 period was $997,000 (or $0.27 per share) as compared to net income of $1,475,000 (or $0.38 per share) in the 1994 period. The average number of common shares outstanding during the nine months ended December 31, 1995 was 3,722,000. Common equivalent shares are not considered in net loss per share calculations as the incremental shares are non-dilutive. The average number of common and common equivalent shares outstanding during the 1994 period was 3,860,000 shares. (iii) Liquidity and Capital Resources The Company's working capital at December 31, 1996 was $3,300,000 compared with $1,136,000 at December 31, 1995. The current ratio was 1.3 : 1 at December 31, 1996 compared with 1.1 : 1 at December 31, 1995. The increase in working capital and current ratio reflects the repayment of intercompany debt from TransAct, the repayment of bank debt by the Company, a higher level of operating activity and the conversion of $1,010,000 principal amount of debentures into 112,210 shares of common stock. During the third quarter, the Company's TransAct subsidiary completed the initial public offering of 1,322,500 shares of its common stock at a price of $8.50 per share. TransAct received net proceeds from the offering of $8,991,000, and used $7,500,000 to repay intercompany indebtedness to Tridex. The balance was used for TransAct's working capital and general corporate purposes. Of the $7,500,000 received from TransAct, the Company used approximately $5,254,000 to repay all outstanding indebtedness to Fleet National Bank. The Company has a $2,000,000 Working Capital Facility (the "Working Capital Facility") with Fleet National Bank ("Fleet"). Under this facility, the Company is required to comply with certain financial covenants, including a minimum tangible net worth, a maximum leverage ratio, a minimum interest coverage ratio, and a minimum current ratio, or Fleet may withdraw its commitment. The Company was in compliance with these covenants at December 31, 1996 and expects to be in compliance with these covenants for the foreseeable future. During 1996, the Company's cash requirements were satisfied by cash flow from operations, borrowings under its lines of credit and by the repayment of intercompany indebtedness from TransAct. At December 31, 1996, the Company had availability of $2,000,000 under the Working Capital Facility. During 1996, $1,010,000 principal amount of debentures were converted into 112,210 10 shares of common stock. The conversion satisfied a $740,000 sinking fund payment due on December 15, 1996. In June 1996, the Company filed with the IRS an application for a ruling that the pro-rata Distribution of the 5,400,000 shares of TransAct common stock owned by the Company would constitute a tax free reorganization for purposes of the Internal Revenue Code of 1986, as amended (the "Code"). On February 12, 1997, the Company received a favorable ruling from the IRS confirming the tax-free nature of the Distribution and announced that it will effect the Distribution on March 31, 1997 to Tridex stockholders of record on March 14, 1997. At March 14, 1997, the Company had outstanding 5,373,310 shares of common stock. Therefore, the ratio for the Distribution is 1.005 shares of TransAct common stock for each share of Tridex. Tridex will distribute cash in lieu of fractional shares. After the Distribution, the 5,400,000 shares of TransAct common stock owned by the Company prior to the Distribution will be owned by the holders of Tridex common stock, Tridex and TransAct will be separate publicly traded companies. In connection with the Distribution, the Board of Directors accelerated the vesting of outstanding options, including options under the Plan, and issued notices of redemption of convertible debentures. During the period January 1, 1997 through March 14, 1997, the Company issued common stock as follows: (a) 599,300 shares to optionees under the Plan upon payment of $4,185,000 exercise price, (b) 260,632 shares to holders of warrants upon payment of $2,211,000 exercise price, (c) 273,318 shares to holder of 10.5% Debentures upon conversion of $2,460,000 principal amount of debentures, (d) 104,127 shares to holders of 8% Notes upon conversion of $1,250,000 aggregate principal amount, and (e) 100,000 shares to certain officers of Ultimate in accordance with the Stock Incentive Compensation Agreement. In connection with the exercise of options under the Plan, the Company offered loans to all employees whose total exercise price of options under the Plan exceeded $50,000. The loans, which total $893,000, are full recourse loans due in May 1998, bear interest at the rate of 6.08% and are secured by pledges of the shares acquired by the employees through the exercise of Plan options. Certain items on the Company's Consolidated Balance Sheet at December 31, 1996 would, on a pro forma basis giving effect to these exercises and conversions, change as follows: cash and cash equivalents would increase from $3,354,000 to $8,857,000; current portion of long term debt would decrease from $3,997,000 to $362,000; and shareholders' equity would increase from $26,015,000 to $37,638,000. After giving effect to the Distribution, the Company consists of its wholly-owned subsidiaries Ultimate Technology Corporation ("Ultimate") and Cash Bases GB Limited ("Cash Bases") and its Tridex Ribbons Division. The Company's management expects that Ultimate, Cash Bases and the Tridex Ribbons Division will have net sales in 1997 greater than 1996 levels and will be profitable for the foreseeable future. However, the Company will have fewer product lines and, therefore, will be more susceptible to the adverse effects of a downturn or disruption in the demand for any single product line. As part of its business strategy, the Company intends (i) to focus on internal growth through the development of products that broaden and extend the business of providing integrated systems and peripheral devices to the POS, financial services and other transaction based markets and (ii) to pursue joint ventures, strategic alliances or other transactions, including transactions to complement its existing products and markets, acquire new product lines or enter new markets. Implementation of this strategy may require substantial capital expenditures. There can be no assurance that the Company will be able to successfully implement its strategy, or that the Company can successfully manage any new operations. The Company believes that funds generated from operations, its cash balances and borrowings under the Working Capital Facility, if necessary, will continue to satisfy its working capital needs, support a certain level of growth and meet scheduled debt retirements. (B) Impact of Inflation Tridex believes that its business has not been affected to a significant degree by inflationary trends because of the low rate of inflation during the past three years and cost reduction programs at each of its operations. Tridex believes that any increase in cost due to inflation can be recovered by price increases or offset by cost reductions and productivity improvements. 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Number Report of Independent Accountants 13 Tridex Corporation and Subsidiaries consolidated financial statements: Consolidated balance sheets as of December 31, 1996 and December 31, 1995. 14 Consolidated statements of operations for the years 16 ended December 31, 1996 and December 31, 1995 (unaudited), the nine months ended December 31, 1995 and December 31, 1994 (unaudited), and the year ended April 1, 1995. Consolidated statements of shareholders' equity for 17 the year ended December 31, 1996 and the nine months ended December 31, 1995. Consolidated statements of cash flows for the years 18 ended December 31, 1996 and December 31, 1995 (unaudited), the nine months ended December 31, 1995 and December 31, 1994 (unaudited), and the year ended April 1, 1995. Notes to consolidated financial statements. 19 Financial Statement Schedules - All schedules are omitted since the required information is either (a) not present or not present in amounts sufficient to require submission of the schedule or (b) included in the financial statements or notes thereto. 12 Report of Independent Accountants To the Board of Directors and Shareholders of Tridex Corporation In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Tridex Corporation and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for the year ended December 31, 1996, the nine months ended December 31, 1995 and the year ended April 1, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Hartford, Connecticut February 13, 1997, except as to Note 15 which is as of March 14, 1997 13 TRIDEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in thousands) December 31, 1996 December 31, 1995 ----------------- ----------------- Current Assets: Cash and cash equivalents $ 3,354 $ 933 Receivables (Note 4) 5,681 4,160 Inventories (Note 5) 5,609 3,244 Deferred tax assets (Note 11) 140 271 Other current assets 345 289 ----------------- ----------------- Total current assets 15,129 8,897 ----------------- ----------------- Plant and equipment: Machinery, furniture and equipment 5,608 3,794 Leasehold improvements 308 282 ----------------- ----------------- 5,916 4,076 Less accumulated depreciation (2,381) (1,921) ----------------- ----------------- 3,535 2,155 Excess of cost over fair value of net assets acquired 6,493 7,190 Other assets 1,923 1,703 Investment in net assets of discontinued TransAct operations (Note 2) 11,573 11,702 ----------------- ----------------- $38,653 $31,647 ================= ================= See notes to consolidated financial statements. 14 TRIDEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (Dollars in thousands)
December 31, 1996 December 31, 1995 ----------------- ----------------- Current liabilities: Bank loans payable (Note 7) $740 $396 Current portion of long term debt (Note 7) 3,997 2,411 Accounts payable 3,859 1,805 Accrued liabilities (Note 6) 3,018 3,085 Income taxes payable 215 64 ----------------- ----------------- Total current liabilities 11,829 7,761 ----------------- ----------------- Long term debt, less current portion (Note 7) 809 8,324 ----------------- ----------------- Commitments and contingencies (Note 9) Shareholders' equity (Notes 1 and 10): Preferred stock, $1 par value; authorized 2,000,000 shares; issued none Common stock, no par value, stated value $.25; authorized 10,000,000 shares; issued 4,160,431 and 3,900,807 shares 1,043 978 Additional paid-in capital 23,361 21,939 Retained earnings (accumulated deficit) 2,239 (6,609) Cumulative valuation adjustments 245 82 Common stock held in treasury, at cost, 124,498 and 119,996 shares (873) (828) ----------------- ----------------- 26,015 15,562 ----------------- ----------------- $38,653 $31,647 ================= =================
See notes to consolidated financial statements. 15 TRIDEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands)
---------------------- ----------------------- ---------- Year Ended Nine Months Ended Year Ended ---------------------- ----------------------- ---------- December December December December April 31, 1996 31, 1995 31, 1995 31, 1994 1, 1995 -------- -------- -------- -------- ------- (unaudited) (unaudited) Net sales $37,053 $30,756 $22,872 $16,115 $23,999 -------- -------- -------- -------- ------- Operating costs and expenses: Cost of sales 27,039 22,267 16,843 11,339 16,763 Engineering, design and product development costs 1,040 992 777 436 651 Selling, administrative and general expenses 7,805 8,330 6,541 3,961 5,750 Provision for restructuring (Note14) -- 125 125 -------- -------- -------- -------- ------- 35,884 31,714 24,286 15,736 23,164 -------- -------- -------- -------- ------- Operating income (loss) 1,169 (958) (1,414) 379 835 Other charges (income): Gain on sale of subsidiary stock (Note 2) (6,200) Interest expense, net 879 1,343 1,035 859 1,168 Other, net 267 156 95 93 154 -------- -------- -------- -------- ------- (5,054) 1,499 1,130 952 1,322 -------- -------- -------- -------- ------- Income (loss) from continuing operations before income taxes 6,223 (2,457) (2,544) (573) (487) Provision (benefit) for income taxes 232 (1,339) (631) (165) (869) -------- -------- -------- -------- ------- Income (loss) from continuing operations 5,991 (1,118) (1,913) (408) 382 Discontinued operations (Note 2): Equity in subsidiary's income from discontinued operations 3,109 1,332 916 1,883 2,304 Spin-off related expenses, net of taxes of $68 252 -------- -------- -------- -------- ------- Net income (loss) $ 8,848 $ 214 $ (997) $ 1,475 $ 2,686 ======== ======== ======== ======== ======= Earnings (loss) per common and common equivalent share: Primary: Income (loss) from continuing operations $ 1.43 $ (0.28) $ (0.52) $ (0.11) $ 0.10 Income from discontinued operations 0.70 0.33 0.25 0.49 0.59 -------- -------- -------- -------- ------- $ 2.13 $0.05 $ (0.27) $ 0.38 $0.69 ======== ======== ======== ======== ======= Fully diluted: Income from continuing operations $ 1.35 Income from discontinued operations 0.63 -------- $ 1.98 ======== Weighted average common and common equivalent shares outstanding: Primary 4,154,000 3,930,000 3,722,000 3,860,000 3,868,000 ========= ========= ========= ========= ======== Fully diluted 4,648,000 =========
See notes to consolidated financial statements. 16 TRIDEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands)
Common stock Common stock held in treasury Additional Cumulative ------------------- ---------------- paid-in Accumulated Valuation Shares Amount Shares Amount capital deficit Adjustments ------ ------ ------ ------ ------- ------- ----------- Balance, April 1, 1995 3,789,682 $ 950 109,996 $738 $ 21,853 $(5,612) $ 124 Exercise of warrants and stock options 111,125 28 86 Purchase of treasury stock 10,000 90 Translation adjustment (99) Appreciation of marketable securities held for sale 57 Net loss (997) --------- ------ ------- ---- -------- ------- ----- Balance, December 31, 1995 3,900,807 978 119,996 828 21,939 (6,609) 82 Exercise of warrants and stock options 147,414 37 482 Purchase of treasury stock 4,502 45 Conversion of debentures 112,210 28 940 Translation adjustment 163 Net income 8,848 --------- ------ ------- ---- -------- ------- ----- Balance, December 31, 1996 4,160,431 $1,043 124,498 $873 $ 23,361 $ 2,239 $ 245 ========= ====== ======= ==== ======== ======= =====
17 TRIDEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Year Ended Nine Months Ended Year Ended ----------------------- -------------------- ---------- December December December December April 31, 1996 31, 1995 31, 1995 31, 1994 1, 1995 -------- -------- --------- -------- ------- (unaudited) (unaudited) Cash flows from operating activities: Net income (loss) $ 8,848 $ 214 $ (997) $ 1,475 $ 2,686 Adjustments to reconcile net income to net cash provided by operating activities: Equity in (used in) subsidiary's income from discontinued operations (3,109) (1,332) (916) (1,883) (2,304) Gain on sale of subsidiary stock (6,200) Depreciation and amortization 1,721 1,658 1,265 957 1,350 Deferred income taxes 720 (688) (80) (608) Loss (gain) on disposal of assets (153) 8 6 104 106 Changes in operating assets and liabilities: Receivables (1,210) (854) 1,592 1,697 (749) Inventory (2,250) (652) (590) (524) (586) Other current assets (29) (125) 54 42 (137) Other assets (129) (64) (28) (38) (74) Accounts payable, accrued liabilities and income taxes payable 1,878 937 143 (228) 566 Other 36 36 --------- --------- --------- --------- --------- Net cash provided by (used in) operating activities 87 (862) 449 1602 286 --------- --------- --------- --------- --------- Cash flows from investing activities: Purchases of plant and equipment (2,011) (964) (439) (757) (1,282) Proceeds from sale of assets 333 7 3 (7) (2) Acquired net assets and acquisition costs, net of cash (68) (5,508) (5,576) Other 81 31 (64) (15) --------- --------- --------- --------- --------- Net cash used in investing activities (1,678) (944) (405) (6,336) (6,875) --------- --------- --------- --------- --------- Cash flows from financing activities: Net change in borrowings under line of credit 285 (343) (1,993) 750 2,400 Net proceeds from issuance of long term debt 997 5,782 5,676 3,500 3,606 Principal payments on long term borrowings (6,096) (4,357) (3,573) (882) (1,666) Proceeds from exercise of stock options and warrants 474 25 24 47 48 Proceeds from repayment of TransAct debt 7,500 Net transactions with TransAct prior to IPO 1,087 278 551 2,131 1,863 Other (291) (140) (134) 644 638 --------- --------- --------- --------- --------- Net cash provided by financing activities 3,956 1,245 551 6,190 6,889 --------- --------- --------- --------- --------- Effect of exchange rate changes on cash 56 (9) (1) 8 --------- --------- --------- --------- --------- Increase (decrease) in cash and cash equivalents 2,421 (561) 586 1,455 308 Cash and cash equivalents at beginning of year 933 1,494 347 39 39 --------- --------- --------- --------- --------- Cash and cash equivalents at end of year $ 3,354 $ 933 $ 933 $ 1,494 $ 347 ========= ========= ========= ========= ========= Supplemental cash flow information: Interest paid $ 899 $ 788 $ 621 $ 851 $ 1,018 Income taxes paid 1,226 1,155 498 435 1,092 Supplemental non-cash investing and financing activities: Conversion of convertible debentures to common stock $ 1,010
See notes to consolidated financial statements. 18 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business and summary of significant accounting policies: Business: Tridex Corporation (the "Company"), through its wholly-owned subsidiaries Ultimate Technology Corporation ("Ultimate") and Cash Bases GB Limited ("Cash Bases"), and its Tridex Ribbons Division, operates in one industry segment, computer peripheral equipment. Operations in this segment include the design, development, manufacture and sale of terminal devices, customer displays, keyboards and cash drawers for point-of-sale ("POS") applications and ribbon cartridges for specialty dot matrix printers. Principles of consolidation: The accompanying consolidated financial statements include the accounts of the Company after elimination of all material intercompany accounts and transactions. See Note 2 for treatment of discontinued operations. Prior years have been restated to reflect discontinued operations. Change in fiscal year end: In December 1995, the Company changed its fiscal year to end on December 31, effective December 31, 1995. Previously, the Company's fiscal year ended on the Saturday closest to March 31. Cash and cash equivalents: Cash equivalents consist primarily of certificates of deposit with maturities of less than ninety days and are carried at cost which approximates market value. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Foreign Currency: The financial position and results of operations of the Company's foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of such subsidiaries have been translated at current exchange rates, and related revenues and expenses have been translated at weighted average exchange rates. The aggregate effect of translation adjustments so calculated is included as a separate component of shareholders' equity. Transaction gains and losses are included in other income. Inventories: Inventories are stated at the lower of cost (principally first-in, first-out) or market. Plant and equipment and depreciation: Plant and equipment and leasehold improvements are stated at cost. Depreciation is provided for primarily by the straight-line method over the estimated useful lives. The estimated useful life of machinery, furniture and equipment is five to ten years. Leasehold improvements are amortized over the shorter of the term of the lease or the useful life of the asset. Excess of cost over fair value of net assets acquired: The excess of cost over fair value of net assets acquired (goodwill) resulted from the acquisitions of Cash Bases in fiscal year 1995 and Ultimate in fiscal year 1993. The amount applicable to these acquisitions totaled $6,493,000 at December 31, 1996, and is being amortized on the straight line method between ten and twenty years. Accumulated amortization of the excess of cost over fair value of net assets acquired was $2,469,000 and $1,772,000 at December 31, 1996 and December 31, 1995, respectively. The Company periodically reviews goodwill to assess recoverability based upon expectations of non-discounted cash flows from operations for each subsidiary having a material goodwill balance. The Company believes that no material impairment of goodwill exists at December 31, 1996 or December 31, 1995. Other assets: Included in other assets at December 31, 1996 are deferred tax assets of $460,000 (see Note 11) and real estate held for sale in the amount of $196,000. At December 31, 1995, such amounts were $1,049,000 and $196,000, respectively. Also included in other assets are bond issue costs (see Note 7) which are being amortized over the term of the bond. Accumulated amortization of other assets was $361,000, and $285,000 at December 31, 1996, and December 31, 1995, respectively. 19 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business and summary of significant accounting policies: (continued) Revenue recognition: Sales are recognized when the product is shipped. Sales to Lowe's Companies, Inc. accounted for approximately 13% of net sales for the year ended December 31, 1996. Sales to Advance Stores Company Inc. ("Advance Auto") accounted for approximately 12% of net sales for the nine months ended December 31, 1995. Income taxes: Income tax expense is based on estimated taxes payable or refundable on a tax return basis for the current year and changes in the amount of deferred tax assets and liabilities during the year. Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement purposes. The Company accounts for income taxes in accordance with FAS 109 "Accounting for Income Taxes," which mandates the liability method for computing deferred income taxes. The objective of the liability method is to recognize the amount of current and deferred taxes payable or refundable at the financial statement date resulting from all events that have been recognized in the financial statement based upon the provisions of enacted tax laws. See Note 11 for a further discussion. Earnings (loss) per share: Primary earnings (loss) per common and common equivalent share are based on the weighted average number of common shares outstanding during the period, including stock options and warrants when the result is dilutive. Fully diluted earnings per common share assumes conversion of dilutive securities, when the result is dilutive. 2. Discontinued Operations: During 1996, the Company implemented a Plan to spin-off its printer group, which was formed in December 1995 by combining the operations of its subsidiaries, Magnetec Corporation ("Magnetec") and Ithaca Peripherals Incorporated ("Ithaca"). In April 1996, the Company announced that it had engaged an investment banking firm to pursue an underwritten public offering of up to 20% of the printer group. In June 1996, the Company incorporated TransAct Technologies Incorporated ("TransAct") as a wholly-owned subsidiary of Tridex. Following the incorporation, Tridex, TransAct, Magnetec and Ithaca entered into a Plan of Reorganization (the "Plan of Reorganization"), pursuant to which: (i) Ithaca merged into Magnetec; (ii) TransAct transferred to Tridex certain assets of Magnetec used in manufacturing operations of the Tridex Ribbons Division; (iii) TransAct issued 5,400,000 shares of its common stock to Tridex in exchange for all the outstanding shares of Magnetec; (iv) TransAct sold in an initial public offering 1,322,500 shares or approximately 19.7% of its common stock; (v) TransAct repaid $8,500,000 of intercompany indebtedness to Tridex; (vi) Tridex applied to the Internal Revenue Service (the "IRS") for a ruling that the pro rata distribution to Tridex stockholders of the 5,400,000 shares of TransAct owned by Tridex (the "Distribution") would constitute a tax-free reorganization for federal income tax purposes; and (vii) Tridex agreed to effect the Distribution promptly after receipt of a favorable ruling from the IRS and the satisfaction of certain other conditions. TransAct received approximately $8,991,000 of net proceeds from its initial public offering and used $7,500,000 to repay intercompany indebtedness to Tridex. The balance was used for TransAct's working capital and general corporate purposes. Of the $7,500,000 received from TransAct, Tridex used approximately $5,254,000 to repay all outstanding indebtedness to Fleet National Bank. TransAct paid the remaining $1,000,000 of intercompany indebtedness on February 14, 1997, together with interest at the rate of 8.25 percent. On February 12, 1997, the Company received a favorable ruling from the IRS confirming the tax-free nature of the Distribution and announced that it will effect the Distribution on March 31, 1997 to Tridex stockholders of record on March 14, 1997. After the Distribution, Tridex and TransAct will be separate publicly traded companies. The Consolidated Financial Statements have been restated from historical financial statements to present the results of operations of TransAct as discontinued operations. Such results are summarized below. 20 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Discontinued Operations: (continued) Year Ended Nine Months Ended Year Ended ----------------- ----------------- ------------- December 31, 1996 December 31, 1995 April 1, 1995 ----------------- ----------------- ------------- (Dollars in thousands) Net sales $42,134 $25,497 $33,362 Operating income 5,233 1,579 3,705 Net income 3,340 916 2,304 Earnings per share $ 0.57 $ 0.17 $ 0.43 3. Business combinations: On June 20, 1994 the Company completed the acquisition of Cash Bases, of Newhaven, England. The acquisition has been accounted for using the purchase method of accounting. The acquired company's assets and liabilities have been recorded in the Company's financial statements at their estimated fair values at the acquisition date. The Consolidated Statements of Operations include the results of operations of the acquired company from the acquisition date. On a pro forma (unaudited) basis, if the acquisition had occurred at the beginning of fiscal 1995, fiscal 1995 data would have been: Net sales $26,624,000; Operating income $1,042,000; Net income $2,749,000; and earnings per common and common equivalent shares $0.70. The fair value of assets acquired, excluding cash acquired, was $3,881,000 and goodwill was $3,978,000. The acquisition was financed by debt incurred of $4,800,000, the assumption of liabilities of $2,351,000, the issuance of warrants of $644,000 and the use of $64,000 in cash. 4. Receivables: Receivables are net of the allowance for doubtful accounts. The reconciliation of the allowance for doubtful accounts is as follows:
Year Ended Nine Months Ended Year Ended ----------------- ----------------- ------------- December 31, 1996 December 31, 1995 April 1, 1995 ----------------- ----------------- ------------- (Dollars in thousands) Balance at beginning of year $ 116 $ 113 $ 130 Provision for doubtful accounts 24 5 25 Accounts written off, net of recoveries (22) (2) (42) ----------------- ----------------- ------------- Balance at end of year $ 118 $ 116 $ 113 ================= ================= =============
5. Inventories: The components of inventories are: December 31, 1996 December 31, 1995 ----------------- ----------------- (Dollars in thousands) Raw materials and component parts $2,051 $1,663 Work-in-process 359 477 Finished goods 3,199 1,104 ----------------- ----------------- $5,609 $3,244 ================= ================= 21 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Accrued liabilities: The components of accrued liabilities are:
December 31, 1996 December 31, 1995 ----------------- ----------------- (Dollars in thousands) Payroll, fringe benefits and commissions $ 822 $ 773 Unfunded pension obligation 577 318 Interest and taxes other than income taxes 241 150 Customer advances, deferred revenue and warranty 57 37 Environmental matters 322 347 Professional services and insurance 220 181 Restructuring 326 Litigation 776 Other 779 177 ----------------- ----------------- $3,018 $3,085 ================= =================
7. Bank credit agreement and long term debt: On August 30, 1996, the Company and Fleet National Bank ("Fleet"), entered into an amended agreement (the "Fleet Credit Agreement") which provides the Company with a $2,000,000 working capital revolving credit facility. The working capital facility expires on June 30, 1998, bears interest payable monthly at a rate equal to Fleet's prime rate (8.25% at December 31, 1996), and bears a non-utilization fee of .25% of the unused facility. Under the prior agreement, Fleet provided the Company with a $5,500,000 term loan (included in the accompanying table as "Term Loan Payable") which was repaid in full during 1996. The Fleet Credit Agreement is secured by a first priority security interest in certain assets, imposes certain covenants (including a minimum tangible net worth, a maximum leverage ratio, a minimum interest coverage ratio and a minimum current ratio) and restricts the amount available for payment in cash dividends and capital stock distributions. During 1996, Fleet waived compliance with certain covenants of the prior agreement for the period ended December 31, 1995, and amended the Working Capital Facility to reduce the minimum tangible net worth requirement for the quarter ended March 30, 1996. As of December 31, 1996, the Company was in full compliance with all covenants of the Fleet Credit Agreement and expects to be in full compliance with all covenants during 1997. The components of long term debt are:
December 31, 1996 December 31, 1995 ----------------- ----------------- (Dollars in thousands) Term loan payable $ 5,500 10.5% Senior Subordinated Convertible Debentures due 1997, net of discount of $6 and $16 $ 2,454 3,454 8% Subordinated Convertible Term Promissory Notes due 1997, net of discount of $76 and 1,174 1,414 Other 1,178 367 ----------------- ----------------- 4,806 10,735 Current portion 3,997 2,411 ----------------- ----------------- $ 809 $ 8,324 ================= =================
The 10.5% Senior Subordinated Convertible Debentures due 1997 (the "10.5% Debentures") were issued in 1993 in conjunction with the acquisition of Ultimate. Interest is payable quarterly on March 15, June 15, September 15 and December 15. The 10.5% Debentures are convertible into Tridex common stock at $9.00 per share. As of December 31, 1996, the Company had reserved 273,318 shares of common stock pursuant to the conversion feature. The indenture restricts the amount available for the payment of cash 22 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Bank credit agreement and long term debt: (continued) dividends and capital stock distributions. In conjunction with the issuance of the 10.5% Debentures, the Company issued to each debenture holder detachable warrants (the "Warrants") to purchase common stock of Tridex at a rate of 10 shares per $1,000 principal amount of debentures. The Warrants are exercisable for a period of five years at $9.25 per share. As of December 31, 1996, the Company had reserved 42,500 shares of common stock for the exercise of the Warrants. The estimated fair market value of the Warrants has been recorded as a discount to the principal amount of the outstanding debentures and is being amortized over the term of the debt. Costs incurred in connection with the issuance of the 10.5% Debentures of approximately $448,000 are recorded in other assets and are being amortized over the term of the debentures. The 8% Subordinated Convertible Term Promissory Notes (the "8% Notes") were issued in conjunction with the acquisition of Ultimate from its former shareholders. The 8% Notes are payable in quarterly installments over five years and are convertible into Tridex common stock at $12.00 per share. As of December 31, 1996, the Company had reserved 104,127 shares of common stock pursuant to this conversion feature. The discount on the 8% Notes represents imputed interest at a rate of approximately 18%. The discount, recorded as a reduction of the purchase price of Ultimate, is being amortized over the life of the notes using the interest rate method. During 1996, certain holders of 8% Notes requested that quarterly principal payments be suspended indefinitely. At December 31, 1996, such suspended principal payments aggregated $450,000. Holders may require payment of any suspended payments upon five days notice. Cash Bases has an agreement with Barclay's Bank that provides line of credit, term loan and equipment financing facilities. At December 31, 1996, (pounds) 432,000 (approximately $740,000) was outstanding under the line of credit facility with availability of (pounds) 68,000 (approximately $116,000). Other long term debt consists of the term notes payable and equipment financing obligations of Cash Bases. The equipment financing obligations are collateralized by the underlying equipment. Maturities of long term debt, including sinking fund requirements and scheduled retirement of the 10.5% Debentures and 8% Notes are as follows: $4,079,000 in 1997, $282,000 in 1998, $204,000 in 1999, $177,000 in 2000, and $146,000 in 2001. See Note 15 for discussion of debt conversions. Interest expense is stated net of interest income of $92,000 in 1996, $14,000 in the nine months ended December 31, 1995, and $33,000 in fiscal 1995. 8. Pension plan: Effective December 31, 1995, the Company established a non-qualified unfunded pension arrangement for Alvin Lukash, a significant shareholder and former corporate officer and director. The pension arrangement, which replaced a prior consulting services agreement, requires the Company to pay an annual benefit of $100,000, payable monthly, through the earlier of March 31, 2000 or the death of Mr. Lukash. Effective December 31, 1996, the arrangement was amended to provide the annual benefit through the death of Mr. Lukash. The unfunded accumulated benefit obligation at December 31, 1996 of $577,000 is included in Accrued Liabilities in the accompanying balance sheet. The Company recorded the actuarial present value of the benefits calculated at a 7.2% discount rate. The Company recorded pension expense of $358,000 in 1996, of which $320,000 was related to the 1996 amendment and was recorded in the quarter ended December 31, 1996. 9. Commitments and contingencies: (a) Lease obligations: At December 31, 1996, the Company was lessee on long term operating leases for equipment and real property. The terms of certain leases provide for escalating rent payments in later years of the lease as well as payment of minimum rent and real estate taxes. Rent expense amounted to approximately $555,000 in 1996, $329,000 in the nine months ended December 31, 1995, and $381,000 in fiscal 1995. Minimum aggregate rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 1996 are as follows: $567,000 in 1997, $567,000 in 1998; $543,000 in 1999; $443,000 in 2000; $334,000 in 2001 and $16,000 thereafter. 23 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Commitments and contingencies: (continued) (b) Environmental matters: The Company is involved in one significant environmental matter: Allu Realty Trust ("Allu"), a Massachusetts business trust with transferable shares, all of which are owned by Tridex, is the former owner of land improved with a manufacturing-warehouse building located at 100 Foley Street, Somerville, Massachusetts (the "Site"). Although Allu has sold the property to 100 Foley Street Incorporated ("Foley"), an unrelated entity, Allu and Tridex remain responsible for certain environmental problems associated with the Site. During July 1984, Allu and Tridex disclosed to the Massachusetts Department of the Attorney General the existence of chromium, oil and grease at the Site. As a result, the Environmental Protection Division of the Department of the Attorney General and the Massachusetts Department of Environmental Protection ("MDEP") conducted an investigation of the Site. At MDEP's request, the Company retained an environmental engineering firm, which completed a Phase II investigation study of the Site. The Company has conducted further studies to characterize and assess the Site more specifically and to determine appropriate long term clean-up measures. In January 1993, the Company entered into an agreement with Foley pursuant to which Tridex and Foley agreed to pay 75% and 25%, respectively, of the costs incurred after January 1, 1992 in connection with the investigation and remediation of the Site (the "Site Participation Agreement"). The Site Participation Agreement also provides that, to the extent there are available proceeds from the sale of the Site or, if not sold, from the operation of the Site after January 1, 1997, Tridex shall be reimbursed for all or a portion of the $260,000 it expended in connection with the Site prior to January 1, 1992. Under the terms of an Escrow Agreement entered into by Tridex and Foley simultaneously with the Site Participation Agreement (the "Escrow Agreement"), Tridex and Foley each placed $125,000 in escrow to fund the payment of their obligations under the Site Participation Agreement. Under the terms of the Escrow Agreement, Tridex must place an additional $100,000 in escrow at the request of the Escrow Agent and thereafter the amount of any additional funds required by the Escrow Agent shall be contributed 75% by Tridex and 25% by Foley. Approximately $1,000 is being held in escrow as of December 31, 1996, all of which was contributed by Foley. As of December 31, 1996, the Company had spent approximately $664,000 in connection with the Site. Of this amount, approximately $494,000 relates to investigation and remediation costs incurred at the Site. Although it is difficult to distinguish between amounts spent for investigation and remediation, the Company estimates that approximately $394,000 has been spent in connection with investigation and approximately $100,000 has been spent in connection with remediation of the Site. The Company estimates that approximately $100,000 to $300,000 will be spent in connection with the Site during 1997, including expenditures from the escrow account. Based upon preliminary estimates provided by a consulting environmental engineer and based upon the likely future uses of the property, as of December 31, 1996, the Company had accrued $322,000 for the Site, which represents currently estimated minimum cost of remediation, after considering the cost sharing arrangement discussed above. Accordingly, although no assurances can be given regarding the materiality of the total costs which may be incurred, the Company does not believe at this time that the remediation of the Site is reasonably likely to have a material effect on the Company's financial condition, results of operations or liquidity. The implementation of clean-up measures has commenced, and may be completed in 1997, in which case the entire amount of remediation costs to be borne by the Company would be incurred and paid in 1997. The precise scope and timing of remediation is dependent upon a proposed sale of the property, which is subject to negotiations to which the Company is not a party. The Company expects that, as in the past, funds being held in escrow, cash from operations and the Company's credit facilities will be sufficient to pay the costs of remediation without a material effect on the Company's operations. The Company has also been notified by an adjacent property owner, Cooper Industries ("Cooper"), that certain petroleum products that may have migrated from the Site have been detected in a monitoring well located on Cooper's property. The Company and Foley are investigating possible oil contamination along the border between the Site and the property owned by Cooper. 24 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Stock options and warrants: 1989 Long Term Incentive Plan The 1989 Long Term Incentive Plan (the "Plan") permits stock-based incentive compensation in the form of: (a) stock options, (b) stock appreciation rights, (c) restricted stock, (d) deferred stock, (e) stock purchase rights and (f) other stock-based compensation. Pursuant to the Plan, up to 1,250,000 shares of common stock may be distributed to officers, key employees and non-employee directors of the Company. Options granted are at prices equal to 100% of the fair market value of the common stock at the date of grant. No charge against income was required with respect to options. Options granted are exercisable at the discretion of the Stock Option Committee, but in no event shall the period be for more than ten years. Ninety days after an employee's termination, the outstanding options are canceled. At December 31, 1996 the Company had reserved 932,506 shares of common stock for issuance upon the exercise of options granted under the Plan. The following table summarizes the activity of the Plan for the year ended December 31, 1996, for the nine months ended December 31, 1995 and for the year ended April 1, 1995.
Year Ended Nine Months Ended Year Ended ---------------------- ----------------------- ---------------------- December 31, 1996 December 31, 1995 April 1, 1995 ---------------------- ----------------------- ---------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price -------- -------- -------- -------- ------- -------- Outstanding at beginning of period 669,530 $6.33 612,465 $5.44 513,855 $5.00 Granted 99,000 8.08 211,800 6.40 127,150 7.05 Exercised (96,964) 2.99 (111,125) 1.12 (14,440) 1.21 Canceled (42,206) 6.24 (43,610) 7.44 (14,100) 8.30 -------- -------- ------- Outstanding at end of period 629,360 7.13 669,530 6.33 612,465 5.44 ======== ======== ======= Options exercisable at end of period 236,412 6.68 213,870 5.02 255,295 3.43 ======== ======== ======= Weighted average fair value of options granted during the period: Equal to market price $ 5.70 $ 4.07 ======== ======== Exceeding market price $ 5.74 $ 2.68 ======== ========
The following summarized additional information about stock options outstanding at December 31, 1996:
Options Outstanding Options Exercisable ------------------------------------------------------------------------------------ Number Weighted- Number Outstanding at Average Weighted- Exercisable at Weighted- December 31, Remaining Average December 31, Average Range of Exercise Prices 1996 Contractual Life Exercise Price 1996 Exercise Price ------------------------ -------------- ---------------- -------------- -------------- -------------- $ 0.75 - $ 5.00 39,790 4.23 $ 1.34 38,690 $ 1.25 5.01 - 7.50 343,840 7.57 6.52 89,520 6.34 7.51 - 10.00 228,730 5.48 8.75 107,002 8.88 10.01 - 11.75 17,000 7.40 11.19 1,200 10.75 -------------- -------------- 629,360 236,412 ============== ==============
Had compensation expense been recognized based on the fair value of the options at their grant dates, as prescribed in Financial Accounting Standard No. 123, the Company's net income (loss) and earnings per share would have been: 25 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Stock options and warrants: (continued) Year Ended Nine Months Ended ----------------- ----------------- December 31, 1996 December 31, 1995 ----------------- ----------------- (Dollars in thousands) Net income (loss): As reported $ 8,848 $ (997) Pro forma under FAS 123 8,673 (1,103) Pro forma earnings per share: As reported $ 2.13 $ (0.27) Pro forma under FAS 123 2.09 (0.30) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for the grants made during the year ended December 31, 1996 and the nine months ended December 31, 1995: dividend yield of 0% for both periods; risk-free interest rates ranging from 5.04% to 5.07% for options granted during the year ended December 31, 1996 and 5.24% to 5.91% for options granted during the nine months ended December 31, 1995; expected volatility factors ranging from 57.0% to 57.6% for the year ended December 31, 1996 and 42.9% to 45.0% for the nine months ended December 31, 1995; and an expected option term ranging from five to ten years for both periods. Warrants: As of December 31, 1996, the Company had outstanding stock purchase warrants for an aggregate of 233,382 shares of common stock. Stock purchase warrants for 117,550 shares expiring five years from date of grant are held by directors of the Company and for 115,832 shares expiring December 31, 1997 originally issued to the purchasers of the 10.5% debentures and the placement agent for the debentures. The following table summarizes the activity of outstanding warrants for the year ended December 31, 1996, for the nine months ended December 31, 1995 and for the year ended April 1, 1995.
Year Ended Nine Months Ended Year Ended ----------------------- ----------------------- ---------------------- December 31, 1996 December 31, 1995 April 1, 1995 ----------------------- ----------------------- ---------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price -------- -------- -------- -------- ------- -------- Outstanding at beginning of period 283,832 $ 7.64 283,832 $ 7.64 318,832 $ 6.90 Exercised (50,450) 4.54 0 (35,000) .88 ---------- -------- -------- -------- --------- -------- Outstanding at end of period 233,382 8.31 283,832 7.64 283,832 7.64 ---------- -------- -------- -------- --------- -------- Warrants exercisable at end of period 209,582 8.43 236,932 7.72 236,932 7.72 ---------- -------- -------- -------- --------- --------
The following summarized additional information about warrants outstanding at December 31, 1996: Warrants Outstanding ----------------------------------------------------- Number Outstanding at Weighted-Average Remaining Exercise Prices December 31, 1996 Contractual Life --------------- --------------------- -------------------------- $5.25 22,500 0.29 $7.25 65,050 4.33 $9.25 145,832 1.00 --------------------- 233,382 ===================== 26 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Income taxes: The sources of profit (loss) before income taxes are as follows:
Year Ended Nine Months Ended Year Ended ----------------- ----------------- ------------- December 31, 1996 December 31, 1995 April 1, 1995 ----------------- ----------------- ------------- (Dollars in thousands) United States $ 5,462 $ (1,991) $ (1,714) Foreign 761 (553) 1,227 ----------------- ----------------- ------------- $ 6,223 $ (2,544) $ (487) ================= ================= =============
The components of the income tax provision (benefit) are as follows:
Year Ended Nine Months Ended Year Ended ----------------- ----------------- ------------- December 31, 1996 December 31, 1995 April 1, 1995 ----------------- ----------------- ------------- (Dollars in thousands) Current: Federal $ (685) $ (426) $ (748) State 94 54 57 Foreign 103 (141) 430 ----------------- ----------------- ------------- $ (488) (513) (261) ----------------- ----------------- ------------- Deferred: Federal 553 (97) (554) State (16) (9) (9) Foreign 183 (12) (45) ----------------- ----------------- ------------- 720 (118) (608) ----------------- ----------------- ------------- Provision (benefit) for income taxes $ 232 $ (631) $ (869) ================= ================= =============
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Company's gross deferred tax assets and liabilities were comprised of the following:
December 31, 1996 December 31, 1995 ----------------- ----------------- (Dollars in thousands) Gross deferred tax assets: Current non-deductible liabilities and reserves $ 869 $1,026 Net operating loss carryforwards 609 582 Federal business and foreign tax credit carryforwards 415 615 Federal minimum tax credit carryforwards 88 211 Depreciation 57 ----------------- ----------------- $1,981 $2,491 ================= ================= Gross deferred tax liabilities: Depreciation $ 254 =================
27 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Income taxes: (continued) At December 31, 1996 and December 31, 1995, valuation allowances of $1,127,000 and $1,171,000, respectively, have been recorded which relate primarily to state net operating loss and federal foreign tax credit carryforwards, and certain state deferred tax deductions for which a tax benefit will not likely be realized. The net change since December 31, 1995 in the valuation allowance for deferred tax assets was a decrease of $44,000 related primarily to a decrease in deferred state tax benefits. At December 31, 1996, the Company had $7,906,000 of state net operating loss carryforwards that expire principally in 1996 through 2000. Foreign tax credit carryforwards which are available to offset future federal income taxes total $384,000 and principally expire in 1997 through 2002. The Company has a federal minimum tax credit carryforward of approximately $88,000 which will be available to reduce federal tax in future years. Differences between the U.S. statutory federal income tax rate and the company's effective income tax rate are analyzed below:
Year Ended Nine Months Ended Year Ended ------------ ----------------- ----------- December 31, December 31, April 1, 1996 1995 1995 ------------ ----------------- ----------- Federal statutory tax rate 34.0% (34.0%) (34.0%) Nondeductible purchase accounting 3.8 7.0 45.1 State income taxes, net of federal income taxes .07 1.0 5.9 Gain on sale of subsidiary stock (33.9) Valuation allowance (0.7) -- (231.5) Federal benefit of acquired loss carryforwards used to reduce goodwill -- -- 6.9 Effect of foreign operations 0.4 2.0 26.1 Other .03 (0.8) 3.1 ------------ ----------------- ----------- Effective tax rate 3.7% (24.8%) (178.4%) ============ ================= ===========
12. Disclosure about Fair Value of Financial Instruments: The carrying amount of cash, trade accounts receivable, other current assets, trade accounts payable, and accrued expenses approximate fair value because of the short maturity of those instruments. The carrying amount of borrowings under the Barclay's agreement approximates their fair value. The fair value of the Company's debt is estimated based on the quoted market prices of the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The estimated fair values of the Company's debt instruments at 12/31/96 are as follows: Carrying Amount Fair Value (Dollars in thousands) 10.5% Debentures $2,454 $3,835 8% Notes 1,174 1,600 13. International Operations: Prior to fiscal year 1995, the Company had no foreign operations and export sales were minimal. As a result of the acquisition of Cash Bases, the Company acquired manufacturing facilities in the United Kingdom. Amounts included in the accompanying consolidated financial statements associated with operations outside the United States consist of the following (in 000's): 28 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. International Operations: (continued)
At and for the At and for the Years Ended At and for the Nine Months Ended Year Ended ------------------------------- -------------------------------- -------------- December 31, December 31, December 31, December 31, April 1, 1996 1995 1995 1994 1995 ------------ ------------ ------------ ------------ -------------- (Unaudited) (Unaudited) (Dollars in thousands) Sales: Domestic $ 22,340 $ 18,874 $ 14,413 $ 9,010 $ 13,471 Foreign 14,713 11,902 8,486 7,105 10,528 Elimination (20) (27) ------------ ------------ ------------ ------------ -------------- Total $ 37,053 $ 30,756 $ 22,872 $ 16,115 $ 23,999 ------------ ------------ ------------ ------------ -------------- Operating Income: Domestic $ 280 $ (446) $ (878) $ (470) $ (158) Foreign 889 (512) (536) 849 993 ------------ ------------ ------------ ------------ -------------- Total $ 1,169 $ (958) $ (1,414) $ 379 $ 835 ------------ ------------ ------------ ------------ -------------- Identifiable Assets: Domestic $ 16,246 $ 11,613 $ 11,613 $ 10,981 $ 14,994 Foreign 10,985 8,332 8,332 7,682 8,887 ------------ ------------ ------------ ------------ -------------- Total $ 27,231 $ 19,945 $ 19,945 $ 18,663 $ 23,881 ------------ ------------ ------------ ------------ --------------
Net sales are based on the location of the operation. Transfers between geographic areas are recorded at amounts generally above cost and in accordance with the regulations of applicable taxing jurisdictions. Operating income consists of total net sales less operating expenses and corporate expenses, and does not include either interest, other income or income taxes. Identifiable assets of geographic areas are those assets used in the Company's operations in each area. The Company had export sales from its United States operations of approximately $130,000 in 1996, $100,000 in the nine months ended December 31, 1995 and $731,000 in fiscal year 1995. Such sales were primarily to Canada and were not material in prior years. Export sales from the Company's foreign operations, which were primarily to European countries, totaled approximately $7,760,000 in 1996, $4,900,000 and in the nine months ending December 31, 1995. The Company recorded net foreign exchange transaction losses of approximately $264,000 in 1996, $29,000 in the nine months ended December 31, 1995 and $85,000 in the year ended April 1, 1995. 14. Other Significant Transactions: See Note 2 for discussion regarding the formation and spin-off of TransAct Technologies Incorporated. During the quarter ended December 31, 1996, the Company recorded a $320,000 provision to amend the unfunded pension arrangement established in the prior year. During the quarter ended December 31, 1995, the Company recorded provisions for the following non-recurring operating expenses: litigation settlement of $680,000, restructuring costs of $125,000, pension of $339,000 and other non-recurring items totaling $246,000. In addition, the Company recorded other charges of $42,000 for estimated loss on disposal of unused real estate and $75,000 for environmental clean-up. The provision for restructuring covers the discontinuance of certain products. A substantial portion of the provision relates to employee severance costs. During the fourth quarter of fiscal 1995, the Company recorded an additional provision for the estimated loss on disposal of unused real estate of $50,000 and an additional provision for estimated environmental clean-up costs of $60,000. Also in the fourth quarter, the Company recorded an adjustment to fully recognize federal deferred tax benefits. 29 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. Subsequent events: In connection with the Distribution, the vesting of all outstanding options to purchase Tridex common stock was accelerated so that all such options became exercisable. The Company also issued a notice of redemption of its convertible debentures with a March 14, 1997 redemption date. During the period January 1, 1997 through March 14, 1997, the Company issued common stock as follows: (a) 599,300 shares to optionees under the Company's 1989 Long Term Incentive Plan upon payment of $4,185,000 exercise price, (b) 260,632 shares to holders of warrants upon payment of $2,211,000 exercise price, (c) 273,318 shares to holders of 10.5% Debentures upon conversion of $2,460,000 principal amount of debentures, (d) 104,127 shares to holders of 8% Notes upon conversion of $1,250,000 principal amount, and (e) 100,000 shares to certain officers of Ultimate in accordance with the Stock Incentive Compensation Agreement. In connection with the exercise of options under the Plan, the Company offered loans to all employees whose total exercise price of options under the Plan exceeded $50,000. The loans, which total $893,000, are full recourse loans due in may 1998, bear interest at the rate of 6.08% and are secured by pledges of the shares acquired by the employees through the exercise of Plan options. At March 14, 1997, the Company had outstanding 5,373,310 shares of common stock. Thus the ratio for the distribution of TransAct shares is 1.005 shares of TransAct for each share of Tridex Corporation. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 30 TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (A) Directors. The information contained in "Information Concerning Nominees for Election as Directors and Executive Officers" of the Company's Proxy Statement (the "Proxy Statement") for its Annual Meeting of Shareholders which is scheduled to be held on May 14, 1997 is hereby incorporated herein by reference. Also see Item 1(E)(i) above. (B) Executive Officers. See Item 1(E)(ii) above. (C) Compliance with Section 16(a) of the Exchange Act. The information contained in "Compliance with Section 16(a)" of the Proxy Statement is hereby incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION The information contained in "Compensation of Directors and Executive Officers" of the Proxy Statement is hereby incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information contained in "Security Ownership of Certain Beneficial Owners and Management" of the Proxy Statement is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION The information contained in "Certain Relationships and Related Transactions" of the Proxy Statement is hereby incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) The following financial statements and exhibits are filed as part of this report: (i) Financial statements See Item 8 on page 12. (ii) Financial statement schedules See Item 8 on page 12. (iii) List of Exhibits. See Exhibit Index on page 33. (B) Reports on Form 8-K. The Company did not file any Current Reports on Form 8-K during the last quarter of the period covered by this report. 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRIDEX CORPORATION By: /s/ Seth M. Lukash ------------------------------ Seth M. Lukash Chairman of the Board, President, Chief Executive Officer, Chief Operating Officer and Director Date: March 25, 1997 Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ Seth M. Lukash Chairman of the Board, March 25, 1997 - ------------------------------ President, Chief Seth M. Lukash Executive Officer, (Principal Executive Officer) Chief Operating Officer and Director /s/ George T. Crandall Vice President, Treasurer, March 25, 1997 - ------------------------------ Controller and Secretary George T. Crandall (Principal Accounting Officer) /s/ Graham Y. Tanaka Director March 25, 1997 - ------------------------------ Graham Y. Tanaka /s/ Paul J. Dunphy Director March 25, 1997 - ------------------------------ Paul J. Dunphy /s/ C. Alan Peyser Director March 25, 1997 - ------------------------------ C. Alan Peyser /s/ Thomas R. Schwarz Director March 25, 1997 - ------------------------------ Thomas R. Schwarz 32 Exhibit Index Page Number ------ 3.1 Certificate of Incorporation of Tridex, as amended, filed on June 28, 1985 as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended March 30, 1985, is hereby incorporated herein by reference. 3.2 Certificate of Amendment of Incorporation of Tridex, dated October 1, 1987, filed on July 18, 1988 as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 1988 is hereby incorporated herein by reference. 3.3 Certificate of Amendment of Incorporation of Tridex, dated August 15, 1988, filed on June 29, 1989 as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended April 1, 1989 is hereby incorporated herein by reference. 3.4 Certificate of Amendment of Incorporation of Tridex, dated March 31,1989 filed on June 29, 1989 as Exhibit 3.4 to the Company's Annual Report on Form 10-K for the fiscal year ended April 1, 1989 is hereby incorporated herein by reference. 3.5 Bylaws of Tridex, as amended and restated as of January 22, 1996, filed on March 26, 1996 as Exhibit 3.5 to the Company's Transition Report on Form 10-K for the transition year ended December 31, 1995 is hereby incorporated herein by reference. 4.1 Description of the Company's common stock set forth in the Company's Registration Statement on Form 8-A filed July 14, 1986, is hereby incorporated herein by reference. 4.2 The Tridex Corporation 1989 Long Term Incentive Plan (as amended and restated), filed as Exhibit A to the Company's Proxy Statement for Annual Meeting of Shareholders filed September 14, 1994 is hereby incorporated herein by reference. 4.3 Form of 8% Subordinated Convertible Term Promissory Notes dated January 20, 1993, by and among the Company and the shareholders of Ultimate Technology Corporation, filed as an Exhibit to Current Report on Form 8-K filed February 10, 1993, is hereby incorporated herein by reference. 4.4 Form of Registration Rights Agreement, dated January 20, 1993, filed as an Exhibit to Current Report on Form 8-K filed February 10, 1993, is hereby incorporated herein by reference. 4.5 Indenture dated as of December 31, 1992 by and among the Company and American Stock Transfer & Trust Company, as Trustee, filed as an Exhibit to Current Report on Form 8-K filed February 10, 1993, is hereby incorporated herein by reference. 4.6 Form of 10.5% Senior Subordinated Convertible Debentures due December 31, 1997, filed as an Exhibit to Current Report on Form 8-K filed February 10, 1993, is hereby incorporated herein by reference. 4.7 Form of Warrant, dated January 20, 1993, to purchase shares of Tridex common stock, filed as an Exhibit to Current Report on Form 8-K filed February 10, 1993, is hereby incorporated herein by reference. 4.8 Form of Registration Rights Agreement, filed as an Exhibit to Current Report on Form 8-K filed February 10, 1993, is hereby incorporated herein by reference. 4.9 Form of Warrant dated January 20, 1993, to purchase common stock of Tridex Corporation, filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended April 3, 1993 is hereby incorporated herein by reference. 10.1 Employment and Non-Competition Agreement, dated as of January 20, 1993, between Ultimate Technology Corporation and Dennis J. Lewis, filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended April 3, 1993 is hereby incorporated herein by reference. 10.2 The Tridex Corporation 1989 Long Term Incentive Plan (as amended and restated) filed as Exhibit A to the Company's Proxy Statement for Annual Meeting of Shareholders filed July 23, 1992 is hereby incorporated herein by reference. 10.3 Employee Performance Compensation Agreement, dated January 20, 1993 by and among Tridex and the Ultimate shareholders, filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended April 3, 1993 is hereby incorporated herein by reference. 10.4 Amended and Restated Credit Agreement dated as of December 15, 1995 among Tridex Corporation, Ithaca Peripherals Incorporated, Ultimate Technology Corporation, Magnetec Corporation, Cash Bases Incorporated and Fleet Bank, National Association. Filed on March 29, 1996 as Exhibit 10.12 to the Company's Transition Report on Form 10-K for the transition period ended December 31, 1995 is hereby incorporated herein by reference. 10.5 Amendment No. 1, dated as of March 15, 1996 to Amended and Restated Credit Agreement, dated as of December 14, 1995, among Tridex Corporation, Ithaca Peripherals Incorporated, Ultimate Technology Corporation, Magnetec Corporation, Cash Bases Incorporated and Fleet Bank, National Association. Filed on March 29, 1996 as Exhibit 10.13 to the Company's Transition Report on Form 10-K for the transition period ended December 31, 1995 is hereby incorporated herein by reference. 33 Page Number ------ 10.6 Amendment No. 2, dated as of August 30, 1996 to Amended and Restated Credit Agreement, dated as of December 14, 1995, among Tridex Corporation, Ithaca Peripherals Incorporated, Ultimate Technology Corporation, Magnetec Corporation, Cash Bases Incorporated and Fleet National Bank, filed on November 12, 1996 as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.7 Service Agreement, dated June 20, 1994, between Cash Bases G.B. Limited and Hugh T. Burnett filed on June 30, 1994 as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 1994 is hereby incorporated by reference. 10.8 Retirement Agreement, dated as of December 31, 1995, between Tridex Corporation and Alvin Lukash, Filed on March 29, 1996 as Exhibit 10.15 to the Company's Transition Report on Form 10-K for the transition year ended December 31, 1995 is hereby incorporated herein by reference. 10.9 First Amendment to Retirement Agreement dated December 31, 1996 between Tridex Corporation and with Alvin Lukash. 35 10.10 Employment Agreement dated December 2, 1996 between Tridex Corporation and Seth M. Lukash. 36 10.11 Employment Agreement dated August 7, 1996 between Tridex Corporation and George T. Crandall. 42 10.12 Plan of Reorganization dated as of June 24, 1996 among Tridex Corporation ("Tridex"), Magnetec Corporation ("Magnetec"), TransAct Technologies Incorporated ("TransAct") and Ithaca Peripherals Incorporated ("Ithaca"), filed on November 12, 1996 as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.13 Amendment to Plan of Reorganization dated as of August 30, 1996 among Tridex, Magnetec, TransAct and Ithaca, filed on November 12, 1996 as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.14 Agreement and Plan of Merger dated as of July 16, 1996 between Magnetec and Ithaca, filed on November 12, 1996 as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.15 Asset Transfer Agreement dated as of July 31, 1996 between Magnetec and Tridex, filed on November 12, 1996 as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.16 Manufacturing Support Services Agreement dated as of September 28, 1996 between Magnetec and Tridex, filed on November 12, 1996 as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.17 Corporate Services Agreement dated as of June 24, 1996 between Tridex and TransAct, filed on November 12, 1996 as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.18 Printer Supply Agreement dated as of July 30, 1996 between Magnetec and Ultimate Technology Corporation, filed on November 12, 1996 as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.19 Tax Sharing Agreement dated as of July 31, 1996 between Tridex and TransAct, filed on November 12, 1996 as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 1996 is hereby incorporated herein by reference. 10.20 Stock Incentive Compensation Agreement among Tridex Corporation, Ultimate Technology Corporation, 47 Dennis Lewis, Gary German and Paul Wolf dated March 10, 1997. 47 10.21 Employment Agreement dated February 21, 1997 between Ultimate Technology Corporation and Dennis Lewis. 57 10.22 Employment Agreement dated February 21, 1997 between Ultimate Technology Corporation and Gary German. 63 10.23 Employment Agreement dated February 21, 1997 between Ultimate Technology Corporation and Paul Wolf. 69 11.1 Statement re: computation of per share earnings. 75 21.1 List of Subsidiaries of Tridex. 76 23.1 Consent of Independent Accountants. 77 23.2 Consent of Independent Accountants. 78 27.1 Financial Data Schedule. 34 EX-10.9 2 AMENDMENT TO RETIREMENT AGREEMENT Exhibit 10.9 AMENDMENT TO RETIREMENT AGREEMENT This First Amendment to Retirement Agreement made and entered into as of this 31st day of December, 1996, by and between Tridex Corporation ("Tridex" or the "Company"), a Connecticut corporation with a principal place of business at 61 Wilton Road, Westport, Connecticut 06880 and Alvin Lukash ("Lukash"), an individual residing at 805 Cypress Boulevard, Apt. 311, Building 96, Palm Aire, Pompano Beach, Florida 33069 with reference to the following background. WHEREAS, on August 16, 1992, Tridex and Lukash entered into a Consulting Services Agreement which was amended by Agreement dated April 1, 1995 (the "Consulting Services Agreement"), and WHEREAS, pursuant to paragraph 8 of the Consulting Services Agreement, Company was required to maintain insurance on Lukash's life in the amount of Five Hundred Thousand Dollars ($500,000), and WHEREAS, Lukash contributed such life insurance policy to an Irrevocable Trust dated August 20, 1981, the Trustees of which are Seth M. Lukash and Stephen H. Friedman, and WHEREAS, the Trustees of said Trust and its principal beneficiary, Mildred Lukash, are willing to waive the requirement that Alvin Lukash maintain such life insurance policy, and WHEREAS, the Company is willing to agree to maintain a life insurance policy on Alvin Lukash's life in the amount of Seventy-Five Thousand Dollars ($75,000), pursuant to a policy issued by United of Omaha, policy number BU1014551, and to amend the Retirement Agreement between Lukash and the Company, dated December 31, 1995 (the "Retirement Agreement") to provide that the retirement benefit contained therein shall continue throughout the life of Lukash. NOW, THEREFORE, in consideration of the promises and agreements herein contained, and for other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto agree as follows: 1. Termination of Portion of Consulting Services Agreement. Tridex and Lukash agree to terminate the provisions of paragraph 8 of the Consulting Services Agreement effective on the date hereof. The remainder of the covenants, terms and conditions of the Consulting Services Agreement, to the extent not heretofore or hereby terminated, shall remain in full force and effect as set forth therein and in the Retirement Agreement. 2. Paragraph 2 of the Retirement Agreement is hereby amended to read as follows: "Retirement Benefit. Effective as of January 1, 1997 Tridex shall pay Lukash in equal monthly installments, a pension benefit at the rate of One Hundred Thousand Dollars ($100,000) a year until his death. In addition, Tridex shall maintain and pay the premiums required to maintain in full force and effect a life insurance policy on Lukash's life in the face amount of Seventy-Five Thousand Dollars ($75,000)." 3. Except as modified herein, the Retirement Agreement is hereby ratified, confirmed and approved. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first-above written. TRIDEX CORPORATION By: /s/ Seth M. Lukash ---------------------------------------- Title: Chairman and Chief Executive Officer ------------------------------------- /s/ Alvin Lukash ------------------------------------------- Alvin Lukash EX-10.10 3 EMPLOYMENT AGREEMENT Exhibit 10.10 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into as of the 2nd day of December, 1996, by and between Tridex Corporation, a Connecticut corporation with a mailing address of 61 Wilton Road, Westport, Connecticut 06880 (the "Company"), and Seth M. Lukash, an individual with a residence address of 404 Harvest Commons, Westport, Connecticut 06880 ("Executive"). INTRODUCTION 1. The Company is in the business of designing, developing, manufacturing and marketing Point of Sale printers and related products (the "Business"). Executive possesses special and unique knowledge, experience and skill respecting the management, operating, financial affairs and business of Tridex that the Board of Directors of Tridex believes are important for the future growth and success of Tridex. 2. The Company desires to employ Executive and Executive desires to accept such employment on the terms and conditions set forth herein. AGREEMENT In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows: 1. Employment Period. The term of this Agreement (the "Employment Period") shall commence on the date hereof and, subject to termination by the Executive or the Company as hereinafter provided, shall continue for a period of two (2) years beginning on the first day of each month after the date hereof. 2. Employment Duties. Subject to the terms and conditions set forth herein, the Company hereby employs Executive to act as Chairman and Chief Executive Officer of the Company during the Employment Period, and Executive hereby accepts such employment. Executive shall have supervision and control over and responsibility for the management and day-to-day operations of the Company subject to the direction and control of the Board of Directors. Executive's duties may not be altered in any material fashion without the approval of Executive. Executive agrees to perform his duties for the Company diligently, competently, and in a good faith manner. 3. Salary and Bonus. (a) Base Salary. The Company agrees to pay Executive $270,000 per year, payable monthly in advance. Executive's base salary shall not be decreased. In addition, no later than December 31 of each year during the Employment Period, commencing December 31, 1996, the Board of Directors of the Company (or any appropriate committee thereof) shall review and may increase, but not decrease, the Executive's annual base salary in its discretion, based upon the Company's performance and the Executive's particular contributions. (b) Bonus. Executive shall have an opportunity to earn an annual cash bonus commensurate with his position as Chairman and Chief Executive Officer under the Company's Executive Incentive Compensation Plan at a target bonus level of at least 50% of the Executive's base salary, subject to the discretion of the Company's Board of Directors (or any appropriate committee thereof). 4. Other Benefits. (a) Insurance and Other Benefits. The Executive shall be entitled to participate in, and shall receive the maximum benefits available under, the Company's insurance programs (including health, disability and life insurance) and any ERISA benefit plans, as the same may be adopted and/or amended from time to time, and shall receive all other fringe benefits that are provided by the Company to other senior executives. The Company shall contribute to the Executive's account the maximum amount permitted under the Company's 401(k) Plan and any other Company pension or retirement plan during the Employment Period. (b) Vacation. Executive shall be entitled to an annual vacation of such duration as may be determined by the Board of Directors, but not less than that generally established for other executives of Company and in no event less than five (5) weeks, without interruption of salary. (c) Automobile Allowance. The Company shall provide the Executive with the automobile allowance provided for the office of Chairman and Chief Executive Officer under the Company's automobile allowance policy. (d) Reimbursement of Expenses. The Company shall reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties or responsibilities under this Agreement, provided that Executive submits to the Company substantiation of such expenses sufficient to satisfy the record keeping guidelines promulgated from time to time by the Internal Revenue Service. (e) Service Fees. The Company shall reimburse the Executive, in an aggregate amount not to exceed $2,500 per year, for professional and other fees incurred by Executive in connection with (i) an annual medical examination of Executive and (ii) the annual planning for and preparation of Executive's personal income tax returns. The Company shall also reimburse the Executive, in an aggregate amount not to exceed $5,000 every twenty-four (24) months during the Employment Period, for estate planning services performed during the Employment Period. Additionally, the Company shall reimburse the Executive, in an amount not to exceed $7,500, for fees and expenses of counsel for the Executive incurred in connection with the negotiation and execution of this Agreement. (f) Consulting Agreement. If any amounts due or paid to Executive would constitute an Excess Parachute Payment under Section 280G of the Internal Revenue Code of 1986, such excess, including any excise tax thereon, shall be paid to Executive for consulting services rendered by Executive after termination of this Agreement. 5. Termination by the Company With Cause. The Company may terminate this Agreement if any of the following events shall occur: (a) the death or disability of the Executive (For purposes of this Agreement, "disability" shall mean the Executive's incapacity due to physical or mental illness which has caused the Executive to be absent from the full-time performance of his duties with the Company for a period of six (6) consecutive months.); (b) any action or inaction by the Executive that constitutes larceny, fraud, gross negligence, a willful or negligent misrepresentation to the directors or officers of the Company, its successors or assigns, a crime involving moral turpitude; or (c) the refusal of the Executive to follow the reasonable and lawful written instructions of the Board of Directors of the Company with respect to the services to be rendered and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused either by the terms of this Agreement or by actions taken by the Company in violation of this Agreement, and with respect to the first two refusals Executive has been given reasonable written notice and explanation thereof and reasonable opportunity to cure and no cure has been effected within a reasonable time after such notice. The Company may terminate this Agreement pursuant to this Section 5 upon written notice to the Executive, except for termination due to the death of the Executive, which shall require no notice. 6. Termination and Severance. 6.1 Notice/Events/Defined Terms. (a) Termination by the Executive. Executive may terminate this Agreement at any time by providing written notice to the Company. (b) Termination by the Company Without Cause. The Company may terminate this Agreement at any time, without Cause by providing written notice to Executive. As used in this Agreement, the term 2 "without Cause" shall mean termination for any reason not specified in Section 5 hereof, except for retirement. (c) Change in Control. A "Change in Control" will be deemed to have occurred if: (1) a Takeover Transaction occurs; or (2) any election of directors of the Company takes place (whether by the directors then in office or by the stockholders at a meeting or by written consent) and a majority of the directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors immediately preceding such election; or (3) the Company effectuates a complete liquidation of the Company or a sale or disposition of all or substantially all of its assets. A "Change in Control" shall not be deemed to include, however, a merger or sale of stock, assets or business of the Company if the Executive immediately after such event owns, or in connection with such event immediately acquires (other than in the Executive's capacity as an equity holder of the Employer or as a beneficiary of its employee stock ownership plan or profit sharing plan), any stock of the buyer or any affiliate thereof which, at the time of Executive's initial investment in such stock, had a purchase price or fair market value greater than $25,000. (d) Takeover Transaction. A "Takeover Transaction" shall mean (i) a merger or consolidation of the Company with, or an acquisition of the Company or all or substantially all of its assets by, any other corporation, other than a merger, consolidation or acquisition in which the individuals who were members of the Board of Directors of the Company immediately prior to such transaction continue to constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a period of not less than twelve (12) months following the closing of such transaction, or (ii) when any person or entity or group of persons or entities (other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company) either related or acting in concert becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of the Company. (e) Terminating Event. A "Terminating Event" shall mean: (i) termination by the Company of the employment of the Executive without Cause occurring within twelve (12) months of a Change of Control; or (ii) resignation of the Executive from the employ of the Company, while the Executive is not receiving payments or benefits from the Company by reason of the Executive's disability, subsequent to any of the following events occurring within twelve (12) months of a Change of Control: (A) a significant reduction in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the Executive immediately prior to the Change in Control; (B) a decrease in the salary payable by the Company to the Executive from the salary payable to the Executive immediately prior to the Change in Control except for across-the-board salary reductions similarly affecting all management personnel of the Company; or (C) the relocation of the Company's executive offices (or, if the Executive is primarily located at the Company's manufacturing facilities, such facilities) by more than 50 miles from their current location in Westport, Connecticut (unless such new location is closer than Westport, Connecticut to the Executive's then residence) provided, however, that a Terminating Event shall not be deemed to have occurred solely as a result of the Executive being an employee of any direct or indirect successor to the business or assets of the Company, rather than continuing as an employee of the Company, following a Change in Control; or (D) elimination or reduction of the Executive's participation in the Company's Executive Incentive Compensation Plan. 6.2 Executive's Right-to-Terminate. Executive may terminate Executive's employment for Good Reason at any time during the term of this Agreement. For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express written consent): (a) the assignment to Executive by the Company of any duties materially inconsistent with Executive's status with the Company or a substantial and material alteration in the nature or status of Executive's responsibilities from those in effect on the date hereof, or a material reduction in Executive's titles or offices as in effect on the date hereof, or any removal of Executive from, or any failure to reelect Executive to, any of such positions, except in connection with the termination of his employment for Disability or Cause or as a result of Executive's death or by Executive other than for Good Reason; 3 (b) a reduction by the Company in Executive's Salary as in effect on the date hereof or as the same may be increased from time to time during the term of this Agreement; (c) except if such action applies to all senior executive officers of the Company generally, any failure by the Company to continue in effect any Fringe Benefits, the taking of any action by the Company which would, directly or indirectly, materially reduce Executive's Fringe Benefits or deprive Executive of any Fringe Benefits enjoyed by Executive at the date hereof, or the failure by the Company to provide Executive with the number of paid vacation days to which Executive is entitled at the date hereof; (d) a relocation of the Company's principal executive offices to a location more than 50 miles from their current location in , or the Company's requiring Executive to be based anywhere other than the Company's principal executive offices; or (e) any material breach, uncured after reasonable notice, by the Company of any provisions of this Agreement. 6.3 Severance. (a) Without Cause. If the Company terminates this Agreement without Cause, other than as a result of a Terminating Event, or if Executive has the right to terminate this Agreement pursuant to Section 6.2 hereof, then commencing on the date of termination of this Agreement, the Company shall provide Executive with a severance package which shall consist of the following: (i) for a period equal to two (2) years after the date of termination (A) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's then current annual base salary under Section 3(a) hereof and (B) continuation of all benefits under Section 4; and (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan for the year of termination. (b) With a Terminating Event. If the Company terminates this Agreement as a result of a Terminating Event, then commencing on the date of such termination and for a period equal to three (3) years thereafter, the Company shall provide Executive with a severance package which shall consist of the following: (i) payment on the first business day of each month an amount equal to one-twelfth of the Executive's then current annual base salary under Section 3(a) hereof; (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan; and (iii) continuation of all benefits under Section 4. In addition, if the Company terminates this Agreement as a result of a Termination Event, then the Company shall cause the immediate vesting of all options and other rights granted to the Executive under the Company's stock plans. At any time when the Company is obligated to make monthly payments under Section 6.3(b), the Company shall, ten (10) days after receipt of a written request from the Executive, pay the executive an amount equal to the balance of the amounts payable under Section 6.3(b)(i) and (ii) provided that the obligation of the Company to continue to provide the benefits under Section 6.3(b)(iii) or to make monthly payments under 6.3(b)(i)-(ii) shall cease upon the payment of such amount. (c) General Release. As a condition precedent to receiving any severance payment, the Executive shall execute a general release of any and all claims which Executive or his heirs, executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and its past, present and future employees, officers, directors, agents and attorneys. (d) Withholding. Subject to Section 4(f), all payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Employer under applicable law. 7. Non-Competition. During the term of this Agreement and (a) in the case of termination other than as a result of a Terminating Event and provided that the executive is receiving the severance payments provided for in Section 6.3(a), for two (2) years following the termination of this Agreement or (b) in the case of termination as a result of a Terminating Event and provided that the executive is receiving, or after the Executive has received, the severance payments provided for in Section 6.3(b), for three (3) years following the termination 4 of this Agreement, Executive will not directly or indirectly whether as a partner, consultant, agent, employee, co-venturer, greater than two percent owner or otherwise or through any other person (as hereafter defined): (a) be engaged in any business or activity which is competitive with the business of the Company in any part of the world in which the Company is at the time of the Executive's termination engaged in selling its products directly or indirectly; or (b) attempt to recruit any employee of the Company, assist in their hiring by any other person, or encourage any employee to terminate his or her employment with the Company; or (c) encourage any customer of the Company to conduct with any other person any business or activity which such customer conducts or could conduct with the Company. For purposes of this Section 7, the term "Person" shall mean an individual or corporation, association or partnership in estate or trust or any other entity or organization. The Executive recognizes and agrees that because a violation by him of this Section 7 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. Executive expressly agrees that the character, duration and scope of this covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of this covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of both Executive and the Company that this covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive which are reasonable in light of the circumstances as they then exist and necessary to provide the Company the intended benefit of this covenant to compete. 8. Confidentiality Covenants. Executive understands that Company may impart to him confidential business information including, without limitation, designs, financial information, personnel information, strategic plans, product development information the like (collectively "Confidential Information"). Executive hereby acknowledges Company's exclusive ownership of such Confidential Information. Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company; (2) only to communicate the Confidential Information to fellow employees, agents and representatives of the Company on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information. Upon demand by the Company or upon termination of Executive's employment, Executive will deliver to the Company all manuals, photographs, recordings, and any other instrument or device by which, through which, or on which confidential Information has been recorded and/or preserved, which are in my Executive's possession, custody or control. Executive acknowledges that for purposes of this Section 8 the term "Company" means any person or entity now or hereafter during the term of this Agreement, which controls, is under common control with, or is controlled by, the Company 9. Governing Law/Jurisdiction This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of Connecticut. The parties agree that this Agreement was made and entered into in Connecticut and each party hereby consents to the jurisdiction of a competent court in Connecticut to hear any dispute arising out of this Agreement. 10. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes any and all previous agreements, written ad oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto. 11. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or certified mail, return receipt requested. 5 (a) to the Company at: 61 Wilton Road Westport, Connecticut 06880 Attn: Chairman of the Tridex Compensation Committee (b) to the Executive at: 404 Harvest Commons Westport, Connecticut 06880 Any such notice or other communication will be considered to have been given (i) on the date of the delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial overnight courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone confirmation of receipt. Either party may, by notice given to the other party in accordance with this section, designate another address or person for receipt of notices hereunder. 12. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement. 13. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement. 14. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TRIDEX CORPORATION By: /s/ Thomas R. Schwarz ----------------------------------- Chairman, Tridex Compensation Committee EXECUTIVE: /s/ Seth M. Lukash ---------------------------------------- Seth M. Lukash 6 EX-10.11 4 EMPLOYMENT AGREEMENT Exhibit 10.11 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into as of the 7th day of August, 1996, by and between Tridex Corporation, a Connecticut corporation with a mailing address of 61 Wilton Road, Westport, Connecticut 06880 (the "Company"), and George Crandall, an individual with a residence address of 32 Mayflower Drive, Trumbull, Connecticut 06611, (the "Executive"). INTRODUCTION 1. The Company is in the business of designing, developing, manufacturing and marketing Point of Sale printers and related products (the "Business"). 2. The Company desires to employ Executive and Executive desires to accept such employment on the terms and conditions set forth herein. AGREEMENT In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows: 1. Employment Period. The term of this Agreement (the "Employment Period") shall commence on the date hereof and, subject to earlier termination as hereinafter provided, shall terminate one (1) year from the date hereof provided that the term of this Agreement shall automatically extend by thirty (30) days for each thirty (30) day period which shall expire without either the Company or Executive giving written notice of an intent to terminate. 2. Employment Duties. Subject to the terms and conditions set forth herein, the Company hereby employs Executive to act as Vice President, Treasurer, and Controller of the Company during the Employment Period, and Executive hereby accepts such employment. The duties assigned and authority granted to Executive shall be as set forth in the By-laws of the Company and as determined by its Board of Directors from time to time. Executive agrees to perform his duties for the Company diligently, competently, and in a good faith manner. The Executive may also engage in civic and charitable activities to the extent they are not inconsistent with Executive's duties hereunder. 3. Salary and Bonus. (a) Base Salary. The Company agrees to pay Executive $93,000 per year, payable monthly at the beginning of each month. Executive's base salary shall not be decreased. In addition, no later than March 31, 1997 the Board of Directors of the Company (or any appropriate committee thereof) shall review and may increase the Executive's annual base salary in its discretion, based upon the Company's performance and the Executive's particular contributions. (b) Bonus. Executive shall have an opportunity to earn an annual cash bonus under the Company's Executive Incentive Compensation Plan, subject to the discretion of the Company's Board of Directors (or any appropriate committee thereof). 4. Other Benefits. (a) Insurance and Other Benefits. The Executive shall be entitled to participate in, and shall receive the maximum benefits available under the Company's insurance programs (including health, disability and life insurance) and any ERISA benefit plans, as the same may be adopted and/or amended from time to time, and shall receive all other fringe benefits that are provided by the Company to other senior executives. The Company shall contribute the maximum amount permitted under current law to the Executive's 401(k) Plan, and any other Company pension or retirement plan during the Employment Period. (b) Vacation. Executive shall be entitled to an annual vacation of such duration as may be determined by the Board of Directors, but not less than that generally established for other executives of Company and in no event less than three (3) weeks, without interruption of salary. (c) Automobile Allowance. The Company shall provide Executive with an automobile allowance. (d) Reimbursement of Expenses. The Company shall reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties or responsibilities under this Agreement, provided that Executive submits to the Company substantiation of such expenses sufficient to satisfy the record keeping guidelines promulgated from time to time by the Internal Revenue Service. 5. Termination by the Company with Cause. The Company may terminate this Agreement if any of the following events shall occur: (a) the death or disability of the Executive (for purposes of this Agreement, "disability" shall mean the Executive's incapacity due to physical or mental illness which has caused the Executive to be absent from the full-time performance of his duties with the Company for a period of six (6) consecutive months.). (b) any action or inaction by the Executive that constitutes larceny, fraud, gross negligence, a willful or negligent misrepresentation to the directors or officers of the Company, its successors or assigns, a crime involving moral turpitude; or (c) the refusal of the Executive to follow the reasonable and lawful written instructions of the Board of Directors of the Company with respect to the services to be rendered and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused either by the terms of this Agreement or by actions taken by the Company in violation of this Agreement, and with respect to the first two refusals Executive has been given reasonable written notice and explanation thereof and reasonable opportunity to cure and no cure has been effected within a reasonable time after such notice. The Company may terminate this Agreement pursuant to this Section 5 upon written notice to the Executive, except for termination due to the death of the Executive, which shall require no notice. 6. Termination and Severance. 6.1 Notice/Events/Defined Terms. (a) Termination of the Executive. Executive may terminate this Agreement at any time by providing written notice to the Company. (b) Termination by the Company Without Cause. The Company may terminate this Agreement at any time, without cause by providing written notice to Executive. As used in this Agreement, the term "without cause" shall mean termination for any reason not specified in Section 5 hereof, except for retirement. (c) Change in Control. A "Change in Control" will be deemed to have occurred if: (1) the Company effectuates a Takeover Transaction; or (2) any election of directors of the Company (whether by the directors then in office or by the stockholders at a meeting or by written consent) where a majority of the directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors immediately preceding such election; or (3) the Company effectuates a complete liquidation of the Company or a sale or disposition of all or substantially all of its assets. A "Change in Control" shall not be deemed to including, however, a merger or sale of stock, assets or business of the Company if the Executive immediately after such event owns, or in connection with such event immediately acquires (other than in the Executive's capacity as an equity holder of the Employer or as a beneficiary of its employee stock ownership plan or profit sharing plan), any stock of the buyer or any affiliate thereof. (d) Takeover Transaction. A "Takeover Transaction" shall mean (i) a merger or consolidation of the Company with, or an acquisition of the Company or all or substantially all of its assets by, any other corporation, other than a merger, consolidation or acquisition in which the individuals who were members of the Board of Directors of the surviving corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a period of not less than twelve (12) months following the closing of such transaction, or (ii) when any person or entity or group of persons 2 or entities (other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company either related or acting in concert becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of the Company. (e) Terminating Event. A "Terminating Event" shall mean: (i) termination by the Company of the employment of the Executive without Cause occurring within twelve (12) months of a Change of Control; or (ii) resignation of the Executive from the employ of the Company, while the Executive is not receiving payments or benefits from the Company by reason of the Executive's disability, subsequent to any of the following events occurring within twelve (12) months of a Change of Control: (A) a significant reduction in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, power functions or duties exercised by the Executive immediately prior to the Change in Control; (B) a decrease in the salary payable by the Company to the Executive from the salary payable to the Executive immediately prior to the Change in Control except for across-the-board salary reductions similarly affecting all management personnel of the Company; or (C) the relocation of the Company's executive offices (or, if the Executive is primarily located at the Company's manufacturing facilities, such facilities) by more than 50 miles from their current location in Westport, Connecticut (unless such new location is closer than Westport, Connecticut to the Executive's then residence) provided, however, that a Terminating Event shall not be deemed to have occurred solely as a result of the Executive being an employee of any direct or indirect successor to the business or assets of the Company, rather than continuing as an employee of the Company, following a Change in Control; or (D) elimination or reduction of the Executive's participation in the Company's Executive Incentive Compensation Plan. 6.2 Severance (a) Without Cause. If the Company terminates this Agreement without Cause, other than as a result of a Terminating Event and for a period equal to one (1) year thereafter, the Company shall provide Executive with a severance package which shall consist of the following: (i) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's then current annual base salary under Section 3(a) hereof; (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan for the year of termination, pro rated for the portion of the fiscal year occurring prior to termination; and (iii) continuation of all benefits under Section 4(a), (b) and (d). (b) With A Terminating Event. If the Company terminates this Agreement as a result of a Terminating Event, then commencing on the date of such termination and for a period equal to two (2) years thereafter, the Company shall provide Executive with a severance package which shall consist of the following: (i) payment on the first business day of each month an amount equal to one-twelfth of the Executive's then current annual base salary under Section 3(a) hereof; (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan; and (iii) continuation of all benefits under Section 4(a), (b), and (d). In addition, if the Company terminates this Agreement as a result of a Terminating Event, then the Company shall cause the immediate vesting of all options granted to the Executive under the Company's stock plans. At any time when the Company is obligated to make monthly payments under Section 6.2(b), the Company shall, ten (10) days after receipt of a written request from the Executive, pay the Executive an amount equal to the balance of the amounts payable under Section 6.2(b)(i)-(ii), provided that the obligation of the Company to continue to provide benefits pursuant to Section 6.2(b) (iii) or to make monthly payments under 6.2(b) (i)-(ii) shall cease upon the payment of such amount. (c) General Release. As a condition precedent to receiving any severance payment, the Executive shall execute a general release of any and all claims with Executive or his heirs, executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and its past, present and future employees, officers, directors, agents and attorneys. 7. Non-Competition. During the term of this Agreement and (a) in the case of termination other than as a result of a Terminating Event, for one (1) year following the termination of this Agreement or (b) in the case of termination as a result of a Terminating Event, for two (2) years following the termination of this Agreement, 3 Executive will not directly or indirectly whether as a partner, consultant, agent, employee, co-venturer, greater than two percent owner or otherwise or through any other person (as hereafter defined): (a) be engaged in any business or activity which is competitive with the business of the Company in any part of the world in which the Company is at the time of the Executive's termination engaged in selling its products directly or indirectly; or (b) attempt to recruit any employee of the Company, assist in their hiring by any other person, or encourage any employee to terminate his or her employment with the Company; or (c) encourage any customer of the Company to conduct with any other person any business or activity which such customer conducts or could conduct with the Company. For purpose of this Section 7, the term "Company" shall include any person controlling under common control with or controlled by, the Company, provided, however, that with respect to Tridex Corporation or any subsidiary of Tridex Corporation, the provisions of this Section 7 shall cease and be of no force and effect one (1) year after the Company is no longer a subsidiary of Tridex. For purposes of this Section 7, the term "Person" shall mean an individual or corporation, association or partnership in estate or trust or any other entity or organization. The Executive recognizes and agrees that because a violation by him of this Section 7 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. Executive expressly agrees that the character, duration and scope of this covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of this covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of both Executive and the Company that this covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive which are reasonable in light of the circumstances as they then exist and necessary to provide the Company the intended benefit of this covenant to compete. 8. Confidentiality Covenants. Executive understands that Company may impart to him confidential business information including, without limitations, designs, financial information, personnel information, strategic plans, product development information and the like (collectively "Confidential Information"). Executive hereby acknowledges Company's exclusive ownership of such Confidential Information. Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company; (2) only to communicate Confidential Information to fellow employees, agents and representatives of the Company on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information. Upon demand by the Company or upon termination of Executive's employment, Executive will deliver to the Company all manuals, photographs, recordings, and any other instrument or device by which, through which, or on which Confidential Information has been recorded and/or preserved, which are in my Executive's possession, custody or control. Executive acknowledges that for purposes of this Section 8 that term "Company" means any person or entity now or hereafter during the term of this Agreement which controls, is under common control with, or is controlled by, the Company. The Executive recognizes and agrees that because a violation by him of this Section 8 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violations, without the necessity of posting a bond. 9. Governing Law/Jurisdiction. This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of Connecticut. The parties agree that this Agreement was made and entered into in Connecticut and each party hereby consents to the jurisdiction of a competent court in Connecticut to hear any dispute arising out of this Agreement. 10. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes any and all previous agreements, written and oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto. 4 11. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or certified mail, return receipt requested. (a) to the Company at: 61 Wilton Road Westport, Connecticut 06880 Attn: Chairman and CEO (b) to the Executive at: 32 Mayflower Drive Trumbull, Connecticut 06611 Any such notice or other communication will be considered to have been given (i) on the date of delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial overnight courier, or (iv) on the date of facsimile transmission (telecopy) provided that the given of the notice obtains telephone confirmation of receipt. Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder. 12. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent by invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid of unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement. 13. Waiver. The failure of any party to insist in any once instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right of privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement. 14. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. IN WITNESS WHEREOF, the parties have executive this Agreement as of the date first written above. Tridex Corporation by: /s/ Seth M. Lukash ------------------------------------- Title: Chairman and CEO EXECUTIVE: /s/ George T. Crandall ---------------------------------------- George Crandall 5 EX-10.20 5 STOCK INCENTIVE COMPENSATION AGREEMENT Exhibit 10.20 STOCK INCENTIVE COMPENSATION AGREEMENT This Stock Incentive Compensation Agreement made and entered into as of this 10th day of March, 1997, by and between Dennis Lewis of 1857 Route 88 North, Newark, New York 14513 ("Lewis"), Gary German of 820 Coventry Drive, Webster, New York 14580 ("German") and Paul Wolf of 15 Manitoba Woods Lane, Spencerport, New York 14559 ("Wolf") (collectively hereinafter referred to as the "Ultimate Officers") and Tridex Corporation, a Connecticut corporation, with its principal place of business at 61 Wilton Road, Westport, Connecticut ("Tridex" or the "Company") and Ultimate Technology Corporation, a New York corporation ("Ultimate"), RECITALS The Ultimate Officers are the senior executive management of Ultimate which is a wholly-owned subsidiary of Tridex. Each of the Ultimate Officers entered into Employment Agreements (the "January, 1993 Employment Agreement") with Ultimate on January 20, 1993, which Employment Agreements expire on April 4, 1998. At the time the Ultimate Officers entered into the January, 1993 Employment Agreements, they also entered into an Employee Performance and Compensation Agreement with Ultimate and Tridex dated January 20, 1993 (the "Performance Agreement"). The Ultimate Officers and Tridex have reached agreement for entering into new employment agreements and for termination of the Performance Agreement, and for the entry into this Agreement and new employment agreements effective upon the Effective Date hereof. NOW, THEREFORE, in consideration of the promises and agreements herein contained, and for other good and valuable consideration, the receipt whereof is hereby acknowledged, the Ultimate Officers and Tridex agree as follows: 1. Definitions. As used herein, the following terms shall have the following meanings unless the context shall otherwise require: a. "Commission" means the United States Securities and Exchange Commission. b. "Closing Value" means on any day the price of the last trade of a security on a national exchange, or if no trade occurred on that day the average of the closing bid and asked prices. c. "Employment Agreements" means those certain employment agreements between Ultimate and each of German, Lewis and Wolf, dated of even date herewith. d. "Exchange Act" means the Securities Exchange Act of 1934, as amended. e. "German" - See Introduction. f. "Holder" means any of German, Lewis or Wolf. g. "Indemnified Party" - See Section 13(c). h. "Indemnifying Party" - See Section 13(c). i. "January, 1993 Employment Agreements" - See Introduction. j. "Lewis" - See Introduction. k. "Net TransAct Proceeds" - See Section 7 l. "Performance Agreement" - See Introduction m. "Piggyback Registration" - See Section 10. n. "Pledge Agreements" means those certain Pledge Agreements between Ultimate and each Ultimate Officer, dated of even date herewith, a form of which is attached hereto as Exhibit A. o. "Spin Off" means the distribution of TransAct Stock to holders of Tridex Stock. p. "TransAct" means TransAct Technologies, Inc., a Delaware corporation. q. "TransAct Stock" means shares of TransAct Common Stock, par value $0.01 per share. r. "TransAct Valuation Date" means a date selected by Tridex a Valuation Date for determining the fair market value of any or all TransAct Stock then subject to the Pledge Agreement. s. "Tridex" - See Introduction. t. "Tridex Pledged Stock" means Tridex Stock pledged to Ultimate by each Ultimate Officer pursuant to Section 3 hereof. u. "Tridex Stock" means shares of Tridex Common Stock, no par value. v. "Valuation Date" means as the context requires (i) the date shares of TransAct Stock are sent to the Transfer Agent for registration in the name of the Ultimate Officers, (ii)any TransAct Valuation Date, or (iii) the date of the Spin-Off. w. "Transfer Agent" means as the context requires, the transfer agent from time to time for with TransAct Stock or Tridex Stock. x. "Sharing Percentages" means as to Lewis - 46%, as to German - 29% and as to Wolf - 25%, or if this Agreement shall be terminated as to any one of German, Lewis or Wolf in accordance with Section 8 prior to January 3, 1999, then the Sharing Percentages for the remaining Ultimate Officers shall be such officer's Sharing Percentage divided by the Sharing Percentages of all Ultimate Officers then party to this Agreement. y. "Ultimate" - See Introduction. z. "Ultimate Officers" - See Introduction. aa. "Wolf" - See Introduction. 2. Termination of Employee Performance Agreement. The Performance Agreement is hereby terminated, and none of the parties to the Performance Agreement shall have any further obligation thereunder. 3. Tridex Representations and Conditions Precedent. Tridex represents to the Ultimate Officers that it has (a) received a ruling from the Internal Revenue Service that the Spin-Off will be tax free to holders of Tridex Stock, (b)received a No Action Letter from the Securities & Exchange Commission that shares of TransAct Stock received by holders of restricted Tridex securities will not be restricted securities except to the extent that the holders are affiliates of TransAct, and (c) that the shares of Tridex Stock, when delivered to the Ultimate Officers, will be validly issued, fully paid and non-assessable. 4. Delivery of Tridex Shares. a. Within two (2) business days of the date hereof, Tridex shall issue and deliver to each Ultimate Officer a number of Tridex Shares equal to the product of (a) 100,000 and (b) such Ultimate Officer's then Sharing Percentage, which such shares shall be restricted securities and shall bear the legends as hereinafter provided. Each share certificate shall bear a restrictive legend as follows: "The shares represented by this Certificate have been acquired for investment and have not been registered under the Securities Act of 1933 as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated, unless and until such shares are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required.." b. Concurrent with the execution and delivery of this Agreement each Ultimate Officer has executed and delivered to Ultimate a Pledge Agreement. Fifty (50%) percent of Tridex Stock received by each Ultimate Officer shall be pledged to Ultimate pursuant to the Pledge Agreement and shall be immediately delivered to Ultimate with stock powers attached to be held by Ultimate pursuant to the terms of this Agreement and the Pledge Agreement. In addition, such Tridex Pledged Stock and any TransAct Stock received by each Ultimate Officer as a dividend with respect to Tridex Pledged Stock shall bear a further legend as follows: "The Shares represented by this Certificate are subject to that Certain Stock Incentive Compensation Agreement, dated March 10, 1997 between the recordholder and Tridex Corporation and may not be sold or transferred except pursuant to such Agreement and are further subject to forfeiture by the recordholder upon the happening of certain events as more fully set forth in said Stock Incentive Compensation Agreement." 5. Additional Distribution. a. On the date of the Spin-Off, the number of shares of TransAct Stock received by the Ultimate Officer not subject to the Pledge Agreement shall be valued based on the Closing Valuation. If and to the extent that the Closing Value of the such TransAct Stock shall be less than $600,000, Tridex shall direct Ultimate to release from the Pledge Agreement and deliver to the Ultimate Officers a number of shares of TransAct Stock based upon the Closing Value on the date of the Spin-Off sufficient so that the value of total shares of TransAct Stock received by the Ultimate Officers by virtue of the Tridex Stock received pursuant to Section 4 and this Section 5a (and not subject to the Pledge Agreement) will have a Closing Value on the 2 date of the Spin-Off equal to $600,000. Additionally Tridex will cause the Transfer Agent to remove any restrictive legends with respect to such TransAct Stock so delivered to the Ultimate Officers. b. On January 2, 1998 Tridex will direct Ultimate to release from the Pledge Agreement and deliver to the Ultimate Officers in accordance with their then respective Sharing Percentages, fifty percent (50%) of the remaining shares of TransAct and Tridex Stock then held pursuant to the Pledge Agreement and fifty percent (50%) of the net proceeds of any sale of TransAct Stock pursuant to Section 7 hereof then being held by Ultimate. On January 2, 1999, unless this Agreement has been terminated pursuant to Section 8 with respect to any Ultimate Officer, Tridex, shall direct to Ultimate to release from the Pledge Agreement and deliver to the Ultimate Officers in accordance with their then Sharing Percentages the balance of the shares of Tridex and TransAct Stock and cash or other securities then being held by Ultimate pursuant to the Pledge Agreement. c. All shares of Tridex Stock delivered to the Ultimate Officers pursuant to this Section 5 shall be restricted securities and bear the legend set forth in Section 4.a. hereof. Tridex shall cause the Transfer Agent to remove the legend set forth in paragraph 4. b. from all TransAct Stock and Tridex Stock delivered pursuant to this Section 5. d. Any payments or distributions required to be made by Ultimate pursuant to this Sections 5 shall be reduced by any federal, state or local withholding obligations incurred by Ultimate as a result of such distribution as determined by its independent public accountant and Ultimate is authorized to sell a sufficient number of shares of TransAct Stock to satisfy such withholding obligations prior to making any distribution thereof in the event that the Net TransAct Proceeds which otherwise would be distributed are insufficient to satisfy such withholding obligations unless the Ultimate officer shall pay to Ultimate the amount of any such insufficiency. 6. Tridex Guarantee. Tridex guarantees to each Ultimate Officer that in the aggregate the total value of the TransAct Stock received by him from Tridex using the sum of Closing Values on each Valuation Date shall equal or exceed the product of $1.2 million and such Officer's Sharing Percentage (the "Guarantee Amount"). The Tridex guarantee shall terminate as to any Ultimate Officer with respect to whom this Agreement is terminated pursuant to Section 8 hereof. If, on January 3, 1999 the total value of the TransAct Stock received by each Ultimate Officer valued as aforesaid shall be less than such Officer's Guarantee Amount, Tridex shall, within ten (10) days, pay to each such Ultimate Officer an amount equal to the difference between his Guarantee Amount and the value of the TransAct Stock theretofor delivered to such Ultimate Officer valued in accordance with the provisions of this paragraph. 7. TransAct Valuation Date/Ultimate Officers Option. At any time and from time to time upon one business day actual notice to each Ultimate Officer, Tridex may set the TransAct Valuation Date with respect to TransAct Stock held by Ultimate pursuant to the Pledge Agreement. Upon receipt of such notice, each Ultimate Officer shall have the right to instruct Tridex to cause Ultimate to sell any or all TransAct Stock which was subject of such notice. Upon receipt of such instructions, Ultimate shall sell such TransAct Stock in an orderly fashion and the net proceeds of such sale shall be distributed in accordance with this Section 7. The Guarantee Amount with respect to such Officer's shall be reduced by the amount of proceeds. From the proceeds, Ultimate will (a) immediately pay to itself an amount determined by its independent public accountants as necessary to satisfy any federal, state or local withholding obligations Ultimate may have with respect to each Ultimate Officer by reason of such Officer's election to sell and (b) on or before March 31 of the year following the year in which the sale occurs, distribute to such Ultimate Officer cash equal to the positive difference, if any, between: (1) the excess of: (i) the actual tax liability of such Ultimate Officer for the calendar year in which the sale occurred, over (ii) the tax liability which such Ultimate Officer would have incurred had the proceeds of a sale of TransAct Stock for such taxable year not been included in such Ultimate Officer's gross income (as defined in the Internal Revenue Code of 1986) (such amount to be calculated by such Ultimate Officer at Ultimate's cost and communicated to Ultimate on or before March 15, and subject to reasonable verification by Tridex's independent public accountants), over (2) the amount of such withholding paid by Ultimate with respect to any proceeds of sale of TransAct Stock during such calendar year. The balance (the "Net TransAct Proceeds") shall remain subject to this Agreement and the Pledge Agreement and shall be invested by Ultimate in United States obligations with a maturity of not more than two years. The account and/or securities in which such proceeds are placed or invested shall designate that the owner thereof is the appropriate Ultimate Officer but that the account or securities are subject to this Agreement and the Pledge 3 Agreement. All interest paid with respect to the Net TransAct Proceeds or securities shall be paid to, or paid over by Ultimate to, the Ultimate Officer for whom the account was opened or for whose benefit the securities were purchased. In the event an Ultimate Officer does not elect to sell all the TransAct Stock which was subject of a TransAct Valuation Date notice, the TransAct Stock subject to the notice shall be valued at the Closing Value on the TransAct Valuation Date and the value of TransAct Stock as so determined with respect to each Ultimate Officer shall reduce such Officer's Guarantee Amount. 8. Early Termination. Notwithstanding any provisions herein to the contrary, if prior to January 3, 1999 an Ultimate Officer's Employment Agreement shall be terminated for Cause, as that term is defined in such Employment Agreement, or if the Ultimate Officer shall voluntarily terminate his employment with Ultimate then Ultimate shall have the right to and shall sell all TransAct Stock then subject to the Pledge Agreement with such terminated Ultimate Officer. The net proceeds of such sale, any securities owned by terminated Ultimate Officer then pledged pursuant to Section 7 hereof and the Pledged Tridex Stock shall be the property of Ultimate free and clear of any claims thereto by such Terminated Ultimate Officer. Upon the death or disability, as that term is defined in the Employment Agreement, prior to December 31, 1998 of an Ultimate Officer, Ultimate shall release from the Pledge Agreement with respect to such deceased or disabled Ultimate Officer, Net TransAct Proceeds, and all sale TransAct and Tridex Stock and shall make the following transfers: a. If such death or disability takes place prior to January 1, 1998, then that portion equal to fifty percent (50%) of the Net TransAct Proceeds and a number of shares of TransAct Stock and Tridex Stock multiplied in each case by a fraction, the numerator of which shall be the number of days having elapsed in 1997 prior to the date of such death or disability and the denominator of which shall be 365, shall be paid (or delivered in the case of stock) to the estate or to the disabled Ultimate Officer, as the case may be; or b. If the date of such Ultimate Officer's death or disability shall occur after December 31, , 1997 but prior to January 1, 1999, then Ultimate shall distribute to the estate of such Ultimate Officer or to the disabled Ultimate Officer an amount equal to the Net TransAct Proceeds, a number of shares of TransAct Stock, and Tridex Stock, multiplied in each case by a fraction, the numerator of which shall be the number of days in 1998 having elapsed prior to the date of such death or disability and the denominator of which shall be 365. c. Ultimate shall sell the TransAct Stock not so delivered pursuant to the foregoing Subsections a. or b. and the cash proceeds thereof together with remaining securities and Pledged Tridex Stock shall be retained by Ultimate free of any claims of such deceased or disabled Ultimate Officer. d. Any payments or distributions required to be made by Ultimate pursuant to this Sections 8 shall be reduced by any federal, state or local withholding obligations incurred by Ultimate as a result of such distribution as determined by its independent public accountant and Ultimate is authorized to sell a sufficient number of shares of TransAct Stock to satisfy such withholding obligations prior to making any distribution thereof in the event that the Net TransAct Proceeds which otherwise would be distributed are insufficient to satisfy such withholding obligations unless the Ultimate officer shall pay to Ultimate the amount of any such insufficiency. 9. Representations. Each Ultimate Officer represents to Tridex on the date hereof, and agrees that such representation shall be deemed made at the date of any release of the Tridex Stock from the Pledge Agreement, that: a. He is an "accredited investor" for purposes of Regulation D under the Securities Act and that it is acquiring the Tridex Stock for its own account, and not with a view to selling or otherwise distributing the Tridex Stock in violation of the Securities Act; b. He has sufficient knowledge and experience in investing in companies similar to Tridex so as to be able to evaluate the risks of its investment in Tridex and is able to financially bear the risks thereof; 4 c. It has had the opportunity to discuss Tridex's, business, financial affairs and management with the Tridex's management and has received (or had made available to it) any financial and business documents requested by it; d. He understands that (a) the shares of Tridex Stock have not been registered under the Securities Act of 1933 by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rules 505 or 506 under the Securities Act, (b) such shares must be held indefinitely unless a subsequent disposition is registered under the Securities Act or is exempt from registration thereunder, (c) such shares will bear a legend to that effect, and (d) the Company will make a notation on its transfer books to such effect. 10. Registration Rights a. "Piggy-Back" Registration. If the Company proposes to register any of its Tridex Stock under the Securities Act in connection with any public offering whether or not for sale for its own account following the date hereof (other than a registration on Form S-8 relating solely to the sale of securities to participants in a stock plan offered by the Company or a registration on Form S-1 or S-4 relating to an acquisition), the Company shall promptly give each Holder written notice of such registration. Upon the written request of any Holder given within thirty (30) days after such notice, the Company shall use its best efforts to cause a registration statement covering all of the Tridex Stock then owned by such Holder (the "Registerable Securities") that each such Holder has requested to be registered to become effective under the Securities Act. The Company shall be under no obligation to complete any offering of its securities it proposes to make under this Section 10 and shall incur no liability to any Holder for its failure to do so. Notwithstanding any other provisions of this Section 10, if the managing underwriter for the offering advises the Company in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registerable Securities which would otherwise be so underwritten, and the number of shares of Registerable Securities that may be included in the underwriting shall be allocated as follows: (i) First, to the Company for shares requested to be sold by it in such offering. (ii) Second, to the Holders for shares to be sold by them in such offering in accordance with their initial Sharing Percentage. In no event shall the rights granted to the Holder in this Agreement reduce the number of Registerable Securities to be included in any offering by the Company. In the event that any limitation is imposed hereunder on the number of Registerable Securities that any Holder may include in such offering, the registration rights provided herein shall continue in full force and effect with respect to any remaining unregistered Registerable Securities of such Holder or any Tridex Stock thereafter delivered to such Holder pursuant to this Agreement; provided that the registration rights granted pursuant to this agreement shall terminate on January 1, 2001. b. Selection of Underwriters. In any Piggyback Registration, the Company shall (unless Company shall otherwise agree) have the right to select the investment bankers and managing underwriters in such registration. c. Expenses. Tridex shall pay all registration expenses in connection with one registration of Registerable Securities requested pursuant to this Section 3; provided that each Holder of Registerable Securities shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registerable Securities pursuant to a registration statement effected pursuant to this Section 10. 11. Obligations of the Company In connection with the registration of any Registerable Securities, the Company shall take the following actions as expeditiously as reasonably possible: a. prepare and file with the Commission a registration statement with respect to such Registerable Securities and use its best efforts to cause such registration statement to become effective (provided, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will 5 furnish to one counsel, selected by the Holders, copies of all such documents proposed to be filed, which documents will be subject to the timely review of such counsel); b. prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for not more than nine (9) months, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such effective period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; c. upon request, furnish to each seller of Registerable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as each such seller may reasonably request in order to facilitate the disposition of the Registerable Securities owned by each such seller; d. use its best efforts to register or qualify such Registerable Securities under such other securities or blue sky laws of such jurisdictions as any Holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of the Registerable Securities owned by such Holder; provided that the Company will not be required (i) to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (d), (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any such jurisdiction; e. notify each seller of such Registerable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will promptly prepare (and, when completed, give notice to each seller of Registerable Securities) a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registerable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; that upon such notification by the Company, each seller of such Registerable Securities will not offer or sell such Registerable Securities until the Company has notified such seller that it has prepared a supplement or amendment to such prospectus and delivered copies of such supplement or amendment to such seller; f. provide a transfer agent and registrar for all such Registerable Securities not later than the effective date of such registration statement; g. enter into such customary agreements (including underwriting agreements in customary form) in order to expedite or facilitate the disposition of such Registerable Securities; and, h. permit each Holder, in its sole and exclusive judgment which might be deemed to be an underwriter or a controlling person of the Company within the meaning of Section 15 of the Securities Act, to participate in the preparation of such registration or comparable statement and to permit the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of the Holder and its counsel should be included, provided that such material shall be furnished under such circumstances as shall cause it to be subject to the indemnification provisions provided pursuant to Section 13(b) hereof. 12. Cooperation by Prospective Sellers, Etc. a. Each prospective seller of Registerable Securities will furnish to the Company in writing such information as the Company may reasonably require from such seller, and otherwise reasonably cooperate with the Company in connection with any registration statement with respect to such Registerable Securities. b. The failure of any prospective seller of Registerable Securities to furnish any information or documents in accordance with any provision contained in this Agreement shall not affect the obligations of the Company under this Agreement to any remaining sellers who furnish such information and documents unless in the 6 reasonable opinion of counsel to the Company or the underwriters, such failure impairs or may impair the viability of the offering or the legality of the registration statement or the underlying offering. c. each selling Holder shall enter into and perform its obligations under an underwriting agreement with the managing underwriter for such offering in customary form not inconsistent with this Agreement, including furnishing any opinion of counsel and agreeing to indemnification obligations reasonably requested by the managing underwriter, but in no event will any Holder be liable for indemnification obligations in excess of the net offering proceeds received by such Holder. 13. Indemnification a. Indemnification by the Company. The Company will indemnify the Holder requesting or joining in a registration and each underwriter of the securities so registered, the officers, directors and partners of each such person and each person, if any, who controls any thereof (within the meaning of the Securities Act) against any and all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of any material fact contained in any prospectus, offering circular or other document incident to any registration, qualification or compliance (or in any related registration statement, notification or the like) or any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to such person and relating to any action or inaction required of such person in connection with any such registration, qualification or compliance, and the Company will reimburse each such Holder, underwriter, officer, director, partner and controlling person for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission based upon written information furnished to the Company in an instrument duly executed by the Holder, underwriter, officer, director, partner or controlling person and stated to be specifically for use in such prospectus, offering circular or other document. b. Indemnification by the Holder. The Holder requesting or joining in a registration will indemnify each underwriter of the securities so registered, the Company and the officers, directors and partners of each such person and each person, if any, who controls any thereof (within the meaning of the Securities Act) and their respective successors in title and assigns against any and all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of any material fact contained in any prospectus, offering circular or other document incident to any registration, qualification or compliance (or in any related registration statement, notification or the like) or any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statement therein not misleading, and the Holder will reimburse each underwriter, the Company and each other person indemnified pursuant to this paragraph (b) for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, however, that this paragraph (b) shall apply only if (and only to the extent that) such statement or omission was made in reliance upon written information furnished to such underwriter or the Company in an instrument duly executed by the Holder and stated to be specifically for use in such prospectus, offering circular or other document (or related registration statement, notification or the like) or any amendment or supplement thereto; and provided further that the Holder's liability hereunder with respect to any particular registration shall be limited to an amount equal to the proceeds received by the Holder from the Registerable Securities sold by the Holder in such registration. c. Indemnification Proceedings. Each party entitled to indemnification pursuant to this Section 13 (the "Indemnified Party") shall give notice to the party required to provide indemnification pursuant to this Section 13 (the "Indemnifying Party") promptly after such Indemnified Party acquires actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume the defense of any claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be reasonably acceptable to the Indemnified Party, and the Indemnified Party may participate in such defense at such party's expense; and provided, further, that the failure by any Indemnified Party to give notice as provided in this paragraph (c) shall not relieve the Indemnifying Party of its obligations under this Section 13 except 7 to the extent that the failure results in a failure of actual notice to the Indemnifying Party and such Indemnifying Party is damaged as a result of the failure to give notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. The reimbursement required by this Section 13 shall be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred. 14. Contribution in Lieu of Indemnification If the indemnification provided for in Section 13 hereof is unavailable to a party that would have been an Indemnified Party under any such section in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each party that would have been an Indemnifying Party thereunder shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or such Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holder agree that it would not be just and equitable if contribution pursuant to this Section 14 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 14. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 14 shall include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to indemnification or contribution from any person who was not guilty of such fraudulent misrepresentation. 15. Reports Under The Exchange Act In order to provide the Holder the benefits of Rule 144 under the Securities Act to sell securities of the Company to the public without registration, the Company agrees to: a. Public Information. Make and keep public information available as those terms are understood and defined in Rule 144, at all times after the date hereof. b. Timely Filing. File with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. c. Compliance; Information. Furnish to any Holder, so long as Holder owns any Registerable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of Rule 144 rights to sell Registerable Securities to the public without registration. 16. Lockup Agreement The Holder, if the Company or the managing underwriters so request in connection with any underwritten registration of the Company's Securities, will not, without the prior written consent of the Company or such underwriters, effect any public sale or other distribution of any equity securities of the Company, including any sale pursuant to Rule 144, during the seven days prior to, and during the ninety (90) day period commencing on the effective date of such underwritten registration, except in connection with such underwritten registration. 8 17. Participation In Underwritten Registrations No person may participate in any underwritten registration pursuant to this Agreement unless such person (a) agrees to sell such person's securities on the basis provided in any underwriting arrangements approved by the persons entitled, under the provisions hereof, to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required by the terms of such underwriting arrangements. The Holder shall be entitled at any time to withdraw such Registerable Securities from such registration prior to its effective date in the event that the Holder shall disapprove of any of the terms of the related underwriting agreement but only if the Holder is permitted to do so by the managing underwriters or pursuant to any agreement therewith. 18. Miscellaneous a. Amendments and Waivers. The provisions of this Agreement, including the provisions of this paragraph (a), may not be amended, modified or supplemented, and any waiver or consent to or any departure from any of the provisions of this Agreement may not be given and shall not become or be effective, unless and until (in each case) the Company shall have received the prior written consent of each Holder to any such amendment, modification, supplement, waiver or consent. b. Term. Subject to the provisions of Section 10(a), the agreements of the Company contained in this Agreement shall continue in full force and effect so long as the Holder holds any Registerable Securities. c. Notices. Except as provided in Section 7, all notices provided for or permitted hereunder shall be made in writing by hand delivery, registered or certified first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set after such Holder's name in the Introduction with a copy to: Michael R. McEvoy, Esq. Harter, Secrest & Emery 700 Midtown Tower Rochester, New York 14804 and (ii) if to the Company, at: 61 Wilton Road Westport, Connecticut 06880 with a copy to: Stephen J. Carlotti Hinckley, Allen & Snyder 1500 Fleet center Providence, Rhode Island 02903 and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 18(c). All such notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. d. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without limitation, subsequent holders of Registerable Securities agreeing to be bound by all of the terms and conditions of this Agreement by executing an Instrument of Accession. e. Counterparts. This Agreement may be executed in four or more counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. 9 f. Headings. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning construction or effect. g. Governing Law. The validity, performance, construction and effect of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Connecticut , without giving effect to principles of conflicts of law. h. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. i. Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registerable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. The parties hereto have caused this Agreement to be duly executed under seal as of the date first above written. Tridex Corporation By: /s/ Seth M. Lukash ------------------------------------- Chairman and Chief Executive Officer /s/ Gary German ---------------------------------------- Gary German /s/ Dennis Lewis ---------------------------------------- Dennis Lewis /s/ Paul Wolf ---------------------------------------- Paul Wolf 10 EX-10.21 6 EMPLOYMENT AGREEMENT Exhibit 10.21 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into as of the 21st day of February, 1997, by and between Ultimate Technology Corporation, a New York corporation with a mailing address of 100 Rawson Road, Victor, New York 14564 (the "Company"), and Dennis J. Lewis, an individual with a residence address of 1857 Route 88 North, Newark, New York 14513 ("Executive"). INTRODUCTION 1. On January 20, 1993, Executive and Company entered into an Employment Agreement (the "January, 1993 Employment Agreement") in connection with the acquisition of all the issued and outstanding stock of the Company by Tridex Corporation, a Connecticut corporation ("Tridex"). Executive and Company wish to terminate the 1993 Employment Agreement and enter into a new employment agreement. AGREEMENT In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows: 1. Termination of 1993 Employment Agreement. Effective on the Effective Date of that certain Stock Incentive Compensation Agreement between Tridex and the Employee, among others, dated of even date herewith the 1993 Employment Agreement is terminated and neither party shall have any further obligation thereunder. 2. Employment Period. The term of this Agreement (the "Employment Period") shall commence on the date hereof and, subject to termination by the Executive or the Company as hereinafter provided, shall continue for a period of three (3) years, subject, nevertheless, to termination as hereinafter provided. 3. Employment Duties. Subject to the terms and conditions set forth herein, the Company hereby employs Executive to act as President of Ultimate Technology Corporation during the Employment Period, and Executive hereby accepts such employment. Executive shall have supervision and control over and responsibility for the management and day-to-day operations of the Company subject to the direction and control of the Board of Directors. Executive's duties may not be altered in any material fashion without the approval of Executive. Executive agrees to perform his duties for the Company diligently, competently, and in a good faith manner. 4. Salary and Bonus. a. Base Salary. The Company agrees to pay Executive $148,320 per year, payable monthly in advance. Executive's base salary shall not be decreased. In addition, no later than December 31 of each year during the Employment Period, commencing December 31, 1997, the Compensation Committee of the Tridex Board of Directors shall review and may increase, in its discretion may grant such further increases, based upon the Company's performance and the Executive's particular contributions. b. Bonus. Executive shall have an opportunity to participate in all annual and/or long term incentive programs, including the Tridex's Executive Incentive Compensation Plan under which Executive may earn up to 35% of his base salary as a bonus upon meeting annual targets and objectives established by the Tridex Board of Directors. c. Options. In order to induce Executive to enter into this Agreement effective on the day after the Spin-Off, as that term is defined in that certain Stock Incentive Compensation Agreement, between Executive and others and Tridex, dated of even date herewith, Tridex will grant to Executive under the proposed Tridex 1997 Long Term Incentive Compensation Plan (or in the event such Plan is not approved by the Tridex shareholders at their next annual meeting, then under the Tridex 1989 Long Term Incentive Plan, as amended), 75,000 options to purchase shares of Tridex Common Stock, no par value, pursuant to an option agreement between Tridex and Executive in the usual and customary form, such option to have a ten (10) year term and to vest over a three (3) year period. Additionally, on or before the record date for the Spin-Off, Tridex will loan to Executive fifty percent (50%) of the option exercise price with respect to all 2 options to purchase Tridex shares currently held by Executive. Such loan shall be secured by a pledge of the Tridex shares to be received upon exercise together with any shares received in the Spin-Off, will have a term of fifteen (15) months will bear a market rate of interest and also contain such other terms and conditions which are customary for similar types of instruments issued in connection with the exercise of options by senior company executives. 5. Other Benefits. a. Insurance and Other Benefits. The Executive shall be entitled to participate in, and shall receive the maximum benefits available under, the Company's or Tridex's insurance programs (including health, disability and life insurance) and any ERISA benefit plans, as the same may be adopted and/or amended from time to time, and shall receive all other fringe benefits that are provided by the Company or Tridex to other senior executives. The Company shall contribute to the Executive's account the maximum amount permitted under the Company's or Tridex's 401(k) Plan and any other Company or Tridex pension or retirement plan during the Employment Period. b. Vacation. Executive shall be entitled to an annual vacation of such duration as may be determined by the Board of Directors, but not less than that generally established for other executives of Company or Tridex and in no event less than four weeks, without interruption of salary. c. Automobile Allowance. The Company shall provide the Executive with the automobile allowance provided for the office of President under Tridex's automobile allowance policy. d. Reimbursement of Expenses. The Company shall reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties or responsibilities under this Agreement, provided that Executive submits to the Company substantiation of such expenses sufficient to satisfy the record keeping guidelines promulgated from time to time by the Internal Revenue Service. 6. Termination by the Company With Cause. The Company may terminate this Agreement if any of the following events shall occur: a. the death or disability of the Executive (For purposes of this Agreement, "disability" shall mean the Executive's incapacity due to physical or mental illness which has caused the Executive to be absent from the full-time performance of his duties with the Company for a period of six (6) consecutive months.); b. any action or inaction by the Executive that constitutes larceny, fraud, gross negligence, a willful or negligent misrepresentation to the directors or officers of the Company, its successors or assigns, a crime involving moral turpitude; or c. the refusal of the Executive to follow the reasonable and lawful written instructions of the Chief Executive Officer of Tridex or the Tridex Board of Directors with respect to the services to be rendered and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused either by the terms of this Agreement or by actions taken by the Company in violation of this Agreement, and with respect to the first two refusals Executive has been given reasonable written notice and explanation thereof and reasonable opportunity to cure and no cure has been effected within a reasonable time after such notice. The Company may terminate this Agreement pursuant to this Section 6 upon written notice to the Executive, except for termination due to the death of the Executive, which shall require no notice. 7. Termination and Severance. 7.1 Notice/Events/Defined Terms. a. Termination by the Executive. Executive may terminate this Agreement at any time by providing written notice to the Company. b. Termination by the Company Without Cause. The Company may terminate this Agreement at any time, without Cause by providing written notice to Executive. As used in this Agreement, the term 3 "without Cause" shall mean termination for any reason not specified in Section 6 hereof, except for retirement. c. Change in Control. A "Change in Control" will be deemed to have occurred if: (1) a Takeover Transaction occurs; or (2) any election of directors of Tridex takes place (whether by the directors then in office or by the stockholders at a meeting or by written consent) and a majority of the directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors immediately preceding such election; or (3) the Company or Tridex effectuates a complete liquidation of the Company or a sale or disposition of all or substantially all of its assets. A "Change in Control" shall not be deemed to include, however, a merger or sale of stock, assets or business of the Company if the Executive immediately after such event owns, or in connection with such event immediately acquires (other than in the Executive's capacity as (1) a current equity holder of Tridex, (2) a holder of options or instruments convertible into an equity interest in Tridex, or (3) as a beneficiary of any employee stock ownership plan or profit sharing plan maintained by Tridex or the Company), any stock of the buyer or any affiliate thereof which, at the time of Executive's initial investment in such stock, had a purchase price or fair market value greater than $25,000. d. Takeover Transaction. A "Takeover Transaction" shall mean (i) a merger or consolidation of the Company or Tridex with, or an acquisition of the Company or Tridex or all or substantially all of its assets by, any other corporation, other than a merger, consolidation or acquisition in which the individuals who were members of the Board of Directors of the Company or Tridex immediately prior to such transaction continue to constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a period of not less than twelve (12) months following the closing of such transaction, or (ii) when any person or entity or group of persons or entities (other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company or Tridex) either related or acting in concert becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company or Tridex representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of the Company or Tridex. e. Terminating Event. A "Terminating Event" shall mean: (i) termination by the Company of the employment of the Executive without Cause occurring within twelve (12) months of a Change of Control; or (ii) resignation of the Executive from the employ of the Company, while the Executive is not receiving payments or benefits from the Company by reason of the Executive's disability, subsequent to any of the following events occurring within twelve (12) months of a Change of Control: (A) a significant reduction in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the Executive immediately prior to the Change in Control; (B) a decrease in the salary payable by the Company to the Executive from the salary payable to the Executive immediately prior to the Change in Control except for across-the-board salary reductions similarly affecting all management personnel of the Company; or (C) elimination or reduction of the Executive's participation in the Company's Executive Incentive Compensation Plan; (D) the relocation of the Company's executive offices by more than fifty (50) miles from their current location in Victor, New York; provided, however, that a Terminating Event shall not be deemed to have occurred solely as a result of Executive being an employee of any direct or indirect successor to the business or assets of the Company, following a Change in Control.. 7.2 Severance. a. Without Cause. If the Company terminates this Agreement without Cause, other than as a result of a Terminating Event, or then commencing on the date of termination of this Agreement, the Company shall provide Executive with a severance package which shall consist of the following: (i) for a period equal to one (1) year after the date of termination (A) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's then current annual base salary under Section 4(a) hereof and (B) continuation of all benefits under Section 5; and (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's or Tridex's Executive Incentive Compensation Plan for the year of termination. 4 b. With a Terminating Event. If the Company terminates this Agreement as a result of a Terminating Event, then commencing on the date of such termination and for a period equal to two (2) years thereafter, the Company shall provide Executive with a severance package which shall consist of the following: (i) payment on the first business day of each month an amount equal to one-twelfth of the Executive's then current annual base salary under Section 4(a) hereof; (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan for the year in which such termination occurs; and (iii) continuation of all benefits under Section 5. In addition, if the Company terminates this Agreement as a result of a Termination Event, then the Company shall cause the immediate vesting of all options and other rights granted to the Executive under the Company's stock plans. At any time when the Company is obligated to make monthly payments under Section 7.2(b), the Company shall, ten (10) days after receipt of a written request from the Executive, pay the executive an amount equal to the balance of the amounts payable under Section 7.2(b)(i) and (ii) provided that the obligation of the Company to continue to provide the benefits under Section 7.2(b)(iii) or to make monthly payments under 7.2(b)(i)-(ii) shall cease upon the payment of such amount. c. General Release. As a condition precedent to receiving any severance payment, the Executive shall execute a release of any and all claims which Executive or his heirs, executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and its past, present and future employees, officers, directors, agents and attorneys arising out of the termination of employment. d. Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Employer under applicable law. 8. Non-Competition. During the term of this Agreement and (a) in the case of termination other than as a result of a Terminating Event and provided that the executive is receiving the severance payments provided for in Section 7.2(a), for one (1) year following the termination of this Agreement or (b) in the case of termination as a result of a Terminating Event and provided that the executive is receiving, or after the Executive has received, the severance payments provided for in Section 7.2(b), for two (2) years following the termination of this Agreement, Executive will not directly or indirectly whether as a partner, consultant, agent, employee, co-venturer, greater than two percent owner or otherwise or through any other person (as hereafter defined): (a) be engaged in any business or activity which is competitive with the business of the Company in any part of the world in which the Company is at the time of the Executive's termination engaged in selling its products directly or indirectly; or (b) attempt to recruit any employee of the Company, assist in their hiring by any other person, or encourage any employee to terminate his or her employment with the Company; or (c) encourage any customer of the Company to conduct with any other person any business or activity which such customer conducts or could conduct with the Company. For purposes of this Section 8, the term "Person" shall mean an individual or corporation, association or partnership in estate or trust or any other entity or organization. The Executive recognizes and agrees that because a violation by him of this Section 8 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. Executive expressly agrees that the character, duration and scope of this covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of this covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of both Executive and the Company that this covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive which are reasonable in light of the circumstances as they then exist and necessary to provide the Company the intended benefit of this covenant to compete. 5 9. Confidentiality Covenants. Executive understands that Company may impart to him confidential business information including, without limitation, designs, financial information, personnel information, strategic plans, product development information the like (collectively "Confidential Information"). Executive hereby acknowledges Company's exclusive ownership of such Confidential Information. Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company; (2) only to communicate the Confidential Information to fellow employees, agents and representatives of the Company on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information. Upon demand by the Company or upon termination of Executive's employment, Executive will deliver to the Company all manuals, photographs, recordings, and any other instrument or device by which, through which, or on which confidential Information has been recorded and/or preserved, which are in my Executive's possession, custody or control. Executive acknowledges that for purposes of this Section 9 the term "Company" means any person or entity now or hereafter during the term of this Agreement, which controls, is under common control with, or is controlled by, the Company 10. Governing Law/Jurisdiction This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of Connecticut. The parties agree that this Agreement was made and entered into in Connecticut and each party hereby consents to the jurisdiction of a competent court in Connecticut to hear any dispute arising out of this Agreement. 11. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes any and all previous agreements, written ad oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto. 12. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or certified mail, return receipt requested. (a) to the Company at: 61 Wilton Road Westport, Connecticut 06880 Attn: Chairman and CEO (b) to the Executive at: 1857 Route 88 North Newark, New York 14513 Any such notice or other communication will be considered to have been given (i) on the date of the delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial overnight courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone confirmation of receipt. Either party may, by notice given to the other party in accordance with this section, designate another address or person for receipt of notices hereunder. 13. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement. 14. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. 6 Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement. 15. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TRIDEX CORPORATION By: /s/ Seth M. Lukash ------------------------------------- Chairman and Chief Executive Officer ULTIMATE TECHNOLOGY CORPORATION By: /s/ Seth M. Lukash ------------------------------------- Vice President EXECUTIVE: /s/ Dennis J. Lewis ---------------------------------------- Dennis J. Lewis 7 EX-10.22 7 EMPLOYMENT AGREEMENT Exhibit 10.22 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into as of the 21st day of February, 1997, by and between Ultimate Technology Corporation, a New York corporation with a mailing address of 100 Rawson Road, Victor, New York 14564 (the "Company"), and Gary German an individual with a residence address of 820 Coventry Drive, Webster, New York 14580 ("Executive"). INTRODUCTION 1. On January 20, 1993, Executive and Company entered into an Employment Agreement (the "January, 1993 Employment Agreement") in connection with the acquisition of all the issued and outstanding stock of the Company by Tridex Corporation, a Connecticut corporation ("Tridex"). Executive and Company wish to terminate the 1993 Employment Agreement and enter into a new employment agreement. AGREEMENT In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows: 1. Termination of 1993 Employment Agreement. Effective on the Effective Date of that certain Stock Incentive Compensation Agreement between Tridex and the Employee, among others, dated of even date herewith the 1993 Employment Agreement is terminated and neither party shall have any further obligation thereunder. 2. Employment Period. The term of this Agreement (the "Employment Period") shall commence on the date hereof and, subject to termination by the Executive or the Company as hereinafter provided, shall continue for a period of three (3) years, subject, nevertheless, to termination as hereinafter provided. 3. Employment Duties. Subject to the terms and conditions set forth herein, the Company hereby employs Executive to act as Vice President Sales of Ultimate Technology Corporation during the Employment Period, and Executive hereby accepts such employment. Executive shall have supervision and control over and responsibility for the management and day-to-day operations of the Company subject to the direction and control of the Board of Directors. Executive's duties may not be altered in any material fashion without the approval of Executive. Executive agrees to perform his duties for the Company diligently, competently, and in a good faith manner. 4. Salary and Bonus. a. Base Salary. The Company agrees to pay Executive $132,870 per year, payable monthly in advance. Executive's base salary shall not be decreased. In addition, no later than December 31 of each year during the Employment Period, commencing December 31, 1997, the Compensation Committee of the Tridex Board of Directors shall review and increase, but not decrease the Executive's annual base salary by the percentage increase in the Consumer Price Index - CPI-U (1987-100) for the preceding twelve month period and in its discretion may grant such further increases, based upon the Company's performance and the Executive's particular contributions. b. Bonus. Executive shall have an opportunity to participate in all annual and/or long term incentive programs, including the Tridex's Executive Incentive Compensation Plan under which Executive may earn up to 35% of his base salary as a bonus upon meeting annual targets and objectives established by the Tridex Board of Directors. c. Options. In order to induce Executive to enter into this Agreement effective on the day after the Spin-Off, as that term is defined in that certain Stock Incentive Compensation Agreement, between Executive and others and Tridex, dated of even date herewith, Tridex will grant to Executive under the proposed Tridex 1997 Long Term Incentive Compensation Plan (or in the event such Plan is not approved by the Tridex shareholders at their next annual meeting, then under the Tridex 1989 Long Term Incentive Plan, as amended), 45,000 options to purchase shares of Tridex Common Stock, no par value, pursuant to an option agreement between Tridex and Executive in the usual and customary form, such option to have a ten (10) year term and to vest over a three (3) year period. Additionally, on or before the record date for the Spin-Off, Tridex will loan to Executive fifty percent (50%) of the option exercise price with respect to all options to purchase Tridex shares currently held by Executive. Such loan shall be secured by a pledge of the Tridex shares to be received upon exercise together with any shares received in the Spin-Off, will have a term of three (3) years, will bear a market rate of interest and also contain such other terms and conditions which are customary for similar types of instruments issued in connection with the exercise of options by senior company executives. 5. Other Benefits. a. Insurance and Other Benefits. The Executive shall be entitled to participate in, and shall receive the maximum benefits available under, the Company's or Tridex's insurance programs (including health, disability and life insurance) and any ERISA benefit plans, as the same may be adopted and/or amended from time to time, and shall receive all other fringe benefits that are provided by the Company or Tridex to other senior executives. The Company shall contribute to the Executive's account the maximum amount permitted under the Company's or Tridex's 401(k) Plan and any other Company or Tridex pension or retirement plan during the Employment Period. b. Vacation. Executive shall be entitled to an annual vacation of such duration as may be determined by the Board of Directors, but not less than that generally established for other executives of Company or Tridex and in no event less than three (3) weeks, without interruption of salary. c. Automobile Allowance. The Company shall provide the Executive with the automobile allowance provided for the office of President under Tridex's automobile allowance policy. d. Reimbursement of Expenses. The Company shall reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties or responsibilities under this Agreement, provided that Executive submits to the Company substantiation of such expenses sufficient to satisfy the record keeping guidelines promulgated from time to time by the Internal Revenue Service. 6. Termination by the Company With Cause. The Company may terminate this Agreement if any of the following events shall occur: a. the death or disability of the Executive (For purposes of this Agreement, "disability" shall mean the Executive's incapacity due to physical or mental illness which has caused the Executive to be absent from the full-time performance of his duties with the Company for a period of six (6) consecutive months.); b. any action or inaction by the Executive that constitutes larceny, fraud, gross negligence, a willful or negligent misrepresentation to the directors or officers of the Company, its successors or assigns, a crime involving moral turpitude; or c. the refusal of the Executive to follow the reasonable and lawful written instructions of the Chief Executive Officer of Tridex or the Tridex Board of Directors with respect to the services to be rendered and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused either by the terms of this Agreement or by actions taken by the Company in violation of this Agreement, and with respect to the first two refusals Executive has been given reasonable written notice and explanation thereof and reasonable opportunity to cure and no cure has been effected within a reasonable time after such notice. The Company may terminate this Agreement pursuant to this Section 6 upon written notice to the Executive, except for termination due to the death of the Executive, which shall require no notice. 7. Termination and Severance. 7.1 Notice/Events/Defined Terms. (a) Termination by the Executive. Executive may terminate this Agreement at any time by providing written notice to the Company. 2 (b) Termination by the Company Without Cause. The Company may terminate this Agreement at any time, without Cause by providing written notice to Executive. As used in this Agreement, the term "without Cause" shall mean termination for any reason not specified in Section 6 hereof, except for retirement. (c) Change in Control. A "Change in Control" will be deemed to have occurred if: (1) a Takeover Transaction occurs; or (2) any election of directors of Tridex takes place (whether by the directors then in office or by the stockholders at a meeting or by written consent) and a majority of the directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors immediately preceding such election; or (3) the Company or Tridex effectuates a complete liquidation of the Company or a sale or disposition of all or substantially all of its assets. A "Change in Control" shall not be deemed to include, however, a merger or sale of stock, assets or business of the Company if the Executive immediately after such event owns, or in connection with such event immediately acquires (other than in the Executive's capacity as (1) a current equity holder of Tridex, (2) a holder of options or instruments convertible into an equity interest in Tridex, or (3) as a beneficiary of any employee stock ownership plan or profit sharing plan maintained by Tridex or the Company), any stock of the buyer or any affiliate thereof which, at the time of Executive's initial investment in such stock, had a purchase price or fair market value greater than $25,000. (d) Takeover Transaction. A "Takeover Transaction" shall mean (i) a merger or consolidation of the Company or Tridex with, or an acquisition of the Company or Tridex or all or substantially all of its assets by, any other corporation, other than a merger, consolidation or acquisition in which the individuals who were members of the Board of Directors of the Company or Tridex immediately prior to such transaction continue to constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a period of not less than twelve (12) months following the closing of such transaction, or (ii) when any person or entity or group of persons or entities (other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company or Tridex) either related or acting in concert becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company or Tridex representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of the Company or Tridex. (e) Terminating Event. A "Terminating Event" shall mean: (i) termination by the Company of the employment of the Executive without Cause occurring within twelve (12) months of a Change of Control; or (ii) resignation of the Executive from the employ of the Company, while the Executive is not receiving payments or benefits from the Company by reason of the Executive's disability, subsequent to any of the following events occurring within twelve (12) months of a Change of Control: (A) a significant reduction in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the Executive immediately prior to the Change in Control; (B) a decrease in the salary payable by the Company to the Executive from the salary payable to the Executive immediately prior to the Change in Control except for across-the-board salary reductions similarly affecting all management personnel of the Company; or (C) elimination or reduction of the Executive's participation in the Company's Executive Incentive Compensation Plan; (D) the relocation of the Company's executive offices by more than fifty (50) miles from their current location in Victor, New York; provided, however, that a Terminating Event shall not be deemed to have occurred solely as a result of Executive being an employee of any direct or indirect successor to the business or assets of the Company, following a Change in Control.. 7.2 Severance. (a) Without Cause. If the Company terminates this Agreement without Cause, other than as a result of a Terminating Event, or then commencing on the date of termination of this Agreement, the Company shall provide Executive with a severance package which shall consist of the following: (i) for a period equal to one (1) year after the date of termination (A) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's then current annual base salary under Section 4(a) hereof and (B) continuation of all benefits under Section 5; and (ii) payment on the first business 3 day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's or Tridex's Executive Incentive Compensation Plan for the year of termination. b. With a Terminating Event. If the Company terminates this Agreement as a result of a Terminating Event, then commencing on the date of such termination and for a period equal to two (2) years thereafter, the Company shall provide Executive with a severance package which shall consist of the following: (i) payment on the first business day of each month an amount equal to one-twelfth of the Executive's then current annual base salary under Section 4(a) hereof; (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan for the year in which such termination occurs; and (iii) continuation of all benefits under Section 5. In addition, if the Company terminates this Agreement as a result of a Termination Event, then the Company shall cause the immediate vesting of all options and other rights granted to the Executive under the Company's stock plans. At any time when the Company is obligated to make monthly payments under Section 7.2(b), the Company shall, ten (10) days after receipt of a written request from the Executive, pay the executive an amount equal to the balance of the amounts payable under Section 7.2(b)(i) and (ii) provided that the obligation of the Company to continue to provide the benefits under Section 7.2(b)(iii) or to make monthly payments under 7.2(b)(i)-(ii) shall cease upon the payment of such amount. c. General Release. As a condition precedent to receiving any severance payment, the Executive shall execute a release of any and all claims which Executive or his heirs, executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and its past, present and future employees, officers, directors, agents and attorneys arising out of the termination of employment. d. Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Employer under applicable law. 8. Non-Competition. During the term of this Agreement and (a) in the case of termination other than as a result of a Terminating Event and provided that the executive is receiving the severance payments provided for in Section 7.2(a), for one (1) year following the termination of this Agreement or (b) in the case of termination as a result of a Terminating Event and provided that the executive is receiving, or after the Executive has received, the severance payments provided for in Section 7.2(b), for two (2) years following the termination of this Agreement, Executive will not directly or indirectly whether as a partner, consultant, agent, employee, co-venturer, greater than two percent owner or otherwise or through any other person (as hereafter defined): (a) be engaged in any business or activity which is competitive with the business of the Company in any part of the world in which the Company is at the time of the Executive's termination engaged in selling its products directly or indirectly; or (b) attempt to recruit any employee of the Company, assist in their hiring by any other person, or encourage any employee to terminate his or her employment with the Company; or (c) encourage any customer of the Company to conduct with any other person any business or activity which such customer conducts or could conduct with the Company. For purposes of this Section 8, the term "Person" shall mean an individual or corporation, association or partnership in estate or trust or any other entity or organization. The Executive recognizes and agrees that because a violation by him of this Section 8 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. Executive expressly agrees that the character, duration and scope of this covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of this covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of both Executive and the Company that this covenant not to compete shall be construed by the court in such a manner as to impose only those 4 restrictions on the conduct of Executive which are reasonable in light of the circumstances as they then exist and necessary to provide the Company the intended benefit of this covenant to compete. 9. Confidentiality Covenants. Executive understands that Company may impart to him confidential business information including, without limitation, designs, financial information, personnel information, strategic plans, product development information the like (collectively "Confidential Information"). Executive hereby acknowledges Company's exclusive ownership of such Confidential Information. Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company; (2) only to communicate the Confidential Information to fellow employees, agents and representatives of the Company on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information. Upon demand by the Company or upon termination of Executive's employment, Executive will deliver to the Company all manuals, photographs, recordings, and any other instrument or device by which, through which, or on which confidential Information has been recorded and/or preserved, which are in my Executive's possession, custody or control. Executive acknowledges that for purposes of this Section 9 the term "Company" means any person or entity now or hereafter during the term of this Agreement, which controls, is under common control with, or is controlled by, the Company 10. Governing Law/Jurisdiction This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of Connecticut. The parties agree that this Agreement was made and entered into in Connecticut and each party hereby consents to the jurisdiction of a competent court in Connecticut to hear any dispute arising out of this Agreement. 11. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes any and all previous agreements, written ad oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto. 12. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or certified mail, return receipt requested. (a) to the Company at: 61 Wilton Road Westport, Connecticut 06880 Attn: Chairman and CEO (b) to the Executive at: 820 Coventry Drive Webster, New York 14580 Any such notice or other communication will be considered to have been given (i) on the date of the delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial overnight courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone confirmation of receipt. Either party may, by notice given to the other party in accordance with this section, designate another address or person for receipt of notices hereunder. 13. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement. 5 14. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement. 15. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TRIDEX CORPORATION By: /s/ Seth M. Lukash ------------------------------------- Chairman and Chief Executive Officer ULTIMATE TECHNOLOGY CORPORATION By: /s/ Seth M. Lukash ------------------------------------- Vice President EXECUTIVE: By: /s/ Gary German ------------------------------------- Gary German 6 EX-10.23 8 EMPLOYMENT AGREEMENT Exhibit 10.23 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into as of the 21st day of February, 1997, by and between Ultimate Technology Corporation, a New York corporation with a mailing address of 100 Rawson Road, Victor, New York 14564 (the "Company"), and Paul Wolf, an individual with a residence address of 15 Manitoba Woods Lane, Spencerport, New York 14559 ("Executive"). INTRODUCTION 1. On January 20, 1993, Executive and Company entered into an Employment Agreement (the "January, 1993 Employment Agreement") in connection with the acquisition of all the issued and outstanding stock of the Company by Tridex Corporation, a Connecticut corporation ("Tridex"). Executive and Company wish to terminate the 1993 Employment Agreement and enter into a new employment agreement. AGREEMENT In consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows: 1. Termination of 1993 Employment Agreement. Effective on the Effective Date of that certain Stock Incentive Compensation Agreement between Tridex and the Employee, among others, dated of even date herewith the 1993 Employment Agreement is terminated and neither party shall have any further obligation thereunder. 2. Employment Period. The term of this Agreement (the "Employment Period") shall commence on the date hereof and, subject to termination by the Executive or the Company as hereinafter provided, shall continue for a period of three (3) years, subject, nevertheless, to termination as hereinafter provided. 3. Employment Duties. Subject to the terms and conditions set forth herein, the Company hereby employs Executive to act as Vice President - Engineering of Ultimate Technology Corporation during the Employment Period, and Executive hereby accepts such employment. Executive shall have supervision and control over and responsibility for the management and day-to-day operations of the Company subject to the direction and control of the Board of Directors. Executive's duties may not be altered in any material fashion without the approval of Executive. Executive agrees to perform his duties for the Company diligently, competently, and in a good faith manner. 4. Salary and Bonus. a. Base Salary. The Company agrees to pay Executive $120,510 per year, payable monthly in advance. Executive's base salary shall not be decreased. In addition, no later than December 31 of each year during the Employment Period, commencing December 31, 1997, the Compensation Committee of the Tridex Board of Directors shall review and increase, but not decrease the Executive's annual base salary by the percentage increase in the Consumer Price Index - CPI-U (1987-100) for the preceding twelve month period and in its discretion may grant such further increases, based upon the Company's performance and the Executive's particular contributions. b. Bonus. Executive shall have an opportunity to participate in all annual and/or long term incentive programs, including the Tridex's Executive Incentive Compensation Plan under which Executive may earn up to 35% of his base salary as a bonus upon meeting annual targets and objectives established by the Tridex Board of Directors. c. Options. In order to induce Executive to enter into this Agreement effective on the day after the Spin-Off, as that term is defined in that certain Stock Incentive Compensation Agreement, between Executive and others and Tridex, dated of even date herewith, Tridex will grant to Executive under the proposed Tridex 1997 Long Term Incentive Compensation Plan (or in the event such Plan is not approved by the Tridex shareholders at their next annual meeting, then under the Tridex 1989 Long Term Incentive Plan, as amended), 45,000 options to purchase shares of Tridex Common Stock, no par value, pursuant to an option agreement between Tridex and Executive in the usual and customary form, such option to have a ten (10) year term and to vest over a three (3) year period. Additionally, on or before the record date for the Spin-Off, Tridex will loan to Executive fifty percent (50%) of the option exercise price with respect to all options to purchase Tridex shares currently held by Executive. Such loan shall be secured by a pledge of the Tridex shares to be received upon exercise together with any shares received in the Spin-Off, will have a term of three (3) years, will bear a market rate of interest and also contain such other terms and conditions which are customary for similar types of instruments issued in connection with the exercise of options by senior company executives. 5. Other Benefits. a. Insurance and Other Benefits. The Executive shall be entitled to participate in, and shall receive the maximum benefits available under, the Company's or Tridex's insurance programs (including health, disability and life insurance) and any ERISA benefit plans, as the same may be adopted and/or amended from time to time, and shall receive all other fringe benefits that are provided by the Company or Tridex to other senior executives. The Company shall contribute to the Executive's account the maximum amount permitted under the Company's or Tridex's 401(k) Plan and any other Company or Tridex pension or retirement plan during the Employment Period. b. Vacation. Executive shall be entitled to an annual vacation of such duration as may be determined by the Board of Directors, but not less than that generally established for other executives of Company or Tridex and in no event less than three (3) weeks, without interruption of salary. c. Reimbursement of Expenses. The Company shall reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties or responsibilities under this Agreement, provided that Executive submits to the Company substantiation of such expenses sufficient to satisfy the record keeping guidelines promulgated from time to time by the Internal Revenue Service. 6. Termination by the Company With Cause. The Company may terminate this Agreement if any of the following events shall occur: a. the death or disability of the Executive (For purposes of this Agreement, "disability" shall mean the Executive's incapacity due to physical or mental illness which has caused the Executive to be absent from the full-time performance of his duties with the Company for a period of six (6) consecutive months.); b. any action or inaction by the Executive that constitutes larceny, fraud, gross negligence, a willful or negligent misrepresentation to the directors or officers of the Company, its successors or assigns, a crime involving moral turpitude; or c. the refusal of the Executive to follow the reasonable and lawful written instructions of the Chief Executive Officer of Tridex or the Tridex Board of Directors with respect to the services to be rendered and the manner of rendering such services by Executive, provided such refusal is material and repetitive and is not justified or excused either by the terms of this Agreement or by actions taken by the Company in violation of this Agreement, and with respect to the first two refusals Executive has been given reasonable written notice and explanation thereof and reasonable opportunity to cure and no cure has been effected within a reasonable time after such notice. The Company may terminate this Agreement pursuant to this Section 6 upon written notice to the Executive, except for termination due to the death of the Executive, which shall require no notice. 7. Termination and Severance. 7.1 Notice/Events/Defined Terms. a. Termination by the Executive. Executive may terminate this Agreement at any time by providing written notice to the Company. b. Termination by the Company Without Cause. The Company may terminate this Agreement at any time, without Cause by providing written notice to Executive. As used in this Agreement, the term 2 "without Cause" shall mean termination for any reason not specified in Section 6 hereof, except for retirement. c. Change in Control. A "Change in Control" will be deemed to have occurred if: (1) a Takeover Transaction occurs; or (2) any election of directors of Tridex takes place (whether by the directors then in office or by the stockholders at a meeting or by written consent) and a majority of the directors in office following such election are individuals who were not nominated by a vote of two-thirds of the members of the Board of Directors immediately preceding such election; or (3) the Company or Tridex effectuates a complete liquidation of the Company or a sale or disposition of all or substantially all of its assets. A "Change in Control" shall not be deemed to include, however, a merger or sale of stock, assets or business of the Company if the Executive immediately after such event owns, or in connection with such event immediately acquires (other than in the Executive's capacity as (1) a current equity holder of Tridex, (2) a holder of options or instruments convertible into an equity interest in Tridex, or (3) as a beneficiary of any employee stock ownership plan or profit sharing plan maintained by Tridex or the Company), any stock of the buyer or any affiliate thereof which, at the time of Executive's initial investment in such stock, had a purchase price or fair market value greater than $25,000. d. Takeover Transaction. A "Takeover Transaction" shall mean (i) a merger or consolidation of the Company or Tridex with, or an acquisition of the Company or Tridex or all or substantially all of its assets by, any other corporation, other than a merger, consolidation or acquisition in which the individuals who were members of the Board of Directors of the Company or Tridex immediately prior to such transaction continue to constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an acquisition involving a holding company, constitute a majority of the Board of Directors of the holding company) for a period of not less than twelve (12) months following the closing of such transaction, or (ii) when any person or entity or group of persons or entities (other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company or Tridex) either related or acting in concert becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company or Tridex representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of the Company or Tridex. e. Terminating Event. A "Terminating Event" shall mean: (i) termination by the Company of the employment of the Executive without Cause occurring within twelve (12) months of a Change of Control; or (ii) resignation of the Executive from the employ of the Company, while the Executive is not receiving payments or benefits from the Company by reason of the Executive's disability, subsequent to any of the following events occurring within twelve (12) months of a Change of Control: (A) a significant reduction in the nature or scope of the Executive's responsibilities, authorities, powers, functions or duties from the responsibilities, authorities, powers, functions or duties exercised by the Executive immediately prior to the Change in Control; (B) a decrease in the salary payable by the Company to the Executive from the salary payable to the Executive immediately prior to the Change in Control except for across-the-board salary reductions similarly affecting all management personnel of the Company; or (C) elimination or reduction of the Executive's participation in the Company's Executive Incentive Compensation Plan; (D) the relocation of the Company's executive offices by more than fifty (50) miles from their current location in Victor, New York; provided, however, that a Terminating Event shall not be deemed to have occurred solely as a result of Executive being an employee of any direct or indirect successor to the business or assets of the Company, following a Change in Control.. 7.2 Severance. a. Without Cause. If the Company terminates this Agreement without Cause, other than as a result of a Terminating Event, or then commencing on the date of termination of this Agreement, the Company shall provide Executive with a severance package which shall consist of the following: (i) for a period equal to one (1) year after the date of termination (A) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's then current annual base salary under Section 4(a) hereof and (B) continuation of all benefits under Section 5; and (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's or Tridex's Executive Incentive Compensation Plan for the year of termination. 3 b. Event, then commencing on the date of such termination and for a period equal to two (2) years thereafter, the Company shall provide Executive with a severance package which shall consist of the following: (i) payment on the first business day of each month an amount equal to one-twelfth of the Executive's then current annual base salary under Section 4(a) hereof; (ii) payment on the first business day of each month of an amount equal to one-twelfth of the Executive's annual target bonus amount under the Company's Executive Incentive Compensation Plan for the year in which such termination occurs; and (iii) continuation of all benefits under Section 5. In addition, if the Company terminates this Agreement as a result of a Termination Event, then the Company shall cause the immediate vesting of all options and other rights granted to the Executive under the Company's stock plans. At any time when the Company is obligated to make monthly payments under Section 7.2(b), the Company shall, ten (10) days after receipt of a written request from the Executive, pay the executive an amount equal to the balance of the amounts payable under Section 7.2(b)(i) and (ii) provided that the obligation of the Company to continue to provide the benefits under Section 7.2(b)(iii) or to make monthly payments under 7.2(b)(i)-(ii) shall cease upon the payment of such amount. c. General Release. As a condition precedent to receiving any severance payment, the Executive shall execute a release of any and all claims which Executive or his heirs, executors, agents or assigns might have against the Company, its subsidiaries, affiliates, successors, assigns and its past, present and future employees, officers, directors, agents and attorneys arising out of the termination of employment. d. Withholding. All payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Employer under applicable law. 8. Non-Competition. During the term of this Agreement and (a) in the case of termination other than as a result of a Terminating Event and provided that the executive is receiving the severance payments provided for in Section 7.2(a), for one (1) year following the termination of this Agreement or (b) in the case of termination as a result of a Terminating Event and provided that the executive is receiving, or after the Executive has received, the severance payments provided for in Section 7.2(b), for two (2) years following the termination of this Agreement, Executive will not directly or indirectly whether as a partner, consultant, agent, employee, co-venturer, greater than two percent owner or otherwise or through any other person (as hereafter defined): (a) be engaged in any business or activity which is competitive with the business of the Company in any part of the world in which the Company is at the time of the Executive's termination engaged in selling its products directly or indirectly; or (b) attempt to recruit any employee of the Company, assist in their hiring by any other person, or encourage any employee to terminate his or her employment with the Company; or (c) encourage any customer of the Company to conduct with any other person any business or activity which such customer conducts or could conduct with the Company. For purposes of this Section 8, the term "Person" shall mean an individual or corporation, association or partnership in estate or trust or any other entity or organization. The Executive recognizes and agrees that because a violation by him of this Section 8 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. Executive expressly agrees that the character, duration and scope of this covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of this covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of both Executive and the Company that this covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of Executive which are reasonable in light of the circumstances as they then exist and necessary to provide the Company the intended benefit of this covenant to compete. 4 9. Confidentiality Covenants. Executive understands that Company may impart to him confidential business information including, without limitation, designs, financial information, personnel information, strategic plans, product development information the like (collectively "Confidential Information"). Executive hereby acknowledges Company's exclusive ownership of such Confidential Information. Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company; (2) only to communicate the Confidential Information to fellow employees, agents and representatives of the Company on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information. Upon demand by the Company or upon termination of Executive's employment, Executive will deliver to the Company all manuals, photographs, recordings, and any other instrument or device by which, through which, or on which confidential Information has been recorded and/or preserved, which are in my Executive's possession, custody or control. Executive acknowledges that for purposes of this Section 9 the term "Company" means any person or entity now or hereafter during the term of this Agreement, which controls, is under common control with, or is controlled by, the Company 10. Governing Law/Jurisdiction This Agreement shall be governed by and interpreted and governed in accordance with the laws of the State of Connecticut. The parties agree that this Agreement was made and entered into in Connecticut and each party hereby consents to the jurisdiction of a competent court in Connecticut to hear any dispute arising out of this Agreement. 11. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes any and all previous agreements, written ad oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto. 12. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, sent by generally recognized overnight courier service, telex or telecopy, or certified mail, return receipt requested. (a) to the Company at: 61 Wilton Road Westport, Connecticut 06880 Attn: Chairman and CEO (b) to the Executive at: 15 Manitoba Woods Lane Spencerport, New York 14559 Any such notice or other communication will be considered to have been given (i) on the date of the delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial overnight courier or (iv) on the date of facsimile transmission (telecopy) provided that the giver of the notice obtains telephone confirmation of receipt. Either party may, by notice given to the other party in accordance with this section, designate another address or person for receipt of notices hereunder. 13. Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement. 14. Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. 5 Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement. 15. Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TRIDEX CORPORATION By: /s/ Seth M. Lukash ------------------------------------- Chairman and Chief Executive Officer ULTIMATE TECHNOLOGY CORPORATION By: /s/ Seth M. Lukash ------------------------------------- Vice President EXECUTIVE: By: /s/ Paul Wolf ------------------------------------- Paul Wolf 6 EX-11 9 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS TRIDEX CORPORATION AND SUBSIDIARIES EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS (Dollars in thousands, except per share amounts)
Years Ended Nine Months Ended ---------------------------- ------------------------------ December 31, December 31, December 31, December 31, 1996 1995 1995 1994 ------------ ------------ ------------ ------------ (unaudited) (unaudited) PRIMARY: EARNINGS: Income (loss) from continuing operations $ 5,991 $ (1,118) $ (1,913) $ (408) Income from discontinued operations 2,857 1,332 916 1,883 ------------ ------------ ------------ ------------ Net income $ 8,848 $ 214 $ (997) $ 1,475 ============ ============ ============ ============ SHARES: Average common shares outstanding 3,913,000 3,711,000 3,722,000 3,625,000 Dilutive effect of outstanding options and warrants as determined by the treasury stock method 241,000 219,000 235,000 ------------ ------------ ------------ ------------ 4,154,000 3,930,000 3,722,000 3,860 ============ ============ ============ ============ EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Income (loss) from continuing operations $ 1.44 $ (0.28) $ (0.52) $ (0.11) Income from discontinued operations 0.69 0.33 0.25 .49 ------------ ------------ ------------ ------------ Net income $ 2.13 $ 0.05 $ (0.27) $ 0.38 ============ ============ ============ ============ FULLY DILUTED: EARNINGS: Income (loss) from continuing operations $ 5,991 Income from discontinued operations 2,857 ------------ Net income 8,848 Add: after-tax interest on convertible debt 341 ------------ Adjusted net income $ 9,189 ============ SHARES: Average common shares outstanding 3,913,000 Dilutive effect of outstanding options and warrants as determined by the treasury stock method 290,000 Dilutive effect of convertible debt assumed converted at the beginning of the year 445,000 ------------ 4,648,000 ============ EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Income (loss) from continuing operations $ 1.36 Income from discontinued operations 0.62 ------------ Net income $ 1.98 ============
EX-21.1 10 SUBSIDIARIES OF THE REGISTRANT TRIDEX CORPORATION EXHIBIT 21.1 SUBSIDIARIES OF TRIDEX CORPORATION Jurisdiction of Percentage Name Incorporation Owner Owned - ---- ------------- ----- ----- Allu Realty Trust * Massachusetts Tridex 100% Cash Bases Incorporated* Delaware Tridex 100% Cash Bases GB, Ltd. United Kingdom Tridex 100% Cash Bases (Deutschland) GmbH Germany Cash Bases 100% Cash Bases Iberica, S.A. Spain Cash Bases 80% TransAct Technologies Incorporated Delaware Tridex 80.3% Magnetec Corporation Connecticut TransAct 100% Ithaca Peripherals Limited United Kingdom Magnetec 100% RIL Corporation* Connecticut Tridex 100% Ultimate Technology Corporation New York Tridex 100% *Inactive EX-23.1 11 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.1 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of the Tridex Corporation 1989 Long term Incentive Plan of our report dated February 13, 1997 except as to Note 15 which is as of March 14, 1997, appearing on page 13 of this Form 10-K. PRICE WATERHOUSE LLP March 27, 1997 Hartford, Connecticut EX-23.2 12 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.2 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-15021) of Tridex Corporation of our report dated February 13, 1997 except as to Note 15 which is as of March 14, 1997, appearing on page 13 of this Form 10-K. PRICE WATERHOUSE LLP March 27, 1997 Hartford, Connecticut EX-27.1 13 FDS --
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 3,354 0 5,799 118 5,609 15,129 5,916 2,381 38,653 11,829 809 0 0 1,043 24,972 38,653 37,053 37,053 27,039 35,860 (5,933) 24 879 6,223 232 5,991 2,857 0 0 8,848 2.13 1.98
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