-----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, TsDI4XnpCejKpT3PpyGJ6EhS14LwHplSrYTAyhJwWYFJnt8ld1Oir9ga9g7UV6Fc U8OPwjPqPvOOqJg8/pJY0Q== 0001047469-98-017776.txt : 19980504 0001047469-98-017776.hdr.sgml : 19980504 ACCESSION NUMBER: 0001047469-98-017776 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980417 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980501 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: 8-K SEC ACT: SEC FILE NUMBER: 001-05513 FILM NUMBER: 98608839 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 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 17, 1998 - -------------------------------------------------------------------------------- TRIDEX CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Connecticut - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 1-5513 06-0682273 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification Number) 61 Wilton Road, Westport, CT 06880 - -------------------------------------------------------------------------------- (Address of principal executive offices) (203) 226-1144 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets On April 17, 1998 Tridex Corporation (the "Company"), through its wholly-owned subsidiary Tridex NC, Inc. ("NC"), purchased all of the issued and outstanding capital stock of Progressive Software, Inc. ("Progressive"), a privately held company, from its sole shareholder, Paul J. Smith. The total purchase price was $48,500,000 of which (1) $33,900,000 was paid in cash, (2) $5,000,000 was paid by delivery of 714,000 shares of the Company's common stock, and (3) $9,600,000 was paid through the assumption of a certain portion of Progressive's debt. Immediately after the closing, NC was merged into Progressive and the $9,600,000 of assumed Progressive debt was paid in full. The purchase price was determined based upon (a) the current and estimated future earnings of Progressive, (b) the potential marketability of Progressive's products and existing contracts, (c) the complimentary nature of Progressive's products with the Company's existing products, and (d) the opportunity for broadening the existing customer base of the Company and Progressive by combining marketing and distribution networks. In connection with the acquisition, the Company received a fairness opinion from an investment banker. The purchase price is subject to post closing adjustment based upon an audited closing date balance sheet. In order to finance the purchase price, the Company entered into a Credit Agreement (the "Credit Agreement") on April 17, 1998 with Fleet National Bank ("Fleet") which provides for a $12 million acquisition term facility and an $8,000,000 working capital revolving credit facility for total senior loan availability of $20 million. Additionally, on April 17, 1998 Massachusetts Mutual Life Insurance Company and related parties (the "MassMutual Investors") purchased at face value $11 million of the Company's 19% senior subordinated notes. In connection with its sale of the 19% senior subordinated notes to the MassMutual Investors, the Company issued to the MassMutual Investors 285,714 shares of its common stock at a purchase price of $7.00 per share. Further, the Company agreed, subject to shareholder approval, to issue to the MassMutual Investors warrants to purchase 350,931 shares of its common stock at $7.00 per share. If the Company is successful in obtaining shareholder approval, effective upon the date of shareholder approval the interest rate on the subordinated notes will be reduced from 19% to 12%. At the annual meeting of shareholders of the Company, scheduled for May 27, 1998, the shareholders will vote on the proposed issuance of the warrants. The sources of funds for the purchase price and the payment of the assumed debt were as follows:
Company cash on hand $16,300,000 Fleet Term Loan 12,000,000 Fleet Revolving Credit Facility 2,200,000 19% Senior Subordinated Notes 11,000,000 Sale of common stock to the MassMutual Investors 2,000,000 Sale of common stock to Paul Smith 5,000,000 ----------- Total $48,500,000 ----------- -----------
The Company intends to operate Progressive as a wholly-owned subsidiary. Progressive will continue to be engaged in the design and manufacture of software and the sale of software and hardware for point of sale ("POS") systems. The Company anticipates that Progressive will continue to have its headquarters and principal operating facility in Charlotte, North Carolina. The Company's April 20, 1998 News Release is included as an exhibit to this report, 2 Item 7. Financial Statements and Exhibits
Page Number ----------- (a) Financial statements of businesses acquired. The required financial statements of Progressive Software, Inc. are not filed herewith as it is impractical to do so. Such statements will be filed within 60 days of May 2, 1998. (b) Pro forma financial information The required pro forma financial information is not filed herewith as it is impractical to do so. Such information will be filed within 60 days of May 2, 1998. (c) Exhibits 2. Plan of acquisition, reorganization, liquidation or succession 2.1 Stock Purchase Agreement dated as of February 5 24, 1998, by and among Paul J. Smith, Progressive Software, Inc., Tridex Corporation and Tridex NC, Inc., with index of Schedules and Exhibits thereto (which shall be provided upon request). 4. Instruments defining the rights of security holders 4.1 Registration Rights Agreement by and between 45 Paul J. Smith and Tridex Corporation dated as of April 17, 1998. 4.2 Securities Purchase Agreements dated as of 58 April 17, 1998, by and among Massachusetts Mutual Life Insurance Company and certain of its affiliates and Tridex Corporation, with index of Schedules and Exhibits thereto (which shall be provided upon request). 4.3 Form of 19% senior subordinated notes due April 130 17, 2005 (included in Exhibit 4.2). 10. Material Contracts 10.1 Credit Agreement dated as of April 17, 1998, by 144 and between Fleet National Bank, Tridex Corporation, Progressive Software, Inc., Ultimate Technology Corporation, and Tridex NC, Inc., with index of Schedules and Exhibits thereto (which shall be provided upon request). 10.2 Term Note in the amount of $12,000,000, due 192 March 31, 2003; payable by Tridex Corporation and its affiliates to Fleet National Bank. 10.3 Working Capital Note in the amount of 195 $8,000,000 due June 30, 1999, payable by Tridex Corporation and its affiliates to Fleet. 99. Additional Exhibits 198 99.1 News Release Dated April 20, 1998
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TRIDEX CORPORATION (Registrant) By: /s/ Seth M. Lukash ---------------------------- Seth M. Lukash Chairman of the Board and Chief Executive Officer Date: April 30, 1998 4 EX-2.1 2 EX. 2.1 EXHIBIT 2.1 STOCK PURCHASE AGREEMENT Introduction This Stock Purchase Agreement, dated as of February 24, 1998 is by and among Paul J. Smith (the "Shareholder"), Progressive Software, Inc., a North Carolina corporation (the "Corporation"), Tridex Corporation, a Connecticut corporation ("Tridex"), and Tridex NC, Inc., a North Carolina corporation and a wholly owned subsidiary of Tridex (the "Buyer"). Background The Shareholder owns all of the issued and outstanding capital stock of the Corporation. The Shareholder desires to sell, and the Buyer desires to purchase, all of the issued and outstanding shares of capital stock of the Corporation (the "Shares") for the Purchase Price, pursuant to the terms and conditions set forth in this Agreement. Agreements IT IS MUTUALLY agreed by the parties hereto as follows: I. Definitions and Construction. 1.1 In addition to the other definitions set forth herein, when used in this Agreement, the following terms have the meanings set forth below: "Agreement" means this Agreement. "Affiliate(s)" means, with respect to any person, any other person controlling, controlled by or under common control with such person. In this context, "control" means the possession, directly or indirectly, of the power to direct the management and policies of such person, whether by contract or through the ownership of voting securities, membership interests, beneficial interests or otherwise. "Audited Closing Balance Sheet" means the audited balance sheet of the Corporation prepared in accordance with GAAP as at the Closing Date, to be audited by the Corporation's accountants, McGaladrey & Pullen, LLP ("McGaladrey & Pullen"), and verified by the Buyer's accountants, Price Waterhouse, LLP ("Price Waterhouse"), as set forth in Section 5.4. "Balance Sheet" means the balance sheet of the Corporation as at December 31, 1997, which is included in the Financial Statements. "Balance Sheet Date" means December 31, 1997. "Buyer" see Introduction. 5 "Closing" means the taking of the actions required to consummate the sale of the Shares by the Shareholder and the purchase of the Shares by the Buyer pursuant to this Agreement. "Closing Date" see Section 11.1. "Code" means the Internal Revenue Code of 1986, as amended. "Corporation" see Introduction. "Damages" means all losses, claims, damages, costs, fines, penalties, obligations, payments and liabilities, together with all reasonable attorneys' fees and expenses, incurred in connection with the foregoing. "Deficiencies" means a final determination by a Governmental Authority that additional taxes are due. "Employee Program" see Section 6.26. "Escrow Amount" means Five Hundred Thousand Dollars ($500,000), subject to increase pursuant to Section 3.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Financial Statements" means those financial statements prepared in accordance with GAAP for the year ended December 31, 1996, which were audited by McGaladrey & Pullen, LLP, the Corporation's independent public accountants, those financial statements prepared in accordance with GAAP for the year ended December 31, 1995, which were audited by Arthur Andersen, LLP, the Corporation's independent public accountants for the year ended December 31, 1995, as well as unaudited financial statements for the year ended December 31, 1997 prepared in accordance with GAAP (except for the absence of footnotes and normal, recurring audit adjustments) by the Corporation, copies of which are attached as Schedule 6.5. The Financial Statements for the year ended December 31, 1997 attached as part of Schedule 6.5 are unaudited as of the date hereof but will be audited and delivered to Buyer prior to Closing. "GAAP" means generally accepted accounting principles consistent with those adopted by the Financial Accounting Standards Board and its predecessor, as in effect on the date of this Agreement. "Governmental Authority" means all agencies, authorities, bodies, boards, commissions, institutions, legislatures and offices of any nature whatsoever for any governing unit or political subdivision, whether federal, state, county, district, municipal, city or otherwise, and whether now or hereafter in existence. "Hazardous Materials" see Section 6.30. "Inventories" see Section 6.10. "Leased Properties" means the real properties leased by the Corporation. 6 "Legal Requirements" means all statutes, laws, rules, regulations, orders, judgments, decrees, permits and contracts of any Governmental Authority including, but not limited to, those relating to employment of labor (for example, ERISA, equal opportunity, occupational safety and health, worker adjustment and retraining, wages, hours and the payment of Social Security and similar taxes), protection of the environment (for example, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq., the Federal Water Pollution Control Act, the Federal Clean Air Act and state equivalents, including M.G.L. c. 21C and 21 E), all building, zoning, health, fire and safety codes and laws imposing taxes or other forms of payment to Governmental Authorities. "Liens" means pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever. "Ordinary Course of Business" means the usual and customary way in which the Corporation has conducted its business in the past year. "Parties" means the Shareholder, the Corporation, Tridex and the Buyer. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Selling Parties" means the Shareholder and the Corporation. "Shareholder" see Introduction. "Taxes" means all taxes, fees, assessments, levies, duties and similar charges imposed by any Governmental Authority, together with all interest, penalties, fines and other additions imposed in respect thereof, including, without limitation, all income, corporate excise tax, gains, real property gains, profits, gross receipts, payroll, employment, social security (and similar), disability, health, hospitalization, unemployment compensation, worker's compensation, Pension Benefit Guaranty Corporation, severance, windfall profits, environmental, license, occupation, customs, imposts, capital stock, franchise, ad valorem, excise, sales, use, transfer, registration, value added, alternative minimum, add-on minimum, successor, withholding and estimated taxes or other charges. "Tax Returns" means all original and amended returns, declarations, certifications, statements, notices, elections, estimates, reports, claims for refund and information returns relating to or required to be filed or maintained in connection with any Tax, together with all schedules and attachments thereto. "Treasury" means the United States Department of Treasury. 1.2 In this Agreement, unless the context otherwise requires: (a) The words "hereby," "hereof," "hereto," "herein," "hereunder" and any similar words refer to this Agreement; the word "hereafter" means after the date of this Agreement, and the word "heretofore" means before the date of this Agreement. 7 (b) The word "person" refers to partnerships (including limited partnerships and limited liability partnerships), corporations, limited liability companies, governmental entities, trusts, other legal entities, and natural persons. (c) References to the "knowledge," the "best knowledge of," "have no knowledge of" or "do not know of" and similar phrases mean (i) in the case of a natural person, the particular fact was actually known, or not actually known, as the context requires, to such person after reasonable investigation and inquiry by such person, and (ii) in the case of the Corporation, means the knowledge or best knowledge of the persons whose names are listed on Schedule 1.2. 1.3. Section and subsection titles are for convenience of reference only and are not to be considered in the interpretation or construction of any of the provisions hereof. II. Purchase and Sale of Shares. 2.1 Subject to the terms and conditions set forth in this Agreement, at the Closing, the Shareholder will sell and transfer the Shares to the Buyer and the Buyer will purchase the Shares from the Shareholder. III. Purchase Price. 3.1 The purchase price payable by the Buyer (the "Purchase Price") in consideration for the transfer of the Shares shall be Forty Eight Million Five Hundred Thousand Dollars ($48,500,000), subject to adjustment as provided in Article V. At least two business days before the Closing Date, the Corporation shall deliver to the Buyer and Tridex its unaudited income statement (the "Interim Income Statement") and unaudited balance sheet (the "Interim Balance Sheet") for the period ending on the Friday before the Closing Date. If Working Capital (as defined in Section 5.1) calculated on the basis of the Interim Balance Sheet is less than Eight Million Three Hundred Fifty Thousand Dollars ($8,350,000), then the Escrow Amount shall be increased to equal the difference between the Required Working Capital (as defined in Section 5.1) and the Working Capital calculated on the basis of the Interim Balance Sheet. 3.2 In accordance with the 338(h)(10) election, to be made under Section 8.14 hereof, the Parties shall establish and agree upon the modified aggregate deemed sales price, as defined under applicable Treasury regulations (the "MADSP"), at which the assets of the Corporation are deemed to have been sold pursuant to the Section 338(h)(10) election, and the allocation of the MADSP among the assets of the Corporation. The allocation of the MADSP among the assets of the Corporation shall be made by the Parties in accordance with Section 338 of the Code and applicable Treasury regulations. The Parties agree to file their federal income tax returns, including Treasury Form 8023A, consistent with such allocation. IV. Payment of Purchase Price. 4.1 At the Closing, Buyer shall: (a) deliver to the Shareholder a certificate representing Seven Hundred Fourteen Thousand (714,000) shares (the "Tridex Shares") of common stock, no par value, of Tridex ("Tridex Common Stock") subject to reduction as follows: (i) if the number of shares, or warrants or other securities convertible or exercisable to obtain shares, of Tridex Common Stock 8 that Tridex is required to provide in connection with subordinated debt financing obtained by Tridex or the Buyer to fund the transaction hereunder (the "Sub Debt Financing Shares") exceeds 336,000, then the number of the Tridex Shares to be delivered to the Shareholder shall be reduced by the remainder (the "Excess Shares") of (A) the number of Sub Debt Financing Shares, minus (B) 336,000; and (ii) the Closing Cash Payment shall include an amount of cash equal to (A) the number of Excess Shares, multiplied by (B) Seven Dollars ($7.00) (the "Excess Shares Value"); and (b) pay, by wire transfer, an amount in cash (the "Closing Cash Payment") equal to (i) the Purchase Price (including the Excess Shares Value, if any) minus (ii) the number of Tridex Shares delivered pursuant to Section 4.1(a) multiplied by Seven Dollars ($7.00), minus (iii) the Escrow Amount. The Escrow Amount shall be paid by the Buyer at Closing to Hinckley, Allen & Snyder (the "Escrow Agent"), who shall hold such funds in an escrow account (the "Escrow Account") pursuant to the terms of an Escrow Agreement substantially in the form attached hereto as Exhibit A (the "Escrow Agreement"). V. Purchase Price Adjustments. 5.1 Working Capital Defined. The Purchase Price agreed to by the Parties assumes that the Working Capital of the Corporation on the Closing Date shall equal Eight Million Eight Hundred Fifty Thousand Dollars ($8,850,000) ("Required Working Capital"). "Working Capital" shall mean the sum of the following amounts, all determined as of the Closing Date: (i) the Corporation's Inventories valued at the lower of cost (determined on a first-in, first-out basis) or market value (meaning the Corporation's market in the ordinary course of its business) in accordance with GAAP; (ii) the Corporation's accounts receivable (excluding loans or advances to employees or the Shareholder), less an appropriate allowance for bad debts, returns, discounts and other customer allowances computed in accordance with GAAP, minus (iii) the Corporation's trade payables and current accrued liabilities computed in accordance with GAAP (excluding any deferred revenue currently estimated at $1,000,000 attributable to the Software License Agreement between the Corporation and McDonald's Corporation dated August 31, 1997), which shall include, without limitation, professional expenses, insurance, payroll, commissions, sales, use and other taxes, utilities and other similar expenses. 5.2 Adjustment for Working Capital. (a) If the amount of the Working Capital as shown on the Audited Closing Balance Sheet (the "Actual Working Capital") is greater or lesser than the Required Working Capital, there shall be an increase or decrease, respectively, in the Purchase Price equal to the amount of the difference between the Actual Working Capital and the Required Working Capital (the "Working Capital Adjustment"). (b) If the Actual Working Capital is greater than the Required Working Capital, then, subject to Section 5.4, (i) the Buyer shall pay to the Shareholder the amount of the Working Capital Adjustment; and (ii) the Escrow Agent shall release the balance of the Escrow Account to the Shareholder on or before ten (10) business days after the expiration of the Review Period (as defined in Section 5.4(c)). 9 (c) If the Actual Working Capital is less than the Required Working Capital and the Working Capital Adjustment is less than the Escrow Amount, then, subject to Section 5.4, prior to expiration of the Review Period, Buyer shall notify the Escrow Agent and the Shareholder and make a written claim for that portion of the Escrow Amount that is equal to the Working Capital Adjustment. (d) If the Actual Working Capital is less than the Required Working Capital and the Working Capital Adjustment is greater than the Escrow Amount, then, subject to Section 5.4, prior to expiration of the Review Period, Buyer shall notify the Escrow Agent and the Shareholder and make a written claim for the return of all of the Escrow Amount. 5.3 Adjustment for Cash on Hand. After the adjustment for Working Capital pursuant to Section 5.2, the Purchase Price shall be increased, subject to Section 5.4(d), by the amount of the Corporation's cash on hand and in accounts, as set forth on the Audited Closing Balance Sheet. 5.4 Procedure for Payment of Adjustments. (a) The adjustment to the Purchase Price for Working Capital specified in Section 5.2(a) shall be determined based upon the Audited Closing Balance Sheet. The costs incurred for preparing the Audited Closing Balance Sheet shall be borne by the Shareholder. (b) The Selling Parties and the Buyer agree that each will cooperate with the other so that the Audited Closing Balance Sheet is completed no later than sixty (60) days after the Closing Date. The Shareholder shall cause McGaladrey & Pullen (i) to provide access to and, upon request, copies of its working papers and otherwise to cooperate with Price Waterhouse during and after the preparation of the Audited Closing Balance Sheet, and (ii) to complete the Audited Closing Balance Sheet as soon as practicable after the Closing Date. (c) Upon completion, the Audited Closing Balance Sheet (and the audited income statement prepared in conjunction therewith) shall be provided to the Shareholder, the Buyer, Tridex and the Escrow Agent. The Buyer shall have no more than sixty (60) days from the date of its receipt of the Audited Closing Balance Sheet (the "Review Period") to review the Audited Closing Balance Sheet with its own accountants, Price Waterhouse. Tridex will cause Price Waterhouse to complete its review as soon as practicable after receipt of the Audited Closing Balance Sheet. The Shareholder and the Corporation agree that the Audited Closing Balance Sheet shall present fairly in all material respects the financial condition of the Corporation at the Closing Date in conformity with GAAP, in a manner consistent with the balance sheet included in the December 31, 1997 audited Financial Statement and, in consideration thereof, Tridex and the Buyer agree that the Buyer and Price Waterhouse may challenge the Audited Closing Balance Sheet only on the basis that it has not been so prepared. (d) If the Buyer has any disagreements with the Audited Closing Balance Sheet then, prior to the expiration of the Review Period, the Buyer shall notify the Shareholder and the Escrow Agent in writing of such disagreements, setting forth the amount and basis for such disagreement. If the Buyer and the Shareholder cannot resolve the disagreement regarding the Audited Closing Date Balance Sheet, such disagreement shall be subject to arbitration pursuant to Section 5.4(f). 10 (e) If the Buyer has made a claim pursuant to Section 5.2(c) or (d) to all or a portion of the Escrow Amount, the Shareholder shall have ten (10) days after the Buyer's notice to deliver to the Escrow Agent and the Buyer an objection in writing to such claim. If the Shareholder does not object to the claim, the amount of the claim shall be paid to the Buyer by the Escrow Agent, and the Shareholder shall pay to the Buyer the amount, if any, by which the Working Capital Adjustment exceeds the Escrow Amount . If the Shareholder objects to the claim, such objection shall be subject to arbitration pursuant to Section 5.4(f). (f) Disputed matters described in Sections 5.4(d)-(e) shall be submitted by the Shareholder and the Buyer, together with their respective accountants, to Ernst & Young, LLP (the "Arbitrator") for binding arbitration. The Shareholder and the Buyer agree that the decision of the Arbitrator with respect to such matters shall be binding on them and the Escrow Agent and not subject to further review. The professional fees and expenses of the Arbitrator shall be borne by the Shareholder if their decision confirms that Buyer is entitled to receive (by Purchase Price reduction or otherwise) an amount equal to at least one-half of the amount claimed by Buyer. Otherwise, such fees and expenses shall be paid by Buyer. 5.5 Reduction for Liabilities Other Than Trade Payables. In addition to any adjustments made to the Purchase Price based on the difference between the Required Working Capital and the Actual Working Capital, the Purchase Price shall be reduced by the total amounts due to third parties from the Corporation for indebtedness and other liabilities and obligations of the Corporation, as set forth on the Audited Closing Balance Sheet, subject to Section 5.4, including but not limited to any indebtedness under the Inventory and Working Capital Financing Agreement effective August 1, 1997 between the Corporation and IBM Credit Corporation (the "IBM Credit Agreement"), but excluding trade payables and current accrued liabilities already excluded from the calculation of Actual Working Capital pursuant to Section 5.1(iii). VI. Representations and Warranties of Selling Parties. The Selling Parties jointly and severally represent and warrant to Tridex and the Buyer that: 6.1 Corporate Status. The Corporation is duly organized, validly existing and in good standing under the laws of the State of North Carolina, with full corporate power and authority to own its properties and to carry on the business now owned and carried on by it. The Corporation has all requisite corporate power and authority to execute and deliver this Agreement. Except as set forth on Schedule 6.1, the Corporation is qualified to do business in all states where its business requires it to be so qualified except in such states where the failure to so qualify would not have a material adverse effect on the Corporation's business or financial condition. A complete list of all states where the Corporation is so qualified, maintains an office or owns property is set forth on Schedule 6.1. 6.2 Capitalization and Shareholder. The authorized capital stock of the Corporation is set forth on Schedule 6.2. The Shares constitute all of the outstanding shares of capital stock of the Corporation. All of the 11 Shares are validly issued, fully paid and nonassessable and free of preemptive rights, and there are no outstanding subscriptions rights, options, calls, puts, rights, warrants, convertible securities, purchase rights or other agreements, contracts or commitments obligating the Corporation to issue or to transfer from its treasury any additional capital shares. Except as specified above, there are no outstanding or authorized stock appreciation rights, phantom stock, profit participation or similar rights with respect to the stock of the Corporation. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting or transferability of the capital stock of the Corporation. 6.3 Ownership of Shares. The Shareholder owns all of the Shares free and clear of all liens, encumbrances, security interests, claims, restrictions, or rights of any third parties. There are no holders of shares of stock in the Corporation other than the Shareholder. 6.4 Subsidiaries. The Corporation does not have any subsidiaries. 6.5 Financial Statements. True, correct and complete copies of the Financial Statements have been or, in the case of the audited Financial Statements for the year ended December 31, 1997, prior to the Closing will have been, delivered to the Buyer and attached hereto as Schedule 6.5. The Financial Statements have been prepared in accordance with GAAP (subject in the case of the unaudited Financial Statements for the year ended December 31, 1997, to the absence of footnotes and normal, recurring audit adjustments), and fairly present the financial position of the Corporation as at the respective dates of the balance sheets included in the Financial Statements and the results of its operations for the respective periods indicated. 6.6 Absence of Changes. Except as disclosed in Schedule 6.6, since the Balance Sheet Date, there has not been any: (a) transaction by the Corporation except in the Ordinary Course of Business; (b) capital expenditure exceeding $ 50,000 or contract entered into for the purchase of any capital asset having a cost in excess of $ 50,000; (c) material adverse change in the financial condition, liabilities, assets or business of the Corporation; (d) destruction, damage to or loss of any asset (whether or not covered by insurance) that materially and adversely affects the financial condition or business of the Corporation; (e) loss of a key employee, labor dispute, strike or work stoppage or other event or condition of any character that materially and adversely affects the financial condition, business or assets of the Corporation; 12 (f) change in accounting methods or practices (including, without limitation, any change in depreciation or amortization policies or rates) by the Corporation; (g) revaluation of the Corporation's material assets; (h) declaration, setting aside or payment of a dividend or other distribution in respect to the capital shares of the Corporation (except as permitted under Section 8.8), or any direct or indirect redemption, repurchase or other acquisition by the Corporation of the Corporation's capital shares; (i) increase in the salary or other compensation payable or to become payable to any of the Corporation's officers, directors or the Shareholder, or the declaration, payment or obligation for the payment of a bonus or other additional salary or compensation to any such person; (j) sale or transfer of any asset of the Corporation, except in the Ordinary Course of Business; (k) amendment or termination of any material contract, agreement or license to which the Corporation is a party, except in the Ordinary Course of Business; (l) loan by the Corporation to any person or entity, or guaranty of any loan; (m) mortgage, pledge or other encumbrance of any asset of the Corporation; (n) waiver or release of any material right or claim of the Corporation, except in the Ordinary Course of Business; (o) other event or condition of any character that has or that might reasonably be expected to have a material adverse effect on the financial condition, business or assets of the Corporation; (p) issuance or sale of any capital shares of the Corporation, or issuance of any other securities by the Corporation; (q) any litigation, arbitration or other legal proceeding commenced by or against the Corporation; (r) any agreement, the performance of which will result in any of the things described in the preceding clauses (a) through (q); or (s) action taken by the Selling Parties that has or that would likely result in a revocation of the Corporation's status as an S-Corporation within the meaning of Section 1361(a) of the Code. 6.7 Absence of Undisclosed Liabilities. 13 The Corporation has no debt, liability or obligation of any nature, whether accrued, absolute or contingent, and whether due or to become due, that is not reflected or reserved against in the Balance Sheet except for those that are disclosed in Schedule 6.7. 6.8 Tax Returns and Audits. (a) Returns. All Tax Returns required to have been filed by the Corporation have been timely filed (taking into account duly granted extensions), and are true, correct and complete in all material respects. Except as disclosed in Schedule 6.8(a), (i) the Corporation is not currently the beneficiary of any extension of time within which to file any Tax Return, and (ii) no claim has ever been made by any Governmental Authority in a jurisdiction where the Corporation does not file Tax Returns that the Corporation is or may be subject to taxation by that jurisdiction. (b) Taxes. All Taxes of the Corporation which have become due (without regard to any extension of the time for payment and whether or not shown on any Tax Return), have been paid. Schedule 6.8(b) sets forth a list of the names and addresses of all Governmental Authorities with the power to assess a tax upon the Corporation, the business or the assets of the Corporation, and sets forth the nature of such taxes including, without limitation, sales, income, property, excise, use and franchise. The Corporation has withheld and paid over all Taxes required to have been withheld and paid over and has complied with all information reporting and back-up withholding requirements relating to Taxes. There are no liens with respect to Taxes on any of the assets of the Corporation, other than liens for Taxes not yet due and payable or for Taxes disclosed in Schedule 6.8(b) that are being contested in good faith through appropriate proceedings. (c) Deficiencies, Proceedings, Waivers. No Deficiencies exist or have been asserted or, to the best of the Selling Parties' knowledge, are expected to be asserted (verbally or in writing), with respect to Taxes of the Corporation, and the Corporation has not received notice nor, to the best of the Selling Parties' knowledge, does it expect to receive notice (verbally or in writing), that the Corporation has not filed a Tax Return or paid all Taxes required to be filed or paid by them. Except as disclosed on Schedule 6.8(c), no audit, examination, investigation, action, suit, claim or proceeding relating to the determination, assessment or collection of any Tax of the Corporation is currently in process, pending or, to the best of the Selling Parties' knowledge, threatened (verbally or in writing). Except as disclosed in Schedule 6.8(a), no waiver or extension of any statute of limitations relating to the assessment of collection of any Tax of the Corporation is in effect. There are no outstanding requests for rulings with any Governmental Authority relating to Taxes of the Corporation. (d) Tax Sharing Arrangements, Liability for Others' Taxes. The Corporation is not and has never been (i) a party to any tax sharing agreement or arrangement (formal or informal, verbal or in writing), or (ii) a member of an affiliated group of corporations (within the meaning of Code Section 1504) filing a consolidated federal income Tax Return, or any similar group under analogous provisions of other law. (e) Returns Furnished, Tax Attributes. The Corporation has delivered to the Buyer true and complete copies of all federal, state, local and foreign income Tax Returns filed by the Corporation for 1994, 1995 and 1996, together with all related examination reports, statements of deficiencies and closing and other agreements. Schedule 6.8(c) indicates which, if 14 any, of such returns have been, or currently are, the subject of any audit, examination or other Tax proceeding. (f) Elections, Special Status. The Corporation: (i) has not filed a consent under Code Section 341(f) concerning collapsible corporations; (ii) has not made any payments, obligated itself to make any payments or become a party to any agreement that under any circumstance could obligate it or any successor or assignee to make any payments that are not or will not be deductible under Code Section 280G or that would be subject to excise Tax under Code Section 4999; (iii) is not a "foreign person" as defined in Code Section 1445(f)(3); (iv) is not and has not been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii); (v) does not own and has not owned any interest in any "controlled foreign corporation" as defined in Code Section 957 or "passive foreign investment company" as defined in Code Section 1296; (vi) is not and has not been a party to any agreement or arrangement for which partnership Tax Returns are required to be filed; (vii) does not own any asset that is subject to a "safe harbor lease" within the meaning of Code Section 168(f)(8), as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982; (viii) does not own any "tax-exempt use property" within the meaning of Code Section 168(h) or "tax exempt bond financed property" within the meaning of Code Section 168(g)(5); and (ix) has not agreed to and is not required to make any adjustment under Code Section 481(a) by reason of a change in accounting method or otherwise. (g) Tax Liability in Financial Statements. The liabilities (including deferred taxes) shown for Taxes, interest and penalties in the Financial Statements as of the Balance Sheet Date and to be included on the Audited Closing Date Balance Sheet are and will be adequate accruals and have been and will be accrued in a manner consistent with the practices utilized for accruing tax liabilities in the tax year ended December 31, 1996 and take into account net operating losses, investment credits and other carryovers for periods ended prior to the Closing Date. (h) S-Corporation Status. The Corporation is an S-Corporation within the meaning of Section 1361(a) of the Code and has been an S-Corporation since it commenced operations in 1994. The Corporation is currently, has been at all times since electing to be taxed as an S-Corporation and will at all times from the execution hereof through the Closing be in compliance with all of the requirements applicable to qualifying for and maintaining eligibility as an S-Corporation under the Code, including, without limitation, those restrictions applicable to the number, type and status of shareholders and classes of stock. The Corporation has not made, nor prior to the Closing will it make or enter into any agreement or understanding to make any distribution on account of stock which is at all disproportionate to the interests of the Shareholders in such Corporation. 6.9 Real Property. (a) Schedule 6.9 contains a complete and accurate description of each parcel of real property leased to the Corporation (the "Leased Properties"). Copies of all the leases listed in Schedule 6.9 (the "Leases") have been provided to the Buyer and are valid and in full force, and there does not exist any default or event that, with notice or passage of time, or both, would constitute a default under any of the Leases. 15 (b) The Corporation does not own or hold a fee or any other interest in any real property except as set forth on Schedule 6.9. (c) To the best of the Selling Parties' knowledge, the zoning of each of the Leased Properties described in Schedule 6.9 permits the presently existing improvements and the continuation of the business presently being conducted on Leased Property. The Corporation has not commenced, nor has the Shareholder or the Corporation received notice of the commencement of, any proceeding that would affect the present zoning classification of any of the Leased Properties. To the best of the Selling Parties' knowledge, the Corporation does not occupy any real property in violation of any building, zoning or other law, ordinance, regulation or order relating to the development, improvement, use or occupancy of real property. 6.10 Inventories. The inventories shown on the Balance Sheet or existing at the date hereof (the "Inventories") of the Corporation consist of items of a quality and quantity useable and salable by the Corporation in the Ordinary Course of Business. Except as disclosed in Schedule 6.10, all items included in the Inventories are the property of the Corporation, except for those shown on the Balance Sheet which have been sold or disposed of in the Ordinary Course of Business since the Balance Sheet Date; and for each of these sales, either the purchaser has made full payment, or the purchaser's liability to make payment is reflected in the books of the Corporation. Schedule 6.10 contains a complete and accurate list of each location of Inventories. Except as disclosed in Schedule 6.10, no items included in the Inventories have been pledged as collateral or are held by the Corporation on consignment from others. The Inventories shown on the Balance Sheet are based on quantities determined by physical count or measurement, and are valued at the lower of cost (determined on a first-in, first-out basis) or market value. The Inventories shown on the Audited Closing Balance Sheet will be based on quantities determined by physical count or measurement, taken at the Corporation's warehouse and other facilities in New Jersey and North Carolina within three (3) days of Closing. 6.11 Other Tangible Personal Property. The books and records of the Corporation contain a complete and accurate description of all machinery and equipment and all other material tangible personal property owned by the Corporations and used in connection with its business. Except as disclosed in Schedule 6.11, no personal property used by the Corporation in connection with its business is held under any lease, security agreement, conditional sales contract or other title retention or security arrangement, or is other than owned by and in the possession and under the control of the Corporation. Copies of any leases, security agreements or other documents listed on Schedule 6.11 have been provided to Buyer and are valid and in full force, and there does not exist any default or event that, with notice or passage of time, or both, would constitute a default under any of such leases, security agreements or other documents. The tangible personal property reflected in those books and records and on Schedule 6.11 constitutes all such tangible personal property necessary for the conduct by the Corporation of the business. 6.12 Accounts Receivable. Schedule 6.12 to this Agreement contains a complete and accurate schedule of the accounts receivable of the Corporation as at December 31, 1997, together with an accurate aging 16 of such accounts receivable. All those accounts receivable, and all accounts receivable of the Corporation arising thereafter, arose from valid sales in the Ordinary Course of Business. 6.13 Intellectual Property. (a) Schedule 6.13(a) contains a complete and accurate list of all trademarks, patents and patent applications, trade names, and registered copyrights, computer programs and software owned by the Corporation or in which it has an interest by license, agreement, common law or otherwise and, to the extent recorded in any form, inventions, processes, discoveries, ideas, designs, formulas, trade secrets, know-how, concepts, writings or other works used by the Corporation in and required for the conduct of its business (collectively, the "Listed Intellectual Property"). Schedule 6.13(a) indicates each instance in which an item of Listed Intellectual Property is licensed to or otherwise not owned exclusively by the Corporation and the nature of the Corporation's interest in such item. To the knowledge of the Corporation and the Shareholder, no third party is engaged in any activity not duly authorized by the Corporation which would constitute an infringement of any Listed Intellectual Property or any inventions, processes, discoveries, ideas, designs, formulas, trade secrets, know-how, concepts, writings or other works which are used in and material to the operation of the Corporation's business (collectively, together with the Listed Intellectual Property, the "Intellectual Property"). There are no claims or proceedings pending or, to the knowledge of the Corporation or Shareholder, threatened against the Corporation, nor are there facts or circumstances known to the Corporation or the Shareholder which could provide the basis for asserting, that the Corporation has, is or was infringing any patent, trademark, trade name or other intellectual property rights of any third party. (b) The Corporation has provided or made available Buyer with true and correct copies of all contracts, agreements, assignments, security interests, letters patent, copyright and trademark registrations and applications therefor and other documents relating to Intellectual Property of the Corporation. Schedule 6.13(b) is a true and accurate list of such contracts, agreements, assignments, security interests, letters patent, copyright and trademark registrations and applications therefor (other than Employee IP Agreements, as defined in Section 6.13(c)). (c) Except as described in Schedule 6.13(c), the Corporation has obtained from all employees, officers, directors, consultants, contractors, agents and others who have contributed to or participated in the conception and development of computer software, hardware, point-of-sale systems or Intellectual Property of the Corporation or who have received copies of or participated in the creation of source code, drawings, plans or specifications of the Corporation, a written agreement acknowledging the Corporation's ownership thereof (or assigning all rights therein to the Corporation) and agreeing to maintain the confidentiality of all such material (the "Employee IP Agreements"). The form of such Employee IP Agreement is attached as Schedule 6.13(c). None of the former or current members of management or key personnel of the Corporation, including all former and current employees, agents, consultants, contractors and others who have contributed to or participated in the conception and development of computer software, hardware, point-of-sale systems or other Intellectual Property of the Corporation has asserted or threatened in writing any claim against the Corporation or any of its subsidiaries in connection with the involvement of such persons in the conception and development of any computer software, hardware, point-of-sale systems or other Intellectual Property of the Corporation and to the best knowledge of the Shareholder and the Corporation no basis exists for any such claim. 17 (d) (i) Except as set forth on Schedule 6.13(a) or (b), the Corporation owns the entire right, title and interest in and to the Listed Intellectual Property and none of the Intellectual Property owned by the Corporation is subject to any outstanding orders, decrees, judgments, stipulations, claims or settlements specifically applicable to the Corporation by name or as a party, nor is any item of such Intellectual Property subject to any option, lease, covenant, condition, agreement (written or oral), Lien, or other claim or restriction. (ii) Except as set forth in Schedule 6.13(b) the Corporation has not granted any license and rights to any other Person with respect to any Intellectual Property owned by the Corporation. (iii) Except as set forth in Schedule 6.13(b), there are no contracts in effect for the conversion, modification or enhancement of software licensed or sold by the Corporation. Except as set forth in Schedule 6.13(b), there are no marketing agreements or other arrangements, including but not limited to value-added reseller, distributor or sales agent, for the direct or indirect marketing of the Corporation's products. (iv) Except as listed in Schedule 6.13(d), all royalties owed under any licenses to or by the Corporation for the period up to and including the Closing have been paid and there exists no default by the Corporation or, to the Corporation's knowledge, by any other party under the terms of said licenses and no event has occurred which, upon the passage of time or the giving of notice, or both, would result in any event of default by the Corporation or, to the Selling Parties' knowledge, by any other party to any license or prevent the Corporation from exercising and obtaining the benefits of any rights of the Corporation contained therein other than those which, in the aggregate, would not reasonably be expected to have a material adverse effect on the business or results of operation of the Corporation. (e) Other than as set forth in Schedule 6.13(e): (i) there is no suit, claim, action, investigation or proceeding pending or, to the best knowledge of the Selling Parties, threatened that the Corporation is infringing on or otherwise violating the rights of any person with regard to any Intellectual Property and, to the best knowledge of the Selling Parties, there is no basis for any such suit, claim, action, investigation or proceeding; (ii) to the best knowledge of the Selling Parties, no person is infringing on or otherwise violating any right of the Corporation with respect to any Intellectual Property owned by, licensed to and/or otherwise used by the Corporation; (iii) the execution and delivery of this Agreement, compliance with its terms and the consummation of the transactions contemplated hereby do not and will not conflict with or result in any violation, breach or default (with or without notice or lapse of time or both) under, or give rise to any right, license or Lien relating to, Intellectual Property owned by the Corporation or with respect to which the Corporation now has or has had any license or other agreement with any third party, or any right of termination, cancellation or acceleration of any material Intellectual Property right or obligation set forth in any license or other agreement to which the Corporation is a party, or the loss or encumbrance of any Intellectual Property or material benefit related thereto, or result in or require the creation, imposition or extension of any Lien upon any Intellectual Property or right; 18 (iv) no licenses or rights have been granted to distribute the source code of, or to use the source code to create Derivative Works (as hereinafter defined) of, any product currently marketed by, commercially available from or under development by the Corporation; and (v) the Corporation has taken reasonable and necessary steps to protect its Intellectual Property and its rights thereunder; to the best knowledge of the Selling Parties, no such rights to Intellectual Property have been lost or are in jeopardy of being lost through failure to act by the Corporation. As used herein "Derivative Work" shall mean a work that is based upon one or more preexisting works, such as a revision, enhancement, modification, abridgment, condensation, expansion or any other form in which such preexisting works may be recast, transformed or adapted, and which, if prepared without authorization of the owner of the copyright in such preexisting work, would constitute a copyright infringement. For purposes hereof, a Derivative Work shall also include any compilation that incorporates such a preexisting work as well as translations from one human language to another and from one type of code to another. 6.14 Title to and Condition of Assets. The Corporation has good and marketable title to all assets, whether real, personal, mixed, tangible or intangible, owned and currently used by it in the conduct of its business (including, without being limited to, all assets referred to or reflected in the Balance Sheet) free and clear of restrictions on or conditions to transfer or assignment, and free and clear of mortgages, liens, pledges, charges, encumbrances, equities, claims, easements, rights of way, covenants, conditions or restrictions, except for (a) those disclosed on Schedule 6.14 to this Agreement; (b) the lien of current taxes not yet due and payable; and (c) possible minor matters that, in the aggregate, are not substantial in amount and do not materially detract from or interfere with the present or intended use of any of these assets, or materially impair the business operations of the Corporation. All of the material tangible personal property of the Corporation is in good operating condition and repair, ordinary wear and tear excepted. The Corporation is in possession of all of the Leased Properties. Other than as set forth on Schedule 6.14 neither the Shareholder, nor any officer or director of the Corporation, nor any spouse or child of any of the foregoing persons nor, to the best knowledge of the Shareholder, any employee of the Corporation, has any interest, directly or indirectly, in any of the real or personal property owned by or leased to the Corporation or any Intellectual Property licensed by the Corporation. The assets (i) reflected on the Balance Sheet, (ii) acquired after the Balance Sheet Date or (iii) set forth on Schedule 6.11 constitute all assets and property necessary for the operation of the Business. 6.15 Customers and Distributors; Suppliers. (a) Schedule 6.15(a) sets forth any customer, customer representative or distributor (whether pursuant to a commission, royalty or other arrangement) who accounted for more than 5% of the sales of the Corporation for either the year ended December 31, 1997 or the year ended December 31, 1996 (collectively, the "Customers and Distributors"). No Customer or Distributor has given notice to the Corporation of its intention to terminate, to cancel or otherwise materially and adversely modify its relationship with the Corporation or to decrease 19 materially or limit its services, supplies or materials to the Corporation or its usage, purchase or distribution of the services or products of the Corporation. (b) Schedule 6.15(b) sets forth a true and complete list of all suppliers of the Corporation to whom it made payments aggregating $100,000 or more during each of the years ended December 31, 1997 and December 31, 1996, showing, with respect to each, the name, address and dollar volume involved. 6.16 Insurance Policies. Schedule 6.16 contains a list of all insurance policies held by the Corporation concerning its business and properties, including the type and amount of coverage and the annual premium. The Corporation has maintained and now maintains in full force and effect (a) insurance on all of its assets and business of a type customarily insured, covering property damage and loss of income by fire or other casualty, and (b) insurance protection against all liabilities, claims and risks against which it is customary to insure, both with respect to the amount and nature of the coverage. True and correct copies of all insurance policies have been provided to Buyer. 6.17 Other Contracts. Except for the agreements listed in Schedule 6.17, copies of which have been furnished to the Buyer, the Corporation is not a party to, nor is any of the Corporation's property bound by, any distributor's or manufacturer's or sales representative or agency agreement, any output or requirements agreement, any agreement not entered into in the Ordinary Course of Business, any loan agreement, indenture, mortgage, lease or guaranty agreement, or any other material agreement that is unusual in nature, duration or amount. To the knowledge of the Selling Parties, there is no default or event that, with notice or passage of time, or both, would constitute a default by any party to any of these agreements. The Corporation has not received notice that any party to any of these agreements intends to cancel or terminate any of these agreements or to exercise or not exercise any options under any of these agreements. To the knowledge of the Selling Parties, the Corporation is not a party to, nor is any of the Corporation's property bound by, any agreement that is materially adverse to the business, properties or financial condition of the Corporation. 6.18 Compliance with Laws. (a) The Corporation has complied with all Legal Requirements, the consequences of a violation of which could have a material adverse effect on its operations, and with all orders, judgments and decrees of any tribunal under applicable Legal Requirements. (b) The Corporation has not directly or indirectly paid or delivered any fee, commission or other money or property, however characterized, to any finder, agent, government official or other party, in the United States or any other country, that is in any manner related to the business or operations of the Corporation and that the Shareholder or the Corporation knows or has reason to believe to have been illegal under any Federal, state or local law of the United States or any other country having jurisdiction. The Corporation has not participated, directly or indirectly, in any boycott or other similar practice affecting any of its actual or potential customers. 20 6.19 Litigation. Except as disclosed in Schedule 6.19, there is no suit, action, arbitration, or legal, administrative or other proceeding, or governmental investigation pending or, to the best of the Selling Parties' knowledge, threatened against, involving or affecting the Corporation or any of its business, assets or financial condition. The matters set forth in Schedule 6.19, if decided adversely to the Corporation, will not result in a material adverse change in the business, assets or financial condition of the Corporation. The Shareholder or the Corporation has furnished or made available to the Buyer relevant court papers and other documents relating to the matters set forth in Schedule 6.19. The Corporation is not in default with respect to any order, writ, injunction or decree of any Federal, state, local, or foreign court, department, agency or instrumentality. Except as set forth in Schedule 6.19, the Corporation is not presently engaged in any legal action to recover moneys due or on account of damages sustained which affect the Corporation, its business assets or financial condition. 6.20 Agreement Will Not Cause Breach or Violation. Except as set forth as Schedule 6.20, the consummation of the transactions contemplated by this Agreement will not result in or constitute any of the following: (a) a default or an event that, with notice or passage of time, or both, would be a default, breach or violation of the certificate of incorporation or bylaws of the Corporation, any lease, license, promissory note, conditional sales contract, commitment, indenture, mortgage, or other agreement, instrument or arrangement to which the Shareholder or the Corporation is a party or by which they or any of their property are bound; (b) an event that would permit any party to terminate any agreement or to accelerate the maturity of any indebtedness or other obligation of the Corporation; or (c) the creation or imposition of any Lien, on any of the properties of the Corporation. 6.21 Authorization and Validity. Each of the Corporation and the Shareholder has the full corporate or individual power, legal capacity and authority to execute, deliver and perform its obligations under this Agreement and the other agreements contemplated hereby to which the Corporation or the Shareholder is a party, and to consummate the transactions contemplated hereby. Upon execution of this Agreement and the other agreements contemplated hereby to which the Corporation or the Shareholder is a party, such agreements shall constitute the legal and binding obligations of the Corporation and the Shareholder, as the case may be, and shall be enforceable against each of them in accordance with their terms, subject to general principles of equity, applicable bankruptcy, insolvency, moratorium and similar laws and principles of public policy which may limit enforcement. 6.22 Interest in Customers, Suppliers and Competitors. Except as disclosed in Schedule 6.22, neither the Shareholder, nor any other officer or director of the Corporation, nor any spouse or child of any of the foregoing persons, has any direct or indirect interest (other than the beneficial ownership of not more than one percent (1%) of the outstanding equity securities of a publicly traded issuer) in any competitor, supplier or customer of the Corporation, or in any person from whom or to whom the Corporation leases any real or personal property, or in any other person with whom the Corporation is doing business. 21 6.23 Corporation's Documents. The Shareholder and the Corporation have furnished to the Buyer for examination true, correct and complete (a) copies of the certificate of incorporation and bylaws of the Corporation; (b) copies of all of the Corporation's corporate records with respect to all proceedings, consents, actions and meetings of the shareholders and board of directors of the Corporation as in existence on the date hereof. The Shareholder is the only person to whom the Corporation has ever issued any shares of capital stock. 6.24 Personnel; Employee Matters. (a) Employee Census. Schedule 6.24(a)(i) contains a complete current employee census, listing the name, position, exempt or non-exempt status, employment date, age, current compensation, three-year compensation history, benefit plan participation and geographic location. Schedule 6.24(a)(ii) contains a complete and accurate list of all employees who are currently on leave of absence or receiving workers' compensation or disability benefits and whom the Corporation expects to return to work, as well as a complete and accurate list of all former employees who are currently receiving severance benefits or continuation of medical insurance coverage under COBRA, with a description and the date of expiration of such severance benefits. (b) Cash Compensation. Schedule 6.24(b) contains a complete and accurate description of (i) all increases in cash compensation including, without limitation, wages, salaries, bonuses (discretionary and formula) and other cash compensation (the "Cash Compensation") of all employees of the Corporation earning Thirty Thousand Dollars ($30,000) or more annually during the current and immediately preceding fiscal year of the Corporation and (ii) any promised increases in Cash Compensation to such employees that have not yet been effected. (c) Compensation Plans. Schedule 6.24(c) contains a complete and accurate list of all compensation plans or arrangements (the "Compensation Plans") sponsored by the Corporation or to which the Corporation contributes on behalf of its employees, other than Employee Programs listed in Schedule 6.26. The Compensation Plans include, without limitation, plans, arrangements or practices that provide for severance pay, deferred compensation, incentive, bonus or performance awards and stock ownership or stock options. The Corporation has provided the Buyer a copy of each written Compensation Plan and a written description of each unwritten Compensation Plan. (d) Employment Agreements. Schedule 6.24(d) contains a complete and accurate list of all employment agreements (the "Employment Agreements") to which the Corporation is a party with respect to its employees. The Employment Agreements include, without limitation, all temporary employee agreements and non-competition agreements. The Corporation has provided the Buyer a copy of each written Employment Agreement and a written description of each unwritten Employment Agreement. (e) Employee Policies and Procedures. Schedule 6.24(e) contains a complete and accurate list of all employee manuals, policies, procedures and work-related rules (the "Employee Policies and Procedures") that apply to employees of the Corporation. The 22 Corporation has provided the Buyer a copy of all written Employee Policies and Procedures and a written description of all unwritten Employee Policies and Procedures. (f) Unwritten Amendments. To the best of the Selling Parties' knowledge, no unwritten amendments have been made, whether by oral communication, pattern of conduct or otherwise, with respect to any Compensation Plans, Employment Agreement or Employee Policies and Procedures. (g) Labor Compliance. (i) Except as set forth in Schedule 6.24(g), the Corporation (A) has been and is in compliance with all material laws, rules, regulations and ordinances respecting employment and employment practices, terms and conditions of employment and wages and hours, and (B) is not liable for any arrears of wages or penalties for failure to comply with any of the foregoing. (ii) The Corporation has not engaged in any unfair labor practice or discriminated on the basis of race, color, religion, sex, national origin, age, or disability in its employment conditions or practices. (iii) There are no (A) unfair labor practice charges or complaints or racial, color, religious, sex, national origin, age or disability discrimination charges or complaints pending or, to the best of the Selling Parties' knowledge, threatened, against the Corporation before any Federal, state or local court, board, department, commission or agency, nor does any basis therefor exist or (B) existing or, to the best of the Selling Parties' knowledge, threatened, labor strikes, disputes, grievances, controversies or other labor troubles affecting the Corporation nor, to the best of the Selling Parties' knowledge, does any basis therefor exist. (h) Unions. The Corporation has never been a party to any agreement with any union, labor organization or collective bargaining unit. No employees of the Corporation are represented by any union, labor organization or collective bargaining unit. To the best knowledge of the Corporation, the employees of the Corporation have no intention to and have not threatened to organize or join a union, labor organization or collective bargaining unit. (i) Aliens. To the best of the Selling Parties knowledge, all employees of the Corporation are citizens of, or are authorized to be employed in, the United States. The Corporation has complied fully with all applicable laws, rules and regulations of Governmental Authority requiring new employees to provide proof of United States citizenship or employment authorization. 6.25 Powers of Attorney/Bank Accounts. Schedule 6.25 contains a list of (i) the names and addresses of all persons holding a power of attorney on behalf of the Corporation; and (ii) the names and addresses of all banks or other financial institutions in which the Corporation has an account, deposit or safe deposit box, with the names of all persons authorized to draw on these accounts or deposits, or to have access to these boxes. 6.26 Employee Programs. 23 (a) Schedule 6.26 sets forth a list of every Employee Program (as defined below) that has been maintained (as such term is further defined below) by the Corporation at any time during the three (3) year period ending on the date hereof. (b) Each Employee Program which has been maintained by the Corporation and which has at any time been intended to qualify under Section 401(a) or 501(c)(9) of the Code has received a favorable determination, notification, opinion or approval letter from the IRS regarding its qualification under such section and has, in fact, been qualified under the applicable section of the Code from the effective date of such Employee Program through and including the Closing (or, if earlier, the date that all of such Employee Program's assets were distributed). No event or omission has occurred which would cause any such Employee Program to lose such qualification under the applicable Code section. (c) Except as otherwise disclosed on Schedule 6.26, there has not been any failure of any party to comply with any laws applicable to or the terms of any Employee Programs that have been maintained by the Corporation, except for any failures to comply that, individually or in the aggregate, would not have a material adverse effect on the properties, financial condition, operations or prospects of the Corporation. With respect to any Employee Program now or heretofore maintained by the Corporation, there has occurred no "prohibited transaction," as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code, or breach of any duty under ERISA or, to the best of the Selling Parties' knowledge, other applicable law (including, without limitation, any health care continuation requirements or any other tax law requirements, or conditions to favorable tax treatment, applicable to such plan), which could result, directly or indirectly (including, without limitation, through any obligation of indemnification or contribution), in any taxes, penalties or other liability to the Corporation or any ERISA Affiliate (as defined below). No litigation, arbitration or governmental administrative proceeding (or investigation) or other proceeding (other than those relating to routine claims for benefits) is pending or, to the best of the Selling Parties' knowledge, threatened, with respect to any such Employee Program. (d) Neither the Corporation nor any ERISA Affiliate of the Corporation has ever maintained any Employee Program subject to Title IV of ERISA. (e) Except as otherwise disclosed on Schedule 6.26, with respect to each Employee Program maintained by the Corporation within the three years preceding the date hereof, complete and correct copies of the following documents (if applicable to such Employee Program) have previously been delivered to the Buyer: (i) all documents embodying or governing such Employee Program and any funding medium for the Employee Program (including, without limitation, trust agreements) as they may have been amended to the date hereof; (ii) the most recent IRS determination, notification, opinion or approval letter with respect to such Employee Program under Code Section 401 or 501(c)(9) and any applications for determination or approval subsequently filed with the IRS; (iii) the three most recently filed IRS Forms 5500, with all applicable schedules and accountants' opinions attached thereto; (iv) the summary plan description for such Employee Program (or other descriptions of such Employee Program provided to employees) and all modifications thereto; (v) any insurance policy (including any fiduciary liability insurance policy) related to such Employee Program; and (vi) any documents evidencing any loan to an Employee Program that is a leveraged employee stock ownership plan. 24 (f) The Corporation has not made any written or, to the best knowledge of the Shareholder, oral representations to its employees inconsistent with the written description of any Employee Program maintained by the Corporation as of the date hereof. (g) There are no unfunded obligations under any Employee Program providing benefits after termination of employment to any employee or former employee of the corporation (or to any beneficiary or dependent of any employee or former employee), including, but not limited to, retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code and insurance conversion privileges under state law. (h) For purposes of this Section 6.26: (i) "Employee Program" means (a) all employee benefit plans within the meaning of ERISA Section 3(3) including, but not limited to, multiple employer welfare arrangements (within the meaning of ERISA Section 3(40)), plans to which more than one unaffiliated employer contributes and employee benefit plans (such as foreign or excess benefit plans) that are not subject to ERISA. In the case of an Employee Program funded through an organization described in Code Section 501(c)(9), each reference to such Employee Program shall include a reference to such organization; (ii) an entity "maintains" an Employee Program if such entity sponsors, contributes to or provides (or has promised to provide) benefits under such Employee Program, or has any obligation (by agreement or under applicable law) to contribute to or provide benefits under such Employee Program, or if such Employee Program provides benefits to or otherwise covers employees of such entity (or their spouses, dependents, or beneficiaries); (iii) an entity is an "ERISA Affiliate" of the Corporation for purposes of this Section 6.26 if it would have ever been considered a single employer with the Corporation under ERISA Section 4001(b) or part of the same "controlled group" as the Corporation for purposes of ERISA Section 302(d)(8)(c). 6.27 Millennium Capability; Status of Debugging. (a) For purposes of this Section 6.27, software will be "Millennium Capable" if it will accurately process Date Data without error or interruption caused by such Date Data, where dates are before, after and during December 31, 1999, the year 2000 and subsequent years, including, but not limited to, recognizing the year 2000 as a leap year, providing correct results when moving backwards and forwards between the 20th and 21st century, and functioning without error or interruption related to or caused by such Date Data. "Date Data" means any information relating to dates expressed in days, months and calendar years. (b) The Corporation's software product known as the Intelligent Restaurant Information System (IRIS), when used in conjunction with the Windows-NT operating system, and in accordance with the Corporation's other specifications for such software, including without limitation those specifications related to hardware, is Millennium Capable. (c) Except as set forth on Schedule 6.27(c), the Corporation's software product known as Sophisticated Multi-Unit Advanced Restaurant Technology ("SMART"), when used in conjunction with the DOS operating system and in accordance with the 25 Corporation's other specifications for such software is Millennium Capable. No representation or warranty is made pursuant to this Section 6.27(c) regarding the capability of the SMART software to prevent any error or interruption related to Date Data which is caused by hardware, operating system software or other computer system components not included in the existing SMART installations and sold by the Corporation. 6.28 Consents. Except as set forth on Schedule 6.28, no consent, authorization, approval, permit or license (each a "Consent") of, or filing with, any Governmental Authority, any lessor, lender or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of the Selling Parties. 6.29 Adverse Agreements. The Corporation is not a party to any agreement or instrument, or subject to any charter or other corporate restriction, or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects, or so far as the Corporation can now foresee, may in the future materially and adversely affect, the condition (financial or otherwise), operations, assets, liabilities or business of the Corporation. 6.30 Environmental Matters. (a) Except as used in compliance with Environmental Law and as set forth in Schedule 6.30, (i) the Corporation has never generated, transported, used, stored, treated, disposed of, or managed any Hazardous Waste (as defined below); (ii) no Hazardous Material (as defined below) has ever been or is threatened to be spilled, released, or disposed of by the Corporation at any site presently or formerly owned, operated, leased, or used by the Corporation, or, to the Selling Parties' knowledge, has ever come to be located in the soil or groundwater at any such site; (iii) to the Selling Parties' knowledge, no Hazardous Material has ever been transported from any site presently or formerly owned, operated, leased, or used by the Corporation for treatment, storage, or disposal at any other place; (iv) there are no underground storage tanks on the premises of the Corporations' headquarters facility in Charlotte, North Carolina and, to the Selling Parties' knowledge, the Corporation does not presently own, operate, lease, or use, nor has the Corporation previously owned, operated, leased, or used any other site on which underground storage tanks are or were located; and (v) no lien has ever been imposed by any Governmental Entity on the property which includes the Corporation's Charlotte, North Carolina headquarters and, to the Selling Parties' knowledge, no lien has ever been imposed by an Governmental Entity on any other property, facility, machinery, or equipment owned, operated, leased, or used by the Corporation in connection with the presence of any Hazardous Material. (b) Except as set forth in Schedule 6.30 hereto, (i) the Corporation has no liability under, nor has the Corporation ever violated in any material respect, any Environmental Law (as defined below); (ii) the property which includes the Corporation's Charlotte, North Carolina headquarters is presently in compliance and, to the Selling parties' knowledge, any other property owned, operated, leased, or used by the Corporation and any facilities and operations thereon are presently in compliance in all material respects with all applicable Environmental Laws and no capital expenditure will be required to maintain such compliance; (iii) the 26 Corporation has never entered into or been subject to any judgment, consent decree, compliance order, or administrative order with respect to any environmental or health and safety matter or received any request for information, notice, demand letter, administrative inquiry, or formal or informal complaint or claim with respect to any environmental or health and safety matter or the enforcement of any Environmental Law (as defined below); and (iv) neither the Corporation nor the Shareholder has any reason to believe that any of the items enumerated in clause (iii) of this paragraph will be forthcoming. (c) Except as set forth in Schedule 6.30, the property which includes the Corporation's Charlotte, North Carolina headquarters does not contain and, to the Selling Parties' knowledge, no other site owned, operated, leased, or used by the Corporation contains any asbestos or asbestos-containing material, any polychlorinated biphenyls (pcbs) or equipment containing pcbs, or any urea formaldehyde. (d) For purposes of this Section 6.30: (i) "Hazardous Material" shall mean and include any hazardous waste, hazardous material, hazardous substance, petroleum product, oil, toxic substance, pollutant, or contaminant, as defined or regulated under any Environmental Law or any other substance which may pose a threat to the environment or to human health or safety; (ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or regulated under any Environmental Law; (iii) "Environmental Law" shall mean any environmental laws, regulation, rule, ordinance, or by-law at the foreign, federal, state, or local level, existing as of the date hereof; and (iv) "the Corporation" shall mean and include the Corporation, its predecessors and all other entities for whose conduct the Corporation is or may be held responsible under any Environmental Law. 6.31. Warranty and Related Matters. There are no product liability, warranty or other similar claims against the Corporation existing or, to the knowledge of the Selling Parties, threatened in writing, alleging that any of its products or services are defective or fail to meet any product or service warranties except as disclosed in Schedule 6.31. The Corporation has not received notice of any statements, citations, correspondence or decisions by any Governmental Entity stating that any product manufactured, marketed or distributed at any time by the Corporation (the "Corporation Products") is defective or unsafe or fails to meet any product warranty or any standards promulgated by any such Governmental Entity. There is no (a) latent or overt design, manufacturing or other defect known to the Selling Parties in any Product or (b) liability for warranty or other claim or return with respect to any Corporation Product except in the ordinary course of business consistent with the past experience of the Corporation for such kinds of claims and liabilities; provided, however, that this Section 6.31 shall not apply to any matter related to Date Data. 6.32 Full Disclosure. None of the representations and warranties made herein by the Selling Parties, or made in any certificate delivered pursuant to this Agreement, furnished or to be furnished by them or on their behalf, contain or will contain any untrue statement of a material fact, or omit any material fact the omission of which would be misleading. VI. A. Investment Representations and Warranties of Shareholder. 6A.1 Tridex Shares Restricted. 27 Shareholder understands that the Tridex Shares to be issued to Shareholder will, until registered pursuant to the Registration Rights Agreement, be restricted and that: (a) the Tridex Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the laws of any other jurisdiction and are being sold in reliance upon an exemption from such registration. The Tridex Shares cannot be sold or transferred by Shareholder unless they are subsequently registered under applicable law or an exemption from registration is available. Except as set forth in the Registration Rights Agreement, neither Tridex nor Buyer is required to register the Tridex Shares nor to make any exemption from registration available; and (b) Shareholder's right to sell or transfer Tridex Shares will be restricted as set forth herein, and the certificates representing the Tridex Shares may bear a legend, which includes restrictions against sale or transfer in violation of applicable securities laws, and which requires that Shareholder furnish an opinion of counsel that any proposed sale or transfer will not violate such laws and other restrictions and requirements. 6A.2 Information Provided to Shareholder. Shareholder has: (a) been furnished with all documents and information concerning Tridex which he has requested; (b) had the opportunity to ask questions and receive answers from Tridex concerning the Tridex Shares and to obtain any additional information necessary to verify the accuracy of the information furnished; and (c) relied only on the foregoing information and documents in determining to make an investment in the Tridex Shares. 6A.3 Accredited Investor Status. Shareholder is an "accredited investor," as defined in Rule 501 under the Securities Act, and is acquiring the Tridex Shares for his own account and not on behalf of any other person, and is acquiring the Tridex Shares for investment purposes only, and not with a view to resale or distribution thereof. Shareholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investing in Tridex. Shareholder recognizes that the information furnished by Tridex does not constitute investment, accounting, legal or tax advice. Shareholder is relying on his own professional advisers, if any, for such advice. Shareholder recognizes that an investment in the Tridex Shares involves substantial risks and has determined that the Tridex Shares are a suitable investment. VII. Representations and Warranties of Tridex and Buyer. Tridex and the Buyer jointly and severally represent and warrant to the Shareholder that: 7.1 Corporate Status; Authorization; Consents. (a) Each of Tridex and the Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; (b) each of Tridex and the Buyer has the full corporate power and authority to execute, deliver and perform its obligations under this Agreement and the other agreements contemplated hereby to which it is a party, and to consummate the transactions contemplated hereby; (c) upon execution of this Agreement and the other agreements contemplated hereby to which Tridex or the Buyer is a party, this Agreement and such other agreements shall constitute the legal and binding obligations of Tridex or the 28 Buyer, as the case may be; (d) no consent, approval or authorization of, or declaration, filing or registration with, any Governmental Authority is required to be made or obtained by Tridex or the Buyer in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement. 7.2 SEC Reports and Financial Statements. Tridex has filed with the SEC, and has heretofore made available to Shareholder, true and complete copies of all forms, reports, schedules, statements and other documents required to be filed by it since December 31, 1996 under the Exchange Act or the Securities Act (such forms, reports, schedules, statements or schedules included therein, are referred to as the "Tridex SEC Documents"). The Tridex SEC Documents, at the time filed, (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. Except to the extent that information contained in any Tridex SEC Document has been revised or superseded by a subsequently filed Tridex Filed SEC Document (as defined in Section 7.3) (a copy of which has been made available to Shareholder prior to the date hereof), none of the Tridex SEC Documents contains an untrue statement of a material fact or omits to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Tridex included in the Tridex SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-Q) and fairly present (subject, in the case of the unaudited statements, to normal, recurring audit adjustments) the consolidated financial position of Tridex and its consolidated subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. 7.3 Absence of Certain Changes or Events. Except as disclosed in the Tridex SEC Documents filed and publicly available prior to the Closing (the "Tridex Filed SEC Documents"), since December 31, 1996, Tridex and its subsidiaries have conducted their respective business only in the ordinary course, and there has not been (i) any material adverse change with respect to Tridex, (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock or any redemption, repurchase or other acquisition of any of its capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) any damage, destruction or loss, whether or not covered by insurance, that has or reasonably could be expected to have a material adverse effect on Tridex or (v) any material change in accounting methods, principles or practices by Tridex. 7.4 No Undisclosed Liabilities. 29 Except as and to the extent set forth in the Tridex Filed SEC Documents, neither Tridex nor any of its subsidiaries has any liabilities of any nature, whether or not accrued, contingent or otherwise, that would be reasonably expected to have a material adverse effect on Tridex. VIII. Selling Parties' Obligations before Closing. From the date of this Agreement until the Closing, the Selling Parties agree that: 8.1 Access to Premises and Information. Tridex, the Buyer and their counsel, accountants and other representatives will have full access during normal business hours to all properties, books, accounts, records, contracts and documents of or relating to the Corporation. The Shareholder will furnish or cause to be furnished to Tridex, the Buyer and their representatives all data and information concerning the business, finances and properties of the Corporation that are reasonably requested by Tridex, Buyer or their representatives. 8.2 Conduct of Business in Ordinary Course. The Corporation will diligently conduct its affairs in the Ordinary Course of Business, and will not make or institute any unusual or novel methods of manufacture, purchase, sale, lease, management, accounting or operation that will vary materially from those methods used by the Corporation during the twelve (12) month period ending on the date of this Agreement. The obligations set forth in this section include, but are not limited to, the specific obligations set forth hereafter in this Article VIII. 8.3 Preservation of Business and Relationships. The Corporation will use its best efforts to preserve its business organization intact, to keep available to the Corporation its present officers and employees and to preserve the Corporation's present relationships with suppliers, customers and others having material business relationships with the Corporation. 8.4 Maintenance of Corporate and Tax Status. The Corporation will not (a) amend its certificate of incorporation or bylaws; (b) issue any shares of capital stock; (c) issue or create any warrants, obligations, subscriptions, options, convertible securities, or other commitments under which any additional shares of its capital stock of any class might be directly or indirectly authorized, issued or transferred from treasury; (d) take any action that would likely result in a revocation of its status as a S-Corporation within the meaning of Section 1361(a) of the Code; or (e) agree to do any of the acts listed in this Section 8.4(a) through (d) above. 30 8.5 Maintenance of Insurance. The Corporation will maintain its existing insurance policies and coverage, subject to variations in amounts required by the ordinary operations of its business. At the request of the Buyer and at the Buyer's sole expense, the amount of insurance against fire and other casualties which, at the date of this Agreement the Corporation carries on any of its properties or in respect of its operations, shall be increased by such amount or amounts as the Buyer specifies. 8.6 Employees and Compensation. The Corporation will not do, nor will it agree to do, any of the following: (a) make any change in compensation payable to or to become payable, to any officer, employee (except in the Ordinary Course of Business), sales agent, or representative; or (b) make any change in benefits payable to any officer, employee (except in the Ordinary Course of Business), sales agent, or representative under any bonus or pension plan or other contract or commitment. 8.7 New Transactions. The Corporation will not do, nor will it agree to do any of the following acts, without the Buyer's prior written consent: (a) enter into any contract, commitment or transaction not in the Ordinary Course of Business; (b) enter into any contract, commitment or transaction in the Ordinary Course of Business involving an amount exceeding $10,000, individually; (c) make any capital expenditures in excess of $10,000 for any single item, or enter into any leases of capital equipment or property under which the annual lease charge is in excess of $10,000; or (d) sell or dispose of any capital assets with a net book value exceeding $10,000, individually; provided that the Corporation may sell a 1997 Chevrolet truck to Smith Investments, an Affiliate of the Shareholder, for no less than its fair market value. 8.8 Dividends, Distributions and Acquisitions of Stock. The Corporation will not: (a) declare, set aside or pay any dividend, or make any distribution in respect of, its capital stock, except for the distribution of up to $300,000 to the Shareholder between January 1, 1998 and the Closing Date; (b) directly or indirectly purchase, redeem or otherwise acquire any shares of its capital stock; or (c) enter into any agreement obligating it to do any of the foregoing prohibited acts. 8.9 Payment of Liabilities and Waiver of Claims. Except as disclosed in Schedule 8.9, the Corporation will not do, nor will it agree to do, any of the following: (a) pay any obligation or liability, fixed or contingent, other than current liabilities incurred in the Ordinary Course of Business; (b) waive or compromise any right or claim in excess of $10,000; or (c) cancel, without full payment, any note, loan or other obligation owing to the Corporation. 31 8.10 Existing Agreements. The Corporation will not modify, amend, cancel or terminate any of its existing material contracts or agreements, or agree to modify, amend, cancel or terminate any of its existing material contracts or agreements. 8.11 Documentation of Procedures and Trade Secrets. At the request of the Buyer, the Corporation will document and describe any of its trade secrets, processes or business procedures specified by the Buyer in form and content satisfactory to the Buyer. 8.12 Representations and Warranties True at Closing. Neither the Shareholder nor the Corporation will take, or will agree to take, any action that will result in any representation or warranty being untrue or incorrect at any time from the date of this Agreement to the Closing. 8.13 Consents of Others. As soon as reasonably practical after the execution and delivery of this Agreement, and in any event on or before the Closing, the Shareholder will obtain the written consent of the persons described in Schedule 6.28 to this Agreement and will furnish to the Buyer executed copies of those consents. 8.14. 338(h)(10) Election. At the request of Tridex, the Selling Parties, Buyer and Tridex shall jointly make a valid, timely and effective election under Section 338(h)(10) of the Code with respect to Buyer's purchase of Shares from Shareholder. IX. Conditions Precedent to Buyer's Performance. The obligations of the Buyer under this Agreement are subject to the satisfaction, at or before the Closing, of all the conditions set out below. The Buyer may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver by the Buyer of any of the Buyer's other rights or remedies, at law or in equity. 9.1 Accuracy of Selling Parties' Representations and Warranties. Except as otherwise permitted by this Agreement, all representations and warranties by the Selling Parties in this Agreement, or in any written statement that is delivered to the Buyer pursuant to this Agreement, will be true in all material respects on and as of the Closing as though made at that time. 32 9.2 Performance by Selling Parties. The Selling Parties will have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by the Shareholder or the Corporation on or before the Closing. 9.3 No Material Adverse Change. During the period from the date hereof until the Closing, there will not have been any material adverse change in the financial condition, results of operations or business of the Corporation, and the Corporation will not have sustained any material loss or damage to its assets, whether or not insured. A material adverse change in the business of the Corporation includes, but is not limited to, the occurrence of an event or change in facts or circumstances which would cause any material assumption underlying the Plan B Financial Forecast attached hereto as Schedule 9.3 to cease to be accurate and reasonably be expected to cause total revenues under such plan to be decreased by more than $1,000,000. 9.4 Audited Financial Statements. The Shareholder shall have delivered to the Buyer a complete and accurate copy of the Corporation's financial statements prepared in accordance with GAAP for the year ended December 31, 1997, audited by McGaladrey & Pullen, showing net sales of at least $33,707,000, and earnings before interest, taxes, depreciation and amortization ("EBITDA") of at least $3,700,000. 9.5 Opinion of Selling Parties' Counsel. The Buyer will have received from Kilpatrick Stockton LLP, counsel for the Selling Parties, an opinion dated the day of the Closing, in form and substance satisfactory to the Buyer and the Buyer's counsel, that: (a) the Corporation is validly existing and in good standing under the laws of the state of its incorporation and has all necessary corporate power to own its properties as now owned and to operate its business as now operated; (b) the authorized capital shares of the Corporation is as set forth on Schedule 6.2, and, based entirely on a certificate from the Shareholder (as to which such counsel has no knowledge of any inconsistent facts or circumstances), all outstanding shares are validly issued, fully paid and nonassessable, and there are no outstanding subscriptions, options, rights, warrants, convertible securities or other agreements or commitments obligating the Corporation to issue or transfer from treasury any additional capital share of any class; (c) this Agreement has been duly and validly authorized by the Corporation and, when executed and delivered by the Selling Parties, this Agreement will be valid and binding on the Selling Parties and enforceable in accordance with its terms, except as limited by general principles of equity, bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally, and public policy; (d) based entirely on a certificate from the Shareholder (as to which such counsel has no knowledge of any inconsistent facts or circumstances), the Shareholder owns, 33 beneficially and of record, all the issued and outstanding capital shares of the Corporation free and clear of all liens, encumbrances, equities, options, claims, charges and restrictions, and the Shareholder has full power to transfer such shares to the Buyer without obtaining the consent or approval of any other person or Governmental Authority; (e) except as disclosed in Schedule 6.19, counsel has no knowledge, without independent investigation, of any suit, action, arbitration, or legal, administrative or other proceeding or governmental investigation pending or threatened against, or affecting the Corporation business or properties, or financial or other condition; (f) neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated in this Agreement will constitute (i) a default or an event that would, with notice or passage of time, or both, constitute a default under, or violation or breach of, the Corporation's certificate of incorporation, bylaws, or to such counsel's knowledge, any indenture, license, lease, franchise, mortgage, instrument or other agreement identified on the Schedules to this Agreement to which the Corporation is a party or by which the properties of the Corporation may be bound, or (ii) to such counsel's knowledge, an event that would permit any party to any such agreement or instrument to terminate it or to accelerate the maturity of any indebtedness or other obligation of the Corporation, or (iii) to such counsel's knowledge, an event that would result in the creation or imposition of any lien, charge or encumbrance on any asset of any of the Corporation; and (g) to such counsel's knowledge, every consent, approval, authorization or order of any court or governmental agency or body that is required for the consummation by the Corporation and the Shareholder of the transactions contemplated by this Agreement has been obtained and is in effect on the day of the Closing. 9.6 Absence of Litigation. No action, suit or proceeding before any court or any governmental body or authority, challenging the transactions contemplated by this Agreement, will have been instituted or threatened on or before the Closing. 9.7 Buyer's Acquisition Financing. The Buyer shall have closed transactions providing financing in an amount totaling at least Thirty-One Million Dollars ($31,000,000), consisting of senior bank financing and subordinated debt financing from institutional investors, subject only to completion of the Closing hereunder; provided, however, that if all conditions set forth in this Article IX other than this Section 9.8 have been satisfied or waived and the Closing has not occurred on or before April 31, 1998, Tridex shall pay to the Corporation the sum of One Hundred and Fifty Thousand Dollars ($150,000) plus, upon presentation of invoices for reasonable professional fees and expenses greater than $150,000 incurred by the Corporation solely in connection with the transactions described in this Agreement, an additional payment of up to Fifty Thousand Dollars ($50,000) to reimburse the Corporation for its actual expenses in an aggregate amount not to exceed Two Hundred Thousand Dollars ($200,000). 9.8 Payoff of Corporation Loans to Shareholder and Affiliates. Any and all loans or advances from the Corporation to the Shareholder, Smith Investments, Inc. or any other Affiliate of the Shareholder shall be paid in full, with such payment documented to the reasonable satisfaction of Buyer. 34 9.9 Consents. Each of the Consents listed on Schedule 6.28, including but not limited to the Consents of McDonald's Corporation and Micros Systems, Inc., shall have been obtained by the Corporation, provided that the Corporation shall not be required to obtain a consent from the landlord of its Colorado office. 9.10 Release of IBM Lien. The Corporation shall have obtained, subject only to the payment in full of amounts due under the IBM Credit Agreement, a release and termination on UCC-3 for each financing statement on UCC-1 on record regarding the security interest securing the loan under the IBM Credit Agreement (the "IBM Releases"). 9.11 Headquarters Lease. The Shareholder shall cause the Smith Family Limited Partnership, the landlord (the "Landlord") under the lease for the Corporation's headquarters in Charlotte, North Carolina to obtain from the Landlord's mortgage lender a subordination, non-disturbance and attornment Agreement among such lender, Landlord and the Corporation, in form reasonably satisfactory to Tridex and Buyer. In addition, if Tridex receives a report from a qualified independent leasing professional, mutually acceptable to Shareholder and Tridex, that the fair market rent for the headquarters facility is less than $28,500, the Shareholder shall cause the Landlord to amend such lease to reduce the rent to the fair market rent. 9.12 Auto Leases. The Corporation shall terminate or assign, and shall have paid to the lessor all fees, charges and penalties required in connection such termination or assignment, all leases to which the Corporation is a party or for which it is otherwise liable for motor vehicles, other than the two (2) 1996 Honda vans, the two (2) 1998 Ford vans and the one (1) 1996 GMC Yukon truck. X. Conditions Precedent to Shareholder's Performance. The obligations of the Shareholder under this Agreement are subject to the satisfaction, at or before the Closing, of the following conditions: 10.1 Accuracy of Buyer's Representations and Warranties. All representations and warranties by the Buyer contained in this Agreement, or in any written statement delivered by the Buyer pursuant to this Agreement, will be true in all material respects on and as of the Closing Date as though such representations and warranties were made on and as of that date. 10.2 Buyer's Performance. The Buyer will have performed and complied in all material respects with all covenants and agreements and satisfied all conditions which it is required by this Agreement to perform, comply with or satisfy, before or at the Closing. 35 10.3 Opinion of Buyer's Counsel. The Shareholder will have received from Hinckley, Allen & Snyder, counsel for the Buyer, an opinion dated the day of the Closing, in form and substance satisfactory to the Shareholder and counsel for the Selling Parties, to the effect that: (a) the Buyer is a corporation in good standing under the laws of the State of Connecticut and has all requisite corporate power and authority to perform its obligations under this Agreement; (b) all corporate proceedings required by law or by the provisions of this Agreement to be taken by the Buyer on or before the Closing, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement, have been duly and validly taken; (c) the Buyer has the corporate power and authority to acquire the Shares for the consideration set forth in this Agreement; (d) this Agreement, the Registration Rights Agreement (as defined in Section 10.4) and the Consulting and Employment Agreement (as defined in Section 11.2(a)) have been duly and validly authorized by Buyer and, when executed and delivered by the Buyer, will be valid and binding on the Buyer and enforceable in accordance with their respective terms, except as limited by general principles of equity, bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally, and public policy; (e) every consent, approval, authorization or order of any court or governmental agency or body that is required for the consummation by the Buyer of the transactions contemplated by this Agreement has been obtained and is in effect on the day of the Closing (f) the Tridex Shares, when issued, will be duly authorized, validly issued, fully paid and nonassessable. 10.4 Registration Rights Agreement. The Buyer will have executed a Registration Rights Agreement (the "Registration Rights Agreement") substantially in the form of Exhibit B between the Buyer and Shareholder covering the Tridex Shares. 10.5 Absence of Litigation. No action, suit or proceeding before any court or any governmental body or authority, challenging the transaction contemplated by this Agreement or to its consummation, will have been instituted or threatened on or before the Closing. XI. Closing. 11.1 Time and Place. The consummation of the sale and purchase of the Shares by the Shareholder and the Buyer pursuant to this Agreement (the "Closing") will take place at the offices of Hinckley, Allen & Snyder, 28 State Street, Boston, Massachusetts 02109 beginning at 10:00 a.m. on April 3, 1998, or at such other time and place to which the parties may agree in writing (the "Closing Date"), but in no event later than April 3, 1998. 36 11.2 Shareholder's Obligations at the Closing. At the Closing, the Shareholder will deliver to the Buyer the following, all documents to be in form and substance reasonably satisfactory to the Buyer and the Buyer's counsel: (a) A certificate or certificates representing the Shares, registered in the name of the Shareholder duly endorsed for transfer to the Buyer and accompanied by stock powers or other instrument of assignment of the Shares to the Buyer duly executed by the Shareholder. (b) The Corporation's minute book showing all of the Corporation's corporate records with respect to all proceedings, consents, actions and meetings of the shareholders and board of directors of the Corporation and the corporate seal of the Corporation. (c) The opinion of counsel to the Corporation and Shareholder as provided in Section 9.5. (d) A certificate of the president and treasurer of the Corporation and the Shareholder respecting the continued truth of the Selling Parties' representations and warranties, the performance by the Selling Parties of, or the compliance by the Selling Parties with, any covenant or obligation required to be performed or complied with by the Selling Parties and the absence of any change in the financial condition or results of operations of the Corporation, except changes occurring in the Ordinary Course of Business during the period from the Balance Sheet Date to the Closing that, in the aggregate, are not materially adverse, and such other changes or transactions, if any, as contemplated by this Agreement. (e) A certificate of the secretary of the Corporation regarding the votes taken to authorize the transactions contemplated under this Agreement and the incumbency of the offices of the Corporation. (f) Except as otherwise specified by the Buyer, the written resignations of all the officers and directors of the Corporation. (g) A Consulting Agreement between the Corporation and the Shareholder substantially in the form attached hereto as Exhibit C (the "Employment and Consulting Agreement"), and an Employee IP Agreement, each duly executed by the Shareholder. (h) Employment Agreements between each employee of the Corporation listed on Exhibit D-1 (each a "Key Employee") and the Corporation substantially in the form attached hereto as Exhibit D-2 (the "Key Employee Agreements"), duly executed by the Key Employees. (i) The Escrow Agreement, duly executed by the Shareholder. (j) The Registration Rights Agreement, substantially in the form of Exhibit B attached hereto, duly executed by the Shareholder. (k) A General Release executed by the Shareholder, dated the day of the Closing, to be in form and substance reasonably satisfactory to counsel for the Shareholder and the Buyer. 37 (l) All consents, elections and other documentation or filings which the Buyer reasonably believes to be required or advisable in connection with the making of an election to have the transaction under this Agreement taxed under the provisions of Section 338(h)(10) of the Code with respect to the Corporation, together with a limited power of attorney irrevocably authorizing the Buyer to file the same with the Internal Revenue Service. (m) The Consents listed on Schedule 6.28. (n) All documents, including but not limited to votes of the board of directors of the Corporation and signature cards, necessary to redesignate the officers and employees who will have authority with respect to the bank accounts identified on Schedule 6.25. (o) The amendment of the lease, executed by the Landlord, and the subordination, nondisturbance and attornment agreement, executed by the Landlord and its mortgage lender, as set forth in Section 9.11. (p) Documentation of the termination or assignment of automotive leases, as set forth in Section 9.12. (q) The IBM Releases. 11.3 Buyer's Obligations at the Closing. At the Closing, the Buyer will pay the Closing Cash Payment as provided in Section 4.1(b) and will deliver to the Shareholder the following: (a) A certificate for the Tridex Shares, substantially in the form attached hereto as Exhibit E, including the legends placed on the reverse thereof. (b) A certificate of the president and treasurer of the Corporation respecting the continued truth of the Buyer's representations and warranties, the performance by the Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by the Buyer. (c) A certificate of the secretary of the Buyer regarding the votes taken to authorize the transactions contemplated under this Agreement (including the initial election of Shareholder to the Board of Directors of the Buyer) and the incumbency of the officers of the Buyer. (d) The opinion of the counsel as provided in Section 10.3. (e) The Employment and Consulting Agreement between the Corporation and the Shareholder, duly executed by the Corporation. (f) The Key Employee Agreements. duly executed by the Corporation. (g) The Escrow Agreement, duly executed by the Buyer and the Escrow Agent. 38 (h) The Registration Rights Agreement, duly executed by the Buyer. XII. Indemnity. 12.1 Indemnification by the Shareholder. Subject to the other provisions of this Article XII, the Shareholder shall indemnify and hold Tridex, Buyer, their Affiliates and their respective employees, representatives, officers, directors and agents (the "Buyer Indemnitees") harmless from and against any and all Damages suffered by any Buyer Indemnitee arising out of: (a) the breach of any representation or warranty made by any of the Selling Parties in this Agreement or in any certificate delivered by any of the Selling Parties at the Closing; (b) the breach of any covenant by any of the Selling Parties in this Agreement; or (c) after the Closing Date, the failure by any of the Selling Parties to perform any of their respective obligations under this Agreement; provided, however, that no claim for indemnification under this Section 12.1 shall be made by the Buyer Indemnitees unless and until the Buyer Indemnitees have incurred Damages in excess of One Hundred Thousand ($100,000) (the "Buyer Threshold Amount"). Once the Buyer Indemnitees have incurred Damages in excess of the Threshold Amount, the Buyer Indemnitees shall be entitled to indemnification for all Damages suffered by the Buyer Indemnitees. In no event shall the Shareholder's obligations for indemnification under this Section 12.1 exceed Five Million Dollars ($5,000,000) and in no event shall Shareholder's obligations for indemnification with respect to Section 6.27 exceed Seven Hundred Fifty Thousand Dollars ($750,000). Except for claims regarding a breach of Sections 6.3, 6.8 and 6.27, the Buyer Indemnitees shall not be permitted to make claims after the first anniversary of the Closing Date, provided that any liability with respect to any claim, or notice of proposed claim, that is made in writing prior to the first anniversary of the Closing Date shall survive until finally determined and paid. The Buyer Indemnitees shall be permitted to make claims regarding a breach of Sections 6.3 until, but not later than, the second anniversary of the Closing Date, provided that any liability with respect to any such claim, or notice of proposed claim, that is made in writing prior to the second anniversary of the Closing Date shall survive until finally determined and paid. The Buyer Indemnitees shall be permitted to make claims regarding a breach of Section 6.8 or 6.27 until, but not later than, the third anniversary of the Closing Date, provided that any liability with respect to any such claim, or notice of proposed claim, that is made in writing prior to the third anniversary of the Closing Date shall survive until finally determined and paid. 12.2 Indemnification by Buyer. Subject to the other provisions of this Article XII, Buyer shall indemnify and hold the Shareholder, and his heirs, executors, personal representatives, successors and assigns (the "Shareholder Indemnitees") harmless from and against any Damages suffered by any Seller Indemnitee arising out of: (a) the breach of any representation or warranty made by Buyer in this Agreement or in any certificate delivered by Buyer at the Closing; (b) the breach of any covenant by Buyer in this Agreement or in any other agreement executed and delivered at the Closing; (c) after the Closing Date, the failure by Buyer to perform any of its obligations under this Agreement provided, however, that no claim for indemnification under this Section 39 12.2 shall be made by the Shareholder Indemnitees unless and until the Shareholder Indemnitees have incurred Damages in excess of One Hundred Thousand Dollars ($100,000) (the "Shareholder Threshold Amount"). Once the Shareholder Indemnitees have incurred Damages in excess of the Threshold Amount, the Shareholder Indemnitees shall be entitled to indemnification for all Damages suffered by the Shareholder Indemnitees. In no event shall the Buyer's obligations for indemnification under this Section 12.2 exceed Five Million Dollars $5,000,000. The Shareholder Indemnitees shall not be permitted to make claims after the first anniversary of the Closing Date, provided that any liability with respect to any such claim, or notice of proposed claim, that is made in writing prior to the first anniversary of the Closing Date shall survive until finally determined and paid. 12.3 Notice and Resolution of Claims. Each indemnified party (a "Beneficiary") shall promptly give written notice to the indemnifying party after obtaining knowledge of any claim that the Beneficiary may have pursuant to this Article XII. Such notice shall set forth in reasonable detail the claim and the basis for indemnification. The indemnifying party shall have thirty (30) days within which to review the notice provided by the Beneficiary. If the indemnifying party agrees to pay the claim for indemnification as presented, the indemnifying party shall promptly pay the Beneficiary the amount of such claim. If the indemnifying party disputes the claim, the indemnifying party shall provide written notice of such dispute to the Beneficiary prior to the expiration of the thirty (30) day review period. If the indemnifying party and the Beneficiary cannot resolve such dispute through negotiation within thirty (30) days of the date of the indemnifying party's notice of dispute, the parties shall submit the dispute to binding arbitration under the rules of, and before the American Arbitration Association in Baltimore, Maryland (the "Arbitration"). The decision of the Arbitration shall be final and binding upon the indemnifying party and the Beneficiary. The indemnifying party and the Beneficiary shall share equally the fees, costs and expenses of the Arbitration. If the indemnifying party fails to dispute the claim for indemnification within the thirty (30) day review period, the claim shall be paid by the indemnifying party to the Beneficiary in the amount originally claimed. If the indemnifying party and the Beneficiary are able to resolve a disputed claim, the claim shall be paid in the amount agreed. If a disputed claim is arbitrated, the claim shall be paid by the indemnifying party in the amount determined by the Arbitration. Failure to dispute a claim, resolution of a dispute through negotiation of the parties, or the decision of the Arbitration shall constitute final determination of a claim for indemnification (in each instance, an "Allowed Claim"). The indemnifying party shall promptly pay or reimburse the Beneficiary, as appropriate, the amount of an Allowed Claim. The Shareholder acknowledges and agrees that the Buyer shall have the right to offset against any amounts due the Shareholder, the full amount of any and all Allowed Claims made by Buyer against the Selling Parties; provided that Buyer has made written demand for payment by the Shareholder of a finally determined claim, and such claim remains unpaid ten (10) days after such demand. 12.4 Right to Assume Defense. If a claim for indemnity shall arise from a claim or action involving a third party (a "Third Party Claim"), the Beneficiary shall permit the indemnifying party to assume its defense. If the indemnifying party assumes the defense of such Third Party Claim, it shall take all reasonable steps necessary to investigate, defend or settle such claim and, to the extent required by this Agreement, shall hold the Beneficiary harmless from and against any and all Damages caused by or arising out of any settlement approved by the indemnifying party or any 40 judgment in connection with such Third Party Claim. Without the written consent of the Beneficiary, the indemnifying party shall not consent to entry of any judgment or enter into any settlement that does not include an unconditional and complete release of the Beneficiary with respect to the Third Party Claim by the claimant making the Third Party Claim. The Beneficiary may participate in such defense or settlement through its own counsel, but at its own expense. Any settlement shall be subject to the Beneficiary's consent, which consent shall not be unreasonably withheld or delayed. 12.5 Insurance Proceeds. Notwithstanding any other provision of this Section XII to the contrary, the Buyer Indemnitees shall not be entitled to any recovery from the Shareholder under this Section XII for any Damages which are attributable to matters for which any Buyer Indemnitee has received, or is entitled to receive, proceeds of insurance under a policy which was in effect at the Closing with respect to the matter for which indemnification is otherwise available hereunder, provided that the availability of insurance coverage for any such claim shall not require a Buyer Indemnitee to make or prosecute an insurance claim as a condition to exercising rights to receive indemnification from Shareholder under this Section XII. XIII. Publicity. 13.1 Subject to the Buyer's obligations under the Exchange Act and other applicable Legal Requirements, all public announcements and notices to third parties concerning the transactions contemplated by this Agreement will be jointly planned, coordinated and approved by the Buyer and the Shareholder. No party will act unilaterally in this regard without the prior approval of the other; however, this approval will not be unreasonably withheld or delayed. XIV. No Broker. 14.1 Each of the parties represents and warrants that it has not dealt with any broker or finder in connection with any of the transactions contemplated by this Agreement and, insofar as each party knows, no broker or other person is entitled to any commission or finder's fee in connection with any of these transactions. Tridex has engaged Lehman Brothers, Inc. to act as its financial advisor for purposes of this transaction, and Tridex is responsible for payment of any and all fees, commissions and expenses of Lehman Brothers, Inc., and agrees to indemnify and hold the Shareholder harmless for any and all fees, commissions and expenses due to Lehman Brothers, Inc. XV. Expenses. 15.1 Each party will pay all costs and expenses incurred or to be incurred by the party in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement. Seller will pay all state and local Taxes due as a result of the purchase and sale hereunder. 41 XVI. Entire Agreement; Amendment; Waiver. 16.1 This Agreement and the schedules and exhibits attached hereto constitute the entire agreement between the parties pertaining to the subject matter contained in it, and supersede all prior and contemporaneous agreements, representations and understandings of the parties. No supplement, modification or amendment of this Agreement will be binding unless executed in writing by all of the parties. No waiver of any of the provisions of this Agreement will be effective unless in writing; no waiver will constitute a waiver of any other provision; and no waiver of a breach of any provision of this Agreement will operate to waive any subsequent breach. XVII. Counterparts. 17.1 This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. XVIII. Parties in Interest. 18.1 Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor will any provision give any third persons any right of subrogation or action against any party to this Agreement. XIX. Successors and Assigns. 19.1 This Agreement will be binding on, and will inure to the benefit of, the parties and their respective successors, assigns, heirs or personal representatives. XX. Further Assurances. 20.1 The Shareholder from time to time will execute and deliver such additional documents and instruments and take such additional actions as may be necessary to carry out the transactions contemplated by this Agreement including, but not limited to, any documents required to complete or confirm the assignment and transfer by the Shareholder to the Corporation of any and all right, title and interest he has or had, at any time, to the Intellectual Property of the Corporation. XXI. Survival. 21.1 All representations, warranties, covenants and agreements of the Parties contained in this Agreement, or in any instrument, certificate or opinion provided for herein, will survive the Closing, subject to the limits set forth in Section XII. 42 XXII. Notices. 22.1 Any notice, consent, approval or other communication required or permitted hereunder will be in writing and will be given (i) by delivery in person, (ii) by certified mail, return receipt requested, (iii) by commercial overnight courier, or (iv) by facsimile transmission (telecopy) (with telephone confirmation of receipt), as follows: (a) If to the Shareholder, to - Mr. Paul J. Smith 2214 Hogan Court Charlotte, NC 28227 with a copy to: E. Lynwood Mallard, Esq. Kilpatrick Stockton LLP 3500 One First Union Center 301 South College Street Charlotte, NC 28202-6001 Tel: (704) 338-5002 Fax: (704) 338-5125 (b) If to the Buyer and/or Tridex, to - Tridex NC, Inc. and/or Tridex Corporation 61 Wilton Road Westport, CT 06880 Attn: Seth M. Lukash President and Chief Executive Officer Tel: (203) 226-1144 Fax: (203) 226-8806 with a copy to - Stephen J. Carlotti, Esq. Hinckley, Allen & Snyder 1500 Fleet Center Providence, RI 02903 Tel: (401) 274- 2000 Fax: (401) 277-9600 or to such other address for any of the above as may be designated by notice to the others. Any such notice or other communication will be considered to have been given (i) on the date of delivery in person, (ii) on the fifth day after mailing by certified mail, provided that receipt of delivery is confirmed in writing, (iii) on the first business day following delivery to a commercial overnight courier, or (iv) on the day of facsimile transmission (telecopy), provided that the giver of the notice obtains telephone confirmation of receipt. 43 XXIII. Governing Law 23.1 This Agreement and the performance thereof will be construed in accordance with, and governed by, the laws of the State of Connecticut. XXIV. Severability. 24.1 If any provision of this Agreement is held invalid or unenforceable by any court of final jurisdiction, it is the intent of the parties that all other provisions of this Agreement be construed to remain fully valid, enforceable and binding on the parties. XXV. Guarantee of Tridex 25.1 Tridex hereby guarantees the payment and performance by Buyer of all of its liabilities and obligations hereunder, in accordance with and subject to the terms and conditions hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above. SELLING PARTIES: PROGRESSIVE SOFTWARE, INC. - ------------------------------- PAUL J. SMITH BY: - ------------------------------- ------------------------------- Paul J. Smith, President and Chief Executive Officer BUYER TRIDEX NC, INC. TRIDEX CORPORATION By: ---------------------------- ------------------------------------ Seth M. Lukash, Seth M. Lukash President President and Chief Executive Officer 44 EX-4.1 3 EX. 4.1 EXHIBIT 4.1 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of April 17, 1998, is by and between Tridex Corporation (the "Company"), a Connecticut corporation, and Paul J. Smith, an individual residing at 2214 Hogan Court, Charlotte, North Carolina 28227 ("Holder"). Preliminary Statement In consideration of that certain Stock Purchase Agreement (the "Stock Purchase Agreement") by and among the parties hereto, Progressive Software, Inc., a North Carolina corporation ("Progressive"), and Tridex NC, Inc., a wholly owned North Carolina subsidiary of the Company (the "Buyer"), dated as of the date hereof, the Company has issued to the Holder 714,000 shares of common stock, without par value (the "Common Stock"), of the Company. The parties wish to set forth herein certain agreements and understandings relating to the registration under the Securities Act of 1933, as amended (the "Securities Act"), of the shares of Common Stock held by the Holder, including any additional shares of Common Stock or other securities of which the Company is the issuer that may hereafter be issued in respect of such shares or upon conversion of or in exchange for such shares or other securities (collectively, the "Covered Shares"). NOW, THEREFORE, in consideration of the premises and the mutual independent covenants contained herein, the parties hereto hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, capitalized terms not otherwise defined shall have the same meaning herein as provided in the Stock Purchase Agreement and the following capitalized terms shall have the following meanings: "Commission" means the Securities and Exchange Commission. "Demand Registration" See Section 2(a)(i). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means the Holder identified in the introductory paragraph to this Agreement or such other Person to whom such Holder shall have assigned or transferred such Holder's Registrable Securities in accordance with the Stock Purchase Agreement and Section 12(e) of this Agreement. "Indemnified Party" See Section 8(c). "Indemnifying Party" See Section 8(c). "Piggyback Registration" See Section 3(a)(i). "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act (other than a registration statement 45 on Form S-4 or S-8 or any comparable form) and the declaration or ordering by the Commission of effectiveness of such registration statement. "Registrable Securities" means (a) the shares of Common Stock issued or issuable to the Holder upon the closing of the transactions contemplated by the Stock Purchase Agreement and (b) any securities of the Company issued as a dividend or other distribution with respect to, or in exchange for a replacement of, the securities referred to in clause (a). "Registration Expenses" See Section 7(a). "Securities Act" means the Securities Act of 1933, as amended. "Stock Purchase Agreement" means that certain Stock Purchase Agreement of even date herewith by and between the Company, the Buyer, the Holder, and Progressive Software, Inc. "Underwriters' Maximum Number" means for any Piggyback Registration, Demand Registration or other registration which is an underwritten registration, that number of securities to which such registration should be limited, in the opinion of the managing underwriters of such registration. 2. Demand Registration. (a) Request for Demand Registration. (i) Subject to the limitations contained in the following paragraphs of this Section 2, the Holder may at any time after the date hereof, give to the Company, pursuant to this clause (i), a written request (a "Demand Notice") for the registration by the Company under the Securities Act of all or any part of the Registrable Securities then owned by the Holder (such registration being herein called a "Demand Registration"). (ii) Subject to the limitations contained in the following paragraphs of this Section 2, after the receipt of such Demand Notice, the Company will use its best efforts in good faith to cause the Demand Registration to become effective as soon as practicable after the date of filing and to keep such Demand Registration continuously effective until all or any portion of the Registrable Securities are eligible for sale by the Holder under Rule 144(k) under the Securities Act in order to permit the prospectus forming a part thereof to be usable by Holder during such period. The Company will use its best efforts in good faith to register such shares in connection with an underwritten offering if an underwritten offering is requested by the Holder. (iii) The Holder shall be permitted to withdraw all or any part of the Registrable Securities from any Demand Registration at any time prior to the effective date of such Demand Registration; provided, however, that if such Demand Registration is withdrawn as a result of the Holder's withdrawal, it shall nonetheless count as a Demand Registration for purposes of Section 2(b) hereof, unless the Holder reimburses the Company for all Registration Expenses incurred by it in connection with such Demand Registration. (b) Limitations on Demand Registration. (i) The Holder will not be entitled to require the Company to effect more than one (1) Demand Registrations pursuant to Section 2(a). If a Demand Registration 46 would be eligible for registration on Form S-3, the Company may effect such Demand Registration pursuant to Form S-3. The Registration Expenses for each Demand Registration, if any, will be borne and paid by the Company. (ii) Any registration initiated by the Holder as a Demand Registration pursuant to Section 2(a) hereof shall not count as a Demand Registration for purposes of Section 2(b)(i) hereof unless and until such registration shall have been declared effective by the Securities and Exchange Commission. (iii) The Company shall not be obligated or required to effect the Demand Registration of any Registrable Securities pursuant to Section 2(a) hereof (A) within ninety (90) days after the Closing Date (as defined in the Stock Purchase Agreement), unless prior to the expiration of that ninety-day period the Company and its accountants shall have been able to secure from Progressive and its accountants information necessary to file financial statements required by SEC Regulation SK, and (B) during the period commencing on the date falling 60 days prior to the Company's estimated date of filing of, and ending on the date 180 days following the effective date of, any registration statement pertaining to any underwritten registration initiated by the Company, for the account of the Company, if the written request of the Holder for such Demand Registration pursuant to Section 2(a)(i) hereof is received by the Company after the Company has given to the Holder a written notice stating that the Company is commencing an underwritten registration, provided, however, that the Company will use its best efforts in good faith to cause any such registration statement to be filed and to become effective as expeditiously as shall be reasonably possible. (c) Priority on Demand Registration. If the managing underwriters in any Demand Registration pursuant to this Section 2 shall give written advice to the Company and the Holder of an Underwriters' Maximum Number, then: (i) the Company will be obligated and required to include in such registration that number of Registrable Securities requested by the Holder which does not exceed the Underwriters' Maximum Number; (ii) if the Underwriters' Maximum Number exceeds the number of Registrable Securities requested by the Holder to be included in such registration, then the Company will be entitled to include in such registration that number of shares of Common Stock or other securities which shall have been requested by the Company to be included in such registration for the account of the Company and which shall not be greater than such excess. The Company shall not be entitled to include any shares of Common Stock in any underwritten Demand Registration unless the Company shall have agreed in writing to sell such securities on the same terms and conditions as shall apply to the Registrable Securities to be included in such Demand Registration. An underwritten Demand Registration shall not, without the consent of the Holder, include any shares other than Registrable Securities and shares of Common Stock sold for the account of the Company. (d) Selection of Underwriters. If any Demand Registration or any registration effected pursuant to Section 2 hereof is a firm commitment or a best efforts underwritten offering, the investment bankers and managing underwriters for such offering will be selected by the Company, subject to the approval of the Holder, or, if the investment bankers and managing underwriters selected by the Company decline to underwrite the Demand Registration, the investment bankers and managing underwriters will be selected by the Holders, subject to the approval of the Company. In either case, approval shall not be unreasonably withheld or delayed. 47 3. Piggyback Registrations. (a) Rights to Piggyback. (i) If (and on each occasion that) the Company proposes to register any of its equity securities under the Securities Act for its own account (each such registration not withdrawn or abandoned prior to the effective date thereof being herein called a "Piggyback Registration"), the Company will give written notice (the "Piggyback Notice") to the Holder of such proposal not later than 20 days prior to the anticipated filing date of such Piggyback Registration. (ii) Subject to the provisions contained in paragraphs (b) and (c) of this Section 3 and in the last sentence of this Section 3(a)(ii), (A) the Company will be required to include in each Piggyback Registration all Registrable Securities with respect to which the Company shall receive from the Holder, within 10 days after the date Piggyback Notice, the written request of the Holder for inclusion in such Piggyback Registration, and (B) the Company will use its best efforts in good faith to effect promptly the registration of all such Registrable Securities. The Holder shall be permitted to withdraw all or any part of the Registrable Securities of the Holder from any Piggyback Registration at any time prior to the effective date of such Piggyback Registration but only if the Holder is permitted to do so by the managing underwriters or pursuant to any agreement therewith. The Company will not be obligated or required to include any Registrable Securities in any registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Commission is applicable. (b) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration initiated by the Company, and the managing underwriters shall give written advice to the Company of an Underwriters' Maximum Number, then the number of Registrable Securities to be offered for the account of the Holder shall be reduced (or excluded) as provided below to the extent necessary to reduce the total amount of the securities to be included in the offering to the Underwriters' Maximum Number, provided that the number of shares to be included in an underwritten Piggyback Registration for the account of any selling security holders, including the Holder, shall be subject to reduction pro rata, based on the number of shares which each selling security holder has requested to be included in such Piggyback Registration. (c) Selection of Underwriters. In any Piggyback Registration, the Company shall (unless the Company shall otherwise agree) have the right to select the investment bankers and managing underwriters in such registration. 4. Lockup Agreement. In the case of an underwritten offering pursuant to which the Holder offers Registrable Securities, the Holder will not, without the prior written consent of the Company or the managing underwriters, effect any sale or other distribution of any equity securities of the Company, including any sale pursuant to Rule 144, during the period from the date of any Demand Notice or Piggyback Notice until the expiration of any customary lockup period, up to one hundred eighty (180) days, required by the managing underwriters following the effective date of such underwritten registration, except in connection with such underwritten registration. In addition, for the period, if any, during which the Holder serves as a director of the Company, and for ninety (90) days after he ceases to so serve, the Holder shall comply with the Company's policy regarding trading by officers, directors and employees. 48 5. Registration Procedures. If (and on each occasion that) the Company shall become obligated hereunder to effect any registration of any Registrable Securities, the Company will use its best efforts in good faith to effect promptly the registration of such Registrable Securities and to permit the public offering and sale of such Registrable Securities in accordance with the intended method of disposition thereof, and, in connection therewith, the Company, as expeditiously as shall be reasonably possible, will: (a) prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective as soon as practicable following the filing thereof (provided, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to one counsel, selected by the Holder, copies of all such documents proposed to be filed, which documents will be subject to the timely review of such counsel); (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for not more than six (6) months, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such effective period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by each such seller and, pursuant to Rule 153 under the Securities Act, promptly deliver to each national securities exchange on which shares of the Company's Common Stock are voted, copies of each prospectus filed under Rule 424 under the Securities Act; (d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided that the Company will not be required (i) to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (d), (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any such jurisdiction; (e) promptly notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and the Company will promptly prepare (and, when completed, give notice to each seller of Registrable Securities) and file with the Securities and Exchange Commission a supplement or amendment to such prospectus or Demand Registration so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; that upon such notification by the Company, each seller of such Registrable Securities will not offer or sell such Registrable Securities until the Company has notified such seller that it has prepared a supplement or amendment to such prospectus and 49 delivered copies of such supplement or amendment to such seller; provided that the number of trading days on which the Holder may be required by the Company not to offer or sell Registrable Securities pursuant to this Section 5(e) shall not exceed 45 days in any twelve (12) month period; (f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be quoted for trading on the Nasdaq Stock Market if then eligible; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) in order to expedite or facilitate the disposition of such Registrable Securities; (i) make available for inspection on a confidential basis by the Holder, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by the Holder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply on a confidential basis all information reasonably requested by the Holder or any such underwriter, attorney, accountant or agent in connection with such registration statement prior to its effectiveness; (j) permit the Holder to participate in the preparation of such registration or comparable statement; (k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in such registration statement for sale in any jurisdiction, the Company will use its best efforts promptly to obtain the withdrawal of such order. (l) to extent practicable, promptly prior to filing any document that is to be incorporated by reference into any Registration Statement or prospectus forming a part thereof, and in any event no later than the date such document is filed, provide copies to the Holder if requested, and make representatives available for discussion of such documents and other customary due diligence matters. (m) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any registration of the Registrable Securities hereunder, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction; (n) if requested by the Holder, or any underwriter, promptly incorporate in such registration statement or prospectus, pursuant to a supplement or post effective amendment if necessary, such information as the Holder and any underwriter may reasonably request to have included therein, including, without limitation, information relating to the "plan of distribution" of the Registrable Securities, information with respect to the principal amount or number of shares of Registrable Securities being sold to such underwriter, the purchase price being paid 50 therefor and any other terms of the offering of the Registrable Securities to be sold in such offering and make all required filings of any such prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporate in such prospectus supplement or post effective amendment; and (o) from time to time, provide such opinions of counsel, certificates and any other documentation, and take such actions, including entering into such agreements, as are reasonably requested by any Holder in connection with any sale by a Holder of Registrable Securities covered by a registration statement hereunder. 6. Cooperation by Holder. (a) The Holder will furnish to the Company in writing such information as the Company may reasonably require from the Holder, and otherwise reasonably cooperate with the Company in connection with any registration statement with respect to such Registrable Securities. (b) The failure of any Holder to furnish any information or documents in accordance with any provision contained in this Agreement shall not affect the obligations of the Company under this Agreement to any other Holder who furnishes such information and documents unless in the reasonable opinion of counsel to the Company or the underwriters, such failure impairs or may impair the viability of the offering or the legality of the registration statement or the underlying offering. (c) The Holder of Registrable Securities included in any registration statement will not (until further notice) effect sales thereof after receipt of telegraphic or written notice from the Company to suspend sales to permit the Company to correct or update such registration statement or prospectus; but the obligations of the Company with respect to maintaining any registration statement current and effective shall be extended by a period of days equal to the period such suspension is in effect. (d) At the end of any period during which the Company is obligated to keep any registration statement current and effective as provided by Section 5(b) hereof (and any extensions thereof required by the preceding paragraph (c) of this Section 6), the Holder of Registrable Securities included in such registration statement shall discontinue sales of shares pursuant to such registration statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such registration statement which remain unsold, and the Holder shall notify the Company of the number of shares registered which remain unsold promptly after receipt of such notice from the Company. 7. Registration Expenses. (a) Except as otherwise provided in Sections 2(a)(iii) and 7(b) hereof, all costs and expenses incurred or sustained in connection with or arising out of each registration pursuant to Sections 2 and 3 hereof, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or Blue Sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with the Blue Sky qualification of Registrable Securities), printing expenses, messenger, telephone and delivery expenses, fees and disbursements of counsel for the Company, fees and disbursements of all independent certified public accountants (including the expenses relating to the preparation and delivery of any special 51 audit or "cold comfort" letters required by or incident to such registration), and fees and disbursements of underwriters (excluding discounts, commissions and expenses representing disguised commissions), the reasonable fees and expenses of any special experts retained by the Company of its own initiative or at the request of the managing underwriters in connection with such registration, and fees and expenses of all (if any) other persons retained by the Company (all such costs and expenses being herein called, collectively, the "Registration Expenses"), will be borne and paid by the Company. The Company will, in any case, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities of the Company are then listed. (b) The Company will not bear the cost of nor pay for any (i) stock transfer taxes imposed in respect of the transfer of any Registrable Securities to any purchaser thereof by the Holder of Registrable Securities in connection with any registration and sale of Registrable Securities pursuant to this Agreement, (ii) any underwriting discounts or commissions or similar fees related to an underwritten offering of the Registrable Securities or (iii) any fees and disbursements of counsel representing the Holder. (c) To the extent that Registration Expenses incident to any registration are, under the terms of this Agreement, not required to be paid by the Company, the Holder of Registrable Securities included in such registration will pay all Registration Expenses which are attributable to the registration of the Holder's Registrable Securities so included in such registration. 8. Indemnification. (a) Indemnification by the Company. The Company will indemnify the Holder requesting or joining in a registration and each underwriter of the securities so registered, the officers, directors and partners of each such Person and each Person, if any, who controls any thereof (within the meaning of the Securities Act) against any and all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of any material fact contained in any prospectus, offering circular or other document incident to any registration, qualification or compliance (or in any related registration statement, notification or the like) or any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to such Person and relating to any action or inaction required of such Person in connection with any such registration, qualification or compliance, and the Company will reimburse each such Holder, underwriter, officer, director, partner and controlling person for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission based upon written information furnished to the Company in writing by such Holder, underwriter, officer, director, partner or controlling person for use in such prospectus, offering circular or other document. (b) Indemnification by the Holder. The Holder requesting or joining in a registration will indemnify each underwriter of the securities so registered, the Company and the officers, directors and partners of each such Person and each Person, if any, who controls any 52 thereof (within the meaning of the Securities Act) and their respective successors in title and assigns against any and all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of any material fact contained in any prospectus, offering circular or other document incident to any registration, qualification or compliance (or in any related registration statement, notification or the like) or any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statement therein not misleading, and the Holder will reimburse each underwriter, the Company and each other person indemnified pursuant to this paragraph (b) for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, however, that this paragraph (b) shall apply only if (and only to the extent that) such statement or omission was made in reliance upon written information furnished to such underwriter or the Company by the Holder for use in such prospectus, offering circular or other document (or related registration statement, notification or the like) or any amendment or supplement thereto; and provided further that the Holder's liability hereunder with respect to any particular registration shall be limited to an amount equal to the proceeds received by the Holder from the Registrable Securities sold by the Holder in such registration. (c) Indemnification Proceedings. Each party entitled to indemnification pursuant to this Section 8 (the "Indemnified Party") shall give notice to the party required to provide indemnification pursuant to this Section 8 (the "Indemnifying Party") promptly after such Indemnified Party acquires actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume the defense of any claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be reasonably acceptable to the Indemnified Party, and the Indemnified Party may participate in such defense at such party's expense; and provided, further, that the failure by any Indemnified Party to give notice as provided in this paragraph (c) shall not relieve the Indemnifying Party of its obligations under this Section 8 except to the extent that the failure results in a failure of actual notice to the Indemnifying Party and such Indemnifying Party is damaged as a result of the failure to give notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. The reimbursement required by this Section 8 shall be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred. 9. Contribution in Lieu of Indemnification. If the indemnification provided for in Section 8 hereof is unavailable to a party that would have been an Indemnified Party under any such section in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each party that would have been an Indemnifying Party thereunder shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or such Indemnified Party 53 and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holder agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 9. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9 shall include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to indemnification or contribution from any person who was not guilty of such fraudulent misrepresentation. 10. Rule 144 Requirements: Form S-3. The Company will use its best efforts in good faith to take all steps necessary to ensure that the Company will be eligible to register securities on Form S-3 (or any comparable form adopted by the Commission), and to make publicly available and available to the Holder, pursuant to Rule 144 of the Commission under the Securities Act, such information as shall be necessary to enable the Holder to make sales of Registrable Securities pursuant to that Rule. The Company will promptly provide any opinions by counsel reasonably required in connection with a sale of Registrable Securities under Rule 144. The Company will use its reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act, and so long as there are outstanding any Registrable Securities, furnish to the Holder, upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration. 11. Participation in Underwritten Registrations. No person may participate in any underwritten registration pursuant to this Agreement unless such person (a) agrees to sell such person's securities on the basis provided in any underwriting arrangements approved by the persons entitled, under the provisions hereof, to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required by the terms of such underwriting arrangements. The Holder shall be entitled at any time to withdraw such Registrable Securities from such registration prior to its effective date in the event that the Holder shall disapprove of any of the terms of the related underwriting agreement but only if the Holder is permitted to do so by the managing underwriters or pursuant to any agreement therewith. 54 12. Miscellaneous. (a) No Inconsistent Agreements. Except for agreements or contracts with institutional lenders providing financing to the Company or the Buyer in connection with the transactions under the Stock Purchase Agreement, the Company will not, at any time after the date hereof, enter into any agreement or contract (whether written or oral) with respect to any of its securities which grants to any security holder (other than the Holder as such) any demand registration rights which prevent the Company from complying with the registration rights granted by the Company to the Holder hereunder. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this paragraph (b), may not be amended, modified or supplemented, and any waiver or consent to or any departure from any of the provisions of this Agreement may not be given and shall not become or be effective, unless and until (in each case) the Company shall have received the prior written consent of each Holder to any such amendment, modification, supplement, waiver or consent. (c) Term. The agreements of the Company contained in this Agreement shall continue in full force and effect so long as the Holder holds any Registrable Securities. (d) Notices. All notices provided for or permitted hereunder shall be made in writing by hand delivery, registered or certified first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: (i) if to the Holder, at: Paul J. Smith 2214 Hogan Court Charlotte, North Carolina 28227 with copies to: E. Lynwood Mallard, Esq. Kilpatrick Stockton LLP 3500 One First Union Center 301 South College Street Charlotte, North Carolina 28202-6001 (ii) if to the Company, at: Tridex Corporation 61 Wilton Road Westport, Connecticut 06880 Attention: Seth M. Lukash, Chairman with a copy to: Stephen J. Carlotti, Esq. Hinckley, Allen & Snyder 1500 Fleet Center Providence, Rhode Island 02903 55 and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 12(d). All such notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, provided that the Holder may not assign his rights hereunder to any third party other than a trust, family limited partnership or similar estate planning entity, in which the beneficiaries or equity owners are limited to the Holder and his spouse and children. (f) Counterparts. This Agreement may be executed in two or more counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning or effect. (h) Governing Law. The validity, performance, construction and effect of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Connecticut without giving effect to principles of conflicts of law. (i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (k) Availability of Rule 144. Notwithstanding anything to the contrary in this Agreement, the Company shall not be required to register any Registrable Securities pursuant to a request under Section 2 or Section 3 hereof if, within 25 days after its receipt of a request therefor, counsel for the Company delivers an opinion to the Holder, in form and substance reasonably satisfactory to counsel to the Holder, that the proposed sale of Registrable Securities requested to be so registered may be effected in its entirety within any 90 day period without registration and without any further holding period pursuant to Rule 144(k) of the Securities Act. 56 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TRIDEX CORPORATION By: --------------------------- Seth M. Lukash Chief Executive Officer HOLDER --------------------------------- Paul J. Smith 57 EX-4.2 4 EX. 4.2 EXHIBIT 4.2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRIDEX CORPORATION TRIDEX NC, INC. ULTIMATE TECHNOLOGY CORPORATION $11,000,000 19% Senior Subordinated Notes due April 17, 2005 of Tridex Corporation, Tridex NC, Inc. and Ultimate Technology Corporation 285,714 Shares of Common Stock, no par value, of Tridex Corporation Warrants for 350,931 Shares of Common Stock, no par value (subject to adjustment), of Tridex Corporation -------------- SECURITIES PURCHASE AGREEMENT -------------- April 17, 1998 - -------------------------------------------------------------------------------- 58 TABLE OF CONTENTS
Page 1. Authorization of Securities; Other Purchasers; etc...................1 2. Sale and Purchase of Securities......................................3 3. Closing..............................................................3 4. Conditions to Closing................................................3 4.1. Representations and Warranties Correct........................3 4.2. Performance; No Default.......................................3 4.3. Related Transactions..........................................4 4.4. Compliance Certificate........................................5 4.5. Opinion of Counsel for the Issuers............................5 4.6. Opinion of Your Special Counsel...............................5 4.7. Certain Additional Documents to be Delivered at or Prior to the Closing..........................................5 4.8. Sale of Securities to Other Purchasers........................5 4.9. Legal Investment; Certificate.................................5 4.10. Sale and Purchase Not Forbidden by Law........................5 4.11. Payment of Transaction Costs..................................6 4.12. Proceedings and Documents.....................................6 4.13. The Term "Obligor"............................................6 5. Representations and Warranties.......................................6 5.1. Organization, Standing, etc...................................6 5.2. Names; Jurisdictions of Incorporation; Subsidiaries...........7 5.3. Qualification.................................................7 5.4. Business, etc.................................................7 5.5. Shares; Voting Provisions; Options; Warrant Shares, etc.......7 5.6. Financial Statements..........................................8 5.7. Changes; Solvency, etc........................................9 5.8. Tax Returns and Payments......................................9 5.9. Funded Debt, Current Debt, Liens, Investments, Transactions with Affiliates, Leases......................................10 5.10. Title to Properties; Liens; Leases; Real Property............10 5.11. Litigation, etc..............................................11 5.12. Valid and Binding Obligations; Compliance with Other Instruments; Absence of Restrictions, etc....................11 5.13. ERISA........................................................13 5.14. Consents, etc................................................14 5.15. Proprietary Rights; Licenses.................................14 5.16. Offer of Securities; Investment Bankers......................14 5.17. Government Regulation........................................15 5.18. Disclosure...................................................15 5.19. Labor Relations; Suppliers, Distributors and Customers.......15 6. Use of Proceeds; Regulation U, etc..................................15
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7. Financial Statements and Information................................16 8. Inspection; Board Visitation Rights; Confidentiality................21 9. Prepayment of Notes.................................................22 9.1. Required Prepayment Without Premium of Notes.................22 9.2. Optional Prepayment With Premium of Notes....................23 9.3. Prepayment Without Premium of the Notes at the Option of Holders of Notes upon a Change of Control....................23 9.4. Allocation of Partial Prepayments of Notes...................24 9.5. Notice of Optional Prepayments of Notes......................24 9.6. Maturity; Accrued Interest; Surrender, etc. of Notes.........24 9.7. Purchase of Notes............................................24 9.8. Payment on Non-Business Days.................................24 9.9. Application of Notes in Satisfaction of Exercise Price of Warrants..................................................24 10. Subordination of Notes and Note Guarantees..........................25 11. Securities Act Matters; Option Plans................................25 12. Registration Rights.................................................25 12.1. Registration on Request......................................25 12.2. Incidental Registration......................................27 12.3. Permitted Registration.......................................28 12.4. Registration Procedures......................................29 12.5. Indemnification..............................................30 12.6. Restrictions on Other Agreements.............................32 13. Covenants of the Holding Company....................................32 13.1. Books of Record and Account; Reserves........................32 13.2. Payment of Taxes; Corporate Existence; Maintenance of Properties; Compliance with Laws; Lines of Business; Proprietary Rights and Licenses..............................32 13.3. Insurance....................................................33 13.4. Limitation on Discount or Sale of Receivables................33 13.5. Limitation on Funded Debt and Current Debt...................33 13.6. Certain Financial Covenants..................................35 13.7. Limitation on Tax Consolidation..............................37 13.8. Limitation on Liens..........................................37 13.9. Limitation on Transactions with Affiliates...................38 13.10. Limitation on Investments....................................38 13.11. Limitation on Issuance of Shares of Subsidiaries.............38 13.12. Limitation on Subsidiary's Consolidation or Merger...........38 13.13. Limitation on the Holding Company's Consolidation or Merger..39 13.14. Limitation on Disposition of Property........................40 13.15. Limitation on Leasebacks.....................................41 13.16. Modification of Certain Documents, Agreements and Instruments; Fiscal Year.....................................41 13.17. Further Assurances...........................................42
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13.18. Additional Subsidiaries......................................42 13.19. Listing Status...............................................42 14. Definitions.........................................................42 14.1. Definitions of Capitalized Terms.............................42 14.2. Other Definitions............................................57 14.3. Accounting Terms and Principles; Laws........................58 15. Remedies............................................................58 15.1. Events of Default Defined; Acceleration of Maturity..........58 15.2. Suits for Enforcement, etc...................................63 15.3. No Election of Remedies......................................63 15.4. Remedies Not Waived..........................................63 15.5. Application of Payments......................................63 16. Registration, Transfer and Exchange of Securities; Limitations on Transfers...........................................................64 17. Replacement of Securities...........................................65 18. Amendment and Waiver................................................65 19. Method of Payment of Securities.....................................66 20. Expenses; Indemnity.................................................67 21. Taxes...............................................................67 22. Communications......................................................67 23. Survival of Agreements, Representations and Warranties, etc.........68 24. Successors and Assigns; Rights of Other Holders.....................69 25. Purchase for Investment; ERISA......................................69 26. Governing Law; Jurisdiction; Waiver of Jury Trial...................71 27. Miscellaneous.......................................................71
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Schedule I Schedule of Purchasers Exhibit 1(a) Form of Note Exhibit 1(b) Form of Certificate for Common Stock Exhibit 1(c) Form of Warrant Exhibit 1(g) Form of Note Guarantee Exhibit 3 Wire Instructions Exhibit 4.3(b) Indebtedness to be Repaid at Closing Exhibit 4.5 Opinion of Hinckley, Allen & Snyder Exhibit 4.6 Opinion of Choate, Hall & Stewart Exhibit 4.7 Additional Documents to be Delivered at or Prior to the Closing Exhibit 5.2 Names; Jurisdictions of Incorporation; Subsidiaries Exhibit 5.4 Disclosure Documents Exhibit 5.5(a) Shares; Voting Provisions Exhibit 5.5(b) Rights, Options, Warrants, etc. Exhibit 5.6(a) Financial Statements Exhibit 5.6(b) Projections and Pro Forma Unaudited Consolidated Balance Sheet Exhibit 5.8 Tax Returns and Payments Exhibit 5.9 Funded Debt, Current Debt, Liens, Investments, Transactions with Affiliates and Leases Exhibit 5.10 Real Property Exhibit 5.11 Litigation, etc. Exhibit 5.13 ERISA Exhibit 5.14 Consents Exhibit 6 Use of Proceeds Exhibit 7(c)(iv) Information as to New Subsidiaries Exhibit 12.6 Restrictions on Other Agreements Exhibit 16(b)(iv) Acknowledgment (re: subordination)
62 TRIDEX CORPORATION TRIDEX NC, INC. ULTIMATE TECHNOLOGY CORPORATION 61 Wilton Road Westport, Connecticut 06880 April 17, 1998 MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY 1295 State Street Springfield, Massachusetts 01111 Ladies and Gentlemen: TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"), TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY CORPORATION, a New York corporation ("UTC" and, together with the Holding Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes collectively referred to herein as the "Issuers" and each, individually, as an "Issuer"), agree with you as follows. Certain capitalized terms used herein are defined in section 15. 1. Authorization of Securities; Other Purchasers; etc. (a) The Obligor has authorized the issue and sale of its 19% Senior Subordinated Notes due April 17, 2005 (herein, together with any notes issued in exchange therefor or replacement thereof, called the "Notes") in the aggregate principal amount of $11,000,000. The Notes are to be substantially in the form of Exhibit 1(a) attached hereto. (b) The Holding Company has authorized the issue and sale of 285,714 shares of its Common Stock (herein, such 285,714 shares, together with any Shares issued in exchange therefor or replacement thereof, called the "Purchased Common Shares"). The certificates for the Common Stock are to be substantially in the form of Exhibit 1(b) attached hereto. (c) The Holding Company has authorized the issue and sale of its warrants (herein, together with any warrants issued in exchange therefor or replacement thereof, called the "Warrants") evidencing rights to purchase in the aggregate 350,931 shares of its Common Stock, subject only to the approval thereof by the stockholders of the Holding Company. The Warrants shall be exercisable for $7.00 per share, shall expire on April 17, 2008 and shall be substantially in the form of Exhibit 1(c) attached hereto. (d) The Notes, the Purchased Common Shares, the Warrants and, unless the context clearly requires otherwise, the Warrant Shares (as defined in the Warrants), are collectively referred to as the "Securities" and each as a "Security". (e) As further provided in each of the Notes, prior to the Warrant Exchange, the Notes shall bear interest at 19% per annum and, at the option of the Obligor, 12/19th 63 of the amount of interest which is due and payable on the Notes on any regularly scheduled interest payment date shall be paid in cash and 7/19th of the amount of interest which is due and payable on the Notes on any regularly scheduled interest payment date shall be paid in kind by adding to the principal amount of each such Note an amount equal to the interest not then paid in cash. Commencing immediately after the Warrant Exchange, the Notes shall bear interest at 12% per annum, payable entirely in cash. Interest on the Notes is payable quarterly on each January 17, April 17, July 17 and October 17, commencing July 17, 1998. In no event shall the amount paid or agreed to be paid by the Obligor as interest and premium on any Note exceed the highest lawful rate permissible under any law applicable thereto. (f) The Holding Company shall use its best efforts to cause its stockholders to approve the issue and sale of the Warrants at the May, 1998 annual meeting of the stockholders of the Holding Company. In the event that the stockholders of the Holding Company shall approve the issue and sale of the Warrants, the Holding Company shall promptly thereafter cause the Warrants to be issued and sold to you and the Other Purchasers in consideration of the reduction of the interest rate required to be paid in respect of the Notes to 12% per annum (the "Warrant Exchange"). (g) The Notes shall be secured by and entitled to the benefits of unconditional guarantees from each of the Subsidiaries of the Holding Company hereafter organized or acquired, pursuant to one or more note guarantees substantially in the form of Exhibit 1(g) attached hereto (each a "Note Guarantee" and collectively the "Note Guarantees"). The Securities are to be issued under this Agreement and separate Securities Purchase Agreements (the "Other Securities Purchase Agreements") identical herewith (except as to the name and address of each of the other purchasers) being entered into concurrently by the Company with each of the other purchasers (the "Other Purchasers") named in Schedule I attached hereto. The issue of Securities to you and the issues of Securities to each of the Other Purchasers are separate transactions and you shall not be liable or responsible for the acts or defaults of the Other Purchasers. 2. Sale and Purchase of Securities. The Issuers will issue and sell to you and, subject to the terms and conditions hereof and in reliance upon the representations and warranties of the Issuers contained herein and in the other Operative Documents, you will purchase from the Issuers, at the Closing, as specified in section 3, such Securities (other than the Warrants) as are specified on that portion of Schedule I attached hereto as is applicable to you. The aggregate purchase price of the Notes and the Purchased Common Shares shall be $13,000,000 which shall be allocated (a) $11,000,000 to the Notes and (b) $2,000,000 to the Purchased Common Shares. The Issuers, you and each of the Other Purchasers agree that the values ascribed to the Securities (which values shall be used by the Issuers, you and the Other Purchasers, as well as any subsequent holder of any of the Securities, for all purposes, including the preparation of tax returns) shall be determined in accordance with the foregoing. 3. Closing. The closing of the sale and purchase of the Securities hereunder (the "Closing") shall take place at the office of Messrs. Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston, Massachusetts 02109, on April 17, 1998 (or on such other date (not later than April 17, 1998) as may be agreed to in writing by the Issuers, you and each of the Other Purchasers) (the "Closing Date"). The Closing shall occur not later than 11:00 A.M. Boston time (your reinvestment deadline) on the Closing Date. At the Closing, the Issuers will deliver to you the 64 Securities to be purchased by you at the Closing against payment of the purchase price thereof to (or for the benefit of) the Issuers in immediately available funds in accordance with the wire instructions set forth on Exhibit 3 attached hereto. Delivery of the Securities to be purchased by you at the Closing shall be made in the form of one or more Notes and Purchased Common Shares, in such denominations and registered in such names as are specified on Schedule I attached hereto and in each case dated, and in the case of the Notes, bearing interest from the Closing Date. If at the Closing the Issuers shall fail to tender the Securities to be delivered to you thereat as provided herein, or if at the Closing any of the conditions specified in section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any other rights you may have by reason of such failure or such non-fulfillment. 4. Conditions to Closing. Your obligation to purchase and pay for the Securities to be purchased by you hereunder at the Closing is subject to the fulfillment to your reasonable satisfaction, prior to or at the Closing, of the following conditions: 4.1. Representations and Warranties Correct. The representations and warranties made by the Issuers herein and in the other Operative Documents shall have been correct when made and shall be correct in all material respects at and as of the time of the Closing (after giving effect to the transactions consummated at the Closing). 4.2. Performance; No Default. Each of the Issuers shall have performed all agreements and complied with all conditions contained herein and in the other Operative Documents required to be performed or complied with by it prior to or at the Closing. At the time of the Closing, no Default or Event of Default shall exist. Since December 31, 1997, no event shall have occurred which could reasonably be expected to result in a Material Adverse Change. 4.3. Related Transactions. (a) Pursuant to and in accordance with the terms of the Stock Purchase Agreement dated as of February 24, 1998 (the "Acquisition Agreement") by and among Paul J. Smith (the "Seller"), Progressive Software, Inc., a North Carolina corporation ("Progressive"), the Holding Company and TNC (the Acquisition Agreement and the other agreements, documents and instruments executed or to be executed in connection therewith are sometimes collectively referred to as the "Acquisition Documents"), TNC shall have purchased from the Seller all of the issued and outstanding shares of capital stock of Progressive and immediately thereafter merged with and into Progressive (such purchase and merger and the other transactions contemplated by the Acquisition Documents are hereinafter referred to as the "Acquisition"). All provisions of relevant law with respect to the Acquisition shall have been complied with. All filings necessary to effectuate the Acquisition, including, without limitation, the filing of a Certificate of Merger with the Secretary of State of North Carolina, shall have been made. The aggregate consideration to be paid to or for the account of the Seller in consideration for the transfer of the capital stock of Progressive, excluding all transaction fees and expenses (which shall not exceed $2,000,000), shall not exceed the amount specified in the Acquisition Agreement. The terms of the Acquisition Documents shall be satisfactory to you in all material respects. 65 (b) The debt and equity capitalization of the Holding Company and its Subsidiaries shall be in all respects satisfactory to you. Without limiting the generality of the foregoing, the Persons indicated on Exhibit 5.5(a) attached hereto shall have acquired from the Holding Company the Shares of the Company specified on such exhibit in connection with the Acquisition and shall have paid the consideration specified for such Shares on such exhibit, in each case upon terms satisfactory to you in all material respects. After giving effect to the Closing, neither the Holding Company nor any of its Subsidiaries shall have any Funded Debt or Current Debt other than that evidenced by the Notes and that which is specified on Exhibit 5.9 attached hereto. The Obligor shall have repaid in full all of the Indebtedness specified on Exhibit 4.3(b) attached hereto and all related Liens shall have been terminated or adequate provision shall have been made therefor and you or your special counsel shall have received evidence of the same. (c) The Organizational Documents of the Holding Company and each of its Subsidiaries shall be in form and substance satisfactory to you in all material respects. (d) The Fleet Bank Documents shall have been executed and delivered and shall be in full force and effect. The Holding Company, TNC and UTC shall have established pursuant thereto (i) an $8,000,000 one-year senior secured revolving credit facility and (ii) a $12,000,000 five-year senior secured term loan facility. The aggregate amount of the unused borrowing availability immediately following the Closing under such revolving credit facility shall be at least $4,500,000 and you shall have been furnished with a borrowing base certificate satisfactory in form and substance to you evidencing the same. The terms of the Fleet Bank Documents shall be satisfactory to you in all material respects. 4.4. Compliance Certificate. You shall have received an Officer's Certificate, dated the Closing Date, certifying that the conditions specified in sections 4.1 and 4.2 have been fulfilled. 4.5. Opinion of Counsel for the Issuers. At the Closing, you shall have received an opinion, dated the Closing Date, from Messrs. Hinckley, Allen & Snyder, counsel for the Issuers, substantially in the form of Exhibit 4.5 attached hereto. 4.6. Opinion of Your Special Counsel. At the Closing, you shall have received an opinion dated the Closing Date, from your special counsel, Messrs. Choate, Hall & Stewart, substantially in the form of Exhibit 4.6 attached hereto. 4.7. Certain Additional Documents to be Delivered at or Prior to the Closing. You shall have received the items specified on Exhibit 4.7 attached hereto, each of which shall be in form and substance satisfactory to you in all material respects. 4.8. Sale of Securities to Other Purchasers. At the Closing, the Issuers shall sell to the Other Purchasers the Securities to be purchased at the Closing by the Other Purchasers pursuant to the Other Securities Purchase Agreements and shall receive payment in full of the purchase price thereof. 4.9. Legal Investment; Certificate. At the time of the Closing, your purchase of the Securities to be issued pursuant hereto shall be permitted under the laws and regulations of any jurisdiction to which you are subject (without resort to any provision of any such law permitting 66 limited investments by you without restriction as to the character of the particular investment), and you shall, if requested by you, have received an Officer's Certificate, dated the Closing Date, certifying as to such matters as you may reasonably request to enable you to determine whether your purchase is so permitted. 4.10. Sale and Purchase Not Forbidden by Law. The offer, issue, sale and delivery by the Issuers of the Securities to be issued pursuant hereto and your purchase of such Securities at the Closing shall not be prohibited by and shall not subject you to any tax, penalty, liability or other onerous condition under or pursuant to any law, statute, rule or regulation then in effect. 4.11. Payment of Transaction Costs. The Issuers shall have paid, in immediately available funds, all reasonable fees, expenses and disbursements incurred by you and the Other Purchasers at or prior to the time of the Closing in connection with the transactions contemplated by the Operative Documents, including, without limitation, the reasonable fees, expenses and disbursements of Choate, Hall & Stewart. 4.12. Proceedings and Documents. All proceedings in connection with the transactions contemplated by the Operative Documents and all agreements, documents and instruments incident to such transactions shall be satisfactory in substance and form to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or copies thereof as you or they may reasonably request. 4.13. The Term "Obligor". All references to the "Obligor" herein shall refer to and include each of the Holding Company, TNC and UTC separately and all representations contained herein shall be deemed to be separately made by each of them, and each of the covenants, agreements and obligations set forth herein shall be deemed to be the joint and several covenants, agreements and obligations of each of them. Any notice, request, consent, report or other information or agreement delivered by any of the Holding Company, TNC or UTC shall be deemed to be ratified by, consented to and also delivered by each of the others. Each of the Holding Company, TNC and UTC recognizes and agrees that each covenant and agreement of the "Obligor" under this Agreement and the other Operative Documents shall create a joint and several obligation of the Holding Company, TNC and UTC, which may be enforced against all of them, jointly, or against each of them separately, provided, however, that the principal, premium, if any, interest and other amounts due and payable under or in respect of the Notes shall be payable first from TNC and the liability of the Holding Company and UTC with respect to the Notes shall be enforced by you and the Other Purchasers only at such time as a demand by you or the Other Purchasers for payment of such amounts has first been made to TNC pursuant to this Agreement and the Other Securities Purchase Agreements and TNC shall have failed to make such payment within two (2) days after the date such demand is made. 5. Representations and Warranties. Each of the Issuers hereby represents and warrants that (after giving effect to the transactions consummated at the Closing): 5.1. Organization, Standing, etc. The Holding Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties, to carry on its business as now conducted, and now proposed to be conducted as described in the Disclosure Documents referred to in section 5.4, and to execute, deliver and perform each of the Operative Documents to which it is (or is to be) a party and to consummate the transactions contemplated by the Operative Documents. 67 5.2. Names; Jurisdictions of Incorporation; Subsidiaries. Exhibit 5.2 attached hereto correctly specifies as to the Holding Company and each of its Subsidiaries (a) its legal name, (b) the jurisdiction of its incorporation, (c) each jurisdiction (other than its jurisdiction of incorporation) in which it is qualified to do business (or in which it has submitted an application for such qualification), and (d) each jurisdiction in which any of its material properties are (or are to be) located. The Holding Company does not have any Subsidiary that is not named on Exhibit 5.2 attached hereto. 5.3. Qualification. The Holding Company and each of its Subsidiaries is duly qualified or licensed (or has applied to become qualified or licensed) to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased or the nature of the activities conducted makes such qualification or licensing necessary, except for those jurisdictions in which the failure to be so qualified or licensed or to be in good standing has not resulted in, and could not reasonably be expected to result in, a Material Adverse Change. 5.4. Business, etc. The Holding Company and its Subsidiaries are engaged in the business of (i) designing and manufacturing point-of-sale (POS) electronic display monitors, keyboards and other peripheral equipment and, upon completing the Acquisition in designing and developing computer software, which hardware and software products are used by retailers and restaurants and in other transaction-based applications, and (ii) assembling and integrating customized POS systems consisting of terminals, monitors, keyboards, scanners, touch-screens, microprocessors, printers and cash drawers used by retailers and restaurants and in other transaction-based applications (the "Business"). The Issuers have furnished to you a true, correct and complete copy of the documents listed on Exhibit 5.4 attached hereto (the "Disclosure Documents"). 5.5. Shares; Voting Provisions; Options; Warrant Shares, etc. (a) Exhibit 5.5(a) attached hereto correctly and fully specifies as to the Holding Company and each of its Subsidiaries (after giving effect to the transactions consummated at the Closing) (i) its authorized and outstanding Shares and (ii) the name of each record and beneficial owner of such Shares who has acquired such Shares in connection with the Acquisition, together with the number (and class, if any) of such Shares held by each such Person and the aggregate consideration paid by such Person for such Shares (which consideration, unless otherwise noted on such exhibit, was paid in cash in full on or prior to the Closing Date). All of the outstanding Shares of the Holding Company and each of its Subsidiaries are, and all Warrant Shares issued upon exercise of the Warrants in accordance with the terms thereof will be, duly authorized, validly issued, fully paid and non-assessable and not subject to any preemptive right, right of first refusal or similar right on the part of the Holding Company or any other Person (except as provided in section 16) and all of such Shares have been (or will have been) offered, issued and sold in all material respects in accordance with all applicable laws. To the knowledge of the Issuers, except as set forth on Exhibit 5.5(a) attached hereto, each of the owners of the Shares indicated on Exhibit 5.5(a) attached hereto own the Shares indicated on such exhibit free of any Lien, proxy, voting agreement, voting trust, stockholders agreement or similar agreement or restriction. Except as set forth on Exhibit 5.5(a) attached hereto, neither the Organizational Documents nor any other agreement, document or instrument binding on or applicable to the Holding Company or any of its Subsidiaries or any of its stockholders contains any provision requiring a higher voting 68 requirement with respect to action taken (and/or to be taken) by its board of directors or stockholders than that which would apply in the absence of such provision. (b) Except as provided in section 12, except for the Warrants and except as set forth on Exhibit 5.5(b) attached hereto, (i) there are no outstanding rights, options, warrants or agreements for the purchase from, or sale or issuance by, the Holding Company or any of its Subsidiaries of any of its Shares or any securities convertible into or exercisable or exchangeable for such Shares; (ii) there are no agreements on the part of the Holding Company or any of its Subsidiaries to issue, sell or distribute any of its Shares, other securities or assets; (iii) neither the Holding Company nor any of its Subsidiaries has any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its Shares or any interest therein or to pay any dividend or make any distribution in respect thereof; and (iv) no Person is entitled to any rights with respect to the registration of any Shares of the Holding Company or any of its Subsidiaries under the Securities Act (or the securities laws of any other jurisdiction). (c) Assuming that the Warrant Exchange were to have occurred on the Closing Date, the aggregate number of shares of Common Stock issuable upon exercise in full of the Warrants immediately after the Closing is 350,931, which, if then issued, would constitute not less than 4.17% of the Common Stock (calculated on a fully-diluted basis assuming the conversion, exercise and exchange of all outstanding securities convertible into and exercisable or exchangeable for Common Stock, including, without limitation, the Warrants). The Holding Company has reserved 350,931 shares of Common Stock solely for issuance upon exercise of the Warrants. (d) The aggregate number of the Purchased Common Shares constitute (i) 4.49% of the outstanding Common Stock and (ii) 3.40% of the Common Stock, calculated on a fully-diluted basis in accordance with section 5.5(c). 5.6. Financial Statements. You have been furnished with: (a) the financial statements referred to on Exhibit 5.6(a) attached hereto, which financial statements (subject, in the case of any unaudited financial statements, to normal year-end and audit adjustments and the omission of footnote disclosure) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and present fairly in all material respects the financial position and the results of operations and cash flows of the Person(s) purported to be covered thereby as at the respective dates and for the respective periods indicated in conformity with GAAP (subject, in the case of any unaudited financial statements, to normal year-end and audit adjustments and the omission of footnote disclosure); (b) the projections referred to on Exhibit 5.6(b) attached hereto, which projections were prepared in good faith, are based upon assumptions that the Holding Company believes are reasonable and take into account all material information regarding the matters set forth therein. Such projections represent the Holding Company's current estimate of the future financial performance of the Holding Company and its Subsidiaries. The Holding Company does not currently anticipate any material deviation from such projections; and 69 (c) the pro forma unaudited consolidated balance sheet referred to on Exhibit 5.6(b) attached hereto, which balance sheet sets forth the estimated financial position of the Holding Company and its Subsidiaries as at the Closing Date, adjusted on a pro forma basis to give effect to the consummation on the Closing Date of the transactions contemplated by the Operative Documents, and reflects all known material liabilities of the Persons purported to be covered thereby, contingent or other, as at the Closing Date. 5.7. Changes; Solvency, etc. Since December 31, 1997: (a) there has been no change in the assets, liabilities or financial condition of the Holding Company and its Subsidiaries from that set forth in the balance sheet as at such date referred to on Exhibit 5.6(a) attached hereto, other than changes in the ordinary course of business which have not been, either in any single case or in the aggregate, materially adverse and (b) no condition or event has occurred which has resulted in, or could reasonably be expected to result in, a Material Adverse Change. Each of the Holding Company and each of its Subsidiaries is (and, after giving effect to the consummation of the transactions at Closing, will be) Solvent. 5.8. Tax Returns and Payments. The Holding Company and, except as set forth on Exhibit 5.8 attached hereto, each of its Subsidiaries have filed all tax returns required by law to be filed and have paid all taxes and assessments shown to be due and payable on such returns and all other governmental charges levied upon any of their respective properties, assets, income, receipts, franchises or sales other than those not yet delinquent. The income tax liability of each of the Holding Company and each of its Subsidiaries has been finally determined by all applicable foreign and domestic, federal, state and local governmental authorities, including, without limitation, the Internal Revenue Service, and satisfied, or the time for audit has expired, for all fiscal years through the fiscal year specified as applicable for such Person on Exhibit 5.8 attached hereto. Neither the Holding Company nor any of its Subsidiaries has executed any waiver or waivers that would have the effect of extending the applicable statute of limitations in respect of income tax liabilities. The charges, accruals and reserves in the financial statements referred to on Exhibit 5.6(a) attached hereto in respect of taxes for all fiscal periods are adequate, and there are no known unpaid assessments for additional taxes for any fiscal period or of any basis therefor. The Holding Company and its Subsidiaries are indemnified under the Acquisition Agreement by the Seller for certain liabilities in respect of taxes (and all related penalties and other amounts) of the Seller and Progressive. 5.9. Funded Debt, Current Debt, Liens, Investments, Transactions with Affiliates, Leases. Exhibit 5.9 attached hereto correctly describes as to the Holding Company and each of its Subsidiaries (after giving effect to the transactions consummated at the Closing): (a) all of its Funded Debt and Current Debt to be outstanding immediately following the Closing in an amount, either individually or in the aggregate, of $100,000 or more (other than that evidenced by the Notes); (b) all Liens to which any of its properties and assets will be subject immediately following the Closing (other than those of the character described in section 13.8(b)); (c) all of its Investments having a fair market value, individually or in the aggregate, of $100,000 or more (and all agreements and commitments to make Investments) to be owned or held immediately following the Closing (other than 70 Investments of the character described in clauses (b) through (g), inclusive, of the definition of Permitted Investments); (d) all of its Affiliates, and all agreements (including, without limitation, all employment and management consulting agreements) with such Affiliates and all transactions with such Affiliates which it is now obligated or now intends to consummate at any time in the future; and (e) each lease of real and/or personal property (other than any lease under which the Holding Company and its Subsidiaries pay less than $100,000 in the aggregate during any period of twelve consecutive months) under which it is a lessee or sublessee and the name of the lessor, the lessee or sublessee, a general description of the property leased, the annual rents payable thereunder and the term thereof. 5.10. Title to Properties; Liens; Leases; Real Property. The Holding Company and each of its Subsidiaries has good and valid (in the case of personalty) and good and marketable (in the case of real property) title to all of their respective properties and assets (including, without limitation, the properties and assets reflected in the balance sheet dated December 31, 1997, referred to on Exhibit 5.6(a) attached hereto), except properties and assets disposed of since such date in the ordinary course of business, free and clear of all Liens (other than Liens permitted under section 13.8). The Holding Company and each of its Subsidiaries enjoys peaceful and undisturbed possession under all leases under which it operates, and all of such leases are valid, subsisting and in full force and effect and are on "arm's length" terms. The only leases of real property to which the Holding Company or any of its Subsidiaries is a party are listed on Exhibit 5.9 attached hereto. Except as set forth on Exhibit 5.10 attached hereto, there are no subtenants or licensees of any real property leased by the Holding Company or any of its Subsidiaries. The only real property owned by the Holding Company or any of its Subsidiaries is described on Exhibit 5.10 attached hereto, and there are no tenants or licensees thereof or thereon. 5.11. Litigation, etc. Except as set forth on Exhibit 5.11 attached hereto, there is no action, proceeding or investigation pending or, to the knowledge of the Issuers, threatened (or any basis therefor known to the Issuers) against or affecting either the Holding Company or any of its Subsidiaries which (a) questions the validity of any of the Operative Documents or any action taken or to be taken pursuant thereto or (b) has resulted in, or could reasonably be expected to result in, a Material Adverse Change. There is no outstanding judgment, decree or order against or affecting either the Holding Company or any of its Subsidiaries which has resulted in, or could reasonably be expected to result in, a Material Adverse Change. 5.12. Valid and Binding Obligations; Compliance with Other Instruments; Absence of Restrictions, etc. (a) This Agreement has been duly authorized, executed and delivered by each Issuer and constitutes the valid and legally binding obligation of each Issuer enforceable against each Issuer in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general equity principles (regardless of whether enforcement is sought in a proceeding at law or in equity). Each of the other Operative Documents to which the Holding Company or any of its Subsidiaries is (or is to be) a party has been duly authorized by the Holding Company or such Subsidiary, as the case may be, and, 71 when executed and delivered, will constitute the valid and legally binding obligation of the Holding Company or such Subsidiary, as the case may be, enforceable against it in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general equity principles (regardless of whether enforcement is sought in a proceeding at law or in equity). (b) Neither the Holding Company nor any of its Subsidiaries is in violation of or in default under any term of its Organizational Documents, or of any agreement, document, instrument, judgment, decree, order, law, statute, rule or regulation applicable to it or any of its properties and assets, in any way which has resulted in, or could reasonably be expected to result in, a Material Adverse Change. Without limiting the generality of the foregoing, the Holding Company and each of its Subsidiaries is in compliance with (and neither it nor any of its predecessors in interest has received any notice to the contrary) and there is no reasonable possibility of any liability of or any judgment, decree or order binding upon or applicable to any such Person or any of its properties or assets under or on account of, any Environmental Laws, except where the same has not resulted in, and could not reasonably be expected to result in, a Material Adverse Change. (c) The execution, delivery and performance of and the consummation of the transactions contemplated by the Operative Documents will not violate or constitute a default under, or permit any Person to accelerate or to require the prepayment of any Indebtedness of the Holding Company or any of its Subsidiaries or to terminate any lease or agreement of the Holding Company or any of its Subsidiaries pursuant to, or result in the creation of any Lien (other than the Liens created by the Fleet Bank Documents) upon any of the properties or assets of the Holding Company or any of its Subsidiaries pursuant to, any term of the Organizational Documents of the Holding Company or any of its Subsidiaries or of any agreement, document, instrument, judgment, decree, order, law, statute, rule or regulation applicable to the Holding Company or any of its Subsidiaries or any of their respective properties and assets. (d) Neither the Holding Company nor any of its Subsidiaries is a party to or bound by or subject to any Organizational Document, or any agreement, document, instrument, judgment, decree, order, law, statute, rule or regulation (other than the Operative Documents and the Fleet Bank Documents and laws, statutes, rules or regulations affecting businesses generally): (i) which restricts its right or ability to incur Indebtedness, to issue securities or to consummate the transactions contemplated hereby; (ii) under the terms of or pursuant to which its obligation to pay all amounts due from it and/or to perform all obligations imposed on it and/or to comply with the terms applicable to it under any of the Operative Documents is in any way restricted; or (iii) which restricts its right or ability to pay dividends and/or to make any other distributions in respect of its Shares, to mortgage or dispose of its properties, to consummate any merger, consolidation or acquisition, to make Investments or capital expenditures, to enter into and perform leases, to pay executive compensation and/or to conduct its business as now conducted and now proposed to be conducted. 5.13. ERISA. 72 (a) The Holding Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance which have not resulted in, and could not reasonably be expected to result in, a Material Adverse Change. Neither the Holding Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Holding Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Holding Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not individually or in the aggregate result in a Material Adverse Change. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. (c) Neither the Holding Company nor any of the ERISA Affiliates has incurred withdrawal liabilities (or are subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate is likely to result in a Material Adverse Change. The Holding Company and each ERISA Affiliate have made all required contributions to Multiemployer Plans. Neither the Holding Company nor any ERISA Affiliate has incurred, nor would reasonably expect to incur, any Withdrawal Liability upon a complete or partial withdrawal from any Multiemployer Plan that individually or in the aggregate is likely to result in a Material Adverse Change. To the knowledge of the Issuers, no Multiemployer Plan is, or is reasonably expected to be, insolvent, in reorganization or terminated within the meaning of Title IV of ERISA. (d) Except as set forth on Exhibit 5.13 attached hereto, neither the Holding Company nor any of its Subsidiaries has any expected postretirement benefit obligation (determined in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code). (e) The consummation of the transactions contemplated by the Operative Documents will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Holding Company in the first sentence of this section 5.13(e) is made in reliance upon and subject to the accuracy of your representation in section 25(b) as to the sources of the funds used to pay the purchase price of the Securities to be purchased by you. 73 5.14. Consents, etc. No consent, approval or authorization of, or declaration or filing with, or other action by, any Person (including, without limitation, any governmental authority) is required on the part of the Holding Company or any of its Subsidiaries as a condition precedent to the valid execution, delivery and performance of and the consummation of the transactions contemplated by the Operative Documents and/or the exercise by any holder of any Securities of any of its rights in respect thereof, including, without limitation, the Acquisition, other than (a) those specified on Exhibit 5.14 attached hereto, all of which, if related to the Acquisition or the transactions to be consummated in connection therewith, shall have been obtained and are unconditional, in full force and effect and not subject to appeal or review, and (b) other consents which, if not obtained, could not reasonably be expected to result in a Material Adverse Change. Without limiting the generality of the foregoing, all filings under the Clayton Act and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 required in connection with the Acquisition have been made and the "waiting period" under such Acts has expired or been terminated. 5.15. Proprietary Rights; Licenses. The Holding Company and each of its Subsidiaries have all Proprietary Rights and Licenses as are necessary for the conduct of their respective businesses as now conducted and now proposed to be conducted, without any known conflict with the rights of others, except where the failure to have any such Proprietary Right and/or License has not resulted in, and could not reasonably be expected to result in, a Material Adverse Change. Each such Proprietary Right and License is in full force and effect, all material obligations with respect thereto have been fulfilled and performed and, to the knowledge of the Issuers, there is no material infringement thereon by any other Person. No default in the performance or observance by the Holding Company or any of its Subsidiaries (or any of their predecessors in interest) of its obligations thereunder has occurred which permits, or after notice of lapse of time or both would permit, the revocation or termination of any Proprietary Right or License which has resulted in, or could reasonably be expected to result in, a Material Adverse Change. 5.16. Offer of Securities; Investment Bankers. Neither the Holding Company nor any of its Subsidiaries nor any Person acting on its behalf (a) has directly or indirectly offered the Securities or any part thereof or any similar securities for issue or sale to, or solicited any offer to buy any of the same from, anyone other than you, the Other Purchasers and not more than 20 other institutional investors, (b) has taken or will take any action which would bring the issuance and sale of the Securities within the provisions of Section 5 of the Securities Act or the registration or qualification provisions of any applicable blue sky or other securities laws, (c) has dealt with any broker, finder, commission agent or other similar Person in connection with the sale of the Securities and the other transactions contemplated by the Operative Documents, other than Fleet Corporate Finance, or (d) is under any obligation to pay any broker's fee, finder's fee or commission in connection with such transactions, other than fees to Fleet Corporate Finance, which fees are the obligation solely of the Issuers. 5.17. Government Regulation. Neither the Holding Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each as amended. 5.18. Disclosure. Neither this Agreement, nor any of the other Operative Documents nor the Disclosure Documents, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading in the light of the circumstances under which such statements were made, it being 74 understood that, except as set forth in section 5.6, no representation or warranty is made with respect to any projections or other prospective financial information. There is no fact known to any of the Issuers (other than information concerning general economic conditions known to the public generally) which has resulted in, or could reasonably be expected to result in, a Material Adverse Change which has not been set forth in this Agreement, the other Operative Documents and the Disclosure Documents. 5.19. Labor Relations; Suppliers, Distributors and Customers. No dispute involving employees of the Holding Company or any of its Subsidiaries or their respective relationships with their respective employees has resulted in, or could reasonably be expected to result in, any Material Adverse Change. The relationships with the suppliers to and distributors for and customers of the Holding Company and its Subsidiaries are satisfactory commercial working relationships and, during the 12-month period ended on the Closing Date, no such supplier, distributor or customer has cancelled or otherwise terminated its relationship with or decreased its services, supplies or materials to or its usage or purchase of the services or products of the Holding Company or any of its Subsidiaries in a manner which has resulted in, or could reasonably be expected to result in, a Material Adverse Change. The Holding Company is not aware of any intention of any such supplier, distributor or customer to take any such action. 6. Use of Proceeds; Regulation U, etc. (a) The proceeds of the sale of the Securities (together with loan proceeds under the Fleet Bank Documents received by the Holding Company at the Closing) will be used on the Closing Date to make the payments to the Persons and for the purposes specified on Exhibit 6 attached hereto. (b) Neither the Holding Company nor any of its Subsidiaries owns, or will use, directly or indirectly, any part of the proceeds of the sale of the Securities for the purpose of purchasing or carrying, any "margin stock" within the meaning of Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve System (herein called a "margin security") or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might constitute the transactions contemplated by the Operative Documents a "purpose credit" within the meaning of said Regulation U or cause this Agreement or any of the other Operative Documents to violate Regulation U or any other regulation of the Board of Governors of the Federal Reserve System, or the Exchange Act or any other applicable law, statute, regulation, rule, order or restriction. 7. Financial Statements and Information. The Holding Company will furnish to you in duplicate, so long as you shall be obligated to purchase Securities hereunder or shall hold any of the Securities, and to each other institutional holder from time to time of the Securities: (a) within 60 days after the end of each of the first three quarterly accounting periods in each fiscal year of the Holding Company, the consolidated and consolidating balance sheets of the Holding Company and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, changes in stockholders' equity and cash flows for such period and for the portion of such fiscal year ended on the last day of such period, in each case setting forth in comparative form the corresponding figures for the same period and portion of the next preceding fiscal year, provided that the delivery by the Holding Company of a true and complete copy of its 75 Form 10-Q report as filed with the Commission (or any analogous foreign governmental authority) or any securities exchange within the time period specified by the Commission (or such foreign governmental authority) or such securities exchange shall be deemed compliance with the requirements of this section 7(a); (b) within 120 days after the end of each fiscal year of the Holding Company, the consolidated and consolidating balance sheets of the Holding Company and its Subsidiaries as at the end of such year and the related consolidated and consolidating statements of income, changes in stockholders' equity and cash flows for such year, in each case setting forth in comparative form the corresponding figures for the next preceding fiscal year and the corresponding figures from the budget for such fiscal year, all in reasonable detail and accompanied by the standard unqualified report on such consolidated financial statements of the Holding Company and its Subsidiaries of Price Waterhouse LLP (or other accountants of recognized national standing selected by the Holding Company, provided that the delivery by the Holding Company of a true and complete copy of its Form 10-K report as filed with the Commission (or any analogous foreign governmental authority) or any securities exchange within the time period specified by the Commission (or such foreign governmental authority) or such securities exchange shall be deemed compliance with the requirements of this section 7(b) other than clause (iv) hereof, which report shall (i) state that the audit of such accountants in connection with such consolidated financial statements has been conducted in accordance with generally accepted auditing standards and that such accountants believe that such audit provides a reasonable basis for their opinion, (ii) contain the other statements required from time to time by the American Institute of Certified Public Accountants for an auditor's standard unqualified opinion (and shall not contain any additional explanatory paragraph concerning uncertainties or other matters), (iii) include the opinion of such accountants that such consolidated financial statements present fairly in all material respects the consolidated financial position of the Holding Company and its Subsidiaries as at the end of such fiscal year and the consolidated results of operations and cash flows for such fiscal year, in conformity with GAAP, and (iv) be accompanied by a separate certificate from such accountants which shall state (A) that such accountants are familiar with the terms of the Operative Documents and provide negative assurance relative to compliance with the applicable covenants of the Operative Documents as they relate to accounting matters and (B) whether or not their examination has disclosed the existence, during or at the end of the fiscal year covered by such financial statements and/or the date of such certificate, of (x) any "reportable condition" (as defined in Statement on Auditing Standards No. 60 issued by the Auditing Standards Board of the American Institute of Certified Public Accountants) in the internal control structure of the Holding Company or any of its Subsidiaries, (y) any Change of Control or (z) any Default or Event of Default and, if their examination has disclosed such a condition or event, specifying in reasonable detail the nature and period of existence thereof; (c) together with each delivery of financial statements pursuant to sections 7(a) and 7(b), an Officer's Certificate which shall: (i) certify that such financial statements have been prepared in accordance with GAAP (subject, in the case of any unaudited financial statements, to normal year-end and audit adjustments and the omission of footnotes) applied on a consistent basis throughout the periods covered thereby and present fairly in all material respects the consolidated financial position 76 and the consolidated results of operations and cash flows of the Holding Company and its Subsidiaries as at the end of and for the periods covered thereby in conformity with GAAP (subject, in the case of any unaudited financial statements, to normal year-end and audit adjustments and the omission of footnotes); (ii) state that, after due inquiry, the signers do not have knowledge of the existence, during the fiscal period covered by such financial statements or as at the date of such Officer's Certificate, of (A) any "reportable condition" (as defined in Statement on Auditing Standards No. 60 issued by the Auditing Standards Board of the American Institute of Certified Public Accountants) in the internal control structure of the Holding Company or any of its Subsidiaries, (B) any Change of Control or (C) any Default or Event of Default, or, if such is not the case, specifying in reasonable detail the nature and period of existence thereof and what action the Holding Company or the applicable Subsidiary has taken, is taking and proposes to take with respect thereto; (iii) in the case of each such Officers' Certificate accompanying the quarterly financial statements delivered pursuant to section 7(a) and the annual financial statements delivered pursuant to section 7(b): (A) show in reasonable detail all computations required to demonstrate compliance, during and at the end of the fiscal period covered by such financial statements, with the provisions of section 13.5, 13.6, and 13.14; and (B) unless already included in the relevant Form 10-Q report or 10-K report delivered pursuant hereto, include in reasonable detail management's discussion and analysis of the results of operations and the financial condition of the Holding Company and its Subsidiaries as at the end of and for the fiscal period covered by such financial statements; and (iv) if there shall exist any Subsidiary of the Holding Company as of the date of such Officer's Certificate which did not exist as of the date of the last Officer's Certificate delivered pursuant to this section 7(c), specify with respect to each such Subsidiary the information called for by Exhibit 7(c)(iv), contain a brief description of the nature of each such Subsidiary's business and certify that each such new Subsidiary has executed and delivered pursuant to section 13.17 a Note Guarantee to each holder of any Notes; (d) as promptly as practicable (but in any event not later than five Business Days) after receipt thereof, copies of all material reports or written comments (including, without limitations, audit reports, so-called management letters and any other reports or communications with respect to the internal control structure of the Company or any of its Subsidiaries) submitted by independent accountants or other management consultants; (e) at such time as any securities of the Holding Company or any of its Subsidiaries are publicly held, as promptly as practicable (but in any event not later than five Business Days) after the same are available, copies of (i) all material press releases issued by the Holding Company or any Subsidiary of the Holding Company, and all notices, proxy statements, financial statements, reports and documents as the Holding 77 Company shall send or make available generally to its stockholders or as any Subsidiary of the Holding Company shall send or make available generally to its stockholders, other than the Holding Company, and (ii) all periodic and special reports, documents and registration statements (other than on Form S-8) which the Holding Company or any Subsidiary of the Holding Company furnishes or files, or any officer, director or stockholder of the Holding Company or any of its Subsidiaries furnishes or files with respect to the Holding Company or any of its Subsidiaries, with the Commission (or any analogous foreign governmental authority) or any securities exchange, excluding the Forms 3, 4 and 5 filed by directors, officers and 10% stockholders of the Holding Company; (f) as promptly as practicable (but in any event not later than five Business Days) after any officer or senior management employee of the Holding Company or any of its Subsidiaries becomes aware of the occurrence of any of the following conditions or events, an Officer's Certificate specifying in reasonable detail the nature and period of existence thereof, what action the Holding Company or any of its Subsidiaries has taken, is taking and proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Holding Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Holding Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Holding Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, has resulted in, or could reasonably be expected to result in, a Material Adverse Change; (g) as promptly as practicable (but in any event not later than three Business Days) after any officer or senior management employee of the Holding Company or any of its Subsidiaries obtains knowledge of the occurrence of any Default or Event of Default, or of any condition or event which has resulted in, or could reasonably be expected to result in, a Material Adverse Change, an Officer's Certificate specifying in reasonable detail the nature and period of existence thereof, what action the Holding Company or any of its Subsidiaries has taken, is taking and proposes to take with respect thereto and the date, if any, on which it is estimated the same will be remedied; (h) as promptly as practicable (but in any event not later than 30 days) after the end of each fiscal year of the Holding Company, an annual budget prepared on a monthly basis for the Holding Company and its Subsidiaries for the succeeding fiscal year and, promptly upon preparation thereof, any other significant budgets which the Holding Company or any of its Subsidiaries prepares and any revisions of such annual or other budgets; 78 (i) as promptly as practicable (but in any event not later than five Business Days) after the occurrence of any condemnation, taking or destruction of or damage to (whether or not covered by insurance) any properties or assets of the Holding Company or any of its Subsidiaries having a value in excess of $500,000, an Officer's Certificate specifying in reasonable detail the nature of such event, what action the Holding Company or any of its Subsidiaries has taken, is taking and proposes to take with respect thereto and the date, if any, on which it is estimated the same will be remedied; (j) as promptly as practicable (but in any event not later than five Business Days) after receipt thereof, copies of all material notices and communications given or received by the Holding Company or any of its Subsidiaries under the Acquisition Documents (including, without limitation, copies of (i) all documents related to adjustments to the consideration paid under the Acquisition Agreement and (ii) all notices and communications relating to claims of breaches and defaults and claims for indemnification given or received by the Holding Company or any of its Subsidiaries), or any of the other agreements, documents and instruments referred to in section 4.3; (k) such other material information relating to the Holding Company or any of its Subsidiaries as shall be furnished to any bank, financial institution or other Person to which the Holding Company or any of its Subsidiaries is indebted for borrowed money or for any letters of credit or similar instruments (other than information relating solely to collateral therefor); and (l) such other information as from time to time may reasonably be requested by the Required Holders of any class of Securities. 8. Inspection; Board Visitation Rights; Confidentiality. (a) The Holding Company will permit any Person designated by you and the Other Purchasers on reasonable notice, during regular business hours (unless a Default or Event of Default shall have occurred and be continuing, in which case, at any time) and at your and the Other Purchasers' expense (unless a Default or Event of Default shall have occurred and be continuing, in which case, at the Holding Company's expense), to visit and inspect any of the properties of the Holding Company and its Subsidiaries, to examine their books and records (and to make copies thereof) and to discuss their affairs, finances and accounts with and to be advised as to the same by, their directors, officers, consultants, counsel and accountants, all at such intervals as you and the Other Purchasers may desire (but not more frequently than twice in any fiscal year, unless a Default or Event of Default shall have occurred and be continuing, in which case, as frequently as you and the Other Purchasers may request). Representatives of the Holding Company and its Subsidiaries may be present at any such meeting. (b) You and the Other Purchasers shall have the right, as a group, to appoint one representative who shall: (a) receive notice of all meetings (both regular and special) of the board of directors of the Holding Company and each committee thereof (such notice to be delivered or mailed as specified in section 22 at the same time as notice is given to the members of such board and/or committee); (b) receive all notices, information and reports which are furnished to the members of such board and/or committee at the same time and in the same manner as the same is furnished to such members; and (c) receive as soon as available (but in any event prior to the next 79 succeeding meeting of such board and/or committee) copies of the minutes of all such meetings. If any action is proposed to be taken after the Closing by such board and/or committee by written consent in lieu of a meeting, the Holding Company will give written notice thereof to such representative, which notice shall describe in reasonable detail the nature and substance of such proposed action and shall be delivered or mailed as specified in section 22 at the same time as notice is given to the members of such board and/or committee (but in no event later than seven days prior to the date upon which such action is proposed to be taken). The Holding Company will furnish such representative with a copy of each such written consent not later than five days after it has been signed by its last signatory. Such representative shall not constitute a member of such board and/or committee and shall not be entitled to vote on any matters presented at meetings of such board and/or committee or to consent to any matter as to which the consent of any such board and/or committee shall have been requested. The board of directors (or other governing board) of the Holding Company shall meet not less frequently than three (3) times during each fiscal year of the Holding Company. (c) Each holder of any Securities agrees by its acceptance thereof that any non-public information concerning the Holding Company and its Subsidiaries which is furnished by the Holding Company to such holder pursuant to this Agreement or any of the other Operative Documents (collectively "Confidential Information") shall be kept confidential by such holder in accordance with procedures adopted by such holder in good faith to protect confidential information of third parties. The term "Confidential Information" shall not include, however, any information which (x) was publicly known or otherwise known to any holder at the time of disclosure by the Holding Company to any holder; (y) subsequently becomes publicly known through no act or omission of any holder or any agent of any holder or (z) becomes known to any holder otherwise than through disclosure by the Holding Company. Notwithstanding the foregoing, each holder of any Securities may disclose Confidential Information: (i) with the consent of the Holding Company (which shall not be unreasonably withheld or delayed); (ii) when required by law or regulation; (iii) in any report, statement or testimony submitted by such holder to any regulatory body having or claiming to have jurisdiction over such holder; (iv) to the National Association of Insurance Commissioners or any similar organization or to any rating agency; (v) to the officers, directors, employees, agents, representatives and professional consultants of such holder and of such holder's Affiliates who have a need to know such information; (vi) in connection with the preservation, exercise and/or enforcement of any of such holder's rights or remedies under this Agreement and the other Operative Documents; (vii) in connection with any contemplated transfer of any of the Securities held by such holder to any institutional investor or financial institution (so long as the recipient of such information agrees to keep such information confidential on terms substantially similar to those set forth in this section 8(c)); (viii) in a response to any summons, subpoena or other legal process or in connection with any judicial or administrative proceeding or inquiry; or (ix) to correct any false or misleading information which may become public concerning the relationship of such holder to the Holding Company or any of its Subsidiaries and/or the transactions contemplated hereby. 9. Prepayment of Notes. 9.1. Required Prepayment Without Premium of Notes. In addition to paying the entire outstanding principal amount of and the interest due on the Notes on the maturity date thereof, on 80 each of April 17, 2003 and April 17, 2004, the Obligor will prepay without premium $3,666,667 aggregate principal amount of the Notes. In addition, on April 17, 2003, the Obligor will prepay without premium the aggregate principal amount of the Notes which represent Capitalized Interest (as such term is defined in the Notes). No partial prepayment of the Notes pursuant to section 9.2 or any other provision of this Agreement shall alter the obligation of the Obligor to make the required prepayments provided for in this section 9.1. 9.2. Optional Prepayment With Premium of Notes. At any time and from time to time after April 17, 1999, the Obligor may, at its option, upon notice as set forth in section 9.5, prepay all or any part (in an integral multiple of $100,000 and a minimum of $500,000 or such lesser principal amount thereof as shall then be outstanding) of the Notes, upon the concurrent payment of either (i) an amount equal to the Make Whole Amount, in the event that the Warrant Exchange shall not have occurred before April 17, 1999, or (ii) a premium (a percentage of the principal amount so prepaid pursuant to this section 9.2) (the "Applicable Premium"), in the event that the Warrant Exchange shall have occurred before April 17, 1999, such percentage to be that set forth in the following table opposite the period in which the date fixed for such prepayment occurs:
Applicable Period Premium ------ ------- April 18, 1999 through April 17, 2000 4.0% April 18, 2000 through April 17, 2001 3.0% April 18, 2001 through April 17, 2002 2.0% April 18, 2002 through April 17, 2003 1.0% April 18, 2003 and thereafter 0.0%
Any partial prepayment of Notes pursuant to this section 9.2 shall be applied to the payment of installments of principal of the Notes in inverse order of maturity. 9.3. Prepayment Without Premium of the Notes at the Option of Holders of Notes upon a Change of Control. (a) If any Change of Control is to occur, then not less than 30 days nor more than 60 days prior to the occurrence of such Change of Control, the Issuers will notify each holder of any Notes of such pending Change of Control and the date upon which it is scheduled to occur. If the Required Holders of the Notes then outstanding furnish a written request for prepayment to the Obligor (in accordance with section 22) not more than 90 days after receipt by such holders of such notice of such Change of Control from the Issuers, the Obligor will prepay without premium all of the Notes then outstanding. Each such prepayment shall occur on the date upon which the Change of Control occurs, unless the Obligor and the Required Holders of the Notes agree to a different date, and no prepayment requested pursuant to this section 9.3 shall be due unless the Change of Control shall occur. (b) Each notice from the Issuers pursuant to this section 9.3 shall make explicit reference to this section 9.3 and shall state that the right of the Required Holders of the Notes then outstanding to require prepayment thereof must be exercised within 90 days of the receipt of such notice. 81 9.4. Allocation of Partial Prepayments of Notes. In the case of each partial prepayment of the Notes under this section 9, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding (excluding any Notes at the time owned by the Holding Company or any Affiliate of the Holding Company) in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof, with adjustments, to the extent practicable, to compensate for any prior prepayments not made exactly in such proportion. 9.5. Notice of Optional Prepayments of Notes. In the case of each prepayment of the Notes under section 9.2, the Obligor shall give written notice thereof to each holder of Notes being prepaid not less than 10 nor more than 30 days prior to the date fixed for such prepayment. Each such notice shall set forth: (a) the date fixed for prepayment; (b) the aggregate principal amount of Notes to be prepaid on such date; and (c) the aggregate principal amount of Notes held by such holder to be prepaid on such date and the amount of accrued interest and an estimation of the Make Whole Amount or Applicable Premium, as applicable, to be paid to such holder on such date (together with the calculation of such Make Whole Amount or Applicable Premium, as applicable, which calculation shall be satisfactory to each holder of the Notes to be so prepaid). Any such notice of optional prepayment may be rescinded and the Obligor shall have the right, through the date fixed for such optional prepayment, to cancel such optional prepayment. 9.6. Maturity; Accrued Interest; Surrender, etc. of Notes. In the case of each prepayment of all or any part of any Note, the principal amount to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the premium, if any, due thereon. Any Note prepaid in full shall be surrendered to the Obligor at the Obligor's principal place of business promptly following prepayment and canceled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 9.7. Purchase of Notes. The Obligor will not, and will not permit any of its Affiliates to, directly or indirectly, purchase or otherwise acquire, or offer to purchase or otherwise acquire, any outstanding Notes except by way of payment or prepayment in accordance with the provisions of the Notes and this Agreement. 9.8. Payment on Non-Business Days. If any amount hereunder or under the Notes shall become due on a day which is not a Business Day, such payment shall be due on the next succeeding Business Day without including the additional day(s) elapsed in the computation of the interest payable on such next succeeding Business Day. 9.9. Application of Notes in Satisfaction of Exercise Price of Warrants. In the event that any holder of any Note shall apply all or any portion of the principal amount of such Notes in satisfaction (in whole or in part) of the payment of the Exercise Price (as defined in the Warrants), any partial application of the principal amount of any such Note shall be applied to the payment of installments of principal due thereunder in order of maturity. No such application of principal to the payment of the Exercise Price shall constitute a prepayment which requires the payment of any prepayment premium. 10. Subordination of Notes and Note Guarantees. The payment of the Notes and Note Guarantees and the rights of the holders thereof are subordinated to the payment of the Superior Indebtedness (as defined in the Notes) and the rights of the holders thereof upon the terms of subordination set forth in the Notes. 82 11. Securities Act Matters; Option Plans. (a) The Holding Company will take, or will cause to be taken, such action as any holder of Securities may reasonably request from time to time to facilitate any sale or disposition by any such holder of any Securities without registration under the Securities Act and/or any applicable securities laws within the limitation of the exemptions provided by any rule or regulation thereunder, including, without limitation, Rule 144A under the Securities Act. (b) Exhibit 5.5 sets forth a true and complete description of the Tridex Corporation 1997 Long Term Incentive Plan, the Tridex Corporation Non-Employee Directors' Stock Plan and the proposed Tridex 1998 Corporation Non-Executive Long Term Incentive Plan, pursuant to which employees and non-employee directors of the Holding Company and its Subsidiaries have been and may be issued Common Stock (or options therefor), which option plans are hereinafter called the "Option Plans." You agree that pursuant to the Option Plans the Holding Company may issue, or grant options or other rights to purchase, up to 744,306 shares of Common Stock at purchase or exercise prices less than the Exercise Price under the Warrants and that such issuance or grant shall not cause any adjustment in the Exercise Price under the Warrants. 12. Registration Rights. 12.1. Registration on Request. (a) In case the Holding Company shall receive from the Required Holders of any Registrable Shares a written request or requests that the Holding Company effect any registration, qualification and/or compliance of any Registrable Shares held by (or issuable to) such holder or holders, and specifying the intended method of offering, sale and distribution, the Holding Company will: (i) promptly give written notice of the proposed registration, qualification and/or compliance to each holder of any Registrable Shares; and (ii) as soon as practicable, effect such registration, qualification and/or compliance (including, without limitation, the execution of an undertaking for post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with exemptive regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of such amount of Registrable Shares as is specified in a written request or requests, made within 60 days after receipt of such written notice from the Holding Company, by any holder or holders of any Registrable Shares. (b) The obligations of the Holding Company under this section 12.1 are subject to the following qualifications: (i) except as provided in section 12.1(b)(vi), the Holding Company shall only be obligated to effect one registration pursuant to this section 12.1; 83 (ii) the Holding Company shall not be obligated to effect any registration pursuant to this section 12.1 unless it shall have been (A) requested to do so by the holder or holders of a majority of the Registrable Shares at the time issued (and issuable) and (B) requested to effect the registration of Registrable Shares having an aggregate Fair Value of not less than $2,000,000; (iii) the Holding Company shall not be obligated to cause any registration statement relating to a registration effected pursuant to this section 12.1 to become effective prior to April 17, 1999; (iv) the Holding Company shall not include in any registration, qualification or compliance requested pursuant to this section 12.1 any other securities (including, without limitation, those to be issued and sold by the Holding Company) without the prior written consent of the holder or holders of a majority of the Registrable Shares to be included in such registration, qualification or compliance; (v) the Holding Company shall pay all Registration Expenses related to any registration, qualification and compliance requested pursuant to this section 12.1; (vi) if, in connection with any registration of Registrable Shares pursuant to this section 12.1, the holders of Registrable Shares requesting registration are unable for any reason to include in such registration all of the Registrable Shares for which registration has been requested, then the holder or holders of the Registrable Shares shall be entitled to additional registrations of Registrable Shares pursuant to this section 12.1, sufficient to permit the holders of the Registrable Shares to register all of the Registrable Shares, provided, however, that in the event that any Registrable Shares are not so registered as a result of the imposition by the managing underwriter(s) of any underwritten offering pursuant to this section 12.1 of a limitation on the number of Registrable Shares which may be included in any such registration, the holders of such Registrable Shares shall be limited to one additional registration of Registrable Shares pursuant to this section 12.1; and (vii) if the Holding Company shall furnish to each holder of Registrable Shares an Officer's Certificate certifying that the Holding Company has determined, as evidenced by a written resolution of the board of directors of the Holding Company, that it is necessary to delay the filing of the registration statement because such a filing at the time requested, or the offering of securities pursuant thereto, would materially interfere with any pending material transaction to which the Holding Company is a party, the Holding Company shall have the right to delay such filing for a period ending not more than 135 days after the first date upon which it shall have received a written request for such registration from the holder or holders of a majority of the Registrable Shares at the time issued (and issuable); provided that (A) the Holding Company may not exercise this right to delay the filing of a registration statement on more than one occasion in any 12 month period and (B) the Holding Company shall reimburse each holder of Registrable Shares for all expenses (including, without limitation, fees, 84 expenses and disbursements of counsel) incurred in connection with any such registration prior to receipt of any such Officer's Certificate. 12.2. Incidental Registration. (a) If the Holding Company at any time or from time to time shall determine to effect the registration, qualification and/or compliance of any of its Shares (whether in connection with an offering by the Holding Company or others) (otherwise than pursuant to a registration on a form inappropriate for an underwritten public offering or relating solely to securities to be issued in a merger, acquisition of the stock or assets of another entity or in a similar transaction), then, in each such case, the Holding Company will: (i) promptly give written notice of the proposed registration, qualification and/or compliance (which shall (A) specify if such registration shall involve an underwritten offering and (B) include a list of the jurisdictions in which the Holding Company intends to register or qualify such securities under the applicable blue sky or other state securities laws) to each holder of any Registrable Shares; and (ii) use its commercially reasonable best efforts to include among the Shares which it then registers or qualifies all Registrable Shares specified by any holder thereof in a written request or requests, made within 30 days after receipt of such written notice from the Holding Company. (b) The obligations of the Holding Company under this section 12.2 are subject to the following qualifications: (i) the Holding Company shall pay all Registration Expenses related to any registration, qualification or compliance requested pursuant to this section 12.2; (ii) if, in connection with any underwritten offering pursuant to this section 12.2, the managing underwriter(s) shall impose a limitation on the number or kind of securities which may be included in any such registration because, in its reasonable judgment, such limitation is necessary to effect an orderly public distribution, then the Holding Company shall be obligated to include in such registration statement only such limited portion of the Registrable Shares (which may be none) as is determined in good faith by such managing underwriter, provided that, if any securities are being offered for the account of any Person other than the Holding Company and the holders of the Registrable Shares, the reduction in the number of Registrable Shares included in such registration shall not represent a greater percentage of the amount of Registrable Shares originally requested to be registered and sold in such registration than the lowest such percentage reduction imposed upon any other Person; (iii) in the case of any underwritten offering, the right of any holder of Registrable Shares to participate in such offering shall be conditioned upon such holder's entering into an underwriting agreement in customary form (and containing other terms and provisions consistent herewith) with the representative(s) of the underwriter(s) selected by the Holding Company; and 85 (iv) in the case of any offering effected pursuant to the demand registration rights granted to the Seller in connection with the Acquisition, the rights of the holders of Registrable Shares to participate in such offering shall be subject to rights of the Seller to limit the number of Registrable Shares which may be included in any such registration. The Holding Company hereby agrees to use its commercially reasonable best efforts to cause the Seller to include the Registrable Shares in any such registration. 12.3. Permitted Registration. If and to the extent that any holder or holders of any Registrable Shares shall have, at the time of delivery of the written request referred to in section 12.2, no present intention of selling or distributing such securities, the Holding Company shall be obligated to effect the registration, qualification and compliance of such securities of such holder or holders only if and to the extent, in each case, that such registration, qualification and compliance are at the time permitted by the applicable statutes or rules and regulations thereunder or the practices of the governmental authority concerned. 12.4. Registration Procedures. In the case of each registration, qualification and/or compliance contemplated by this section 12, the Holding Company will keep the holder or holders of Registrable Shares advised in writing as to the initiation of proceedings for such registration, qualification and compliance and as to the completion thereof, and will advise each such holder, upon request, of the progress of such proceedings. In addition, the Holding Company will follow procedures customarily observed by issuers in registered public offerings, and accord to the holder or holders of Registrable Shares all rights (including, without limitation, the right to perform appropriate "due diligence") customarily accorded to selling stockholders in secondary distributions and to managing underwriters if the transaction in question is or were an underwritten public offering. The holders of the Registrable Shares shall cooperate in the preparation of any registration statement by providing any information or materials and entering into any customary agreements (including, without limitation, underwriting agreements) customarily required of selling security holders in similar transactions. At the expense of the Holding Company or of the party or parties bearing the expenses of such registration, qualification and compliance, the Holding Company will (a) keep such registration, qualification and compliance current and effective by such action as may be necessary or appropriate, including, without limitation, the filing of post-effective amendments and supplements to any registration statement or prospectus, for such period (not to exceed 180 days) as is necessary to permit the sale and distribution of the Registrable Shares pursuant thereto, (b) take all necessary action under any applicable blue sky or other state securities law to permit such sale and/or distribution, all as requested by the holder or holders of Registrable Shares included therein, provided that the Holding Company shall not be required to so register or qualify the Registrable Shares in any jurisdiction if, solely as a result thereof, the Holding Company must qualify generally to do business therein or consent to general service of process therein, (c) comply with applicable requirements of all regulatory entities, including, without limitation, the National Association of Securities Dealers, Inc., (d) furnish each holder of Registrable Shares included therein such number of registration statements, prospectuses, supplements, amendments, offering circulars and other documents incidental thereto as such holder from time to time may reasonably request, (e) list all Registrable Shares on each securities exchange on which securities of the same class are then listed and (f) furnish (or cause to be furnished) to each holder of Registrable Shares, all undertakings, agreements, certificates, opinions, financial statements and "comfort letters" of the sort customarily provided to selling stockholders in secondary distributions and to 86 the managing underwriters, if the transaction in question is or were an underwritten public offering. 12.5. Indemnification. (a) Without limiting the generality of section 20, the Holding Company will indemnify, defend and hold harmless each holder of Registrable Shares included in any registration, qualification and/or compliance contemplated by this section 12 and each underwriter of such securities, and each Person, if any, who controls each such holder and underwriter within the meaning of the Securities Act, and their respective directors, officers, employees, agents, advisors and Affiliates (each, an "Indemnified Person"), to the fullest extent enforceable under applicable law against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, supplement, amendment, offering circular or other document related to any registration, qualification or compliance or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation (or alleged violation) of the Securities Act or other securities laws in connection with any such registration, qualification or compliance, and will reimburse each such Indemnified Person for any legal or any other expenses reasonably incurred in connection with investigating and/or defending (and/or preparing for any investigation or defense of) any such claim, loss, damage, liability, action or violation; provided that the Holding Company will not be liable in any such case to any such Indemnified Person if, but only to the extent that, any such claim, loss, damage, liability, action, violation or expense is finally determined to arise out of or result from any untrue statement in or omission from written information furnished to the Holding Company by an instrument duly executed by such Indemnified Person and stated to be specifically for use therein. Each holder of Registrable Shares will, if securities held by such holder are included in a registration effected pursuant to this section 12, indemnify, defend and hold harmless the Holding Company, each of its directors and officers who signs the related registration statement, and each Person, if any, who controls the Holding Company within the meaning of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, supplement, amendment, offering circular or other document or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Holding Company and such directors, officers or Persons for any legal or any other expenses reasonably incurred in connection with investigating or defending (and/or preparing for any investigation or defense of) any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) was made in (or omitted from) such registration statement, prospectus, supplement, amendment, offering circular or other document in reliance upon and in conformity with written information furnished to the Holding Company by an instrument duly executed by such holder and stated to be specifically for use therein; provided that the liability of any such holder under this section 12.5 shall be limited to the net sales proceeds actually received by such holder as a result of the sale by it of securities in such registration. 87 (b) Each party entitled to indemnification under this section 12.5 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom, provided that (i) the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this section 12.5, except to the extent of any claim, loss, damage, liability or expense caused solely by such failure, (ii) counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), (iii) the Indemnified Party may participate in such defense at such party's expense and (iv) the Indemnified Party shall be entitled to separate counsel at the expense of the Indemnifying Party if, in the reasonable opinion of counsel to the Indemnified Party, there shall exist any conflict of interest (or potential conflict of interest) between the Indemnified Party and the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (c) If the indemnification provided for in this section 12.5 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any claim, loss, damage, liability or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such claim, loss, damage, liability or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, or of the Indemnified Party, on the other hand, in connection with such claim, loss, damage, liability or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 12.6. Restrictions on Other Agreements. Except as set forth on Exhibit 12.6 attached hereto, the Holding Company will not grant any right relating to the registration of its securities if the exercise thereof interferes with or is inconsistent with or will delay (or could reasonably be expected to interfere with or be inconsistent with or delay) the exercise and enjoyment of any of the rights granted under this section 12, without the written consent of holders of 66-2/3% or more of the Registrable Shares at the time outstanding, which consent may be given or withheld in the sole discretion of such holders. The Holding Company will not permit any of its Subsidiaries to grant any right relating to the registration of its securities. 88 13. Covenants of the Holding Company. So long as any of the Notes shall remain outstanding, the Holding Company will duly perform and observe each and all of the covenants and agreements hereinafter set forth: 13.1. Books of Record and Account; Reserves. The Holding Company will, and will cause each of its Subsidiaries to, (a) at all times keep proper books of record and account in which full, true and correct entries shall be made of its transactions in accordance with GAAP and (b) set aside on its books from its earnings for each fiscal year all such proper reserves as shall be required in accordance with GAAP in connection with its business. 13.2. Payment of Taxes; Corporate Existence; Maintenance of Properties; Compliance with Laws; Lines of Business; Proprietary Rights and Licenses. The Holding Company will, and will cause each of its Subsidiaries to: (a) pay and discharge promptly as they become due and payable all taxes, assessments and other governmental charges or levies imposed upon it or its income or upon any of its property, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, could reasonably be expected by law to become a Lien upon its property and could reasonably be expected to result in a Material Adverse Change; provided that no such Person shall be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings promptly initiated and diligently conducted and if it shall have set aside on its books such reserves, if any, with respect thereto as are required by GAAP; provided, further, that the Holding Company will, and will cause each of its Subsidiaries to, pay any such tax, assessment, charge, levy or claim prior to the commencement of any proceeding to foreclose any Lien securing the same; (b) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence; (c) maintain and keep its material properties in good repair, working order and condition (ordinary wear and tear and casualties excepted); (d) comply in all respects with all applicable laws, statutes, rules, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities in respect of the conduct of its business and the ownership of its property (including, without limitation, all Environmental Laws), if the failure to do so could reasonably be expected to result in a Material Adverse Change; provided that no such Person shall be required by reason of this section 13.2(d) to comply therewith at any time while it shall be contesting its obligation to do so in good faith by appropriate proceedings promptly initiated and diligently conducted, and if it shall have set aside on its books such reserves, if any, with respect thereto as are required by GAAP; (e) engage only in the Business (and lines of business related to and supportive of the Business), and keep substantially all its assets in the United States of America; and (f) own or have a valid license for all material Proprietary Rights and Licenses used by it in the conduct of its business. 89 13.3. Insurance. The Holding Company will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers, insurance with respect to its properties and businesses against loss or damage of the kinds customarily insured against by Persons of established reputation engaged in the same or a similar business and similarly situated, in such amounts and by such methods (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as shall be customary for such Persons and reasonably deemed adequate by the Holding Company. 13.4. Limitation on Discount or Sale of Receivables. The Holding Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, discount or sell any of its accounts receivable, except that any such Person may settle doubtful accounts or may grant discounts (such as quantity or prompt payment discounts) in the ordinary course of business. 13.5. Limitation on Funded Debt and Current Debt. The Holding Company will not, and will not permit any of its Subsidiaries to, be liable or create, assume, incur, guarantee, or in any manner become liable, contingently or otherwise, in respect of any Funded Debt or Current Debt other than: (a) Funded Debt evidenced by the Notes (and Note Guarantees); (b) Funded Debt and/or Current Debt under (i) the Fleet Bank Agreement and (ii) other senior credit facilities which the Holding Company and/or its Subsidiaries may enter into from time to time, provided that (x) both at the time of and immediately after the establishment of any such credit facility, no Default or Event of Default shall have occurred and be continuing, (y) the lender under any such credit facility shall have agreed in writing that (A) the documents executed and delivered in connection with such credit facility shall be subject to provisions identical to those set forth in section 13.16(c) and (B) the Indebtedness evidenced by the Notes and Note Guarantors shall be subordinate to such senior credit facility on terms materially identical to the subordination provisions set forth in the Notes, and (z) the Indebtedness issued pursuant to such senior credit facility bears interest at market rates prevailing at its date of issuance and has other terms and conditions no more restrictive in any material respect upon the Holding Company or any of its Subsidiaries than those provided in the Fleet Bank Documents, and provided, further, that the aggregate outstanding principal amount thereof, including, without limitation, all amounts due (contingently or otherwise) in respect of reimbursement obligations under letters of credit, interest rate protection agreements or similar instruments (and all related reimbursement agreements) does not exceed (1) in the case of the Fleet Bank Agreement, $20,000,000 plus the interest and other amounts directly attributable to such principal amount plus the maximum amount of Indebtedness incurred in respect of the interest rate protection agreement provided under the Fleet Bank Agreement or (2) in the case of such other credit facilities, at any time the maximum amount of Consolidated Total Debt (calculated on a pro forma basis giving effect to the proposed Funded Debt and/or Current Debt) permitted under section 13.6(c); (c) Funded Debt and/or Current Debt outstanding on the date hereof and referred to on Exhibit 5.9 attached hereto (but, in each case, no renewal, extension, refinancing or refunding of any thereof); (d) Funded Debt and/or Current Debt under Capital Leases or consisting of purchase money loans in addition to that permitted pursuant to section 13.5(c), provided 90 that (i) both at the time of and immediately after giving effect to the incurrence thereof and the retirement of any Indebtedness which is concurrently being retired, no Default or Event of Default shall have occurred and be continuing, (ii) the aggregate outstanding principal amount of such Funded Debt and Current Debt incurred pursuant to this section 13.5(d) shall at no time exceed $3,000,000 and (iii) any Liens securing such Funded Debt and/or Current Debt are permitted under section 13.8(d); (e) Funded Debt and/or Current Debt incurred to extend, refinance, refund or renew (the "Refinancing Debt") any other outstanding Funded Debt and/or Current Debt permitted under this section 13.5 (the "Refinanced Debt"), provided that: (i) the aggregate outstanding principal amount of the Refinancing Debt shall not at any time exceed (A) that of the Refinanced Debt immediately prior to such refinancing or (B) in the case of any extensions, refinancings, refundings or renewals of the Funded Debt and Current Debt under the Fleet Bank Agreement or any Refinancing Debt thereof, the amount permitted under section 13.5(b); (ii) the scheduled final maturity date of the Refinancing Debt is not earlier than that of the Refinanced Debt; (iii) the Weighted Average Life to Maturity of the Refinancing Debt is not less than that of the Refinanced Debt; (iv) the Refinancing Debt has a ranking which is not senior (as a result of any contractual or structural subordination, the grant of any collateral security therefor, any change in the Persons obligated with respect thereto or otherwise) to the ranking of the Refinanced Debt; (v) the Refinancing Debt bears interest at market rates prevailing at its date of issuance; and (vi) both at the time of and immediately after giving effect to the incurrence of the Refinancing Debt and the retirement of the Refinanced Debt, no Default or Event of Default shall have occurred and be continuing; (f) Funded Debt and/or Current Debt owing to the Holding Company or to any Wholly-Owned Subsidiary of the Holding Company; and (g) Funded Debt and/or Current Debt owing to any former employee in connection with a purchase of Shares of the Holding Company from such former employee. For purposes of this section 13.5, any Person becoming a Subsidiary of the Holding Company after the date hereof shall be deemed, at the time it becomes a Subsidiary, to have incurred all of its then outstanding Funded Debt and Current Debt. 13.6. Certain Financial Covenants. 91 (a) Consolidated Net Worth. On and as of the last day of each fiscal quarter of the Holding Company, Consolidated Net Worth shall not be less than an amount equal to 75% of the Consolidated Net Worth as of the Closing Date, plus an aggregate amount equal to 75% of positive Consolidated Net Income for the period commencing on the Closing Date to and including such last day (but without reduction for any losses). (b) Fixed Charges Coverage Ratio. On and as of the last day of each fiscal quarter of the Holding Company during the periods referred to below, the ratio of Consolidated Cash Flow for the period of four consecutive fiscal quarters of the Holding Company then ended to Consolidated Fixed Charges for such period shall not be less than the applicable ratio specified below:
Period Ratio ------ ----- Closing Date to and including June 30, 1999 2.00 to 1.00 From and after July 1, 1999 to and including December 31, 2001 2.50 to 1.00 From and after January 1, 2002 3.00 to 1.00
Notwithstanding any provision hereof to the contrary, the ratio specified in this section 13.6(b) shall be tested initially as of the fiscal quarter ending September 30, 1998 and Consolidated Cash Flow as of such date shall be determined by annualizing the Consolidated Cash Flow for the six months then ended. Consolidated Cash Flow for purposes of the ratio specified in this section 13.6(b) as of December 31, 1998 shall be determined by annualizing the Consolidated Cash Flow for the nine months then ended. (c) Leverage Ratio. The Holding Company will not permit, on any date during any period specified below, the ratio of Consolidated Total Debt outstanding on such date to Consolidated Cash Flow for the period of four consecutive fiscal quarters of the Company ending on, or most recently ended prior to, such date, to exceed the applicable ratio specified below:
Period Ratio ------ ----- Closing Date to and including June 30, 1999 5.50 to 1.00 From and after July 1, 1999 to and including December 31, 2001 5.00 to 1.00 From and after January 1, 2002 to and including December 31, 2002 4.00 to 1.00 From and after January 1, 2003 3.50 to 1.00
Notwithstanding any provision hereof to the contrary, the ratio specified in this section 13.6(c) shall be tested initially as of the fiscal quarter ending September 30, 1998 92 and Consolidated Cash Flow as of such date shall be determined by annualizing the Consolidated Cash Flow for the six months then ended. Consolidated Cash Flow for purposes of the ratio specified in this section 13.6(c) as of December 31, 1998 shall be determined by annualizing the Consolidated Cash Flow for the nine months then ended. 13.7. Limitation on Tax Consolidation. The Holding Company will not, and will not permit any of its Subsidiaries to, become a party to a consolidated or combined income tax return with any Person other than the Holding Company and its Subsidiaries. 13.8. Limitation on Liens. The Holding Company will not, and will not permit any of its Subsidiaries to, create or suffer to exist any Lien in respect of any property of any character of the Holding Company or any of its Subsidiaries (whether owned on the date hereof or hereafter acquired); provided that there shall be excluded from the operation of this section 13.8: (a) Liens securing Funded Debt and Current Debt, including amounts due (contingently or otherwise) in respect of reimbursement obligations under letters of credit, interest rate protection agreements or similar instruments and all related reimbursement agreements, under the Fleet Bank Agreement to the extent permitted under section 13.5(b) or any Refinancing Debt incurred to refinance or refund the same to the extent permitted under section 13.5(e); (b) Liens (other than any Lien created by any Environmental Law or by Section 4068 of ERISA), charges and encumbrances which (i) are incurred in the ordinary course of business and which are incidental to the conduct of the business of the Holding Company and its Subsidiaries and the ownership of its and their property, (ii) are not incurred in connection with the borrowing of money or the obtaining of advances or credit, (iii) do not in the aggregate materially detract from the value of the property of the Holding Company or its Subsidiaries or materially impair the use thereof in the operation of its or their business and (iv) do not (and could not reasonably be expected to) materially adversely affect the rights of the holders of the Notes; (c) any Lien existing on the date hereof and referred to on Exhibit 5.9 attached hereto; (d) any Lien securing Funded Debt and/or Current Debt under Capital Leases or consisting of purchase money loans permitted under section 13.5(d), provided that (i) such Lien does not extend to or cover any property other than that being leased or acquired and (ii) the aggregate amount of Indebtedness secured thereby does not exceed the cost of such property; and (e) any Lien upon or in any property at the time such property is acquired by the Holding Company or any of its Subsidiaries, including property of any Person which is to be acquired by the Holding Company or any of its Subsidiaries and thereafter becomes a Subsidiary of the Holding Company; provided that (i) such Lien was not incurred in contemplation of the acquisition of such property and does not and shall not extend to or cover any other property of the Holding Company or any of its Subsidiaries and (ii) the Funded Debt and Current Debt secured thereby is permitted under section 13.5 and does not exceed the fair market value of such property. 93 13.9. Limitation on Transactions with Affiliates. The Holding Company will not, and will not permit any of its Subsidiaries to, engage in any transaction (including, without limitation, the purchase, sale or exchange of any properties and assets or the rendering of any services or the payment of compensation) with an Affiliate of the Holding Company or of any of its Subsidiaries on terms less favorable to the Holding Company or any such Subsidiary in any material respect than would be obtainable at the time in comparable transactions with a Person not such an Affiliate. 13.10. Limitation on Investments. The Holding Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, make or commit to make any Investments other than Permitted Investments. 13.11. Limitation on Issuance of Shares of Subsidiaries. The Holding Company will not permit any of its Subsidiaries to (a) issue, sell or otherwise dispose of any Shares (or any securities convertible into or exercisable or exchangeable for Shares) of such Subsidiary except to the Holding Company or to a Wholly-Owned Subsidiary of the Holding Company or (b) sell, transfer or otherwise dispose of any Shares (or any securities convertible into or exercisable or exchangeable for Shares) of any other Subsidiary of the Holding Company except to the Holding Company or to a Wholly-Owned Subsidiary of the Holding Company. The Holding Company will not, in any event, permit any Subsidiary of the Holding Company to have outstanding any Preferred Shares. 13.12. Limitation on Subsidiary's Consolidation or Merger. The Holding Company will not permit any of its Subsidiaries to consummate any merger or consolidation with any other Person, provided that any Wholly-Owned Subsidiary of the Holding Company may be merged into the Holding Company or into another Wholly-Owned Subsidiary of the Holding Company, if (a) the Holding Company or such other Wholly-Owned Subsidiary is the surviving Person from such merger and is Solvent (both at the time of and immediately after giving effect thereto), (b) the Holding Company or such other Wholly-Owned Subsidiary shall have delivered to each holder of a Security such opinions, confirmations and other agreements and instruments as the Required Holders of each class of Securities shall have reasonably requested and (c) both at the time of and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. No transaction permitted by this section 13.12 shall have the effect of releasing the Holding Company or any other party to any of the Operative Documents from any liability or obligation under any of the Operative Documents. 13.13. Limitation on the Holding Company's Consolidation or Merger. The Holding Company will not consolidate with or merge into any other Person or Transfer all or substantially all of its property in a single transaction or series of transactions to any Person, provided that the foregoing restriction does not apply to the consolidation or merger of the Holding Company with or into, or the Transfer of all or substantially all of its property in a single transaction or series of transactions to, any other Person so long as: (a) the successor formed by such consolidation or the survivor of such merger or the Person that acquires as a result of such Transfer all or substantially all of the property of the Holding Company, as the case may be (the "Successor Corporation"), shall be a Solvent corporation organized and existing under the laws of and conducting a majority of its business in the United States of America, any state thereof or the District of Columbia and whose lines of business are related to or not materially different from the Business; 94 (b) if the Holding Company is not the Successor Corporation, the Successor Corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and each of the other Operative Documents (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders of the Notes), and the Holding Company shall have caused to be delivered to each holder of Notes an opinion of counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are legal, valid and binding obligations of such Successor Corporation enforceable against it in accordance with their respective terms and covering such other matters as the Required Holders may reasonably request; and (c) immediately after giving effect to such transaction (i) no Default or Event of Default shall have occurred and be continuing, (ii) the Net Worth of the Successor Corporation shall not be less than the Net Worth of the Holding Company immediately prior to such transaction and (iii) the Holding Company or the Successor Corporation, as the case may be, would be able to incur at least $1 of additional Funded Debt and/or Current Debt under section 13.5. No such transaction by the Holding Company shall have the effect of releasing the Holding Company or any Successor Corporation that shall theretofore have become such in the manner prescribed in this section 13.13 from its liability under this Agreement or any of the other Operative Documents. 13.14. Limitation on Disposition of Property. The Holding Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, sell, lease or otherwise dispose of any of their respective properties and assets (or any right, title or interest therein), whether owned on the date hereof or hereafter acquired and whether real, personal or mixed, tangible or intangible, including, without limitation, any Shares, securities or Indebtedness of any Subsidiary of the Holding Company, except for (a) sales of inventory and licenses of software or other Proprietary Rights in the ordinary course of business, (b) dispositions of tangible personal property and assets that have suffered casualties if the proceeds thereof (including insurance proceeds) are reinvested in tangible personal properties and assets of substantially similar value and utility and/or applied to the permanent reduction of Superior Indebtedness, in each case within 180 days following the receipt of such proceeds, (c) transactions permitted under section 13.13, and (d) other sales of properties and assets if, in the case of this clause (d), on the date of such sale and after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing; (ii) in the case of any sale of properties and assets having a value of $1,000,000 or more, the board of directors of the Holding Company shall have reasonably determined in good faith, as evidenced by written resolutions thereof promptly delivered to the holders of the Notes, that (A) the sale of such properties and assets is in the best interests of the Holding Company and its Subsidiaries and is not disadvantageous in any material respect to the holders of the Notes and (B) such properties and assets are being disposed of for fair and adequate consideration on fair and adequate terms; and 95 (iii) the aggregate value of all properties and assets sold pursuant to this clause (e) during the period commencing on the Closing Date and ended on the date of such sale is not more than 25% of Consolidated Total Assets as at the end of the most recently completed fiscal quarter of the Holding Company immediately prior to the date of such sale; provided that, if the proceeds of a sale made pursuant to this clause (d) (net of all costs and out-of-pocket expenses in connection therewith) are applied within 180 days of the consummation of such sale to (x) the purchase by the Holding Company (or the Subsidiary effecting such sale) of other property and assets used and useful in the ordinary course of business of the Holding Company or such Subsidiary, (y) the prepayment (and permanent reduction) of the Funded Debt under the Fleet Bank Agreement (or any Refinancing Debt incurred to refinance or refund such Funded Debt) or (z) the prepayment of the Notes pursuant to section 9.2, then, from and after the date such net proceeds are so applied, such sale shall be disregarded for purposes of any subsequent computation under this clause (d). For purposes of determining compliance with this section 13.14, the value of any properties and assets (other than cash) to be sold by the Holding Company or any of its Subsidiaries shall be deemed to be the fair market value thereof (as reasonably determined by the board of directors of the Holding Company as of the date of disposition thereof). 13.15. Limitation on Leasebacks. The Holding Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, sell or otherwise dispose of any of its property if, as part of the same transaction or series of related transactions, any such Person shall then or thereafter rent or lease as lessee, or similarly acquire the right to possession or use of, such property (or a major portion thereof), or other property which it intends to use for substantially the same purpose or purposes, under any lease, agreement or other arrangement which obligates any such Person to pay rent as lessee or make any other payments for such possession or use. 13.16. Modification of Certain Documents, Agreements and Instruments; Fiscal Year. The Holding Company will not, and will not permit any of its Subsidiaries to: (a) file after the Closing any resolution of its board of directors (or other governing body) with the Secretary of State of the jurisdiction of its organization to establish or create a series of Preferred Shares having terms which require the mandatory redemption of such Preferred Shares on a date prior to the date of maturity of the Notes or a separate class of equity securities; (b) amend, modify, supplement or waive any term, condition or provision of its Organizational Documents, the Option Plans or any of the agreements, documents or instruments referred to in section 4.3 including, without limitation, the Acquisition Documents (other than the Fleet Bank Documents as to which the following section 13.16(c) applies), if the effect thereof is, or could reasonably be expected to be, to impose restrictions upon the Holding Company or any of its Subsidiaries that are more restrictive in any material respect than those set forth in its Organizational Documents or such other agreements, documents and instruments as in effect on the Closing Date; or (c) amend, supplement, modify or waive any term of the Fleet Bank Documents (or the documents relating to any Refinancing Debt thereof) if the effect 96 thereof is (i) to increase the aggregate outstanding principal amount of the Indebtedness thereunder to an amount in excess of that permitted under section 13.5(b), (ii) to make the scheduled final maturity date of the Indebtedness thereunder earlier than that specified under the Fleet Bank Agreement as in effect on the Closing Date (except that the working capital loan facility thereunder may be renewed and extended on any number of occasions), (iii) to make the Weighted Average Life to Maturity of the Indebtedness thereunder less than that of the Indebtedness under the Fleet Bank Agreement as in effect on the Closing Date, (iv) to make the ranking of the Indebtedness thereunder senior (as a result of any contractual or structural subordination, the grant of any collateral security therefor, any change in the Persons obligated with respect thereto or otherwise) to the ranking of the Indebtedness under the Fleet Bank Agreement as in effect on the Closing Date, or (v) to make the interest rate(s) applicable to the Indebtedness thereunder higher than the market rates prevailing at the time of such amendment, supplement, modification or waiver. 13.17. Further Assurances. (a) From time to time hereafter, the Holding Company will execute and deliver, or will cause to be executed and delivered, such additional agreements, documents and instruments and will take all such other actions as any holder or holders of the Notes may reasonably request for the purpose of implementing or effectuating the provisions of the Operative Documents. (b) Without limiting the generality of the foregoing, in the event that the Holding Company at any time or from time to time shall organize or acquire any direct or indirect Subsidiary, then and in each such case the Holding Company will (i) promptly (but in any event not later than 20 days prior to consummating any such transaction) notify each holder of the Notes and (ii) not later than the date upon which such transaction is consummated cause such Subsidiary to execute and deliver to each holder of any Notes a Note Guarantee. 13.18. Additional Subsidiaries. Notwithstanding anything to the contrary set forth herein, without the prior written consent of the Required Holders of the Notes (which consent shall not be unreasonably withheld or delayed), the Holding Company shall not, and shall not permit any of its Subsidiaries to, organize or acquire any Subsidiary (other than a Subsidiary organized or acquired in connection with a Permitted Investment of the kind described in clause (h) of the definition of the term "Permitted Investment"). 13.19. Listing Status. The Holding Company shall use its best efforts to assure that the Common Stock shall at all times be listed on the Nasdaq stock exchange or another recognized national stock exchange in the United States. 14. Definitions. 14.1. Definitions of Capitalized Terms. The terms defined in this section 14.1, whenever used in this Agreement, shall, unless the context otherwise requires, have the following respective meanings: "Acquisition", "Acquisition Agreement" and "Acquisition Documents" shall have the respective meanings specified in section 4.3. 97 "Affiliate" of any Person shall mean any other Person which, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such first-mentioned Person; provided that in no event shall you or any other institutional holder of Securities be deemed to be an Affiliate of the Holding Company or any of its Subsidiaries. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock or other Shares or by contract or otherwise. "Applicable Premium" shall have the meaning specified in section 9.2. "Business" shall have the meaning specified in section 5.4. "Business Day" shall mean any day other than a Saturday, Sunday or other day which shall be in Boston, Massachusetts, or New York, New York, a legal holiday or a day on which banking institutions therein are authorized by law to close. "Capital Lease" shall mean any lease or similar arrangement which is of such a nature that payment obligations of the lessee or obligor thereunder are required to be capitalized and shown as liabilities upon a balance sheet of such lessee or obligor prepared in accordance with GAAP or for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet. "Capitalized Interest" shall have the meaning specified in the Notes. "Cash Flow" of any Person shall mean, for any period, the Net Income of such Person for such period after restoring thereto amounts deducted for (a) Fixed Charges, (b) taxes in respect of income and profits, (c) depreciation and amortization, and (d) non-cash stock issuance employee compensation expense, determined in accordance with GAAP. "Change of Control" shall mean an event or series of events (occurring for whatever reason) following which: (a) Seth M. Lukash shall cease to serve as Chairman and Chief Executive Officer of the Holding Company (in both title and function) for any reason other than his death or permanent disability; (b) Seth M. Lukash shall cease to serve as Chairman and Chief Executive Officer of the Holding Company (in both title and function) as a result of his death or permanent disability and the Holding Company shall have failed to engage an individual satisfactory to the Required Holders of each class of Securities within six months after such event; or (c) the Holding Company shall cease to own beneficially and control 100% of the outstanding Shares of each of TNC and UTC. "Closing" and "Closing Date" shall have the respective meanings specified in section 3. 98 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Commission" shall mean the Securities and Exchange Commission or any other federal agency from time to time administering the Securities Act and/or the Exchange Act. "Common Stock" shall mean the Common Stock, without par value, of the Holding Company as constituted on the Closing Date and any Shares into which such Common Stock shall have been changed or any Shares resulting from any reclassification of such Common Stock. "Confidential Information" shall have the meaning specified in section 8. "Consolidated Cash Flow" [13.6], "Consolidated Fixed Charges" [13.6], "Consolidated Interest Charges" [13.6], "Consolidated Net Income" [13.6], "Consolidated Net Worth" [13.6],"Consolidated Total Debt" [13.6] and "Consolidated Total Assets" [13.14] shall mean the Cash Flow, Fixed Charges, Interest Charges, Net Income, Net Worth, Total Debt and Total Assets, as the case may be, of the Holding Company and its Subsidiaries (whether or not ordinarily consolidated in consolidated financial statements of the Holding Company and its Subsidiaries), all consolidated in accordance with GAAP, and after giving appropriate effect to outside minority interests, if any, in Subsidiaries, provided that in determining Consolidated Cash Flow and Consolidated Net Income there shall be excluded (a) the Net Income of any Person (other than a Subsidiary of the Holding Company) in which the Holding Company or any Subsidiary of the Holding Company has an ownership interest, except to the extent that any such Net Income has been actually received by the Holding Company or such Subsidiary in the form of cash dividends or similar cash distributions, (b) any extraordinary gains and losses, (c) any equity interest of the Holding Company or any of its Subsidiaries in the unremitted earnings of any Person not a Subsidiary of the Holding Company or any of its Subsidiaries, (d) any amounts representing the write-off of in-process research and development expenses to be incurred in connection with the Acquisition, (e) the one-time charges related to the Acquisition. "Current Debt" of any Person shall mean, at any date, without duplication of amounts, (a) all Indebtedness for borrowed money or in respect of Capital Leases or the deferred purchase price of property (including, without limitation, all Indebtedness of the kind referred to in clauses (b), (c), (d) and (e) of the definition of Indebtedness but excluding trade payables and employee wages arising in the ordinary course of business), whether or not interest-bearing, and whether secured or unsecured, of such Person at such date which would, in accordance with GAAP, be classified as short-term Indebtedness at such date, but specifically excluding the current maturities of such Person's Funded Debt, (b) all Guarantees by such Person at such date of Current Debt of others and (c) the aggregate amount which is due on or before the expiration of one year from such date in respect of any Redeemable Shares of such Person (other than the Warrants and Warrant Shares). "Current Market Price" of any security (including, without limitation, any share of Common Stock) as of any date herein specified shall mean the average of the daily closing prices for the 20 consecutive trading days immediately prior to, but not including the day in question (or in the event that a security has been traded for less than 20 days, each of the trading days prior to the day in question on which such security has been traded). The closing price for each day shall be (a) if such security is listed or admitted for trading on any domestic national securities exchange, the closing sale price of such security, regular way, or the average of the closing bid prices thereof if no such sale occurred, in each case as officially reported on the 99 principal securities exchange on which such security is listed, or (b) if not reported as described in clause (a), the closing sale price of such security, or the average of the closing bid prices thereof if no such sale occurred, in each case as reported by the Nasdaq Stock Market, or any similar system of automated dissemination of quotations of securities prices then in common use, if so quoted, as reported by any member firm of the New York Stock Exchange selected by the Company, or (c) if not quoted as described in clause (b), the average of the closing bid and asked prices for such security as reported by the National Quotation Bureau Incorporated or any similar successor organization, as reported by any member firm of the New York Stock Exchange selected by the Company. "Default" shall mean any condition or event which constitutes or, after notice or lapse of time or both, would constitute an Event of Default. "Disclosure Documents" shall have the meaning specified in section 5.4. "Environmental Laws" shall mean any law, statute, rule, regulation or other governmental standard or requirement relating or pertaining to (a) the generation, manufacture, management, handling, use, sale, transportation, treatment, storage, disposal, delivery, discharge, release or emission of any waste, pollutant or toxic, hazardous or other similar substance (including, without limitation, petroleum and petroleum-derived materials), or (b) any other act, omission or condition affecting or involving pollution or contamination of the environment. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and rulings thereunder. "ERISA Affiliate" shall mean each trade or business (whether or not incorporated) that, together with the Holding Company, would be treated as a single employer under section 4001(b) of ERISA, or that is a member of a group of which the Holding Company is a member and that is a controlled group within the meaning of section 4971(e)(2)(B) of the Code. "Event of Default" shall have the meaning specified in section 15.1. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Fair Value" shall mean the fair value of the appropriate security, property, asset, business or entity as determined by the board of directors of the Holding Company, provided that if, within 15 days following receipt of the writing setting forth any such determination of Fair Value by the board of directors of the Holding Company, the Required Holders of the Warrants (for purposes of any determination of Fair Value pursuant to section 4 of the Warrants) shall notify the Holding Company of their disagreement with such determination, then Fair Value shall be determined by an independent appraiser of recognized national standing (selected by the Holding Company and reasonably satisfactory to the Required Holders of the Warrants. Each determination of Fair Value shall be made in accordance with generally accepted financial practice (but without any adjustment on account of any lack of liquidity, lack of control and/or restriction on transferability of any securities) and shall be set forth in writing, and the Holding Company shall, immediately following such determination, deliver a copy thereof to each holder or holders of the Securities then outstanding. For purposes of any determination of Fair Value pursuant to section 4 of the Warrants, Fair Value shall be calculated on a basis which assumes 100 (x) the exercise of the Warrants and the receipt of the consideration payable upon such exercise and (y) the issuance of all Common Stock permitted to be issued pursuant to the Option Plans and the receipt of the consideration payable upon such issuance. The determination of any such independent appraiser so made shall be conclusive and binding on the Holding Company and on all holder or holders of the applicable class of Securities. The Holding Company shall pay all of the expenses incurred in connection with any such determination, including, without limitation, the expenses of the independent appraiser engaged to make such determination. If the Holding Company shall not have engaged such appraiser within 20 days after the occurrence of the event giving rise to the need therefor, then such appraiser may be engaged by the Required Holders of the Warrants (for purposes of any determination of Fair Value pursuant to section 4 of the Warrants). Notwithstanding the foregoing, in the case of any security, if clauses (a), (b) or (c) of the definition of Current Market Price are applicable to such security, then the Fair Value of such security shall be the Current Market Price of such security. "Fixed Charges" of any Person shall mean, for any period, the sum (without duplication of amounts) of all Interest Charges and all Rental Obligations of such Person for such period, determined in accordance with GAAP. "Fleet Bank Agreement" shall mean the Credit Agreement dated as of April 17, 1998 among the Holding Company, TNC, UTC and Progressive, acting as joint and several obligors, and Fleet National Bank, and an interest rate protection agreement, as the same may be from time to time amended, restated or otherwise modified in accordance with provisions of section 13.16(c). "Fleet Bank Documents" shall mean the Fleet Bank Agreement and the other agreements, documents and instruments related thereto. "Funded Debt" of any Person shall mean, at any date, without duplication of amounts, (a) all Indebtedness for borrowed money or in respect of Capital Leases or the deferred purchase price of property (including, without limitation, all Indebtedness of the kind referred to in clauses (b), (c), (d) and (e) of the definition of Indebtedness), whether or not interest-bearing, of such Person which would, in accordance with GAAP, be classified as long-term Indebtedness at such date, but in any event including all such Indebtedness, whether secured or unsecured, of such Person which matures (or which, pursuant to the terms of a revolving credit agreement or otherwise, is directly or indirectly renewable or extendible at the option of such Person for a period ending) more than one year after the date of the creation thereof, notwithstanding the fact that payments in respect thereof (whether installment, serial maturity or sinking fund payments or otherwise) are required to be made by such Person not more than one year after the date as of which the amount of Funded Debt is being determined, other than any amount thereof which is at the time included in Current Debt of such Person, (b) all Guarantees by such Person at such date of Funded Debt of others and (c) the aggregate amount which is due more than one year from such date in respect of any Redeemable Shares of such Person (other than the Warrants and Warrant Shares). For all purposes under this Agreement, the Indebtedness incurred in respect of the interest rate protection agreement provided under the Fleet Bank Agreement shall constitute Funded Debt of the Holding Company, TNC, UTC and Progressive. "GAAP" shall mean generally accepted accounting principles as in effect in the United States from time to time, consistently applied. 101 "Guarantee" of any Person shall mean, at any date, any obligation of such Person at such date guaranteeing, directly or indirectly, any Indebtedness, liability or other obligation of any other Person in any manner, but in any event including all endorsements (other than for collection or deposit in the ordinary course of business), all discounts with recourse and all obligations incurred through an agreement, contingent or otherwise (a) to purchase the obligations of any other Person or any security therefor or to advance or supply funds for the payment or purchase of such obligations, or (b) to purchase, sell or lease (as lessee or lessor) property, products, materials or supplies or to purchase or sell transportation or services, primarily for the purpose of enabling the obligor to make payment of such obligations or to assure the owner of such obligations against loss, regardless of the delivery or non-delivery of the property, products, materials or supplies or the furnishing or nonfurnishing of the transportation or services, or (c) to provide funds for the payment of, or obligating such Person to make, any loan, advance, capital contribution or other investment in the obligor for the purpose of assuring a minimum equity, asset base, working capital or other balance sheet condition for any date or to provide funds for the payment of any obligation, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the obligor. The amount of any Guarantee shall be equal to the amount of all Indebtedness, liabilities and other obligations directly or indirectly guaranteed thereby. "Holding Company" shall have the meaning specified at the beginning of this Agreement. "Indebtedness" of any Person shall mean, at any date, all indebtedness, liabilities and other obligations of such Person at such date (other than items of stockholders' equity) which would, in accordance with GAAP, be classified as liabilities of such Person, but in any event including (without duplication): (a) all Guarantees of such Person; (b) all indebtedness, liabilities and other obligations secured by any Lien on any property owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligations; (c) all indebtedness, liabilities and other obligations of such Person arising under any conditional sale or other title retention agreement, whether or not the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property; (d) the amount of the obligation required to be recorded by the lessee in respect of any Capital Lease under which such Person is lessee; and (e) all indebtedness, liabilities and other obligations arising in connection with letters of credit, bankers acceptances or other credit enhancement facilities and Swaps; provided that, in the case of any Indebtedness of the kind referred to in clauses (b) and (c) of this definition, if such Indebtedness is "nonrecourse" to such Person (that is, such Person has no liability in respect thereof other than to return the property securing such Indebtedness or the property subject to the conditional sale or other title retention agreement), then, for purposes hereof, the amount of such Indebtedness at such date shall be equal to the fair market value of such property. 102 "Indemnified Costs" and "Indemnitee" shall have the respective meanings specified in section 20. "Interest Charges" of any Person shall mean, for any period, the aggregate amount of all cash interest paid, payable or guaranteed during such period by such Person in respect of Funded Debt and Current Debt, including, without limitation, the "imputed interest" portion of Rental Obligations on Capital Leases and all interest capitalized and/or deferred during such period on any Funded Debt and Current Debt, determined in accordance with GAAP. "Investment" of any Person shall mean any investment made by such Person in any other Person by stock purchase, capital contribution, loan, advance, acquisition of Indebtedness, Guarantee or otherwise. "Issuer" or Issuers" shall have the respective meanings specified at the beginning of this Agreement. "Licenses" shall mean certificates of public convenience and necessity, franchises, licenses and other permits and authorizations from governmental authorities. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, lien (statutory or otherwise), preference, priority, security interest, chattel mortgage or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property and any lease having substantially the same effect as any of the foregoing. "Make Whole Amount" shall mean, at any date, with respect to any prepayment or payment (whether on account of acceleration or otherwise) of any Notes, if the Treasury Rate plus 100 basis points at such date is lower than 19% per annum (prior to the Warrant Exchange ) or 12% per annum (after the Warrant Exchange), the excess of (x) the present value of the principal and interest payments on and in respect of the Notes being prepaid or paid, as the case may be, that would otherwise become due and payable (without giving effect to such prepayment or payment) (including the final payment on the maturity date of the Notes), discounted at a rate which is equal to the Treasury Rate plus 100 basis points over (y) the principal amount of the Notes being prepaid or paid, as the case may be, at par. If the Treasury Rate plus 100 basis points at the date of such prepayment or payment is equal to or higher than 19% per annum (prior to the Warrant Exchange ) or 12% per annum (after the Warrant Exchange), the Make Whole Amount is zero. "Material Adverse Change" shall mean a material adverse change in or effect upon (a) the condition (financial or otherwise), business, performance, operations, properties, profits or prospects of the Holding Company and its Subsidiaries taken as a whole, (b) the legality, validity or enforceability of this Agreement, the Securities or any of the other Operative Documents; (c) the rights and remedies of any holder of Securities with respect thereto or (d) the ability of the Holding Company or any of its Subsidiaries to perform their obligations under any of the Operative Documents and/or to comply with any of the terms thereof applicable to it. The parties agree that if the maximum aggregate amount of all losses, damages, expenses and liabilities attributable to any breach of a representation made by the Holding Company herein or in any of the other Operative Documents is and shall be not more than $1,000,000, the same shall not constitute a Material Adverse Change. 103 "Multiemployer Plan" shall mean any Plan that is a "multiemployer plan" as defined in section 4001(a)(3) of ERISA. "Net Income" of any Person shall mean, for any period, the net income (or net loss) of such Person for such period, determined in accordance with GAAP. "Net Worth" of any Person shall mean, at any date, (a) the total assets of such Person which would be shown as assets on a balance sheet of such Person at such date prepared in accordance with GAAP minus (b) the total liabilities of such Person which would be shown as liabilities on a balance sheet of such Person at such date prepared in accordance with GAAP. "Note Guarantees" shall have the meaning specified in section 1. "Notes" shall have the meaning specified in section 1. "Obligor" shall have the meaning specified at the beginning of this Agreement and in section 4.13. "Officer's Certificate" shall mean a certificate signed on behalf of the Holding Company by its Chairman, its President, its Chief Financial Officer or one of its Senior Vice Presidents. "Operative Documents" shall mean this Agreement, the Other Securities Purchase Agreements, the Securities, the Note Guarantees, and each of the other agreements, documents and instruments executed in connection herewith and therewith, each as it may from time to time be amended, modified or supplemented. "Option Plans" shall have the meaning specified in section 11. "Organizational Documents" of any Person shall mean such Person's charter and by-laws, partnership agreement, operating agreement, members agreement, trust agreement, as applicable, and/or any other similar agreement, document or instrument. "Other Securities Purchase Agreements" and "Other Purchasers" shall have the respective meanings specified in section 1. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Permitted Investment" shall mean any of the following Investments: (a) Investments, if any, existing on the date hereof and referred to in Exhibit 5.9 attached hereto; (b) Investments by the Holding Company or by any of its Subsidiaries in any Wholly-Owned Subsidiary of the Holding Company (or in any Person which simultaneously therewith becomes a Wholly-Owned Subsidiary of the Holding Company) made by stock purchase, capital contribution, loan or advance, provided that (i) both at the time of and immediately after giving effect to any such Investment, no Default or Event of Default shall have occurred and be continuing and (ii) all such 104 Investments are made only in Solvent entities (A) which are organized under the laws of and conduct substantially all of their respective businesses in the United States of America (or a state thereof or the District of Columbia) and (B) whose lines of business are related to or not materially different from the Business; (c) readily marketable obligations (having a maturity not in excess of 12 months from the date of acquisition thereof) of, or fully and unconditionally guaranteed (as to both principal and interest) by, the United States of America or an agency thereof; (d) negotiable certificates of deposit (having a maturity not in excess of 12 months from the date of acquisition thereof) evidencing direct obligations of any federally insured commercial bank or trust company organized and operating in the United States of America having capital and surplus and undivided profits of at least $100,000,000 and having the highest or second highest rating available from Moody's Investors Service, Inc., Standard & Poor's Corporation or Fitch Investors Service; (e) Shares of so-called "money market funds" registered under the Investment Company Act of 1940, as amended, organized and operating in the United States of America, having total net assets of $1,000,000,000 or more and investing primarily in securities of the character described in the preceding clauses (c) and (d) of this definition; (f) Investments in Repurchase Agreements; (g) accounts receivable arising from transactions in the ordinary course of business; contingent liabilities represented by endorsements of negotiable instruments for collection or deposit in the ordinary course of business; advances (including advances to employees), deposits, down payments and prepayments on account of firm purchase orders, in each case made in the ordinary course of business; and (h) Investments made after the date hereof not otherwise permitted by the preceding clauses (a) through (g) of this definition, provided that both at the time of and immediately after giving effect to any such Investment (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Holding Company would be able to incur at least $1 of additional Funded Debt and/or Current Debt under section 13.5, and (iii) the aggregate amount of Investments made pursuant to this clause (h) shall not exceed $1,500,000 at any time. "Person" shall mean an individual, a corporation, a limited liability company, an association, a joint-stock company, a business trust or other similar organization, a partnership, a joint venture, a trust, an unincorporated organization or a government or any agency, instrumentality or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Holding Company or any ERISA Affiliate or with respect to which the Holding Company or any ERISA Affiliate may have any liability. 105 "Preferred Shares", as applied to any Person, shall mean Shares of such Person which shall be entitled to preference or priority over any other Shares of such Person in respect of either the payment of dividends or the distribution of assets upon liquidation. "Progressive" shall have the meaning specified in section 4.3. "Proprietary Rights" shall mean any patents, registered and common law trademarks, service marks, trade names, copyrights, licenses and other similar rights (including, without limitation, know-how, trade secrets and other confidential information) and applications for each of the foregoing, if any. "Purchased Common Shares" shall have the meaning specified in section 1. "Redeemable" shall mean, with respect to any Shares of any Person, each Share of such Person that is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into Funded Debt or Current Debt of such Person, (i) at a fixed or determinable date, whether by operation of any sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person or (b) convertible into other Redeemable Shares. "Refinanced Debt" shall have the meaning specified in section 13.5. "Refinancing Debt" shall have the meaning specified in section 13.5. "Registrable Shares" shall mean any Warrant Shares, except that, as to any particular Registrable Shares, such securities, once issued, will cease to be Registrable Shares when (a) a registration statement covering such securities has been declared effective and such securities have been disposed of pursuant to an effective registration statement or (b) such securities are sold to the public in accordance with Rule 144 (or any similar provision then in force) under the Securities Act. A Person shall be deemed a "holder" of Registrable Shares for purposes of section 12 if such Person is the holder of any Warrants or any Warrant Shares issued upon exercise of any Warrant. "Registration Expenses" shall mean all fees, expenses and disbursements related to any registration, qualification or compliance pursuant to section 12, including, without limitation, all registration, filing, rating and listing fees, blue sky fees and expenses, printing expenses, fees and disbursements of counsel (including, without limitation, the fees, expenses and disbursements of counsel for the holder or holders of the Registrable Shares), and expenses of any special audits incident to or required by any registration, qualification or compliance, except that Registration Expenses shall not include any underwriters' discounts or commissions attributable to any Registrable Shares registered and sold pursuant to any such registration. "Rental Obligations" of any Person shall mean, for any period, all rents and other amounts (including as such, all payments which such Person is obligated to make to the lessor on termination of any lease and/or on surrender of the leased property other than payments for which such Person is contingently liable on account of early termination or breach of such lease) paid, payable or guaranteed during such period by such Person, as lessee or sublessee under any lease, excluding any amount required to be paid by such Person (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes, utilities and similar charges, determined in accordance with GAAP. Whenever it is necessary to determine 106 the amount of Rental Obligations for any period, to the extent that such Rental Obligations are not definitely determinable by the terms of the lease, the Rental Obligations not so definitely determinable shall be estimated in good faith and in such reasonable manner as the board of directors of the Holding Company may determine. "Repurchase Agreement" shall mean any written agreement (a) that provides for (i) the transfer of one or more United States Governmental Securities (as defined below) in an aggregate principal amount at least equal to the amount of the Transfer Price (as defined below) to the Holding Company or any of its Subsidiaries from an Acceptable Bank (as defined below) or an Acceptable Broker-Dealer (as defined below) against a transfer of funds (the "Transfer Price") by the Holding Company or such Subsidiary to such Acceptable Bank or Acceptable Broker-Dealer, and (ii) a simultaneous agreement by the Holding Company or such Subsidiary, in connection with such transfer of funds, to transfer to such Acceptable Bank or Acceptable Broker-Dealer the same or substantially similar United States Governmental Securities for a price not less than the Transfer Price plus a reasonable return thereon at a date certain not later than 365 days after such transfer of funds; (b) in respect of which the Holding Company or such Subsidiary shall have the right, whether by contract or pursuant to applicable law, to liquidate such agreement upon the occurrence of any default thereunder; and (c) in connection with which the Holding Company or such Subsidiary, or an agent thereof, shall have taken all action required by applicable law or regulations to perfect a Lien in such United States Governmental Securities. For purposes of this definition, (x) the term "Acceptable Bank" shall mean any bank or trust company of the sort described in clause (d) of the definition of Permitted Investments; (y) the term "Acceptable Broker-Dealer" shall mean any Person other than a natural person (i) which is registered as a broker or dealer pursuant to the Exchange Act and (ii) whose long-term unsecured debt obligations shall have been given the highest or second highest rating available from Standard & Poor's Corporation, Moody's Investors Service, Inc. or any other credit rating agency of recognized national standing; and (z) "United States Governmental Securities" shall mean securities of the kind referred to in clause (c) of the definition of Permitted Investment. "Required Holders" as applied to describe the requisite holder or holders of any class of the Securities, shall mean, at any date, the holder or holders of a majority or more in interest of such class of Securities at the time outstanding (excluding all Securities at the time owned by the Holding Company or any Affiliate of the Holding Company). "Securities" shall have the meaning specified in section 1. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Seller" shall have the meaning specified in section 4.3. "Shares" of any Person shall include any and all Shares of capital stock, partnership interests, limited liability company interests, membership interests, or other Shares, interests, participations or other equivalents (however designated and of any class) in the capital of, or other ownership interests in, such Person, and, as applied to the Holding Company, includes the Common Stock. "Solvent" as applied to any Person at any date shall mean that on and as of such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, 107 including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities on and as of any date shall be computed as the amount that, in the light of all the facts and circumstances existing on and as of such date, represents the amount that can reasonably be expected to become an actual or matured liability. For purposes of this definition, "Person" shall mean, where so required by the context in which the term "Solvent" appears, such Person and its Subsidiaries taken as a whole. "Source" shall have the meaning specified in section 25. "Subsidiary" of any Person at any date shall mean (a) any other Person a majority (by number of votes) of the Voting Stock of which is owned by such first-mentioned Person and/or by one or more other Subsidiaries of such first-mentioned Person, (b) any Person of which the first-mentioned Person or any of its other Subsidiaries is a general partner and (c) any other Person with respect to which such first-mentioned Person and/or any one or more other Subsidiaries of such first-mentioned Person (i) is entitled to more than 50% of such Person's profits or losses or more than 50% of such Person's assets on liquidation or (ii) holds an equity interest in such Person of more than 50%. As used herein, unless the context clearly required otherwise, the term "Subsidiary" refers to a Subsidiary of the Holding Company. "Successor Corporation" shall have the meaning specified in section 13.13. "Superior Indebtedness" shall have the meaning specified in the Notes. "Swaps" shall mean, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "TNC" shall have the meaning specified at the beginning of this Agreement. "Total Assets" of any Person shall mean, at any date, the depreciated book value of all properties and assets of such Person (whether real, personal or mixed, tangible or intangible) at such date, determined in accordance with GAAP. "Total Debt" of any Person shall mean, at any date, all Funded Debt and Current Debt of such Person at such date, determined in accordance with GAAP. 108 "Transfer" shall mean, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property or assets, including, without limitation, the capital stock of any Subsidiary. "Treasury Rate" at any time with respect to any Notes being prepaid or paid (whether on account of acceleration or otherwise), as the case may be, shall mean and shall be determined by reference to the applicable display on the Bloomberg Financial Markets Service as of 10:00 A.M., Boston time, on the second business Day prior to the date fixed for such prepayment or payment (or, if such display is no longer available, any publicly available source of similar market data as selected by the Required Holders of the Notes and reasonably acceptable to the Company), and shall be the yield on actively traded United States Treasury securities adjusted to a maturity equal to the then remaining Weighted Average Life to Maturity of the Notes then being prepaid or paid (whether on account of acceleration or otherwise) (the "Remaining Life"). If the Remaining Life is not equal to the maturity of a United States Treasury security for which a yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of the two closest United States Treasury securities for which such yields are given, except that if the Remaining Life is less than one year, the average yield on actively-traded United States Treasury securities adjusted to a constant maturity of one year shall be used. The Treasury Rate shall be computed to the fifth decimal place (one-thousandth of a percentage point) and then rounded to the fourth decimal place (one-hundredth of a percentage point). "UTC" shall have the meaning specified at the beginning of this Agreement. "Voting Stock", when used with reference to any Person, shall mean Shares (however designated) of such Person having ordinary voting power for the election of a majority of the members of the board of directors (or other governing board) of such Person, other than Shares having such power only by reason of the happening of a contingency. "Warrant Exchange" shall have the meaning specified in section 1. "Warrant Shares" shall have the meaning specified in the Warrants. "Warrants" shall have the meaning specified in section 1. "Weighted Average Life to Maturity" of any Indebtedness or obligation shall mean, at any date, the number of years obtained by dividing the then Remaining Dollar-years of such Indebtedness or obligation by the then outstanding principal amount of such Indebtedness or obligation. For purposes of this definition, the "Remaining Dollar-years" of any Indebtedness or obligation shall mean, at any date, the total of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly-Owned Subsidiary" of any Person at any date shall mean any Subsidiary of such Person at such date all of the outstanding Shares of which, other than directors' qualifying Shares and the like, shall at the time be owned by such Person and/or by one or more other Wholly-Owned Subsidiaries of such Person and the accounts of which are consolidated with those of such Person in accordance with GAAP. 109 "Withdrawal Liability" shall have the meaning given such term under Part 1 of Subtitle E of Title IV of ERISA. 14.2. Other Definitions. The terms defined in this section 14.2, whenever used in this Agreement, shall, unless the context otherwise requires, have the respective meanings hereinafter specified. "this Agreement" (and similar references to any of the other Operative Documents) shall mean, and the words "herein" (and "therein"), "hereof" (and "thereof"), "hereunder" (and "thereunder") and words of similar import shall refer to, such instruments as they may from time to time be amended, modified or supplemented. "beneficial" ownership of any Shares or other securities by any Person shall be determined in the manner set forth in Rule 13d-3 of the Commission under the Exchange Act. a "class" of Securities shall refer to the Notes, the Warrants or the Warrant Shares, as the case may be, each of which is a separate class. "corporation" shall include an association, joint stock company, business trust or other similar organization. "premium" when used in conjunction with references to principal of and interest on the Notes, shall mean any amount due upon any payment or prepayment of any of the Notes, other than principal and interest, and shall include the Make Whole Amount or Applicable Premium, as the case may be. "qualification" or "compliance" shall mean the qualification or compliance of all Registrable Shares included in any registration pursuant to section 12 under all applicable blue sky or other state securities laws. "register", "registered" and "registration" as used in section 12 refer to a registration effected by filing a registration statement in compliance with the Securities Act to permit the sale and disposition of the Registrable Shares and any amendment filed or required to be filed to permit any such disposition. 14.3. Accounting Terms and Principles; Laws. (a) All accounting terms used herein which are not expressly defined in this Agreement shall have the respective meanings given to them in accordance with GAAP; all computations made pursuant to this Agreement shall be made in accordance with GAAP and all financial statements shall be prepared in accordance with GAAP. If there shall occur any change in accounting principles from GAAP as in effect on the Closing Date, then the Holding Company and the Required Holders of the Notes shall make adjustments to such financial covenants as are determined in good faith to be appropriate to reflect such changes so that the criteria for evaluating the financial condition and operations of the Holding Company and its Subsidiaries shall be the same after such changes as if such changes had not been made. 110 (b) All references herein to laws, statutes, rules, regulations and/or to other governmental restrictions, standards and/or requirements shall, unless the context clearly requires otherwise, be deemed to refer to those promulgated, issued and/or enforced by any domestic or foreign federal, state or local government, governmental agency, authority, court, instrumentality or regulatory body, including, without limitation, those of the United States of America or any state thereof or the District of Columbia. 15. Remedies. 15.1. Events of Default Defined; Acceleration of Maturity. If any one or more of the following events ("Events of Default") shall occur (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), that is to say: (a) if default shall be made in the due and punctual payment of all or any part of the principal of, or premium (if any) on, any Note when and as the same shall become due and payable, whether at the stated maturity thereof, by notice of or demand for prepayment, or otherwise; (b) if default shall be made in the due and punctual payment of any interest on any Note or any fee when and as the same shall become due and payable and such default shall have continued for a period of three Business Days; (c) if default shall be made in the performance or observance of any covenant, agreement or condition contained in sections 7(g), 8(a), 8(b), 9.6, 13.2(b), 13.5 to 13.7, inclusive, or 13.9 to 13.19, inclusive; (d) if default shall be made in the performance or observance of any other of the covenants, agreements or conditions contained in this Agreement or any of the other Operative Documents and such default shall have continued for a period of 30 days after the earlier to occur of (i) the Holding Company's obtaining actual knowledge of such default or (ii) the Holding Company's receipt of written notice of such default; (e) if the Holding Company or any Subsidiary of the Holding Company shall make a general assignment for the benefit of creditors, or shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts as they become due, or shall file a voluntary petition in bankruptcy, or shall be adjudicated bankrupt or insolvent, or shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or shall file any answer admitting or not contesting the material allegations of a petition filed against it in any such proceeding, or shall seek or consent to or acquiesce in the appointment of any trustee, custodian, receiver, liquidator or fiscal agent for it or for all or any substantial part of its properties, or shall (or its directors or stockholders shall) take any action looking to its dissolution or liquidation; (f) if, within 60 days after the commencement of an action against the Holding Company or any Subsidiary of the Holding Company seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or 111 similar relief under any present or future statute, law or regulation, such action shall not have been dismissed or all orders or proceedings thereunder affecting the operations or the business of the Holding Company or any Subsidiary of the Holding Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within 60 days after the appointment without the consent or acquiescence of the Holding Company or any Subsidiary of the Holding Company of any trustee, custodian, receiver, liquidator or fiscal agent for the Holding Company or any Subsidiary of the Holding Company or for all or any substantial part of their respective properties, such appointment shall not have been vacated; (g) if, under the provisions of any law for the relief or aid of debtors, any court or governmental agency of competent jurisdiction shall assume custody or control of the Holding Company or of any Subsidiary of the Holding Company or of all or any substantial part of their respective properties and such custody or control shall not be terminated or stayed within 60 days from the date of assumption of such custody or control; (h) if the Holding Company or any Subsidiary of the Holding Company shall fail to (i) make any payment due on any Indebtedness (other than the Notes) or other obligation (including any in respect of any performance bond, bid bond or lease or any Shares upon the exercise by any Person of any put or call option or other similar right of redemption or repurchase with regard to such Shares), if the aggregate outstanding amount thereof (and of any other Indebtedness or other obligation as to which the Holding Company or any Subsidiary of the Holding Company is in default) exceeds $3,000,000 (or the equivalent thereof, as of any date of determination, in any other currency), or (ii) perform, observe or discharge any covenant, condition or obligation in any agreement, document or instrument evidencing, securing or relating to such Indebtedness or other obligation, if the effect of any such failure of the character described in this clause (h) is to cause, or any other Person shall cause, any payment in respect thereof in an aggregate amount of $3,000,000 (or the equivalent thereof, as of any date of determination, in any other currency) or more to become due and payable; (i) if a final judgment or judgments for the payment of money which, together with all other outstanding final judgments for the payment of money against the Holding Company and/or any Subsidiary of the Holding Company (excluding any judgment or judgments as to which a financially sound and reputable insurance company (having the highest or second highest rating available from A.M. Best Holding Company or an equivalent Person) has accepted full liability in writing), exceeds an aggregate of $1,000,000 (or the equivalent thereof, as of any date of determination, in any other currency) shall be rendered against the Holding Company or any Subsidiary of the Holding Company which judgments are not, within 60 days after entry thereof, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; (j) if any representation or warranty made by or on behalf of the Holding Company or any Subsidiary of the Holding Company in this Agreement or in any of the other Operative Documents or in any agreement, document or instrument delivered under or pursuant to any provision hereof or thereof shall prove to have been false or incorrect in any material respect on the date as of which made; 112 (k) if, at any time, this Agreement or any of the other Operative Documents shall for any reason (other than the scheduled termination thereof in accordance with its terms) expire, fail to be in full force and effect or be disaffirmed, repudiated, cancelled, terminated or declared to be unenforceable, null and void; or (l) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Holding Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $500,000 (or the equivalent thereof, as of any date of determination, in any other currency), (iv) the Holding Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Holding Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Holding Company or any Subsidiary of the Holding Company establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Holding Company or any Subsidiary of the Holding Company thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, has resulted in, or could reasonably be expected to result in, a liability in excess of $1,000,000; then, upon the occurrence and during the continuance of any Event of Default (other than one of the character described in clauses (e), (f) or (g) of this section 15.1) and at the option of the holder or holders of 66-2/3% or more in aggregate principal amount of the Notes at the time outstanding (excluding any Notes at the time owned by the Holding Company or any Affiliate of the Holding Company), exercised by written notice to the Obligor, the principal of all Notes shall forthwith become due and payable, together with interest accrued thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Obligor shall forthwith upon any such acceleration pay to the holder or holders of all the Notes then outstanding (i) the entire principal of and interest accrued on the Notes and (ii) in addition, to the extent permitted by applicable law, an amount equal to the Make Whole Amount or the Applicable Premium, as applicable, as liquidated damages and not as a penalty; provided that, in the case of an Event of Default of the character described in clauses (a) or (b) of this section 15.1 and irrespective of whether all of the Notes have been declared due and payable by the holder or holders of 66-2/3% or more in aggregate principal amount of the Notes at the time outstanding, any holder of Notes who or which has not consented to any waiver with respect to such Event of Default may, at the option of such holder, by written notice to the Obligor, declare all Notes then held by such holder to be, and such Notes shall thereupon become, forthwith due and payable, together with interest accrued thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Obligor shall forthwith upon any such acceleration pay to such holder (i) the entire principal of and interest accrued on such Notes, and (ii) in addition, to the extent permitted by applicable law, an amount equal to the Make Whole Amount or the Applicable Premium, as applicable, as liquidated damages and not as a penalty; provided, further, that, in the case of an Event of Default of the character described in 113 clauses (e), (f) or (g) of this section 15.1, the principal of all Notes shall forthwith become due and payable, together with interest accrued thereon (including any interest accruing after the commencement of any action or proceeding under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable domestic or foreign federal or state bankruptcy, insolvency or other similar law, and any other interest that would have accrued but for the commencement of such proceeding, whether or not any such interest is allowed as an enforceable claim in such proceeding), without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Obligor shall forthwith upon any such acceleration pay to the holder or holders of all the Notes then outstanding (i) the entire principal of and interest accrued on the Notes, and (ii) in addition, to the extent permitted by applicable law, an amount equal to the Make Whole Amount or the Applicable Premium, as applicable, as liquidated damages and not as a penalty. Notwithstanding the foregoing provisions, at any time after the occurrence of any Event of Default and of notice thereof, if any, by any holder or holders of Notes and before any judgment, decree or order for payment of the money due has been obtained by or on behalf of any holder or holders of the Notes, the Required Holders of the Notes by written notice to the Obligor, may rescind and annul such Event of Default and/or notice of such Event of Default and the consequences thereof with respect to all of the Notes (including any Notes which were accelerated pursuant to the first proviso in the preceding paragraph by any holder or holders on account of an Event of Default of the character described in clause (a) or (b) of this section 15.1) if: (1) the Obligor has paid a sum sufficient to pay (A) all overdue interest on all Notes; (B) the principal of (and premium, if any, on) any Notes which have become due otherwise than by such Event of Default or notice thereof; and (C) interest on such overdue principal (and premium, if any) and, to the extent that payment of such interest is lawful, interest upon overdue interest, all at the rate for overdue amounts specified in such Notes; and (2) all Defaults and Events of Default, other than the non-payment of amounts which have become due solely by such acceleration, have been cured or waived as provided in section 18. No such rescission shall affect any subsequent default or impair any right consequent thereon. The holder or holders of the Notes will endeavor to furnish to the holders of Superior Indebtedness (or their agent or representative) copies of any notice furnished by such holder or holders of the Notes to the Obligor of the occurrence of an Event of Default and of the acceleration of the Notes pursuant to this section 15.1, provided that the failure to furnish such copies of any such notice to the holder or holders of the Superior Indebtedness shall not be actionable by any Person and shall not have any effect upon any of the rights of the holder or holders of the Notes on account of any Event of Default or otherwise. 15.2. Suits for Enforcement, etc. In case any one or more of the Events of Default specified in section 15.1 shall have occurred and be continuing, and irrespective of whether any 114 Notes have become or have been declared immediately due and payable under section 15.1, the holder of any Security may proceed to protect and enforce its rights either by suit in equity or by action at law, or both. Each of the Issuers stipulates that the remedies at law of the holder or holders of the Securities in the event of any Event of Default by it or any of its Subsidiaries in the performance of or compliance with any covenant or agreement in this Agreement or any of the other Operative Documents are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance thereof, whether by an injunction against a violation thereof or otherwise. Without limiting the generality of the foregoing (and without derogating from any provision contained in this Agreement or any of the other Operative Documents), upon the occurrence and during the continuance of an Event of Default, the Required Holders of the Notes at the time outstanding shall, as a group, have the right to apply for and have a receiver appointed for the Holding Company and its Subsidiaries, or any one or more of them, by a court of competent jurisdiction in any action taken by any such holders to enforce their respective rights and remedies hereunder and under the other Operative Documents in order to manage, protect and preserve the assets of the Holding Company and its Subsidiaries and continue the operation of the business of the Holding Company and its Subsidiaries, or to sell or dispose of the assets of the Holding Company and its Subsidiaries, and to collect all revenues and profits thereof and apply the same to the payment of all expenses and other charges of such receivership, including the compensation of the receiver, and each of the Issuers hereby consents to such appointment without regard to the presence or absence of any misfeasance or malfeasance or any other fact or circumstance which otherwise would provide a defense to such appointment. 15.3. No Election of Remedies. No remedy conferred in this Agreement or in any of the other Operative Documents upon the holder of any Security is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or thereunder or now or hereafter existing at law or in equity or by statute or otherwise. 15.4. Remedies Not Waived. No course of dealing between the Holding Company and any of its Subsidiaries, on the one hand, and any holder of any Security, on the other hand, and no delay by any such holder in exercising any rights hereunder or under any of the other Operative Documents shall operate as a waiver of any rights of any such holder. 15.5. Application of Payments. In case any one or more of the Events of Default specified in section 15.1 shall have occurred and be continuing, all amounts to be applied to the prepayment or payment of any Notes shall be applied, after the payment of all related costs and expenses incurred by the holders of the Notes (including, without limitation, compensation to any and all trustees, liquidators, receivers or similar officials and reasonable fees, expenses and disbursements of counsel) in such order of priority as is determined by the Required Holders of the Notes entitled to such amounts. 16. Registration, Transfer and Exchange of Securities; Limitations on Transfers. (a) Securities issued hereunder shall be issued in registered form. Each of the Issuers shall keep at its principal executive office (which is now located at the address set forth at the beginning of this Agreement) registers in which it shall provide for the registration and transfer of the Securities issued by it. The name and address of each holder of the Securities shall be registered in such registers. The Issuers shall give to any institutional holder of any Security promptly (but in any event within 10 days) following 115 request therefor, a complete and correct copy of the names and addresses of all registered holders of the Securities and the amount and kind of Securities held by each. Whenever any Security or Securities shall be surrendered for transfer or exchange, the Issuers at their expense will execute and deliver in exchange therefor a new Security or Securities (in such denominations and registered in such name or names as may be requested by the holder of the surrendered Security or Securities), in the same aggregate unpaid principal amount (in the case of the Notes and, in such case, dated so as not to result in any loss of interest and together with all necessary Note Guarantees) or the same aggregate number of Shares (in the case of the Warrants and Warrant Shares), as applicable, as that of the Security or Securities so surrendered. The Issuers may treat the Person in whose name any Security is registered as the owner of such Security for all purposes. (b) Notwithstanding anything to the contrary herein or in any of the other Operative Documents, no holder of any Security may transfer any Security to any other Person unless each of the following conditions is satisfied: (i) after giving effect to the proposed transfer, (A) the transferee shall hold at least 10% of the aggregate principal amount or aggregate number of Shares, as the case may be, of each class of Securities then outstanding and (B) there are not more than eight holders of the Securities; (ii) the transferee is not a competitor of the Holding Company or any of its Subsidiaries; provided that in no event shall any bank, insurance company or other institutional investor be deemed, for purposes of this section 16(b), to be a competitor of the Holding Company and its Subsidiaries; (iii) at least 51% of the aggregate principal amount of the Notes then outstanding is held by the MassMutual Group (as defined below); (iv) in the case of any transfer of any Note, the transferee shall have executed an acknowledgment substantially in the form of Exhibit 16(b)(iv) attached hereto and delivered the same to the holders of Superior Indebtedness (or their agent or representative); and (v) in the case of any transfer of any Note by any holder of any Note, the transferor shall deliver to the Obligor an opinion of counsel, which in the case of the MassMutual Group (as herein defined) may be in-house counsel (or, in the case of MassMutual Corporate Investors and MassMutual Participation Investors, an appropriate officer) to the effect that such transfer does not violate the provisions of Section 5 of the Securities Act; provided that the provisions of this section 16(b): (A) shall not apply to any transfer to any Affiliate of an initial holder of the Securities or to any Person for whom any initial holder of the Securities serves as investment advisor or investment manager and (B) shall not apply to any transfer (other than a transfer described in section 16(b)(ii)) if at the time of such transfer any Default or Event of Default shall have occurred and be continuing. As used herein, the term "MassMutual Group" shall mean Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, MassMutual Corporate Value Partners Limited, their respective Affiliates and 116 any other Person for whom any such Person serves as investment advisor or investment manager. 17. Replacement of Securities. Upon receipt by the Issuers of reasonably satisfactory evidence of the loss, theft, destruction or mutilation of any Security and (in the case of loss, theft or destruction) of reasonably satisfactory indemnity, and (in the case of mutilation) upon surrender of such Security, the Issuers at their expense will execute and deliver in lieu of such Security a new Security of like tenor and, in the case of any new Note, dated so as not to result in any loss of interest and accompanied by all necessary Note Guarantees. Your unsecured agreement to indemnify and/or affidavit and that of any other institutional holder shall constitute satisfactory indemnity and/or satisfactory evidence of loss, theft or destruction for the purpose of this section 17. 18. Amendment and Waiver. (a) Any term of this Agreement and the Other Securities Purchase Agreements and, unless explicitly provided otherwise therein, of any of the other Operative Documents may, with the consent of the Issuers, be amended, or compliance therewith may be waived, in writing only, by the Required Holders of each class of Securities entitled to the benefits of such term, provided that (i) without the consent of the holders of all of the Notes at the time outstanding, no such amendment or waiver shall (A) change the amount of the principal of or any rate of interest on or premium payable with respect to any of the Notes or change the payment terms of any of the Notes or, except as provided in the Notes, subordinate the obligation of the Obligor (or of any other Person primarily or secondarily liable therefor) to pay any amount due on such Notes to any other obligation, or (B) change the percentage of holders of Notes required to approve any such amendment, effectuate any such waiver or accelerate payment of the Notes; (ii) without the consent of the holders of all of the Warrants and Warrant Shares at the time outstanding, no such amendment or waiver shall (A) modify any of the provisions of section 12, or (B) change the percentage of holders of the Warrants and Warrant Shares required to approve any such amendment or effect any such waiver; and (iii) no such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. Executed or true and correct copies of any amendment, waiver or consent effected pursuant to this section 18 shall be delivered by the Issuers to each holder of Securities forthwith (but in any event not later than five days) following the effective date thereof. (b) The Issuers will not, directly or indirectly, request or negotiate for, or offer or pay any remuneration or grant any security as an inducement for, any proposed amendment or waiver of any of the provisions of this Agreement or any of the other Operative Documents unless each holder of the Securities (irrespective of the kind and amount of Securities then owned by it) shall be informed thereof by the Issuers and, if such holder is entitled to the benefit of any such provision proposed to be amended or waived, shall be afforded the opportunity of considering the same, shall be supplied by the Issuers with sufficient information to enable it to make an informed decision with respect thereto and shall be offered and paid such remuneration and granted such security on the same terms. (c) In determining whether the requisite holders of Securities have given any authorization, consent or waiver under this section 18, any Securities owned by the 117 Holding Company or any of its Affiliates shall be disregarded and deemed not to be outstanding. 19. Method of Payment of Securities. Irrespective of any provision hereof or of the other Operative Documents to the contrary, so long as you (or your nominee) or any other institutional holder shall hold any Security, the Issuers (and each other Person primarily or secondarily liable therefor) will make all payments thereon to you or such other institutional holder by the method and at the address for such purpose specified in Schedule I attached hereto or by such other method or at such other address as you or such institutional holder may designate in writing, without requiring any presentation or surrender of such Security, except that if any Security shall be paid, prepaid and/or repurchased in full, such Security shall be surrendered to the Issuers promptly following such payment, prepayment or repurchase and cancelled. 20. Expenses; Indemnity. Whether or not the transactions contemplated by any of the Operative Documents shall be consummated, the Issuers will pay or cause to be paid (or reimbursed, as the case may be) and will defend, indemnify and hold you (and each other holder of any of the Securities) and each of your (and such other holder's) directors, officers, employees, agents, advisors and Affiliates (each, an "Indemnitee") harmless (on an after tax basis) in respect of all costs, losses, expenses (including, without limitation, the reasonable fees, costs, expenses and disbursements of one counsel for all of the Indemnitees) and damages (collectively, "Indemnified Costs") incurred by or asserted against any Indemnitee in connection with the negotiation, execution, delivery, performance and/or enforcement of this Agreement or any of the other Operative Documents (including, without limitation, so-called work-outs and/or restructurings and all amendments, waivers and consents hereunder and thereunder, whether or not effected) and/or the consummation of the transactions contemplated hereby and thereby or which may otherwise be related in any way to this Agreement or any other Operative Documents or such transactions or such Indemnitee's relationship to the Holding Company or any of its Affiliates or any of its properties and assets, including, without limitation, any and all Indemnified Costs related in any way to the requirements of any Environmental Laws (as the same may be amended, modified or supplemented from time to time) or to any environmental investigation, assessment, site monitoring, containment, clean up, remediation, removal, restoration, reporting and sampling, whether or not consented to, or requested or approved by, any Indemnitee, and whether or not such Indemnified Cost is attributable to an event or condition originating from any properties or assets of the Holding Company or any of its Subsidiaries or any other properties previously or hereafter owned, leased, occupied or operated by the Holding Company or any of its Subsidiaries. Notwithstanding the foregoing, (a) the Holding Company shall not have any obligation to an Indemnitee under this section 20 with respect to any Indemnified Cost to the extent such Indemnified Cost arises solely as a result of the gross negligence, willful misconduct or bad faith of such Indemnitee and (b) the Holding Company shall not be liable with respect to the fees, costs, expenses and disbursements of your counsel if the sale and purchase of the Securities pursuant to this Agreement and the other Securities Purchase Agreements is not consummated due to your investment committee's failure to approve such transaction. 21. Taxes. The Issuers will pay all taxes and fees (including interest and penalties), including, without limitation, all recording and filing fees, issuance and documentary stamp and similar taxes, which may be payable in respect of the execution and delivery of this Agreement and each of the other Operative Documents and the issuance of the Securities. 118 22. Communications. All communications provided for herein and, unless explicitly provided otherwise therein, in any of the other Operative Documents shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such communication by a recognized overnight delivery service (charges prepaid), (b) by a recognized overnight delivery service (charges prepaid), or (c) by messenger. Any such communication must be sent (i) if to the Holding Company or to any of its Subsidiaries, to it at: Tridex Corporation 61 Wilton Road Westport, Connecticut 06880 Attention: Mr. Seth M. Lukash Telecopy No.: (203) 266-8806 with a copy (which shall not constitute notice) to: Hinckley, Allen & Snyder 28 State Street Boston, Massachusetts 02109 Attention: Stephen J. Carlotti, Esq. Telecopy No.: (617) 345-9020 or at such other address (or telecopy number) as may be furnished in writing by the Holding Company to each holder of any Security and (ii) if to you, at your address for such purpose set forth in Schedule I attached hereto, with a copy (which shall not constitute notice) to: Choate, Hall & Stewart Exchange Place 53 State Street, Boston, Massachusetts 02109 Attention: Frank B. Porter, Jr., Esq. Telecopy No.: (617) 248-4000 and if to any other holder of any Security, at the address of such holder as it appears on the applicable register maintained pursuant to section 16, or at such other address as may be furnished in writing by you or by any other holder to the Holding Company. Communications under this section 22 shall be deemed given only when actually received. 23. Survival of Agreements, Representations and Warranties, etc. All agreements, representations and warranties contained herein and in the other Operative Documents shall be deemed to have been relied upon by you and shall survive the execution and delivery of this Agreement and each of the other Operative Documents, the issue, sale and delivery of the Securities and payment therefor and any disposition of the Securities by you, whether or not any investigation at any time is made by you or on your behalf. All indemnification provisions, including, without limitation, those contained in sections 12.5, 20 and 21, shall survive the date upon which none of the Securities shall be outstanding and the termination of this Agreement and each of the other Operative Documents. 24. Successors and Assigns; Rights of Other Holders. This Agreement and, unless explicitly provided otherwise therein, each of the other Operative Documents shall bind and inure to the benefit of and be enforceable by the Issuers and you, successors to the Issuers and your 119 successors and assigns, and, in addition, shall inure to the benefit of and be enforceable by each holder from time to time of any Securities who, upon acceptance thereof, shall, without further action, be entitled to enforce the applicable provisions and enjoy the applicable benefits hereof and thereof. The Issuers may not assign any of its rights or obligations hereunder or under any of the other Operative Documents without the written consent of all of the holders of the Securities then outstanding. 25. Purchase for Investment; ERISA. (a) You represent and warrant (i) that you have been furnished with all information that you have requested for the purpose of evaluating your proposed acquisition of the Securities to be issued to you pursuant hereto, (ii) that you will acquire such Securities for your own account for investment and not for distribution in any manner that would violate applicable securities laws, but without prejudice to your rights to dispose of such Securities or a portion thereof to a transferee or transferees, in accordance with such laws if at some future time you deem it advisable to do so and (iii) that you are an "accredited investor" as such term is defined in Regulation D of the Commission under the Securities Act. The acquisition of such Securities by you at the Closing shall constitute your confirmation of the foregoing representations and warranties. You understand that such Securities are being sold to you in a transaction which is exempt from the registration requirements of the Securities Act, and that, in making the representations and warranties contained in section 5.16, each of the Issuers is relying, to the extent applicable, upon your representations and warranties contained herein. (b) You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Securities to be purchased by you hereunder: (i) the Source is an "insurance company general account" as defined in Section V(e) of Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and, except as you have disclosed to the Holding Company in writing pursuant to this section (i), the amount of reserves and liabilities for the general account contract(s) held by or on behalf of any employee benefit plan or group of plans maintained by the same employer or employee organization do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with the state of domicile of the insurer; or (ii) the Source is a separate account of an insurance company maintained by you in which an employee benefit plan (or its related trust) has an interest, which separate account is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any annuitant) are not affected in any manner by the investment performance of the separate account; or (iii) the Source is either (A) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (B) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 120 1991) and, except as you have disclosed to the Issuers in writing pursuant to this section (iii), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (iv) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Holding Company and (A) the identity of such QPAM and (B) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Issuers in writing pursuant to this section (iv); or (v) the Source is a governmental plan; or (vi) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Issuers in writing pursuant to this section (vi); or (vii) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this section 25(b), the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA, and the term "QPAM Exemption" means PTE 84-14 (issued March 13, 1984). 26. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement and, unless explicitly provided otherwise therein, each of the other Operative Documents, including the validity hereof and thereof and the rights and obligations of the parties hereunder and thereunder, and all amendments and supplements hereof and thereof and all waivers and consents hereunder and thereunder, shall be construed in accordance with and governed by the domestic substantive laws of The Commonwealth of Massachusetts without giving effect to any choice of law or conflicts of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction. Each of the Issuers, to the extent that it may lawfully do so, hereby consents to service of process, and to be sued, in The Commonwealth of Massachusetts and consents to the jurisdiction of the courts of The Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts, as well as to the jurisdiction of all courts to which an appeal may be taken from such courts, for the purpose of any suit, action or other proceeding arising out of any of its obligations hereunder or thereunder or with respect to the transactions contemplated hereby or thereby, and expressly waives any and all objections it may have as to venue in any such courts. Each of the Issuers further agrees that a summons and 121 complaint commencing an action or proceeding in any of such courts shall be properly served and shall confer personal jurisdiction if served personally or by certified mail to it at its address referred to in section 22 or as otherwise provided under the laws of The Commonwealth of Massachusetts. Notwithstanding the foregoing, each of the Issuers agrees that nothing contained in this section 26 shall preclude the institution of any such suit, action or other proceeding in any jurisdiction other than The Commonwealth of Massachusetts. EACH OF THE ISSUERS IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR THEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 27. Miscellaneous. The headings in this Agreement and in each of the other Operative Documents are for purposes of reference only and shall not limit or otherwise affect the meaning hereof or thereof. This Agreement (together with the other Operative Documents) embodies the entire agreement and understanding between you and the Holding Company and supersedes all prior agreements and understandings relating to the subject matter hereof. Each covenant contained herein and in each of the other Operative Documents shall be construed (absent an express provision to the contrary) as being independent of each other covenant contained herein and therein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. If any provision in this Agreement or in any of the other Operative Documents refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable, whether such action is taken directly or indirectly by such Person. In case any provision in this Agreement or any of the other Operative Documents shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. This Agreement and, unless explicitly provided otherwise therein, each of the other Operative Documents, may be executed in any number of counterparts and by the parties hereto or thereto, as the case may be, on separate counterparts but all such counterparts shall together constitute but one and the same instrument. [The remainder of this page is intentionally left blank.] 122 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterparts of this Agreement, whereupon it shall become a binding agreement under seal between you and the Issuers. Please then return one of such counterparts to the Issuers. Very truly yours, TRIDEX CORPORATION By --------------------------- (Title) TRIDEX NC, INC. By --------------------------- (Title) ULTIMATE TECHNOLOGY CORPORATION By --------------------------- (Title) The foregoing Agreement is hereby agreed to as of the date thereof. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By ------------------------------- (Title) 123 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterparts of this Agreement, whereupon it shall become a binding agreement under seal between you and the Issuers. Please then return one of such counterparts to the Issuers. Very truly yours, TRIDEX CORPORATION By --------------------------- (Title) TRIDEX NC, INC. By --------------------------- (Title) ULTIMATE TECHNOLOGY CORPORATION By --------------------------- (Title) The foregoing Agreement is hereby agreed to as of the date thereof. MASSMUTUAL CORPORATE INVESTORS By ---------------------------------- (Title) The foregoing is executed on behalf of MassMutual Corporate Investors, organized under a Declaration of Trust, dated September 13, 1985, as amended from time to time. The obligations of such Trust are not personally binding upon, nor shall resort be had to the property of, any of the Trustees, shareholders, officers, employees or agents of such Trust, but the Trust's property only shall be bound. 124 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterparts of this Agreement, whereupon it shall become a binding agreement under seal between you and the Issuers. Please then return one of such counterparts to the Issuers. Very truly yours, TRIDEX CORPORATION By --------------------------- (Title) TRIDEX NC, INC. By --------------------------- (Title) ULTIMATE TECHNOLOGY CORPORATION By --------------------------- (Title) The foregoing Agreement is hereby agreed to as of the date thereof. MASSMUTUAL PARTICIPATION INVESTORS By -------------------------------- (Title) The foregoing is executed on behalf of MassMutual Participation Investors, organized under a Declaration of Trust, dated April 7, 1988, as amended from time to time. The obligations of such Trust are not personally binding upon, nor shall resort be had to the property of, any of the Trustees, shareholders, officers, employees or agents of such Trust, but the Trust's property only shall be bound. 125 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterparts of this Agreement, whereupon it shall become a binding agreement under seal between you and the Issuers. Please then return one of such counterparts to the Issuers. Very truly yours, TRIDEX CORPORATION By --------------------------- (Title) TRIDEX NC, INC. By --------------------------- (Title) ULTIMATE TECHNOLOGY CORPORATION By --------------------------- (Title) The foregoing Agreement is hereby agreed to as of the date thereof. MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED By Massachusetts Mutual Life Insurance Company, as Investment Manager By ------------------------------------ (Title) 126 TRIDEX CORPORATION TRIDEX NC, INC. ULTIMATE TECHNOLOGY CORPORATION 61 Wilton Road Westport, Connecticut 06880 April 17, 1998 MASSMUTUAL CORPORATE INVESTORS 1295 State Street Springfield, Massachusetts 01111 Ladies and Gentlemen: TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"), TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY CORPORATION, a New York corporation ("UTC" and, together with the Holding Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes collectively referred to herein as the "Issuers" and each, individually, as an "Issuer"), agree with you as follows. Certain capitalized terms used herein are defined in section 15. 1. Authorization of Securities; Other Purchasers; etc. (a) The Obligor has authorized the issue and sale of its 19% Senior Subordinated Notes due April 17, 2005 (herein, together with any notes issued in exchange therefor or replacement thereof, called the "Notes") in the aggregate principal amount of $11,000,000. The Notes are to be substantially in the form of Exhibit 1(a) attached hereto. (b) The Holding Company has authorized the issue and sale of 285,714 shares of its Common Shares (herein, such 285,714 shares, together with any Shares issued in exchange therefor or replacement thereof, called the "Purchased Common Shares"). The certificates for the Common Stock are to be substantially in the form of Exhibit 1(b) attached hereto. (c) The Holding Company has authorized the issue and sale of its warrants (herein, together with any warrants issued in exchange therefor or replacement thereof, called the "Warrants") evidencing rights to purchase in the aggregate 350,931 shares of Common Shares, subject only to the approval thereof by the stockholders of the Holding Company. The Warrants shall be exercisable for consideration of $7.00 per share, shall expire on April 17, 2008 and shall be substantially in the form of Exhibit 1(c) attached hereto. 127 TRIDEX CORPORATION TRIDEX NC, INC. ULTIMATE TECHNOLOGY CORPORATION 61 Wilton Road Westport, Connecticut 06880 April 17, 1998 MASSMUTUAL PARTICIPATION INVESTORS 1295 State Street Springfield, Massachusetts 01111 Ladies and Gentlemen: TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"), TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY CORPORATION, a New York corporation ("UTC" and, together with the Holding Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes collectively referred to herein as the "Issuers" and each, individually, as an "Issuer"), agree with you as follows. Certain capitalized terms used herein are defined in section 15. 1. Authorization of Securities; Other Purchasers; etc. (a) The Obligor has authorized the issue and sale of its 19% Senior Subordinated Notes due April 17, 2005 (herein, together with any notes issued in exchange therefor or replacement thereof, called the "Notes") in the aggregate principal amount of $11,000,000. The Notes are to be substantially in the form of Exhibit 1(a) attached hereto. (b) The Holding Company has authorized the issue and sale of 285,714 shares of its Common Shares (herein, such 285,714 shares, together with any Shares issued in exchange therefor or replacement thereof called the "Purchased Common Shares"). The certificates for the Common Stock are to be substantially in the form of Exhibit 1(b) attached hereto. (c) The Holding Company has authorized the issue and sale of its warrants (herein, together with any warrants issued in exchange therefor or replacement thereof, called the "Warrants") evidencing rights to purchase in the aggregate 350,931 shares of Common Shares, subject only to the approval thereof by the stockholders of the Holding Company. The Warrants shall be exercisable for consideration of $7.00 per share, shall expire on April 17, 2008 and shall be substantially in the form of Exhibit 1(c) attached hereto. 128 TRIDEX CORPORATION TRIDEX NC, INC. ULTIMATE TECHNOLOGY CORPORATION 61 Wilton Road Westport, Connecticut 06880 April 17, 1998 MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED 1295 State Street Springfield, Massachusetts 01111 Ladies and Gentlemen: TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"), TRIDEX NC, INC., a North Carolina corporation ("TNC"), and ULTIMATE TECHNOLOGY CORPORATION, a New York corporation ("UTC" and, together with the Holding Company and TNC, acting as joint and several obligors, the "Obligor") (sometimes collectively referred to herein as the "Issuers" and each, individually, as an "Issuer"), agree with you as follows. Certain capitalized terms used herein are defined in section 15. 1. Authorization of Securities; Other Purchasers; etc. (a) The Obligor has authorized the issue and sale of its 19% Senior Subordinated Notes due April 17, 2005 (herein, together with any notes issued in exchange therefor or replacement thereof, called the "Notes") in the aggregate principal amount of $11,000,000. The Notes are to be substantially in the form of Exhibit 1(a) attached hereto. (b) The Holding Company has authorized the issue and sale of 285,714 shares of its Common Shares (herein, such 285,714 shares, together with any Shares issued in exchange therefor or replacement thereof called the "Purchased Common Shares"). The certificates for the Common Stock are to be substantially in the form of Exhibit 1(b) attached hereto. (c) The Holding Company has authorized the issue and sale of its warrants (herein, together with any warrants issued in exchange therefor or replacement thereof, called the "Warrants") evidencing rights to purchase in the aggregate 350,931 shares of Common Shares, subject only to the approval thereof by the stockholders of the Holding Company. The Warrants shall be exercisable for consideration of $7.00 per share, shall expire on April 17, 2008 and shall be substantially in the form of Exhibit 1(c) attached hereto. 129 EX-4.3 5 EX. 4.3 EXHIBIT 4.3 THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS NOTE ARE SUBORDINATED TO THE PAYMENT OF SUPERIOR INDEBTEDNESS (AS HEREINAFTER DEFINED) AND THE RIGHTS OF THE HOLDERS OF SUPERIOR INDEBTEDNESS UPON THE TERMS OF SUBORDINATION SET FORTH IN THIS NOTE. TRIDEX CORPORATION, TRIDEX NC, INC. ULTIMATE TECHNOLOGY CORPORATION 19% Senior Subordinated Note due April __, 2005 No. R- $____________ April __, 1998 TRIDEX CORPORATION, a Connecticut corporation (the "Holding Company"), TRIDEX NC, INC., a North Carolina Corporation ("TNC"), and ULTIMATE TECHNOLOGY CORPORATION, a New York corporation ("UTC" and, together with the Holding Company and TNC, acting as joint and several obligors, the "Obligor"), for value received, hereby promises to pay to _____________________, or registered assigns, the principal amount of _______________ DOLLARS ($ ________ ) on April __, 2005, with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance of such principal amount at the rate of 19% per annum until the Warrant Exchange, and thereafter at the rate of 12% per annum, from the date hereof, payable quarterly on the ____ day of January, April, July and October of each year after the date hereof, commencing on [July , 1998/the first such date next succeeding the date hereof], until the principal hereof shall have become due and payable (whether at maturity or at a date fixed for prepayment or by declaration or otherwise), and with interest on any overdue principal (including any overdue prepayment of principal) and (to the extent permitted by applicable law) premium, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at the rate of 21% per annum until the Warrant Exchange, and thereafter at the rate of 14% per annum until paid, payable quarterly as aforesaid or, at the option of the holder hereof, on demand and, upon acceleration of this Note, together with the Make Whole Amount or the Applicable Premium, as applicable, specified in the Securities Purchase Agreements hereinafter referred to, as liquidated damages and not as a penalty; provided that in no event shall the amount payable by the Obligor as interest on this Note exceed the highest lawful rate permissible under any law applicable hereto. Payments of principal, premium, if any, and interest hereon shall be made in lawful money of the United States of America by the method and at the address for such purpose specified in the Securities Purchase Agreements hereinafter referred to, and such payments shall be overdue for purposes hereof if not made on the originally scheduled date of payment therefor, without giving effect to any applicable grace period and notwithstanding 130 that such payment may be prohibited under the terms of subordination applicable hereto set forth below. As further provided in section 2, the Obligor may, at its option, in lieu of paying cash, pay a portion of the interest due on this Note on any regularly scheduled interest payment date by adding to the principal amount of this Note an amount equal to such portion of the interest, and all references herein (or in any of the other Operative Documents (as defined in the Securities Purchase Agreements)) to the principal amount of this Note shall, unless the context clearly requires otherwise, mean the principal amount as so adjusted from time to time. This Note is one of the Obligor's 19% Senior Subordinated Notes due April __, 2005, limited to $11,000,000 aggregate principal amount, issued pursuant to those certain Securities Purchase Agreements dated April __, 1998 (such agreements, as amended, modified and supplemented from time to time, the "Securities Purchase Agreements") between the Issuers and the institutional investors named therein, and the holder hereof is entitled to the benefits of the Securities Purchase Agreements and the other Operative Documents referred to in the Securities Purchase Agreements, including, without limitation, the Note Guarantees (if any), and may enforce the agreements contained therein and exercise the remedies provided for thereby or otherwise available in respect thereof, all in accordance with the terms thereof. This Note is subject to prepayment as specified in the Securities Purchase Agreements. Capitalized terms used herein without definition have the meanings ascribed to them in the Securities Purchase Agreements. 1. Subordination of Senior Subordinated Notes. Payments on this Note, and the rights of the holder hereof and of all guarantees with respect hereto, are subordinate and junior in right of payment, to the extent specified in this section 1, to Superior Indebtedness (as defined below). 1.1. Certain Definitions. As used in this section 1, the following terms have the following respective meanings: "Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et seq., as from time to time hereafter amended, and any successor or similar statute. "Blockage Period" shall have the meaning specified in section 1.4. "Covenant Default" shall have the meaning specified in section 1.4. "Enforcement Notice"shall have the meaning specified in section 1.11. "Liquidation Payment" shall have the meaning specified in section 1.3. "Operative Documents" shall mean the Securities Purchase Agreements, together with all agreements, documents and instruments executed in connection therewith. "Payment Default" shall have the meaning specified in section 1.4. "Permissible Securities" shall mean (a) any debt securities the payment of which is subordinated, at least to the extent provided in this section 1 with respect to the 131 Subordinated Indebtedness, to the payment of all Superior Indebtedness at the time outstanding and all securities issued in exchange therefor and (b) any Shares of the Obligor. "Senior Subordinated Notes" shall mean the Obligor's 19% Senior Subordinated Notes due April __, 2005 (together with any notes issued in exchange therefor or replacement thereof), of which this Note is one. "Subordinated Indebtedness" shall mean the principal amount of the Indebtedness evidenced by the Senior Subordinated Notes, together with any interest (including any interest accruing after the commencement of any action or proceeding under any bankruptcy, insolvency or other similar law, and any interest that would have accrued but for the commencement of any such proceeding, whether or not any such interest is allowed as an enforceable claim in such proceeding), and premium and any other amount (including any fee or expense) due thereon or payable, if any, with respect thereto, including any such amounts payable by any guarantor thereof. "Subordination Notice" shall have the meaning specified in section 1.4. "Superior Indebtedness" shall mean the principal amount of, interest (including any interest accruing after the commencement of any action or proceeding under any bankruptcy, insolvency or other similar law, and any interest that would have accrued but for the commencement of any such proceeding, whether or not any such interest is allowed as an enforceable claim in such proceeding) and premium (if any) or other amount (including any fee, expense or indemnification payment) due in respect of the Funded Debt and/or Current Debt specified in and to the extent permitted by sections 13.5(b), (c) and (d) of the Securities Purchase Agreements (or any Refinancing Debt thereof permitted under section 13.5(e) of the Securities Purchase Agreements) and all guarantees with respect thereto, provided that in no event shall Superior Indebtedness include any amount due in respect of (a) the Senior Subordinated Notes, (b) any Indebtedness which is expressly made equal or subordinate in right of payment to the Senior Subordinated Notes or (c) any Indebtedness for goods, materials or services purchased in the ordinary course of business. 1.2. Subordinated Indebtedness Subordinated to Superior Indebtedness; No Amendments. (a) The Obligor for itself and its successors and assigns, and for its Subsidiaries and the successors and assigns of such Subsidiaries, covenants and agrees, and each holder of any Subordinated Indebtedness, by its acceptance thereof, shall be deemed to have agreed, notwithstanding anything to the contrary in this Note or any of the other Operative Documents, that the payment of the Subordinated Indebtedness shall be subordinated and junior in right of payment to the extent and in the manner set forth in this section 1, to the prior payment in full in cash or cash equivalents of all Superior Indebtedness, and that each holder of Superior Indebtedness, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Superior Indebtedness in reliance upon the provisions contained in this section 1. No present or future holder of Superior Indebtedness shall be prejudiced in the right to enforce the subordination of the Subordinated Indebtedness effected pursuant to this section 1 by any act or failure to act on the part of the Obligor. 132 (b) Neither this section 1 nor any of the terms of the Subordinated Indebtedness relating to the timing or amount of any payment (or prepayment) of the principal of or premium, if any, or interest on the Subordinated Indebtedness, shall be amended without the written consent of the holder or holders of at least 66-2/3% in aggregate principal amount of the Superior Indebtedness at the time outstanding. (c) Unless and until the Superior Indebtedness has been paid in full in cash or cash equivalents, the Obligor shall not grant to the holders of the Subordinated Indebtedness any Lien in or on any of the assets of the Obligor to secure the Subordinated Indebtedness without the written consent of the holder or holders of not less than 66-2/3% in aggregate principal amount of the Superior Indebtedness at the time outstanding. 1.3. Dissolution, Liquidation, Reorganization, etc. Upon any payment or distribution of the assets of the Obligor (or any of its Subsidiaries) of any kind or character, whether in cash, property or securities, to creditors upon any dissolution, winding-up, total or partial liquidation, reorganization, composition, arrangement, adjustment or readjustment of the Obligor (or any of its Subsidiaries) or its (or their) securities, whether voluntary or involuntary, or in bankruptcy, insolvency, reorganization, liquidation or receivership proceedings, or upon a general assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of the Obligor (or any of its Subsidiaries), or otherwise (hereinafter a "Liquidation Payment"), then and in any such event: (a) the holders of the Superior Indebtedness shall be entitled to receive payment in full in cash or cash equivalents (or to have such payment duly provided for in cash or cash equivalents in a manner reasonably satisfactory to the holders of Superior Indebtedness) of all amounts due or to become due on or in respect of all Superior Indebtedness, before any Liquidation Payment, whether in cash, property or securities (other than Permissible Securities), is made on account of or applied to the Subordinated Indebtedness; (b) the Subordinated Indebtedness shall forthwith become due and payable, and any Liquidation Payment, whether in cash, property or securities (other than Permissible Securities), to which the holders of the Subordinated Indebtedness would be entitled except for the provisions of this section 1, shall be paid or delivered by any debtor, custodian, liquidating trustee, agent or other Person making such Liquidation Payment, directly to the holders of the Superior Indebtedness, or their representative or representatives, ratably according to the aggregate amounts remaining unpaid on account of the Superior Indebtedness, for application to the payment thereof, to the extent necessary to pay the Superior Indebtedness in full in cash or cash equivalents after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such Superior Indebtedness; (c) each holder of the Subordinated Indebtedness at the time outstanding hereby irrevocably authorizes and empowers each holder of the Superior Indebtedness or such holder's representative to collect and receive such holder's ratable share of any Liquidation Payment and to receipt therefor, and, if any holder of Subordinated Indebtedness fails to file a claim therefor at least ten (10) calendar days prior to the date established by rule of law or order of court for such filing, to file and prove (but not to vote) such claim therefor, provided that such holder of Superior Indebtedness shall 133 concurrently send written notice thereof to each holder of Subordinated Indebtedness together with a copy of the proof of claim so filed; and (d) the holders of the Subordinated Indebtedness shall execute and deliver to the holders of the Superior Indebtedness or their representative or representatives all such further instruments confirming the above authorization and all such powers of attorney, proofs of claim, assignments of claim and other instruments, and shall take all such other action, as may be reasonably requested by the holders of the Superior Indebtedness or such representative or representatives, to enforce such claims and to carry out the purposes of this section 1. Upon any payment or distribution of assets referred to in this section 1, the holders of the Subordinated Indebtedness shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such bankruptcy, insolvency, reorganization, liquidation, receivership or other proceeding is pending, or a certificate of the debtor, custodian, liquidating trustee, agent or other Person making any such payment or distribution to such holders, for the purpose of ascertaining the Persons entitled to participate therein, the holders of the Superior Indebtedness, the then outstanding principal amount of the Superior Indebtedness and any and all amounts payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this section 1. 1.4. No Payments With Respect to Subordinated Indebtedness in Certain Circumstances. (a) The Obligor will not, and will not permit any of its Subsidiaries to, directly or indirectly, make or agree to make, and neither the holder nor any assignee or successor holder of any Subordinated Indebtedness will accept or receive any payment or distribution (in cash, property or securities (other than Permissible Securities) by set-off or otherwise), direct or indirect, of or on account of the Subordinated Indebtedness if, at the time of such payment or distribution, such payment or distribution is prohibited by Section 7.1 of the Fleet Bank Agreement or is made in contravention of the payment rights in respect of the Superior Indebtedness set forth in Section 2.5 of the Fleet Bank Agreement or if, at the time of such payment or distribution or immediately after giving effect thereto: (i) a default in the payment when due of all or any portion of the principal of or premium, if any, or interest on any Superior Indebtedness or of any other amount (including any fee, expense or indemnification payment) due in respect thereof shall have occurred (a "Payment Default"); or (ii) all of the following four conditions shall exist: (A) a default other than a Payment Default shall have occurred with respect to any Superior Indebtedness which permits the holder or holders thereof to immediately accelerate the maturity thereof (a "Covenant Default"); and (B) the Obligor and the holder or holders of Subordinated Indebtedness shall have received written notice (given as provided in the Securities Purchase Agreements) (each a "Subordination Notice") of such 134 Covenant Default from the requisite holder or holders of the Superior Indebtedness, or their representative or representatives (which notice shall state that it is a "Subordination Notice" and shall make explicit reference to the provisions of this section 1.4(a)(ii)); and (C) such Covenant Default shall not have been cured by the Obligor pursuant to the provisions of the agreements governing such Superior Indebtedness or waived in writing by the requisite holder or holders of the Superior Indebtedness with respect to which such Covenant Default shall have occurred; and (D) less than 180 days shall have elapsed after the date of receipt by the Obligor and the holders of the Subordinated Indebtedness of such Subordination Notice (any period during which the restrictions imposed by this section 1.4(a)(ii) are in effect being hereinafter referred to as a "Blockage Period"); provided, however, that, for the purpose of this section 1.4(a)(ii), (1) Blockage Periods shall not be in effect for more than an aggregate of 180 days during any period of 365 consecutive days, (2) Blockage Periods shall not be in effect on more than three occasions for an aggregate of 180 days during any period of 365 consecutive days, and (3) no facts or circumstances known to the holders of Superior Indebtedness giving any Subordination Notice on the date any Subordination Notice is given may be used or shall be effective as a basis for any subsequent Subordination Notice. (b) The restrictions imposed by section 1.4(a) shall cease to apply and the Obligor may resume payments in respect of the Subordinated Indebtedness (including any payments which shall not have been made on account of the provisions of this section 1, but excluding any payments which may have become due upon any acceleration of the maturity of the Subordinated Indebtedness) or any judgment with respect thereto upon the earliest to occur of (i) the cure of the Payment Default or Covenant Default by the Obligor pursuant to the provisions of the agreements governing such Superior Indebtedness, (ii) the written waiver thereof by the requisite holder or holders of the Superior Indebtedness with respect to which such Payment Default or Covenant Default shall have occurred or (iii) in the case of a Covenant Default, (A) the expiration of the applicable Blockage Period or (B) the termination of such Blockage Period by such requisite holder or holders of such Superior Indebtedness. (c) In the event of either (i) the failure of the Obligor to pay the principal of and interest and premium, if any, on any Superior Indebtedness upon the maturity thereof or any other amount (including any fee, expense or indemnification payment) due in respect thereof or (ii) an acceleration of the maturity of the principal of any Superior Indebtedness in accordance with the terms thereof (which acceleration has not been rescinded or annulled), such Superior Indebtedness shall first be paid in full in cash or cash equivalents (or provision for such payment in cash or cash equivalents shall be made in a manner reasonably satisfactory to the holder or holders of such Superior Indebtedness) before any payment or distribution (in cash, properties or securities (other than Permissible Securities), by set-off or otherwise) is made on account of or applied to the Subordinated Indebtedness. 135 (d) Nothing herein shall affect or impair the right of any holder of any Senior Subordinated Notes to apply any amount payable in respect thereof to the payment of any amount due upon the exercise of any Warrants at any time. 1.5. Payments and Distributions Received. If any payment or distribution of any kind or character, whether in cash, property or securities (other than Permissible Securities), shall be received by any holder of any of the Subordinated Indebtedness in contravention of this section 1, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Superior Indebtedness, or their representative or representatives, ratably according to the aggregate amount remaining unpaid on account of such Superior Indebtedness, for application to the payment of the Superior Indebtedness, to the extent necessary to pay all such Superior Indebtedness in full in cash or cash equivalents, after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such Superior Indebtedness. In the event of the failure of any holder of any of the Subordinated Indebtedness to endorse or assign any such payment or distribution, any holder of the Superior Indebtedness or such holder's representative is hereby irrevocably authorized to endorse or assign the same. 1.6. Subrogation. Subject to the payment in full of all Superior Indebtedness in cash or cash equivalents, in case cash, property or securities otherwise payable or deliverable to the holders of the Subordinated Indebtedness shall have been applied pursuant to this section 1 to the payment of Superior Indebtedness, then and in each such case, the holders of the Subordinated Indebtedness shall be subrogated to the rights of each holder of Superior Indebtedness to receive any further payment or distribution in respect of or applicable to the Superior Indebtedness; and, for the purposes of such subrogation, no payment or distribution to the holders of Superior Indebtedness of any cash, property or securities to which any holder of Subordinated Indebtedness would be entitled except for the provisions of this section 1 shall, and no payment over pursuant to the provisions of this section 1 to the holders of Superior Indebtedness by the holders of the Subordinated Indebtedness shall as between the Obligor, its creditors other than the holders of Superior Indebtedness and the holders of Subordinated Indebtedness, be deemed to be a payment by the Obligor to or on account of Superior Indebtedness. 1.7. Certain Notices. In the event that (a) any Superior Indebtedness or Subordinated Indebtedness shall be transferred and/or shall become due and payable before the expressed maturity thereof as the result of the occurrence of a default or any event of default or (b) any term or provision of any agreement, document or instrument related to the Superior Indebtedness or Subordinated Indebtedness shall be amended, modified or supplemented, or compliance therewith waived, the Obligor will give immediate written notice in writing of such event to each holder of Subordinated Indebtedness and Superior Indebtedness (together with copies of all related agreements, documents and instruments). Each notice of any transfer of any Superior Indebtedness or Subordinated Indebtedness shall include the name and address of the applicable transferee for purposes of this section 1. The holder or holders of Superior Indebtedness shall be obligated to give a Subordination Notice (as defined in section 1.4) to a holder of Subordinated Indebtedness other than the initial holders thereof only if the holder or holders of Superior Indebtedness shall have been furnished written notice of such other holder's address for purposes of this section 1. No holder of Subordinated Indebtedness shall be obligated to give any notice under section 1.11 to any holder of Superior Indebtedness unless such holder of Subordinated Indebtedness shall have been furnished written notice of the address of such holder of Superior Indebtedness for purposes of this section 1. All notices to the holders of the Superior 136 Indebtedness arising under the credit facility established by Fleet Bank Agreement shall be sent to: Fleet National Bank, One Landmark Square, Stamford, Connecticut 06901, Attention: Frederick A. Meagher. 1.8. Subordination Not Affected, etc. The terms of this section 1, the subordination effected hereby and the rights created hereby of the holders of the Superior Indebtedness shall not be affected by (a) any amendment or modification of or supplement to any Superior Indebtedness (or any renewal, extension, refinancing or refunding thereof) or any agreement, document or instrument relating thereto to the extent not prohibited by the Securities Purchase Agreements, (b) any exercise or non-exercise of any right, power or remedy under or in respect of any Superior Indebtedness (or any security or collateral therefor) or pursuant to any agreement, document or instrument relating thereto or (c) any waiver, consent, release, indulgence, delay or other action, inaction or omission, in respect of any Superior Indebtedness (or any security or collateral therefor) or pursuant to any agreement, document or instrument relating thereto, whether or not any holder of any Subordinated Indebtedness shall have had notice or knowledge of any of the foregoing. 1.9. Obligations Unimpaired. The provisions of this section 1 are solely for the purpose of defining the relative rights of the holders of Superior Indebtedness on the one hand and the holders of Subordinated Indebtedness on the other hand, and (a) subject to the rights, if any, under this section 1 of the holders of Superior Indebtedness, nothing in this section 1 shall (i) impair as between the Obligor and the holder of any Subordinated Indebtedness the obligation of the Obligor, which is unconditional and absolute, to pay to the holder thereof all amounts due thereon in accordance with the terms thereof or (ii) except as otherwise provided in section 1.11, prevent the holder of any Subordinated Indebtedness from exercising all remedies available to such holder, whether arising under the Operative Documents, applicable law or otherwise, and (b) no Person is entitled to any third party beneficiary rights or other similar rights on account of or under this section 1 other than the holders of the Superior Indebtedness. The failure to make any payment due in respect of the Subordinated Indebtedness or to comply with any of the terms and conditions of any of the agreements, documents and instruments related to the Subordinated Indebtedness by reason of any provision of this section 1 shall not be construed as preventing the occurrence of any Default or Event of Default with respect to the Subordinated Indebtedness. 1.10. Holders of Subordinated Indebtedness Entitled to Assume Payments Not Prohibited in Absence of Notice. No holder of Subordinated Indebtedness shall at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment to it, unless and until such holder shall have received written notice thereof (given as provided in the Securities Purchase Agreements) from the Obligor or from any holder of Superior Indebtedness or any agent or representative thereof. Prior to the receipt of any such notice, each holder of Subordinated Indebtedness shall be entitled to assume conclusively that no such facts exist, without, however, limiting any right of any holder of Superior Indebtedness under this section 1 to recover from any holder of the Subordinated Indebtedness any payment made in contravention of this section 1 (including, without limitation, any such payment made in violation of Section 7.1 of the Fleet Bank Agreement or in contravention of the payment rights in respect of the Superior Indebtedness set forth in Section 2.5 of the Fleet Bank Agreement). Each payment on the Subordinated Indebtedness by the Obligor shall be deemed to constitute a representation of the Obligor that such payment is permitted to be paid by the Obligor under this section 1. 137 Each holder of Subordinated Indebtedness shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Superior Indebtedness or to be the agent or representative of any holder of Superior Indebtedness to establish that such notice has been given by any such Person. In the event that such holder of Subordinated Indebtedness determines in good faith that further evidence is required with respect to the right of any such Person to participate in any payment or distribution pursuant to this section 1, such holder of Subordinated Indebtedness may request such Person to furnish evidence to the reasonable satisfaction of such holder of Subordinated Indebtedness as to any fact pertinent to the rights of such Person under this section 1, and if such evidence is not furnished, such holder of Subordinated Indebtedness may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 1.11. Limitation on Right of Action. Notwithstanding anything to the contrary contained in this Note or any of the other Operative Documents, including, without limitation, the rights of the holders of Subordinated Indebtedness under section 2.2 of this Note and sections 9.4 and 16 of the Securities Purchase Agreements, the holders of the Subordinated Indebtedness agree that, if any Superior Indebtedness is outstanding, the holders of the Subordinated Indebtedness will not accelerate any of the Subordinated Indebtedness or take any other enforcement action with respect to the Subordinated Indebtedness, unless: (a) the holder or holders of any Superior Indebtedness shall have accelerated the Superior Indebtedness or shall have foreclosed upon any collateral securing the same; (b) a proceeding under the Bankruptcy Code or any similar state statute or law (including any law providing for the appointment of a receiver or other similar official) shall have been commenced by or against the Obligor by Persons other than the holders of the Subordinated Indebtedness; or (c) not less than 10 days prior to accelerating any of the Subordinated Indebtedness or taking any other enforcement action with respect to the Subordinated Indebtedness, the holders of Subordinated Indebtedness shall have given each holder of Superior Indebtedness written notice of the same, which notice shall specify in reasonable detail the default on the basis of which the holders of the Subordinated Indebtedness shall take any enforcement action and the enforcement action that the holders of Subordinated Indebtedness then intend to take (each an "Enforcement Notice"); (d) in the event that a Blockage Period shall have commenced during the 10-day period subsequent to delivery of an Enforcement Notice, such Blockage Period shall have expired or been terminated by the requisite holder or holders of the Superior Indebtedness; or (e) the Superior Indebtedness shall have been paid in full in cash or cash equivalents and all commitments of the holder or holders of the Superior Indebtedness shall have been terminated. In the event that the holders of the Subordinated Indebtedness shall have accelerated the Subordinated Indebtedness solely based upon an acceleration of the Superior Indebtedness and the holder or holders of the Superior Indebtedness shall thereafter rescind such acceleration, the holders of the Subordinated Indebtedness shall likewise rescind their acceleration of the Subordinated Indebtedness. 138 1.12 Notices to Holders of Subordinated Indebtedness. Notwithstanding my provision to the contrary herein or in any other Operative Documents, any notice required or permitted hereby to be given by the holder or holders of the Superior Indebtedness to the holders of the Subordinated Indebtedness which are members of the MassMutual Group shall be deemed to have been properly given if given solely to Massachusetts Mutual Life Insurance Company acting on behalf of all holders of the Subordinated Indebtedness which are members of the MassMutual Group and in the manner provided in the Securities Purchase Agreements. 2. Provisions Concerning Capitalized Interest. 2.1. Option of the Obligor to Capitalize a Portion of Interest. During the period commencing on the date of this Note and ending on the earlier to occur of the Warrant Exchange or April 17, 2003, the Obligor may, at its option (upon notice as provided in section 2.2), in lieu of paying cash, pay up to 7/19th of the amount of interest which is due and payable on this Note on any regularly scheduled interest payment date (the portion of interest that is not so paid in cash on any regularly scheduled interest payment date being hereinafter referred to as the "Capitalized Interest") by increasing the principal amount of this Note, as of such regularly scheduled interest payment date (any such date on and as of which the principal amount shall be so increased being referred to as an "Adjustment Date"), by an amount equal to the Capitalized Interest, provided that (a) the Obligor exercises such option proportionately with respect to all of the Notes then outstanding and (b) on such regularly scheduled interest payment date, the Obligor pays in cash in full all interest (other than interest that is capitalized pursuant to this section 2) which is due and payable on such date on all of the Notes then outstanding. If the Obligor shall, in accordance with the terms of this section 2, exercise such option, then, from and after each Adjustment Date, the outstanding principal amount of each Note shall, without further action, be increased by an amount equal to the Capitalized Interest added thereto as of such Adjustment Date. 2.2. Notice from the Obligor. To exercise its option under section 2.1, the Obligor shall deliver to each holder of any Note not less than 10 or more than 30 days prior to an Adjustment Date, an Officers' Certificate which shall specify: (a) the applicable Adjustment Date; (b) (i) the portion of the interest which is due and payable on such Adjustment Date on the Notes to be treated as Capitalized Interest, (ii) the aggregate amount of Capitalized Interest to be added as of such Adjustment Date to the principal amount of the Notes then outstanding and (iii) the amount of Capitalized Interest to be added as of such Adjustment Date to the principal amount of each Note then held by such holder; (c) the aggregate amount of interest to be paid in cash on such Adjustment Date on all of the Notes then outstanding and the amount of interest to be paid in cash on such Adjustment Date with respect to each Note then held by such holder; (d) the aggregate principal amount of the Notes then outstanding and the principal amount of each Note then held by such holder, in each case both before and after giving effect to the adjustments to be made as of such Adjustment Date; 139 (e) the aggregate amount of each interest payment to be made on and after such Adjustment Date on all of the Notes then outstanding (if paid entirely in cash) and the amount of each such interest payment on each Note then held by such holder; and (f) in reasonable detail, all computations made in determining the foregoing. In the absence of manifest error, the computations set forth in such Officers' Certificate shall be deemed final binding and conclusive upon the Obligor and the holders of the Notes, unless, in any case, the Required Holders of the Notes shall notify the Obligor in writing of their objection (in reasonable detail) to any portion of such Officers' Certificate within 30 days of the date upon which such Officers' Certificate was furnished to the holders of the Notes. In such event, the Obligor shall, at its expense, within 15 days following the receipt of any such notice from the Required Holders of the Notes, deliver to the holders of the Notes a certificate signed by a firm of independent certified public accountants of recognized national standing (which may be the regular auditors of the Obligor), setting forth in reasonable detail any adjustments which, in the opinion of such accountants, should be made to the amounts set forth in such Officers' Certificate in order for such amounts to be correct and consistent with the terms hereof and of the other Operative Documents and, in reasonable detail, all computations made in determining any such adjustments. The certificate of any such firm of accountants shall be conclusive evidence of the correctness of such amounts under this section 2.2. 2.3 Limitations on the Option of the Obligor to Capitalize Interest. Notwithstanding anything to the contrary contained in this section 2, the Obligor may not capitalize any interest pursuant to the provisions of this section 2 on any Adjustment Date if on such Adjustment Date any Default or Event of Default shall have occurred and be continuing. 3. General. 3.1. Registered Notes, etc. This Note is in registered form and is transferable only by surrender hereof at the principal executive office of the Obligor as provided in the Securities Purchase Agreements. The Obligor may treat the person in whose name this Note is registered on the Note register maintained at such office pursuant to the Securities Purchase Agreements as the owner hereof for all purposes, and the Obligor shall not be affected by any notice to the contrary. 3.2. Events of Default, etc. In case an Event of Default, as defined in the Securities Purchase Agreements, shall occur and be continuing, the unpaid balance of the principal of this Note may be declared and become due and payable in the manner and with the effect provided in the Securities Purchase Agreements. Reference is hereby made to section 16.1 of the Securities Purchase Agreements for certain provisions requiring the holder or holders of the Notes to endeavor to furnish copies to the holder or holders of Superior Indebtedness of any notice given to the Obligor by the holder or holders of the Notes pursuant to section 16.1 of the Securities Purchase Agreements. 3.3. Certain Waivers. The parties hereto, including the makers and all guarantors and endorsers of this Note, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance or enforcement of this Note. 140 3.4. Governing Law. This Note shall be construed in accordance with and governed by the domestic substantive laws of The Commonwealth of Massachusetts without giving effect to any choice of law or conflicts of law provision or rule that would cause the application of domestic substantive laws of any other jurisdiction. [The remainder of this page is intentionally left blank.] 141 IN WITNESS WHEREOF, the Obligor has executed this Note as an instrument under seal as of the date first above written. TRIDEX CORPORATION By (Title) TRIDEX NC, INC. By (Title) ULTIMATE TECHNOLOGY CORPORATION By (Title) 142 FORM OF ASSIGNMENT [To be signed only upon transfer of Note] For value received, the undersigned hereby sells, assigns and transfers unto the within Note, and appoints Attorney to transfer such Note on the books of TRIDEX CORPORATION, TRIDEX NC, INC. and ULTIMATE TECHNOLOGY CORPORATION with full power of substitution in the premises. Date: , --------------------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Note) Signed in the presence of - ---------------------------- 143 EX-10.1 6 EX. 10.1 EXHIBIT 10.1 CREDIT AGREEMENT Dated as of April 17, 1998 among TRIDEX CORPORATION, PROGRESSIVE SOFTWARE, INC., ULTIMATE TECHNOLOGY CORPORATION TRIDEX NC, INC. and FLEET NATIONAL BANK 144 CREDIT AGREEMENT dated as of April 17, 1998 among TRIDEX CORPORATION, a Connecticut corporation ("Tridex"), PROGRESSIVE SOFTWARE, INC., a North Carolina corporation ("PSI"), ULTIMATE TECHNOLOGY CORPORATION, , a New York corporation ("UTC"), TRIDEX NC, INC., a North Carolina corporation ("Tridex NC", and collectively, together with Tridex, UTC and PSI, the "Borrowers" and each individually a "Borrower"), and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States of America (the "Bank"). WHEREAS, the Borrowers desire that the Bank extend credit as provided herein and the Bank is prepared to extend such credit; and WHEREAS, the Borrowers are and will be operated on an integrated basis in connection with their respective financial resources and each of the Borrowers will receive direct and indirect economic and financial benefits from the credit to be extended under this Agreement, and each of the Borrowers acknowledges that the Bank would not provide the financing hereunder but for the joint and several obligations of each such Borrower hereunder with respect to all such indebtedness incurred hereunder. NOW THEREFORE, in consideration of the foregoing, which is incorporated by reference, and other valuable consideration, receipt of which is acknowledged, the parties, intending to be legally bound, agree as follows: ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS Section Definitions. As used in this Agreement, the following terms have the following meanings (terms defined in the singular to have a correlative meaning when used in the plural and vice versa): "Affiliate" means any Person: (a) which directly or indirectly controls, or is controlled by, or is under common control with, any Borrower or any of their respective Subsidiaries; (b) which directly or indirectly beneficially owns or holds five percent or more of any class of voting stock of any Borrower or any of their respective Subsidiaries; (c) five percent or more of the voting stock of which is directly or indirectly beneficially owned or held by any Borrower or any of their respective Subsidiaries; or (d) which is a partnership in which any Borrower or any of their respective Subsidiaries is a general partner. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. "Agreement" means this Credit Agreement, as amended or supplemented from time to time. References to Articles, Sections, Exhibits, Schedules and the like refer to the Articles, Sections, Exhibits, Schedules and the like of this Agreement unless otherwise indicated. "Amortization Date" means the last day of each calendar quarter, commencing on June 30, 1998, up to (and including) the Termination Date, provided that if any such day is not a Banking Day, such day shall be the next succeeding Banking Day. "Banking Day" means, a day on which commercial banks settle payments in (i) New York or London if the payment obligation is calculated by reference to any LIBO Rate, or (ii) New York, if the payment obligation is calculated by reference to the Prime Rate. 145 "Borrowing" means any Loan requested by any Borrower hereunder. "Borrowing Base" means an amount equal to the sum of (a) 80% of Eligible Receivables, and (b) 50% of Eligible Inventory , provided, however, in no event shall the aggregate amount under clause (b) exceed $3,500,000. Unless the Bank shall otherwise determine, the Borrowing Base as of any date shall be the Borrowing Base set forth on the most current Borrowing Base Certificate certified and delivered by the Borrower pursuant to either Section 6.8 or Section 4.2. If, at any time, the Borrowing Base shall exceed the Commitment, for purposes of this Agreement the Borrowing Base shall be deemed to be equal to the Commitment. "Borrowing Base Certificate" means a certificate substantially in the form of Exhibit B hereto or such other form agreed to in writing by the Bank and the Borrower. "Capital Lease" means any lease which has been or should be capitalized on the books of the lessee in accordance with GAAP. "Change of Control" means any one or more of the following events: (a) the failure by Seth Lukash to remain active in the day to day senior management of Tridex; or (b) the stockholders of any Borrower shall approve a plan or proposal for the acquisition of, merger, liquidation or dissolution of such Borrower, or a sale of more than 25% of its assets in one or a series of related transactions (other than the proposed merger of Tridex NC into PSI; or (c) a Person or group of Persons acting in concert (other than the direct or indirect beneficial owners of the capital stock of any Borrower as of the date of this Agreement) shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the direct or indirect beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended from time to time) of securities of such Borrower representing 25% or more of the combined voting power of the outstanding voting securities for the election of directors or shall have the right to elect a majority of the board of directors of such Borrower. "Closing Date" means the date this Agreement has been executed by the Borrowers and the Bank. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitments" means the Term Loan Commitment and the Working Capital Commitment. "Consolidated Subsidiary" means any Subsidiary whose accounts are or are required to be consolidated with the accounts of a Person in accordance with GAAP. "Current Assets" of any Person at any time means all cash, Receivables and Inventory of such Person. "Current Funded Bank Debt" means, with respect to any Person, all Debt of such Person for money borrowed, other than Subordinated Debt. 146 "Current Liabilities" means all liabilities of a Person treated as current liabilities in accordance with GAAP, including without limitation (a) all obligations payable on demand or within one year after the date in which the determination is made and (b) installment and sinking fund payments required to be made within one year after the date on which determination is made, but excluding all such liabilities or obligations which are renewable or extendible at the option of such Person to a date more than one year from the date of determination. "Debt" means, with respect to any Person: (a) indebtedness of such Person for borrowed money; (b) indebtedness for the deferred purchase price of property or services (except trade payables in the ordinary course of business); (c) Unfunded Benefit Liabilities of such Person; (d) the face amount of any outstanding letters of credit issued for the account of such person; (e) obligations arising under acceptance facilities; (f) guaranties, endorsements (other than for collection in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss, including any contingent obligations under swaps, derivatives, currency exchanges and similar transactions; (g) obligations secured by any Lien on property of such Person; and (h) obligations of such Person as lessee under Capital Leases. "Default" means any event which with the giving of notice or lapse of time, or both, would become an Event of Default. "Default Rate" means, with respect to the principal of any Loan and, to the extent permitted by law, any other amount payable by the Borrowers under this Agreement or the Notes that is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period from and including the due date, to, but excluding the date on which such amount is paid in full equal to two percentage points above the Prime Rate as in effect from time to time plus the applicable Margin (provided that, if the amount so in default is principal of a LIBOR Loan and the due date thereof is a day other than the last day of the Interest Period therefor, the "Default Rate" for such principal shall be, for the period from and including the due date and to but excluding the last day of the Interest Period therefor, two percentage points above the interest rate for such Loan as provided in Section 2.10 hereof and, thereafter, the rate provided for above in this definition). "Dollars" and the sign "$" mean lawful money of the United States of America. "EBIT" means, for any Person, for any period, earnings before Interest Expense and taxes for such Person determined in accordance with GAAP. "EBITDA" means, for any Person, for any period, earnings before Interest Expense, taxes, depreciation, amortization and extraordinary items for such Person determined in accordance with GAAP. "Eligible Inventory" means, as of any date of determination thereof, all Inventory (valued at the lower of cost or its net realizable value as determined using GAAP) owned by the Borrowers, but excluding (a) all Inventory in which the Bank does not have a first perfected security interest, subject to no other Lien prior to or on a parity with such security interest, (b) all Inventory for which warehouse receipts or documents of title have been issued, unless the same are delivered to the Bank, and (c) all other Inventory deemed ineligible by the Bank because of any circumstance that could, in the Bank's judgment, reasonably exercised, adversely affect the quality of such Inventory as collateral security. Notwithstanding the preceding sentence, "Eligible Inventory" shall not include any Inventory not located at premises owned by or leased 147 to or contracted to a Borrower, unless such Inventory is in transit (and insured) or such Borrower has made a formal financing statement filing against the consignee of such Inventory and has given any party claiming of record a security interest in such consignee's Inventory, or other assets that might include such Inventory, notice of such Borrower's consignment arrangements with such consignee or has taken equivalent protective steps satisfactory to the Bank. "Eligible Receivables" means, as of any date of determination thereof, all Receivables of the Borrowers net of the Borrowers' customary reserves, discounts, credits, returns, rebates, allowances or set-offs, excluding the following: (i) any Receivable unpaid for 90 or more days from the date of the original invoice; (ii) any Receivable evidenced by chattel paper or an instrument of any kind unless such chattel paper or instrument is pledged and delivered to the Bank or unless the total amount of such Receivables at any one time does not exceed 5% of total Eligible Receivables at such time; (iii) any Receivable which is owed by an account debtor which is insolvent or the subject of any bankruptcy or insolvency proceedings of any kind or of any other proceeding or action, which might have an adverse effect on the business of such account debtor; (iv) all Receivables deemed uncollectable by a Borrower or turned over to collection agencies or outside collection attorneys; (v) any Receivable which is not a valid, legally enforceable obligation of the account debtor or is subject to any present or contingent, or any fact exists which is the basis for any future, offset or counterclaim or other defense on the part of such account debtor; (vi) any Receivable not evidenced by an invoice or other documentation in form reasonably acceptable to the Bank; (vii) any Receivable which arises out of any transaction between (A) any Borrower and (B) any Subsidiary or any Affiliate or any other Borrower; (viii) any Receivable which is subject to any provision prohibiting its assignment or requiring notice not theretofor given of or consent not theretofor obtained to such assignment; (ix) all Receivables from customers having their place of business outside of the United States of America, except for such Receivables backed by either (A) letters of credit denominated in Dollars issued to a Borrower by banks acceptable to the Bank or (B) credit insurance policies acceptable to the Bank; (x) all Receivables arising out of or in connection with advance billings of a customer's requirements of supplies over a period of time, but only to the extent that such Receivables exceed 10% of all Eligible Receivables; (xi) all Receivables that do not conform to the representations and warranties contained in Article 2 of the Security Agreement; 148 (xii) all Receivables in which the Bank does not have a first perfected security interest, subject to no other Lien prior to or on a parity with such security interest; (xiii) all Receivables not denominated in Dollars; (xiv) all Receivables from an account debtor if more than 50% of the aggregate Dollar amount of invoices billed with respect to such account debtor is more than 90 days past due according to the original terms of payment; (xv) if any account debtor owes greater than 20% of the Dollar value of total Receivables collectively owed to the Borrowers on a consolidated basis, then all Receivables owed by such account debtor in excess of such 20% limitation shall be ineligible; (xvi) any Receivable in respect of which the U.S. Government or any agency thereof is the account debtor; (xvii) any Receivable which is owed by an account debtor who has disputed liability or made any claim with respect to any other account due from such account debtor to a Borrower, except the foregoing exclusion shall not apply to any account debtor unless and until such disputed amounts equal or exceed twenty percent (20%) of the aggregate Dollar amount of accounts due from such account debtor; and (xviii) any Receivable which is determined by the Bank, in the exercise of its reasonable judgment, to be ineligible for any other reason generally accepted in the commercial finance business as a reason for ineligibility. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, including any rules and regulations promulgated thereunder. "ERISA Affiliate" means any corporation or trade or business which is a member of any group of organizations (i) described in section 414(b) or (c) of the Code of which any Borrower is a member, or (ii) solely for purposes of potential liability under section 302(c)(11) of ERISA and section 412(c)(11) of the Code and the lien created under section 302(f) of ERISA and section 412(n) of the Code, described in section 414(m) or (o) of the Code of which any Borrower is a member. "Event of Default" has the meaning given such term in Section 9.1. "Excess Cash Flow" shall mean (i) excess cash flow of the Borrowers on a consolidated basis after all sources and uses of cash as shown on the Borrowers' consolidated annual audited statement of cash flows in respect of each fiscal year, minus (ii) the amount (if any) by which the outstanding principal amount of the Working Capital Loans as at the end of 149 such fiscal year exceeds the outstanding principal amount of the Working Capital Loans as at the end of the fiscal year immediately preceding such fiscal year. "Facility Documents" means this Agreement, the Notes, the Subordination Agreements, the Security Agreement, the Pledge Agreement and each of the documents, certificates or other instruments referred to in Article 4 hereof as well as any other document, instrument or certificate to be delivered by the Borrowers in connection with this Agreement or in connection with the documents, certificates or instruments referred to in Article 4, including documents delivered in connection with any Borrowing. "Fixed Charge Coverage Ratio" means, with respect to any Person, for any period, the ratio of (i) EBITDA minus cash taxes paid, dividends paid and any capital expenditures, to (ii) current maturities of long term Debt, plus Interest Expense, for such period. "Forfeiture Proceeding" means any action, proceeding or investigation affecting the Parent or any of its Subsidiaries or Affiliates before any court, governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or the receipt of notice by any such party that any of them is a suspect in or a target of any governmental inquiry or investigation, which may result in an indictment of any of them or the seizure or forfeiture of any of their property. "Funded Debt" means, with respect to any Person, all Debt (senior and subordinated) of such Person for money borrowed, including Capital Lease obligations. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the financial statements referred to in Section 5.5 (except for changes concurred in by the Borrowers' independent public accountants). "Interest Coverage Ratio" means, with respect to any Person, for any period, the ratio of (i) EBIT to (ii) Interest Expense for such period. "Interest Expense" shall mean, with respect to any Person, for any period, the sum, for such Person in accordance with GAAP, of (a) all interest on Debt that is accrued as an expense during such period (including, without limitation, imputed interest on Capital Lease obligations), plus (b) all amounts paid, accrued or amortized as an expense during such period in respect of interest rate protection agreements, minus (c) all amounts received or accrued as income during such period in respect of interest rate protection agreements. "Interest Period" means with respect to any LIBOR Loan, the period commencing on the date such Loan is made, converted from another type of Loan or renewed, as the case may be, and ending, as the Borrowers may select pursuant to Section 2.11, on the numerically corresponding day in the first, second, third, sixth (or if available through the Bank, the ninth or twelfth) calendar month thereafter, provided that each such Interest Period which commences on the last Banking Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Day of the appropriate calendar month. With respect to Prime Rate Loans, "Interest Period" means the period commencing on the date such Loan was made and ending on the Banking Day on which such Prime Rate Loan is repaid. 150 "Inventory" means all inventory, now or hereafter owned and wherever located, of the Borrowers, including (without limitation) raw materials, work-in-process, finished goods, supplies and packaging materials. "Lending Office" means the lending office of the Bank set forth on the signature page. "LIBO Rate" means, as applicable to any LIBOR Loan, the rate per annum (rounded upward, if necessary, to the nearest 1/32 of one percent) as determined on the basis of the offered rates for deposits in U.S. dollars, for a period of time comparable to such LIBOR Loan which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two London Banking Days preceding the first day of such LIBOR Loan; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR rate shall be the rate (rounded upwards as described above, if necessary) for deposits in dollars for a period substantially equal to the interest period on the Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that service for the purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day that is two (2) London Banking Days prior to the beginning of such interest period. If both the Telerate and Reuters system are unavailable, then the rate for that date will be determined on the basis of the offered rates for deposits in U.S. dollars for a period of time comparable to such LIBOR Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) London Banking Days preceding the first day of such LIBOR Loan as selected by the Bank. The principal London office of each of the four major London banks will be requested to provide a quotation of its U.S. dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European banks for a period of time comparable to such LIBOR Loan offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that its two London Banking Days preceding the first day of such LIBOR Loan. In the event that Bank is unable to obtain any such quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR Loan cannot be determined. In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Requirement with respect to LIBOR deposits of the Bank then for any period during which such Reserve Requirement shall apply, LIBO Rate shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Requirement. "LIBOR Loan" means any Loan when and to the extent the interest rate therefor is determined on the basis of the definition "LIBO Rate." "Lien" means any lien (statutory or otherwise), security interest, mortgage, deed of trust, priority, pledge, negative pledge, charge, conditional sale, title retention agreement, financing lease or other encumbrance or similar right of others, or any agreement to give any of the foregoing. "Loan" means any of the Term Loan or the Working Capital Loans, and "Loans" means the Term Loan and the Working Capital Loans. 151 "Margin" means the percentage points to be added to the Bank's Prime Rate or the then applicable LIBOR Rate, in each case based upon the following performance criteria: 152
Prime Rate LIBOR Margin Margin Senior Funded Debt/EBITDA (Percentage (Percentage of the Borrowers Points) Points) ---------------- ------- ------- Greater than or equal to 3.00 2.75 1.00 Less than 3.00, but greater than or 2.25 0.00 equal to 2.00 Less than 2.00, but greater than or 1.75 0.00 equal to 1.00 Less than 1.00 1.25 0.00
Notwithstanding the foregoing, the applicable Margins set forth above with respect to the LIBOR Rates will be reduced by .25 percentage points upon consummation of the Mass Mutual Transaction. "Mass Mutual Transaction" means a transaction pursuant to which Massachusetts Mutual Life Insurance Company and/or its affiliates acquire approximately 285,714 shares of the capital stock of Tridex, which shares shall be newly issued pursuant to an equity offering by Tridex. "Multiemployer Plan" means a Plan defined as such in section 3(37) of ERISA to which contributions have been made by the Borrowers or any ERISA Affiliate and which is covered by Title IV of ERISA. "Net Income (Loss)" of any Person for any period means the net income (loss) of such Person for such period determined in accordance with GAAP. "Net Income Increase" means, for any period, the aggregate of fifty percent (50%) of the Borrowers' Net Income, on a consolidated basis, in respect of such period. "Notes" means the Term Note and the Working Capital Note. "Notice of Borrowing" shall mean the notice of each Borrowing described in Section 2.8 and in the form of Exhibit E hereto. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Plan" means any employee benefit or other plan established or maintained, or to which contributions have been made, by any Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA, other than a Multiemployer Plan. 153 "Pledge Agreement" means the stock pledge agreement dated as of the Closing Date by Tridex in favor of the Bank, in substantially the form of Exhibit D. "Prime Rate" means that rate of interest from time to time announced by the Bank at its office located at 111 Westminster Street, Providence, Rhode Island 02903, which rate may not be the Bank's lowest or best rate. "Prime Rate Loan" means any Loan when and to the extent the interest rate therefor is determined in relation to the Prime Rate. "Receivables" means all accounts owing to a Person arising out of or in connection with the bona fide sale or lease of goods or services in the ordinary course of business. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulatory Change" means any change after the date of this Agreement in United States federal, state, municipal or foreign laws or regulations (including without limitation Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including the Bank of or under any United States, federal, state, municipal or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Reserve Requirement" means, for any Interest Period for any LIBOR Loan, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in Boston with deposits exceeding $1,000,000,000 against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the LIBO Rate for LIBOR Loans is to be determined as provided in the definition of "LIBO Rate" in this Section 1.1 or (ii) any category of extensions of credit or other assets which include LIBOR Loans. "Revolving Credit Termination Date" means June 30, 1999; provided that if such date is not a Banking Day, the Revolving Credit Termination Date shall be the next succeeding Banking Day (or, if such next succeeding Banking Day falls in the next calendar month, the next preceding Banking Day) or (b) the earlier date of termination of the Commitments pursuant to Section 9.2. "Security Agreement" means the security agreement dated as of the Closing Date by the Borrowers in favor of the Bank, in substantially the form of Exhibit C. "Senior Funded Debt" means for any Person at any time, all Funded Debt, other than Subordinated Debt. 154 "Senior Liabilities" means for any Person at any time, all Debt, other than contingent liabilities and Subordinated Debt. "Sub Debt Agreements" means collectively the agreements dated April 17, 1998 governing the $11,000,000 Subordinated Debt issued to Massachusetts Mutual Life Insurance Company and certain of its affiliates. "Subordinated Debt" means Funded Debt of a Person subordinated to the Loans on terms satisfactory to the Bank. "$11,000,000 Subordinated Debt" means the Subordinated Debt issued pursuant to and governed by the Sub Debt Agreements. "Subsidiary" means, with respect to any Person, any corporation or other entity of which at least a majority of the securities or other ownership interests having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by such Person. "Tangible Capital Base" means, for any Person, the sum of Tangible Net Worth plus Subordinated Debt. "Tangible Net Worth" means, at any date of determination thereof, the excess of total assets of a Person over total liabilities of such Person, excluding, however, from the determination of total assets: loans and advances to officers and non-consolidated Affiliates, goodwill, trademarks, patents, organizational costs, unamortized debt discounts and expenses and other like intangible assets as defined by GAAP. "Term Loan" shall have the meaning set forth in Section 2.1(b) herein. "Term Loan Commitment" means the obligation of the Bank to make the Term Loan under this Agreement in the aggregate principal amount of up to $12,000,000, as such amount may be reduced or otherwise modified from time to time. "Term Note" means the promissory note of the Borrowers in the form of Exhibit A1 hereto evidencing the Term Loan made by the Bank hereunder and all promissory notes delivered in substitution or exchange therefor, as amended or supplemented from time to time. "Termination Date" means March 31, 2003; provided that if such date is not a Banking Day, the Termination Date shall be the next succeeding Banking Date. "Total Liabilities" means all liabilities of a Person which would be classified as such on a balance sheet in accordance with GAAP. "Unfunded Benefit Liabilities" means, with respect to any Plan, the amount (if any) by which the present value of all benefit liabilities (within the meaning of section 4001(a)(16) of ERISA) under the Plan exceeds the fair market value of all Plan assets allocable to such benefit liabilities, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA for calculating the potential liability of the Borrowers or any ERISA Affiliate under Title IV of ERISA. "Working Capital Commitment" means the obligation of the Bank to make the Working Capital Loans under this Agreement in the aggregate principal amount of up to 155 $8,000,000, as such amount may be limited or reduced pursuant to Article 2 or otherwise modified from time. "Working Capital Loans" shall have the meaning set forth in Section 2.1(a) herein. "Working Capital Note" means the promissory note of the Borrowers in the form of Exhibit A2 hereto evidencing the Working Capital Loans made by the Bank hereunder and all promissory notes delivered in substitution or exchange therefor, as amended or supplemented from time to time. Section 1.1. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, and all financial data required to be delivered hereunder shall be prepared in accordance with GAAP. Section 1.2. Currency Equivalents. For all purposes of this Agreement, all amounts denominated in a currency other than Dollars shall be converted into the Dollar equivalent of such amounts. The equivalent in another currency of an amount in Dollars shall be determined at the rate of exchange quoted by Fleet National Bank in Boston at 9:00 a.m. (Boston time) on the date of determination, to prime banks in Boston for the spot purchase in the Boston foreign exchange market of such amount of Dollars with such other currency. ARTICLE 2. THE CREDIT Section 2.1. The Loans. (a) Subject to the terms and conditions of this Agreement, the Bank agrees to make revolving loans (the "Working Capital Loans") to the Borrowers from time to time from and including the date hereof to and including the Revolving Credit Termination Date, up to but not exceeding in the aggregate principal amount at any one time outstanding the amount of the Working Capital Commitment, and provided that the aggregate outstanding principal amount of Working Capital Loans shall at no time exceed the Borrowing Base. The Working Capital Loans may be outstanding as Prime Rate Loans or LIBOR Loans (each a "type" of Loan). The Working Capital Loans shall be due and payable on the Revolving Credit Termination Date. Each type of Loan shall be made and maintained at the Bank's Lending Office for such type of Loan. The Bank and the Borrowers hereby terminate that certain Amended and Restated Credit Agreement dated as of December 15, 1995, as amended, among Tridex, UTC and the Bank. (b) Subject to the terms and conditions of this Agreement, the Bank agrees to make a term loan (the "Term Loan") to the Borrowers on the date hereof in one advance in the principal amount of $12,000,000. Once so funded, the Term Loan may be outstanding in full or in part as Prime Rate Loans or LIBOR Loans (each a "type" of Loan) pursuant to the provisions of this Article 2. Principal on the Term Loan shall be payable in accordance with the following amortization schedule: First Year of Amortization: $300,000 per quarter, payable on June 30, 1998, September 30, 1998, December 31, 1998 and March 31, 1999. Second Year of Amortization: $450,000 per quarter, payable on June 30, 1999, September 30, 1999, December 31, 1999 and March 31, 2000. 156 Third Year of Amortization: $750,000 per quarter, payable on June 30, 2000, September 30, 2000, December 31, 2000 and March 31, 2001. Fourth Year of Amortization: $750,000 per quarter, payable on June 30, 2001, September 30, 2001, December 31, 2001 and March 31, 2002. Fifth Year of Amortization: $750,000 per quarter, payable on June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003. Each type of Loan shall be made and maintained at the Bank's Lending Office for such type of Loan. Section 2.2. The Notes. The Working Capital Loans shall be evidenced by a promissory note in favor of the Bank in the form of Exhibit A-2, dated the date of this Agreement, duly completed and executed by the Borrowers. The Term Loan shall be evidenced by a promissory note in favor of the Bank in the form of Exhibit A-1, dated the date of this Agreement, duly completed and executed by the Borrowers. Section 2.3. Purpose. The Borrowers shall use the proceeds of the Working Capital Loans for general corporate purposes, including working capital, leasehold improvements and equipment needs. In addition, up to $3,500,000 of the proceeds of the Working Capital Loans can be advanced to Tridex NC to fund a portion of the acquisition purchase price of PSI's stock, provided, however that in the event the Mass Mutual Transaction closes on or prior to the Closing Date, the aforesaid $3,500,000 amount will be reduced by the amount of the equity funds received by Tridex from the Mass Mutual Transaction. The proceeds of the Term Loan shall also be advanced to Tridex NC to fund a portion of the acquisition purchase price of PSI's stock. No proceeds of the Loans shall be used to directly or indirectly fund the needs of any Subsidiary of any Borrower if such Subsidiary is not also a Borrower hereunder. No proceeds of the Loans shall be used for the purpose, whether immediate, incidental or ultimate, of buying or carrying "margin stock" within the meaning of Regulation U. Section 2.4. Borrowing Procedures. The Borrowers shall give the Bank notice of each Borrowing to be made hereunder as provided in Section 2.8. Not later than 1:00 p.m. Hartford, Connecticut time on the date of such Borrowing, the Bank shall, subject to the conditions of this Agreement, make the amount of the Loan to be made by it on such day available to the Borrowers, in immediately available funds, by the Bank crediting an account of the Borrowers designated by the Borrowers and maintained with the Bank at the Lending Office. Section 2.5. Prepayments and Conversions. (a) Optional Prepayments and Conversions. The Borrowers shall have the right to make prepayments of principal, or to convert one type of Loan into another type of Loan, at any time or from time to time; provided that: (i) the Borrowers shall give the Bank notice of each such prepayment or conversion as provided in Section 2.8; and (ii) LIBOR Loans may be prepaid or converted only on the last day of an Interest Period for such Loans, unless the Borrowers compensate the Bank as required pursuant to Section 3.4 herein, and (iii) prepayments made in respect of the Term Loan shall be applied to the installments of principal in the inverse order of their maturities. (b) Mandatory Prepayments. The Borrowers shall immediately repay the excess by which the aggregate principal amount of all outstanding Working Capital Loans 157 exceeds the Working Capital Commitment. In addition, amounts outstanding under the Term Loan will be reduced from time to time by an amount equal to 50% of the annual consolidated Excess Cash Flow of the Borrowers and their subsidiaries. Payment of such Excess Cash Flow amounts shall be made within 30 days of the annual audited financial statements prepared on a consolidated basis of the Borrowers and be applied toward payments under the Term Loan in the inverse order of their maturities. In addition, 100% of the net cash proceeds from any sale by any of the Borrowers of any material assets outside of the normal course of business or from any new issuances of stock (other than pursuant to the Mass Mutual Transaction) otherwise permitted under this Agreement shall be utilized by the Borrowers to repay amounts under the Term Loan in the inverse order of their maturities. In addition, at such time, if any, as the Borrowers shall consummate the Mass Mutual Transaction, the net proceeds from such transaction shall first be utilized by the Borrowers to repay amounts outstanding as Working Capital Loans and thereafter will be utilized to repay amounts outstanding under the Term Loan in the inverse order of their maturities. In addition, upon the occurrence of any Change of Control, the Borrowers shall immediately, at the option of and upon demand by the Bank, repay all outstanding amounts under the Loans, and such amounts shall be repaid prior to making any payments on any Subordinated Debt. Each such prepayment in accordance with the foregoing provisions shall be applied first to any expenses incurred by the Bank, second to any interest due on the amount prepaid, and last to the outstanding principal amount of the Loans prepaid, in each case in such manner as provided above. (c) Yield Maintenance Fee. If, at any time (i) the interest rate on any Loan is a fixed rate, and (ii) the Bank in its sole discretion should determine that current market conditions can accommodate a prepayment request, Borrowers shall have the right at any time and from time to time to prepay the Loan in whole (but not in part), and Borrowers shall pay to the Bank a yield maintenance fee in an amount computed as follows: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the maturity date of the term chosen pursuant to the Fixed Rate Election as to which the prepayment is made, shall be subtracted from the "cost of funds" component of the fixed rate in effect at the time of prepayment. If the result is zero or a negative number, there shall be no yield maintenance fee. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amount shall be devided by 360 and multiplied by the number of the days remaining in the term chosen pursuant to the Fixed Rate Election as to which the prepayment is made. Said amount shall be reduced to present value calculated by using the number of days remaining in the designated term and using the above-referenced United States Treasury security rate and the number of days remaining in the term chosen shall be the yield maintenance fee due to the Bank upon prepayment of the fixed rate Loan. Each reference in this paragraph to "Fixed Rate Election" shall mean the election by Borrowers pursuant to Section 2.11 hereof. If by reason of an Event of Default the Bank elects to declare such Loan to be immediately due and payable, then any yield maintenance fee with respect to the Loan shall become due and payable in the same manner as though Borrowers had exercised such right of prepayment. Section 2.6. Late Charges. Payments not received within 10 days of the due date therefor (including payments which are incomplete due to there being insufficient funds in the Borrowers' operating accounts at the Bank) will be subject to a one-time charge equal to 5% of the amount overdue. 158 Section 2.7. Changes of Commitment. The Borrowers shall have the right to reduce or terminate the amount of the unused portion of the Working Capital Commitment at any time or from time to time, provided that: (i) the Borrowers shall give notice of each such reduction or termination to the Bank as provided in Section 2.8; and (ii) each partial reduction shall be in an aggregate amount at least equal to $500,000 (and integral multiples of $100,000 in excess thereof). Once reduced or terminated, such Working Capital Commitment may not be reinstated. Section 2.8. Certain Notices. Notices by the Borrowers to the Bank of each Borrowing pursuant to Section 2.4, and each prepayment or conversion pursuant to Section 2.5(a), and each reduction or termination of a Commitment pursuant to Section 2.7 shall be irrevocable and shall be effective only if received by the Bank not later than 12:00 noon Hartford, Connecticut time, and (a) in the case of Borrowings and prepayments of, conversions into and (in the case of LIBOR Loans) renewals of (i) Prime Rate Loans, given on the Banking Day thereof;; and (ii) LIBOR Loans, given two Banking Days prior thereto; and (b) in the case of reductions or termination of the Working Capital Commitment, given one Banking Day prior thereto. Each such Notice of Borrowing shall be in the form of Exhibit E hereto and shall specify the Loans to be borrowed, prepaid, converted or renewed and the amount (subject to Section 2.9) and type of the Loans to be borrowed, or converted, or renewed or prepaid and the date of the Borrowing or prepayment, or conversion or renewal (which shall be a Banking Day). Each such notice of reduction or termination shall specify the amount of the Commitment to be reduced or terminated. Section 2.9. Minimum Amounts. Except for Borrowings which exhaust the full remaining amount of the unused portion of either of the Commitments or prepayments or conversions which result in the prepayment or conversion of all Loans, as the case may be, of a particular type, each Borrowing, optional prepayment, conversion and renewal of principal of Loans of a particular type shall be in an amount at least equal to (a) $500,000 with respect to Prime Rate Loans, and (b) $500,000 and integral multiples of $100,000 in excess thereof with respect to LIBOR Loans (borrowings, prepayments, conversions or renewals of or into Loans of different types or, in the case of LIBOR Loans, having different Interest Periods at the same time hereunder to be deemed separate borrowings, prepayments, conversions and renewals for the purposes of the foregoing, one for each type of Interest Period). Section 2.10. Interest. (a) Interest shall accrue on the outstanding and unpaid principal amount of each Loan for the period from and including the date of such Loan to but excluding the date such Loan is due at the following rates per annum: (i) for Prime Rate Loans, at a variable rate per annum equal to the Prime Rate plus the Margin and; (ii) for LIBOR Loans, at a fixed rate equal to the LIBO Rate plus the Margin, for the period from and including the first day of the Interest Period therefore to but excluding the last day of such Interest Period. If the principal amount of any Loan and any other amount payable by the Borrowers hereunder or under the Notes shall not be paid when due (at stated maturity, by acceleration or otherwise), interest shall accrue on such amount to the fullest extent permitted by law from and including such due date to but excluding the date such amount is paid in full at the Default Rate for such type of Loan. (b) The interest rate on Prime Rate Loans shall change when the Prime Rate changes and interest on each such Loan shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Interest on each LIBOR Loan shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 159 (c) Accrued interest on all types of Loans shall be due and payable in arrears upon any payment of principal, in arrears on the last day of any Interest Period and on the last day of each calendar month, commencing May 31, 1998, and, with respect to Working Capital Loans, on the Revolving Credit Termination Date, and, with respect to the Term Loan, on the Termination Date; provided that interest accruing at the Default Rate shall be due and payable from time to time on demand of the Bank. Section 2.11. Interest Periods; Renewals. (a) In the case of each LIBOR Loan, the Borrowers shall select an Interest Period of any duration in accordance with the definition of Interest Period in Section 1.1, subject to the following limitations: (i) no Interest Period may extend beyond the Revolving Credit Termination Date, except with respect to the Term Loan for which no Interest Period may extend beyond an Amortization Date unless, after giving effect thereto, the aggregate principal amount of the LIBOR Loans having Interest Periods which end after such Amortization Date shall be equal to or less than the principal amount to be outstanding hereunder after such Amortization Date; (iii) notwithstanding clauses (i) and (ii) above, no Interest Period shall have a duration less than one month, and if any such proposed Interest Period would otherwise be for a shorter period, such Interest Period shall not be available; (iv) if an Interest Period would end on a day which is not a Banking Day, such Interest Period shall be extended to the next Banking Day; and (v) no more than five Interest Periods may be outstanding at any one time in respect of either the Term Loan or the Working Capital Loans. (b) Upon notice to the Bank as provided in Section 2.8, the Borrowers may renew any LIBOR Loan on the last day of the Interest Period therefor as the same type of Loan with an Interest Period of the same or different duration in accordance with the limitations provided above. If the Borrowers shall fail to give notice to the Bank of such a renewal, such LIBOR Loan shall automatically become a Prime Rate Loan on the last day of the current Interest Period. Section 2.12. Fees. (a) Commitment Fee. During the period ending on the Revolving Credit Termination Date, there will be a per annum commitment fee payable on the average unused daily availability under the Working Capital Commitment, payable quarterly in arrears on the first Banking Day after the end of each quarter and calculated on a 360 day year for actual days elapsed. The commitment fee rate will vary based on the then prevailing ratio of consolidated Senior Funded Debt to EBITDA of the Borrowers (the applicable ratio for such quarter will be the ratio determined as of the last day of the previous quarter for the twelve month period then ended), as follows: 160
Senior Funded Debt/EBITDA of the Borrowers Commitment Fee ---------------- -------------- Greater than or equal to 3.00 0.625% Less than 3.00, but greater than or equal to 2.00 0.50% Less than 2.00, but greater than or equal to 1.00 0.375% Less than 1.00 0.25%
(b) Facility Fees. The Borrowers shall pay to the Bank, on the Closing Date, a $45,000 upfront facility fee for the Working Capital Loans. In addition, the Borrowers shall pay to the Bank, on the Closing Date, a $45,000 upfront facility fee for the Term Loan. Section 1.13. Payments Generally. All payments under this Agreement or the Notes shall be made in Dollars in immediately available funds not later than 1:00 p.m. Hartford, Connecticut, time on the relevant dates specified above (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Banking Day) at the Lending Office of the Bank. The Bank may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrowers with the Bank. Until the Bank and the Borrowers otherwise agree, the Bank shall debit the Borrowers' account number 9361886549 with the Bank for the amount of any payment required hereunder, but the Bank may also debit any ordinary deposit account of the Borrowers if the amount in account number 9361886549 is insufficient to make any required payment. The Borrowers shall, at the time of making each payment under this Agreement or the Notes, specify to the Bank the principal or other amount payable by the Borrowers under this Agreement or the Note to which such payment is to be applied (and in the event that it fails to so specify, or if a Default or Event of Default has occurred and is continuing, the Bank may apply such payment as it may elect in its sole discretion). If the due date of any payment under this Agreement or the Notes would otherwise fall on a day which is not a Banking Day, such date shall be extended to the next succeeding Banking Day and interest shall be payable for any principal so extended for the period of such extension. ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC. Section 3.1. Additional Costs. (a) The Borrowers shall pay to the Bank from time to time on demand such amounts as the Bank may determine to be necessary to compensate it for any costs which the Bank determines are attributable to its making or maintaining any LIBOR Loans under this Agreement or the Notes or its obligation to make any such Loans hereunder, or any reduction in any amount receivable by the Bank hereunder in respect of any such Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to the Bank under this Agreement or the Notes in respect of any of such Loans (other than taxes imposed on the overall net income of the Bank or of its Lending Office for any of such Loans by the jurisdiction in which the Principal Office or such Lending Office is located); or (ii) imposes or modifies any reserve, special deposit, deposit insurance or 161 assessment, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, the Bank (including any of such Loans or any deposits referred to in the definition of "LIBO Rate" in Section 1.1); or (iii) imposes any other condition affecting this Agreement or the Notes (or any of such extensions of credit or liabilities). The Bank will notify the Borrowers of any event occurring after the date of this Agreement which will entitle the Bank to compensation pursuant to this Section 3.1(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. (b) Without limiting the effect of the foregoing provisions of this Section 3.1, in the event that, by reason of any Regulatory Change, the Bank either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of the Bank which includes deposits by reference to which the interest rate on LIBOR Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of the Bank which includes LIBOR Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if the Bank so elects by notice to the Borrowers, the obligation of the Bank to make or renew, and to convert Loans of any other type into, Loans of such type hereunder shall be suspended until the date such Regulatory Change ceases to be in effect, and the Borrowers shall on the last day(s) of the then current Interest Period(s) for the outstanding Loans of such type, either prepay such Loans or convert such Loans into another type of Loan in accordance with Section 2.5. (c) Without limiting the effect of the foregoing provisions of this Section 3.1 (but without duplication), the Borrowers shall pay to the Bank from time to time on request such amounts as the Bank may determine to be necessary to compensate the Bank for any costs which it determines are attributable to the maintenance by it or any of its affiliates pursuant to any law or regulation of any jurisdiction or any interpretation, directive or request (whether or not having the force of law and whether in effect on the date of this Agreement or thereafter) of any court or governmental or monetary authority of capital in respect of its Loans hereunder or its obligation to make Loans hereunder (such compensation to include, without limitation, an amount equal to any reduction in return on assets or equity of the Bank to a level below that which it could have achieved but for such law, regulation, interpretation, directive or request). The Bank will notify the Borrowers if it is entitled to compensation pursuant to this Section 3.1(c) as promptly as practicable after it determines to request such compensation. (d) Determinations and allocations by the Bank for purposes of this Section 3.1 of the effect of any Regulatory Change pursuant to subsections (a) or (b), or of the effect of capital maintained pursuant to subsection (c), on its costs of making or maintaining Loans or its obligation to make Loans, or on amounts receivable by, or the rate of return to, it in respect of Loans or such obligation, and of the additional amounts required to compensate the Bank under this Section 3.1, shall be conclusive, provided that such determinations and allocations are made on a reasonable basis; provided, however, that the Bank shall provide ninety days' notice of any additional amounts required to compensate the Bank under this Section 3.1 (the "Adjustment"), and the Borrowers may thereafter attempt to negotiate the amount of the Adjustment in good faith with the Bank within ninety days of the day on which the Borrowers are so notified. If the Borrowers and the Bank are unable to agree on the amount of the Adjustment within such ninety-day period, then the amount of the Adjustment shall be the amount set forth in the aforementioned notice from the Bank to the Borrowers. Whatever the final Adjustment may be, if the Bank shall still have any Loans outstanding to the Borrowers 162 upon the expiration of such ninety-day period, then the Adjustment shall be effective retroactive to the date on which the Borrowers first received notice of the Adjustment. The Bank shall not be obligated to offer LIBO Rates with respect to Interest Periods commencing during the period following any such notice and prior to agreement by the Bank and the Borrowers as to the amount of the Adjustment. Section 3.2. Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if the Bank determines (which determination shall be conclusive) that: (a) quotations of interest rates for the relevant deposits referred to in the definition of "LIBO Rate" in Section 1.1 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for any LIBOR Loans as provided in this Agreement; or (b) the relevant rates of interest referred to in the definition of "LIBO Rate" in Section 1.1 upon the basis of which the rate of interest for any LIBOR Loans is to be determined do not adequately cover the cost to the Bank of making or maintaining such Loans; then the Bank shall give the Borrowers prompt notice thereof, and so long as such condition remains in effect, the Bank shall be under no obligation to make or renew Loans of such type or to convert Loans of any other type into Loans of such type and the Borrowers shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected type, either prepay such Loans or convert such Loans into another type of Loans in accordance with Section 2.5. Section 3.3. Illegality. Notwithstanding any other provision in this Agreement, in the event that it becomes unlawful for the Bank or its Lending Office to (a) honor its obligation to make or renew LIBOR Loans hereunder or convert Loans of any type into Loans of such type, or (b) maintain LIBOR Loans hereunder, then the Bank shall promptly notify the Borrowers thereof and the Bank's obligation to make or renew LIBOR Loans and to convert other types of Loans into Loans of such type hereunder shall be suspended until such time as the Bank may again make, renew or convert and maintain such affected Loans and the Borrowers shall, on the last day(s) of the then current Interest Period for the outstanding LIBOR Loans, as the case may be (or on such earlier date as the Bank may specify to the Borrowers), either prepay such Loans or convert such Loans into another type of Loans in accordance with Section 2.5. Section 3.4. Certain Compensation. The Borrowers shall pay to the Bank, upon the request of the Bank, such amount or amounts as shall be sufficient (in the reasonable opinion of the Bank) to compensate it for any loss, cost or expense which the Bank determines is attributable to: (a) any payment, prepayment, conversion or renewal of a LIBOR Loan on a date other than the last day of an Interest Period for such Loan (whether by reason of acceleration or otherwise); or (b) any failure by the Borrowers to borrow, convert into or renew a LIBOR Loan to be made, converted into or renewed by the Bank on the date specified therefor in the relevant notice under Section 2.4, 2.5 or 2.11, as the case may be. Without limiting the foregoing, such compensation shall include an amount equal to the excess, if any, of: (i) the amount of interest which otherwise would have accrued on the principal amount so paid, prepaid, converted or renewed or not borrowed, converted or renewed for the 163 period from and including the date of such payment, prepayment or conversion or failure to borrow, convert or renew to but excluding the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or renew, to but excluding the last day of the Interest Period for such Loan which would have commenced on the date specified therefor in the relevant notice) at the applicable rate of interest for such Loan provided for herein; over (ii) with respect to a LIBOR Loan, the amount of interest (as reasonably determined by the Bank) the Bank would have bid in the London interbank market for Dollar deposits for amounts comparable to such principal amount and maturities comparable to such period. A determination of the Bank as to the amounts payable pursuant to this Section 3.4 shall be conclusive absent manifest error. ARTICLE 4. CONDITIONS PRECEDENT Section 4.1. Documentary Conditions Precedent. The obligation of the Bank to make the Loans is subject to the conditions precedent that the Bank shall have received on or before the date of such Borrowing each of the following, in form and substance satisfactory to the Bank and its counsel: (a) the Notes duly executed by the Borrowers; (b) the Security Agreement duly executed by the Borrowers, together with (i) acknowledgment copies of the financing statements (UCC-1) duly filed under the Uniform Commercial Code of all jurisdictions necessary or, in the opinion of the Bank, desirable to perfect the security interest created by the Security Agreement; (ii) certified copies of requests for information (Form UCC-11) identifying all of the financing statements on file with respect to the Borrowers in all jurisdictions referred to under (i), including the financing statements filed by the Bank against the Borrowers, indicating that no party claims an interest in any of the Collateral (as defined in the Security Agreement); (c) a certificate of the Secretary or Assistant Secretary of each Borrower, dated the Closing Date, attesting to all corporate action taken by such Borrower, including resolutions of its Board of Directors authorizing the execution, delivery and performance of the Facility Documents to which it is a party and each other document to be delivered pursuant to this Agreement and certifying copies of the Certificate of Incorporation and by-laws of such Borrower; (d) a certificate of the Secretary or Assistant Secretary of each Borrower, dated the Closing Date, certifying the names and true signatures of the officers of such Borrower authorized to sign the Facility Documents to which it is a party and the other documents to be delivered by such Borrower under this Agreement; (e) a certificate of a duly authorized officer of each Borrower, dated the Closing Date, stating that the representations and warranties in Article 5 of this Agreement, and Article 2 of the Security Agreement, and in each other Facility Document, are true and correct on such date as though made on and as of such date and that no event has occurred and is continuing which constitutes a Default or Event of Default; (f) an Environmental Indemnification Agreement duly signed by the Borrowers in form and substance satisfactory to the Bank; 164 (g) a certificate of good standing for each Borrower from the Secretary of the State of the state in which such Borrower is incorporated and each other jurisdiction in which such Borrower is qualified to do business; (h) payment by the Borrowers to the Bank of the facility fees as required by Section 2.12(b), and all other expenses and fees incurred by the Bank; (i) a favorable opinion of counsel for the Borrowers, dated the Closing Date, in form and substance satisfactory to the Bank; (j) copies of all instruments evidencing any Subordinated Debt of any Borrower and a satisfactory review of the same; (k) evidence of the acquisition by Tridex of PSI on terms satisfactory to the Bank in all respects; (l) evidence of the issuance by Tridex of 714,000 shares stock of Tridex to Paul Smith, representing $5,000,000 of the acquisition purchase price of PSI's stock; (m) evidence of successful placement by Tridex of at least $11,000,000 of the Subordinated Debt relating to the acquisition of PSI stock, with a current cash coupon interest rate of no greater than 12% (plus deferred interest or PIK of not greater than 7%), with a bank or other institutional lender; (n) evidence of payment by Tridex to Paul Smith of $16,100,000 from available cash, representing a portion of the purchase price of PSI's stock; (o) delivery to the Bank of year 2000 compliance forms satisfactory to the Bank in all respects; (p) delivery to the Bank of year-end audited financial statements for both Tridex (consolidated) and PSI showing no material variations from the draft financial statements previously supplied by the Borrowers to the Bank; (q) evidence of no material adverse change in the business, management, operations, properties, prospects or condition (financial or otherwise) of any Borrower or any of their respective Subsidiaries since the date of the commitment letter; (r) evidence of liability and property insurance of the Borrowers satisfactory to the Bank, with suitable endorsements naming the Bank as loss payee; (s) a Borrowing Base Certificate and a recent receivables and inventory aging satisfactory to the Bank; (t) fair value Balance Sheets for each of the Borrowers; and (u) evidence of the absence of any change in market conditions which, in the Bank's opinion, would materially impair a financial institution's ability to fund Loans of this type. Section 4.2. Additional Conditions Precedent. The obligation of the Bank to make the Loans pursuant to a Borrowing which increases the amount outstanding hereunder 165 (including the initial Borrowing) shall be subject to the further conditions precedent that on the date of such Borrowing: (a) the following statements shall be true: (i) the representations and warranties contained in Article 5 herein, and in Article 2 of the Security Agreement, and in each other Facility Document, are true and correct on and as of the date of such Loan as though made on and as of such date; and (ii) no Default or Event of Default has occurred and is continuing, or would result from such Loan; and (iii) there has been no material adverse change in the business, management, operations, properties, prospects or condition (financial or otherwise) of any Borrower or any of their respective Subsidiaries since the Closing Date; (b) the Bank shall have received such approvals, opinions or documents as the Bank may reasonably request; and (c) the Bank shall have received a current Borrowing Base Certificate. Section 4.3. Deemed Representations. Each Notice of Borrowing hereunder and acceptance by any Borrower of the proceeds of such Borrowing shall constitute a representation and warranty that the statements contained in Section 4.2(a) are true and correct both on the date of such notice and, unless any Borrower otherwise notifies the Bank prior to such Borrowing, as of the date of such Borrowing. ARTICLE 5. REPRESENTATIONS AND WARRANTIES Each Borrower hereby represents and warrants that: Section 5.1. Incorporation, Good Standing and Due Qualification. Each of such Borrowers and its Subsidiaries is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its assets and to transact the business in which it is now engaged or proposed to be engaged, and is duly qualified as a foreign corporation and in good standing under the laws of each other jurisdiction in which such qualification is required. Section 5.2. Corporate Power and Authority; No Conflicts. The execution, delivery and performance by such Borrower of the Facility Documents to which it is a party have been duly authorized by all necessary corporate action and do not and will not: (a) require any consent or approval of its stockholders; (b) contravene its charter or by-laws; (c) violate any provision of, or require any filing (other than the filing of the financing statements contemplated by the Security Agreement), registration, consent or approval under, any law, rule, regulation (including, without limitation, Regulation U), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to such Borrower or any of its Subsidiaries or Affiliates; (d) result in a breach of or constitute a default or require any consent under any indenture or loan or credit agreement or any other agreement, lease or instrument to which such Borrower is a party or by which it or its properties may be bound or affected; (e) result in, or require, the creation or imposition of any Lien (other than as created under the Security Agreement), upon or with respect to any of the properties now owned or hereafter acquired by such Borrower; or (f) cause such Borrower (or any Subsidiary or Affiliate, as the 166 case may be) to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any such indenture, agreement, lease or instrument. Section 5.3. Legally Enforceable Agreements. Each Facility Document to which such Borrower is a party is, or when delivered under this Agreement will be, a legal, valid and binding obligation of such Borrower enforceable against such Borrower in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. Section 5.4. Litigation. Except as set forth on Schedule 5.4, there are no actions, suits or proceedings pending or, to the knowledge of such Borrower, threatened, against or affecting such Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator, which may, in any one case or in the aggregate, materially adversely affect the financial condition, operations, properties or business of such Borrower or any such Subsidiary or of or the ability of such Borrower to perform its obligation under the Facility Documents to which it is a party. Section 5.5. Financial Statements. The consolidated and consolidating balance sheet of such Borrower and its Consolidated Subsidiaries as at December 31, 1997, and the related consolidated and consolidating income statement and statements of cash flows and changes in stockholders' equity of such Borrower and its Consolidated Subsidiaries for the fiscal year then ended, and the accompanying footnotes, together with the opinion thereon as to the consolidated statements, of Price Waterhouse, independent certified public accountants, copies of which have been furnished to the Bank, are complete and correct and fairly present the financial condition of such Borrower and its Consolidated Subsidiaries as at such dates and the results of the operations of such Borrower and its Consolidated Subsidiaries for the periods covered by such statements, all in accordance with GAAP consistently applied (subject to year-end adjustments in the case of the interim financial statements). There are no liabilities of such Borrower or any of its Consolidated Subsidiaries, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising in the ordinary course of business since December 31, 1997. No information, exhibit or report furnished by such Borrower to the Bank in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading. Since December 31, 1997, there has been no material adverse change in the condition (financial or otherwise), business, operations or prospects of such Borrower or any of its Subsidiaries. Section 5.6. Ownership and Liens. Such Borrower and each of its Consolidated Subsidiaries has title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the properties and assets, and leasehold interests reflected in the financial statements referred to in Section 5.5 (other than any properties or assets disposed of in the ordinary course of business), and none of the properties and assets owned by such Borrower or any of its Subsidiaries and none of its leasehold interests is subject to any Lien, except as disclosed in such financial statements or as may be permitted hereunder and except for the Lien created by the Security Agreement. Section 5.7. Taxes. Except as set forth on Schedule 5.7, such Borrower and each of its Subsidiaries has filed all tax returns (federal, state and local) required to be filed and has paid all taxes, assessments and governmental charges and levies thereon to be due, including interests and penalties. 167 Section 5.8. ERISA. Each Plan, and, to the best knowledge of such Borrower, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable federal or state law, and no event or condition is occurring or exists concerning which such Borrower would be under an obligation to furnish a report to the Bank in accordance with Section 6.8(k) hereof. As of the most recent valuation date for each Plan, each Plan was "fully funded," which for purposes of this Section 5.8 shall mean that the fair market value of the assets of the Plan is not less than the present value of the accrued benefits of all participants in the Plan, computed on a Plan termination basis. To the best knowledge of such Borrower, no Plan has ceased being fully funded as of the date these representations are made with respect to any Loan under this Agreement. Section 5.9. Subsidiaries and Ownership of Stock. Schedule 5.9 is a complete and accurate list of the Subsidiaries of such Borrower, showing the jurisdiction of incorporation or organization of each Subsidiary and showing the percentage of such Borrower's ownership of the outstanding stock or other interest of each such Subsidiary. All of the outstanding capital stock or other interest of each such Subsidiary has been validly issued, is fully paid and nonassessable and is owned by such Borrower free and clear of all Liens. Section 5.10. Credit Arrangements. Schedule 5.10 is a complete and correct list of all credit agreements, indentures, purchase agreements, guaranties, Capital Leases and other investments, agreements and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which such Borrower or any of its Subsidiaries is in any manner directly or contingently obligated; and the maximum principal or face amounts of the credit in question, outstanding and which can be outstanding, are correctly stated, and all Liens of any nature given or agreed to be given as security therefor are correctly described or indicated in such Schedule. Section 5.11. Operation of Business. Such Borrower and each of its Subsidiaries possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, or rights thereto, to conduct its business substantially as now conducted and as presently proposed to be conducted, and neither such Borrower nor any of its Subsidiaries is in violation of any valid rights of others with respect to any of the foregoing. Section 5.12. Hazardous Materials. Such Borrower and each of its Subsidiaries have obtained all permits, licenses and other authorizations which are required under all Environmental Laws, except to the extent failure to have any such permit, license or authorization would not have a material adverse effect on the consolidated financial condition, operations, business or prospects of such Borrower and its Consolidated Subsidiaries. Such Borrower and each of its Subsidiaries are in compliance with the terms and conditions of all such permits, licenses and authorizations, and are also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply would not have a material adverse effect on the consolidated financial condition, operations, business or prospects of such Borrower and its Consolidated Subsidiaries. In addition, except as set forth in Schedule 5.12 hereto: 168 (a) No notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or threatened by any governmental or other entity with respect to any alleged failure by such Borrower or any of its Subsidiaries to have any permit, license or authorization required in connection with the conduct of the business of such Borrower or any of its Subsidiaries or with respect to any generation, treatment, storage, recycling, transportation, release or disposal, or any release as defined in 42 U.S.C. s/s 9601(22) ("Release") of any substance regulated under Environmental Laws ("Hazardous Materials") generated by such Borrower or any of its Subsidiaries. (b) Neither such Borrower nor any of its Subsidiaries has handled any Hazardous Material, other than as a generator, on any property now or previously owned or leased by such Borrower or any of its Subsidiaries to an extent that it has, or may reasonably be expected to have, a material adverse effect on the consolidated financial condition, operations, business or prospects taken as a whole of the Borrowers and their Consolidated Subsidiaries; and (i) to the best of its knowledge, no PCB is or has been present at any property now or previously owned or leased by such Borrower or any of its Subsidiaries; (ii) to the best of its knowledge, no asbestos is or has been present at any property now or previously owned or leased by such Borrower or any of its Subsidiaries; (iii) there are no underground storage tanks for Hazardous Materials, active or abandoned, at any property now or previously owned or leased by such Borrower or any of its Subsidiaries; (iv) no Hazardous Materials have been Released, in a reportable quantity, where such a quantity has been established by statute, ordinance, rule, regulation or order, at, on or under any property now or previously owned by such Borrower or any of its Subsidiaries. (c) Neither such Borrower nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location which is listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for possible inclusion on the National Priorities List by the Environmental Protection Agency in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLIS") or on any similar state or foreign list or which is the subject of federal, state, foreign or local enforcement actions or other investigations which may lead to claims against such Borrower or any of its Subsidiaries for clean-up costs, remedial work, damages to natural resources or for personal injury claims, including, but not limited to, claims under CERCLA. (d) No Hazardous Material generated by such Borrower or any of its Subsidiaries has been recycled, treated, stored, disposed of or Released by such Borrower or any of its Subsidiaries at any location other than those listed in Schedule 5.12 hereto. (e) No oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of such Borrower or any of its Subsidiaries and no property now or previously owned or leased by such Borrower or any of its Subsidiaries is listed or proposed for 169 listing on the National Priority List promulgated pursuant to CERCLA, on CERCLIS or on any similar state or foreign list of sites requiring investigation or clean-up. (f) There are no Liens arising under or pursuant to any Environmental Laws on any of the real property or properties owned or leased by such Borrower or any of its Subsidiaries, and no government actions have been taken or are in process which could subject any of such properties to such Liens and neither such Borrower nor any of its Subsidiaries would be required to place any notice or restriction relating to the presence of Hazardous Materials at any property owned by it in any deed to such property. (g) There have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted by or which are in the possession of such Borrower or any of its Subsidiaries in relation to any property or facility now or previously owned or leased by such Borrower or any of its Subsidiaries which have not been made available to the Bank. Section 5.13. No Default on Outstanding Judgments or Orders. Such Borrower and each of its Subsidiaries has satisfied all judgments and neither such Borrower nor any of its Subsidiaries is in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court, arbitrator or federal, state, municipal or other governmental authority, commission, board, bureau, agency or instrumentality, domestic or foreign. Section 5.14. No Defaults on Other Agreements. Neither such Borrower nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction which could have a material adverse effect on the business, properties, assets, operations or conditions, financial or otherwise, of such Borrower or any of its Subsidiaries, or the ability of such Borrower to carry out its obligations under the Facility Documents to which it is a party. Neither such Borrower nor any of its Subsidiaries is in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument material to its business to which it is a party. Section 5.15. Labor Disputes and Acts of God. Neither the business nor the properties of such Borrower or of any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), materially and adversely affecting such business or properties or the operation of such Borrower or such Subsidiary. Section 5.16. Governmental Regulation. Neither such Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act, the Federal Power Act or any statute or regulation limiting its ability to incur indebtedness for money borrowed as contemplated hereby. Section 5.17. Partnerships. Neither such Borrower nor any of its Subsidiaries is a partner in any partnership. Section 5.18. No Forfeiture. Neither such Borrower nor any of its Subsidiaries or Affiliates is engaged in or proposes to be engaged in the conduct of any business or activity which could result in a Forfeiture Proceeding and no Forfeiture Proceeding against any of them is pending or threatened. 170 Section 5.19. Solvency. (a) The present fair salable value of the assets of such Borrower after giving effect to all the transactions contemplated by the Facility Documents and the funding of all Commitments hereunder exceeds the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of such Borrower and its Subsidiaries as they mature. (b) The property of such Borrower does not constitute unreasonably small capital for such Borrower to carry out its business as now conducted and as proposed to be conducted, including the capital needs of such Borrower. (c) Such Borrower does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by such Borrower, and of amounts to be payable on or in respect of debt of such Borrower). The cash available to such Borrower, after taking into account all other anticipated uses of the cash of such Borrower, is anticipated to be sufficient to pay all such amounts on or in respect of debt of such Borrower when such amounts are required to be paid. (d) Such Borrower does not believe that final judgments against it in actions for money damages will be rendered at a time when, or in an amount such that, such Borrower will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). The cash available to such Borrower after taking into account all other anticipated uses of the cash of such Borrower (including the payments on or in respect of debt referred to in paragraph (c) of this Section 5.19), is anticipated to be sufficient to pay all such judgments promptly in accordance with their terms. ARTICLE 6. AFFIRMATIVE COVENANTS So long as either of the Notes shall remain unpaid or the Bank shall have either of the Commitments under this Agreement, the Borrowers shall: Section 6.1. Maintenance of Existence. Preserve and maintain, and cause each of their respective Subsidiaries to preserve and maintain, their corporate existence and good standing in the jurisdiction of their incorporation, and qualify and remain qualified, and cause each of their respective Subsidiaries to qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is required. Section 6.2. Conduct of Business. Continue, and cause each of their respective Subsidiaries to continue, to engage in an efficient and economical manner in a business of the same general type as conducted by it on the date of this Agreement. Section 6.3. Maintenance of Properties. Maintain, keep and preserve, and cause each of their respective Subsidiaries to maintain, keep and preserve, all of their properties (tangible and intangible), necessary or useful in the proper conduct of their business in good working order and condition, ordinary wear and tear excepted. Section 6.4. Maintenance of Records. Keep, and cause each of their respective Subsidiaries to keep, adequate records and books of account, in which complete entries will be 171 made in accordance with GAAP, reflecting all financial transactions of the Borrowers and their respective Subsidiaries. Section 6.5. Maintenance of Insurance. Maintain, and cause each of their respective Subsidiaries to maintain, insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof. Section 6.6. Compliance with Laws. Comply, and cause each of their respective Subsidiaries to comply, in all respects with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property. Section 6.7. Right of Inspection. At any reasonable time and from time to time, permit the Bank or any agent or representative thereof, to examine and make copies and abstracts from the records and books of account of, and visit the properties of, the Borrowers and any of their respective Subsidiaries, and to discuss the affairs, finances and accounts of the Borrowers and any such Subsidiary with any of its officers and directors and the Borrowers' independent accountants. Section 6.8. Reporting Requirements. Furnish to the Bank: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrowers, a consolidated and consolidating balance sheet of the Borrowers and their respective Consolidated Subsidiaries as of the end of such fiscal year and a consolidated and consolidating income statement and statements of cash flows and changes in stockholders' equity and working capital of the Borrowers and their respective Consolidated Subsidiaries for such fiscal year, all in reasonable detail and stating in comparative form the respective consolidated and consolidating figures for the corresponding date and period in the prior fiscal year and all prepared in accordance with GAAP and as to the consolidated statements accompanied by an opinion thereon acceptable to the Bank by Price Waterhouse or other independent accountants of national standing selected by the Borrowers; (b) as soon as available and in any event within 60 days after the end of the first fiscal quarters of Tridex, a true and complete copy of Tridex's Report on Form 10-Q; (c) as soon as available and in any event within 60 days after the end of each fiscal quarter, a consolidating balance sheet of the Borrowers and their respective Consolidated Subsidiaries as of the end of such month and a consolidating income statement and statements of cash flows and changes in stockholders' equity and working capital, of the Borrowers and their respective Consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such month, all in reasonable detail and stating in comparative form the consolidating figures for the corresponding date and period in the previous fiscal year and all prepared in accordance with GAAP and certified by the President or Chief Financial Officer of each Borrower (subject to year-end adjustments); (d) promptly upon receipt thereof, copies of any reports, inclusive of any management letters, submitted to any Borrower or any of its Subsidiaries by independent certified public accountants in connection with examination of the financial statements of such Borrower or any such Subsidiary made by such accountants; 172 (e) promptly at the end of each fiscal quarter, a certificate of the President or Chief Financial Officer of each Borrower (i) certifying that to the best of his knowledge no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (ii) with computations demonstrating compliance with the covenants contained in Articles 7 and 8; (f) as soon as available and in any event within 120 days after the end of each fiscal year of Tridex, a true and complete copy of Tridex's Report on Form 10-K; (g) within 30 days after the Closing Date, and thereafter, as soon as available and in any event within 120 days after the end of each fiscal year of the Borrowers, management's projected financial statements inclusive of a balance sheet, an income statement and a statement of cash flow (supported by key assumptions) for each upcoming fiscal year, prepared on a quarterly basis for such year; (h) simultaneously with the delivery of the projected financial statements referred to in Section 6.8( g), a copy of the Borrowers' business plan for each upcoming fiscal year; (i) simultaneously with the delivery of the annual financial statements referred to in Section 6.8( a), a certificate of the independent public accountants who audited such statements to the effect that, in making the examination necessary for the audit of such statements, they have obtained no knowledge of any condition or event which constitutes a Default or Event of Default, or if such accountants shall have obtained knowledge of any such condition or event, specifying in such certificate each such condition or event of which they have knowledge and the nature and status thereof; (j) promptly after the commencement thereof, notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Borrower or any of its Subsidiaries which, if determined adversely to such Borrower or such Subsidiary, could have a material adverse effect on the financial condition, properties or operations of such Borrower or such Subsidiary; (k) as soon as possible and in any event within five days after the Borrower's awareness of the occurrence of each Default or Event of Default, or after the awareness by any Borrower of the violation of any covenant in any Facility Document, a written notice setting forth the details of such Default or Event of Default or such violation and the action which is proposed to be taken by any Borrower with respect thereto; (l) as soon as possible, and in any event within ten days after any Borrower knows or has reason to know that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan have occurred or exist, a statement signed by a senior financial officer of such Borrower setting forth details respecting such event or condition and the action, if any, which such Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by such Borrower or an ERISA Affiliate with respect to such event or condition): (i) any reportable event, as defined in section 4043( b) of ERISA, with respect to a Plan, as to which PBGC has not by regulation waived the requirement 173 of section 4043( a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of section 412 of the Code or section 302 of ERISA including, without limitation, the failure to make on or before its due date a required installment under section 412( m) of the Code or section 302( e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with section 412( d) of the Code) and any request for a waiver under section 412( d) of the Code for any Plan; (ii) the distribution under section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by such Borrower or an ERISA Affiliate to terminate any Plan; (iii) the institution by PBGC of proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by such Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by such Borrower or any ERISA Affiliate that results in liability under section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt of such Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against such Borrower or any ERISA Affiliate to enforce section 515 of ERISA, which proceeding is not dismissed within 30 days; (vi) the adoption of an amendment to any Plan that pursuant to section 401( a)( 29) of the Code or section 307 of ERISA would result in the loss of tax-exempt status of the trust of which such Plan is a part if such Borrower or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (vii) any event or circumstance exists which may reasonably be expected to constitute grounds for such Borrower or any ERISA Affiliate to incur liability under Title IV of ERISA or under sections 412( c)( 11) or 412( n) of the Code with respect to any Plan; and (viii) the Unfunded Benefit Liabilities of one or more Plans increase after the date of this Agreement in an amount which is material in relation to the financial condition of such Borrower and its Subsidiaries, on a consolidated basis; provided, however, that such increase shall not be deemed to be material so long as it does not exceed during any consecutive 2-year period $200,000; (m) promptly after the request of the Bank, copies of each annual report filed pursuant to section 104 of ERISA with respect to each Plan (including, to the extent required by section 104 of ERISA, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information referred to in section 103) and each annual report filed with respect to each Plan under section 4065 of ERISA; provided, however, that in the case of a Multiemployer Plan, such annual reports shall be furnished only if they are available to such Borrower or an ERISA Affiliate; 174 (n) promptly after the furnishing thereof, copies of any statement or report furnished to any other party pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Bank pursuant to any other clause of this Section 6.8; (o) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which any Borrower or any of its Subsidiaries sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements which any Borrower or any of its Subsidiary files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; (p) as soon as available, and in any event within 10 days of the end of each fiscal month, an aging schedule with respect to Receivables of each Borrower with names of all account debtors, and an Inventory breakdown for each Borrower, as of the end of such calendar month and certified by the President or Chief Financial Officer of each Borrower; (q) a monthly Borrowing Base Certificate certified by Tridex's President or Chief Financial Officer, within 10 days of the end of each month; (r) promptly after the sending thereof, copies of any reports or financial covenant compliance certificates provided to the holders of Subordinated Debt by any of the Borrowers; (s) notice of any proposed payment or prepayment under the $11,000,000 Subordinated Debt, at least 5 Banking Days prior to the date of such proposed payment; (t) on a continuous basis, an up-to-date list of the names and addresses of all holders of the $11,000,000 Subordinated Debt; (u) promptly after the commencement thereof or promptly after any Borrower knows of the commencement or threat thereof, notice of any Forfeiture Proceeding; and (v) such other information respecting the condition or operations, financial or otherwise, of any Borrower or any of its Subsidiaries as the Bank may from time to time reasonably request. Section 6.9. Operating Accounts. Maintain, and cause each of their respective Subsidiaries to maintain, all principal United States operating accounts at the Bank. Section 6.10. Hedging of Interest Rate Exposure. Within 30 days of the Closing Date, the Borrowers shall, on terms and conditions acceptable to the Bank, hedge not less than 50% of their floating interest rate exposure on the Term Loan during the first two years of the Term Loan. ARTICLE 7. NEGATIVE COVENANTS So long as either of the Notes shall remain unpaid or the Bank shall have either of the Commitments under this Agreement, the Borrowers shall not: 175 Section 7.1. Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist any Debt, except: (a) Debt of the Borrowers under this Agreement or the Notes; (b) Debt described in Schedule 5.10, including renewals, extensions or refinancings thereof, provided that the principal amount thereof does not increase; (c) Debt of the Borrowers or any of their respective Subsidiaries secured by purchase money Liens permitted by Section 7.3; (d) Debt represented by Capital Leases in an aggregate amount not to exceed [$ 500,000], so long as the Bank is provided the first opportunity to fund such Capital Lease amounts; (e) Debt of any Borrower to any other Borrower; (f) Debt of the Borrowers pursuant to any interest rate protection agreements entered into pursuant to Section 6.10 hereof; and (g) Debt of the Borrowers or and such Subsidiary, in the maximum principal amount of $240,000, arising in connection with that certain Assistance Agreement by and between the State of Connecticut acting by the Department of Economic Development and Tridex Corporation pursuant to which the State of Connecticut has agreed to make available up to $240,000, in the form of loans or grants, for asset acquisitions (the "Assistance Agreement"). Notwithstanding the foregoing, the Borrowers will be permitted to make payments on the $11,000,000 Subordinated Debt only if the following criteria are met: (a) Consolidated Senior Funded Debt of the Borrowers divided by EBITDA is less than 2.0 to 1.0 and remains below such level after such repayment of such $11,000,000 Subordinated Debt; (b) Consolidated Tangible Capital Base of the Borrowers is at least $10,000,000 and remains at or above such level after the repayment of such $11,000,000 Subordinated Debt; (c) Consolidated Senior Liabilities divided by Tangible Capital Base is less than 2.0 to 1.0 and remains at or below such level after the repayment of such $11,000,000 Subordinated Debt; (d) The payment of such $11,000,000 Subordinated Debt may not exceed $5,000,000 annually; and (e) The Borrowers are in compliance with all covenants and other terms and provisions of the Facility Documents after giving effect to any payment or prepayment of such $11,000,000 Subordinated Debt. Section 7.2. Guaranties, Etc. Assume, guaranty, endorse or otherwise be or become directly or contingently responsible or liable, or permit any of their respective Subsidiaries to assume, guarantee, endorse or otherwise be or become directly or indirectly 176 responsible or liable (including, but not limited to, an agreement to purchase any obligation, stock, assets, goods or services or to supply or advance any funds, assets, goods or services, or an agreement to maintain or cause such Person to maintain a minimum working capital or net worth or otherwise to assure the creditors of any Person against loss) for the obligations of any Person, except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business. Section 7.3. Liens. Create, incur, assume or suffer to exist, or permit any of their respective Subsidiaries to create, incur, assume or suffer to exist, any Lien, upon or with respect to any of its properties, now owned or hereafter acquired, except: (a) Liens for taxes or assessments or other government charges or levies if not yet due and payable or if due and payable if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; (b) Liens imposed by law, such as mechanic's, materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due for more than 30 days, or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established; (c) Liens under workers' compensation, unemployment insurance, social security or similar legislation (other than ERISA); (d) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; (e) judgment and other similar Liens arising in connection with court proceedings; provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; (f) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use and enjoyment by any Borrower or any such Subsidiary of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; (g) Liens securing obligations of such a Subsidiary to a Borrower or another such Subsidiary; (h) Liens set forth on Schedule 7.3, provided the Debt secured by such Liens is permitted by Section 7.1; (i) purchase money Liens on any property hereafter acquired or the assumption of any Lien on property existing at the time of such acquisition, or a Lien incurred in connection with any conditional sale or other title retention agreement or a Capital Lease; provided that: 177 (i) any property subject to any of the foregoing is acquired by a Borrower or any such Subsidiary in the ordinary course of its business and the Lien on any such property is created contemporaneously with such acquisition; (ii) the obligation secured by any Lien so created, assumed or existing shall not exceed 80 percent of the lesser of cost or fair market value as of the time of acquisition of the property covered thereby to a Borrower or any such Subsidiary acquiring the same; (iii) each such Lien shall attach only to the property so acquired and fixed improvements thereon; and (iv) the obligations secured by such Lien are permitted by the provisions of Section 7.1; and Section 7.4. Leases. Create, incur, assume or suffer to exist, or permit their respective Subsidiaries to create, incur, assume or suffer to exist, any obligation as lessee for the rental or hire of any real or personal property, except: (a) leases existing on the date of this Agreement and any extensions or renewals thereof; (b) leases (other than Capital Leases) which do not in the aggregate require the Borrowers and their respective Subsidiaries on a consolidated basis to make payments (including taxes, insurance, maintenance and similar expense which any Borrower or any Subsidiary is required to pay under the terms of any lease) in any fiscal year of the Borrowers in excess of $250,000; (c) Capital Leases permitted by Section 7.3. Section 7.5. Investments. Make, or permit any of their respective Subsidiaries to make, any loan or advance to any Person or purchase or otherwise acquire, or permit any such Subsidiary to purchase or otherwise acquire, any capital stock, assets, obligations or other securities of, make any capital contribution to, or otherwise invest in, or acquire any interest in, any Person, except: (a) direct obligations of the United States of America or any agency thereof with maturities of one year or less from the date of acquisition; (b) commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.; (c) certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank operating within the United States of America having capital and surplus in excess of $500,000,000; and (d) for stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to a Borrower or any such Subsidiary. Section 7.6. Dividends. Declare or pay any dividends, purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding, or make any distribution of assets to its stockholders as such whether in cash, assets or in obligations of any Borrower, or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption or retirement of any shares of its capital stock, or make any other distribution by reduction of capital or otherwise in respect of any shares of its capital stock or permit any of their respective Subsidiaries to purchase or otherwise acquire for value any stock of any Borrower or another such Subsidiary, except that: (a) any Borrower may declare and deliver dividends and make distributions payable solely in common stock of such Borrower; (b) any Borrower may purchase or otherwise acquire shares of its capital stock by exchange for or out of the proceeds received from a substantially concurrent issue of new shares of its capital stock; (c) payments may be made on the $11,000,000 Subordinated Debt in accordance with Section 7.1 hereof; and (d) any Subsidiary may declare and deliver dividends and make distributions to a Borrower which is its parent corporation. 178 Section 7.7. Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of, or permit any of their respective Subsidiaries to sell, lease, assign, transfer or otherwise dispose of, any of its now owned or hereafter acquired assets (including, without limitation, shares of stock and indebtedness of such Subsidiaries, receivables and leasehold interests); except: (a) for inventory disposed of in the ordinary course of business; (b) the sale or other disposition of assets no longer used or useful in the conduct of its business; and (c) that any such Subsidiary may sell, lease, assign or otherwise transfer its assets to its parent corporation. Section 7.8. Stock of Subsidiaries, Etc. Sell or otherwise dispose of any shares of capital stock of any of their respective Subsidiaries or permit any such Subsidiary to issue any additional shares of its capital stock, except directors' qualifying shares. Section 7.9. Transactions with Affiliates. Enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate or permit any of their respective Subsidiaries to enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of such Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to such Borrower or such Subsidiary than it would obtain in a comparable arms' length transaction with a Person not an Affiliate, and except as set forth on Schedule 7.9. Section 7.10. Mergers, Etc. Merge or consolidate with, or sell, assign, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, or acquire all or substantially all of the assets or the business of any Person (or enter into any agreement to do any of the foregoing), or permit any of their respective Subsidiaries to do so except that any such Subsidiary may merge into or transfer assets to a Borrower, and except for mergers pursuant to which (i) a Borrower is the surviving entity, (ii) voting control of the surviving entity remains with the shareholders of such Borrower immediately preceding such merger and (iii) the Borrowers are thereafter in full compliance with all covenants herein. Section 7.11. No Activities Leading to Forfeiture. Neither the Borrowers nor any of their respective Subsidiaries or Affiliates shall engage in or propose to be engaged in the conduct of any business or activity which could result in a Forfeiture Proceeding. ARTICLE 8. FINANCIAL COVENANTS So long as either of the Notes shall remain unpaid or the Bank shall have either of the Commitments under this Agreement: Section 8.1. Minimum Tangible Capital Base. The Borrowers, on a consolidated basis, shall maintain at all times, as measured at the end of each fiscal quarter, commencing June 30, 1998, a Tangible Capital Base of not less than $4,750,000, and such minimum dollar amount shall increase from year to year by the sum of (a) 50% of the Borrowers' Net Income for each previous fiscal year (with no reduction for losses) commencing with the annual net income determined as of December 31, 1998 plus (b) 100% of net proceeds from the sale of stock or asset sales after January 1, 1998, plus (c) 100% of the amount of any issuance of additional Subordinated Debt, plus (d) 75% of the net proceeds from the Mass Mutual Transaction. 179 Section 8.2. Maximum Senior Funded Debt to EBITDA Ratio. The Borrowers, on a consolidated basis, shall maintain at all times, as measured at the end of each fiscal quarter, commencing June 30, 1998 for the twelve month period then ended (a rolling twelve month calculation measured as of the end of each successive quarter), a ratio of Senior Funded Debt to EBITDA, of not more than 4.0 to 1.0, provided, however, that this ratio shall be reduced to not more than 3.0 to 1.0 commencing on March 31, 1999 and shall be reduced to not more than 2.5 to 1.0 commencing on March 31, 2000. Section 8.3. Maximum Funded Debt to EBITDA Ratio. The Borrowers, on a consolidated basis, shall maintain at all times, as measured at the end of each fiscal quarter, commencing June 30, 1998 for the twelve month period then ended (a rolling twelve month calculation measured as of the end of each successive quarter), a ratio of Funded Debt to EBITDA, of not more than 6.25 to 1.0, provided, however, that this ratio shall be reduced to not more than 4.5 to 1.0 commencing on March 31, 1999 and shall be reduced to not more than 4.0 to 1.0 commencing on March 31, 2000. Section 8.4. Minimum Interest Coverage Ratio. The Borrowers, on a consolidated basis, shall maintain at all times, as measured at the end of each fiscal quarter, commencing June 30, 1998 for the twelve month period then ended (a rolling twelve month calculation measured as of the end of each successive quarter), an Interest Coverage Ratio of not less than 2.0 to 1.0. Section 8.5. Minimum Fixed Charge Coverage Ratio. The Borrowers, on a consolidated basis, shall maintain at all times, as measured at the end of each fiscal quarter, commencing June 30, 1998 for the twelve month period then ended (a rolling twelve month calculation measured as of the end of each successive quarter), a Fixed Charge Coverage Ratio of not less than 1.25 to 1.0, provided, however, that this ratio shall be increased to not less than 1.5 to 1.0 commencing on March 31, 1999. ARTICLE 9. EVENTS OF DEFAULT Section 9.1. Events of Default. Any of the following events shall be an "Event of Default": (a) the Borrowers shall: (i) fail to pay the principal of any Note as and when due and payable; or (ii) fail to pay interest on any Note or any fee or other amount due hereunder as and when due and payable; (b) any representation or warranty made or deemed made by any Borrower in this Agreement or in any other Facility Document or which is contained in any certificate, document, opinion, financial or other statement furnished at any time under or in connection with any Facility Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (c) any Borrower shall: (i) fail to perform or observe any term, covenant or agreement contained in Section 2.3 or Articles 7 or 8; or (ii) fail to perform or observe any term, covenant or agreement on its part to be performed or observed (other than the obligations specifically referred to elsewhere in this Section 9.1) in any Facility Document and such failure shall continue for 20 consecutive days after the earlier to occur of (i) such Borrower's obtaining actual knowledge of such failure or default or (ii) such Borrower's receipt of written notice of such default; 180 (d) any Borrower, or any of its respective Subsidiaries: (i) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; or (ii) shall make an assignment for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; or (iii) shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (iv) shall have had any such petition or application filed or any such proceeding shall have been commenced against it, in which an adjudication or appointment is made or order for relief is entered, or which petition, application or proceeding remains undismissed for a period of 30 days or more; or shall be the subject of any proceeding under which its assets may be subject to seizure, forfeiture or divestiture (other than a proceeding in respect of a Lien permitted under Section 7.3( b)); or (v) by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for all or any substantial part of its property; or (vi) shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of 30 days or more; (e) one or more judgments, decrees or orders for the payment of money in excess of $500,000 in the aggregate shall be rendered against any Borrower, or any of its respective Subsidiaries and such judgments, decrees or orders shall continue unsatisfied and in effect for a period of 30 consecutive days without being vacated, discharged, satisfied or stayed or bonded pending appeal; (f) any event or condition shall occur or exist with respect to any Plan or Multiemployer Plan concerning which any Borrower is under an obligation to furnish a report to the Bank in accordance with Section 6.8( h) hereof and as a result of such event or condition, together with all other such events or conditions, such Borrower or any ERISA Affiliate has incurred or in the opinion of the Bank is reasonably likely to incur a liability to a Plan, a Multiemployer Plan, the PBGC or a section 4042 Trustee (or any combination of the foregoing) which is material in relation to the financial position of such Borrower and its Subsidiaries, on a consolidated basis; provided, however, that any such amount shall not be deemed to be material so long as all such amounts do not exceed in the aggregate during any consecutive 2-year period $500,000; (g) the Unfunded Benefit Liabilities of one or more Plans have increased after the date of this Agreement in an amount which is material (as specified in Section 9.1( g) hereof); (h) (A) any Forfeiture Proceeding shall have been commenced or any Borrower shall have given the Bank written notice of the commencement of any Forfeiture Proceeding as provided in Section 6.8 or (B) the Bank has a good faith basis to believe that a Forfeiture Proceeding has been threatened or commenced; (i) there shall be any material adverse change in the condition (financial or otherwise), business, management, operations, properties or prospects of the Borrowers and their respective Subsidiaries since the Closing Date; (j) the Security Agreement shall at any time after its execution and delivery and for any reason cease: (A) to create a valid and perfected first priority security interest in and to the property purported to be subject to such agreement; or (B) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be con- 181 tested by the party thereto, or such party shall deny it has further liability or obligation thereunder or such party shall fail to perform any of its obligations thereunder; (k) any refinancing of the Working Capital Loans with another financial institution, either before or after the Revolving Credit Termination Date, at a time when the Term Loan is still outstanding; or (l) any default or event of default shall occur and be continuing under the Sub Debt Agreements. Section 9.2. Remedies. If any Event of Default shall occur and be continuing, the Bank may, by notice to the Borrowers, (a) declare the Commitments to be terminated, whereupon the same shall forthwith terminate, and (b) declare the outstanding principal of the Notes, all interest thereon and all other amounts payable under this Agreement and the Notes or any one of them to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided that, in the case of an Event of Default referred to in Section 9.1( d) or Section 9.1( h)( A) above, the Commitments shall be immediately terminated, and the Notes, all interest thereon and all other amounts payable under this Agreement shall be immediately due and payable without notice, presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrowers. ARTICLE 10. MISCELLANEOUS Section 10.1. Amendments and Waivers. Except as otherwise expressly provided in this Agreement, any provision of this Agreement may be amended or modified only by an instrument in writing signed by the Borrowers and the Bank, and any provision of this Agreement may be waived by the Borrowers and the Bank. No failure on the part of the Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 10.2. Usury. All agreements between the Borrowers and the Bank are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced by the Notes or otherwise, shall the amount paid or agreed to be paid to the Bank for the use or the forbearance of the indebtedness evidenced by the Notes exceed the maximum permissible under applicable law. As used herein, the term "applicable law" shall mean the law in effect as of the date hereof provided, however that in the event there is a change in the law which results in a higher permissible rate of interest, then the Notes shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of the Borrowers and the Bank in the execution, delivery and acceptance of the Notes to contract in strict compliance with the laws of the State of Connecticut from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Facility Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever the Bank should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and 182 not to the payment of interest. This provision shall control every other provision of all agreements between the Borrowers and the Bank. Section 10.3. Expenses. The Borrowers shall reimburse the Bank on demand for all reasonable costs, expenses and charges (including, without limitation, telephone, telex, courier expenses, printing costs, reasonable fees and charges of external legal counsel for the Bank and reasonable costs allocated after the Closing Date by its internal legal department) incurred by the Bank in connection with the preparation, negotiation, execution, delivery, filing, recording, performance, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes or any Facility Document (subject to a limit of $35,000, plus disbursements, for the fees of external counsel in preparing the Facility Documents). The Borrowers agree to indemnify the Bank and its directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses incurred by any of them arising out of or by reason of any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to any actual or proposed use by the Borrowers or any of their respective Subsidiaries of the proceeds of the Loans, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation or litigation or other proceedings (but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). Section 10.4. Survival. The obligations of the Borrowers under Section 10.3 shall survive the repayment of the Loans and the termination of the Commitments. Section 10.5. Assignment; Participations. This Agreement shall be binding upon, and shall inure to the benefit of, the Borrowers, the Bank and their respective successors and assigns, except that no Borrower may assign or transfer its rights or obligations hereunder. The Bank may assign, or sell participations in, all or any part of any Loan to another bank or other entity, in minimum amounts of $1,000,000, in which event (a) in the case of an assignment, upon notice thereof by the Bank to the Borrowers, the assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, benefits and obligations as it would have if it were the Bank hereunder; and (b) in the case of a participation, the participant shall have no rights under the Facility Documents. The agreement executed by the Bank in favor of the participant shall not give the participant the right to require the Bank to take or omit to take any action hereunder except action directly relating to (i) the extension of a payment date with respect to any portion of the principal of or interest on any amount outstanding hereunder allocated to such participant, (ii) the reduction of the principal amount outstanding hereunder or (iii) the reduction of the rate of interest payable on such amount or any amount of fees payable hereunder to a rate or amount, as the case may be, below that which the participant is entitled to receive under its agreement with the Bank. The Bank may furnish any information concerning the Borrowers in the possession of the Bank from time to time to assignees and participants (including prospective assignees and participants); provided that the Bank shall require any such prospective assignee or such participant (prospective or otherwise) to agree in writing to maintain the confidentiality of such information. The Bank shall have the right at any time to pledge all or any portion of its rights under the Loans or this Agreement or the Notes to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U. S. C. Section 341. No such pledge or enforcement thereof shall release the Bank from its obligations under any of the Facility Documents. 183 Section 10.6. Notices. Unless the party to be notified otherwise notifies the other party in writing as provided in this Section, and except as otherwise provided in this Agreement, notices shall be delivered in person or sent by overnight courier, facsimile, ordinary mail, cable or telex addressed to such party at its "Address for Notices" on the signature page of this Agreement. Notices shall be effective: (a) on the day on which delivered to such party in person, (b) on the first Banking Day after the day on which sent to such party by overnight courier, (c) if given by mail, 48 hours after deposit in the mails with first-class postage prepaid, addressed as aforesaid, and (d) if given by facsimile, cable or telex, when the facsimile, cable or telex is transmitted to the facsimile, cable or telex number as aforesaid; provided that notices to the Bank shall be effective upon receipt. Copies of all notices sent to the Borrower shall also be provided to Stephen J. Carlotti, Esq., Hinckley, Allen & Snyder, 1500 Fleet Center, Providence, Rhode Island 02930. Section 10.7. Setoff. The Borrowers hereby grant to the Bank, a lien, security interest and right of setoff as security for all liabilities and obligations to the Bank, whether now existing or hereafter in the possession, custody, safekeeping or control of the Bank or any entity under the control of Fleet Financial Group, Inc., or in transit to any of them. At any time, without demand or notice, the Bank may set off the same or any part thereof and apply the same to any liability or obligation of the Borrowers even though unmatured and regardless of the adequacy of any other collateral securing the Loans. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWERS OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. SECTION 10.8. JURISDICTION; IMMUNITIES. EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY CONNECTICUT STATE OR UNITED STATES FEDERAL COURT SITTING IN CONNECTICUT OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CONNECTICUT STATE OR FEDERAL COURT. EACH BORROWER IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO EACH BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 10.6. EACH BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH BORROWER FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. EACH BORROWER FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE BANK SHALL BE BROUGHT ONLY IN CONNECTICUT STATE OR UNITED STATES FEDERAL COURT SITTING IN CONNECTICUT. EACH BORROWER WAIVES ANY RIGHT IT MAY HAVE TO JURY TRIAL. (a) Nothing in this Section 10.8 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring 184 any action or proceeding against any Borrower or its property in the courts of any other jurisdictions. (b) To the extent that any Borrower has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether from service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Borrower hereby irrevocably waives such immunity in respect of its obligations under this Agreement and the Note. Section 10.9. Table of Contents; Headings. Any table of contents and the headings and captions hereunder are for convenience only and shall not affect the interpretation or construction of this Agreement. Section 10.10. Severability. The provisions of this Agreement are intended to be severable. If for any reason any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. Section 10.11. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing any such counterpart. Section 10.12. Integration. The Facility Documents set forth the entire agreement between the parties hereto relating to the transactions contemplated thereby and supersede any prior oral or written statements or agreements with respect to such transactions. SECTION 10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CONNECTICUT. Section 10.14. Confidentiality. The Bank agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with safe and sound banking practices, any nonpublic information supplied to it by the Borrowers pursuant to this Agreement which is identified by the Borrowers as being confidential at the time the same is delivered to the Bank, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Bank, (iii) to bank examiners, auditors or accountants, (iv) in connection with any litigation to which the Bank is a party or (v) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) agrees to maintain the confidentiality of such information; and provided finally that in no event shall the Bank be obligated or required to return any materials furnished by the Borrowers. Section 10.15. Treatment of Certain Information. Each Borrower (a) acknowledges that services may be offered or provided to it (in connection with this Agreement or otherwise) by the Bank or by one or more of its subsidiaries or affiliates and (b) acknowledges that information delivered to the Bank by any Borrower may be provided to each such subsidiary and affiliate. 185 SECTION 10.16. COMMERCIAL WAIVER. EACH BORROWER ACKNOWLEDGES THAT THE LOANS EVIDENCED BY THE NOTES ARE FOR COMMERCIAL PURPOSES AND WAIVES ANY RIGHT TO NOTICE AND HEARING UNDER SECTIONS 52-278a THROUGH 52-278n OF THE CONNECTICUT GENERAL STATUTES AS NOW OR HEREAFTER AMENDED AND AUTHORIZES THE ATTORNEY OF THE BANK, OR ANY SUCCESSOR THERETO, TO ISSUE A WRIT OF PREJUDGMENT REMEDY WITHOUT COURT ORDER. FURTHER, EACH BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENTS, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS NOW IN FORCE OR WHICH MAY HEREAFTER BECOME LAWS. EACH BORROWER ACKNOWLEDGES THAT IT MAKES THESE WAIVERS AND THE WAIVERS CONTAINED IN SECTION 10.8 KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THESE WAIVERS WITH ITS ATTORNEYS. SECTION 10.17. WAIVER OF JURY TRIAL BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE BORROWERS AND THE BANK WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE BORROWERS AND THE BANK DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE BORROWERS AND THE BANK HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER FACILITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. Section 10.18. Multiple Borrowers. (a) It is understood and agreed by each Borrower that the handling of this credit facility on a joint borrowing basis as set forth in this Agreement is solely as an accommodation to the Borrowers and at their request, and that the Bank shall not incur liability to the Borrowers as a result thereof. To induce the Bank to do so and in consideration thereof, each Borrower hereby agrees to indemnify the Bank and to hold the Bank harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against the Bank by any Borrower or by any other Person arising from or incurred by reason of the Bank's handling of the financing arrangements of the Borrowers as provided herein, reliance by the Bank on any request or instruction from any other Borrower or any other action taken by the Bank with respect to this Section 10.18. (b) Each Borrower represents and warrants to the Bank that the request for joint handling of the Loans to be made by the Bank hereunder was made because the Borrowers are engaged in an integrated operation which required financing on a basis permitting the availability of credit from time to time to each Borrower as required for the continued successful operation of each Borrower of the integrated operation of the Borrowers. Each Borrower expects to derive benefit, directly or indirectly, from such availability because the 186 successful operation of the Borrowers is dependent on the continued successful performance of the functions of the integrated group. (c) Each Borrower hereby irrevocably designates Tridex as its attorney to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of each Borrower, and does hereby authorize the Bank to pay over or credit all Loan proceeds hereunder to Tridex as the Borrowers' attorney in fact, recognizing, however, that the Bank is not bound by such authorization and may elect either to disburse loan proceeds to each Borrower directly for its use, to Tridex as attorney for any Borrower or to Tridex for its own account, in which case Tridex may advance or lend such proceeds to the other Borrowers. Notwithstanding the foregoing, the Bank agrees to advance (i) the proceeds of the Term Loan and (ii) an initial advance of $3,500,000 (subject to reduction pursuant to Section 2.3 in the event of the Mass Mutual Transaction) under the Working Capital Loans directly to Tridex NC to be utilized to pay a portion of the acquisition price of PSI's stock. In addition, and notwithstanding any other provision to the contrary in this Agreement, the Term Loan and that portion of the Working Capital Loans so advanced to Tridex NC to pay a portion of the purchase price of PSI is stock shall be repaid to the Bank in accordance with this Agreement first from Tridex NC and the liability of the other three Borrowers in respect of such Loans shall be asserted by the Bank only at such time as a demand for payment for such Loans has first been made by the Bank to Tridex NC. Subject to the foregoing, the Borrowers shall remain jointly and severally liable on all of the Loans, and each of Tridex, UTI and PSI hereby jointly and severally and unconditionally guaranty the prompt payment and performance of all obligations of Tridex NC in respect of the Loans. Each Borrower further agrees that all obligations hereunder or referred to herein or under any other Facility Document shall be joint and several, and that each Borrower shall make payment upon any notes issued pursuant hereto and any and all other obligations hereunder or referred to herein or under any other Facility Document upon their maturity by acceleration or otherwise, and that such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearances granted by the Bank to any Borrower, failure of the Bank to give any Borrower notice of borrowing or any other notice, any failure of the Bank to pursue or preserve its rights against any other Borrower, the release by the Bank of any collateral now or hereafter acquired from any Borrower, failure of the Bank to realize upon such collateral in a commercially reasonable manner, and that such agreement by each Borrower to pay upon any notice issued pursuant hereto is unconditional and unaffected by prior recourse by the Bank to the other Borrowers or any collateral for such Borrowers' obligations or the lack thereof. (d) Each Borrower hereby grants a right of contribution to each other Borrower for any amount paid by such other Borrower in satisfaction of any obligations under this Agreement, the Notes or any other Facility Document; provided, however, that the aggregate of the rights of contribution against any Borrower hereunder shall not exceed such Borrower's net worth. In calculating the net worth of any Borrower for purposes of this paragraph, such Borrower's obligations under the Facility Documents will not be included in its liabilities and such Borrower's rights of contribution against other Borrowers for amounts paid under the Facility Documents will not be included in its assets. (e) All notices to, or other communications with, the Borrowers or any one of them shall be sufficient if given to any of the Borrowers. Although the Bank may require that all of the Borrowers or a particular Borrower execute any document (including any Notice of Borrowing) in any matter pertaining to this Agreement or any of the other Facility Documents, 187 any one of the Borrowers may bind all of the Borrowers and any document (including any Notice of Borrowing) signed by any Borrower, and any and all action taken by any Borrower, is sufficient to represent all of the Borrowers. Without limiting the foregoing, any single Borrower may make representations and warranties on behalf of all the Borrowers or any other Borrower, and such representations and warranties shall be of the same force and effect as if made directly by such other Borrowers. Section 10.19. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken or condition exists. Section 10.20. Time of the Essence. Time and punctuality shall be of the essence with respect to this instrument, but no delay or failure of the Bank to enforce any of the provisions herein contained and no conduct or statement of the Bank shall waive or affect any of the Bank's rights hereunder. Section 10.21. Reference to and Effect on the Facility Documents. (a) Upon the effectiveness of this Agreement, on and after the date hereof each reference in the Facility Documents to the Credit Agreement or the Note, shall mean and be a reference to this Credit Agreement as amended and restated hereby or the Note as amended and restated in connection with the execution and delivery of this Agreement. (b) The execution, delivery and effectiveness of this Agreement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Bank under any of the Facility Documents, nor constitute a waiver of any provision of any of the Facility Documents. Section 10.22. Replacement Promissory Note. Upon receipt of an affidavit of an officer of the Bank as to the loss, theft, destruction or mutilation of any Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon surrender and cancellation of such Note or other security document, Borrower will issue, in lieu thereof, a replacement Note or other security document in the same principal amount thereof and otherwise of like tenor. 188 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. TRIDEX CORPORATION By ------------------------------------ George T. Crandall Treasurer Address for Notices to Borrower: 61 Wilton Avenue Westport, Connecticut 06880 ULTIMATE TECHNOLOGY CORPORATION By ------------------------------------ George T. Crandall Treasurer Address for Notices to Borrower: 100 Rawson Road Victor, New York 14564 PROGRESSIVE SOFTWARE, INC. By ------------------------------------ Daniel Bergeron Treasurer Address for Notices to Borrower: 2301 Crown Center Drive Charlotte, North Carolina 28227 TRIDEX NC, INC. By ------------------------------------ Daniel Bergeron Treasurer 189 Address for Notices to Borrower: 61 Wilton Avenue Westport, Connecticut 06880 FLEET NATIONAL BANK By ------------------------------------ Frederick A. Meagher Vice President Address for Notices and Lending Office: One Landmark Square Stamford, Connecticut 06901 Attn: Frederick A. Meagher Vice President Facsimile No.: (203) 964-4836 190 EXHIBITS Exhibit A-1 - Term Note Exhibit A-2 - Working Capital Note Exhibit B - Borrowing Base Certificate Exhibit C - Security Agreement Exhibit D - Pledge Agreement Exhibit E - Notice of Borrowing SCHEDULES Schedule 5.4 - Litigation Schedule 5.7 - Taxes Schedule 5.9 - Subsidiaries of Borrowers Schedule 5.10 - Credit Arrangements Schedule 5.12 - Hazardous Materials Schedule 7.3 - Liens Schedule 7.9 - Transactions with Affiliates Outside the Ordinary Course of Business 191 EX-10.2 7 EX. 10.2 EXHIBIT 10.2 PROMISSORY NOTE $12,000,000 Stamford, Connecticut April 17, 1998 For value received, TRIDEX CORPORATION, ULTIMATE TECHNOLOGY CORPORATION, TRIDEX NC, INC. and PROGRESSIVE SOFTWARE, INC. (the "Borrowers"), hereby jointly and severally promise, to pay to the order of FLEET NATIONAL BANK, (the "Bank") at the office of the Bank at One Landmark Square, Stamford, Connecticut 06901, for the account of the appropriate Lending Office of the Bank, the principal sum of TWELVE MILLION DOLLARS ($12,000,000), in lawful money of the United States of America and in immediately available funds, on the date(s) and in the manner provided in said Credit Agreement. The Borrowers also promise to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, at said principal office for the account of said Lending Office, in like money, at the rates of interest as provided in the Credit Agreement referred to below, on the date(s) and in the manner provided in said Credit Agreement. This is the Term Note referred to in that certain Credit Agreement (as amended from time to time the "Credit Agreement") dated of even date herewith among the Borrowers and the Bank and evidences the Term Loan made by the Bank thereunder. All terms not defined herein shall have the meanings given to them in the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain Events of Default and for prepayments on the terms and conditions specified therein. The Borrowers waive presentment, notice of dishonor, protest and any other notice or formality with respect to this Note. 192 This Note shall be governed by, and interpreted and construed in accordance with, the laws of the State of Connecticut. THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE TERM LOAN. TRIDEX CORPORATION By ------------------------------------- George T. Crandall Treasurer ULTIMATE TECHNOLOGY CORPORATION By ------------------------------------- George T. Crandall Treasurer PROGRESSIVE SOFTWARE, INC. By ------------------------------------- Daniel Bergeron Treasurer TRIDEX NC, INC. By ------------------------------------- Daniel Bergeron Treasurer 193
Amount Amount of Balance Notation Date of Loan Payment Outstanding By - ---- ------- ------- ----------- -- 194
EX-10.3 8 EX. 10.3 EXHIBIT 10.3 PROMISSORY NOTE $8,000,000 Stamford, Connecticut April 17, 1998 For value received, TRIDEX CORPORATION, ULTIMATE TECHNOLOGY CORPORATION, TRIDEX NC, INC. and PROGRESSIVE SOFTWARE, INC. (the "Borrowers"), hereby jointly and severally promise, to pay to the order of FLEET NATIONAL BANK, (the "Bank") at the office of the Bank at One Landmark Square, Stamford, Connecticut 06901, for the account of the appropriate Lending Office of the Bank, the principal sum of EIGHT MILLION DOLLARS ($8,000,000) or, if less, the amount of Working Capital Loans made by the Bank to the Borrowers pursuant to the Credit Agreement referred to below, in lawful money of the United States of America and in immediately available funds, on the date(s) and in the manner provided in said Credit Agreement. The Borrowers also promise to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, at said principal office for the account of said Lending Office, in like money, at the rates of interest as provided in the Credit Agreement referred to below, on the date(s) and in the manner provided in said Credit Agreement. The date and amount of each Working Capital Loan made by the Bank to the Borrowers under the Credit Agreement referred to below, and each payment of principal thereof, shall be recorded by the Bank on its books and, prior to any transfer of this Note (or, at the discretion of the Bank, at any other time), endorsed by the Bank on the schedule attached hereto or any continuation thereof. This is the Working Capital Note referred to in that certain Credit Agreement (as amended from time to time the "Credit Agreement") dated of even date herewith among the Borrowers and the Bank and evidences the Working Capital Loans made by the Bank thereunder. All terms not defined herein shall have the meanings given to them in the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain Events of Default and for prepayments on the terms and conditions specified therein. The Borrowers waive presentment, notice of dishonor, protest and any other notice or formality with respect to this Note. 195 This Note shall be governed by, and interpreted and construed in accordance with, the laws of the State of Connecticut. THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE WORKING CAPITAL LOANS. TRIDEX CORPORATION By ------------------------------------- George T. Crandall Treasurer ULTIMATE TECHNOLOGY CORPORATION By ------------------------------------- George T. Crandall Treasurer PROGRESSIVE SOFTWARE, INC. By ------------------------------------- Daniel Bergeron Treasurer TRIDEX NC, INC. By ------------------------------------- Daniel Bergeron Treasurer 196
Amount Amount of Balance Notation Date of Loan Payment Outstanding By - ---- ------- ------- ----------- --
197 EX-99.1 9 EX-99.1 (TRIDEX/PROGRESSIVE) (TRDX) Tridex Corporation Completes Acquisition of Progressive Software WESTPORT, Conn.--April 20, 1998--Tridex Corporation (Nasdaq National Market: TRDX), a leading manufacturer of peripheral devices and integrated systems for retail point-of-sale ("POS") and other transaction-based markets, today announced that it has acquired privately-held Progressive Software, Inc. ("Progressive"), a leading software and systems provider for the restaurant industry headquartered in Charlotte, North Carolina with branch locations in seven U.S. cities. Progressive's 1997 revenues were approximately $34 million. Progressive will operate as a wholly owned subsidiary of Tridex and remain headquartered in North Carolina. The purchase price was $48.5 million, comprised of $33.9 million in cash, $5.0 million in Tridex common stock, and the assumption of $9.6 million of Progressive debt. Financing of the transaction consisted of a $12.0 million Senior Term Loan from Fleet Bank, N.A., the purchase of $11.0 million Senior Subordinated Notes and $2.0 million in shares of Tridex common stock by Massachusetts Mutual Life Insurance Company and its affiliates ("Mass Mutual"), a $2.2 million borrowing from a newly established $8.0 million Revolving Credit Facility with Fleet Bank, N.A., and $16.3 million in cash. Additionally, Tridex agreed to seek shareholder approval of the issuance to Mass Mutual of a warrant to purchase 350,931 shares of Tridex common stock at $7.00 per share. Exclusive of a one time, non-cash charge of approximately $15.8 million, net of a deferred tax benefit, which is expected to be recorded during the second quarter ending June 30, 1998, related to the write off of research and development in progress, Tridex management believes, based on forecasts provided by Progressive and on current business conditions, that this acquisition will be accretive to 1998 earnings. Seth Lukash, Chairman and Chief Executive Officer of Tridex, commented, "We are very excited about Progressive joining the Tridex family. We believe that this acquisition will create significant benefits for our customers and shareholders. It marks Tridex's entry into the software sector of the restaurant market and establishes Tridex as a total solution provider of POS hardware and software. Progressive has a strong management team and an outstanding industry reputation. "Since being founded in 1982, Progressive has provided high-quality, customized POS and back office application software through a direct sales force to the full service, family dining, and quick service markets in the United States and Canada. We believe that this market offers significant opportunity for growth. Progressive's customers include Starbucks Coffee; Golden Corral; Shoney's; Braum's Ice Cream; Ryan's Steaks, Buffet and Bakery; and Family Dollar Stores." Mr. Lukash continued, "The acquisition of Progressive has dramatically diversified Tridex's revenue base. The efforts of the combined companies to penetrate new markets and develop new products will be facilitated by synergies between Progressive and Tridex. Moreover, we feel that we can achieve appreciable cost reductions for various components and peripherals through the combined purchasing power of our two organizations. We look forward to continuing to provide Progressive's customers with the same high-quality products, service and support they have come to expect." Ray Mueller, President of Progressive, commented, "We are very pleased to be associated with a company of Tridex's quality and stability. Tridex's success has been achieved by acquiring, integrating and growing companies serving complimentary markets. We believe that this relationship bodes well for our customers, employees and industry. We look forward to a long and mutually beneficial relationship." Tridex Corporation, which is comprised of its Ultimate Technology Corporation and Progressive Software, Inc. subsidiaries and the Tridex Ribbon Division, provides custom hardware and software solutions for retail point-of-sale, hospitality and other transaction-based markets. The statements contained in this release which are not historical facts may be deemed to contained forward-looking statements with respect to events, the occurrence of which involve risks and uncertainties, including, without limitation, uncertainties detailed in the Company's Securities and Exchange Commission filings. - -0- All trademarks are held by their respective companies. CONTACT: Tridex Corporation Seth M. Lukash Chairman and Chief Executive Officer (203) 226-1144 or TRDX's INVESTOR RELATIONS COUNSEL: The Equity Group Devin Sullivan (212) 836-9608 Robert Goldstein (212) 371-8660 (END) -----END PRIVACY-ENHANCED MESSAGE-----