<PAGE>
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended March 27, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to _________
------------
Commission File Number 0-9859
------------
BANCTEC, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 75-1559633
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.
4435 Spring Valley Road
Dallas, Texas 75244
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 450-7700
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of Class)
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. /X/
Aggregate Market Value of voting stock held by non-affiliates of the
Registrant at
May 31, 1994: $168,944,098
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.
Number of Shares Outstanding at
Title of Each Class May 31, 1994
------------------- ------------
Common Stock, $.01 Par Value 10,756,546
------------
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive proxy
statement to be filed for the annual meeting of stockholders scheduled to be
held on August 18, 1994.
==============================================================================
<PAGE>
BANCTEC, INC.
ANNUAL REPORT
ON
FORM 10-K
YEAR ENDED MARCH 27, 1994
PART I
ITEM 1. BUSINESS
GENERAL
BancTec, Inc., a Delaware corporation, ("BancTec" or the "Company") is a
leader in providing integrated systems, applications software, network services
and maintenance support to the financial transaction processing market. The
Company develops turn-key image processing systems, data capture systems and
integrated software products for banking, financial services,
telecommunications, utility, petroleum, insurance, government, retail and other
industries. The Company also designs and manufactures document processing
equipment for original equipment manufacturer ("OEM") customers and provides
network support services for local area networks ("LAN") and personal computers
("PC"). Unless otherwise indicated, all further references to BancTec or the
Company shall include its wholly-owned subsidiaries and the ScanData and
Servibanca joint ventures discussed in Note B of the financial statements.
During fiscal year 1994, BancTec acquired LeRoux, Pitts & Assoc. ("LPA"), a
provider of software products for debit and credit card processing and
electronic check authorization requirements. The Company also acquired
Imagesolve International, Ltd. ("ImageSolve"), a provider of integrated systems
solutions for capturing, routing, storing and accessing electronic images of
paper documents. A third acquisition was Advanced Computer Systems, Inc.
("ACS"), a provider of integrated software solutions used by community banks for
in-house data processing, proof of deposit and various check processing-related
applications. In addition, the Company acquired Terminal Data Corporation
("TDC"), a provider of document imaging systems, page scanning devices, and
digital and microfilm cameras.
BANCTEC PRODUCTS
The Company targets its products to specific market segments where it
believes it has certain competitive advantages and can maintain or achieve a
leadership position.
SYSTEMS SOLUTIONS, SOFTWARE PRODUCTS AND EQUIPMENT. In fiscal year 1994, the
Company derived approximately 54% of its revenues from sales of the following
products:
IMAGING SYSTEMS. BancTec offers image-based products which are used to
process a variety of financial and full page documents. The Company's
ImageFIRST-R- product family provides image-based solutions for financial-
related applications. Remittance payment processors utilize ImageFIRST to
capture and digitize check and other document images, including utility,
telephone, retail and credit card bills, mortgage coupons and tax notices.
Document images are displayed on PC monitors, eliminating the need to
physically handle paper documents during processing. BancTec's intelligent
character recognition ("ICR") product utilizes neural network technology,
custom software and various hardware components to enable the ImageFIRST
system to automatically read and interpret a high
1
<PAGE>
percentage of the hand printed characters on checks and other documents.
The incorporation of ICR capabilities further reduces the requirement for
human intervention in document processing and increases processing
efficiency.
Document processors also use ImageFIRST systems to capture and process
digitized images of credit card sales drafts. Rather than handle thousands
of individual paper sales drafts each day, operators view document images
on PC monitors and key in transaction amounts and other information. In
addition, ImageFIRST systems are currently used to produce image statements
and process European giro documents used in centralized country-wide
clearing operations. ImageFIRST systems may also be used for image-based
check repair, which enables banks that handle large volumes of checks to
more efficiently re-process items which have been rejected in the standard
processing cycle.
The Company's ImageFIRST systems utilize an Open Systems Architecture
("OSA") platform, which enables customers to easily add industry standard
hardware and/or software components to further improve processing
capabilities. Development of ImageFIRST OSA with ICR has given BancTec an
excellent competitive position with respect to financial document
processing in the United States, Canadian, European and Australian markets.
As a result of the acquisitions made in fiscal 1994, the Company also
offers products for a variety of full page document imaging applications.
The DocuScan-R- 2000 and 4000 series products utilize photo-optical
technology, gray scale capture capabilities, image character recognition
software and high precision document transports to scan and digitize a
variety of full-sized documents. The Company also provides systems
solutions utilizing Computer Output to Laser Disk (COLD) technology to
electronically archive computer-generated documents such as invoices,
statements and business forms on optical disks.
DOCUMENT PROCESSING SYSTEMS, CHECK SORTING SYSTEMS AND ELECTRONIC
COMPONENTS. The 9400 Document Processing System is utilized for remittance
and/or sales draft applications by financial transaction processors that
require automation but do not require high-speed image-based systems. By
accelerating the processing of payments, customers are able to improve
their cash flow and maximize funds availability. The system can operate as
a stand-alone device or in a clustered environment with a LAN and data
concentrator.
The 4300 Document Processing System is used by financial institutions to
re-encode and re-introduce repaired documents into the check processing
cycle. The 4300 can be configured as a PC-driven stand-alone device or a
multi-application controller-based system. With the controller option, the
4300 can also process other types of documents, such as remittances and/or
sales drafts.
The Company also manufactures low, medium and high-speed document
reader/sorters and related components that read magnetic ink character
recognition ("MICR") and optical character recognition ("OCR") data from
financial documents and sort them according to patterns established by the
user. BancTec markets these products to various major systems providers
throughout the world. OEM purchasers of the Company's reader/sorters
include International Business Machines, AT&T Global Information Systems
(NCR) and Bull Corporation of America. The Company also directly markets
these products in conjunction with its software products to financial
document processors as (i) plug-compatible alternatives for the IBM 3890
high-speed reader/sorter, (ii) remote reader/sorters which enable banks to
operate check processing centers in various locations, (iii) stand-alone
reader sorters which utilize the Company's system software and (iv)
replacement systems for BancTec's and other vendors' older generation
products.
2
<PAGE>
The Company markets the Transaction Processing System ("TPS"), which
utilizes reader/sorters and application software to perform check clearing
for large financial institutions in the United Kingdom and Ireland.
Components such as microfilm cameras, microfilm modules, image cameras,
MICR encoders, ink jet printers and various peripheral equipment are also
manufactured and marketed by the Company.
COMMUNITY BANKING PRODUCTS. The Company provides Banker-II, ACCESS and
PODExpress-R- products to community banks. Banker-II and ACCESS are
software packages which integrate check sorting, platform automation, loan
processing, deposit management, ATM and teller processing and other bank
operations activities. PODExpress combines PC and UNIX-based software
products with the Company's reader/sorters to provide solutions for proof-
of-deposit and other check sorting applications. Community banks use
BancTec's products to improve operational efficiency and to compete
effectively with larger institutions.
ELECTRONIC PAYMENT PROCESSING PRODUCTS. BancTec markets software products
for electronic credit, debit and courtesy card processing, electronic check
authorization, inventory management and other electronic funds transfer
("EFT") oriented applications. The Company's products enable retailers to
process consumers' electronic transactions in-lane, in-store, at the main
office as well as at the electronic payment network switch.
SUPPORT PRODUCTS AND CONSUMABLE SUPPLIES. The Company utilizes its
telemarketing organization to distribute document processing supplies and
related products that are a source of recurring revenue. BancTec's
CheckMender, HeatStrip-R- and BancStrip-R- are used by banks to re-encode
checks which cannot be read by traditional check sorting equipment. The
Company's CheckMender automatically applies HeatStrip material to the
bottom edge of checks which have been damaged, have missing or erroneous
information or are otherwise unreadable. BancTec also provides encoding
ribbons, microfilm, ink rollers and other consumable supplies that are used
with the Company's document processing equipment.
BancTec generally warrants its equipment and software products sold
directly to end-users for 30 days from the date of installation and its OEM
products sold to systems providers for 90 days from the date of shipment.
NETWORK SERVICES AND EQUIPMENT MAINTENANCE. The Company derived approximately
46% of its revenue in fiscal year 1994 from the following network services and
equipment maintenance related products.
NETWORK SERVICES AND PERSONAL COMPUTER SUPPORT. BancTec provides LAN and
PC hardware support, systems integration services, asset management, help
desk services and installation coordination to major companies. The
Company's service engineers provide on-site or on-call support for file
servers, personal computers, laptop computers, engineering workstations,
printers and other peripheral equipment. BancTec also provides technical
telephone support for Novell network operating systems software and is the
U.S. warranty service provider for Dell Computer Corp.
INSTALLATION AND MAINTENANCE OF BANCTEC PRODUCTS. As a key aspect of
BancTec's strategy of providing its customers with a total system solution,
the Company installs and maintains its own products. Standard maintenance
contracts are available which specify type of service, hours of coverage
and monthly rates. Contracts may also be tailored to meet the specific
needs of individual
3
<PAGE>
customers. The Company's maintenance contracts typically include both
parts and labor.
THIRD-PARTY SERVICE FOR OTHER DOCUMENT PROCESSING EQUIPMENT. BancTec
provides hardware maintenance services for IBM 3890 and 3890 XP
reader/sorters, which are the primary transports for check sorting in many
large banks. The Company also refurbishes and resells IBM 3890 and 3890 XP
reader/sorters to banks and bank service bureaus.
At May 31, 1994, BancTec employed approximately 998 service engineers
located in the United States, Canada, Australia, United Kingdom,
Scandinavia and continental Europe.
SOFTWARE ENGINEERING
Through its staff of approximately 369 software engineers, the Company
maintains standard system and application software products. In addition, the
Company utilizes these software engineers to modify and enhance its standard
application software products for customers in order to meet their particular
operating requirements. Enhancements are generally paid by the customer under
the terms of a sales contract. This software engineering activity is generally
charged to cost of sales as incurred.
PRODUCT DEVELOPMENT
The Company is engaged in ongoing development engineering activities in
connection with new and existing products, employing as of May 31, 1994,
approximately 101 persons for such activities.
The following table sets forth certain information regarding the Company's
development engineering expenditures for the indicated fiscal years:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Development engineering expenditures............... $9,515 $8,490 $7,692
Percent of total revenue........................ 3.8% 3.6% 4.0%
Percent of equipment and software revenue....... 7.1% 6.1% 6.6%
</TABLE>
The Company also spent approximately $994,000, $851,000 and $2,149,000 in
fiscal years 1994, 1993 and 1992, respectively, on engineering activities funded
by customers relating to the development of new products and improvements of
existing products.
Current expenditures are concentrated on developing new applications for
the Company's product lines and improving and expanding existing products, as
described below:
IMAGING SYSTEMS. The Company is currently developing several methods of
utilizing "gray scale" and other related technologies to further enhance
financial document image clarity and readability. Additional projects center
around the utilization of image archival technology and "in-line" image quality
assurance algorithms.
Projects for enhanced full page imaging such as a higher speed camera,
hardware interface adapters and additional software connectivity capabilities
for page scanners are also in development.
4
<PAGE>
DOCUMENT PROCESSING SYSTEMS, CHECK SORTING SYSTEMS AND ELECTRONIC
COMPONENTS. Development activity continues on low-cost, low-speed financial
document transports for use at processing sites with modest volumes. The
Company is also developing both high speed and low speed MICR encoder modules
which may be used with various BancTec reader/sorter products and image
systems. During the year, BancTec completed development work on the CheckMender
IV device, which may be combined with the Company's patented HeatStrip products
for check repair requirements.
COMMUNITY BANKING PRODUCTS. The Company continues to enhance its systems
solutions and integrated software products for community banking applications.
Current development projects include the development of PODExpress Image
solutions for image-based proof of deposit and Banker III software for
integrated banking operations requirements.
ELECTRONIC PAYMENT PROCESSING. Several development projects are underway
regarding the Company's EFT products. A major application development program
will provide Electronic Benefits Transfer (EBT) capabilities to large grocery
chains. The Company's Open Systems-based Mainsail software product is being
enhanced with graphic user interfaces (GUI) and with the ability to utilize
additional commercial grade teleprocessing monitors.
The Tandem-based electronic switching product has recently been enhanced to
support a check authorization subsystem. Additional development projects will
add graphic user interfaces further improving product performance. Development
work also continues in order to position this product for multi-lane retail and
other markets. Research and design projects are underway to support Tandem
Computer's movement into Open Systems (POSIX) architectures. This will allow
the Company's Open Systems products and Tandem proprietary applications to run
concurrently on the same hardware platforms.
There is no assurance that the Company's development efforts will result in
successful commercial products. Many risks exist in new product development,
adopting new technology and introducing any new products.
SALES AND DISTRIBUTION
The Company's distribution strategy is to employ multiple sales channels to
achieve the widest possible distribution of its products. The Company's
products are sold to end-users, OEMs, value added resellers ("VARs") and systems
integrators. In fiscal year 1994, BancTec had five separate business units
distributing its products in North America. The five business units focused on
the following areas:
1. Financial document processing systems sold directly to high-volume document
processors, such as large banks, financial service providers, telephone
companies, gas and electric utilities, petroleum companies, service
bureaus, insurance companies, retailers and other end-users.
2. Systems solutions and integrated software products for community banks and
smaller regional banks.
3. Software products for electronic funds transfer and point-of-sale ("POS")
applications for retailers, grocery chains and financial institutions.
4. PC/LAN network support services, PC warranty services, third party
maintenance and other maintenance-related products and services for major
North American companies and government institutions.
5
<PAGE>
5. Document processing equipment, imaging products and electronic components
for OEMs, VARs and various other resellers.
Internationally, BancTec also sells its products through a variety of
channels. The Company has direct sales forces in the United Kingdom, Canada and
Australia. A separate business unit, Imagesolve, uses its sales organization to
market various image-based systems integration solutions in the United Kingdom
and continental Europe. Third-party maintenance and support services are also
marketed in the United Kingdom via a separate direct sales force.
In fiscal 1992, BancTec, Inc. and Thomson-CSF established a joint venture
company, ScanData N.V., which has exclusive rights to market and service various
products provided by BancTec and Thomson in specified territories, consisting of
continental Europe, Scandinavia and North Africa. In fiscal year 1994, BancTec
acquired a 33% equity interest in Servibanca, a document processing services
provider located in Chile. Servibanca will introduce the Company's products and
services to the South American document processing market. BancTec uses various
other distributor and OEM relationships to market its products in Asia and
various other locations.
The Company's combined worldwide sales organization totals approximately
165 people. Major sales offices are located in several U.S. cities, Toronto,
Montreal, London, Paris, Frankfurt, Sydney and Santiago, Chile.
Sales of products to foreign entities, which accounted for approximately
25% of total revenues in fiscal year 1994, are subject to various risks,
including fluctuations in exchange rates, import controls and the need for
export licenses. See Note J of Notes to Consolidated Financial Statements for
financial information concerning the Company's international operations.
SIGNIFICANT CUSTOMERS
For fiscal years 1994, 1993 and 1992, no single customer accounted for more
than 10% of the total revenue of the Company.
COMPETITION
The Company believes that product performance, quality, service and price
are important competitive factors in the markets in which it competes.
Generally, the Company emphasizes unique product features, flexibility to
configure unique systems from standard products, quality and service in its
competitive efforts. In marketing its products, the Company competes directly
or indirectly with a wide variety of companies, some of which have substantially
greater financial and other resources than the Company.
BACKLOG
The Company's firm order backlog for its products at March 27, 1994 and
March 28, 1993 was approximately $48,379,000 and $49,787,000 respectively.
The Company's backlog does not include contracts for recurring service and
maintenance-related products and support products. The Company's backlog is
subject to fluctuation due to various factors, including the size and timing of
orders for the Company's products and exchange rate fluctuations, and is not
necessarily indicative of the level of future revenue.
6
<PAGE>
MANUFACTURING
The Company's hardware and systems products are assembled using various
standard purchased components such as PC monitors, minicomputers, encoders,
communications equipment and other electronic devices. Certain engineered
products are purchased from sole source suppliers. The Company generally has
contracts with these suppliers that are renewed periodically and that require no
minimum purchases. If the supply of certain components or subassemblies were
interrupted without sufficient notice, the result could be an interruption of
product deliveries. The Company has not experienced, nor does it foresee, any
difficulty in obtaining necessary parts.
PATENTS AND TRADEMARKS
The Company has registered patents in the United States and Canada
protecting the Company's HeatStrip product. In addition, BancTec holds U.S.
patents relating to high-speed document handling, encoding, and optical and
magnetic character recognition. BancTec also holds patents relating to image
processing technology in both the U.S. and several European countries.
The validity of any patents issued or which may be issued to the Company
may be challenged by others and the Company could encounter legal difficulties
in enforcing its patents rights against infringement. In addition, there can be
no assurance that other technology cannot or will not be developed or that
patents will not be obtained by others which would render the Company's patents
obsolete. Management does not consider the Company's patents to be essential to
the ongoing operations of the Company.
The Company has an exclusive, paid-up, worldwide right and license from
Control Data Corporation to all issued and pending patents that pertain to
certain OEM products and to the know-how and technology related to the
manufacture of such products. This exclusive right and license expires in 2014.
In April, 1986, the Company executed a non-exclusive license agreement with
TRW Financial Systems, Inc. (formerly Teknekron Financial Systems, Inc.). The
agreement permits the Company to manufacture and market digital image processing
systems subject to a patent held by that company.
The Company has several registered trademarks, including "BancTec" and
various product names.
EMPLOYEES
At May 31, 1994, the Company employed approximately 2,439 full-time
employees and considers its employee relations to be good. None of the
Company's employees are represented by a labor union, and the Company has never
experienced a work stoppage.
ITEM 2. PROPERTIES
The Company owns or leases numerous facilities throughout the world to
support its operations. The Company believes that these facilties are adequate
to meet its ongoing needs. The loss of any one facility could have an adverse
impact on operations in the short term.
The Company has the option to renew all leases on principal facilities at
the end of the lease terms.
7
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
EXECUTIVE OFFICERS OF BANCTEC
Executive officers are elected annually at the first meeting of the Board
of Directors following the annual meeting of stockholders. No family
relationships exist among the executive officers of BancTec.
The executive officers of BancTec are:
NAME AGE POSITION
---- --- --------
Grahame N. Clark, Jr. ..... 51 Chairman of the Board and Chief Executive
Officer
Norton A. Stuart, Jr. ..... 59 President
William E. Bassett ........ 52 Executive Vice President
Jerome R. Brown ........... 49 Senior Vice President
William A. Feldman ........ 51 Senior Vice President
Tod V. Mongan ............. 43 Senior Vice President, Secretary and
General Counsel
Gary T. Robinson .......... 47 Senior Vice President and Chief Financial
Officer
James R. Wimberley ........ 53 Senior Vice President
Gordon F. Kipp ............ 47 Vice President
Peter N. Weeks ............ 48 Vice President
James E. Uren ............. 57 Vice President
John G. Guthrie ........... 57 Vice President
Michael D. Kubic .......... 39 Vice President, Controller, and Assistant
Treasurer
Kevin L. Roper ............ 39 Vice President
Michael N. Lavey .......... 36 Treasurer
Mr. Clark has been Chairman of the Board and Chief Executive Officer since
April 1987.
Mr. Stuart has been President since April 1987.
Mr. Bassett has been Executive Vice President since January 1993. Since
October 1977, Mr. Bassett has been employed by BancTec in various
management capacities.
Mr. Brown has been Senior Vice President since January 1991. Since April
1984, Mr. Brown has been employed by BancTec in various management
capacities.
Mr. Feldman has been Senior Vice President since January 1991. For the
five years prior to joining BancTec, Mr. Feldman was employed by Concurrent
Computer Corporation in various management capacities.
Mr. Mongan has been Senior Vice President, Secretary and General Counsel
since January 1993. Since November 1979, Mr. Mongan has been employed by
BancTec in various management capacities.
8
<PAGE>
Mr. Robinson has been Senior Vice President and Chief Financial Officer
since January 1993. Since November 1985, Mr. Robinson has been employed by
BancTec in various management capacities.
Mr. Wimberley has been Senior Vice President since January 1993. Since
January 1984, Mr. Wimberley has been employed by BancTec in various
management capacities.
Mr. Kipp has been Vice President since February 1990. For the five years
prior to joining BancTec, Mr. Kipp was employed by Intecom, Inc. in various
management capacities.
Mr. Weeks has been Vice President since January 1989. Since December 1977,
Mr. Weeks has been employed by BancTec in various management capacities.
Mr. Uren has been Vice President since September 1993. Since October 1988,
Mr. Uren has been employed by BancTec in various management capacities.
Mr. Guthrie has been Vice President since September 1993. Since February
1989, Mr. Guthrie has been employed by BancTec in various management
capacities.
Mr. Kubic has been Vice President, Controller, and Assistant Treasurer
since September 1993. Since August 1986, Mr. Kubic has been employed by
BancTec in various management capacities.
Mr. Roper has been Vice President since March 1994. Since March 1985,
Mr. Roper has been employed by BancTec in various management capacities.
Mr. Lavey has been Treasurer since March 1994. Since March 1990, Mr. Lavey
has been employed by BancTec in various management capacities. For the
three years prior to joining BancTec, Mr. Lavey was employed by NAC, Inc.
as Controller.
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of the Company is traded on the over-the-counter market
and is quoted on the National Market System of the National Association of
Securities Dealers Automated Quotation (NASDAQ) System under the symbol BTEC.
The following table sets forth the range of high and low sales prices per share
of common stock, as reported by NASDAQ for the periods indicated. All sales
prices have been restated to reflect the three-for-two common stock split as
discussed in Note G of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------
1994 1993
---------------- ----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter............ 20 15-1/2 16-1/3 13-2/3
Second Quarter........... 22-3/4 17-1/4 17-7/8 13-7/8
Third Quarter............ 24 18-3/4 19-7/8 15-2/3
Fourth Quarter........... 24-3/4 20 20-1/8 15-1/2
</TABLE>
The Company has not paid any cash dividends on its common stock since its
organization and currently intends to continue a policy of retaining earnings
for the Company's operations and planned expansion of its business or to
repurchase its common stock. In addition, the Company's credit agreement places
restrictions on the payment of dividends. The number of stockholders of record
as of May 31, 1994, was approximately 1,290.
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ----- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
For the year:
Revenue......................... $247,538 $233,885 $190,968 $183,761 $185,835
Income before cumulative
effect of accounting change... 16,343 14,351 11,721 10,672 10,498
Net income...................... 16,343 15,186 11,721 10,672 10,498
Income per share before
cumulative effect of accounting
change........................ 1.45 1.32 1.15 1.08 1.06
Net income per share............ 1.45 1.40 1.15 1.08 1.06
At fiscal year-end:
Total assets.................... $276,270 $194,846 $171,254 $152,707 $156,566
Working capital................. 46,085 49,687 43,143 41,764 41,878
Long-term debt.................. 50,564 12,239 19,629 27,392 34,388
Stockholders' equity............ 128,273 109,972 92,252 78,920 69,964
Weighted average number of
common shares................... 11,294 10,870 10,173 9,861 9,929
</TABLE>
The foregoing summary reflects the acquisitions as discussed in Note B of
Notes to Consolidated Financial Statements from their respective date of
acquisition. Additionally, the per share amounts and the weighted average
number of common shares have been restated to reflect the three-for-two common
stock split.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal year 1994 results reflected the acquisitions of LPA from August 23,
1993, Imagesolve from December 1, 1993, ACS from December 23, 1994 and TDC from
February 28, 1994. Fiscal year 1993 results reflected the acquisitions of CFS
and Access from June 29, 1992 and August 1, 1992, respectively. Fiscal year
1992 results reflected the acquisitions of ebm Systems' service operations and
Monitronics from August 30, 1991 and September 27, 1991, respectively.
Additionally, fiscal year 1992 reflected the consolidated results of ScanData
S.A., a French company formed in conjunction with the ScanData joint venture
with Thomson-CSF, from September 30, 1991. The combined revenues of the
companies acquired in fiscal years 1994, 1993 and 1992 accounted for
approximately, 5%, 5%, and 8% of consolidated revenues, in their respective
years of acquisition. See Note B of Notes to Consolidated Financial Statements
for a discussion of these acquisitions.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
Revenue for fiscal year 1994 of $247,538,000 increased by $13,653,000 or
5.8% from fiscal year 1993 due to increases in network service revenue and
current year acquisitions offset in part by reductions in equipment revenue.
Revenue from maintenance and other services of $112,805,000 increased
$17,886,000 or 18.8% primarily due to business growth in the network services
business in the United States. Revenue from equipment and software of
$134,733,000 decreased by $4,233,000 or 3.0% from fiscal 1993 due to decreases
in reader/sorter equipment and document processing systems, offset in part by
growth in software from current year acquisitions. Revenue from equipment and
software represented 54.4% of total revenue in fiscal year 1994, compared to
59.4% in fiscal year 1993.
Gross profit of $69,652,000 for fiscal year 1994 increased by $3,052,000 or
4.6% over the same period for last year. Gross margin of 28.1% decreased by .4%
from the prior year due to a change in the mix of revenue to lower margin
maintenance revenue and the reduction in equipment revenue from prior year
levels. Gross profit for maintenance and other services increased by $5,556,000
due to the increase in network service revenue and an improvement in the gross
margin to 22.4% compared to 20.8% in fiscal year 1993. Gross profit for
equipment and software decreased by $2,504,000 due to the reduction in equipment
revenue and a 1.0% decrease in the associated gross margin percent. Partially
offsetting the reduction in equipment gross profit was an increase in software
revenue primarily from current year acquisitions and an improvement in software
margins.
Operating expenses increased by $3,719,000 from the prior year due to the
current year acquisitions. Operating expenses as a percentage of sales were
17.9% compared to 17.3% in the prior year.
Net interest expense decreased by $494,000 from fiscal 1993 as a result of
a lower average cost of borrowing and additional interest income on investments.
Net sundry expense decreased by $1,935,000 due to the absence of exchange losses
in the current year and gains on the sale of stock held for investment in fiscal
1994.
The provision for income taxes increased $720,000 over fiscal year 1993 due
to the increase in taxable income. The overall effective tax rate of 40.0%
remained constant with the prior year.
Minority interest of $2,625,000 reflects the ScanData Joint Venture
partner's (Thomson) 49.5% share of the losses incurred in the joint venture for
fiscal year 1994.
11
<PAGE>
Fiscal year 1994 income before cumulative effect of accounting change of
$16,343,000 resulted in earnings per share of $1.45, compared to $14,351,000 and
$1.32 in fiscal year 1993. The fiscal year 1993 net income after accounting
change included $835,000 or an earnings per share effect of $0.08 for the
cumulative effect of adoption of SFAS No. 109 - Accounting for Income Taxes.
FISCAL YEAR 1993 COMPARED TO FISCAL YEAR 1992
Revenue for fiscal year 1993 of $233,885,000 increased $42,917,000, or
22.5% from fiscal year 1992, as a result of increases in both equipment and
maintenance sales. Maintenance and other service revenue increased $20,140,000
or 26.9% from fiscal year 1992 due to growth in network services resulting from
acquisitions and new business. Revenue from equipment and software increased
$22,777,000 or 19.6% from fiscal year 1992 primarily due to acceptance by the
Swedish Bankgiro of a $14,000,000 turn-key image processing system and increased
end-user reader/sorter revenue due to acquisitions, offset in part by reduced
document processing systems and OEM reader/sorter revenue. Equipment and
software revenue represented 59.4% of total revenue in fiscal year 1993,
compared to 60.8% in fiscal year 1992.
Gross profit increased $8,712,000 or 15.1%. Fiscal year 1993 gross margin
of 28.5% decreased from 30.3% in the prior year primarily due to engineering
cost of sales related to the giro processing product and the write-off of an
obsolete page reader product in the joint venture.
Operating expenses increased $5,214,000 primarily due to increased sales
and marketing expense resulting from acquisitions. Operating expenses decreased
as a percentage of revenue to 17.3% in fiscal 1993 from 18.5% in fiscal 1992.
Net interest expense decreased $1,262,000 due to a lower average balance on
the term loan and a decline in the average effective interest rate on the term
loan due to the expiration of interest rate swap agreements. Net sundry
expenses increased $2,340,000 primarily due to a combination of foreign currency
transaction losses of $1,122,000 and increased goodwill amortization of $608,000
due to acquisitions.
The provision for income taxes reflected an increase in the Company's
effective tax rate to 40.0% in fiscal year 1993 from 37.7% in fiscal year 1992
primarily due to an increase in the foreign entities effective tax rates.
Minority interest of $1,675,000 represents Thomson's 49.5% share of the
losses incurred in the joint venture. These joint venture losses included the
write-off of an obsolete page reader product.
Fiscal year 1993 income before cumulative effect of accounting change
increased $2,630,000 or 22.4% compared to fiscal 1992, resulting in earnings per
share of $1.32 compared to $1.15 last year. The income improvement in fiscal
1993 was primarily due to increased gross profit on higher revenue and lower
interest expense offset in part by foreign currency losses.
During fiscal 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109 - Accounting for Income Taxes. BancTec has elected to
reflect the cumulative effect of adopting SFAS 109 as a change in accounting
principle as of the beginning of fiscal 1993, increasing net income to
$15,186,000 or $1.40 per share. The adoption of SFAS 109 had no significant
impact on fiscal 1993 income before cumulative effect of accounting change.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Funds to support the Company's operations, including capital expenditures,
have been derived from a combination of funds provided by operations, long and
short-term bank financing, capital leasing and, to a lesser extent, by sales of
capital stock under employee stock option and purchase plans. The Company has
three credit facilities currently in place under an agreement with several
banks. Under the term loan facility, the Company borrowed $51,000,000 in fiscal
year 1989 to fund the acquisition of Computer Entry Systems, (CES), of which
$13,181,000 is outstanding at March 27, 1994. Under the acquisition loan
facility, the Company may borrow up to $55,000,000, of which $44,200,000 has
been borrowed as of March 27, 1994 to fund the ACS and TDC acquisitions.
Remaining acquisition costs of TDC totalling $7,800,000 will be paid from
additional borrowings against the acquisition facility and/or operating cash
balances. The Company also has available a $20,000,000 revolving credit
facility which had no outstanding balance as of March 27, 1994. The Company
continues to make scheduled payments on the CES term loan of $1,821,000 per
quarter until maturity in March 1996. Under the terms of the acquisition loan
facility, interest only is currently payable and the amount outstanding on
December 31, 1994 will be converted to a term loan due and payable over 20 equal
quarterly payments until maturity in December 1999. During fiscal year 1994,
the Company borrowed a maximum amount of $3,000,000 against the revolving credit
facility, which was repaid by year end. See Note D of Notes to Consolidated
Financial Statements. The Company believes that it has sufficient financial
resources available to support its anticipated requirements to fund operations
in fiscal year 1995, and is not aware of any trends, demands or commitments
which would have a material impact on the Company's long or short-term
liquidity.
Cash and cash equivalents decreased during the year as funds were utilized
for capital expenditures, current year acquisitions, inventory growth and in
support of several customer contracts with longer life cycles.
Accounts receivable increased in fiscal 1994 due to acquisitions and
increased sales in the fourth quarter as compared to the prior fiscal year.
Inventory increased due to a growth in finished goods reader/sorters due to
lower customer shipments, inventory from acquisitions and a buildup in support
of scheduled shipments for our image based products.
Net fixed assets increased due to current year capital additions in support
of the network services business, purchase of the headquarters facility, capital
leases on computer equipment and phone systems and business acquisitions.
Excess of cost over net assets of acquired business increased as of a
result of current year acquisitions. See Note B of Notes to the Consolidated
Financial Statements.
Current liabilities increased as a result of current maturities on the
acquisition facility, customer advances in Scandinavia, increases in amounts due
from the joint venture to Thomson, growth in network services deferred revenue
and liabilities assumed with the current year acquisitions.
Long-term debt increased primarily as a result of the borrowings under the
acquisition loan facility and to a lesser extent for debt assumed as part of one
of the acquisitions.
Inflation has not had a material effect on the operating results of the
Company.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
BancTec, Inc.:
We have audited the accompanying consolidated balance sheets of BancTec,
Inc. (a Delaware corporation) and subsidiaries as of March 27, 1994 and March
28, 1993, and the related consolidated statements of income, cash flows and
stockholders' equity for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. The
consolidated financial statements of BancTec, Inc. as of March 29, 1992 were
audited by other auditors whose report dated May 28, 1992, expressed an
unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BancTec, Inc. and
subsidiaries as of March 27, 1994 and March 28, 1993, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As explained in Note F of Notes to Consolidated Financial Statements,
effective March 30, 1992, the Company changed its method of accounting for
income taxes.
Arthur Andersen & Co.
Dallas, Texas
May 17, 1994
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
BancTec, Inc.
We have audited the accompanying consolidated statements of income, cash
flows, and stockholders' equity of BancTec, Inc. and subsidiaries for the year
ended March 29, 1992. Our audit also included the financial statement schedules
listed in the Index at Item 14(a) as of March 29, 1992 and for the year ended
March 29, 1992. These financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of BancTec, Inc. for the year ended March 29, 1992, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein at March 29, 1992 and for the year ended March
29, 1992.
Ernst & Young
Dallas, Texas
May 28, 1992
15
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
A S S E T S
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................ $ 12,644 $ 25,326
Accounts receivable, less allowance for doubtful accounts
of $1,518,000 in 1994 and $1,342,000 in 1993.......... 66,635 47,849
Inventories.............................................. 48,769 36,934
Other.................................................... 8,667 6,437
-------- --------
Total current assets............................... 136,715 116,546
-------- --------
PROPERTY, PLANT AND EQUIPMENT-AT COST:
Land..................................................... 1,295 277
Field support spare parts................................ 44,548 35,611
Machinery and equipment.................................. 34,377 29,872
Furniture, fixtures and other............................ 20,378 15,273
Building................................................. 4,911 690
-------- --------
105,509 81,723
Less accumulated depreciation and amortization........... 60,125 47,535
-------- --------
Net property, plant and equipment ................. 45,384 34,188
-------- --------
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESS,
less accumulated amortization of $6,832,000 in 1994 and
$4,932,000 in 1993....................................... 88,352 39,119
-------- --------
OTHER INTANGIBLE ASSETS, less accumulated amortization of
$4,388,000 in 1994 and $2,598,000 in 1993................ 3,264 4,011
-------- --------
OTHER ASSETS............................................... 2,555 982
-------- --------
TOTAL ASSETS............................................... $276,270 $194,846
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt..................... $ 12,426 $ 9,846
Trade accounts payable................................... 19,539 12,771
Other accrued expenses and liabilities................... 31,968 26,945
Deferred revenue......................................... 23,580 14,561
Income taxes............................................. 3,117 2,736
-------- --------
Total current liabilities.......................... 90,630 66,859
-------- --------
LONG-TERM DEBT, less current maturities.................... 50,564 12,239
-------- --------
OTHER LIABILITIES.......................................... 5,593 1,941
-------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 1,210 3,835
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock-authorized, 1,000,000 shares of $.01 par
value:
Series A - no shares issued and outstanding -- --
Series B - no shares issued and outstanding -- --
Common Stock-authorized, 45,000,000 shares of $.01 par
value: issued and outstanding, 10,743,550 shares in
1994 and 10,428,400 in 1993........................... 107 104
Additional paid-in capital.............................. 45,959 43,731
Retained earnings........................................ 84,361 68,018
Foreign currency translation adjustments................. (721) (750)
Unearned compensation.................................... (1,433) (1,131)
-------- --------
Total stockholders' equity......................... 128,273 109,972
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................. $276,270 $194,846
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 27, March 28, March 29,
1994 1993 1992
-------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C>
REVENUE:
Equipment and software.......................... $134,733 $138,966 $116,189
Maintenance and other services.................. 112,805 94,919 74,779
-------- -------- --------
247,538 233,885 190,968
-------- -------- --------
COSTS OF SALES:
Equipment and software.......................... 90,380 92,109 75,295
Maintenance and other services.................. 87,506 75,176 57,785
-------- -------- --------
177,886 167,285 133,080
-------- -------- --------
Gross profit.............................. 69,652 66,600 57,888
-------- -------- --------
OPERATING EXPENSES:
Product development............................. 9,515 8,490 7,692
Selling, general and administrative............. 34,701 32,007 27,591
-------- -------- --------
44,216 40,497 35,283
-------- -------- --------
Income from operations.................... 25,436 26,103 22,605
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income................................. 422 315 534
Interest expense................................ (1,846) (2,233) (3,714)
Sundry-net...................................... (1,149) (3,084) (744)
-------- -------- --------
(2,573) (5,002) (3,924)
-------- -------- --------
Income before income taxes, minority inter-
est and cumulative effect of accounting
change..................................... 22,863 21,101 18,681
-------- -------- --------
INCOME TAX PROVISION (BENEFIT):
Current......................................... 11,363 8,969 6,405
Deferred........................................ (2,218) (544) 641
-------- -------- --------
9,145 8,425 7,046
-------- -------- --------
MINORITY INTEREST................................. 2,625 1,675 86
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE.......................................... 16,343 14,351 11,721
CUMULATIVE EFFECT OF ACCOUNTING CHANGE............ -- 835 --
-------- -------- --------
NET INCOME........................................ $ 16,343 $ 15,186 $ 11,721
-------- -------- --------
-------- -------- --------
NET INCOME PER SHARE:
Income Before Accounting Change................. $1.45 $1.32 $1.15
Cumulative Effect of Accounting Change.......... -- .08 --
-------- -------- --------
Net Income...................................... $1.45 $1.40 $1.15
-------- -------- --------
-------- -------- --------
Fully Diluted Shares............................ 11,294 10,870 10,173
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 27, March 28, March 29,
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 16,343 $ 15,186 $ 11,721
Adjustments to reconcile net income to cash flows
provided by operating activities:
Depreciation and amortization............. 18,827 14,478 12,956
Deferred income tax expense (benefit)..... (2,218) (544) 641
Cumulative effect of accounting change.... -- (835) --
Other non-cash items...................... 258 1,069 --
(Increase) decrease in accounts receivable (8,182) (8,840) 3,566
(Increase) decrease in inventories........ (6,833) 5,888 2,587
(Increase) decrease in other assets....... (6,776) 598 (2,796)
Increase in trade accounts payable........ 3,217 3,331 1,465
Increase in deferred revenue.............. 5,125 5,801 3,492
Increase (decrease) in other accrued
expenses and liabilities............... 3,171 6,165 (4,192)
Minority interest in earnings............. (2,625) (1,675) (86)
-------- -------- --------
Cash flows provided by operating
activities.......................... 20,307 40,622 29,354
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment...... (24,821) (15,199) (16,080)
Disposition of property, plant and equipment.... 3,196 3,057 2,903
Purchase of businesses, net of cash acquired.... (49,014) (6,162) (9,389)
-------- -------- --------
Cash flows used in investing
activities.......................... (70,639) (18,304) (22,566)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of current maturities of long-term debt
and capital lease obligations................ (8,168) (6,003) (7,721)
Proceeds from long-term borrowings.............. 44,200 -- --
Proceeds from short-term borrowings............. 3,000 6,000 2,500
Payments of short-term borrowings............... (3,000) (6,000) (2,500)
Repurchase of common stock...................... -- -- (205)
Proceeds from sales and issuances of common
stock........................................ 1,650 2,087 1,554
-------- -------- --------
Cash flows provided by (used in)
financing activities................ 37,682 (3,916) (6,372)
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH........... (32) (891) 1,074
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... (12,682) 17,511 1,490
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR..... 25,326 7,815 6,325
-------- -------- --------
CASH AND CASH EQUIVALENTS - END OF YEAR........... $ 12,644 $ 25,326 $ 7,815
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended March 27, 1994, March 28, 1993 and March 29, 1992
(In thousands)
<TABLE>
<CAPTION>
Foreign
Currency
Addi- Trans-
tional lation Unearned
Common Paid-in Retained Adjust- Compen-
Stock Capital Earnings ments sation Total
------ ------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1991..... $ 61 $38,138 $40,744 $ (23) $ -- $ 78,920
Common stock issued princip-
ally under employee stock
plans....................... 3 1,551 -- -- -- 1,554
Repurchase and retirement of
common stock................ -- (205) -- -- -- (205)
Foreign currency translation
adjustments................. -- -- -- 262 -- 262
Net income.................... -- -- 11,721 -- -- 11,721
---- ------- ------- ----- ------- --------
Balance at March 29, 1992..... 64 39,484 52,465 239 -- 92,252
Common stock issued princip-
ally under employee stock
plans....................... 2 2,088 -- -- -- 2,090
Three-for-two common stock
split....................... 35 (41) -- -- -- (6)
Shares issued for CFS acquisi-
tion........................ 3 -- 367 -- -- 370
Common stock issued under
restricted stock plan....... -- 1,239 -- -- (1,239) --
Amortization of unearned
compensation................ -- -- -- -- 108 108
Tax benefit from exercise of
stock options............... -- 961 -- -- -- 961
Foreign currency translation
adjustments................. -- -- -- (989) -- (989)
Net income.................... -- -- 15,186 -- -- 15,186
---- ------- ------- ----- ------- --------
Balance at March 28, 1993..... 104 43,731 68,018 (750) (1,131) 109,972
Common stock issued princip-
ally under employee stock
plans....................... 3 1,668 -- -- -- 1,671
Common stock issued under
restricted stock plan....... -- 490 -- -- (490) --
Amortization of unearned
compensation................ -- -- -- -- 188 188
Tax benefit from exercise of
stock options............... -- 70 -- -- -- 70
Foreign currency translation
adjustments................. -- -- -- 29 -- 29
Net income.................... -- -- 16,343 -- -- 16,343
---- ------- ------- ----- ------- --------
Balance at March 27, 1994..... $107 $45,959 $84,361 $(721) $(1,433) $128,273
---- ------- ------- ----- ------- --------
---- ------- ------- ----- ------- --------
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF ACCOUNTING POLICIES
The principal business of BancTec, Inc. and subsidiaries ("the Company") is
the development, manufacture and sale of integrated financial transaction
processing systems, application software and support services. The Company
develops turn-key image processing systems, data capture systems and integrated
software products for the banking, financial services, telecommunications,
utility, petroleum, insurance, government, retail and other industries. The
Company also designs, manufactures and markets document processing equipment for
original equipment manufacturer (OEM) customers and provides network support
services for local area networks and personal computers.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and the ScanData Joint Venture discussed in Note
B. All significant intercompany accounts and transactions have been eliminated.
The Company's fiscal year is a 52/53 week year which ends on or about March 31.
Fiscal year 1994 ended on March 27, 1994, fiscal year 1993 ended on March 28,
1993 and fiscal year 1992 ended on March 29, 1992.
The Company uses a 13-week period for quarterly reporting.
CASH EQUIVALENTS
Cash equivalents include investments with original maturities of three
months or less. Investments with original maturities greater than three months
are included in other current assets or other assets depending upon maturity.
There were no such investments with original maturities greater than three
months at fiscal year-end 1994 and 1993.
INVENTORIES
Inventories are stated at the lower of cost or market determined using the
first-in, first-out method.
DEFERRED REVENUE
Certain of the Company's contracts permit the Company to bill the customer
in advance of the time revenue is recognized. Deferred revenue represents
billings in excess of revenue recognized.
REVENUE RECOGNITION
The Company's revenue recognition policy for its principal sources of
revenue are:
Equipment and software sales - Revenue from sales of established products
is recognized upon shipment in conformity with Statement of Position No. 91-1,
Software Revenue Recognition. Revenue for new products, certain other equipment
and software with lengthy development or installation periods is generally
recognized at the time of acceptance by the customer. Contracts with lengthy
software development periods are accounted for in conformity with Accounting
Research Bulletin No. 45, Long-Term
21
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Construction Contracts. Under such contracts, the excess of engineering costs
and other related miscellaneous equipment costs over advance billings on such
contracts are recorded in other current assets. All contract costs, including
equipment and software are charged to cost of sales at the time the related
revenue is recognized. At March 27, 1994 and March 28, 1993, there were $803,000
and $647,000, respectively, of costs in excess of advance billings recorded in
other current assets.
Maintenance - Revenue from maintenance contracts is recognized ratably over
the term of the contract.
The Company generally warrants its equipment and software products sold
directly to end-users for 30 days and OEM products sold to system providers for
90 days from the date of shipment. The Company provides for warranty costs at
the time revenue is recorded.
DEPRECIATION AND AMORTIZATION
Depreciation is provided in amounts sufficient to charge the cost of
depreciable assets to operations over their estimated service lives. Such
amounts are charged to cost of sales or operating expenses in the consolidated
statements of income, as appropriate. Straight-line or declining balance
methods of depreciation are used for financial reporting purposes. Accelerated
methods are used for tax purposes.
Leasehold improvements and assets recorded under capital lease obligations
are depreciated over the shorter of their estimated useful life or the remaining
lease term. Field support spare parts, which are repairable replacement parts
for products maintained under service contracts, are amortized over a useful
life of three or five years. Depreciable lives for furniture, fixtures and
machinery is generally seven years. Buildings utilize a forty year life.
Intangible assets are amortized on a straight-line basis over their
estimated useful lives. The excess of cost over net assets of acquired business
is amortized over 10 to 40 years. Other intangible assets are amortized over 3
to 5 years.
PRODUCT DEVELOPMENT
Company-sponsored product development costs are expensed as incurred.
Customer-sponsored product development costs are generally charged to costs of
sales or the proceeds generated therefrom are credited to product development
costs by the Company.
INCOME TAXES
Deferred income taxes recognize the effect of temporary differences between
the reporting of transactions and the basis of assets and liabilities for
financial accounting and income tax purposes. Utilization of income tax credits
are accounted for using the flow-through method, which recognizes the credits as
reductions of income tax expense in the year utilized.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at the year-end rates of exchange. Revenue and
expenses are
22
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
translated monthly at the average exchange rates for the month. Translation
gains and losses are reported as a separate component of stockholders' equity,
and transaction gains and losses are included in results of operations.
NET INCOME PER SHARE
Net income per common and common equivalent share is based upon the
weighted average number of outstanding shares during the year. The number of
outstanding shares of common stock has been adjusted to reflect the assumed
exercise of all outstanding stock options which are dilutive, at the beginning
of the period or date of issuance, and the use of the proceeds of such assumed
exercise to repurchase, at market, common stock of the Company.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current
year presentation.
On February 8, 1993, the Company authorized a three-for-two stock split
payable in the form of a 50% stock dividend to stockholders of record on
February 18, 1993. All share and per share data has been adjusted to reflect
the stock split.
NOTE B - ACQUISITIONS AND EQUITY INVESTMENTS
During the second quarter of fiscal year 1994, the Company acquired certain
assets and assumed certain liabilities of LeRoux, Pitts and Associates ("LPA"),
a subsidiary of NYNEX. The acquisition of LPA provides BancTec EFT-oriented
software products for debit/credit card processing and electronic check
authorization requirements. The purchase price, including acquisition costs,
was approximately $2,500,000, which was paid in cash, plus liabilities assumed
of approximately $1,500,000. The business combination was accounted for as a
purchase and accordingly, LPA operations are included in the Company's
consolidated results of operations from August 20, 1993, the effective date of
the transaction. The assets and liabilities acquired are recorded in the
Company's consolidated balance sheet at the assigned fair value.
During the second quarter of fiscal year 1994, BancTec contributed
approximately $500,000 in cash and certain other considerations in exchange for
a 33% equity interest in Servibanca, S.A.("Servibanca"), a Chilean company.
Servibanca is a check processing service bureau as well as a distributor of
BancTec image processing systems, document processing systems, and stand alone
reader/sorters to banks, service bureaus, and other financial processors in
Chile and other South American countries. BancTec's investment in and share of
Servibanca's earnings have been included since September 14, 1993, and are
recorded using the equity method of accounting.
During the third quarter of fiscal year 1994, the Company acquired
Imagesolve International, Ltd. ("Imagesolve"), a leading British provider of
integrated systems solutions for electronic document imaging, specializing in
solutions utilizing Computer Output to Laser Disk (COLD) technology, which
electronically archives computer-generated documents onto optical disks. The
purchase price, including acquisition costs, was approximately $2,800,000, which
was paid in cash, plus liabilities assumed of approximately $1,350,000. The
business combination was accounted for as a purchase
23
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
and accordingly, Imagesolve operations are included in the Company's
consolidated results of operations from December 1, 1993, the effective date of
the transaction. The assets and liabilities acquired are recorded in the
Company's consolidated balance sheet at the assigned fair value.
Also during the third quarter of fiscal year 1994, the Company acquired
Advanced Computer Systems, Inc. ("ACS"). ACS is currently a leading provider of
software products which integrates check sorting, platform automation, loan
processing, ATM and teller terminal processing and other bank operations
activities, to banks with less than $300 million in assets. The purchase price,
including acquisition costs, was approximately $25,300,000, which was paid in
cash borrowed under the acquisition loan facility discussed in Note D, plus
liabilities assumed of approximately $13,600,000. The business combination was
accounted for as a purchase and accordingly, ACS operations are included in the
Company's consolidated results of operations from December 23, 1993, the
effective date of the transaction. The assets and liabilities acquired are
recorded in the Company's consolidated balance sheet at the assigned fair value.
During the fourth quarter of fiscal year 1994, the Company acquired
Terminal Data Corporation ("TDC"). TDC is a provider of document imaging
systems, page scanning devices, and digital and microfilm cameras. The purchase
price, including acquisition costs, was approximately $23,600,000, of which
approximately $18,100,000 has been paid in cash as of year end. Liabilities
assumed in the transaction were approximately $11,750,000. Such cash was
borrowed under the acquisition loan facility. Non-cash consideration of
approximately $5,500,000 consists primarily of future payments to be made for
stock and debt which had not been tendered as of year end. Such payments shall
be made using additional funds borrowed under the acquisition loan facility
and/or operating cash. The business combination was accounted for as a purchase
and accordingly, TDC operations are included in the Company's consolidated
results of operations from February 28, 1994, the effective date of the
transaction. The assets and liabilities acquired are recorded in the Company's
consolidated balance sheet at the assigned fair value.
The following unaudited pro forma information combines the results of
operations of the Company, ACS and TDC as if the purchase transactions had
occurred at the beginning of fiscal year 1993. The pro forma information is
based on the historical financial statements of BancTec, ACS and TDC giving
effect to the transactions under the purchase method of accounting and including
adjustments necessary to reflect the exclusion of certain ACS and TDC
administration costs, additional interest on debt, amortization of the excess of
cost over net assets of acquired business and the related tax impact thereof.
Management believes that these pro forma statements may not be indicative
of the results that would have occurred if the combinations had been in effect
on the dates indicated or which may be obtained in the future. Anticipated
efficiencies from the consolidation of these entities are not fully
determinable, and therefore, have been excluded from these pro forma results of
operations. The Company has not considered the LPA and Imagesolve acquisitions
in these unaudited pro forma results of operations because such acquisitions are
not material to the consolidated financial statements.
24
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
(Unaudited)
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Revenue....................................... $284,770 $277,847
Income before cumulative effect of change
in accounting method.................... 15,477 13,288
Net Income.................................... 15,477 14,123
Net Income per share:
Before accounting change................... $1.37 $1.22
Net Income................................. $1.37 $1.30
</TABLE>
In the second quarter of fiscal year 1993, the Company acquired Computer
Field Specialists, Inc. and Computer Field Specialists of Texas, Inc.
(collectively, "CFS") for 318,181 (477,272 as adjusted for stock split) shares
of common stock. The acquisition was accounted for as a pooling of interests.
The financial statements include the combined results of CFS and BancTec from
June 29, 1992, the date of the acquisition. Prior periods have not been
restated due to immateriality.
Also during the second quarter of fiscal year 1993, the Company acquired
Springfield Computer Consultants, Inc., which markets under the name of Access
Banking Systems ("Access"). The purchase price, including acquisition costs,
was approximately $3,400,000, of which $2,900,000 was paid in cash. Non-cash
consideration of $500,000 consists primarily of future payments to the former
owners. The business combination was accounted for as a purchase and
accordingly, Access operations are included in the Company's consolidated
results of operations from August 1, 1992, the effective date of the
transaction. The assets and liabilities acquired are recorded in the Company's
consolidated balance sheet at the assigned fair value.
In the third quarter of fiscal year 1992, BancTec, Inc. and Thomson-CSF
("Thomson"), a French company, established a joint venture company, ScanData
N.V. BancTec contributed approximately $6,500,000 comprised of all of the
outstanding stock of BancTec GmbH and BancTec Nederlands B.V., at book value,
cash totalling $304,000 and other consideration in exchange for 50.5% of the
shares of ScanData N.V.. Thomson contributed the assets, liabilities and
contracts of ScanData S.A. (formerly the Cyberbanque operations) for 49.5% of
the shares of ScanData N.V.. The transaction was recorded as an acquisition of
ScanData S.A. using the purchase method. Accordingly, ScanData S.A. operations
are included in the Company's consolidated financial results of operations from
September 30, 1991, the effective date of the acquisition for accounting
purposes.
During the second quarter of fiscal year 1992, the Company acquired the
third-party service business and related assets of ebm Systems, Inc. for a total
cost, including acquisition costs, of approximately $6,400,000, paid in cash.
The business combination was accounted for as a purchase and accordingly, ebm
operations are included in the Company's consolidated financial results of
operations from August 30, 1991, the effective date of the transaction.
Also during the second quarter of fiscal year 1992, the outstanding common
stock of Monitronics, Inc., a supplier of banking system hardware and software
was acquired at a total cost, including acquisition costs, of approximately
$2,000,000. Non-cash consideration totaled $1,350,000 and consisted primarily
of future payments to the former owners. The business combination was accounted
for as a purchase and
25
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
accordingly, Monitronics operations are included in the Company's consolidated
financial results of operations from September 27, 1991, the effective date of
the transaction.
The Company has not disclosed unaudited proforma results of operations of
CFS, Access, ScanData S.A., ebm Systems, Inc., and Monitronics, Inc. as if the
acquisitions had been made as of the beginning of fiscal year 1993 or 1992
because such acquisitions are not material to the consolidated financial
statements.
The excess of the costs of these acquired businesses over the fair value
assigned to the assets acquired less liabilities assumed are being amortized
over their estimated useful lives using the straight-line method commencing with
the respective dates of acquisition:
Acquired Business Goodwill Amortization Period
----------------- ----------------------------
LPA 15 years
ImageSolve 20 years
ACS 20 years
TDC 25 years
Access 15 years
ScanData S.A. 20 years
ebm 10 years
Monitronics 15 years
The Company continually evaluates whether events and circumstances indicate
the remaining estimated useful life of goodwill may warrant revision or that the
remaining balance of goodwill may not be recoverable. No adjustments to
recorded goodwill have resulted from these evaluations.
NOTE C - INVENTORIES
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Raw materials................................. $18,395 $16,215
Work-in-process .............................. 6,565 2,639
Finished goods ............................... 28,732 21,707
Obsolescence and valuation reserves........... (4,923) (3,627)
------- -------
$48,769 $36,934
------- -------
------- -------
</TABLE>
NOTE D - INDEBTEDNESS
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Term loans payable to banks................... $61,340 $20,697
Obligations under capital leases.............. 1,650 1,388
------- -------
62,990 22,085
Less current maturities....................... 12,426 9,846
------- -------
$50,564 $12,239
------- -------
------- -------
</TABLE>
26
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Future maturities of indebtedness, excluding obligations under capital
leases, are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
----------- --------------
<S> <C>
1995............................. $11,941
1996............................. 13,175
1997............................. 9,247
1998............................. 9,247
1999............................. 9,247
Thereafter....................... 8,483
-------
$61,340
-------
-------
</TABLE>
During fiscal year 1994, the Company renegotiated the terms of its credit
agreement with several banks. The revised agreement provides for a $20,000,000
short-term revolving credit facility ("revolving credit facility"), a
$51,000,000 term loan ("term loan") and a $55,000,000 acquisition loan facility
("acquisition facility") which are unsecured. The agreement contains
restrictive covenants which, among other things, restrict payment of dividends,
limit additional debt and require the Company to maintain a defined current
ratio, minimum net worth and a minimum ratio of cash flow from operations to
debt service. The revolving credit facility bears interest at the lender's
prime commercial rate or, at the Company's option, the London Interbank Offered
Rate (LIBOR) on Eurodollar borrowings plus 1 point. A commitment fee of 1/4% on
the unused revolving credit facility is payable on a quarterly basis. The term
loan and acquisition facility bear interest at the lender's prime commercial
rate or, at the Company's option, LIBOR plus 1-1/4 to 1-3/4 points, depending on
the Company debt to capitalization ratio, as defined. At March 27, 1994, the
Company's debt to capitalization ratio was .35 and the applicable interest rate
was LIBOR plus 1-1/2 points.
At March 29, 1992, the Company had outstanding interest rate swap
agreements which effectively converted $25,000,000 of floating rate debt to
fixed rate debt with interest rates ranging from 11.53% to 11.98%. Under the
agreements, which expired in the first quarter of fiscal year 1993, the Company
made payments to a counter party at a fixed rate and in return received payments
at variable rates based on the prime rate as defined in the agreements. The net
interest paid is included in interest expense.
Borrowings under the term loan total $13,181,000 at March 27, 1994.
Principal payments under the term loan are due in 28 equal quarterly
installments, plus interest, which commenced on June 30, 1989 and matures in
fiscal year 1996.
Under the acquisition facility, the Company may borrow up to $55,000,000
during the period from inception of the facility, October 6, 1993, through
December 31, 1994 for the purpose of funding acquisitions. At December 31,
1994, the balance of the acquisition facility will be converted to a term loan
and principal payments are due in 20 equal quarterly installments, plus
interest, which commence on March 31, 1995 and end on December 31, 1999. At
March 27, 1994, the balance of the acquisition facility was $44,200,000.
The weighted average interest rate on borrowings under the term loan and
acquisition facility was 4.94% at March 27, 1994.
27
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Future minimum lease payments under capital lease obligations are as
follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
----------- --------------
<S> <C>
1995............................. $ 734
1996............................. 556
1997............................. 313
1998............................. 128
1999............................. 33
------
Total minimum lease payments..... 1,764
Less amount representing interest
(5.9%-10.3% rate).............. 114
------
Present value of net minimum lease
payments, including current
maturities of $635,000 at
March 27, 1994 ................ $1,650
------
------
</TABLE>
Property, plant and equipment recorded under capital leases are as follows:
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Machinery and equipment....................... $ 852 $ 702
Furniture, fixtures and other................. 3,006 2,133
------- -------
Total - at cost............................... 3,858 2,835
Less accumulated depreciation ................ 1,991 1,351
------- -------
$ 1,867 $ 1,484
------- -------
------- -------
</TABLE>
The Company paid cash totalling $1,093,000, $1,967,000, and $3,442,000 for
interest during fiscal years 1994, 1993 and 1992, respectively.
NOTE E - OTHER ACCRUED EXPENSES AND LIABILITIES
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Salaries, wages and other compensation........ $16,033 $12,086
Accrued taxes, other than income taxes........ 3,860 1,859
Advances from customers....................... 3,279 2,666
Other......................................... 8,796 10,334
------- -------
$31,968 $26,945
------- -------
------- -------
</TABLE>
NOTE F - INCOME TAXES
In 1993, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109 - Accounting for Income Taxes. SFAS 109 is an asset and
liability approach which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events which have been
recognized in the Company's financial statements or tax returns. In estimating
future tax consequences, SFAS 109 generally considers all expected future events
other than enactments of changes in the tax law or rates. Previously, the
Company used the SFAS 96 asset and liability approach that
28
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
gave no recognition to future events other than the recovery of assets and
settlement of liabilities at their recorded amounts.
BancTec elected to reflect the cumulative effect of adopting this
pronouncement as a change in accounting principle as of the beginning of fiscal
year 1993 with a credit to earnings of $835,000. Prior year's financial
statements were not restated. This credit consists primarily of the increase in
net deferred tax assets to reflect the benefit of taxes previously provided for
profit on inventory sold between BancTec entities within different taxing
jurisdictions but still on the Company's consolidated books at the end of fiscal
1992. Such benefit could not be recorded under SFAS 96. The impact of adoption
of SFAS 109 on fiscal 1993 results was not significant and previously reported
quarters have not been restated.
The domestic and foreign components of income before income taxes and
cumulative effect of accounting change consisted of the following:
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 27, March 28, March 29,
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Domestic (including Puerto Rico)....... $26,754 $19,272 $10,413
Foreign................................ (3,891) 1,829 8,268
------- ------- -------
$22,863 $21,101 $18,681
------- ------- -------
------- ------- -------
</TABLE>
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 27, March 28, March 29,
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Current:
Federal (including Puerto Rico)..... $ 9,508 $7,174 $4,356
State............................... 729 822 918
Foreign............................. 1,126 973 1,131
------- ------ ------
Total current.................... 11,363 8,969 6,405
------- ------ ------
Deferred:
Federal............................. (972) (544) 641
Foreign............................. (1,246) - -
------- ------ ------
Total deferred................... (2,218) (544) 641
------- ------ ------
$ 9,145 $8,425 $7,046
------- ------ ------
------- ------ ------
</TABLE>
29
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The difference between the income tax provision computed at the statutory
federal income tax rate and the financial statement provision for taxes is
summarized as follows:
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 27, March 28, March 29,
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Provision at U.S. statutory rate of 35%
in fiscal year 1994, and 34% for
fiscal year 1993 and 1992........... $8,002 $7,174 $6,352
Increase (reduction) in tax expense
resulting from:
Impact of foreign and Puerto Rico
income tax rates............... (1,029) 475 (388)
Charge in lieu of taxes for tax
benefits realized from the
acquisition of CES............. 137 110 468
Valuation reserves provided for tax
deductible losses generated.... 1,246 - -
Utilization of investment and
alternative minimum tax credits. - (584) -
Domestic amortization of cost over
net assets of acquired business. 637 437 355
State income tax, net of federal
income tax benefit............. 474 597 606
Other............................. (322) 216 (347)
------ ------ ------
$9,145 $8,425 $7,046
------ ------ ------
------ ------ ------
</TABLE>
The Company paid cash totalling $9,414,000, $5,006,000, and $6,049,000, for
income taxes in fiscal years 1994, 1993 and 1992, respectively.
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and their
financial reporting basis and are included in other current assets. The
deferred tax benefit in fiscal years 1994 and 1993 and the deferred tax
provision in fiscal year 1992 represented the effect of changes in the amounts
of temporary differences during those fiscal years.
30
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
As of March 27, 1994 and March 28, 1993, deferred tax assets (liabilities),
as determined under the provisions of SFAS 109, were comprised of the following:
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Gross Deferred Tax Liability:
Depreciation................................ $ (939) $(2,070)
------- -------
Gross Deferred Tax Assets:
Inventory reserves.......................... 1,088 997
Warranty reserves........................... 104 136
Employee benefit accruals................... 2,015 1,568
Accounts receivable reserves................ 531 361
Deductible acquisition costs................ 238 397
Net operating losses........................ 6,135 3,654
Taxes paid on intercompany profits.......... 983 1,215
Alternative minimum tax credit carryforward. - 350
Other....................................... 117 201
------- -------
Gross deferred tax assets................... 11,211 8,879
------- -------
Deferred tax assets valuation reserve....... (4,900) (3,654)
------- -------
Net deferred tax asset...................... $ 5,372 $ 3,155
------- -------
------- -------
</TABLE>
The net change in the deferred tax asset valuation reserve in fiscal 1994
and 1993 was $1,246,000 and $2,326,000, respectively, and is attributable to
the increase in the net operating loss carryforwards of the Company's Canadian
and Australian subsidiaries and the German entity of the Scandata Joint Venture.
At March 27, 1994, the Company had approximately $566,000 in deductible
temporary differences remaining for financial reporting purposes as a result of
the acquisition of CES. An adjustment to the excess of cost over net assets of
business acquired and a charge in lieu of taxes is recorded for any tax benefits
resulting from realization of these carryforwards in years subsequent to the
acquisition.
Undistributed earnings of foreign subsidiaries were approximately
$7,264,000 at March 27, 1994 and $6,831,000 at March 28, 1993. No taxes have
been provided on these undistributed earnings as they are considered to be
permanently reinvested.
NOTE G - STOCKHOLDERS' EQUITY
On February 8, 1993, the Company authorized a three-for-two stock split
payable in the form of a 50% stock dividend to stockholders of record on
February 18, 1993. A total of 3,457,553 shares of common stock were issued in
connection with the split. Accordingly, $34,576 was transferred from additional
paid-in capital to common stock. All share and per share data presented has
been adjusted to reflect the stock split.
31
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
EMPLOYEE STOCK AWARD PLANS
At March 27, 1994, a total of 2,313,558 shares of common stock were
reserved for issuance under the Company's stock award plans. At March 27, 1994,
630,966 shares were available for future grant. In general, the plans provide
for the granting of options or restricted shares to key employees. A summary of
the key provisions of each type award is as follows:
STOCK OPTIONS
In general, the plans provide for the granting of options at not less than
the fair market value of the stock at the date of grant. Options issued
vest periodically as defined in the plans. At March 27, 1994, options to
purchase 1,682,592 shares were outstanding, of which options to purchase
617,182 shares were vested and could be exercised.
A summary of activity in the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
---------- ---------------
<S> <C> <C> <C>
Options outstanding - March 29, 1992.... 1,532,974 $ 3.50 - $11.50
Granted................................. 375,897 14.67 - 18.83
Exercised............................... (297,044) 4.67 - 10.50
Forfeited............................... (51,505) 4.83 - 16.92
----------
Options outstanding - March 28, 1993.... 1,560,322 3.50 - 18.83
Granted................................. 397,235 17.75 - 22.38
Exercised............................... (221,933) 3.50 - 18.83
Forfeited .............................. (53,032) 4.83 - 18.83
----------
Options outstanding - March 27, 1994.... 1,682,592 $ 3.50 - $22.38
----------
----------
</TABLE>
RESTRICTED STOCK AWARDS
The Board of Directors of the Company periodically awards restricted stock
to key employees as compensation. Vesting is pro rata and is subject to
future service. Unearned compensation is charged for the market value of
the shares on the date of grant and is amortized to expense over the
vesting period. Such amount is shown as a reduction of stockholders'
equity in the accompanying consolidated balance sheets. During fiscal
1994, 27,981 restricted shares were awarded and unearned compensation of
$490,100 was recorded. During fiscal 1993, 53,312 restricted shares were
awarded and unearned compensation of $1,239,000 was recorded. Vesting on
such shares ranges from 3 years to 19 years. In fiscal year 1994 and 1993,
$188,100 and $108,000, respectively, was amortized to expense.
EMPLOYEE STOCK PURCHASE PLANS
The Company has an employees' stock purchase plan, under which 42,142
shares of common stock were reserved at March 27, 1994. The shares are offered
for sale to employees only, through payroll deductions, at prices equal to 85%
of the lesser of the fair market value of the Company's common stock on the
first day of the offering period or the last day of the exercise period. During
fiscal years 1994 and 1993, the Company issued 49,186 and 51,474 shares,
respectively, under the plan.
32
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
STOCKHOLDER RIGHTS
On June 16, 1988, the Company adopted a Stockholder Rights Plan in which
common stock purchase rights were distributed as a dividend at the rate of one
right for each common share held as of the close of business on June 27, 1988.
Each share issued thereafter also received one right. As a result of the
three-for-two stock split, the number of rights associated with each share of
common stock has been adjusted from one right to two-thirds of a right. The
Stockholder Rights Plan was designed to deter coercive takeover tactics and to
prevent an acquirer from gaining control of the Company without offering a fair
price to all of the Company's stockholders. The rights will expire on May 24,
1998.
Each right will entitle stockholders to buy one and one-half shares of
common stock of the Company at an exercise price of $35.50. The rights will be
exercisable only if a person or group acquires beneficial ownership of 20% or
more of the Company's common stock or commences a tender or exchange offer upon
consummation of which such person or group would beneficially own 30% or more of
the common shares.
If any person becomes the beneficial owner of 35% or more of the Company's
common stock, other than pursuant to certain tender or exchange offers described
in the Plan, or if the Company is the surviving corporation in a merger with a
20%-or-more stockholder and its common shares are not changed or converted, or
if a 20%-or-more stockholder engages in certain self-dealing transactions with
the Company, then each right not owned by such person or related parties will
entitle its holder to purchase, at the right's then current exercise price,
shares of Company common stock (or, in certain circumstances as determined by
the Board, cash, other property, or other securities) having a value of twice
the right's exercise price. In addition, after any person has become a
20%-or-more stockholder, (i) if the Company is involved in a merger or other
business combination transaction in which it is not the continuing or surviving
corporation (other than a merger described in the previous sentence or a merger
that follows a certain tender or exchange offers described in the Plan), or (ii)
if the Company sells 50% or more of its assets or earning power, each right will
entitle its holder to purchase, at the right's then current exercise price,
shares of common stock of such other person having a value of twice the right's
exercise price. The Company will generally be entitled to redeem the rights at
$.05 per right at any time until the fifteenth day (subject to certain limited
extensions) following public announcement that a 20% position has been acquired.
NOTE H - EMPLOYEE BENEFIT PLANS
The Company has an employee savings plan which allows substantially all
full-time domestic employees to make contributions defined by section 401(k) of
the Internal Revenue Code. The Company elected to contribute 1.4%, 1.5%, and
2.6% of the qualifying participant's base salary in fiscal years 1994, 1993 and
1992, respectively. Amounts expensed under the plan for the years ended March
27, 1994, March 28, 1993, and March 29, 1992 were $597,000, $600,000, and
$698,000, respectively. The Company provides no material post retirement
benefits to its employees.
33
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE I - COMMITMENTS AND CONTINGENCIES
The Company leases most of its production facilities and certain equipment
under non-cancelable operating leases expiring through fiscal year 2010. Total
Company rent expense for the years ended March 27, 1994, March 28, 1993, and
March 29, 1992 was $4,263,000, $4,701,000, and $4,754,000, respectively.
Future minimum payments under non-cancelable operating leases are
approximately as follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
----------- --------------
<S> <C>
1995............................. $ 5,260
1996............................. 4,125
1997............................. 3,022
1998............................. 2,610
1999............................. 1,658
Thereafter....................... 4,808
-------
$21,483
--------
--------
</TABLE>
The Company has the option to renew operating leases on its major
facilities at the end of the current lease terms.
NOTE J - GEOGRAPHIC OPERATIONS
The Company operates in the following geographic areas: the United States,
including Puerto Rico, Europe, including the United Kingdom and Scandinavia, and
other international areas consisting primarily of Australia and Canada.
Interarea sales to affiliates are accounted for at established transfer prices.
Sales and operating income for the years ended March 27, 1994, March 28,
1993, and March 29, 1992, and identifiable assets at the end of each of those
years, classified by geographic area, are as follows:
<TABLE>
<CAPTION>
Other
United Inter- Elimi- Consoli-
States Europe national nations dated
------ ------ ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
1994
Sales to unaffiliated customers..$186,362 $56,778 $ 4,398 $ - $247,538
Interarea sales to affiliates.... 16,809 - - (16,809) -
Operating income................. 25,159 (2,175) (569) 3,021 25,436
Identifiable assets.............. 236,136 54,759 2,234 (16,859) 276,270
1993
Sales to unaffiliated customers. $171,539 $56,571 $ 5,775 $ - $233,885
Interarea sales to affiliates.... 25,121 710 - (25,831) -
Operating income................. 25,717 (1,166) (718) 2,270 26,103
Identifiable assets.............. 164,055 46,886 2,809 (18,904) 194,846
1992
Sales to unaffiliated customers..$141,728 $35,646 $13,594 $ - $190,968
Interarea sales to affiliates.... 18,576 2,690 - (21,266) -
Operating income................. 24,527 2,245 352 (4,519) 22,605
Identifiable assets.............. 154,294 37,526 3,705 (24,271) 171,254
</TABLE>
34
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Foreign currency transaction losses in fiscal years 1994, 1993 and 1992
were $374,000, $1,122,000, and $17,000, respectively, and are included as part
of sundry-net in the consolidated statements of income.
NOTE K - RELATED PARTIES
Prior to fiscal year 1994, ScanData S.A. subcontracted the performance of
maintenance services for certain customers to Thomson, a partner in the ScanData
J.V. discussed in Note B. Under the terms of such agreement, ScanData S.A.
received 12.5% of the amount billed for maintenance services in exchange for
providing such customers to Thomson. This agreement expired at the end of
fiscal year 1993. Included in fiscal year 1993 and 1992 revenues are $461,000
and $208,000, respectively, related to this arrangement. Included in trade
accounts payable at March 27, 1994 and March 28, 1993 are $6,635,000 and
$2,531,000, respectively, payable to Thomson.
NOTE L - SUMMARIZED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1994
------------------------------------------------
Q1 Q2 Q3 Q4 Total
-- -- -- -- -----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenue............................ $54,878 $53,342 $59,539 $79,779 $247,538
Gross profit....................... 15,251 14,815 17,620 21,966 69,652
Net income......................... 3,280 3,356 4,257 5,450 16,343
Fully diluted net income per share. .30 .30 .38 .48 1.45
1993
------------------------------------------------
Q1 Q2 Q3 Q4 Total
-- -- -- -- -----
(In thousands, except per share data)
Revenue............................ $49,246 $67,670 $56,377 $60,592 $233,885
Gross profit....................... 14,651 18,063 17,079 16,807 66,600
Income before cumulative effect of
accounting change............... 2,803 3,737 3,622 4,189 14,351
Net income......................... 3,638 3,737 3,622 4,189 15,186
Fully diluted income per share
before cumulative effect of
accounting change............... .27 .34 .33 .38 1.32
Fully diluted net income per share. .35 .34 .33 .38 1.40
</TABLE>
Due to changes in the market value of the Company's stock, net income per
share as presented does not equal the sum of the quarters.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
35
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1994 annual meeting
of stockholders, except for the information regarding executive officers of the
Company which is contained in Part I of this Annual Report on Form 10-K. The
information required by this item contained in such definitive proxy material is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1994 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1994 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1994 annual meeting
of stockholders, which information is incorporated herein by reference.
36
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements: See Index to Financial
Statements and Schedules on page 40.
(b) Reports on Form 8-K:
(i) January 5, 1994, Acquisition of Advanced Computer Systems,
Inc.
(ii) May 16, 1994, Acquisition of Terminal Data Corporation.
(c) Exhibits
3.1 - Certificate of Incorporation.(6)
3.2 - By-Laws.(1)
4.1 - Specimen of Common Stock Certificate.(1)
10.1 - BancTec, Inc. 1989 Stock Plan (8)
10.2 - BancTec, Inc. Incentive Stock Option Plan, as amended.(3)
10.3 - BancTec, Inc. 1982 Nonqualified Stock Option Plan, as amended.(3)
10.4 - BancTec, Inc. 1994 Stock Plan.(11)
10.5 - BancTec, Inc. 1990 Employee Stock Purchase Plan, as amended.(7)
10.6 - BancTec, Inc. Deferred Compensation Plan.(9)
10.7 - Employment Agreement with Grahame N. Clark, Jr. dated
May 28, 1992.(10)
10.8 - Employment Agreement with Norton A. Stuart dated
May 28, 1992.(10)
10.9 - Employment Agreement with Tod V. Mongan dated May 28, 1992.(10)
10.10 - Employment Agreement with Gary T. Robinson dated
May 28, 1992.(10)
10.11 - Rights Agreement dated June 16, 1988.(5)
10.12 - Amended and Restated Credit Agreement dated October 6, 1993 among
the Company, its Subsidiaries and Texas Commerce Bank National
Association, as Agent.(11)
10.13 - Form of Indemnification Agreement between the Company and each of
its Directors and Officers.(4)
10.14 - License Agreement dated April 1, 1986 between the Company and TRW
Financial Systems, Inc. (formerly Teknekron Financial Systems,
Inc.), a TRW company.(2)
11.1 - Statement re: computation of net income per share.(11)
37
<PAGE>
22.1 - Subsidiaries.(11)
24.1 - Consent of Independent Public Accountants.(11)
24.2 - Consent of Independent Public Accountants.(11)
- - - - - ----------
(1) Filed as an Exhibit to the Company's Registration Statement on Form
8-B and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended March 31, 1985 and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended March 30, 1987 and incorporated herein by reference.
(4) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended March 29, 1988 and incorporated herein by reference.
(5) Incorporated by reference to the Company's current report on Form
8-K filed on July 6, 1988.
(6) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended April 2, 1989 and incorporated herein by reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended March 31, 1990 and incorporated herein by reference.
(8) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended March 31, 1991 and incorporated herein by reference.
(9) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended March 29, 1992 and incorporated herein by reference.
(10) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended March 28, 1993 and incorporated herein by reference.
(11) Filed herewith.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BANCTEC, INC.
By /s/ Grahame N. Clark, Jr.
---------------------------------
Grahame N. Clark, Jr.
Chairman of the Board
and Chief Executive Officer
Dated: June 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Grahame N. Clark, Jr. Chairman of the Board and Chief June 22, 1994
- - - - - ----------------------------- Executive Officer and Director
Grahame N. Clark, Jr. (Principal Executive Officer)
/s/ Norton A. Stuart, Jr. President and Director June 22, 1994
- - - - - -----------------------------
Norton A. Stuart, Jr.
/s/ Gary T. Robinson Senior Vice President and June 22, 1994
- - - - - ----------------------------- Chief Financial Officer
Gary T. Robinson (Principal Financial Officer)
/s/ Michael D. Kubic Vice President, Controller and June 22, 1994
- - - - - ----------------------------- Assistant Treasurer
Michael D. Kubic (Principal Accounting Officer)
/s/ Michael E. Faherty Director June 22, 1994
- - - - - -----------------------------
Michael E. Faherty
Director
- - - - - -----------------------------
Paul J. Ferri
/s/ Rawles Fulgham Director June 22, 1994
- - - - - -----------------------------
Rawles Fulgham
Director
- - - - - -----------------------------
Thomas G. Kamp
/s/ Michael A. Stone Director June 22, 1994
- - - - - -----------------------------
Michael A. Stone
/s/ Merle J. Volding Director June 22, 1994
- - - - - -----------------------------
Merle J. Volding
39
<PAGE>
BANCTEC, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
Number
------
Financial Statements and Report of Independent Public Accountants
- - - - - -----------------------------------------------------------------
Report of Independent Public Accountants...................... 14-15, 41
Consolidated Balance Sheets at March 27, 1994 and March 28,
1993......................................................... 16-17
Consolidated Statements of Income for the years ended March 27,
1994, March 28, 1993 and March 29, 1992........................ 18
Consolidated Statements of Cash Flows for the years ended
March 27, 1994, March 28, 1993 and March 29, 1992.............. 19
Consolidated Statements of Stockholders' Equity for the years
ended March 27, 1994, March 28, 1993 and March 29, 1992........ 20
Notes to Consolidated Financial Statements..................... 21-35
Supporting Schedules
- - - - - --------------------
Schedules:
VIII Valuation and Qualifying Accounts for the years ended
March 27, 1994, March 28, 1993 and March 29, 1992..... 42
IX Short-term Borrowings for the years ended March 27,
1994, March 28, 1993 and March 29, 1992............... 43
X Supplementary Income Statement Information for the
years ended March 27, 1994, March 28, 1993 and
March 29, 1992........................................ 44
All other schedules have been omitted as the required information is
inapplicable, not required, or the information is included in the financial
statements and notes thereto.
40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
BancTec, Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements as of March 27, 1994 and March
28, 1993 and for the years then ended included in BancTec, Inc.'s Form 10-K, and
have issued our report thereon dated May 17, 1994. Our audits were made for the
purpose of forming an opinion on the 1994 and 1993 consolidated financial
statements taken as a whole. The schedules listed in the index to financial
statements and schedules are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic 1994 and 1993 consolidated
financial statements. The 1994 and 1993 consolidated schedules have been
subjected to the auditing procedures applied in the audits of the basic 1994
and 1993 consolidated financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set forth therein in
relation to the basic 1994 and 1993 consolidated financial statements taken as
a whole.
Arthur Andersen & Co.
Dallas, Texas
May 17, 1994
41
<PAGE>
Schedule VIII
BANCTEC, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended March 27, 1994, March 28, 1993 and March 29, 1992
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- ----------------- -------- --------
Additions
-----------------
Balance at Charged to Balance at
beginning costs and end of
Description of period expenses Other Deductions period
----------- ---------- --------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 27, 1994:
Allowance for doubtful
accounts............... $1,342 $ 312 $ - $ 136(a) $1,518
Inventory obsolescence and
valuation reserves..... 3,627 2,945 - 1,649(b) 4,923
------ ------ ----- ------ ------
$4,969 $3,257 $ - $1,785 $6,441
------ ------ ----- ------ ------
------ ------ ----- ------ ------
Year ended March 28, 1993:
Allowance for doubtful
accounts............... $1,831 $ 324 $ - $ 813(a) $1,342
Inventory obsolescence and
valuation reserves..... 3,792 2,692 - 2,857(b) 3,627
------ ------ ----- ------ ------
$5,623 $3,016 $ - $3,670 $4,969
------ ------ ----- ------ ------
------ ------ ----- ------ ------
Year ended March 29, 1992:
Allowance for doubtful
accounts............... $2,039 $ 170 $ - $ 378(a) $1,831(c)
Inventory obsolescence and
valuation reserves..... 4,501 735 - 1,444(b) 3,792
------ ------ ----- ------ ------
$6,540 $ 905 $ - $1,822 $5,623
------ ------ ----- ------ ------
------ ------ ----- ------ ------
<FN>
- - - - - ------------
(a) Write-off of uncollectible accounts.
(b) Scrapping of obsolete inventory and book to physical inventory adjustments.
(c) Comprised of $1,501 applicable to current accounts receivable and $330
applicable to non-current receivables.
</TABLE>
42
<PAGE>
Schedule IX
BANCTEC, INC.
SHORT-TERM BORROWINGS
Years Ended March 27, 1994, March 28, 1993 and March 29, 1992
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest rate
Category of aggregate at end of interest during the during the during the
short-term borrowings period rate period period (a) period (a)
--------------------- --------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Year ended March 27, 1994:
Amounts payable to banks.. $ - 6.13% $3,000,000 $ 24,725 6.13%
Year ended March 28, 1993:
Amounts payable to banks.. - 4.98% 6,000,000 1,588,398 5.07%
Year ended March 29, 1992:
Amounts payable to banks.. - 6.29% 2,500,000 1,043,956 6.36%
<FN>
- - - - - ------------
(a) The average amount outstanding and the weighted average interest rate
during the period were computed on a daily basis.
</TABLE>
43
<PAGE>
Schedule X
BANCTEC, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Column A Column B
-------- --------
Item Charged to costs and expenses
---- ------------------------------
Years ended
------------------------------
March 27, March 28, March 29,
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Depreciation and amortization of intangible assets:
Excess of cost over net assets of acquired
business....................................... $1,900 $1,658 $1,113
Other intangible assets........................... 1,790 1,420 1,178
------ ------ ------
$3,690 $3,078 $2,291
------ ------ ------
------ ------ ------
</TABLE>
All other required information has been omitted as no other single item
exceeds 1% of total sales and revenues.
44
<PAGE>
EXHIBIT 10.4
BANCTEC, INC.
1994 STOCK PLAN
SCOPE AND PURPOSE OF PLAN
This BancTec, Inc. 1994 Stock Plan (the "Plan") provides
for the granting of Nonstatutory Stock Options (hereinafter
defined) to certain employees of BancTec, Inc., a Delaware
corporation (the "Corporation") or of its Affiliates (hereinafter
defined).
The purpose of the Plan is to provide an incentive for
certain selected employees of the Corporation or its Affiliates
to remain in the service of the Corporation or its Affiliates, to
extend to them the opportunity to acquire a proprietary interest
in the Corporation so that they will apply their best efforts for
the benefit of the Corporation, and to aid the Corporation in
attracting able persons to enter the service of the Corporation
and its Affiliates.
SECTION 1. Definitions.
1.1. "Act" shall mean the Securities Exchange Act of
1934, as amended.
1.2. "Affiliates" shall mean (a) any corporation, other
than the Corporation, in an unbroken chain of corporations ending
with the Corporation if each of the corporations, other than the
Corporation, owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of
the other corporations in such chain and (b) any corporation,
other than the Corporation, in an unbroken chain of corporations
beginning with the Corporation if each of the corporations, other
than the last corporation in the unbroken chain, owns stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
1.3. "Agreement" shall mean the written agreement
between the Corporation and a Holder evidencing the Option
granted by the Corporation and the understanding of the parties
with respect thereto.
1.4. "Option" shall mean an award granted in accordance
with the provisions of the Plan in the form of a Nonstatutory
Option.
1.5. "Board of Directors" shall mean the board of
directors of the Corporation.
1.6. "Code" shall mean the Internal Revenue Code of
1986, as amended.
1994 STOCK PLAN
<PAGE>
1.7. "Committee" shall mean the committee appointed
pursuant to Section 3 hereof by the Board of Directors to
administer this Plan.
1.8. "Eligible Individuals" shall mean certain selected
employees, excluding individuals who are subject to liability
under section 16(b) of the Act, of the Corporation or of any of
its Affiliates.
1.9. "Fair Market Value" shall mean:
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or
regional securities exchange at the date of determining the Fair
Market Value, the last reported sale price on such exchange on
the last business day prior to the date in question; or
(b) If shares of Stock of the same class shall not be
listed or admitted to unlisted trading privileges as provided in
Subsection 1.9(a) and sales prices therefor in the over-the-
counter market shall be reported by the National Association of
Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ")
National Market System at the date of determining the Fair Market
Value, the last reported sale price so reported on the last
business day prior to the date in question; or
(c) If shares of Stock of the same class shall not be
listed or admitted to unlisted trading privileges as provided in
Subsection 1.9(a) and sales prices therefor shall not be reported
by the NASDAQ National Market System as provided in Subsection
1.9(b), and bid and asked prices therefor in the over-the-counter
market shall be reported by NASDAQ (or, if not so reported, by
the National Quotation Bureau Incorporated) at the date of
determining the Fair Market Value, the average of the closing bid
and asked prices on the last business day prior to the date in
question; or
(d) If shares of Stock of the same class shall not be
listed or admitted to unlisted trading privileges as provided in
Subsection 1.9(a) and sales prices or bid and asked prices
therefor shall not be reported by NASDAQ (or the National
Quotation Bureau Incorporated) as provided in Subsection 1.9(b)
or Subsection 1.9(c) at the date of determining the Fair Market
Value, the value determined in good faith by the Board of
Directors.
1.10. "Holder" shall mean an Eligible Individual to whom
an Option has been granted.
1.11. "Nonstatutory Options" shall mean stock options
that do not satisfy the requirements of section 422 of the Code.
1994 STOCK PLAN 2
<PAGE>
1.12. "Stock" shall mean the Corporation's authorized
$.01 par value common stock, together with any other securities
with respect to which Options granted hereunder may become
exercisable.
SECTION 2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO THE
PLAN.
2.1. DESCRIPTION OF STOCK AND MAXIMUM SHARES ALLOCATED.
The Stock, which Options granted hereunder give a Holder the
right to purchase, may be unissued or reacquired shares of Stock,
as the Board of Directors may, in its sole and absolute
discretion, from time to time determine.
Subject to the adjustments in Section 6.5 hereof, the
aggregate number of shares of Stock that may be issued pursuant
to the exercise of all Options granted hereunder shall not exceed
500,000 shares of BancTec, Inc. Stock.
2.2. RESTORATION OF UNPURCHASED SHARES. If an Option
hereunder expires or terminates for any reason during the term of
this Plan and prior to the exercise of an Option in full or if
all of the shares of Stock subject to an Option have not for any
other reason been issued pursuant to the Option, the shares of
Stock subject to but not issued or otherwise used under such
Option shall be "restored" to the Plan by again being available
for Options granted after the shares' restoration.
2.3. ISSUANCE OF STOCK IN NAME OF HOLDER. Upon
issuance of Stock to any Holder pursuant to the terms of this
Plan and any Holder's Agreement, such Stock shall only be issued
into the name of the Holder or his legal representative.
SECTION 3. ADMINISTRATION OF THE PLAN.
3.1 COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall consist of all non-employee
members of the Board of Directors.
3.2 DURATION, REMOVAL, ETC. The members of the
Committee shall serve at the pleasure of the Board of Directors,
which shall have the power, at any time and from time to time, to
remove members from the Committee or to add members thereto.
Vacancies on the Committee, however caused, shall be filled by
action of the Board of Directors.
3.3 MEETINGS AND ACTIONS OF COMMITTEE. The Committee
shall elect one of its members as its Chairman and shall hold its
meetings at such times and places as it may determine. All
decisions and determinations of the Committee shall be made by
the majority vote or decision of all of its members present at a
meeting; provided, however, that any decision or determination
reduced to writing and signed by all of the members of the
Committee shall be as fully effective as if it had been made at a
meeting duly called and held. The Committee may make any rules
and regulations for the conduct of its business
1994 STOCK PLAN 3
<PAGE>
that are not inconsistent with the provisions hereof and with the
bylaws of the Corporation as it may deem advisable.
3.4 COMMITTEE'S POWERS. Subject to the express
provisions hereof, the Committee shall have the authority, in its
sole and absolute discretion, (a) to adopt, amend, and rescind
administrative and interpretive rules and regulations relating to
the Plan; (b) to determine the terms and provisions of the
respective Agreements (which need not be identical), including,
but not limited to provisions defining or otherwise relating to
(i) the term and the period or periods and extent of
exercisability of the Options, (ii) the extent to which the
transferability of shares of Stock issued upon exercise of
Options is restricted, (iii) the effect of termination of
employment upon the exercisability of the Options, and (iv) the
effect of approved leaves of absence (consistent with any
applicable regulations of the Internal Revenue Service); (c) to
accelerate the time of exercisability of any Option that has been
granted; (d) to construe the respective Agreements and the Plan;
and (e) to make all other determinations and perform all other
acts necessary or advisable for administering the Plan, including
the delegation of such ministerial acts and responsibilities as
the Committee deems appropriate. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in
the Plan or in any Agreement in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the
sole and final judge of such expediency. The Committee shall
have full discretion to make all determinations on the matters
referred to in this Section, and such determinations shall be
final, binding and conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION.
4.1. ELIGIBLE INDIVIDUALS. Options may be granted
hereunder only to persons who are Eligible Individuals at the
time of the grant thereof.
4.2. NO RIGHT TO OPTION. The adoption of the Plan
shall not be deemed to give any person a right to be granted an
Option.
SECTION 5. GRANT OF OPTIONS AND CERTAIN TERMS OF THE
AGREEMENTS.
Subject to the express provisions hereof, the Committee
shall determine which Eligible Individuals shall be granted
Options hereunder from time to time. In making grants, the
Committee shall take into consideration the contribution the
potential Holder has made or may make to the success of the
Corporation or its Affiliates and such other considerations as
the Board of Directors may from time to time specify. The
Committee shall also determine the number of shares subject to
each such Option and shall authorize and cause the Corporation to
grant Options in accordance with such determinations.
The date on which the Committee completes all action
constituting an offer of an Option to an individual, including the
specification of the number of shares of Stock to be subject to the
Option, shall be the date on which the Option covered by an Agreement
1994 STOCK PLAN 4
<PAGE>
is granted, even though certain terms of the Agreement may not
be at such time determined and even though the Agreement may not
be executed until a later time. For purposes of the preceding
sentence, an offer shall not be deemed made until the Committee
has communicated the grant thereof to the potential Holder. In
no event, however, shall an Eligible Individual gain any rights
in addition to those specified by the Committee in its grant,
regardless of the time that may pass between the grant of the
Option and the actual execution of the Agreement by the Corporation
and the Holder.
Each Option granted hereunder shall be evidenced by an
Agreement, executed by the Corporation and the Eligible
Individual to whom the Option is granted, incorporating such
terms as the Committee shall deem necessary or desirable. More
than one Option may be granted hereunder to the same Eligible
Individual and be outstanding concurrently hereunder. In the
event an Eligible Individual is granted more than one Option,
such grants shall each be evidenced by separate Agreements.
Each Agreement may contain or otherwise provide for
conditions giving rise to the forfeiture of the Stock acquired
pursuant to an Option granted hereunder or otherwise, and such
restrictions on the transferability of shares of the Stock
acquired pursuant to an Option granted hereunder or otherwise as
the Committee in its sole and absolute discretion shall deem
proper or advisable. Such conditions giving rise to forfeiture
may include, but need not be limited to, the requirement that the
Holder render substantial services to the Corporation or its
Affiliates for a specified period of time. Such restrictions on
transferability may include, but need not be limited to, options
and rights of first refusal in favor of the Corporation and
shareholders of the Corporation other than the Holder of such
shares of Stock who is a party to the particular Agreement or a
subsequent holder of the shares of Stock who is bound by such
Agreement.
In addition, the Committee may grant cash awards payable
in connection with the exercise of an Option the terms and
conditions of such awards to be as the Committee in its sole
discretion deems appropriate.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
All Options granted hereunder shall comply with, be
deemed to include, and shall be subject to the following terms
and conditions:
6.1. NUMBER OF SHARES. Each Agreement shall state the
number of shares of Stock to which it relates.
6.2. OPTION EXERCISE PRICE. Each Nonstatutory Stock
Option Agreement shall state the exercise price per share of
Stock. The exercise price per share of Stock subject to a
Nonstatutory Option shall not be less than the greater of (a) the
par value per share of the Stock or (b) 100% of the Fair Market
Value per share of the Stock on the date of the grant of the
Option.
1994 STOCK PLAN 5
<PAGE>
6.3. MEDIUM AND TIME OF PAYMENT, METHOD OF EXERCISE,
AND WITHHOLDING TAXES. The exercise price of an Option shall be
payable upon the exercise of the Option (i) in cash (ii) by check
payable to the order of the Corporation, (iii) with the consent
of the Committee, with shares of Stock of the Corporation owned
by the Holder, including a multiple series of exchanges of such
Stock, or (iv) by a combination of cash and such shares.
Exercise of an Option shall not be effective until the
Corporation has received written notice of exercise. Such notice
must specify the number of whole shares to be purchased and be
accompanied by payment in full of the aggregate exercise price of
the number of shares purchased. The Corporation shall not in any
case be required to sell, issue, or deliver a fractional share of
Stock with respect to any Option.
The Committee may, in its discretion, require a Holder to
pay to the Corporation at the time of exercise of an Option or
portion thereof, the amount that the Corporation deems necessary
to satisfy its obligation to withhold Federal, state or local
income or other taxes incurred by reason of the exercise. Where
the exercise of an Option does not give rise to an obligation to
withhold Federal income or other taxes on the date of exercise,
the Corporation may, in its discretion, require a Holder to place
unrestricted shares of Stock, which may be the shares received
upon exercise of the Option, in escrow for the benefit of the
Corporation until such time as Federal income or other tax
withholding is no longer required with respect to such shares or
until such withholding is required on amounts included in the
gross income of the Holder as a result of the exercise of an
Option or the disposition of shares of Stock acquired pursuant
thereto. At such later time, the Corporation, in its discretion,
may require a Holder to pay to the Corporation the amount that
the Corporation deems necessary to satisfy its obligation to
withhold Federal, state or local income or other taxes incurred
by reason of the exercise of the Option or the disposition of
shares of Stock. Upon receipt of such payment by the
Corporation, such shares of Stock shall be released from escrow
to the Holder.
6.4. TERM, TIME OF EXERCISE, AND TRANSFERABILITY OF
OPTIONS. In addition to such other terms and conditions as may
be included in a particular Agreement granting an Option, the
rights of a Holder under an Option shall be exercisable during a
Holder's lifetime only by him or by his guardian or legal
representative. Each Option shall also be subject to the
following terms and conditions:
(a) TERMINATION OF EMPLOYMENT. The provisions of this
Section shall apply to the extent a Holder's Agreement
does not expressly provide otherwise. If a Holder ceases
to be employed by at least one of the employers in the
group of employers consisting of the Corporation and its
Affiliates because the Holder voluntarily terminates
employment with such group of employers, the Holder shall
have the right for thirty (30) days after such
termination or cessation to exercise the Option with
respect to that portion thereof that has become
exercisable, and thereafter that portion of the Option
shall terminate and cease to be exercisable.
1994 STOCK PLAN 6
<PAGE>
If a Holder ceases to be employed by at least one of the
employers in the group of employers consisting of the
Corporation and its Affiliates because any of such
entities terminates the Holder's employment for
"misconduct" (as defined below), the portion, if any, of
an Option that remains unexercised, including that
portion, if any, that pursuant to the Agreement is not
yet exercisable, at the time of the Holder's termination
of employment, shall terminate and cease to be
exercisable as of such time. "Misconduct" shall be as
defined in the Corporation's Personnel Policy and
Procedures Manual.
If a Holder ceases to be employed by at least one of the
employers in the group of employers consisting of the
Corporation and its Affiliates because one or more of
such entities terminates the employment of the Holder,
but not for "misconduct" (as defined above), the Holder
shall have the right for ninety (90) days after such
termination or cessation to exercise the Option with
respect to that portion thereof that has become
exercisable, and thereafter that portion of the Option
shall terminate and cease to be exercisable.
That portion of an Option which is not exercisable on the
date of termination of employment or cessation of
directorship shall terminate and be forfeited to the
Corporation on the date of such termination or cessation.
(b) DISABILITY. The provisions of this Section shall
apply to the extent a Holder's Agreement does not
expressly provide otherwise. If a Holder ceases to be
employed by at least one of the employers in the group of
employers consisting of the Corporation and its
Affiliates by reason of disability (as defined in section
22(e)(3) of the Code), the Holder shall have the right
for twelve (12) months after the date of termination of
employment with such group of employers by reason of
disability, whichever occurs latest, to exercise an
Option to the extent such Option is exercisable, and
thereafter the Option shall terminate and cease to be
exercisable.
(c) DEATH. The provisions of this Section shall apply
to the extent a Holder's Agreement does not expressly
provide otherwise. If a Holder dies while in the employ
of the Corporation or an Affiliate, an Option shall be
exercisable by the Holder's legal representatives, heirs,
legatees, or distributees for twelve (12) months
following the date of the Holder's death to the extent
such Option is exercisable, and thereafter the Option
shall terminate and cease to be exercisable.
The Committee shall have authority to prescribe in any
Option Agreement that the Option evidenced thereby may be
exercised in full or in part as to any number of shares subject
thereto at any time or from time to time during the term of the
Option, or in such installments at such times during said term as
the Committee may prescribe. Except as provided above and unless
otherwise provided in any Agreement, an Option may be
1994 STOCK PLAN 7
<PAGE>
exercised at any time or from time to time during the term of the
Option. Such exercise may be as to any or all whole (but no
fractional) shares which have become purchasable under the Option.
Within a reasonable time or such time as may be permitted
by law after the Corporation receives written notice that the
Holder has elected to exercise all or a portion of an Option,
such notice to be accompanied by payment in full of the aggregate
Option exercise price of the number of shares of Stock purchased,
the Corporation shall deliver a certificate representing such
shares and pay any other amounts payable in consequence of such
exercise. The number of the shares of Stock transferrable due to
an exercise of an Option shall not be increased due to the
passage of time, except as may be provided in an Agreement.
However, this number of such shares of Stock which are
transferrable may increase due to the occurrence of certain
events which are fully described in Section 6.5.
Nothing herein or in any Option granted hereunder shall
require the Corporation to issue any shares pursuant to such
Option if such issuance would, in the opinion of counsel for the
Corporation, constitute a violation of the Securities Act of
1933, as amended, or any similar or superseding statute or
statutes, or any other applicable statute or regulation, as then
in effect. At the time of receipt of shares pursuant to an
Option, the Corporation may, as a condition precedent, require
from the Holder of the Option (or in the event of his death, his
legal representatives, heirs, legatees, or distributees) such
written representations, if any, concerning his intentions with
regard to the retention or disposition of the shares being
acquired pursuant to such Option and such written covenants and
agreements, if any, as to the manner of disposal of such shares
as, in the opinion of counsel to the Corporation, may be
necessary to ensure that any disposition by such Holder (or in
the event of his death, his legal representatives, heirs,
legatees, or distributees), will not involve a violation of the
Securities Act of 1933, as amended, or any similar or superseding
statute or statutes, or any other applicable state or Federal
statute or regulation, as then in effect.
6.5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION,
MERGER, ETC. Notwithstanding any other provision hereof, in the
event of any change in the number of outstanding shares of Stock
(a) effected without receipt of consideration therefor
by the Corporation, by reason of a stock dividend,
or split, combination, exchange of shares or other
recapitalization, merger, or otherwise, in which
the Corporation is the surviving corporation;
(b) by reason of a spin-off to the shareholders of a
part of the Corporation into a separate entity; or
(c) by reason of assumptions and conversions of
outstanding grants due to an acquisition by the
Corporation of a separate entity;
1994 STOCK PLAN 8
<PAGE>
the following shall occur: (1) the aggregate number and class of
the reserved shares, (2) the number and class of shares subject
to each outstanding Option and (3) the exercise price of each
outstanding Option shall be automatically adjusted to accurately
and equitably reflect the effect thereon of such change;
provided, however, that any fractional share resulting from such
adjustment may be eliminated. In the event of a dispute
concerning such adjustment, the Committee has full discretion to
determine the resolution of the dispute. Such determination
shall be final, binding and conclusive. The number of reserved
shares or the number of shares subject to any outstanding Option
shall be automatically reduced by any fraction included therein
which results from any adjustment made pursuant to this Section.
The following provisions of this Section shall apply
unless a Holder's Agreement provides otherwise. The occurrence
of:
(a) a dissolution or liquidation of the Corporation;
(b) a merger or consolidation (other than a merger
effecting a reincorporation of the Corporation in
another state or any other merger or a
consolidation in which the shareholders of the
surviving corporation and their proportionate
interests therein immediately after the merger or
consolidation are substantially similar to the
shareholders of the Corporation and their
proportionate interests therein immediately prior
to the merger or consolidation) in which the
Corporation is not the surviving corporation (or
survives only as a subsidiary of another
corporation in a transaction in which the
shareholders of the parent of the Corporation and
their proportionate interests therein immediately
after the transaction are not substantially
identical to the shareholders of the Corporation
and their proportionate interests therein
immediately prior to the transaction); or
(c) a transaction in which any person becomes the
owner of 50% or more of the total combined voting
power of all classes of stock of the Corporation;
shall cause every Option then outstanding to terminate, but the
Holders of each such then outstanding Options shall, in any
event, have the right, immediately prior to such dissolution,
liquidation, merger, consolidation, or transaction, to exercise
such Options, to the extent not theretofore exercised, without
regard to the determination as to the periods and installments of
exercisability made pursuant to a Holder's Agreement if (and only
if) such Options have not at that time expired or been
terminated.
6.6. RIGHTS AS A SHAREHOLDER. A Holder shall have no
right as a shareholder with respect to any shares covered by his
Option until a certificate representing
1994 STOCK PLAN 9
<PAGE>
such shares is issued and delivered to him. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash
or other property) or distributions or other rights for which the
record date is prior to the date such certificate is issued.
6.7. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
Subject to the terms and conditions of and within the limitations
of the Plan, the Committee may modify, extend or renew
outstanding Options granted under the Plan, or accept the
surrender of Options outstanding hereunder (to the extent not
theretofore exercised) and authorize the granting of new Options
hereunder in substitution therefor (to the extent not theretofore
exercised). Except as otherwise allowed herein, the Committee
may not, without the consent of the Holder, modify any
outstanding Options so as to specify a higher or lower exercise
price as to Options
6.8. FURNISH INFORMATION. Each Holder shall furnish to
the Corporation all information requested by the Corporation to
enable it to comply with any reporting or other requirement
imposed upon the Corporation by or under any applicable statute
or regulation.
6.9. OBLIGATION TO EXERCISE. The granting of an Option
hereunder shall impose no obligation upon the Holder to exercise
the same or any part thereof.
6.10. AGREEMENT PROVISIONS. The Agreements authorized
under the Plan shall contain such provisions in addition to those
required by the Plan (including, without limitation, restrictions
or the removal of restrictions upon the exercise of an Option and
the retention or transfer of shares thereby acquired), as the
Committee shall deem advisable.
6.11. NON-TRANSFERABILITY OF OPTION. An Option granted
under this Plan shall not be transferable except by will or by
the laws of descent and distribution. The Holder may not make
any disposition of an Option or any interest therein. As used in
this Plan, "disposition" means any sale, transfer, encumbrance,
gift, donation, assignment, pledge, hypothecation, or other
disposition, whether similar or dissimilar to those previously
enumerated, whether voluntary or involuntary, and whether during
the Holder's lifetime or upon or after his death, including, but
not limited to, any disposition by operation of law, by court
order, by judicial process, or by foreclosure, levy, or
attachment, except a transfer by will or by the laws of descent
or distribution. Any attempted disposition in violation of this
Section shall be void and ineffective for all purposes.
SECTION 7. REMEDIES
7.1. REMEDIES. The Corporation shall be entitled to
recover from a Holder reasonable attorneys' fees incurred in
connection with the enforcement of the terms and provisions of
the Plan and any Agreement whether by an action to enforce
specific performance or for damages for its breach or otherwise.
1994 STOCK PLAN 10
<PAGE>
7.2. SPECIFIC PERFORMANCE. The Corporation shall be
entitled to enforce the terms and provisions of this Section,
including the remedy of specific performance, in Dallas, Dallas
County, Texas or in such other places the Corporation desires.
SECTION 8. AMENDMENT OF PLAN.
The Board of Directors may, insofar as permitted by law,
with respect to any shares at the time that are not subject to
Options, suspend or discontinue the Plan or revise or amend it in
any respect whatsoever.
SECTION 9. GENERAL.
9.1. APPLICATION OF FUNDS. The proceeds received by
the Corporation from the sale of shares pursuant to Options shall
be used for general corporate purposes.
9.2. RIGHT OF THE CORPORATION AND AFFILIATES TO
TERMINATE EMPLOYMENT. Nothing contained in the Plan, or in any
Agreement, shall confer upon any Holder the right to continue in
the employ of the Corporation or any Affiliate, or interfere in
any way with the rights of the Corporation or any Affiliate to
terminate his employment any time.
9.3. NO LIABILITY FOR GOOD FAITH DETERMINATIONS.
Neither the members of the Board of Directors nor any member of
the Committee shall be liable, even if negligent, for any act,
omission, or determination taken or made in good faith with
respect to the Plan or any Option granted under it, and members
of the Board of Directors and the Committee shall be entitled to
indemnification and reimbursement by the Corporation in respect
of any claim, loss, damage, or expense (including attorneys'
fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the
Corporation, and amounts paid in satisfaction of a judgment,
except a judgment based on a finding of bad faith) arising
therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage
that may from time to time be in effect.
9.4. INFORMATION CONFIDENTIAL. As partial
consideration for the granting of each Option hereunder, the
Agreement may, in the Committee's sole and absolute discretion,
provide that the Holder shall agree with the Corporation that he
will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the
Plan; provided, however, that such information may be disclosed
as required by law and may be given in confidence to the Holder's
spouse, tax and financial advisors, or to a financial institution
to the extent that such information is necessary to secure a
loan. In the event any breach of this promise comes to the
attention of the Committee, it shall take into consideration such
breach in determining whether to recommend the grant of any
future Option to such Holder as a factor militating against the
advisability of granting any such future Option to such
individual.
1994 STOCK PLAN 11
<PAGE>
9.5. OTHER BENEFITS. Participation in the Plan shall
not preclude the Holder from eligibility in any other stock
option plan of the Corporation or any Affiliate or any old age
benefit, insurance, pension, profit sharing, retirement, bonus,
or other extra compensation plans which the Corporation or any
Affiliate has adopted, or may, at any time, adopt for the benefit
of its employees.
9.6. EXECUTION OF RECEIPTS AND RELEASES. Any payment
of cash or any issuance or transfer of shares of Stock to the
Holder, or to his legal representative, heir, legatee, or
distributee, in accordance with the provisions hereof, shall, to
the extent thereof, be in full satisfaction of all claims of such
persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition
precedent to such payment, to execute a release and receipt
therefor in such form as it shall determine.
9.7. NO GUARANTEE OF INTERESTS. The Committee, the
Board of Directors and the Corporation, individually and
collectively, do NOT guarantee the Stock of the Corporation from
loss or depreciation.
9.8. PAYMENT OF EXPENSES. All expenses incident to the
administration, termination, or protection of the Plan,
including, but not limited to, legal and accounting fees, shall
be paid by the Corporation or its Affiliates; provided, however,
the Corporation or an Affiliate may recover any and all damages,
fees, expenses, and/or costs arising out of any actions taken by
the Corporation to enforce its rights hereunder.
9.9. CORPORATION RECORDS. Records of the Corporation
or its Affiliates regarding the Holder's period of employment,
termination of employment and the reason therefor, leaves of
absence, re-employment, and other matters shall be conclusive for
all purposes hereunder, unless determined by the Committee to be
incorrect.
9.10. INFORMATION. The Corporation and its Affiliates
shall, upon request or as may be specifically required hereunder,
furnish or cause to be furnished, all of the information or
documentation which is necessary or required by the Committee to
perform its duties and functions under the Plan.
9.11. NO LIABILITY OF CORPORATION. The Corporation
assumes no obligation or responsibility to the Holder or his
legal representatives, heirs, legatees, or distributees for any
act of, or failure to act on the part of, the Committee.
9.12. CORPORATION ACTION. Any action required of the
Corporation shall be by resolution of its Board of Directors or
by a person authorized to act by resolution of the Board of
Directors.
9.13. SEVERABILITY. If any provision of this Plan is
held to be illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining provisions hereof,
1994 STOCK PLAN 12
<PAGE>
but such provision shall be fully severable, and the Plan shall be
construed and enforced as if the illegal or invalid provision had
never been included herein.
9.14. NOTICES. Whenever any notice is required or
permitted hereunder, such notice must be in writing and
personally delivered or sent by mail or by a nationally
recognized courier service. Any notice required or permitted to
be delivered hereunder shall be deemed to be delivered on the
date on which it is personally delivered, or, if mailed, whether
actually received or not, on the third business day after it is
deposited in the United States mail, certified or registered,
postage prepaid, addressed to the person who is to receive it at
the address which such person has previously specified by written
notice delivered in accordance herewith or, if by courier,
twenty-four (24) hours after it is sent, addressed as described
in this Section. The Corporation or a Holder may change, at any
time and from time to time, by written notice to the other, the
address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation
and each Holder shall specify as its and his address for
receiving notices the address set forth in the Agreement
pertaining to the shares to which such notice relates.
9.15. WAIVER OF NOTICE. Any person entitled to notice
hereunder may waive such notice.
9.16. SUCCESSORS. The Plan shall be binding upon the
Holder, his legal representatives, heirs, legatees and
distributees upon the Corporation, its successors, and assigns,
and upon the Committee, and its successors.
9.17. HEADINGS. The titles and headings of Sections are
included for convenience of reference only and are not to be
considered in construction of the provisions hereof.
9.18. GOVERNING LAW. All questions arising with respect
to the provisions of the Plan shall be determined by application
of the laws of the State of Delaware except to the extent
Delaware law is preempted by Federal law. Questions arising with
respect to the provisions of an Agreement that are matters of
contract law shall be governed by the laws of the state specified
in the Agreement, except to the extent preempted by Federal law
and except to the extent that Delaware corporate law conflicts
with the contract law of such state, in which event Delaware
corporate law shall govern. The obligation of the Corporation to
sell and deliver Stock hereunder is subject to applicable laws
and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of
such Stock.
9.19. WORD USAGE. Words used in the masculine shall
apply to the feminine where applicable, and wherever the context
of this Plan dictates, the plural shall be read as the singular
and the singular as the plural.
1994 STOCK PLAN 13
<PAGE>
SECTION 10. APPROVAL OF BOARD OF DIRECTORS.
The Plan shall take effect on the date it is approved by
the Board of Directors of the Corporation.
1994 STOCK PLAN 14
<PAGE>
EXHIBIT 10.12
AMENDED AND RESTATED CREDIT AGREEMENT
Dated October 6, 1993
among
BANCTEC, INC.
and its Domestic Subsidiaries
BANCTEC USA, INC.
BTI SYSTEMS, INC.
BANCTEC (PUERTO RICO), INC.
BANCTEC (MANAGEMENT), INC.
BANCTEC THIRD PARTY MAINTENANCE, INC.
THE BANKS NAMED HEREIN
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Funds Administrator
and
TEXAS COMMERCE BANK, NATIONAL ASSOCIATION
as Agent and in its Individual Capacity
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
Section 1.1. Certain Defined Terms...................................2
Section 1.2. Accounting and Other Terms.............................16
ARTICLE II. TERM LOAN
Section 2.1. Term Loan..............................................16
Section 2.2. Term Notes.............................................16
ARTICLE III. THE REVOLVING CREDIT LOAN
Section 3.1. Revolving Credit Loan..................................17
Section 3.2. Revolving Credit Notes.................................17
Section 3.3. Borrowing Procedure....................................18
Section 3.4. Disbursement of Advances...............................19
Section 3.5. Use of Proceeds........................................19
Section 3.6. Commitment Fee; Reduction or Term-
ination of Revolving Credit Commitment.................19
ARTICLE IV. ACQUISITION FACILITY LOAN
Section 4.1. Acquisition Facility Loan..............................20
Section 4.2. Acquisition Facility Notes.............................20
Section 4.3. Borrowing Procedure....................................21
Section 4.4. Disbursement of Advances...............................21
Section 4.5. Use of Proceeds........................................21
Section 4.6. Commitment Fee.........................................21
Section 4.7. Funding Fee............................................22
ARTICLE V. PAYMENTS AND CONVERSIONS
Section 5.1. Method of Payment......................................22
Section 5.2. Optional Prepayments...................................22
Section 5.3. Selection and Conversion of
Interest Options.......................................23
Section 5.4. Interest Computations; Notice of
Base Rate Change.......................................23
ARTICLE VI. SPECIAL PROVISIONS; ILLEGALITY
Section 6.1. Additional Costs.......................................24
Section 6.2. Limitations on Types of Interest Options...............25
-i-
<PAGE>
Section 6.3. Illegality.............................................26
Section 6.4. Substitute Rates.......................................26
Section 6.5. Compensation...........................................27
Section 6.6. Capital Adequacy.......................................27
ARTICLE VII. COLLATERAL, SET-OFF AND GUARANTIES
Section 7.1. Release of Collateral..................................28
Section 7.2. Set-off................................................28
Section 7.3. Guaranty of the Obligations............................28
ARTICLE VIII. CONDITIONS PRECEDENCE
Section 8.1. Initial Acquisition Facility
Loan Advance...........................................29
Section 8.2. Any Acquisition Facility Advance.......................30
Section 8.3. Any Advance............................................30
ARTICLE IX. REPRESENTATIONS AND WARRANTIES
Section 9.1. Organization, Standing, Qualification..................31
Section 9.2. Authorization, Enforceability, Etc.....................31
Section 9.3. Ownership of Subsidiaries and
Names; Joint Ventures..................................32
Section 9.4. Financial Statements and Business Conditions...........32
Section 9.5. Taxes..................................................33
Section 9.6. Title to Properties; Liens.............................33
Section 9.7. Leases.................................................33
Section 9.8. Business; Compliance...................................33
Section 9.9. Franchises, Patents, Trademarks and Other Rights.......33
Section 9.10. Litigation, Proceedings, Etc...........................33
Section 9.11. Compliance with Law....................................34
Section 9.12. Employee Benefit Plans.................................34
Section 9.13. Use of Proceeds........................................34
Section 9.14. Relationship to the Banks..............................34
Section 9.15. Investment Company Act.................................34
Section 9.16. Public Utility Holding Company Act.....................34
Section 9.17. Government Regulation..................................34
Section 9.18. Regulation U...........................................35
Section 9.19. Environmental Laws.....................................35
Section 9.20. Labor Disputes; Compliance.............................35
Section 9.21. Benefit to Obligated Parties...........................35
Section 9.22. Original Credit Agreement..............................35
-ii-
<PAGE>
ARTICLE X. COVENANTS
Section 10.1. Financial Statements...................................36
Section 10.2. Certificates; SEC Filings; Other Information...........36
Section 10.3. Transactions with Affiliates...........................37
Section 10.4. Preservation of Existence, Properties
and Business...........................................38
Section 10.5. Business Combinations..................................38
Section 10.6. Payment of Taxes and Claims............................39
Section 10.7. Inspection Rights......................................40
Section 10.8. Keeping Books and Records..............................40
Section 10.9. Compliance with Laws...................................40
Section 10.10. Compliance with Agreements.............................40
Section 10.11. Notices................................................41
Section 10.12. Compliance with ERISA and the Internal
Revenue Code...........................................41
Section 10.13. Compliance with Regulations G, T, U and X..............41
Section 10.14. Further Assurances.....................................41
Section 10.15. Limitation on Debt.....................................41
Section 10.16. Minimum Net Worth......................................42
Section 10.17. Consolidated Current Assets to
Consolidated Current Liabilities.......................42
Section 10.18. Minimum Interest Coverage Ratio/
Minimum Cash Flow Coverage Ratio.......................42
Section 10.19. Maximum Debt to Capitalization Ratio...................43
Section 10.20. Amendment of Corporate Documents.......................43
Section 10.21. Distributions..........................................43
Section 10.22. Investments............................................43
Section 10.23. Negative Pledge........................................43
Section 10.24. Capital Expenditures...................................44
Section 10.25. Agreements.............................................44
Section 10.26. Insurance..............................................44
ARTICLE XI. DEFAULT
Section 11.1. Events of Default......................................44
Section 11.2. Remedies...............................................46
Section 11.3. Performance by Agent...................................47
ARTICLE XII. THE AGENT
Section 12.1. Appointment, Powers and Immunities.....................47
Section 12.2. Rights as a Bank.......................................48
Section 12.3. Sharing of Payments....................................49
Section 12.4. No Liability of Agent; Indemnity.......................49
Section 12.5. Agent's Employees; Funds Administrator.................50
Section 12.6. Reliance by Agent......................................50
-iii-
<PAGE>
Section 12.7. Several Commitments....................................50
Section 12.8. Successor Agent........................................51
ARTICLE XIII. MISCELLANEOUS
Section 13.1. Amendments, Etc........................................51
Section 13.2. Notices................................................51
Section 13.3. No Waiver; Remedies....................................52
Section 13.4. Costs, Expenses and Taxes..............................52
Section 13.5. Indemnity..............................................52
Section 13.6. Fees...................................................53
Section 13.7. Governing Law..........................................53
Section 13.8. Maximum Interest Rate..................................53
Section 13.9. Survival of Representations and Warranties.............54
Section 13.10. Binding Effect.........................................54
Section 13.11. Successors and Assigns; Participations.................54
Section 13.12. Assumption or Substitution.............................57
Section 13.13. Invalid Provisions.....................................58
Section 13.14. Number and Gender of Words.............................58
Section 13.15. Descriptive Headings...................................58
Section 13.16. Execution in Counterparts..............................58
Section 13.17. Letter of Credit Advances..............................58
Section 13.18. Entire Agreement.......................................59
-iv-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 6, 1993,
is among: (i) BANCTEC, INC., a Delaware corporation ("Borrower"); (ii) the
following Subsidiaries of Borrower (the "Domestic Subsidiaries"): BANCTEC USA,
INC., a Delaware corporation, BTI SYSTEMS, INC., a Pennsylvania corporation,
BANCTEC (PUERTO RICO), INC., a Delaware corporation, BANCTEC (MANAGEMENT),
INC., a Delaware corporation, BANCTEC THIRD PARTY MAINTENANCE, INC., a Texas
corporation; (iii) the banks listed on the signature pages hereof (the "Banks"),
(iv) TEXAS COMMERCE BANK, NATIONAL ASSOCIATION, a national banking association
(in its capacity as agent for the Banks, together with its successors and
assigns in such capacity, "Agent" and in its individual capacity "TCB"), and
(iv) TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association
("Funds Administrator").
RECITALS:
A. Pursuant to the Original Credit Agreement and the Amendments
(defined in Section 1.1), the Banks have previously extended to Borrower a term
loan of up to $57,000,000 (the "Term Loan") and a revolving credit loan in a
principal amount not to exceed $20,000,000.
B. Borrower and the Subsidiaries have requested the Banks to extend
credit to Borrower in order to enable it to borrow from time to time up to the
principal of $55,000,000 (the "Acquisition Facility Loan") for the purpose of
making Acquisitions (defined in Section 1.1.)
C. Borrower and the Subsidiaries have requested that the Banks modify
certain of the terms of the Term Loan, the Revolving Credit Loan and the
Original Credit Agreement (as previously amended).
D. The Banks are willing to extend the Acquisition Facility Loan to
Borrower and to modify certain terms of the Term Loan and the Revolving Credit
Loan upon and subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
-1-
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACQUISITION" means an Investment in capital stock or other equity
securities (or securities convertible into, exchangeable for or evidencing any
right or option to purchase or otherwise acquire any such stock or securities)
of any Person if, afterward, such Person would be a Subsidiary, or any
acquisition of all or a significant portion of the Property of any Person, that
at such time was not a wholly-owned Subsidiary, whether such Investment or
acquisition was effected by purchase, exchange, Combination or otherwise.
"ACQUISITION FACILITY LOAN" means the loan described in Recital B of
this Agreement and made or to be made pursuant to Section 4.1.
"ACQUISITION FACILITY CLOSING DATE" means October 6, 1993.
"ACQUISITION FACILITY COMMITMENT" shall have the meaning assigned to it
in Section 4.1.
"ACQUISITION FACILITY NOTES" shall have the meaning assigned to it in
Section 4.2.
"ADDITIONAL COSTS" shall have the meaning assigned to it in Section
6.1(a).
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in
substantially the form of EXHIBIT "A" hereto, which each Bank shall complete
and provide to Agent.
"ADVANCE" means an advance of funds by Bank to Borrower pursuant to
Article III or Article IV.
"ADVANCE REQUEST FORM" means a certificate, in substantially the form
of EXHIBIT "B" hereto, properly completed and signed by Borrower requesting
Advances.
"AFFILIATE" means any Person that, directly or indirectly, controls,
or is controlled by or under common control with, another Person. For the
purposes of this definition, "control" (including the terms "controlled by" and
"under common control with"), as used with respect to any Person, means the
power to direct or cause the direction of the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or by contract or otherwise. Without limiting the generality of the
foregoing, a Subsidiary of a Person is an Affiliate of that Person.
"AGENT" shall have the meaning assigned to it in the first paragraph
of this Agreement.
"AGREEMENT" means this Amended and Restated Credit Agreement, as it
may be modified or amended from time to time hereafter in accordance with the
provisions hereof. This
-2-
<PAGE>
Agreement supersedes the Original Credit Agreement and all of the Amendments.
"AMENDMENTS" means the amendments to the Original Credit Agreement
among Borrower, the Guarantors, the Banks and Agent which preceded this
Agreement, including Amendment No. 1 to Credit Agreement dated as of February
10, 1989, Amendment No. 2 to Credit Agreement dated as of May 31, 1989,
Amendment No. 3 to Credit Agreement dated as of October 19, 1990, Amendment No.
4 to Credit Agreement dated as of November 1, 1990 and Amendment No. 5 to Credit
Agreement dated as of October 1, 1991.
"ALTERNATE BASE RATE" means at anytime, the greater of (a) the Base
Rate, or (b) the Federal Funds Rate plus one-half of one percent ( 1/2 of 1%).
"APPLICABLE ACQUISITION FACILITY RATE" means at any time, (a) with
respect to Eurodollar Loans, a rate per annum equal to the Eurodollar Rate, (b)
with respect to CD Rate Loans, a rate per annum equal to the CD Rate and (c)
with respect to Base Rate Loans, a rate per annum equal to the Alternate Base
Rate.
"APPLICABLE LENDING OFFICE" means with respect to each Bank, such
Bank's Domestic Lending Office for the portions of the Loans bearing interest at
the Alternate Base Rate and the CD Rate, and such Bank's Eurodollar Lending
Office for the portions of the Loans bearing interest at the Eurodollar Rate.
"APPLICABLE REVOLVING CREDIT RATE" means at any time (a) with respect
to Eurodollar Loans, a rate per annum equal to the Eurodollar Rate plus one
percent (1%), and (b) with respect to Base Rate Loans, a rate per annum equal to
the Alternate Base Rate.
"APPLICABLE TERM RATE" means at any time, (a) with respect to
Eurodollar Loans, a rate per annum equal to the Eurodollar Rate, (b) with
respect to CD Rate Loans, a rate per annum equal to the CD Rate and (c) with
respect to Base Rate Loans, a rate per annum equal to the Alternate Base Rate.
"ASSESSMENT RATE" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as well capitalized and within supervisory subgroup "B" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. S 327.3(d) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the U.S.
"ASSIGNMENT AND ACCEPTANCE" shall have the meaning assigned to it in
Section 13.11(c).
"AUTHORIZATIONS" shall have the meaning assigned to it in Section 9.9.
"BANK" shall mean each of the banks listed on the signature pages of
this Agreement.
"BASE RATE" means at anytime, the rate of interest per annum then most
recently announced by TCB as its prime rate and thereafter entered into the
minutes of TCB's Loan and Discount Committee, automatically fluctuating upward
and downward with and at the time
-3-
<PAGE>
specified in each such announcement without special notice to Borrower. The Base
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. TCB may make commercial or other loans at
rates of interest at. above or below the Base Rate.
"BASE RATE LOAN" means a portion of any Loan which bears interest at a
rate based upon the Alternate Base Rate as determined pursuant to Section 5.4.
"BOARD" means the Board of Governors of the U.S. Federal Reserve
System.
"BORROWER" shall have the meaning assigned to it in the first paragraph
of this Agreement.
"BORROWINGS" means for any Person: (a) all indebtedness (including, in
the case of the Obligated Parties, the Obligations), whether or not represented
by bonds, debentures, notes, securities or other evidences of indebtedness, for
the repayment of money borrowed, (b) all indebtedness representing deferred
payment of the purchase price of property or assets, (c) all indebtedness under
any capital lease, (d) all indebtedness under guaranties, endorsements,
assumptions, or other contractual contingent obligations, including any letters
of credit, or obligations in respect of, or to purchase or otherwise acquire,
indebtedness of others, (e) all indebtedness secured by a Lien existing on
property owned, subject to such Lien, whether or not the indebtedness secured
thereby shall have been assumed by the owner thereof and (f) all amendments,
renewals, extensions, modifications and refundings of any indebtedness or
obligations referred to above in (a), (b), (c), (d) or (e).
"BUSINESS DAY" means a day other than (i) Saturday, (ii) Sunday, or
(iii) any other day on which banks are required or authorized to close in Dallas
or Houston, Texas, or Washington, D.C.
"CAPITAL EXPENDITURES" means for any period, all investments in fixed
or capital assets (including spare parts to the extent that spare parts are
treated by GAAP as fixed or capital assets) during such period, but excluding
Acquisitions.
"CD QUOTED RATE" means the rate of interest per annum determined by
Agent to be the average (rounded upward to the nearest whole multiple of one
sixteenth of one percent) of the interest rates quoted by the Reference Banks as
of approximately 10:00 a.m. Dallas time (or as soon thereafter as practicable)
on the beginning date of such Interest Period by a total of three dealers in
certificates of deposit in an amount comparable to the CD Rate Loan to which
such Interest Period applies and having a maturity comparable to such Interest
Period. If any Reference Bank does not furnish a timely quotation, Agent shall
determine the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Reference Banks. If none of such
quotations is available on a timely basis, the provisions of Section 6.4 shall
apply. The determination by Agent of the rate of interest per annum provided
hereby shall be conclusive absent manifest error.
"CD RATE" means for any CD Rate Loan, a rate per annum (rounded
upwards, if necessary, to the nearest l/100th of 1%) equal to (i) the CD Quoted
Rate for such CD Rate Loan
-4-
<PAGE>
for the Interest Period for such CD Rate Loan divided by 1.0 minus the CD
Reserve Requirement for such CD Rate Loan for such Interest Period, plus (ii)
the Assessment Rate, plus (iii) the Interest Rate Adjustment Factor as of the
beginning date of such Interest Period.
"CD RATE LOAN" means a portion of any Loan which bears interest at a
rate based upon the CD Rate.
"CD RESERVE REQUIREMENT" means for any CD Rate Loan and for any
Interest Period therefor, 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 New York City with deposits in excess of $l,000,000,000 in
respect of nonpersonal time deposits in Dollars in New York City having original
maturities and principal amounts comparable to the relevant CD Rate Loan and its
Interest Period, and in the amount of $100,000 or more. Without limiting the
effect of the foregoing, the CD Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks by reason of any
Regulatory Change.
"CENTRAL TIME" means Central Standard Time or Central Daylight Savings
Time, as the case may be.
"COLLATERAL" means all Property of Borrower and its Subsidiaries and
any proceeds therefrom as to which the Banks were given security interests,
pledges, hypothecations, liens or mortgages pursuant to the Original Credit
Agreement and the Amendments.
"COMBINATION" means any merger, consolidation, amalgamation or share
exchange involving two or more Persons.
"COMMITMENT" means as to any Bank, the aggregate of such Bank's
Acquisition Facility Commitment and Revolving Credit Commitment.
"CONSOLIDATED TANGIBLE ASSETS" means net assets of Borrower and its
Subsidiaries, on a consolidated basis, less the sum of (a) any surplus resulting
from any write-up of assets, (b) goodwill, including any amounts, however
designated, representing the excess of the purchase price paid for assets
acquired over the book value assigned thereto by Borrower, (c) patents,
trademarks, service marks, trade names and copyrights, and (d) other intangible
assets.
"CURRENT DATE" means a date within 30 days prior to the Acquisition
Facility Closing Date.
"CURRENT FINANCIALS" means the consolidated Financial Statements of
Borrower and its Subsidiaries for the fiscal year ended March 28, 1993 and the
three months ended June 30, 1993.
"DEBT" means for any Person, all liabilities to any other Person,
including, without limitation, all Borrowings and all other debts, claims and
indebtedness, contingent, fixed or otherwise, heretofore, now or from time to
time hereafter owing, due or payable, however evidenced, created, incurred,
acquired or owing and however arising, whether under written or
-5-
<PAGE>
oral agreement, operation of law, or otherwise.
"DEBTOR RELIEF LAW" means any conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, fraudulent transfer, reorganization or
similar debtor relief Laws from time to time in effect generally affecting the
Rights of creditors.
"DEBT TO CAPITALIZATION RATIO" means a ratio of (i) long term Debt,
including the current maturities thereof, to (ii) the sum of long term Debt plus
consolidated stockholders' equity of Borrower and its Subsidiaries.
"DEFAULT" means any Event of Default and any other event which, with
the lapse of time or giving of notice or both, would constitute an Event of
Default.
"DEFAULT RATE" means the lesser of the Maximum Rate or the sum of the
Base Rate in effect from day to day plus three percent (3%).
"DISPOSITION" means any sale, lease, assignment, transfer or other
disposition by any Person, or any grant by any Person of any Right or option to
purchase or otherwise acquire, any of its Property, except any sale, lease,
assignment, transfer or other disposition of inventory or equipment effected in
the ordinary course of the Person's business (including, without limitation, the
sale or trade-in of equipment and the sale or other disposal of excess, obsolete
or worn out equipment).
"DISTRIBUTION" means for any Person (a) with respect to any capital
stock issued by such Person, the retirement, redemption, purchase or other
acquisition for value of any such stock, (b) the declaration or payment of any
dividend or other distribution on or with respect to any such stock, other than
a dividend which takes the form of capital stock issued by such Person or a cash
payment in lieu of issuing fractional shares, not to exceed $25,000 in the
aggregate in any twelve month period, and (c) any other payment by such Person
with respect to stock.
"DOLLARS AND $" means lawful money of the U.S.
"DOMESTIC LENDING OFFICE" means the office of each Bank specified as
its Domestic Lending Office below its name on the signature pages hereof or such
other office as such Bank may from time to time specify to Agent and Borrower.
"DOMESTIC SUBSIDIARY" means any Subsidiary of Borrower which is not a
Foreign Subsidiary, including those Domestic Subsidiaries named in the opening
paragraph of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all regulations issued pursuant thereto.
"EURODOLLAR LENDING OFFICE" means the office of each Bank specified as
its Eurodollar Lending Office below its name on the signature pages hereof or
such other office of such Bank as such Bank may from time to time specify to
Agent and Borrower.
-6-
<PAGE>
"EURODOLLAR LOAN" means a portion of any Loan which bears interest at
a rate based upon the Eurodollar Rate as determined by Section 5.4.
"EURODOLLAR RATE" means (i) as to any Eurodollar Loan that is a Term
Loan or an Acquisition Facility Loan, a rate per annum (rounded upwards, if
necessary, to the nearest l/100th of 1%) determined by Agent to be equal to (A)
the Interbank Offered Rate for such Eurodollar Loan for the Interest Period for
such Eurodollar Loan divided by 1.0 minus the Eurodollar Reserve Requirement for
such Eurodollar Loan for such Interest Period plus (B) the Interest Rate
Adjustment Factor as of the beginning date of such Interest Period, and (ii) as
to any Eurodollar Loan that is a Revolving Credit Loan, a rate per annum
(rounded upwards, if necessary, to the nearest l/100th of 1%) determined by
Agent to be equal to the Interbank Offered Rate for such Eurodollar Loan for the
Interest Period for such Eurodollar Loan divided by 1.0 minus the Eurodollar
Reserve Requirement for such Eurodollar Loan for such Interest Period.
"EURODOLLAR RESERVE REQUIREMENT" means for any Eurodollar Loan and for
any Interest Period therefor, 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 New York City 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 Eurodollar Reserve Requirement
shall reflect any other reserves required to be maintained by such member banks
by reason of any Regulatory Change against (a) any category of liabilities which
includes deposits by reference to which the Eurodollar Rate is to be determined
as provided in the definition of "Interbank Offered Rate" in this Section 1.1,
or (b) any category of extensions of credit or other assets which include
Eurodollar Loans.
"EVENT OF DEFAULT" means any of the events listed in Section 11.1 of
this Agreement.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended.
"FEDERAL FUNDS RATE" means for any day, the rate per annum (rounded
upwards, if necessary, to the nearest l/100th of 1%) determined by Agent to be
equal to the weighted average of the rates on overnight federal funds
transactions with member banks of the Federal Reserve System arranged by federal
funds brokers on such day, as published by the Federal Reserve Bank of New York,
New York on the Business Day next succeeding such day or if such rates are not
published for any day, the average of the rates charged to the Reference Banks
on such day on such transactions. The determination by Agent of the rate of
interest per annum provided above shall be conclusive absent manifest error.
"FINANCIAL STATEMENTS" means balance sheets, income statements,
statements of stockholders' equity and statements of cash flows.
"FIRA" shall have the meaning assigned to it in Section 9.14.
"FOREIGN SUBSIDIARY" means any Subsidiary which is organized under the
laws of a jurisdiction other than the U.S. or any state thereof.
-7-
<PAGE>
"FUNDING FEE" shall have the meaning assigned to it in Section 4.7.
"FUNDS ADMINISTRATOR" shall have the meaning assigned to it in the
first paragraph of this Agreement.
"GAAP" means generally accepted accounting principles for financial
reporting in the U.S.
"GUARANTORS" means the Domestic Subsidiaries named in the opening
paragraph of this Agreement and each other Domestic Subsidiary of Borrower that
executes a Guaranty for the benefit of the Banks.
"GUARANTY" means a Guaranty Agreement executed by a Guarantor for the
benefit of the Banks, in substantially the form of Exhibit "C" hereto, as the
same may be supplemented, amended or otherwise modified from time to time.
"IMPOSITIONS" shall have the meaning assigned to it in Section 10.6
"INTERBANK OFFERED RATE" means the rate of interest per annum
determined by Agent to be the average (rounded upward to the nearest whole
multiple of one sixteenth of one percent) of the interest rates quoted by the
Reference Banks at approximately 11:00 A.M. New York time (or as soon thereafter
as practicable) on the day two (2) Business Days prior to the first day of the
Interest Period for such Eurodollar Loan for the offering by the Reference Banks
to leading banks in whatever interbank market may be selected by the Reference
Banks, in their sole discretion, of Dollar deposits having a term comparable to
such Interest Period and in an amount comparable to the principal amount of the
respective Eurodollar Loans of the Reference Banks to which such Interest Period
relates. If any Reference Bank is not participating in any Eurodollar Loan
during the Interest Period therefor (pursuant to Section 5.1 or 5.2 or 5.3
hereof or for any other reason), the Eurodollar Rate for such Eurodollar Loans
for such Interest Period shall be determined by reference to the amount of the
Eurodollar Loan that such Reference Bank would have made had it been
participating in such Eurodollar Loan. If any Reference Bank does not furnish a
timely quotation, Agent shall determine the relevant interest rate on the basis
of the quotation or quotations furnished by the remaining Reference Bank or
Reference Banks. If none of such quotations is available on a timely basis, the
provisions of Section 6.4 shall apply. The determination by Agent of the rate of
interest per annum provided hereby shall be conclusive absent manifest error.
"INTERCOMPANY LOANS" means loans or advances by Borrower to one or more
Subsidiaries, including those made pursuant to the Intercompany Loan Agreements.
"INTERCOMPANY LOAN AGREEMENT" means the loan agreements between
Borrower and each of the Guarantors executed in connection with the Original
Credit Agreement and certain of the Amendments, and any loan agreements between
Borrower and any Subsidiary in the future, as the same may be supplemented,
amended or otherwise modified from time to time.
"INTEREST OPTION" shall have the meaning assigned to it in Section
5.3.
-8-
<PAGE>
"INTEREST PAYMENT DATE" means (a) with respect to any Base Rate Loan,
the earlier of (i) the last Business Day of each March, June, September and
December, commencing on the first such day to occur after an Advance has been
made, any portion of which bears interest at a rate based on the Base Rate or
after a CD Rate Loan or Eurodollar Loan has been converted to a Base Rate Loan
or (ii) the day upon which such Base Rate Loan is converted to a CD Rate Loan or
Eurodollar Loan, and (b) with respect to any Eurodollar Loan or CD Rate Loan, if
the Interest Period pertaining thereto ends on a day one, two or three months
after the day the Interest Period commenced, on the last day of the Interest
Period or, if the Interest Period pertaining thereto ends on a day four, five or
six months after the day the Interest Period commenced, on the day three months
after the day of the commencement of such Interest Period and on the last day of
such Interest Period.
"INTEREST PERIOD" means for any Eurodollar Loan or CD Rate Loan (i)
initially, the period commencing on the day an Advance has been made, any
portion of which bears interest at a rate based on the Eurodollar Rate or the CD
Rate or on the day that a Base Rate Loan has been converted to a Eurodollar Loan
or CD Rate Loan and in each case ending on the numerically corresponding day
one, two, three, four, five or six months thereafter, as selected by Borrower in
its written notice to Agent or as otherwise determined pursuant to this
Agreement, and (ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period for such CD Rate Loan or Eurodollar Loan
and ending on the numerically corresponding day one, two, three, four, five or
six months thereafter as selected by Borrower in its written notice to Agent or
as otherwise determined pursuant to this Agreement, provided that the foregoing
provisions relating to Interest Periods are subject to the following:
(a) If any Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next succeeding
Business Day, except that if the next Business Day would fall in the next
calendar month, the Interest Period shall end on the immediately preceding
Business Day;
(b) any Interest Period that begins on the last day of a calendar
month (or on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month;
(c) if any Interest Period for any CD Rate Loan or Eurodollar Loan
would, but for this paragraph (c), include a date on which a payment of
principal is due, then (i) such Interest Period for that portion of the
principal as is required to be repaid on such date shall end on such date
unless a Base Rate Loan is outstanding in an amount at least equal to the
portion of the principal as is required to be repaid on such date and (ii)
the remainder (if any) of the principal amount of such CD Rate Loan or
Eurodollar Loan shall have an Interest Period determined as otherwise
provided in this definition;
(d) any Interest Period which would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(e) if Borrower fails to give Agent written notice of the length
of an Interest Period, Borrower shall be deemed to have selected an
Interest Period which is of the same duration as the Interest Period then
ended, or, as to the first Interest Period for any
-9-
<PAGE>
Loan, Borrower shall be deemed to have selected a three month Interest
Period; and
(f) no Interest Period shall extend for a period less than one
month.
"INTEREST RATE ADJUSTMENT FACTOR" means the following:
DEBT TO CAPITALIZATION RATIO INTEREST RATE ADJUSTMENT FACTOR
---------------------------- -------------------------------
Less than .25 to 1.0 1-1/4%
From .25 to 1.0 to .40 1-1/2%
Above .40 to 1.0 1-3/4%
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended and in effect from time to time, and the regulations promulgated
thereunder.
"INVESTMENT" of any Person shall mean any investment by means of any
direct or indirect (a) loan, advance, guarantee (a guarantee to be deemed an
Investment equal to the principal amount of the Debt guaranteed), capital
contribution, transfer of assets (other than for an amount equal to the fair
value of the assets transferred payable in cash within ninety days of such sale)
by such Person or (b) purchase or other acquisition for consideration by such
Person of evidences of indebtedness, capital stock or other securities of any
other Person.
"LAWS" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of the U.S., any state or commonwealth,
any nation or country, any territory or possession, or any Tribunal, all as
amended and in effect from time to time.
"LIEN" means any claim, mortgage, pledge, assignment, hypothecation,
trust, security interest, encumbrance, lien or charge of any kind (including,
without limitation, any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature thereof, or the
interest of the lessor under any capital lease).
"LITIGATION" means any proceeding, claim, lawsuit, action or
investigation by or before any Tribunal.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, and
any and all other agreements or instruments now or hereafter executed and
delivered by Borrower or any other Person in connection with guaranteeing,
securing or otherwise supporting payment or performance of, this Agreement, any
Note, or any Guaranty, as they may be supplemented, amended or otherwise
modified from time to time.
"LOAN" means the Term Loan, the Revolving Credit Loan or the
Acquisition Facility Loan, including as to the Revolving Credit Loan and the
Acquisition Facility Loan, the Commitments, and "LOANS" means those three
Loans collectively, including the Commitments.
"MARGIN STOCK" shall have the meaning assigned to that term in
Regulation U.
"MATERIAL ADVERSE EFFECT" means any effect that is material and adverse
to the business,
-10-
<PAGE>
financial condition or operations of Borrower and its Subsidiaries considered as
a whole.
"MAXIMUM RATE" means the maximum rate of nonusurious interest permitted
from day to day by applicable law, including as to Article 5069-1.4, Vernon's
Texas Civil Statutes (and as the same may be incorporated by reference in other
Texas statutes), but otherwise without limitation, that rate based upon the
"indicated rate ceiling" and calculated after taking into account any and all
relevant fees, payments, and other charges incurred in connection with the Loan
Documents which are deemed to be interest under applicable law.
"NET INCOME" means for any period, the consolidated net income of
Borrower and its Subsidiaries for such period, provided that there shall be
excluded: (a) any net income (or net loss) of any Person in which Borrower has
an ownership interest other than its Subsidiaries, except to the extent that any
such income has actually been received by Borrower in the form of cash dividends
or similar distributions; and (b) any net gains or losses on the sale or other
disposition, not in the ordinary course of business, of investments and other
capital assets, provided that there shall also be excluded any related charges
for taxes thereon and other costs associated with the sale.
"NOTES" means collectively, the Term Notes, the Revolving Credit Notes
and the Acquisition Facility Notes.
"OBLIGATED PARTY" means Borrower and each of the Guarantors.
"OBLIGATIONS" means all loans, advances, debts, liabilities,
obligations, covenants and duties of Borrower and each other Obligated Party to
Agent or the Banks or any of them of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, arising
under any of the Loan Documents, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening of a letter of
credit, loan, guaranty, indemnification or in any other manner, whether direct
or indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising and however acquired.
The term includes, without limitation, all interest, charges, expenses, fees,
attorneys' fees and any other sums chargeable to any of the Obligated Parties
under any of the Loan Documents.
"OFFICERS' CERTIFICATE" means for any Person, a certificate executed by
(i) the Chairman, President or any Vice President and (ii) the Secretary or any
Assistant Secretary of such Person.
"ORIGINAL CREDIT AGREEMENT" means the Credit Agreement dated as of
January 18, 1989 among Borrower, the Subsidiaries, the Banks, Agent and others.
"PAYMENT OFFICE" means Agent's account at Texas Commerce Bank National
Association, 712 Main Street, Houston, Texas 77002.
"PERMITTED INVESTMENT" means an Investment in any of the following:
(a) securities issued or directly and fully guaranteed or insured
by the U.S., any agency or instrumentality thereof (provided that the full
faith and credit of the U.S.
-11-
<PAGE>
is pledged in support thereof) or Puerto Rico having maturities of not
more than 12 months from the date of settlement:
(b) time deposits, certificates of deposit and bankers'
acceptances, in each case with maturities of not more than twelve months
from the date of settlement, (i) of any commercial bank incorporated in
the U.S. of recognized standing having capital and surplus in excess of
$100,000,000, (ii) which are fully insured by the Federal Deposit
Insurance Corporation, or (iii), in the case of Investments by any Foreign
Subsidiary, of any foreign branch of a U.S. bank or any foreign bank whose
commercial paper is rated at least A-2 or the equivalent by Standard &
Poor's Corporation, at least P-2 or the equivalent by Moody's Investor's
Service, Inc. or, in the case of any foreign bank, at least an equivalent
rating by a rating agency with an international standing comparable to
Standard 6 Poor's Corporation or Moody's Investor's Service, Inc.;
(c) securities by any U.S. state or subdivision or agency thereof
rated at least AAA or the equivalent thereof by Standard & Poor's
Corporation or at least Aaa or the equivalent thereof by Moody's Investors
Service, Inc. having maturities of not more than 12 months from the date
of settlement;
(d) commercial paper issued by any Person incorporated in the U.S.
rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than 12 months after the
date of acquisition or loan participations purchased on a non-recourse
basis in unsecured loans of corporations incorporated in the U.S. which
issue commercial paper of the type described above;
(e) shares of money market funds substantially all of whose assets
are comprised of securities of the types described in clauses (a) through
(c) above;
(f) eurodollar deposits, provided that (i) such deposits mature
within 12 months or less after the date of such investment, (ii) such
deposits are issued by commercial banks whose commercial paper is rated
A-2 or its equivalent or better by Standard & Poor's Corporation or P-2 or
its equivalent or better by Moody's Investors Service, Inc., and (iii)
such deposits must be purchased in the U.S.;
(g) repurchase agreements respecting any of the securities
described in clauses (a), (b), (c), and (e) above with banks incorporated
under the laws of the United States or of any State thereof whose
commercial paper ratings are A-2 or its equivalent or better by Standard &
Poor's Corporation or P-2 or its equivalent or better by Moody's Investors
Service, Inc.; provided, however, that the collateral therefor be actually
transferred or that the collateral therefor be held in custody by a
domestic commercial bank having total assets of not less than
$1,000,000,000 and confirmation is received from such bank that such
collateral is being held as security for the repurchase obligation;
(h) time deposits, certificates of deposit and bankers'
acceptances, in each case with maturities of not more than 60 months from
the date of settlement, of any
-12-
<PAGE>
commercial bank domiciled in Puerto Rico which are fully insured by the
Federal Deposit Insurance Corporation; or
(i) any of the securities of the type described in clauses (a),
(b), (c), (d), (f), and (g) above of TCB provided that the rating assigned
to the commercial paper issued by it is A-3 or its equivalent or better by
Standard 6 Poor's Corporation or P-3 or its equivalent or better by
Moody's Investors Services, Inc.
"PERMITTED LIENS" means to the extent reflected and provided for on
the grantor's books and records and not impairing the operations of Borrower or
any performance hereunder or contemplated hereby, (i) Liens arising by operation
of Law for Taxes not yet due and payable, (ii) mechanic's, materialman's,
shipper's or warehouseman's Liens for services or materials for which payment is
not yet due, (iii) Liens on and limited to specific items of equipment or
parcels of real estate acquired hereafter that secure purchase money Borrowings
permitted hereunder, (iv) Liens consisting of zoning restrictions, easements or
other restrictions on the use of real estate, none of which is violated by
existing land use to the extent it could be expected to have a Material Adverse
Effect, (v) the following, if the validity or amount thereof is being contested
in good faith and by appropriate and lawful proceedings of which Borrower has
given prior notice to Agent and for which appropriate reserves have been
established and so long as levy and execution have been and continue to be
effectively stayed: Liens for taxes due and payable; Liens upon and defects in
title to real or personal property; Liens of mechanics, materialmen, shippers,
warehousemen, carriers and landlords; Liens for judgments; and (vi) pledges or
deposits made to secure payment of worker's compensation, or to participate in
any fund in connection with worker's compensation, unemployment insurance, or
other social security programs.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, limited liability
company, corporation, company, institution, entity, party or government (whether
national, federal, state, county, city, municipal, or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"PLAN" means any employee benefit plan or other plan maintained by any
Obligated Party for employees of Borrower and covered by Title IV of ERISA.
"PRO RATA" means as to any Bank, (i) as applied to considerations
involving any one of the Loans, such Bank's ratable share of such Loan expressed
by the percentage identified opposite its name as to such Loan on the signature
pages hereof, and (ii) as applied to considerations involving all of the Loans,
such Bank's ratable share of the aggregate of all of the Loans expressed by the
percentage identified opposite its name as to all Loans on the signature pages
hereof.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible, and whether now owned
or hereafter acquired.
"RECEIVABLES" means, for any Person, all of such Person's presently
existing and hereafter arising or acquired accounts, receivables and present and
future Rights of such Person
-13-
<PAGE>
to payment for goods sold or leased or for services rendered, including, without
limitation, those which are not evidenced by instruments or chattel paper, and
whether or not they have been earned by performance; proceeds of any letters of
credit on which such Person is named as beneficiary; contract rights; chattel
paper; instruments; documents; insurance proceeds; and all such obligations
whatsoever owing to such Person, together with all instruments and all documents
of title representing any of the foregoing, all Rights in any merchandise or
goods which any of the same may represent, and all right, title, security and
guaranties with respect to each of the foregoing, including, without limitation,
any right of stoppage in transit.
"REFERENCE BANKS" means TCB, Comerica Bank and NationsBank of Texas,
N.A.
"REGISTER" shall have the meaning assigned to it in Section 13.11(e).
"REGULATION D" means Regulation D of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"REGULATION G" means Regulation G of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"REGULATION T" means Regulation T of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"REGULATION U" means Regulation U of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"REGULATION X" means Regulation X of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"REGULATORY CHANGE" means with respect to any Bank, any change on or
after the date of this Agreement in any U.S. federal, state, or foreign Laws
(including Regulation D) or the adoption or making on or after such date of any
interpretation, directive, or request applying to a class of banks or other
lending institutions (including Bank) of or under any U.S. federal, state, or
foreign Laws (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REPORTABLE EVENT" shall have the meaning assigned to that term in
Title IV of ERISA.
"REQUISITE BANK" means (i) as applied to considerations involving any
one of the Loans, Banks whose Pro Rata percentages relating to such Loan
together equal at least 66-2/3 percent, and (ii) as applied to considerations
involving all of the Loans, Banks whose Pro Rata percentages relating to all
Loans together equal at least 66-2/3 percent; PROVIDED, HOWEVER, that in all
instances providing for Rights of Requisite Banks under Article X, Section 11.2,
Section 11.3, Section 12.1 and Section 12.8, Requisite Banks shall be determined
pursuant to (ii) above.
"REVOLVING CREDIT COMMITMENT" shall have the meaning assigned to it in
Section 3.1.
"REVOLVING CREDIT LOAN" means the loan described in Recital A of this
Agreement and
-14-
<PAGE>
made or to be made pursuant to Section 3.1.
"REVOLVING CREDIT MAXIMUM COMMITMENT" shall have the meaning assigned
to it in Section 3.1.
"REVOLVING CREDIT NOTE" shall have the meaning assigned to it in
Section 3.2.
"RIGHTS" means rights, remedies, powers and privileges.
"SEC" means the U.S. Securities and Exchange Commission.
"SEC FILING" means a report or statement filed with the SEC pursuant to
Sections 13, 14, or 15(d) of the Exchange Act and the regulations thereunder, or
a registration statement filed with the SEC pursuant to the Securities Act of
1933, as amended, and the regulations thereunder.
"SUBSIDIARY" means, as to Borrower, those Subsidiaries named in the
opening paragraph of this Agreement, and as to Borrower or any other Person, any
other Person of which more than fifty percent (50%) of the issued and
outstanding securities having ordinary voting power for the election of a
majority of directors is owned or controlled, directly or indirectly, by such
Person.
"TAXES" means all taxes, assessments, fees, levies, imposts, duties,
deductions, withholdings, or other charges of any nature whatsoever from time to
time or at anytime imposed by any Laws or Tribunal.
"TCB" means Texas Commerce Bank, National Association, a national
banking association, in its individual capacity.
"TERM LOAN" means the loan described in Recital A of this Agreement
and made pursuant to Section 2.1.
"TERM NOTES" shall have the meaning assigned to it in Section 2.2.
"TERMINATION DATE" means (a) With respect to the Term Loan, the
earlier of (i) March 31, 1996, or (ii) the date on which the Term Loan is
terminated or accelerated pursuant to Article XI; (b) with respect to the
Revolving Credit Commitment of each Bank, the earlier of (i) September 30, 1994,
(ii) the date on which the Revolving Credit Commitment of each Bank is
terminated by notice from borrower to Agent pursuant to Section 3.6, or (iii)
the date on which the Revolving Credit Loan is terminated or accelerated
pursuant to Article XI; and (c) with respect to the Acquisition Facility
Commitment of each Bank, the earlier of (i) December 31, 1994 or (ii) the date
on which the Acquisition Facility Loan is terminated or accelerated pursuant to
Article XI.
"TRIBUNAL" means any federal, state, municipal or other governmental
department, judicial body, commission, board, bureau, agency or instrumentality
of the U.S. or of any state, commonwealth, nation, territory, possession,
county, parish or municipality, whether now or
-15-
<PAGE>
hereafter constituted or existing.
"UCC" means the Uniform Commercial Code as enacted in the State of
Texas, as amended.
"U.S." means the United States of America.
SECTION 1.2. ACCOUNTING AND OTHER TERMS. All accounting and financial
terms used in any of the Loan Documents, and the compliance with each covenant
contained herein which relates to financial matters, shall be determined in
accordance with GAAP, except to the extent that a deviation therefrom is
expressly stated therein. If compliance with any covenant contained herein is
affected by a change in GAAP, such covenant shall be modified to take into
account the change in question. All other terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are defined therein.
ARTICLE II
TERM LOAN
SECTION 2.1. TERM LOAN. The Term Loan has been funded to Borrower in
accordance with the Original Credit Agreement (as amended) in the total
aggregate amount of $51,000,000, and no additional Advances are permitted or
required with respect to the Term Loan. As of the date hereof, the outstanding
principal balance of the Term Loan is $15,002,278, and interest on the Term Loan
has been paid through the Interest Payment Date next preceding the date hereof.
SECTION 2.2. TERM NOTES.
(a) The obligation of Borrower to repay the Term Loan shall be evidenced
by notes (the "Term Notes") substantially in the form of EXHIBIT "D" hereto,
one of which shall be payable to the order of each Bank in the principal amount
of such Bank's Pro Rata share of the outstanding balance of the Term Loan as of
the date hereof. The Term Notes shall be dated the Acquisition Facility Closing
Date and shall replace the Term Notes executed by Borrower pursuant to the
Original Credit Agreement. The validity and enforceability of the indebtedness
evidenced by the notes executed by Borrower pursuant to the Original Credit
Agreement shall not be diminished, extinguished or adversely affected by the
Term Notes but shall be carried forward and merged into the Term Notes.
(b) Subject to Section 5.3, the principal amount of the Term Loan shall
be due and payable in equal consecutive quarterly installments of $1,821,429
each on the last Business Day of each June, September, December and March in
each year; provided, however, that a final installment shall be due, unless the
Term Loan has been fully repaid theretofore, on the Termination Date applicable
to the Term Loan, in the amount necessary to repay in full the unpaid principal
amount of the Term Loan.
(c) The outstanding principal of the Term Loan shall bear interest prior
to maturity at a varying rate per annum from day to day equal to the lesser of
(i) the Maximum Rate or (ii) the Applicable Term Rate; provided, however, if at
any time the rate of interest specified in
-16-
<PAGE>
clause (ii) preceding shall exceed the Maximum Rate, thereby causing interest on
the Term Loan to be limited to the Maximum Rate, then any subsequent reduction
in the Applicable Term Rate shall not reduce the rate of interest on the Term
Loan below the Maximum Rate until the aggregate amount of interest accrued on
the Term Loan equals the aggregate amount of interest that would have accrued on
the Term Loan if the interest rate specified in clause (ii) preceding had at all
times been in effect. Each change in the rate of interest charged on the Term
Loan shall become effective, without notice to Borrower, upon the effective date
of each change in the Applicable Term Rate or the Maximum Rate, as the case may
be.
(d) Accrued and unpaid interest on the Term Loan shall be due and
payable on each Interest Payment Date and at maturity. All past due principal
and interest shall bear interest at the Default Rate.
ARTICLE III
THE REVOLVING CREDIT LOAN
SECTION 3.1. REVOLVING CREDIT LOAN. The Revolving Credit Loan has been
funded to Borrower in accordance with the Original Credit Agreement (as
amended). As of the date hereof the outstanding principal balance of the
Revolving Credit Loan is $0, and interest on the Revolving Credit Loan has been
paid through the Interest Payment Date next preceding the date hereof.
Continuing through the Termination Date applicable to the Revolving Credit Loan,
upon the terms and conditions and in reliance upon the representations and
warranties hereinafter set forth, each Bank, severally and not jointly (except
as provided in Section 12.7), agrees to make one or more Advances under the
Revolving Credit Loan to Borrower from time to time in an aggregate principal
amount at any time outstanding not to exceed its Revolving Credit Commitment.
The "Revolving Credit Commitment" of each Bank shall equal its Pro Rata share of
$20,000,000, subject to any reductions under Section 3.6 (herein called the
"Revolving Credit Maximum Commitment"). Subject to the foregoing limitations and
other terms and provisions of this Agreement, Borrower may borrow, repay, prepay
and reborrow hereunder.
SECTION 3.2. REVOLVING CREDIT NOTES.
(a) The Advances made by each Bank under the Revolving Credit Loan shall
be evidenced by a single promissory note (the "Revolving Credit Note")
substantially in the form of EXHIBIT "E" hereto payable to the order of such
Bank in a principal amount equal to its Pro Rata share of the Revolving Credit
Maximum Commitment. The Revolving Credit Notes shall be dated the Acquisition
Facility Closing Date and shall replace the Revolving Credit Notes executed by
Borrower pursuant to the Original Credit Agreement. The validity and
enforceability of the indebtedness evidenced by the notes executed by Borrower
pursuant to the Original Credit Agreement shall not be diminished, extinguished
or adversely affected by the Revolving Credit Notes but shall be carried forward
and merged into the Revolving Credit Notes.
(b) The principal of the Revolving Credit Loan shall be due and payable
on the Termination Date applicable to the Revolving Credit Loan.
(c) The outstanding principal amount of the Revolving Credit Loan shall
bear interest prior to maturity at a varying rate per annum from day to day
equal to the lesser of (i) the
-17-
<PAGE>
Maximum Rate, or (ii) the Applicable Revolving Credit Rate; provided, however,
if at any time the rate of interest specified in clause (ii) preceding shall
exceed the Maximum Rate, thereby causing the interest on the Revolving Credit
Loan to be limited to the Maximum Rate, then any subsequent reduction in the
Applicable Revolving Credit Rate shall not reduce the rate of interest on the
Revolving Credit Loan below the Maximum Rate until the aggregate amount of
interest accrued on the Revolving Credit Loan equals the aggregate amount of
interest that would have accrued on the Revolving Credit Loan if the interest
rate specified in clause (ii) preceding had at all times been in effect. Each
change in the rate of interest charged on the Revolving Credit Loan shall become
effective, without notice to Borrower, upon the effective date of each change in
the Applicable Revolving Credit Rate or the Maximum Rate, as the case may be.
(d) Accrued and unpaid interest on the Revolving Credit Loan shall be
due and payable on each Interest Payment Date and at maturity. All past due
principal and interest shall bear interest at the Default Rate.
SECTION 3.3. BORROWING PROCEDURE.
(a) Each request for Advances under the Revolving Credit Loan shall be,
in the aggregate, in a minimum principal amount of $500,000.
(b) With respect to Advances under the Revolving Credit Loan that are to
bear interest at a rate based on the Eurodollar Rate or the CD Rate, borrower
shall notify Agent and the Funds Administrator of a request for Advances by
delivering an Advance Request Form to Agent and the Funds Administrator prior to
11:00 A.M., Central Time, at least three Business Days prior to the date on
which such Advances are to be made. The Advance Request Form shall specify: (i)
the requested date of the Advances (which shall be a Business Day), and (ii) the
aggregate amount of the Advances, (iii) the Interest Option applicable to such
Advances, it being agreed that only one Interest Option shall apply to the
Advances made on any one day, and (iv) the duration of the Interest Period for
any Eurodollar Loan or CD Rate Loan. Agent and the Funds Administrator shall
accept telephonic requests for such Advances, provided that (i) Borrower
promptly confirms such request by delivering an Advance Request Form to Agent
and the Funds Administrator setting forth the same information that Borrower
provided in its telephonic request, and (ii) such acceptance shall not
constitute a waiver of Agent's and the Funds Administrator's right to require
prior delivery of an Advance Request Form in connection with subsequent Advances
under the Revolving Credit Loan.
(c) With respect to Advances under the Revolving Credit Loan that are to
bear interest at a rate based on the Alternate Base Rate, Borrower shall notify
Agent and the Funds Administrator of the request for such Advances by delivering
an Advance Request Form to Agent and the Funds Administrator prior to 11:00
A.M., Central Time, at least one Business Day Prior to the date on which such
Advances are to be made. The Advance Request Form shall set forth the
information described in Section 3.4(b)(i)(iii) above. Agent and the Funds
Administrator shall accept telephonic requests for such Advances at any time
prior to 12:00 noon, Central Time on the day of the requested Advances, provided
that (i) Borrower promptly confirms such request by delivering an Advance
Request Form to Agent and the Funds Administrator setting forth the same
information that Borrower provided in its telephonic request, and (ii) such
acceptance shall not constitute a waiver of Agent and the Funds
-18-
<PAGE>
Administrator's right to require delivery of an Advance Request Form in
connection with subsequent Advances under the Revolving Credit Loan.
SECTION 3.4. DISBURSEMENT OF ADVANCES. Promptly after the Funds
Administrator receives an Advance Request Form (or telephonic notice in lieu
thereof) requesting Advances under the Revolving Credit Loan, the Funds
Administrator shall notify each Bank of the requested Advances. Each Bank shall
make its Pro Rata portion of the aggregate amount of requested Advances
available to the Funds Administrator, at the Payment Office, in immediately
available funds for the account of Borrower, not later than 2:00 P.M., Central
Time, on the date of the requested Advances. After the Funds Administrator's
receipt of such funds and upon fulfillment of the applicable conditions
precedent in Article VIII, the Funds Administrator shall make the proceeds of
such Advances available to Borrower before 2:00 P.M., Central Time by crediting
the same in immediately available funds to an account of Borrower maintained
with the Funds Administrator. Advances made by each Bank under the Revolving
Credit Loan shall be made and maintained at each Bank's Applicable Lending
Office.
SECTION 3.5. USE OF PROCEEDS. The proceeds of the Revolving Credit Loan
shall be used by Borrower for its general corporate purposes and for
Intercompany Loans; provided, however, that no proceeds of the Revolving Credit
Loan shall be used (a) the make optional prepayments on the Term Loan, (b) to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock, (c) for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
Margin Stock (except for payments on the term Loan otherwise permitted
hereunder), or (d) for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of Regulation U.
SECTION 3.6. COMMITMENT FEE; REDUCTION OR TERMINATION OF REVOLVING CREDIT
COMMITMENT. Borrower agrees to pay to Agent for the account of the Banks a
commitment fee on the average daily unused portion of the Revolving Credit
Maximum Commitment, calculated by deducting from the Revolving Credit Maximum
Commitment all outstanding Advances under the Revolving Credit Loan for the
period from the date of the Original Credit Agreement to and including the
Termination Date applicable to the Revolving Credit Loan. Through September 30,
1993 such fee shall accrue at the rate of three-eighths of one percent (3/8%)
per annum based on a 360 day year and the actual number of days elapsed.
Commencing October 1, 1993, such fee shall accrue at the rate of one-fourth of
one percent (1/4%) per annum based on a 360 day year and the actual number of
elapsed. Such fee shall be payable on the last Business Day of each March, June,
September, and December, with the next payment due December 31, 1993, and ending
on the Termination Date applicable to the Revolving Credit Loan. Borrower shall
have the right at any time to terminate in whole or from time to time to reduce
irrevocably in part the Revolving Credit Maximum Commitment, upon not less than
three Business Days prior notice to Agent specifying the effective date thereof,
whether a termination or reduction is being made, and the amount of any partial
reduction. Each partial reduction shall be at least $500,000, and Borrower shall
simultaneously prepay the amount by which the unpaid principal amount of the
Revolving Credit Loan exceeds the Revolving Credit Maximum Commitment (after
giving effect to such notice) plus accrued interest on the principal amount so
prepaid. Any termination of the Revolving Credit Maximum Commitment that reduces
the amount of the Revolving Credit Maximum Commitment below the principal amount
of the Eurodollar Loans
-19-
<PAGE>
then outstanding may be made only on the last day of the respective Interest
Periods for such Eurodollar Loans, unless Borrower also pays any compensation
due the Banks under this Agreement on account of such termination on a day other
than the last day of an Interest Period.
ARTICLE IV
ACQUISITION FACILITY LOAN
SECTION 4.1. ACQUISITION FACILITY LOAN. From the Acquisition
Facility Closing Date through the Termination Date applicable to the Acquisition
Facility, upon the terms and conditions and in reliance upon the representations
and warranties hereinafter set forth, each Bank, severally and not jointly
(except as provided in Section 12.7), agrees to make one or more Advances under
the Acquisition Facility Loan to Borrower from time to time in an aggregate
principal amount at any time outstanding not to exceed its Acquisition Facility
Commitment. The "Acquisition Facility Commitment" of each Bank shall equal its
Pro Rata share of $55,000,000.00.
SECTION 4.2. ACQUISITION FACILITY NOTES.
(a) The Advances made by each Bank under the Acquisition Facility Loan
shall be evidenced by a single promissory note (the "Acquisition Facility Note")
substantially in the form of EXHIBIT "F" hereto payable to the order of such
Bank in a principal amount equal to its Acquisition Facility Commitment and
dated the Acquisition Facility Closing Date. The principal amount of the
Acquisition Facility Loan advanced as of the Acquisition Facility Advance
Termination Date shall be due and payable in 20 substantially equal consecutive
quarterly installments on the last Business Day of each June, September,
December and March in each year, commencing on March 31, 1995 and ending on
December 31, 1999; provided, however, that the last such installment shall be in
the amount necessary to repay in full the unpaid principal amount of the
Acquisition Facility Loan.
(b) The outstanding principal amount of the Acquisition Facility Loan
shall bear interest prior to maturity at a varying rate per annum from day to
day equal to the lesser of (i) the Maximum Rate, or (ii) the Applicable
Acquisition Facility Rate; provided, however, if at any time the rate of
interest specified in clause (ii) preceding shall exceed the Maximum Rate,
thereby causing the interest on the Acquisition Facility to be limited to the
Maximum Rate, then any subsequent reduction in the Applicable Acquisition
Facility Rate shall not reduce the rate of interest on the Acquisition Facility
Loan below the Maximum Rate until the aggregate amount of interest accrued on
the Acquisition Facility Loan equals the aggregate amount of interest that would
have accrued on the Acquisition Facility if the interest rate specified in
clause (ii) preceding had at all times been in effect. Each change in the rate
of interest charged on the Acquisition Facility shall become effective, without
notice to Borrower, upon the effective date of each change in the Applicable
Acquisition Facility Rate or the Maximum Rate, as the case may be.
(c) Accrued and unpaid interest on the Advances under the Acquisition
Facility Loan shall be due and payable on each Interest Payment Date and at
maturity. All past due principal and interest shall bear interest at the Default
Rate.
-20-
<PAGE>
SECTION 4.3. BORROWING PROCEDURE.
(a) Each request for Advances under the Acquisition Facility Loan shall
be, in the aggregate, in a minimum principal amount of $1,000,000.
(b) With respect to Advances under the Acquisition Facility Loan that
are to bear interest at a rate based on the Eurodollar Rate or the CD Rate,
Borrower shall notify Agent and the Funds Administrator of a request for
Advances by delivering an Advance Request Form to Agent and the Funds
Administrator prior to 11:00 A.M., Central Time, at least three Business Days
prior to the date on which such Advances are to be made. The Advance Request
Form shall specify: (i) the requested date of the Advances (which shall be a
Business Day), and (ii) the aggregate amount of the Advances, (iii) the Interest
Option applicable to such Advances, it being agreed that only one Interest
Option shall apply to the Advances made on any one day, and (iv) the duration of
the Interest Period.
(c) With respect to Advances under the Acquisition Facility Loan that
are to bear interest at a rate based on the Alternate Base Rate, Borrower shall
notify Agent and the Funds Administrator of the request for such Advances by
delivering an Advance Request Form to Agent and the Funds Administrator prior to
11:00 A.M., Central Time, at least one Business Day Prior to the date on which
such Advances are to be made. The Advance Request Form shall set forth the
information described in Section 4.3(b)(i)-(iii) above.
SECTION 4.4. DISBURSEMENT OF ADVANCES. Promptly after the Funds
Administrator receives an Advance Request Form requesting Advances under the
Acquisition Facility Loan, the Funds Administrator shall notify each Bank of the
requested Advances. Each Bank shall make its Pro Rata portion of the aggregate
amount of requested Advances available to the Funds Administrator, at the
Payment Office, in immediately available funds for the account of Borrower, not
later than 2:00 P.M., Central Time, on the date of the requested Advances. After
the Funds Administrator's receipt of such funds and upon fulfillment of the
applicable conditions precedent in Article VIII, the Funds Administrator shall
make the proceeds of such Advances available to Borrower before 2:00 P.M.,
Central Time by crediting the same in immediately available funds to an account
of Borrower maintained with the Funds Administrator. Advances made by each Bank
under the Acquisition Facility Loan shall be made and maintained at each Bank's
Applicable Lending Office.
SECTION 4.5. USE OF PROCEEDS. The proceeds of the Acquisition
Facility Loan shall be used by Borrower to make Acquisitions and to pay expenses
incurred in connection therewith, except that the Acquisition Facility Loan
shall not be used (i) to make optional prepayments on the Term Loan or the
Revolving Credit Loan or (ii) to make any Acquisition of Margin Stock which
would result in a violation of Regulation U.
SECTION 4.6. COMMITMENT FEE. Borrower agrees to pay to Agent for the
account of each of the Banks a commitment fee on the average daily unused
portion of their Acquisition Facility Commitment, calculated by deducting from
the Acquisition Facility Commitment all outstanding Advances under the
Acquisition Facility Loan for the period from and including the Acquisition
Facility Closing Date to and including the Acquisition Facility Termination
Date, at the rate of one-fourth of one percent (1%) per annum based on a 360 day
year and the actual
-21-
<PAGE>
number of days elapsed, payable on the last Business Day of each March, June,
September, and December, commencing December 31, 1993, and ending on the
Termination Date applicable to the Acquisition Facility. Upon receipt of such
fee, Agent shall promptly distribute to each Bank in immediately available funds
its Pro Rata portion of the fee received.
SECTION 4.7. FUNDING FEE. Borrower agrees to pay to Agent for the
account of the Banks a funding fee (the "Funding Fee") equal to one-fourth of
one percent (1/4%) times the amount of any Advance used for an Acquisition for
which the Banks' approval is required under Section 10.5. The Funding Fee as to
any such Advance shall be payable concurrently with and as a condition to the
making of such Advance. Upon receipt of such fee, Agent shall promptly
distribute to each Bank in immediately available funds its Pro Rata portion of
the fee received. If the Funding Fee is determined to constitute interest on the
Advance or the Acquisition Facility Loan, the amount of the Funding Fee shall be
taken into consideration in determining the Maximum Rate applicable to the
Acquisition Facility Loan.
ARTICLE V
PAYMENTS AND CONVERSIONS
SECTION 5.1. METHOD OF PAYMENT. All payments of principal, interest and
other sums to be made by Borrower hereunder and under the Notes shall be made to
Agent, in Dollars, in immediately available funds, not later than 12:00 noon,
Central Time, on the date on which such payment shall become due. Each payment
received after such time on such due date shall be deemed to have been made on
the next succeeding Business Day. Whenever any payment hereunder or under any
Note shall be stated to be due on a day that is not a Business Day, such payment
shall be made on the next succeeding Business Day and interest or any fee, as
the case may be, shall continue to accrue during such extension, provided that
if, in the case of a Eurodollar Loan or CD Rate Loan, the next succeeding
Business Day is in the next calendar month, such payment shall be made on the
immediately preceding Business Day. Borrower shall, at the time of making each
payment hereunder or under any Note, specify to Agent the amounts payable by
Borrower hereunder to which such payment is to be applied (and in the event that
it fails to so specify, or if an Event of Default has occurred and is
continuing, Agent may apply such payment in such order and manner as the
Requisite Banks may direct, but subject to Section 12.3 hereof). Each payment
received by Agent hereunder or under any Note shall be paid promptly to the
Banks in accordance with Section 12.3, in immediately available funds, for the
account of each Bank's Applicable Lending Office for the Loan in respect of
which such payment is made.
SECTION 5.2. OPTIONAL PREPAYMENTS. Borrower may, on at least three
Business Days prior written notice to Agent, prepay the principal of the Term
Loan or the Acquisition Facility Loan in whole or in part, at any time or from
time to time, without premium or penalty (except as provided in Sections 6.5 and
13.5), with accrued interest to the date of prepayment on the principal amount
so prepaid, provided that: (a) a Eurodollar Loan or CD Rate Loan may be prepaid
only on the last day of the Interest Period relating thereto, unless Borrower
also pays any compensation due the Banks under this Agreement on account of its
prepaying on a day other than the last day of an Interest Period; (b) each
partial prepayment on the Term Loan or Acquisition Facility Loan and each
payment on the Revolving Credit Loan shall be in the principal amount of
$100,000 (or the full outstanding amount, if less than $100,000); and (c)
-22-
<PAGE>
prepayments on the Term Loan and the Acquisition Facility Loan shall be applied
to installments in inverse order of their maturities and may not be reborrowed
hereunder.
SECTION 5.3. SELECTION AND CONVERSION OF INTEREST OPTIONS. Subject to
the terms of Section 6.4 and the other terms and provisions of this Agreement,
Borrower shall have the option of having all or any portion of the Term Loan or
Acquisition Facility Loan bear interest at a rate based on the CD Rate, the
Alternate Base Rate or the Eurodollar Rate and shall have the option of having
all or any portion of the Revolving Credit Loan bear interest at a rate based on
the Alternate Base Rate or the Eurodollar Rate (individually herein called an
"Interest Option" and collectively called the "Interest Options"); provided,
however, (a) with respect to each request for Advances under the Acquisition
Facility Loan and the Revolving Credit Loan, Borrower can have only one Interest
Option in effect for the aggregate amount of the Advances requested on the date
of the Advances, and Borrower may convert Base Rate Loans under the Revolving
Credit Loan and Base Rate Loans and CD Rate Loans under the Acquisition Facility
Loan to Eurodollar Loans as provided and subject to the limitations set forth
below at any time after the third day following the date of the Advances which
make up such Base Rate Loans or CD Rate Loan; (b) each Eurodollar Loan shall be
in an amount not less than $500,000; (c) each CD Rate Loan shall be in an amount
not less than $500,000; and (d) no more than four Interest Periods shall be
outstanding at any time under each of the Term Loan, the Acquisition Facility
Loan, or the Revolving Credit Loan. Borrower may, subject to the limitations set
forth above, from time to time convert a Loan to another permitted rate by
giving Agent irrevocable written notice of its election to convert at least
three Business Days prior to the requested conversion date, specifying the date
of conversion, the amount of the Loans subject to the Interest Option, the
applicable Interest Option and, with respect to the conversion of Base Rate
Loans to CD Rate Loans or Eurodollar Loans, the duration of the Interest Period
selected with respect thereto; provided, however, that (x) a Eurodollar Loan or
CD Rate Loan may be converted only on the last day of the Interest Period
pertaining thereto, unless Borrower also pays any compensation due the Banks
under this Agreement, if any, on account of such conversion on a day other than
the last day of an Interest Period, and (y) a Base Rate Loan may not be
converted when a Default has occurred and is continuing. Upon the expiration of
any Interest Period applicable to a Eurodollar Loan or CD Rate Loan, the
Eurodollar Loan or CD Rate Loan shall be continued for an Interest Period having
the same duration as the Interest Period then ended unless Borrower shall have
given Agent a notice of conversion with respect thereto in accordance with this
Section; provided, however, no Eurodollar Loan or CD Rate Loan shall be
continued as such if a Default has occurred and is continuing. Upon the
occurrence of an Event of Default, Agent may convert all Eurodollar Loans or CD
Rate Loans to Base Rate Loans at the end of the respective Interest Periods
thereof.
SECTION 5.4. INTEREST COMPUTATIONS; NOTICE OF BASE RATE CHANGE. All
payments of interest on Eurodollar Loans shall be computed on the per annum
basis of a year of 360 days and for the actual number of days (including the
first day but excluding the last day) elapsed unless such calculations would
result in a rate in excess of the Maximum Rate, in which case interest shall be
calculated on a per annum basis of 365 or 366 days, as the case may be. All
payments of interest on Base Rate Loans shall be computed on the per annum basis
of a year of 365 days or 366 days, as the case may be. All payments of interest
on CD Rate Loans shall be computed on the per annum basis of a year of 360 days.
-23-
<PAGE>
ARTICLE VI
SPECIAL PROVISIONS; ILLEGALITY
SECTION 6.1. ADDITIONAL COSTS.
(a) From time to time, within 10 Business Days after the receipt by
Borrower of a certificate of a Bank containing the information described in this
Section 6.1(a), Borrower shall pay compensation for Additional Costs to Agent
for the account of such Bank. The term "Additional Costs" means material
increases in costs or material reductions in amounts receivable by a Bank which,
in either case, are attributable to (i) such Bank's making or maintaining of any
CD Rate Loans or Eurodollar Loans, (ii) such Bank's obligation to charge
Borrower interest on the Loans at the rate based on the CD Rate or Eurodollar
Rate, or (iii) any reduction in any amount receivable by such Bank hereunder in
respect of any CD Rate Loans, Eurodollar Loans or such obligation, in each case
resulting from a Regulatory Change which:
(1) changes the basis of taxation of any amount payable to such
Bank under this Agreement or any of its Notes in respect of any of such
Eurodollar Loans (other than changes which affect Taxes measured by or
imposed on the overall net income of such Bank or of its Applicable
Lending Office for any of such Eurodollar Loans by the jurisdiction in
which such Bank has its principal office or such Applicable Lending
Office); or
(2) imposes or modifies any reserve, special deposit, minimum
capital ratio or similar requirements (other than any existing CD Reserve
Requirements or Eurodollar Reserve Requirements) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Bank (including any of such CD Rate Loans, Eurodollar
Loans or any deposits referred to in the definition of "CD Rate" or
"Interbank Offered Rate" in Section 1.1 hereof); or
(3) imposes any other condition affecting this Agreement (or any
of such extensions of credit or liabilities or commitments).
Each determination of the materiality of an Additional Cost shall be made by the
affected Bank in its sole judgment. A Bank's determination of the amounts
necessary to pay Additional Costs and of the reasons for the existence of
Additional Costs shall be made in such Bank's exercise of reasonableness and
good faith. Each Bank will notify Borrower through Agent of any event occurring
after the date of this Agreement which will entitle such Bank to compensation
pursuant to this Section 6.1(a) as promptly as practicable after it obtains
knowledge thereof. Such Bank will use good faith reasonable efforts to designate
a different Applicable Lending Office for the Eurodollar Loans of such Bank or
make any other mechanical change in funding Loans hereunder if such designation
or change will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Bank, be disadvantageous to such Bank
(provided that such Bank shall have no obligation to so designate an Applicable
Lending Office located in the U. S.). Each Bank will furnish Borrower through
Agent with a certificate (which shall be conclusive, absent manifest error, as
to the matters stated therein) stating the change that has occurred or other
conditions that have been imposed on such Bank that entitles the Bank to
compensation hereunder, the amount the Bank has determined to be necessary to
compensate it
-24-
<PAGE>
for the Additional Costs and the manner in which such amount has been
calculated. If any Bank requests compensation from Borrower under this Section
6.1(a), Borrower may, by notice to such Bank through Agent, suspend the
obligation of such Bank to charge Borrower interest on the Loans at a rate based
on the CD Rate or Eurodollar Rate, as the case may be, until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Sections 6.4 hereof shall be applicable). Any amounts received by
Agent from Borrower pursuant to this Section 6.1 shall be disbursed by Agent in
immediately available funds to the Banks requesting such amounts.
(b) Without limiting the effect of the foregoing provisions of this
Section 6.1, in the event that, by reason of any Regulatory Change, any 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
such Bank which includes deposits by reference to which the interest rate on CD
Rate Loans or Eurodollar Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of such Bank which includes CD
Rate Loans or Eurodollar Loans or (ii) becomes subject to restrictions on the
amount of such category of liabilities or assets which it may hold, then, if
such Bank so elects by notice to Borrower (with a copy to the Funds
Administrator and to Agent), the obligation of such Bank to charge Borrower
interest on the Loans at a rate based on the CD Rate or the Eurodollar Rate, as
the case may be, shall be suspended until the date such Regulatory Change ceases
to be in effect (in which case the provisions of Section 6.4 hereof shall be
applicable).
(c) If Borrower becomes obligated to pay additional amounts to any Bank
pursuant to this Section 6.1 as a result of any condition described herein,
then, unless such Bank has theretofore taken steps to remove or cure, and has
removed or cured, the conditions creating the cause for such obligation to pay
such additional amounts, Borrower may designate another Bank which is entitled
to be an assignee of a Bank's interest under Section 13.11 and is reasonably
acceptable to the Agent to purchase the Obligation of such Bank and such Bank's
Rights hereunder, without recourse to or warranty by, or expense to, such Bank,
for a purchase price equal to the outstanding principal amount of the Loans
payable to such Bank plus any accrued but unpaid interest on such Loans and any
other amounts accrued but unpaid in respect of that Bank's commitment. Any such
purchase shall be in accordance with and subject to the provisions of Section
13.11.
SECTION 6.2. LIMITATIONS ON TYPES OF INTEREST OPTIONS. Anything herein
to the contrary notwithstanding, if, with respect to any CD Rate Loan or
Eurodollar Loan:
(a) Agent determines (which determination shall be conclusive)
that quotations of interest rates for the relevant deposits referred to in
the definition of "Interbank Offered Rate" in Section 1.1 hereof are not
being provided by the Reference Banks in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest for
Eurodollar Loans for Interest Periods therefor as provided in this
Agreement, or
(b) Agent determines (which determination shall be conclusive)
that quotations of interest rates for the CD Quoted Rate described in
Section 1.1 hereof are not being offered to Agent by dealers in
certificates of deposit as contemplated herein in the
-25-
<PAGE>
relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for CD Rate Loans for Interest Periods
therefor as provided in this Agreement, or
(c) the Requisite Banks determine (which determination shall be
conclusive) and notify Agent that the relevant rates of interest referred
to in the definitions of CD Quoted Rate or Interbank Offered Rate in
Section 1.1 hereof, upon the basis of which the rates of interest for CD
Rate Loans or Eurodollar Loans are to be determined, do not accurately
reflect the cost to the Banks of making or maintaining such CD Rate Loans
or Eurodollar Loans for Interest Periods therefor,
then Agent shall promptly notify Borrower and each Bank thereof, and so long as
such condition remains in effect, the Banks shall be under no obligation to
charge interest on the Loans at a rate based on the CD Rate or the Eurodollar
Rate, as the case may be, or maintain any CD Rate Loans or Eurodollar Loans, as
the case may be.
SECTION 6.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement to the contrary, in the event that it becomes unlawful for any Bank at
its Applicable Lending Office to (a) honor its obligation to charge interest on
the Loans at a rate based on the Eurodollar Rate or (b) make or maintain
Eurodollar Loans hereunder, then such Bank shall promptly notify Borrower
thereof through Agent and such Bank's obligation to charge interest on the Loans
at a rate based on the Eurodollar Rate and maintain Eurodollar Loans hereunder
shall be suspended until such time as such Bank at its Applicable Lending Office
may again lawfully charge interest on the loans at a rate based on the
Eurodollar Rate and maintain Eurodollar Loans (in which case the provisions of
Section 6.4 hereof shall be applicable); provided, however, that each Bank shall
use good faith reasonable efforts to specify a new Applicable Lending Office for
Eurodollar Loans of such Bank with a view to effecting compliance with the
applicable law.
SECTION 6.4. SUBSTITUTE RATES. If the obligation of any Bank to charge
interest on the Loans at a rate based on the CD Rate or the Eurodollar Rate or
make or maintain CD Rate Loans or Eurodollar Loans shall be suspended pursuant
to Sections 6.1, 6.2 or 6.3 hereof, (i) all amounts of the Loans which would
otherwise be made or maintained by such Bank as Eurodollar Loans shall be made
or maintained instead as CD Rate Loans or Base Rate Loans (and, if an event
referred to in Sections 6.1(b) or 6.3 hereof has occurred and such Bank so
requests by notice to Borrower with a copy to Agent and the Funds
Administrator), each Eurodollar Loan of such Bank then outstanding shall be
automatically converted into a CD Rate Loan or Base Rate Loan on the date
specified by such Bank in such notice), and (ii) all amounts of the Loans which
would otherwise be made or maintained by such Bank as CD Rate Loans shall be
made or maintained instead as Base Rate Loans or Eurodollar Loans (and, if an
event referred to in Sections 6.1(b) or 6.3 hereof has occurred and such Bank so
requests by notice to Borrower with a copy to Agent, each CD Rate Loan of such
Bank then outstanding shall be automatically converted into a Base Rate Loan or
Eurodollar Loan on the date specified by such Bank in such notice). The decision
between the alternative substitute interest rates specified in (i) and (ii)
above shall be made by Borrower, except that Agent shall be permitted to select
an alternative if Borrower fails to do so within three business days after
written notice from Agent.
-26-
<PAGE>
SECTION 6.5. COMPENSATION. Within 10 Business Days after the receipt
by Borrower of a certificate of a Bank containing the information described in
this Section 6.5 which shall be delivered to Borrower through Agent, Borrower
shall pay to Agent for the account of such Bank, from time to time, such amount
or amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for any loss, cost, liability, or expense which such Bank
determines in its sole discretion is material and incurred by it as a result of:
(1) any payment, prepayment, or conversion of a CD Rate Loan or a
Eurodollar Loan made by such Bank on a date other than the last day of an
Interest Period for such CD Rate or Eurodollar Loan;
(2) any failure by Borrower to borrow Advances which were to bear
interest at a rate based on the CD Rate or Eurodollar Rate and were to be
made by such Bank on the date for such borrowing specified in the relevant
Advance Request Form; or
(3) any failure by Borrower to make any payment or prepayment on a
CD Rate Loan Eurodollar Loan on the date due;
such compensation to include, without limitation, (i) any loss or reasonable
expense sustained or incurred in liquidating or employing deposits from third
Persons acquired to effect or maintain such Eurodollar Loan or any part thereof
and (ii) an amount equal to the excess, if any of (A) its cost of obtaining the
funds for the CD Rate Loan or Eurodollar Loan being paid, prepaid or converted
or not borrowed (based on the CD Rate or Eurodollar Rate applicable thereto) for
the period from the date of such payment, prepayment or conversion or failure to
borrow to the last day of the Interest Period for such CD Rate Loan or
Eurodollar Loan (or, in the case of a failure to borrow, the Interest Period for
such CD Rate Loan or Eurodollar Loan which would have commenced on the date of
such failure to borrow) over (B) the amount of interest (as reasonably
determined by such Bank) that would be realized by such Bank in re-employing the
funds so paid, prepaid or converted or not borrowed for such period or Interest
Period, as the case may be. A Bank must request compensation under this Section
6.5(1) as promptly as practicable after it obtains knowledge of the event which
entitles it to compensation pursuant to this Section 6.5, but in any event
within 180 days after it obtains such knowledge and (2) pursuant to a
certificate which sets forth the amount such Bank is entitled to receive
pursuant to this Section 6.5 and the basis for determining such amount, which
certificate shall be conclusive as to the matters set forth therein in the
absence of manifest error. Any amounts received by Agent from Borrower pursuant
to this Section 6.5 shall be disbursed by Agent in immediately available funds
to the Banks requesting such amounts.
SECTION 6.6. CAPITAL ADEQUACY. If after the date hereof, any Bank shall
have determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any other Regulatory
Change or compliance by any Bank (or its Applicable Lending Office) with any
request or directive regarding capital adequacy (whether or not having the force
of law), has or would have the effect of reducing the rate of return on such
Bank's capital as a consequence of its obligations hereunder to a level below
that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy), then from time to time, within 10 Business Days after receipt
by Borrower of a certificate of a Bank containing the
-27-
<PAGE>
information described in this Section 6.6 which shall be delivered to Borrower
through Agent and shall be conclusive as to the matters set forth therein absent
manifest error, Borrower shall pay to Agent such additional amount or amounts as
will compensate such Bank for such reduction. In determining such amount, such
Bank may use any reasonable averaging and attribution methods. A certificate of
any Bank claiming compensation under this Section (a) shall identify the
Regulatory Change, the amount that such Bank has reasonably determined will
compensate it for any such Regulatory Change and the way in which such amount
has been calculated, (b) shall be delivered to Borrower through Agent as
promptly as practical after the Bank obtains knowledge of the Regulatory Change
which entitled it to compensation pursuant to this Section, and (c) shall be
conclusive as to the matters set forth therein in the absence of manifest error.
Any amounts received by Agent from Borrower pursuant to this Section 6.6 shall
be disbursed by Agent in immediately available funds to the Banks requesting
such amounts.
ARTICLE VII
COLLATERAL, SET-OFF AND GUARANTIES
SECTION 7.1. RELEASE OF COLLATERAL. On the Acquisition Facility Closing
Date, in reliance on the representations and warranties contained herein, the
Banks shall release all liens, pledges, hypothecations and security interests
granted by Borrower and other Obligated Parties pursuant to the Original Credit
Agreement (as amended), other than the right of set-off described in Section 7.2
and the Guaranties of the Domestic Subsidiaries. Such release shall not affect
the continuing validity or enforceability of the Obligations or the Guaranties,
and Borrower, Guarantors and all other Obligated Parties ratify and confirm all
of the Obligations existing as of the Acquisition Facility Closing Date.
SECTION 7.2. SET-OFF. Upon the occurrence of any Event of Default,
Agent and each Bank are hereby authorized at any time and from time to time to
set-off and apply any and all deposits (time or demand, provisional or final) at
any time held and other indebtedness at any time owing by Agent or any Bank or
any Affiliate of Agent or any Bank to or for the credit or the account of any
Obligated Party against any and all of the obligations, indebtedness and
liability of any Obligated Party under any Loan Document irrespective of whether
Agent or any Bank shall have made any demand under any Loan Document and
although such obligations may be contingent and unmatured. The rights of Agent
and each Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which Agent or any Bank
may have. If after a set-off pursuant to this Section 7.2 Borrower delivers to
Agent evidence satisfactory to the Requisite Banks of the amount of funds that
were acquired pursuant to such set-off and that were being held at such time by
Borrower or one of its Subsidiaries to pay the Obligated Parties' obligations
for employee withholding and unemployment taxes, then Agent and each Bank
exercising a right of set-off agrees to pay the amount of such funds to the
governmental agency to whom such obligations are owed.
SECTION 7.3. GUARANTY OF THE OBLIGATIONS.
(a) The Guarantors shall guarantee payment of the Obligations by
execution and delivery of their respective Guaranties.
-28-
<PAGE>
(b) Each Guarantor shall be jointly and severally liable under its
Guaranty for the full amount of the Obligations, subject to the "Maximum Amount"
of such Guarantor's liability specified in its Guaranty. The relative benefits
received by each of the Guarantors under this Agreement shall be deemed to be in
the same proportion as the "Maximum Amount" of such Guarantor (as defined in its
Guaranty) bears to the arithmetic sum of the "Maximum Amounts" of all of the
Guarantors. None of the Guarantors will exercise any right of contribution
against any other Guarantor until all the Obligations shall have been paid in
full.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1. INITIAL ACQUISITION FACILITY LOAN ADVANCE. In addition to
the requirements set forth in Section 8.2 and 8.3, the obligation of each Bank
to make its Pro Rata share of the initial Advance under the Acquisition Facility
Loan and its Pro Rata share of the next Advance under the Revolving Credit Loan
is subject to the conditions precedent that Agent shall have received on or
prior to the day of such Advance all of the following, each dated (unless
otherwise indicated) the Acquisition Facility Closing Date, in form and
substance satisfactory to Agent and its counsel and in sufficient numbers for
each Bank and, in the case of any actions required to be taken, evidence, in
form and substance satisfactory to Agent and its counsel, that the following
required actions have been taken:
(a) NOTES. The Notes duly executed by Borrower;
(b) GUARANTIES. A Guaranty duly executed by each Guarantor;
(c) CORPORATE CERTIFICATES. Certificates of each Obligated
Party, executed by its Chairman, President or any Vice President and its
Secretary or any Assistant Secretary and in the form attached hereto as
EXHIBIT "G";
(d) GOOD STANDING AND AUTHORITY. Certificates of the appropriate
Tribunals of the jurisdictions set forth opposite the name of each
Obligated Party on Schedule 1 hereto, each dated a Current Date, to the
effect that each such Obligated Party is in good standing with respect to
the payment of franchise and similar Taxes and is duly qualified to
transact business in such jurisdictions (accompanied, if requested by
Agent, by an Officers' Certificate of such Obligated Party that such
Tribunal certificates are true and correct);
(e) OPINION OF COUNSEL. A legal opinion from Johnson & Gibbs,
P.C., counsel for the Obligated Parties, in the form attached hereto as
Exhibit "H"; and
(f) NO LITIGATION; CONSUMMATION OF TRANSACTION No injunction,
preliminary injunction, or temporary restraining order shall exist which
prohibits or may prohibit the transactions allowed herein or any other
related transaction, and no litigation or similar proceeding (including
without limitation any litigation or other proceeding seeking any type of
injunction, any type of restraining order or any similar remedy) shall
exist with respect to the transactions contemplated herein which, if
adversely determined, could in the reasonable judgment of Agent have any
Material Adverse Effect.
-29-
<PAGE>
SECTION 8.2. ANY ACQUISITION FACILITY ADVANCE. The obligation of each
Bank to make any Advance under the Acquisition Facility Loan hereunder shall be
subject to the following conditions precedent:
(a) APPROVAL. Each request for an Advance under the Acquisition
Facility Loan that is to be used for purposes of an Acquisition which is
prohibited by Section 10.5 shall be subject to the Agent's receipt of the
Banks' written approval and other documentation required by Section 10.5.
(b) FORM U-1. Agent shall have received a Federal Reserve Form
U-l provided for in Regulation U executed by an authorized officer of
Borrower, the statements made in which shall be such, in the opinion of
Agent, as to permit the transactions contemplated hereby in accordance
with Regulation U; and
SECTION 8.3. ANY ADVANCE. The obligation of each Bank to make each
Advance under either the Acquisition Facility Loan or Revolving Credit Loan
hereunder shall be subject to the following conditions precedent:
(a) ADVANCE REQUEST FORM. The Funds Administrator and Agent
shall have received an Advance Request Form executed by an authorized
officer of Borrower, all of the statements in which shall be true and
correct on and as of the date of the requested Advances. Each Advance
Request Form shall be delivered at the time and otherwise in accordance
with Section 3.3 or 4.3.
(b) NO DEFAULT. As of the date of the making of such Advance,
no Default exists;
(c) COMPLIANCE WITH AGREEMENT. The Obligated Parties shall have
performed and complied with all agreements and conditions contained herein
that are required to be performed or complied with at or prior to the date
of such Advance;
(d) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IX shall be true in all material respects
on the date of making of such Advance with the same force and effect as
though made on and as of that date, and the request by Borrower for such
Advance shall constitute a representation by Borrower that such
representations and warranties are true and correct as of the date of such
request; provided, however, that for purposes of this subsection (d), (i)
on or after the date on which Borrower delivers its audited Financial
Statements to Agent and the Funds Administrator pursuant to Section
10.l(a), the reference in the first sentence of Section 9.4(a) to the
Current Financials shall be a reference to the audited Financial
Statements most recently delivered to the Agent and Funds Administrator by
Borrower pursuant to Section 10.l(a) prior to the date of such Advance,
and (ii) in each representation and warranty in Article IX that makes
reference to a Schedule, the representation under this subsection (d) that
such representation and warranty in Article IX shall be true in all
material respects on the date of the Advance shall take into account any
subsequent amendments or changes to the Schedule (i) to which Agent or the
Funds Administrator has consented, which consent shall not be withheld
unreasonably, (ii) which reflect
-30-
<PAGE>
changes allowed by the terms of this Agreement, or (iii) which reflect
changes which could not be expected to have a Material Adverse Effect;
(e) PROCEEDINGS SATISFACTORY. All proceedings taken in
connection with the transactions contemplated by the Loan Documents shall
be reasonably satisfactory to Agent and its counsel, and all Loan
Documents shall be in form and substance satisfactory to Agent and its
counsel;
(f) CHANGE. No event shall have occurred since the date hereof
with respect to any of the Obligated Parties or any of their Subsidiaries
which could be expected to have a Material Adverse Effect; and
(g) ADDITIONAL INFORMATION. Agent shall have received such
additional documents, certificates from Obligated Parties, instruments,
and other information as Agent or its legal counsel, Cohan, Simpson,
Cowlishaw, Aranza & Wulff, L.L.P., may request.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
To induce Agent and the Banks to enter into this Agreement and to make the
Loans, the Obligated Parties hereby jointly and severally represent and warrant
to Agent and the Banks as follows:
SECTION 9.1. ORGANIZATION, STANDING, QUALIFICATION. Each Obligated
Party (a) is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, (b) has all requisite
corporate power to conduct its business and to execute and deliver, and perform
its obligations under, the Loan Documents, and (c) is duly qualified to transact
business as a foreign corporation in each jurisdiction in which the nature of
the activities conducted by it or the nature of the assets owned by it would
make such qualification necessary, except where the failure to so qualify could
not be expected to have a Material Adverse Effect.
SECTION 9.2. AUTHORIZATION, ENFORCEABILITY, ETC.
(a) The execution, delivery and performance by each of the Obligated
Parties of the Loan Documents have been duly authorized by all necessary
corporate action and do not and will not (i) violate any provision of any
agreement, law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect to which any Obligated Party is a
party or is subject; (ii) result in, or require the creation or imposition of,
any Lien (other than a Permitted Lien) upon or with respect to any asset now
owned by any Obligated Party; or (iii) result in a breach of or constitute
default by any Obligated Party, and no Obligated Party is in default, under any
indenture, loan or credit agreement or any other agreement or instrument to
which any Obligated Party is a party or by which it or any of its assets may be
bound or affected, which breach or default could be expected to have a Material
Adverse Effect. No Person other than an Obligated Party is in default to the
extent that an Obligated Party could be materially and adversely affected under
any indenture, loan or credit agreement or any other
-31-
<PAGE>
material agreement or instrument to which any Obligated Party is a party or by
which it or any of its assets may be bound or affected.
(b) No approval, authorization, order, license, permit, franchise or
consent of or registration, declaration, qualification or filing with any
Tribunal is required in connection with the execution, delivery and performance
by each Obligated Party of the Loan Documents, or, if any such requirement
exists, it has been satisfied, and proof of such satisfaction has been furnished
to Agent.
(c) The Loan Documents, when duly executed and delivered by each
Obligated Party required to execute the same, will constitute legal, valid and
binding obligations of each Obligated Party, enforceable against each Obligated
Party in accordance with their respective terms except as the enforceability
thereof may be limited by Debtor Relief Laws.
SECTION 9.3. OWNERSHIP OF SUBSIDIARIES AND NAMES; JOINT VENTURES. The
extent of the Obligated Parties' ownership of the capital stock of or equity
interest in, and jurisdiction of, organization of, each of their respective
Subsidiaries is as set forth on Schedule 2 and, except as set forth thereon,
none of the Obligated Parties has any other Subsidiaries. All of the issued and
outstanding shares of capital stock of Borrower and each of its Subsidiaries are
duly authorized, validly issued, fully paid and non-assessable. There are no
outstanding contracts, options, warrants, instruments, documents or agreements
binding upon any Subsidiary described on Schedule 2 granting to any Person or
group of Persons any right to purchase or acquire shares of the capital stock of
any such Subsidiary except as permitted by Article X.
SECTION 9.4. FINANCIAL STATEMENTS AND BUSINESS CONDITION.
(a) The Current Financials fairly present the consolidated financial
conditions and the results of operations of Borrower and its Subsidiaries as of,
and for the portion of the fiscal year ending on, the dates thereof, all in
accordance with GAAP. There were no material liabilities, direct or indirect,
fixed or contingent, of the Obligated Parties as of the dates of the Current
Financials which are not reflected therein or in the notes thereto, which were
required to be shown by GAAP. Except for transactions directly related to, or
specifically contemplated by, the Loan Documents and transactions heretofore
disclosed in writing to Agent, there have been no changes in the financial
condition of Borrower and its Subsidiaries from that shown in the Current
Financials between such dates and the date hereof which could be expected to
have a Material Adverse Effect.
(b) On the Acquisition Facility Closing Date, and after giving effect to
the transactions contemplated by this Agreement, the making of the Loans by the
Banks and the execution and delivery of the Guaranty Agreements by the
Guarantors (i) none of the Obligated Parties or, except as disclosed in writing
to Agent on the Acquisition Facility Closing Date, any of their Subsidiaries
will be insolvent and the aggregate fair market value of the assets of the
Obligated Parties (including the fair market value of their equity interest in
the Subsidiaries) will exceed Borrower's liabilities (including without
limitation contingent liabilities) by at least $10,000,000 and (ii) each of the
Obligated Parties will be able to pay its Debts as they mature. None of the
Obligated Parties intends to incur, or believes that it will incur, Debt that
will be beyond its ability to pay as such Debt matures. None of the Obligated
Parties is engaged in any
-32-
<PAGE>
business or transaction, or is about to engage in any business or transaction
for which such Obligated Party, after consummation of the above described
transactions, has (a) an unreasonably small capital or (b) remaining assets that
are unreasonably small in relation to the business transaction.
SECTION 9.5. TAXES. Each Obligated Party has filed all Tax returns
required to have been filed and has paid all Taxes shown to be due and Payable
on such returns, including interest and penalties, and all other Taxes which are
payable by it, to the extent the same have become due and payable, unless (a)
the amount, applicability or validity thereof is currently being contested by an
Obligated Party in good faith by appropriate action diligently conducted, and
such Obligated Party has set aside on its books reserves (segregated to the
extent required by GAAP) deemed by it to be adequate with respect thereto or (b)
the failure to have made such filings or payments could not be expected to have
a Material Adverse Effect. No income Tax liability of any Obligated Party has
been asserted by the Internal Revenue Service or other taxing authority for
Taxes in excess of those already paid, or, if such liability has been asserted,
(i) the amount, applicability or validity thereof is currently being contested
by an Obligated Party in good faith by appropriate action diligently conducted,
and such Obligated Party has set aside on its books reserves (segregated to the
extent required by GAAP) deemed by it to be adequate with respect thereto or
(ii) all such asserted liabilities could not be expected to have a Material
Adverse Effect.
SECTION 9.6. TITLE TO PROPERTIES; LIENS. Each Obligated Party has good
and marketable title to all assets purported to be owned by it (except for minor
defects in title and minor encumbrances not in any case materially detracting
from the value of the assets affected thereby), and all such assets are free and
clear of all Liens other than Liens permitted by Section 10.23.
SECTION 9.7. LEASES. All material leases under which any Obligated Party
is lessee or tenant are in full force and effect, and there does not exist any
default or potential default thereunder except to the extent that any such lease
or default or potential default thereunder could not be expected to have a
Material Adverse Effect.
SECTION 9.8. BUSINESS; COMPLIANCE. Each Obligated Party has performed
and complied with all material obligations required to be performed by it and is
not in default under, any license, permit, order, authorization, grant, order or
regulation except to the extend that such nonperformance, noncompliance or
default could not be expected to have a Material Adverse Effect.
SECTION 9.9. FRANCHISES, PATENTS, TRADEMARKS AND OTHER RIGHTS. The
Obligated Parties have all franchises, permits, licenses, patents, trademarks,
service marks, trade names, copyrights and other authority (collectively, the
"Authorizations") as are necessary to enable them to carry on their respective
businesses as now being conducted; there has not been a default under any of the
Authorizations that could be expected to have a Material Adverse Effect; and
none of the Authorizations conflict with the rights of other Persons, which
conflict could be expected to have a Material Adverse Effect.
SECTION 9.10. LITIGATION, PROCEEDINGS, ETC. As of the date hereof,
except as set forth
-33-
<PAGE>
on Schedule 3 hereto, (a) there is no Litigation pending, or to the knowledge of
the Obligated Parties, threatened against or affecting, the transactions
contemplated hereby, any Obligated Party or any Obligated Party's assets at law
or in equity, or before or by any Tribunal, which Litigation could be expected
to have a Material Adverse Effect, (b) no accidents, acts or actions have
occurred which involve any claim not fully covered by insurance or provided for
by adequate reserves established by and reflected in the Current Financials
which could be expected to have a Material Adverse Effect, and (c) no Obligated
Party is in default with respect to any order, writ, injunction or decree of any
Tribunal which could be expected to have a Material Adverse Effect.
SECTION 9.11. COMPLIANCE WITH LAW. The business and operations of each
Obligated Party have been and are being conducted in accordance with all Laws
and orders of any Tribunal or arbitrator, except to the extent that any
noncompliance could not be expected (either individually or collectively) to
result in a Material Adverse Effect.
SECTION 9.12. EMPLOYEE BENEFIT PLANS. Based upon ERISA and the
regulations and published interpretations thereunder, each Obligated Party is in
compliance with the applicable provisions of ERISA, except where such
noncompliance could not be expected to have a Material Adverse Effect. No
Reportable Event has occurred with respect to any Plan, except for Reportable
Events which could not be expected to have a Material Adverse Effect.
SECTION 9.13. USE OF PROCEEDS. Proceeds of the Loans have been used as
set forth in the Original Credit Agreement and the Amendments and shall be used
as set forth in Articles III and IV.
SECTION 9.14. RELATIONSHIP TO THE BANKS. No Person having "control" (as
such term is defined in the Financial Institutions Regulatory and Interest Rate
Control Act of 1978 ("FIRA"), or in regulations promulgated pursuant thereto) of
any Obligated Party is an "executive officer", "director" or "person who
directly or indirectly or in concert with one or more persons, owns, controls,
or has the power to vote more than ten percent (10%) of any class of voting
securities" (as such terms are defined in FIRA or in any regulations promulgated
pursuant thereto) of any of the Banks.
SECTION 9.15. INVESTMENT COMPANY ACT. No Obligated Party or Affiliate of
any Obligated Party is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 9.16. PUBLIC UTILITY HOLDING COMPANY ACT. No Obligated Party or
Affiliate of any Obligated Party is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 9.17. GOVERNMENT REGULATION. Neither any Obligated Party nor
any Affiliate of any Obligated Party is subject to regulation under the Federal
Power Act, the Interstate Commerce Act (as any of the preceding acts have been
amended) or any other Law (other than Regulation X) which regulates the
incurring by any Obligated Party of Borrowings.
-34-
<PAGE>
SECTION 9.18. REGULATION U. None of the Obligated Parties is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying Margin Stock. None of the
Obligated Parties nor any Person acting on behalf of the Obligated Parties has
taken or will take any action which might cause any of the Loans to violate
Regulation U or any other regulation of the Board or to violate the Exchange Act
or any rule or regulation thereunder, in each case as now in effect or as the
same may hereafter be in effect.
SECTION 9.19. ENVIRONMENTAL LAWS. The Obligated Parties, and the
Properties that they own, lease or occupy are in compliance with all Laws
relating to pollution control and environmental contamination, including, but
not limited to, all Laws governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of hazardous
wastes, except where noncompliance could not be expected to have a Material
Adverse Effect, and none of the Obligated Parties has been alleged to be in
violation of, nor has been subject to any administrative or judicial proceedings
pursuant to such Laws that could be expected to have a Material Adverse Effect.
SECTION 9.20. LABOR DISPUTES; COMPLIANCE. Except as set forth on
Schedule 4 hereto, (a) no strike, slowdown, picketing, work stoppage or other
labor dispute against or affecting any Obligated Party, or premises of any of
them exists or is pending or, to its knowledge, threatened, (b) no application
for certification of a collective bargaining agent is pending, (c) there is no
lockout of any employees by any Obligated Party, nor is any such action
contemplated by any of them, (d) each Obligated Party has complied in all
material respects with all Laws relating to employment, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes, and
occupational safety and health except where noncompliance could not be expected,
individually or in the aggregate, to result in a Material Adverse Effect and (e)
no Obligated Party is liable for the payment of Taxes, fines, penalties or other
amounts, however designated, for failure to comply with any of the foregoing
employment Laws which individually or in the aggregate could be expected to have
a Material Adverse Effect.
SECTION 9.21. BENEFIT TO OBLIGATED PARTIES. The operations of the
Obligated Parties are interrelated and interdependent and, therefore, loans or
extensions of credit to any one Obligated Party will produce direct financial
benefits to the other Obligated Parties. The value of the consideration received
and to be received by Borrower and each Guarantor as a result of such Obligated
Parties entering into this Agreement and the other Loan Documents to which they
are a party is reasonably worth at least as much as its liability and
obligations of such Obligated Party hereunder and under the other Loan Documents
to which it is a party and such liability and obligations have benefited and may
reasonably be expected to benefit each Obligated Party directly.
SECTION 9.22. ORIGINAL CREDIT AGREEMENT. As of the Acquisition Facility
Closing Date, no Default exists under the Original Credit Agreement or the
Amendments or any of the documents relating thereto.
-35-
<PAGE>
ARTICLE X
COVENANTS
The Obligated Parties, jointly and severally, covenant and agree that, as
long as the Obligations or any part thereof are outstanding or any Bank has any
commitment hereunder, each of them will perform and observe all, and not permit
or suffer any nonperformance or failure of any, of the following covenants,
unless Requisite Banks shall otherwise consent in writing (which consent may be
withheld or refused for any reason):
SECTION 10.1. FINANCIAL STATEMENTS. Borrower will furnish to the Agent
and the Funds Administrator:
(a) As soon as available, and in any event within 120 days after
the end of each fiscal year of Borrower, Financial Statements of Borrower
and its Subsidiaries for such fiscal year showing on a consolidated basis
the financial position, results of operations and cash flows as of the end
of such fiscal year and for the 12-month period then ended, in each case
setting forth the comparable information for the preceding fiscal year,
all in reasonable detail and accompanied by the report of Ernst & Young,
Arthur Andersen & Co. or other independent certified public accountants of
recognized standing chosen by Borrower and consented to by Agent (provided
Agent's consent shall not unreasonably be withheld), based on an audit
using generally accepted auditing standards, that the Financial Statements
present fairly, in all material respects, the consolidated financial
position, results of operations and cash flows of Borrower and its
Subsidiaries for the respective periods in conformity with GAAP. The
report required hereby shall not be qualified on the basis that Borrower
is not a going concern or otherwise qualified or limited because of
restricted or limited examination by the accountants of any material
portion of the records of Borrower or any of its Subsidiaries.
(b) As soon as available, and in any event within 60 days after
the last day of each of the first three fiscal quarters of each fiscal
year of Borrower, Financial Statements showing on a consolidated basis the
financial position, results of operations and cash flows of Borrower and
its Subsidiaries as of, and for the period from the beginning of the
current fiscal year to, such last day, in each case setting forth
comparable information for the corresponding period of the preceding
fiscal year and all in reasonable detail.
(c) As soon as available, and in any event within 60 days after
the last day of each of the first three fiscal quarters of each fiscal
year of Borrower and within 120 days after the last day of each fiscal
year of Borrower, balance sheets and income statements showing on a
consolidating basis the financial position and results of operations of
Borrower and its Subsidiaries as of, and for the period from the beginning
of the current fiscal year to, such last day, substantially in the form
attached hereto as Exhibit "I".
SECTION 10.2. CERTIFICATES; SEC FILINGS; OTHER INFORMATION. Borrower
will observe all of the following:
-36-
<PAGE>
(a) Concurrently with the delivery of the Financial Statements
referred to in Subsections 10.1(a), 10.1(b), and 10.1(c), Borrower will
furnish to Agent a certificate of an authorized officer of Borrower in the
form attached hereto as Exhibit "J" (i) stating that no Default has
occurred and is continuing or, if such officer has knowledge of a Default,
the nature thereof and specifying the steps taken or proposed to remedy
such Default, (ii) showing in reasonable detail the calculations showing
compliance with Sections 10.15, 10.16, 10.17, 10.18, 10.19 and 10.22 using
GAAP consistently applied with the Financial Statements as of March 28,
1993 and (iii) with respect to the certificates delivered in connection
with the Financial Statements referred to in Subsection 10.1(b) and
10.1(c), certifying that the Financial Statements attached have been
prepared in accordance with GAAP consistently applied (except in those
circumstances disclosed therein where GAAP has not been consistently
applied in the current period in relation to the preceding period) and
fairly present, in all material respects (subject to year-end audit
adjustments), the financial condition and results of operations of
Borrower and its Subsidiaries, on a consolidated or consolidating basis,
as the case may be, at the date and for the periods indicated therein.
(b) Concurrently with the delivery of the Financial Statements
referred to in Subsection 10.1(a), Borrower will also furnish to Agent a
certificate of the independent accountants referred to therein to the
effect that no Default has occurred with respect to the covenants
contained in Sections 10.16, 10.17, 10.18 and 10.19 or, if such
accountants have knowledge of a Default with respect to any such Section,
specifying the nature thereof.
(c) As soon as available, Borrower will furnish to Agent copies
(i) of Borrower's SEC Filings, (ii) of Borrower's annual, quarterly and
other reports to shareholders, NASDAQ or any securities exchange on which
any of its securities are traded, (iii) of orders issued by any Tribunal
in any Litigation to which any Obligated Party or any of their respective
Subsidiaries is a party, and (iv) of press releases or other statements
made available generally by Borrower or any of its Subsidiaries to the
public generally concerning material developments in the business or
affairs of Borrower or any of its Subsidiaries.
(d) Borrower will furnish promptly to Agent, such additional
information concerning any of the Obligated Parties or any of their
respective Subsidiaries as Agent may reasonably request.
SECTION 10.3. TRANSACTIONS WITH AFFILIATES. No Obligated Party will
engage or permit any Subsidiary to engage, in 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 business and upon fair and reasonable terms. Any
management compensation arrangement approved by the Borrower's board of
directors shall be deemed to be on fair and reasonable terms.
-37-
<PAGE>
SECTION 10.4. PRESERVATION OF EXISTENCE, PROPERTIES AND BUSINESS.
(a) Except as otherwise contemplated herein, each Obligated Party will,
and will cause each of its Subsidiaries to, preserve and maintain its corporate
existence.
(b) Except as otherwise permitted herein or except where the failure to
do so could not be expected to have a Material Adverse Effect, each Obligated
Party will, and will cause each of its Subsidiaries to, (i) preserve and
maintain all of its leases, franchises, qualifications and Rights that are
necessary or desirable in the ordinary conduct of its business, (ii) operate and
maintain in good condition and repair, ordinary wear and tear excepted, all of
its Properties which are necessary or material in accordance with sound business
practices in the proper conduct of its business, and (iii) conduct its business
as presently conducted in accordance with good business practices.
(c) None of the Obligated Parties will dissolve or liquidate except
following a Disposition to another Obligated Party which is not a Foreign
Subsidiary.
SECTION 10.5. BUSINESS COMBINATIONS.
(a) Borrower will not effect any Combination with any other Person
(including any other Obligated Party) unless (i) Borrower is the continuing or
surviving corporation of the Combination; (ii) no Default shall have occurred
and be continuing immediately prior to, and after giving effect to, the
Combination; (iii) the corporate officers of Borrower shall not substantially
change as a result of the Combination; (iv) the other party to the Combination
shall be engaged in substantially the same business engaged in by Borrower
immediately prior to the Combination; (v) there shall have been executed,
delivered and filed such instruments, agreements, documents and papers as may be
reasonably requested by Agent or any Bank to preserve and protect their Rights
under the Loan Documents; and (vi) Borrower has delivered to Agent an Officer's
Certificate, in form and substance reasonably satisfactory to Agent, to the
effect that the conditions stated in clauses (i) through (v) preceding and in
Subsection (d) below have been satisfied.
(b) No Subsidiary will effect any Combination with any other Person
(including any other Obligated Party) unless (i) no Default shall have occurred
and be continuing immediately prior to, or after giving effect to, the
Combination; (ii) after the Combination Borrower will remain the direct or
indirect owner of all of the outstanding capital stock and other equity
securities of the continuing or surviving corporation; (iii) the other party to
the Combination shall be engaged in substantially the same business engaged in
by Subsidiary immediately prior to the Combination; (iv) there shall have been
executed, delivered and filed such instruments, agreements, documents and papers
as may be reasonably requested by Agent or any Bank to (x) make the continuing
or surviving corporation a party to this Agreement and other appropriate Loan
Documents, and (y) preserve and protect their Rights under the Loan Documents;
and (v) Borrower has delivered to Agent an Officer's Certificate, in form and
substance reasonably satisfactory to Agent to the effect that the conditions
stated in clauses (i) through (iv) preceding and in Subsection (d) below have
been satisfied.
-38-
<PAGE>
(c) Except as otherwise permitted herein, no Obligated Party may effect
any Disposition if the effect of such Disposition, individually and in the
aggregate for all Obligated Parties would exceed four percent (4%) of
Consolidated Tangible Assets as reflected in the most recent Financial
Statement.
(d) The Obligated Parties shall not effect any Acquisition (including
without limitation an Acquisition in the form of a Combination permitted by
Subsections (a) or (b)) unless the aggregate amount of consideration paid,
issued, delivered or committed (whether currently, in installments or
contingently) by the Obligated Parties to other parties in respect of the
transaction could not exceed (i) as to any individual Acquisition, $27,500,000,
or (ii) as to all Acquisitions committed to or consummated before December 31,
1994, $35,000,000; PROVIDED, HOWEVER, that the foregoing limitations shall not
apply to any Acquisition for which the sole consideration is the common stock of
Borrower.
(e) If an Obligated Party desires to effect an Acquisition that would
not be permitted by Subsection 10.5(d) and to seek a waiver of Subsection
10.5(d) as to the Acquisition in question, the Obligated Party shall request
Agent to ask the Banks for a waiver and shall provide Agent all material
information in such Obligated Party's possession relating to such Acquisition
and any additional information or documents requested by Agent or any Bank. The
Banks shall not be obligated to waive Subsection 10.5(d) as to any Acquisition;
however, in declining to provide a waiver, the Banks shall take into
consideration only the following, and may condition their waiver on satisfactory
resolution of any concerns relating to the following:
(1) The financial condition, management, business or other
interests of the Obligated Parties and their Subsidiaries at the time the
request for waiver is made, and the potential effects of such Acquisition
on the financial condition, management, business or other interests of the
Obligated Parties and their Subsidiaries;
(2) The financial condition, management, business or other
interests of the party that is the subject of the Acquisition;
(3) The expected effects of such Acquisition on the Obligated
Parties' future performance under this Agreement;
(4) The need, in a Bank's opinion, for modification of any
covenants under this Agreement or incorporation of additional covenants
into this Agreement because of the change in circumstances brought about
by such Acquisition;
(5) The need, in a Bank's opinion, to secure or further guaranty
the Loans because of the change in circumstances brought about by such
Acquisition; and
(6) Any other matters reasonably considered material and
significant to any Bank, including, without limitation, conflicts of
interest between a Bank and the Obligated Party relating to the subject of
the Acquisition.
SECTION 10.6. PAYMENT OF TAXES AND CLAIMS. Each Obligated Party will pay
or discharge, and will cause each of its Subsidiaries (but only to the extent
that the Subsidiary's
-39-
<PAGE>
assets shall be sufficient for the purpose) to pay or discharge, at or before
maturity or before they become delinquent (a) all Taxes, levies, assessments,
vault, water and sewer rents, rates, charges, levies, permits, inspection and
license fees and other governmental and quasi-governmental charges and any
penalties or interest for nonpayment thereof, heretofore, or hereafter imposed
or which may become a lien upon any property owned by Borrower, any Obligated
Party or any of their respective Subsidiaries or arising with respect to the
occupancy, use, possession or leasing thereof (collectively the "Impositions")
and (b) all lawful Debts, including without limitation all claims for labor,
material or supplies except to the extent that failure to pay or discharge the
items set forth in (a) and (b) could not be expected to have a Material Adverse
Effect; provided, however, that neither Borrower nor any other Obligated Party
nor any of their respective Subsidiaries shall be required to pay or discharge
any claim for labor, material, or supplies or any Imposition which is being
contested in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves in conformity with GAAP have been established.
SECTION 10.7. INSPECTION RIGHTS. At any reasonable time and from time
to time, upon not less than three Business Days written notice from Agent or any
Bank to Borrower, each Obligated Party will permit and will cause each of its
Subsidiaries to permit, representatives of Agent or such Bank to (a) examine and
make copies of the books and records of, and (b) to discuss the business,
operations, and financial condition of, such Obligated Party and its
Subsidiaries with their respective officers and with their independent certified
public accountants, in each case at reasonable times and at the expense of Agent
or such Bank.
SECTION 10.8. KEEPING BOOKS AND RECORDS. Each Obligated Party will
maintain, and will cause each of its Subsidiaries to maintain, books of record
and account in conformity with GAAP (except for books of record and account of
any Foreign Subsidiary, which shall be kept in conformity with generally
accepted accounting principles in its jurisdiction of organization).
SECTION 10.9. COMPLIANCE WITH LAWS. Each Obligated Party will comply,
and will cause each of its Subsidiaries to comply, with all Laws and orders of
any Tribunal or arbitrator except to the extent that any noncompliance could not
be expected (either individually or collectively) to result in a Material
Adverse Effect.
SECTION 10.10. COMPLIANCE WITH AGREEMENTS. Each Obligated Party will
comply, and will cause each of its Subsidiaries to comply, in all respects with
all indentures, mortgages, deeds of trust and other agreements binding on it or
affecting its properties or business, except to the extent that any
noncompliance could not be expected (either individually or collectively) to
result in a Material Adverse Effect.
SECTION 10.11. NOTICES. Each Obligated Party will promptly notify,
and will cause each of its Subsidiaries to promptly notify, Agent of:
(a) the commencement of any Litigation against any of the
Obligated Parties or any of their respective Subsidiaries that reasonably
could be expected to have a Material Adverse Effect;
-40-
<PAGE>
(b) the occurrence of a default or event of default under any
instrument or agreement evidencing any material Borrowings of any of the
Obligated Parties or any of their respective Subsidiaries;
(c) any other matter that reasonably could be expected to have a
Material Adverse Effect;
(d) The occurrence or anticipated occurrence of any Reportable
Event arising in connection with any Plan or any other potential material
liability with respect to any Plan of any Obligated Party; and
(e) The occurrence of any Default.
Any notification required by this Section 10.11 shall be accompanied by an
Officers' Certificate of the applicable Person setting forth the details of the
specified events and the action which the applicable Person proposes to take
with respect thereto.
SECTION 10.12. COMPLIANCE WITH ERISA AND THE INTERNAL REVENUE CODE.
Each Obligated Party will comply with all material requirements of ERISA and the
Internal Revenue Code, if applicable, so as not to give rise to any liability
thereunder for noncompliance, except to the extent that any noncompliance could
not be expected (either individually or collectively) to result in a Material
Adverse Effect.
SECTION 10.13. COMPLIANCE WITH REGULATIONS G, T, U AND X. Neither any
Obligated Party nor any Person acting on its behalf will take any action which
might cause this Agreement, or any of the other Loan Documents to violate, and
the Obligated Parties will take all actions necessary to cause compliance with
Regulations G, T, U and X and the Exchange Act, in each case as now in effect or
as the same may hereafter be in effect.
SECTION 10.14. FURTHER ASSURANCES. Each Obligated Party will execute
and deliver, and will cause each of its Subsidiaries to execute and deliver,
such further instruments, agreements and documents and take such further action
as may be reasonably requested by Agent to carry out the provisions and purposes
of this Agreement and the other Loan Documents.
SECTION 10.15. LIMITATION ON DEBT. Neither Borrower nor any Subsidiary
of Borrower shall incur, create, assume, have outstanding, guarantee or
otherwise be or become directly or indirectly liable with respect to any Debt
except:
(a) Borrowings represented by the Loans;
(b) Intercompany Loans, provided that the aggregate amount of
Intercompany Loans to Foreign Subsidiaries shall not exceed $20,000,000;
(c) Debt consisting of current liabilities incurred in the
ordinary course of business, excluding Borrowings and accounts payable
which have remained unpaid for a period of 60 days (120 days in the case
of such liabilities of Foreign Subsidiaries to Persons outside of the
U.S.) after the same became due unless the same shall currently
-41-
<PAGE>
be disputed or contested by Borrower or such Subsidiary in good faith and
adequate reserves in accordance with GAAP have been established;
(d) indebtedness for Impositions to the extent not yet delinquent;
and
(e) additional Borrowings in an aggregate principal amount at any
time not to exceed $10,000,000; PROVIDED, HOWEVER, if a Person becomes
a Subsidiary in an Acquisition or Combination permitted by Section 10.5
and has Borrowings at the time of such Acquisition or Combination, the sum
of such Borrowings and the other Borrowings of Borrower and its other
Subsidiaries may exceed $10,000,000 if (i) the sum of such Borrowings and
the other Borrowings of Borrower and its other Subsidiaries (other than
the Loans) does not exceed $20,000,000 and (ii) the sum of such Borrowings
and the other Borrowings of Borrower and its other Subsidiaries (other
than the Loans) is reduced to $10,000,000 or less within ninety (90) days
after the Acquisition or Combination in question.
SECTION 10.16. MINIMUM NET WORTH. Borrower will not permit the
consolidated stockholder's equity of the Borrower and its Subsidiaries to be
less than the amounts set forth in the table below as of the last day of each
fiscal month during the periods indicated:
<TABLE>
<CAPTION>
STOCKHOLDER'S EQUITY FISCAL YEAR ENDED MARCH 31
-------------------- --------------------------
<S> <C>
$105,000,000 1994
$115,000,000 1995
$125,000,000 1996
$135,000,000 1997
$145,000,000 1998
$155,000,000 1999
</TABLE>
SECTION 10.17. CONSOLIDATED CURRENT ASSETS TO CONSOLIDATED CURRENT
LIABILITIES. Borrower and its Subsidiaries will maintain as of the last day of
each fiscal month a ratio of consolidated current assets to consolidated current
liabilities of not less than 1.50 to 1.0. For purposes of this ratio, all
amounts owed pursuant to the Revolving Credit Loan shall be considered
noncurrent liabilities.
SECTION 10.18. MINIMUM INTEREST COVERAGE RATIO/MINIMUM CASH FLOW
COVERAGE RATIO. Borrower and its Subsidiaries will maintain on a consolidated
basis:
(a) A ratio of (i) Net Income without deduction for interest
expense, depreciation or income taxes (other than income taxes actually
paid), to (ii) interest expense plus required principal payments,
determined as of the end of each March, June, September and December, in
each case for the preceding 12-month period, of not less than 1.6 to 1.0
until June 30, 1995, and of not less than 1.75 to 1.0 thereafter; and
(b) Until December 31, 1994, a ratio of (i) Net Income, without
deduction for interest expense or income taxes to (ii) interest expense,
determined as of the end of each
-42-
<PAGE>
March, June, September and December, in each case for the preceding
12-month period, of not less than 5.0 to 1.0.
SECTION 10.19. MAXIMUM DEBT TO CAPITALIZATION RATIO. Borrower and the
Subsidiaries, on a consolidated basis, will not allow the Debt to Capitalization
Ratio to exceed .45 to 1.0 as of the end of any fiscal quarter while the
Obligations remain unpaid.
SECTION 10.20. AMENDMENT OF CORPORATE DOCUMENTS. No Obligated Party
will amend its certificate or articles of incorporation or bylaws as in effect
on the date hereof if the effect of such amendment might reasonably be construed
to adversely affect the rights of any Bank under any of the Loan Documents, or
the ability of any of the Obligated Parties to perform fully its obligations
under this Agreement and the Loan Documents.
SECTION 10.21. DISTRIBUTIONS. No Obligated Party will make, or permit
or suffer any of its Subsidiaries to make, any Distribution, other than
Distributions to another Obligated Party which is not a Foreign Subsidiary or
Distributions which are Borrower's purchases of its own common stock.
SECTION 10.22. INVESTMENTS. No Obligated Party will have, or permit or
suffer any of its Subsidiaries to have, directly or indirectly, any Investment
(including without limitation any Acquisition or any Investment resulting
therefrom) other than:
(a) Permitted Investments;
(b) Receivables;
(c) Investments (including without limitation Intercompany Loans) in
Subsidiaries; provided, however, that the aggregate amount of such
Investments in Foreign Subsidiaries shall not exceed at any one time
$25,000,000;
(d) loans or other extensions of credit to employees provided such
loans and extensions of credit to employees do not exceed in the aggregate
for Borrower and its Subsidiaries an amount equal to $l,000,000;
(e) not in excess of the aggregate unliquidated amount of
Investments represented by Acquisitions permitted by Section 10.5(d);
(f) promissory notes received in connection with any Disposition
permitted by Section 10.5(c); and
(g) additional Investments in any of the categories referred to in
Subsections (a) through (f) above in excess of the amounts therein
permitted and additional Investments of any other nature; provided that at
the time of any such Investment and after giving effect thereto the
aggregate unliquidated amount of Investments of the Obligated Parties
permitted only by this subsection (g) shall not exceed $1,000,000.
SECTION 10.23. NEGATIVE PLEDGE. No Obligated Party shall, at any time,
create, incur,
-43-
<PAGE>
assume or permit to exist any Lien on any of its Property, other than:
(a) Permitted Liens;
(b) capital leases permitted under Section 10.15;
(c) those Liens listed on Schedule 5; and
(d) purchase money Liens upon or in Property acquired by Borrower
after June 30, 1993 or Liens existing in such Property at the time of
acquisition thereof, or, in the case of any Person which thereafter
becomes a Subsidiary, Liens upon or in its Property existing at the time
such Person becomes a Subsidiary, provided that (i) no such Lien extends
or shall extend to or cover any Property of Borrower or any Subsidiary, as
the case may be, other than the Property then being acquired and fixed
improvements then or thereafter erected thereon, (ii) the aggregate
principal amount of all Debt of Borrower and its Subsidiaries secured by
all Liens described in this Subsection (d) shall not exceed in the
aggregate $10,000,000 at any one time outstanding, and (iii) no such Lien
or Debt secured thereby shall be extended, refunded or renewed.
SECTION 10.24. CAPITAL EXPENDITURES. Borrower and its Subsidiaries
will not make or commit to any Capital Expenditures which exceed in the
aggregate an amount equal to $25,000,000 during any 12-month period determined
as of the end of each March, June, September and December.
SECTION 10.25. AGREEMENTS. None of the Obligated Parties will enter
into any agreement containing any provisions which would be violated or breached
by the performance of the obligations or duties of any Person under the Loan
Documents.
SECTION 10.26. INSURANCE. Borrower and its Subsidiaries shall each
maintain, with companies rated A+10 or better by Best & Company, insurance
policies (i) insuring their assets against loss by fire, explosion, theft and
other risks and casualties as are currently insured against and (ii) insuring it
and Agent as representative of the Banks against liability for personal injury
and property damages relating to the Properties of Borrower and its
Subsidiaries, such policies to be in such amounts and covering such risks as are
currently insured against, subject to availability at commercially reasonable
rates.
ARTICLE XI
DEFAULT
SECTION 11.1. EVENTS OF DEFAULT. Each of the following shall be deemed
an "Event of Default".
(a) Borrower shall fail to pay within five days of the date due
any payment Obligation or any part thereof.
(b) Any representation or warranty made by any of the Obligated
Parties in Article IX of this Agreement, or made (or deemed made pursuant
to Section 8.3(d)) by
-44-
<PAGE>
any of the Obligated Parties (or any of their respective officers) in any
Loan Document, certificate, report, notice or financial statement
furnished at any time pursuant to Article VIII of this Agreement, shall be
false, misleading or erroneous in any material respect when made or deemed
to have been made.
(c) Any Obligated Party shall fail to perform, observe or comply
with any of the covenants contained in Sections 10.4(c), 10.5, 10.11,
10.13, 10.18, 10.21, 10.23 and 10.25 of this Agreement or Borrower shall
fail to comply with Section 10.4(a).
(d) Borrower shall fail to perform, observe or comply with any
covenant, agreement or term contained in this Agreement or any other Loan
Document other than those specified in Subsections (a) and (c) above, and
such failure shall remain unremedied for five consecutive Business Days
following written notice thereof by Agent to Borrower.
(e) Any of the Obligated Parties or any of their respective
Subsidiaries shall commence a voluntary proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any Debtor Relief Law or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official of it or a substantial
part of its property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it or shall make a general
assignment for the benefit of creditors or shall generally fail to pay its
debts as they become due or shall admit in writing its inability to pay
its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(f) An involuntary proceeding shall be commenced against any of
the Obligated Parties or any of their respective Subsidiaries seeking
liquidation, reorganization, or other relief with respect to it or its
debts under any Debtor Relief Law or seeking the appointment of a trustee,
receiver, liquidator, custodian, or other similar official for it or a
substantial part of its property, and such involuntary proceeding (i)
shall not have been duly contested within 30 days after the commencement
of the proceeding or (ii), if duly contested within such 30 days, shall
for any reason remain undismissed and unstayed for a period of 90 days
after the commencement of the proceeding.
(g) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to discharge within a period of 30 days after the
commencement thereof any attachment, sequestration, or similar proceeding
or proceedings involving an aggregate amount in excess of $1,000,000
against any of its assets or properties.
(h) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to satisfy and discharge any final non-appealable
judgment or judgments against it for the payment of money in an aggregate
amount in excess of $1,000,000 prior to the time any Lien arising as a
result thereof attaches to any of its assets.
(i) Any of the Obligated Parties or any of their respective
Subsidiaries shall
-45-
<PAGE>
fail to pay when due and after the passage of any applicable notice and
cure periods any principal of or interest on any Borrowings the total
principal amount of which is equal to or in excess of $1,000,000 (other
than the Obligations) or any event or condition shall occur which results
in the acceleration of the maturity of any such Borrowings.
(j) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to pay when due and after the passage of any
applicable notice and cure periods any principal of or interest on any
Borrowings from any of the Banks (other than the Obligations) or any event
or condition shall occur which results in the acceleration of the maturity
of any such Borrowings.
(k) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity
or enforceability thereof shall be contested or challenged by any
Obligated Party or any of their respective Subsidiaries, or any Obligated
Party shall deny that it has any further liability or obligation under any
of the Loan Documents; provided no Event of Default shall be deemed to
have occurred under this Subsection (j) if the event occurring under this
Subsection (j) occurred as a result of an act or failure to act by Agent
or any Bank or until 30 days after the occurrence thereof if the event
occurring was caused by a Person other than an Obligated Party.
(1) The occurrence of a default or event of default under any of
the Intercompany Loan Agreements.
SECTION 11.2. REMEDIES. Upon the occurrence of an Event of Default,
Agent may and shall, at the direction of Requisite Banks, do any one or more of
the following:
(a) ACCELERATION. Declare the unpaid principal of and accrued
and unpaid interest on the Notes and any of the other obligations of the
Obligated Parties under the Loan Documents immediately due and payable,
and the same shall thereupon become due and payable, without notice,
demand, resentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all of
which are hereby expressly waived by Borrower.
(b) TERMINATION OF COMMITMENTS TO ADVANCE. Terminate the
Commitments of the Bank hereunder without notice to Borrower and the other
Obligated Parties.
(c) JUDGMENT. Reduce any claim to judgment.
(d) RIGHTS. Exercise any and all rights and remedies afforded
by the laws of the State of Texas or any other jurisdiction, by any of the
Loan Documents, by equity, or otherwise.
(e) APPLICATION OF PAYMENTS AND PROCEEDS. Apply any and all
amounts held in accounts for, or received in payment of the obligations
of, the Obligated Parties under the Loan Documents to the Obligations, in
such order and manner as Requisite Banks may direct, or hold any such
amount as additional security for repayment of the
-46-
<PAGE>
Obligations, notwithstanding any instruction to the contrary by Borrower
or any other Obligated Party; provided that Obligated Party shall remain
liable to Bank for any deficiency.
Provided, however, that upon the occurrence of an Event of Default under
Subsection (e) or (f) of Section 11.1, the Commitments of all Banks hereunder
shall automatically terminate, and the unpaid principal of and accrued and
unpaid interest on the Notes and all of the other obligations of the Obligated
Parties under the Loan Documents shall thereupon become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest, or other formalities of
any kind, all of which are hereby waived by Borrower. Upon the occurrence of any
such Event of Default, Banks may exercise all rights and remedies available to
them at law or in equity, under the Loan Documents, or otherwise.
SECTION 11.3. PERFORMANCE BY AGENT. If Borrower or any other
Obligated Party shall fail to perform any covenant, duty, or agreement in
accordance with the terms of the Loan Documents, and such failure shall remain
unremedied for five consecutive Business Days following written notice thereof
by Agent, Agent may at the direction of Requisite Banks perform, or attempt to
perform, such covenant, duty, or agreement on behalf of Borrower or any other
Obligated Party. In such event, Agent shall give the applicable Obligated Party
prompt written notification of its intent to perform or attempt to perform such
covenant, duty or agreement and Borrower shall at the request of Agent, promptly
pay any amount expended by Banks or Agent on its behalf in such performance or
attempted performance to Agent, for the account of Agent or the Banks who
actually expended such amounts, together with interest thereon at the Default
Rate through the date of such expenditure by Agent or the Banks (as appropriate)
until paid. Notwithstanding the foregoing, it is expressly agreed that neither
Agent nor any Bank shall have any liability or responsibility for the
performance of any obligations of Borrower or any other Obligated Party under
the Loan Documents.
ARTICLE XII
THE AGENT
SECTION 12.1. APPOINTMENT, POWERS AND IMMUNITIES. In order to
expedite the various transactions contemplated by this Agreement, the Banks
hereby appoint TCB to act as their Agent hereunder and under each of the other
Loan Documents. TCB consents to such appointment and agrees to perform the
duties of Agent as specified herein. The Banks authorize and direct Agent to
take such action in their name and on their behalf under the terms and
provisions of the Loan Documents and to exercise such rights and powers
thereunder as are specifically delegated to or required of Agent for the Banks,
together with such rights and powers as are reasonably incidental thereto. Agent
is hereby expressly authorized as Agent on behalf of itself and the other Banks:
(a) To receive on behalf of each of the Banks any payment of
principal, interest, fees or other amounts paid pursuant to this Agreement
and the Notes and to distribute to each Bank its share of all payments so
received as provided in this Agreement;
(b) To receive all documents and items to be furnished under the
Loan
-47-
<PAGE>
Documents;
(c) To act as nominee for and on behalf of the Banks in and under
the Loan Documents;
(d) To arrange for the means whereby the funds of the Banks are to
be made available to Borrower;
(e) To distribute to the Banks information, requests, notices,
payments, prepayments, documents, and other items received from Borrower,
the other Obligated Parties and other Persons;
(f) To execute and deliver to Borrower, the other Obligated
Parties and other Persons all requests, demands, approvals, notices, and
consents received from the Banks;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Bank all rights and remedies of the Banks upon the
occurrence of any Event of Default specified in the Loan Documents; and
(h) To take such other actions as may be requested by Requisite
Banks.
Agent (i) shall have no duties or responsibilities except those expressly set
forth in this Agreement and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee for any Bank, (ii) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
Requisite Banks, and (iii) shall not be responsible for any action taken or
omitted to be taken by it or by any of its officers, directors, agents or
employees hereunder or under any other Loan Document, except for its own gross
negligence or willful misconduct and that of its officers, directors, agents or
employees while acting within the scope of their employment or agency. As to any
matters not expressly provided for by this Agreement, Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by Requisite Banks, and such instructions of
Requisite Banks in any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
SECTION 12.2. RIGHTS AS A BANK. With respect to its Commitment to
lend hereunder and Advances made by it, Agent in its capacity as a Bank and not
as Agent shall have the same rights and powers hereunder as the other Banks and
may exercise the same as though it were not Agent for the Banks, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include Agent
in its individual capacity. Agent and its Affiliates may (without having to
account therefor to any bank) accept deposits from, lend money to, provide
financial advisory and merchant banking services to, and generally engage in any
kind of banking, depositary, trust, financial advisory or other business with
Borrower, any other Obligated Party, any of their respective Affiliates and any
of their officers, directors and employees as if it were not acting as Agent,
and Agent may accept fees and other consideration from Borrower, any other
Obligated Party, any of their respective Affiliates and any of their officers,
directors and employees (in addition to the agency or arrangements fees
heretofore agreed to between Borrower and Agent) for services in connection with
this Agreement or otherwise without having
-48-
<PAGE>
to account for the same to the Banks.
SECTION 12.3. SHARING OF PAYMENTS. All payments of principal and
interest received in payment of amounts owing in connection with the Loans shall
be promptly distributed by Agent to the Banks, each Bank to receive its Pro Rata
portion of each Loan in immediately available funds. Any and all other amounts
received by Agent as payment on the Obligations shall be promptly distributed to
the Banks, each Bank to receive its Pro Rata portion thereof in immediately
available funds unless this Agreement or any other Loan Document directs that
Agent distribute such amounts in an alternative manner. If any Bank shall obtain
payment of any principal of or interest on any Loan made by it to Borrower under
this Agreement or payment of any other Obligations under the Loan Documents then
owed by Borrower or any other Obligated Party to such Bank through the exercise
of any right of set-off, banker's lien, counterclaim or similar right, or
otherwise, it shall promptly purchase from the other Banks participations in
that Loan made by the other Banks hereunder in such amounts, and make such other
adjustments from time to time such that each Bank shall share the benefit of
such payment (net of any expenses which may be incurred by such Bank in
obtaining or preserving such benefit) in accordance with its Pro Rata portion
thereof. To such end all of the Banks shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored. Each Obligated Party agrees, to the
fullest extent it may effectively do so under applicable law, that any Bank so
purchasing a participation in the Loans made by the other Banks may exercise all
rights of set-off, banker's lien, counterclaim, or similar rights with respect
to such participation as fully as if such Bank were a direct holder of Loans to
Borrower in the amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or affect the right of any Bank to
exercise and retain the benefits of exercising any such right with respect to
any other indebtedness or obligation of Borrower or any other Obligated Party.
SECTION 12.4. NO LIABILITY OF AGENT OR FUNDS ADMINISTRATOR;
INDEMNITY. Neither Agent, nor the Funds Administrator, nor any of their
Affiliates, officers, directors, employees or agents shall be liable for any
action taken or omitted to be taken by it or them hereunder or otherwise in
connection with this Agreement, except for its or their own gross negligence or
willful misconduct. The Banks hereby agree to indemnify Agent and the Funds
Administrator against all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys' fees), and
disbursement of any kind or nature whatsoever (to the extent not paid by
Borrower and to the extent not attributable to Agent's, the Funds
Administrator's, or their Affiliates', officers', directors', employees' or
agents' gross negligence or willful misconduct) resulting from any action taken
or omitted to be taken by Agent or the Funds Administrator on their own behalf
or on behalf of the other Banks under the Loan Documents; provided that each
Bank shall only be liable to Agent and the Funds Administrator for its Pro Rata
portion of the amounts due Agent or the Funds Administrator as a result of the
indemnification provided for herein. THE EXPRESS INTENTION OF THE BANKS IS THAT
AGENT AND THE FUNDS ADMINISTRATOR SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD
HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS'
FEES) AND DISBURSEMENTS OF ANY KIND OR NATURE ARISING OUT OF OR RESULTING FROM
THE SOLE OR CONTRIBUTORY NEGLIGENCE OF AGENT OR THE FUNDS ADMINISTRATOR.
-49-
<PAGE>
Each Bank agrees that it has, independently and without reliance on Agent, the
Funds Administrator or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon Agent, the Funds Administrator or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. Neither Agent nor the Funds Administrator shall be responsible to the
Banks for any recitals, statements, representations, or warranties contained in
this Agreement, or in any other Loan Document, or of the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of this Agreement or
any other Loan Document or for any failure by Borrower or any Obligated Party to
perform any of its obligations under this Agreement or any other Loan Document.
Neither Agent nor the Funds Administrator shall be required to keep itself
informed as to the performance or observance by Borrower or any Obligated Party
of this Agreement or any other Loan Document or to inspect the properties or
books of Borrower or any Obligated Party.
SECTION 12.5. AGENT'S EMPLOYEES; FUNDS ADMINISTRATOR. Agent may
execute any and all duties under the Loan Documents by or through agents or
employees and shall be entitled to advice of counsel pertaining to all matters
thereunder. Without limiting the rights of Agent under the preceding sentence,
Agent may execute any and all of its duties under the Loan Documents through the
Funds Administrator, in which case the Funds Administrator shall be entitled to
the Rights under the Loan Documents available to Agent if Agent had executed
such duties.
SECTION 12.6. RELIANCE BY AGENT. Agent shall be entitled to rely on
any notice, consent, certificate, schedule, affidavit, letter, telegram,
teletype message, statement, order or other document believed to be genuine and
correct and to have been signed or sent by the proper Person or Persons and upon
advice and statements of legal counsel, independent accountants and other
experts. Agent and the Obligated Parties may deem and treat the original Banks
hereunder as the owners of their respective Notes for all purposes hereof until
receipt by Agent and the Obligated Parties of notice of assignment or transfer
of any interest therein by any Bank. Any request, authority or consent of any
holder of any of the Notes shall be conclusive and binding on any subsequent
holder, transferee, or assignee of such Notes.
SECTION 12.7. SEVERAL COMMITMENTS. Except as expressly provided in
this Section 12.7, the obligations of the Banks under this Agreement are
several. The default by any Bank in making an Advance in accordance with its
Commitment shall not relieve the other Banks of their obligations under this
Agreement. In the event of any default by any Bank in making an Advance, each
nondefaulting Bank shall be obligated to make its Advance but shall not be
obligated to advance the amount which the defaulting Bank was required to
advance hereunder; provided, however, that TCB shall have the obligation to make
such defaulting Bank's Advance available to Borrower, will be entitled to all
interest attributable thereto until reimbursed therefor, and will be deemed to
be the holder of the outstanding indebtedness represented thereby for purposes
of determining Requisite Banks and for determining Pro Rata portions. In no
event shall any Bank other than TCB be required to advance any amount or amounts
which shall in the aggregate exceed such Bank's Commitment. Nothing in this
Section shall be construed as releasing, modifying, or waiving the obligation of
each Bank to forward to Agent funds to meet all requested Advances pursuant to
the terms of the Loan Documents.
-50-
<PAGE>
SECTION 12.8. SUCCESSOR AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Banks and Borrower, and should Agent (a) fail or
refuse to take any action hereunder requested by the required percentage of
Banks, (b) be declared insolvent or (c) in its individual capacity as a Bank
sell, assign or otherwise participate (otherwise than to its Affiliates) its
right, title and interest in the Loans and the Loan Documents such that, after
giving effect to such sales, assignments or participations, its Pro Rata share
of all of the Loans is reduced below 6.49%, the Requisite Banks shall have the
right to appoint a successor Agent acceptable to Borrower. If no successor Agent
shall have been appointed hereunder within 30 days after Agent's notice of
resignation or removal, then the resigning or removed Agent may, on behalf of
the Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the U.S. or any State thereof and having a combined capital
and surplus of at least $100,000,000. Upon the acceptance of this appointment as
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all rights, powers, privileges, immunities, and duties of the
resigning or removed Agent, and the resigning or removed Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any Agent's resignation or removal as Agent, the
provisions of Article XII shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or any Note, nor consent to any departure by any Obligated
Party herefrom or therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Requisite Banks in all cases, and then, in
any case, such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) waive any of the conditions specified in
Article VIII (if and to the extent that the Advance which is the subject of such
waiver would involve an increase in the aggregate outstanding amount of Loans
over the aggregate amount of Loans outstanding immediately prior to such
Advance), (b) reduce or increase the amount or alter the terms of the
Commitments of any Banks or subject any Banks to any additional obligations, (c)
reduce the principal of, or rate or amount of interest applicable to any Loan
other than as provided in this Agreement, or any fees hereunder, (d) postpone
any date fixed for any payment of principal of, or interest on, the Notes or any
fees hereunder, (e) change this Section 13.1, (f) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
number of Banks, which shall be required for the Banks or any of them to take
any action hereunder, or (g) release any Guaranty or any collateral securing the
Obligations; and provided, that no amendment, waiver or consent shall, unless in
writing and signed by Agent in addition to the Banks required above to take such
action, affect the rights or duties of Agent under this Agreement or any Note.
SECTION 13.2. NOTICES. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telex, telegraph,
telecopy, cable or in writing and telexed, telecopied, telegraphed, cabled,
mailed, or delivered to the intended recipient at the "Address
-51-
<PAGE>
for Notices" specified below its name on the signature pages hereof; or, as to
any party at such other address as shall be designated by such party in a notice
to each other party given in accordance with this Section. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopied, subject to telephone
confirmation of receipt, or delivered to the telegraph or cable office, subject
to telephone confirmation of receipt, or when personally delivered or, in the
case of a mailed notice return receipt requested, upon receipt, in each case
given or addressed as aforesaid.
SECTION 13.3. NO WAIVER; REMEDIES. No failure on the part of any Bank
or Agent to exercise, and no delay in exercising, any right hereunder or under
any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, or any abandonment or discontinuance of any steps to
enforce such right, preclude any other or further exercise thereof or the
exercise of any other right. No notice to or demand on the Obligated Party in
any case shall entitle the Obligated Party to any other or further notice or
demand in similar or other circumstances. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 13.4. COSTS, EXPENSES AND TAXES. Each Obligated Party agrees
to pay on demand (i) all costs and expenses of Agent in connection with the
preparation, execution, delivery and administration of this Agreement, the Notes
and all other Loan Documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for Agent
with respect thereto and with respect to advising Agent as to its rights and
responsibilities under this Agreement, the Notes and the other Loan Documents,
and any modification, supplement or waiver of any of the terms of this
Agreement, and (ii) all reasonable costs and expenses of Agent (including
reasonable counsels' fees) in connection with the enforcement of this Agreement,
the Notes and any other Loan Document. In addition, each Obligated Party shall
pay any and all stamp and other Taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement and the Notes and
the other documents to be delivered hereunder, and agrees to save Agent and each
Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such Taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of this Agreement, any Note and any other Loan Document. Without
prejudice to the survival of any other obligations of the Obligated Parties
under this Agreement, the Notes or any other Loan Document, the obligations of
Obligated Parties under this Section 13.4 shall survive the termination of this
Agreement and repayment of the Notes.
SECTION 13.5. INDEMNITY.
(a) Each of the Obligated Parties shall indemnify Agent, the Funds
Administrator, the Banks and each Affiliate thereof and their respective
directors, officers, employees, attorneys and agents ("Indemnitee") from, and
hold each of them harmless against, any and all actions, suits, proceedings
(including any investigations or inquiries), claims, losses, liabilities,
damages or expenses of any kind or nature whatsoever (INCLUDING WITHOUT
LIMITATION, THOSE ARISING OUT OF NEGLIGENCE OF ANY INDEMNITEE) which may be
incurred by or asserted against or involve any Indemnitee as a result of or
arising out of or in
-52-
<PAGE>
any way related to (i) any of the Loan Documents, any of the Loans or any actual
or proposed use by any of the Obligated Parties of any of the proceeds of any
extension of credit by the Bank hereunder or any breach by any of the Obligated
Parties of any of the Loan Documents or (ii) any Litigation (including any
threatened Litigation) relating to any of the foregoing, and the Obligated
Parties shall reimburse and, upon demand by any Indemnitee, shall pay or
reimburse such Indemnitee for any legal or other expenses (including allocated
costs of internal counsel) incurred by such Indemnitee in connection with
investigating, defending or preparing to defend any pending or threatened
Litigation (including any inquiry or investigation); provided, however, no
Obligated Party shall be obligated to pay or make reimbursement for any
settlement to which Borrower has not consented (which consent will not be
unreasonably withheld); and, provided, further, no Obligated Party shall not be
liable for any liability, loss, damage or expense to any Indemnitee if it has
been determined by a final decision (after all appeals and the expiration of
time to appeal) by a court of competent jurisdiction that such liability, loss,
damage or expense resulted from the gross negligence or willful misconduct of
such Indemnitee. None of Agent and the Banks shall be responsible or liable to
any other Person for consequential damages which may be alleged as a result of
any of the Loan Documents.
(b) Without prejudice to the survival of any other obligations of the
Obligated Parties under any of the Loan Documents, the obligations of the
Obligated Parties under this Section 13.5 shall survive the termination of this
Agreement and payment of the Notes.
SECTION 13.6. FEES. In addition to any other fees provided for
herein, Borrower agrees to pay to TCB for TCB's own account in immediately
available funds all fees described in the agreements between TCB and Borrower.
SECTION 13.7. GOVERNING LAW. This Agreement, all Notes and all other
documents executed in connection herewith, shall be deemed to be contracts and
agreements executed by the Obligated Parties, Agent and the Banks under the laws
of the State of Texas and of the U.S. and for all purposes shall be construed in
accordance with, and governed by, the laws of said State and of the U.S. Without
limitation of the foregoing, nothing in this Agreement or in the Notes shall be
deemed to constitute a waiver of any rights which Bank may have under applicable
federal legislation relating to the amount of interest which Bank may contract
for, take, receive or charge in respect of any Loans, including any right to
take, receive, reserve and charge interest at the rate allowed by the law of the
state where Bank is located. Agent, the Banks and the Obligated Parties further
agree that insofar as the provisions of Article 1.4, Subtitle 1, Title 79, of
the Revised Civil Statutes of Texas, 1925, as amended, are applicable to the
determination of the Maximum Rate with respect to the Notes, the indicated rate
ceiling computed from time to time pursuant to Section (a) of such Article shall
apply to the Notes; provided, however, that to the extent permitted by such
Article, Agent may from time to time by notice from Agent to the Obligated
Parties and Borrower revise the election of such interest rate ceiling as such
ceiling affects the then current or future balances of the Loans outstanding
under the Notes. The provisions of Chapter 15 of Subtitle 3 of the said Title 79
do not apply to this Agreement or any Note issued hereunder.
SECTION 13.8. MAXIMUM INTEREST RATE. No provision of this Agreement or
of any other Loan Document shall require the payment or permit the collection of
interest in excess of the maximum permitted by applicable Law. If any excess of
interest in such respect is hereby
-53-
<PAGE>
provided for, or shall be adjudicated to be so provided, in any Loan Document or
otherwise in connection with this loan transaction, the provisions of this
Section shall govern and prevail and neither Borrower nor the sureties,
guarantors, successors, or assigns of Borrower shall be obligated to pay the
excess amount of such interest or any other excess sum paid for the use,
forbearance, or detention of sums loaned pursuant hereto. In the event Agent or
any Bank ever receives, collects, or applies as interest any such sum, such
amount which would be in excess of the maximum amount permitted by applicable
law shall be applied as a payment and reduction of the principal of the
indebtedness evidenced by the Notes; and, if the principal of the Notes has been
paid in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, Borrower and Bank shall, to the extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the indebtedness
evidenced by the Notes so that interest for the entire term does not exceed the
Maximum Rate. In addition to the foregoing, the Bank shall be permitted to cure
any violation or alleged violation of applicable usury laws in any manner
permitted by Tex. Rev. Civ. Stat. Ann. article 5069-1.06.
SECTION 13.9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and covenants contained herein or in any of the Loan
Documents, or made in writing by the Obligated Parties in connection herewith,
shall survive the execution and delivery of this Agreement and of the Notes, and
will bind and inure to the benefit of the respective successors and assigns of
the parties hereto, whether so expressed or not, provided that the undertaking
of the Banks to make Loans to the Obligated Parties shall not inure to the
benefit of any successor or assign of the Obligated Parties.
SECTION 13.10. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Obligated Parties, Agent, and when Agent
shall have been notified by each Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of the Obligated
Parties, Agent, and each Bank and their respective successors and assigns.
SECTION 13.11. SUCCESSORS AND ASSIGNS PARTICIPATIONS.
(a) Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and permitted assigns
of such party; and all covenants, promises and agreements by or on behalf of the
Obligated Parties, Agent or the Banks that are contained in this Agreement shall
bind and inure to the benefit of their respective successors and assigns. None
of the Obligated Parties may assign or transfer any of its Rights or obligations
hereunder without the written consent of all the Banks.
(b) Each Bank may, with the prior written consent of Agent (except for
participations to a Bank's Affiliates) but without the consent of the Obligated
Parties, sell participations to one or more banks or other entities in all or a
portion of its Rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Loans owing to it and the
Notes held by it); provided, however, that (i) such Bank's obligations under
this Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other
-54-
<PAGE>
entities shall be entitled to the cost protection provisions contained in
Article VI and Section 13.4, but only to the extent that such protection would
have been available to such Bank, calculated as if no such participations had
been sold, and (iv) the Obligated Parties, Agent and the other Banks shall
continue to deal solely and directly with such Bank in connection with such
Bank's Rights and obligations under this Agreement; provided further, that such
Bank shall retain the sole Right and responsibility to enforce the obligations
of the Obligated Parties relating to the Loans including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; but such Bank may grant a participant rights (which shall be no
greater than Bank's rights insofar as Borrower is concerned) with respect to (y)
amendments, modifications or waivers with respect to any fees payable hereunder
(including, without limitation, the amount and the dates fixed for the payment
of any such fees) or the amount of principal or the rate of interest payable on,
or the dates fixed for any payment of principal of or interest on, the Loans and
(z) any extension of the Termination Date.
(c) Each Bank may assign, with the prior written consent of the
Obligated Parties (which shall not be unreasonably withheld) to one or more
assignees, all or a portion of its interests, Rights, and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the same portion of the Loans at the time owing to it and the Notes held by it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Bank's rights and obligations under
this Agreement and shall be in a minimum principal amount of $5,000,000, (ii)
the amount of the Commitment of the assigning Bank remaining after each such
assignment (determined as of the date of the Assignment and Acceptance) shall be
in a minimum principal amount of $5,000,000 and (iii) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance in the form of EXHIBIT "K"
hereto (an "Assignment and Acceptance"), together with a properly completed
Administrative Questionnaire, any Notes subject to such assignment and a
processing and recordation fee of $2,000. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five Business
Days after the execution thereof (x) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Bank hereby, and (y) the assignor Bank thereunder
shall, to the extent provided in such Assignment and Acceptance (and in the case
of an Assignment and Acceptance covering all of the remaining portion of an
assigning Bank's rights and obligations under this Agreement, such Bank shall
cease to be a party hereto).
(d) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee shall confirm to and agree with each other
and the other parties hereto as follows: (i) other than the representation and
warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Bank assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such Bank assignor makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Obligated Parties or the performance or observance of its respective
obligations
-55-
<PAGE>
under this Agreement or any other instrument or document furnished pursuant
hereto or thereto; (iii) such assignee confirms that it has received a copy of
this Agreement together with copies of the Financial Statements referred to in
Sections 9.4 or 10.1 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon Agent, such Bank assignor or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes Agent to take such action
on behalf of such assignee and to exercise such powers under this Agreement as
are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; (vi) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Bank and (vii) each assignee
organized under the laws of a jurisdiction outside the U.S., agrees to provide
the forms prescribed by the Internal Revenue Service of the U.S. certifying as
to the assignee's exemption from U.S. withholding taxes with respect to all
payments to be made to the assignee under the Agreement or such other documents
as are necessary to indicate that all such payments are subject to such tax at a
rate reduced by an applicable tax treaty.
(e) Agent shall maintain at its office a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Banks and the Commitment of, and principal amount of the
Advances owing to, each Bank from time to time (the "Register"). The entries in
the Register shall be conclusive, in the absence of manifest error, and the
Obligated Parties, Agent and the Banks may treat each person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Agreement.
The Register shall be available for inspection by the Obligated Parties or any
Bank at any reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee together with any Notes subject to such
assignment and the written consent to such assignment, Agent shall, if such
Assignment and Acceptance has been completed and is precisely in the form of
EXHIBIT "K" hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Banks and the Obligated Parties. Within five Business Days after
receipt of such notice, Borrower shall execute and deliver to Agent in exchange
for the surrendered Notes new Notes to the order of such assignee in an amount
equal to its portion of the Commitment assumed by it pursuant to such Assignment
and Acceptance and, if the assigning Bank has retained any Commitment hereunder,
new Notes to the order of the assigning Bank in an amount equal to the
Commitment retained by it hereunder. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Notes, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of EXHIBIT "D", EXHIBIT "E" or
EXHIBIT "F", as applicable, hereto. Cancelled Notes shall be returned to
Borrower. Borrower shall not be liable for the expenses incurred by the
assigning Bank and assignee with respect to the delivery of new Notes to the
assignee.
(g) Agent and each Bank shall preserve the confidentiality of any
confidential information relating to the Obligated Parties received from the
Obligated Parties.
-56-
<PAGE>
Notwithstanding any other provision herein, any Bank may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 13.11 disclose to the assignee or participant or proposed assignee
or participant any information relating to the Obligated Parties furnished to
such Bank by or on behalf of the Obligated Parties; provided, that prior to any
such disclosure, each such assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any confidential
information relating to the Obligated Parties received from such Bank.
SECTION 13.12. ASSUMPTION OR SUBSTITUTION.
(a) If an Obligated Party desires to effect an Acquisition that would
not be permitted by Section 10.5(d) by seeking a waiver pursuant to Section
10.5(e) and at least three Banks, but not all of them, have provided the waiver,
any one or more of the Banks providing a waiver may (but shall not be obligated
to) assume all or a portion of the Commitment and Loans of the Banks which did
not provide a waiver.
(b) The Banks electing to assume the Commitment and Loans of another
Bank shall provide a written notice of such election to the Agent, the Funds
Administrator, the other Banks and the Obligated Parties within 15 days after
the Banks' decisions with respect to the waiver requested under Section 10.5(e)
were delivered to the Obligated Party.
(c) The election contained in such written notice shall be irrevocable
and shall constitute the Bank's agreement to assume and purchase all or such
portion of the interests, Rights, and obligations of such other Bank(s) under
this Agreement (including, without limitation, all or a portion of its
Commitment and the same portion of the Loans at the time owing to it and the
Notes held by it). Such Commitments and Loans, or portion thereof, to be assumed
by the assuming Banks shall be allocated proportionately among those Banks who
have elected to assume the same in accordance with the respective Commitments
and Loans of such assuming Banks as of the date of the last Bank's election to
assume (PROVIDED, HOWEVER, in no event shall a Bank be required to assume an
amount or portion of the Commitments and Loans of the other Banks in excess of
the amount which such Bank agreed to assume pursuant to the immediately
preceding sentence) or on such other basis as such assuming Banks agree.
(d) The Agent shall promptly notify the Borrower, the Funds
Administrator and the other assuming Banks whenever it receives any notice from
a Bank pursuant to this Section 13.12.
(e) If the assuming Banks do not elect as provided in subsection (c) to
assume all of the other Banks' Commitments and Loans, the Borrower may
designate, by written notice to Agent and the assuming Banks, one or more
eligible assignees not a party to this Agreement to assume and purchase all or
such portion of the interests, Rights, and obligations of such other Bank under
this Agreement (including, without limitation, all or a portion of its
Commitment and the same portion of the Loans at the time owing to it and the
Notes held by it), at a price equal to the unpaid principal amount of such Loans
plus all accrued and unpaid interest thereon, and all other fees, costs and
expenses owed to such Bank hereunder. No designation of a nominee shall be
effective unless the Agent shall have received approval of such nominee,
together with the portion of the total Commitment and Loans to be assumed by it,
from the
-57-
<PAGE>
assuming Banks representing at least 66-2/3% of the aggregate Commitments and
Loans of all assuming Banks (which approval shall not be unreasonably withheld).
(f) Each assumption and purchase under this Section 13.12 shall be
effective when each of the following conditions has been satisfied in a manner
satisfactory to the Agent:
(1) each assuming Bank, each Assignee and the nonconsenting Banks
have executed an Assignment and Acceptance pursuant to Section 13.11 as to
all of such non-consenting Banks' interests, Rights, and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the same portion of the Loans at the time owing to it and
the Notes held by it).
(2) each nominee shall have completed and delivered to the Agent
an Administrative questionnaire.
(g) If the assuming Banks do not elect as provided in subsection (c) to
assume all of the non-consenting Banks' Commitments and Loans and the Borrower
does not effectively designate one or more eligible assignees to assume the
Commitments of and purchase the Loans of the non-consenting Banks as
contemplated hereby, the Borrower's request for a waiver under Section 10.5(e)
shall be deemed to have been refused.
SECTION 13.13. INVALID PROVISIONS. If any provision of any of the Loan
Documents is held to be illegal, invalid or unenforceable under any present or
future Laws effective during the term thereof, such provision shall be fully
severable; the appropriate Loan Documents shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
thereof; and the remaining provisions thereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance therefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provision there shall be added automatically as a part
of such Loan Document a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
SECTION 13.14. NUMBER AND GENDER OF WORDS. Whenever in any of the Loan
Documents the singular number is used, the same shall include the plural, where
appropriate, and vice versa, and words of any gender shall include each other
gender where appropriate.
SECTION 13.15. DESCRIPTIVE HEADINGS. The section headings appearing in
this Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Agreement.
SECTION 13.16. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different 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
agreement.
SECTION 13.17. LETTER OF CREDIT ADVANCES. In accordance with the terms
of this Agreement, each of the parties hereto acknowledges and agrees that any
amounts advanced by
-58-
<PAGE>
TCB pursuant to letters of credit issued in favor of one or more Obligated
Parties will constitute "Obligations" hereunder and will be subject to and
entitled to the benefits of the Events of Default and related rights and
remedies under Article 11 hereof. Each letter of credit shall be evidenced by a
separate written agreement, and nothing herein shall obligate TCB to issue any
letter of credit of behalf of any Obligated Party.
SECTION 13.18. ENTIRE AGREEMENT. THIS AGREEMENT (INCLUDING THE EXHIBITS
AND SCHEDULES HERETO), THE OTHER LOAN DOCUMENTS, AND THE FEE AGREEMENTS REFERRED
TO IN SECTION 13.6 CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.2(A)
OF THE TEXAS BUSINESS AND COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
-59-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
BANCTEC, INC., a Delaware corporation
By: /s/ Gary T. Robinson
-----------------------------------
Gary T. Robinson
Senior Vice President, Chief Financial
Officer and Treasurer
DOMESTIC SUBSIDIARIES:
BANCTEC USA, INC., a Delaware corporation
By: /s/ Gary T. Robinson
----------------------------------
Gary T. Robinson
Senior Vice President, Chief Financial
Officer and Treasurer
BTI SYSTEMS, INC., a Pennsylvania
corporation
By: /s/ Gary T. Robinson
-----------------------------------
Gary T. Robinson
Senior Vice President, Chief Financial
Officer and Treasurer
BANCTEC (PUERTO RICO), INC.,
a Delaware corporation
By: /s/ Gary T. Robinson
-----------------------------------
Gary T. Robinson
Senior Vice President, Chief Financial
Officer and Treasurer
-60-
<PAGE>
BANCTEC (MANAGEMENT), INC.,
a Delaware corporation
By: /s/ Gary T. Robinson
----------------------------------
Gary T. Robinson
Senior Vice President, Chief Financial
Officer and Treasurer
BANCTEC THIRD PARTY MAINTENANCE
INC., a Texas corporation
By: /s/ Gary T. Robinson
-----------------------------------
Gary T. Robinson
Senior Vice President, Chief Financial
Officer and Treasurer
AGENT/TCB:
TEXAS COMMERCE BANK,
NATIONAL ASSOCIATION,
a national banking association,
By: /s/ Mark J. Denton
-----------------------------------
Mark J. Denton
Senior Vice President
Address for Notices:
Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
-61-
<PAGE>
FUNDS ADMINISTRATOR:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
a national banking association,
By: /s/ W.O. Clifford
-----------------------------------
W.O. Clifford
Address for Notices:
712 Main Street
Mail Station 8 TCBS 27
Houston, Texas 77002
-62-
<PAGE>
BANKS:
Pro Rata Percentage TEXAS COMMERCE BANK, NATIONAL
TERM LOAN 33.77% ASSOCIATION
REVOLVING CREDIT LOAN 33.77%
ACQUISITION FACILITY LOAN
32.72727273%
ALL LOANS 33.146% By: /s/ Mark J. Denton
-----------------------------------
Mark J. Denton
Senior Vice President
Address for Notices:
c/o Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
Domestic Lending Office:
c/o Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
Eurodollar Lending Office:
c/o Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
-63-
<PAGE>
Pro Rata Percentage: COMERICA BANK
TERM LOAN 27.27%
REVOLVING CREDIT LOAN 27.27%
ACQUISITION FACILITY LOAN
7.272727272%
ALL LOANS 15.292% By: /s/ James R. Phillips
----------------------------------
Name: James R. Phillips
--------------------------
Title: Assistant Vice President
-------------------------
Address for Notices:
One Detroit Center
500 Woodward Ave. MC 3281
Detroit, Michigan 48226
Domestic Lending Office:
One Detroit Center
500 Woodward Ave. MC 3281
Detroit, Michigan 48226
Eurodollar Lending Office
Comerica Bank
Grand Cayman Deposits
Tower 100 - Renaissance Center
Detroit, Michigan 48243-3085
-64-
<PAGE>
Pro Rata Percentage: NATIONSBANK OF TEXAS, N.A.
TERM LOAN 15.58%
REVOLVING CREDIT LOAN 15.58%
ACQUISITION FACILITY LOAN
29.0909090909%
ALL LOANS 23.673% By: /s/ Richard J. Pettit
-----------------------------
Richard J. Pettit
Vice President
Address for Notices:
NationsBank of Texas, N.A.
NationsBank Plaza, 7th Floor
901 Main Street
Dallas, Texas 75202
Domestic Lending Office:
NationsBank of Texas, N.A.
NationsBank Plaza, 7th Floor
901 Main Street
Dallas, Texas 75202
Eurodollar Lending Office:
NationsBank of Texas, N.A.
NationsBank Plaza, 7th Floor
901 Main Street
Dallas, Texas 75202
-65-
<PAGE>
Pro Rata Percentage: NATIONAL CITY BANK, KENTUCKY
TERM LOAN 11.69%
REVOLVING CREDIT LOAN 11.69%
ACQUISITION FACILITY LOAN
18/181818181%
ALL LOANS 15.578% By: /s/ Don R. Pullen
-----------------------------
Name: Don R. Pullen
---------------------
Title: Vice President
--------------------
Address for Notices:
National City Bank, Kentucky
101 South Fifth Street
Louisville, Kentucky 40202
Domestic Lending Office:
National City Bank, Kentucky
101 South Fifth Street
Louisville, Kentucky 40202
Eurodollar Lending Office:
National City Bank, Kentucky
101 South Fifth Street
Louisville, Kentucky 40202
-66-
<PAGE>
Pro Rata Percentage: NBD BANK, N.A.
TERM LOAN 11.69%
REVOLVING CREDIT LOAN 11.69%
ACQUISITION FACILITY LOAN
12.727272727%
ALL LOANS 12.311% By: /s/ D. Andrew Bateman
------------------------------
Name: D. Andrew Bateman
----------------------
Title: First Vice President
---------------------
Address for Notices:
NBD Bank, N.A.
611 Woodward
Detroit, Michigan 48226
Attn: Robert Rummell
National Banking Division
Domestic Lending Office:
NBD Bank, N.A.
611 Woodward
Detroit, Michigan 48226
Eurodollar Lending Office:
NBD Bank, N.A.
611 Woodward
- 67 -
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Years Ended
------------------------------------
March 27, March 28, March 29,
1994 1993 1992
---------- ----------- -----------
<S> <C> <C> <C>
Income before cumulative effect of
accounting change......................... $16,343,000 $14,351,000 $11,721,000
----------- ----------- -----------
----------- ----------- -----------
Net Income................................... $16,343,000 $15,186,000 $11,721,000
----------- ----------- -----------
----------- ----------- -----------
Shares outstanding beginning of period....... 10,428,400 9,553,742 9,209,625
Weighted average number of shares issued from
exercise of stock options................. 135,713 595,985 113,448
Weighted average number shares repurchased
during the year........................... - - (16,854)
----------- ----------- ------------
Weighted average number of shares
outstanding............................... 10,564,113 10,149,727 9,306,219
Shares issuable from assumed exercise of stock
options and stock purchase plan, reduced by
the number of shares which could have been
purchased with the proceeds from exercise
of such options, stock purchase plan, and
unearned compensation on restricted stock
assets.................................... 622,684 719,837 609,828
----------- ----------- -----------
Weighted average number of shares outstanding
as adjusted............................... 11,186,797 10,869,564 9,916,047
----------- ----------- -----------
----------- ----------- -----------
Primary income per common and common equivalent
share before accounting change............ $1.46 $1.32 $1.18
----------- ----------- -----------
----------- ----------- -----------
Primary income per common and common equivalent
share..................................... $1.46 $1.40 $1.18
----------- ----------- -----------
----------- ----------- -----------
Assuming full dilution:
Weighted average number of shares outstanding..10,564,113 10,149,727 9,306,219
Shares issuable from assumed exercise of stock
options and stock purchase plan, reduced by
the number of shares which could have been
purchased with the proceeds from exercise
of such options, stock purchase plan, and
unearned compensation on restricted stock
assets.................................... 730,074 719,837 866,321
----------- ----------- -----------
Weighted average number of shares outstanding
as adjusted............................... 11,294,187 10,869,564 10,172,540
----------- ----------- -----------
----------- ----------- -----------
Fully diluted income per common and common
equivalent share before accounting change. $1.45 $1.32 $1.15
----------- ----------- -----------
----------- ----------- -----------
Primary income per common and common
equivalent share.......................... $1.45 $1.40 $1.15
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF BANCTEC, INC.
1. BancTec USA, Inc., a Delaware corporation.
2. BTI Systems, Inc., a Delaware corporation.
3. BancTec (Management) Inc., a Delaware corporation.
4. BancTec (Export), Inc., a Virgin Islands corporation.
5. BancTec (Puerto Rico), Inc., a Delaware corporation.
6. BancTec (Canada), Inc., a Canadian corporation.
7. BancTec Limited, a U.K. company.
8. BancTec (Australia) Pty Limited, an Australian corporation.
9. ScanData N.V., a Netherlands corporation (Joint Venture with Thomson).
ScanData GmbH, a German corporation.
ScanData France S.A., a French corporation.
ScanData B.V., a Dutch corporation.
BanTech AB, a Swedish corporation.
<PAGE>
EXHIBIT 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated May 17, 1994, included in this Form 10-K, into the
Company's previously filed Registration Statement Form S-3 (No. 33-28942);
Registration Statement Form S-8 (No. 33-28939); Registration Statement Form S-8
(No. 33-29163); Registration Statement Form S-8 (No. 33-32824); Registration
Statement Form S-3 (No. 33-35988); Registration Statement Form S-8 (No. 33-
37377); Registration Statement Form S-3 (No. 33-49918) and Registration
Statement Form S-8 (No. 33-71114).
Arthur Andersen & Co.
Dallas, Texas
June 20, 1994
<PAGE>
EXHIBIT 24.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-28939) pertaining to the BancTec, Inc. Incentive Stock Option
Plan; Registration Statement (Form S-8 No. 33-29163) pertaining to the BancTec,
Inc. 1982 Non-Qualified Stock Option Plan and Input Business Machines, Inc. 1982
Incentive Stock Option Plan; Registration Statement (Form S-3 No. 33-28942) of
BancTec, Inc. and subsidiaries; Registration Statement (Form S-8 No. 33-32824)
pertaining to the BancTec, Inc. 1990 Employee Stock Purchase Plan; Registration
Statement (Form S-3 No. 33-35988) of BancTec, Inc. and subsidiaries;
Registration Statement (Form S-8 No. 33-37377) pertaining to the BancTec, Inc.
1989 Stock Plan; Registration Statement (Form S-8 No. 33-71114) pertaining to
the BancTec, Inc. 1989 Stock Plan; Registration Statement (Form S-3 No.
33-49918) of BancTec, Inc. and subsidiaries and in the related Prospectus of our
report dated May 28, 1992, with respect to the consolidated financial statements
and schedules of BancTec, Inc. and subsidiaries for the year ended March 29,
1992 included in the Annual Report (Form 10-K) for the year ended March 27,
1994.
Ernst & Young
Dallas, Texas
June 20, 1994
