<PAGE>
As filed with the Securities and Exchange Commission on August 8, 1995
Registration No. 33-60391
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4/A
AMENDMENT #1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BANCTEC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 3670 75-1559633
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification
organization) Code Number)
4435 SPRING VALLEY ROAD
DALLAS, TEXAS 75244
(214) 450-7700
(Address, including zip code, and telephone number,
including area code, or registrant's principal executive offices)
TOD V. MONGAN
SENIOR VICE PRESIDENT
SECRETARY AND GENERAL COUNSEL
4435 SPRING VALLEY ROAD
DALLAS, TEXAS 75244
(214) 450-7700
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Jim A. Watson Don M. Glendenning
Vinson & Elkins L.L.P. Locke Purnell Rain Harrell
3700 Trammell Crow Center (A Professional Corporation)
2001 Ross Avenue 2200 Ross Avenue, Suite 2200
Dallas, Texas 75201 Dallas, Texas 75201
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share
(includes associated Rights)(2) 9,200,000 $15.57 $143,244,000 $49,394.48
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c), using the average of the high and low prices
reported on The Nasdaq National Market System for the Registrant's
Common Stock on June 16, 1995.
(2) The Registration Statement also pertains to rights to purchase shares of
Common Stock of the Registrant. One right is attached to and trades with
each share of Common Stock of the Registrant. Until the occurrence of
certain events, the rights are not exercisable and will not be evidenced
or transferred apart from the Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
August ____, 1995
To the Stockholders of BancTec, Inc.:
Enclosed are a Notice of Annual Meeting of Stockholders, a Joint Proxy
Statement and Prospectus, and a Proxy for an Annual Meeting of Stockholders (the
"Meeting") of BancTec, Inc. ("BancTec") to be held on August ___, 1995, at
______ a.m., Dallas, Texas time, at Texas Commerce Bank Tower, Fourth Floor
Boardroom, 2200 Ross Avenue, Dallas, Texas.
At the Meeting you will be asked to consider and vote on the issuance of
shares of BancTec Common Stock in accordance with the terms of an Agreement and
Plan of Merger ("Merger Agreement") pursuant to which a wholly-owned subsidiary
of BancTec will be merged with and into Recognition International Inc.
("Recognition"), with Recognition becoming a wholly-owned subsidiary of BancTec.
The terms of the Merger Agreement provide that holders of Recognition Common
Stock owned as of the effective time of the merger will receive 0.59 of a share
of BancTec Common Stock for each Recognition share. Immediately after the
Merger, the current stockholders of Recognition will own approximately 45% of
the then outstanding BancTec Common Stock. In addition, you will be asked to
vote upon three nominees for directors of BancTec and to approve an increase in
the number of shares available for issuance pursuant to the BancTec, Inc. 1990
Employee Stock Purchase Plan. Details of the proposals are set forth in the
accompanying Joint Proxy Statement and Prospectus, which you should read
carefully.
After careful consideration, the Board of Directors of BancTec has
approved the Merger Agreement and recommends that all stockholders vote for its
approval. The Board of Directors of BancTec believes that the proposed merger
presents significant opportunities for growth in shareholder value,
international market coverage, and product and technology diversity. The
combined company, we believe, will be more cost efficient and therefore
financially stronger, and better able to compete in its chosen markets as a
result of its larger critical mass.
All stockholders are invited to attend the Meeting in person. The
affirmative vote of a majority of the shares of BancTec Common Stock present, in
person or by proxy, at the Meeting will be necessary for approval and adoption
of the Merger Agreement, the election of the three directors and the approval of
the increase in shares available for issuance pursuant the Employee Stock
Purchase Plan.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING, YOU ARE URGED
TO READ THE JOINT PROXY STATEMENT AND PROSPECTUS AND PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. If you attend the Meeting in person you may, if
you wish, vote personally on all matters brought before the Meeting even if you
have previously returned your Proxy.
Sincerely,
Grahame N. Clark, Jr.
Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE READ, SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
BANCTEC, INC.
4435 SPRING VALLEY ROAD
DALLAS, TEXAS 75244
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST ___, 1995
To the Stockholders of BancTec, Inc.:
Notice is hereby given that an Annual Meeting of Stockholders (the
"Meeting") of BancTec, Inc. ("BancTec") will be held on August ___, 1995, at
______:00 a.m., Dallas, Texas at Texas Commerce Bank Tower, Fourth Floor
Boardroom, 2200 Ross Avenue, Dallas, Texas, for the following purposes:
(1) to consider and vote on the issuance of shares of BancTec
Common Stock in accordance with the terms of an Agreement and Plan of
Merger dated as of May 19, 1995 (the "Merger Agreement") among BTEC Merger
Subsidiary, Inc. ("BancTec Sub") and Recognition International Inc.
("Recognition"), pursuant to which among other things, (a) BancTec Sub
would be merged with and into Recognition (the "Merger") and (b) each
stockholder of Recognition would receive for each share of Recognition
Common Stock owned as of the effective time of the Merger 0.59 of a share
of BancTec Common Stock (which approval and adoption shall constitute,
among other things, approval of the issuance of shares of BancTec Common
Stock in connection with the Merger) as described in the accompanying
Joint Proxy Statement and Prospectus;
(2) to consider and vote on the election of three nominees for
directors;
(3) to consider and vote on a proposal to increase in the number
of shares available for issuance pursuant to the BancTec, Inc. 1990
Employee Stock Purchase Plan by 200,000 shares; and
(4) to transact such other business as may properly come before
the Meeting or any adjournments or postponements thereof.
Notwithstanding stockholder approval of the foregoing Proposals, BancTec
reserves the right to abandon the Merger at any time prior to the consummation
of the Merger. See "The Merger Agreement-Termination" for a discussion of
BancTec's ability to abandon the Merger.
The Board of Directors of BancTec (the "BancTec Board") has fixed the
close of business on ________________, 1995, as the record date for the
determination of stockholders entitled to notice of and to vote at the Meeting,
and only stockholders of record at such time will be entitled to notice of and
to vote at the Meeting. A list of BancTec stockholders entitled to vote at the
Meeting will be available for examination, during ordinary business hours, at
Banctec's offices at 4435 Spring Valley Road, Dallas, Texas 75244, for ten days
prior to the Meeting.
A form of Proxy and a Joint Proxy Statement and Prospectus containing more
detailed information with respect to the matters to be considered at the Meeting
accompany this notice.
You are cordially invited and urged to attend the Meeting in person, but
if you are unable to do so, please complete, sign, date and promptly return the
enclosed Proxy in the enclosed, self-addressed, stamped envelope. If you attend
the Meeting and desire to revoke your Proxy and vote in person you may do so. In
any event, a Proxy may be revoked at any time before it is voted.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF EACH OF THE
ABOVE PROPOSALS.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE READ THE
JOINT PROXY STATEMENT AND PROSPECTUS AND COMPLETE, SIGN, DATE AND MAIL PROMPTLY
THE ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, AN ADDRESSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THAT
PURPOSE.
By Order of the Board of Directors,
Tod V. Mongan
Senior Vice President, General Counsel and
Secretary
Dallas, Texas
August ___, 1995
<PAGE>
August ____, 1995
To the Stockholders of Recognition International Inc.:
Enclosed are a Notice of Special Meeting of Stockholders, a Joint Proxy
Statement and Prospectus, and a Proxy for a Special Meeting of Stockholders (the
"Meeting") of Recognition International Inc. ("Recognition") to be held on
_____________, 1995, at _____ a.m. Dallas, Texas time, at _____________________.
At the Meeting you will be asked to consider and vote on a proposal to
approve and adopt an Agreement and Plan of Merger ("Merger Agreement") pursuant
to which a wholly-owned subsidiary of BancTec, Inc. ("BancTec") will be merged
with and into Recognition, with Recognition becoming a wholly-owned subsidiary
of BancTec. The terms of the Merger Agreement provide that holders of
Recognition Common Stock owned as of the effective time of the merger will
receive 0.59 of a share of BancTec Common Stock for each Recognition share.
Immediately after the Merger, the current stockholders of Recognition will own
approximately 45% of the then outstanding BancTec Common Stock. Details of the
proposal are set forth in the accompanying Joint Proxy Statement and Prospectus,
which you should read carefully.
After careful consideration, the Board of Directors of Recognition has
approved the Merger Agreement and recommends that all stockholders vote for its
approval. The Board of Directors of Recognition believes that the proposed
merger presents significant opportunities for enhancement of shareholder value
both in the near term and in the future. Going forward, the combination presents
opportunities for operating efficiencies and synergies which should make the
combined company financially stronger and more competitive. In the meantime, the
number of shares of BancTec stock to be received by Recognition stockholders in
the proposed merger represents a premium over the market price of Recognition
stock at the time the Merger Agreement was signed.
All stockholders are invited to attend the Meeting in person. The
affirmative vote of a majority of the shares of Recognition Common Stock
present, in person or by proxy, at the Meeting will be necessary for approval
and adoption of the merger Agreement.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING, YOU ARE URGED
TO READ THE JOINT PROXY STATEMENT AND PROSPECTUS AND PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. If you attend the Meeting in person you may, if
you wish, vote personally on all matters brought before the meeting even if you
have previously returned your Proxy.
Sincerely,
Robert A. Vanourek
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE READ, SIGN, DATE AND RETURN YOUR PROXY
<PAGE>
RECOGNITION INTERNATIONAL INC.
2701 EAST GRAUWYLER ROAD
IRVING, TEXAS 75061
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ______, 1995
To the Stockholders of Recognition International Inc.:
Notice is hereby given that a Special Meeting of Stockholders of
Recognition International Inc., a Delaware corporation ("Recognition"), will be
held on _______, 1995, at __ o'clock in the morning, Central Standard Time, at
_____________________, Dallas, Texas for the following purpose:
(1) to consider and vote on a proposal to approve and adopt an
Agreement and Plan of Merger dated as of May 19, 1995 (the "Merger
Agreement") among Recognition, BancTec, Inc. ("BancTec") and BTEC Merger
Subsidiary, Inc. ("BancTec Sub") pursuant to which, among other things,
(a) BancTec Sub would be merged with and into Recognition (the "Merger")
and (b) each stockholder of Recognition would receive for each share of
Recognition Common Stock owned as of the effective time of the Merger 0.59
of a share of BancTec Common Stock as described in the accompanying Joint
Proxy Statement and Prospectus; and
(2) to transact such other business as may properly be brought
before said meeting or any adjournment(s) or postponement(s) thereof.
Notwithstanding stockholder approval of the foregoing proposals
Recognition reserves the right to abandon the Merger at any time prior to the
consummation thereof.
Only stockholders of record at the close of business on _________, 1995,
are entitled to notice of, and to vote at, such meeting or any adjournment(s) or
postponement(s)thereof. A complete list of stockholders entitled to vote at the
meeting will be open to examination by any stockholder at the offices of Locke
Purnell Rain Harrell, Suite 2200, 2200 Ross Avenue, Dallas, Texas, for a period
of at least ten days before the meeting.
A form of Proxy and a Joint Proxy Statement and Prospectus containing more
detailed information with respect to the matters to be considered at the Meeting
accompany this notice.
You are cordially invited to attend the meeting in person, but if you
cannot do so, please read the Joint Proxy Statement and Prospectus and complete,
date, sign and return the accompanying proxy card at your earliest convenience.
A reply envelope is provided for this purpose, which needs no postage if mailed
in the United States. Your immediate attention is requested in order to save the
company additional solicitation expense.
By Order of the Board of Directors
Carol S. Lyon
Vice President and Secretary
Dallas, Texas
August ____, 1995
<PAGE>
Subject to completion, Dated August 8, 1995
Preliminary Copy Confidential- For Use of the
Securities and Exchange Commission only
BANCTEC, INC. RECOGNITION INTERNATIONAL INC.
_____________
JOINT PROXY STATEMENT AND PROSPECTUS
_____________
GENERAL INFORMATION
This Joint Proxy Statement and Prospectus (the "Proxy Statement/Prospectus") is
furnished in connection with the solicitation of proxies by the Board of
Directors of BancTec, Inc., a Delaware corporation ("BancTec"), and Recognition
International Inc., a Delaware corporation ("Recognition"), for use in
connection with an Annual Meeting of Stockholders of BancTec (the "BancTec
Meeting") and a Special Meeting of Stockholders of Recognition (the "Recognition
Meeting"), respectively, each of which is to be held on _____, 1995, or any
adjournment(s) or postponement(s) thereof. At such meetings, the stockholders of
each of BancTec and Recognition will consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger dated as of May 19, 1995 (the
"Merger Agreement") among BancTec, BTEC Merger Subsidiary, Inc., a Delaware
corporation and a wholly-owned subsidiary of BancTec ("BancTec Sub"), and
Recognition, pursuant to which BancTec Sub would be merged with and into
Recognition (the "Merger") with Recognition becoming a wholly-owned subsidiary
of BancTec. As a result of the Merger, each of the then outstanding shares of
Common Stock, $.25 par value, of Recognition (the "Recognition Common Stock")
would be converted into the right to receive 0.59 of a share of Common Stock,
$.01 par value, of BancTec (the "BancTec Common Stock"). Immediately after
the Merger, the current stockholders of Recognition will own approximately 45%
of the then outstanding BancTec Common Stock.
In addition, at the BancTec Meeting, the stockholders of BancTec will
consider and vote upon the election of three nominees as directors of BancTec
and will consider and vote upon a proposal to approve an increase in the number
of shares available for issuance pursuant to the BancTec, Inc. 1990 Employee
Stock Purchase Plan by 200,000 shares.
The stockholders of BancTec and Recognition also will consider and vote
upon such other business as may properly come before the meetings or any
adjournment(s) or postponement(s) thereof. A representative of Arthur Andersen
LLP will be present at the BancTec Meeting with an opportunity to make a
statement and to respond to appropriate questions. Likewise, a representative of
Price Waterhouse LLP will be present at the Recognition Meeting with an
opportunity to make a statement and to respond to appropriate questions.
This Proxy Statement/Prospectus also constitutes a prospectus of BancTec
with respect to the shares of BancTec Common Stock (including the associated
rights under the BancTec Stockholder Rights Plan) to be issued pursuant to the
Merger.
FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING THE MERGER,
SEE "CERTAIN CONSIDERATIONS."
This Proxy Statement/Prospectus is first being mailed to the stockholders
of BancTec and Recognition on or about ________, 1995.
_________________
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________
THE DATE OF THIS JOINT PROXY STATEMENT AND PROSPECTUS IS ________, 1995.
i
<PAGE>
AVAILABLE INFORMATION
BancTec and Recognition are each subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60601. Copies
of such materials can also be obtained from the Public Reference Section of the
Commission at 450 Fifty Street, N.W., Judiciary Plaza, Washington, D.C., 20549
at prescribed rates. The shares of Common Stock of Recognition (the "Recognition
Common Stock") are listed on the New York Stock Exchange and, as such, the
periodic reports, proxy statements and other information filed by Recognition
with the Commission can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005. Shares of Common
Stock of BancTec (the "BancTec Common Stock") are quoted on The Nasdaq National
Market System. Reports and other information concerning BancTec can be inspected
at the offices of The Nasdaq Stock Market, Inc. Listing Section, 1735 K Street,
N.W., Washington, D.C. 20006.
BancTec has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of BancTec Common Stock to be
issued in connection with the Merger. This Proxy Statement/Prospectus also
constitutes the Prospectus of BancTec filed as part of the Registration
Statement. This Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The Registration
Statement and any amendments thereto, including exhibits filed as a part
thereof, are available for inspection and copying as set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
RELATING TO BANCTEC AND RECOGNITION WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. DOCUMENTS RELATING TO BANCTEC (OTHER THAN EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE
TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE,
FROM BANCTEC, INC., 4435 SPRING VALLEY ROAD, DALLAS, TEXAS 75244, ATTENTION TOD
V. MONGAN, SECRETARY, TELEPHONE: (214) 450-7700. DOCUMENTS RELATING TO
RECOGNITION (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, FROM RECOGNITION INTERNATIONAL INC., P.
O. BOX 660204, DALLAS, TEXAS 75266-0204, ATTENTION CAROL LYON, SECRETARY,
TELEPHONE: (214) 579-6382. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY SUCH REQUEST SHOULD BE MADE BY ________, 1995. COPIES OF DOCUMENTS SO
REQUESTED WILL BE SENT BY FIRST CLASS MAIL, POSTAGE PAID WITHIN ONE BUSINESS DAY
OF THE RECEIPT OF SUCH REQUEST.
The following BancTec documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended March 26, 1995,
(the "1995 BancTec 10-K");
2. BancTec's Current Report on Form 8-K dated May 19, 1995 (filed
with the Commission on May 31, 1995);
3. The description of the BancTec Common Stock and associated stock
purchase rights contained in the Registration Statement on
Form 8-A dated July 6, 1988; and
4. BancTec Quarterly Report on Form 10-Q dated August 4, 1995 for
the quarter ended June 25, 1995.
The following Recognition documents are incorporated by reference herein:
1. Recognition's Annual Report on Form 10-K for the year ended
October 31, 1994;
2. Recognition's Quarterly Report on Form 10-Q for the quarter
ended January 31, 1995;
3. Recognition's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1995;
4. Recognition's Current Report on Form 8-K dated May 31, 1995;
ii
<PAGE>
5. The description of Recognition's Common Stock contained in Form
8-A declared effective February 11, 1980; and
6. The description of Recognition's Preferred Stock Purchase Rights
contained in Form 8-A dated September 25, 1992.
All documents filed by BancTec or Recognition with the Commission pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof
and prior to the date of the BancTec and Recognition stockholder meetings shall
be deemed to be incorporated by reference herein and shall be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated by reference herein or contained in this Proxy Statement/Prospectus
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein (or in any other subsequently filed document
which also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
_____________
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY FROM ANY PERSON, IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN
OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS
PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BANCTEC OR RECOGNITION SINCE THE
DATE OF THIS PROXY STATEMENT/PROSPECTUS.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION......................................................... i
AVAILABLE INFORMATION....................................................... ii
DOCUMENTS INCORPORATED BY REFERENCE......................................... ii
SUMMARY..................................................................... 1
RISK FACTORS............................................................... 12
Integration of the Business.......................................... 12
Substantial Dilution of Ownership.................................... 12
Costs Relating to the Merger......................................... 12
Management of Combined Company....................................... 13
Factors Affecting Market Price of BancTec Common Stock............... 13
Interests of Certain Persons Relating to Recognition in the Merger... 13
Shares Eligible for Future Sale...................................... 13
Certain Anti-Takeover Provisions..................................... 13
THE MEETINGS............................................................... 13
Matters to be Considered at the Meetings............................. 14
Votes Required....................................................... 14
Voting of Proxies.................................................... 14
Revocability of Proxies.............................................. 14
Record Date; Shares Entitled to Vote; Quorum......................... 14
No Dissenters' Rights................................................ 15
Solicitation of Proxies.............................................. 15
THE MERGER................................................................. 16
General.............................................................. 16
Background of the Merger............................................. 16
Reasons for the Merger; Recommendations of the Boards of Directors... 17
Opinions of Financial Advisors....................................... 19
Interests of Certain Persons in the Merger........................... 25
Accounting Treatment................................................. 26
Certain Federal Income Tax Consequences.............................. 27
Regulatory Approval.................................................. 28
Resale Restrictions.................................................. 28
THE MERGER AGREEMENT....................................................... 28
The Merger........................................................... 28
Exchange Procedures.................................................. 29
Representations and Warranties....................................... 30
Certain Covenants.................................................... 30
No Solicitation of Transactions...................................... 31
Indemnification and Insurance........................................ 32
Conditions........................................................... 32
Termination.......................................................... 32
Termination Fee...................................................... 33
Expenses............................................................. 33
Amendment and Waiver................................................. 33
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................ 34
DESCRIPTION OF CAPITAL STOCK............................................... 40
BancTec Capital Stock................................................ 40
Recognition Capital Stock............................................ 42
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
COMPARATIVE RIGHTS OF STOCKHOLDERS......................................... 43
General.............................................................. 43
Classified Board of Directors........................................ 43
Stockholders Rights Plans............................................ 44
Number of Directors; Removal; Filling Vacancies...................... 45
Stockholder Action by Written Consent; Special Meetings.............. 45
Fair Price Provisions................................................ 45
Amendment of the Certificate of Incorporation and Bylaws............. 48
Limitation of Liability of Directors................................. 48
Indemnification of Directors and Officers............................ 48
Delaware Anti-Takeover Statute....................................... 49
Advance Notice Provisions for Stockholder Nominations and
Stockholder Proposals............................................... 50
ELECTION OF BANCTEC DIRECTORS.............................................. 52
MEETINGS AND COMMITTEES OF THE BANCTEC BOARD............................... 53
BANCTEC EXECUTIVE COMPENSATION............................................. 53
Summary Compensation Table........................................... 53
BancTec Option Grants in Fiscal 1995................................. 56
Aggregated Option Exercises in Fiscal 1995 and Fiscal Year-End
Option Values 57
Compensation of BancTec Directors ................................... 57
BancTec Employment Agreements........................................ 57
BancTec Compensation Committee and Option Committee Interlocks and
Insider Participation............................................... 58
BancTec Compensation Committee Report on Executive Compensation...... 58
Performance Graph.................................................... 60
PROPOSAL TO AMEND BANCTEC'S 1990 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE
THE NUMBER OF SHARES OF BANCTEC COMMON STOCK RESERVED FOR ISSUANCE......... 61
General.............................................................. 61
The Amendment........................................................ 61
Reasons for the 1990 Plan............................................ 61
Administration of the 1990 Plan...................................... 61
Eligibility.......................................................... 61
Stock Offerings...................................................... 62
Election to Participate.............................................. 62
Restrictions on Options.............................................. 63
Amendment and Termination of the 1990 Plan........................... 63
Tax Considerations................................................... 63
Vote Required and Recommendation for Approval of the Proposed
Amendment to the 1990 Plan.......................................... 64
CERTAIN STOCKHOLDERS....................................................... 65
LEGAL MATTERS.............................................................. 67
EXPERTS.................................................................... 67
STOCKHOLDER PROPOSALS...................................................... 67
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS........................... 67
OTHER MATTERS.............................................................. 67
APPENDIX A - Agreement and Plan of Merger.................................. A-1
APPENDIX B - Opinion of Merrill Lynch...................................... B-1
APPENDIX C - Opinion of Bear Stearns....................................... C-1
APPENDIX D - BancTec, Inc. 1990 Employee Stock Purchase Plan............... D-1
</TABLE>
v
<PAGE>
SUMMARY
The following summary of certain information contained elsewhere in this
Joint Proxy Statement and Prospectus (the "Proxy Statement/Prospectus"), does
not purport to be complete and is qualified in its entirety by reference to the
full text, including the Appendices attached hereto. As used in this Proxy
Statement/Prospectus, "BancTec" refers to BancTec, Inc. and "Recognition" refers
to Recognition International Inc. and unless the context otherwise requires,
such entities and their respective subsidiaries and affiliated partnerships. The
information contained in this Proxy Statement/Prospectus with respect to BancTec
and its affiliates has been supplied by BancTec, and the information with
respect to Recognition and its affiliates has been supplied by Recognition.
Certain capitalized terms which are used but not defined in this summary are
defined elsewhere in this Proxy Statement/Prospectus.
BANCTEC
BancTec is a provider of electronic and document-based financial
transaction processing systems, application software and support services.
BancTec develops products for banking, financial services, insurance,
government, utility, telecommunications, retail, and other industries. In
addition, BancTec designs and manufactures document transports and scanners for
value added resellers and original equipment manufacturers and provides support
services to users of local area networks and personal computers.
Document Processing Systems. BancTec offers a variety of products which
are used to process financial or full page documents. BancTec's ImageFIRST(R)
and 9400 series products provide solutions for financial document processing
requirements, such as high-speed check sorting and remittance payment
processing. By accelerating the processing of financial documents, customers are
able to improve their cash flow and maximize funds availability. BancTec's
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 efficiently scan, digitize, route and archive
full-sized business documents such as contracts, letters, insurance forms and
engineering drawings.
Integrated Core Processing And Bank Automation Software Products. BancTec
provides several hardware and software products to community banks. Banker II(R)
and ACCESS(TM) are core processing software products which integrate check
sorting, platform automation, loan processing, deposit management, ATM and
teller processing and other bank operations activities. PODExpress(R) combines
PC UNIX-based software products with the Company's reader/sorters to provide
solutions for proof-of-deposit and other check sorting applications.
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 and
point of sale applications. The Company's products enable retailers to process
consumers' electronic transactions in-lane, in-store, at the main office or at
the electronic payment switch.
Network Services and Personal Computer Support. BancTec provides LAN and
PC hardware support, systems integration services, asset management, help desk
services and installation coordination. It'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. and
AST Research Inc. As a key aspect of BancTec's strategy of providing its
customers with a total system solution, BancTec installs and maintains its own
products.
Sales and Distribution. In the United States, BancTec's U.S. Banking and
Commercial Systems focuses on the following areas:
1. 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 products for community banks and
smaller regional banks.
3. Software products for electronic funds transfer and point-of-sale
applications for retailers, grocery chains and financial institutions.
1
<PAGE>
The Company's North American Service and Manufacturing Group focuses on
the following areas:
1. 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.
2. Document processing equipment, imaging products and electronic
components for original equipment manufacturers and value added resellers.
Internationally, BancTec sells its products through a variety of channels.
The Company has direct sales forces in the United Kingdom, Canada, Japan and
Australia. In 1992, BancTec and Thomson-CSF established a joint venture company,
ScanData N.V., which has exclusive rights to market and service BancTec's
products in continental Europe, Scandinavia and North Africa. The Company also
has a 33% interest in Servibanca, a South American company which specializes in
financial document processing.
BancTec's principal executive offices are located at 4435 Spring Valley
Road, Dallas, Texas 75244, and its telephone number at such address is
(214) 450-7700.
RECOGNITION
Recognition is a supplier of document recognition and imaging systems,
workflow and image software and related customer service. Recognition's products
are designed primarily to manage and process the flow of paper documents,
information and work activities. Recognition operates its business through
several strategic business units: the Worldwide Systems Group (comprised of the
OEM & Technology Division, the Solutions Division, the International Solutions
Division and the Service Division); and the Software Division.
The OEM & Technology Division develops and manufactures equipment and
software products designed to automate the input of data from paper documents
for processing in centralized and distributed environments. These products
utilize Recognition's core technical competencies which include magnetic ink
character recognition ("MICR"), optical character recognition ("OCR"), image
character recognition ("ICR"), high-speed paper handling, image capture and
local area networking. Examples of applications for Recognition's systems
include the sorting and encoding of checks and airline tickets, the processing
and encoding of customer payments for utilities, credit card, insurance and
similar industries, and the image capture, manipulation and processing of forms
such as medical claims, employee applications and purchase orders.
The Solutions Division was formed in 1994 to take advantage of
Recognition's application expertise in order to develop and market complete
system solutions for forms processing, remittance and payment processing and
document management processing. In developing these solutions, the Division
integrates equipment, application software and professional services provided by
the Division, other Recognition divisions and/or third parties.
The International Solutions Division markets products to the international
marketplace through Recognition's wholly-owned subsidiaries and a network of
resellers and distributors. The Division sells products which are produced by
other Recognition divisions and products supplied by other vendors. The Division
also markets PC-based wide and local area network products purchased from
various vendors and integrated for use by government agencies and commercial
customers. Such network products are primarily marketed by Recognition's
Canadian subsidiary. In addition, the Division markets equipment and software
maintenance and support services similar to those provided by the Service
Division.
The Service Division's staff of over 500 U.S. field technicians provides
hardware and software maintenance and support services on an on-call, on-site or
return-to-factory basis to its customers. These services are provided for
Recognition's products and other manufacturers' electro-mechanical equipment,
such as item processing transports and high-speed laser printers. The Division
also provides telephone support services, contract programming services,
software updates and training for equipment and software products.
The Software Division has developed and markets a family of open system
software products under the brand name Plexus(R). The Division also markets
products developed by other vendors. These products allow users to streamline
and redesign the flow of information through the work environment. The
Division's imaging software products consist of optical storage management
software and a development environment for network-based imaging systems. Its
workflow products manage the flow of data between various steps in a user-
defined business process. The Plexus product line improves employee productivity
and customer service by eliminating the need for the retrieval of information
records typically stored as paper documents and permitting the electronic
routing of such records and related information between computers and other data
2
<PAGE>
processing equipment in the workplace. The Division also provides telephone
support services, contract programming services, consulting services, software
updates and training for its products.
Recognition was founded in 1961. In March 1993, the company changed its
name to Recognition International Inc. from Recognition Equipment Incorporated.
Recognition's principal executive office is located at 2701 East Grauwyler Road,
Irving, Texas 75061 and its telephone number is (214) 579-6000.
ANNUAL AND SPECIAL MEETINGS OF STOCKHOLDERS
This Proxy Statement/Prospectus relates to an Annual Meeting of
Stockholders of BancTec (the "BancTec Meeting") and a Special Meeting of
Stockholders of Recognition (the "Recognition Meeting," and collectively with
the BancTec Meeting, the "Meetings"). At the Recognition Meeting, the
stockholders of Recognition will consider and vote upon a proposal to approve
and adopt an Agreement and Plan of Merger dated as of May 19, 1995 (the "Merger
Agreement") among BancTec, BTEC Merger Subsidiary, Inc., a wholly owned
subsidiary of BancTec ("BancTec Sub"), and Recognition pursuant to which BancTec
Sub would be merged with and into Recognition (the "Merger"). A copy of the
Merger Agreement is attached to this Proxy Statement/Prospectus as Appendix A.
At the BancTec Meeting, the stockholders of BancTec will consider and vote on
the issuance of shares of BancTec Common Stock pursuant to the terms of the
Merger Agreement. In addition, the stockholders of BancTec will consider and
vote upon the election of three nominees as directors of BancTec (the "Election
of Directors") and a proposal to approve an increase in the number of shares
available for issuance pursuant to the BancTec, Inc. 1990 Employee Stock
Purchase Plan by 200,000 shares (the "Purchase Plan Approval").
The BancTec Meeting will be held on ________, 1995, at __:00 a.m., Dallas,
Texas time, at Texas Commerce Bank Tower, Fourth Floor Boardroom, 2200 Ross
Avenue, Dallas, Texas. The record date for stockholders of BancTec entitled to
notice of and to vote at the BancTec Meeting is as of the close of business on
____________, 1995. Voting rights for BancTec are vested in the holders of the
BancTec Common Stock, with each share of BancTec Common Stock entitled to one
vote on each matter coming before the stockholders. As of _______, 1995, there
were approximately _______________ shares of BancTec Common Stock outstanding
and approximately _______ holders of record.
The Recognition Meeting will be held on ____________, 1995, at __:00 a.m.,
Dallas, Texas time, at _________. The record date for stockholders of
Recognition entitled to notice of and to vote at the Recognition Meeting is as
of the close of business on ___________, 1995. Voting rights for Recognition are
vested in the holders of the Common Stock, $.25 par value, of Recognition
("Recognition Common Stock"), with each share of Recognition Common Stock
entitled to one vote on each matter coming before the stockholders. As of June
1, 1995, there were 15,355,740 shares of Recognition Common Stock outstanding
and approximately 4,940 holders of record.
VOTES REQUIRED
BancTec. In accordance with the National Association of Securities Dealers,
Inc. ("NASD") By-Laws, the affirmative vote of a majority of the shares of
BancTec Common Stock present, in person or by proxy, at the BancTec Meeting will
be necessary for approval of the issuance of shares of BancTec Common Stock to
Recognition stockholders pursuant to the terms of the Merger Agreement.
Additionally, pursuant to General Corporation Law of the State of Delaware (the
"DGCL"), the affirmative vote of a majority of the shares of BancTec Common
Stock present, in person or by proxy, at the BancTec Meeting will be necessary
for the election of the nominees for Directors and the approval and adoption of
the proposed amendment to the BancTec Inc. 1990 Employee Stock Purchase Plan.
As of June 6, 1995, directors and executive officers of BancTec were beneficial
owners of approximately ____% of the outstanding shares of BancTec Common Stock
(excluding 712,080 shares which may be acquired upon exercise of options or
other rights which are exercisable within 60 days of June 6, 1995).
Recognition. Pursuant to the DGCL, the favorable vote of the holders of at
least a majority of the outstanding shares of Recognition Common Stock is
required for the approval and adoption of the Merger Agreement. As of June 1,
1995, directors and executive officers of Recognition were beneficial owners of
approximately 0.78% of the outstanding shares of Recognition Common Stock
(excluding 902,483 shares which may be acquired upon exercise of options or
other rights which are exercisable within 60 days of June 1, 1995)
THE MERGER
Conversion of Securities. Upon consummation of the transactions
contemplated by the Merger Agreement, (a) BancTec Sub will be merged with and
into Recognition (the "Merger") and (b) each issued and outstanding share of
Recognition Common Stock will be converted into the right to receive 0.59 of a
share of BancTec Common Stock (the "Exchange Ratio"). Immediately after the
Merger, the current Stockholders of Recognition will own approximately 45% of
the then outstanding BancTec Common Stock. Fractional shares of BancTec Common
stock will not be issued in connection with the Merger. A holder otherwise
entitled to a fractional share will be paid cash in lieu of such fractional
share in an amount equal to the product of the Average Price (as defined) of a
share
3
<PAGE>
of the BancTec Common Stock multiplied by the fraction of a share to which such
holder would otherwise be entitled.
Recommendations of the Boards of Directors. The BancTec Board has
approved the Merger Agreement and recommends a vote FOR approval and adoption of
the Merger Agreement by the stockholders of BancTec. The BancTec Board believes
that the terms of the Merger are fair to and in the best interests of BancTec
and its stockholders. The Board of Directors of Recognition (the "Recognition
Board") has approved the Merger Agreement and recommends a vote FOR approval and
adoption of the Merger Agreement by the stockholders of Recognition. The
Recognition Board believes that the terms of the Merger are fair to and are in
the best interests of Recognition and its stockholders.
For a discussion of the factors considered by the respective Boards of
Directors in reaching their decisions, see "The Merger-Reasons for the Merger;
Recommendations of the Boards of Directors."
Opinions of Financial Advisors. On May 19, 1995, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") delivered its oral opinion to
BancTec's Board, which opinion was subsequently confirmed in writing, that, as
of such date and based on the assumptions made and matters considered in, and
the limitations on, the review undertaken by Merrill Lynch as discussed by
Merrill Lynch with Banctec's Board, the Exchange Ratio was fair to BancTec from
a financial point of view. Merrill Lynch subsequently delivered its written
opinion dated the date of this Proxy Statement/Prospectus (the "Merrill Lynch
Opinion") that, as of such date and based on the assumptions made and matters
considered in, and the limitations on, the review undertaken by Merrill Lynch as
set forth therein, the Exchange Ratio was fair to BancTec from a financial point
of view.
On May 19, 1995, Bear, Stearns & Co. Inc. ("Bear Stearns") delivered its
written opinion to Recognition's Board to the effect that, based on various
considerations and assumptions, the Exchange Ratio was fair from a financial
point of view to the holders of Recognition Common Stock. Bear Stearns
subsequently confirmed such opinion by delivery of its written opinion dated the
date of this Proxy Statement/Prospectus.
Copies of the full text of the written opinions of Merrill Lynch and Bear
Stearns, dated the date of this Proxy Statement/Prospectus, which set forth the
assumptions made, procedures followed, matters considered and limits of their
respective reviews, are attached to this Proxy Statement/Prospectus as
Appendices B and C, respectively, and should be read carefully in their
entirety. See "The Merger-Opinions of Financial Advisors."
Interests of Certain Persons in the Merger. In considering the
recommendation of Recognition's Board with respect to the Merger Agreement and
the transactions contemplated thereby, stockholders should be aware that certain
employees and members of the management and the Board of Directors of
Recognition have certain interests in the Merger that are in addition to the
interests of stockholders of Recognition generally, including without
limitation, severance agreements entered into in December 1994 providing for
immediate exercisability of stock options and extension of exercisability
periods of such options under certain circumstances, the acceleration of stock
options, the continuation of indemnification and insurance coverage, and the
acceleration of the vesting and payment of benefits under the Executive Benefit
Plan. See "The Merger--Interests of Certain Persons in the Merger," and "The
Merger Agreement--Indemnification and Insurance.
Conditions to the Merger. The obligations of BancTec and Recognition to
consummate the Merger are subject to the satisfaction of certain conditions,
including, among others, (i) obtaining requisite stockholder approvals, (ii) the
expiration or termination of the waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (iii) the absence of any material adverse change in the
financial condition, business, operations or prospects of the other party,
except that certain changes occurring because of the Merger Agreement and its
announcement shall not be considered as material adverse changes, (iv) the
absence of any injunction prohibiting consummation of the Merger, (v) the
receipt of certain legal opinions with respect to the tax consequences of the
Merger and (vi) the qualification of the Merger as a pooling of interests.
The obligation of BancTec to consummate the Merger is further subject to
the following conditions to be satisfied at or prior to the Effective Time: (a)
the absence of a determination by BancTec, upon review of certain matters
described in a disclosure letter provided to BancTec pursuant to the terms of
the Merger Agreement, that in its reasonable judgment such matters are likely to
have a material adverse affect upon the business, financial condition or result
of operations of Recognition and its subsidiaries taken as a whole, (b) the
performance in all material respects of Recognition's obligations required to be
performed by it under the Merger Agreement, and (c) the truth and correctness of
the representations and warranties of Recognition contained in the Merger
Agreement. In addition, the obligation of Recognition to consummate the Merger
is further subject to the following conditions to be satisfied at or prior to
the Effective Time: (a) the performance in all material respects of BancTec's
obligations required to be performed by it under the Merger Agreement, and (b)
the truth and correctness of the representations and warranties of BancTec
contained in
4
<PAGE>
the Merger Agreement. See "The Merger-Certain Federal Income Tax Consequences,"
"The Merger-Accounting Treatment" and "The Merger Agreement-Conditions."
Effective Time of the Merger. The Merger will become effective upon the
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time"), which certificate will be filed as promptly as
practicable after the requisite stockholder approvals have been obtained and all
other conditions to the Merger have been satisfied or waived. Subject to the
satisfaction (or waiver) of the other conditions to the obligations of BancTec
and Recognition to consummate the Merger, it is presently expected that the
Merger will be consummated immediately following the Meetings or as soon
thereafter as such other conditions are satisfied.
Exchange of Recognition Stock Certificates. Upon consummation of the
Merger, each holder of a certificate or certificates representing shares of
Recognition Common Stock ("Certificates") outstanding immediately prior to the
Merger will, upon the surrender thereof (duly endorsed, if required) to a
designated exchange agent (the "Exchange Agent"), be entitled to receive a
certificate or certificates representing the number of whole shares of BancTec
Common Stock into which such shares of Recognition Common Stock will have been
automatically converted as a result of the Merger. After the consummation of the
Merger, the Exchange Agent will mail a letter of transmittal with instructions
to all holders of record of Recognition Common Stock as of the Effective Time
for use in surrendering their Certificates in exchange for certificates
representing shares of BancTec Common Stock. CERTIFICATES SHOULD NOT BE
SURRENDERED UNTIL THE LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. See
"The Merger Agreement-Exchange Procedures."
No Dissenters' Rights. Holders of BancTec Common Stock and Recognition
Common Stock are not entitled to dissenters' rights in connection with the
Merger.
Certain Federal Income Tax Consequences. The obligations of Recognition
and BancTec to consummate the Merger are conditioned on the receipt of opinions
of their respective counsel, Locke Purnell Rain Harrell (A Professional
Corporation) and Vinson & Elkins L.L.P., to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
If so treated, no gain or loss will be recognized by Recognition stockholders
upon the receipt of BancTec Common Stock in exchange for Recognition Common
Stock except with respect to cash received in lieu of a fractional interest in
BancTec Common Stock. See "The Merger-Certain Federal Income Tax Consequences"
and "The Merger Agreement-Conditions."
Accounting Treatment. Both BancTec and Recognition believe that the Merger
will qualify as a pooling of interests for accounting and financial reporting
purposes. Recognition has received a "pooling letter" from Price Waterhouse LLP,
their independent accountants, dated May 19, 1995, to the effect that, subject
to customary qualifications, no event has occurred with respect to Recognition
which would preclude the Merger from being treated as a pooling of interests for
accounting purposes. BancTec has received a "pooling letter" from Arthur
Andersen LLP, their independant public accountants, dated May 19, 1995, to the
effect that, subject to customary qualifications, the Merger will be treated as
a pooling of interests for accounting purposes. Consummation of the Merger is
conditioned upon the Merger being treated as a pooling of interests as reflected
in the unaudited pro forma condensed combined financial statements contained in
this Registration Statement. See "The Merger-Accounting Treatment" and "The
Merger Agreement-Conditions."
Resale Restrictions. All shares of BancTec Common Stock received by
Recognition stockholders in the Merger will be freely transferable, except that
shares of BancTec Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of Recognition
at the time of the Recognition Meeting may be resold by them only in certain
permitted circumstances. See "The Merger-Resale Restrictions."
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the approval
by the stockholders of Recognition and BancTec, respectively, in a number of
circumstances, which include, among others: (a) by the mutual consent of
Recognition and BancTec by action of their respective Boards of Directors; (b)
by action of the Board of Directors of either Recognition or BancTec if (i) the
Merger shall not have been consummated by December 31, 1995, (ii) the adoption
of the Merger Agreement and the approval of the transactions contemplated
thereby by Recognition's stockholders shall not have been obtained at a
stockholders' meeting duly convened for such purpose (or any adjournment
thereof), (iii) the adoption of the Merger Agreement and the approval of the
transactions contemplated thereby by BancTec's stockholders shall not have been
obtained at a stockholders' meeting duly convened for such purpose (or any
adjournment thereof) or (iv) a court or governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement which shall
have become final and nonappealable; and (c) by action of Recognition's Board,
if in the exercise of its good faith judgment as to its fiduciary duties to its
stockholders
5
<PAGE>
imposed by law, Recognition's Board determines that such termination is required
by reason of an Alternative Proposal (hereinafter defined) being made for
Recognition. See "The Merger Agreement-Termination."
Termination Fee. If any person makes an Alternative Proposal for
Recognition and the Merger Agreement is thereafter terminated by Recognition or
by BancTec if Recognition's stockholders did not approve the Merger Agreement,
Recognition is required to pay BancTec a fee of $5,500,000. See "The Merger
Agreement-Termination Fee."
Regulatory Approval. Under the HSR Act, the Merger cannot be consummated
until notifications and certain information have been furnished to the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and specified waiting period requirements
have been satisfied. BancTec and Recognition each filed notification and report
forms under the HSR Act with the FTC and the Antitrust Division on June 8, 1995,
along with requests for early termination of the waiting period, and on
______________, 1995, early termination of the waiting period was granted.
6
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
Set forth below are selected historical financial data of BancTec and
Recognition which are based upon the historical consolidated financial
statements of BancTec and Recognition. The following data should be read in
conjunction with the respective consolidated financial statements incorporated
by reference in this Joint Proxy Statement/Prospectus.
BANCTEC, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE FISCAL YEARS ENDED
------------------------ -------------------------------------------------------
JUNE 25, JUNE 26, MARCH 26, MARCH 27, MARCH 28, MARCH 29, MARCH 31,
1995 1994 1995 1994 1993 1992 1991
----------- ----------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(FOR THE PERIOD):
Revenue........................ $ 73,152 $ 69,466 $297,539 $247,538 $233,885 $190,968 $183,761
Income before cumulative
effect of accounting change.. 3,825 3,702 12,509 16,343 14,351 11,721 10,672
Net income..................... 3,825 3,702 12,509 16,343 15,186 11,721 10,672
Income per share before
cumulative effect of
accounting change............ 0.35 0.33 1.12 1.45 1.32 1.15 1.08
Net income per share........... 0.35 0.33 1.12 1.45 1.40 1.15 1.08
FINANCIAL POSITION
(AT PERIOD END):
Total assets................... $301,705 -- $307,366 $276,270 $194,846 $171,254 $152,707
Working capital................ 35,850 -- 32,013 46,085 49,687 43,143 41,764
Long-term debt................. 42,577 -- 42,459 50,564 12,239 19,629 27,392
Stockholders' equity........... 141,153 -- 137,128 128,273 109,972 92,252 78,920
Weighted average shares 10,934 11,227 11,128 11,294 10,870 10,173 9,861
</TABLE>
7
<PAGE>
RECOGNITION INTERNATIONAL INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED APRIL 30, FOR THE FISCAL YEARS ENDED OCTOBER 31,
-------------------- ------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- -------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(FOR THE PERIOD):
Revenue......................... $108,852 $112,925 $219,393 $230,578 $199,186 $155,153 $230,618
Income (loss) before
extraordinary items........... 146 (735) (26,580) 7,936 4,052 2,709 (31,687)
Net income (loss)............... 146 (735) (26,580) 7,936 4,836 6,238 (31,687)
Income (loss) per share before
extraordinary items........... 0.01 (0.05) (1.70) 0.55 0.32 0.25 (3.10)
Net income (loss) per share..... 0.01 (0.05) (1.70) 0.55 0.38 0.57 (3.10)
FINANCIAL POSITION
(AT PERIOD END):
Total assets.................... $203,476 -- $204,463 $217,364 $188,383 $163,793 $181,291
Working capital................. 55,898 -- 52,592 75,044 42,193 57,651 59,933
Long-term debt.................. 49,472 -- 51,722 53,656 63,781 57,688 77,628
Stockholders' equity............ 79,856 -- 77,837 100,802 61,416 56,232 39,495
Weighted average shares........... 15,492 15,806 15,623 14,496 12,649 10,878 10,213
</TABLE>
8
<PAGE>
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma condensed combined financial
data are presented assuming the Merger will be accounted for as a pooling of
interests. The Financial Position data reflect the combined historical data of
BancTec at June 25, 1995 and Recognition at April 30, 1995. The Summary of
Operations data for the three months ended June 25,1995 and June 26, 1994
include BancTec financial data for the three months ended June 25, 1995 and June
26, 1994 combined with the Recognition financial data for the three months ended
April 30, 1995 and April 30, 1994, respectively. The Summary of Operations data
for the years ended March 26, 1995, March 27, 1994 and March 28, 1993 include
BancTec fiscal year-end data for the years ended March 26, 1995, March 27, 1994
and March 28, 1993 combined with the Recognition financial data for the twelve
months ended April 30, 1995 and the fiscal years ended October 31, 1993 and
1992, respectively. The twelve months ended April 30, 1995 for Recognition were
determined by subtracting the six months ended April 30, 1994 from the year
ended October 31, 1994, and adding the six months ended April 30, 1995.
Therefore, Recognition's results of operations for the three months ended April
30, 1995 have been included in the pro forma condensed combined financial data
for both the three months ended April 30, 1995 and the twelve months ended April
30, 1995. Recognition's revenue and income from continuing operations for the
three months ended April 30, 1995 were $55,451,000 and $617,000, respectively.
As the six months ended April 30, 1994 have been subtracted out to arrive at the
twelve months ended April 30, 1995, they are excluded from the pro forma
condensed combined financial statements. Recognition's revenue and loss from
continuing operations for the six months ended April 30, 1994 were $112,925,000
and $735,000, respectively.
The unaudited pro forma condensed combined financial data do not reflect
expenses expected to be incurred by BancTec and Recognition in connection with
the Merger or the effect of cost savings, if any, which may be realized after
the consummation of the Merger. BancTec expects to incur charges to operations
currently estimated at approximately $65,000,000 to $75,000,000 in the quarters
ended September 30, 1995 and December 31, 1995, the quarters in which the Merger
is expected to be consummated, to reflect costs associated with combining the
operations of the two companies, primarily the closing of duplicate facilities
of approximately $12,600,000, write-off of inventory related to duplicate
product lines of approximately $10,000,000, writeoff of goodwill and other
intangible assets of approximately $18,000,000, writeoff of other assets of
approximately $9,700,000, severance of approximately $14,700,000, and
transaction fees and costs incident to the Merger of approximately $5,000,000.
The midpoint of the estimated charge after effecting for estimated tax benefits
of $20,000,000, is reflected in the unaudited pro forma condensed combined
balance sheet. The future cash requirements related to these charges are
estimated to be in the range of $36,000,000. These preliminary estimates are
subject to change based upon additional information. The unaudited pro forma
condensed combined financial data are not necessarily indicative of the
operating results that would have been achieved had the Merger been in effect as
of the beginning of the periods presented and should not be construed as
representative of future operations. See "Unaudited Pro Forma Condensed Combined
Financial Statements."
BANCTEC, INC.
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE FISCAL YEARS ENDED
------------------------------ -------------------------------------------------------
JUNE 25, 1995 JUNE 26, 1994 MARCH 26, 1995 MARCH 27, 1994 MARCH 28, 1993
-------------- --------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(FOR THE PERIOD):
Revenue................. $128,603 $132,043 $512,859 $478,116 $433,071
Income (loss) from
continuing operations.. 4,442 2,311 (3,190) 24,279 18,403
Income (loss) from
continuing operations
per share.............. 0.22 0.11 (0.16) 1.22 1.00
<CAPTION>
FINANCIAL POSITION JUNE 25, 1995
(AT PERIOD END): --------------
<S> <C> <C>
Total assets............ $476,181
Working capital......... 55,248
Long-term debt.......... 92,049
Stockholders' equity.... 181,009
Weighted average shares..... 20,052 20,505 20,253 19,847 18,333
</TABLE>
9
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain historical per share data
of BancTec and Recognition and combined per share data on an unaudited pro forma
basis after giving effect to the merger on a pooling of interests basis assuming
the issuance of 0.59 of a share of BancTec Common Stock in the Merger in
exchange for each share of Recognition Common Stock. This data should be read in
conjunction with the selected financial data, the pro forma condensed combined
financial statements included elsewhere in the Joint Proxy Statement/Prospectus
and the separate historical financial statements of BancTec and Recognition
incorporated by reference herein.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE FISCAL YEARS ENDED
--------------------------------- -------------------------------------------------------
JUNE 25, 1995 JUNE 26, 1994 MARCH 26, 1995 MARCH 27, 1994 MARCH 28, 1993
-------------- ---------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
HISTORICAL BANCTEC:
Income from continuing
operations per share $ 0.35 $0.33 $ 1.12 $1.45 $1.32
Book value per share (4) $13.25
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE FISCAL YEARS ENDED OCTOBER 31,
--------------------------------- ------------------------------------------------------
APRIL 30,1995 APRIL 30,1994 1994 1993 1992
-------------- -------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
HISTORICAL RECOGNITION:
Income (loss) from
continuing operations
per share (3) $0.04 ($0.09) ($1.70) $0.55 $0.32
Book value per share (4) $5.18
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE FISCAL YEARS ENDED
--------------------------------- -------------------------------------------------------
JUNE 25, 1995 JUNE 26, 1994 MARCH 26, 1995 MARCH 27, 1994 MARCH 28, 1993
--------------- ---------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED:(1)
Income (loss) from
continuing operations
per share (2)(3) $0.22 $0.11 ($0.16) $1.22 $1.00
Book value per share (4) $9.17
Income (loss) from
continuing operations
per equivalent share (5) $0.13 $0.06 ($0.09) $0.72 $0.59
Book value per equivalent
share (5) $5.41
</TABLE>
(1) For the purposes of the pro forma condensed combined data, BancTec's
financial data for the three months ended June 25, 1995 and June 26, 1994
and for the three fiscal years ended March 26, 1995, March 27, 1994 and
March 28, 1993 have been combined with Recognition's financial data for the
three months ended April 30, 1995 and 1994 and for the twelve months ended
April 30, 1995 and the fiscal years ended October 31, 1993 and 1992,
respectively. Intercompany transactions between the companies are minimal
and therefore, no adjustments for such transactions have been made.
(2) The pro forma combined per share amounts have been calculated by factoring
the historical Recognition weighted average shares outstanding by the
Exchange Ratio of 0.59 shares of BancTec Common Stock for each share of
Recognition Common Stock.
(3) For the computation of earnings per share for both Recognition on a stand-
alone basis, and for the companies on a combined basis, Recognition has
convertible debt that is anti-dilutive; therefore it has been excluded
from the calculations.
(4) The historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock outstanding as reported on
the face of each companies' latest Annual Report on Form 10-K or Quarterly
Report on Form 10-Q. Shares of Recognition stock have been converted using
the Exchange Ratio for the pro forma combined book value computation. The
pro forma book value computation also takes into account the midpoint of the
estimated range for the transaction cost charges estimated at $50,000,000
(net of estimated tax benefits), and $10,000,000 in benefits from
utilization of Recognition income tax valuation reserves.
(5) The pro forma equivalent income (loss) from continuing operations per share
and the pro forma equivalent book value represents the pro forma combined
income (loss) from continuing operations per share and book value multiplied
by the exchange ratio.
10
<PAGE>
COMPARATIVE MARKET DATA
The BancTec Common Stock is traded through The Nasdaq National Market
System. The Recognition Common Stock has been primarily traded on the NYSE
(symbol "REC") since February 14, 1980 (the date on which such shares commenced
public trading). The table below sets forth, for the calendar quarters
indicated, the high and low sales prices per share reported on the NYSE
Composite Tape or by The Nasdaq National Market System, as appropriate, for the
BancTec Common Stock and the Recognition Common Stock. The information with
respect to The Nasdaq quotations was obtained from the National Association of
Securities Dealers, Inc. and reflects interdealer prices, without retail markup,
markdown or commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
BANCTEC RECOGNITION
COMMON STOCK COMMON STOCK
------------ ------------
HIGH LOW HIGH LOW
------ ------ ---- ------
<S> <C> <C> <C> <C>
1993:
First Quarter........................... $20.13 $15.50 $16.25 $11.88
Second Quarter.......................... $20.00 $15.50 $16.50 $12.63
Third Quarter........................... $22.75 $17.25 $16.88 $11.75
Fourth Quarter.......................... $24.25 $18.75 $17.75 $13.75
1994:
First Quarter........................... $24.75 $20.00 $15.13 $11.88
Second Quarter.......................... $23.50 $18.75 $14.13 $ 8.13
Third Quarter........................... $26.50 $19.50 $ 8.88 $ 6.38
Fourth Quarter.......................... $27.25 $18.25 $ 9.63 $ 6.88
1995:
First Quarter........................... $22.00 $14.75 $ 9.38 $ 6.50
Second Quarter.......................... $19.75 $14.75 $ 9.13 $ 6.50
</TABLE>
The last reported sale prices per share of BancTec Common Stock and
Recognition Common Stock on May 18, 1995, the last trading day preceding public
announcement of the Merger, were $17.63 and $7.00, respectively. The Exchange
Ratio of Recognition Common Stock to BancTec Common Stock has been fixed at one
share of Recognition exchanged for 0.59 of a share of BancTec.
Because the Exchange Ratio is fixed and because the market price of BancTec
Common Stock is subject to fluctuation, the market value of the shares of
BancTec Common Stock that holders of Recognition Common Stock will receive in
the Merger may increase or decrease prior to and following the Merger.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE BANCTEC
COMMON STOCK AND THE RECOGNITION COMMON STOCK.
On ________, 1995, the most recent practicable date prior to the printing of
this Joint Proxy Statement/Prospectus, the last reported Common Stock sales
price was $___________ for BancTec and $_________ for Recognition.
DIVIDEND POLICY
Both companies have had a policy of retaining their earnings for use in the
company. No dividends have been paid by either company in the past. At this time
there are no plans to declare and pay dividends on the combined companies in the
future.
RISK FACTORS
See "Risk Factors" with respect to factors which should be considered in
evaluating the Merger.
11
<PAGE>
RISK FACTORS
The following factors should be considered carefully by the stockholders
of BancTec and Recognition in connection with voting upon the Merger.
INTEGRATION OF THE BUSINESS
Following the Merger, BancTec intends to integrate certain of the
operations, including research and development, sales and marketing, finance and
administrative functions of the two companies as soon as reasonably practicable.
The Merger involves the integration of two companies that have previously
operated independently. While BancTec has experience in the integration of
acquired operations there can be no assurance that BancTec will not encounter
difficulties in integrating the operations of Recognition with those of BancTec
or that all of the benefits expected from such integration will be realized. Any
delays or unexpected costs incurred in connection with such integration could
have an adverse effect on the combined company's business, operating results or
financial condition in the short term. Furthermore, there can be no assurance
that the operations, management and personnel of the two companies will be
compatible or that BancTec or Recognition will not experience the loss of key
personnel. Among the factors considered by the Boards of Directors of BancTec
and Recognition in connection with their approval of the Merger Agreement were
the opportunities for economies of scale and operating efficiencies that should
result from the Merger. While BancTec and Recognition expect to achieve savings
in operating costs as a result of the Merger (including, without limitation,
integration of office facilities, information systems and support functions and
the combined purchasing power of the two companies), there can be no assurances
that the savings will be realized.
SUBSTANTIAL DILUTION OF OWNERSHIP
Following consummation of the Merger, the current shareholders of
Recognition as a group will beneficially own approximately 45% of the
outstanding shares of BancTec Common Stock. The Merger will represent a
substantial dilution of the ownership interests of BancTec's current
stockholders.
COSTS RELATING TO THE MERGER
In connection with the Merger, the combined company expects to incur
substantial costs in the quarters ending September 30 and December 31, 1995.
These include costs, currently estimated to be at least $5,000,000, related to
transaction fees and costs incident to the Merger, including the fees of
financial advisors, attorneys and accountants. In addition, the combined company
expects to incur approximately $45,000,000 of costs associated with elimination
of duplicate facilities, severance costs relating to the termination of certain
employees and the writeoff of costs relating to inventories for duplicate
product lines and other intangible assets, net of related income tax benefit of
$20,000,000. In addition, costs related to the Merger could increase if BancTec
and Recognition encounter difficulties in the consummation of the Merger or in
the integration of their businesses. There can be no assurance that the combined
company will not incur charges in subsequent quarters to reflect additional
costs which could have an adverse effect on the business, financial condition,
results of operations and price of the Common Stock of the combined company.
MANAGEMENT OF COMBINED COMPANY; RECOGNITION LOSSES
The transition to the combined company will require substantial attention
from management. In addition, last year, Recognition had losses of approximately
$27,000,000, which included a restructuring charge of approximately $20,000,000,
and other non-recurring charges of approximately $6,000,000. The diversion of
management attention and any difficulties encountered in the transition process
or continued losses by Recognition could have an adverse effect on the business,
financial condition and results of operations of the combined company.
12
<PAGE>
INTERESTS OF CERTAIN PERSONS RELATED TO RECOGNITION IN THE MERGER
Certain persons related to Recognition could be deemed to have an interest
in the Merger. BancTec has agreed to assume all outstanding options granted
under the Recognition Stock Option Plans. Pursuant to agreements entered into in
December 1994 with several executives, the Merger and a subsequent termination
of an executive's employment will cause immediate exercisability of options and
extend exercisability of such options for periods of 12 to 24 months after such
termination. BancTec has also agreed to keep in effect in the Bylaws of the
combined company a provision for mandatory indemnification of the past and
present officers and directors of Recognition and each other person who has been
afforded indemnification by Recognition as of the date of the Merger Agreement
to the fullest extent permitted by the DGCL for a period of not less than five
years from the Effective Time. In addition, BancTec has agreed to maintain, for
a minimum of five years following the Merger, Recognition's current directors'
and officers' liability insurance, or comparable insurance, with respect to
matters occurring prior to the Merger. Finally, the Merger will trigger the
accelerated vesting provisions of Recognition's Executive Benefit Plan. See "The
Merger--Interests of Certain Persons in the Merger."
FACTORS AFFECTING MARKET PRICE OF BANCTEC COMMON STOCK
Because the Exchange Ratio is fixed and the market price of BancTec Common
Stock is subject to fluctuation, the market value of the shares of BancTec
Common Stock that holders of Recognition Common Stock will receive in the Merger
may increase or decrease prior to and following the Merger. There can be no
assurance that at or after the Effective Time such shares of BancTec Common
Stock will maintain or equal the prices at which such shares have traded in the
past. The closing price of BancTec Common Stock on the day prior to the
announcement of the Merger was $17.63. The stock traded as low as $14.75 on
May 26 and May 29, 1995, and closed at $17.75 on July 31, 1995. The prices at
which BancTec Common Stock trades after the Merger may be influenced by many
factors including, among others, the liquidity of the market for BancTec Common
Stock, investor perceptions of BancTec and the industry in which it operates,
the operating results of BancTec, and general economic and market conditions.
Similar factors affect the prices at which the Recognition (or any other) Common
Stock currently trades.
SHARES ELIGIBLE FOR FUTURE SALE
As a result of this transaction, BancTec will issue approximately
9,060,000 shares of its Common Stock. All such shares will, subject to any
resale restrictions imposed by Rules 144 and 145 of the Securities Act, be
freely tradeable shortly following the consummation of the Merger. See "Resale
Restrictions." Additionally, the price of BancTec Common Stock following the
consummation of the Merger will reflect the performance and prospects of the
combined company.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Restated Certificate of Incorporation and Bylaws
of BancTec may make an unsolicited acquisition of control of BancTec more
difficult or expensive. Furthermore, BancTec has adopted a stockholder rights
plan which may also make an unsolicited acquisition of BancTec more difficult or
expensive. See "Description of BancTec Capital Stock."
THE MEETINGS
MATTERS TO BE CONSIDERED AT THE MEETINGS
BancTec. At the BancTec Meeting, holders of BancTec Common Stock will
consider and vote upon a proposal to approve and adopt the Merger Agreement and
the transactions contemplated thereby. BancTec stockholders will also consider
and vote upon the election of three directors, the proposal to amend the
BancTec, Inc. 1990 Stock Purchase Plan, and such other matters as may properly
be brought before the BancTec Meeting or any adjournment(s) or postponement(s)
thereof.
THE BANCTEC BOARD HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT
BANCTEC STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
(WHICH APPROVAL AND ADOPTION SHALL CONSTITUTE, AMONG OTHER THINGS, APPROVAL OF
THE ISSUANCE OF SHARES OF BANCTEC COMMON STOCK IN CONNECTION WITH THE MERGER).
The BancTec Board also recommends that stockholders vote for the election of the
three nominees for Director: Rawles Fulgham, Thomas G. Kamp and Norton A.
Stuart, Jr. Lastly, the BancTec Board recommends that stockholders vote for the
approval and adoption of the proposal to amend the BancTec, Inc. 1990 Stock
Purchase Plan.
Recognition. At the Recognition Meeting, holders of Recognition Common
Stock will consider and vote upon a proposal to approve and adopt the Merger
Agreement and such other matters as may properly be brought before the
Recognition Meeting or any adjournment(s) or postponement(s) thereof.
THE RECOGNITION BOARD HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS
THAT RECOGNITION STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
13
<PAGE>
VOTES REQUIRED
BancTec. In accordance with the NASD By-Laws, the affirmative vote of a
majority of the shares of BancTec Common Stock present, in person or by proxy,
at the BancTec Meeting will be necessary for approval of the issuance of shares
of BancTec Common Stock to Recognition stockholders pursuant to the terms of the
Merger Agreement. Additionally, pursuant to DGCL, the affirmative vote of a
majority of the shares of BancTec Common Stock present, in person or by proxy,
at the BancTec Meeting will be necessary for the election of the nominees for
Directors and the approval and adoption of the proposed amendment to the
BancTec, Inc. 1990 Employee Stock Purchase Plan.
At June 6, 1995, BancTec's directors and executive officers may be deemed
to be beneficial owners of 370,378 shares of BancTec Common Stock (excluding
712,080 shares which may be acquired upon exercise of options and other rights
which are exercisable within 60 days of June 6, 1995), or approximately _______%
of the then outstanding shares of BancTec Common Stock. The directors and
executive officers of BancTec have indicated that they intend to vote their
shares for approval and adoption of the Merger Agreement, for the election of
the nominees for Directors, and for the amendment to the BancTec, Inc. 1990
Employee Stock Option Plan.
Recognition. Pursuant to the DGCL, the affirmative vote of the holders of
at least a majority of the outstanding shares of Recognition Common Stock is
required to approve and adopt the Merger Agreement. Each share of Recognition
Common Stock is entitled to one vote.
At June 1, 1995, Recognition's directors and executive officers may be
deemed to be beneficial owners of 120,189 shares of Recognition Common Stock
(excluding 902,483 shares which may be acquired upon exercise of options or
other rights which are exercisable within 60 days of June 1, 1995), or
approximately 0.78% of the then outstanding shares of Recognition Common Stock.
The directors and executive officers of Recognition have indicated that they
intend to vote their shares for approval and adoption of the Merger Agreement.
VOTING OF PROXIES
Shares of BancTec Common Stock or Recognition Common Stock, as the case
may be, represented by properly executed proxies received at or prior to the
Meetings, will be voted at the appropriate Meeting in the manner specified by
the holders of such shares. Properly executed proxies which do not contain
voting instructions will be voted FOR approval and adoption of the Merger
Agreement, and, in the case of BancTec stockholders, FOR election of the
nominees for Director and FOR approval of the increase in the number of shares
available for issuance pursuant to the 1990 Stock Plan. Abstention from voting
on the Merger Agreement or a broker non-vote on the Merger Agreement by
Recognition stockholders will have the practical effect of voting against such
matters. Broker non-votes by BancTec stockholders will have no impact since such
broker non-votes are not considered "shares present" for voting purposes.
If any other matters are properly presented at either the BancTec Meeting
or the Recognition Meeting for consideration, the person or persons named in the
relevant form of proxy enclosed herewith and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment,
unless the proxy indicates otherwise. Neither BancTec nor Recognition has any
knowledge of any matters to be presented at the BancTec Meeting or the
Recognition Meeting, as the case may be, other than those matters referred to
and described herein.
REVOCABILITY OF PROXIES
The grant of a proxy on the BancTec or Recognition form of proxy does not
preclude a stockholder from voting in person or otherwise revoking a proxy.
Attendance at the relevant Meeting will not in and of itself constitute
revocation of a proxy. A stockholder may revoke a proxy at any time prior to its
exercise by delivering to BancTec, Inc., Attention: Tod V. Mongan, Secretary,
4435 Spring Valley Road, Dallas, Texas 75244 (in the case of a BancTec
stockholder) or Recognition International Inc., Attention: Carol Lyon,
Secretary, P. O. Box 660204, Dallas, Texas 75266-0204 (in the case of a
Recognition stockholder) a duly executed revocation or a proxy bearing a later
date or by voting in person at the appropriate Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
BancTec. Only holders of BancTec Common Stock at the close of business on
________________, 1995, will be entitled to receive notice of and to vote at the
BancTec Meeting. At ________________, 1995,
14
<PAGE>
BancTec had outstanding approximately ______________ shares of BancTec Common
Stock. A majority of the outstanding shares of BancTec Common Stock entitled to
vote must be represented in person or by proxy at the BancTec Meeting in order
for a quorum to be present at the BancTec Meeting.
Recognition. Only holders of record of Recognition Common Stock at the
close of business on _______________, 1995, will be entitled to receive notice
at the Recognition Meeting. At June 1, 1995, Recognition had outstanding
15,355,740 shares of Recognition Common Stock. A majority of the outstanding
shares of Recognition Common Stock entitled to vote must be represented in
person or by proxy at the Recognition Meeting in order for a quorum to be
present at the Recognition Meeting.
NO DISSENTERS' RIGHTS
Holders of BancTec Common Stock and Recognition Common Stock are not
entitled to dissenters' rights in connection with the Merger. An affirmative
vote may be raised by the companies as a defense in potential legal claims that
may arise as a result of this transaction.
SOLICITATION OF PROXIES
Each of BancTec and Recognition will bear the cost of the solicitation of
proxies from its own stockholders, except that BancTec and Recognition will
share equally the cost of printing and mailing this Proxy Statement/Prospectus.
In addition to solicitation by mail, the directors, officers and employees of
each company and their respective subsidiaries may solicit proxies from
stockholders of such company by telephone or telegram or in person. Such persons
will not be additionally compensated, but will be reimbursed for reasonable out-
of-pocket expenses incurred in connection with such solicitation. Arrangements
will also be made with brokerage firms, nominees, fiduciaries and other
custodians for the forwarding of solicitation materials to the beneficial owners
of shares held by record by such persons, and BancTec and Recognition will
reimburse such persons for their reasonable out-of-pocket expenses in connection
therewith.
Chemical Mellon Shareholder Services will assist in the solicitation of
proxies by BancTec for a fee of $4,500, plus reimbursement of reasonable out-of-
pocket expenses. Corporate Investor Communications, Inc. will assist in the
solicitation of proxies by Recognition for a fee of $5,000, plus reimbursement
of reasonable out-of-pocket expenses.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS
15
<PAGE>
THE MERGER
GENERAL
The Merger Agreement provides for a business combination between BancTec
and Recognition in which a wholly owned subsidiary of BancTec will be merged
with and into Recognition and the holders of Recognition Common Stock will be
issued shares of BancTec Common Stock in a transaction intended to qualify as a
pooling of interests for accounting purposes and as a tax-free reorganization
for federal income tax purposes. The discussion in this Proxy
Statement/Prospectus of the Merger and the description of the Merger's principal
terms are subject to and qualified in their entirety by reference to the Merger
Agreement, a copy of which is attached to this Proxy Statement/Prospectus as
Appendix A and which is incorporated herein by reference.
BACKGROUND OF THE MERGER
Starting in 1991, Recognition commenced a transition from closed,
proprietary hardware products to open system solutions for document processing
customers. During 1994, sales of the older, proprietary products declined at a
faster rate than their replacement by the new, open systems products. This led
to Recognition's decision to close its manufacturing facility in Charlotte,
North Carolina. Also, the growth rate in Recognition's software business slowed
to approximately 20% in 1994 compared to the 50-75% annual growth previously
experienced. As a result of this transition taking place in its hardware
business and the slowing growth of its software business, Recognition, in the
third fiscal quarter of 1994, adopted a restructuring plan to improve its
operations and enhance profitability.
For many years, Recognition had been actively evaluating strategic and
tactical alternatives seeking to enhance shareholder value. As a result of this
evaluation process, Recognition sold numerous business units, acquired other
companies, invested in internal business development, and partnered with other
companies in its industry. At the time of the adoption of the 1994 restructuring
plan, Recognition's Board encouraged Recognition's management to continue to
investigate the strategic and tactical alternatives available to enhance
shareholder value. Recognition's management had exploratory conversations with a
number of companies regarding strategic and tactical alternatives including
strategic partnerships, acquisitions and dispositions, all with the view of
enhancing shareholder value. Recognition did not receive any offers or
significant indications of interest in an acquisition of the corporation during
the course of these conversations and inquiries. While Recognition did not
solicit bids during this process, Recognition's management believed that the
nature and scope of these conversations and inquiries indicated that the formal
solicitation of bids would not be well calculated to maximize shareholder value,
particularly in light of the potential damage to the corporation if key
personnel were to leave the company or if customers were to defer orders in the
face of any announced solicitation of bids.
At the November 1994 meeting of Recognition's Board of Directors,
following management's review and assessment of its various strategic
alternatives and a report from Bear Stearns, Recognition's financial advisor,
the Board concluded that management should focus on completion of the
restructuring plan and implementation of management's fiscal 1995 operating plan
while exploring strategic options for its software business and seeking the
acquisition of companies compatible with its solutions business. While Bear
Stearns had been advising Recognition with respect to its strategic alternatives
for several months during 1994, Recognition entered into a letter agreement with
Bear Stearns in November 1994 to compensate Bear Stearns for the services
performed and to set forth the basis upon which Bear Stearns would be
compensated for future assistance.
In January 1995, a member of Recognition's Board was contacted by an
investment banker who inquired as to whether Recognition would be interested in
a transaction with BancTec. Recognition responded that it would consider any
reasonable proposal in the exercise of its fiduciary duties. The investment
banker also contacted, but was not engaged by, BancTec. After Bear Stearns
contacted the investment banker at Recognition's request, it was determined that
no proposal had been made by either party, and there was no further contact
between the parties with respect to the matter.
Recognition remained focused on its internal operations until April 1995.
At that time, a decline in the price of BancTec Common Stock resulting from an
announcement by BancTec that it expected lower earnings for its fiscal year due
to settlement of a lawsuit and a restructuring charge, as well as Recognition's
awareness that pursuing strategic alternatives such as dispositions of some of
its businesses might affect pooling of interests treatment for any prospective
merger, caused Recognition's management to consider whether it might be
appropriate to contact BancTec management concerning a possible transaction.
It was the belief of Recognition's management and Board that a business
combination with BancTec could enhance stockholder value at a rate faster than
could be achieved by Recognition independently. In April 1995, after
consultation with members of Recognition's Board and Recognition's other
advisors, Robert A. Vanourek, Chief Executive Officer of Recognition, contacted
Grahame N. Clark, Jr., Chief
16
<PAGE>
Executive Officer of BancTec, to arrange a meeting to discuss a potential
business combination between the two companies. Over the past several years
BancTec has pursued an active acquisition strategy to enhance its position in
markets BancTec considered strategic to its operations.
On April 29, 1995, a meeting was held between Messrs. Clark and Vanourek
where it was agreed, subject to the concurrence of the BancTec Board, to have a
further confidential discussion among a limited number of persons to determine
whether a business combination could be arranged which would be in the best
interests of both companies.
On May 3, 1995, a meeting of BancTec's Board was held to discuss the
potential acquisition of Recognition by BancTec. At the conclusion of the
meeting Mr. Clark was instructed to proceed with negotiations on the basis of a
stock-for-stock exchange of shares between the two companies and also under the
condition that the acquisition be accounted for as a pooling of interests.
BancTec's Board also determined that it was in the best interest of the
stockholders of BancTec to engage an investment banking firm to assist in the
analysis and to provide the Board with a fairness opinion regarding the proposed
transaction. Prior to this transaction, BancTec did not maintain a relationship
with any investment banking or financial advisory firm. At the time of the
transaction, the Board of BancTec determined that, because of the broad
distribution of BancTec shares and the relative size of the proposed
transaction, a large well known national firm should be chosen. Thus, following
the meeting of BancTec's Board, management of BancTec contacted Merrill Lynch,
who, a number of years earlier, had submitted a proposal to provide similar
services to BancTec, to investigate Merrill Lynch's interest in acting as
BancTec's financial advisor in this transaction. Merrill Lynch indicated that
they were interested in providing these services to BancTec and thereafter
submitted a proposal. BancTec management negotiated the terms of the Merrill
Lynch proposal and reached terms the BancTec Board found satisfactory. During
the following week, BancTec and Merrill Lynch entered into a formal agreement
whereby Merrill Lynch agreed to act as BancTec's financial advisor in the
proposed transaction with Recognition.
On May 4, 1995, Mr. Vanourek advised Recognition's Board of the decisions
reached by BancTec's Board on May 3, 1995, and Recognition's Board unanimously
authorized Recognition's management and advisors to continue the discussions
with BancTec.
During the period from May 2, 1995 through May 18, 1995, a limited number
of executives from BancTec and Recognition, together with their respective legal
and financial advisors, met on numerous occasions. It was during the course of
these meetings that due diligence was conducted and completed, and the proposed
Merger Agreement, including the Exchange Ratio, was negotiated.
On May 19, 1995, Recognition's Board met to consider the proposed Merger
Agreement, including the proposed Exchange Ratio as well as other provisions
contained in the Merger Agreement. Representatives of Bear Stearns,
Recognition's financial advisor, together with members of Recognition's senior
management and its other legal and financial advisors, reviewed with
Recognition's Board, among other things, the terms of the Merger Agreement,
Recognition's strategic alternatives, the potential risks and benefits of the
Merger, financial and valuation analyses relating thereto and due diligence
findings. Bear Stearns delivered its written opinion to Recognition's Board
that, based upon various considerations and assumptions, the proposed Exchange
Ratio was fair from a financial point of view to the holders of Recognition
Common Stock. After extensive discussion and consideration, Recognition's Board
approved the Merger Agreement and the transactions contemplated thereby, and
authorized the execution of the Merger Agreement.
The BancTec Board held a special meeting on May 19, 1995 to consider the
proposed Merger Agreement and the transactions contemplated thereby, including
the proposed Exchange Ratio as well as other provisions contained in the Merger
Agreement. At this meeting members of BancTec's senior management, together with
BancTec's legal and financial advisors, reviewed with BancTec's Board, among
other things, the background of the proposed merger, the strategic rationale for
the merger, the potential risks and benefits of the merger, a summary of the due
diligence findings, financial and valuation analyses, and the terms of the
Merger Agreement. In addition, Merrill Lynch delivered its oral opinion to
BancTec's Board, which opinion was subsequently confirmed in writing, that as of
such date and based on the assumptions made and matters considered in, and the
limitations on, the review undertaken by Merrill Lynch as discussed by Merrill
Lynch with BancTec's Board, the Exchange Ratio was fair to BancTec from a
financial point of view. After extensive discussion and consideration, BancTec's
Board approved the Merger Agreement and the transactions contemplated thereby,
and authorized the execution of the Merger Agreement.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
BancTec. The BancTec Board believes that the terms of the Merger Agreement
are fair to and in the best interests of BancTec and its stockholders.
Accordingly, BancTec's Board has approved the Merger Agreement and recommends
approval thereof by the stockholders of BancTec. In reaching its determination,
17
<PAGE>
the BancTec Board consulted with BancTec management, as well as its financial
and legal advisors, and considered a number of factors, including, without
limitation, the following:
(i) the opportunities for economies of scale and operating
efficiencies that should result from the Merger, particularly in terms of
the integration of office facilities, information systems and support
functions;
(ii) based on the companies' combined earning potential and the
Exchange Ratio, the Merger, although dilutive in 1995, would be accretive
to BancTec's projected earnings per share on a stand-alone basis for the
calendar years 1996 through 1999, assuming certain synergies and
operating forecasts under the Recognition Base Case (as hereinafter
defined) are achieved;
(iii) the market capitalization of the combined company will be
larger than BancTec's current market capitalization, providing BancTec
stockholders with enhanced liquidity;
(iv) the combination of Recognition's and BancTec's service
organizations will establish an organization with an expanded market
presence to provide additional services to current customers as well as
providing a viable alternative to potential customers;
(v) Each company's customer base of its legacy system will
provide an expanded market for sales of the other company's current
products;
(vi) Recognition's Plexus software products will provide BancTec
with an opportunity to combine workflow software with its page imaging
products in order to better compete in the large market for page imaging
systems;
(vii) Recognition's strategic alliances will provide BancTec with
an expanded distribution channel for BancTec's current products and
support services;
(viii) Recognition's operation in Japan will provide BancTec with an
established Japanese operation where BancTec has identified potential
sales opportunities for its current product offerings;
(ix) Recognition's operations in Canada provide products which are
complementary to those offered by BancTec's Canadian operation and will
provide BancTec with an expanded presence in the Canadian marketplace;
(x) Recognition's operations in Europe will provide BancTec with
established operations in certain countries that BancTec has identified as
potential sales opportunities for its current product offerings;
(xi) the past financial performance of Recognition, including the
special charge of $ 25.6 million recorded in fiscal 1994;
(xii) the oral opinion of Merrill Lynch (which was subsequently
confirmed in writing) that, as of May 19, 1995 and based on the
assumptions made and matters considered in, and the limitations on, the
review undertaken by Merrill Lynch as discussed by Merrill Lynch with
BancTec's Board, the Exchange Ratio was fair to BancTec from a financial
point of view;
(xiii) the terms of the Merger Agreement; and
(xix) the conditions to the Merger Agreement that the Merger will
be accounted for under the pooling of interests method of accounting and
will be a tax-free reorganization for federal income tax purposes.
The BancTec Board considered the above, understanding that the implication
of some of the factors were negative, in light of its knowledge of the business
and operations of BancTec and Recognition, information about Recognition
provided by BancTec's management, and its business judgment. In view of the wide
variety of factors considered in connection with its evaluation of the Merger,
the BancTec Board did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching its determination. However, the BancTec Board placed special
emphasis on the complementary business and products of Recognition, particularly
Recognition's workflow software, maintenance base and Canadian and Japanese
markets, BancTec's financial and management strengths, BancTec's strength in
being able to integrate operations of previous acquisitions and its view that
these complementing strengths would enhance the value of BancTec in the eyes of
its customers and the investment community.
THE BANCTEC BOARD RECOMMENDS THAT BANCTEC STOCKHOLDERS VOTE TO APPROVE AND
ADOPT THE MERGER AGREEMENT.
Recognition. The Recognition Board believes that the terms of the Merger
Agreement and the transactions contemplated thereby are in the best interests of
Recognition and its stockholders. Accordingly, Recognition's Board has approved
the Merger Agreement and recommends approval thereof by the stockholders of
Recognition. In reaching its determination, the Recognition Board consulted with
Recognition management, as well as its legal counsel, Locke Purnell Rain Harrell
and Skadden, Arps, Slate, Meagher & Flom, and its financial advisors, Bear
Stearns, and considered a number of factors, including, without limitation, the
following:
(i) information concerning the financial condition, results of
operations, businesses and prospects of BancTec and Recognition;
(ii) the enhanced position of the combined company to succeed
through the combination of complementary product lines;
(iii) the ability of the combined company to compete more
effectively with larger, better capitalized competitors;
(iv) the opportunities for operating efficiencies and synergies as
a result of the Merger, particularly through the integration of office and
manufacturing facilities, information systems and support functions and
the combined purchasing power of the two companies;
(v) the increased market capitalization and financial strength of
the combined company;
18
<PAGE>
(vi) Recognition's strategic alternatives, including remaining an
independent company or effecting a business combination with one or more
parties;
(vii) the terms and conditions of the Merger Agreement, including
the condition that Recognition receive comfort that the Merger will be a
tax-free reorganization for federal income tax purposes;
(viii) the ability of the Recognition Board to entertain alternative
proposals, negotiate and give information to third parties and terminate
the Merger Agreement in the event of an alternative proposal if required
by the Recognition Board's fiduciary duties to Recognition stockholders;
(ix) the opportunity for the holders of Recognition Common Stock
to receive a premium over the market price for their shares immediately
prior to the announcement of the Merger (the Exchange Ratio represented a
premium of approximately 49% over the closing sales price of $7.00 per
share of Recognition Common Stock on May 18, 1995, the day prior to the
announcement of the Merger, based upon 0.59 times the closing sales price
per share of BancTec Common Stock ($17.63) on such date); and
(x) the financial presentation of Bear Stearns delivered to the
Recognition Board, including the opinion of Bear Stearns rendered on May
19, 1995, that the Exchange Ratio was fair from a financial point of view
to the holders of Recognition Common Stock.
With respect to items (i), (ii), (iii) and (v) above, the Recognition
Board believes that the businesses in which Recognition is involved face
increasing competitive pressures from larger, better-capitalized competitors.
As the markets for Recognition's products are increasingly characterized by
rapidly changing technologies, product obsolescence and evolving industry
standards, access to capital and the ability to fund substantial research and
development and introduce new products at a level competitive with larger
competitors has become increasingly important. The Recognition Board believes
that the increased market capitalization and financial strength of the combined
company should provide enhanced access to both public and private sources of
financing, which should increase the combined company's ability to compete with
larger competitors in new product developments and enhancements.
Similarly, the Recognition Board believes that the integration of office
and manufacturing facilities, information systems and support functions and the
combined purchasing power of the two companies as described in (iv) above should
provide operating efficiencies and synergies that should increase the
competitiveness of the combined company. The Recognition Board also believes
that the premium over market price immediately prior to announcement of the
Merger as described in (ix) above coupled with the assurance that the Merger
will be a tax-free reorganization for federal income tax purposes as described
in (vii) above provide an economic benefit that is in the best interests of
Recognition's stockholders.
While Recognition will forego its other strategic alternatives as
described in (vi) above, the Recognition Board believes that the Merger is a
preferable alternative to maintaining an independent Recognition both because of
the competitive pressures described above and because of the economic benefit to
stockholders as described in (ix) and addressed in the financial presentation of
Bear Stearns noted in (x) and described in detail below. Furthermore, the
Recognition Board has been careful to preserve the ability, as described in
(viii) above, to entertain any alternative proposals that might be presented and
to negotiate, give information to third parties, and terminate the Merger
Agreement in the event of an alternative proposal if required by the Recognition
Board's fiduciary duties to Recognition stockholders. Accordingly, the
Recognition Board believes that the positive factors in favor of the Merger
greatly outweigh any negative considerations, and the Recognition Board believes
that the Merger offers the opportunity to create a combined company with greater
financial resources and flexibility, competitive strengths and business
opportunities than would be possible for Recognition alone.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Recognition Board did not find it practicable to,
and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determination.
THE RECOGNITION BOARD RECOMMENDS THAT RECOGNITION STOCKHOLDERS VOTE TO
APPROVE AND ADOPT THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
BancTec
On May 19, 1995, Merrill Lynch delivered its oral opinion to the Board of
Directors of BancTec, which opinion was subsequently confirmed in writing, that,
as of such date and based upon and subject to the assumptions made and matters
considered in, and the limitations on, the review undertaken by Merrill Lynch as
reviewed by Merrill Lynch with the Board of Directors of BancTec, the Exchange
Ratio was fair to BancTec from a financial point of view. Merrill Lynch
subsequently delivered to the Board of Directors of BancTec the Merrill Lynch
Opinion to the effect that, as of the date of this Proxy Statement/Prospectus
and based upon and subject to the assumptions made and matters considered in,
and the limitations on, the review undertaken by Merrill Lynch as set forth in
the Merrill Lynch Opinion, the Exchange Ratio was fair to BancTec from a
financial point of view.
A copy of the Merrill Lynch Opinion, which sets forth the assumptions made
and matters considered in, and the limitations on, the review undertaken by
Merrill Lynch, is attached as Appendix B to this Proxy Statement/Prospectus.
The summary of the Merrill Lynch Opinion set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion. The May 19, 1995 opinion is substantially similar to the
Merrill Lynch Opinion. STOCKHOLDERS OF BANCTEC ARE URGED TO, AND SHOULD, READ
THE MERRILL LYNCH OPINION IN ITS ENTIRETY.
The Merrill Lynch Opinion is directed only to the fairness of the Exchange
Ratio to BancTec from a financial point of view, and does not constitute a
recommendation to any BancTec stockholder as to how such stockholder should vote
at the BancTec Meeting. The Exchange Ratio was determined through negotiations
between BancTec and Recognition and was approved by the Board of Directors of
BancTec. Merrill Lynch provided advice to BancTec during the course of such
negotiations, but did not make a recommendation with respect to what the
Exchange Ratio should be or the range the Exchange Ratio should fall within.
In arriving at its opinion dated May 19, 1995, Merrill Lynch, among other
things: (i) reviewed Recognition's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended October 31, 1994 and
Recognition's Form 10-Q and the related unaudited financial information for the
quarterly period ending January 31, 1995; (ii) reviewed BancTec's Annual
Reports, Forms 10-K and related financial information for the five fiscal years
ended March 27, 1994 and BancTec's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending June 26, 1994, September
25, 1994 and December 25, 1994; (iii) reviewed certain information, including
financial forecasts, relating to the business, earnings, cash flow, assets and
prospects of Recognition and BancTec furnished to Merrill Lynch by Recognition
and BancTec; (iv) conducted discussions with members of senior management of
Recognition and BancTec concerning their respective businesses and prospects;
(v) reviewed certain information furnished to Merrill Lynch by BancTec and
conducted discussions with members of senior management of BancTec concerning
the potential combination effects resulting from the Merger on the operations of
the combined entity; (vi) reviewed the historical market prices and trading
activity for shares of Recognition Common Stock and shares of BancTec Common
19
<PAGE>
Stock and compared them with that of certain publicly traded companies which
Merrill Lynch deemed to be reasonably similar to Recognition and BancTec,
respectively; (vii) compared the results of operations of Recognition and
BancTec with that of certain companies which Merrill Lynch deemed to be
reasonably similar to Recognition and BancTec, respectively; (viii) compared the
proposed financial terms of the transactions contemplated by the Merger
Agreement with the financial terms of certain other mergers and acquisitions
which Merrill Lynch deemed to be relevant; (ix) considered the pro forma effect
of the Merger on BancTec's capitalization ratios and earnings, cash flow and
book value per share; (x) reviewed a draft of the Merger Agreement dated May 15,
1995; and (xi) reviewed such other financial studies and information, performed
such other analyses and took into account such other matters as Merrill Lynch
deemed necessary, including Merrill Lynch's assessment of general economic,
market and monetary conditions as they existed on May 19, 1995.
In preparing its opinion dated May 19, 1995, Merrill Lynch relied upon the
accuracy and completeness of all information supplied or otherwise made
available to it by Recognition and BancTec, and Merrill Lynch did not
independently verify such information or undertake an independent appraisal of
the assets or the liabilities, contingent or otherwise, of Recognition or
BancTec. Merrill Lynch did not visit any of the facilities of Recognition or
BancTec. With respect to the financial forecasts furnished by Recognition and
BancTec, including forecasts regarding the timing, nature and magnitude of
potential combination effects resulting from the Merger which were furnished by
BancTec, Merrill Lynch assumed that they were reasonably prepared and reflected
the best currently available estimates and judgments of Recognition's or
BancTec's management as to the expected future financial performance of
Recognition or BancTec, either on a stand-alone basis or giving effect for the
Merger, as the case may be. Furthermore, in rendering the opinion, Merrill
Lynch assumed that the Merger will be accounted for as a pooling of interests
transaction.
The following is a summary of the analyses performed by Merrill Lynch in
connection with its opinion dated May 19, 1995. In connection with the Merrill
Lynch Opinion, Merrill Lynch performed certain procedures, including each of the
financial analyses described below, to update its analyses made in connection
with the delivery of its opinion dated May 19, 1995, and reviewed with the
managements of BancTec and Recognition the financial information on which such
analyses were based and other factors, including the current financial results
of such companies and the future prospects for such companies.
Discounted Cash Flow Analysis. Merrill Lynch calculated ranges of equity
value for Recognition based upon the value, discounted to the present, of its
five-year stream of projected unlevered after-tax free cash flow and its
projected calendar year 1999 terminal value based upon a range of multiples of
its projected calendar year 1999 earnings before interest, taxes, depreciation
and amortization ("EBITDA"). In conducting its analysis, Merrill Lynch utilized
financial projections prepared by BancTec's management which were based on
certain operating assumptions and projections and included certain material
potential costs and benefits of the Merger reasonably foreseen by BancTec's
management, including synergies, restructuring charges, the expected impact of
the announcement of the Merger upon the operations of Recognition, and tax
benefits of net operating losses carried forward by Recognition (the
"Recognition Base Case"). Merrill Lynch also performed a sensitivity analysis
on the Recognition Base Case which assumed that the aggregate amount of
potential annual synergies utilized by BancTec management in the Recognition
Base Case was reduced by 25% (the "Recognition Conservative Case"). In both the
Recognition Base Case and the Recognition Conservative Case, Merrill Lynch
utilized discount rates reflecting a weighted cost of capital ranging from 13.0%
to 16.0% and terminal value multiples of calendar year 1999 EBITDA ranging from
4.0x to 6.0x. Based on this analysis, Merrill Lynch calculated a range of
values of between $9.67 and $15.21 per share of Recognition Common Stock based
on the Recognition Base Case, and of between $8.08 and $12.97 per share of
Recognition Common Stock based on the Recognition Conservative Case.
Merrill Lynch also calculated ranges of equity value for BancTec on a
stand-alone basis based upon the value, discounted to the present, of its five-
year stream of projected unlevered after-tax free cash flow and its projected
calendar year 1999 terminal value based upon a range of multiples of its
projected calendar year 1999 EBITDA. In conducting its analysis, Merrill Lynch
utilized financial projections prepared by the management of BancTec based on
certain operating assumptions and projections. Utilizing the same range of
discount rates and terminal value EBITDA multiples as were applied to
Recognition, Merrill Lynch calculated a range of values of between $18.89 and
$30.41 per share of BancTec Common Stock.
Merrill Lynch utilized the discounted cash flow methodology to calculate
implied exchange ratios based on the relative ranges of value for Recognition
and BancTec. The comparison of the BancTec value ranges to the Recognition
value ranges under the Recognition Base Case and the Recognition Conservative
Case yielded, respectively, implied exchange ratios of between 0.318 and 0.805
and between 0.266 and 0.687 shares of BancTec Common Stock for each share of
Recognition Common Stock.
Analysis of Selected Comparable Publicly Traded Companies. Merrill Lynch
compared certain historical financial and operating data and projected financial
performance of Recognition under both the Recognition Base Case and the
Recognition Conservative Case with similar publicly available historical
financial and operating data and projections of future financial performance
(reflecting a composite of research analysts' estimates) of five companies
deemed by Merrill Lynch to be reasonably similar to Recognition: Caere
Corporation, Cornerstone Imaging, Inc., Filenet Corporation, National Computer
Systems, Inc., and Scan Optics, Inc. (collectively, the "Recognition Comparable
20
<PAGE>
Companies"). Merrill Lynch determined that, in view of the potential synergies
and other savings anticipated from the Merger, the comparison of the market
value as multiples of calendar 1996 estimated earnings per share ("EPS", which
for the Recognition Comparable Companies were obtained from First Call, IBES and
Zacks and were adjusted by Merrill Lynch to reflect a December 31 year end) was
the most relevant basis for valuation under this methodology. For purposes of
this analysis, Merrill Lynch defined "market value" as the closing price per
share on May 18, 1995 multiplied by the number of shares outstanding. Merrill
Lynch determined that an appropriate range of multiples of market value to
projected 1996 EPS for Recognition was between 9.0x and 11.0x, based upon a
range of multiples for the Recognition Comparable Companies of between 6.3x and
15.0x. Based on the foregoing ranges, Merrill Lynch calculated implied value
ranges of between $11.88 and $14.52 per share of Recognition Common Stock under
the Recognition Base Case and between $10.17 and $12.43 per share of Recognition
Common Stock under the Recognition Conservative Case.
Merrill Lynch also compared certain historical financial and operating
data and projected financial performance of BancTec with similar publicly
available historical financial and operating data and projections of future
financial performance (reflecting a composite of research analysts' estimates)
of 14 companies deemed by Merrill Lynch to be reasonably similar to BancTec:
Affiliated Computer Services, Bisys Group, Inc., Broadway & Seymour, Inc.,
Fiserv, Inc., Henry (Jack) & Associates, Hogan Systems, Inc., Verifone, Inc.,
Bell & Howell Holdings Company, Caere Corporation, Cornerstone Imaging, Inc.,
Filenet Corporation, National Computer Systems, Inc., Scan Optics, Inc., and
Wang Labs, Inc. (collectively, the "BancTec Comparable Companies"). Merrill
Lynch determined that an appropriate range of multiples of market value to
projected 1996 EPS for BancTec was between 10.0x and 13.0x, based upon a range
of multiples for the BancTec Comparable Companies of between 6.3x and 15.5x.
Based on the foregoing ranges, Merrill Lynch calculated an implied value range
of between $15.30 and $19.89 per share of BancTec Common Stock.
Based on its analysis, Merrill Lynch calculated ranges of implied exchange
ratios of between 0.597 and 0.949 (under the Recognition Base Case) and between
0.511 and 0.812 (under the Recognition Conservative Case) shares of BancTec
Common Stock for each share of Recognition Common Stock.
No company utilized in the selected comparable publicly traded companies
analysis was identical to Recognition or BancTec. Accordingly, an analysis of
the results of such a comparison is not purely mathematical; rather, it involves
complex considerations and judgments concerning differences in historical and
projected financial and operating characteristics of the comparable companies
and other factors that could affect the public trading value of the comparable
companies or company to which they are being compared.
Analysis of Selected Comparable Acquisition Transactions. Merrill Lynch
reviewed certain publicly available information regarding 15 selected business
combinations involving companies in the data processing, computer programming
and other computer-related industries announced since February 1988
(collectively, the "Comparable Transactions"). These transactions, in reverse
chronological order of public announcement, were the following: (i) the
acquisition of Calera Recognition Systems, Inc. by Caere Corporation; (ii) the
acquisition of ElectroCom Automation Inc. by AEG AG; (iii) the acquisition of
The Ask Group, Inc. by Computer Associates International, Inc.; (iv) the
acquisition of Advanced Computer Systems, Inc., by BancTec, Inc.; (v) the
acquisition of Imagesolve International Ltd. by BancTec, Inc.; (vi) the
acquisition of Terminal Data Corporation by BancTec, Inc.; (vii) the acquisition
of Digital Communications Associates, Inc. by DCA Holdings, Inc.; (viii) the
acquisition of Leroux Pitts and Associates by BancTec, Inc.; (ix) the
acquisition of Cybertek Corporation by Policy Management Systems Corporation;
(x) the acquisition of Springfield Computer Consultants by BancTec, Inc.; (xi)
the acquisition of Monitronics, Inc. by BancTec, Inc.; (xii) the acquisition of
ebm Systems, Inc. by BancTec, Inc.; (xiii) the acquisition of Intermec
Corporation by Litton Industries, Inc.; (xiv) the acquisition of Gesco, Inc. by
Fiserv, Inc.; and (xv) the acquisition of Mtech Corporation by Electronic Data
Systems Corporation.
Merrill Lynch compared the prices paid in such transactions in terms of,
among other things, the equity value as a multiple of net income for the last
twelve months ("LTM") prior to announcement and the transaction value (defined
as equity value plus long-term debt and short-term debt plus the liquidation
value of preferred stock plus minority interest less cash, cash equivalents and
proceeds received upon exercise of options) as a multiple of LTM sales, LTM
EBITDA and LTM earnings before interest and taxes ("EBIT"). In view of
Recognition's weak historical operating performance relative to the operating
assumptions and financial projections utilized by the management of BancTec in
arriving at the Recognition Base Case, Merrill Lynch determined that the
transaction value as a multiple of LTM sales was the most relevant basis for
valuation under this methodology. Merrill Lynch thus determined that an
appropriate range of multiples of transaction value to LTM sales was between
0.80x and 0.90x for Recognition based upon a range of multiples of between 0.53x
and 2.29x for the Comparable Transactions.
Merrill Lynch then calculated the implied values per share of Recognition
Common Stock by applying its LTM sales (through January 31, 1995) to the range
of multiples derived from Merrill Lynch's analysis of the Comparable
Transactions. Based on its analysis, Merrill Lynch calculated that the
Comparable Transactions indicated a value range of between $10.44 and $11.90 per
share of Recognition Common Stock and a range of implied exchange ratios of
between 0.485 and 0.633 shares of BancTec Common Stock for each share of
Recognition Common Stock.
21
<PAGE>
No company utilized in the selected comparable acquisition transaction
analysis was identical to Recognition or BancTec. Accordingly, an analysis of
the results of the foregoing is not purely mathematical. Rather, it involves
complex considerations and judgments concerning differences in historical and
projected financial and operating characteristics of the companies included in
the selected comparable acquisition transaction analysis and other factors
(including the value of the anticipated synergies of the Merger) that could
affect the transaction consideration for such companies and Recognition.
Pro Forma Merger Analysis. Utilizing the Exchange Ratio, Merrill Lynch
analyzed certain pro forma effects resulting from the Merger, including the
effect on BancTec's projected EPS on a stand-alone basis. In its analysis,
Merrill Lynch made certain assumptions with respect to the use of pro forma
generation of cash, including an assumption that BancTec would use excess cash
to repurchase BancTec's stock and to redeem Recognition's convertible debt prior
to maturity, and took into account BancTec's proposed change of fiscal year end
to December 31. Based on the Recognition Base Case, Merrill Lynch's analysis
indicated that the Merger would be dilutive to BancTec's projected EPS for the
period between April 1 and December 31, 1995 and would be accretive to BancTec's
projected EPS for the calendar years 1996, 1997, 1998 and 1999. Merrill Lynch's
analysis under the Recognition Conservative Case indicated that the Merger would
be dilutive to BancTec's projected EPS for the period between April 1 and
December 31, 1995, neutral to BancTec's projected EPS for the calendar year
1996, and accretive to BancTec's projected EPS for the calendar years 1997, 1998
and 1999.
Historical Stock Price Analysis. Merrill Lynch reviewed the performance
of the per share daily closing market price of Recognition Common Stock over the
period from May 18, 1990 to May 17, 1995 and compared such daily closing prices
with the performance of the Standard & Poor's 500 Index and a composite index of
the Recognition Comparable Companies. Merrill Lynch also reviewed the
performance of the per share daily closing market price of BancTec Common Stock
over the same period and compared such daily closing prices with the performance
of the Standard & Poor's 500 Index and a composite index of the BancTec
Comparable Companies.
The summary set forth above does not purport to be a complete description
of the analyses performed by Merrill Lynch. In arriving at its opinion dated
May 19, 1995, Merrill Lynch performed a variety of financial analyses, the
material portions of which are summarized above. In addition, Merrill Lynch
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all such analyses and factors, could create a misleading view of the process
underlying its opinion. In performing its analyses, Merrill Lynch made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of BancTec or
Recognition. Any estimates incorporated in the analyses performed by Merrill
Lynch are not necessarily indicative of actual past or future results or values,
which may be significantly more or less favorable than such estimates. In
addition, analyses relating to the value of businesses or assets do not purport
to be appraisals or to reflect the prices at which such businesses or assets may
actually be sold. Because such estimates are inherently subject to uncertainty,
neither Merrill Lynch, BancTec nor any other person assumes responsibility for
their accuracy. The preparation of a fairness opinion is a complex process not
necessarily susceptible to partial or summary description. Merrill Lynch did
not assign any relative weights to any of its analyses in preparing its fairness
opinion.
As part of its investment banking business, Merrill Lynch is continuously
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions. The Board of Directors of BancTec retained Merrill
Lynch to act as its financial advisor because Merrill Lynch is an
internationally recognized investment banking firm with substantial experience
in transactions similar to the Merger.
In the ordinary course of business, Merrill Lynch may actively trade the
securities of both BancTec and Recognition for its own account and the account
of its customers and, accordingly, may at any time hold a long or short position
in such securities.
For its financial advisory services in connection with the Merger, BancTec
has agreed to pay Merrill Lynch a retainer fee of $100,000, an additional fee of
$250,000 upon the execution of the Merger Agreement, and an additional $900,000
payable upon the consummation of the Merger. BancTec has also agreed to
reimburse Merrill Lynch for its reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of its legal counsel, and to indemnify Merrill
Lynch and certain related persons against certain liabilities, including
liabilities under securities laws, arising out of its engagement.
22
<PAGE>
Recognition
Bear Stearns advised Recognition with respect to its strategic
alternatives for several months during 1994, and Recognition entered into a
letter agreement with Bear Stearns in November 1994 to compensate Bear Stearns
for the services performed and to set forth the basis upon which Bear Stearns
would be compensated for future assistance. This engagement was expanded in May
1995 to include rendering its fairness opinion to the Recognition Board as to
the fairness of the Exchange Ratio, from a financial point of view, to the
common stockholders of Recognition. The Recognition Board selected Bear Stearns
based on its qualifications, expertise, prior investment banking relationship
and familiarity with Recognition.
Bear Stearns delivered its written opinion to the Recognition Board to the
effect that, as of May 19, 1995, the Exchange Ratio was fair, from a financial
point of view, to the stockholders of Recognition. Bear Stearns subsequently
updated its opinion to the date of this Joint Proxy Statement/Prospectus.
The full text of Bear Stearns' fairness opinion, which sets forth certain
assumptions made, certain procedures followed and certain matters considered by
Bear Stearns, is attached as Appendix C to this Joint Proxy
Statement/Prospectus. As set forth therein, Bear Stearns relied upon and assumed
the accuracy and completeness of the financial and other information provided to
it by Recognition and BancTec. With respect to Recognition's and BancTec's
projected financial results, Bear Stearns assumed that the projections have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of Recognition and BancTec as to the expected
future performance of Recognition and BancTec, respectively. Bear Stearns did
not perform any independent verification of the information or projections
provided to it and Bear Stearns relied upon the assurances of the managements of
Recognition and BancTec that they are unaware of any facts that would make the
information or projections provided to Bear Stearns incomplete or misleading. In
arriving at its opinion, Bear Stearns did not perform or obtain any independent
appraisal of the assets of Recognition or BancTec. Bear Stearns' Opinion is
necessarily based on economics, market and other conditions, and the information
made available to it, as of the date of its opinion. Bear Stearns further
assumed that the Merger would be accounted for in accordance with the pooling of
interests method of accounting under the requirements of APB No. 16 and would
qualify as a tax-free reorganization under Section (S) 328(a) of the Code. Bear
Stearns' opinion addresses only the fairness of the Exchange Ratio from a
financial point of view and does not constitute a recommendation to any
stockholder of Recognition as to how such stockholder should vote on the Merger
Agreement. Bear Stearns did not recommend what the Exchange Ratio should be nor
the range the Exchange Ratio should fall within. The Exchange Ratio in the
Merger was determined through arm's-length negotiations between Recognition and
BancTec.
The summary of the opinion of Bear Stearns set forth in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion. RECOGNITION STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THIS
OPINION CAREFULLY IN ITS ENTIRETY IN CONNECTION WITH THIS JOINT PROXY
STATEMENT/PROSPECTUS FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE
REVIEW BY BEAR STEARNS.
In rendering the fairness opinion, Bear Stearns, among other things: (i)
reviewed the Joint Proxy Statement/Prospectus in substantially final form to be
sent to the stockholders of Recognition; (ii) reviewed Recognition's Annual
Reports to Stockholders, Annual Reports on Form 10-K and Proxy Statements for
the fiscal years ended October 31, 1991 through 1994, and its Quarterly Reports
on Form 10-Q for the fiscal periods ended January 31 and April 30, 1995; (iii)
reviewed BancTec's Annual Reports to Stockholders, Annual Reports on Form 10-K
and Proxy Statements, for the fiscal years ended in March 1991 through 1995;
(iv) reviewed certain operating and financial information, including
projections, provided to Bear Stearns by the managements of Recognition and
BancTec relating to their respective businesses and prospects; (v) met with
certain members of Recognition's and BancTec's senior managements to discuss
their operations, historical financial statements and future prospects, and
their views of the business, operational and strategic benefits, potential
synergies and other implications of the Merger; (vi) reviewed the pro forma
financial impact of the Merger on Recognition stockholders; (vii) reviewed the
historical stock prices and trading volumes of the common shares of Recognition
and BancTec; (viii) reviewed publicly available financial information and stock
market performance data of other publicly-held companies which Bear Stearns
deemed generally comparable to Recognition and BancTec; (ix) reviewed the
financial terms of certain other recent acquisitions of companies which Bear
Stearns deemed generally comparable to
23
<PAGE>
Recognition and BancTec; and (x) conducted such other studies, analyses,
inquiries and investigations as Bear Stearns deemed appropriate.
The following is a brief summary of certain of the financial analyses used
by Bear Stearns in connection with providing its opinions to the Recognition
Board.
Contribution Analysis. Bear Stearns analyzed the pro forma contribution of
each of Recognition and BancTec to the combined company, if the Merger were to
be consummated, and reviewed certain historical and estimated future operating
and financial information including, among other things, the revenues, earnings
before interest, taxes, depreciation and amortization ("EBITDA"), earnings
before interest and taxes ("EBIT") and net income of Recognition and BancTec,
and the pro forma revenues, EBITDA, EBIT and net income of the combined company
resulting from the Merger based on internal financial analyses and projections
for Recognition and BancTec prepared by their respective managements. The
contribution analysis did not take into account any potential synergies or cost
savings that might be realized after the Merger and excluded restructuring and
litigation charges and other one time write-offs. Such analysis indicated that,
based on management projections, pro forma for the fiscal year ended in
March 1995 and projected for March 1996 and 1997 (March is currently the end
of BancTec's fiscal year) Recognition's relative contribution to the financial
results of the combined company would be (i) 42.6%, 41.7% and 41.2%,
respectively, of revenues, (ii) 29.6%, 31.5% and 33.7%, respectively, of EBITDA,
(iii) 15.1%, 22.9% and 28.0%, respectively, of EBIT and (iv) 5.4%, 26.8% and
37.3%, respectively, of net income. Bear Stearns noted that the approximately
47.5% of the pro forma fully diluted number of shares for the combined company
to be owned by former Recognition stockholders after the Merger is higher than
Recognition's amount contributed to total pro forma EBITDA, EBIT and net income.
Bear Stearns further noted that the contribution analysis did not consider the
different valuation multiples, such as the price-earnings multiples, that the
market ascribed to Recognition and BancTec both on a current basis and on a
historical basis.
Pro Forma Combination Analysis. Bear Stearns analyzed earnings per share
pro forma for the fiscal year ended in March 1995 and projected for March 1996
and 1997 for both Recognition and, on a pro forma basis, for the combined
company after the Merger. These analyses were based upon projections provided by
the senior managements of Recognition and BancTec. Such analysis did not take
into account any potential synergies or cost savings that might be realized
after the Merger and excluded restructuring and litigation charges and other one
time write-offs. Based on managements' projections, and after taking into
account the Exchange Ratio, such analysis showed accretion in Recognition's
fully diluted earnings per share resulting from the Merger of 666.7%, 64.1% and
10.5% for 1995, 1996 and 1997, respectively. Bear Stearns also analyzed earnings
per share projected for March 1996 and 1997, assuming that potential synergies
and cost savings of $10 million were realized in fiscal 1996 and $20 million
were realized in fiscal 1997. Based on managements' projections, and after
taking into account the Exchange Ratio and such synergies, such analysis showed
accretion in Recognition's fully diluted earnings per share resulting from the
Merger of 104.9% for 1996 and 56.6% for 1997. Bear Stearns further noted that
the combination analysis did not consider the different valuation multiples,
such as the price-earnings multiples, that the market ascribed to Recognition
and BancTec both on a current basis and on a historical basis.
Historic Stock Trading Analysis. Bear Stearns reviewed the historical
public trading prices of Recognition and BancTec Common Stock for the last five
years. Bear Stearns also reviewed both the historical ratio of the public
trading price per share of Recognition Common Stock to the public trading price
per share of BancTec Common Stock on a weekly basis from May 18, 1990 to May
12, 1995 as well as the daily average public trading prices of Recognition
Common Stock and BancTec Common Stock over periods ranging from 5 to the 180
days immediately preceding May 16, 1995. Such analysis indicated that the ratio
of the public trading price per share of Recognition Common Stock to the public
trading price per share of BancTec Common Stock averaged 0.42 for the 180
days preceding May 16, 1995 and 0.41 for the 5 days preceding May 16, 1995. From
the week ended March 31, 1995 to the week ended May 12, 1995, the ratio of the
closing price of Recognition Common Stock at the end of each week to the closing
price of BancTec Common Stock at the end of each week ranged from 0.40 to 0.45.
From May 18, 1990 to May 12, 1995, the ratio of the weekly closing price of
Recognition Common Stock to the weekly closing price of BancTec Common Stock
ranged from 0.26 to 0.97. Bear Stearns noted that during the past 12 months, the
highest ratio of the weekly closing price of Recognition's Common Stock to the
weekly closing price of BancTec Common Stock price was 0.48, a level below the
Exchange Ratio of 0.59.
Selected Transactions Analysis. Bear Stearns reviewed certain information
relating to sixteen recent transactions accounted for as a pooling of interests
under the requirements of APB No. 16, in which the pro forma fully diluted
number of shares for the combined company to be owned by the target company was
equal
24
<PAGE>
to or greater than 29% ("Selected Pooling Transactions"). None of the Selected
Pooling Transactions were deemed directly comparable to the Merger. Such
analysis indicated that the premiums represented by the market value of the
consideration paid in the Selected Pooling Transactions ranged from -18.2% to
57.5% for the one day prior to the date of announcement of the transaction as
compared to a premium of approximately 49% in the Merger based on the Exchange
Ratio and the closing market prices of Recognition Common Stock and BancTec
Common Stock on May 18, 1995. Bear Stearns also reviewed certain information
relating to eight acquisitions of companies in similar businesses to Recognition
("Selected Acquisition Transactions"). As part of this analysis, Bear Stearns
calculated a transaction value (defined as the offer value plus liquidation
value of preferred stock plus the principal amount of debt less cash and option
proceeds) as a multiple of the respective acquired companies' latest twelve
months ("LTM") revenues and EBITDA. The calculations for the Selected
Acquisition Transactions yielded harmonic mean multiples of .8x and 6.5x for LTM
revenues and EBITDA compared to multiples of 0.8x and 7.9x, respectively, based
on the transaction value in the Merger derived from the Exchange Ratio of 0.59x.
Selected Comparable Companies Analysis. Bear Stearns compared certain
financial information for Recognition with corresponding publicly available
information of certain other publicly traded companies that Bear Stearns
considered comparable in certain respects to Recognition. Such comparable
companies included Bell & Howell, FileNet, Jack Henry & Associates, National
Computer Systems, Scan Optics and Wang Laboratories (the "Comparable Group"). An
analysis of multiples for the Comparable Group yielded the following range of
multiples: (i) market value to estimated 1995 calendar earnings per share of
12.0x to 19.3x (with a harmonic mean of 15.8x); (ii) market value to estimated
1996 calendar earnings per share of 6.3x to 15.6x (with a harmonic mean of
10.5x); (iii) market capitalization to LTM revenues of .5x to 2.7x (with a
harmonic mean of 1.0x); and (iv) market capitalization to LTM EBITDA of 5.4x to
12.0x (with a harmonic mean of 8.0x). Based upon a price per share of
Recognition of $7.00 (the closing price on May 16th), the multiples for
Recognition are as follows: (i) market value to estimated calendar 1995 earnings
per share of 22.0x; (ii) market value to estimated 1996 calendar year earnings
per share of 10.6x; (iii) market capitalization to LTM revenues of 0.6x; and 4)
market capitalization to LTM EBITDA of 5.6x.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Bear Stearns' opinion. In arriving at its opinion, Bear Stearns
considered the results of all such analyses. The analyses were prepared solely
for purposes of providing its opinion as to the fairness of the Exchange Ratio,
from a financial point of view, to the stockholders of Recognition. Analyses
based upon forecasts of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested
by such analyses. As described above, Bear Stearns' opinion and presentation to
the Recognition Board was one of many factors taken into consideration by the
Recognition Board in making its determination to approve the Merger Agreement.
The foregoing summary does not purport to be a complete description of the
analysis performed by Bear Stearns.
Bear Stearns is an internationally recognized investment banking firm and
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and other purposes.
Bear Stearns has served as the principal financial advisor to Recognition
for some time, having advised the corporation in connection with its acquisition
of the Lundy Financial Systems Division of TransTechnology Corporation in 1992
and having served as lead underwriter of the corporation's public offering of
common stock in 1993. Bear Stearns advised Recognition with respect to its
strategic alternatives for much of 1994, and Recognition entered into a letter
agreement with Bear Stearns in November of 1994 to compensate Bear Stearns for
the services performed and to set forth the basis upon which Bear Stearns would
be compensated for future assistance. Accordingly, Bear Stearns already had
been engaged by Recognition at the time Recognition determined to contact
BancTec in April of 1995, and in light of Bear Stearns' experience and
reputation in such matters, Recognition did not believe it was necessary or in
the best interests of the company to interview other financial advisor
candidates.
Pursuant to a letter agreement, dated November 17, 1994 and supplemented
May 9, 1995, Recognition paid Bear Stearns a retainer of $50,000 and an
additional $350,000 for rendering its opinion in connection with the Merger, and
upon consummation of the Merger will pay Bear Stearns an additional fee of
approximately $1,400,000. Recognition has also agreed to reimburse Bear
Stearns for its reasonable out-of-pocket expenses, including the reasonable fees
and disbursements of counsel, and to indemnify Bear Stearns and certain related
persons against certain liabilities in connection with the engagement of Bear
Stearns, including certain liabilities under the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Recognition Board with respect to
the Merger Agreement and the transactions contemplated thereby, stockholders
should be aware that certain employees and members of the management and the
Board of Directors of Recognition have certain interests in the Merger that are
in addition to the interests of stockholders of Recognition generally.
25
<PAGE>
Stock Plans. As provided in the Merger Agreement, by virtue of the Merger,
all options (the "Recognition Options") outstanding at the Effective Time under
any Recognition stock option plan (collectively, the "Recognition Stock Option
Plans"), whether or not then exercisable, will be assumed by BancTec and
converted into and become a right to purchase BancTec Common Stock. Each
Recognition Option assumed by BancTec will be exercisable upon the same terms
and conditions as under the applicable Recognition Stock Option Plans and
applicable option agreements issued thereunder, except that (i) each BancTec
Option shall be exercisable for the number of shares of BancTec Common Stock
equal to the product, rounded to the nearest whole share, of (A) the number of
shares of Recognition Common Stock subject to the original Recognition Option
immediately prior to the Effective Time, times (B) the Exchange Ratio and (ii)
the per share exercise price for each such Recognition Option will be equal to
(A) the per share exercise price for the share of Recognition Common Stock
subject to such Recognition Option immediately prior to the Effective Time
divided by (B) the Exchange Ratio, rounded upward to the nearest full cent. As
of June 1, 1995, employees (or former employees) and directors of Recognition
owned Recognition Options to purchase an aggregate of 2,528,036 shares of
Recognition Common Stock at a weighted average price of $9.693 per share (at
exercise prices ranging from $4.88 to $16.75 per share). Approval of the Merger
Agreement by the stockholders of BancTec will constitute stockholder approval of
the assumption by BancTec of the rights and obligations of Recognition under the
Recognition Stock Option Plans. See "The Merger Agreement-The Merger."
Recognition has two compensation plans for its outside directors: a stock
option plan and a restricted stock plan. Pursuant to the terms of Recognition's
stock option plan for outside directors, options previously granted to outside
directors will become immediately exercisable upon the occurrence of a "change
of control" as defined in the plan. Pursuant to the terms of Recognition's
restricted stock plan for outside directors, shares of Recognition Common Stock
previously granted to outside directors which are subject to forfeiture will
become non-forfeitable immediately upon the occurrence of a "change of control"
as defined in the plan. The Merger will trigger the change in control provisions
in both plans.
Severance Agreements. Recognition commenced a review and revision of
executive compensation in February 1993 with the assistance of Towers, Perrin,
Forster & Crosby, Inc., an outside compensation consultant. This process
resulted in, among other things, agreements with six of its executive officers,
Robert A. Vanourek, Dennis R. Constantine, Thomas D. Neitzel, Thomas E. Hoefert,
Larry H. Lattig, and Carol S. Lyon; one former officer, Robert M. Swartz; and
one non-executive management employee, N. Michael Potts, containing "change in
control" provisions which were approved by the Recognition Board in November
1994 and executed in December 1994. The agreements provide that in the event of
certain change in control circumstances, each of such persons will receive an
amount which, when added to all other "parachute payments" as defined in Section
280G of the Code, does not exceed approximately three times such person's
average annual compensation for the preceding five years. With respect to the
former executive, such amount is payable upon a change in control. With respect
to the six current executives and the non-executive management employee, such
amounts are payable in the event of termination of employment (other than for
cause, disability, death or voluntary resignation) within six months prior to
(in the case of Mr. Vanourek) or within 36 months after (for all six current
executives and the non-executive management employee) a change in control of
Recognition. The agreements with the six current executives, one former
executive and the non-executive management employee also provide for immediate
exercisability of all such persons' stock options upon termination of employment
in the context of a change in control and extend exercisability of such options
for periods of 12 to 24 months after such termination. Recognition also has a
contract entered into in June 1994 with another former executive, Thomas A.
Loose, relating to his retirement which provides for the exercisability of each
of his outstanding stock options at any time prior to October 31, 1997 and
amended in December 1994 to provide for a payment of approximately three times
his current compensation upon a change in control. The Merger will trigger the
change in control provisions.
Executive Benefit Plan and Other Payments. In addition to severance benefits,
the persons named above are entitled to payment of currently earned and vested
compensation, including any earned bonuses and previously vested benefits
pursuant to Recognition's Executive Benefit Plan (the "Plan"), which provides
for the payment of benefits upon death, retirement at age 65, or retirement
after age 55, with benefits payable in the form of designated monthly payments
for 20 years. The Plan's vested percentages range from 25% following 3 years'
participation in the Plan, up to 100% following 10 years' participation in the
Plan. The Plan provides that, upon an "Event of Nonforfeitability," a
participant's vested percentage in his benefit is increased to 100%. The Plan
further provides that, if a participant's employment is terminated within 24
months following an "Event of Nonforfeitability," for any reason other than
death, termination for cause, disability or voluntary resignation, then the
present value of the benefit is paid to the participant in a lump sum
immediately following the termination of employment. The Merger is an "Event of
Nonforfeitability" and will trigger the accelerated vesting and payment
provisions of the Plan.
Summary of Payments. The following chart sets forth the estimated currently
earned and vested amounts with respect to which payment would be accelerated by
the Merger and the estimated severance benefits for each of the named persons.
<TABLE>
<CAPTION>
Estimate of Total of Estimated Currently
Currently Vested Benefits
Vested Estimate of Maximum and Maximum Severance
Benefits/(1)//(2)/ Severance Amounts/(2)//(3)/ Amounts/(2)/
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert A. Vanourek $ 708,221 $1,224,049 $1,932,270
President and Chief
Executive Officer
-------------------------------------------------------------------------------------------------------------------
Dennis R. Constantine $ 75,000 $ 837,589 $ 912,589
Vice President; President,
OEM & Technology Division
-------------------------------------------------------------------------------------------------------------------
Thomas E. Hoefert $ 92,589 $ 531,362 $ 623,951
Vice President, Chief
Financial Officer and Controller
-------------------------------------------------------------------------------------------------------------------
Larry H. Lattig $ 50,000 $ 398,367 $ 448,367
Vice President and Treasurer
-------------------------------------------------------------------------------------------------------------------
Thomas A. Loose $1,094,321 $ 550,000 $1,644,321
Of Counsel; Former Senior
Vice President and
General Counsel
-------------------------------------------------------------------------------------------------------------------
Carol S. Lyon $ 45,000 $ 292,966 $ 337,966
Vice President, Secretary
and Associate General Counsel
-------------------------------------------------------------------------------------------------------------------
Thomas D. Neitzel $ 271,348 $ 865,722 $1,137,070
Vice President; President,
Service Division
-------------------------------------------------------------------------------------------------------------------
N. Michael Potts $ 44,048 $ 441,788 $ 485,836
General Manager, Solutions
Division
-------------------------------------------------------------------------------------------------------------------
Robert M. Swartz $ 198,846 $1,009,133 $1,207,979
Former Senior Vice
President; President,
Worldwide System Group
-------------------------------------------------------------------------------------------------------------------
TOTAL $2,579,373 $6,150,976 $8,730,349
===================================================================================================================
</TABLE>
/(1)/ Estimate of currently vested benefits under the Executive Benefit Plan and
of earned bonuses for fiscal year 1995, assuming 100% of targeted bonus is
earned. The targeted bonus amounts would decrease if a lower percentage
were earned or if it is determined that no bonuses are payable. As Mr.
Loose does not participate in the bonus plan under his retirement
arrangement with Recognition, the amount shown for Mr. Loose is his
currently vested benefits under the Executive Benefit Plan. As Mr. Potts
does not participate in the Executive Benefit Plan, the amount shown for
Mr. Potts is earned bonus, which is an actual amount for Mr. Potts, who
participates in a management incentive plan, rather than the executive
bonus plan in which the other named persons participate.
/(2)/ Payments could be increased to the extent that a greater percentage of
targeted bonus is earned and to the extent that amounts, if any, otherwise
capped by the limitation imposed by Section 280G of the Code are assigned
to the value of noncompetition agreements. Such increase would not exceed
$993,500.
/(3)/ Consists of estimated cash payments including contractual severance
amount, unearned bonus amounts for fiscal year 1995, and accelerated
vesting of benefits under the Executive Benefit Plan, and the estimated
non-cash benefit resulting from accelerated vesting of stock options
assuming a stock price of $17 per share of the Company's Common Stock.
This column sets forth the lesser of the contractual severance amount or
the severance amount as capped by the limit determined by Section 280G of
the Code.
In addition BancTec has agreed that, from and after the Effective Time,
for one year, it will continue to implement the Recognition Termination and
Severance Pay Plan for the employees of Recognition.
Indemnification and Insurance. In accordance with Recognition's existing
policies and agreements, BancTec has agreed to indemnify and advance expenses to
each person who was on May 19, 1995, or has been at any time prior to May 19,
1995, an officer, directors, employee, trustee or agent of Recognition (or any
subsidiary thereof) (the "Indemnified Parties"), to the fullest extent permitted
under applicable law, against all liabilities, costs or expenses and amounts
paid in settlement in connection with any claim or action arising out of or
pertaining to acts or omissions by them in their capacities as such, whether
commenced or claimed before or after the Effective Time. For a period of five
years after the Effective Time, BancTec is obligated to maintain in effect
policies of directors' and officers' liability insurance that are substantially
no less advantageous to the Indemnified Parties than the policies presently
maintained by Recognition, subject to certain maximum annual payments. See "The
Merger Agreement-Indemnification and Insurance."
ACCOUNTING TREATMENT
The Merger will qualify as a pooling of interests for accounting and
financial reporting purposes. BancTec has received a "pooling letter" from
Arthur Andersen LLP, their independent public accountants, dated May 19, 1995,
to the effect that the Merger will be treated as a pooling of interests for
accounting purposes. In addition, Recognition has received a letter from Price
Waterhouse LLP, their independent accountants, dated May 19, 1995, to the effect
that, subject to customary qualifications, no event has occurred with respect to
Recognition that would preclude the Merger from being treated as a pooling of
interests for accounting purposes. Under this method of accounting, the assets
and liabilities of BancTec and Recognition will be combined based
26
<PAGE>
on the respective carrying values of the accounts in the historical financial
statements of each entity. Results of operations of the combined company will
include income of BancTec and Recognition for the entire fiscal period in which
the combination occurs and the historical results of operations of the separate
companies for fiscal years prior to the Merger will be combined and reported as
the results of operations of the combined company.
Consummation of the Merger is conditioned upon this Registration Statement
treating the accounting for the Merger as a pooling of interests for accounting
purposes. See "The Merger-Conditions" and "Unaudited Pro Forma Condensed
Combined Financial Statements." Certain events, including certain transactions
with respect to BancTec Common Stock by affiliates of Recognition or BancTec,
respectively, may prevent the Merger from qualifying as a pooling of interests
for accounting and financial reporting purposes. See "The Merger-Resale
Restrictions."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences of the Merger and the tax opinions to be received by both companies
and is based upon current provisions of the Code, existing regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. No attempt has been made to comment on all federal income
tax consequences of the Merger that may be relevant to particular holders,
including holders that are subject to special tax rules such as dealers in
securities, foreign persons, mutual funds, insurance companies, tax-exempt
entities and holders who do not hold their shares as capital assets. Holders of
Recognition Common Stock are advised and expected to consult their own tax
advisers regarding the federal income tax consequences of the Merger in light of
their personal circumstances and the consequences under state, local and foreign
tax laws.
No ruling from the Internal Revenue Service ("IRS") has been or will be
requested in connection with the Merger. The respective obligations of
Recognition and BancTec to consummate the Merger are conditioned upon the
receipt of opinions of their respective special counsel, Locke Purnell Rain
Harrell and Vinson & Elkins L.L.P., that the Merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. See "The Merger Agreement - Conditions." Such
opinions will be subject to certain assumptions and based on certain
representations of Recognition and BancTec, including a representation by
Recognition that the historic stockholders of Recognition will retain a
significant continuing equity interest in BancTec and representations by both
BancTec and Recognition that substantially all of the assets of Recognition and
BancTec Sub will be retained by BancTec. Stockholders of Recognition should be
aware that such opinions are not binding on the IRS and no assurance can be
given that the IRS will not adopt a contrary position or that the IRS position
would not be sustained by a court.
The following federal income tax consequences will occur upon a
reorganization under Section 368(a) of the Code:
(a) no gain or loss will be recognized by BancTec, BancTec Sub or
Recognition in connection with the Merger;
(b) no gain or loss will be recognized by a holder of Recognition
Common Stock upon the exchange of all of such holder's shares of
Recognition Common Stock solely for shares of BancTec Common Stock in the
Merger;
(c) the aggregate basis of the shares of BancTec Common Stock
received by a Recognition stockholder in the Merger (including any
fractional share deemed received) will be the same as the aggregate basis
of the shares of Recognition Common Stock surrendered in exchange
therefor;
(d) the holding period of the shares of BancTec Common Stock
received by a Recognition stockholder in the Merger will include the
holding period of the shares of Recognition Common Stock surrendered in
exchange therefor, provided that such shares of Recognition Common Stock
are held as capital assets at the Effective Time; and
(e) a stockholder of Recognition who receives cash in lieu of a
fractional share will recognize gain or loss equal to the difference, if
any, between such stockholder's basis in the fractional share as described
in paragraph (c) above) and the amount of cash received. Such gain or loss
will be a capital gain or loss if the Recognition Common Stock is held by
such stockholder as a capital asset at the Effective Time.
27
<PAGE>
REGULATORY APPROVAL
Under the HSR Act, and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger cannot be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and specified waiting period requirements have been satisfied.
BancTec and Recognition each filed notification and report forms under the HSR
Act with the FTC and the Antitrust Division on June 8, 1995 along with requests
for early termination of the waiting period and on ____________, 1995 early
termination of the waiting period was granted. At any time before or after the
Effective Time, and notwithstanding that the HSR Act waiting period has expired,
the Antitrust Division, the FTC or any state could take action under the
antitrust laws as it deems necessary or desirable. Such action could include
seeking to enjoin the consummation of the Merger or seeking divestiture of
Recognition or businesses of BancTec or Recognition by BancTec. Private parties
may also be able to take legal action under the antitrust laws under certain
circumstances.
RESALE RESTRICTIONS
All shares of BancTec Common Stock received by Recognition stockholders in
the Merger will be freely transferable, except that the shares of BancTec Common
Stock received by persons who are deemed to be "affiliates" (as such term is
defined under the Securities Act) of Recognition at the time of the Recognition
Meeting may be resold by them only in transactions permitted by the resale
provisions of Rule 145 promulgated under the Securities Act (or Rule 144 in the
case of such persons who become affiliates of BancTec) or as otherwise permitted
under the Securities Act. Persons who may be deemed to be affiliates of
Recognition or BancTec generally include individuals or entities that control,
are controlled by, or are under common control with, such party and may include
certain officers and directors of such party as well as principal stockholders
of such party. The Merger Agreement requires Recognition to exercise its best
efforts to cause each of its affiliates to execute a written agreement to the
effect that such person will not offer to sell, transfer or otherwise dispose of
any of the shares of BancTec Common Stock issued to such person in or pursuant
to the Merger unless (a) such sale, transfer or other disposition has been
registered under the Securities Act, (b) such sale, transfer or other
disposition is made in conformity with Rule 145 under the Securities Act or (c)
in the opinion of counsel or pursuant to a "no-action" letter obtained from the
Commission by such person, such sale, transfer or other disposition is exempt
from registration under the Securities Act. In order to qualify for pooling of
interests treatment, an affiliate of either BancTec or Recognition may not sell
(subject to certain de minimus exceptions), or in any other way reduce said
affiliate's relative risk to, the shares of BancTec Common Stock until after
such time as BancTec publishes results covering at least 30 days of combined
operations of BancTec and Recognition. Recognition and BancTec have each agreed
to use their best efforts to obtain agreements from their respective affiliates
not to engage in any such transactions. See "The Merger-Accounting Treatment"
and "The Merger Agreement-Certain Covenants."
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement.
THE MERGER
Pursuant to the Merger Agreement, subject to the terms and conditions
thereof, at the Effective Time (as defined below), BancTec Sub will be merged
with and into Recognition. The Merger will have the effects specified in the
DGCL.
Upon the satisfaction or waiver of all conditions to the Merger, and
provided that the Merger Agreement has not been terminated or abandoned, BancTec
and Recognition will cause a Certificate of Merger to be executed, acknowledged
and filed with the Secretary of State of the State of Delaware as provided in
Section 251 of the DGCL (the "Certificate of Merger"). The time at which the
Merger becomes effective is referred to as the Effective Time.
As a result of the Merger and without any action on the part of the
holders thereof, each share of Recognition Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive 0.59 of a share of BancTec Common Stock and will cease to be outstanding
and will be cancelled and retired. Each holder of a Certificate representing any
such shares of Recognition Common Stock
28
<PAGE>
will thereafter cease to have any rights with respect to such shares of
Recognition Common Stock, except the right to receive, without interest, shares
of BancTec Common Stock and cash for fractional interests of BancTec Common
Stock (as described in "-Exchange Procedures") upon the surrender of such
Certificate. Each share of Recognition Common Stock held in Recognition's
treasury at the Effective Time will cease to be outstanding and will be
cancelled and retired without payment of any consideration therefor.
At the Effective Time, all Recognition Options then outstanding under the
Recognition Stock Option Plans will remain outstanding and will be assumed by
BancTec. Each such Recognition Option will be exercisable upon the same terms
and conditions as under the applicable Recognition Stock Option Plan and the
applicable option agreement issued thereunder, except that (a) each such
Recognition Option will be exercisable for that whole number of shares of
BancTec Common Stock (to the nearest whole share) into which the number of
shares of BancTec Common Stock under the unexercised portion of such option
would be converted at the Effective Time and (b) the exercise price per share of
BancTec Common Stock will be an amount equal to the exercise price per share
subject to such Recognition Option prior to the Effective Time divided by the
Exchange Ratio (rounded upward to the nearest full cent). Approval of the Merger
Agreement by the stockholders of BancTec will constitute stockholder approval of
the assumption by BancTec of the rights and obligations of Recognition under the
Recognition Stock Option Plans and of the amendment of such plans to provide
for, among other things, the conversion at the Effective Time of each
outstanding stock option into an option to purchase shares of BancTec Common
Stock at the Exchange Ratio. See "The Merger-Interests of Certain Persons in the
Merger."
EXCHANGE PROCEDURES
Promptly after the Effective Time, the Exchange Agent will mail to each
person who was, at the Effective Time, a holder of record of shares of
Recognition Common Stock, a letter of transmittal to be used by such holders in
forwarding their certificates representing shares of Recognition Common Stock
("Certificates"), and instructions for effecting the surrender of the
Certificates in exchange for certificates representing shares of BancTec Common
Stock. Upon surrender to the Exchange Agent of a Certificate for cancellation,
together with such letter of transmittal, the holder of such Certificate will be
entitled to receive a certificate representing that number of whole shares of
BancTec Common Stock, cash in lieu of any fractional shares (as described below)
and unpaid dividends and distributions, if any, which such holder has the right
to receive in respect of the Certificate surrendered, and the Certificate so
surrendered will be cancelled. RECOGNITION STOCKHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
No fractional shares of BancTec Common Stock will be issued and any holder
of shares of Recognition Common Stock entitled under the Merger Agreement to
receive a fractional share will be entitled to receive only a cash payment in
lieu thereof, which payment will be in an amount equal to the product of the
Average Price of a share of the BancTec Common Stock multiplied by the
fractional percentage of a share of BancTec Common Stock to which such holder
would otherwise be entitled. The "Average Price" of a share of BancTec Common
Stock will be the average of the closing bid and asked prices (as reported by
The Wall Street Journal, or, if not reported thereby, another authoritative
source) over the ten business days immediately preceding the closing date of the
Merger.
No dividends on shares of BancTec Common Stock, if applicable, will be
paid with respect to any shares of Recognition Common Stock or other securities
represented by a Certificate until such Certificate is surrendered for exchange
as provided in the Merger Agreement. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
of certificates representing shares of BancTec Common Stock issued in exchange
therefor, (i) at the time of such surrender, the amount of any dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such shares of BancTec Common Stock and not paid, less
the amount of any withholding taxes which may be required thereon, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender thereof and a
payment date subsequent to surrender thereof payable with respect to such whole
shares of BancTec Common Stock less the amount of any withholding taxes which
may be required thereon.
At or after the Effective Time, there will be no transfers on the transfer
books of Recognition of shares of Recognition Common Stock which were
outstanding immediately prior to the Effective Time.
29
<PAGE>
Any portion of the monies from which cash payments in lieu of fractional
interests in shares of BancTec Common Stock will be made (including the proceeds
of any investments thereof) and any shares of BancTec Common Stock that are
unclaimed by the former stockholders of Recognition one year after the Effective
Time will be delivered to the surviving corporation in the Merger (Recognition).
Any former stockholders of Recognition who have not theretofore complied with
the exchange procedures in the Merger Agreement may thereafter look to the
surviving corporation in the Merger (Recognition) for payment of their shares of
BancTec Common Stock, cash in lieu of fractional shares, and any unpaid
dividends and distributions on shares of BancTec Common Stock, deliverable in
respect of each share of Recognition Common Stock such stockholder holds.
Notwithstanding the foregoing, neither Recognition, BancTec, the Exchange Agent
nor any other person will be liable to any former holder of shares of
Recognition Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
No interest will be paid or accrued on cash in lieu of fractional shares
and unpaid dividends and distributions, if any, which will be paid upon
surrender of Certificates.
In the event that any Certificate has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required, by the surviving corporation
in the Merger (Recognition), the posting by such person of a bond in such
reasonable amount as BancTec may direct as indemnity against any claim that may
be made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the shares of
BancTec Common Stock, cash in lieu of fractional shares, and any unpaid
dividends and distributions on shares of BancTec Common Stock, as described
above.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties
relating to, among other things: (a) the due organization, power and standing of
Recognition and BancTec and similar corporate matters; (b) the authorization,
execution, delivery and enforceability of the Merger Agreement; (c) the capital
structure of Recognition and BancTec; (d) subsidiaries of Recognition and
BancTec; (e) investment interests of Recognition and BancTec; (f) the absence of
conflicts under charters or bylaws and violations of any instruments or law, and
required consents or approvals; (g) certain documents filed by each of
Recognition and BancTec with the Commission and the accuracy of information
contained therein; (h) litigation; (i) conduct of business in the ordinary
course and the absence of certain changes or material adverse effects; (j)
taxes; (k) labor matters; (l) qualification for "pooling of interests"
accounting treatment; (m) brokers' and finders' fees with respect to the Merger;
(n) receipt of fairness opinions; and (o) ownership of the capital stock of the
other company.
CERTAIN COVENANTS
Recognition has agreed, among other things, prior to the consummation of
the Merger, unless BancTec agrees in writing or as otherwise required or
permitted by the Merger Agreement, to (i) conduct its operations with no
material change and according to the ordinary and usual course of business, and
(ii) to use its reasonable best efforts to preserve intact its business
organization and goodwill, keep available the services of its officers and
employees and maintain satisfactory business relationships. Furthermore,
Recognition has agreed, among other things, prior to the consummation of the
Merger, unless BancTec agrees in writing or as otherwise required or permitted
by the Merger Agreement, not to (i) sell, pledge, or agree to sell or pledge any
stock owned by it in any subsidiary, (ii) amend its Certificate of Incorporation
or Bylaws, (iii) split, combine or reclassify any shares of its outstanding
capital stock, (iv) declare, set aside or pay any dividends or other
distribution payable in cash, stock or property or redeem or otherwise acquire
any shares of its capital stock or the capital stock of any of its subsidiaries,
(v) authorize for issuance, issue, sell or agree to issue or sell any additional
shares of its capital stock of any class, except for unissued shares of
Recognition Common Stock reserved for issuance upon the exercise of currently
outstanding Recognition stock options, (vi) dispose of, transfer, lease,
license, mortgage, pledge or encumber any fixed or other assets, except for
product sales and other than in the ordinary course of business, in amounts
greater than $1,500,000 in the aggregate for Recognition and its subsidiaries
collectively, (vii) incur, assume or prepay any indebtedness or any other
material liabilities other than in the ordinary course of business and
consistent with past practices, nor assume, guarantee, endorse or otherwise
become liable for the obligations of any other person, except for Recognition's
subsidiaries in the ordinary course of business, (viii) make any loans, advances
or capital contributions to, or investments in, any other person, other than to
a subsidiary in the ordinary course of business, (ix) authorize capital
expenditures in excess of $250,000 per expenditure or $6,000,000 in the
aggregate for Recognition and its subsidiaries collectively, (x) permit any
insurance policy naming Recognition or any of its subsidiaries as a beneficiary
or a loss payee to be cancelled or terminated by failure to pay premiums or (xi)
enter into any new agreements with any of its officers, directors
30
<PAGE>
or employees or any officers, directors or employees of any subsidiary of
Recognition, nor grant any increases in the compensation of their respective
officers, directors and employees, nor enter into, adopt or amend any employee
compensation or benefit plans.
BancTec has agreed, among other things, prior to the consummation of the
Merger, unless Recognition agrees in writing or as otherwise required or
permitted by the Merger Agreement, to (i) conduct its operations with no
material change and according to the ordinary and usual course of business, and
(ii) to use its reasonable best efforts to preserve intact its business
organization and goodwill, keep available the services of its officers and
employees and maintain satisfactory business relationships. Furthermore, BancTec
has agreed, among other things, prior to the consummation of the Merger, unless
Recognition agrees in writing or as otherwise required or permitted by the
Merger Agreement, not to (i) sell, pledge, or agree to sell or pledge any stock
owned by it in any subsidiary, (ii) amend its Restated Certificate of
Incorporation or Bylaws, (iii) split, combine or reclassify any shares of its
outstanding capital stock, (iv) declare, set aside or pay any dividends or other
distribution payable in cash, stock or property or redeem or otherwise acquire
any shares of its capital stock or the capital stock of any of its subsidiaries,
(v) authorize for issuance, issue, sell or agree to issue or sell any additional
shares of its capital stock of any class, except for unissued shares of BancTec
Common Stock granted or reserved for issuance upon the exercise of BancTec
employee stock options and except for grants of options under the BancTec
Employee Stock Option Plan, in the ordinary course of business, or (vi) incur,
assume or prepay any indebtedness or any other material liabilities other than
in the ordinary course of business and consistent with past practices or assume,
guarantee, endorse or otherwise become liable for the obligations of any other
person, except for BancTec's subsidiaries in the ordinary course of business.
Recognition and BancTec have agreed that, during the period from May 19,
1995 until the Effective Time, except as otherwise contemplated by the Merger
Agreement, neither Recognition nor BancTec will knowingly take or knowingly fail
to take any action which would jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes or as a "reorganization" within
the meaning of Section 368(a) of the Code. Both companies have also agreed: (a)
to cooperate in the prompt preparation and filing of certain documents under
federal and state securities laws and with applicable government entities, and
(b) to use their best efforts to obtain and deliver to each other certain
letters from "affiliates," as defined under Rule 145 under the Securities Act or
by applicable accounting rules.
NO SOLICITATION OF TRANSACTIONS
Recognition has agreed that it will not, and will direct and use its best
efforts to cause its officers, directors, employees, agents and representatives
not to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of,
Recognition or any of its significant subsidiaries (any such proposal or offer
being hereinafter referred to as an "Alternative Proposal"), or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal. Recognition has agreed to immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
prior to the date of the Merger Agreement with respect to any of the foregoing
and to take the necessary steps to inform the appropriate individuals or
entities of these obligations. Recognition has also agreed to notify BancTec
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any negotiations or discussions are sought to
be initiated or continued with it; provided that the Recognition Board may (i)
furnish information to, or enter into discussions or negotiations with, any
person or entity that makes an unsolicited bona fide proposal to acquire
Recognition pursuant to a merger, consolidation, share exchange, business
combination, purchase of a substantial portion of its assets, or other similar
transactions, if, and only to the extent that, (a) the Recognition Board
determines in good faith that such action is required for the Board of Directors
to comply with its fiduciary duties to stockholders imposed by law, (b) prior to
furnishing such information to, or entering into discussions or negotiations
with, the other person or entity, Recognition provides written notice to BancTec
to the effect that it is furnishing information to, or entering into discussions
or negotiations with, the other person or entity, or (c) subject to any
confidentiality agreement with the other person or entity (which Recognition
determined in good faith was required to be executed in order for the Board of
Directors to comply with its fiduciary duties to stockholders imposed by law),
Recognition keeps BancTec informed of its status (not the terms) of any such
discussions or negotiations, and (ii) to the extent applicable, comply with Rule
14e-2 promulgated under the Exchange Act with regard to the Alternative
Proposal.
31
<PAGE>
INDEMNIFICATION AND INSURANCE
BancTec has agreed to indemnify and advance expenses to each person who
was on May 19, 1995, or has been at any time prior to May 19, 1995, an officer,
director, employee, trustee or agent of Recognition (or any subsidiary thereof)
(the "Indemnified Parties"), to the fullest extent permitted under applicable
law, against all losses, claims, damages, liabilities, costs or expenses
(including attorney's fees), judgments, fines, penalties and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to acts or omissions, or alleged acts
or omissions, by them in their capacities as such, whether commenced, asserted
or claimed before or after the Effective Time and including, without limitation,
liabilities arising under the Securities Act, the Exchange Act and state
corporation laws in connection with the Merger.
For a period of five years after the Effective Time, BancTec is obligated
to maintain in effect policies of directors' and officers' liability insurance
covering certain Indemnified Parties presently covered by Recognition insurance
policies that are substantially no less advantageous to such Indemnified Parties
than the policies presently maintained by Recognition; provided that BancTec
shall not be required in order to maintain such coverage to pay an annual
premium in excess of two times the current annual premium paid by Recognition
for its existing coverage (the "Cap"); and provided further, that if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual premium
in excess of the Cap, BancTec shall only be required to obtain as much coverage
as can be obtained by paying an annual premium equal to the Cap.
CONDITIONS
The respective obligations of Recognition and BancTec to consummate the
Merger are subject to the fulfillment of each of the following additional
conditions, among others: (a) the Merger Agreement and the transactions
contemplated thereby shall have been approved in the manner required by law or
by applicable regulations of any stock exchange or other regulatory body, as the
case may be, by the holders of the issued and outstanding shares of capital
stock of Recognition and BancTec entitled to vote thereon; (b) the waiting
period applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated; (c) none of the parties to the Merger Agreement
shall be subject to any order or injunction against the consummation of the
transactions contemplated by the Merger Agreement; and (d) the Registration
Statement shall have become effective under the Securities Act and no stop order
with respect thereto shall be in effect.
The obligations of each of Recognition and BancTec to effect the Merger
are also subject to the satisfaction or waiver by the other party prior to the
Effective Time of the following conditions, among others: (a) the other party
shall have performed, in all material respects, all obligations required to be
performed by it under the Merger Agreement; (b) each party shall have received
the opinion of its tax counsel that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that Recognition and BancTec will each be a party to that
reorganization within the meaning of Section 386(b) of the Code; and (c) from
the date of the Merger Agreement through the Effective Time, there shall not
have occurred any event, change or development that individually or in the
aggregate with other such events, changes or developments materially and
adversely affects the business, financial condition or results of operations of
the other party and its subsidiaries taken as a whole, except that any adverse
impact on the revenues, income, balance sheet or operations of the other party
or its subsidiaries caused by adverse changes in orders, backlog, bidding
qualifications, relations with resellers, integrators, OEM customers,
cancellations and rescheduling of orders, or the ability to retain agreed upon
employees or attract new employees, will be presumed, unless there is clear
evidence to the contrary, to have occurred as a result of the transactions
contemplated by the Merger Agreement or the announcement thereof.
Further, in accordance with the terms of the Merger Agreement and the
terms of the Indenture governing Recognition's 7-1/4% Convertible Subordinated
Debentures due 2011 (the "Debentures"), prior to the Merger BancTec must execute
a supplemental indenture providing that the holder of each Debenture shall have
the right to convert such Debenture into the same amount of BancTec Common Stock
(and other property, including cash) receivable after the Merger by a holder of
the number of shares of Recognition Common Stock deliverable upon conversion of
such Debenture immediately prior to the Merger. The supplemental indenture will
provide for adjustments of the conversion price in accordance with the terms of
the Indenture.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by the
stockholders of Recognition and BancTec, respectively: (a) by the mutual consent
of Recognition and BancTec, (b) by action of the Board of Directors of either
Recognition or BancTec if (i) the Merger shall not have been consummated by
December 31, 1995, provided that the terminating party shall not have breached
in any material respect its obligations under the Merger, Agreement in any
manner that shall have proximately contributed to the failure to consummate the
Merger; (ii) the adoption of the Merger Agreement and the approval of the
transactions contemplated thereby by Recognition's stockholders shall not have
been obtained at a meeting duly convened therefor or at any adjournment thereof;
(iii) the adoption of the Merger Agreement and the approval of the transactions
contemplated thereby by BancTec's stockholders shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof; or (iv) if a
United States Federal or state court of competent jurisdiction or United States
32
<PAGE>
Federal or state governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement and such order, decree, ruling or other
action shall have become final and non-appealable; provided, that the party
seeking to terminate the Merger Agreement pursuant to this clause (iv) shall
have used all reasonable efforts to remove such injunction, order or decree; and
(c) by action of the Recognition Board, if in the exercise of its good faith
judgment as to its fiduciary duties to its stockholders imposed by law, based on
advice of legal counsel and receipt of financial advisors evaluations, the
Recognition Board determines that such termination is required by reason of an
Alternative Proposal being made for Recognition.
TERMINATION FEE
In the event that any person shall have made an Alternative Proposal for
Recognition and thereafter the Merger Agreement is terminated by Recognition or
by BancTec if Recognition's stockholders have not approved the Merger Agreement,
then Recognition shall be required to pay BancTec a fee of $5,500,000
("Alternative Proposal Fee"). If Recognition fails to make such payment and
BancTec receives a judgment against Recognition therefor, Recognition shall be
required to pay BancTec for its costs in connection with such suit.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby shall be paid by the party incurring such expenses, except as otherwise
provided in the Merger Agreement. The Merger Agreement provides that the
following expenses will be shared equally by BancTec and Recognition: (a) the
filing fee in connection with the HSR Act filing, (b) the filing fee in
connection with the filing of the Registration Statement with the Commission and
(c) the expenses incurred in connection with printing and mailing this Proxy
Statement/Prospectus.
AMENDMENT AND WAIVER
The parties may modify or amend the Merger Agreement by written agreement
at any time prior to the Effective Time, to the extent permitted by applicable
law. The conditions to each party's obligation to consummate the Merger may be
waived by such party in whole or in part to the extent permitted by applicable
law.
33
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
are presented assuming the Merger will be accounted for as a pooling of
interests.
The unaudited pro forma condensed combined balance sheet reflects the
combined historical consolidated balance sheets of BancTec as of June 25, 1995,
and Recognition as of April 30, 1995. The unaudited condensed combined
statements of income are based on the consolidated financial statements of
Banctec for the three months ended June 25, 1995 and June 26, 1994, and fiscal
years ended March 26, 1995, March 27, 1994, and March 28, 1993, and the
consolidated financial statements of Recognition for the three months ended
April 30, 1995 and April 30, 1994 and the twelve months ended April 30, 1995 and
the fiscal years ended October 31, 1993 and 1992, respectively.
For all applicable periods presented in the pro forma condensed combined
statements of income, shares used in the computation of earnings per common and
common equivalent shares give effect to the Exchange Ratio.
The unaudited pro forma condensed combined financial statements are not
necessarily indicative of the results that would have been achieved had the
Merger occurred on the dates indicated and should not be construed as
representative of future operations. These pro forma condensed combined
financial statements should be read in conjunction with the related historical
financial statements and notes thereto of BancTec and Recognition incorporated
by reference in this Proxy Statement/Prospectus.
34
<PAGE>
BANCTEC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 25, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BANCTEC RECOGNITION PRO FORMA PRO FORMA
JUNE 25,1995 APRIL 30,1995 ADJUSTMENTS COMBINED
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents..... $ 13,427 $ 43,937 $ (24,000)(C) $ 33,364
Accounts Receivable - net..... 72,813 51,629 --- 124,442
Inventories - net............. 51,183 23,784 (10,000)(C) 64,967
Other Current ................ 13,196 3,907 10,000 (A) 27,103
--------- -------- --------- ---------
Current Assets.............. 150,619 123,257 (24,000) 249,876
Fixed Assets - net............ 52,258 42,052 (3,000)(C) 91,310
Long Term Receivables......... --- 3,802 --- 3,802
Goodwill...................... 85,658 15,114 (9,000)(C) 91,772
Other Assets.................. 13,170 19,251 (13,000)(C) 39,421
20,000 (C)
--------- -------- --------- ---------
Total Assets................ $ 301,705 $203,476 $ (29,000) $ 476,181
======== ======= ======== ========
Revolving Credit Facility..... $ 13,132 $ --- $ --- $ 13,132
Short Term Debt............... --- 9,044 --- 9,044
Current Portion LTD........... 15,699 --- --- 15,699
Trade Accounts Payables....... 14,412 14,533 --- 28,945
Taxes Payable................. 7,095 1,454 --- 8,549
Accrued Liabilities........... 38,273 24,176 12,500 (C) 74,949
Advances...................... 26,158 18,152 --- 44,310
--------- -------- --------- ---------
Current Liabilities......... 114,769 67,359 12,500 194,628
Other Debt.................... 42,577 49,472 --- 92,049
Other LT Liabilities.......... 3,206 6,789 (1,500)(C) 8,495
Stockholders' Equity
Common Stock.................. 107 3,464 (3,373)(D) 198
Paid in Capital............... 40,129 142,008 3,373 (D) 185,510
Retained Earnings............. 100,693 (63,802) (50,000)(C) (3,109)
10,000 (A)
Translation Adjustments....... 224 (1,814) --- (1,590)
--------- -------- --------- ---------
Total Stockholders' Equity.... 141,153 79,856 (40,000) 181,009
--------- -------- --------- ---------
Total Liabilities and
Stockholders' Equity........ $ 301,705 $203,476 $ (29,000) $ 476,181
======== ======= ======== ========
</TABLE>
(See accompanying Notes)
35
<PAGE>
BANCTEC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 25, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BANCTEC RECOGNITION PRO FORMA PRO FORMA
JUNE 25,1995 APRIL 30,1995 ADJUSTMENTS COMBINED
------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue........................... $ 73,152 $ 55,451 $ --- $ 128,603
Cost of Sales..................... 52,090 38,675 --- 90,765
----------- ---------- ------- ---------
Gross Profit.................... 21,062 16,776 --- 37,838
----------- ---------- ------- ---------
Operating Expenses
Product Development and
Engineering.................... 1,981 2,603 --- 4,584
SG&A............................ 10,247 11,006 --- 21,253
Restructuring................... --- 733 --- 733
Other........................... 996 851 --- 1,847
----------- ---------- ------- ---------
Operating Expenses........... 13,224 15,193 --- 28,417
----------- ---------- ------- ---------
Income From Operations............ 7,838 1,583 --- 9,421
----------- ---------- ------- ---------
Other Income/(Expense)
Interest Income................. 95 676 --- 771
Interest Expense................ (1,505) (1,082) --- (2,587)
Sundry ......................... 167 1,148 --- 1,315
----------- ---------- ------- ---------
Other Income/(Expense)....... (1,243) 742 --- (501)
----------- ---------- ------- ---------
Income before
Income Taxes and
Minority Interest................ 6,595 2,325 --- 8,920
Income Tax Provision.............. 2,770 1,708 --- 4,478
Minority Interest................. --- --- --- ---
----------- ---------- ------- ---------
Income From Continuing
Operations....................... $ 3,825 $ 617 $ --- $ 4,442
========== ========= ====== ========
Income From Continuing
Operations Per Share............. $ 0.35 $ 0.04 $ 0.22
========== ========= ========
Weighted Average Shares........... 10,934 15,454 (6,336)(B) 20,052
</TABLE>
(See accompanying Notes)
36
<PAGE>
BANCTEC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BANCTEC RECOGNITION PRO FORMA PRO FORMA
JUNE 26,1994 APRIL 30,1994 ADJUSTMENTS COMBINED
------------ -------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue........................... $ 69,466 $ 62,577 $ --- $ 132,043
Cost of Sales..................... 48,684 44,483 --- 93,167
----------- ---------- ------- ---------
Gross Profit.................... 20,782 18,094 --- 38,876
----------- ---------- ------- ---------
Operating Expenses
Product Development and
Engineering.................... 2,759 4,094 --- 6,853
SG&A............................ 10,854 12,414 --- 23,268
Restructuring................... --- --- --- ---
Other........................... 1,074 856 --- 1,930
----------- ---------- ------- ---------
Operating Expenses........... 14,687 17,364 --- 32,051
----------- ---------- ------- ---------
Income From Operations............ 6,095 730 --- 6,825
----------- ---------- ------- ---------
Other Income/(Expense)
Interest Income................. 37 586 --- 623
Interest Expense................ (1,064) (1,071) --- (2,135)
Sundry ......................... 559 74 --- 633
----------- ---------- ------- ---------
Other Income/(Expense)....... (468) (411) --- (879)
----------- ---------- ------- ---------
Income before
Income Taxes and
Minority Interest................ 5,627 319 --- 5,946
Income Tax Provision.............. 2,364 1,710 --- 4,074
Minority Interest................. 439 --- --- 439
----------- ---------- ------- ---------
Income (Loss) From Continuing
Operations....................... $ 3,702 $ (1,391) $ --- $ 2,311
========== ========= ====== ========
Income (Loss) From Continuing
Operations Per Share............. $ 0.33 $ (0.09) $ 0.11
========== ========= ========
Weighted Average Shares........... 11,227 15,725 (6,447)(B) 20,505
</TABLE>
(See accompanying Notes)
37
<PAGE>
BANCTEC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED MARCH 26, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BANCTEC RECOGNITION PRO FORMA PRO FORMA
MARCH 26,1995 APRIL 30,1995 ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue........................... $ 297,539 $ 215,320 $ --- $ 512,859
Cost of Sales..................... 210,695 152,338 --- 363,033
----------- ---------- ------- ---------
Gross Profit.................... 86,844 62,982 --- 149,826
----------- ---------- ------- ---------
Operating Expenses
Product Development and
Engineering.................... 9,590 15,122 --- 24,712
SG&A............................ 49,560 44,771 --- 94,331
Restructuring................... --- 21,036 --- 21,036
Other........................... 4,010 4,760 --- 8,770
----------- ---------- ------- ---------
Operating Expenses........... 63,160 85,689 --- 148,849
----------- ---------- ------- ---------
Income (Loss) From Operations..... 23,684 (22,707) --- 977
----------- ---------- ------- ---------
Other Income/(Expense)
Interest Income................. 252 2,519 --- 2,771
Interest Expense................ (5,679) (4,344) --- (10,023)
Sundry ......................... 1,523 1,496 --- 3,019
----------- ---------- ------- ---------
Other Income/(Expense)....... (3,904) (329) --- (4,233)
----------- ---------- ------- ---------
Income (Loss) before
Income Taxes and
Minority Interest................ 19,780 (23,036) --- (3,256)
Income Tax Provision.............. 8,481 2,663 (10,000)(A) 1,144
Minority Interest................. 1,210 --- --- 1,210
----------- ---------- ------- ---------
Income (Loss) From Continuing
Operations....................... $ 12,509 $ (25,699) $10,000 $ (3,190)
========== ========= ====== ========
Income (Loss) From Continuing
Operations Per Share............. $ 1.12 $ (1.66) $ (0.16)
========== ========= ========
Weighted Average Shares........... 11,128 15,466 (6,341)(B) 20,253
</TABLE>
(See accompanying Notes)
38
<PAGE>
BANCTEC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED MARCH 27, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BANCTEC RECOGNITION PRO FORMA PRO FORMA
MARCH 27,1994 OCTOBER 31,1993 ADJUSTMENTS COMBINED
------------- --------------- ----------- --------
<S> <C> <C> <C> <C>
Revenue........................... $ 247,538 $ 230,578 $ --- $ 478,116
Cost of Sales..................... 177,886 146,652 --- 324,538
----------- ---------- ------- ---------
Gross Profit.................... 69,652 83,926 --- 153,578
----------- ---------- ------- ---------
Operating Expenses
Product Development
and Engineering............... 9,515 16,585 --- 26,100
SG&A............................ 34,701 48,258 --- 82,959
Restructuring................... --- --- --- ---
Other........................... 1,834 3,972 --- 5,806
----------- ---------- ------- ---------
Operating Expenses........... 46,050 68,815 --- 114,865
----------- ---------- ------- ---------
Income From Operations 23,602 15,111 --- 38,713
----------- ---------- ------- ---------
Other Income/(Expense)
Interest Income................. 422 2,676 --- 3,098
Interest Expense................ (1,846) (5,340) --- (7,186)
Sundry.......................... 685 (619) --- 66
----------- ---------- ------- ---------
Other Income/(Expense) (739) (3,283) --- (4,022)
----------- ---------- ------- ---------
Income before
Income Taxes and
Minority Interest............. 22,863 11,828 --- 34,691
Income Tax Provision.............. 9,145 3,892 --- 13,037
Minority Interest................. 2,625 --- --- 2,625
----------- ---------- ------- ---------
Income from Continuing
Operations..................... $ 16,343 $ 7,936 $ --- $ 24,279
========== ========= ====== ========
Income from continuing operations
per share...................... $ 1.45 $ 0.55 $ 1.22
========== ========= ========
Weighted Average Shares........... 11,294 14,496 (5,943)(B) 19,847
</TABLE>
(See accompanying Notes)
39
<PAGE>
BANCTEC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED MARCH 28, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BANCTEC RECOGNITION PRO FORMA PRO FORMA
MARCH 28, 1993 OCTOBER 31, 1992 ADJUSTMENTS COMBINED
-------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue........................... $ 233,885 $ 199,186 $ - $ 433,071
Cost of Sales..................... 167,285 128,007 - 295,292
---------- ---------- ------ ----------
Gross Profit.................... 66,600 71,179 - 137,779
---------- ---------- ------ ----------
Operating Expenses
Product Development
and Engineering............... 8,490 14,168 - 22,658
SG&A............................ 32,007 39,594 - 71,601
Restructuring................... - 2,257 - 2,257
Other........................... 1,666 3,030 - 4,696
---------- ---------- ------ ---------
Operating Expenses........... 42,163 59,049 - 101,212
---------- ---------- ------ ---------
Income From Operations 24,437 12,130 - 36,567
---------- ---------- ------ ---------
Other Income/(Expense)
Interest Income................. 315 3,902 - 4,217
Interest Expense................ (2,233) (5,610) - (7,843)
Sundry.......................... (1,418) (1,099) - (2,517)
---------- ---------- ------ ---------
Other Income/(Expense) (3,336) (2,807) - (6,143)
---------- ---------- ------ ---------
Income before
Income Taxes and
Minority Interest............. 21,101 9,323 - 30,424
Income Tax Provision.............. 8,425 5,271 - 13,696
Minority Interest................. 1,675 - - 1,675
---------- ---------- ------ ---------
Income From
Continuing Operations........... $ 14,351 $ 4,052 $ - $ 18,403
========== ========== ===== ========
Income From Continuing
Operations Per Share............ $ 1.32 $ 0.32 $ 1.00
========== ========== ========
Weighted Average Shares........... 10,870 12,649 (5,186)(B) 18,333
</TABLE>
(See accompanying Notes)
40
<PAGE>
BANCTEC, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The unaudited pro forma condensed combined statements of income are based on
the consolidated financial statements of BancTec for the three months ended June
25, 1995 and June 26, 1994, and the fiscal years ended March 26, 1995, March 27,
1994, and March 28, 1993, and the consolidated financial statements of
Recognition for the three months ended April 30, 1995 and 1994, the twelve
months ended April 30, 1995, and the fiscal years ended October 31, 1993 and
1992. The twelve months ended April 30, 1995 for Recognition were determined by
subtracting the six months ended April 30, 1994 from the year ended October 31,
1994, and adding the six months ended April 30, 1995. Therefore, Recognition's
results of operations for the three months ended April 30, 1995 have been
included in the pro forma condensed combined financial data in both the three
months ended April 30, 1995 and the twelve months ended April 30, 1995.
Recognition's revenue and income from continuing operations for the three months
ended April 30, 1995 were $55,451,000 and $617,000, respectively. As the six
months ended April 30, 1994 have been subtracted out to arrive at the twelve
months ended April 30, 1995, they are excluded from the pro forma condensed
combined financial statements. Recognition's revenue and loss from continuing
operations for the six months ended April 30, 1994 were $112,925,000 and
$735,000, respectively. Intercompany sales between the two combining entities
have been minimal and therefore no intercompany eliminations have been
reflected.
The pro forma condensed combined balance sheet is based on BancTec's and
Recognition's balance sheets at June 25, 1995, and April 30, 1995,
respectively, and upon the adjustments and assumptions described below.
The unaudited pro forma condensed combined financial statements do not
reflect expenses expected to be incurred by BancTec and Recognition in
connection with the Merger or the effect of cost savings, if any, which may be
realized after the consummation of the Merger.
NOTE 2 - PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed combined financial statements reflect the
following pro forma adjustments:
(A) The pro forma condensed combined statement of income of the combined
company for the year ended March 26, 1995, includes an adjustment to the income
tax provision of $10,000,000 to adjust for Recognition's historical tax
provision, to reflect the expected future benefits associated with Recognition's
federal net operating loss carryforwards and temporary differences.
(B) The pro forma combined condensed financial statements reflect the
issuance of 0.59 of a share of BancTec Common Stock for each share of
Recognition Common Stock to effect the Merger. The impact of Recognition's
convertible debt is anti-dilutive and therefore has been excluded from the
computation of pro forma earnings per share.
(C) BancTec expects to incur charges to operations currently estimated at
approximately $65,000,000 to $75,000,000 in the quarters ended September 30,
1995, and December 31, 1995, the quarters which the Merger is expected to be
consummated, to reflect costs associated with combining the operations of the
two companies, primarily the closing of duplicate facilities of approximately
$12,600,000, write-off of inventory related to duplicate product lines of
approximately $10,000,000, write-off of goodwill and other intangible assets of
approximately $18,000,000, write-off of other assets of approximately
$9,700,000, severance of approximately $14,700,000, and transaction fees and
costs incident to the Merger of approximately $5,000,000. The midpoint of the
estimated charge after effecting for estimated tax benefits of $20,000,000, is
reflected in the unaudited pro forma condensed combined balance sheet. The
future cash requirements related to these charges are estimated to be in the
range of $36,000,000 of which approximately $24,000,000 is expected to be
expended in the first year following the consummation of the merger and the
remainder is expected to be expended in future years. BancTec will utilize
existing cash balances and post-merger cash flows from operations to meet the
cash flow requirements of the merger charge. The existing cash balances earn
interest of approximately five percent. These preliminary estimates are subject
to change based upon additional information.
(D) The unaudited pro forma condensed combined balance sheet reflects the
issuance of 0.59 of a share of BancTec Common Stock for each share of
Recognition Common Stock outstanding as of April 30, 1995, therefore, the
historical combined common stock and paid-in capital account balances have been
adjusted to reflect the number of shares assumed to be issued and for the
differences in par value per common share of BancTec and Recognition. The impact
of this adjustment does not result in a change to the total combined
stockholders' equity.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
BANCTEC CAPITAL STOCK
BancTec's authorized capital stock presently consists of 46,000,000 shares
divided into two classes: (i) 45,000,000 shares of Common Stock, par value $.01
per share ("BancTec Common Stock"), and 1,000,000 shares of Preferred Stock, par
value $.01 per share ("BancTec Preferred Stock").
BancTec Common Stock. Holders of BancTec Common Stock have no preemptive
rights and are entitled to one vote for each share held on each matter submitted
to a vote of stockholders. Cumulative voting for the election of Directors is
not permitted, which means that the holders of a majority of the outstanding
shares of BancTec Common Stock can elect all of the Directors. Subject to the
prior payment of any dividends on any outstanding shares of BancTec Preferred
Stock, sinking fund payments or any other requirements for the purchase or
redemption of the Preferred Stock, the holders of BancTec Common Stock are
entitled to receive ratably such dividends as may be declared by BancTec's Board
out of funds legally available therefor. On any liquidation of BancTec, and
after paying or adequately providing for the payment of all of its obligations
and amounts to which the holders of any outstanding shares of Preferred Stock
are entitled, the remainder of the assets of BancTec shall be distributed pro
rata to the holders of BancTec Common Stock.
BancTec Preferred Stock. The BancTec Restated Certificate of
Incorporation authorizes the issuance of 1,000,000 shares of Preferred Stock,
par value $.01 per share. No BancTec Preferred Stock is currently outstanding
and BancTec has no present plans to issue BancTec Preferred Stock. The BancTec
Board has authority to issue the authorized BancTec Preferred Stock in one or
more series, each series to have such designation and number of shares as the
BancTec Board may fix prior to the issuance of any shares of such series. Each
series may have such preferences and relative, participating, optional or other
special rights, with such qualifications, limitations or restrictions of the
preferential rights as are stated in the resolution or resolutions providing for
the issue of the series of the Preferred Stock as may be adopted from time to
time by the BancTec Board prior to the issuance of any shares of such series.
Depending upon the terms established by the BancTec Board for any series of
BancTec Preferred Stock, such BancTec Preferred Stock may limit the rights of
holders of shares of BancTec Common Stock.
BancTec Common Stock Rights. The BancTec Board has adopted a stockholders
rights plan, pursuant to which one right (the "Right" or "Rights") is issued
with respect to each share of BancTec Common Stock issued by BancTec. Each Right
entitles the registered holder to purchase from BancTec one share of BancTec
Common Stock at a purchase price of $35.00 per share of BancTec Common Stock,
subject to adjustment (the "Purchase Price"). The description and terms of the
Rights are set forth in a Rights Agreement dated as of June 16, 1988 (the
"BancTec Rights Agreement") between BancTec and First RepublicBank Dallas, N.A.,
as Rights Agent.
Currently, the Rights are attached to all BancTec Common Stock
certificates representing shares outstanding and are not represented by separate
Rights certificates. Until the earlier to occur of (i) ten days following a
public announcement (the "Shares Acquisition Date") that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of BancTec Common Stock, or (ii) ten business days following
the commencement of a tender offer or exchange offer which would result in a
person or group beneficially owning 30% or more of such outstanding shares of
BancTec Common Stock, the Rights will separate from the BancTec Common Stock and
a Distribution Date (the "Rights Distribution Date") will occur. Until the
Rights Distribution Date (or earlier redemption or expiration of the Rights),
the Rights will be transferred with and only with BancTec Common Stock
certificates. BancTec Common Stock certificates contain a notation incorporating
the Rights Agreement by reference. Until the Rights Distribution Date (or
earlier redemption or expiration of the Rights), the surrender or transfer of
any certificates for BancTec Common Stock outstanding will also constitute the
transfer of the Rights associated with the BancTec Common Stock represented by
such certificate. As soon as practicable following the Rights Distribution Date,
separate certificates evidencing the Rights (the "Rights Certificates") will be
mailed to holders of record of the BancTec Common Stock as of the close of
business on the Rights Distribution Date, and the separate Rights Certificates
alone will evidence the Rights. Except as otherwise determined by the BancTec
Board, and except in certain circumstances described in the Rights Agreement,
only shares of BancTec Common Stock issued prior to the Rights Distribution Date
will be issued with Rights.
42
<PAGE>
The Rights are not exercisable until the Rights Distribution Date and will
expire at the close of business on May 24, 1998, unless earlier redeemed by
BancTec as described below. As soon as practicable after the Rights Distribution
Date, Rights Certificates will be mailed to holders of record of BancTec Common
Stock as of the close of business on the Rights Distribution Date and,
thereafter, the separate Rights Certificates alone will represent the Rights.
In the event that, at any time following the Rights Distribution Date, (i)
BancTec is the surviving corporation in a merger with an Acquiring Person and
its Common Stock is not changed or exchanged, (ii) a Person becomes the
beneficial owner of more than 35% of the then outstanding shares of BancTec
Common Stock other than pursuant to an offer for all outstanding shares of
BancTec Common Stock which the independent directors determine to be fair to,
and otherwise in the best interest of stockholders, or (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, each holder of a Right will thereafter have the right to receive,
upon exercise, BancTec Common Stock having a value equal to two times the
exercise price of the Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by an Acquiring Person will be null and void. However, Rights
are not exercisable following the occurrence of either of the events set forth
above until such time as the Rights are no longer redeemable by BancTec as set
forth below.
In the event that, at any time following the Shares Acquisition Date, (i)
BancTec is acquired in a merger or other business combination transaction in
which BancTec is not the surviving corporation or (ii) 50% or more of BancTec's
assets or earning power is sold or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right. The events
set forth in this paragraph and in the preceding paragraph are referred to as
the "Triggering Events."
The Purchase Price payable, and the number of shares of BancTec Common
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of,
BancTec Common Stock, (ii) if holders of BancTec Common Stock are granted
certain rights or warrants to subscribe for BancTec Common Stock or convertible
securities at less than the current market price of BancTec Common Stock, or
(iii) upon the distribution to holders of BancTec Common Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of BancTec Common Stock will be issued and, in lieu
thereof, an adjustment in cash may be made based on the market price of BancTec
Common Stock on the last trading date prior to the date of exercise.
At any time until fifteen days following the Shares Acquisition Date,
BancTec may redeem the Rights in whole, but not in part, at a price of $.05 per
Right, payable in cash. Under certain circumstances set forth in the Rights
Agreement, the decision to redeem shall require the concurrence of a majority of
the Continuing Directors. After the redemption period has expired, BancTec's
right to redemption may be reinstated if an Acquiring Person reduces his
beneficial ownership to 10% or less of the outstanding shares of BancTec Common
Stock in a transaction or series of transactions not involving BancTec.
Immediately upon the action of the BancTec Board ordering redemption of the
Rights, with, where required, the concurrence of the Continuing Directors, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $.05 redemption price.
The term "Continuing Directors" means any member of BancTec Board who was
a member of BancTec Board prior to the date of the Rights Agreements, and any
person who is subsequently elected to the BancTec Board if such person is
recommended or approved by a majority of the Continuing Directors, but shall not
include an Acquiring Person, or any representative of, or person affiliated
with, the foregoing entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of BancTec including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to BancTec, stockholders may, depending upon the
circumstances,
43
<PAGE>
recognize taxable income in the event that the Rights become exercisable for
BancTec Common Stock (or other consideration) or for common stock of the
acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
BancTec Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the BancTec Board (in
certain circumstances, with the concurrence of the Continuing Directors) in
order to cure any ambiguity, to make changes which do not adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, has no rights as
a stockholder of BancTec including, without limitation, the right to vote or to
receive dividends.
The foregoing summary of certain terms of the Rights is qualified in its
entirety by references to the Rights Agreement, a copy of which is incorporated
herein by reference.
RECOGNITION CAPITAL STOCK
Authorized Capital Stock. Recognition's authorized capital stock
presently consists of 31,000,000 shares divided into two classes: (i) 30,000,000
shares of Common Stock, par value $.25 per share ("Recognition Common Stock"),
and (ii) 1,000,000 shares of Preferred Stock, no par value per share
("Recognition Preferred Stock").
Recognition Common Stock. Pursuant to its Restated Certificate of
Incorporation, Recognition is authorized to issue 30,000,000 shares of
Recognition Common Stock, of which 15,355,740 shares were outstanding at June
15, 1995. Holders of Recognition Common Stock do not have any preemptive rights
to subscribe for or to purchase additional securities of Recognition, nor do
they have any right to convert Recognition Common Stock into other securities of
Recognition. Each holder of Recognition Common Stock is entitled to cast one
vote for each share held on all matters voted upon by stockholders and, in
elections for directors, is entitled to cumulate his votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of shares which he is entitled to vote, or to
distribute his votes on the same principle among as many candidates as he thinks
fit. Each holder of shares of Recognition Common Stock is entitled (subject to
the rights of holders of any preferred stock which hereafter may be outstanding)
to receive dividends when and as declared by the BancTec Board and to receive
his ratable portion of assets available for distribution upon liquidation. The
Recognition Common Stock is not subject to redemption or to liability for
further calls.
Recognition Preferred Stock. The Restated Certificate of Incorporation of
Recognition authorizes the issuance of 1,000,000 shares of Recognition Preferred
Stock, no par value. The Recognition Board has designated 200,000 shares of
Recognition Preferred Stock as Series A Junior Participating Preferred Stock. No
shares of Recognition Preferred Stock have been issued and Recognition presently
has no plans to issue any shares of Recognition Preferred Stock. The Recognition
Board is authorized, without further stockholder approval, to establish from
time to time one or more series of Recognition Preferred Stock and to determine
the series, including the rights, preferences and privileges of any such rights,
dividend rates, conversion rights, voting rights, terms of redemption,
liquidation preferences, sinking fund terms and the name, description and number
of shares constituting any such series. The Recognition Board, without
stockholder approval, may issue Recognition Preferred Stock with voting and/or
conversion rights, which could adversely affect the voting power of the holders
of Recognition Common Stock and could be used as an anti-takeover measure by
Recognition without any further action by the stockholders.
Recognition Preferred Stock Purchase Rights. In September 1992,
Recognition's Board declared a dividend distribution to stockholders of record
on September 29, 1992, of one Preferred Stock Purchase Right (a "Preferred
Right") for each outstanding share of Recognition Common Stock. Each share of
Recognition Common Stock issued after September 1992 has an associated Preferred
Right. A Preferred Right may be exercised to purchase one-hundredth of a share
of Series A Junior Participating Preferred Stock of Recognition (a "Unit") at an
exercise price of $60 per Unit. Recognition would register the Recognition
Preferred Stock issuable on exercise of the Preferred Rights under the
Securities Act at such time as may be required by law. The Preferred Rights are
exercisable only if a person or group acquires beneficial ownership of 25% or
more of the Recognition Common Stock. However, the Preferred Rights would not
become exercisable if the Recognition Common Stock is acquired pursuant to an
offer for all shares which a majority
44
<PAGE>
of Recognition's independent directors, excluding all officers, determines to be
fair to, and otherwise in the best interests of, Recognition and its
stockholders. The Preferred Rights are not exercisable in connection with
the transactions contemplated by the Merger.
If any person or group becomes the beneficial owner of 25% or more of the
Recognition Common Stock other than pursuant to an offer for all shares as
described above, or if a 25% or more stockholder engages in a merger with
Recognition in which Recognition survives and shares of Recognition Common Stock
are not changed or converted, each Preferred Right not owned by such person or
group or related parties will entitle its holder to purchase, at the Preferred
Right's then current exercise price, Recognition Common Stock (or, in certain
circumstances as determined by Recognition's Board, cash, property, or other
securities) having a value of twice the Preferred Right's exercise price. In
addition, if any time after a person or group acquires beneficial ownership of
25% or more of the Recognition Common Stock, Recognition is involved in a merger
or other business combination transaction with another person in which
Recognition Common Stock is changed or converted or sells 50% or more of
Recognition's assets or earning power to another person, each Preferred Right
will entitle its holder to purchase, at the Preferred Right's then current
exercise price, common stock of such other person having a value of twice the
Preferred Right's exercise price.
The Preferred Rights expire in 2002, and may be redeemed by Recognition
for one cent per Right at any time before the tenth business day following the
public announcement that a person or group has acquired 25% or more of the
Recognition Common Stock.
Until the Preferred Rights become exercisable, the Preferred Rights are
attached to the shares of Recognition Common Stock and no separate certificates
will be issued. Stockholders will exchange their Preferred Rights with shares of
Recognition Common Stock in the Merger.
The foregoing summary of certain terms of the Preferred Rights is
qualified in its entirety by references to the Rights Agreement (the
"Recognition Rights Agreement") dated as of September 18, 1992 between
Recognition and Society National Bank, as Rights Agent.
COMPARATIVE RIGHTS OF STOCKHOLDERS
GENERAL
As a result of the Merger, holders of Recognition Common Stock will become
stockholders of BancTec and the rights of all such former Recognition
stockholders will thereafter be governed by the BancTec Restated Certificate of
Incorporation, as amended (the "BancTec Certificate of Incorporation") the
BancTec Bylaws, BancTec Rights Agreement and the DGCL. The following is a
summary comparison of the material differences between the rights of holders of
BancTec Common Stock and holders of Recognition Common Stock. Because both
BancTec and Recognition are organized and exist under Delaware law and are
subject to the DGCL, these differences arise from various provisions of the
certificates of incorporation and the bylaws of the two companies. This summary
is qualified in its entirety by reference to the full text of the BancTec
Certificate of Incorporation, the BancTec Bylaws, the BancTec Rights Agreement,
the Recognition Certificate of Incorporation and the Recognition Bylaws. For
information as to how to obtain copies of such documents, see "Incorporation of
Certain Documents by Reference."
CLASSIFIED BOARD OF DIRECTORS
The DGCL provides that a corporation's board of directors may be divided
into various classes with staggered terms of office. The BancTec Certificate of
Incorporation provides that the BancTec Board is divided into three classes of
directors, as nearly equal in number as reasonably possible. One class of
directors is elected each year for a three-year term.
Classification of directors has the effect of making it more difficult for
stockholders to change the composition of the BancTec Board. At least two annual
meetings of stockholders, instead of one, will generally be required to effect a
change in the majority of the BancTec Board. Such a delay may help ensure that
BancTec's directors, if confronted by a holder attempting to force a proxy
contest, a tender or exchange offer or other extraordinary corporate
transaction, would have sufficient time to review the proposal as well as any
available alternatives to the proposal and to act in what they believe to be the
best interests of the stockholders.
45
<PAGE>
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of BancTec, even though such a transaction could be
beneficial to BancTec and its stockholders. The classification of the BancTec
Board might also increase the likelihood that incumbent directors will retain
their positions.
The Recognition Bylaws contain a substantially identical classified board
provision.
STOCKHOLDERS RIGHTS PLANS
BancTec has adopted a stockholder rights plan that is designed to protect
BancTec stockholders from coercive or unfair takeover tactics. To implement the
plan, the BancTec Board declared a dividend distribution of one Right for each
outstanding share of BancTec Common Stock and authorized the issuance of one
Right for each share of BancTec Common Stock issued thereafter, but prior to the
triggering of the plan. One Right will be issued with respect to each share of
BancTec Common Stock issued pursuant to the Merger. Each Right entitles a
registered holder to purchase, upon the occurrence of certain specified events,
one share of BancTec Common Stock at a Purchase Price of $35.00 per share. The
description and terms of the Rights are set forth in the BancTec Rights
Agreement. In general, pursuant to the BancTec Rights Agreement, upon occurrence
of specified triggering events, such as ten days following the public
announcement (the "Shares Acquisition Date") of the acquisition by any person
(other than BancTec or any of its subsidiaries) of the beneficial ownership of
securities representing 20% or more of the outstanding shares of BancTec Common
Stock or ten days following the commencement of a tender offer or exchange offer
resulting in any person beneficially owning 30% or more of the outstanding
shares of BancTec Common Stock, a Distribution Date will occur at which time
BancTec's stockholders (except those stockholders whose Rights have been voided
under the BancTec Rights Agreement as a result of a triggering event) may
exercise their Rights.
In the event that, at any time following a Distribution Date, BancTec is
the surviving corporation in a merger with an Acquiring Person, BancTec's stock
is not exchanged, and a person becomes the beneficial owner of more than 35% of
the then outstanding shares of BancTec Common Stock, each holder of a Right will
have the right to receive BancTec Common Stock having a value equal to two times
the exercise price of the Right. In the event that, any time following the
Shares Acquisition Date, BancTec is acquired in a merger or other business
combination transaction in which BancTec is not the surviving corporation or 50%
or more of BancTec's assets or earning power is sold or transferred, each holder
of a Right (except those stockholders whose Rights have been voided under the
BancTec Rights Agreement as a result of a triggering event) will have the right
to receive common stock of the acquiring company having a value equal to two
times the exercise price of the Right. Under certain circumstances, BancTec may
redeem the Rights, which will otherwise expire on the close of business on May
24, 1998. See "Description of Capital Stock-BancTec Common Stock Rights." The
effect of the BancTec Rights Agreement may be to render more difficult a change
in control of BancTec.
Recognition has adopted a stockholder rights plan that is similarly
designed to protect Recognition stockholders from coercive or unfair takeover
tactics, but which has certain differences from the BancTec Rights Agreement. To
implement the plan, on September 29, 1992, the Recognition Board declared a
dividend distribution of one Preferred Stock Purchase Right (a "Preferred
Right") for each outstanding share of Recognition Common Stock and authorized
the issuance of one Preferred Stock Purchase Right for each share of Recognition
Common Stock issued thereafter, but prior to the triggering of the plan. Each
Preferred Stock Purchase Right entitles a registered holder to purchase, upon
the occurrence of certain specified events, one-hundredth of a share of Series A
Junior Participating Preferred Stock of Recognition (a "Unit") at a Purchase
Price of $60.00 per unit. The description and terms of the Rights are set forth
in the Recognition Rights Agreement. In general, pursuant to the Recognition
Rights Agreement, Preferred Rights are exercisable only if a person or group
acquires beneficial ownership of 25% or more of the Recognition Common Stock. If
a person or group acquires beneficial ownership of 25% or more of the
Recognition Common Stock or if a 25% or more stockholder engages in a merger
with Recognition in which Recognition survives and shares of Recognition Common
Stock are not changed, each Preferred Right not owned by such person or group
will entitle its holder to purchase Recognition Common Stock having a value of
twice the Preferred Right's exercise price. In addition, if Recognition is
involved in a merger or other business combination transaction with another
person in which the Recognition Common Stock is changed or 50% or more of
Recognition's assets or earning power is sold, each Preferred Right will entitle
its holder to purchase the common stock of such other person having a value of
twice the Preferred Right's exercise price.
46
<PAGE>
The Preferred Rights are not exercisable if the Recognition Common Stock
is acquired pursuant to an offer for all shares which a majority of
Recognition's independent directors determines to be fair to Recognition and its
stockholders. The Preferred Rights expire in 2002 and may be redeemed by
Recognition at any time prior to the tenth business day following the public
announcement that a person or group has acquired 25% or more of Recognition
Common Stock.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The BancTec Certificate of Incorporation and Bylaws provides that the
number of directors and the number of directors in each class will be fixed from
time to time by resolution of the BancTec Board or by resolution of the
stockholders at the annual meeting of stockholders or at a special meeting of
stockholders called for that purpose, but in no event shall the number of
directors be less than three nor more than fifteen. In addition, the BancTec
Certificate of Incorporation provides that any vacancies will be filled only by
the affirmative vote of a majority of the remaining directors, though less than
a quorum. Directors appointed to fill vacancies will serve the remainder of the
term of the resigning or terminated director. Accordingly, the BancTec Board
could prevent any stockholder from enlarging the BancTec Board and filling the
new directorships with such stockholder's own nominees.
Under the Delaware law, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may only be removed by
the stockholders for cause. The BancTec Certificate of Incorporation provides
that directors may be removed only for cause and only upon the affirmative vote
of holders of at least a majority of the voting power of all the then
outstanding shares of stock entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class, subject to any
rights of holders of BancTec Preferred Stock.
The Recognition Restated Certificate of Incorporation provides that the
number of directors constituting the Recognition Board shall be determined by or
pursuant to the Recognition Bylaws, and shall not be less than six. Pursuant to
the Recognition Bylaws, the Board of Directors of Recognition currently consists
of eight directors.
Under the Recognition Bylaws, subject to the rights of any holders of
Recognition Preferred Stock, any vacancy in the Recognition Board and any newly
created directorship resulting from an increase in the authorized number of
directors may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. A director chosen to fill a
vacancy shall serve for the unexpired term of his predecessor. A director chosen
to fill a newly created directorship shall serve until the next annual meeting
of stockholders.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The BancTec Certificate of Incorporation and the BancTec Bylaws do not
contain any provisions restricting the taking of any action without a meeting.
The BancTec Bylaws provide that special meetings of the stockholders for any
purpose or purposes may be called by (i) the Chairman of BancTec, (ii) the
President of BancTec, (iii) the BancTec Board, (iv) the holders of not less than
10% of all shares entitled to vote at such meeting, or (v) as otherwise provided
in the BancTec Certificate of Incorporation.
The Recognition Restated Certificate of Incorporation and the Recognition
Bylaws do not contain any provisions restricting the taking of any action by
stockholders without a meeting. The Recognition Bylaws provide that special
meetings of the stockholders for any purpose or purposes may be called by (i)
the President of Recognition, (ii) the Recognition Board, or (iii) the President
or Secretary of Recognition at the written request of a majority of the
Recognition directors.
FAIR PRICE PROVISIONS
The BancTec Certificate of Incorporation contains a "fair price"
provision, requiring that, in addition to any other vote required by the BancTec
Certificate of Incorporation or the Delaware Law, certain "Business Combination"
transactions with a "Related Person" will be subject to the affirmative vote of
the holders of not less than 75% of the outstanding voting stock held by
stockholders other than the Related Person.
47
<PAGE>
For the purposes of this provision, certain terms are defined as follows:
"Business Combination" means (a) any merger or consolidation of BancTec or
a subsidiary with a Related Person or any other corporation which is, on or
after such merger or consolidation, or would be an Affiliate or Associate of a
Related Person, (b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with a Related Person or any Affiliate or Associate of
any Related Person of any assets of BancTec or of a subsidiary of BancTec having
an aggregate Fair Market Value of 10% or more of the total consolidated assets
of BancTec and its subsidiaries taken as a whole, as of the end of its most
recent fiscal year ending prior to the time the determination is being made; (c)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition, to
BancTec or a subsidiary of BancTec of any assets of a Related Person or any
Affiliate or Associate of any Related Person having an aggregate Fair Market
Value of 10% or more of the total consolidated assets of BancTec and its
subsidiaries taken as a whole, as of the end of its most recent fiscal year
ending prior to the time the determination is being made; (d) any issuance,
pledge or transfer of securities of BancTec or a subsidiary of BancTec to or
with a Related person or any Affiliate or Associate or any Related Person; (e)
any reclassification of securities (including any reverse stock split) or
recapitalization of BancTec, or any merger or consolidation of BancTec with any
of its subsidiaries or any other transaction (whether or not with or into or
otherwise involving a Related Person or any Affiliate or Associate of any
Related Person) that would have the effect, of increasing the proportionate
share of any class of equity or convertible securities of BancTec or any
subsidiary of BancTec which is directly or indirectly beneficially owned by any
Related Person or any Affiliate or Associate of any Related person; (f) the
adoption of any plan or proposal for the liquidation or dissolution of BancTec
proposed by or on behalf of a Related Person or any Affiliate or Associate
thereof; or (g) any agreement, contract or other arrangement providing for or
resulting in any of the transactions described in this definition of Business
Combination.
The term "Disinterested Director" means any member of the BancTec Board
who, while such person is a member of the BancTec Board, is not an Affiliate,
Associate or a representative of the Related Person involved in a proposed
Business Combination and was a member of the BancTec Board prior to the time
that the Related Person became a Related Person, and any successor of a
Disinterested Director who, while such successor is a member of the BancTec
Board, is not an Affiliate, Associate or a representative of the Related Person
and is recommended or elected to succeed a Disinterested Director by the BancTec
Board without counting the vote of any director who is not Disinterested
Director.
The term "Fair Market Value" means: (i) in case of capital stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for the New York
Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite
Tape, or if such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Exchange Act on which such stock
is listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on The Nasdaq National Market System or
any successor system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as determined
in good faith by the BancTec Board without counting the vote of any director who
is not a Disinterested Director; and (ii) in the case of property other than
cash or stock, the fair market value of such property on the date in question as
determined in good faith by the BancTec Board without counting the vote of any
director who is not a Disinterested Director.
The term "Related Person" shall mean any person (other than BancTec, or
any subsidiary and other than any profit-sharing, employee stock ownership or
other employee benefit plan of BancTec or any subsidiary or any trustee of or
fiduciary with respect to any such plan when acting in such capacity) who or
which: (a) is the beneficial owner (as hereinafter defined) of 20 percent (20%)
or more of the voting stock of BancTec; (b) is an Affiliate or Associate of
BancTec and at any time within the two-year period immediately prior to the date
in question was the beneficial owner of 20 percent (20%) or more of the then
outstanding voting stock of BancTec; or (c) is an assignee of or has otherwise
succeeded to the beneficial ownership of any shares of voting stock of BancTec
which were at any time within the two-year period immediately prior to such time
beneficially owned by any Related Person, if such assignment or succession shall
have occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of 1933, as
amended.
The 75% voting requirement will not be applicable and a Business
Combination with a Related Person may be approved by the vote (if any) required
by law or by any other provision of the BancTec Certificate of Incorporation if;
48
<PAGE>
(1) The Business Combination shall have been approved by the
BancTec Board without counting the vote of any director who is not a
"Disinterested Director"; or
(2) All of the following conditions are met:
(i) The aggregate amount of cash or the "Fair Market Value"
as of the date of the consummation of the Business Combination (the
"Combination Date") of the property, securities or other
consideration to be received per share by holders of a particular
class or series of capital stock, as the case may be, of BancTec in
the Business Combination is not less than the highest of: (a) the
highest per share price (including brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by or on behalf of the
Related Person in acquiring beneficial ownership of any of its
holdings of such class or series of capital stock of BancTec (A)
within the two-year period immediately prior to the first public
announcement of the proposed Business Combination (the "Announcement
Date") or (B) in the transaction or series of transactions in which
the Related Person became a Related Person, whichever is higher; or
(b) the Fair Market Value per share of the shares of capital stock
being acquired in the Business Combination as of (A) the
Announcement Date or (B) the date on which the Related Person became
a Related Person, whichever is higher; or (c) in the case of shares
of BancTec Common Stock, the per share book value of BancTec Common
Stock as reported at the end of the fiscal quarter immediately prior
to the Announcement Date, and in the case of shares of BancTec
Preferred Stock, the highest preferential amount per share to which
the holders of shares of such class or series of BancTec Preferred
Stock would be entitled as of the Combination Date in the event of
any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of BancTec, regardless of whether the Business
Combination to be consummated constitutes such an event; and
(ii) The consideration to be received by holders of a
particular class or series of capital stock shall be in cash or in
the same form as previously has been paid by or on behalf of the
Related Person in connection with its direct or indirect acquisition
of beneficial ownership of shares of such class or series of stock.
If the consideration so paid for any such shares varied as to form,
the form of consideration for such shares shall be either cash or
the form used to acquire beneficial ownership of the largest number
of shares of such class or series of capital stock previously
acquired by the Related Person; and
(iii) After such Related Person has become a Related Person
and prior to the consummation of such Business Combination: (a)
except as approved by the BancTec Board without counting the vote of
any director who is not a Disinterested Director, there shall have
been no failure to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on any
outstanding BancTec Preferred Stock; (b) there shall have been (A)
no reduction in the annual rate of dividends paid on BancTec Common
Stock (except as necessary to reflect any subdivision of BancTec
Common Stock), except as approved by the BancTec Board without
counting the vote of any director who is not a Disinterested
Director, and (B) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of
outstanding shares of BancTec Common Stock, unless the failure so to
increase such annual rate is approved by the BancTec Board without
counting the vote of any director who is not a Disinterested
Director; and (c) such Related Person shall not have become the
beneficial owner of any additional shares of voting stock except as
part of the transaction which results in such Related Person
becoming a Related person; and
(iv) After such Related Person has become a Related Person,
such Related Person shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance or any
tax credits or other tax advantages provided by BancTec, whether in
anticipation of or in connection with such Business Combination or
otherwise; and
(v) A proxy information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder shall be mailed to all stockholders of
BancTec at least 30 days prior to the consummation of such Business
Combination (whether
49
<PAGE>
or not such proxy or information statement is required to be mailed
pursuant to the Exchange Act or subsequent provisions).
The "fair price" provision is intended to ensure that all stockholders
receive equal treatment in the event of a tender or exchange offer and to
protect stockholders against coercive or two-tiered takeover bids.
Notwithstanding the foregoing, the provision could also have the effect of
discouraging a third party from making a tender or exchange offer for BancTec,
event though such an offer might be beneficial to BancTec and its stockholders.
The Recognition Restated Certificate of Incorporation and the Recognition
Bylaws do not contain any "fair price" provisions. However, any sale, lease or
exchange of all of Recognition's property and assets requires the affirmative
vote of the holders of 62.5% of its outstanding voting stock pursuant to the
Recognition Restated Certificate of Incorporation.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The affirmative vote of the holders of at least two-thirds of the total
voting power of all outstanding voting shares of BancTec is required to amend,
alter, change or repeal the provisions in the Restated Certificate of
Incorporation of BancTec relating to the classification of the Board of
Directors or to impose a provision providing for cumulative voting in the
election of directors. The amendment, alteration, change or repeal of any other
provision of the Restated Certificate of Incorporation of BancTec requires the
affirmative vote of the holders of at least a majority of all outstanding shares
entitled to vote at a meeting of stockholders.
The affirmative vote of holders of at least 80% of the issued and
outstanding shares of stock entitled to vote is required to amend, alter, change
or repeal the provisions in the Restated Certificate of Incorporation of
Recognition relating to cumulative voting for the election of directors or the
method for determining the number of directors or their term of office or the
minimum number of directors. The amendment, alteration, change or repeal of any
other provision of the Restated Certificate of Incorporation requires the
affirmative vote of the holders of at least 62.5% of the issued and outstanding
shares of stock entitled to vote thereon.
LIMITATION OF LIABILITY OF DIRECTORS
The DGCL permits a corporation to include a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director or
officer to the corporation or its stockholders for damages for a breach of the
director's fiduciary duty, subject to certain limitations. Each of the BancTec
Certificate of Incorporation and the Recognition Certificate includes such a
provision, as set forth below, to the maximum extent permitted by law.
Each of the BancTec Certificate and the Recognition Certificate provides
that a director will not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL which concerns unlawful payments of dividends, stock
purchases or redemptions or (iv) for any transaction from which the director
derived an improper personal benefit.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions described above apply to an
officer of the corporation only if he or she is a director of the corporation
and is acting in his or her capacity as director, and do not apply to officers
of the corporation who are not directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The DGCL provides that a corporation may advance expense
of defense (upon receipt of a written
50
<PAGE>
undertaking to reimburse the corporation if indemnification is not appropriate)
and must reimburse a successful defendant for expenses, including attorney's
fees, actually and reasonably incurred, and permits a corporation to purchase
and maintain liability insurance for its directors and officers. The DGCL
provides that indemnification may be made for any claim, issue or matter as to
which a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation, unless and
only to the extent a court determines that a person is entitled to indemnity for
such expenses as the court deems proper.
The Restated Certificate of Incorporation of Recognition provides that any
person made a party to any civil or criminal action, suit or proceeding by
reason of the fact that he or she is or was a director, officer or employee of
Recognition or any corporation that he or she served as such at the request of
Recognition shall be indemnified by Recognition against the reasonable expenses,
including attorneys' fees, and amounts paid in satisfaction of judgment or in
settlement, other than amounts paid to Recognition by him or her, actually and
necessarily incurred by such person or imposed in connection with or resulting
from the defense of any such action, suit or proceeding or in connection with
any appeal therein, except in relation to matters as to which it shall be
adjudged that such officer, director or employee is liable for negligence or
misconduct in the performance of his or her duties. Neither a conviction in any
criminal action, suit or proceeding, nor a settlement in any civil action, suit
or proceeding shall itself be deemed an adjudication that such officer, director
or employee is liable for negligence or misconduct in the performance of his or
her duties to Recognition. The foregoing rights of indemnification conferred by
the Restated Certificate of Incorporation are stated to be nonexclusive of any
other rights that such officers, directors and employees of Recognition and the
other persons above mentioned may have or hereafter acquire.
The Recognition Bylaws provide that Recognition shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than an action by or in
the right of Recognition) by reason of the fact that he or she is or was a
director or officer of Recognition, or (while a director or officer of
Recognition) is or was an employee or agent of Recognition or is or was serving
at the request of Recognition as a director, officer, employee or agent of
another corporation or other entity, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner that the person reasonably believed
to be in or not opposed to the best interests of Recognition and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. In addition, Recognition shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of Recognition to procure
a judgment in its favor by reason of the fact that such person is or was a
director or officer of Recognition, or (while a director or officer of
Recognition) is or was serving in the capacities set forth in the preceding
sentence against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of Recognition; provided,
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been determined to be liable to Recognition
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that
notwithstanding the determination of liability and in view of the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses that the court shall deem proper. Under the Recognition Bylaws, the
determination of indemnification is made (i) by the Recognition Board by
majority vote of a quorum consisting of directors who are not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable, or if a
quorum of disinterested directors so directs, by independent counsel in a
written opinion, or (iii) by the Recognition stockholders. The indemnification
rights conferred by the Recognition Bylaws are not exclusive of any other right
to which persons seeking indemnification may be entitled under any bylaw,
agreement, contract, vote of stockholders or disinterested directors or
otherwise.
Recognition is authorized to purchase and maintain and Recognition
maintains insurance on behalf of its directors, officers, employees and agents.
DELAWARE ANTI-TAKEOVER STATUTE
Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the date
that such stockholder becomes an interested stockholder unless (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction which
51
<PAGE>
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares held by directors who are also officers and employee
stock purchase plans in which employee participants do not have the right to
determine confidentially whether plan shares will be tendered in a tender or
exchange offer) or (iii) on or subsequent to such date, the business combination
is approved by the board of directors of the corporation and by the affirmative
vote at an annual or special meeting, and not by written consent, of at least
66% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 203 of the DGCL an interested
stockholder is defined to include (a) any person that is the owner of 15% or
more of the outstanding voting stock of the corporation or is an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within three years immediately prior
to the relevant date and (b) the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the DGCL may make it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the corporation's certificate of incorporation or stockholders may
elect to exclude a corporation from the restrictions imposed thereunder.
Both the Restated Certificate of Incorporation of BancTec and the Restated
Certificate of Incorporation of Recognition do not exclude either company from
the restrictions imposed under Section 203 of the DGCL.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS
The Recognition Bylaws establish an advance notice procedure for
stockholders to make nominations of candidates for election as directors and to
bring other business before an annual meeting of stockholders (the "Stockholder
Notice Procedure").
The Stockholder Notice Procedure provides that only persons who are
nominated at a meeting of stockholders (i) by or at the direction of the
Recognition Board, (ii) by a nominating committee or person appointed by the
Recognition Board or (iii) by any stockholder of Recognition entitled to vote
for the election of directors at the meeting who complies with the applicable
notice procedures. Under the Stockholder Notice Procedure, to be timely, notice
of stockholder nominations must be delivered to or mailed and received at
Recognition's principal executive offices not less than 50 days nor more than 75
days before the meeting (in the event less than 60 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which notice of the date of the
meeting was first mailed or given to stockholders or such public disclosure was
made).
Under the Stockholder Notice Procedure, a stockholder's notice to
Recognition must be made to the Secretary of Recognition and contain certain
information concerning the nominee, including (a) the name, age, business
address and residence address of the nominee, (b) the principal occupation or
employment of the nominee, (c) the class and number of shares of capital stock
of Recognition that are beneficially owned by the nominee, and (d) any other
information relating to the person that is required to be disclosed and
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Exchange Act. The nominating stockholder's notice must also provide
(i) the name and record address of the nominating stockholder and (ii) the class
and number of shares of capital stock of Recognition that are beneficially owned
by the nominating stockholder.
To be properly brought before an annual meeting of stockholders, business
must be specified in the notice of meeting given at the direction of the
Recognition Board, otherwise brought before the meeting by or at the direction
of the Recognition Board, or otherwise properly brought before the meeting by a
stockholder. Under the Stockholder Notice Procedure, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of
Recognition not less than 50 days nor more than 75 days prior to the meeting (in
the event less than 60 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the annual meeting was
first mailed or given to stockholders or such public disclosure was made). A
stockholder's notice must be given to the Secretary of Recognition and set forth
as to each matter the stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
52
<PAGE>
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and record address of the stockholder proposing such business, (c) the
class and number of shares of Recognition that are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
By requiring advance notice of nominations by stockholders, the
Stockholder Notice Procedure affords the Recognition Board an opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the Recognition Board, to inform its stockholders
about such qualifications. By requiring advance notice of other proposed
business, the Stockholder Notice Procedure also provides a more orderly
procedure for conducting annual meetings of stockholders and, to the extent
deemed necessary or desirable by the Recognition Board, provides the Recognition
Board with an opportunity to inform stockholders, prior to such meetings, of any
business proposed to be conducted at such meetings, together with any
recommendations as to the Recognition Board's position regarding action to be
taken with respect to such business, so that stockholders can better decide
whether to attend such a meeting or to grant a proxy regarding the disposition
of any such business.
Although the Recognition Bylaws do not give the Recognition Board any
power to approve or disapprove stockholder nominations for the election of
directors or proposals for action, the foregoing provisions may have the effect
of precluding a contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed, and in
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal,
without regard to whether consideration of such nominees or proposals might be
harmful or beneficial to Recognition and its stockholders.
53
<PAGE>
ELECTION OF BANCTEC DIRECTORS
The directors of BancTec have been divided into three classes. The members
of each class serve for three years. Pursuant to BancTec's bylaws, the BancTec
Board has fixed the number of directors at eight. Three of the eight BancTec
directors' terms expire this year. The term of office for each BancTec director
shall be until the year following each nominee's name below or until a successor
is elected and qualified. BancTec directors are elected by a plurality of the
votes of shares of BancTec Common Stock present in person or by proxy and
entitled to vote at the Meeting.
The BancTec Board recommends a vote FOR the election of the following
nominees to be elected for a term expiring in 1998:
<TABLE>
<CAPTION>
Name Age Position
---- --- ----------------------
<S> <C> <C>
Rawles Fulgham 67 Director
Thomas G. Kamp 69 Director
Norton A. Stuart, Jr. 60 President and Director
</TABLE>
The following directors are presently serving unexpired terms, ending the
year following such director's name:
<TABLE>
<CAPTION>
Name Age Position
---- --- -----------------------
<S> <C> <C>
Grahame N. Clark, Jr. (1996) 52 Chairman and Chief Executive
Officer and Director
Michael E. Faherty (1997) 60 Director
Paul J. Ferri (1997) 56 Director
Michael A. Stone (1996) 58 Director
Merle J. Volding (1997) 71 Director
</TABLE>
Mr. Fulgham has been a director of BancTec since June 1982. Since
September 1989, Mr. Fulgham has served as senior advisor of Merrill Lynch. From
August 1982 to September 1989, Mr. Fulgham was executive director of Merrill
Lynch Private Capital Inc. In addition, Mr. Fulgham presently serves as a
director of Dresser Industries, Inc. (a supplier to energy-related companies),
NCH Corporation (a manufacturer of products used in maintenance applications),
Republic Financial Services, Inc. (a provider of casualty life insurance and
consumer finance) and INDRESCO, Inc. (a provider of products for industrial
production and infrastructure development).
Mr. Kamp has been a director of BancTec since June 1982. Mr. Kamp served
as chairman of the board of Premier Computer Corporation (a disk drive
remanufacturer) from 1985 to 1990, and also served as chairman of the board of
Rodime, Inc. (a disk drive manufacturer) from 1989 to 1991. Mr. Kamp was vice
chairman of Control Data Corporation until December 1984 and chairman of
Centronics Data Computer Corporation (a holding company) from January 1985 until
January 1988.
Mr. Stuart has been a director of BancTec since February 1986. Mr. Stuart
has been President of BancTec since April 1987.
Mr. Faherty has been a director of BancTec since September 1984. Since
1977, Mr. Faherty has been president of MICO, Inc., a family-owned consulting
and contract executive business. As part of the contract executive business, Mr.
Faherty from time to time serves as a corporate officer of companies. Currently,
he is serving as chairman and CEO of eccs inc. (a manufacturer of mass storage
subsystems and an integrator of systems utilizing such subsystems). Mr. Faherty
also serves as a director of Biomagnetic Technologies Inc. (a manufacturer of
magnetic imaging equipment), ALC Communications (a provider of long distance
telecommunication services), and eccs inc.
Mr. Ferri has been a director of BancTec since September 1978. Mr. Ferri
has been managing general partner in Matrix Partners III, L.P. and Matrix
Partners II, L.P. (venture capital investment partnerships) and Matrix Partners
(a liquidating trust) since March 1990, August 1985, and January 1982,
respectively. In addition, Mr. Ferri is a director of Stratus Computer, Inc. (a
manufacturer of fault tolerant computer systems), Applix, Inc. (office
automation software), Atria Software, Inc. (software CASE tool), Cascade
Communications
54
<PAGE>
Corp. (frame relay data communications products), Veritech Microwave, Inc.
(microwave components and subsystems), and VideoServer Corp. (network system
supplier to video conferencing market).
Mr. Clark has been a director of BancTec since September 1985. Mr. Clark
has been Chairman and Chief Executive Officer of BancTec since April 1987. Mr.
Clark also serves as a director of El Chico Restaurants, Inc. (owner and
franchiser of El Chico and other Tex-Mex style Mexican restaurants).
Mr. Stone has been a director of BancTec since January 1979. Since March
1985, Mr. Stone has been general partner of Davis Venture Group, L.P., the
general partner of Davis Venture Partners, L.P. (a venture capital partnership).
Mr. Volding has been a director of BancTec since December 1971. From April
1987 to April 1989, Mr. Volding was Chairman of the Executive Committee of
BancTec. From October 1985 to April 1987, Mr. Volding was Chairman of the Board
of BancTec. Mr. Volding served as President and Chief Executive Officer of
BancTec from March 1974 to October 1985. Mr. Volding also serves as a director
of Computer Language Research, Inc. (a developer of proprietary software
systems).
Should any nominee named herein for the office of director become unable
or unwilling to accept nomination or election, it is intended that the persons
acting under the proxy will vote for the election, in his stead, of such other
person as the BancTec Board may recommend. The BancTec Board has no reason to
believe that any nominee named above will be unable or unwilling to serve if
elected.
MEETINGS AND COMMITTEES OF THE BANCTEC BOARD
The BancTec Board held seven meetings in Fiscal 1995, and each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the BancTec Board held during the period for which he served as a director and
(ii) the total number of meetings held by all committees of the BancTec Board on
which he served.
The BancTec Board does not have a standing nominating committee or a
committee performing similar functions. Nominees to the BancTec Board are
selected by the entire BancTec Board.
The Board has an Option Committee (the "BancTec Option Committee"), which
is composed of Michael A. Stone, Michael E. Faherty, Paul J. Ferri, Rawles
Fulgham, Thomas G. Kamp, and Merle J. Volding. The BancTec Option Committee
administers the 1989 Plan and the 1994 Plan. The BancTec Option Committee held
six meetings during Fiscal 1995.
The Board has a Compensation Committee (the "BancTec Compensation
Committee"), which is composed of Michael E. Faherty, Paul J. Ferri, and Rawles
Fulgham. The BancTec Compensation Committee reviews and makes recommendations
regarding compensation and other employment benefits of officers and employees
of BancTec. The BancTec Compensation Committee held two meetings during Fiscal
1995.
The Board has an Audit Committee (the "BancTec Audit Committee"), which is
composed of Thomas G. Kamp, Michael A. Stone, and Merle J. Volding. The BancTec
Audit Committee reviews BancTec's financial results, recommends the appointment
of BancTec's outside auditors, reviews the scope and results of audits, and
reviews internal accounting controls. The BancTec Audit Committee held three
meetings during Fiscal 1995.
BANCTEC EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
earned during Fiscal 1995 and the fiscal years ended March 27, 1994 ("Fiscal
1994") and March 27, 1993 ("Fiscal 1993"), by BancTec's Chief Executive Officer
and each of BancTec's four other most highly compensated executive officers
(based upon salary and bonus earned during Fiscal 1995). All information
relating to shares of BancTec Common
55
<PAGE>
Stock and options to purchase BancTec Common Stock contained herein have been
adjusted to reflect the three-for-two stock split of BancTec Common Stock
effected in February 1993.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------------------------------------ ----------------------------------
Fiscal Restricted Stock
Name and Principal Position(s) Year Salary ($) Bonus($)(1) Award(s) ($) Options (#)(2)
----------------------------- ------------ -------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Grahame N. Clark, Jr. 1995 256,877 -0- 35,035(3) 20,000
Chairman and Chief Executive Officer 1994 256,849 198,645 392,364 40,000
1993 255,615 181,059 229,361 60,000
Norton A. Stuart, Jr. 1995 187,383 -0- 19,860(4) 5,000
President 1994 186,924 112,651 19,703 10,000
1993 185,038 111,757 44,873 15,000
William A. Feldman 1995 165,083 -0- 13,968(5) 5,000
Senior Vice President 1994 164,336 79,167 13,582 10,000
1993 159,810 77,074 137,284 22,500
William E. Bassett 1995 171,083 -0- 14,674(6) 3,500
Executive Vice President; President, 1994 169,337 83,261 12,224 15,000
BancTec USA, Inc. 1993 135,904 69,312 108,159 37,500
Jerome R. Brown 1995 136,459 -0- 11,193(7) 2,000
Senior Vice President 1994 135,754 63,428 11,095 5,000
1993 128,500 62,943 132,502 22,500
</TABLE>
___________________________
(1) Reflects bonus earned during the fiscal year. In some instances, all or a
portion of the bonus was paid during the next fiscal year.
(2) Options to acquire shares of BancTec Common Stock.
(3) On March 26, 1995, Mr. Clark held 33,844 shares of restricted BancTec
Common Stock granted under BancTec's 1989 Stock Option Plan (the "1989
Plan") with a value of $575,348 based upon the last sales price of BancTec
Common Stock reported on March 24, 1995, the last trading day of Fiscal
1995. Of these 33,844 shares of restricted stock, 8,239 shares vest, in
whole or in part, within three years of the date of grant and the
remaining shares of restricted stock will vest beyond three years from the
date of grant. Of such 8,239 shares, 3,465 vested on April 1, 1995, 557
vested on May 27, 1995, 513 vested on May 17, 1995, 2,120 will vest on
April 1, 1996, 557 will vest on May 27, 1996, 513 will vest on May 17,
1996, and 514 shares will vest on May 17, 1997. Dividends, if any, paid in
respect of BancTec Common Stock will be paid in respect of BancTec Common
Stock held as restricted stock.
(4) On March 26, 1995, Mr. Stuart held 2,525 shares of restricted BancTec
Common Stock granted under BancTec's 1989 Plan with a value of $42,925
based upon the last sales price of Common Stock reported on The Nasdaq
National Market System on March 24, 1995, the last trading day of Fiscal
1995. Of these 2,525 shares of restricted stock, 965 shares vested on
April 1, 1995, 343 shares vested on May 27, 1995, 291 shares vested on May
17, 1995, and 344 shares will vest on May 27, 1996, and 291 shares will
vest on each of May 17, 1996 and May 17, 1997. Dividends, if any, paid in
respect of BancTec Common Stock will be paid in respect of BancTec Common
Stock held as restricted stock.
(5) On March 26, 1995, Mr. Feldman held 8,336 shares of restricted BancTec
Common Stock granted under the 1989 Plan with a value of $141,712 based
upon the last sales price of BancTec Common Stock reported on The Nasdaq
National Market System on March 24, 1995, the last trading day of Fiscal
1995. Of these 8,336 shares of restricted stock, 805 shares vested on
April 1, 1995, 237 vested on May 27, 1995, 204 shares vested May 17, 1995,
and 647 vested on June 1, 1995. On June 1, 1995, Mr. Feldman resigned
56
<PAGE>
his position as Senior Vice President. As a result of his resignation, the
remaining 6,443 shares of restricted stock held by Mr. Feldman were
forfeited.
(6) On March 26, 1995, Mr. Bassett held 6,655 shares of restricted BancTec
Common Stock granted under the 1989 Plan with a value of $113,135 based
upon the last sales price of BancTec Common Stock reported on The Nasdaq
National Market System on March 24, 1995, the last trading day of Fiscal
1995. Of these 6,655 shares of restricted stock, 1,769 shares will vest,
in whole or in part, within three years of the date of grant and the
remaining shares of restricted stock will vest beyond three years from the
date of grant. Of such 1,769 shares, 698 shares vested on April 1, 1995,
213 vested on May 27, 1995, 215 vested on May 17, 1995, 213 will vest on
May 27, 1996, 215 will vest on each of May 17, 1996 and May 17, 1997.
Dividends, if any, paid in respect of BancTec Common Stock will be paid in
respect of BancTec Common Stock held as restricted stock.
(7) On March 26, 1995, Mr. Brown held 8,113 shares of restricted BancTec
Common Stock granted under the 1989 Plan with a value of $137,921 based
upon the last sales price of BancTec Common Stock reported on The Nasdaq
National Market System on March 24, 1995, the last trading day of Fiscal
1995. Of these 8,113 shares of restricted stock, 657 shares vested on
April 1, 1995, 193 vested on May 27, 1995, 164 vested on May 17, 1995, and
522 vested on June 1, 1995. On June 1, 1995, Mr. Brown resigned his
position as Senior Vice President. As a result of his resignation, the
remaining 6,577 shares of restricted stock held by Mr. Brown were
forfeited.
57
<PAGE>
BANCTEC OPTION GRANTS IN FISCAL 1995
The following table sets forth information related to options granted to
the named BancTec executive officers during Fiscal 1995.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(1)
------------------------------------------------------------------------------------------------ ----------------------------
Percent of Total
Options Options Granted to Exercise or
Granted Employees in Base Price
Name (#)(2) Fiscal Year(%) ($/Sh)(3) Expiration Date 5% ($) 10% ($)
-------------- --------------- ------------------ ------------- ----------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Grahame N. Clark, Jr. 20,000 6.96 18.00 January 24, 2001 122,434 277,762
Norton A. Stuart, Jr. 5,000 1.74 18.00 January 24, 2001 30,609 69,440
William A. Feldman 5,000 1.74 18.00 January 24, 2001 30,609 69,440
William E. Bassett 3,500 1.22 18.00 January 24, 2001 21,426 48,608
Jerome R. Brown 2,000 .70 18.00 January 24, 2001 12,243 27,776
</TABLE>
_____________________
(1) The potential realizable value portion of the foregoing table illustrates
the value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compound
rates of appreciation of the BancTec Common Stock over the term of the
options. These amounts do not take into account provisions of certain
options providing for termination of the options following termination of
employment, nontransferability, or vesting periods of up to five years.
These amounts represent certain assumed rates of appreciation only. Actual
gains on stock option exercises are dependent on the future performance of
the BancTec Common Stock and overall stock market conditions. There can be
no assurance that the potential values reflected in this table will be
achieved. All amounts have been rounded to the nearest whole dollar
amount.
(2) Options to acquire shares of BancTec Common Stock, which were granted on
January 24, 1995, under the 1989 Plan. The options will vest ratably over
five years beginning one year after the date of grant.
(3) The option exercise price may be paid in shares of BancTec Common Stock
owned by the executive officer, in cash, or a combination of either of the
foregoing, as approved by the BancTec Option Committee in its discretion.
58
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information related to the number of
options exercised in Fiscal 1995 and the value realized by the named BancTec
executive officers. Further, the table provides information related to the
number and value of options held by the named BancTec executive officer at the
end of Fiscal 1995.
<TABLE>
<CAPTION>
Number of Unexercised Options at Value of Unexercised In-the-Money
Fiscal Year-End Options at Fiscal Year-End(1)
-------------------------------- ---------------------------------
Shares Acquired Value
Name on Exercise(#) Realized($)(2) Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable ($)
------------------ --------------- ------------------- -------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Grahame N. Clark, Jr. 11,250 177,352 99,500 124,750 562,770 279,645
Norton A. Stuart, Jr. -0- -0- 45,235 31,000 382,821 67,740
William A. Feldman 28,500 324,960 18,500 44,500 102,480 135,480
William E. Bassett 7,800 125,234 49,650 50,150 303,807 104,217
Jerome R. Brown -0- -0- 28,600 31,800 178,908 105,954
</TABLE>
________________________________
(1) The last sales price of BancTec Common Stock as reported on The Nasdaq
National Market System of NASDAQ on March 24, 1995, the last trading day
of Fiscal 1995, was $17.00. Value is calculated on the basis of the
remainder of $17.00 minus the exercise price multiplied by the number of
shares of BancTec Common Stock underlying the option.
(2) Value is calculated based on the remainder of the closing market price of
BancTec Common Stock on the date of the exercise minus the exercise price
multiplied by the number of shares to which the exercise relates.
COMPENSATION OF BANCTEC DIRECTORS
Each director who is not an employee of BancTec is entitled to receive
compensation in the amount of $12,000 per year plus a fee of $1,000 for each day
on which he attends a meeting of the BancTec Board or a meeting of a committee
of the BancTec Board, if the committee meeting is not held on the same day as a
BancTec Board meeting. Pursuant to the terms of a nondiscretionary formula in
the 1989 Plan, each director who is not an employee of BancTec was granted
options during Fiscal 1995 to purchase 5,000 shares of Common Stock at an
exercise price of $18.00 per share.
BANCTEC EMPLOYMENT AGREEMENTS
BancTec has entered into employment agreements (the "Agreements") with
Grahame N. Clark, Jr., Norton A. Stuart, Jr., and Tod V. Mongan. Each of the
Agreements provides for the payment of base salary amounts and the participation
in any employee benefit or bonus plan or arrangement made available by BancTec
on a basis consistent with the terms, conditions, and overall administration of
such plan or arrangement. The term of each of the Agreements is five years from
May 28, 1992, the date of each of the Agreements.
Upon the death of an executive during the term of that executive's
Agreement, BancTec is obligated to pay the executive's base salary for a period
of months (not to exceed twelve months) determined by multiplying two times the
number of complete twelve-month periods of employment of the executive with
BancTec. Each Agreement provides that if the executive's employment is
terminated (whether such termination is by the executive or by BancTec) within
three years after a Triggering Event (which, generally speaking, is defined in
the Agreement as a change in control of BancTec) for any reason other than (i)
termination by BancTec for cause (as defined in
59
<PAGE>
the Agreement), (ii) the executive having reached the age of 65, or (iii) the
executive's death, BancTec is obligated to make a lump sum cash payment equal to
2.99 times the average of the executive's annualized includable compensation (as
defined in the Agreement) received from BancTec during the period consisting of
the five full taxable years ending immediately preceding the Triggering Event.
BancTec is obligated to transfer to an irrevocable trust upon the occurrence of
a Triggering Event, or as soon thereafter as BancTec knows of the Triggering
Event, the amount of cash that BancTec would be obligated to pay under the
Agreement if such executive's employment were terminated on that date.
BANCTEC COMPENSATION COMMITTEE AND OPTION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
During Fiscal 1995, the BancTec Compensation Committee was composed of
Michael E. Faherty, Paul J. Ferri and Rawles Fulgham and the BancTec Option
Committee was composed of Michael A. Stone, Michael E. Faherty, Paul J. Ferri,
Rawles Fulgham, Thomas G. Kamp, and Merle J. Volding. See "Election of
Directors" and "Meetings and Committees of the Board." No member of the BancTec
Compensation Committee or the BancTec Option Committee is an officer of BancTec.
No member of the BancTec Compensation Committee or the BancTec Option Committee
was formerly an officer of BancTec except for Mr. Volding, a member of the
BancTec Option Committee, who was formerly an officer of BancTec.
BANCTEC COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The BancTec Compensation Committee of the BancTec Board is comprised of
three nonemployee directors of BancTec, Michael E. Faherty, Paul J. Ferri, and
Rawles Fulgham. The BancTec Compensation Committee members each serve for a term
of three years. A new member is added each year with the then acting chairman
stepping down from the BancTec Compensation Committee.
The BancTec Compensation Committee is responsible for setting and
administering the policies governing annual compensation of the executive
officers of BancTec. These policies are based upon the philosophy that BancTec's
long-term success is best achieved through recruitment and retention of the best
people in the industry. The BancTec Compensation Committee applies this
philosophy in determining compensation for BancTec's executive officers in three
areas: salary; bonuses; and stock options and awards.
Base Salary. BancTec strives to offer salaries to its executive officers
which are competitive in its industry for similar positions requiring similar
qualifications. In determining executive officers' salaries, the BancTec
Compensation Committee considers information provided by Hewitt Associates
(independent consultants) and from published salary surveys specific to
BancTec's industry, size, and geographic location.
BancTec's executive officers' base salaries are targeted at slightly below
the median as indicated in the salary surveys. Base salaries are reviewed bi-
annually to determine if adjustments are necessary based upon competitive
practices and economic conditions. In addition, executive officers' salaries are
periodically adjusted based on individual performance and changes in job content
and responsibilities.
The BancTec Compensation Committee evaluates the performance and sets the
salary of BancTec's Chairman and Chief Executive Officer, Grahame N. Clark, Jr.
Mr. Clark does not participate in any discussions of the BancTec Compensation
Committee regarding his salary or performance. Mr. Clark evaluates the
performance of all other executive officers, and recommends salary adjustments
which are reviewed and acted upon by the BancTec Compensation Committee.
Performance evaluations for individual executive officers are based on
achievement of predetermined individual goals. For Mr. Clark, these goals are
set by the BancTec Compensation Committee, and for all other officers, these
goals are set by Mr. Clark.
Bonuses. BancTec seeks to provide additional incentives and rewards to
executives who make contributions of outstanding value to BancTec. For this
reason, the BancTec Compensation Committee administers a bonus plan, which can
comprise a substantial portion of the total compensation of executive officers
when earned and paid. It is the intention of the BancTec Compensation Committee
to weight the total compensation of the executive officers heavily in the area
of incentive compensation. The BancTec Compensation Committee believes that
optimal
60
<PAGE>
performance is encouraged through the use of incentive programs, furthering the
goal of having performance compensation as an important component of total
executive compensation.
In consultation with the Chairman, the BancTec Compensation Committee
determines annually the total amount of cash bonuses available for executive
officers. Awards under the plan are contingent upon the performance of BancTec
as a whole, based upon BancTec attaining certain financial and operational goals
set by the BancTec Board annually in consultation with the Chairman. The target
amounts of bonus available to each executive officer are set annually by the
BancTec Compensation Committee with regard to Mr. Clark and by Mr. Clark,
subject to review and approval by the BancTec Compensation Committee, with
regard to executive officers other than Mr. Clark. In all cases the target
amounts for individual officers are based upon such officer's individual goals
and objectives and the goals and objectives established for the particular
operating unit such officer is responsible for managing. Executive officers earn
a percentage of the target amounts under the bonus plan based on the achievement
of these performance goals and objectives as determined annually by the BancTec
Compensation Committee and a percentage based on BancTec's attainment of the
pre-tax goals. Awards are weighted so that proportionately higher awards are
received when BancTec's performance exceeds targets and proportionately smaller
or no awards are made when BancTec does not meet targets.
Stock Options. The BancTec Compensation Committee believes that employee
equity participation provides significant additional motivation to executive
officers to maximize value for BancTec's stockholders, and therefore recommends
to the BancTec Option Committee periodic grants of stock options under the 1989
Stock Option Plan. Stock options are approved by the BancTec Option Committee,
based on the recommendation of the BancTec Compensation Committee, with exercise
prices at the prevailing market price at date of grant. The stock options will
have value only if BancTec's stock price increases over the exercise price.
Therefore, the BancTec Compensation Committee believes that stock options serve
to align the interest of executive officers closely with the other stockholders
because of the direct benefit executive officers receive through improved stock
performance.
The BancTec Compensation Committee makes recommendations to the BancTec
Option Committee concerning the size and frequency of option grants for
executive officers, after consideration of recommendations from the Chairman.
Recommendations for options are based upon relative position and
responsibilities of each executive officer, historical and expected
contributions of each officer to BancTec, and previous option grants to such
executive officers within BancTec. Generally, option grants vest over five years
and expire six years from date of grant. Option grants for Fiscal 1995 are set
forth in the table entitled "Option Grants in Fiscal 1995."
Restricted Stock. BancTec has implemented the use of restricted stock in
order to further the goal of having its executive officers maintain a "stake" in
the long-term success of BancTec, through equity ownership, as well as
encouraging long-term employment with BancTec. Restricted awards are given to
executive officers in lieu of base salary increases and in lieu of a fixed
percentage of the available bonus for each fiscal year.
Each time an executive officer's base salary is increased such executive
officer must take a minimum of 50% of such increase as a restricted stock award.
It is such officer's option to take up to the entire amount of such increase as
a restricted stock award but in no event can the percentage fall below 50%. The
amount of restricted stock awarded is based on the base salary increase, the
percentage to be taken in stock, the number of years remaining until such
officer reaches sixty years of age, and the closing price of BancTec's Common
Stock on the day of the award. This restricted stock award vests in equal annual
installments over the number of years remaining until such officer attains the
age of sixty.
Executive officers are required to take 15% of their annual incentive
bonus, if any, in the form of a restricted stock award. The number of shares of
restricted stock awarded is based upon the closing price of BancTec's Common
Stock on the date the incentive bonus is approved by the BancTec Compensation
Committee. The restricted stock awarded to each executive officer vests over a
period of three years.
BANCTEC COMPENSATION COMMITTEE
Michael E. Faherty
Paul J. Ferri
Rawles Fulgham
61
<PAGE>
PERFORMANCE GRAPH
The following chart compares the yearly percentage change in the
cumulative total stockholder return of BancTec's Common Stock during the five
fiscal years ended March 26, 1995, with the yearly change in cumulative total
return of The Nasdaq National Market System Total Market Index and Standard and
Poors (S&P) Computer Software and Services Industry Group Index. The comparison
assumes that $100 was invested on March 30, 1990, in BancTec's Common Stock and
in each of the foregoing indices and assumes reinvestment of dividends.
BANCTEC VS NASDAQ TOTAL MARKET AND S&P SOFTWARE AND SERVICES INDICES
1990-1995
-------------
<TABLE>
<CAPTION>
S&P
NASDAQ Software
Date BancTec Stock Mkt and Svc
---- ------- --------- -------
<S> <C> <C> <C>
31-Mar-90 100.000 100.000 100.000
31-Mar-91 73.103 113.830 91.309
29-Mar-92 128.279 145.110 123.554
28-Mar-93 138.625 166.534 155.336
27-Mar-94 194.488 180.652 173.798
26-Mar-95 140.694 197.945 238.146
</TABLE>
62
<PAGE>
PROPOSAL TO AMEND BANCTEC'S 1990 EMPLOYEE STOCK PURCHASE PLAN
TO INCREASE THE NUMBER OF SHARES OF
BANCTEC COMMON STOCK RESERVED FOR ISSUANCE
GENERAL
On January 22, 1990, the BancTec Board adopted the 1990 Stock Purchase
Plan (the "1990 Plan"). The stockholders of BancTec approved the 1990 Plan on
September 5, 1990. The BancTec Board has directed that an amendment to the 1990
Plan be submitted to the stockholders of BancTec at the next annual meeting of
the stockholders for the ratification and approval of the 1990 Plan by a
majority of the stockholders present in person, or represented by proxy, and
entitled to vote at the meeting, as required to qualify the 1990 Plan as an
"employee stock purchase plan" pursuant to the provisions of Section 423 of the
Code. If the amendment to the 1990 Plan is not so approved by the stockholders
of BancTec within the 12 month period immediately subsequent to the adoption of
the amendment to the 1990 Plan by the BancTec Board, the 1990 Plan will not
qualify for special tax treatment as an employee stock purchase plan, and
participating employees will realize income upon the receipt of BancTec Common
Stock after the exercise of an option granted under the 1990 Plan. The
description in this Proxy Statement of the 1990 Plan is intended solely as a
summary, does not purport to be complete, and is qualified in its entirety by
the full text of the 1990 Plan attached hereto as Appendix D.
THE AMENDMENT
The proposed amendment to the 1990 Plan (the "Amendment") would increase
the aggregate number of shares of BancTec Common Stock that may be issued upon
the exercise of options under the 1990 Plan from 300,000 shares to 500,000
shares.
REASONS FOR THE 1990 PLAN
The 1990 Plan is an arrangement which provides all eligible employees of
BancTec and of its subsidiaries the opportunity to acquire a proprietary
interest in BancTec, increasing their interest in BancTec's welfare, and
encouraging them to remain in the employ of BancTec or of its subsidiaries.
The 1990 Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 and is not qualified under Section 401(a)
of the Code.
Participation in the 1990 Plan is entirely voluntary. While an individual
who buys BancTec Common Stock has an opportunity for profit, he also takes the
risk of loss. Not all eligible employees are necessarily in the financial
position to take the risk associated with the ownership of BancTec Common Stock.
ADMINISTRATION OF THE 1990 PLAN
The 1990 Plan is administered by the BancTec Option Committee, which
consists of all nonemployee members of the Board. The BancTec Option Committee
has full power and authority to construe, interpret and administer the 1990 Plan
and has the full and exclusive right to establish the terms of each offering of
BancTec Common Stock pursuant to the provisions of the 1990 Plan. All actions
taken and determinations made by the BancTec Option Committee pursuant to the
provisions of the 1990 Plan shall be made by a majority of the members of the
BancTec Option Committee and shall be conclusive. No member of the BancTec
Option Committee shall be liable for any action taken or determination made in
good faith. No member of the BancTec Option Committee is eligible to participate
in the 1990 Plan.
ELIGIBILITY
Participation in the 1990 Plan is available to all employees of BancTec or
any of its subsidiaries, who have completed 90 continuous days of employment
with BancTec or its subsidiaries by the first day of the Payroll Deduction
Period (hereinafter defined). Notwithstanding the foregoing, officers and
directors of BancTec are not
63
<PAGE>
eligible to participate in the 1990 Plan except to the extent that any such
person cannot be excluded from eligibility under the 1990 Plan without the 1990
Plan failing to satisfy the requirements of Section 423 of the Code. In the
event that the 1990 Plan is approved by the stockholders of BancTec, officers of
BancTec, who are otherwise eligible to participate in the 1990 Plan, will at
that time become eligible to participate in, and be granted options under, the
1990 Plan.
As of June 6, 1995, approximately 2,000 employees of BancTec and its
subsidiaries were eligible to participate in the 1990 Plan.
STOCK OFFERINGS
The fiscal year of the 1990 Plan is the twelve-month period ending
December 31. Each year on the first day of the first payroll period ending in
January and July, unless the BancTec Board determines otherwise, BancTec will
offer to each eligible employee the opportunity to purchase BancTec Common Stock
through voluntary payroll deductions. Each eligible employee will be entitled to
purchase up to that number of full shares which could be purchased at the option
price determined as of the date of grant of the options, with an amount equal to
such percentage as the BancTec Board may determine for any semiannual offering
(but not to exceed 10%) of the eligible compensation which the eligible employee
receives from BancTec during the six-month period during which deductions are
made from his pay ("Payroll Deduction Period").
The option price for each semiannual offering will be the lesser of 85% of
the fair market value of BancTec Common Stock on the date the option to purchase
such stock under the 1990 Plan is granted or 85% of the fair market value of the
BancTec Common Stock on the date the right to purchase such stock is exercised.
Fair market value, as of any applicable date, is the simple average of the
closing bid and asked prices of the BancTec Common Stock as quoted by the
National Association of Securities Dealers' Automated Quotations ("Nasdaq")
System or the closing price of the BancTec Common Stock, as reported on a
national securities exchange or as quoted on the National Market System.
Subject to the terms and conditions and within the limitations of the 1990
Plan and Section 423 of the Code, the BancTec Option Committee may modify,
extend or renew outstanding options granted under the 1990 Plan or accept the
surrender of options outstanding under the 1990 Plan (to the extent not
theretofore exercised) and authorize the granting of a new option under the 1990
Plan in substitution for an old option (to the extent not theretofore
exercised). In addition, the BancTec Option Committee may authorize and direct
the substitution of a new option or the assumption of an old option, granted by
BancTec to an eligible employee under another employee stock purchase plan of
BancTec, to the extent such option has not been exercised or terminated and
other eligible employees of BancTec are granted similar rights and privileges.
ELECTION TO PARTICIPATE
Eligible employees who wish to participate must elect to do so by the end
of the offering period (the "Offering Period"), which is the ten day period
beginning on the first day of the Payroll Deduction Period. Each eligible
employee's election will indicate the percentage of his compensation with
respect to which he wishes to participate and will authorize payroll deductions,
to be made over the Payroll Deduction Period. A participant may authorize
payroll deductions in an amount of not less than one percent nor more than ten
percent (in multiples of one percent) of his compensation for the Payroll
Deduction Period. A participant may not alter his payroll deduction
authorization during the Payroll Deduction Period in order to authorize a
greater or lesser payroll deduction than he originally elected during the
Offering Period. However, he may cancel his payroll deduction authorization and
participate only to the extent of the number of shares for which options could
be exercised with the amount of payroll deductions previously made. In addition,
at the end of the Payroll Deduction Period, he may elect to exercise only part
of the options previously granted to him and receive a refund for the excess
amounts deducted from his pay.
An employee who is otherwise eligible to participate in the 1990 Plan may
waive such right to participate by declining, in writing, to authorize a payroll
deduction. This declination results in an irrevocable waiver of participation
only for the specific Payroll Deduction Period to which it relates but shall
not, in and of itself,
64
<PAGE>
adversely impact the right of the eligible employee to participate in the 1990
Plan during any subsequent Payroll Deduction Period in which he has not filed a
written declination.
RESTRICTIONS ON OPTIONS
Under the 1990 Plan, options may be granted only on shares of BancTec
Common Stock, and, under the Plan as amended, no more than 500,000 shares of
BancTec Common Stock, may be sold pursuant to the exercise of options granted
under the 1990 Plan, subject to appropriate adjustments as described below. No
fractional shares shall be issued under the 1990 Plan.
No eligible employee will be granted an option to purchase shares of
BancTec Common Stock under the 1990 Plan if such employee, immediately after the
grant of the option, owns stock equal to five percent or more of the total
combined voting power or value of all classes of stock of BancTec, including the
stock of BancTec he has been granted options to purchase. For purposes of
determining the stock of BancTec owned by an eligible employee, such employee is
deemed to own BancTec stock owned by such persons and entities described in
Section 425(d) of the Code. No eligible employee will be granted options to
purchase BancTec Common Stock under the 1990 Plan which permits him to accrue
rights to purchase stock under all employee stock purchase plans of BancTec at a
rate which exceeds $25,000 (or such other maximum as may be prescribed from time
to time by the Code) of fair market value of such stock (determined at the time
of the grant) for each calendar year in which such rights are outstanding at any
time in accordance with the provisions of Section 423(b)(8) of the Code.
AMENDMENT AND TERMINATION OF THE 1990 PLAN
BancTEc may amend, alter, suspend or terminate the 1990 Plan at any time
and in any manner, except in any way that would adversely affect a participant's
rights under an option previously granted to a participant. With respect to
certain amendments to the 1990 Plan, approval by the stockholders of BancTec of
any such amendment to the 1990 Plan may be necessary in order to satisfy the
requirements of Section 423 of the Code and certain rules and regulations
promulgated thereunder. In the event that such approval by the stockholders of
BancTec for any such amendment is not obtained, the 1990 Plan will not qualify
for special tax treatment as an employee stock purchase plan, and participating
employees will realize income upon the receipt of BancTec Common Stock after the
exercise of an option granted under the 1990 Plan. The 1990 Plan has no
termination date.
TAX CONSIDERATIONS
The 1990 Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Code, which, in part, requires approval of the
amendment to the 1990 Plan within 12 months immediately subsequent to the
adoption of the amendment to the 1990 Plan. As of the date of this Prospectus,
however, the amendment to the 1990 Plan had not been approved by the
stockholders of BancTec. If the amendment to the 1990 Plan is not approved by
the stockholders of BancTec within the 12 month period immediately subsequent to
the adoption of the amendment to the 1990 Plan by the BancTec Board on January
24, 1995, the 1990 Plan will not qualify for special tax treatment as an
employee stock purchase plan, and participating employees will realize income
upon the receipt of BancTec Common Stock after the exercise of an option granted
under the 1990 Plan.
The following discussion of certain tax considerations related to the 1990
Plan assumes that the necessary approval of the amendment to the 1990 Plan by
the stockholders of BancTec is obtained. Under the 1990 Plan, an employee will
not recognize any gain upon receipt of a share of stock if (a) he holds such
stock for two years after the date he was first granted the option to purchase
such share and for one year after the transfer of such share to him, and (b) the
employee is employed by BancTec (or a parent or subsidiary corporation or a
corporation ("successor corporation"), or a parent or subsidiary corporation of
such successor corporation issuing or assuming a stock option in a transaction
to which Section 425(a) of the Code applies (merger, consolidation, acquisition,
separation, reorganization, liquidation, etc.)) at all times during the period
beginning with the date he is granted the option and ending on the day three
months before the date he exercises the option.
The employee will, however, recognize gain when he thereafter disposes of
the stock, or dies still owning the stock. If an employee (a) disposes of shares
purchased under an option more than two years after the grant of
65
<PAGE>
the option and one year after the transfer of such shares to him or (b) dies
while owning such shares, he will recognize ordinary income (compensation
income) in the year of the disposition or death in an amount equal to the lesser
of (1) the excess of the fair market value of the shares at the time of such
disposition or death over the amount paid for the shares under the option, or
(2) the excess of the fair market value of the shares at the time the option was
granted over the option exercise price. In the event that the option exercise
price is not fixed or determinable at the time the option is granted, then for
purposes of this rule, the option exercise price shall be determined as if the
option was exercised at such time. Any remaining gain resulting from such
disposition will constitute capital gain, and any loss will constitute capital
loss, if the shares am held as capital assets. The employee's basis in the
shares, for purposes of computing capital gain or loss on the disposition of
such shares, will be the exercise price plus any amount of ordinary income
recognized by him on the disposition of the shares. In general, if the employee
dies while owning such shares, his basis in the shares, for purposes of
computing capital gain or loss on the ultimate disposition of such shares by his
beneficiary, will be the fair market value of such shares on the date of the
employee's death (without regard to any amount includable in the decedent's
gross income).
If the employee disposes of the shares acquired pursuant to the option
within two years of the date of the grant of the option or within one year after
the transfer of such shares to him, he will recognize ordinary income (taxable
as compensation) in the year of disposition equal to the excess, if any, of the
fair market value of the shares on the date of exercise over the exercise price,
regardless of whether such excess is greater than the gain realized on the
disposition. In addition, if such shares are held as capital assets, the
employee will realize (a) capital gain equal to the excess of the sales price
over the fair market value of the shares on the date the option was exercised or
(b) capital loss equal to the excess of the fair market value of the shares on
the date the option was exercised over the sales price. The basis in such shares
of stock, for purposes of computing such gain, will be the exercise price of the
shares plus the amount of ordinary income recognized by the employee on the
disposition of the shares. Such capital gain will be long-term if the shares
have been held more than one year at the time of disposition.
BancTec is not entitled to any deduction for federal income tax purposes
in connection with the issuance or exercise of an option under the 1990 Plan
unless the employee makes a disposition of the shares purchased pursuant to the
exercise of the option within two years after the date of the grant of the
option or within one year after the transfer of such shares to him. If the
employee disposes of the shares within such period, BancTec will be entitled to
a deduction equal to the amount recognized by the employee as ordinary income.
Any disposition of the shares after the end of such period does not entitle
BancTec to any deduction for federal income tax purposes.
Under the Code, an employee, upon the exercise of a right to purchase
stock under the 1990 Plan, will not be in receipt of an item of "tax preference"
as described in Section 57 of the Code.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE
1990 PLAN
To be approved by the stockholders, the Amendment must receive the
approval of stockholders holding at least a majority of the outstanding shares
of BancTec Common Stock. The enclosed form of proxy provides a means for
stockholders to vote for the Amendment, to vote against the Amendment, or to
abstain from voting with respect to the Amendment. Each properly executed proxy
received in time for the meeting will be voted as specified therein. If a
stockholder executes and returns a proxy but does not specify otherwise, the
shares represented by such stockholder's proxy will be voted "FOR" the
amendment.
THE BANCTEC BOARD RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT.
66
<PAGE>
CERTAIN STOCKHOLDERS
The following table sets forth certain information as of June 6, 1995,
regarding the ownership of Common Stock of: (i) each person who is known by
BancTec to be the beneficial owner of more than five percent of the outstanding
shares of BancTec Common Stock; (ii) each director of BancTec; (iii) each
executive officer named in the Summary Compensation Table; and (iv) all
executive officers and directors of BancTec as a group. Included in the "Number
of Shares of Common Stock" are shares attributable to options that are
exercisable as of, or will be exercisable within 60 days after, June 6, 1995.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OF OUTSTANDING
NAME OF BENEFICIAL OWNER(1) COMMON STOCK COMMON STOCK
--------------------------- ------------ ------------
<S> <C> <C>
FMR Corp.(2)..................
82 Devonshire Street
Boston, Massachusetts 02109 1,247,050 %
Oppenheimer Group, Inc.(4).... 576,100 %
Oppenheimer Tower
World Financial Center
New York, New York 10281
Grahame N. Clark, Jr.(5)...... 168,607 %
Paul J. Ferri(6).............. 117,062 %
Norton A. Stuart, Jr.(7)...... 77,685 *
William A. Feldman(8)......... 74,368 *
Jerome R. Brown(9)............ 71,460 *
William E. Bassett(10)........ 69,957 *
Michael E. Faherty(11)........ 52,042 *
Michael A. Stone(12).......... 48,250 *
Rawles Fulgham(13)............ 44,500 *
Merle J. Volding(14).......... 43,577 *
Thomas G. Kamp(15)............ 22,750 *
All executive officers and
directors as a group (22
persons)(16).................. 1,082,458 %
</TABLE>
________________________
* Less than one percent.
(1) Except as otherwise indicated, each stockholder has sole investment and
sole voting power with respect to the shares of BancTec Common Stock
shown.
(2) As of May 31, 1995, FMR Corp. beneficially owned 1,247,050 shares of the
BancTec Common Stock. This number includes 508,850 shares beneficially
owned by Fidelity Management & Research Company, as a result of its
serving as investment advisor to various investment companies registered
under Section 8 of the Investment Company Act of 1940 and serving as
investment advisor to certain other funds which are generally offered to
limited groups of investors; and 709,400 shares beneficially owned by
Fidelity
67
<PAGE>
Management Trust Company, as a result of its serving as trustee or
managing agent for various private investment accounts, primarily employee
benefit plans, and serves as investment advisor to certain other funds
which are generally offered to limited groups of investors; and 28,800
shares beneficially owned by Fidelity International Limited, as a result
of its serving as investment advisor to various non-U.S. investment
companies.
(3) These shares are owned by a variety of investment advisory clients of
Oppenheimer Group, Inc., which clients receive dividends and the proceeds
from the sale of such shares. In addition, no individual client is known
to have such interest with respect to more than 5% of the shares
outstanding.
(4) Includes 99,500 shares that Mr. Clark may acquire pursuant to stock
options and 29,309 shares of unreleased BancTec restricted stock.
(5) Includes 28,750 shares that Mr. Ferri may acquire pursuant to BancTec
stock options.
(6) Includes 42,235 shares that Mr. Stuart may acquire pursuant to BancTec
stock options and 926 shares of unreleased BancTec restricted stock.
(7) Includes 63,000 shares that Mr. Feldman may acquire pursuant to BancTec
stock options.
(8) Includes 60,400 shares that Mr. Brown may acquire pursuant to BancTec
stock options.
(9) Includes 49,650 shares that Mr. Bassett may acquire pursuant to BancTec
stock options and 5,529 shares of unreleased BancTec restricted stock.
(10) Includes 28,750 shares that Mr. Faherty may acquire pursuant to BancTec
stock options.
(11) Includes 29,500 shares that Mr. Stone may acquire pursuant to BancTec
stock options.
(12) Includes 28,750 shares that Mr. Fulgham may acquire pursuant to BancTec
stock options.
(13) Includes 43,202 shares that Mr. Volding may acquire pursuant to BancTec
stock options.
(14) Includes 22,750 shares that Mr. Kamp may acquire pursuant to BancTec stock
options.
(15) Also includes 712,080 shares subject to stock options and 51,940 shares of
unreleased BancTec restricted stock.
68
<PAGE>
LEGAL MATTERS
The validity of the shares of BancTec Common Stock issuable in the Merger
and the federal income tax consequences in connection with the Merger will be
passed upon for BancTec by Vinson & Elkins L.L.P., Dallas, Texas. The federal
income tax consequences in connection with the Merger will be passed upon for
Recognition by Locke Purnell Rain Harrell (A Professional Corporation), Dallas,
Texas.
EXPERTS
The consolidated financial statements and schedules of BancTec,
incorporated by reference in this Proxy Statement/Prospectus, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto. Such financial statements and schedules audited by
Arthur Andersen LLP have been incorporated herein by reference in reliance upon
the authority of said firm as experts in accounting and auditing in giving such
reports.
The consolidated financial statements and schedules of Recognition
incorporated in this Proxy Statement/Prospectus by reference to the Annual
Report on Form 10-K for the year ended October 31, 1994, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
STOCKHOLDER PROPOSALS
Any proposals that stockholders of BancTec desire to have presented at the
1996 Annual Meeting of Stockholders must have been received by BancTec at its
principal executive offices no later than April 1, 1996, for inclusion in
BancTec's 1996 Proxy Materials unless BancTec notifies the Stockholders
otherwise.
In order for proposals of stockholders to be considered for inclusion in
the proxy statement and form of proxy for the next annual meeting of
stockholders of Recognition (if the Merger is not consummated), such proposals
must be received by the Secretary of Recognition by September 22, 1995. The By-
Laws of Recognition require stockholders who wish to make proposals or nominate
directors at an annual meeting to give written notice to the Secretary of
Recognition at its principal executive offices not less than 50 days nor more
than 75 days prior to the meeting or, if Recognition gives less than 60 days
notice of the date of the meeting, then not later than the 15th day after the
notice of the date of the meeting was given.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The BancTec Board, upon the recommendation of the BancTec Audit Committee,
has selected Arthur Andersen LLP to act as independent public accountants for
the fiscal year ending in March 1996.
Arthur Andersen LLP has advised BancTec that it will have a
representative in attendance at the BancTec Meeting with the opportunity to
make a statement, if such representative desires to do so, and to respond to
appropriate questions presented at the BancTec Meeting.
Price Waterhouse LLP has advised Recognition that it will have a
representative in attendance at the Recognition Meeting with the opportunity to
make a statement, if such representative desires to do so, and to respond to
appropriate questions presented at the Recognition Meeting.
OTHER MATTERS
The BancTec Board does not intend to bring any other matters before the
BancTec Meeting and does not know of any matters which will be brought before
the BancTec Meeting by others. However, if any other matters properly come
before the BancTec Meeting, it is the intention of the persons named in the
accompanying proxy to vote such proxy in accordance with their judgment on such
matters.
69
<PAGE>
APPENDIX A
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BANCTEC, INC.
BTEC MERGER SUBSIDIARY, INC.
AND
RECOGNITION INTERNATIONAL INC.
DATED AS OF MAY 19, 1995
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
THE MERGER
<C> <S> <C>
Section 1.1 The Merger............................................ 2
Section 1.2 Effective Time of the Merger.......................... 2
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation.......................... 2
Section 2.2 By-Laws............................................... 2
Section 2.3 Directors and Officers of Surviving Corporation....... 3
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio........................................ 3
Section 3.2 Exchange of Shares.................................... 4
Section 3.3 Dividends; Transfer Taxes............................. 4
Section 3.4 No Fractional Securities.............................. 5
Section 3.5 Closing of Company Transfer Books..................... 6
Section 3.6 Closing............................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Organization.......................................... 6
Section 4.2 Capitalization........................................ 7
Section 4.3 Subsidiaries.......................................... 7
Section 4.4 Authority Relative to this Agreement.................. 9
Section 4.5 Consents and Approvals; No Violations................. 9
Section 4.6 Reports and Financial Statements...................... 10
Section 4.7 Absence of Certain Changes or Events.................. 11
Section 4.8 Litigation............................................ 11
Section 4.9 Information in Disclosure Documents and Registration
Statement............................................. 11
Section 4.10 Absence of Undisclosed Liabilities.................... 12
Section 4.11 No Default............................................ 12
Section 4.12 Taxes................................................. 13
Section 4.13 Title to Properties; Encumbrances..................... 14
Section 4.14 Trademarks, Patents and Copyrights.................... 15
Section 4.15 Compliance with Applicable Law........................ 16
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
Section 4.16 Labor Matters......................................... 16
Section 4.17 Employee Benefit Plans................................ 16
Section 4.18 Opinion of Financial Advisor.......................... 19
Section 4.19 Environment Matters................................... 20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization.......................................... 20
Section 5.2 Capitalization........................................ 21
Section 5.3 Company Subsidiaries.................................. 22
Section 5.4 Authority Relative to this Agreement.................. 23
Section 5.5 Consents and Approvals; No Violations................. 23
Section 5.6 Reports and Financial Statements...................... 24
Section 5.7 Absence of Certain Changes or Events.................. 25
Section 5.8 Litigation............................................ 25
Section 5.9 Absence of Undisclosed Liabilities.................... 25
Section 5.10 No Default............................................ 26
Section 5.11 Taxes................................................. 26
Section 5.12 Employee Benefit Plans................................ 28
Section 5.13 Title to Properties; Encumbrances..................... 31
Section 5.14 Compliance with Applicable Law........................ 32
Section 5.15 Information in Disclosure Documents and Registration
Statement............................................. 32
Section 5.16 Opinion of Financial Advisor.......................... 32
Section 5.17 Trademarks, Patents and Copyrights.................... 33
Section 5.18 Labor Matters......................................... 33
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger. 35
Section 6.2 Conduct of Business by Parent Pending the Merger...... 37
Section 6.3 Conduct of Business of Parent Subsidiary.............. 38
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information................................ 38
Section 7.2 Acquisition Proposals................................. 39
Section 7.3 Registration Statement................................ 40
Section 7.4 Proxy Statements; Stockholder Approvals............... 41
Section 7.5 Compliance with the Securities Act.................... 42
Section 7.6 Antitrust Laws........................................ 42
Section 7.7 Employee Stock Options and Convertible Debentures..... 43
Section 7.8 Public Announcements.................................. 44
</TABLE>
ii
<PAGE>
<TABLE>
<C> <C> <C>
Section 7.9 By-Law Indemnification Provision...................... 44
Section 7.10 Expenses.............................................. 45
Section 7.12 Additional Agreements................................. 46
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger................................................ 46
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger................................................ 47
Section 8.3 Conditions to Obligations of Parent and Parent
Subsidiary to Effect the Merger....................... 49
ARTICLE IX
TERMINATION
Section 9.1 Termination by Mutual Consent......................... 51
Section 9.2 Termination by Either Parent or the Company........... 51
Section 9.3 Termination by the Company............................ 52
Section 9.4 Effect of Termination and Abandonment................. 53
Section 9.5 Extension; Waiver..................................... 54
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and Agreements 54
Section 10.2 Brokers............................................... 54
Section 10.3 Notices............................................... 55
Section 10.4 Descriptive Headings.................................. 56
Section 10.5 Entire Agreement; Assignment.......................... 56
Section 10.6 Governing Law......................................... 56
Section 10.7 Specific Performance.................................. 56
Section 10.8 Counterparts.......................................... 57
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 19, 1995, (the "Agreement")
by and among BancTec, Inc., a Delaware corporation ("Parent"), BTECMerger
Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent
("Parent Subsidiary"), and Recognition International Inc., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent and Parent Subsidiary and the
Company deem it advisable and in the best interests of their respective
stockholders that Parent acquire the Company, and such Boards of Directors have
approved the merger (the "Merger") of Parent Subsidiary with and into the
Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests:
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
1
<PAGE>
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined in Section 1.2
hereof), Parent Subsidiary shall be merged with and into the Company and the
separate existence of Parent Subsidiary shall thereupon cease, and the name of
the Company, as the surviving corporation in the Merger (the "Surviving
Corporation"), shall by virtue of the Merger be "BTEC Merger Subsidiary, Inc."
The Merger shall have the effects set forth in Section 259 of the General
Corporation Law of the State of Delaware (the "GCL").
Section 1.2 Effective Time of the Merger. The Merger shall become
effective when a properly executed Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, which filing shall be made as soon
as practicable after the closing of the transactions contemplated by this
Agreement in accordance with Section 3.6 hereof. When used in this Agreement,
the term "Effective Time" shall mean the date and time at which such Certificate
is so filed.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the Certificate of
Incorporation of the Company, except as amended to change the name to BTEC
Merger Subsidiary, Inc.
Section 2.2 By-Laws. The By-Laws of Parent Subsidiary as in effect at the
Effective Time shall be the By-Laws of the Company.
2
<PAGE>
Section 2.3 Directors and Officers of Surviving Corporation.
(a) The directors of Parent Subsidiary at the Effective Time shall be
the initial directors of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of Incorporation
and By-Laws of the Surviving Corporation or as otherwise provided by law.
(b) The officers of the Parent at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the Certificate of Incorporation and By-
Laws of the Surviving Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Each unit consisting of a share of Common Stock, par value $.25
per share, of the Company together with each Preferred Stock Purchase Right
associated therewith (issued in accordance with the Rights Agreement dated
September 29, 1992 between the Company and Society National Bank) (each such
unit a "Share" and multiple units the "Shares") issued and outstanding
immediately prior to the Effective Time (other than Shares held by Parent or any
subsidiary of Parent) shall be converted into the right to receive .59 (the
"Exchange Ratio") of a share of Parent Common Stock ("Parent Common Stock" and
"Parent Shares"), payable upon the surrender of the certificate formerly
3
<PAGE>
representing such Share. Holders of shares of the Company Common Stock shall
also have the right to receive together with each share of Parent Common Stock
issued in the Merger, one associated stock purchase right (a "Right") in
accordance with the Rights Agreement dated June 16, 1988 between Parent and
First Republic Bank, Dallas, as amended. References herein to the shares of
Parent Common Stock issuable in the Merger shall be deemed to include the
associated Rights.
(b) Each Share held in the treasury of the Company and each Share held
by Parent or Parent Subsidiary immediately prior to the Effective Time shall be
cancelled and retired and cease to exist;
(c) Each share of Common Stock, par value $.01 per share, of Parent
Subsidiary issued and outstanding immediately prior to the Effective Time shall
be converted into and exchangeable for one share of Common Stock of the
Surviving Corporation.
Section 3.2 Exchange of Shares. Parent shall authorize one or more
persons to act as exchange agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Parent shall make available, and each
holder of Shares will be entitled to receive, upon surrender to the Exchange
Agent of one or more certificates representing such Shares for cancellation,
certificates representing the number of Parent Shares into which such Shares are
converted in the Merger. The Parent Shares into which the Shares shall be
converted in the Merger shall be deemed to have been issued at the Effective
Time.
Section 3.3 Dividends; Transfer Taxes. No dividends that are declared on
Parent Shares will be paid to persons entitled to receive certificates
representing Parent Shares until such persons surrender their certificates
representing Shares. Upon such surrender, there shall be paid to the person in
whose name the certificates representing such Parent
4
<PAGE>
Shares shall be issued, any dividends which shall have become payable with
respect to such Parent Shares between the Effective Time and the time of such
surrender. In no event shall the person entitled to receive such dividends be
entitled to receive interest on such dividends. If any certificates for any
Parent Shares are to be issued in a name other than that in which the
certificate representing Shares surrendered in exchange therefor is registered
it shall be a condition of such exchange that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such Parent Shares in a name other
than that of the registered holder of the certificate surrendered or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Shares for any Parent Shares
or dividends thereon or, in accordance with Section 3.4 hereof, proceeds of the
sale of fractional interests, delivered to a public official pursuant to
applicable escheat laws.
Section 3.4 No Fractional Securities. No certificates or scrip
representing fractional Parent Shares shall be issued upon the surrender for
exchange of certificates representing Shares pursuant to this Article III and no
dividend, stock split-up or other change in the capital structure of the Company
shall relate to any fractional security, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In
lieu of any such fractional securities, each holder of Shares who would
otherwise have been entitled to a fraction of a Parent Share upon surrender of
stock certificates for exchange pursuant to this Article III will be paid cash
upon such surrender in an amount equal to the product of such fraction
multiplied by the closing sale price of Parent Shares on the National
Association of Securities Dealers Automated Quotations
5
<PAGE>
National Market System (the "NASDAQ") on the day of the Effective Time, or, if
the Parent Shares are not so traded on such day, the closing sale price on the
next preceding day on which such stock was traded on the NASDAQ.
Section 3.5 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates representing Parent Shares.
Section 3.6 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Vinson & Elkins
L.L.P., 2001 Ross Avenue, Suite 3700, Dallas, Texas 75201, at 10:00 a.m., local
time, on the later of (a) the date of the stockholders' meetings referred to in
Section 7.4 hereof or (b) the day on which all of the conditions set forth in
Article VIII hereof are satisfied or waived, or at such other date, time and
place as Parent and the Company shall agree.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
The Parent represents and warrants to the Company and its subsidiaries as
follows:
Section 4.1 Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
6
<PAGE>
qualified will not have a material adverse effect on Parent and its subsidiaries
taken as a whole. Parent Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Parent
Subsidiary has not engaged in any business since the date of its incorporation.
Section 4.2 Capitalization. The authorized capital stock of Parent
consists of 45,000,000 shares of Common Stock, par value $.01 per share, and
1,000,000 shares of Preferred Stock, par value $.01 per share. As of December
25, 1994, (a) 10,614,667 Parent Shares were issued and outstanding, (b) no
shares of Parent Preferred Stock were issued and outstanding, (c) employee stock
options to acquire 1,728,170 Parent Shares (the "Parent Employee Stock Options")
were outstanding under all stock option plans of Parent and (d) 2,817,155 Parent
Shares were reserved for issuance pursuant to all employee benefit plans of
Parent. All of the issued and outstanding Parent Shares are validly issued,
fully paid and nonassessable and free of preemptive rights. All of the Parent
Shares issuable in exchange for Shares at the Effective Time in accordance with
this Agreement will be, when so issued, duly authorized, validly issued, fully
paid and nonassessable. The authorized capital stock of Parent Subsidiary
consists of 1,000 shares of Common Stock, par value $.01 per share, 1,000 shares
of which are validly issued and outstanding, fully paid and nonassessable and
are owned by Parent.
Section 4.3 Subsidiaries. Except as set forth on Schedule 4.3 hereto, the
Parent does not directly or indirectly own any interest in any other
corporation, partnership, joint venture or other business association or entity,
foreign or domestic. Such corporations, partnerships, joint ventures or other
business entities of which the Parent or any of its other subsidiaries owns,
directly or indirectly, greater than fifty percent of the shares of capital
stock or other equity interests (including partnership interests) entitled
(without regard to
7
<PAGE>
the occurrence of any contingency) to cast at least a majority of the votes that
may be cast by all shares or equity interests having ordinary voting power for
the election of directors or other governing body of such entity are herein
after referred to as the "subsidiaries". Each subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each subsidiary has the corporate power, as the
case may be, to carry on its business as it is now being conducted or presently
proposed to be conducted. Each subsidiary that is a corporation is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary except
where the failure to be so qualified will not have a material adverse effect on
the Parent and its subsidiaries taken as whole. Each subsidiary that is a
partnership is duly qualified as a foreign partnership authorized to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary except where the failure to be so qualified will
not have a material adverse effect on Parent and its subsidiaries taken as a
whole. All of the outstanding shares of capital stock of the subsidiaries that
are corporations are validly issued, fully paid and nonassessable. Except as
set forth on Schedule 4.3 hereto, all of the outstanding shares of capital stock
of, or other ownership interests in, each of the subsidiaries are owned by
Parent or by a subsidiary of Parent free and clear of any liens, claims, charges
or encumbrances. Except as set forth in Schedule 4.3 hereto, there are not now,
and at the Effective Time there will not be, any outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Parent or any subsidiary to issue, transfer or sell any
securities of any such subsidiary. There are not now, and at the Effective Time
there will
8
<PAGE>
not be, any voting trusts or other agreements or understandings to which Parent
or any of the its subsidiaries is a party or is bound with respect to the voting
of the capital stock of Parent or any its subsidiaries.
Section 4.4 Authority Relative to this Agreement. Each of Parent and
Parent Subsidiary has the corporate power to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Parent and Parent Subsidiary and the consummation by Parent and
Parent Subsidiary of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of Parent and Parent Subsidiary, and by
Parent as the sole stockholder of Parent Subsidiary, and, except for the
approvals of Parent's stockholders to be sought at the stockholders' meeting
contemplated by Section 7.4(b) hereof, no other corporate proceedings on the
part of Parent or Parent Subsidiary are necessary to authorize this Agreement or
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Parent Subsidiary and constitutes a
valid and binding agreement of each of Parent and Parent Subsidiary, enforceable
against Parent and Parent Subsidiary in accordance with its terms.
Section 4.5 Consents and Approvals; No Violations. Except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state or
foreign laws relating to takeovers, if applicable, state securities or blue sky
laws, and the filing and recordation of a Certificate of Merger as required by
the GCL, no filing with, and no permit, authorization, consent or approval of,
any public body or authority is necessary for the consummation by Parent and
Parent Subsidiary of the transactions contemplated by this Agreement. Neither
the
9
<PAGE>
execution and delivery of this Agreement by Parent or Parent Subsidiary nor the
consummation by Parent or Parent Subsidiary of the transactions contemplated
hereby, nor compliance by Parent or Parent Subsidiary with any of the provisions
hereof, will (a) conflict with or result in any breach of any provisions of the
Certificate of Incorporation or By-Laws of Parent or of Parent Subsidiary, (b)
except as set forth on Schedule 4.5 hereto, result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party or by which any of them or
any of their properties or assets may be bound or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of clauses
(b) and (c) for violations, breaches or defaults which are not in the aggregate
material to Parent and its subsidiaries taken as a whole.
Section 4.6 Reports and Financial Statements. Parent has filed all
reports required to be filed with the Securities and Exchange Commission (the
"SEC") pursuant to the Exchange Act since January 1, 1992 (collectively, the
"SEC Reports"), and has previously furnished the Company with true and complete
copies of all such SEC Reports. None of such SEC Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the balance sheets (including the related notes)
included in the SEC Reports presents fairly in all material respects the
consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof, and the other related statements
10
<PAGE>
(including the related notes) included therein present fairly in all material
respects the results of operations and the changes in financial position of
Parent and its subsidiaries for the respective periods or as of the respective
dates set forth therein, all in conformity with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein.
Section 4.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 4.7 hereto or in the SEC Reports, since December 25, 1994, Parent and
its subsidiaries have not: (a) taken any of the actions set forth in Sections
6.2(b) or 6.2(c) hereof; (b) suffered any material adverse change in the
business, financial condition, results of operations, properties, assets or
liabilities of Parent and its subsidiaries taken as a whole; or (c) conducted
its business and operations other than in the ordinary course of business and
consistent with past practices.
Section 4.8 Litigation. Except for litigation disclosed in the notes to
the financial statements included in Parent's Annual Report to Stockholders for
the year ended March 27, 1994 or in the SEC Reports there is no suit, action or
proceeding pending or, to the best knowledge of Parent, threatened against or
affecting Parent or any of its subsidiaries, the outcome of which, in the
reasonable judgment of Parent, is likely to materially and adversely affect the
business, financial condition or results of operations of Parent and its
subsidiaries taken as a whole; nor is there any judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Parent nor any of its
subsidiaries having, or which, insofar as can reasonably be foreseen, in the
future may have, any such effect.
Section 4.9 Information in Disclosure Documents and Registration
Statement. None of the information to be supplied by Parent or Parent
Subsidiary for inclusion in
11
<PAGE>
(a) the Registration Statement to be filed with the SEC by Parent on Form S-4
under the Securities Act for the purpose of registering the Parent Shares to be
issued in the Merger (the "Registration Statement") and (b) the joint proxy
statement to be distributed in connection with the Parent's and the Company's
meeting of stockholders to vote upon this Agreement (the "Proxy Statement") will
in the case of the Registration Statement, at the time it becomes effective and
at the Effective Time, or, in the case of the Proxy Statement or any amendments
thereof or supplements thereto, at the time of the mailing of the Proxy
Statement and any amendments or supplements thereto, and at the time of the
meeting of stockholders to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act, and the rules and regulations promulgated
thereunder.
Section 4.10 Absence of Undisclosed Liabilities. Except for liabilities
or obligations which are accrued or reserved against in Parent's financial
statements (or reflected in the notes thereto) included in the Parent SEC
Reports or which were incurred after December 25, 1994 in the ordinary course of
business and consistent with past practices, Parent and its subsidiaries do not
have any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of a nature required by generally accepted accounting principles to
be reflected in a corporate balance sheet (or reflected in the notes thereto).
Section 4.11 No Default. Neither Parent nor any of its subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provisions of (a) its Certificate
12
<PAGE>
of Incorporation or By-Laws, (b) any note, bond, mortgage, indenture, license,
agreement, contract, lease, commitment or other obligation to which Parent or
any of the its subsidiaries is a party or by which they or any of their
properties or assets may be bound, or (c) any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its subsidiaries,
except in the case of clauses (b) and (c) above for defaults or violations which
would not have a material adverse effect on Parent and its subsidiaries, taken
as a whole.
Section 4.12 Taxes.
(a) Parent has heretofore delivered or will make available to the Company
true, correct and complete copies of the consolidated federal, state, local and
foreign income, franchise, sales and use and other Tax Returns (as hereinafter
defined) filed by Parent and its subsidiaries for each of the Parent's years
ended March 31, 1990, 1991, 1992, 1993 and 1994 inclusive. Parent has duly
filed, and each of its subsidiaries has duly filed, all material federal, state,
local and foreign income, franchise, sales and other Tax Returns required to be
filed by Parent or subsidiaries. All such Tax Returns are true, correct and
complete, in all material respects, and Parent and its subsidiaries have duly
paid, all Taxes (as hereinafter defined) required to be paid in respect of the
periods covered by such returns and have paid or made adequate provisions for
payment of all accrued but unpaid Taxes in respect of all periods since the
periods covered by such Tax Returns. Except as set forth in Schedule 4.12
hereof, there are no material tax liens on the assets of Parent or its
subsidiaries. Except as set forth in Schedule 4.12 hereof, no deficiencies have
been assessed as a result of any examination of Tax Returns of Parent or its
subsidiaries by federal, state, local or foreign tax authorities, and no
deficiencies for Taxes have been proposed or asserted against Parent and its
subsidiaries. Except as disclosed in Schedule 4.12 hereof, no issue has been
raised
13
<PAGE>
during the past five years by any federal, state, local or foreign taxing
authority which, if raised with regard to any period not so examined, could
reasonably be expected to result in a proposed deficiency for any period not so
examined. Except as disclosed in Schedule 4.12 hereof, neither Parent nor any
of its subsidiaries has granted any extension or waiver of the statutory period
of limitations applicable to any claim for Taxes. Parent and each of its
subsidiaries have complied (and until the Closing will comply) in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes, including the withholding and reporting requirements
under Sections 1441 through 1464, 3401 through 3406 and 6041 through 6049 of the
Code (or similar provisions under any foreign laws) and have, within the time
and in the manner prescribed by law, paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales and use, transfer, license,
payroll, disability, unemployment, estimated, withholding, capital stock and
franchise taxes, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof, including any interest, penalties
or additions thereto. For purposes of this Agreement, the term "Tax Return"
shall mean any report, return or other information or document required to be
supplied to a taxing authority in connection with Taxes.
Section 4.13 Title to Properties; Encumbrances. Except as described in
the following sentence, each of Parent and its subsidiaries has good, valid
leasehold interest in, all of its properties and assets (real, personal and
mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the consolidated balance sheet
14
<PAGE>
of Parent and its subsidiaries as of December 25, 1994 included in Parent's
Quarterly Report on Form 10-Q for the period ended on such date (except for
properties and assets disposed of in the ordinary course of business and
consistent with past practices since December 25, 1994). None of such
properties or assets are subject to any liability, obligation, claim, lien,
mortgage, pledge, security interest, conditional sale agreement, charge or
encumbrance of any kind (whether absolute, charge or encumbrance of any kind
(whether absolute, accrued, contingent or otherwise), except (i) as set forth in
Schedule 4.13 hereto, and (ii) imperfections of title and encumbrance, if any,
which are not substantial in amount, do not materially detract from the value of
the property or assets subject thereto and do not impair the operations of
Parent and the its subsidiaries.
Section 4.14 Trademarks, Patents and Copyrights. Parent and its
subsidiaries own or possess adequate licenses or other valid rights to use all
material patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of Parent and
its subsidiaries as currently conducted or as contemplated to be conducted, and
Parent, except as set forth in Schedule 4.14 hereof, is unaware of any assertion
or claim challenging the validity of any of the foregoing. To the best
knowledge of the Parent, the conduct of the business of Parent and the
subsidiaries as currently conducted does not conflict in any way with any
patent, patent rights, license, trademark, trademark right, trade name, trade
name right, service mark or copyright of any third party, except as set forth in
Schedule 4.14 hereof. To the best knowledge of Parent there are no
infringements of any proprietary rights owned by or licensed by or to Parent or
any of its subsidiaries.
15
<PAGE>
Section 4.15 Compliance with Applicable Law. Each of Parent and its
subsidiary is in compliance with all applicable laws (whether statutory or
otherwise), rules, regulations, orders, ordinances, judgments or decrees of all
governmental authorities (federal, state, local, foreign or otherwise), where
the failure to be in such compliance would have a material adverse effect on
Parent and its subsidiaries, taken as a whole.
Section 4.16 Labor Matters. Neither Parent nor any of its subsidiaries is
a party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. There is
no unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of Parent, threatened against Parent or its subsidiaries relating to
their business, except for any such preceding pending which would not have a
material adverse effect on Parent and its subsidiaries, taken as a whole. To the
knowledge of Parent, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or threatened
involving employees of Parent or any of its subsidiaries.
Section 4.17 Employee Benefit Plans.
(a) Schedule 4.17 hereto sets forth a true and complete list of all the
following: each "employee benefit plan," as such term is defined in Section
3(3) of Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder ("ERISA"), pursuant to which the
Parent or any of its subsidiaries has (A) any liability with respect to current
or former employees, agents, directors, or independent contractors of the Parent
or its subsidiaries ("Employees") or (B) any obligation to issue capital stock
of the Parent or any of its subsidiaries (each, an "Employee Plan"), and each
other plan, program, policy, contract or arrangement providing for bonuses,
deferred pay, stock or stock related awards, severance pay, salary continuation
or similar benefits, life
16
<PAGE>
insurance or other employee benefits, or compensation to or for any Employees or
any beneficiaries or dependents of any Employees (other than directors' and
officers' liability policies), whether or not insured or funded, (A) pursuant to
which the Parent or any of its subsidiaries has any liability or (B)
constituting an employment or severance agreement or arrangement with any
officer or director of the Parent or any subsidiary (each, a "Benefit
Arrangement"). Parent has provided Company with respect to each Employee Plan
and Benefit Arrangement: (i) a true and complete copy of all written documents
comprising such Employee Plan or Benefit Arrangement (including amendments and
individual agreements relating thereto) or, if there is no such written
document, an accurate and complete description of such Employee Plan or Benefit
Arrangement; (ii) Form 5500 or similar form (including all schedules thereto),
if applicable; for the last two years; (iii) the most recent financial
statements and actuarial reports, if any; (iv) the summary plan description
currently in effect and all material modifications thereof, if any; and (v) the
most recent Internal Revenue Service determination letter, if any.
(b) Each Employee Plan and Benefit Arrangement has been established and
maintained in all material respects in accordance with its terms and in material
compliance with all applicable laws, including, but not limited to, ERISA and
the Code. Neither the Parent nor any of its subsidiaries nor any of their
respective current or former directors, officers, or employees, nor, to the best
knowledge of the Parent, any other disqualified person or party-in-interest with
respect to any Employee Plan, have engaged directly or indirectly in any
"prohibited transaction," as such term is defined in section 4975 of the Code or
section 406 of ERISA, with respect to which the Parent or its subsidiaries could
have or has any material liability. All contributions required to be made to
the Employee Plans and Benefit Arrangements have been made in a timely fashion.
Each Employee Plan
17
<PAGE>
that is intended to be qualified under Section 401(a) of the Code is so
qualified, and each related trust is exempt from taxation under Section 501(a)
of the Code.
(c) No Employee Plan is subject to Title IV of ERISA or Section 412 of the
Code.
(d) No Employee Plan is a "multiemployer plan" as that term is defined in
Section 3(37) of ERISA or a "multiple employer plan" described in Section
4063(a) of ERISA, nor has the Parent or any ERISA Affiliate at any time since
September 2, 1974, contributed to or been obligated to contribute to such a
multiemployer plan or multiple employer plan. "ERISA Affiliate" means any
entity that is required to be aggregated with Parent or any of its subsidiaries
under Sections 414(b),(c),(m) or (o) of the Code.
(e) Except with respect to an Employee Plan, neither the Parent nor any
ERISA Affiliate has any Controlled Group Liability, nor do any circumstances
exist that could result in any of them having any Controlled Group Liability.
"Controlled Group Liability" means any and all liabilities under (i) Title IV of
ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the Code and
(iv) the continuation coverage requirements of section 601 et seq. of ERISA and
section 4980B of the Code.
(f) Except as provided on Schedule 4.17 hereto, neither the execution or
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, constitutes an event under any Employee Plan, Benefit
Arrangement, loan to, or individual agreement or contract with, an Employee that
may result in any payment (whether of severance pay or otherwise), restriction
or limitation upon the assets of any Employee Plan or Benefit Arrangement,
acceleration of payment or vesting, increase in benefits or compensation, or
required funding, with respect to any Employee, the forgiveness of any loan or
other commitment of any Employees, or result in any prohibited transaction
18
<PAGE>
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
(g) There are no actions, suits, arbitrations, inquiries, investigations or
other proceedings (other than routine claims for benefits) pending or, to the
Parent's knowledge, threatened, with respect to any Employee Plan or Benefit
Arrangement.
(h) Except as provided on schedule 4.17 hereto, no amounts paid or payable
by the Parent or any subsidiary to or with respect to any Employee will fail to
be deductible for federal income tax purposes by reason of Section 280G of the
Code.
(i) No Employees and no beneficiaries or dependents of Employees are or may
become entitled under any Employee Plan or Benefit Arrangement to post-
employment welfare benefits of any kind, including without limitation death or
medical benefits, other than coverage mandated by Section 4980B of the Code.
(j) Neither Parent, any subsidiary or any ERISA Affiliate, nor any of the
Employee Plans, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction with any of the Employee
Plans in connection with which Parent, any subsidiary or any ERISA Affiliate,
any of the Employee Plans, any such trust, or any trustee or administrator
thereof, or any party dealing with the Employee Plans or any such trust could be
subject to either a material civil liability under section 409 of ERISA or
Section 502(i) of ERISA, or a material tax imposed pursuant to Section 4975 or
4976 of the Code.
Section 4.18 Opinion of Financial Advisor. The Board of Directors of
Parent (at a meeting duly called and held) has unanimously determined that the
transactions contemplated hereby are fair to and in the best interests of the
holders of the Common Stock. Parent has received the opinion of Merrill Lynch &
Co., Parent's financial advisor,
19
<PAGE>
substantially to the effect that the Exchange Ratio and the Merger is fair to
Parent from a financial point of view.
Section 4.19 Environment Matters. Except as set forth on Schedule 4.19,
neither the Parent nor any of its subsidiaries is in violation of any laws,
regulations, or ordinances whose primary purpose is the protection of the
environment or human health, the Parent and each subsidiary possesses all
permits and authorizations required for its operations under such laws, and the
Parent has filed or submitted all notifications and reports required under such
laws. The Parent and each subsidiary has disposed of all of its hazardous
wastes, hazardous substances, solid wastes, and any other pollutants or
contaminants only at facilities authorized to receive such wastes. Neither the
parent nor any of it subsidiaries has received notice of any actual or potential
liability arising from the disposal or release of hazardous wastes, hazardous
substances, solid wastes, or any other pollutant or contaminant (a) generated by
the Parent or any subsidiary, (b) transported to a disposal facility by the
Parent or any subsidiary, (c) at a facility owned or operated by the Parent or
any subsidiary or (d) where such disposal or release was arranged for by the
Parent and each subsidiary within the meaning of 42 U.S.C. Section 9607(a)(3) or
any analogous state or local law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, and Parent Subsidiary as
follows:
Section 5.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be
20
<PAGE>
conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified will
not have a material adverse effect on the Company and its subsidiaries taken as
a whole.
Section 5.2 Capitalization. The authorized capital stock of the Company
consists of (a) 30,000,000 shares of Common Stock, par value $.25 per share, (b)
800,000 shares of Preferred Stock, no par value, (c) 200,000 shares of Series A
Junior Participating Preferred Stock, (d) 7 1/4% Convertible Subordinated
Debentures Due 2011, (the "Convertible Debentures") and (e) Preferred Stock
Purchase Rights. As of the date hereof, (a) 15,355,740 Shares were issued and
outstanding, (b) no shares of preferred stock were outstanding, (c) employee and
director stock options to acquire 2,528,136 Shares (the "Employee Stock
Options") were outstanding under all stock option plans and agreements of the
Company (d) 3,087,882 shares were reserved for issuance under the Convertible
Debentures, and (e) 15,355,740 Preferred Stock Purchase Rights were issued and
outstanding. All of the issued and outstanding Shares are validly issued, fully
paid and nonassessable and free of preemptive rights. Except as set forth above
and as otherwise provided for in this Agreement, there are not now, and at the
Effective Time there will not be, any shares of capital stock of the Company
issued or outstanding or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating the Company
to issue, transfer or sell any shares of its capital stock. Except as provided
in this Agreement, after the Effective Time, the Company will have no obligation
to issue, transfer or sell any shares of its capital stock pursuant to any
employee benefit plan or otherwise.
21
<PAGE>
Section 5.3 Company Subsidiaries. Except as set forth on Schedule 5.3
hereto, the Company does not directly or indirectly own any interest in any
other corporation, partnership, joint venture or other business association or
entity, foreign or domestic. Such corporations, partnerships, joint ventures or
other business entities of which the Company or any of its other subsidiaries
owns, directly or indirectly, greater than fifty percent of the shares of
capital stock or other equity interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to cast at least
a majority of the votes that may be cast by all shares or equity interests
having ordinary voting power for the election of directors or other governing
body of such entity are hereinafter referred to as the "Subsidiaries". Except
as set forth in Schedule 5.3 hereto, each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted or presently proposed to be conducted.
Each Subsidiary is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary except where the failure to be so qualified will not
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. Except as set forth on Schedule 5.3 hereof, all of the outstanding
shares of capital stock of the Subsidiaries are validly issued, fully paid and
nonassessable and are owned by the Company or by a Subsidiary free and clear of
any liens, claims, charges and encumbrances. There are not now, and at the
Effective Time there will not be, any outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
other commitments obligating the Company or any Subsidiary to issue, transfer or
sell any securities of any Subsidiary. There are not now, and at the Effective
22
<PAGE>
Time there will not be, any voting trusts or other agreements or understandings
to which the Company or any of the Subsidiary is a party or is bound with
respect to the voting of the capital stock of the Company or any of the
Subsidiary.
Section 5.4 Authority Relative to this Agreement. The Company has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Company's Board of Directors and, except for the approval
of its stockholders to be sought at the stockholders meeting contemplated by
Section 7.4 hereof, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
Section 5.5 Consents and Approvals; No Violations. Except for applicable
requirements of the HSR Act, the Securities Act, the Exchange Act, and state or
foreign laws relating to takeovers, if applicable, state securities or blue sky
laws and the filing and recordation of a Certificate of Merger as required by
the GCL, no filing with, and no permit, authorization, consent or approval of,
any public body or authority is necessary for the consummation by the Company of
the transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by the Company, nor the consummation by the Company
of the transactions contemplated hereby, nor compliance by the Company with any
of the provisions hereof, will (a) conflict with or result in any breach of any
provisions of the Certificate of Incorporation or By-Laws of the Company or any
Subsidiary, (b) except as set forth on Schedule 5.5, result in a violation or
breach of, or
23
<PAGE>
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which the
Company or any Subsidiary is a party or by which any of them or any of their
properties or assets may be bound or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any Subsidiary or
any of their properties or assets, except in the case of clauses (b) and (c) for
violations, breaches or defaults which are not in the aggregate material to the
Company and Subsidiaries taken as a whole.
Section 5.6 Reports and Financial Statements. The Company has filed all
reports required to be filed with the SEC pursuant to the Exchange Act since
January 1, 1992 (such reports, and its Prospectus dated April 20, 1993 relating
to its Common Stock, being hereinafter collectively referred to as the "Company
SEC Reports"), and has previously furnished Parent with true and complete copies
of all such Company SEC Reports. None of such Company SEC Reports, as of their
respective dates, contained any untrue statement or a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the balance sheets (including the related notes)
included in the Company SEC Reports presents fairly in all material respects the
consolidated financial position of the Company and the Subsidiaries as of the
respective dates thereof, and the other related statements (including the
related notes) included therein present fairly in all material respects the
results of operations and the changes in financial position of the Company and
the Subsidiaries for the respective periods or as of the respective dates set
forth therein, all in conformity with generally accepted accounting
24
<PAGE>
principles consistently applied during the periods involved, except as otherwise
noted therein.
Section 5.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 5.7 hereto or in the Company SEC Reports, since January 31, 1995,
neither the Company nor any of the Subsidiaries has: (a) taken any of the
actions set forth in Sections 6.1(b), except in the ordinary course of business
and consistent with past practices, Section 6.1(c) or except in the ordinary
course of business and consistent with past practices Section 6.1(e) hereof; (b)
suffered any material adverse change in the business, financial condition,
results of operations, properties, assets or liabilities of the Company and the
Subsidiaries taken as a whole; or (c) conducted its business and operations
other than in the ordinary course of business and consistent with past
practices.
Section 5.8 Litigation. Except for litigation disclosed in the Company
SEC Reports or in Schedule 5.8 there is no suit, action or proceeding pending
or, to the best knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries, the outcome of which, in the reasonable
judgment of the Company, may materially and adversely affect the business,
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole; nor is there any judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Company nor any of its Subsidiaries having,
or which, insofar as can reasonably be foreseen, in the future may have, any
such effect.
Section 5.9 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which are accrued or reserved against in the Company's financial
statements (or reflected in the notes thereto) included in the Company SEC
Reports or which were incurred after January 31, 1995 in the ordinary course of
business and consistent with past practices, the
25
<PAGE>
Company and the Subsidiaries do not have any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required by generally
accepted accounting principles to be reflected in a corporate balance sheet (or
reflected in the notes thereto).
Section 5.10 No Default. Neither the Company nor any of the Subsidiaries
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provisions of (a) its Certificate of Incorporation or By-Laws, (b)
any note, bond, mortgage, indenture, license, agreement, contract, lease,
commitment or other obligation to which the Company or any Subsidiary is a party
or by which they or any of their properties or assets may be bound, or (c) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any Subsidiary, except in the case of clauses (b) and (c) above for
defaults or violations which would not have a material adverse effect on the
Company and the Subsidiaries, taken as a whole.
Section 5.11 Taxes.
(a) The Company has heretofore delivered or will make available to Parent
true, correct and complete copies of the consolidated federal, state, local and
foreign income, franchise, sales and other Tax Returns filed by the Company and
Subsidiaries for each of the Company's years ended October 31, 1990, 1991, 1992,
1993 and 1994 inclusive. The Company has duly filed, and each Subsidiary has
duly filed, all material federal, state, local and foreign income, franchise,
sales and use and other Tax Returns required to be filed by the Company or the
Subsidiary. All such Tax Returns are true, correct and complete, in all
material respects, and the Company and the Subsidiaries have duly paid all Taxes
required to be paid in respect of the periods shown as due in such returns and
have made adequate provision for payment of all accrued but unpaid Taxes
anticipated in respect of
26
<PAGE>
all periods since the periods covered by such Tax Returns except as set forth in
Schedule 5.11 hereof. Except as set forth in Schedule 5.11 hereof, there are no
material tax liens on the assets of the Company and the Subsidiaries. Except as
set forth in Schedule 5.11 hereof, no deficiencies have been assessed as a
result of any examination of Tax Returns of the Company or the Subsidiaries by
federal, state, local or foreign tax authorities, and no deficiencies for Taxes
have been proposed or asserted against the Company and the Subsidiaries. Except
as disclosed in Schedule 5.11 hereof, no issue has been raised during the past
five years by any federal, state, local or foreign taxing authority which, if
raised with regard to any period not so examined, could reasonably be expected
to result in a proposed deficiency for any period not so examined. Except as
disclosed in Schedule 5.11 hereof, neither the Company nor any of the
Subsidiaries has granted any extension or waiver of the statutory period of
limitations applicable to any claim for Taxes. Except as set forth on Schedule
5.11 hereof, neither the Company nor any of the Subsidiaries is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code. The Company and each of the Subsidiaries have
complied (and until the Closing will comply) in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes including the reporting and withholding requirements under Sections
1441 through 1464, 3401 through 3406 and 6041 through 6049 of the Code or
similar provisions under any foreign laws) and have, within the time and in the
manner prescribed by law, paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under applicable laws.
27
<PAGE>
Section 5.12 Employee Benefit Plans; ERISA.
(a) Schedule 5.12 hereto sets forth a true and complete list of all the
following: each "employee benefit plan," as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder ("ERISA"), other than any plans or
arrangements required by local law, pursuant to which the Company or any
Subsidiary has (A) any liability with respect to current or former employees,
agents, directors, or independent contractors of the Company or any Subsidiary
("Company Employees") or (B) any obligation to issue capital stock of the
Company or any Subsidiaries (each, a "Company Employee Plan"), and each other
plan, program, policy, contract or arrangement providing for bonuses, deferred
pay, stock or stock related awards, severance pay, salary continuation or
similar benefits, life insurance or other employee benefits, or compensation to
or for any Company Employees or any beneficiaries or dependents of any Company
Employees (other than directors' and officers' liability policies), whether or
not insured or funded, (A) pursuant to which the Company or any Subsidiary has
any liability or (B) constituting an employment or severance agreement or
arrangement with any officer or director of the Company or any Subsidiary (each,
a "Benefit Arrangement"). The Company has provided, or will provide, Parent
with respect to each Company Employee Plan and Benefit Arrangement: (i) a true
and complete copy of all written documents comprising such Company Employee Plan
or Benefit Arrangement (including amendments and individual agreements relating
thereto) or, if there is no such written document, an accurate and complete
description of such Company Employee Plan or Benefit Arrangement; (ii) the most
recent Form 5500 or similar form (including all schedules thereto), if
applicable; (iii) the most recent financial statements and actuarial reports, if
any; (iv) the summary plan description currently in effect and all material
28
<PAGE>
modifications thereof, if any; and (v) the most recent Internal Revenue Service
determination letter, if any.
(b) Each Company Employee Plan and Benefit Arrangement has been established
and maintained in all material respects in accordance with its terms and in
material compliance with all applicable laws, including, but not limited to,
ERISA and the Code. Neither the Company nor any Subsidiaries nor any of their
respective current or former directors, officers, or employees, nor, to the best
knowledge of the Company, any other disqualified person or party-in-interest
with respect to any Company Employee Plan, have engaged directly or indirectly
in any "prohibited transaction," as such term is defined in section 4975 of the
Code or section 406 of ERISA, with respect to which the Company or its
Subsidiaries could have or has any material liability. All contributions
required to be made to the Company Employee Plans and Benefit Arrangements have
been made in a timely fashion. Each Company Employee Plan that is intended to
be qualified under Section 401(a) of the Code is so qualified, and each related
trust is exempt from taxation under Section 501(a) of the Code.
(c) No Company Employee Plan is subject to Title IV of ERISA or Section 412
of the Code.
(d) No Company Employee Plan is a "multiemployer plan" as that term is
defined in Section 3(37) of ERISA or a "multiple employer plan" described in
Section 4063(a) of ERISA, nor has the Company or any ERISA Affiliate of the
Company at any time since September 2, 1974, contributed to or been obligated to
contribute to such a multiemployer plan or multiple employer plan. "ERISA
Affiliate" means any entity that is required to be aggregated with the Company
or any Subsidiary under Sections 414(b),(c),(m) or (o) of the Code.
29
<PAGE>
(e) Except with respect to a Company Employee Plan, neither the Company nor
any ERISA Affiliate has any Controlled Group Liability, nor do any circumstances
exist that could result in any of them having any Controlled Group Liability.
"Controlled Group Liability" means any and all liabilities under (i) Title IV of
ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the Code and
(iv) the continuation coverage requirements of section 601 et seq. of ERISA and
section 4980B of the Code.
(f) Except as provided on Schedule 5.12, neither the execution or delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
constitutes an event under any Company Employee Plan, Benefit Arrangement, loan
to, or individual agreement or contract with, a Company Employee that may result
in any payment (whether of severance pay or otherwise), restriction or
limitation upon the assets of any Company Employee Plan or Benefit Arrangement,
acceleration of payment or vesting, increase in benefits or compensation, or
required funding, with respect to any Company Employee, the forgiveness of any
loan or other commitment of any Company Employees, or resulting any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
(g) Except as provided in Exhibit 5.12 hereto, there are no actions, suits,
arbitrations, inquiries, investigations or other proceedings (other than routine
claims for benefits) pending or, to the Company's knowledge, threatened, with
respect to any Company Employee Plan or Benefit Arrangement.
(h) Except as provided in Schedule 5.12 hereto, no amounts paid or payable
by the Company or any Subsidiary to or with respect to any Company Employee will
fail to be deductible for federal income tax purposes by reason of Section 280G
of the Code.
30
<PAGE>
(i) No Company Employees and no beneficiaries or dependents of Company
Employees are or may become entitled under any Company Employee Plan or Benefit
Arrangement to post-employment welfare benefits of any kind, including without
limitation death or medical benefits, other than coverage mandated by Section
4980B of the Code.
(j) Neither the Company, any Subsidiary or any ERISA Affiliate, nor any of
the Company Employee Plans, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction with any of the Employee
Plans in connection with which the Company, and Subsidiary or any ERISA
Affiliate, any of the Company Employee Plans, any such trust, or any trustee or
administrator thereof, or any party dealing with the Company Employee Plans or
any such trust could be subject to either a material civil liability under
section 409 of ERISA or Section 502(i) of ERISA, or a material tax imposed
pursuant to section 4975 or 4976 of the Code.
Section 5.13 Title to Properties; Encumbrances. Except as described in
the following sentence, each of the Company and the Subsidiaries has good, valid
and marketable title to, or a valid leasehold interest in, all of its properties
and assets (real, personal and mixed, tangible and intangible), including,
without limitation, all the properties and assets reflected in the consolidated
balance sheet of the Company and the Subsidiaries as of January 31, 1995
included in the Company's Quarterly Report on Form 10-Q for the period ended on
such date (except as set forth in Schedule 5.13 hereof and except for properties
and assets disposed of in the ordinary course of business and consistent with
past practices since January 31, 1995). None of such properties or assets is
subject to any liability, obligation, claim, lien, mortgage, pledge, security
interest, conditional sale agreement, charge or encumbrance of any kind
(whether absolute, accrued, contingent or otherwise), except (i) as set forth in
Schedule 5.13 hereto, and (ii) imperfections of title and
31
<PAGE>
encumbrances, if any, which are not substantial in amount, do not materially
detract from the value of the property or assets subject thereto and do not
impair the operations of the Company and the Subsidiaries.
Section 5.14 Compliance with Applicable Law. Each of the Company and the
Subsidiaries is in compliance with all applicable laws (whether statutory or
otherwise), rules, regulations, orders, ordinances, judgments or decrees of all
governmental authorities (federal, state, local, foreign or otherwise)
(collectively, the "Laws"), where the failure to be in such compliance would
have a material adverse effect of the Company and the Subsidiaries, taken as a
whole.
Section 5.15 Information in Disclosure Documents and Registration
Statement. None of the information to be supplied by the Company for inclusion
in the Proxy Statement or the Registration Statement will, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, or, in the case of the Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the meeting of
stockholders of the Company to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act, and the rules and regulations
promulgated thereunder.
Section 5.16 Opinion of Financial Advisor. The Board of Directors of the
Company (at meetings duly called and held) has unanimously determined that the
transactions contemplated hereby are fair to and in the best interests of the
holders of the Shares. The
32
<PAGE>
Company has received the written opinion of Bear, Stearns & Co., Inc., the
Company's financial advisor, substantially to the effect that the consideration
to be received in the Merger by the holders of the Shares is fair to such
stockholders from a financial point of view.
Section 5.17 Trademarks, Patents and Copyrights. The Company and the
Subsidiaries own or possess adequate licenses or other valid rights to use all
material patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of the Company
and the Subsidiaries as currently conducted or as contemplated to be conducted,
and the Company except as set forth in Schedule 5.17 hereof, is unaware of any
assertion or claim challenging the validity of any of the foregoing. To the
best knowledge of the Company, the conduct of the business of the Company and
the Subsidiaries as currently conducted does not conflict in any way with any
patent, patent right, license, trademark, trademark right, trade name, trade
name right, service mark or copyright of any third parties except as set forth
in Schedule 5.17 hereof. To the best knowledge of the Company there are no
infringements of any proprietary rights owned by or licensed by or to the
Company or any Subsidiary, except as set forth in Schedule 5.17 hereof.
Section 5.18 Labor Matters. Except as set forth on Schedule 5.18, neither
the Company nor any of the Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. There is no unfair labor practice or
labor arbitration proceeding pending or, to the knowledge of the Company,
threatened against the Company or the Subsidiaries
33
<PAGE>
relating to their business, except for any such preceding which would not have a
material adverse effect on the Company and the Subsidiaries, taken as a whole.
To the knowledge of the Company, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of the Subsidiaries.
Section 5.19 Environmental Matters. Except as set forth on Schedule 5.19,
and notwithstanding the materiality qualification in Sections 5.10 and 5.14,
neither the Company nor a Subsidiary is in violation of any laws, regulations,
or ordinances whose primary purpose is the protection of the environment or
human health, the Company and its Subsidiaries possess all permit and
authorizations required for its operations under such laws, and the Company and
its Subsidiaries have filed or submitted all notifications and reports required
under such laws. The Company and its Subsidiaries have disposed of all of its
hazardous wastes, hazardous substances, solid wastes, and any other pollutants
or contaminants only at facilities authorized to receive such wastes. Except as
set forth in Schedule 5.19, the Company and its Subsidiaries have not received
notice of any actual or potential liability arising from the disposal or release
of hazardous wastes, hazardous substances, solid wastes, or any other pollutant
or contaminant (a) generated by the Company or any Subsidiary or any of their
operations, (b) transported to a disposal facility by the Company or any
Subsidiary, (c) at a facility owned or operated by the Company or (d) where such
disposal or release was arranged for by the Company or any Subsidiary, within
the meaning of 42 U.S.C. Section 9607(a)(3) or any analogous state or local law.
34
<PAGE>
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger.
Prior to the Effective Time, unless Parent shall otherwise agree in writing, or
as otherwise contemplated by this Agreement:
(a) the respective businesses of the Company and the Subsidiaries
shall be conducted only in the ordinary and usual course of business and
consistent with past practices, and there shall be no material changes in the
conduct of the Company's and the Subsidiaries' operations;
(b) the Company shall not (i) sell or pledge or agree to sell or
pledge any stock owned by it in any of the Subsidiaries; (ii) amend its
Certificate of Incorporation or By-laws; or (iii) split, combine or reclassify
any shares of its outstanding capital stock or declare, set aside or pay any
dividend or other distribution payable in cash, stock or property, or redeem or
otherwise acquire any shares of its capital stock or shares of the capital stock
of any of the Subsidiaries;
(c) neither the Company nor any of the Subsidiaries shall (i)
authorize for issuance, issue or sell or agree to issue or sell any additional
shares of, or rights of any kind to acquire any shares of, its capital stock of
any class (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise), except for
unissued Shares reserved for issuance upon the exercise of currently outstanding
Employee Stock Options; (ii) except for product sales, dispose of, transfer,
lease, license, mortgage, pledge or encumber any fixed or other assets other
than in the ordinary course of business and in any event, in amounts greater
than $1,500,000 in the aggregate for the Company and the Subsidiaries
collectively; (iii) incur, assume or prepay any indebtedness
35
<PAGE>
or any other material liabilities other than in the ordinary course of business
and consistent with past practices; (iv) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person other than a Subsidiary in the ordinary
course of business and consistent with past practices; (v) make any loans,
advances or capital contributions to, or investments in, any other person, other
than to a Subsidiary in the ordinary course of business; (vi) authorize capital
expenditures in excess of $250,000 per expenditure and $6,000,000 in the
aggregate for the Company and the Subsidiaries collectively; (vii) permit any
insurance policy naming the Company or any Subsidiary as a beneficiary or a loss
payee to be cancelled or terminated by failure to pay premiums; or (viii) enter
into any contract, agreement, commitment or arrangement with respect to any of
the foregoing;
(d) the Company shall use its best efforts to preserve intact the
business organization of the Company and the Subsidiaries, to keep available the
services of their present officers and key employees, and to preserve the
goodwill of those having business relationships with it and the Subsidiaries;
(e) neither the Company nor any of the Subsidiaries will enter into
any new agreements with any of their respective officers, directors or employees
or grant any increases in the compensation of their respective officers,
directors and employees, or enter into, adopt or amend any employee compensation
or benefit plans or any Plan (as that term is defined in Schedule 5.12 hereto);
and
(f) neither the Company nor any of the Subsidiaries shall (i)
knowingly take or allow to be taken any action which would jeopardize the
treatment of Parent's acquisition of the Company as a pooling of interests for
accounting purposes; or
36
<PAGE>
(ii) knowingly take any action which would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 386(a) of the Code.
Section 6.2 Conduct of Business by Parent Pending the Merger. Prior
to the Effective Time, unless the Company shall otherwise agree in writing, or
as otherwise contemplated by this Agreement:
(a) the respective businesses of Parent and its subsidiaries shall be
conducted only in the ordinary and usual course of business and consistent with
past practices, and there shall be no material changes in the conduct of
Parent's operations;
(b) Parent shall not (i) sell or pledge or agree to sell or pledge any
stock owned by it in any of its subsidiaries; (ii) amend its Certificate of
Incorporation or By-Laws; or (iii) split, combine or reclassify any shares of
its outstanding capital stock or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or redeem or otherwise acquire
any shares of its capital stock or shares of the capital stock of any of its
subsidiaries;
(c) neither Parent nor any of the its subsidiaries shall (i) authorize
for issuance, issue or sell or agree to issue or sell any additional shares of,
or rights of any kind to acquire any shares of, its capital stock of any class
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except for unissued shares of
Parent Common Stock granted or reserved for issuance upon the exercise of Parent
Employee Stock Options and except for grants of options under the Parent
Employee Stock Option Plan, in the ordinary course of business; (ii) incur,
assume or prepay any indebtedness or any other material liabilities other than
in the ordinary course of business and consistent with past practices; (iii)
assume, guarantee, endorse or
37
<PAGE>
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person other than its subsidiary in
the ordinary course of business.
(d) Parent shall use its best efforts to preserve intact the business
organization of the Parent and its subsidiaries, to keep available the services
of their present officers and key employees, and to preserve the goodwill of
those having business relationships with it and its subsidiaries; and
(e) neither Parent nor any of its subsidiaries shall (i) knowingly
take or allow to be taken any action which would jeopardize the treatment of
Parent's acquisition of the Company as a pooling of interests for accounting
purposes; or (ii) knowingly take any action which would jeopardize qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
Section 6.3 Conduct of Business of Parent Subsidiary. During the
period from the date of this Agreement to the Effective Time, Parent Subsidiary
shall not engage in any activities of any nature except as provided in or
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Except for information relating
to any claims either party may have against the other, the Company and Parent
shall each afford to the other and to the other's financial advisors, legal
counsel, accountants, consultants and other representatives full access during
normal business hours throughout the period prior to the Effective Time to all
of its books, records, properties, plants and personnel and, during such period,
each shall furnish promptly to the other (a) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of federal
or state
38
<PAGE>
securities laws, and (b) all other information as such other party may
reasonably request, provided that no investigation pursuant to this Section 7.1
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Merger. Each party
shall hold in confidence all nonpublic information until such time as such
information is otherwise publicly available and, if this Agreement is
terminated, each party will deliver to the other all documents, work papers and
other material (including copies) obtained by such party or on its behalf from
the other party as a result of this Agreement or in connection herewith, whether
so obtained before or after the execution hereof.
Section 7.2 Acquisition Proposals. Company agrees (a) that, neither
it nor its Subsidiaries shall, and that it and they will use their best efforts
to cause their respective directors, officers, employees, financial advisors,
legal counsel, accountants and other agents and representatives not to, initiate
or solicit, directly or indirectly, any inquiries or the making of any proposal
with respect to, engage in negotiations concerning, provide any confidential
information or data to or have any discussions with any person relating to, any
acquisition, business combination or purchase of all or any significant portion
of the assets of, or any equity interest in such party or any subsidiary of such
party (an "Acquisition Proposal"), other than the Merger, (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person conducted heretofore with respect to
any of the foregoing, and (c) that it will notify the other party immediately in
writing if any such inquiries or proposals are received by, any such information
is requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it; provided, however, that nothing contained in
this Section 7.2 shall prohibit the Board of Directors of the Company from (i)
furnishing information or
39
<PAGE>
entering into discussions or negotiations with, any person or entity that makes
an unsolicited bona fide proposal to acquire such party pursuant to a merger,
consolidation, share exchange, purchase of a substantial portion of the assets,
business combination or other similar transaction, if and only to the extent
that, (1) the Board of Directors of the Company determines in good faith that
such action is required for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law, (2) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
the Company provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity, and (3) subject to any confidentiality agreement with
such person or entity (which the Company determined in good faith was required
to be executed in order for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law), the Company keeps the Parent informed of
the status (not the terms) of any such discussions or negotiations; and (ii) to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal. Nothing in this Section 7.2 shall
(1) permit the Company to terminate this Agreement (except as specifically
provided in Article IX hereof), (2) permit the Company to enter into any
agreement with respect to an Acquisition Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement, the Company
shall not enter into any agreement with any person that provides for, or in any
way facilitates, an Acquisition Proposal (other than a confidentiality agreement
in customary form), or (3) affect any other obligation of any party under this
Agreement.
Section 7.3 Registration Statement. As promptly as practicable,
Parent and the Company shall prepare and file with the SEC the Proxy Statement
and Parent shall prepare
40
<PAGE>
and file with the SEC the Registration Statement. Each of Parent and the
Company shall use its best efforts to have the Registration Statement declared
effective. Parent will also use its best efforts to take any action required to
be taken under state securities or blue sky laws in connection with the issuance
of the Parent Shares pursuant hereto. The Company shall furnish Parent with all
information concerning the Company and the holders of its capital stock and
shall take such other action as Parent may reasonably request in connection with
such Registration Statement and issuance of Parent Shares.
Section 7.4 Proxy Statements; Stockholder Approvals.
(a) The Company, acting through its Board of Directors, shall, in
accordance with applicable law and its Certificate of Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene and hold as
soon as practicable following the date upon which the Registration
Statement becomes effective a meeting of its stockholders for the purpose
of voting to approve and adopt this Agreement and shall use its best
efforts to obtain such stockholder approval; and
(ii) recommend approval and adoption of this Agreement by the
stockholders of the Company and include in the Proxy Statement such
recommendation, and take all lawful action to solicit such approval.
(b) Parent, acting through its Board of Directors, shall, in
accordance with applicable law and its Certificate of Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene and hold as
soon as practicable following the date upon which the Registration
Statement becomes effective a meeting of its stockholders for the purpose
of voting to approve and
41
<PAGE>
adopt this Agreement and shall use its best efforts to obtain such
stockholder approval; and
(ii) recommend approval and adoption of this Agreement by the
stockholders of Parent and include in the Proxy Statement such
recommendation, and take all lawful action to solicit such approval.
(c) Parent and the Company, as promptly as practicable, shall cause
the definitive Proxy Statement to be mailed to their stockholders. At the
stockholders' meetings, each of Parent and the Company shall vote or cause to be
voted in favor of approval and adoption of this Agreement all Shares as to which
it holds proxies at such time.
Section 7.5 Compliance with the Securities Act.
(a) Prior to the Effective Time the Company shall cause to be
delivered to Parent a list identifying all persons who were, in its reasonable
judgment, upon consultation with Locke Purnell Rain Harrell, at the record date
for the Company stockholders' meeting convened in accordance with Section 7.4
hereof, "affiliates" of the Company as that term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act (the "Affiliates").
(b) The Company shall use its best efforts to cause each person who is
identified as an Affiliate in the list referred to in (a) above to deliver to
Parent at or prior to the Effective Time a written agreement in the form
attached hereto as Exhibit A (the "Affiliate Letters").
Section 7.6 Antitrust Laws. As promptly as practicable, the Company,
Parent and Parent Subsidiary shall make all filings and submissions under the
HSR Act as may be reasonably required to be made in connection with this
Agreement and the transactions
42
<PAGE>
contemplated hereby. Subject to Section 7.1 hereof, the Company will furnish to
Parent and Parent Subsidiary, and Parent and Parent Subsidiary will furnish to
the Company, such information and assistance as the other may reasonably request
in connection with the preparation of any such filings or submissions. Subject
to Section 7.1 hereof, the Company will provide Parent and Parent Subsidiary,
and Parent and Parent Subsidiary will provide the Company, with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives, on the one
hand, and any governmental agency or authority or members of their respective
staffs, on the other hand, with respect to this Agreement and the transactions
contemplated hereby.
Section 7.7 Employee Stock Options and Convertible Debentures. The
Company has not since December 1994 accelerated the vesting or exercisability of
or otherwise modified and, except as provided in this Section 7.7, from the date
hereof the Company will not accelerate the vesting or exercisability of or
otherwise modify, the terms and conditions applicable to the Employee Stock
Options whether set forth in the governing stock option plans of the Company
(the "Company Stock Option Plans"), the option agreement with the employee or
otherwise. At the Effective Time, each of the Employee Stock Options which is
outstanding and unexercised both as of the date hereof and at the Effective Time
shall continue and be assumed by the Surviving Corporation and any successor
corporation and shares of Parent Common Stock in such number as determined
pursuant to the Exchange Ratio shall be substituted for the Shares for which
such options are or will be exercisable. In accordance with the requirements
of Section 14.07 of that certain Indenture (the "Indenture") dated as of April
3, 1986 between the Company and the trustee thereof relating to $51,750,000 of
7 1/4% Convertible Subordinated Debentures due 2011 (the "Debentures"),
43
<PAGE>
Company shall cause to be filed with the Trustee at each office or agency
maintained for the purpose of conversion of the Debentures and shall cause to be
mailed to the holders of the Debentures a notice stating the date on which the
Merger is expected to become effective and the date, if any is to be fixed, as
of which it is expected that holders of Company Common Stock of record shall be
entitled to exchange their shares of Company Common Stock for Parent Common
Stock. Such notice shall be mailed at least 20 days prior to the date set forth
in the notice and shall otherwise comply with the requirements of Section 14.07
of the Indenture.
Section 7.8 Public Announcements. Parent and Parent Subsidiary, on the
one hand, and the Company, on the other hand, agree that they will not issue any
press release or otherwise make any public statement or respond to any press
inquiry with respect to this Agreement or the transactions contemplated hereby
without the prior approval of the other party, except as may be required by law.
Section 7.9 By-Law Indemnification Provision.
(a) Parent shall cause the Surviving Corporation and any successor of
the Surviving corporation to keep in effect in its By-Laws a provision for a
period of not less than five years from the Effective Time which provides for
mandatory indemnification of the past and present officers and directors of the
Company and each other person who has been afforded indemnification by the
Company as of the date of this Agreement to the fullest extent permitted by the
GCL.
(b) Parent shall cause to be maintained in effect for a period ending
not sooner than the fifth anniversary of the Effective Time directors' and
officers' liability insurance providing at least the same coverage with respect
to the Company's officers and directors and each other person who has been
insured by the Company as of the date of this
44
<PAGE>
Agreement as afforded under policies maintained by the Company with respect to
its directors and officers prior to the Effective Time which insurance if
available within the price Cap as described below shall provide coverage for
alleged wrongful acts or omissions occurring with respect to the transactions
contemplated by this Agreement and alleged wrongful acts or omissions occurring
prior to the Effective Time; provided, however, that Parent shall not be
required in order to maintain or procure such coverage to pay annual premiums in
excess of two hundred percent (200%) of the current annual premiums paid by the
Company for its existing coverage (the "Cap"); and provided, further, that if
such coverage cannot be obtained, or can be obtained only by paying annual
premiums in excess of the Cap, Parent shall only be required to obtain as much
coverage as can be obtained by paying annual premiums equal to the Cap.
Section 7.10 Expenses. Whether or not the Merger is consummated all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses except that the filing fees in connection with the HSR Act filing and
those expenses incurred in connection with printing the Registration Statement
and the related Proxy Statement, as well as the filing fee relating to the
Registration Statement will be shared equally by Parent and the Company.
Section 7.11 Employment Agreements. Without limiting any other
contractual obligations of the Surviving Corporation, Parent expressly shall
cause the Surviving Corporation and any successor to comply with the provisions
of the employment agreements set forth at Schedule 7.11.
45
<PAGE>
Section 7.12 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulation to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and/or
directors of Parent, Parent Subsidiary and the Company shall take all such
necessary action.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated.
(b) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and shall have provided for
the Merger to be accounted for on a pooling of interest basis.
46
<PAGE>
(c) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of each of
the Company and Parent in accordance with applicable law.
(d) No preliminary or permanent injunction or other order by any
federal or state court in the United States which prohibits the consummation of
the Merger shall have been issued and remain in effect.
(e) Each of the Company and Parent shall have received an opinion from
its financial advisors that the merger is fair from a financial point of view to
such entity and its shareholders and such opinion shall not be withdrawn or
modified on or before the Effective Time.
Section 8.2 Conditions to Obligation of the Company to Effect the Merger.
In addition to the conditions on 8.1 hereof, the obligation of the Company to
effect the Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following additional conditions:
(a) Each of Parent and Parent Subsidiary shall have performed in all
material respects its obligations under this Agreement required to be performed
by it at or prior to the Effective Time and the representations and warranties
of Parent and Parent Subsidiary contained in this Agreement shall have been true
and correct in all material respects at the time made.
(b) There shall have not have been a Parent Material Adverse Change
since the date of this Agreement. For the purposes of this Agreement, a Parent
Material Adverse Change shall mean an event, change or development that
individually or in the aggregate with other such events, changes or developments
materially and adversely affects the business, financial condition or results of
operations of the Parent and its subsidiaries
47
<PAGE>
taken as a whole. Any adverse impact on the revenues, income, balance sheet, or
operations of the Parent or its subsidiaries caused by adverse changes in
orders, backlog, bidding qualifications, relations with resellers, integrators,
OEM customers, cancellations and rescheduling of orders, or the ability to
retain agreed upon employees or attract new employees, will be presumed, unless
there is clear evidence to the contrary, to have occurred as a result of the
transaction contemplated by this Agreement or the announcement thereof and in
any such event will not be deemed to be an event, change or development which is
or will be material and adverse for purposes of this definition.
(c) The Company shall have received an opinion of Locke Purnell Rain
Harrell counsel to the Company, in form and substance reasonably satisfactory to
the Company, dated as of the Effective Time, substantially to the effect that
the Merger will constitute a reorganization for federal income tax purposes
within the meaning of Section 368(a) of the Code and that accordingly:
(i) No gain or loss will be recognized by the stockholders of the
Company who exchange their Shares solely for Parent Shares pursuant to the
Merger (except to the extent that cash is received in lieu of a fractional
share interest);
(ii) The aggregate basis of the Parent Shares received by
stockholders in the Merger will be the same as the aggregate basis of the
Shares surrendered in exchange therefor (reduced by any amount allocable to
a fractional share interest for which cash is received); and
(iii) The holding period of the Parent Shares received by
stockholders in the Merger will include the period during which the Shares
surrendered in exchange therefor were held, provided such Shares were held
as a capital asset at the Effective Time.
48
<PAGE>
In rendering such opinion counsel may require and rely upon
representations contained in certificates of officers of Parent, Parent
Subsidiary, Company and others as well as certificates of shareholders who
beneficially own five percent or more of the votes or value of any class of
stock of Parent, Parent Subsidiary, Company and others.
(d) In accordance with the requirements of Section 14.06 of the
Indenture, Parent and Parent Subsidiary shall have executed and delivered to
Trustee a supplemental indenture providing that the holder of each Debenture
then outstanding shall have the right to convert such Debenture into the amount
of Parent Common Stock and other securities and property (including cash)
receivable after the Effective Time by a holder of the number of shares of
Company Common Stock deliverable upon conversion of such Debenture immediately
prior to the Effective Time. Such supplemental indenture shall provide for
adjustments of the Conversion Price (as such term is defined in the Indenture)
which shall be as nearly equivalent as may be practicable to the adjustments of
the Conversion Price provided for in Article XIV of the Indenture.
Section 8.3 Conditions to Obligations of Parent and Parent Subsidiary to
Effect the Merger. The obligations of Parent and Parent Subsidiary to effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following additional conditions:
(a) The Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
at the time made. Based upon its review of the matters described in that
certain disclosure letter referencing this section dated the date of this
Agreement, the Parent shall not have determined in its reasonable judgment
49
<PAGE>
that such matters are likely to have a material and adverse affect upon the
business, financial condition or results of operations of the Company and its
Subsidiaries taken as a whole.
(b) There shall have not have been a Company Material Adverse Change
since the date of this Agreement. For the purposes of this Agreement, a Company
Material Adverse Change shall mean an event, change or development that
individually or in the aggregate with other such events, changes or developments
materially and adversely affects the business, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole. Any adverse
impact on the revenues, income, balance sheet, or operation of the Company
caused by adverse changes in orders, backlog, bidding qualifications, relations
with resellers, integrators, OEM customers, cancellations and rescheduling of
orders, or the ability to retain agreed upon employees or attract new employees,
will be presumed, unless there is clear evidence to the contrary, to have
occurred as a result of the transaction contemplated by this Agreement or the
announcement thereof and in any such event will not be deemed to be an event,
change or development which is or will be material and adverse for purposes of
this definition.
(c) Parent shall have received an opinion of Vinson & Elkins L.L.P.,
in the form of substance reasonably satisfactory to Parent, dated as of the
Effective Time, substantially to the effect that the Merger will constitute a
reorganization for federal income tax purposes within the meaning of Section
368(a) of the Code and that accordingly for federal income tax purposes:
(i) No gain or loss will be recognized by the stockholders of the
Company who exchange their Shares solely for Parent Shares pursuant to the
Merger (except to the extent that cash is received in lieu of a fractional
share interest);
50
<PAGE>
(ii) The aggregate basis of the Parent Shares received by
stockholders in the Merger will be the same as the aggregate basis of the
Shares surrendered in exchange therefor (reduced by any amount allocable to
a fractional share interest for which cash is received);
(iii) The holding period of the Parent Shares received by
stockholders in the Merger will include the period during which the Shares
surrendered in exchange therefor were held, provided such Shares were held
as a capital asset at the Effective Time; and
(iv) No gain or loss will be recognized by the Company, Parent or
Parent Subsidiary as a result of the Merger.
In rendering such opinion, Vinson & Elkins may require and rely upon
representations contained in certificates of officers of Parent, Parent
Subsidiary, Company and others as well as certificates of shareholders who
beneficially own five percent or more of the votes or value of any class of
stock of Parent, Parent Subsidiary, Company and others.
ARTICLE IX
TERMINATION
Section 9.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the stockholders of the
Company or Parent, by the mutual consent of Parent and the Company.
Section 9.2 Termination by Either Parent or the Company. This Agreement
may be terminated and the Merger may be abandoned by action of the Board of
Directors of either Parent or the Company if (a) the Merger shall not have been
consummated by
51
<PAGE>
December 31, 1995, or (b) the approval of the Company's stockholders required by
Section 8.1(c) shall not have been obtained at a meeting duly convened therefor
or at any adjournment thereof, or (c) the approval of Parent's stockholders
required by Section 8.1(c) shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof, or (d) a United States federal
or state court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause (d) shall have used all reasonable efforts to
remove such injunction, order or decree, and, provided, in the case of a
termination pursuant to clause (a) above, that the terminating party shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the occurrence of the
failure referred to in said clause.
Section 9.3 Termination by the Company. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the adoption and approval by the Stockholders of the Company if (i) the
Board of Directors receives a written opinion from the Company's financial
advisors that an Acquisition Proposal is superior to the Merger, and (ii) in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, the Board of Directors of the Company determines,
after receipt of a written opinion of Locke Purnell Rain & Harrell, that such
termination is required by its fiduciary duties by reason of an Acquisition
Proposal being made.
52
<PAGE>
Section 9.4 Effect of Termination and Abandonment.
(a) If the Company terminates this Agreement pursuant to Section 9.3
or either Parent or the Company terminates this Agreement pursuant to Section
9.2(b) and prior to the meeting of the Company's stockholders a competing
Acquisition Proposal was received by the Company then, upon such termination,
the Company (or the successor thereto) shall pay Parent a fee (the "Alternative
Proposal Fee") in cash of $5,500,000.
(b) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article 9, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
9.4 and Section 7.1 and except for the provisions of Sections 7.10 and 10.2.
Moreover, in the event of termination of this Agreement pursuant to Section 9.2
or 9.3, nothing herein shall prejudice the ability of the non-breaching party
from seeking damages from any other party for any breach of this Agreement,
including without limitation, attorneys' fees and the right to pursue any remedy
at law or in equity; and provided further, that in the event Parent has received
the Alternative Proposal Fee, it shall not (i) assert or pursue in any manner,
directly or indirectly, any claim or cause of action based in whole or in part
upon alleged tortious or other interference with rights under this Agreement
against any entity or person submitting an Acquisition Proposal or (ii) assert
or pursue in any manner, directly or indirectly, any claim or cause of action
against the Company or any of its officers or directors based in whole or in
part upon its or their receipt, consideration, recommendation, or approval of an
Acquisition Proposal of the company's exercise of its right of termination under
Section 9.3. Notwithstanding the foregoing, in the event the Parent is required
to file suit to seek such Alternative Proposal Fee, and it ultimately succeeds
on the merits, it shall be entitled
53
<PAGE>
to all expenses, including attorneys' fees, which it has incurred in enforcing
its rights hereunder.
Section 9.5 Extension; Waiver. At any time prior to the effective time,
any party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and Agreements.
No representations, warranties or agreements contained herein shall survive
beyond the Effective Time except that the agreements contained in the
Confidentiality Letter between the Company and Parent dated April 29, 1995 and
executed by Parent on May 2, 1995, and the agreements contained in Sections 3.1,
3.2, 3.3, 3.4, 3.5, 3.6, 7.8, 7.9, 7.10, 7.12 and 10.2 hereof shall survive
beyond the Effective Time.
Section 10.2 Brokers. The Company represents and warrants that, (a)
except for its financial advisors, Bear, Stearns & Co. Inc., no broker, finder
or financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company and
(b) the Company's fee arrangements with Bear, Stearns &
54
<PAGE>
Co. Inc., have been disclosed to Parent. Parent represents and warrants that,
except for its financial advisor, Merrill Lynch & Co., (c) no broker, finder or
financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Parent
Subsidiary and (d) Parent's fee arrangements with Merrill Lynch & Co., have been
disclosed to the Company.
Section 10.3 Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by telex or telegram or mailed by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Parent Subsidiary, to:
Grahame N. Clark, Jr.
BancTec, Inc.
4435 Spring Valley Road
Dallas, Texas 75244
with a copy to: Jim A. Watson
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
(b) if to the Company, to:
Robert A. Vanourek
Recognition International Inc.
2701 E. Grauwyler Road
Irving, Texas 75061
55
<PAGE>
with a copy to:
Don M. Glendenning.
Locke Purnell Rain Harrell
(A Professional Corporation)
2200 Ross Avenue, Suite 2200
Dallas, TX 75201
Section 10.4 Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.5 Entire Agreement; Assignment. This Agreement (including
the Exhibits, Schedules and other documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all other prior agreements
and understandings, both written and oral among the parties or any of them, with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise, provided that Parent or Parent Subsidiary may
assign its rights and obligations hereunder to a direct or indirect subsidiary
of Parent, but no such assignment shall relieve Parent or Parent Subsidiary, as
the case may be, of its obligations hereunder.
Section 10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
Section 10.7 Specific Performance. The parties hereto agree that
irreparable damages would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
56
<PAGE>
Section 10.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREFORE, each of Parent, Parent Subsidiary and the
Company has caused this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above written.
BancTec, Inc.
By: /s/ Grahame N. Clark, Jr.
--------------------------------------------
Name: Grahame N. Clark, Jr.
Title: President and Chief Executive Officer
BTEC Merger Subsidiary, Inc.
By: /s/ Grahame N. Clark, Jr.
-------------------------------------------
Name: Grahame N. Clark, Jr.
Title: President and Chief Executive Officer
Recognition International Inc.
By: /s/ Robert A. Vanourek
-------------------------------------------
Name: Robert A. Vanourek
Title: President and Chief Executive Officer
57
<PAGE>
APPENDIX B
[MERRILL LYNCH LETTERHEAD]
_______, 1995
Board of Directors
BancTec, Inc.
4435 Spring Valley Road
Dallas, Texas 75244
Attention: Grahame N. Clark, Jr.
Gentlemen:
BancTec, Inc. (the "Company"), BTEC Merger Subsidiary, Inc., a wholly
owned subsidiary of the Company (the "Purchaser"), and Recognition International
Inc. (the "Subject Company") propose to enter into an agreement (the
"Agreement") pursuant to which the Subject Company will be merged with the
Purchaser in a transaction (the "Merger") in which each share of the Subject
Company's common stock, par value $0.25 per share (the "Shares"), will be
converted into the right to receive 0.59 shares (the "Exchange Ratio") of the
common stock, par value $.01 per share, of the Company (the "Company Shares").
The Merger is expected to be considered by the shareholders of the Company and
the Subject Company at special shareholders' meetings and consummated on or
shortly after the date of such meetings.
You have asked us whether, in our opinion, the proposed Exchange Ratio
pursuant to the Merger, is fair to the Company from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Subject Company's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended October 31,
1994 and the Subject Company's Form 10-Q and the related unaudited
financial information for the quarterly period ending January 31,
1995;
(2) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended March 27, 1994
and the Company's Forms 10-Q and the related unaudited financial
information for the quarterly periods ending June 26, 1994, September
25, 1994 and December 25, 1994;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Subject Company and the Company, furnished to us by the Subject
Company and the Company;
(4) Conducted discussions with members of senior management of the
Subject Company and the Company concerning their respective
businesses and prospects;
(5) Reviewed certain information furnished to us by the Company and
conducted discussions with members of senior management of the
Company concerning the potential combination effects resulting from
the Merger on the operations of the combined entity;
<PAGE>
(6) Reviewed the historical market prices and trading activity for the
Shares and the Company Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to
the Subject Company and the Company, respectively;
(7) Compared the results of operations of the Subject Company and the
Company with that of certain companies which we deemed to be
reasonably similar to the Subject Company and the Company,
respectively;
(8) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of certain
other mergers and acquisitions which we deemed to be relevant;
(9) Considered the pro forma effect of the Merger on the Company's
capitalization ratios and earnings, cash flow and book value per
share;
(10) Reviewed a draft of the Agreement dated May 15, 1995, and
(11) Reviewed such other financial studies and information, performed
such other analyses and took into account such other matters as we
deemed necessary, including our assessment of general economic,
market and monetary conditions as they exist as of this date.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Subject
Company and the Company, and we have not independently verified such information
or undertaken an independent appraisal of the assets or the liabilities,
contingent or otherwise, of the Subject Company or the Company. We have not
visited any of the facilities of the Subject Company or the Company. With
respect to the financial forecasts furnished by the Subject Company and the
Company, including forecasts regarding the timing, nature and magnitude of
potential combination effects resulting from the Merger which have been
furnished by the Company, we have assumed that they have been reasonably
prepared and reflect the best currently available estimates and judgment of the
Subject Company's or the Company's management as to the expected future
financial performance of the Subject Company or the Company, either on a stand-
alone basis or giving effect for the Merger, as the case may be. Furthermore,
in rendering the opinion, we have assumed that the Merger will be accounted for
as a pooling-of-interests transaction.
In the ordinary course of business, we may actively trade the securities of
both the Company and the Subject Company for our own account and the account of
our customers and, accordingly, may at any time hold a long or short position in
securities of the Company and the Subject Company.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the proposed Exchange Ratio is fair to the Company from a
financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
<PAGE>
[BEAR, STEARNS LETTERHEAD]
APPENDIX C
August 7, 1995
Board of Directors
Recognition International Inc.
2701 Grauwyler Road
Irving, Texas 75061
Dear Sirs and Madam:
Recognition International Inc. ("REC") has entered into an Agreement and
Plan of Merger (the "Merger Agreement") dated May 19, 1995 with BancTec, Inc.
("BTEC"), pursuant to which REC will be merged (the "Merger") into a newly
formed, wholly owned subsidiary of BancTec, Inc. ("BTEC"). As a result of the
Merger, each share of common stock of Recognition will be converted into 0.59 of
a share of common stock of BTEC. You have provided us with a copy of the Joint
Proxy Statement and Prospectus of REC and BTEC, which includes the Merger
Agreement, in substantially the form to be sent to the stockholders of
Recognition (the "Proxy Statement").
You have asked us to render our opinion as to whether the Merger is
fair, from a financial point of view, to the stockholders of REC.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Proxy Statement;
2. reviewed REC's Annual Reports to Shareholders, Annual
Reports on Form 10-K and Proxy Statements for the fiscal years ended
October 31, 1991 through 1994, and its Quarterly Reports on Form 10-Q for
the fiscal periods ended January 31 and April 30, 1995 and reviewed BTEC's
Annual Reports to Shareholders, Annual Reports on Form 10-K and Proxy
Statements for the fiscal years ended March 1991 through March 1995;
3. reviewed certain operating and financial information,
including projections, provided to us by REC's and BTEC's managements
relating to their respective businesses and prospects;
4. met with certain members of REC's and BTEC's senior
managements to discuss their operations, historical financial statements
and future prospects and their views of the business, operational and
strategic benefits, potential synergies and other implications of the
Merger;
5. reviewed the pro forma financial impact of the Merger on
REC stockholders;
6. reviewed the historical stock prices and trading volumes of
the common stock of REC and of BTEC;
7. reviewed publicly available financial information and stock
market performance data of other publicly-held companies which we deemed
generally comparable to REC and to BTEC;
8. reviewed the financial terms of certain other recent
acquisitions of companies which we deemed generally comparable to REC and
to BTEC; and
9. conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information provided to us by REC
and BTEC. With respect to REC's and BTEC's
C-1
<PAGE>
projected financial results, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of REC and BTEC as to the expected future
performance of REC and BTEC, respectively. We have not assumed any
responsibility for the information or projections provided to us and we have
further relied upon the assurances of the managements of REC and BTEC that they
are unaware of any facts that would make the information or projections provided
to us incomplete or misleading. In arriving at our opinion, we have not
performed or obtained any independent appraisal of the assets of REC or BTEC.
Our opinion is necessarily based on economic, market and other conditions, and
the information made available to us, as of the date hereof.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger is fair, from a financial point of view, to the
stockholders of REC.
We have acted as financial advisor to REC in connection with the Merger
and will receive a fee for such advisory services, including the rendering of
this opinion, payment of a significant portion of which is contingent upon the
consummation of the Merger.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: ____________________________
Managing Director
C-2
<PAGE>
APPENDIX D
----------
BANCTEC, INC.
1990 EMPLOYEE STOCK PURCHASE PLAN
(amended January 24, 1995)
ARTICLE I
NATURE OF PLAN
This employee stock purchase plan is hereby established for the purpose of
providing all eligible employees of BancTec, Inc. (the "Company") and of its
parent and subsidiary corporations (within the meaning of Sections 425(e) and
(f) of the Code) with the opportunity to acquire a proprietary interest in the
Company, increasing their interest in the Company's welfare, and encouraging
them to remain in the employ of the Company or of its parent or subsidiary
corporations.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
Section 2.1 Definitions. For the purpose of this Plan, the following
definitions shall apply unless the context requires otherwise:
(a) "Administration Committee" shall mean the Plan Administration Committee
as from time to time constituted pursuant to Section 6.1.
(b) "Board of Directors" shall mean the Board of Directors of the Company
unless otherwise indicated or the context otherwise requires.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Company" shall mean BancTec, Inc. or any successor thereto which shall
adopt this Plan.
(e) "Compensation" shall mean an Employee's total compensation received for
personal services rendered to the Employer as an Employee which are actually
paid during the Plan Year and which are subject to withholding for Federal
income tax purposes. Compensation shall not include bonuses, overtime pay or
commissions based on sales.
(f) "Effective Date" shall mean January 22, 1990, the date as of which the
Board of Directors adopted the Plan; provided, however, that if the Plan is not
approved by the stockholders of the Company within the twelve month period
immediately subsequent to the date the Plan was adopted by the Board of
Directors, the Plan shall not be qualified as an "employee stock purchase plan"
under the provisions of Section 423 of the Code.
(g) "Employee" shall mean any person who, on or after the Effective Date,
is an employee (within the meaning of Sections 423 and 3401(c) of the Code) of
the Company or of its parent or subsidiary corporations (within the meaning of
Sections 425(e) and (f) of the Code). Notwithstanding the foregoing, officers
and directors of the Company are not eligible to participate in the Plan, except
to
<PAGE>
the extent that any such person cannot be excluded from eligibility under the
Plan without the Plan failing to satisfy the requirements of Section 423 of the
Code. Further, notwithstanding the foregoing, in the event that the Plan is
approved by the affirmative votes of a majority of the stockholders of the
Company present in person, or represented by proxy, and entitled to vote at a
meeting thereof, then from and after the time of such approval officers of the
Company, who are otherwise eligible to participate in the Plan, shall be deemed
to be eligible to participate in, and be granted options under, the Plan.
(h) "Employer" shall mean the Company and, if any, its parent or subsidiary
corporations (within the meaning of Sections 425(e) and (f) of the Code).
(i) "Exercise Period" shall mean (i) the month of June, with respect to the
Payroll Deduction Period beginning on January 1st, and (ii) the month of
December, with respect to the Payroll Deduction Period beginning on July 1st.
The Exercise Period shall be the period during which Participants may exercise
their options, in whole or in part.
(j) "1981 Plan" shall mean the BancTec, Inc. 1981 Employee Stock Purchase
Plan, as amended on April 3, 1986.
(k) "Offering Period" shall mean (i) the first 15 days of the month of
December immediately preceding the Payroll Deduction Period beginning on January
1st and (ii) the first 15 days of the month of June immediately preceding the
Payroll Deduction Period beginning on July 1st. The Offering Period shall be
the period during which each eligible Employee shall determine whether and to
what extent he desires to participate in the Plan by electing to authorize
payroll deductions to be effective during the Payroll Deduction Period
immediately subsequent to the Offering Period.
(l) "Participant" shall mean an Employee or former Employee to whom an
option has been granted hereunder and who has elected to participate herein by
authorizing payroll deductions.
(m) "Payroll Deduction Account" shall mean that separate account maintained
hereunder to record the amount of a Participant's wages that have been withheld
hereunder.
(n) "Payroll Deduction Period" shall mean, for the respective half of the
Plan Year, the period January 1st through June 30th or July 1st through December
31st. Notwithstanding the foregoing, the Payroll Deduction Period with respect
to a given Participant shall end on the date that the Participant receives his
last paycheck from the Employer after his employment with the Employer
terminates.
(o) "Plan" shall mean the BancTec, Inc. 1990 Employee Stock Purchase Plan,
as embodied herein and as amended from time to time.
(p) "Plan Year" shall mean each calendar year, which calendar year shall be
the Plan's fiscal year.
Section 2.2 Word Usage. Except when otherwise indicated by the context,
any masculine terminology used herein also includes the feminine and neuter, and
vice versa, and the singular shall also include the plural, and vice versa. The
words "hereof", "herein" and "hereunder", and other similar compounds of the
word "here" shall mean and refer to the entire Plan and not to any particular
provision or section. All references to Sections or Articles shall mean and
refer to Sections and Articles contained
2
<PAGE>
in this Plan unless otherwise indicated.
Section 2.3 Construction. It is the intention of the Company that the Plan
be qualified as an employee stock purchase plan under the provisions of Section
423 of the Code, and all provisions shall be construed to that result.
Moreover, the provisions of the Plan shall apply only to an Employee who is in
the employ of the Company or of its parent or subsidiary corporations (within
the meaning of Sections 425(e) and (f) of the Code) on or after the Effective
Date.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Section 3.1 Eligibility. Options may be granted under the Plan only to
Employees. Subject to the restrictions of Section 5.3, each Employee may become
a Participant in the Plan during the Offering Period if he has or will have
completed ninety (90) continuous days of employment with the Company or its
parent or subsidiary corporations (within the meaning of Sections 425(e) and (f)
of the Code) by the first day of the Payroll Deduction Period.
Section 3.2 Election to Participate. Any Employee who is eligible to
participate herein may become a Participant by filing a written election to
participate with the Administration Committee and by authorizing payroll
deductions during the Offering Period under Section 4.1. An Employee may elect
to participate for less than the maximum number of shares to which he is
entitled by authorizing a payroll deduction under Section 4.1 of a percentage
of Compensation less than the percentage determined by the Board of Directors
under Section 5.1(b).
Section 3.3 Waiver of Participation. An Employee who is otherwise eligible
to participate herein may waive his right to participate for any Payroll
Deduction by declining to authorize a payroll deduction. Such declination must
be filed in writing with the Administration Committee in the time and manner
specified thereby. The filing of a written declination shall result in the
Employee's waiver of participation only for the Payroll Deduction Period to
which it relates and shall be irrevocable with respect to such Payroll Deduction
Period. An Employee's waiver of participation for a specified Payroll Deduction
Period shall not, in and of itself, adversely impact the right of such Employee
to participate in the Plan during any subsequent Payroll Deduction Period except
those with respect to which he files additional written declinations with the
Administration Committee in accordance with the provisions of this Section 3.3.
ARTICLE IV
PAYROLL DEDUCTION AUTHORIZATION
Section 4.1 Payroll Deductions. Each Employee who is eligible and elects,
pursuant to Article III, to participate herein and who is granted options
pursuant to Section 5.1 shall authorize the making of payroll deductions to fund
the purchase of the stock he may purchase pursuant to the option granted to him
hereunder. Deductions shall be made at the regular payroll periods applicable
to the Participant and shall be credited to the Participant's Payroll Deduction
Account.
3
<PAGE>
(a) Amount of Payroll Deductions. Subject to the restrictions of Section
5.3, a Participant may authorize payroll deductions in an amount of not less
than one percent (1%) nor more than ten percent (10%) (in multiples of one
percent (1%)) of his Compensation for the Payroll Deduction Period.
(b) Change in Authorization. Except to the extent provided in Section
4.1(c), a Participant may not vary the amount of his payroll deduction for any
Payroll Deduction Period. He may, by notice to the Administration Committee,
elect to change his payroll deduction rate, within the limits specified in
subsection (a) of this Section 4.1, during the immediately following Offering
Period, effective for the immediately following Payroll Deduction Period.
(c) Discontinuance of Payroll Deductions. A Participant may revoke his
payroll deduction authorization effective on the first day of any pay period by
filing a notice thereof with the Administration Committee at least twenty (20)
days in advance of the effective date of such revocation. Upon discontinuance
of payroll deductions, a Participant may withdraw the total amount credited to
his Payroll Deduction Account in accordance with the provisions of Sections 4.2
and 4.3, or he may file written notice of his intent to allow the funds in his
Payroll Deduction Account to remain in such Account until the Exercise Period,
at which time he may elect to exercise the option in whole or in part, in
accordance with Section 5.6.
(d) Automatic Change or Discontinuance of Payroll Deductions. The
Administration Committee may unilaterally change or discontinue a Participant's
payroll deduction authorization if necessary to satisfy the restrictions of
Section 5.3 or otherwise to satisfy the requirements of Section 423 of the Code.
Section 4.2 Withdrawal of Payroll Deduction Account.
(a) As of the effective date that a Participant discontinues his payroll
deduction he may withdraw the balance credited to his Payroll Deduction Account
by filing a written request therefor with the Administration Committee.
(b) Notwithstanding anything contained herein to the contrary, any amounts
remaining credited to a Participant's Payroll Deduction Account on the last day
of the Payroll Deduction Period, after taking into account the exercise of an
option, in whole or in part, if any, shall be refunded to the Participant.
(c) Notwithstanding anything contained herein to the contrary, any amounts
remaining credited to a Participant's Payroll Deduction Account on the day a
Participant's employment with the Company terminates for reason other than
death, disability or retirement, as provided in Section 5.6(b), shall be
refunded to the Participant.
(d) Each Employee shall have the option of transferring his Payroll
Deduction Account from the BancTec, Inc. 1981 Employee Stock Purchase Plan (as
amended on April 3, 1986) to this Plan, or having such amounts refunded to him.
Section 4.3 Forfeiture of Right to Deduct. In the event a Participant
revokes his payroll deduction authorization and withdraws the amount credited to
his Payroll Deduction Account, he shall not be permitted to redeposit such sum
at a later date, nor shall he be permitted to resume payroll deductions until
the first day of the immediately following Payroll Deduction Period.
4
<PAGE>
Section 4.4 Forfeiture of Right to Exercise Options. In the event of a
withdrawal by a Participant of the amount credited to his Payroll Deduction
Account, the Participant shall forfeit all rights to any option granted to him
with respect to the withdrawn amounts.
ARTICLE V
OPTIONS
Section 5.1 Grant of Options. Two times during each Plan Year, unless the
Board of Directors determines otherwise, the Administration Committee shall make
an offering under which options to purchase Company stock are granted to all
Employees eligible to participate in the Plan pursuant to Section 3.1. Except
as provided in Sections 5.1(b) and 5.3 of the Plan, all Employees granted
options under the Plan shall have the same rights and privileges.
(a) Date of Grant. All options granted hereunder shall be granted on the
same date, which date shall be the first day of the Offering Period.
(b) Amount of Grant. Subject to the restrictions of Section 5.3, each
Employee who is eligible to participate herein and to whom the offering is to be
made shall be granted an option to purchase up to that number of whole shares of
Company stock which could be purchased at the option price (determined as of the
date of grant, without regard to any lower price which may become applicable on
the date of exercise) with an amount equal to such percentage of an Employee's
Compensation as the Board of Directors determines for the annual offering, but
not to exceed ten percent (10%) of an Employee's Compensation for the Plan Year
beginning prior to or coincident with the Offering Period.
Section 5.2 Limitation on Options Granted. Options may not be granted
hereunder pursuant to which more than 500,000 shares of Company stock may be
purchased. Either authorized and unissued shares or issued shares heretofore or
hereafter reacquired by the Company may be made subject to option under the
Plan. Further, if for any reason any option granted under the Plan terminates,
in whole or in part, without being exercised in full, shares subject to such
terminated option which has not been exercised may be subjected to a new option
under the Plan.
Notwithstanding the foregoing provision, in the event of any change in the
number or kind of outstanding shares of Company stock subject to options
hereunder effected without receipt of consideration therefor by the Company, by
reason of a stock dividend, stock split, combination, exchange of shares or
other recapitalization, merger, or otherwise, in which the Company is the
surviving corporation, an appropriate and proportionate adjustment shall be made
in the number or kind of shares as to which options are or may be granted
hereunder. A corresponding adjustment changing the number or kind of shares
allocated to unexercised options or portions thereof, which shall have been
granted prior to any such change, shall likewise be made. Any such adjustment,
however, in the outstanding options shall be made without change in the total
price applicable to the unexercised portion of the option but with a
corresponding adjustment, if appropriate, in the price for each share of stock
covered by the option. In the event of a dispute concerning such adjustment,
the decision of the Administration Committee shall be conclusive. The number of
shares subject to any option granted hereunder shall be automatically reduced by
any fraction included therein which results from any adjustment made pursuant to
this Section 5.2.
5
<PAGE>
Further, in the event of a sale of all or substantially all of the assets
of the Company; a merger or consolidation (other than a merger effecting a
reincorporation of the Company in another state or any other merger or a
consolidation in which the stockholders of the surviving corporation and their
proportionate interests therein immediately after the merger or consolidation
are substantially identical to the stockholders of the Company and their
proportionate interests therein immediately prior to the merger or
consolidation) in which the Company is not the surviving corporation; or any
other transaction or series of transactions resulting in a person or entity
becoming the owner of 50% or more of the total combined voting power of all
classes of stock of the Company, then the Company shall, at its option, either
(i) substitute for the shares subject to the unexercised portions of such
outstanding options an appropriate number of shares of each class of stock or
other securities of the reorganized or merged or consolidated corporation which
were distributed to the stockholders of the Company with respect to such shares
(or, as appropriate, in the case of an acquisition of the Company by another
corporation, substitute the shares of the acquiring corporation for the shares
of the Company), or (ii) cancel all such options as of the effective date of any
such transaction by giving notice to each holder thereof or his personal
representative of its intention to do so and by permitting the exercise of all
such outstanding options, without regard to any other provisions of the Plan,
during the 30-day period immediately preceding such effective date, or (iii)
allow the options granted under the Plan to remain outstanding without any
modifications or amendments.
Section 5.3 Limitations on Grant of Options. Notwithstanding any provision
contained herein to the contrary,
(a) No option shall be granted to an Employee hereunder if, immediately
after such option is granted, such Employee owns stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of stock
of the Employer or of any of its parent or subsidiary corporations (within the
meaning of Sections 425(e) and (f) of the Code), computed in accordance with
Section 423(b)(3) of the Code, and
(b) No Employee shall be granted an option hereunder which permits his
rights to purchase stock under the Plan and under all other employee stock
purchase plans (within the meaning of Section 423 of the Code) of the Company or
of any of its parent or subsidiary corporations (within the meaning of Sections
425(e) and (f) of the Code) to accrue at a rate which exceeds $25,000 (or such
other rate as may be prescribed from time to time by the Code) of fair market
value of Company stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time, in accordance
with the provisions of Section 423(b)(8) of the Code.
Section 5.4 Expiration of Options. The expiration date of options granted
hereunder shall be the last day of the Payroll Deduction Period with respect to
which the options are granted hereunder.
Section 5.5 Option Price. A Participant who exercises, in whole or in
part, the option granted to him hereunder may acquire Company stock with respect
to which the option was granted at a cost which is the lesser of:
(a) Eighty-five percent (85%) of the fair market value of the stock on the
date the option was granted, the first day of the Offering Period, or
(b) Eighty-five percent (85%) of the fair market value of the stock on the
date the option is
6
<PAGE>
exercised, the last day of the Exercise Period.
For the purposes of this Section 5.5, the fair market value of the stock on
any given date shall be determined by taking the simple average of the closing
bid and asked prices on such date of such stock as quoted by the National
Association of Securities Dealers' Automated Quotations ("NASDAQ") System or
the closing price on such date of such stock, as reported on a national
securities exchange or as quoted on the National Market System of NASDAQ (or if
there shall be no trading on such date, then on the first previous date on which
there is such trading).
Section 5.6 Exercise of Options. The option granted to a Participant may
be exercised in accordance with the following:
(a) By Participant While Employed. At any time during the Exercise Period,
a Participant may exercise his option, in whole or in part, by delivering
written notice of exercise to the Administration Committee or its agent, in such
form and in such manner as the Administration Committee shall prescribe. If a
Participant exercises his option in part, his option shall thereupon terminate
and become void to the extent of the part not exercised.
If, on the last day of the Exercise Period, a Participant has not exercised
his option in whole or in part and has not filed a written notice of election
not to exercise with the Administration Committee or its agent, such Participant
shall be deemed to have exercised his option in full on the last day of the
Exercise Period.
The balance credited to a Participant's Payroll Deduction Account, after
exercising his option, or after electing not to exercise such option, shall be
paid to him in cash.
(b) By Participant After Termination of Employment. If a Participant's
employment with the Employer terminates for any reason other than death,
disability or retirement, his option hereunder shall immediately terminate and
become void, and the amount credited to such Participant's Payroll Deduction
Account shall be paid to him in cash.
(c) By a Retired or Disabled Participant. If a Participant's employment
with the Employer terminates on account of the Participant's disability or
retirement, such Participant shall have the right to exercise his option during
the period beginning on the date his employment terminates and ending ninety
(90) days following such date. The exercise price shall be the price at which
the Participant could have exercised the option if he had remained in the employ
of the Employer through the end of the Payroll Deduction Period. In the event
the Participant elects not to exercise his option during such period, the
balance credited to such Participant's Payroll Deduction Account shall be paid
to him in cash.
For purposes of this Section 5.6, a Participant shall be considered
disabled if, by reason of physical or mental impairment, he is unable to perform
the usual and customary duties of his employment.
For the purposes of this Section 5.6, a Participant shall be considered to
have retired if his employment with the Employer terminates after he attains age
fifty-five (55) and with the consent of the Employer.
7
<PAGE>
(d) By a Deceased Participant's Representative. In the event a
Participant's employment with the Employer terminates on account of the death of
the Participant, his heirs, legatees, distributees or personal representative
shall have the right to exercise such Participant's option during the period
beginning on the date of his death and ending ninety (90) days following his
date of death. The exercise price shall be the price at which the Participant
could have exercised the option if he had remained a Participant throughout the
Payroll Deduction Period. In the event the Participant's heirs, legatees,
distributees or personal representative elect not to exercise the options during
such period, the balance credited to the deceased Participant's Payroll
Deduction Account shall be paid to his heirs, legatees, distributees or personal
representative, whichever is applicable, in cash.
Section 5.7 Payment for Shares. Upon the exercise of an option, the shares
of stock shall be paid for in full by the transfer of the purchase price from
the amount credited to the Participant's Payroll Deduction Account to an account
of the Employer, and any balance credited to such Participant's Payroll
Deduction Account shall be paid to him in cash. The Participant, his personal
representative, heirs, legatees or distributees may purchase all or a part of
the number of full shares which the balance credited to the Participant's
Payroll Deduction Account is sufficient to purchase and receive the balance
credited to such account in cash.
Section 5.8 Transfer of Shares Upon Exercise. The shares of Company stock
purchased by a Participant pursuant to the exercise of an option hereunder shall
be issued or transferred to him on the books of the Company on the last day of
the Exercise Period. Until such time, the Participant shall have none of the
rights and privileges of a stockholder in the Company with respect to shares of
stock subject to an option under the Plan. Stock certificates shall be
delivered to the Participant within forty-five (45) days of such date.
Section 5.9 Transfer of Options. No option granted under the Plan may be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the Participant to whom granted, may be exercised only by such
Participant.
Section 5.10 Substitution and Assumption of Options. Subject to the terms
and conditions and within the limitations of the Plan, the Administration
Committee may authorize and direct a substitution of a new option, or an
assumption of an old option, granted by the Company (to the extent not
theretofore exercised or terminated) to an Employee under the 1981 Plan.
Notwithstanding any other provision of this Plan or the 1981 Plan, an option
granted to an Employee under the 1981 Plan and substituted or assumed hereunder
may be exercised only within 30 days following the Effective Date. Further, any
election to participate in the 1981 Plan by an Employee shall be deemed to be an
election to participate in this Plan.
The intent of this Section 5.10 is to provide that all Employees granted
options under employee stock purchase plans of the Company shall have the same
rights and privileges. In furtherance of the foregoing, the Administration
Committee may authorize and direct that an Employee be permitted to apply sums
which were withheld under the 1981 Plan towards the purchase of additional
Company stock under the Plan; provided, however, that all other Employees shall
be permitted to make payments in an amount not less than that which any such
Employee is allowed to carry over, to be applied toward the purchase of
additional Company stock under the Plan.
Section 5.11 Modification, Extension and Renewal of Options. Subject to
the terms and
8
<PAGE>
conditions and within the limitations of the Plan and Section 423 of the Code,
the Administration 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 a new
option hereunder in substitution for an old option (to the extent not
theretofore exercised). However, no modification of an option granted hereunder
shall, without the consent of the Participant, alter or impair any rights or
obligations under any option theretofore granted hereunder to such Participant
under the Plan.
ARTICLE VI
ADMINISTRATION COMMITTEE
Section 6.1 Appointment of Committee. The Administration Committee shall
be comprised of all members of the Board of Directors who are not Employees of
the Company.
(a) Interested Member. Notwithstanding anything contained herein to the
contrary, no member of the Administration Committee shall be eligible to
participate in the Plan at any time during his term as a member of the
Administration Committee.
(b) Term. Each member of the Administration Committee shall serve until
his successor is appointed. Any member of the Administration Committee may be
removed by the Board of Directors, with or without cause, which shall have the
power to fill any vacancy which may occur. A committee member may resign upon
thirty (30) days written notice to the Company.
(c) Compensation. The members of the Administration Committee shall serve
without compensation for services as such, but the Company shall pay all
expenses of the Administration Committee.
Section 6.2 Powers of Administration Committee. The Administration
Committee shall have the following powers and duties:
(a) To direct the administration of the Plan in accordance with the
provisions herein set forth;
(b) To adopt rules of procedure and regulations necessary for the
administration of the Plan provided the rules are not inconsistent with the
terms of the Plan;
(c) To determine all questions with regard to rights of Employees and
Participants under the Plan, including, but not limited to, rights of
eligibility of an Employee to participate in the Plan and the amount of a
Participant's option;
(d) To enforce the terms of the Plan and the rules and regulations it
adopts;
(e) To direct the distribution of the shares of Company stock purchased
pursuant to the exercise of an option granted hereunder;
(f) To furnish the Employer with information which the Employer may require
for tax or other
9
<PAGE>
purposes;
(g) To engage the service of counsel (who may, if appropriate, be counsel
for the Company) and agents whom it may deem advisable to assist it with the
performance of its duties;
(h) To prescribe procedures to be followed by Participants in exercising
options;
(i) To receive from the Employer and from Employees such information as
shall be necessary for the proper administration of the Plan;
(j) To maintain, or cause to be maintained, separate Accounts in the name
of each Participant to reflect the Participant's Payroll Deduction Account under
the Plan;
(k) To select a secretary, who need not be a member of the Administration
Committee; and
(l) To interpret and construe the Plan.
Section 6.3 Manner of Action. The decision of a majority of the members of
the Administration Committee appointed and qualified shall control. In case of
a vacancy in the membership of the Administration Committee, the remaining
members of the Committee may exercise any and all of the powers, authorities,
duties and discretion conferred upon the Administration Committee pending the
filling of a vacancy. The Administration Committee may, but need not, call or
hold formal meetings. Any decisions made or action taken pursuant to written
approval of a majority of the then members shall be sufficient. The
Administration Committee shall maintain adequate records of its decisions.
Section 6.4 Authorized Representative. The Administration Committee may
authorize any one of its members, or its secretary, to sign on its behalf any
notices, directions, applications, certificates,consents, approvals, waivers,
letters or other documents.
Section 6.5 Nondiscrimination. The Administration Committee shall
administer the Plan in a uniform, nondiscriminatory manner.
Section 6.6 Books and Records. The Administration Committee shall
maintain, or cause to be maintained, records which will adequately disclose at
all times the options which have been granted, to whom they have been granted,
the status of the options and the number of shares of Company stock which are
subject to options. The books, forms and methods of accounting shall be the
responsibility of the Administration Committee.
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1 Amendment. The Company shall have the right at any time and in
any manner to amend, alter or suspend the Plan.
Section 7.2 Termination. The Company shall have the right to terminate the
Plan at any time.
10
<PAGE>
Further, no offering shall be made hereunder after any day upon which
Participants elect to participate herein for a number of shares equal to or
greater than the number of shares remaining available for purchase. If the
number of shares for which Employees elect to participate shall be greater than
the shares remaining available, the shares available shall at the end of the
Offering Period be allocated among such Participants pro rata on the basis of
the number of shares for which each has elected to participate.
Section 7.3 No Alteration of Rights. Notwithstanding the foregoing
provisions of this Article VII, the Company shall not amend, alter, suspend or
terminate the Plan in any way which would adversely affect any Participant's
rights under any option then outstanding under the Plan.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Execution of Receipts and Releases. Any payment or any
issuance or transfer of shares of Company stock to any Participant, or to his
legal representative, heirs, legatee or distributee, in accordance with the
provisions of the Plan, shall to the extent thereof be in full satisfaction of
all claims hereunder against the Plan. The Administration Committee may require
such Participant, legal representative, heir, legatee or distributee, as a
condition precedent to such payment, to execute a receipt and release therefor
in such form as it shall determine.
Section 8.2 Plan Funds. To the extent permitted by law, all amounts held
by the Company or an Employer in Payroll Deduction Accounts under the Plan may
be used for any corporate purpose of the Company.
Section 8.3 No Guarantee of Interests. Neither the Administration
Committee nor the Employer guarantees the Company stock from loss or
depreciation.
Section 8.4 Payment of Expenses. All expenses incident to the design,
establishment, administration, termination or protection of the Plan, including,
but not limited to, legal and accounting fees, shall be paid by the Company or
appropriate Employer.
Section 8.5 Employer Records. Records of the Employer as to an Employee's
or Participant's period of employment, termination of employment and the reason
therefor, leaves of absence, re-employment and Compensation will be conclusive
on all persons, unless determined to be incorrect.
Section 8.6 Interpretations and Adjustments. To the extent permitted by
law, an interpretation of the Plan and a decision on any matter within the
Administration Committee's discretion made in good faith is binding on all
persons. A misstatement or other mistake of fact shall be corrected when it
becomes known and the person responsible shall make such adjustment on account
thereof as he considers equitable and practicable.
Section 8.7 Uniform Rules. In the administration of the Plan, uniform
rules will be applied to all Participants similarly situated.
Section 8.8 No Rights Implied. Nothing contained in the Plan or any
modification or amendment
11
<PAGE>
to the Plan or in the creation of any Payroll Deduction Account, or the issuance
of any option or shares of Company stock pursuant to such option, shall give any
Employee or Participant any right to continue employment, any legal or equitable
right against the Company, any other Employer, or any officer, director or
Employee of the Company or any Employer, except as expressly provided by the
Plan.
Section 8.9 Information. The Employer 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
Administration Committee to perform its duties and functions under the Plan.
The Employer's records as to the current information the Employer furnishes to
the Administration Committee shall be conclusive as to all persons, unless
determined to be incorrect.
Section 8.10 No Liability. The Employer assumes no obligation or
responsibility to any of the Employees, Participants, or personal
representatives, heirs, legatees or distributees for any act of, or failure to
act, on the part of the Administration Committee.
Section 8. 11 No Liability for Good Faith Determinations. Neither the
members of the Board of Directors nor any member of the Administration Committee
shall be liable 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 Administrative Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including attorneys' fees, the costs of settling any suit,
provided such settlement is approved by legal counsel selected by the Company,
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.
Section 8.12 Company Action. Any action required of the Company or any
Employer shall be by resolution of its Board of Directors or by a person
authorized to act by board resolution.
Section 8. 13 Severability. In the event any provision of the Plan shall
be held to be illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining provisions of the Plan, but shall be fully
severable and the Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein.
Section 8.14 Notice. Any notice required to be given herein by the
Employer or the Administration Committee shall be deemed delivered, when (a)
personally delivered or (b) placed in the United States mails, in an envelope
addressed to the last known address of the person to whom the notice is given.
Section 8.15 Waiver of Notice. Any person entitled to notice under the
Plan may waive the notice.
Section 8.16 Successors. The Plan shall be binding upon all persons
entitled to options under the Plan, their respective heirs, legatees and legal
representatives, upon the Employer, its successors and assigns, and upon the
Administration Committee and their successors.
Section 8.17 Headings. The titles and headings of Articles and Sections
are included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12
<PAGE>
Section 8.18 Governing Law. All questions arising with respect to the
provisions of this Plan shall be determined by application of the laws of the
State of Texas except to the extent Texas law is preempted by Federal statute.
The obligation of the Company to sell and deliver stock under the Plan 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.
13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Restated Certificate of Incorporation of the
registrant provides that the registrant must indemnify its officers and
directors to the fullest extent permitted by the Delaware General Corporation
Law. Pursuant to Section 145 of the Delaware General Corporation Law, the
registrant generally has the power to indemnify its present and former directors
and officers against expenses and liabilities incurred by them in connection
with any suit to which they are, or are threatened to be made, a party by reason
of their serving in those positions so long as they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the registrant, and with respect to any criminal action, they had no
reasonable cause to believe their conduct was unlawful. With respect to suits by
or in the right of the registrant, however, indemnification is generally limited
to attorneys' fees and other expenses and is not available if the person is
adjudged to be liable to the registrant unless the court determines that
indemnification is appropriate. The statute expressly provides that the power to
indemnify authorized thereby is not exclusive of any rights granted under any
by-law, agreement, vote of stockholders or disinterested directors, or
otherwise. The registrant also has the power to purchase and maintain insurance
liability insurance which indemnifies the directors and officers of the
registrant against damages arising out of certain kinds of claims which might be
made against them based on their negligent acts or omissions while acting in
their capacity as such. The registrant's Certificates of Incorporation
eliminates the liability of the registrant's directors for monetary damages for
breach of their fiduciary duty as directors. This provision, however, does not
eliminate a director's liability (i) for any breach of the director,s duty
loyalty to the registrant or its stockholders, (ii) for acts of omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock redemptions
or repurchases, or (iv) for any transaction from which a director derived an
improper personal benefit.
ITEM 21 - EXHIBITS
The following exhibits are included as part of this Registration
Statement
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Merger, dated May 19, 1995, between BancTec,
Inc. ("BancTec") and Recognition International Inc. ("Recognition")
(attached as Appendix A to the Joint Proxy Statement and Prospectus
forming a part of this Registration Statement).
3.1 Restated Certificate of Incorporation of BancTec (incorporated by
reference to Exhibit 3.1 to BancTec's Annual Report on Form 10-K
dated June 16, 1995).
3.2 Bylaws of BancTec (incorporated by reference to Exhibit 3.2 to the
Annual Report on Form 10-K dated June 16, 1995).
*5.1 Opinion of Vinson & Elkins L.L.P. as to the legality of the
securities to be registered.
*8.1 Opinion of Vinson & Elkins L.L.P. as to federal income tax
consequences.
10.1 BancTec, Inc. 1989 Stock Plan (incorporated by reference to Exhibit
10.1 of the Annual Report on Form 10-K dated June 16, 1995).
10.2 BancTec, Inc. Incentive Stock Option Plan, as amended (incorporated
by reference to Exhibit 10.2 of the Annual Report on Form 10-K
dated June 16, 1995).
II-1
<PAGE>
10.3 BancTec, Inc. 1982 Nonqualified Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.3 of the Annual Report on
Form 10-K dated June 16, 1995).
10.4 BancTec, Inc. 1994 Stock Plan (incorporated by reference to Exhibit
10.4 of the Annual Report on Form 10-K dated June 16, 1995).
10.5 BancTec, Inc. 1990 Employee Stock Purchase Plan, as amended
(incorporated by reference to Exhibit 10.5 of the Annual Report on
Form 10-K dated June 16, 1995).
10.6 BancTec,Inc. Deferred Compensation Plan (incorporated by reference
to Exhibit 10.6 of the Annual Report on Form 10-K dated June 16,
1995).
10.7 Employment Agreement dated May 28, 1992, between BancTec and
Grahame N. Clark, Jr. (incorporated by reference to Exhibit 10.7 of
the Annual Report on Form 10-K dated June 16, 1995).
10.8 Employment Agreement dated May 28, 1992, between BancTec and Norton
A. Stuart (incorporated by reference to Exhibit 10.8 of the Annual
Report on Form 10-K dated June 16, 1995).
10.9 Employment Agreement dated May 28, 1992, between BancTec and Tod V.
Mongan (incorporated by reference to Exhibit 10.9 of the Annual
Report on Form 10-K dated June 16, 1995).
10.10 Rights Agreement dated June 16, 1988, between BancTec and First
RepublicBank Dallas, N.A., as Rights Agent (incorporated by
reference to Exhibit 10.10 of the Annual Report on Form 10-K
dated June 16, 1995).
10.11 Second Amended and Restated Credit Agreement dated December 28,
1994, among BancTec, its subsidiries and Texas Commerce Bank
National Association, as Agent (incorporated by reference to
Exhibit 10.11 of the Annual Report on Form 10-K dated June 16,
1995).
10.12 Form of Indemnification Agreement between BancTec and each of its
Directors and Officers (incorporated by reference to Exhibit 10.12
of the Annual Report on Form 10-K dated June 16, 1995).
10.13 License Agreement dated April 1, 1986, between BancTec and TRW
Financial Systems, Inc. (formerly Teknekron Financial Systems,
Inc.), a TRW company (incorporated by reference to Exhibit 10.13 of
the Annual Report on Form 10-K dated June 16, 1995).
21.1 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21.1 of the Annual Report on Form 10-K dated
June 16, 1995).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
23.4 Consent of Bear, Stearns & Co. Inc.
23.5 Consent of Towers, Perrin, Forster & Crosby, Inc.
24.1 The power of attorney of officers and directors of BancTec is set
forth on the signature page of this Registration Statement.
99.1 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(attached as Appendix B to the Joint Proxy Statement and
Prospectus forming a part of this Registration Statement).
II-2
<PAGE>
99.2 Opinion of Bear, Stearns & Co. Inc. (attach as Appendix C to the
Joint Proxy Statement and Prospectus forming a part of this
Registration Statement).
99.3 Form of Proxy for Annual Meeting of Stockholders of BancTec, Inc.
99.4 Form of Proxy for Special Meeting of Stockholders of Recognition
International Inc.
_____________________
* To be filed by amendment
ITEM 22 - UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment of this Registration Statement:
(1) To include any prospectus required by Section 10(a)
(3) of the Securities Act;
(2) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement; and
(3) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this Registration
Statement;
provided, however, that clauses (1) and (2) above do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference into this Registration Statement;
(b) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes as follows:
(a) That, prior to any public reoffering of the securities
registered hereunder through-use of a prospectus which is a part of this
Registration Statement, by any person who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by other items of the
applicable form.
II-3
<PAGE>
(b) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately preceding or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the provisions described in Item 20 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities ct and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such directors, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to such request.
The undersigned registrant herby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on the 7th day of August, 1995.
BANCTEC, INC.
By: /s/ Graham N. Clark, Jr.
---------------------------------
Grahame N. Clark, Jr.
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
* Chairman of the Board, Chief Executive August 7, 1995
-------------------------------------------- Officer and Director (Principal
Grahame N. Clark, Jr. Executive Officer)
* President and Director August 7, 1995
--------------------------------------------
Norton A. Stuart, Jr.
* Vice President, Controller and Assistant August 7, 1995
-------------------------------------------- Treasurer (Principal Accounting Officer)
Michael D. Kubic
* Director August 7, 1995
--------------------------------------------
Michael E. Faherty
* Director August 7, 1995
--------------------------------------------
Paul J. Ferri
* Director August 7, 1995
--------------------------------------------
Rawles Fulgham
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
* Director August 7, 1995
--------------------------------------------
Thomas G. Kamp
* Director August 7, 1995
--------------------------------------------
Michael A. Stone
* Director August 7, 1995
--------------------------------------------
Merle J. Volding
/s/ Tod V. Mongan August 7, 1995
--------------------------------------------
Tod V. Mongan
Attorney-in-fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Merger, dated May 19, 1995, between BancTec,
Inc. ("BancTec") and Recognition International Inc. ("Recognition")
(attached as Appendix A to the Joint Proxy Statement and Prospectus
forming a part of this Registration Statement).
3.1 Restated Certificate of Incorporation of BancTec (incorporated by
reference to Exhibit 3.1 to BancTec's Annual Report on Form 10-K
dated June 16, 1995).
3.2 Bylaws of BancTec (incorporated by reference to Exhibit 3.2 to the
Annual Report on Form 10-K dated June 16, 1995).
*5.1 Opinion of Vinson & Elkins L.L.P. as to the legality of the
securities to be registered.
*8.1 Opinion of Vinson & Elkins L.L.P. as to federal income tax
consequences.
10.1 BancTec, Inc. 1989 Stock Plan (incorporated by reference to Exhibit
10.1 of the Annual Report on Form 10-K dated June 16, 1995).
10.2 BancTec, Inc. Incentive Stock Option Plan, as amended (incorporated
by reference to Exhibit 10.2 of the Annual Report on Form 10-K
dated June 16, 1995).
<PAGE>
10.3 BancTec, Inc. 1982 Nonqualified Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.3 of the Annual Report on
Form 10-K dated June 16, 1995).
10.4 BancTec, Inc. 1994 Stock Plan (incorporated by reference to Exhibit
10.4 of the Annual Report on Form 10-K dated June 16, 1995).
10.5 BancTec, Inc. 1990 Employee Stock Purchase Plan, as amended
(incorporated by reference to Exhibit 10.5 of the Annual Report on
Form 10-K dated June 16, 1995).
10.6 BancTec,Inc. Deferred Compensation Plan (incorporated by reference
to Exhibit 10.6 of the Annual Report on Form 10-K dated June 16,
1995).
10.7 Employment Agreement dated May 28, 1992, between BancTec and
Grahame N. Clark, Jr. (incorporated by reference to Exhibit 10.7 of
the Annual Report on Form 10-K dated June 16, 1995).
10.8 Employment Agreement dated May 28, 1992, between BancTec and Norton
A. Stuart (incorporated by reference to Exhibit 10.8 of the Annual
Report on Form 10-K dated June 16, 1995).
10.9 Employment Agreement dated May 28, 1992, between BancTec and Tod V.
Mongan (incorporated by reference to Exhibit 10.9 of the Annual
Report on Form 10-K dated June 16, 1995).
10.10 Rights Agreement dated June 16, 1988, between BancTec and First
RepublicBank Dallas, N.A., as Rights Agent (incorporated by
reference to Exhibit 10.10 of the Annual Report on Form 10-K
dated June 16, 1995).
10.11 Second Amended and Restated Credit Agreement dated December 28,
1994, among BancTec, its subsidiaries and Texas Commerce Bank
National Association, as Agent (incorporated by reference to
Exhibit 10.11 of the Annual Report on Form 10-K dated June 16,
1995).
10.12 Form of Indemnification Agreement between BancTec and each of its
Directors and Officers (incorporated by reference to Exhibit 10.12
of the Annual Report on Form 10-K dated June 16, 1995).
10.13 License Agreement dated April 1, 1986, between BancTec and TRW
Financial Systems, Inc. (formerly Teknekron Financial Systems,
Inc.), a TRW company (incorporated by reference to Exhibit 10.13 of
the Annual Report on Form 10-K dated June 16, 1995).
21.1 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21.1 of the Annual Report on Form 10-K dated June 16,
1995).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
23.4 Consent of Bear, Stearns & Co. Inc.
23.5 Consent of Towers, Perrin, Forster & Crosby, Inc.
24.1 The power of attorney of officers and directors of BancTec is set
forth on the signature page of this Registration Statement.
99.1 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(attached as Appendix B to the Joint Proxy Statement and Prospectus
forming a part of this Registration Statement).
<PAGE>
99.2 Opinion of Bear, Stearns & Co. Inc. (attach as Appendix C to the
Joint Proxy Statement and Prospectus forming a part of this
Registration Statement).
99.3 Form of Proxy for Annual Meeting of Stockholders of BancTec, Inc.
99.4 Form of Proxy for Special Meeting of Stockholders of Recognition
International Inc.
_____________________
* To be filed by amendment
<PAGE>
Exhibit 23.1
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated May 19, 1995,
included in BancTec, Inc.'s Form 10-K for the year ended March 26, 1995 and to
all references to our firm included in this Form S-4.
ARTHUR ANDERSEN LLP
Dallas, Texas
August 7, 1995
<PAGE>
Exhibit 23.2
Consent of Independent Accountants
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of BancTec, Inc. of
our report dated December 7, 1994, which appears on page 33 of Recognition
International Inc.'s 1994 Annual Report to Stockholders, which is incorporated
by reference in its Annual Report on Form 10-K for the year ended October 31,
1994. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page F-1 of such Annual Report
on Form 10-K. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
Price Waterhouse LLP
Dallas, Texas
August 7, 1995
<PAGE>
EXHIBIT 23.3
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the inclusion of our opinion to the Board of
Directors of BancTec Inc. ("BancTec"), included as Appendix B to the Joint Proxy
Statement and Prospectus forming part of the Registration Statement on Form S-4
thereto relating to the proposed merger of BTEC Merger Subsidiary, Inc., a
wholly owned subsidiary of BancTec, with and into Recognition International
Inc., and to the references therein to such opinion and our firm.
In giving such consent, we do not admit and we hereby disclaim that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act 0f 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By:
-----------------------------
Managing Director
Dated: August 7, 1995
<PAGE>
EXHIBIT 23.4
CONSENT OF BEAR, STEARNS & CO. INC.
We hereby consent to the inclusion in the Joint Proxy Statement and Prospectus
forming part of this Registration Statement on Form S-4 of BancTec, Inc. of our
opinion attached as Appendix C thereto and to the reference to such opinion and
to our firm therein. We also confirm the accuracy in all material respects of
the description and summary of such fairness opinion and the description and
summary of our analyses, observations, beliefs and conclusions relating thereto,
set forth under the heading "Opinion of Financial Advisors - Recognition"
therein. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 and the rules and regulations of the Securities and Exchange
Commission issued thereunder.
Bear, Stearns & Co. Inc.
By:___________________________
Managing Director
Dated: August 7, 1995
<PAGE>
EXHIBIT 23.5
Consent of Towers, Perrin, Forster & Crosby, Inc.
We hereby consent to the naming of, and references to, our firm in the
Joint Proxy Statement and Prospectus forming part of this Registration Statement
on Form S-4 of BancTec, Inc. In giving such consent, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 and the rules and regulations of the Securities and
Exchange Commission issued thereunder.
Dated August 7, 1995 Towers, Perrin, Forster & Crosby, Inc.
By: __________________________
Principal
<PAGE>
EXHIBIT 99.3
BANCTEC, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST ___, 1995
The undersigned hereby appoints Grahame N. Clark, Jr. and Norton A.
Stuart, Jr. as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote as designated below, all the
shares of common stock of BancTec, Inc. held of record by the undersigned on
July ___, 1995, at the Annual Meeting of Stockholders to be held on August ___,
1995 at 10:00 a.m., Dallas, Texas time, at the Texas Commerce Bank Tower,Fourth
Floor Boardroom, 2200 Ross Avenue, Dallas, Texas, and at any adjournment(s)
thereof. Receipt of the Notice of Annual Meeting of Stockholders and the Proxy
Statement in connection therewith, each dated July ___, 1995, is hereby
acknowledged. The undersigned hereby revokes any proxies heretofore given.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS HEREON. IN
THE ABSENCE OF SUCH SPECIFICATIONS, THE PROXY WILL BE VOTED FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT (WHICH APPROVAL AND ADOPTION SHALL
CONSTITUTE, AMONG OTHER THINGS, APPROVAL OF THE ISSUANCE OF SHARES OF BANCTEC
COMMON STOCK IN CONNECTION WITH THE MERGER), FOR THE ELECTION TO THE BOARD
OF DIRECTORS OF THE NOMINEES LISTED ON THIS PROXY, FOR APPROVAL OF THE
AMENDMENT TO THE BANCTEC, INC. 1990 EMPLOYEE STOCK PURCHASE PLAN AND IN THE
DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS.
(REVERSE SIDE)
_________________________________________________________
__________
COMMON
1. APPROVAL AND ADOPTION OF THE MERGER AGREEMENT (WHICH APPROVAL AND ADOPTION
SHALL CONSTITUTE, AMONG OTHER THINGS, APPROVAL OF THE ISSUANCE OF SHARES
OF BANCTEC COMMON STOCK):
FOR AGAINST ABSTAIN
___ ____ ____
2. ELECTION OF DIRECTORS: Rawles Fulgham, Thomas G. Kamp, Norton A. Stuart,
Jr. (INSTRUCTION: To withhold authority for any individual nominee, write
that nominee's name on the space provided below.)
FOR all nominees WITHHOLD AUTHORITY
listed above to vote FOR all
(except as marked nominees listed
to the contrary). above.
_____________________________
____ ____
3. APPROVAL OF THE AMENDMENT TO THE BANCTEC, INC. 1990 EMPLOYEE STOCK
PURCHASE PLAN:
FOR AGAINST ABSTAIN
___ ____ ____
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE WITH RESPECT TO
ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT(S) THEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST ___, 1995.
Dated: _________________, 1995
______________________________________
______________________________________
Signature(s)
When signing on behalf of a
corporation, partnership, estate,
trust, or in any other representative
capacity, please sign name and title.
For joint accounts each joint owner
must sign.
<PAGE>
EXHIBIT 99.4
RECOGNITION INTERNATIONAL INC.
SPECIAL MEETING OF STOCKHOLDERS -- _________, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gilbert H. Lamphere and Robert Vanourek,
and each of them, as Proxies, each with the power to appoint his substitute and
to revoke such appointment, and hereby authorizes each of them, for and in the
name, place and stead of the undersigned, to represent and to vote (acting by
majority or, if only one be present, then by that one alone) all the shares of
Common Stock of Recognition International Inc. held of record by the undersigned
on ______________, 1995 at the special meeting of stockholders to be held
________, 1995, or any adjournment(s) or postponement(s) thereof, and especially
to vote as designated on the reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted for Proposal No. 1.
(SEE REVERSE SIDE)
1. PROPOSAL TO APPROVE AND ADOPT AN AGREEMENT AND PLAN OF MERGER DATED AS
OF MAY 19, 1995 (THE "MERGER AGREEMENT") AMONG RECOGNITION, BANCTEC, INC.
("BANCTEC") AND BTEC MERGER SUBSIDIARY, INC. ("BANCTEC SUB") PURSUANT TO
WHICH, AMONG OTHER THINGS, (A) BANCTEC SUB WOULD BE MERGED WITH AND INTO
RECOGNITION (THE "MERGER") AND (B) EACH STOCKHOLDER OF RECOGNITION WOULD
RECEIVE FOR EACH SHARE OF RECOGNITION COMMON STOCK OWNED AS OF THE
EFFECTIVE TIME OF THE MERGER 0.59 OF A SHARE OF BANCTEC COMMON STOCK AS
DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT AND PROSPECTUS; AND
FOR AGAINST ABSTAIN
___ ____ ____
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S)
THEREOF.
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Signature_________________________ Date___________
Signature_________________________ Date___________
