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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended March 26, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number 0-9859
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BANCTEC, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 75-1559633
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4435 Spring Valley Road
Dallas, Texas 75244
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 450-7700
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of Class)
--------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. X
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Aggregate Market Value of voting stock held by non-affiliates of the Registrant
at
May 31, 1995: $129,847,574
Indicate the number of shares outstanding of each of the Registrant's classes
of Common Stock, as of the latest practicable date.
Number of Shares Outstanding at
Title of Each Class May 31, 1995
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Common Stock, $.01 Par Value 10,988,953
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DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive proxy
statement to be filed for the annual meeting of stockholders scheduled to be
held on August 24, 1995.
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BANCTEC, INC.
ANNUAL REPORT
ON
FORM 10-K
YEAR ENDED MARCH 26, 1995
PART I
ITEM 1. BUSINESS
GENERAL
BancTec Inc., a Delaware corporation, ("BancTec" or the "Company") is a
leading provider of electronic and document-based financial transaction
processing systems, application software and support services. The Company
develops products for banking, financial services, insurance, government,
utility, telecommunications, retail and other industries. In addition, BancTec
designs and manufactures document processing hardware and scanners for value
added resellers ("VARs") and original equipment manufacturer ("OEM") customers
and provides network support services to users of local area networks ("LANs")
and personal computers ("PCs"). Unless otherwise indicated, all further
references to BancTec or the Company shall include its wholly owned subsidiaries
and the ScanData and Servibanca joint ventures.
BANCTEC PRODUCTS
The Company targets its products to specific market segments where it
believes it has certain competitive advantages and can maintain or achieve a
leadership position.
SYSTEMS SOLUTIONS, SOFTWARE PRODUCTS AND EQUIPMENT. In fiscal year 1995, the
Company derived approximately 56% of its revenues from sales of the following
products:
IMAGING SYSTEMS. BancTec offers image-based products which are used to
process a variety of financial and full-page documents. The Company's
ImageFIRST(R) product family provides solutions for financial document
processing requirements. Remittance payment processors utilize ImageFIRST
to capture, digitize and process check and other document images, including
utility, telephone, retail and credit card bills, mortgage coupons and tax
notices. ImageFIRST systems are also used worldwide to process sales
drafts, European giro documents, coupons and many other types of financial
documents.
The Company's imaging systems may also be used by banks for high volume
check processing applications such as proof of deposit ("POD") and image
statement preparation. Other BancTec products provide image-based solutions
for rejected check repair, enabling financial institutions that handle
large volumes of checks to more efficiently reprocess items which have been
rejected in normal operating cycles.
In fiscal 1995, BancTec introduced ImageFIRST OpenArchive, an advanced
product designed specifically for high speed archiving of financial
document images and related transaction data. ImageFIRST OpenArchive
contains a multi-tiered archival system that utilizes magnetic disks,
optical disks and various tape cartridge technologies for high volume image
storage. Images are routed over standard Ethernet connections using TCP/IP
protocol, and are displayed on industry standard PCs using the Microsoft
Windows(R) operating system. The ImageFIRST Open Archive product is used by
document processors to substantially increase productivity and improve
customer service capabilities.
The Company's financial imaging products utilize an Open Systems
Architecture ("OSA") platform which enables customers to easily add
industry standard hardware and/or software components to further improve
processing capabilities. Development of OSA-based products has given
BancTec an excellent competitive position with respect to financial
document processing in the United States, Canadian, European and Australian
markets.
BancTec also offers products for a variety of full-page document imaging
applications. The DocuScan(R) 2000 and 4000 series products utilize photo-
optical technology, gray scale capture capabilities, image character
recognition software and high-precision document transports to scan and
digitize a variety of full-sized business documents. In addition, the
Company provides systems solutions utilizing Computer Output to Laser Disk
("COLD") technology to electronically archive computer-generated documents
such as invoices, statements and business forms on optical disks. In fiscal
1995, BancTec
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introduced ImageFIRST Office, an Integrated Document Management Product
that combines BancTec's advanced scanning systems, an open systems
architecture, the Microsoft Windows operating system, and industry standard
hardware, software and peripheral components. With ImageFIRST Office,
companies and financial institutions have the ability to efficiently
create, organize, annotate, route and store digitized images of all types
of business documents.
DOCUMENT PROCESSING SYSTEMS, CHECK SORTING SYSTEMS AND ELECTRONIC
COMPONENTS. The 9400 Document Processing System is utilized for remittance
and/or sales draft applications by financial transaction processors that
require automation but do not require high-speed image-based systems. By
accelerating the processing of payments, customers are able to improve
their cash flow and maximize funds availability. The system can operate as
a stand-alone device or in a clustered environment with a LAN and data
concentrator.
The 4300 Document Processing System is used by financial institutions to
re-encode and re-introduce repaired documents into the check processing
cycle. The 4300 can be configured as a PC-driven stand-alone device or a
multi-application controller-based system. With the controller option, the
4300 can also process other types of documents, such as remittances and
sales drafts.
The Company also offers low, medium and high-speed document reader/sorters
and related components that read magnetic ink character recognition
("MICR") and optical character recognition ("OCR") data from financial
documents and sorts them according to patterns established by the user.
BancTec markets these products directly to its customers and to various
systems providers throughout the world.
BancTec markets the Transaction Processing System ("TPS"), which utilizes
reader/sorters and application software to perform check clearing for large
financial institutions in the United Kingdom, Ireland and India.
Components such as microfilm cameras, microfilm modules, image cameras,
MICR encoders, ink jet printers and various peripheral equipment are also
manufactured and marketed by the Company.
INTEGRATED CORE PROCESSING AND BANK AUTOMATION SOFTWARE PRODUCTS. The
Company provides Banker-II(R), ACCESS(TM) and PODExpress(R) products to
community banks. Banker II and ACCESS 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 combines PC and UNIX-based software products with
the Company's reader/sorters to provide solutions for proof-of-deposit and
other check sorting applications. Community banks use BancTec's software
products to improve operational efficiency and to compete effectively with
larger institutions.
ELECTRONIC PAYMENT PROCESSING PRODUCTS. BancTec markets software products
for electronic credit, debit and courtesy card processing, electronic check
authorization, inventory management and other electronic funds transfer
("EFT") and point of sale ("POS") 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. BancTec also
markets software products relating to electronic benefits transfer ("EBT")
applications. EBT software products are currently being implemented by
various U.S. and state governmental agencies to reduce fraud and increase
efficiency in government-sponsored benefit payment programs.
SUPPORT PRODUCTS AND CONSUMABLE SUPPLIES. The Company utilizes its
telemarketing organization to distribute document processing supplies and
related products that are a source of recurring revenue. BancTec's
CheckMender(R), HeatStrip(R) and BancStrip(R) are used by banks to re-
encode checks which cannot be read by traditional check sorting equipment.
The Company's CheckMender automatically applies HeatStrip material to the
bottom edge of checks which have been damaged, have missing or erroneous
information or are otherwise unreadable. BancTec also provides encoding
ribbons, microfilm, ink rollers and other consumable supplies that are used
with the Company's document processing equipment. During fiscal 1995,
BancTec introduced the CheckMender IV(R) product, which offers several
operational improvements over previous CheckMender models.
BancTec generally warrants its equipment and software products sold
directly to end-users for 30 days from the date of installation and its OEM
products sold to systems providers for 90 days from the date of shipment.
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NETWORK SERVICES AND EQUIPMENT MAINTENANCE. The Company derived approximately
44% of its revenue in fiscal 1995 from the following network services and
equipment maintenance related products:
NETWORK SERVICES AND PERSONAL COMPUTER SUPPORT. BancTec provides LAN and PC
hardware support, systems integration services, asset management, help desk
services and installation coordination to major companies. The Company's
service engineers provide on-site or on-call support for file servers,
personal computers, laptop computers, engineering document processing
systems, printers and other peripheral equipment. BancTec also provides
technical telephone support for Novell network operating systems software
and is a U.S warranty service provider for Dell Computer Corp. and AST
Research Inc.
INSTALLATION AND MAINTENANCE OF BANCTEC PRODUCTS. A key aspect of BancTec's
strategy of providing its customers with a total system solution is that
the Company installs and maintains its own products. Standard maintenance
contracts are available which specify type of service, hours of coverage
and monthly rates. Contracts may also be tailored to meet the specific
needs of individual customers. The Company's maintenance contracts
typically include both parts and labor.
THIRD-PARTY SERVICE FOR OTHER DOCUMENT PROCESSING EQUIPMENT. BancTec
provides hardware maintenance services for IBM 3890 and 3890 XP
reader/sorters, which are the primary transports for check sorting in many
large banks. The Company also refurbishes and resells IBM 3890 and 3890 XP
reader/sorters to banks and bank service bureaus. The Company also provides
hardware maintenance service for IBM 3800 printers.
At May 31, 1995, BancTec employed approximately 1,034 service engineers
located in the United States, Canada, United Kingdom, Scandinavia,
continental Europe and Australia.
CHECK PROCESSING SERVICE BUREAU OPERATIONS. The Company also owns and operates
three service bureau facilities that provide check and item processing services.
The service bureaus utilize BancTec hardware, check processing software,
operations personnel and maintenance services to process checks and related
documents for financial institutions. The Company intends to continue to offer a
variety of check-related services to U.S. community banks through its service
bureau operations.
SOFTWARE ENGINEERING
Through its staff of approximately 295 software engineers, the Company
maintains standard system and application software products. In addition, the
Company utilizes these software engineers to modify and enhance its standard
application software products for customers in order to meet their particular
operating requirements. Enhancements are generally paid by the customer under
the terms of a sales contract. This software engineering activity is generally
charged to cost of sales as incurred.
PRODUCT DEVELOPMENT
The Company is engaged in ongoing development engineering activities in
connection with new and existing products, employing as of May 31, 1995,
approximately 83 persons for such activities.
The following table sets forth certain information regarding the Company's
development engineering expenditures for the indicated fiscal years:
<TABLE>
<CAPTION>
1995 1994 1993
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(Dollars in thousands)
<S> <C> <C> <C>
Development engineering expenditures....... $9,590 $9,515 $8,490
Percent of total revenue................... 3.2% 3.8% 3.6%
Percent of equipment and software revenue.. 5.7% 7.1% 6.1%
</TABLE>
The Company also spent approximately $300,000, $994,000 and $851,000 in
fiscal years 1995, 1994 and 1993, respectively, on engineering activities funded
by customers relating to the development of new products and improvements of
existing products.
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Current expenditures are concentrated on developing new applications for
the Company's product lines and improving and expanding existing products, as
described below:
IMAGING SYSTEMS. The Company is currently developing methods of utilizing
mathematical algorithms to enable document processing systems to automatically
read and interpret the full handwritten "legal amount" found on standard checks.
Other projects focus on the development of additional integrated image-based
check processing software modules, the conversion of images between compression
types in support of archiving and image interchange, various grayscale printing
projects and the enhancement of current image-based document workflow software
products.
DOCUMENT PROCESSING SYSTEMS, CHECK SORTING SYSTEMS AND ELECTRONIC
COMPONENTS. Development activity continues on low-cost, low-speed financial
document transports for use at processing sites with modest volumes. Additional
projects focus on the integration of Universal LAN Interchange technology (ULI)
and standard PCs into the Company's non-image wholesale lockbox products. Other
projects focus on integrating advanced laser printers into wholesale lockbox
product configurations.
INTEGRATED CORE PROCESSING AND BANK AUTOMATION SOFTWARE PRODUCTS. The
Company continues to enhance its family of community bank-oriented integrated
software products. Development activity continues on a "next generation"
client/server based core application processing product, which uses graphical
user interfaces and the Microsoft Windows operating system to more efficiently
process deposits and loans, generate management reports and coordinate community
bank operations. Other products under development allow customers to transfer
stored computer data into industry-standard relational data bases, facilitating
the distribution of management information throughout an organization.
ELECTRONIC PAYMENT PROCESSING PRODUCTS. Several development projects are
underway regarding the Company's EFT/POS software products. These projects
include an Open Systems switch product which allows electronic transaction
information to flow across networks alongside other financial information. An
additional project enhances the scalability of the Company's switch products,
enabling them to be utilized by much larger retail customers. Other projects
center around the generation of card production files and providing "returns and
refunds" applications in Tandem environments.
There is no assurance that the Company's development efforts will result in
successful commercial products. Many risks exist in developing new product
concepts, adopting new technology and introducing new products to the market.
SALES AND DISTRIBUTION
The Company's distribution strategy is to employ multiple sales channels to
achieve the widest possible distribution of its products. The Company's products
are sold to end-users, OEMs, VARs and systems integrators.
Domestically, BancTec's U.S. Open Solutions Group focuses on the following
areas:
1. Financial document processing systems sold directly to high-volume
document processors, such as large banks, financial service providers,
telephone companies, gas and electric utilities, petroleum companies,
service bureaus, insurance companies, retailers and other end-users.
2. Systems solutions and integrated 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.
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 OEMs, VARs and various other resellers.
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Internationally, BancTec also sells its products through a variety of
channels. The Company has direct sales forces in the United Kingdom, Canada,
Japan and Australia. Third-party maintenance and support services are also
marketed in the United Kingdom via a separate direct sales force.
In fiscal 1992, BancTec, Inc. and Thomson-CSF established a joint venture
company, ScanData N.V., which has exclusive rights to market and service various
products provided by BancTec and Thomson in specified territories, consisting of
continental Europe, Scandinavia and North Africa. In fiscal 1994, BancTec
acquired a 33% equity interest in Servibanca, a document processing services
provider located in Chile. Servibanca offers a variety of products and services
to the South American document processing market. BancTec uses various other
distributor and OEM relationships to market its products in Asia and various
other locations.
During fiscal year 1995, the Company began operations in Japan. BancTec
Japan, Inc. has responsibility for the distribution of the Company's products
and service programs to financial institutions and companies in Japan.
The Company's combined worldwide sales organization totals approximately
120 people. Major sales offices are located in several U.S. cities, Toronto,
Montreal, London, Paris, Sydney, and Tokyo.
Sales of products to foreign entities, which accounted for approximately
18% of total revenues in fiscal 1995, are subject to various risks, including
fluctuations in exchange rates, import controls and the need for export
licenses. See Note K of Notes to Consolidated Financial Statements for financial
information concerning the Company's international operations.
SIGNIFICANT CUSTOMERS
For fiscal years 1995, 1994 and 1993, no single customer accounted for more
than 10% of the total revenue of the Company.
COMPETITION
The Company believes that product performance, quality, service and price
are important competitive factors in the markets in which it competes.
Generally, the Company emphasizes unique product features, flexibility to
configure unique systems from standard products, quality and service in its
competitive efforts. In marketing its products, the Company competes directly or
indirectly with a wide variety of companies, some of which have substantially
greater financial and other resources than the Company.
BACKLOG
The Company's firm order backlog for its products at March 26, 1995 and
March 27, 1994 was approximately $44,125,000 and $48,379,000 respectively.
The Company's backlog does not include contracts for recurring service and
maintenance-related products and support products. BancTec's backlog is subject
to fluctuation due to various factors, including the size and timing of orders
for the Company's products and exchange rate fluctuations, and is not
necessarily indicative of the level of future revenue.
MANUFACTURING
The Company's hardware and systems products are assembled using various
standard purchased components such as PC monitors, minicomputers, encoders,
communications equipment and other electronic devices. Certain engineered
products are purchased from sole source suppliers. The Company generally has
contracts with these suppliers that are renewed periodically and that require no
minimum purchases. If the supply of certain components or subassemblies were
interrupted without sufficient notice, the result could be an interruption of
product deliveries. The Company has not experienced, nor does it foresee, any
difficulty in obtaining the necessary parts.
PATENTS
The Company has registered patents in the United States and Canada
protecting the
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Company's HeatStrip(R) product. In addition, BancTec holds U.S. patents relating
to high-speed document handling, encoding, and optical and magnetic character
recognition. BancTec also holds patents relating to image processing technology
in the U.S. and several European countries.
The validity of any patents issued or which may be issued to the Company
may be challenged by others and the Company could encounter legal difficulties
in enforcing its patents rights against infringement. In addition, there can be
no assurance that other technology cannot or will not be developed or that
patents will not be obtained by others which would render the Company's patents
obsolete. Management does not consider the Company's patents to be essential to
the ongoing operations of the Company.
The Company has an exclusive, paid-up, worldwide right and license from
Control Data Corporation to all issued and pending patents that pertain to
certain OEM products and to the know-how and technology related to the
manufacture of such products. This exclusive right and license expires in the
year 2014.
In April 1986, the Company executed a non-exclusive license agreement with
TRW Financial Systems, Inc. (formerly Teknekron Financial Systems, Inc.). The
agreement permits the Company to manufacture and market digital image processing
systems subject to a patent held by that company.
BancTec has several registered trademarks, including "BancTec" and various
product names.
EMPLOYEES
At May 31, 1995, the Company employed approximately 2,274 full-time
employees and considers its employee relations to be good. None of the Company's
employees are represented by a labor union, and the Company has never
experienced a work stoppage.
ITEM 2. PROPERTIES
The Company owns or leases numerous facilities throughout the world to
support its operations. The Company believes that these facilities are adequate
to meet its ongoing needs. The loss of any one facility could have an adverse
impact on operations in the short term.
The Company has the option to renew all leases on principal facilities at
the end of the respective lease terms.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
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EXECUTIVE OFFICERS OF BANCTEC
Executive officers are elected annually at the first meeting of the Board
of Directors following the annual meeting of stockholders. No family
relationships exist among the executive officers of BancTec.
The executive officers of BancTec are:
Name Age Position
---- --- --------
Grahame N. Clark, Jr....... 52 Chairman of the Board and Chief Executive
Officer
Norton A. Stuart, Jr....... 60 President
William E. Bassett......... 53 Executive Vice President
Tod V. Mongan.............. 44 Senior Vice President, Secretary and
General Counsel
James R. Wimberley......... 54 Senior Vice President
George W. Christian........ 49 Vice President
John G. Guthrie............ 58 Vice President
Michael D. Kubic........... 40 Vice President, Controller, and Assistant
Treasurer
Kevin L. Roper............. 40 Vice President
James E. Uren.............. 58 Vice President
Michael N. Lavey........... 37 Treasurer
Mr. Clark has been Chairman of the Board and Chief Executive Officer since
April 1987.
Mr. Stuart has been President since April 1987.
Mr. Bassett has been Executive Vice President since January 1993. Since
October 1977, Mr. Bassett has been employed by BancTec in various
management capacities.
Mr. Mongan has been Senior Vice President, Secretary and General Counsel
since January 1993. Since November 1979, Mr. Mongan has been employed by
BancTec in various management capacities.
Mr. Wimberley has been Senior Vice President since January 1993. Since
January 1984, Mr. Wimberley has been employed by BancTec in various
management capacities.
Mr. Christian has been Vice President since March 1995. Since April 1985,
Mr. Christian has been employed by BancTec in various management
capacities.
Mr. Guthrie has been Vice President since September 1993. Since February
1989, Mr. Guthrie has been employed by BancTec in various management
capacities.
Mr. Kubic has been Vice President, Controller, and Assistant Treasurer
since September 1993. Since August 1986, Mr. Kubic has been employed by
BancTec in various management capacities.
Mr. Roper has been Vice President since March 1994. Since March 1985, Mr.
Roper has been employed by BancTec in various management capacities.
Mr. Uren has been Vice President since September 1993. Since October 1988,
Mr. Uren has been employed by BancTec in various management capacities.
Mr. Lavey has been Treasurer since March 1994. Since March 1990, Mr. Lavey
has been employed by BancTec in various management capacities.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of the Company is traded on the over-the-counter market
and is quoted on The NASDAQ National Market system under the symbol BTEC. The
following table sets forth the range of high and low sales prices per share of
common stock, as reported by NASDAQ for the periods indicated.
<TABLE>
<CAPTION>
Fiscal Year
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1995 1994
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High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter........... 23-1/2 19 20 15-1/2
Second Quarter.......... 26-1/2 18-3/4 22-3/4 17-1/4
Third Quarter........... 27-1/4 18-1/4 24 18-3/4
Fourth Quarter.......... 22 15-3/4 24-3/4 20
</TABLE>
The Company has not paid any cash dividends on its common stock since its
organization and currently intends to continue a policy of retaining earnings
for the Company's operations and planned expansion of its business or to
repurchase its common stock. In addition, the Company's credit agreement places
restrictions on the payment of dividends. The number of stockholders of record
as of May 31, 1995, was approximately 1,470.
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
For the year:
Revenue.................................... $297,539 $247,538 $233,885 $190,968 $183,761
Income before cumulative
effect of accounting change............... 12,509 16,343 14,351 11,721 10,672
Net income................................. 12,509 16,343 15,186 11,721 10,672
Income per share before
cumulative effect of accounting
change................................... 1.12 1.45 1.32 1.15 1.08
Net income per share....................... 1.12 1.45 1.40 1.15 1.08
At fiscal year-end:
Total assets............................... $307,366 $276,270 $194,846 $171,254 $152,707
Working capital............................ 32,013 46,085 49,687 43,143 41,764
Long-term debt............................. 42,459 50,564 12,239 19,629 27,392
Stockholders' equity....................... 137,128 128,273 109,972 92,252 78,920
Weighted Average Shares..................... 11,128 11,294 10,870 10,173 9,861
</TABLE>
The foregoing summary reflects the acquisitions as discussed in Note B of
Notes to Consolidated Financial Statements from their respective date of
acquisition. Additionally, the per share amounts and the weighted average
number of common shares have been restated to reflect the three-for-two common
stock split on February 8, 1993 as discussed in Note A.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company continually attempts to seek out strategic acquisition
opportunities in related businesses and technologies. The Company consummated no
acquisitions during fiscal year 1995 but had made numerous acquisitions during
the two years prior to fiscal year 1995. Fiscal year 1994 results reflected the
acquisitions of LeRoux, Pitts, and Associates ("LPA"), a subsidiary of NYNEX,
from August 23, 1993, Imagesolve International, Ltd. ("Imagesolve") from
December 1, 1993, Advanced Computer Systems, Inc. ("ACS") from December 23, 1993
and Terminal Data Corporation, Inc. ("TDC") from February 28, 1994. Fiscal year
1993 results reflected the acquisitions of Computer Field Specialists, Inc.
("CFS") and Springfield Computer Consultants, Inc. ("Access") from June 29, 1992
and August 1, 1992, respectively. The combined revenues of the companies
acquired in fiscal years 1994 and 1993 accounted for approximately 5% of
consolidated revenues, in each of their respective years of acquisition. See
Note B of Notes to Consolidated Financial Statements for a discussion of these
acquisitions.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Consolidated revenue for fiscal year 1995 of $297,539,000 increased by
$50,001,000 or 20.2% from fiscal year 1994 due primarily to the full year effect
of fiscal 1994 acquisitions, continued growth in the domestic network services
business and increased shipment of image systems domestically. Partially
offsetting these consolidated revenue increases were lower revenues for
reader/sorter and document processing systems hardware. For fiscal year 1995,
revenue from equipment and software of $168,012,000 increased by $33,279,000 or
24.7% over fiscal year 1994. The increase in equipment and software revenue is
attributed to inclusion for a full year of the TDC and ACS acquisitions. For
fiscal year 1995, revenue from maintenance and other services of $129,527,000
increased $16,722,000 or 14.8% over fiscal year 1994. The increase in
maintenance and other services revenue is due to the continued growth of the
network services business domestically and a full year of maintenance from the
TDC acquisition. Revenue from equipment and software represented 56.5% of total
revenue in fiscal year 1995 compared to 54.4% in fiscal year 1994.
Consolidated gross profit of $86,844,000 for fiscal year 1995 increased by
$17,192,000 or 24.7% over the same period for last year and the gross margin
percentage of 29.2% increased by 1.1 percentage points over the prior year's
percentage. The improvement in gross profit and gross margin is due to higher
returns in software as a result of the ACS acquisition and productivity
improvements in delivering the Company's traditional software products.
Partially offsetting these improvements were additional unfavorable
manufacturing variances as a result of lower volume shipments of reader/sorters
and document processing systems. Gross profit from equipment and software
increased by $12,811,000 while the associated gross margin percent also
increased by 1.1 percentage points. The increases are primarily the result of
the ACS acquisition offset in part by the unfavorable manufacturing variances.
Gross profit for maintenance and other services increased by $4,381,000 while
the gross margin percentage increased by 0.5 percentage points. The improvement
in gross profit and gross margin is primarily the result of the increased
network services revenue.
Operating expenses increased by $17,110,000 from the prior year due to a
combination of acquisition related goodwill amortization, additional staffing
from the TDC and ACS acquisitions and a $4,250,000 charge taken in the fourth
quarter to settle a litigation claim and for the reorganization of the Company's
North American operations.
Net interest expense increased by $4,003,000 from fiscal 1994 as a result
of the increase in debt to fund the acquisitions and higher interest rates. Net
sundry income increased by $838,000 primarily due to additional current year
foreign currency transaction gains.
The provision for income taxes reflected an increase in the Company's
effective tax rate to 42.9% in fiscal year 1995 from 40.0% in fiscal year 1994
due to increased nondeductible goodwill and the geographic mix of where profit
is earned.
Minority interest of $1,210,000 reflects the ScanData Joint Venture
partner's (Thomson) 49.5% share of the losses incurred in the joint venture for
fiscal year 1995, limited when the amount of net J.V. equity reached zero.
Fiscal year 1995 net income of $12,509,000 resulted in earnings per share
of
9
<PAGE>
$1.12, compared to $16,343,000 and $1.45 in fiscal year 1994.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
Consolidated revenue for fiscal year 1994 of $247,538,000 increased by
$13,653,000 or 5.8% from fiscal year 1993 due to increases in network service
revenue and current year acquisitions offset in part by reductions in equipment
revenue. Revenue from maintenance and other services of $112,805,000 increased
$17,886,000 or 18.8% primarily due to growth in the domestic network services
business. Revenue from equipment and software of $134,733,000 decreased by
$4,233,000 or 3.0% from fiscal 1993 due to decreases in reader/sorter and
document processing systems hardware, offset in part by growth in software from
current year acquisitions. Revenue from equipment and software represented
54.4% of total revenue in fiscal year 1994, compared to 59.4% in fiscal year
1993.
Consolidated gross profit of $69,652,000 for fiscal year 1994 increased by
$3,052,000 or 4.6% over the same period for the prior year. Gross margin of
28.1% decreased by 0.4 percentage points from the prior year due to a change in
the mix of revenue to lower margin maintenance revenue and the reduction in
equipment revenue from prior year levels. Gross profit from maintenance and
other services increased by $5,556,000 due to the increase in network service
revenue and an improvement in the gross margin to 22.4% compared to 20.8% in
fiscal year 1993. Gross profit from equipment and software decreased by
$2,504,000 due to the reduction in equipment revenue and a 1.0 percentage point
decrease in the associated gross margin percent. Partially offsetting the
reduction in equipment gross profit was an increase in software revenue
primarily from current year acquisitions and an improvement in software margins.
Operating expenses increased by $3,887,000 from the prior year due to the
current year acquisitions. Operating expenses as a percentage of sales were
18.6% compared to 18.0% in the prior year.
Net interest expense decreased by $494,000 from fiscal 1993 as a result of
a lower average cost of borrowing and additional interest income on investments.
Net sundry income increased by $2,103,000 due to the absence of exchange losses
in the current year and gains on the sale of stock held for investment in fiscal
1994.
The provision for income taxes increased $720,000 over fiscal year 1993 due
to the increase in taxable income. The overall effective tax rate of 40.0%
remained constant with the prior year.
Minority interest of $2,625,000 reflects the ScanData Joint Venture
partner's (Thomson) 49.5% share of the losses incurred in the joint venture for
fiscal year 1994.
Fiscal year 1994 income before cumulative effect of accounting change of
$16,343,000 resulted in earnings per share of $1.45, compared to $14,351,000 and
$1.32 in fiscal year 1993. The fiscal year 1993 net income after accounting
change included $835,000 or an earnings per share effect of $0.08 for the
cumulative effect of adoption of SFAS No. 109 - Accounting for Income Taxes.
LIQUIDITY AND CAPITAL RESOURCES
Funds to support the Company's operations, including capital expenditures,
have been derived from a combination of funds provided by operations, long and
short-term bank financing, capital leasing and, to a lesser extent, by sales of
capital stock under employee stock option and purchase plans. The Company has
three credit facilities currently in place under an agreement with several
banks. Under the term loan facility, the Company borrowed $51,000,000 in fiscal
year 1989 to fund the acquisition of Computer Entry Systems (CES), of which
$5,895,000 is outstanding at March 26, 1995. The Company continues to make
scheduled payments on the CES term loan of $1,821,000 per quarter until maturity
in December 1995. Under the acquisition loan facility, the Company borrowed the
maximum amount available of $55,000,000. The terms of the agreement have been
revised and amended to allow borrowings in foreign currency which the Company
utilizes as part of its foreign currency risk management program. The
outstanding balance of $55,219,000 as of March 26, 1995 includes recognized but
unrealized losses of $495,000 resulting from converting certain notes under the
facility into foreign currencies. The amount outstanding has been converted to
a term
10
<PAGE>
loan and is due and payable over 20 equal quarterly payments until maturity in
December 1999 as required by the agreement. The Company also has available a
$30,000,000 revolving credit facility which had an outstanding balance of
$12,942,000 as of March 26, 1995. This balance included $642,000 in recognized
but unrealized losses resulting from converting certain notes under this
facility into foreign currencies. During fiscal year 1995, the Company borrowed
a maximum amount of $15,000,000 against this revolving credit facility. See
Note D of Notes to Consolidated Financial Statements for a further discussion of
this agreement. The Company believes that it has sufficient financial resources
available to support its anticipated requirements to fund operations in fiscal
year 1996, and is not aware of any trends, demands or commitments which would
have a material impact on the Company's long or short-term liquidity.
Cash and cash equivalents decreased during the year primarily as a result
of the cash payments made to complete the fiscal year 1994 acquisitions and the
repurchase of $6,994,000 of the Company's stock.
Accounts receivable increased in fiscal 1995 due to a combination of a
longer collection cycle on the larger end-user image installations and the
growth in revenue over the prior fiscal year.
Net inventory increased in the current year due to purchases of expendable
field inventory to support the Company's maintenance business and for purchases
in support of new products being developed by the Company.
Net fixed assets increased primarily due to the purchase of spares in
support of the Company's network services business, and the acquisition and
refurbishment of a facility in Dallas.
The increase in Other Long-Term Assets resulted from recording the long-
term portion of the deferred tax benefits associated with the acquisitions, the
capitalization of Banker OSA software and the recording of a note receivable
relating to the sale of the Frederick, Maryland facility.
Current liabilities increased as a result of current maturities on the
acquisition facility, borrowings against the revolving credit facility, growth
in the ScanData Joint Venture deferred revenue, additional severance and legal
accruals and the timing of payments for income taxes and accrued liabilities.
Long-term debt decreased primarily due to payment of the TDC debenture, and
reclassification of the CES Term Loan to current liabilities as scheduled
payments are made.
Other Long-Term Liabilities decreased primarily as a result of payments
made on assumed acquisition liabilities.
The minority interest account was reduced to zero during the year as a
result of losses incurred in the joint venture.
Inflation has not had a material effect on the operating results of the
Company.
SUBSEQUENT EVENT
On May 19, 1995, the Company entered an agreement with Recognition
International, Inc. ("Recognition") to acquire 100% of the outstanding shares of
Recognition in a stock for stock exchange. The transaction will be accounted
for as a pooling of interests. See Note N of notes to consolidated financial
statements for a further discussion of this agreement.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
BancTec, Inc.:
We have audited the accompanying consolidated balance sheets of BancTec,
Inc. (a Delaware corporation) and subsidiaries as of March 26, 1995 and March
27, 1994, and the related consolidated statements of income, cash flows and
stockholders' equity for each of the three years in the period ended March 26,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BancTec, Inc. and
subsidiaries as of March 26, 1995 and March 27, 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
March 26, 1995 in conformity with generally accepted accounting principles.
As explained in Note G of Notes to Consolidated Financial Statements,
effective March 30, 1992, the Company changed its method of accounting for
income taxes.
Arthur Andersen LLP
Dallas, Texas
May 19, 1995
12
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
A S S E T S
<TABLE>
<CAPTION>
March 26, March 27,
1995 1994
--------- ---------
(In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 11,091 $ 12,644
Accounts receivable, less allowance for doubtful accounts of
$1,646,000 in 1995 and $1,518,000 in 1994.................. 81,790 66,635
Inventories................................................... 51,491 48,769
Other......................................................... 11,911 8,667
------- --------
Total current assets.................................... 156,283 136,715
------- --------
PROPERTY, PLANT AND EQUIPMENT-AT COST:
Land.......................................................... 1,188 1,295
Field support spare parts..................................... 56,146 44,548
Machinery and equipment....................................... 28,752 34,377
Furniture, fixtures and other................................. 22,159 20,378
Building...................................................... 6,080 4,911
------- --------
114,325 105,509
Less accumulated depreciation and amortization................ 62,971 60,125
------- --------
Net property, plant and equipment....................... 51,354 45,384
------- --------
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESS,
less accumulated amortization of $10,890,000 in 1995 and
$6,832,000 in 1994............................................. 86,243 88,352
-------- --------
OTHER INTANGIBLE ASSETS, less accumulated amortization of
$6,157,000 in 1995 and $4,388,000 in 1994...................... 1,437 3,264
------- --------
OTHER ASSETS.................................................... 12,049 2,555
------- --------
TOTAL ASSETS.................................................... $307,366 $276,270
======== ========
</TABLE>
See notes to consolidated financial statements.
13
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
<TABLE>
<CAPTION>
March 26, March 27,
1995 1994
--------- --------
(In thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Revolving Credit Facility......................... $ 12,942 $ -
Current maturities of long-term debt.............. 20,290 12,426
Trade accounts payable............................ 22,430 19,539
Other accrued expenses and liabilities............ 42,349 31,968
Deferred revenue.................................. 26,000 23,580
Income taxes...................................... 259 3,117
--------- --------
Total current liabilities................... 124,270 90,630
--------- --------
LONG-TERM DEBT, less current maturities............. 42,459 50,564
--------- --------
OTHER LIABILITIES................................... 3,509 5,593
--------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST - 1,210
--------- --------
STOCKHOLDERS' EQUITY:
Preferred stock-authorized, 1,000,000 shares of
$.01 par value:
Series A - no shares issued and outstanding - -
Series B - no shares issued and outstanding - -
Common Stock-authorized, 45,000,000 shares of
$.01 par value: issued and outstanding,
10,638,806 shares in 1995 and 10,743,550 in
1994........................................... 107 107
Additional paid-in capital........................ 41,409 45,959
Retained earnings................................. 96,868 84,361
Foreign currency translation adjustments.......... 91 (721)
Unearned compensation............................. (1,347) (1,433)
-------- --------
Total stockholders' equity.................... 137,128 128,273
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $307,366 $276,270
======== ========
</TABLE>
See notes to consolidated financial statements.
14
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended
-----------------------------------
March 26, March 27, March 28,
1995 1994 1993
----------- ---------- ----------
(In thousands, except per share data)
<S> <C> <C> <C>
REVENUE:
Equipment and software.......................... $168,012 $134,733 $138,966
Maintenance and other services.................. 129,527 112,805 94,919
-------- -------- --------
297,539 247,538 233,885
-------- -------- --------
COSTS OF SALES:
Equipment and software.......................... 110,848 90,380 92,109
Maintenance and other services.................. 99,847 87,506 75,176
-------- -------- --------
210,695 177,886 167,285
-------- -------- --------
Gross profit................................... 86,844 69,652 66,600
-------- -------- --------
OPERATING EXPENSES:
Product development............................. 9,590 9,515 8,490
Selling, general and administrative............. 49,560 34,701 32,007
Goodwill amortization........................... 4,010 1,834 1,666
-------- -------- --------
63,160 46,050 42,163
-------- -------- --------
Income from operations......................... 23,684 23,602 24,437
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income................................. 252 422 315
Interest expense................................ (5,679) (1,846) (2,233)
Sundry-net...................................... 1,523 685 (1,418)
-------- -------- --------
(3,904) (739) (3,336)
-------- -------- --------
Income before income taxes, minority inter-
est and cumulative effect of accounting
change......................................... 19,780 22,863 21,101
-------- -------- --------
INCOME TAX PROVISION (BENEFIT):
Current......................................... 7,092 11,363 8,969
Deferred........................................ 1,389 (2,218) (544)
-------- -------- --------
8,481 9,145 8,425
-------- -------- --------
MINORITY INTEREST................................ 1,210 2,625 1,675
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE.......................................... 12,509 16,343 14,351
CUMULATIVE EFFECT OF ACCOUNTING CHANGE........... - - 835
-------- -------- --------
NET INCOME....................................... $ 12,509 $ 16,343 $ 15,186
======== ======== ========
NET INCOME PER SHARE:
Income Before Accounting Change................. $1.12 $1.45 $ 1.32
Cumulative Effect of Accounting Change.......... - - .08
-------- -------- --------
Net Income...................................... $1.12 $1.45 $ 1.40
======== ======== ========
Weighted Average Shares......................... 11,128 11,294 10,870
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
----------------------------------
March 26, March 27, March 28,
1995 1994 1993
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................... $ 12,509 $ 16,343 $ 15,186
Adjustments to reconcile net income to cash flows
provided by operating activities:
Depreciation and amortization................ 24,153 18,827 14,478
Deferred income tax expense (benefit)........ 1,389 (2,218) (544)
Cumulative effect of accounting change....... - - (835)
Loss due to scrapping of obsolete property,
plant, and equipment...................... 4,264 3,196 3,057
Other non-cash items......................... 1,652 258 1,069
Increase in accounts receivable.............. (10,281) (8,182) (8,840)
(Increase) decrease in inventories........... (1,444) (6,833) 5,888
(Increase) decrease in other assets.......... (7,106) (6,776) 598
Increase (decrease) in trade accts payable... (2,038) 3,217 3,331
Increase in deferred revenue................. 1,634 5,125 5,801
Increase in other accrued expenses
and liabilities........................... 10,754 3,171 6,165
Minority interest in earnings................ (1,210) (2,625) (1,675)
------ -------- --------
Cash flows provided by operating
activities............................. 34,276 23,503 43,679
------ -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment......... (26,695) (24,821) (15,199)
Purchase of businesses, net of cash acquired....... (13,180) (49,014) (6,162)
-------- -------- --------
Cash flows used in investing
activities............................. (39,875) (73,835) (21,361)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of current maturities of long-term debt
and capital lease obligations................... (12,291) (8,168) (6,003)
Proceeds from long-term borrowings................. 10,800 44,200 -
Proceeds from short-term borrowings................ 15,000 3,000 6,000
Payments of short-term borrowings.................. (2,700) (3,000) (6,000)
Repurchase of common stock......................... (6,994) - -
Proceeds from sales and issuances of common
stock........................................... 1,989 1,671 2,090
------ -------- --------
Cash flows provided by (used in)
financing activities................... 5,804 37,703 (3,913)
------ -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.............. (1,758) (53) (894)
------ -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ (1,553) (12,682) 17,511
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR........ 12,644 25,326 7,815
------ -------- --------
CASH AND CASH EQUIVALENTS - END OF YEAR.............. $ 11,091 $ 12,644 $ 25,326
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 26, 1995, March 27, 1994 and March 28, 1993
(In thousands)
<TABLE>
<CAPTION>
Foreign
Currency
Addi- Trans-
tional lation Unearned
Common Paid-in Retained Adjust- Compen-
Stock Capital Earnings ments sation Total
------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 29, 1992....... $64 $39,484 $52,465 $ 239 $ - $ 92,252
Common stock issued princi-
pally under employee stock
plans.......................... 2 2,088 - - - 2,090
Three-for-two common stock
split.......................... 35 (41) - - - (6)
Shares issued for CFS acquisi-
tion........................... 3 - 367 - - 370
Common stock issued under
restricted stock plan.......... - 1,239 - - (1,239) -
Amortization of unearned
compensation................... - - - - 108 108
Tax benefit from exercise of
stock options.................. - 961 - - - 961
Foreign currency translation
adjustments.................... - - - (989) - (989)
Net income...................... - - 15,186 - - 15,186
-------- -------- -------- -------- -------- -------
Balance at March 28, 1993....... 104 43,731 68,018 (750) (1,131) 109,972
Common stock issued princi-
pally under employee stock
plans.......................... 3 1,668 - - - 1,671
Common stock issued under
restricted stock plan.......... - 490 - - (490) -
Amortization of unearned
compensation................... - - - - 188 188
Tax benefit from exercise of
stock options.................. - 70 - - - 70
Foreign currency translation
adjustments.................... - - - 29 - 29
Net income...................... - - 16,343 - - 16,343
-------- ------- ------- ------- ------- --------
Balance at March 27, 1994....... 107 45,959 84,361 (721) (1,433) 128,273
Common stock issued princi-
pally under employee stock
plans.......................... 3 1,986 - - - 1,989
Common stock issued under
restricted stock plan.......... - 141 - - (141) -
Amortization of unearned
compensation................... - - - - 227 227
Repurchase and retirement of
common stock................... (3) (6,991) - - - (6,994)
Tax benefit from exercise of
stock options.................. - 314 - - - 314
Foreign currency translation
adjustments and rounding....... - - (2) 812 - 810
Net income...................... - - 12,509 - - 12,509
------ -------- ------- ------ ----- --------
Balance at March 26, 1995....... $ 107 $41,409 $96,868 $ 91 $(1,347) $137,128
======= ======= ======= ====== ======= ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF ACCOUNTING POLICIES
The principal business of BancTec, Inc. and subsidiaries ("the Company") is
the development, manufacture and sale of integrated financial transaction
processing systems, application software and support services. The Company
develops turn-key image processing systems, data capture systems and integrated
software products for the banking, financial services, telecommunications,
utility, petroleum, insurance, government, retail and other industries. The
Company also designs, manufactures and markets document processing equipment for
original equipment manufacturer ("OEM") customers and provides network support
services for local area networks and personal computers.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and the ScanData Joint Venture which was
established with Thomson-CSF in fiscal year 1992. All significant intercompany
accounts and transactions have been eliminated. The Company's fiscal year is a
52/53 week year which ends on or about March 31. Fiscal year 1995 ended on
March 26, 1995, fiscal year 1994 ended on March 27, 1994 and fiscal year 1993
ended on March 28, 1993.
The Company uses a 13-week period for quarterly reporting.
CASH EQUIVALENTS
Cash equivalents consist of investments with original maturities of three
months or less. There were no investments with original maturities greater than
three months at fiscal year-end 1995 and 1994.
INVENTORIES
Inventories are valued at the lower of cost or market and include the cost
of raw materials, labor, factory overhead and purchased subassemblies. Cost is
determined using the first-in, first-out method.
DEFERRED REVENUE
Certain of the Company's contracts permit the Company to bill the customer
in advance of the time revenue is recognized. Deferred revenue represents
billings in excess of revenue recognized. Revenue is recognized ratably over
the contract period as the services are performed, which usually occurs within
one year of billing.
DERIVATIVE FINANCIAL INSTRUMENTS
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the period of the agreements. Unamortized premiums are
included in other current assets or other assets on the balance sheet depending
on the amortization period.
Amounts receivable or payable in foreign currencies which have been hedged
using forward exchange agreements are valued on the balance sheet at the rate of
exchange under the forward exchange agreement.
REVENUE RECOGNITION
The Company's revenue recognition policy for its principal sources of
revenue are:
Equipment and software sales - Revenue from sales of established products
is recognized upon shipment in conformity with AICPA Statement of Position No.
91-1, Software Revenue Recognition. Revenue for new products, certain other
equipment and software with lengthy development or installation periods is
generally recognized at the time of acceptance by the customer. Contracts with
lengthy software development periods are accounted for in conformity with
Accounting Research Bulletin No. 45, Long-Term Construction Contracts. Under
such contracts, the excess of engineering costs and other related miscellaneous
equipment costs over advance billings on such contracts are recorded in other
current assets. All contract costs, including equipment and software are
charged to cost of sales at the time the related revenue is recognized. At March
26, 1995 and
18
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
March 27, 1994, there were $949,000 and $803,000, respectively, of costs in
excess of advance billings recorded in other current assets.
Maintenance - Revenue from maintenance contracts is recognized ratably over
the term of the contract.
The Company generally warrants its equipment and software products sold
directly to end-users for 30 days and OEM products sold to system providers for
90 days from the date of shipment. The Company provides for warranty costs at
the time revenue is recorded.
DEPRECIATION AND AMORTIZATION
Depreciation is provided in amounts sufficient to charge the cost of
depreciable assets to operations over their estimated service lives. Such
amounts are charged to cost of sales or operating expenses in the consolidated
statements of income, as appropriate. Straight-line or declining balance
methods of depreciation are used for financial reporting purposes. Accelerated
methods are used for tax purposes.
Leasehold improvements and assets recorded under capital lease obligations
are depreciated over the shorter of their estimated useful life or the remaining
lease term. Field support spare parts, which are repairable replacement parts
for products maintained under service contracts, are amortized over a useful
life of three or five years. Depreciable lives for furniture, fixtures and
machinery is generally seven years. Buildings utilize a forty-year life.
Intangible assets are amortized on a straight-line basis over their
estimated useful lives. The excess of cost over net assets of acquired business
is amortized over 10 to 40 years. Other intangible assets are amortized over 3
to 5 years.
PRODUCT DEVELOPMENT
Company-sponsored software product development costs are expensed as
incurred until technological feasibiity has been established. At that time, the
software product development costs are capitalized in conformity with Statement
of Financial Accounting Standards (SFAS) No. 86 - Accounting for the costs of
computer software to be sold, leased or otherwise marketed. At March 26, 1995,
$857,000 of capitalized software costs were recorded in other long-term assets
net of zero amortization. At March 27, 1994, there were no capitalized software
costs recorded as the feasibility of the product was still being determined.
Initial amortization of the amounts recorded during fiscal year 1995 will start
when the product is available for general release. The annual amortization
shall be the greater of the amount computed based on a ratio of units sold
divided by an anticipated installation base of 300 units or the straight-line
method over 3 years. Customer-sponsored product development costs are generally
charged to costs of sales or the proceeds generated therefrom are credited to
product development costs by the Company.
INCOME TAXES
Deferred income taxes recognize the effect of temporary differences between
the reporting of transactions and the basis of assets and liabilities for
financial accounting and income tax purposes.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at the year-end rates of exchange. Assets and
Liabilities denominated in other than each entities non-functional currency, as
defined in SFAS 52 - Foreign Currency Translation, are translated at the year-
end rates of exchange. Revenue and expenses are translated monthly at the
average exchange rates for the month. Translation gains and losses are reported
as a separate component of stockholders' equity, and transaction gains and
losses are included in results of operations.
NET INCOME PER SHARE
Net income per common and common equivalent share is based upon the
weighted average number of outstanding shares during the year. The number of
outstanding shares of common
19
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
stock has been adjusted to reflect the assumed exercise of all outstanding stock
options which are dilutive, at the beginning of the period or date of issuance,
and the use of the proceeds of such assumed exercise to repurchase, at market,
common stock of the Company.
CONCENTRATION OF CREDIT RISK
The Company sells its products to certain customers under specified credit
terms in the normal course of business. These customers can generally be
classified as banking, financial services, insurance, government, utility,
telecommunications or retail entities. Due to the diversity of customers sold
to, management does not consider there to be a concentration of risk within any
single classification.
As of March 26, 1995, one customer's account balance amounted to 10 percent
of the Company's accounts receivable.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current
year presentation.
On February 8, 1993, the Company authorized a three-for-two stock split
payable in the form of a 50% stock dividend to stockholders of record on
February 18, 1993. All share and per share data has been adjusted to reflect
the stock split.
NOTE B - ACQUISITIONS AND EQUITY INVESTMENTS
During the second quarter of fiscal year 1994, the Company acquired certain
assets and assumed certain liabilities of LeRoux, Pitts and Associates ("LPA"),
a subsidiary of NYNEX. The acquisition of LPA provides BancTec EFT-oriented
software products for debit/credit card processing and electronic check
authorization requirements. The purchase price of the assets, including
acquisition costs, was approximately $2,500,000, which was paid in cash, plus
liabilities assumed of approximately $1,500,000. The business combination was
accounted for as a purchase and, accordingly, LPA operations are included in the
Company's consolidated results of operations from August 20, 1993, the effective
date of the transaction. The assets and liabilities acquired are recorded in
the Company's consolidated balance sheet at the assigned fair value.
During the second quarter of fiscal year 1994, BancTec contributed
approximately $500,000 in cash and certain other consideration in exchange for a
33% equity interest in Servibanca, S.A.("Servibanca"), a Chilean company.
Servibanca is a check processing service bureau as well as a distributor of
BancTec image processing systems, document processing systems, and stand-alone
reader/sorters to banks, service bureaus, and other financial processors in
Chile and other South American countries. BancTec's investment in and share of
Servibanca's earnings have been included since September 14, 1993, and are
recorded using the equity method of accounting.
During the third quarter of fiscal year 1994, the Company acquired 100% of
the stock of Imagesolve International, Ltd. ("Imagesolve"), a leading British
provider of integrated systems solutions for electronic document imaging,
specializing in solutions utilizing Computer Output to Laser Disk (COLD)
technology, which electronically archives computer-generated documents onto
optical disks. The purchase price for the stock, including acquisition costs,
was approximately $2,800,000, which was paid in cash. The business combination
was accounted for as a purchase and, accordingly, Imagesolve operations are
included in the Company's consolidated results of operations from December 1,
1993, the effective date of the transaction. The assets and liabilities
acquired are recorded in the Company's consolidated balance sheet at the
assigned fair value.
Also during the third quarter of fiscal year 1994, the Company acquired
100% of the stock of Advanced Computer Systems, Inc. ("ACS"). ACS was a leading
provider of software products which included integrating of check sorting,
platform automation, loan processing, ATM and teller terminal processing and
other bank operations activities, to banks with generally less than $300 million
in assets. The purchase price for the stock, including acquisition costs, was
approximately $25,300,000, which was paid in cash borrowed under the acquisition
loan facility discussed in Note D. The business combination was accounted for as
a purchase and, accordingly, ACS operations are included in the
20
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Company's consolidated results of operations from December 23, 1993, the
effective date of the transaction. The assets and liabilities acquired are
recorded in the Company's consolidated balance sheet at the assigned fair value.
During the fourth quarter of fiscal year 1994, the Company acquired 100% of
the stock of Terminal Data Corporation ("TDC"). TDC was a provider of document
imaging systems, page scanning devices, and digital and microfilm cameras. The
purchase price for the stock, including acquisition costs, was approximately
$23,600,000, of which approximately $18,100,000 was paid in cash during fiscal
year 1994. Such cash was borrowed under the acquisition loan facility. Non-cash
consideration of approximately $5,500,000 consisted primarily of future payments
to be made for stock and debt which were paid during fiscal year 1995 with cash
borrowed under the acquisition loan facility and operating cash. The business
combination was accounted for as a purchase and, accordingly, TDC operations are
included in the Company's consolidated results of operations from February 28,
1994, the effective date of the transaction. The assets and liabilities
acquired are recorded in the Company's consolidated balance sheet at the
assigned fair value.
The following unaudited pro forma information combines the results of
operations of the Company, ACS and TDC as if the purchase transactions had
occurred at the beginning of fiscal year 1993. The pro forma information is
based on the historical financial statements of BancTec, ACS and TDC giving
effect to the transactions under the purchase method of accounting and including
adjustments necessary to reflect the exclusion of certain ACS and TDC
administration costs, additional interest on debt, amortization of the excess of
cost over net assets of acquired business and the related tax impact thereof.
Management believes that these pro forma statements may not be indicative
of the results that would have occurred if the combinations had been in effect
on the dates indicated or which may be obtained in the future. Anticipated
efficiencies from the consolidation of these entities are not fully
determinable, and therefore, have been excluded from these pro forma results of
operations. The Company has not considered the LPA and Imagesolve acquisitions
in these unaudited pro forma results of operations because such acquisitions are
not material to the consolidated financial statements.
<TABLE>
<CAPTION>
(Unaudited)
March 27, March 28,
1994 1993
----------- ---------
(In thousands)
<S> <C> <C>
Revenue.................................... $284,770 $277,847
Income before cumulative effect of change
in accounting method..................... 15,477 13,288
Net Income................................. 15,477 14,123
Net Income per share:
Before accounting change................. $1.37 $1.22
Net Income............................... $1.37 $1.30
</TABLE>
In the second quarter of fiscal year 1993, the Company acquired Computer
Field Specialists, Inc. and Computer Field Specialists of Texas, Inc.
(collectively, "CFS") for 318,181 (477,272 as adjusted for stock split) shares
of common stock. The acquisition was accounted for as a pooling of interests.
The financial statements include the combined results of CFS and BancTec from
June 29, 1992, the date of the acquisition. Prior periods have not been
restated due to immateriality.
Also during the second quarter of fiscal year 1993, the Company acquired
Springfield Computer Consultants, Inc., which marketed under the name of Access
Banking Systems ("Access"). The purchase price, including acquisition costs, was
approximately $3,400,000, of which $2,900,000 was paid in cash. Non-cash
consideration of $500,000 consisted primarily of future payments to the former
owners. The business combination was accounted for as a purchase and,
accordingly, Access operations are included in the Company's consolidated
results of operations from August 1, 1992, the effective date of the
transaction. The assets and liabilities acquired are recorded in the Company's
consolidated balance sheet at the assigned fair value.
21
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has not disclosed unaudited pro forma results of operations of
CFS and Access as if the acquisitions had been made as of the beginning of
fiscal year 1993 because such acquisitions are not material to the consolidated
financial statements.
The excess of the costs of these acquired businesses over the fair value
assigned to the assets acquired less liabilities assumed are being amortized
over their estimated useful lives using the straight-line method commencing with
the respective dates of acquisition:
Acquired Business Goodwill Amortization Period
----------------- ----------------------------
LPA 15 years
ImageSolve 20 years
ACS 20 years
TDC 25 years
Access 15 years
The Company continually evaluates whether events and circumstances indicate
the remaining estimated useful life of goodwill may warrant revision or that the
remaining balance of goodwill may not be recoverable. No adjustments to
recorded goodwill have resulted from these evaluations.
<TABLE>
<CAPTION>
NOTE C - INVENTORIES
March 26, March 27,
1995 1994
--------- ---------
(In thousands)
<S> <C> <C>
Raw materials..................... $19,482 $16,317
Work-in-process................... 5,387 6,516
Finished goods.................... 26,622 25,936
------- -------
$51,491 $48,769
======= =======
NOTE D - INDEBTEDNESS
March 26, March 27,
1995 1994
------- -------
(In thousands)
Term loans payable to banks....... $61,114 $61,340
Obligations under capital leases.. 1,635 1,650
------- -------
62,749 62,990
Less current maturities........... 20,290 12,426
------- -------
$42,459 $50,564
======= =======
</TABLE>
Future maturities of term loans payable to banks are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
----------- --------------
<S> <C>
1996............................. $19,645
1997............................. 11,000
1998............................. 11,000
1999............................. 11,000
2000............................. 8,469
Thereafter....................... -
-------
$61,114
=======
</TABLE>
During fiscal year 1995, the Company renegotiated the terms of its credit
agreement with several banks. The amended and restated agreement provides for a
$30,000,000 short-term revolving credit facility ("revolving credit facility"),
a $51,000,000 term loan ("term loan") and a $55,000,000 acquisition loan
facility ("acquisition facility") which are unsecured. The agreement contains
restrictive covenants which, among other things, restrict payment of dividends,
limit additional debt and require the Company to maintain a defined current
ratio, minimum net worth and a minimum ratio of cash flow from operations to
debt service. At March 26, 1995, the Company was in compliance with all of
22
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
the covenants required under the agreement. The agreement was amended to permit
borrowing in foreign currency which the Company utilizes as part of its foreign
currency risk management program discussed in Note E. The revolving credit
facility bears interest at the lender's prime commercial rate or, at the
Company's option, the London Interbank Offered Rate (LIBOR) on Eurocurrency
borrowings plus 1 point. A commitment fee of 1/4% on the unused revolving
credit facility is payable on a quarterly basis. The term loan and acquisition
facility bear interest at the lender's prime commercial rate or, at the
Company's option, LIBOR plus 1-1/4 to 1-3/4 points, depending on the Company's
debt to capitalization ratio, as defined. At March 26, 1995, the Company's debt
to capitalization ratio was .37 and the applicable interest rate was LIBOR plus
1-1/2 points.
At March 26, 1995, the Company was party to one interest rate cap agreement.
This agreement, which expires in May of 1997, entitles the Company to receive
from a counterparty, on a quarterly basis, the amount, if any, by which interest
payments calculated using LIBOR on the notional amount of $27,500,000 exceed
7.0%, with a ceiling of 9.5%, above which the Company would receive no
additional amount. There were no interest rate cap agreements in place during
fiscal years 1994 or 1993.
At March 26, 1995, the amount outstanding under the revolving credit facility
was $12,942,000 at a weighted average interest rate of 6.65%. During fiscal year
1995, the Company borrowed a maximum amount of $15,000,000 against this
facility.
Borrowings under the term loan total $5,895,000 at March 26, 1995. Principal
payments under the term loan are due in 28 equal quarterly installments, plus
interest, which commenced on June 30, 1989 and matures in fiscal year 1996.
Under the acquisition facility, the Company was allowed to borrow up to
$55,000,000 during the period from inception of the facility, October 6, 1993,
through December 31, 1994 for the purpose of funding acquisitions. The Company
borrowed the maximum amount available under this facility. At December 31, 1994,
the balance of the acquisition facility was converted to a term loan and
principal payments are due in 20 equal quarterly installments, plus interest,
which commence on March 31, 1995 and end on December 31, 1999. At March 26,
1995, the balance of the acquisition facility was $55,219,000 which includes
unrealized losses resulting from converting certain notes under the facility
into foreign currencies. Such unrealized losses are offset by unrealized gains
on intercompany borrowings.
The weighted average interest rate on borrowings under the term loan and
acquisition facility was 7.63% at March 26, 1995.
Future minimum lease payments under capital lease obligations are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
----------- --------------
<S> <C>
1996............................. $ 759
1997............................. 527
1998............................. 319
1999............................. 229
2000............................. 32
------
Total minimum lease payments..... 1,866
Less amount representing interest
(5.9%-13.0% rate)............... 231
------
Present value of net minimum lease
payments, including current
maturities of $645,000 at
March 26, 1995 ................. $1,635
======
</TABLE>
23
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Property, plant and equipment recorded under capital leases are as follows:
<TABLE>
<CAPTION>
March 26, March 27,
1995 1994
--------- ---------
(In thousands)
<S> <C> <C>
Machinery and equipment................. $ 967 $ 852
Furniture, fixtures and other........... 2,290 3,006
------ ------
Total - at cost......................... 3,257 3,858
Less accumulated depreciation........... 1,622 1,991
------ ------
$1,635 $1,867
====== ======
</TABLE>
The Company paid cash totalling $4,853,000, $1,093,000, and $1,967,000, for
interest during fiscal years 1995, 1994 and 1993, respectively.
NOTE E - DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate and foreign currency risks.
Interest rate cap agreements are used to reduce the potential impact of
increases in interest rates on floating-rate long-term debt. As discussed in
Note D, the Company has one interest cap agreement in effect at March 26, 1995,
which provides protection to the Company against increases in the LIBOR interest
rate from 7.0% to 9.5% on approximately one-half of the Company's acquisition
facility borrowings.
The Company utilizes foreign currency forward exchange agreements in
conjunction with foreign currency borrowings discussed in Note D to hedge
significant foreign currency receivables and payables. Under the terms of the
forward exchange agreements, the Company and a counterparty agree to exchange
foreign currency amounts on a specified date at an agreed upon exchange rate.
At March 26, 1995, the Company had two forward exchange agreements in effect
which required the Company to exchange 45,000,000 Swedish Krona ("SEK") and
21,000,000 SEK for German Deutschmarks ("DM") at the agreed upon SEK/DM exchange
rates of 4.8921 and 4.952, respectively. At March 26, 1995, the market exchange
rate between SEK and DM was approximately 5.184.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its interest rate cap and foreign currency forward
exchange agreements but has no off-balance sheet credit risk of accounting loss.
The Company anticipates that its counterparties will be able to fully satisfy
their obligations under their contracts. The Company does not obtain collateral
or other security to support financial instruments subject to credit risk but
monitors the credit standing of the counterparties.
NOTE F - OTHER ACCRUED EXPENSES AND LIABILITIES
<TABLE>
<CAPTION>
March 26, March 27,
1995 1994
--------- ---------
(In thousands)
<S> <C> <C>
Salaries, wages and other compensation.. $16,281 $16,033
Accrued taxes, other than income taxes.. 3,918 3,860
Advances from customers................. 5,981 3,279
Accrued invoices and costs.............. 4,723 4,177
Acquisition liabilities................. 3,509 815
Other................................... 7,937 3,804
------- -------
$42,349 $31,968
======= =======
</TABLE>
24
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE G - INCOME TAXES
In 1993, the Company adopted SFAS No. 109 - Accounting for Income Taxes.
SFAS 109 is an asset and liability approach which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events which have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Previously, the Company used the SFAS 96 asset and liability approach that gave
no recognition to future events other than the recovery of assets and settlement
of liabilities at their recorded amounts.
BancTec elected to reflect the cumulative effect of adopting this
pronouncement as a change in accounting principle as of the beginning of fiscal
year 1993 with a credit to earnings of $835,000. Prior year's financial
statements were not restated. This credit consists primarily of the increase in
net deferred tax assets to reflect the benefit of taxes previously provided for
profit on inventory sold between BancTec entities within different taxing
jurisdictions but still on the Company's consolidated books at the end of fiscal
1992. Such benefit could not be recorded under SFAS 96. The impact of adoption
of SFAS 109 on fiscal 1993 results was not significant and previously reported
quarters were not restated.
The domestic and foreign components of income before income taxes and
cumulative effect of accounting change consisted of the following:
<TABLE>
<CAPTION>
Years Ended
---------------------------------
March 26, March 27, March 28,
1995 1994 1993
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Domestic (including Puerto Rico).... $24,427 $26,754 $19,272
Foreign............................. (4,647) (3,891) 1,829
------- ------- -------
$19,780 $22,863 $21,101
======= ======= =======
</TABLE>
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
Years Ended
----------------------------------
March 26, March 27, March 28,
1995 1994 1993
--------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Current:
Federal (including Puerto Rico).. $4,911 $ 9,508 $7,174
State............................ 1,355 729 822
Foreign.......................... 826 1,126 973
------ ------- ------
Total current.................... 7,092 11,363 8,969
------ ------- ------
Deferred:
Federal.......................... 2,141 (972) (544)
Foreign.......................... (752) (1,246) -
------ ------- ------
Total deferred................... 1,389 (2,218) (544)
------ ------- ------
$8,481 $ 9,145 $8,425
====== ======= ======
</TABLE>
25
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The difference between the income tax provision computed at the statutory
federal income tax rate and the financial statement provision for taxes is
summarized as follows:
<TABLE>
<CAPTION>
Years Ended
----------------------------------
March 26, March 27, March 28,
1995 1994 1993
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Provision at U.S. statutory rate of 35% in
fiscal years 1995 and 1994, and 34% for
fiscal year 1993............................. $ 6,923 $ 8,002 $7,174
Increase (reduction) in tax expense
resulting from:
Impact of foreign and Puerto Rico
income tax rates.......................... (717) (1,029) 475
Charge/credit in lieu of taxes for tax
benefits realized from acquisitions....... (1,457) 137 110
Valuation reserves provided for
tax deductible losses generated........... 1,428 1,246 -
Utilization of investment and
alternative minimum tax credits........... - - (584)
Domestic amortization of cost over
net assets of acquired business........... 1,295 637 437
State income tax, net of federal
income tax benefit........................ 486 474 597
Other........................................ 523 (322) 216
------- ------- ------
$ 8,481 $ 9,145 $8,425
======= ======= ======
</TABLE>
The Company paid cash totalling $8,192,000, $9,414,000, and $5,006,000, for
income taxes in fiscal years 1995, 1994 and 1993, respectively.
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and their
financial reporting basis and are included in other current assets or other
assets depending on the timing of the expected realization. The deferred tax
benefit in fiscal years 1995, 1994 and 1993 represented the effect of changes in
the amounts of temporary differences during those fiscal years.
Deferred tax assets (liabilities), as determined under the provisions of
SFAS 109, were comprised of the following:
<TABLE>
<CAPTION>
Years Ended
----------------------------------
March 26, March 27, March 28,
1995 1994 1993
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Gross Deferred Tax Liability:
Depreciation................................. $ (684) $ (939) $(2,070)
------- ------- -------
Gross Deferred Tax Assets:
Inventory reserves........................... 1,236 1,088 997
Warranty reserves............................ 86 104 136
Employee benefit accruals.................... 2,692 2,015 1,568
Accounts receivable reserves................. 508 531 361
Deductible acquisition costs................. 2,038 238 397
Net operating losses......................... 13,075 6,135 3,654
Taxes paid on intercompany profits........... 1,076 983 1,215
Alternative minimum tax credit carryforward.. 1,134 - 350
Other........................................ (51) 117 201
------- ------- -------
Gross deferred tax assets.................... 21,794 11,211 8,879
------- ------- -------
Deferred tax assets valuation reserve........ (6,878) (4,900) (3,654)
------- ------- -------
Net deferred tax asset.................... $14,232 $ 5,372 $ 3,155
======= ======= =======
</TABLE>
The Company has net operating loss carryforwards which expire as follows:
1997 though 2000, $12,567,000; 2001 through 2008, $8,667,000; and indefinite,
$12,660,000.
26
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The net change in the deferred tax asset valuation reserve in fiscal 1995,
1994 and 1993 was $1,978,000, $1,246,000, and $2,326,000, respectively, and is
attributable to the increase in the net operating loss carryforwards of the
Company's Canadian, Japanese and Australian subsidiaries and the German entity
of the Scandata Joint Venture.
At March 26, 1995, the Company had approximately $188,000 in deductible
temporary differences remaining for financial reporting purposes as a result of
the acquisition of CES. An adjustment to the excess of cost over net assets of
business acquired and a charge in lieu of taxes is recorded for any tax benefits
resulting from realization of these carryforwards in years subsequent to the
acquisition.
Undistributed earnings of foreign subsidiaries were approximately $7,510,000,
$7,264,000 and $6,831,000 at March 26, 1995, March 27, 1994, and March 28, 1993,
respectively. No taxes have been provided on these undistributed earnings as
they are considered to be permanently reinvested.
NOTE H - STOCKHOLDERS' EQUITY
On February 8, 1993, the Company authorized a three-for-two stock split
payable in the form of a 50% stock dividend to stockholders of record on
February 18, 1993. A total of 3,457,553 shares of common stock were issued in
connection with the split. Accordingly, $34,576 was transferred from additional
paid-in capital to common stock. All share and per share data presented has
been adjusted to reflect the stock split.
EMPLOYEE STOCK AWARD PLANS
At March 26, 1995, a total of 2,622,644 shares of common stock were reserved
for issuance under the Company's stock award plans. At March 26, 1995, 861,794
shares were available for future grant. In general, the plans provide for the
granting of options or restricted shares to key employees. A summary of the key
provisions of each type award is as follows:
STOCK OPTIONS
In general, the plans provide for the granting of options at not less than the
fair market value of the stock at the date of grant. Options issued vest
periodically as defined in the plans. At March 26, 1995, options to purchase
1,760,850 shares were outstanding, of which options to purchase 756,415 shares
were vested and could be exercised.
A summary of activity in the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
---------- ---------------
<S> <C> <C>
Options outstanding - March 28, 1993.. 1,560,322 $3.50 - $18.83
Granted............................... 397,235 17.75 - 22.38
Exercised............................. (221,933) 3.50 - 18.83
Forfeited............................. (53,032) 4.83 - 18.83
---------
Options outstanding - March 27, 1994.. 1,682,592 4.83 - 22.38
Granted............................... 317,550 18.00 - 22.75
Exercised............................. (173,138) 4.83 - 18.83
Forfeited............................. (66,154) 5.42 - 22.25
---------
Options outstanding - March 26, 1995.. 1,760,850 $4.83 - $22.75
=========
</TABLE>
RESTRICTED STOCK AWARDS
The Board of Directors of the Company periodically awards restricted stock to
key employees as compensation. Vesting is pro rata and is subject to future
service. Unearned compensation is charged for the market value of the shares
on the date of grant and is amortized to expense over the vesting period.
Such amount is shown as a reduction of stockholders' equity in the
accompanying consolidated balance sheets. During fiscal year 1995, 6,203
shares were awarded and unearned compensation of $141,118 was recorded.
During fiscal 1994, 27,981 restricted shares were awarded and
27
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
unearned compensation of $490,100 was recorded. Vesting on such shares ranges
from 3 years to 21 years. In fiscal years 1995, 1994 and 1993, $227,037,
$188,100 and $108,000, respectively, was amortized to expense.
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employees' stock purchase plan under which 194,512 shares
of common stock were reserved at March 26, 1995. The shares are offered for
sale to employees only, through payroll deductions, at prices equal to 85% of
the lesser of the fair market value of the Company's common stock on the first
day of the offering period or the last day of the exercise period. During
fiscal years 1995 and 1994, the Company issued 47,630 and 49,186 shares,
respectively, under the plan.
STOCKHOLDER RIGHTS
On June 16, 1988, the Company adopted a Stockholder Rights Plan in which
common stock purchase rights were distributed as a dividend at the rate of one
right for each common share held as of the close of business on June 27, 1988.
Each share issued thereafter also received one right. As a result of the three-
for-two stock split, the number of rights associated with each share of common
stock has been adjusted from one right to two-thirds of a right. The
Stockholder Rights Plan was designed to deter coercive takeover tactics and to
prevent an acquirer from gaining control of the Company without offering a fair
price to all of the Company's stockholders. The rights will expire on May 24,
1998.
Each right will entitle stockholders to buy one and one-half shares of common
stock of the Company at an exercise price of $35.50. The rights will be
exercisable only if a person or group acquires beneficial ownership of 20% or
more of the Company's common stock or commences a tender or exchange offer upon
consummation of which such person or group would beneficially own 30% or more of
the common shares.
If any person becomes the beneficial owner of 35% or more of the Company's
common stock, other than pursuant to certain tender or exchange offers described
in the Plan, or if the Company is the surviving corporation in a merger with a
20%-or-more stockholder and its common shares are not changed or converted, or
if a 20%-or-more stockholder engages in certain self-dealing transactions with
the Company, then each right not owned by such person or related parties will
entitle its holder to purchase, at the right's then current exercise price,
shares of Company common stock (or, in certain circumstances as determined by
the Board, cash, other property, or other securities) having a value of twice
the right's exercise price. In addition, after any person has become a 20%-or-
more stockholder, (i) if the Company is involved in a merger or other business
combination transaction in which it is not the continuing or surviving
corporation (other than a merger described in the previous sentence or a merger
that follows a certain tender or exchange offers described in the Plan), or (ii)
if the Company sells 50% or more of its assets or earning power, each right will
entitle its holder to purchase, at the right's then current exercise price,
shares of common stock of such other person having a value of twice the right's
exercise price.
The Company will generally be entitled to redeem the rights at $.05 per right
at any time until the fifteenth day (subject to certain limited extensions)
following public announcement that a 20% position has been acquired.
NOTE I - EMPLOYEE BENEFIT PLANS
The Company has an employee savings plan which allows substantially all full-
time domestic employees to make contributions defined by Section 401(k) of the
Internal Revenue Code. The Company elected to contribute 1.1%, 1.4%, and 1.5%
of the qualifying participant's base salary in fiscal years 1995, 1994 and 1993,
respectively. Amounts expensed under the plan for the years ended March 26,
1995, March 27, 1994, and March 28, 1993 were $600,000, $597,000, and $600,000,
respectively. The Company provides no material postretirement benefits to its
employees.
28
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE J - COMMITMENTS AND CONTINGENCIES
The Company leases most of its production facilities and certain equipment
under non-cancelable operating leases expiring through fiscal year 2010. Total
Company rent expense for the years ended March 26, 1995, March 27, 1994, and
March 28, 1993 was $6,597,000, $4,263,000, and $4,701,000, respectively.
Future minimum payments under non-cancelable operating leases are
approximately as follows:
Fiscal Year (In thousands)
----------- --------------
1996............................. $ 5,476
1997............................. 4,232
1998............................. 3,624
1999............................. 2,134
2000............................. 1,022
Thereafter....................... 3,855
-------
$20,343
=======
The Company has the option to renew operating leases on its major
facilities at the end of the current lease terms.
The Company and its subsidiaries are parties to various legal proceedings.
Although the ultimate disposition of such proceedings is not presently
determinable, in the opinion of the Company, any liability that might ensue
would not be material in relation to the consolidated operations of the Company.
NOTE K - GEOGRAPHIC OPERATIONS
The Company operates in the following geographic areas: the United States,
including Puerto Rico, Europe, including the United Kingdom and Scandinavia, and
other international areas consisting primarily of Australia, Japan, and Canada.
Interarea sales to affiliates are accounted for at established transfer prices.
Sales and operating income for the years ended March 26, 1995, March 27,
1994, and March 28, 1993, and identifiable assets at the end of each of those
years, classified by geographic area, are as follows:
<TABLE>
<CAPTION>
Other
United Inter- Elimina- Consoli-
States Europe national tions dated
------ -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
1995 (In thousands)
Sales to unaffiliated customers....... $242,732 $49,568 $5,239 $ - $297,539
Interarea sales to affiliates......... 8,652 - - (8,652) -
Operating income...................... 27,597 (1,904) (1,972) (37) 23,684
Identifiable assets................... 255,310 59,593 5,049 (12,586) 307,366
1994
Sales to unaffiliated customers....... $186,362 $56,778 $4,398 $ - $247,538
Interarea sales to affiliates......... 16,809 - - (16,809) -
Operating income...................... 23,339 (2,470) (569) 3,302 23,602
Identifiable assets................... 236,136 54,759 2,234 (16,859) 276,270
1993
Sales to unaffiliated customers....... $171,539 $56,571 $5,775 $ - $233,885
Interarea sales to affiliates......... 25,121 710 - (25,831) -
Operating income...................... 24,312 (1,222) (718) 2,065 24,437
Identifiable assets................... 164,055 46,886 2,809 (18,904) 194,846
</TABLE>
Foreign currency transaction gains in fiscal year 1995 were $1,080,000, while
foreign currency losses in fiscal years 1994 and 1993 were $374,000 and
$1,122,000, respectively, and are included as part of sundry-net in the
consolidated statements of income.
29
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE L - RELATED PARTIES
Prior to fiscal year 1994, ScanData S.A. subcontracted the performance of
maintenance services for certain customers to Thomson, a partner in the ScanData
Joint Venture. Under the terms of such agreement, ScanData S.A. received 12.5%
of the amount billed for maintenance services in exchange for providing such
customers to Thomson. This agreement expired at the end of fiscal year 1993.
Included in fiscal year 1993 revenues is $461,000 related to this arrangement.
Included in trade accounts payable at March 26, 1995 and March 27, 1994 are
$6,713,000 and $6,635,000, respectively, payable to Thomson.
NOTE M - SUMMARIZED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995
--------------------------------------------
Q1 Q2 Q3 Q4 Total
------- ------- ------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenue................................. $69,466 $73,225 $77,756 $77,092 $297,539
Gross profit............................ 20,782 23,105 22,816 20,141 86,844
Net income.............................. 3,702 4,074 4,428 305 12,509
Fully diluted net income per share...... .33 .36 .40 .03 1.12
1994
--------------------------------------------
Q1 Q2 Q3 Q4 Total
------- ------- ------- ------- --------
(In thousands, except per share data)
Revenue................................. $54,878 $53,342 $59,539 $79,779 $247,538
Gross profit............................ 15,251 14,815 17,620 21,966 69,652
Net income.............................. 3,280 3,356 4,257 5,450 16,343
Fully diluted net income per share...... .30 .30 .38 .48 1.45
</TABLE>
Due to the impact of stock prices on the computation of earnings per share,
net income per share as presented does not equal the sum of the quarters.
NOTE N - SUBSEQUENT EVENT
On May 19, 1995, the Company entered an agreement with Recognition
International, Inc. ("Recognition") to acquire 100% of the outstanding shares of
Recognition in a stock for stock exchange. This transaction, which will be
accounted for as a pooling of interests, will result in the issuance of
approximately 9,100,000 shares of BancTec common stock. The merger is subject to
regulatory and shareholder approval and is expected to be completed in
September, 1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
30
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1995 annual meeting
of stockholders, except for the information regarding executive officers of the
Company which is contained in Part I of this Annual Report on Form 10-K. The
information required by this item contained in such definitive proxy material is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1995 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1995 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1995 annual meeting
of stockholders, which information is incorporated herein by reference.
31
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements: See Index to Financial Statements and
Schedules on page 35.
(b) Reports on Form 8-K:
(i) May 31, 1995, Execution of Agreement and Plan of Merger with
Recognition International, Inc.
(c) Exhibits
3.1 - Certificate of Incorporation.(6)
3.2 - By-Laws.(1)
4.1 - Specimen of Common Stock Certificate.(1)
10.1 - BancTec, Inc. 1989 Stock Plan.(8)
10.2 - BancTec, Inc. Incentive Stock Option Plan, as amended.(3)
10.3 - BancTec, Inc. 1982 Nonqualified Stock Option Plan, as amended.(3)
10.4 - BancTec, Inc. 1994 Stock Plan.(11)
10.5 - BancTec, Inc. 1990 Employee Stock Purchase Plan, as amended.(7)
10.6 - BancTec, Inc. Deferred Compensation Plan.(9)
10.7 - Employment Agreement with Grahame N. Clark, Jr. dated May 28,
1992.(10)
10.8 - Employment Agreement with Norton A. Stuart dated May 28, 1992.(10)
10.9 - Employment Agreement with Tod V. Mongan dated May 28, 1992.(10)
10.10 - Rights Agreement dated June 16, 1988.(5)
10.11 - Second Amended and Restated Credit Agreement dated December 28, 1994
among the Company, its Subsidiaries and Texas Commerce Bank National
Association, as Agent.(12)
10.12 - Form of Indemnification Agreement between the Company and each of its
Directors and Officers.(4)
10.13 - License Agreement dated April 1, 1986 between the Company and TRW
Financial Systems, Inc. (formerly Teknekron Financial Systems, Inc.),
a TRW company.(2)
11.1 - Statement re: computation of net income per share.(12)
21.1 - Subsidiaries.(12)
23.1 - Consent of Independent Public Accountants.(12)
27.0 - Selected Financial Data.(13)
- ----------
(1) Filed as an Exhibit to the Company's Registration Statement on Form 8-B and
incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 31, 1985 and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 30, 1987 and incorporated herein by reference.
32
<PAGE>
(4) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 29, 1988 and incorporated herein by reference.
(5) Incorporated by reference to the Company's current report on Form 8-A filed
on July 6, 1988.
(6) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended April 2, 1989 and incorporated herein by reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 31, 1990 and incorporated herein by reference.
(8) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 31, 1991 and incorporated herein by reference.
(9) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 29, 1992 and incorporated herein by reference.
(10) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 28, 1993 and incorporated herein by reference.
(11) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended March 27, 1994 and incorporated herein by reference.
(12) Filed herewith.
(13) Filed electronically only.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BANCTEC, INC.
By /s/ Grahame N. Clark, Jr.
-------------------------------
Grahame N. Clark, Jr.
Chairman of the Board
and Chief Executive Officer
Dated: June 16, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Chairman of the Board and Chief June 16, 1995
/s/ Grahame N. Clark, Jr. Executive Officer and Director
- ---------------------------- (Principal Executive and Financial
Grahame N. Clark, Jr. Officer)
/s/ Norton A. Stuart, Jr. President and Director June 16, 1995
- ----------------------------
Norton A. Stuart, Jr.
Vice President, Controller and June 16, 1995
/s/ Michael D. Kubic Assistant Treasurer
- ---------------------------- (Principal Accounting Officer)
Michael D. Kubic
/s/ Michael E. Faherty Director June 16, 1995
- ----------------------------
Michael E. Faherty
/s/ Paul J. Ferri Director June 16, 1995
- ----------------------------
Paul J. Ferri
/s/ Rawles Fulgham Director June 16, 1995
- ----------------------------
Rawles Fulgham
/s/ Thomas G. Kamp Director June 16, 1995
- ----------------------------
Thomas G. Kamp
/s/ Michael A. Stone Director June 16, 1995
- ----------------------------
Michael A. Stone
/s/ Merle J. Volding Director June 16, 1995
- ----------------------------
Merle J. Volding
</TABLE>
34
<PAGE>
BANCTEC, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Financial Statements and Report of Independent Public Accountants
- -----------------------------------------------------------------
Report of Independent Public Accountants............................... 12, 36
Consolidated Balance Sheets at March 26, 1995 and March 27, 1994....... 13-14
Consolidated Statements of Income for the years ended March 26, 1995,
March 27, 1994 and March 28, 1993.................................... 15
Consolidated Statements of Cash Flows for the years ended March 26,
1995, March 27, 1994 and March 28, 1993.............................. 16
Consolidated Statements of Stockholders' Equity for the years ended
March 26, 1995, March 27, 1994 and March 28, 1993.................... 17
Notes to Consolidated Financial Statements............................. 18-30
Supporting Schedule
- -------------------
Schedule II - Valuation and Qualifying Accounts for the years ended
March 26, 1995, March 27, 1994 and March 28, 1993......... 37
</TABLE>
All other schedules have been omitted as the required information is
inapplicable, not required, or the information is included in the financial
statements and notes thereto.
35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
BancTec, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in BancTec, Inc.'s Form 10-K, and
have issued our report thereon dated May 19, 1995. Our report contained an
explanatory paragraph calling attention to the Company's change in method of
accounting for income taxes, effective March 30, 1992, as discussed in Note G to
the consolidated financial statements. Our audits were made for the purpose of
forming an opinion on those consolidated financial statements taken as a whole.
The schedule listed in the index to financial statements and schedules is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Dallas, Texas
May 19, 1995
36
<PAGE>
SCHEDULE II
BANCTEC, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended March 26, 1995, March 27, 1994 and March 28, 1993
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
---------- ---------- -------------------- ---------- ----------
Additions
--------------------
Balance at Charged to Balance at
beginning costs and end of
Description of period expenses Other Deductions period
- --------------------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 26, 1995:
Allowance for doubtful
accounts............... $1,518 $ 223 $ - $ 95(a) $1,646
Inventory obsolescence and
valuation reserves..... 4,923 2,339 - 2,151(b) 5,111
----- ----- ---- ------ -----
$6,441 $2,562 $ - $2,246 $6,757
====== ====== ===== ====== ======
Year ended March 27, 1994:
Allowance for doubtful
accounts............... $1,342 $ 312 $ - $ 136(a) $1,518
Inventory obsolescence and
valuation reserves..... 3,627 2,945 - 1,649(b) 4,923
------ ------ ----- ------ ------
$4,969 $3,257 $ - $1,785 $6,441
====== ====== ===== ====== ======
Year ended March 28, 1993:
Allowance for doubtful
accounts............... $1,831 $ 324 $ - $ 813(a) $1,342
Inventory obsolescence and
valuation reserves..... 3,792 2,692 - 2,857(b) 3,627
------ ------ ----- ------ ------
$5,623 $3,016 $ - $3,670 $4,969
====== ====== ===== ====== ======
</TABLE>
- ------------
(a) Write-off of uncollectible accounts.
(b) Scrapping of obsolete inventory and book to physical inventory adjustments.
37
<PAGE>
EXHIBIT 10.11
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------
Dated December 28, 1994
among
BANCTEC, INC.
and its Domestic Subsidiaries
BANCTEC USA, INC.
BANCTEC TECHNOLOGIES, INC.
BANCTEC (PUERTO RICO), INC.
BANCTEC (MANAGEMENT), INC.
BANCTEC THIRD PARTY MAINTENANCE, INC.
THE BANKS NAMED HEREIN
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Funds Administrator
and
TEXAS COMMERCE BANK, NATIONAL ASSOCIATION
as Agent and in its Individual Capacity
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS
Section 1.1. Certain Defined Terms........................... 1
Section 1.2. Accounting and Other Terms...................... 17
ARTICLE II. TERM LOAN
Section 2.1. Term Loan....................................... 17
Section 2.2. Term Notes...................................... 18
ARTICLE III. THE REVOLVING CREDIT LOAN
Section 3.1. Revolving Credit Loan........................... 18
Section 3.2. Revolving Credit Notes.......................... 19
Section 3.3. Borrowing Procedure............................. 20
Section 3.4. Disbursement of Advances........................ 20
Section 3.5. Use of Proceeds................................. 21
Section 3.6. Commitment Fee; Reduction or Term-
ination of Revolving Credit Commitment.......... 21
ARTICLE IV. ACQUISITION FACILITY LOAN
Section 4.1. Acquisition Facility Loan....................... 22
Section 4.2. Acquisition Facility Notes...................... 22
ARTICLE V. PAYMENTS AND CONVERSIONS
Section 5.1. Method of Payment............................... 23
Section 5.2. Optional Prepayments............................ 23
Section 5.3. Selection and Conversion of
Interest Options................................ 24
Section 5.4. Interest Computations; Notice of
Base Rate Change................................ 25
ARTICLE VI. SPECIAL PROVISIONS; ILLEGALITY
Section 6.1. Additional Costs................................ 25
Section 6.2. Limitations on Types of Interest Options........ 27
Section 6.3. Illegality...................................... 28
Section 6.4. Substitute Rates................................ 28
Section 6.5. Compensation.................................... 28
Section 6.6. Capital Adequacy................................ 30
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII. SET-OFF AND GUARANTIES
Section 7.1. Set-off......................................... 30
Section 7.2. Guaranty of the Obligations..................... 31
ARTICLE VIII. CONDITIONS PRECEDENCE
Section 8.1. Execution of this Agreement..................... 31
Section 8.2. Any Revolving Credit Advance.................... 32
ARTICLE IX. REPRESENTATIONS AND WARRANTIES
Section 9.1. Organization, Standing, Qualification........... 33
Section 9.2. Authorization, Enforceability, Etc.............. 33
Section 9.3. Ownership of Subsidiaries and
Names; Joint Ventures........................... 34
Section 9.4. Financial Statements and Business Conditions.... 34
Section 9.5. Taxes........................................... 35
Section 9.6. Title to Properties; Liens...................... 35
Section 9.7. Leases.......................................... 35
Section 9.8. Business; Compliance............................ 35
Section 9.9. Franchises, Patents, Trademarks and Other Rights 35
Section 9.10. Litigation, Proceedings, Etc.................... 36
Section 9.11. Compliance with Law............................. 36
Section 9.12. Employee Benefit Plans.......................... 36
Section 9.13. Use of Proceeds................................. 36
Section 9.14. Relationship to the Banks....................... 36
Section 9.15. Investment Company Act.......................... 36
Section 9.16. Public Utility Holding Company Act.............. 36
Section 9.17. Government Regulation........................... 37
Section 9.18. Regulation U.................................... 37
Section 9.19. Environmental Laws.............................. 37
Section 9.20. Labor Disputes; Compliance...................... 37
Section 9.21. Benefit to Obligated Parties.................... 37
Section 9.22. Original Credit Agreement....................... 38
ARTICLE X. COVENANTS
Section 10.1. Financial Statements............................ 38
Section 10.2. Certificates; SEC Filings; Other Information.... 39
Section 10.3. Transactions with Affiliates.................... 40
Section 10.4. Preservation of Existence, Properties
and Business.................................... 40
Section 10.5. Business Combinations........................... 40
Section 10.6. Payment of Taxes and Claims..................... 41
Section 10.7. Inspection Rights............................... 41
Section 10.8. Keeping Books and Records....................... 42
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 10.9. Compliance with Laws............................ 42
Section 10.10. Compliance with Agreements...................... 42
Section 10.11. Notices......................................... 42
Section 10.12. Compliance with ERISA and the Internal
Revenue Code.................................... 42
Section 10.13. Compliance with Regulations G, U and X.......... 43
Section 10.14. Further Assurances.............................. 43
Section 10.15. Limitation on Debt.............................. 43
Section 10.16. Minimum Net Worth............................... 44
Section 10.17. Consolidated Current Assets to
Consolidated Current Liabilities................ 44
Section 10.18. Minimum Interest Coverage Ratio/
Minimum Cash Flow Coverage Ratio................ 44
Section 10.19. Maximum Debt to Capitalization Ratio............ 44
Section 10.20. Amendment of Corporate Documents................ 44
Section 10.21. Distributions................................... 44
Section 10.22. Investments..................................... 45
Section 10.23. Negative Pledge................................. 45
Section 10.24. Capital Expenditures............................ 46
Section 10.25. Agreements...................................... 46
Section 10.26. Insurance....................................... 46
ARTICLE XI. DEFAULT
Section 11.1. Events of Default............................... 46
Section 11.2. Remedies........................................ 48
Section 11.3. Performance by Agent............................ 49
ARTICLE XII. THE AGENT
Section 12.1. Appointment, Powers and Immunities.............. 49
Section 12.2. Rights as a Bank................................ 50
Section 12.3. Sharing of Payments............................. 51
Section 12.4. No Liability of Agent; Indemnity................ 51
Section 12.5. Agent's Employees; Funds Administrator.......... 52
Section 12.6. Reliance by Agent............................... 52
Section 12.7. Several Commitments............................. 52
Section 12.8. Successor Agent................................. 53
ARTICLE XIII. MISCELLANEOUS
Section 13.1. Amendments, Etc................................. 53
Section 13.2. Notices......................................... 54
Section 13.3. No Waiver; Remedies............................. 54
Section 13.4. Costs, Expenses and Taxes....................... 54
Section 13.5. Indemnity....................................... 55
Section 13.6. Fees............................................ 55
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 13.7. Governing Law................................... 55
Section 13.8. Maximum Interest Rate........................... 56
Section 13.9. Survival of Representations and Warranties...... 56
Section 13.10. Binding Effect.................................. 57
Section 13.11. Successors and Assigns; Participations.......... 57
Section 13.12. Invalid Provisions.............................. 59
Section 13.13. Number and Gender of Words...................... 60
Section 13.14. Descriptive Headings............................ 60
Section 13.15. Execution in Counterparts....................... 60
Section 13.16. Letter of Credit Advances....................... 60
Section 13.17. Entire Agreement................................ 60
Exhibits
A Administrative Questionnaire
B Advance Request Form
C Guaranty
D Term Notes
E Revolving Credit Notes
F Acquisition Facility Notes
G Corporate Certificates
H Opinion of Borrower's Counsel
I Balance Sheets and Income Statements
J Section 10.2 Officer's Certificate
K Assignment and Acceptance
Schedules
1. Good Standing of Obligated Parties
2. Ownership of Subsidiaries
3. Litigation
4. Labor Disputes, Compliance
5. Liens
</TABLE>
iv
<PAGE>
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 28,
1994, is among: (i) BANCTEC, INC., a Delaware corporation ("Borrower"); (ii) the
following Subsidiaries of Borrower (the "Domestic Subsidiaries"): BANCTEC USA,
INC., a Delaware corporation, BANCTEC TECHNOLOGIES, INC., a Delaware
corporation, BANCTEC (PUERTO RICO), INC., a Delaware corporation, BANCTEC
(MANAGEMENT), INC., a Delaware corporation, BANCTEC THIRD PARTY MAINTENANCE,
INC., a Texas corporation; (iii) the banks listed on the signature pages hereof
(the "Banks") and (iv) TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association, and successor by merger to Texas Commerce Bank, National
Association (in its capacity as agent for the Banks, together with its
successors and assigns in such capacity, "Agent," in its capacity as Funds
Administrator, the "Funds Administrator" and in its individual capacity "TCB").
RECITALS:
A. Borrower, its Domestic Subsidiaries, the Banks, TCB, Agent and the
Funds Administrator entered into the First Restated Agreement (defined in
Section 1.1) for the purpose of amending and restating the Original Credit
Agreement (defined in Section 1.1).
B. Borrower and the Domestic Subsidiaries have asked the Banks to modify
certain of the terms of First Restated Agreement.
C. The Banks are willing to modify the First Restated Agreement upon and
subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree, and amend and restate the First
Restated Agreement in its entirety, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACQUISITION" means an Investment in capital stock or other equity
securities (or securities convertible into, exchangeable for or evidencing any
right or option to purchase or otherwise acquire any such stock or securities)
of any Person if, afterward, such Person would be a Subsidiary, or any
acquisition of all or a significant portion of the Property of any Person,
1
<PAGE>
that at such time was not a wholly-owned Subsidiary, whether such Investment or
acquisition was effected by purchase, exchange, Combination or otherwise.
"ACQUISITION FACILITY LOAN" means the loan described in Recital B of this
Agreement and made or to be made pursuant to Section 4.1.
"ACQUISITION FACILITY NOTES" has the meaning assigned to it in Section 4.2.
"ADDITIONAL COSTS" has the meaning assigned to it in Section 6.1(a).
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in
substantially the form of EXHIBIT "A" hereto, which each Bank shall complete and
provide to Agent.
"ADVANCE" means an advance of funds by Bank to Borrower pursuant to Article
III.
"ADVANCE REQUEST FORM" means a certificate, in substantially the form of
EXHIBIT "B" hereto, properly completed and signed by Borrower requesting
Advances.
"AFFILIATE" means any Person that, directly or indirectly, controls, or is
controlled by or under common control with, another Person. For the purposes of
this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or by
contract or otherwise. Without limiting the generality of the foregoing, a
Subsidiary of a Person is an Affiliate of that Person.
"AGENT" has the meaning assigned to it in the first paragraph of this
Agreement.
"AGREEMENT" means this Second Amended and Restated Credit Agreement, as it
may be modified or amended from time to time hereafter in accordance with the
provisions hereof. This Agreement supersedes the First Restated Agreement and
all of the Amendments.
"AMENDMENTS" means the amendments to the First Restated Agreement among
Borrower, the Guarantors, the Banks, Agent and the Funds Administrator which
preceded this Agreement, including First Amendment to Amended and Restated
Credit Agreement dated as of June 20, 1994, and Second Amendment to Amended and
Restated Credit Agreement dated as of September 30, 1994.
"ALTERNATE BASE RATE" means, at any time, the greater of (a) the Base Rate,
or (b) the Federal Funds Rate plus one-half of one percent (1/2 of 1%).
"ALTERNATE CURRENCY" means French francs, British pounds sterling, Japanese
yen, Australian dollars, Canadian dollars, German deutschemarks, Netherland
guilders, Swedish kronen and the currency of any other foreign country agreed to
by all of the Banks.
2
<PAGE>
"ALTERNATE CURRENCY LENDING OFFICE" means the office of each Bank specified
as its Alternate Currency Lending Office for each Alternate Currency below its
name on the signature pages hereof or such other office of such Bank as such
Bank may from time to time specify to Agent and Borrower.
"ALTERNATE CURRENCY LOAN" means a portion of any Loan which is funded in
Alternate Currency and bears interest at the Alternate Currency Rate.
"ALTERNATE CURRENCY BASE RATE" means for any Interest Period for each
Alternate Currency Loan, a rate per annum equal to the per annum rate of
interest determined by the Agent (rounded upward to the nearest 0.01%) to be the
rate per annum at which deposits in the relevant Alternate Currency are offered
by the Alternate Currency Lending Office of Agent to a prime bank in the
interbank domestic alternate currency market at 10:00 a.m. (Houston, Texas time)
two Business Days before the first day of such Interest Period, for a period
equal to such Interest Period in an amount substantially equal to the amount of
the relevant Alternate Currency Loan to be outstanding during such Interest
Period.
"ALTERNATE CURRENCY RATE" means (i) as to any Alternate Currency Loan that
is a Term Loan or an Acquisition Facility Loan, a rate per annum (rounded
upwards, if necessary, to the nearest l/100th of 1%) determined by Agent to be
equal to the Alternate Currency Base Rate for such Alternate Currency Loan for
the Interest Period for such Alternate Currency Loan plus the Interest Rate
Adjustment Factor as of the beginning date of such Interest Period, and (ii) as
to any Alternate Currency Loan that is a Revolving Credit Loan, a rate per annum
(rounded upwards, if necessary, to the nearest l/100th of 1%) determined by
Agent to be equal to the Alternate Currency Base Rate for such Alternate
Currency Loan for the Interest Period for such Alternate Currency Loan.
"APPLICABLE ACQUISITION FACILITY RATE" means at any time, (a) with respect
to Eurodollar Loans, a rate per annum equal to the Eurodollar Rate, (b) with
respect to CD Rate Loans, a rate per annum equal to the CD Rate, (c) with
respect to Base Rate Loans, a rate per annum equal to the Alternate Base Rate
and (d) with respect to Alternate Currency Loans, a rate per annum equal to the
Alternate Currency Rate.
"APPLICABLE LENDING OFFICE" means with respect to each Bank, such Bank's
Domestic Lending Office for the portions of the Loans bearing interest at the
Alternate Base Rate and the CD Rate, such Bank's Eurodollar Lending Office for
the portions of the Loans bearing interest at the Eurodollar Rate and such
Bank's Alternate Currency Lending Office for the portions of the Loans made in
Alternate Currency.
"APPLICABLE REVOLVING CREDIT RATE" means at any time (a) with respect to
Eurodollar Loans, a rate per annum equal to the Eurodollar Rate plus one percent
(1%), (b) with respect to Base Rate Loans, a rate per annum equal to the
Alternate Base Rate and (c) with respect to Alternate Currency Loans, a rate per
annum equal to the Alternate Currency Rate plus one percent (1%).
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"APPLICABLE TERM RATE" means at any time, (a) with respect to Eurodollar
Loans, a rate per annum equal to the Eurodollar Rate, (b) with respect to CD
Rate Loans, a rate per annum equal to the CD Rate, (c) with respect to Base Rate
Loans, a rate per annum equal to the Alternate Base Rate and (d) with respect to
Alternate Currency Loans, a rate per annum equal to the Alternate Currency Rate.
"ASSESSMENT RATE" means for any day the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
well capitalized and within supervisory subgroup "B" (or a comparable successor
assessment risk classification) within the meaning of 12 C.F.R. S 327.3(d) (or
any successor provision) to the Federal Deposit Insurance Corporation (or any
successor) for such Corporation's (or such successor's) insuring time deposits
at offices of such institution in the U.S.
"ASSIGNMENT AND ACCEPTANCE" has the meaning assigned to it in Section
13.11(c).
"AUTHORIZATIONS" has the meaning assigned to it in Section 9.9.
"BANK" means each of the banks listed on the signature pages of this
Agreement.
"BASE RATE" means at anytime, the rate of interest per annum then most
recently announced by TCB as its prime rate and thereafter entered into the
minutes of TCB's Loan and Discount Committee, automatically fluctuating upward
and downward with and at the time specified in each such announcement without
special notice to Borrower. The Base Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
TCB may make commercial or other loans at rates of interest at above or below
the Base Rate.
"BASE RATE LOAN" means a portion of any Loan which bears interest at a rate
based upon the Alternate Base Rate as determined pursuant to Section 5.4.
"BOARD" means the Board of Governors of the U.S. Federal Reserve System.
"BORROWER" has the meaning assigned to it in the first paragraph of this
Agreement.
"BORROWINGS" means for any Person: (a) all indebtedness (including, in the
case of the Obligated Parties, the Obligations), whether or not represented by
bonds, debentures, notes, securities or other evidences of indebtedness, for the
repayment of money borrowed, (b) all indebtedness representing deferred payment
of the purchase price of property or assets, (c) all indebtedness under any
capital lease, (d) all indebtedness under guaranties, endorsements, assumptions,
or other contractual contingent obligations, including any letters of credit, or
obligations in respect of, or to purchase or otherwise acquire, indebtedness of
others, (e) all indebtedness secured by a Lien existing on property owned,
subject to such Lien, whether or not the indebtedness secured thereby shall have
been assumed by the owner thereof and (f) all amendments, renewals, extensions,
modifications and refundings of any indebtedness or
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obligations referred to above in (a), (b), (c), (d) or (e).
"BUSINESS DAY" means a day other than (i) Saturday, (ii) Sunday, or (iii)
any other day on which banks are required or authorized to close in Dallas or
Houston, Texas, Washington, D.C. or any city in which an Alternate Currency Loan
is to be paid or advanced.
"CAPITAL EXPENDITURES" means for any period, all investments in fixed or
capital assets (including spare parts to the extent that spare parts are treated
by GAAP as fixed or capital assets) during such period, but excluding
Acquisitions.
"CD QUOTED RATE" means the rate of interest per annum determined by Agent
to be the average (rounded upward to the nearest whole multiple of one sixteenth
of one percent) of the interest rates quoted by the Reference Banks as of
approximately 10:00 a.m. Dallas time (or as soon thereafter as practicable) on
the beginning date of such Interest Period by a total of three dealers in
certificates of deposit in an amount comparable to the CD Rate Loan to which
such Interest Period applies and having a maturity comparable to such Interest
Period. If any Reference Bank does not furnish a timely quotation, Agent shall
determine the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Reference Banks. If none of such
quotations is available on a timely basis, the provisions of Section 6.4 shall
apply. The determination by Agent of the rate of interest per annum provided
hereby shall be conclusive absent manifest error.
"CD RATE" means for any CD Rate Loan, a rate per annum (rounded upwards, if
necessary, to the nearest l/100th of 1%) equal to (i) the CD Quoted Rate for
such CD Rate Loan for the Interest Period for such CD Rate Loan divided by 1.0
minus the CD Reserve Requirement for such CD Rate Loan for such Interest Period,
plus (ii) the Assessment Rate, plus (iii) the Interest Rate Adjustment Factor as
of the beginning date of such Interest Period.
"CD RATE LOAN" means a portion of any Loan which bears interest at a rate
based upon the CD Rate.
"CD RESERVE REQUIREMENT" means for any CD Rate Loan and for any Interest
Period therefor, the average maximum rate at which reserves (including any
marginal, supplemental, or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits in excess of $l,000,000,000 in
respect of nonpersonal time deposits in Dollars in New York City having original
maturities and principal amounts comparable to the relevant CD Rate Loan and its
Interest Period, and in the amount of $100,000 or more. Without limiting the
effect of the foregoing, the CD Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks by reason of any
Regulatory Change.
"CENTRAL TIME" means Central Standard Time or Central Daylight Savings
Time, as the case may be.
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"COMBINATION" means any merger, consolidation, amalgamation or share
exchange involving two or more Persons.
"COMMITMENT" means as to any Bank, such Bank's Revolving Credit
Commitment.
"CONSOLIDATED TANGIBLE ASSETS" means net assets of Borrower and its
Subsidiaries, on a consolidated basis, less the sum of (a) any surplus resulting
from any write-up of assets, (b) goodwill, including any amounts, however
designated, representing the excess of the purchase price paid for assets
acquired over the book value assigned thereto by Borrower, (c) patents,
trademarks, service marks, trade names and copyrights, and (d) other intangible
assets.
"CURRENT FINANCIALS" means the consolidated Financial Statements of
Borrower and its Subsidiaries for the fiscal year ended March 27, 1994 and the
six months ended September 25, 1994.
"DEBT" means for any Person, all liabilities to any other Person,
including, without limitation, all Borrowings and all other debts, claims and
indebtedness, contingent, fixed or otherwise, heretofore, now or from time to
time hereafter owing, due or payable, however evidenced, created, incurred,
acquired or owing and however arising, whether under written or oral agreement,
operation of law, or otherwise.
"DEBTOR RELIEF LAW" means any conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, fraudulent transfer, reorganization or
similar debtor relief Laws from time to time in effect generally affecting the
Rights of creditors.
"DEBT TO CAPITALIZATION RATIO" means a ratio of (i) long term Debt,
including the current maturities thereof, to (ii) the sum of long term Debt plus
consolidated stockholders' equity of Borrower and its Subsidiaries.
"DEFAULT" means any Event of Default and any other event which, with the
lapse of time or giving of notice or both, would constitute an Event of Default.
"DEFAULT RATE" means the lesser of the Maximum Rate or the sum of the Base
Rate in effect from day to day plus three percent (3%).
"DISPOSITION" means any sale, lease, assignment, transfer or other
disposition by any Person, or any grant by any Person of any Right or option to
purchase or otherwise acquire, any of its Property, except any sale, lease,
assignment, transfer or other disposition of inventory or equipment effected in
the ordinary course of the Person's business (including, without limitation, the
sale or trade-in of equipment and the sale or other disposal of excess, obsolete
or worn out equipment).
"DISTRIBUTION" means for any Person (a) with respect to any capital stock
issued by such Person, the retirement, redemption, purchase or other acquisition
for value of any such stock,
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(b) the declaration or payment of any dividend or other distribution on or with
respect to any such stock, other than a dividend which takes the form of capital
stock issued by such Person or a cash payment in lieu of issuing fractional
shares, not to exceed $25,000 in the aggregate in any twelve month period, and
(c) any other payment by such Person with respect to stock.
"DOLLARS AND $" means lawful money of the U.S.
"DOLLAR EQUIVALENT" means (i) the equivalent in Dollars of any Alternate
Currency and (ii) the equivalent in any Alternate Currency of Dollars. For
purposes of this Agreement, Dollar Equivalent shall be determined by using the
quoted spot rate at which TCB or any affiliate of TCB offers to exchange Dollars
for such Alternate Currency at 10:00 a.m. (Houston, Texas time) two Business
Days prior to the date on which such equivalent is to be determined pursuant to
the provisions of this Agreement. The Agent shall notify each affected Bank of
such determination on such date. The Dollar Equivalent of each Loan made in an
Alternate Currency shall be recalculated hereunder on each date it is necessary
to determine the unused portion of each Bank's Commitment or any Loans
outstanding on such date.
"DOMESTIC LENDING OFFICE" means the office of each Bank specified as its
Domestic Lending Office below its name on the signature pages hereof or such
other office as such Bank may from time to time specify to Agent and Borrower.
"DOMESTIC SUBSIDIARY" means any Subsidiary of Borrower which is not a
Foreign Subsidiary, including those Domestic Subsidiaries named in the opening
paragraph of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all regulations issued pursuant thereto.
"EURODOLLAR LENDING OFFICE" means the office of each Bank specified as its
Eurodollar Lending Office below its name on the signature pages hereof or such
other office of such Bank as such Bank may from time to time specify to Agent
and Borrower.
"EURODOLLAR LOAN" means a portion of any Loan which bears interest at a
rate based upon the Eurodollar Rate as determined by Section 5.4.
"EURODOLLAR RATE" means (i) as to any Eurodollar Loan that is a Term Loan
or an Acquisition Facility Loan, a rate per annum (rounded upwards, if
necessary, to the nearest l/100th of 1%) determined by Agent to be equal to (A)
the Interbank Offered Rate for such Eurodollar Loan for the Interest Period for
such Eurodollar Loan divided by 1.0 minus the Eurodollar Reserve Requirement for
such Eurodollar Loan for such Interest Period plus (B) the Interest Rate
Adjustment Factor as of the beginning date of such Interest Period, and (ii) as
to any Eurodollar Loan that is a Revolving Credit Loan, a rate per annum
(rounded upwards, if necessary, to the nearest l/100th of 1%) determined by
Agent to be equal to the Interbank Offered Rate for such Eurodollar Loan for the
Interest Period for such Eurodollar Loan divided
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by 1.0 minus the Eurodollar Reserve Requirement for such Eurodollar Loan for
such Interest Period.
"EURODOLLAR RESERVE REQUIREMENT" means for any Eurodollar Loan and for any
Interest Period therefor, the average maximum rate at which reserves (including
any marginal, supplemental, or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding $1,000,000,000 against
"eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Eurodollar Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks by
reason of any Regulatory Change against (a) any category of liabilities which
includes deposits by reference to which the Eurodollar Rate is to be determined
as provided in the definition of "Interbank Offered Rate" in this Section 1.1,
or (b) any category of extensions of credit or other assets which include
Eurodollar Loans.
"EVENT OF DEFAULT" means any of the events listed in Section 11.1 of this
Agreement.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"FEDERAL FUNDS RATE" means for any day, the rate per annum (rounded
upwards, if necessary, to the nearest l/100th of 1%) determined by Agent to be
equal to the weighted average of the rates on overnight federal funds
transactions with member banks of the Federal Reserve System arranged by federal
funds brokers on such day, as published by the Federal Reserve Bank of New York,
New York on the Business Day next succeeding such day or if such rates are not
published for any day, the average of the rates charged to the Reference Banks
on such day on such transactions. The determination by Agent of the rate of
interest per annum provided above shall be conclusive absent manifest error.
"FINANCIAL STATEMENTS" means balance sheets, income statements, statements
of stockholders' equity and statements of cash flows.
"FIRA" has the meaning assigned to it in Section 9.14.
"FIRST RESTATED AGREEMENT" means the Amended and Restated Credit Agreement
between Borrower, its Domestic Subsidiaries, the Banks, Agent and Funds
Administrator, dated October 6, 1993.
"FOREIGN SUBSIDIARY" means any Subsidiary which is organized under the laws
of a jurisdiction other than the U.S. or any state thereof.
"FUNDING FEE" has the meaning assigned to it in Section 4.7.
"FUNDS ADMINISTRATOR" has the meaning assigned to it in the first paragraph
of this Agreement.
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"GAAP" means generally accepted accounting principles for financial
reporting in the U.S.
"GUARANTORS" means the Domestic Subsidiaries named in the opening paragraph
of this Agreement and each other Domestic Subsidiary of Borrower that executes a
Guaranty for the benefit of the Banks.
"GUARANTY" means a Guaranty Agreement executed by a Guarantor for the
benefit of the Banks, in substantially the form of EXHIBIT "C" hereto, as the
same may be supplemented, amended or otherwise modified from time to time.
"IMPOSITIONS" has the meaning assigned to it in Section 10.6
"INTERBANK OFFERED RATE" means the rate of interest per annum determined by
Agent to be the average (rounded upward to the nearest whole multiple of one
sixteenth of one percent) of the interest rates quoted by the Reference Banks at
approximately 11:00 a.m. New York time (or as soon thereafter as practicable) on
the day two (2) Business Days prior to the first day of the Interest Period for
such Eurodollar Loan for the offering by the Reference Banks to leading banks in
whatever interbank market may be selected by the Reference Banks, in their sole
discretion, of Dollar deposits having a term comparable to such Interest Period
and in an amount comparable to the principal amount of the respective Eurodollar
Loans of the Reference Banks to which such Interest Period relates. If any
Reference Bank is not participating in any Eurodollar Loan during the Interest
Period therefor (pursuant to Section 5.1 or 5.2 or 5.3 hereof or for any other
reason), the Eurodollar Rate for such Eurodollar Loans for such Interest Period
shall be determined by reference to the amount of the Eurodollar Loan that such
Reference Bank would have made had it been participating in such Eurodollar
Loan. If any Reference Bank does not furnish a timely quotation, Agent shall
determine the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Reference Banks. If none of such
quotations is available on a timely basis, the provisions of Section 6.4 shall
apply. The determination by Agent of the rate of interest per annum provided
hereby shall be conclusive absent manifest error.
"INTERCOMPANY LOANS" means loans or advances by Borrower to one or more
Subsidiaries, including those made pursuant to the Intercompany Loan Agreements,
except that Intercompany Loans do not include intercompany accounts receivable
of up to $10 million reclassified for regulatory purposes as short term
intercompany advances.
"INTERCOMPANY LOAN AGREEMENT" means the loan agreements between Borrower
and each of the Guarantors executed in connection with the Original Credit
Agreement and certain of the Amendments, and any loan agreements between
Borrower and any Subsidiary in the future, as the same may be supplemented,
amended or otherwise modified from time to time.
"INTEREST OR CURRENCY OPTION" has the meaning assigned to it in Section
5.3.
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"INTEREST PAYMENT DATE" means (a) with respect to any Base Rate Loan, the
earlier of (i) the last Business Day of each March, June, September and
December, commencing on the first such day to occur after an Advance has been
made, any portion of which bears interest at a rate based on the Base Rate or
after an Alternate Currency Loan, CD Rate Loan or Eurodollar Loan has been
converted to a Base Rate Loan or (ii) the day upon which such Base Rate Loan is
converted to an Alternate Currency Loan, CD Rate Loan or Eurodollar Loan, and
(b) with respect to any Alternate Currency Loan, Eurodollar Loan or CD Rate
Loan, if the Interest Period pertaining thereto ends on a day one, two or three
months after the day the Interest Period commenced, on the last day of the
Interest Period or, if the Interest Period pertaining thereto ends on a day
four, five or six months after the day the Interest Period commenced, on the day
three months after the day of the commencement of such Interest Period and on
the last day of such Interest Period.
"INTEREST PERIOD" means for any Alternate Currency Loan, Eurodollar Loan or
CD Rate Loan (i) initially, the period commencing on the day an Advance has been
made, any portion of which bears interest at a rate based on the Alternate
Currency Rate, the Eurodollar Rate or the CD Rate or on the day that a Base Rate
Loan has been converted to an Alternate Currency Loan, a Eurodollar Loan or CD
Rate Loan and in each case ending on the numerically corresponding day one, two,
three, four, five or six months thereafter, as selected by Borrower in its
written notice to Agent or as otherwise determined pursuant to this Agreement,
and (ii) thereafter, each period commencing on the last day of the immediately
preceding Interest Period for such or Alternate Currency Loan, Eurodollar Loan,
CD Rate Loan and ending on the numerically corresponding day one, two, three,
four, five or six months thereafter as selected by Borrower in its written
notice to Agent or as otherwise determined pursuant to this Agreement, provided
that the foregoing provisions relating to Interest Periods are subject to the
following:
(a) If any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding
Business Day, except that if the next Business Day would fall in the next
calendar month, the Interest Period shall end on the immediately preceding
Business Day;
(b) any Interest Period that begins on the last day of a calendar
month (or on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month;
(c) if any Interest Period for any Alternate Currency Loan, Eurodollar
Loan or CD Rate Loan would, but for this paragraph (c), include a date on
which a payment of principal is due, then (i) such Interest Period for that
portion of the principal as is required to be repaid on such date shall end
on such date unless a Base Rate Loan is outstanding in an amount at least
equal to the portion of the principal as is required to be repaid on such
date and (ii) the remainder (if any) of the principal amount of such
Alternate Currency Loan, Eurodollar Loan or CD Rate Loan shall have an
Interest Period determined as otherwise provided in this definition;
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(d) any Interest Period which would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(e) if Borrower fails to give Agent written notice of the length of an
Interest Period, Borrower shall be deemed to have selected an Interest
Period which is of the same duration as the Interest Period then ended, or,
as to the first Interest Period for any Loan, Borrower shall be deemed to
have selected a three month Interest Period; and
(f) no Interest Period shall extend for a period less than one month.
"INTEREST RATE ADJUSTMENT FACTOR" means the following:
Debt to Capitalization Ratio Interest Rate Adjustment Factor
---------------------------- -------------------------------
Less than .25 to 1.0 1-1/4%
From .25 to 1.0 to .40 to 1.0 1-1/2%
Above .40 to 1.0 1-3/4%
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended
and in effect from time to time, and the regulations promulgated thereunder.
"INVESTMENT" of any Person means any investment by means of any direct or
indirect (a) loan, advance, guarantee (a guarantee to be deemed an Investment
equal to the principal amount of the Debt guaranteed), capital contribution,
transfer of assets (other than for an amount equal to the fair value of the
assets transferred payable in cash within ninety days of such sale) by such
Person or (b) purchase or other acquisition for consideration by such Person of
evidences of indebtedness, capital stock or other securities of any other
Person.
"LAWS" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of the U.S., any state or commonwealth,
any nation or country, any territory or possession, or any Tribunal, all as
amended and in effect from time to time.
"LIEN" means any claim, mortgage, pledge, assignment, hypothecation, trust,
security interest, encumbrance, lien or charge of any kind (including, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof, or the
interest of the lessor under any capital lease).
"LITIGATION" means any proceeding, claim, lawsuit, action or investigation
by or before any Tribunal.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, and any
and all other agreements or instruments now or hereafter executed and delivered
by Borrower or any other Person in connection with guaranteeing, securing or
otherwise supporting payment or performance of, the First Restated Agreement,
this Agreement, any Note, or any Guaranty, as
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they may be supplemented, amended or otherwise modified from time to time.
"LOAN" means the Term Loan, the Revolving Credit Loan or the Acquisition
Facility Loan, including as to the Revolving Credit Loan and the Acquisition
Facility Loan, the Commitments, and "LOANS" means those three Loans
collectively, including the Commitments.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U.
"MATERIAL ADVERSE EFFECT" means any effect that is material and adverse to
the business, financial condition or operations of Borrower and its Subsidiaries
considered as a whole.
"MAXIMUM RATE" means the maximum rate of nonusurious interest permitted
from day to day by applicable law, including as to Article 5069-1.4, Vernon's
Texas Civil Statutes (and as the same may be incorporated by reference in other
Texas statutes), but otherwise without limitation, that rate based upon the
"indicated rate ceiling" and calculated after taking into account any and all
relevant fees, payments, and other charges incurred in connection with the Loan
Documents which are deemed to be interest under applicable law.
"NET INCOME" means for any period, the consolidated net income of Borrower
and its Subsidiaries for such period, provided that there shall be excluded: (a)
any net income (or net loss) of any Person in which Borrower has an ownership
interest other than its Subsidiaries, except to the extent that any such income
has actually been received by Borrower in the form of cash dividends or similar
distributions; and (b) any net gains or losses on the sale or other disposition,
not in the ordinary course of business, of investments and other capital assets,
provided that there shall also be excluded any related charges for taxes thereon
and other costs associated with the sale.
"NOTES" means collectively, the Term Notes, the Revolving Credit Notes and
the Acquisition Facility Notes.
"OBLIGATED PARTY" means Borrower and each of the Guarantors.
"OBLIGATIONS" means all loans, advances, debts, liabilities, obligations,
covenants and duties of Borrower and each other Obligated Party to Agent or the
Banks or any of them of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under any of the
Loan Documents, whether or not for the payment of money, whether arising by
reason of an extension of credit, opening of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and any other
sums chargeable to any of the Obligated Parties under any of the Loan Documents.
"OFFICERS' CERTIFICATE" means for any Person, a certificate executed by (i)
the Chairman,
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President or any Vice President and (ii) the Secretary or any Assistant
Secretary of such Person.
"ORIGINAL CREDIT AGREEMENT" means the Credit Agreement dated as of January
18, 1989 among Borrower, the Subsidiaries, the Banks, Agent and others.
"PAYMENT OFFICE" means Agent's account at Texas Commerce Bank National
Association, 712 Main Street, Houston, Texas 77002.
"PERMITTED INVESTMENT" means an Investment in any of the following:
(a) securities issued or directly and fully guaranteed or insured by
the U.S., any agency or instrumentality thereof (provided that the full
faith and credit of the U.S. is pledged in support thereof) or Puerto Rico
having maturities of not more than 12 months from the date of settlement;
(b) time deposits, certificates of deposit and bankers' acceptances,
in each case with maturities of not more than twelve months from the date
of settlement, (i) of any commercial bank incorporated in the U.S. of
recognized standing having capital and surplus in excess of $100,000,000,
(ii) which are fully insured by the Federal Deposit Insurance Corporation,
or (iii), in the case of Investments by any Foreign Subsidiary, of any
foreign branch of a U.S. bank or any foreign bank whose commercial paper is
rated at least A-2 or the equivalent by Standard & Poor's Corporation, at
least P-2 or the equivalent by Moody's Investor's Service, Inc. or, in the
case of any foreign bank, at least an equivalent rating by a rating agency
with an international standing comparable to Standard 6 Poor's Corporation
or Moody's Investor's Service, Inc.;
(c) securities by any U.S. state or subdivision or agency thereof
rated at least AAA or the equivalent thereof by Standard & Poor's
Corporation or at least Aaa or the equivalent thereof by Moody's Investors
Service, Inc. having maturities of not more than 12 months from the date of
settlement;
(d) commercial paper issued by any Person incorporated in the U.S.
rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than 12 months after the
date of acquisition or loan participations purchased on a non-recourse
basis in unsecured loans of corporations incorporated in the U.S. which
issue commercial paper of the type described above;
(e) shares of money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (a) through (c)
above;
(f) eurodollar deposits, provided that (i) such deposits mature within
12 months or less after the date of such investment, (ii) such deposits are
issued by commercial banks whose commercial paper is rated A-2 or its
equivalent or better by
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Standard & Poor's Corporation or P-2 or its equivalent or better by Moody's
Investors Service, Inc., and (iii) such deposits must be purchased in the
U.S.;
(g) repurchase agreements respecting any of the securities described
in clauses (a), (b), (c), and (e) above with banks incorporated under the
laws of the United States or of any State thereof whose commercial paper
ratings are A-2 or its equivalent or better by Standard & Poor's
Corporation or P-2 or its equivalent or better by Moody's Investors
Service, Inc.; provided, however, that the collateral therefor be actually
transferred or that the collateral therefor be held in custody by a
domestic commercial bank having total assets of not less than
$1,000,000,000 and confirmation is received from such bank that such
collateral is being held as security for the repurchase obligation;
(h) time deposits, certificates of deposit and bankers' acceptances,
in each case with maturities of not more than 60 months from the date of
settlement, of any commercial bank domiciled in Puerto Rico which are fully
insured by the Federal Deposit Insurance Corporation; or
(i) any of the securities of the type described in clauses (a), (b),
(c), (d), (f), and (g) above of TCB provided that the rating assigned to
the commercial paper issued by it is A-3 or its equivalent or better by
Standard 6 Poor's Corporation or P-3 or its equivalent or better by Moody's
Investors Services, Inc.
"PERMITTED LIENS" means to the extent reflected and provided for on the
grantor's books and records and not impairing the operations of Borrower or any
performance hereunder or contemplated hereby, (i) Liens arising by operation of
Law for Taxes not yet due and payable, (ii) mechanic's, materialman's, shipper's
or warehouseman's Liens for services or materials for which payment is not yet
due, (iii) Liens on and limited to specific items of equipment or parcels of
real estate acquired hereafter that secure purchase money Borrowings permitted
hereunder, (iv) Liens consisting of zoning restrictions, easements or other
restrictions on the use of real estate, none of which is violated by existing
land use to the extent it could be expected to have a Material Adverse Effect,
(v) the following, if the validity or amount thereof is being contested in good
faith and by appropriate and lawful proceedings of which Borrower has given
prior notice to Agent and for which appropriate reserves have been established
and so long as levy and execution have been and continue to be effectively
stayed: Liens for taxes due and payable; Liens upon and defects in title to real
or personal property; Liens of mechanics, materialmen, shippers, warehousemen,
carriers and landlords; Liens for judgments; and (vi) pledges or deposits made
to secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, or other social
security programs.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, limited liability
company, corporation, company, institution, entity, party or government (whether
national, federal, state, county, city, municipal,
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or otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"PLAN" means any employee benefit plan or other plan maintained by any
Obligated Party for employees of Borrower and covered by Title IV of ERISA.
"PRO RATA" means as to any Bank, (i) as applied to considerations involving
any one of the Loans, such Bank's ratable share of such Loan expressed by the
percentage identified opposite its name as to such Loan on the signature pages
hereof, and (ii) as applied to considerations involving all of the Loans, such
Bank's ratable share of the aggregate of all of the Loans expressed by the
percentage identified opposite its name as to all Loans on the signature pages
hereof.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible, and whether now owned or
hereafter acquired.
"RECEIVABLES" means, for any Person, all of such Person's presently
existing and hereafter arising or acquired accounts, receivables and present and
future Rights of such Person to payment for goods sold or leased or for services
rendered, including, without limitation, those which are not evidenced by
instruments or chattel paper, and whether or not they have been earned by
performance; proceeds of any letters of credit on which such Person is named as
beneficiary; contract rights; chattel paper; instruments; documents; insurance
proceeds; and all such obligations whatsoever owing to such Person, together
with all instruments and all documents of title representing any of the
foregoing, all Rights in any merchandise or goods which any of the same may
represent, and all right, title, security and guaranties with respect to each of
the foregoing, including, without limitation, any right of stoppage in transit.
"REFERENCE BANKS" means TCB, Comerica Bank and NationsBank of Texas, N.A.
"REGISTER" has the meaning assigned to it in Section 13.11(e).
"REGULATION D" means Regulation D of the Board, as the same is from time to
time in effect, and all official rulings and interpretations thereunder or
thereof.
"REGULATION G" means Regulation G of the Board, as the same is from time to
time in effect, and all official rulings and interpretations thereunder or
thereof.
"REGULATION T" means Regulation T of the Board, as the same is from time to
time in effect, and all official rulings and interpretations thereunder or
thereof.
"REGULATION U" means Regulation U of the Board, as the same is from time to
time in effect, and all official rulings and interpretations thereunder or
thereof.
"REGULATION X" means Regulation X of the Board, as the same is from time to
time in
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effect, and all official rulings and interpretations thereunder or thereof.
"REGULATORY CHANGE" means with respect to any Bank, any change on or after
the date of this Agreement in any U.S. federal, state, or foreign Laws
(including Regulation D) or the adoption or making on or after such date of any
interpretation, directive, or request applying to a class of banks or other
lending institutions (including Bank) of or under any U.S. federal, state, or
foreign Laws (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REPORTABLE EVENT" has the meaning assigned to that term in Title IV of
ERISA.
"REQUISITE BANKS" means (i) as applied to considerations involving any one
of the Loans, Banks whose Pro Rata percentages relating to such Loan together
equal at least 66-2/3 percent, and (ii) as applied to considerations involving
all of the Loans, Banks whose Pro Rata percentages relating to all Loans
together equal at least 66-2/3 percent; provided, however, that in all instances
providing for Rights of Requisite Banks under Article X, Section 11.2, Section
11.3, Section 12.1 and Section 12.8, Requisite Banks shall be determined
pursuant to (ii) above.
"REVOLVING CREDIT COMMITMENT" has the meaning assigned to it in Section
3.1.
"REVOLVING CREDIT LOAN" means the loan described in Recital A of this
Agreement and made or to be made pursuant to Section 3.1.
"REVOLVING CREDIT MAXIMUM COMMITMENT" has the meaning assigned to it in
Section 3.1.
"REVOLVING CREDIT NOTE" has the meaning assigned to it in Section 3.2.
"RIGHTS" means rights, remedies, powers and privileges.
"SEC" means the U.S. Securities and Exchange Commission.
"SEC FILING" means a report or statement filed with the SEC pursuant to
Sections 13, 14, or 15(d) of the Exchange Act and the regulations thereunder, or
a registration statement filed with the SEC pursuant to the Securities Act of
1933, as amended, and the regulations thereunder.
"SUBSIDIARY" means, as to Borrower, those Subsidiaries named in the opening
paragraph of this Agreement, and as to Borrower or any other Person, any other
Person of which more than fifty percent (50%) of the issued and outstanding
securities having ordinary voting power for the election of a majority of
directors is owned or controlled, directly or indirectly, by such Person.
"TAXES" means all taxes, assessments, fees, levies, imposts, duties,
deductions,
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withholdings, or other charges of any nature whatsoever from time to time or at
anytime imposed by any Laws or Tribunal.
"TCB" means Texas Commerce Bank, National Association, a national banking
association, in its individual capacity.
"TERM LOAN" means the loan described in Recital A of this Agreement and
made pursuant to Section 2.1.
"TERM NOTES" has the meaning assigned to it in Section 2.2.
"TERMINATION DATE" means (a) with respect to the Term Loan, the earlier of
(i) March 31, 1996, or (ii) the date on which the Term Loan is terminated or
accelerated pursuant to Article XI; and (b) with respect to the Revolving Credit
Commitment of each Bank, the earlier of (i) September 30, 1997, (ii) the date on
which the Revolving Credit Commitment of each Bank is terminated by notice from
borrower to Agent pursuant to Section 3.6, or (iii) the date on which the
Revolving Credit Loan is terminated or accelerated pursuant to Article XI.
"TRIBUNAL" means any federal, state, municipal or other governmental
department, judicial body, commission, board, bureau, agency or instrumentality
of the U.S. or of any state, commonwealth, nation, territory, possession,
county, parish or municipality, whether now or hereafter constituted or
existing.
"UCC" means the Uniform Commercial Code as enacted in the State of Texas,
as amended.
"U.S." means the United States of America.
SECTION 1.2. ACCOUNTING AND OTHER TERMS. All accounting and financial
terms used in any of the Loan Documents, and the compliance with each covenant
contained herein which relates to financial matters, shall be determined in
accordance with GAAP, except to the extent that a deviation therefrom is
expressly stated therein. If compliance with any covenant contained herein is
affected by a change in GAAP, such covenant shall be modified to take into
account the change in question. All other terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are defined therein.
ARTICLE II
TERM LOAN
SECTION 2.1. TERM LOAN. The Term Loan has been funded to Borrower in
accordance with the Original Credit Agreement (as amended) in the total
aggregate amount of $51,000,000, and no additional Advances are permitted or
required with respect to the Term Loan. As of the date hereof, the outstanding
principal balance of the Term Loan is $7,716,562, and interest on
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the Term Loan has been paid through the Interest Payment Date next preceding the
date hereof.
SECTION 2.2. TERM NOTES.
(a) The obligation of Borrower to repay the Term Loan is evidenced by notes
(the "Term Notes") substantially in the form of EXHIBIT "D" hereto, one of which
is payable to the order of each Bank in the principal amount of such Bank's Pro
Rata share of the outstanding balance of the Term Loan as of the date of the
First Restated Agreement. The Term Notes are dated the same date as the First
Restated Agreement and replaced the Term Notes executed by Borrower to the
Original Credit Agreement. References to the "Credit Agreement" in the Term
Notes are hereby amended to be references to this Agreement. The validity and
enforceability of the indebtedness evidenced by the Term Notes are not
diminished, extinguished or adversely affected by the execution of this
Agreement and are hereby ratified in all respects by Borrower.
(b) Subject to Section 5.3, the principal amount of the Term Loan shall be
due and payable in equal consecutive quarterly installments of $1,821,429 each
(or in Alternate Currency in the Dollar Equivalent of that amount) on the last
Business Day of each June, September, December and March in each year; provided,
however, that a final installment shall be due, unless the Term Loan has been
fully repaid theretofore, on the Termination Date applicable to the Term Loan,
in the amount necessary to repay in full the unpaid principal amount of the Term
Loan.
(c) The outstanding principal of the Term Loan shall bear interest prior to
maturity at a varying rate per annum from day to day equal to the lesser of (i)
the Maximum Rate or (ii) the Applicable Term Rate; provided, however, if at any
time the rate of interest specified in clause (ii) preceding shall exceed the
Maximum Rate, thereby causing interest on the Term Loan to be limited to the
Maximum Rate, then any subsequent reduction in the Applicable Term Rate shall
not reduce the rate of interest on the Term Loan below the Maximum Rate until
the aggregate amount of interest accrued on the Term Loan equals the aggregate
amount of interest that would have accrued on the Term Loan if the interest rate
specified in clause (ii) preceding had at all times been in effect. Each change
in the rate of interest charged on the Term Loan shall become effective, without
notice to Borrower, upon the effective date of each change in the Applicable
Term Rate or the Maximum Rate, as the case may be.
(d) Accrued and unpaid interest on the Term Loan shall be due and payable
on each Interest Payment Date and at maturity. All past due principal and
interest shall bear interest at the Default Rate.
ARTICLE III
THE REVOLVING CREDIT LOAN
SECTION 3.1. REVOLVING CREDIT LOAN. The Revolving Credit Loan has been
funded to Borrower in accordance with the First Restated Agreement and the
Original Credit Agreement. As of the date hereof the outstanding principal
balance of the Revolving Credit Loan is
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$12,300,000, and interest on the Revolving Credit Loan has been paid through the
Interest Payment Date next preceding the date hereof. Continuing through the
Termination Date applicable to the Revolving Credit Loan, upon the terms and
conditions and in reliance upon the representations and warranties hereinafter
set forth, each Bank, severally and not jointly (except as provided in Section
12.7), agrees to make one or more Advances under the Revolving Credit Loan to
Borrower from time to time in an aggregate principal amount at any time
outstanding not to exceed its Revolving Credit Commitment. The "Revolving
Credit Commitment" of each Bank equals its Pro Rata share of $30,000,000 (or, as
to portions thereof which are Alternate Currency Loans, the Dollar Equivalent
thereof), subject to any reductions under Section 3.6 (herein called the
"Revolving Credit Maximum Commitment"). Subject to the foregoing limitations
and other terms and provisions of this Agreement, Borrower may borrow, repay,
prepay and reborrow hereunder.
SECTION 3.2. REVOLVING CREDIT NOTES.
(a) The Advances made by each Bank under the Revolving Credit Loan are
evidenced by a single renewal and extension promissory note (the "Revolving
Credit Note") substantially in the form of EXHIBIT "E" attached hereto, payable
to the order of such Bank in a principal amount equal to its Pro Rata share of
the Revolving Credit Maximum Commitment. The Revolving Credit Notes are dated
the same date as the second Amendment to the First Restated Agreement and
replaced the Revolving Credit Notes executed by Borrower pursuant to the First
Restated Agreement and the Original Credit Agreement. References to the "Credit
Agreement" in the Revolving Credit Notes are hereby amended to be references to
this Agreement. The validity and enforceability of the indebtedness evidenced
by the Revolving Credit Notes are not diminished, extinguished or adversely
affected by the execution of this Agreement and are hereby ratified in all
respects by Borrower.
(b) The principal of the Revolving Credit Loan shall be due and payable on
the Termination Date applicable to the Revolving Credit Loan.
(c) The outstanding principal amount of the Revolving Credit Loan shall
bear interest prior to maturity at a varying rate per annum from day to day
equal to the lesser of (i) the Maximum Rate, or (ii) the Applicable Revolving
Credit Rate; provided, however, if at any time the rate of interest specified in
clause (ii) preceding shall exceed the Maximum Rate, thereby causing the
interest on the Revolving Credit Loan to be limited to the Maximum Rate, then
any subsequent reduction in the Applicable Revolving Credit Rate shall not
reduce the rate of interest on the Revolving Credit Loan below the Maximum Rate
until the aggregate amount of interest accrued on the Revolving Credit Loan
equals the aggregate amount of interest that would have accrued on the Revolving
Credit Loan if the interest rate specified in clause (ii) preceding had at all
times been in effect. Each change in the rate of interest charged on the
Revolving Credit Loan shall become effective, without notice to Borrower, upon
the effective date of each change in the Applicable Revolving Credit Rate or the
Maximum Rate, as the case may be.
(d) Accrued and unpaid interest on the Revolving Credit Loan shall be due
and
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payable on each Interest Payment Date and at maturity. All past due principal
and interest shall bear interest at the Default Rate.
SECTION 3.3. BORROWING PROCEDURE.
(a) Each request for Advances under the Revolving Credit Loan shall be, in
the aggregate, in a minimum principal amount of $500,000 (or, as to portions
thereof which are Alternate Currency Loans, the Dollar Equivalent thereof).
(b) With respect to Advances under the Revolving Credit Loan that are to be
Alternate Currency Loans or are to bear interest at a rate based on the
Eurodollar Rate or the CD Rate, borrower shall notify Agent and the Funds
Administrator of a request for Advances by delivering an Advance Request Form to
Agent and the Funds Administrator prior to 11:00 A.M., Central Time, at least
three Business Days prior to the date on which such Advances are to be made.
The Advance Request Form shall specify: (i) the requested date of the Advances
(which shall be a Business Day), and (ii) the aggregate amount of the Advances,
(iii) the Interest or Currency Option applicable to such Advances, it being
agreed that only one Interest or Currency Option shall apply to the Advances
made on any one day, (iv) the duration of the Interest Period for any Eurodollar
Loan or CD Rate Loan. Agent and the Funds Administrator shall accept telephonic
requests for such Advances, provided that (i) Borrower promptly confirms such
request by delivering an Advance Request Form to Agent and the Funds
Administrator setting forth the same information that Borrower provided in its
telephonic request, and (ii) such acceptance shall not constitute a waiver of
Agent's and the Funds Administrator's right to require prior delivery of an
Advance Request Form in connection with subsequent Advances under the Revolving
Credit Loan.
(c) With respect to Advances under the Revolving Credit Loan that are to
bear interest at a rate based on the Alternate Base Rate, Borrower shall notify
Agent and the Funds Administrator of the request for such Advances by delivering
an Advance Request Form to Agent and the Funds Administrator prior to 11:00
A.M., Central Time, at least one Business Day Prior to the date on which such
Advances are to be made. The Advance Request Form shall set forth the
information described in Section 3.4(b)(i)(iii) above. Agent and the Funds
Administrator shall accept telephonic requests for such Advances at any time
prior to 12:00 noon, Central Time on the day of the requested Advances, provided
that (i) Borrower promptly confirms such request by delivering an Advance
Request Form to Agent and the Funds Administrator setting forth the same
information that Borrower provided in its telephonic request, and (ii) such
acceptance shall not constitute a waiver of Agent and the Funds Administrator's
right to require delivery of an Advance Request Form in connection with
subsequent Advances under the Revolving Credit Loan.
SECTION 3.4. DISBURSEMENT OF ADVANCES. Promptly after the Funds
Administrator receives an Advance Request Form (or telephonic notice in lieu
thereof) requesting Advances under the Revolving Credit Loan, the Funds
Administrator shall notify each Bank of the requested Advances. Each Bank shall
make its Pro Rata portion of the aggregate amount of
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requested Advances available to the Funds Administrator, at the Payment Office
or, as to Alternate Currency Loans, at the Funds Administrator's office for such
Alternate Currency as designated from time to time by Agent, in immediately
available funds for the account of Borrower, not later than 2:00 P.M., Central
Time, on the date of the requested Advances. After the Funds Administrator's
receipt of such funds and upon fulfillment of the applicable conditions
precedent in Article VIII, the Funds Administrator shall make the proceeds of
such Advances available to Borrower before 2:00 P.M., Central Time or, as to
Alternate Currency Loans, before noon in the city in which such Alternate
Currency Loan is being advanced, by crediting the same in immediately available
funds to an account of Borrower maintained with the Funds Administrator.
Advances made by each Bank under the Revolving Credit Loan shall be made and
maintained at each Bank's Applicable Lending Office.
SECTION 3.5. USE OF PROCEEDS. The proceeds of the Revolving Credit Loan
shall be used by Borrower for its general corporate purposes and for
Intercompany Loans; provided, however, that no proceeds of the Revolving Credit
Loan shall be used (a) the make optional prepayments on the Term Loan, (b) to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock, (c) for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
Margin Stock (except for payments on the term Loan otherwise permitted
hereunder), or (d) for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of Regulation U.
SECTION 3.6. COMMITMENT FEE; REDUCTION OR TERMINATION OF REVOLVING CREDIT
COMMITMENT. Borrower agrees to pay to Agent for the account of the Banks a
commitment fee on the average daily unused portion of the Revolving Credit
Maximum Commitment, calculated by deducting from the Revolving Credit Maximum
Commitment all outstanding Advances under the Revolving Credit Loan for the
period from the date of the Original Credit Agreement to and including the
Termination Date applicable to the Revolving Credit Loan. Through September 30,
1993 such fee shall accrue at the rate of three-eighths of one percent (3/8%)
per annum based on a 360 day year and the actual number of days elapsed.
Commencing October 1, 1993, such fee shall accrue at the rate of one-fourth of
one percent (1/4%) per annum based on a 360 day year and the actual number of
days elapsed. Such fee shall be payable on the last Business Day of each March,
June, September, and December, with the next payment due December 31, 1993, and
ending on the Termination Date applicable to the Revolving Credit Loan.
Borrower shall have the right at any time to terminate in whole or from time to
time to reduce irrevocably in part the Revolving Credit Maximum Commitment, upon
not less than three Business Days prior notice to Agent specifying the effective
date thereof, whether a termination or reduction is being made, and the amount
of any partial reduction. Each partial reduction shall be at least $500,000 or
Dollar Equivalent, and Borrower shall simultaneously prepay the amount by which
the unpaid principal amount of the Revolving Credit Loan exceeds the Revolving
Credit Maximum Commitment (after giving effect to such notice) plus accrued
interest on the principal amount so prepaid. Any termination of the Revolving
Credit Maximum Commitment that reduces the amount of the Revolving Credit
Maximum Commitment below the aggregate principal amount of the Alternate
Currency Loans and Eurodollar Loans then outstanding may
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be made only on the last day of the respective Interest Periods for such
Alternate Currency Loans or Eurodollar Loans, unless Borrower also pays any
compensation due the Banks under this Agreement on account of such termination
on a day other than the last day of an Interest Period.
ARTICLE IV
ACQUISITION FACILITY LOAN
SECTION 4.1. ACQUISITION FACILITY LOAN. As of the date of this Agreement
[$54,750,000] of the Acquisition Facility Loan has been funded to Borrower in
accordance with the First Restated Agreement. No further advances are
contemplated or permitted under the Acquisition Facility Loan. Interest due on
the Acquisition Facility Loan has been paid through the Interest payment Date
next preceding the date hereof. Borrower has paid all fees relating to the
Acquisition Facility Loan required by the First Restated Agreement and shall pay
Interest on the Acquisition Facility Loan on the next Interest Payment Date.
SECTION 4.2. ACQUISITION FACILITY NOTES.
(a) The obligation of Borrower to repay the Acquisition Facility Loan is
evidenced by notes (the "Acquisition Facility Notes") substantially in the form
of EXHIBIT "F" hereto, one of which is payable to the order of each Bank in a
principal amount equal to its Pro Rata Share of $55,000,000. The Acquisition
Facility Notes are dated the same date as the First Restated Agreement. The
principal amount of the Acquisition Facility Loan is due and payable in 20
substantially equal consecutive quarterly installments on the last Business Day
of each June, September, December and March in each year, commencing on March
31, 1995 and ending on December 31, 1999; provided, however, that the last such
installment shall be in the amount necessary to repay in full the unpaid
principal amount of the Acquisition Facility Loan. References to the "Credit
Agreement" in the Acquisition Facility Notes are hereby amended to be references
to this Agreement. The validity and enforceability of the indebtedness
evidenced by the Acquisition Facility Notes are not diminished, extinguished or
adversely affected by the execution of this Agreement and are hereby ratified in
all respects by Borrower.
(b) The outstanding principal amount of the Acquisition Facility Loan shall
bear interest prior to maturity at a varying rate per annum from day to day
equal to the lesser of (i) the Maximum Rate, or (ii) the Applicable Acquisition
Facility Rate; provided, however, if at any time the rate of interest specified
in clause (ii) preceding shall exceed the Maximum Rate, thereby causing the
interest on the Acquisition Facility to be limited to the Maximum Rate, then any
subsequent reduction in the Applicable Acquisition Facility Rate shall not
reduce the rate of interest on the Acquisition Facility Loan below the Maximum
Rate until the aggregate amount of interest accrued on the Acquisition Facility
Loan equals the aggregate amount of interest that would have accrued on the
Acquisition Facility if the interest rate specified in clause (ii) preceding had
at all times been in effect. Each change in the rate of interest charged on the
Acquisition Facility shall become effective, without notice to Borrower, upon
the effective date
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of each change in the Applicable Acquisition Facility Rate or the Maximum Rate,
as the case may be.
(c) Accrued and unpaid interest on the Advances under the Acquisition
Facility Loan shall be due and payable on each Interest Payment Date and at
maturity. All past due principal and interest shall bear interest at the
Default Rate.
ARTICLE V
PAYMENTS AND CONVERSIONS
SECTION 5.1. METHOD OF PAYMENT. All payments of principal, interest and
other sums to be made by Borrower hereunder and under the Notes (other than with
respect to Alternate Currency Loans) shall be made to Agent, in Dollars, in
immediately available funds, not later than 12:00 noon, Central Time, on the
date on which such payment shall become due. Each payment received after such
time on such due date shall be deemed to have been made on the next succeeding
Business Day. All payments of principal, interest and other sums to be made by
Borrower hereunder and under the Notes with respect to Alternate Currency Loans
shall be made to Agent, in such Alternate Currency, in immediately available
funds, before the close of the banking day, on the date on which such payment
shall become due. Each payment received after such time on such due date shall
be deemed to have been made on the next succeeding Business Day. Whenever any
payment hereunder or under any Note shall be stated to be due on a day that is
not a Business Day, such payment shall be made on the next succeeding Business
Day and interest or any fee, as the case may be, shall continue to accrue during
such extension, provided that if, in the case of an Alternate Currency Loan, a
Eurodollar Loan or CD Rate Loan, the next succeeding Business Day is in the next
calendar month, such payment shall be made on the immediately preceding Business
Day. Borrower shall, at the time of making each payment hereunder or under any
Note with respect to an Alternate Currency Loan, specify to Agent the bank or
payment office at which such payment will be made, which must be the bank or
payment office Agent has specified for payments in the type of Alternate
Currency in question. Borrower shall, at the time of making each payment
hereunder or under any Note, specify to Agent the amounts payable by Borrower
hereunder to which such payment is to be applied (and in the event that it fails
to so specify, or if an Event of Default has occurred and is continuing, Agent
may apply such payment in such order and manner as the Requisite Banks may
direct, but subject to Section 12.3 hereof). Each payment received by Agent
hereunder or under any Note shall be paid promptly to the Banks in accordance
with Section 12.3, in immediately available funds, for the account of each
Bank's Applicable Lending Office for the Loan in respect of which such payment
is made.
SECTION 5.2. OPTIONAL PREPAYMENTS. Borrower may, on at least three
Business Days prior written notice to Agent, prepay the principal of the Term
Loan or the Acquisition Facility Loan in whole or in part, at any time or from
time to time, without premium or penalty (except as provided in Sections 6.5 and
13.5), with accrued interest to the date of prepayment on the principal amount
so prepaid, provided that: (a) an Alternate Currency Loan, a Eurodollar Loan
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or CD Rate Loan may be prepaid only on the last day of the Interest Period
relating thereto, unless Borrower also pays any compensation due the Banks under
this Agreement on account of its prepaying on a day other than the last day of
an Interest Period; (b) each partial prepayment on the Term Loan or Acquisition
Facility Loan and each payment on the Revolving Credit Loan shall be in the
principal amount of $100,000 (or the full outstanding amount, if less than
$100,000) or Dollar Equivalent; and (c) prepayments on the Term Loan and the
Acquisition Facility Loan shall be applied to installments in inverse order of
their maturities and may not be reborrowed.
SECTION 5.3. SELECTION AND CONVERSION OF INTEREST OR CURRENCY OPTIONS.
Subject to the terms of Section 6.4 and the other terms and provisions of this
Agreement, Borrower has the option (i) of having all or any portion of the Term
Loan or Acquisition Facility Loan bear interest at a rate based on the CD Rate,
the Alternate Base Rate or the Eurodollar Rate, (ii) of having all or any
portion of the Revolving Credit Loan bear interest at a rate based on the
Alternate Base Rate or the Eurodollar Rate and (iii) of having all or any
portion of each of the Loans be in Dollars or Alternate Currency (individually
herein called an "Interest or Currency Option" and collectively called the
"Interest or Currency Options"); provided, however, (a) with respect to each
request for Advances under the Revolving Credit Loan, Borrower can have only one
Interest or Currency Option in effect for the aggregate amount of the Advances
requested on the date of the Advances, and Borrower may convert Base Rate Loans
under the Revolving Credit Loan and Base Rate Loans and CD Rate Loans under the
Acquisition Facility Loan to Eurodollar Loans or Alternate Currency Loans as
provided and subject to the limitations set forth below at any time after the
third day following the date of the Advances which make up such Base Rate Loans
or CD Rate Loan; (b) each Eurodollar Loan or Alternate Currency Loan shall be in
an amount not less than $500,000 or its Dollar Equivalent; (c) each CD Rate Loan
shall be in an amount not less than $500,000; and (d) no more than an aggregate
of twenty Interest Periods and Interest or Currency Options shall be outstanding
at any time under the Loans. Borrower may, subject to the limitations set forth
above, from time to time convert a Loan to another permitted rate or to another
currency by giving Agent irrevocable written notice of its election to convert
at least three Business Days prior to the requested conversion date, specifying
the date of conversion, the amount of the Loans subject to the Interest or
Currency Option, the applicable Interest or Currency Option and, with respect to
the conversion of Base Rate Loans to CD Rate Loans, Eurodollar Loans or
Alternate Currency Loans, the duration of the Interest Period selected with
respect thereto; provided, however, that (x) an Alternate Currency Loan,
Eurodollar Loan or CD Rate Loan may be converted only on the last day of the
Interest Period pertaining thereto, unless Borrower also pays any compensation
due the Banks under this Agreement, if any, on account of such conversion on a
day other than the last day of an Interest Period, and (y) a Base Rate Loan may
not be converted when a Default has occurred and is continuing. Upon the
expiration of any Interest Period applicable to an Alternate Currency Loan,
Eurodollar Loan or CD Rate Loan, the Alternate Currency Loan, Eurodollar Loan or
CD Rate Loan shall be continued for an Interest Period having the same duration
as the Interest Period then ended unless Borrower shall have given Agent a
notice of conversion with respect thereto in accordance with this Section;
provided, however, no Alternate Currency Loan, Eurodollar Loan or CD Rate Loan
shall be continued as such if a Default has occurred and is
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continuing. Upon the occurrence of an Event of Default, Agent may convert all
Alternate Currency Loans, Eurodollar Loans or CD Rate Loans to Base Rate Loans
in Dollars at the end of the respective Interest Periods thereof.
SECTION 5.4. INTEREST COMPUTATIONS; NOTICE OF BASE RATE CHANGE. All
payments of interest on Alternate Currency Loans and Eurodollar Loans shall be
computed on the per annum basis of a year of 360 days and for the actual number
of days (including the first day but excluding the last day) elapsed unless such
calculations would result in a rate in excess of the Maximum Rate, in which case
interest shall be calculated on a per annum basis of 365 or 366 days, as the
case may be. All payments of interest on Base Rate Loans shall be computed on
the per annum basis of a year of 365 days or 366 days, as the case may be. All
payments of interest on CD Rate Loans shall be computed on the per annum basis
of a year of 360 days.
ARTICLE VI
SPECIAL PROVISIONS; ILLEGALITY
SECTION 6.1. ADDITIONAL COSTS.
(a) From time to time, within 10 Business Days after the receipt by
Borrower of a certificate of a Bank containing the information described in this
Section 6.1(a), Borrower shall pay compensation for Additional Costs to Agent
for the account of such Bank. The term "Additional Costs" means material
increases in costs or material reductions in amounts receivable by a Bank which,
in either case, are attributable to (i) such Bank's making or maintaining of any
Alternate Currency Loans, Eurodollar Loans or CD Rate Loans, (ii) such Bank's
obligation to charge Borrower interest on the Loans at the rate based on the
Alternate Currency Rate, Eurodollar Rate or CD Rate, or (iii) any reduction in
any amount receivable by such Bank hereunder in respect of any Alternate
Currency Loans, Eurodollar Loans or CD Rate Loans such obligation, in each case
resulting from a Regulatory Change which:
(1) changes the basis of taxation of any amount payable to such Bank
under this Agreement or any of its Notes in respect of any of such
Alternate Currency Loans or Eurodollar Loans (other than changes which
affect Taxes measured by or imposed on the overall net income of such Bank
or of its Applicable Lending Office for any of such Alternate Currency
Loans or Eurodollar Loans by the jurisdiction in which such Bank has its
principal office or such Applicable Lending Office); or
(2) imposes or modifies any reserve, special deposit, minimum capital
ratio or similar requirements (other than any existing CD Reserve
Requirements or Eurodollar Reserve Requirements) relating to any extensions
of credit or other assets of, or any deposits with or other liabilities of,
such Bank (including any of such CD Rate Loans, Eurodollar Loans or any
deposits referred to in the definition of "CD Rate" or "Interbank Offered
Rate" in Section 1.1 hereof); or
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(3) imposes any other condition affecting this Agreement (or any of
such extensions of credit or liabilities or commitments).
Each determination of the materiality of an Additional Cost shall be made by the
affected Bank in its sole judgment. A Bank's determination of the amounts
necessary to pay Additional Costs and of the reasons for the existence of
Additional Costs shall be made in such Bank's exercise of reasonableness and
good faith. Each Bank will notify Borrower through Agent of any event occurring
after the date of this Agreement which will entitle such Bank to compensation
pursuant to this Section 6.1(a) as promptly as practicable after it obtains
knowledge thereof. Such Bank will use good faith reasonable efforts to
designate a different Applicable Lending Office for the Alternate Currency Loans
or Eurodollar Loans of such Bank or make any other mechanical change in funding
Loans hereunder if such designation or change will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole opinion of such Bank,
be disadvantageous to such Bank (provided that such Bank shall have no
obligation to so designate an Applicable Lending Office located in the U. S.).
Each Bank will furnish Borrower through Agent with a certificate (which shall be
conclusive, absent manifest error, as to the matters stated therein) stating the
change that has occurred or other conditions that have been imposed on such Bank
that entitles the Bank to compensation hereunder, the amount the Bank has
determined to be necessary to compensate it for the Additional Costs and the
manner in which such amount has been calculated. If any Bank requests
compensation from Borrower under this Section 6.1(a), Borrower may, by notice to
such Bank through Agent, suspend the obligation of such Bank to make an
Alternate Currency Loan or to charge Borrower interest on the Loans at a rate
based on the Eurodollar Rate or CD Rate, as the case may be, until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Sections 6.4 hereof shall be applicable). Any amounts
received by Agent from Borrower pursuant to this Section 6.1 shall be disbursed
by Agent in immediately available funds to the Banks requesting such amounts.
(b) Without limiting the effect of the foregoing provisions of this Section
6.1, in the event that, by reason of any Regulatory Change, any Bank either (i)
incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such Bank
which includes deposits by reference to which the interest rate on Alternate
Currency Loans, Eurodollar Loans or CD Rate Loans is determined as provided in
this Agreement or a category of extensions of credit or other assets of such
Bank which includes Alternate Currency Loans, Eurodollar Loans or CD Rate Loans
or (ii) becomes subject to restrictions on the amount of such category of
liabilities or assets which it may hold, then, if such Bank so elects by notice
to Borrower (with a copy to the Funds Administrator and to Agent), the
obligation of such Bank to make Alternate Currency Loans or to charge Borrower
interest on the Loans at a rate based on the CD Rate or the Eurodollar Rate, as
the case may be, shall be suspended until the date such Regulatory Change ceases
to be in effect (in which case the provisions of Section 6.4 hereof shall be
applicable).
(c) If Borrower becomes obligated to pay additional amounts to any Bank
pursuant to this Section 6.1 as a result of any condition described herein,
then, unless such Bank has
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theretofore taken steps to remove or cure, and has removed or cured, the
conditions creating the cause for such obligation to pay such additional
amounts, Borrower may designate another Bank which is entitled to be an assignee
of a Bank's interest under Section 13.11 and is reasonably acceptable to the
Agent to purchase the Obligation of such Bank and such Bank's Rights hereunder,
without recourse to or warranty by, or expense to, such Bank, for a purchase
price equal to the outstanding principal amount of the Loans payable to such
Bank plus any accrued but unpaid interest on such Loans and any other amounts
accrued but unpaid in respect of that Bank's commitment. Any such purchase
shall be in accordance with and subject to the provisions of Section 13.11.
SECTION 6.2. LIMITATIONS ON TYPES OF INTEREST OR CURRENCY OPTIONS. Anything
herein to the contrary notwithstanding, with respect to any Alternate Currency,
Eurodollar Loan or CD Rate Loan, the Banks shall be under no obligation to make
Alternate Currency Loans or to charge interest on the Loans at a rate based on
the CD Rate or the Eurodollar Rate, as the case may be, or maintain any
Alternate Currency Loans, CD Rate Loans or Eurodollar Loans, as the case may be
for as long as such event or condition continues, if:
(a) Agent determines (which determination shall be conclusive) that
quotations of interest rates for the relevant deposits referred to in the
definition of "Interbank Offered Rate" in Section 1.1 hereof are not being
provided by the Reference Banks in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for Eurodollar
Loans for Interest Periods therefor as provided in this Agreement, or
(b) Agent determines (which determination shall be conclusive) that
quotations of interest rates for the CD Quoted Rate described in Section
1.1 hereof are not being offered to Agent by dealers in certificates of
deposit as contemplated herein in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for CD Rate
Loans for Interest Periods therefor as provided in this Agreement, or
(c) Agent determines (which determination shall be conclusive) that
quotations of interest rates for loans made in Alternate Currency are not
being offered to Agent upon the basis of which the rates of interest for
Alternate Currency Loans are to be determined, do not accurately reflect
the cost to the Banks of making or maintaining such Alternate Currency
Loans for Interest Periods therefor, or
(d) the Requisite Banks determine (which determination shall be
conclusive) and notify Agent that the relevant rates of interest referred
to in the definitions of CD Quoted Rate or Interbank Offered Rate in
Section 1.1 hereof, upon the basis of which the rates of interest for CD
Rate Loans or Eurodollar Loans are to be determined, do not accurately
reflect the cost to the Banks of making or maintaining such CD Rate Loans
or Eurodollar Loans for Interest Periods therefor, or
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(e) there occurs on or before the date an Alternate Currency Loan is
to be made any material adverse change in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls which would in the opinion of Agent make it impracticable
for the Alternate Currency Loan to be denominated in the Alternate Currency
specified by Borrower.
Agent shall promptly notify Borrower and each Bank of the occurrence of any of
such events or conditions.
SECTION 6.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement to the contrary, in the event that it becomes unlawful for any Bank at
its Applicable Lending Office to (a) honor its obligation to charge interest on
the Loans at a rate based on the Eurodollar Rate or (b) make or maintain
Alternate Currency Loans or Eurodollar Loans hereunder, then such Bank shall
promptly notify Borrower thereof through Agent and such Bank's obligation to
charge interest on the Loans at a rate based on the Eurodollar Rate and maintain
Alternate Currency Loans or Eurodollar Loans hereunder shall be suspended until
such time as such Bank at its Applicable Lending Office may again lawfully
charge interest on the loans at a rate based on the Eurodollar Rate and maintain
Alternate Currency Loans or Eurodollar Loans (in which case the provisions of
Section 6.4 hereof shall be applicable); provided, however, that each Bank shall
use good faith reasonable efforts to specify a new Applicable Lending Office for
Alternate Currency Loans and Eurodollar Loans of such Bank with a view to
effecting compliance with the applicable law.
SECTION 6.4. SUBSTITUTE RATES. If the obligation of any Bank to charge
interest on the Loans at a rate based on the CD Rate or the Eurodollar Rate or
make or maintain Alternate Currency Loans, CD Rate Loans or Eurodollar Loans
shall be suspended pursuant to Sections 6.1, 6.2 or 6.3 hereof, (i) all amounts
of the Loans which would otherwise be made or maintained by such Bank as
Alternate Currency Loans or Eurodollar Loans shall be made or maintained instead
as CD Rate Loans or Base Rate Loans in Dollars (and, if an event referred to in
Sections 6.1(b) or 6.3 hereof has occurred and such Bank so requests by notice
to Borrower [with a copy to Agent and the Funds Administrator], each Alternate
Currency Loan or Eurodollar Loan of such Bank then outstanding shall be
automatically converted into a CD Rate Loan or Base Rate Loan in Dollars on the
date specified by such Bank in such notice), and (ii) all amounts of the Loans
which would otherwise be made or maintained by such Bank as CD Rate Loans shall
be made or maintained instead as Base Rate Loans or Eurodollar Loans (and, if an
event referred to in Sections 6.1(b) or 6.3 hereof has occurred and such Bank so
requests by notice to Borrower with a copy to Agent, each CD Rate Loan of such
Bank then outstanding shall be automatically converted into a Base Rate Loan or
Eurodollar Loan on the date specified by such Bank in such notice). The
decision between the alternative substitute interest rates or currencies
specified in (i) and (ii) above shall be made by Borrower, except that Agent
shall be permitted to select an alternative if Borrower fails to do so within
three business days after written notice from Agent.
SECTION 6.5. COMPENSATION. Within 10 Business Days after the receipt by
Borrower
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of a certificate of a Bank containing the information described in this Section
6.5 which shall be delivered to Borrower through Agent, Borrower shall pay to
Agent for the account of such Bank, from time to time, such amount or amounts as
shall be sufficient (in the reasonable opinion of such Bank) to compensate it
for any loss, cost, liability, or expense which such Bank determines in its sole
discretion is material and incurred by it as a result of:
(a) any payment, prepayment, or conversion of an Alternate Currency
Loan, CD Rate Loan or a Eurodollar Loan made by such Bank on a date other
than the last day of an Interest Period for such Alternate Currency Loan,
CD Rate Loan or Eurodollar Loan;
(b) any failure by Borrower to borrow Advances which were to be
Alternate Currency Loans or which were to bear interest at a rate based on
the CD Rate or Eurodollar Rate and were to be made by such Bank on the date
for such borrowing specified in the relevant Advance Request Form; or
(c) any failure by Borrower to make any payment or prepayment on a CD
Rate Loan or Eurodollar Loan on the date due;
(d) any failure to pay any Alternate Currency Loan in the Alternate
Currency in which it was made;
such compensation to include, without limitation, (i) any loss or reasonable
expense sustained or incurred in liquidating or employing deposits from third
Persons acquired to effect or maintain such Alternate Currency Loan or
Eurodollar Loan or any part thereof, (ii) an amount equal to the excess, if any
of (A) its cost of obtaining the funds for the Alternate Currency Loan, CD Rate
Loan or Eurodollar Loan being paid, prepaid or converted or not borrowed (based
on the Alternate Currency Rate, the CD Rate or Eurodollar Rate applicable
thereto) for the period from the date of such payment, prepayment or conversion
or failure to borrow to the last day of the Interest Period for such Alternate
Currency Loan, CD Rate Loan or Eurodollar Loan (or, in the case of a failure to
borrow, the Interest Period for such Alternate Currency Loan, CD Rate Loan or
Eurodollar Loan which would have commenced on the date of such failure to
borrow) over (B) the amount of interest (as reasonably determined by such Bank)
that would be realized by such Bank in re-employing the funds so paid, prepaid
or converted or not borrowed for such period or Interest Period, as the case may
be, (iii) any loss incurred in liquidating or closing out any foreign currency
contract undertaken by such Bank in funding or maintaining such Alternate
Currency Loan, and (iv) any loss arising from any change in the value of Dollars
in relation to any such Alternate Currency Loan which was not paid on the date
due between the date such payment was due and the date of payment, or which was
not paid in the Alternate Currency in which it was made, all as determined by
such Bank in its good faith discretion), but otherwise without penalty. A Bank
must request compensation under this Section 6.5(1) as promptly as practicable
after it obtains knowledge of the event which entitles it to compensation
pursuant to this Section 6.5, but in any event within 180 days after it obtains
such knowledge and (2) pursuant to a certificate which sets forth the amount
such Bank is entitled to receive
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pursuant to this Section 6.5 and the basis for determining such amount, which
certificate shall be conclusive as to the matters set forth therein in the
absence of manifest error. Any amounts received by Agent from Borrower pursuant
to this Section 6.5 shall be disbursed by Agent in immediately available funds
to the Banks requesting such amounts.
SECTION 6.6. CAPITAL ADEQUACY. If after the date hereof, any Bank shall
have determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any other Regulatory
Change or compliance by any Bank (or its Applicable Lending Office) with any
request or directive regarding capital adequacy (whether or not having the force
of law), has or would have the effect of reducing the rate of return on such
Bank's capital as a consequence of its obligations hereunder to a level below
that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy), then from time to time, within 10 Business Days after receipt
by Borrower of a certificate of a Bank containing the information described in
this Section 6.6 which shall be delivered to Borrower through Agent and shall be
conclusive as to the matters set forth therein absent manifest error, Borrower
shall pay to Agent such additional amount or amounts as will compensate such
Bank for such reduction. In determining such amount, such Bank may use any
reasonable averaging and attribution methods. A certificate of any Bank
claiming compensation under this Section (a) shall identify the Regulatory
Change, the amount that such Bank has reasonably determined will compensate it
for any such Regulatory Change and the way in which such amount has been
calculated, (b) shall be delivered to Borrower through Agent as promptly as
practical after the Bank obtains knowledge of the Regulatory Change which
entitled it to compensation pursuant to this Section, and (c) shall be
conclusive as to the matters set forth therein in the absence of manifest error.
Any amounts received by Agent from Borrower pursuant to this Section 6.6 shall
be disbursed by Agent in immediately available funds to the Banks requesting
such amounts.
ARTICLE VII
SET-OFF AND GUARANTIES
SECTION 7.1. SET-OFF. Upon the occurrence of any Event of Default, Agent
and each Bank are hereby authorized at any time and from time to time to set-off
and apply any and all deposits (time or demand, provisional or final) at any
time held and other indebtedness at any time owing by Agent or any Bank or any
Affiliate of Agent or any Bank to or for the credit or the account of any
Obligated Party against any and all of the obligations, indebtedness and
liability of any Obligated Party under any Loan Document irrespective of whether
Agent or any Bank shall have made any demand under any Loan Document and
although such obligations may be contingent and unmatured. The rights of Agent
and each Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which Agent or any Bank
may have. If after a set-off pursuant to this Section 7.1 Borrower delivers to
Agent evidence satisfactory to the Requisite Banks of the amount of funds that
were acquired pursuant to such set-off and that were being held at such time by
Borrower or one of its
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Subsidiaries to pay the Obligated Parties' obligations for employee withholding
and unemployment taxes, then Agent and each Bank exercising a right of set-off
agrees to pay the amount of such funds to the governmental agency to whom such
obligations are owed.
SECTION 7.2. GUARANTY OF THE OBLIGATIONS.
(a) The Guarantors shall guarantee payment of the Obligations. Each
Guarantor has previously executed and delivered its respective Guaranty.
References to the "Credit Agreement" in the Guaranties are hereby amended to be
references to this Agreement. The validity and enforceability of each Guaranty
are not diminished, extinguished or adversely affected by the execution of this
Agreement and are hereby ratified in all respects by the Guarantors.
(b) Each Guarantor shall be jointly and severally liable under its Guaranty
for the full amount of the Obligations, subject to the "Maximum Amount" of such
Guarantor's liability specified in its Guaranty. The relative benefits received
by each of the Guarantors under this Agreement shall be deemed to be in the same
proportion as the "Maximum Amount" of such Guarantor (as defined in its
Guaranty) bears to the arithmetic sum of the "Maximum Amounts" of all of the
Guarantors. None of the Guarantors will exercise any right of contribution
against any other Guarantor until all the Obligations shall have been paid in
full.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1. EXECUTION OF THIS AGREEMENT. The obligation of each Bank to
enter into this Agreement and to make its Pro Rata share of the next Advance
under the Revolving Credit Loan is subject to the conditions precedent that
Agent shall have received on or prior to the day of such Advance all of the
following, each dated (unless otherwise indicated) the same date as this
Agreement, in form and substance satisfactory to Agent and its counsel and in
sufficient numbers for each Bank and, in the case of any actions required to be
taken, evidence, in form and substance satisfactory to Agent and its counsel,
that the following required actions have been taken:
(a) Good Standing and Authority. Certificates of the appropriate
Tribunals of the jurisdictions set forth opposite the name of each
Obligated Party on Schedule 1 hereto, each dated within 30 days of the Date
of this Agreement, to the effect that each such Obligated Party is in good
standing with respect to the payment of franchise and similar Taxes and is
duly qualified to transact business in such jurisdictions (accompanied, if
requested by Agent, by an Officers' Certificate of such Obligated Party
that such Tribunal certificates are true and correct);
(b) Opinion of Counsel. A legal opinion from its general counsel in
the form attached hereto as EXHIBIT "G"; and
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(c) No Litigation; Consummation of Transaction. No injunction,
preliminary injunction, or temporary restraining order shall exist which
prohibits or may prohibit the transactions allowed herein or any other
related transaction, and no litigation or similar proceeding (including
without limitation any litigation or other proceeding seeking any type of
injunction, any type of restraining order or any similar remedy) shall
exist with respect to the transactions contemplated herein which, if
adversely determined, could in the reasonable judgment of Agent have any
Material Adverse Effect.
SECTION 8.2. ANY REVOLVING CREDIT ADVANCE. The obligation of each Bank to
make each Advance under the Revolving Credit Loan is subject to the following
conditions precedent:
(a) Advance Request Form. The Funds Administrator and Agent shall
have received an Advance Request Form executed by an authorized officer of
Borrower, all of the statements in which shall be true and correct on and
as of the date of the requested Advances. Each Advance Request Form shall
be delivered at the time and otherwise in accordance with Section 3.3 or
4.3.
(b) No Default. As of the date of the making of such Advance, no
Default exists;
(c) Compliance with Agreement. The Obligated Parties shall have
performed and complied with all agreements and conditions contained herein
that are required to be performed or complied with at or prior to the date
of such Advance;
(d) Representations and Warranties. The representations and
warranties contained in Article IX shall be true in all material respects
on the date of making of such Advance with the same force and effect as
though made on and as of that date, and the request by Borrower for such
Advance shall constitute a representation by Borrower that such
representations and warranties are true and correct as of the date of such
request; provided, however, that for purposes of this subsection (d), (i)
on or after the date on which Borrower delivers its audited Financial
Statements to Agent and the Funds Administrator pursuant to Section
10.l(a), the reference in the first sentence of Section 9.4(a) to the
Current Financials shall be a reference to the audited Financial Statements
most recently delivered to the Agent and Funds Administrator by Borrower
pursuant to Section 10.l(a) prior to the date of such Advance, and (ii) in
each representation and warranty in Article IX that makes reference to a
Schedule, the representation under this subsection (d) that such
representation and warranty in Article IX shall be true in all material
respects on the date of the Advance shall take into account any subsequent
amendments or changes to the Schedule (i) to which Agent or the Funds
Administrator has consented, which consent shall not be withheld
unreasonably, (ii) which reflect changes allowed by the terms of this
Agreement, or (iii) which reflect changes which could not be expected to
have a Material Adverse Effect;
(e) Proceedings Satisfactory. All proceedings taken in connection
with the
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transactions contemplated by the Loan Documents shall be reasonably
satisfactory to Agent and its counsel, and all Loan Documents shall be in
form and substance satisfactory to Agent and its counsel;
(f) Change. No event shall have occurred since the date hereof with
respect to any of the Obligated Parties or any of their Subsidiaries which
could be expected to have a Material Adverse Effect; and
(g) Additional Information. Agent shall have received such additional
documents, certificates from Obligated Parties, instruments, and other
information as Agent or its legal counsel, Cohan, Simpson, Cowlishaw &
Wulff, L.L.P., may request.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
To induce Agent and the Banks to enter into this Agreement and to make the
Loans, the Obligated Parties hereby jointly and severally represent and warrant
to Agent and the Banks as follows:
SECTION 9.1. ORGANIZATION, STANDING, QUALIFICATION. Each Obligated Party
(a) is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, (b) has all requisite corporate
power to conduct its business and to execute and deliver, and perform its
obligations under, the Loan Documents, and (c) is duly qualified to transact
business as a foreign corporation in each jurisdiction in which the nature of
the activities conducted by it or the nature of the assets owned by it would
make such qualification necessary, except where the failure to so qualify could
not be expected to have a Material Adverse Effect.
SECTION 9.2. AUTHORIZATION, ENFORCEABILITY, ETC.
(a) The execution, delivery and performance by each of the Obligated
Parties of the Loan Documents have been duly authorized by all necessary
corporate action and do not and will not (i) violate any provision of any
agreement, law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect to which any Obligated Party is a
party or is subject; (ii) result in, or require the creation or imposition of,
any Lien (other than a Permitted Lien) upon or with respect to any asset now
owned by any Obligated Party; or (iii) result in a breach of or constitute
default by any Obligated Party, and no Obligated Party is in default, under any
indenture, loan or credit agreement or any other agreement or instrument to
which any Obligated Party is a party or by which it or any of its assets may be
bound or affected, which breach or default could be expected to have a Material
Adverse Effect. No Person other than an Obligated Party is in default to the
extent that an Obligated Party could be materially and adversely affected under
any indenture, loan or credit agreement or any other material agreement or
instrument to which any Obligated Party is a party or by which it or any
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of its assets may be bound or affected.
(b) No approval, authorization, order, license, permit, franchise or
consent of or registration, declaration, qualification or filing with any
Tribunal is required in connection with the execution, delivery and performance
by each Obligated Party of the Loan Documents, or, if any such requirement
exists, it has been satisfied, and proof of such satisfaction has been furnished
to Agent.
(c) The Loan Documents, when duly executed and delivered by each Obligated
Party required to execute the same, will constitute legal, valid and binding
obligations of each Obligated Party, enforceable against each Obligated Party in
accordance with their respective terms except as the enforceability thereof may
be limited by Debtor Relief Laws.
SECTION 9.3. OWNERSHIP OF SUBSIDIARIES AND NAMES; JOINT VENTURES. The
extent of the Obligated Parties' ownership of the capital stock of or equity
interest in, and jurisdiction of, organization of, each of their respective
Subsidiaries is as set forth on Schedule 2 and, except as set forth thereon,
none of the Obligated Parties has any other Subsidiaries. All of the issued and
outstanding shares of capital stock of Borrower and each of its Subsidiaries are
duly authorized, validly issued, fully paid and non-assessable. There are no
outstanding contracts, options, warrants, instruments, documents or agreements
binding upon any Subsidiary described on Schedule 2 granting to any Person or
group of Persons any right to purchase or acquire shares of the capital stock of
any such Subsidiary except as permitted by Article X.
SECTION 9.4. FINANCIAL STATEMENTS AND BUSINESS CONDITION.
(a) The Current Financials fairly present the consolidated financial
conditions and the results of operations of Borrower and its Subsidiaries as of,
and for the portion of the fiscal year ending on, the dates thereof, all in
accordance with GAAP. There were no material liabilities, direct or indirect,
fixed or contingent, of the Obligated Parties as of the dates of the Current
Financials which are not reflected therein or in the notes thereto, which were
required to be shown by GAAP. Except for transactions directly related to, or
specifically contemplated by, the Loan Documents and transactions heretofore
disclosed in writing to Agent, there have been no changes in the financial
condition of Borrower and its Subsidiaries from that shown in the Current
Financials between such dates and the date hereof which could be expected to
have a Material Adverse Effect.
(b) As of the Date of this Agreement, and after giving effect to the
transactions contemplated by this Agreement, the making of the Loans by the
Banks and the execution and delivery of the Guaranty Agreements by the
Guarantors (i) none of the Obligated Parties or, except as disclosed in writing
to Agent before the execution of this Agreement, any of their Subsidiaries will
be insolvent and the aggregate fair market value of the assets of the Obligated
Parties (including the fair market value of their equity interest in the
Subsidiaries) will exceed Borrower's liabilities (including without limitation
contingent liabilities) by at least $10,000,000 and (ii) each of the Obligated
Parties will be able to pay its Debts as they mature. None of the
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Obligated Parties intends to incur, or believes that it will incur, Debt that
will be beyond its ability to pay as such Debt matures. None of the Obligated
Parties is engaged in any business or transaction, or is about to engage in any
business or transaction for which such Obligated Party, after consummation of
the above described transactions, has (a) an unreasonably small capital or (b)
remaining assets that are unreasonably small in relation to the business
transaction.
SECTION 9.5. TAXES. Each Obligated Party has filed all Tax returns
required to have been filed and has paid all Taxes shown to be due and Payable
on such returns, including interest and penalties, and all other Taxes which are
payable by it, to the extent the same have become due and payable, unless (a)
the amount, applicability or validity thereof is currently being contested by an
Obligated Party in good faith by appropriate action diligently conducted, and
such Obligated Party has set aside on its books reserves (segregated to the
extent required by GAAP) deemed by it to be adequate with respect thereto or (b)
the failure to have made such filings or payments could not be expected to have
a Material Adverse Effect. No income Tax liability of any Obligated Party has
been asserted by the Internal Revenue Service or other taxing authority for
Taxes in excess of those already paid, or, if such liability has been asserted,
(i) the amount, applicability or validity thereof is currently being contested
by an Obligated Party in good faith by appropriate action diligently conducted,
and such Obligated Party has set aside on its books reserves (segregated to the
extent required by GAAP) deemed by it to be adequate with respect thereto or
(ii) all such asserted liabilities could not be expected to have a Material
Adverse Effect.
SECTION 9.6. TITLE TO PROPERTIES; LIENS. Each Obligated Party has good
and marketable title to all assets purported to be owned by it (except for minor
defects in title and minor encumbrances not in any case materially detracting
from the value of the assets affected thereby), and all such assets are free and
clear of all Liens other than Liens permitted by Section 10.23.
SECTION 9.7. LEASES. All material leases under which any Obligated Party
is lessee or tenant are in full force and effect, and there does not exist any
default or potential default thereunder except to the extent that any such lease
or default or potential default thereunder could not be expected to have a
Material Adverse Effect.
SECTION 9.8. BUSINESS; COMPLIANCE. Each Obligated Party has performed and
complied with all material obligations required to be performed by it and is not
in default under, any license, permit, order, authorization, grant, order or
regulation except to the extend that such nonperformance, noncompliance or
default could not be expected to have a Material Adverse Effect.
SECTION 9.9. FRANCHISES, PATENTS, TRADEMARKS AND OTHER RIGHTS. The
Obligated Parties have all franchises, permits, licenses, patents, trademarks,
service marks, trade names, copyrights and other authority (collectively, the
"Authorizations") as are necessary to enable them to carry on their respective
businesses as now being conducted; there has not been a default under any of the
Authorizations that could be expected to have a Material Adverse Effect; and
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none of the Authorizations conflict with the rights of other Persons, which
conflict could be expected to have a Material Adverse Effect.
SECTION 9.10. LITIGATION, PROCEEDINGS, ETC. As of the date hereof, except
as set forth on Schedule 3 hereto, (a) there is no Litigation pending, or to the
knowledge of the Obligated Parties, threatened against or affecting, the
transactions contemplated hereby, any Obligated Party or any Obligated Party's
assets at law or in equity, or before or by any Tribunal, which Litigation could
be expected to have a Material Adverse Effect, (b) no accidents, acts or actions
have occurred which involve any claim not fully covered by insurance or provided
for by adequate reserves established by and reflected in the Current Financials
which could be expected to have a Material Adverse Effect, and (c) no Obligated
Party is in default with respect to any order, writ, injunction or decree of any
Tribunal which could be expected to have a Material Adverse Effect.
SECTION 9.11. COMPLIANCE WITH LAW. The business and operations of each
Obligated Party have been and are being conducted in accordance with all Laws
and orders of any Tribunal or arbitrator, except to the extent that any
noncompliance could not be expected (either individually or collectively) to
result in a Material Adverse Effect.
SECTION 9.12. EMPLOYEE BENEFIT PLANS. Based upon ERISA and the
regulations and published interpretations thereunder, each Obligated Party is in
compliance with the applicable provisions of ERISA, except where such
noncompliance could not be expected to have a Material Adverse Effect. No
Reportable Event has occurred with respect to any Plan, except for Reportable
Events which could not be expected to have a Material Adverse Effect.
SECTION 9.13. USE OF PROCEEDS. Proceeds of the Loans have been used as
set forth in the Original Credit Agreement, the First Restated Agreement and the
Amendments and shall be used as set forth in Articles III and IV.
SECTION 9.14. RELATIONSHIP TO THE BANKS. No Person having "control" (as
such term is defined in the Financial Institutions Regulatory and Interest Rate
Control Act of 1978 ("FIRA"), or in regulations promulgated pursuant thereto) of
any Obligated Party is an "executive officer", "director" or "person who
directly or indirectly or in concert with one or more persons, owns, controls,
or has the power to vote more than ten percent (10%) of any class of voting
securities" (as such terms are defined in FIRA or in any regulations promulgated
pursuant thereto) of any of the Banks.
SECTION 9.15. INVESTMENT COMPANY ACT. No Obligated Party or Affiliate of
any Obligated Party is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 9.16. PUBLIC UTILITY HOLDING COMPANY ACT. No Obligated Party or
Affiliate of any Obligated Party is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding
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company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 9.17. GOVERNMENT REGULATION. Neither any Obligated Party nor any
Affiliate of any Obligated Party is subject to regulation under the Federal
Power Act, the Interstate Commerce Act (as any of the preceding acts have been
amended) or any other Law (other than Regulation X) which regulates the
incurring by any Obligated Party of Borrowings.
SECTION 9.18. REGULATION U. None of the Obligated Parties is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying Margin Stock. None of the
Obligated Parties nor any Person acting on behalf of the Obligated Parties has
taken or will take any action which might cause any of the Loans to violate
Regulation U or any other regulation of the Board or to violate the Exchange Act
or any rule or regulation thereunder, in each case as now in effect or as the
same may hereafter be in effect.
SECTION 9.19. ENVIRONMENTAL LAWS. The Obligated Parties, and the
Properties that they own, lease or occupy are in compliance with all Laws
relating to pollution control and environmental contamination, including, but
not limited to, all Laws governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of hazardous
wastes, except where noncompliance could not be expected to have a Material
Adverse Effect, and none of the Obligated Parties has been alleged to be in
violation of, nor has been subject to any administrative or judicial proceedings
pursuant to such Laws that could be expected to have a Material Adverse Effect.
SECTION 9.20. LABOR DISPUTES; COMPLIANCE. Except as set forth on Schedule
4 hereto, (a) no strike, slowdown, picketing, work stoppage or other labor
dispute against or affecting any Obligated Party, or premises of any of them
exists or is pending or, to its knowledge, threatened, (b) no application for
certification of a collective bargaining agent is pending, (c) there is no
lockout of any employees by any Obligated Party, nor is any such action
contemplated by any of them, (d) each Obligated Party has complied in all
material respects with all Laws relating to employment, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes, and
occupational safety and health except where noncompliance could not be expected,
individually or in the aggregate, to result in a Material Adverse Effect and (e)
no Obligated Party is liable for the payment of Taxes, fines, penalties or other
amounts, however designated, for failure to comply with any of the foregoing
employment Laws which individually or in the aggregate could be expected to have
a Material Adverse Effect.
SECTION 9.21. BENEFIT TO OBLIGATED PARTIES. The operations of the
Obligated Parties are interrelated and interdependent and, therefore, loans or
extensions of credit to any one Obligated Party will produce direct financial
benefits to the other Obligated Parties. The value of the consideration
received and to be received by Borrower and each Guarantor as a result of such
Obligated Parties entering into this Agreement and the other Loan Documents to
which they are a party is reasonably worth at least as much as its liability and
obligations of such Obligated Party hereunder and under the other Loan Documents
to which it is a party and such liability
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and obligations have benefited and may reasonably be expected to benefit each
Obligated Party directly.
SECTION 9.22. ORIGINAL CREDIT AGREEMENT. As of the date of this
Agreement, no Default exists under the First Restated Agreement or the
Amendments or any of the documents relating thereto.
ARTICLE X
COVENANTS
The Obligated Parties, jointly and severally, covenant and agree that, as
long as the Obligations or any part thereof are outstanding or any Bank has any
commitment hereunder, each of them will perform and observe all, and not permit
or suffer any nonperformance or failure of any, of the following covenants,
unless Requisite Banks shall otherwise consent in writing (which consent may be
withheld or refused for any reason):
SECTION 10.1. FINANCIAL STATEMENTS. Borrower will furnish to the Agent
and the Funds Administrator:
(a) As soon as available, and in any event within 120 days after the
end of each fiscal year of Borrower, Financial Statements of Borrower and
its Subsidiaries for such fiscal year showing on a consolidated basis the
financial position, results of operations and cash flows as of the end of
such fiscal year and for the 12-month period then ended, in each case
setting forth the comparable information for the preceding fiscal year, all
in reasonable detail and accompanied by the report of Ernst & Young, Arthur
Andersen & Co. or other independent certified public accountants of
recognized standing chosen by Borrower and consented to by Agent (provided
Agent's consent shall not unreasonably be withheld), based on an audit
using generally accepted auditing standards, that the Financial Statements
present fairly, in all material respects, the consolidated financial
position, results of operations and cash flows of Borrower and its
Subsidiaries for the respective periods in conformity with GAAP. The
report required hereby shall not be qualified on the basis that Borrower is
not a going concern or otherwise qualified or limited because of restricted
or limited examination by the accountants of any material portion of the
records of Borrower or any of its Subsidiaries.
(b) As soon as available, and in any event within 60 days after the
last day of each of the first three fiscal quarters of each fiscal year of
Borrower, Financial Statements showing on a consolidated basis the
financial position, results of operations and cash flows of Borrower and
its Subsidiaries as of, and for the period from the beginning of the
current fiscal year to, such last day, in each case setting forth
comparable information for the corresponding period of the preceding fiscal
year and all in reasonable detail.
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(c) As soon as available, and in any event within 60 days after the
last day of each of the first three fiscal quarters of each fiscal year of
Borrower and within 120 days after the last day of each fiscal year of
Borrower, balance sheets and income statements showing on a consolidating
basis the financial position and results of operations of Borrower and its
Subsidiaries as of, and for the period from the beginning of the current
fiscal year to, such last day, substantially in the form attached hereto as
EXHIBIT "H."
SECTION 10.2. CERTIFICATES; SEC FILINGS; OTHER INFORMATION. Borrower will
observe all of the following:
(a) Concurrently with the delivery of the Financial Statements
referred to in Subsections 10.1(a), 10.1(b), and 10.1(c), Borrower will
furnish to Agent a certificate of an authorized officer of Borrower in the
form attached hereto as EXHIBIT "I" (i) stating that no Default has
occurred and is continuing or, if such officer has knowledge of a Default,
the nature thereof and specifying the steps taken or proposed to remedy
such Default, (ii) showing in reasonable detail the calculations showing
compliance with Sections 10.15, 10.16, 10.17, 10.18, 10.19 and 10.22 using
GAAP consistently applied with the Financial Statements as of March 28,
1993 and (iii) with respect to the certificates delivered in connection
with the Financial Statements referred to in Subsection 10.1(b) and
10.1(c), certifying that the Financial Statements attached have been
prepared in accordance with GAAP consistently applied (except in those
circumstances disclosed therein where GAAP has not been consistently
applied in the current period in relation to the preceding period) and
fairly present, in all material respects (subject to year-end audit
adjustments), the financial condition and results of operations of Borrower
and its Subsidiaries, on a consolidated or consolidating basis, as the case
may be, at the date and for the periods indicated therein.
(b) Concurrently with the delivery of the Financial Statements
referred to in Subsection 10.1(a), Borrower will also furnish to Agent a
certificate of the independent accountants referred to therein to the
effect that no Default has occurred with respect to the covenants contained
in Sections 10.16, 10.17, 10.18 and 10.19 or, if such accountants have
knowledge of a Default with respect to any such Section, specifying the
nature thereof.
(c) As soon as available, Borrower will furnish to Agent copies (i) of
Borrower's SEC Filings, (ii) of Borrower's annual, quarterly and other
reports to shareholders, NASDAQ or any securities exchange on which any of
its securities are traded, (iii) of orders issued by any Tribunal in any
Litigation to which any Obligated Party or any of their respective
Subsidiaries is a party, and (iv) of press releases or other statements
made available generally by Borrower or any of its Subsidiaries to the
public generally concerning material developments in the business or
affairs of Borrower or any of its Subsidiaries.
(d) Borrower will furnish promptly to Agent, such additional
information
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concerning any of the Obligated Parties or any of their respective
Subsidiaries as Agent may reasonably request.
(e) Within sixty (60) days after the execution of this Agreement, each
Obligated shall furnish to Agent certificates executed by its Chairman,
President or any Vice President and its Secretary or Assistant Secretary in
the form attached hereto as EXHIBIT "J."
SECTION 10.3. TRANSACTIONS WITH AFFILIATES. No Obligated Party will
engage or permit any Subsidiary to engage, in any transaction including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate except in the ordinary course of and pursuant to the
reasonable requirements of business and upon fair and reasonable terms. Any
management compensation arrangement approved by the Borrower's board of
directors shall be deemed to be on fair and reasonable terms.
SECTION 10.4. PRESERVATION OF EXISTENCE, PROPERTIES AND BUSINESS.
(a) Except as otherwise contemplated herein, each Obligated Party will, and
will cause each of its Subsidiaries to, preserve and maintain its corporate
existence.
(b) Except as otherwise permitted herein or except where the failure to do
so could not be expected to have a Material Adverse Effect, each Obligated Party
will, and will cause each of its Subsidiaries to, (i) preserve and maintain all
of its leases, franchises, qualifications and Rights that are necessary or
desirable in the ordinary conduct of its business, (ii) operate and maintain in
good condition and repair, ordinary wear and tear excepted, all of its
Properties which are necessary or material in accordance with sound business
practices in the proper conduct of its business, and (iii) conduct its business
as presently conducted in accordance with good business practices.
(c) None of the Obligated Parties will dissolve or liquidate except
following a Disposition to another Obligated Party which is not a Foreign
Subsidiary.
SECTION 10.5. BUSINESS COMBINATIONS.
(a) Borrower will not effect any Combination with any other Person
(including any other Obligated Party) unless (i) Borrower is the continuing or
surviving corporation of the Combination; (ii) no Default shall have occurred
and be continuing immediately prior to, and after giving effect to, the
Combination; (iii) the corporate officers of Borrower shall not substantially
change as a result of the Combination; (iv) the other party to the Combination
shall be engaged in substantially the same business engaged in by Borrower
immediately prior to the Combination; (v) there shall have been executed,
delivered and filed such instruments, agreements, documents and papers as may be
reasonably requested by Agent or any Bank to preserve and protect their Rights
under the Loan Documents; and (vi) Borrower has delivered to Agent an Officer's
Certificate, in form and substance reasonably satisfactory to Agent, to the
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effect that the conditions stated in clauses (i) through (v) preceding have been
satisfied.
(b) No Subsidiary will effect any Combination with any other Person
(including any other Obligated Party) unless (i) no Default shall have occurred
and be continuing immediately prior to, or after giving effect to, the
Combination; (ii) after the Combination Borrower will remain the direct or
indirect owner of all of the outstanding capital stock and other equity
securities of the continuing or surviving corporation; (iii) the other party to
the Combination shall be engaged in substantially the same business engaged in
by Subsidiary immediately prior to the Combination; (iv) there shall have been
executed, delivered and filed such instruments, agreements, documents and papers
as may be reasonably requested by Agent or any Bank to (x) make the continuing
or surviving corporation a party to this Agreement and other appropriate Loan
Documents, and (y) preserve and protect their Rights under the Loan Documents;
and (v) Borrower has delivered to Agent an Officer's Certificate, in form and
substance reasonably satisfactory to Agent to the effect that the conditions
stated in clauses (i) through (iv) preceding have been satisfied.
(c) Except as otherwise permitted herein, no Obligated Party may effect any
Disposition if the effect of such Disposition, individually and in the aggregate
for all Obligated Parties would exceed four percent (4%) of Consolidated
Tangible Assets as reflected in the most recent Financial Statement.
SECTION 10.6. PAYMENT OF TAXES AND CLAIMS. Each Obligated Party will pay
or discharge, and will cause each of its Subsidiaries (but only to the extent
that the Subsidiary's assets shall be sufficient for the purpose) to pay or
discharge, at or before maturity or before they become delinquent (a) all Taxes,
levies, assessments, vault, water and sewer rents, rates, charges, levies,
permits, inspection and license fees and other governmental and quasi-
governmental charges and any penalties or interest for nonpayment thereof,
heretofore, or hereafter imposed or which may become a lien upon any property
owned by Borrower, any Obligated Party or any of their respective Subsidiaries
or arising with respect to the occupancy, use, possession or leasing thereof
(collectively the "Impositions") and (b) all lawful Debts, including without
limitation all claims for labor, material or supplies except to the extent that
failure to pay or discharge the items set forth in (a) and (b) could not be
expected to have a Material Adverse Effect; provided, however, that neither
Borrower nor any other Obligated Party nor any of their respective Subsidiaries
shall be required to pay or discharge any claim for labor, material, or supplies
or any Imposition which is being contested in good faith by appropriate
proceedings diligently pursued, and for which adequate reserves in conformity
with GAAP have been established.
SECTION 10.7. INSPECTION RIGHTS. At any reasonable time and from time to
time, upon not less than three Business Days written notice from Agent or any
Bank to Borrower, each Obligated Party will permit and will cause each of its
Subsidiaries to permit, representatives of Agent or such Bank to (a) examine and
make copies of the books and records of, and (b) to discuss the business,
operations, and financial condition of, such Obligated Party and its
Subsidiaries with their respective officers and with their independent certified
public accountants,
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in each case at reasonable times and at the expense of Agent or such Bank.
SECTION 10.8. KEEPING BOOKS AND RECORDS. Each Obligated Party will
maintain, and will cause each of its Subsidiaries to maintain, books of record
and account in conformity with GAAP (except for books of record and account of
any Foreign Subsidiary, which shall be kept in conformity with generally
accepted accounting principles in its jurisdiction of organization).
SECTION 10.9. COMPLIANCE WITH LAWS. Each Obligated Party will comply, and
will cause each of its Subsidiaries to comply, with all Laws and orders of any
Tribunal or arbitrator except to the extent that any noncompliance could not be
expected (either individually or collectively) to result in a Material Adverse
Effect.
SECTION 10.10. COMPLIANCE WITH AGREEMENTS. Each Obligated Party will
comply, and will cause each of its Subsidiaries to comply, in all respects with
all indentures, mortgages, deeds of trust and other agreements binding on it or
affecting its properties or business, except to the extent that any
noncompliance could not be expected (either individually or collectively) to
result in a Material Adverse Effect.
SECTION 10.11. NOTICES. Each Obligated Party will promptly notify, and
will cause each of its Subsidiaries to promptly notify, Agent of:
(a) the commencement of any Litigation against any of the Obligated
Parties or any of their respective Subsidiaries that reasonably could be
expected to have a Material Adverse Effect;
(b) the occurrence of a default or event of default under any
instrument or agreement evidencing any material Borrowings of any of the
Obligated Parties or any of their respective Subsidiaries;
(c) any other matter that reasonably could be expected to have a
Material Adverse Effect;
(d) The occurrence or anticipated occurrence of any Reportable Event
arising in connection with any Plan or any other potential material
liability with respect to any Plan of any Obligated Party; and
(e) The occurrence of any Default.
Any notification required by this Section 10.11 shall be accompanied by an
Officers' Certificate of the applicable Person setting forth the details of the
specified events and the action which the applicable Person proposes to take
with respect thereto.
SECTION 10.12. COMPLIANCE WITH ERISA AND THE INTERNAL REVENUE CODE. Each
Obligated Party will comply with all material requirements of ERISA and the
Internal Revenue
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Code, if applicable, so as not to give rise to any liability thereunder for
noncompliance, except to the extent that any noncompliance could not be expected
(either individually or collectively) to result in a Material Adverse Effect.
SECTION 10.13. COMPLIANCE WITH REGULATIONS G, T, U AND X. Neither any
Obligated Party nor any Person acting on its behalf will take any action which
might cause this Agreement, or any of the other Loan Documents to violate, and
the Obligated Parties will take all actions necessary to cause compliance with
Regulations G, T, U and X and the Exchange Act, in each case as now in effect or
as the same may hereafter be in effect.
SECTION 10.14. FURTHER ASSURANCES. Each Obligated Party will execute and
deliver, and will cause each of its Subsidiaries to execute and deliver, such
further instruments, agreements and documents and take such further action as
may be reasonably requested by Agent to carry out the provisions and purposes of
this Agreement and the other Loan Documents.
SECTION 10.15. LIMITATION ON DEBT. Neither Borrower nor any Subsidiary of
Borrower shall incur, create, assume, have outstanding, guarantee or otherwise
be or become directly or indirectly liable with respect to any Debt except:
(a) Borrowings represented by the Loans;
(b) Intercompany Loans, provided that the aggregate amount of
Intercompany Loans to Foreign Subsidiaries shall not exceed $20,000,000;
(c) Debt consisting of current liabilities incurred in the ordinary
course of business, excluding Borrowings and accounts payable which have
remained unpaid for a period of 60 days (120 days in the case of such
liabilities of Foreign Subsidiaries to Persons outside of the U.S.) after
the same became due unless the same shall currently be disputed or
contested by Borrower or such Subsidiary in good faith and adequate
reserves in accordance with GAAP have been established;
(d) indebtedness for Impositions to the extent not yet delinquent; and
(e) additional Borrowings in an aggregate principal amount at any time
not to exceed $10,000,000; provided, however, if a Person becomes a
Subsidiary in an Acquisition or Combination permitted by Section 10.5 and
has Borrowings at the time of such Acquisition or Combination, the sum of
such Borrowings and the other Borrowings of Borrower and its other
Subsidiaries may exceed $10,000,000 if (i) the sum of such Borrowings and
the other Borrowings of Borrower and its other Subsidiaries (other than the
Loans) does not exceed $20,000,000 and (ii) the sum of such Borrowings and
the other Borrowings of Borrower and its other Subsidiaries (other than the
Loans) is reduced to $10,000,000 or less within ninety (90) days after the
Acquisition or Combination in question.
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SECTION 10.16. MINIMUM NET WORTH. Borrower will not permit the
consolidated stockholder's equity of the Borrower and its Subsidiaries to be
less than the amounts set forth in the table below as of the last day of each
fiscal quarter during the periods indicated:
<TABLE>
<CAPTION>
Stockholder's Equity Fiscal Year Ended March 31
---------------------- --------------------------
<S> <C>
$115,000,000 1995
$125,000,000 1996
$135,000,000 1997
$145,000,000 1998
$155,000,000 1999
</TABLE>
SECTION 10.17. CONSOLIDATED CURRENT ASSETS TO CONSOLIDATED CURRENT
LIABILITIES. Borrower and its Subsidiaries will maintain as of the last day of
each fiscal quarter a ratio of consolidated current assets to consolidated
current liabilities of not less than 1.25 to 1.0. For purposes of this ratio,
all amounts owed pursuant to the Revolving Credit Loan shall be considered
noncurrent liabilities.
SECTION 10.18. MINIMUM INTEREST COVERAGE RATIO/MINIMUM CASH FLOW COVERAGE
RATIO. Borrower and its Subsidiaries will maintain on a consolidated basis:
(a) A ratio of (i) Net Income without deduction for interest expense,
depreciation or income taxes (other than income taxes actually paid), to
(ii) interest expense plus required principal payments, determined as of
the end of each March, June, September and December, in each case for the
preceding 12-month period, of not less than 1.6 to 1.0 until June 30, 1995,
and of not less than 1.75 to 1.0 thereafter; and
(b) Until December 31, 1994, a ratio of (i) Net Income, without
deduction for interest expense or income taxes to (ii) interest expense,
determined as of the end of each March, June, September and December, in
each case for the preceding 12-month period, of not less than 5.0 to 1.0.
SECTION 10.19. MAXIMUM DEBT TO CAPITALIZATION RATIO. Borrower and the
Subsidiaries, on a consolidated basis, will not allow the Debt to Capitalization
Ratio to exceed .45 to 1.0 as of the end of any fiscal quarter while the
Obligations remain unpaid.
SECTION 10.20. AMENDMENT OF CORPORATE DOCUMENTS. No Obligated Party will
amend its certificate or articles of incorporation or bylaws as in effect on the
date hereof if the effect of such amendment might reasonably be construed to
adversely affect the rights of any Bank under any of the Loan Documents, or the
ability of any of the Obligated Parties to perform fully its obligations under
this Agreement and the Loan Documents.
SECTION 10.21. DISTRIBUTIONS. No Obligated Party will make, or permit or
suffer any of its Subsidiaries to make, any Distribution, other than
Distributions to another Obligated Party
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which is not a Foreign Subsidiary or Distributions which are Borrower's
purchases of its own common stock.
SECTION 10.22. INVESTMENTS. No Obligated Party will have, or permit or
suffer any of its Subsidiaries to have, directly or indirectly, any Investment
(including without limitation any Acquisition or any Investment resulting
therefrom) other than:
(a) Permitted Investments;
(b) Receivables;
(c) Investments (including without limitation Intercompany Loans) in
Subsidiaries; provided, however, that the aggregate amount of such
Investments in Foreign Subsidiaries shall not exceed at any one time
$30,000,000;
(d) loans or other extensions of credit to employees provided such
loans and extensions of credit to employees do not exceed in the aggregate
for Borrower and its Subsidiaries an amount equal to $l,000,000;
(e) promissory notes received in connection with any Disposition
permitted by Section 10.5(c); and
(f) additional Investments in any of the categories referred to in
Subsections (a) through (e) above in excess of the amounts therein
permitted and additional Investments of any other nature; provided that at
the time of any such Investment and after giving effect thereto the
aggregate unliquidated amount of Investments of the Obligated Parties
permitted only by this subsection (g) shall not exceed $1,000,000.
SECTION 10.23. NEGATIVE PLEDGE. No Obligated Party shall, at any time,
create, incur, assume or permit to exist any Lien on any of its Property, other
than:
(a) Permitted Liens;
(b) capital leases permitted under Section 10.15;
(c) those Liens listed on Schedule 5; and
(d) purchase money Liens upon or in Property acquired by Borrower
after June 30, 1993 or Liens existing in such Property at the time of
acquisition thereof, or, in the case of any Person which thereafter becomes
a Subsidiary, Liens upon or in its Property existing at the time such
Person becomes a Subsidiary, provided that (i) no such Lien extends or
shall extend to or cover any Property of Borrower or any Subsidiary, as the
case may be, other than the Property then being acquired and fixed
improvements then or thereafter erected thereon, (ii) the aggregate
principal amount of all Debt of
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Borrower and its Subsidiaries secured by all Liens described in this
Subsection (d) shall not exceed in the aggregate $10,000,000 at any one
time outstanding, and (iii) no such Lien or Debt secured thereby shall be
extended, refunded or renewed.
SECTION 10.24. CAPITAL EXPENDITURES. Borrower and its Subsidiaries will
not make or commit to any Capital Expenditures which exceed in the aggregate an
amount equal to $25,000,000 during any 12-month period determined as of the end
of each March, June, September and December. Borrower's acquisition of its
headquarters building in November 1993 and its acquisition of a building on
Midway Road, Dallas, Texas, in July 1994 are not included in calculation of
Capital Expenditures for purposes of the preceding sentence.
SECTION 10.25. AGREEMENTS. None of the Obligated Parties will enter into
any agreement containing any provisions which would be violated or breached by
the performance of the obligations or duties of any Person under the Loan
Documents.
SECTION 10.26. INSURANCE. Borrower and its Subsidiaries shall each
maintain, with companies rated A+10 or better by Best & Company, insurance
policies (i) insuring their assets against loss by fire, explosion, theft and
other risks and casualties as are currently insured against and (ii) insuring it
and Agent as representative of the Banks against liability for personal injury
and property damages relating to the Properties of Borrower and its
Subsidiaries, such policies to be in such amounts and covering such risks as are
currently insured against, subject to availability at commercially reasonable
rates.
ARTICLE XI
DEFAULT
SECTION 11.1. EVENTS OF DEFAULT. Each of the following shall be deemed an
"Event of Default".
(a) Borrower shall fail to pay within five days of the date due any
payment Obligation or any part thereof.
(b) Any representation or warranty made by any of the Obligated
Parties in Article IX of this Agreement, or made (or deemed made pursuant
to Section 8.3(d)) by any of the Obligated Parties (or any of their
respective officers) in any Loan Document, certificate, report, notice or
financial statement furnished at any time pursuant to Article VIII of this
Agreement, shall be false, misleading or erroneous in any material respect
when made or deemed to have been made.
(c) Any Obligated Party shall fail to perform, observe or comply with
any of the covenants contained in Sections 10.4(c), 10.5, 10.11, 10.13,
10.18, 10.21, 10.23 and 10.25 of this Agreement or Borrower shall fail to
comply with Section 10.4(a).
(d) Borrower shall fail to perform, observe or comply with any
covenant,
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agreement or term contained in this Agreement or any other Loan Document
other than those specified in Subsections (a) and (c) above, and such
failure shall remain unremedied for five consecutive Business Days
following written notice thereof by Agent to Borrower.
(e) Any of the Obligated Parties or any of their respective
Subsidiaries shall commence a voluntary proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any Debtor Relief Law or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official of it or a substantial
part of its property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it or shall make a general
assignment for the benefit of creditors or shall generally fail to pay its
debts as they become due or shall admit in writing its inability to pay its
debts as they become due or shall take any corporate action to authorize
any of the foregoing.
(f) An involuntary proceeding shall be commenced against any of the
Obligated Parties or any of their respective Subsidiaries seeking
liquidation, reorganization, or other relief with respect to it or its
debts under any Debtor Relief Law or seeking the appointment of a trustee,
receiver, liquidator, custodian, or other similar official for it or a
substantial part of its property, and such involuntary proceeding (i) shall
not have been duly contested within 30 days after the commencement of the
proceeding or (ii), if duly contested within such 30 days, shall for any
reason remain undismissed and unstayed for a period of 90 days after the
commencement of the proceeding.
(g) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to discharge within a period of 30 days after the
commencement thereof any attachment, sequestration, or similar proceeding
or proceedings involving an aggregate amount in excess of $1,000,000
against any of its assets or properties.
(h) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to satisfy and discharge any final non-appealable
judgment or judgments against it for the payment of money in an aggregate
amount in excess of $1,000,000 prior to the time any Lien arising as a
result thereof attaches to any of its assets.
(i) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to pay when due and after the passage of any
applicable notice and cure periods any principal of or interest on any
Borrowings the total principal amount of which is equal to or in excess of
$1,000,000 (other than the Obligations) or any event or condition shall
occur which results in the acceleration of the maturity of any such
Borrowings.
(j) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to pay when due and after the passage of any
applicable notice and cure periods any
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principal of or interest on any Borrowings from any of the Banks (other
than the Obligations) or any event or condition shall occur which results
in the acceleration of the maturity of any such Borrowings.
(k) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by any Obligated
Party or any of their respective Subsidiaries, or any Obligated Party shall
deny that it has any further liability or obligation under any of the Loan
Documents; provided no Event of Default shall be deemed to have occurred
under this Subsection (j) if the event occurring under this Subsection (j)
occurred as a result of an act or failure to act by Agent or any Bank or
until 30 days after the occurrence thereof if the event occurring was
caused by a Person other than an Obligated Party.
(l) The occurrence of a default or event of default under any of the
Intercompany Loan Agreements.
SECTION 11.2. REMEDIES. Upon the occurrence of an Event of Default, Agent
may and shall, at the direction of Requisite Banks, do any one or more of the
following:
(a) Acceleration. Declare the unpaid principal of and accrued and
unpaid interest on the Notes and any of the other obligations of the
Obligated Parties under the Loan Documents immediately due and payable, and
the same shall thereupon become due and payable, without notice, demand,
resentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, protest, or other formalities of any kind, all of which are
hereby expressly waived by Borrower.
(b) Termination of Commitments to Advance. Terminate the Commitments
of the Bank hereunder without notice to Borrower and the other Obligated
Parties.
(c) Judgment. Reduce any claim to judgment.
(d) Rights. Exercise any and all rights and remedies afforded by the
laws of the State of Texas or any other jurisdiction, by any of the Loan
Documents, by equity, or otherwise .
(e) Application of Payments and Proceeds. Apply any and all amounts
held in accounts for, or received in payment of the obligations of, the
Obligated Parties under the Loan Documents to the Obligations, in such
order and manner as Requisite Banks may direct, or hold any such amount as
additional security for repayment of the Obligations, notwithstanding any
instruction to the contrary by Borrower or any other Obligated Party;
provided that Obligated Party shall remain liable to Bank for any
deficiency.
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Provided, however, that upon the occurrence of an Event of Default under
Subsection (e) or (f) of Section 11.1, the Commitments of all Banks hereunder
shall automatically terminate, and the unpaid principal of and accrued and
unpaid interest on the Notes and all of the other obligations of the Obligated
Parties under the Loan Documents shall thereupon become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest, or other formalities of
any kind, all of which are hereby waived by Borrower. Upon the occurrence of
any such Event of Default, Banks may exercise all rights and remedies available
to them at law or in equity, under the Loan Documents, or otherwise.
SECTION 11.3. PERFORMANCE BY AGENT. If Borrower or any other Obligated
Party shall fail to perform any covenant, duty, or agreement in accordance with
the terms of the Loan Documents, and such failure shall remain unremedied for
five consecutive Business Days following written notice thereof by Agent, Agent
may at the direction of Requisite Banks perform, or attempt to perform, such
covenant, duty, or agreement on behalf of Borrower or any other Obligated Party.
In such event, Agent shall give the applicable Obligated Party prompt written
notification of its intent to perform or attempt to perform such covenant, duty
or agreement and Borrower shall at the request of Agent, promptly pay any amount
expended by Banks or Agent on its behalf in such performance or attempted
performance to Agent, for the account of Agent or the Banks who actually
expended such amounts, together with interest thereon at the Default Rate
through the date of such expenditure by Agent or the Banks (as appropriate)
until paid. Notwithstanding the foregoing, it is expressly agreed that neither
Agent nor any Bank shall have any liability or responsibility for the
performance of any obligations of Borrower or any other Obligated Party under
the Loan Documents.
ARTICLE XII
THE AGENT
SECTION 12.1. APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite
the various transactions contemplated by this Agreement, the Banks hereby
appoint TCB to act as their Agent hereunder and under each of the other Loan
Documents. TCB consents to such appointment and agrees to perform the duties of
Agent as specified herein. The Banks authorize and direct Agent to take such
action in their name and on their behalf under the terms and provisions of the
Loan Documents and to exercise such rights and powers thereunder as are
specifically delegated to or required of Agent for the Banks, together with such
rights and powers as are reasonably incidental thereto. Agent is hereby
expressly authorized as Agent on behalf of itself and the other Banks:
(a) To receive on behalf of each of the Banks any payment of
principal, interest, fees or other amounts paid pursuant to this Agreement
and the Notes and to distribute to each Bank its share of all payments so
received as provided in this Agreement;
(b) To receive all documents and items to be furnished under the Loan
Documents;
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(c) To act as nominee for and on behalf of the Banks in and under the
Loan Documents;
(d) To arrange for the means whereby the funds of the Banks are to be
made available to Borrower;
(e) To distribute to the Banks information, requests, notices,
payments, prepayments, documents, and other items received from Borrower,
the other Obligated Parties and other Persons;
(f) To execute and deliver to Borrower, the other Obligated Parties
and other Persons all requests, demands, approvals, notices, and consents
received from the Banks;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Bank all rights and remedies of the Banks upon the
occurrence of any Event of Default specified in the Loan Documents; and
(h) To take such other actions as may be requested by Requisite Banks.
Agent (i) shall have no duties or responsibilities except those expressly set
forth in this Agreement and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee for any Bank, (ii) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by
Requisite Banks, and (iii) shall not be responsible for any action taken or
omitted to be taken by it or by any of its officers, directors, agents or
employees hereunder or under any other Loan Document, except for its own gross
negligence or willful misconduct and that of its officers, directors, agents or
employees while acting within the scope of their employment or agency. As to
any matters not expressly provided for by this Agreement, Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by Requisite Banks, and such instructions of
Requisite Banks in any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
SECTION 12.2. RIGHTS AS A BANK. With respect to its Commitment to lend
hereunder and Advances made by it, Agent in its capacity as a Bank and not as
Agent shall have the same rights and powers hereunder as the other Banks and may
exercise the same as though it were not Agent for the Banks, and the term "Bank"
or "Banks" shall, unless the context otherwise indicates, include Agent in its
individual capacity. Agent and its Affiliates may (without having to account
therefor to any bank) accept deposits from, lend money to, provide financial
advisory and merchant banking services to, and generally engage in any kind of
banking, depositary, trust, financial advisory or other business with Borrower,
any other Obligated Party, any of their respective Affiliates and any of their
officers, directors and employees as if it were not acting as Agent, and Agent
may accept fees and other consideration from Borrower, any other Obligated
Party, any of their respective Affiliates and any of their officers, directors
and employees (in addition to the agency or arrangements fees heretofore agreed
to between
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Borrower and Agent) for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
SECTION 12.3. SHARING OF PAYMENTS. All payments of principal and interest
received in payment of amounts owing in connection with the Loans shall be
promptly distributed by Agent to the Banks, each Bank to receive its Pro Rata
portion of each Loan in immediately available funds. Any and all other amounts
received by Agent as payment on the Obligations shall be promptly distributed to
the Banks, each Bank to receive its Pro Rata portion thereof in immediately
available funds unless this Agreement or any other Loan Document directs that
Agent distribute such amounts in an alternative manner. If any Bank shall
obtain payment of any principal of or interest on any Loan made by it to
Borrower under this Agreement or payment of any other Obligations under the Loan
Documents then owed by Borrower or any other Obligated Party to such Bank
through the exercise of any right of set-off, banker's lien, counterclaim or
similar right, or otherwise, it shall promptly purchase from the other Banks
participations in that Loan made by the other Banks hereunder in such amounts,
and make such other adjustments from time to time such that each Bank shall
share the benefit of such payment (net of any expenses which may be incurred by
such Bank in obtaining or preserving such benefit) in accordance with its Pro
Rata portion thereof. To such end all of the Banks shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. Each Obligated
Party agrees, to the fullest extent it may effectively do so under applicable
law, that any Bank so purchasing a participation in the Loans made by the other
Banks may exercise all rights of set-off, banker's lien, counterclaim, or
similar rights with respect to such participation as fully as if such Bank were
a direct holder of Loans to Borrower in the amount of such participation.
Nothing contained herein shall require any Bank to exercise any such right or
affect the right of any Bank to exercise and retain the benefits of exercising
any such right with respect to any other indebtedness or obligation of Borrower
or any other Obligated Party.
SECTION 12.4. NO LIABILITY OF AGENT OR FUNDS ADMINISTRATOR; INDEMNITY.
Neither Agent, nor the Funds Administrator, nor any of their Affiliates,
officers, directors, employees or agents shall be liable for any action taken or
omitted to be taken by it or them hereunder or otherwise in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
The Banks hereby agree to indemnify Agent and the Funds Administrator against
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys' fees), and disbursement of any kind
or nature whatsoever (to the extent not paid by Borrower and to the extent not
attributable to Agent's, the Funds Administrator's, or their Affiliates',
officers', directors', employees' or agents' gross negligence or willful
misconduct) resulting from any action taken or omitted to be taken by Agent or
the Funds Administrator on their own behalf or on behalf of the other Banks
under the Loan Documents; provided that each Bank shall only be liable to Agent
and the Funds Administrator for its Pro Rata portion of the amounts due Agent or
the Funds Administrator as a result of the indemnification provided for herein.
THE EXPRESS INTENTION OF THE BANKS IS THAT AGENT AND THE FUNDS ADMINISTRATOR
SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH
LIABILITIES,
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OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES (INCLUDING ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND OR NATURE
ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF AGENT OR
THE FUNDS ADMINISTRATOR. Each Bank agrees that it has, independently and
without reliance on Agent, the Funds Administrator or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of Borrower and decision to enter into this Agreement and that
it will, independently and without reliance upon Agent, the Funds Administrator
or any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. Neither Agent nor the Funds Administrator shall be responsible to
the Banks for any recitals, statements, representations, or warranties contained
in this Agreement, or in any other Loan Document, or of the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of this Agreement or
any other Loan Document or for any failure by Borrower or any Obligated Party to
perform any of its obligations under this Agreement or any other Loan Document.
Neither Agent nor the Funds Administrator shall be required to keep itself
informed as to the performance or observance by Borrower or any Obligated Party
of this Agreement or any other Loan Document or to inspect the properties or
books of Borrower or any Obligated Party.
SECTION 12.5. AGENT'S EMPLOYEES; FUNDS ADMINISTRATOR. Agent may execute
any and all duties under the Loan Documents by or through agents or employees
and shall be entitled to advice of counsel pertaining to all matters thereunder.
Without limiting the rights of Agent under the preceding sentence, Agent may
execute any and all of its duties under the Loan Documents through the Funds
Administrator, in which case the Funds Administrator shall be entitled to the
Rights under the Loan Documents available to Agent if Agent had executed such
duties.
SECTION 12.6. RELIANCE BY AGENT. Agent shall be entitled to rely on any
notice, consent, certificate, schedule, affidavit, letter, telegram, teletype
message, statement, order or other document believed to be genuine and correct
and to have been signed or sent by the proper Person or Persons and upon advice
and statements of legal counsel, independent accountants and other experts.
Agent and the Obligated Parties may deem and treat the original Banks hereunder
as the owners of their respective Notes for all purposes hereof until receipt by
Agent and the Obligated Parties of notice of assignment or transfer of any
interest therein by any Bank. Any request, authority or consent of any holder
of any of the Notes shall be conclusive and binding on any subsequent holder,
transferee, or assignee of such Notes.
SECTION 12.7. SEVERAL COMMITMENTS. Except as expressly provided in this
Section 12.7, the obligations of the Banks under this Agreement are several.
The default by any Bank in making an Advance in accordance with its Commitment
shall not relieve the other Banks of their obligations under this Agreement. In
the event of any default by any Bank in making an Advance, each nondefaulting
Bank shall be obligated to make its Advance but shall not be obligated to
advance the amount which the defaulting Bank was required to advance hereunder;
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provided, however, that TCB shall have the obligation to make such defaulting
Bank's Advance available to Borrower, will be entitled to all interest
attributable thereto until reimbursed therefor, and will be deemed to be the
holder of the outstanding indebtedness represented thereby for purposes of
determining Requisite Banks and for determining Pro Rata portions. In no event
shall any Bank other than TCB be required to advance any amount or amounts which
shall in the aggregate exceed such Bank's Commitment. Nothing in this Section
shall be construed as releasing, modifying, or waiving the obligation of each
Bank to forward to Agent funds to meet all requested Advances pursuant to the
terms of the Loan Documents.
SECTION 12.8. SUCCESSOR AGENT. Subject to the appointment and acceptance
of a successor Agent as provided below, Agent may resign at any time by giving
notice thereof to the Banks and Borrower, and should Agent (a) fail or refuse to
take any action hereunder requested by the required percentage of Banks, (b) be
declared insolvent or (c) in its individual capacity as a Bank sell, assign or
otherwise participate (otherwise than to its Affiliates) its right, title and
interest in the Loans and the Loan Documents such that, after giving effect to
such sales, assignments or participations, its Pro Rata share of all of the
Loans is reduced below 6.49%, the Requisite Banks shall have the right to
appoint a successor Agent acceptable to Borrower. If no successor Agent shall
have been appointed hereunder within 30 days after Agent's notice of resignation
or removal, then the resigning or removed Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized under the
laws of the U.S. or any State thereof and having a combined capital and surplus
of at least $100,000,000. Upon the acceptance of this appointment as successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all rights, powers, privileges, immunities, and duties of the resigning or
removed Agent, and the resigning or removed Agent shall be discharged from its
duties and obligations under this Agreement and the other Loan Documents. After
any Agent's resignation or removal as Agent, the provisions of Article XII shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement or any Note, nor consent to any departure by any Obligated Party
herefrom or therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Requisite Banks in all cases, and then, in any
case, such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no
amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) waive any of the conditions specified in
Article VIII (if and to the extent that the Advance which is the subject of such
waiver would involve an increase in the aggregate outstanding amount of Loans
over the aggregate amount of Loans outstanding immediately prior to such
Advance), (b) reduce or increase the amount or alter the terms of the
Commitments of any Banks or subject any Banks to any additional obligations, (c)
reduce the principal of, or rate or amount of interest applicable to any Loan
other than as provided in this
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Agreement, or any fees hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees hereunder, (e) change this
Section 13.1, (f) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Banks, which shall be
required for the Banks or any of them to take any action hereunder, or (g)
release any Guaranty or any collateral securing the Obligations; and provided,
that no amendment, waiver or consent shall, unless in writing and signed by
Agent in addition to the Banks required above to take such action, affect the
rights or duties of Agent under this Agreement or any Note.
SECTION 13.2. NOTICES. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telex, telegraph,
telecopy, cable or in writing and telexed, telecopied, telegraphed, cabled,
mailed, or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party at
such other address as shall be designated by such party in a notice to each
other party given in accordance with this Section. Except as otherwise provided
in this Agreement, all such communications shall be deemed to have been duly
given when transmitted by telex or telecopied, subject to telephone confirmation
of receipt, or delivered to the telegraph or cable office, subject to telephone
confirmation of receipt, or when personally delivered or, in the case of a
mailed notice return receipt requested, upon receipt, in each case given or
addressed as aforesaid.
SECTION 13.3. NO WAIVER; REMEDIES. No failure on the part of any Bank or
Agent to exercise, and no delay in exercising, any right hereunder or under any
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right, or any abandonment or discontinuance of any steps to enforce
such right, preclude any other or further exercise thereof or the exercise of
any other right. No notice to or demand on the Obligated Party in any case
shall entitle the Obligated Party to any other or further notice or demand in
similar or other circumstances. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 13.4. COSTS, EXPENSES AND TAXES. Each Obligated Party agrees to
pay on demand (i) all costs and expenses of Agent in connection with the
preparation, execution, delivery and administration of this Agreement, the Notes
and all other Loan Documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for Agent
with respect thereto and with respect to advising Agent as to its rights and
responsibilities under this Agreement, the Notes and the other Loan Documents,
and any modification, supplement or waiver of any of the terms of this
Agreement, and (ii) all reasonable costs and expenses of Agent (including
reasonable counsels' fees) in connection with the enforcement of this Agreement,
the Notes and any other Loan Document. In addition, each Obligated Party shall
pay any and all stamp and other Taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement and the Notes and
the other documents to be delivered hereunder, and agrees to save Agent and each
Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or
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omission to pay such Taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of this Agreement, any
Note and any other Loan Document. Without prejudice to the survival of any
other obligations of the Obligated Parties under this Agreement, the Notes or
any other Loan Document, the obligations of Obligated Parties under this Section
13.4 shall survive the termination of this Agreement and repayment of the Notes.
SECTION 13.5. INDEMNITY.
(a) Each of the Obligated Parties shall indemnify Agent, the Funds
Administrator, the Banks and each Affiliate thereof and their respective
directors, officers, employees, attorneys and agents ("Indemnitee") from, and
hold each of them harmless against, any and all actions, suits, proceedings
(including any investigations or inquiries), claims, losses, liabilities,
damages or expenses of any kind or nature whatsoever (INCLUDING WITHOUT
LIMITATION, THOSE ARISING OUT OF NEGLIGENCE OF ANY INDEMNITEE) which may be
incurred by or asserted against or involve any Indemnitee as a result of or
arising out of or in any way related to (i) any of the Loan Documents, any of
the Loans or any actual or proposed use by any of the Obligated Parties of any
of the proceeds of any extension of credit by the Bank hereunder or any breach
by any of the Obligated Parties of any of the Loan Documents or (ii) any
Litigation (including any threatened Litigation) relating to any of the
foregoing, and the Obligated Parties shall reimburse and, upon demand by any
Indemnitee, shall pay or reimburse such Indemnitee for any legal or other
expenses (including allocated costs of internal counsel) incurred by such
Indemnitee in connection with investigating, defending or preparing to defend
any pending or threatened Litigation (including any inquiry or investigation);
provided, however, no Obligated Party shall be obligated to pay or make
reimbursement for any settlement to which Borrower has not consented (which
consent will not be unreasonably withheld); and, provided, further, no Obligated
Party shall not be liable for any liability, loss, damage or expense to any
Indemnitee if it has been determined by a final decision (after all appeals and
the expiration of time to appeal) by a court of competent jurisdiction that such
liability, loss, damage or expense resulted from the gross negligence or willful
misconduct of such Indemnitee. None of Agent and the Banks shall be responsible
or liable to any other Person for consequential damages which may be alleged as
a result of any of the Loan Documents.
(b) Without prejudice to the survival of any other obligations of the
Obligated Parties under any of the Loan Documents, the obligations of the
Obligated Parties under this Section 13.5 shall survive the termination of this
Agreement and payment of the Notes.
SECTION 13.6. FEES. In addition to any other fees provided for herein,
Borrower agrees to pay to TCB for TCB's own account in immediately available
funds all fees described in the agreements between TCB and Borrower.
SECTION 13.7. GOVERNING LAW. This Agreement, all Notes and all other
documents executed in connection herewith, shall be deemed to be contracts and
agreements executed by the Obligated Parties, Agent and the Banks under the laws
of the State of Texas and of the U.S.
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and for all purposes shall be construed in accordance with, and governed by, the
laws of said State and of the U.S. Without limitation of the foregoing, nothing
in this Agreement or in the Notes shall be deemed to constitute a waiver of any
rights which Bank may have under applicable federal legislation relating to the
amount of interest which Bank may contract for, take, receive or charge in
respect of any Loans, including any right to take, receive, reserve and charge
interest at the rate allowed by the law of the state where Bank is located.
Agent, the Banks and the Obligated Parties further agree that insofar as the
provisions of Article 1.4, Subtitle 1, Title 79, of the Revised Civil Statutes
of Texas, 1925, as amended, are applicable to the determination of the Maximum
Rate with respect to the Notes, the indicated rate ceiling computed from time to
time pursuant to Section (a) of such Article shall apply to the Notes; provided,
however, that to the extent permitted by such Article, Agent may from time to
time by notice from Agent to the Obligated Parties and Borrower revise the
election of such interest rate ceiling as such ceiling affects the then current
or future balances of the Loans outstanding under the Notes. The provisions of
Chapter 15 of Subtitle 3 of the said Title 79 do not apply to this Agreement or
any Note issued hereunder.
SECTION 13.8. MAXIMUM INTEREST RATE. No provision of this Agreement or of
any other Loan Document shall require the payment or permit the collection of
interest in excess of the maximum permitted by applicable Law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
Borrower nor the sureties, guarantors, successors, or assigns of Borrower shall
be obligated to pay the excess amount of such interest or any other excess sum
paid for the use, forbearance, or detention of sums loaned pursuant hereto. In
the event Agent or any Bank ever receives, collects, or applies as interest any
such sum, such amount which would be in excess of the maximum amount permitted
by applicable law shall be applied as a payment and reduction of the principal
of the indebtedness evidenced by the Notes; and, if the principal of the Notes
has been paid in full, any remaining excess shall forthwith be paid to Borrower.
In determining whether or not the interest paid or payable exceeds the Maximum
Rate, Borrower and Bank shall, to the extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the indebtedness
evidenced by the Notes so that interest for the entire term does not exceed the
Maximum Rate. In addition to the foregoing, the Bank shall be permitted to cure
any violation or alleged violation of applicable usury laws in any manner
permitted by Tex. Rev. Civ. Stat. Ann. article 5069-1.06.
SECTION 13.9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and covenants contained herein or in any of the Loan
Documents, or made in writing by the Obligated Parties in connection herewith,
shall survive the execution and delivery of this Agreement and of the Notes, and
will bind and inure to the benefit of the respective successors and assigns of
the parties hereto, whether so expressed or not, provided that the undertaking
of the Banks to make Loans to the Obligated Parties shall not inure to the
benefit of any successor or assign of the Obligated Parties.
56
<PAGE>
SECTION 13.10. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Obligated Parties, Agent, and when Agent
shall have been notified by each Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of the Obligated
Parties, Agent, and each Bank and their respective successors and assigns.
SECTION 13.11. SUCCESSORS AND ASSIGNS PARTICIPATIONS.
(a) Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and permitted assigns
of such party; and all covenants, promises and agreements by or on behalf of the
Obligated Parties, Agent or the Banks that are contained in this Agreement shall
bind and inure to the benefit of their respective successors and assigns. None
of the Obligated Parties may assign or transfer any of its Rights or obligations
hereunder without the written consent of all the Banks.
(b) Each Bank may, with the prior written consent of Agent (except for
participations to a Bank's Affiliates) but without the consent of the Obligated
Parties, sell participations to one or more banks or other entities in all or a
portion of its Rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Loans owing to it and the
Notes held by it); provided, however, that (i) such Bank's obligations under
this Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other entities shall be entitled to the cost
protection provisions contained in Article VI and Section 13.4, but only to the
extent that such protection would have been available to such Bank, calculated
as if no such participations had been sold, and (iv) the Obligated Parties,
Agent and the other Banks shall continue to deal solely and directly with such
Bank in connection with such Bank's Rights and obligations under this Agreement;
provided further, that such Bank shall retain the sole Right and responsibility
to enforce the obligations of the Obligated Parties relating to the Loans
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; but such Bank may grant a
participant rights (which shall be no greater than Bank's rights insofar as
Borrower is concerned) with respect to (y) amendments, modifications or waivers
with respect to any fees payable hereunder (including, without limitation, the
amount and the dates fixed for the payment of any such fees) or the amount of
principal or the rate of interest payable on, or the dates fixed for any payment
of principal of or interest on, the Loans and (z) any extension of the
Termination Date.
(c) Each Bank may assign, with the prior written consent of the Obligated
Parties (which shall not be unreasonably withheld) to one or more assignees, all
or a portion of its interests, Rights, and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment and the same
portion of the Loans at the time owing to it and the Notes held by it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Bank's rights and obligations under
this Agreement and shall be in a minimum principal amount of $5,000,000, (ii)
the amount of the Commitment of the assigning Bank remaining after each such
assignment (determined as of the date of the
57
<PAGE>
Assignment and Acceptance) shall be in a minimum principal amount of $5,000,000
and (iii) the parties to each such assignment shall execute and deliver to
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance in the form of EXHIBIT "K" hereto (an "Assignment and Acceptance"),
together with a properly completed Administrative Questionnaire, any Notes
subject to such assignment and a processing and recordation fee of $2,000. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least five Business Days after the execution thereof (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereby, and
(y) the assignor Bank thereunder shall, to the extent provided in such
Assignment and Acceptance (and in the case of an Assignment and Acceptance
covering all of the remaining portion of an assigning Bank's rights and
obligations under this Agreement, such Bank shall cease to be a party hereto).
(d) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee shall confirm to and agree with each other
and the other parties hereto as follows: (i) other than the representation and
warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Bank assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such Bank assignor makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Obligated Parties or the performance or observance of its respective
obligations under this Agreement or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee confirms that it has received a
copy of this Agreement together with copies of the Financial Statements referred
to in Sections 9.4 or 10.1 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon Agent, such Bank assignor or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes Agent to take such
action on behalf of such assignee and to exercise such powers under this
Agreement as are delegated to Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; (vi) such assignee agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Bank and (vii)
each assignee organized under the laws of a jurisdiction outside the U.S.,
agrees to provide the forms prescribed by the Internal Revenue Service of the
U.S. certifying as to the assignee's exemption from U.S. withholding taxes with
respect to all payments to be made to the assignee under the Agreement or such
other documents as are necessary to indicate that all such payments are subject
to such tax at a rate reduced by an applicable tax treaty.
(e) Agent shall maintain at its office a copy of each Assignment and
Acceptance
58
<PAGE>
delivered to it and a register for the recordation of the names and addresses of
the Banks and the Commitment of, and principal amount of the Advances owing to,
each Bank from time to time (the "Register"). The entries in the Register shall
be conclusive, in the absence of manifest error, and the Obligated Parties,
Agent and the Banks may treat each person whose name is recorded in the Register
as a Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Obligated Parties or any Bank at any reasonable
time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee together with any Notes subject to such
assignment and the written consent to such assignment, Agent shall, if such
Assignment and Acceptance has been completed and is precisely in the form of
EXHIBIT "K" hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Banks and the Obligated Parties. Within five Business Days after
receipt of such notice, Borrower shall execute and deliver to Agent in exchange
for the surrendered Notes new Notes to the order of such assignee in an amount
equal to its portion of the Commitment assumed by it pursuant to such Assignment
and Acceptance and, if the assigning Bank has retained any Commitment hereunder,
new Notes to the order of the assigning Bank in an amount equal to the
Commitment retained by it hereunder. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Notes, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of EXHIBIT "D," EXHIBIT "E" or
EXHIBIT "F", as applicable, hereto. Cancelled Notes shall be returned to
Borrower. Borrower shall not be liable for the expenses incurred by the
assigning Bank and assignee with respect to the delivery of new Notes to the
assignee.
(g) Agent and each Bank shall preserve the confidentiality of any
confidential information relating to the Obligated Parties received from the
Obligated Parties. Notwithstanding any other provision herein, any Bank may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 13.11 disclose to the assignee or
participant or proposed assignee or participant any information relating to the
Obligated Parties furnished to such Bank by or on behalf of the Obligated
Parties; provided, that prior to any such disclosure, each such assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Obligated
Parties received from such Bank.
SECTION 13.12. INVALID PROVISIONS. If any provision of any of the Loan
Documents is held to be illegal, invalid or unenforceable under any present or
future Laws effective during the term thereof, such provision shall be fully
severable; the appropriate Loan Documents shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
thereof; and the remaining provisions thereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance therefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provision there shall be added automatically as a part
of such Loan Document a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid
59
<PAGE>
and enforceable.
SECTION 13.13. NUMBER AND GENDER OF WORDS. Whenever in any of the Loan
Documents the singular number is used, the same shall include the plural, where
appropriate, and vice versa, and words of any gender shall include each other
gender where appropriate.
SECTION 13.14. DESCRIPTIVE HEADINGS. The section headings appearing in
this Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Agreement.
SECTION 13.15. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 13.16. LETTER OF CREDIT ADVANCES. In accordance with the terms of
this Agreement, each of the parties hereto acknowledges and agrees that any
amounts advanced by TCB pursuant to letters of credit issued in favor of one or
more Obligated Parties will constitute "Obligations" hereunder and will be
subject to and entitled to the benefits of the Events of Default and related
rights and remedies under Article 11 hereof. Each letter of credit shall be
evidenced by a separate written agreement, and nothing herein shall obligate TCB
to issue any letter of credit of behalf of any Obligated Party.
SECTION 13.17. ENTIRE AGREEMENT. THIS AGREEMENT (INCLUDING THE EXHIBITS
AND SCHEDULES HERETO), THE OTHER LOAN DOCUMENTS, AND THE FEE AGREEMENTS REFERRED
TO IN SECTION 13.6 CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.2(A)
OF THE TEXAS BUSINESS AND COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
60
<PAGE>
BORROWER:
BANCTEC, INC., a Delaware corporation
By:
----------------------------------
Gary T. Robinson
Senior Vice President and Chief
Financial Officer
DOMESTIC SUBSIDIARIES:
BANCTEC USA, INC., a Delaware corporation
By:
-----------------------------------
Gary T. Robinson
Senior Vice President
BANCTEC TECHNOLOGIES, INC., a Delaware
corporation (formerly, by
change of name) BTI SYSTEMS, INC.
By:
-----------------------------------
Gary T. Robinson
Senior Vice President
61
<PAGE>
BANCTEC (PUERTO RICO), INC.,
a Delaware corporation
By:
-----------------------------------
Gary T. Robinson
Senior Vice President
BANCTEC (MANAGEMENT), INC.,
a Delaware corporation
By:
-----------------------------------
Gary T. Robinson
Senior Vice President and Chief
Financial Officer
BANCTEC THIRD PARTY MAINTENANCE
INC., a Texas corporation
By:
-----------------------------------
Gary T. Robinson
President
62
<PAGE>
AGENT/TCB/FUND ADMINISTRATOR:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
a national banking association,
By:
----------------------------------
Mark J. Denton
Senior Vice President
Address for Notices as Agent:
Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
Address for Notices as Funds
Administrator:
712 Main Street
Mail Station 8 TCBS 27
Houston, Texas 77002
63
<PAGE>
Exhibit 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Years ended
-------------------------------------
March 26, March 27, March 28,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Income before cumulative effect of
accounting change...................... $12,509,100 $16,343,000 $14,351,000
=========== =========== ===========
Net Income.............................. $12,509,000 $16,343,000 $15,186,000
=========== =========== ===========
Shares outstanding beginning of period.. 10,743,550 10,428,400 9,553,742
Weighted average number of shares issued
from exercise of stock options......... 118,525 135,713 595,985
Weighted average number of shares
repurchased during the year............ (235,667) - -
----------- ----------- -----------
Weighted average number of shares
outstanding............................ 10,626,408 10,564,113 10,149,727
Shares issuable from assumed exercise
of stock options and stock purchase
plan, reduced by the number of shares
which could have been purchased with
the proceeds from exercise of such
options, stock purchase plan, and
unearned compensation on restricted
stock assets........................... 500,939 622,684 719,837
----------- ----------- -----------
Weighted average number of shares
outstanding as adjusted................ 11,127,347 11,186,797 10,869,564
=========== =========== ===========
Primary income per common and common
equivalent share before accounting
change................................. $1.12 $1.46 $1.32
=========== =========== ===========
Primary income per common and common
equivalent share....................... $1.12 $1.46 $1.40
=========== =========== ===========
Assuming full dilution:
Weighted average number of shares
outstanding............................ 10,626,408 10,564,113 10,149,727
Shares issuable from assumed exercise
of stock options and stock purchase
plan, reduced by the number of shares
which could have been purchased with
the proceeds from exercise of such
options, stock purchase plan, and
unearned compensation on restricted
stock assets........................... 501,185 730,074 719,837
----------- ----------- -----------
Weighted average number of shares
outstanding as adjusted................ 11,127,593 11,294,187 10,869,564
=========== =========== ===========
Fully diluted income per common and
common equivalent share before
accounting change...................... $1.12 $1.45 $1.32
=========== =========== ===========
Fully diluted income per common and
common equivalent share................ $1.12 $1.45 $1.40
=========== =========== ===========
</TABLE>
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF BANCTEC, INC.
1. BancTec USA, Inc., a Delaware corporation.
2. BancTec Technologies, Inc., a Delaware corporation.
3. BancTec (Management) Inc., a Delaware corporation.
4. BancTec (Export), Inc., a Virgin Islands corporation.
5. BancTec (Puerto Rico), Inc., a Delaware corporation.
6. BancTec (Canada), Inc., a Canadian corporation.
7. BancTec Limited, a U.K. company.
8. BancTec (Australia) Pty Limited, an Australian corporation.
9. ScanData N.V., a Netherlands corporation (Joint Venture with Thomson-CSF):
ScanData GmbH, a German corporation.
ScanData France S.A., a French corporation.
ScanData B.V., a Dutch corporation.
BancTech AB, a Swedish corporation.
10. BancTec Japan, Inc., a Japan corporation.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated May 19, 1995, included in this Form 10-K, into the Company's
previously filed Registration Statement Form S-3 (No. 33-28942); Registration
Statement Form S-8 (No. 33-28939); Registration Statement Form S-8 (No. 29163);
Registration Statement Form S-8 (No. 33-32824); Registration Statement Form S-3
(No. 33-35988); Registration Statement Form S-8 (No. 33-37377), Registration
Statement Form S-3 (No. 33-49918); Registration Statement Form S-8 (No.
33-71114) and Registration Statement Form S-8 (33-58335).
Arthur Andersen LLP
Dallas, Texas
June 16, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET, STATEMENT OF OPERATIONS AND NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND FOOTNOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-26-1995
<PERIOD-END> MAR-26-1995
<CASH> 11,091
<SECURITIES> 0
<RECEIVABLES> 83,436
<ALLOWANCES> (1,646)
<INVENTORY> 51,491
<CURRENT-ASSETS> 156,283
<PP&E> 114,325
<DEPRECIATION> (62,971)
<TOTAL-ASSETS> 307,366
<CURRENT-LIABILITIES> 124,270
<BONDS> 42,459
<COMMON> 107
0
0
<OTHER-SE> 137,021
<TOTAL-LIABILITY-AND-EQUITY> 307,366
<SALES> 297,539
<TOTAL-REVENUES> 297,539
<CGS> 210,695
<TOTAL-COSTS> 210,695
<OTHER-EXPENSES> 63,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,679
<INCOME-PRETAX> 19,780
<INCOME-TAX> 8,481
<INCOME-CONTINUING> 12,509
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,509
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
</TABLE>
