<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(Mark One)
[_] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM MARCH 27, 1995 TO DECEMBER 31, 1995
----------------
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.)
75244
4435 SPRING VALLEY ROAD (ZIP CODE)
DALLAS, TEXAS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
Registrant's telephone number, including area code: (214) 450-7700
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
<S> <C>
Common Stock, $.01 Par Value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [X]
Aggregate Market Value of voting stock held by non-affiliates of the
Registrant at
February 29, 1996: $259,744,952
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING AT
TITLE OF EACH CLASS FEBRUARY 29, 1996
------------------- -------------------------------
<S> <C>
Common Stock, $.01 Par Value 19,878,486
</TABLE>
----------------
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 May 22, 1996.
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<PAGE>
BANCTEC, INC.
ANNUAL REPORT
ON
FORM 10-K
NINE MONTHS ENDED DECEMBER 31, 1995
PART I
ITEM 1. BUSINESS
GENERAL
BancTec, Inc., a Delaware corporation, ("BancTec" or the "Company") is a
leading provider of integrated financial transaction processing systems,
imaging and workflow products, applications software and professional
services. The Company develops systems solutions for the banking, financial
services, insurance, health care, government, utility, telecommunications,
grocery and retail industries. The Company also designs and manufactures
document processing equipment for value added resellers ("VARs") and original
equipment manufacturers ("OEMs") and provides network management and support
services for users of local area networks ("LANs") and personal computers
("PCs"). Unless otherwise indicated, all further references to BancTec(R) or
the Company shall include its wholly owned subsidiaries.
On October 12, 1995, the Company acquired Recognition International Inc.
("Recognition"), a Dallas-based provider of document processing systems,
imaging and workflow software, and maintenance services. The agreement
qualifies as a tax-free reorganization and was accounted for on a "pooling of
interests" basis. Under the terms of the agreement, Recognition shareholders
received .59 share of BancTec stock for each Recognition share owned.
BANCTEC PRODUCTS
The Company markets its products to specific target markets where it
believes it has certain competitive advantages and can maintain or achieve a
leadership position.
SYSTEMS SOLUTIONS, SOFTWARE PRODUCTS AND EQUIPMENT. During the nine months
ended December 31, 1995, the Company derived approximately 49% of its revenues
from sales of the following products:
Imaging Systems. The Company offers image technology based solutions 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 applications. Remittance payment processors utilize
ImageFIRST systems 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, financial coupons and many other types of financial documents.
The Company also offers the TRACE(R) family of products to airline ticket and
European giro processors, and to other organizations with requirements for
systems that can process documents at speeds in excess of 2,000 per minute.
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 Company 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.
The Company also offers the ImageFIRST OpenArchive(TM) product, which is
designed specifically for high speed archiving of financial documents, full
page documents and related transaction data. The ImageFIRST OpenArchive
product is a multi-tiered archival system that utilizes magnetic disks,
optical disks and various tape cartridge technologies for high volume image
storage. The ImageFIRST OpenArchive product is used by document processors to
substantially increase productivity and improve customer service capabilities.
1
<PAGE>
The Company's financial document imaging products utilize an Open Systems
Architecture ("OSA") platform which enables customers to add industry standard
hardware and/or software components to further improve processing
capabilities.
The Company offers a variety of products for full page document imaging
applications, including a complete family of document imaging software
products through its Plexus(R) division. Plexus software products offer
workflow, data management, forms processing and character recognition
capabilities that enable users to automate, coordinate and evolve business
processes. Plexus software products can evolve from single-site departmental
storage and retrieval applications to enterprise-wide applications across
multiple hardware platforms.
BancTec's DocuScan(R) 2000, 4000 and the new S series page readers utilize
photo-optical technology, gray scale image capture capabilities, character
recognition software and high precision document transports to scan and
digitize full-sized business documents such as invoices, statements and
business forms. In addition, the Company provides systems solutions utilizing
Computer Output to Laser Disk (COLD) technology to electronically archive
computer-generated documents on optical disks.
Document Processing Systems, Check Sorting Systems and Electronic
Components. During the current year, the Company introduced the Model 9500
Document Processing System. The Model 9500 system is utilized for remittance
and/or check processing applications by processors that require automation but
do not necessarily require high-speed image-based systems.
The Company also offers low, medium and high-speed series 5000 document
reader/sorters and related components that read magnetic ink character
recognition ("MICR") and optical character recognition ("OCR") data from
financial documents and sort the documents according to established patterns.
The Company markets Series 5000 products directly to end-users and to various
resellers and systems integrators throughout the world. The Company's
Universal Transport(TM) and Series 5000 reader/sorters are also both sold
worldwide through OEM channels.
Components such as microfilm cameras, microfilm modules, image cameras, MICR
encoders, ink jet components and various peripheral equipment are also
manufactured and marketed by the Company.
Integrated Data Processing and Bank Automation Software Products. The
Company provides Banker-II(TM), ACCESS(TM) and PODExpress(R) products to
community banks. Banker II and ACCESS are software products which integrate
check sorting, platform automation, loan processing, deposit management, ATM
and teller processing and other bank operations activities. The PODExpress
software 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.
Electronic Payment Processing Products. The Company markets software
products for electronic credit, debit and courtesy card processing, electronic
check authorization, inventory management, 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. The Company also markets
software products relating to electronic benefits transfer ("EBT")
applications which States have implemented as a replacement for traditional
food stamp programs.
Support Products and Consumable Supplies. The Company utilizes its
telemarketing organization to sell document processing supplies and related
products that are a source of recurring revenue. The Company's CheckMender(R)
IV, HeatStrip(R) and BancStrip(TM) products are used by banks to repair checks
which cannot be processed by check sorting equipment. The Company's
CheckMender IV product automatically applies HeatStrip material to the bottom
edge of checks which have been damaged, have missing or erroneous information
or are otherwise unreadable. The Company also provides encoding ribbons,
microfilm, ink rollers and other consumable supplies that are used with the
Company's document processing equipment.
2
<PAGE>
The Company typically sells its products to end-users with maintenance
contracts and also offers a warranty for 30 days from the date of
installation. The Company's OEM products are sold with a 90 day warranty from
the date of shipment.
NETWORK MANAGEMENT SERVICES AND EQUIPMENT MAINTENANCE. The Company derived
approximately 51% of its revenue during the nine months ended December 31,
1995, from the following network management and equipment maintenance related
products:
Network Management Services and Personal Computer Support. The Company
provides large companies with LAN and PC hardware support, systems integration
services, asset management services, help desk services and installation
coordination. The Company's customer 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. The Company also provides telephone technical support for Novell
network operating systems software and is a U.S warranty service provider for
Dell Computer Corp., AST Research Inc., Power Computing Co., PictureTel, Inc.
and other companies.
Installation and Maintenance of BancTec Products. A key aspect of the
Company'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. The Company
provides hardware maintenance services for IBM 3890 and 3890 XP
reader/sorters, which are the primary products 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 services for IBM 3800 and Xerox printers.
At February 29, 1996, the Company employed approximately 1,280 customer
service engineers located in the United States, Canada, United Kingdom,
Scandinavia, continental Europe, Australia and Japan.
SERVICE BUREAU OPERATIONS. The Company owns and operates three service
bureau facilities that provide check and data processing services. The service
bureaus utilize the Company's hardware, software, operations personnel and
maintenance services to process checks and related documents for financial
institutions.
The Company is also currently developing a separate service bureau
specifically for authorizing electronic funds transfer (EFT) transactions.
SOFTWARE ENGINEERING
Through its staff of approximately 270 software engineers, the Company
develops and maintains standard system and application software products. In
addition, these software engineers modify and enhance standard application
software products for customers in order to meet particular operating
requirements. Enhancements are generally paid for 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 software and hardware product development
activities in connection with new and existing products, employing as of
February 29, 1996, approximately 110 persons for such activities.
3
<PAGE>
The following table sets forth certain information regarding the Company's
product development expenditures for the indicated periods:
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
------------------------- -------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------ ------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Product development expenditures. $21,455 $20,899 $28,072 $26,100
Percent of total revenue......... 5.6% 5.4% 5.4% 5.5%
Percent of equipment and software
revenue......................... 11.4% 10.3% 10.5% 10.2%
</TABLE>
The Company also spent approximately $174,000, $225,000, $300,000 and
$994,000 during the nine months ended December 31, 1995, and December 31,
1994, and in fiscal years ending March 26, 1995, and March 27, 1994,
respectively, on engineering activities funded by customers relating to the
development of new products and improvements of existing products.
Current expenditures are concentrated on developing new applications for the
Company's product lines and improving and expanding existing products, as
described below:
Financial Document Processing Systems
The Company is currently adding enhanced imaging capabilities to certain
products. These enhancements include the utilization of "Edged Based
Thresholding" and other hardware and software improvements needed to optimize
image quality. Projects to enhance current image cameras and develop new
cameras are also under way for many of the Company's financial document
imaging systems. These enhancements will allow the utilization of "gray scale"
as well as bitonal (black and white) images, further increasing system
flexibility and image quality. In addition, several development projects are
underway relating to the Company's image archival and retrieval systems. These
projects focus on increasing processing speed and enhancing image storage
capabilities.
New image-based OCR readers will also significantly improve document
character scanning accuracy and will enable multiple document types to be
processed within the same batch of work. Also under development are new MICR
encoders for certain products that will improve document read rates. Other
projects focus on bar code technology, airline ticket processing, enhanced ink
jet printing, improvements to document feeder mechanisms, and enhanced
intelligent character recognition capabilities.
Full Page Document Imaging/Workflow
The Company is currently developing a new family of high-speed scanners for
full page applications which will be introduced in 1996. Other development
activity includes fingerprint scanning applications, integrated capture
subsystems, and new feeder technology that will enable the Company's products
to scan an even wider range of paper sizes.
The Company's Plexus division is currently developing new software products
and implementing changes to several current software products. Projects
include new versions of FloWare(R), FloWare Desk(TM) enhancements, and Storage
Manager(TM), porting certain Plexus software products to new platforms,
including Windows NT, the incorporation of rules-based engines, improving
graphical definition tools, and the creation of developers' kits to be used by
the Company's business partners. Also underway is the integration of Plexus
software into the Company's ImageFIRST Open Archive product family.
Integrated Data Processing
Development activity continues on enhanced client/server based banking
application software products that more efficiently process deposits and
loans, generate management reports and coordinate operations.
4
<PAGE>
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, distributors, OEMs, VARs and systems
integrators.
Domestically, the Company's U.S. Banking and Commercial Systems division
focuses on the following areas:
1. Financial document processing systems sold directly to high-volume
processors, such as banks, financial service providers, telephone
companies, gas and electric utilities, petroleum companies, service
bureaus, insurance companies, retailers and other end-users.
2. Image archival and retrieval systems to high-volume document
processors.
3. Systems solutions and integrated products for community banks, smaller
regional banks and other lower volume document processors.
4. Software products for electronic funds transfer and point-of-sale
applications for retailers, grocery chains and financial institutions.
5. Outsourcing of document and electronic financial transaction and data
processing.
The Company's Plexus division focuses on the following areas:
1. Software products for document imaging and workflow applications.
The Company's North American Service and Manufacturing division focuses on
the following areas:
1. PC/LAN network management and support services, PC warranty services,
help desk support services 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.
The Company's Support Products division sells consumable supplies to
customers who utilize the Company's products.
Internationally, the Company also sells its products through a variety of
channels. The Company has direct sales forces in the United Kingdom, France,
Spain, Sweden, Denmark, Germany, Canada, Australia and Japan. Network
management and support services are also marketed in the United Kingdom via a
separate direct sales force.
In fiscal 1992, the Company and Thomson-CSF ("Thomson") established a joint
venture company, ScanData Holding N.V., with subsidiaries in France, Sweden,
Germany and the Netherlands, which had exclusive rights to market and service
various products provided by the Company and Thomson in specified territories,
consisting of continental Europe, Scandinavia and North Africa. On March 15,
1996, the Company purchased Thomson's interest in ScanData Holding N.V. for
cash of approximately $7,200,000. In fiscal 1994, the Company acquired a 33%
equity interest in Servibanca, a document processing service provider located
in Chile. Servibanca offers a variety of products and services to the South
American document processing market. The Company uses various other
distributor and OEM relationships to market its products in Asia and other
locations.
5
<PAGE>
International sales, which accounted for approximately 26% of total revenues
during the nine months ended December 31, 1995, are subject to various risks,
including fluctuations in exchange rates, import controls and the need for
export licenses. See Note N of Notes to Consolidated Financial Statements for
financial information concerning the Company's international operations.
SIGNIFICANT CUSTOMERS
For the nine months ended December 31, 1995, and December 31, 1994, and in
fiscal years 1995 and 1994, 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 backlog of orders believed to be firm for its products at
December 31, 1995, and March 26, 1995, was approximately $113,675,000 and
$98,374,000, respectively.
The Company's backlog excludes contracts for recurring hardware and software
maintenance and support products. The Company's backlog is subject to
fluctuation due to various factors, including the size and timing of orders
for the Company's products and exchange rate fluctuations, and is not
necessarily indicative of the level of future revenue.
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 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 components or subassemblies.
PATENTS
The Company owns numerous U.S. and foreign patents, and holds licenses under
numerous patents owned by others. The Company also owns a number of registered
and common law trademarks in the U.S. and other countries relating to the
Company's trade names and product names.
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 patent 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.
BancTec, BancStrip, CheckMender, DocuScan, HeatStrip, ImageFIRST, Plexus,
PODExpress and TRACE are registered trademarks, and ACCESS, Banker-II,
OpenArchive and Universal Transport are trademarks of the Company in the U.S.
and other countries.
6
<PAGE>
EMPLOYEES
At February 29, 1996, the Company employed approximately 3,560 full-time
employees and considers its employee relations to be good. None of the
Company's employees are represented by a labor union. 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 lease terms.
The Company has announced that it will relocate its manufacturing operation
from Oklahoma City, Oklahoma, and consolidate operations in a Company-owned
manufacturing facility located in the Dallas, Texas, area by the end of 1996.
The Company has also announced plans to close its subassembly operation in
Puerto Rico and outsource those requirements to third parties by the end of
the current year. The Company will continue to manufacture the HeatStrip and
BancStrip products in Puerto Rico. The Dallas facility will become the primary
location for all Company assembly and manufacturing activities.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
EXECUTIVE OFFICERS OF BANCTEC
Executive officers are elected annually at the first meeting of the Board of
Directors following the annual meeting of stockholders. No family
relationships exist among the executive officers of BancTec.
The executive officers of BancTec are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Grahame N. Clark, Jr............ 53 Chairman of the Board, President, and Chief
Executive Officer
William E. Bassett.............. 54 Executive Vice President
John G. Guthrie................. 59 Senior Vice President
Tod V. Mongan................... 45 Senior Vice President, Secretary and
General Counsel
Raghavan Rajaji................. 49 Senior Vice President, Treasurer and Chief
Financial Officer
James E. Uren................... 59 Senior Vice President
James R. Wimberley.............. 55 Senior Vice President
George W. Christian............. 49 Vice President
Michael D. Kubic................ 40 Vice President, Controller, and Assistant
Treasurer
</TABLE>
Mr. Clark has been Chairman of the Board and Chief Executive Officer since
April 1987 and President since September 1995.
Mr. Bassett has been Executive Vice President since January 1993. Since
October 1977, Mr. Bassett has been employed by BancTec in various management
capacities.
7
<PAGE>
Mr. Guthrie has been Senior Vice President since September 1995. Since
February 1989, Mr. Guthrie 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. Rajaji has been Senior Vice President, Treasurer and Chief Financial
Officer since September 27, 1995. For the five years prior to that date, Mr.
Rajaji was employed by Occidental Chemical Corporation as Senior Vice President
and Chief Financial Officer.
Mr. Uren has been Senior Vice President since September 1995. Since October
1988, Mr. Uren 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. 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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of the Company has historically been traded on the NASDAQ
National Market system under the symbol BTEC. As of December 28, 1995, the
Company's common stock is listed on the New York Stock Exchange under the
symbol BTC.
Prior to the acquisition of Recognition on October 12, 1995, Recognition's
common stock was listed on the New York Stock Exchange under the symbol REC. At
the close of business on October 12, 1995, Recognition common stock ceased
trading and each share was converted into the right to receive 0.59 of a share
of BancTec common stock. The Recognition stock prices shown below have been
adjusted to reflect this exchange ratio.
<TABLE>
<CAPTION>
BANCTEC RECOGNITION
------------- ---------------
NINE MONTHS ENDED DECEMBER 31, 1995 HIGH LOW HIGH LOW
----------------------------------- ----- ---- ------ -----
<S> <C> <C> <C> <C>
First Quarter ended June 25, 1995.... $ 17 3/4 $14 3/4 $ 15 1/2 $ 11
Second Quarter ended September 24,
1995................................ 21 3/4 15 1/4 19 1/8 14 7/8
Third Quarter ended December 31,
1995(a)............................. 22 3/4 18 21 3/8 16 1/2
<CAPTION>
FISCAL YEAR ENDED MARCH 26, 1995
--------------------------------
<S> <C> <C> <C> <C>
First Quarter ended June 26, 1994.... $ 23 1/2 $ 19 $ 24 $ 14
Second Quarter ended September 25,
1994................................ 26 1/2 18 3/4 15 10 3/4
Third Quarter ended December 25,
1994................................ 27 1/4 18 3/4 16 1/4 11 5/8
Fourth Quarter ended March 26, 1995.. 22 15 3/4 15 7/8 11
</TABLE>
- --------
(a) Recognition ceased trading as of the close of business on October 12, 1995,
therefore, Recognition's high and low prices are for the period September 25,
1995, through October 12, 1995.
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. The number
of stockholders of record as of February 29, 1996, was approximately 2,960.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
--------------------------- ---------------------------------------
DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994 1993 1992
------------ ------------ -------- -------- -------- --------
[UNAUDITED] [RESTATED (C)]
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
For the period:
Revenue............... $383,984 $389,743 $516,932 $478,116 $433,071 $346,121
Income (loss) before
cumulative effect of
accounting change.... (53,481)(a) (12,887)(b) (15,608)(b) 22,729 17,524 17,026
Net income (loss)..... (53,481)(a) (12,887)(b) (15,608)(b) 22,729 18,359 17,026
Income (loss) per
share before
cumulative effect of
accounting change.... ($2.63) ($0.63) ($0.77) $ 1.15 $ 0.96 $ 1.03
Net income (loss) per
share................ ($2.63) ($0.63) ($0.77) $ 1.15 $ 1.00 $ 1.03
At period-end:
Total assets.......... $440,348 $497,433 $501,758 $489,488 $380,633 $334,114
Working capital....... 47,086 95,162 90,140 126,692 96,609 104,627
Long-term debt........ 82,972 99,359 94,181 104,220 76,020 77,317
Stockholders' equity.. 156,201 206,346 206,743 224,929 168,792 147,551
Weighted average shares. 20,315 20,341 20,350 19,740 18,333 16,591
</TABLE>
- --------
(a) Includes net of tax charges of $61,817,000--See Note D of Notes To
Consolidated Financial Statements
(b) Includes net of tax charges of $25,132,000--See Note D of Notes To
Consolidated Financial Statements
(c) The Company's financial statements have been restated for fiscal years
1992 through 1995, due to a change in the reporting entity to reflect its
merger with Recognition under the pooling of interests method of
accounting. Prior to the merger, Recognition had a fiscal year end of
October 31, and BancTec had a fiscal year-end of on or about March 31.
Since the merger was accounted for as a pooling, combined results of the
two companies are presented for all periods disclosed.
The foregoing summary reflects the acquisitions as discussed in Note C of
Notes to Consolidated Financial Statements from their respective dates of
acquisition. All periods previously disclosed have been restated to include
Recognition since the acquisition was accounted for as a pooling of interests
(See (c) above). Additionally, the per share amounts and the weighted average
number of common shares have been restated to reflect the Company's three-for-
two common stock split on February 8, 1993, and the .59 exchange ratio for
Recognition stock.
In December 1995, the Company changed its fiscal year end from a 52/53 week
year which ended on or about March 31, to a calendar year end of December 31.
This resulted in a nine month transitional period for the current reporting
period.
The consolidated balance sheet data as of December 31, 1995, are those of
the combined Company. The consolidated balance sheet data as of December 31,
1994, includes the Company as of December 26, 1994, combined with Recognition
as of December 25, 1994. The consolidated balance sheet data for fiscal years
1995, 1994, 1993 and 1992 includes the Company as of March 26, 1995, March 27,
1994, March 28, 1993, and March 29, 1992, combined with the consolidated
balance sheet data of Recognition as of March 26, 1995, and October 31, 1993,
1992 and 1991, respectively. The consolidated statement of operations data for
the nine months ended December 31, 1995, and December 31, 1994, includes the
Company's results for the nine months ended December 31, 1995, and December
26, 1994, combined with Recognition's results for the nine months ended
December 31, 1995, and December 25, 1994, respectively. The consolidated
statement of operations data for the fiscal years ended 1995, 1994, 1993 and
1992 includes the Company's fiscal years ended March 26, 1995, March 27, 1994,
March 28, 1993, and March 29, 1992, combined with Recognition's fiscal years
ended October 31, 1994, 1993, 1992 and 1991, respectively.
9
<PAGE>
Recognition's results of operations for the five months ended March 26,
1995, are excluded from the consolidated statement of operations in order to
combine complete twelve month periods and is therefore included in the
statement of stockholders' equity for the year ended March 26, 1995. For
additional information, see Note C to Notes to Consolidated Financial
Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On October 12, 1995, the Company completed the acquisition of Recognition
International Inc. ("Recognition"). The transaction was accounted for as a
pooling of interests; therefore, the consolidated results of the combined
companies for all periods are presented in the accompanying financial
statements. Concurrent with the transaction, the Company also changed its year
end to December 31 for this year and all subsequent reporting periods. For the
comparison of the nine months ended December 31, 1995, and December 31, 1994,
the financial results for each company were consolidated. For the comparison
of the fiscal year 1995 and fiscal year 1994, the financial results of the
Company for the periods ending March 26, 1995, and March 27, 1994, were
combined with the Recognition financial results for the periods ending October
31, 1994, and October 31, 1993, respectively.
As part of the acquisition of Recognition, the Company has taken a pretax
charge of $85,187,000 during the quarter ended December 31, 1995, to integrate
the two companies and to cover the cost of severance, duplicate and impaired
assets, idle facilities, loss contracts and transaction costs. See Note D of
Notes to Consolidated Financial Statements for a further discussion of these
charges. Also included in both the nine months ended December 31, 1994, and in
the twelve months ended October 31, 1994, is a pretax restructuring charge of
$19,732,000 taken by Recognition to consolidate support overhead and
manufacturing operations in Dallas, to close a manufacturing facility in
Charlotte, North Carolina, and to reduce expenses in the software division
through consolidation and staff reduction. For financial statement
presentation consistency, the Recognition restructuring charge was
redistributed as follows: $13,652,000 to equipment and software cost of sales,
$1,884,000 to maintenance cost of sales, $503,000 to product development and
$3,693,000 to selling, general and administrative expenses. Also, included in
both the nine months ended December 31, 1994, and twelve months ended October
31, 1994, periods for Recognition were other non-restructuring charges of
approximately $5,900,000, with $2,200,000 charged to equipment and software
cost of sales, $500,000 charged to maintenance cost of sales, $2,800,000
charged to product development and $400,000 charged to amortization.
In addition, the Company in the fiscal year ended March 27, 1994, acquired
and consolidated the results 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. The Company consummated no acquisitions during the
fiscal year ended March 26, 1995.
COMPARISON OF NINE MONTHS ENDED DECEMBER 31, 1995, AND DECEMBER 31, 1994
Consolidated revenue for the nine months ended December 31, 1995, of
$383,984,000 decreased by $5,759,000 or 1.5% from the same period in the prior
year due to a reduction of $16,674,000 in Recognition revenue offset in part
by an increase of $10,915,000 from the standalone Company revenue. The
reduction in Recognition revenue was primarily in equipment and software
products. Specific large dollar Recognition revenue reductions included
approximately $8,500,000 from network integration projects in Canada,
$3,600,000 from Plexus software, $2,700,000 from older style reader/sorters
and smaller reductions in several other older product lines. Recognition
revenue increased approximately $5,368,000 for the recently released Universal
Transport product and its associated encoder module. The increase in the
standalone Company revenue was from a combination of continued growth in
domestic network management services and incremental document processing
maintenance revenue from European giro processing systems. Equipment and
software revenue accounted for 49.0% of total revenue in the nine months ended
December 31, 1995, compared to 52.2% in the nine months ended December 31,
1994.
10
<PAGE>
Consolidated gross profit of $61,481,000 decreased by $38,535,000 or 38.5%
from the same period in the prior year. When adjusted for charges of
$41,838,000 in the current period and $18,236,000 in the prior period, the
adjusted gross profit for the nine months ended December 31, 1995, of
$103,319,000 decreased by $14,933,000, or 12.6%. The adjusted gross profit for
equipment and software of $60,410,000 decreased by $8,436,000 due to a
combination of lower revenues from the Recognition operations, the mix of
products sold in community banking and cost overruns on certain large systems
development contracts. The adjusted gross profit for maintenance and other
services of $42,909,000 decreased by $6,497,000 as the additional gross profit
from higher sales primarily from the standalone Company business were offset
by the reduced high margin maintenance revenues in the Recognition currency
and European giro products, startup costs related to several new large network
service contracts and incremental costs from an additional week of expenses in
the current year.
Operating expenses of $125,452,000 increased by $25,442,000 or 25.4% from
the same period in the prior year. When operating expenses are adjusted for
charges of $42,964,000 in the current period, and $7,396,000 in the prior
period, operating expenses decreased by $10,126,000 or 10.9%. Product
development expenses when adjusted for charges were down by $2,788,000 due to
a combination of the Recognition restructuring plan actions from the prior
year and the elimination of duplicate development projects subsequent to the
acquisition. Selling, general and administrative expenses when adjusted for
charges were down by $5,997,000 due to the Recognition restructuring plan
actions from the prior year and the elimination of duplicate administration
and corporate office staff personnel upon completion of the acquisition.
Net interest expense of $5,470,000 was up slightly over the prior period due
to lower investment income. Net sundry expense of $1,274,000 in the current
period was comprised primarily of foreign currency transaction losses and the
write-off of a lease receivable. The net sundry income of $1,116,000 in the
prior period consisted primarily of foreign currency transaction gains.
The current period income tax benefit was $17,234,000 compared to an income
tax provision of $9,984,000 in the prior period. The current period benefit
was affected by certain costs that were non-deductible for tax purposes and by
the geographic mix of where income and losses were generated. The prior year
income tax provision was derived primarily from the profits earned by the
Company prior to the acquisition, while the losses from the Recognition
domestic operations were not benefited due to the uncertainty of their
realization by Recognition as a standalone company.
Minority interest of $1,210,000 in the period ended December 31, 1994
reflects the ScanData Joint Venture partner's (Thomson) 49.5% share of losses
incurred in the joint venture. With the joint venture net equity position at
zero, no minority interest adjustments for sharing of losses were made during
the nine month period ending December 31, 1995.
For the nine month period ended December 31, 1995, the net loss of
$53,481,000 resulted in a loss per share of $2.63, compared to a loss of
$12,887,000 and a loss per share of $0.63 for the nine month period ended
December 31, 1994.
COMPARISON OF FISCAL YEAR 1995 AND FISCAL YEAR 1994
Consolidated revenue of $516,932,000 increased by $38,816,000 or 8.1% from
the prior year due primarily to the full year effect of acquisitions made by
the Company in fiscal year 1994, continued growth in the network management
services business and increased shipment of image systems offset in part by
decreases in older hardware products. Revenue from equipment and software of
$266,750,000 increased $10,858,000 or 4.2% due to the inclusion of TDC and ACS
for a full year in fiscal year 1995 offset in part by decreases in the sales
of older Recognition hardware products. Revenue from maintenance and other
services of $250,182,000 increased by $27,958,000 or 12.6% due to continued
growth in the domestic network management business and increased support
services revenue from Recognition. Equipment and software revenue accounted
for 51.6% of total revenue in fiscal year 1995 compared to 53.5% in fiscal
year 1994.
11
<PAGE>
Consolidated gross profit of $135,728,000 decreased by $15,466,000 or 10.2%
from the same period in the prior year. When adjusted to deduct charges of
$18,236,000 taken by Recognition in fiscal year 1995, adjusted gross profit of
$153,964,000 increased by $2,770,000 or 1.8% over the same period in the prior
year. The improvement in gross profit was due to the inclusion of ACS for a
full year and growth in network management services offset by a significant
decrease in gross profit from the Recognition hardware products as a result of
decreased revenues from older products, a higher percentage of lower margin
third party revenue and higher manufacturing costs. Adjusted gross profit for
equipment and software of $87,265,000 decreased by $10,221,000 or 10.5% as a
result of the lower revenue from older Recognition products offset in part by
the full year of revenue from the ACS acquisition. Adjusted gross profit for
maintenance and other services of $66,699,000 increased by $12,991,000 or
24.2% due to the growth in revenue.
Operating expenses of $136,626,000 increased by $21,761,000 or 18.9% from
the same period in the prior year. When operating expenses are adjusted to
deduct $7,396,000 in charges taken by Recognition in fiscal year 1995, the
increase in operating expenses is reduced to $14,365,000. The increase was due
to a combination of increased goodwill amortization, increased staffing as a
result of the TDC and ACS acquisitions and a charge taken by the Company to
settle a litigation claim.
Net interest expense of $7,339,000 increased by $3,251,000 as a result of
increased debt assumed by the Company to fund the TDC and ACS acquisitions and
higher interest rates. Net sundry income of $2,082,000 increased by $2,016,000
over the prior year primarily as a result of foreign currency transaction
gains.
The provision for income taxes of $10,663,000 decreased by $1,540,000 from
the prior year as a result of decreased domestic profit. The net operating
loss for the fiscal year 1995 was derived primarily from the Recognition
restructuring and miscellaneous other charges. No tax benefit was provided on
these Recognition losses by Recognition because of the uncertainty as to their
ultimate realization.
Minority interest of $1,210,000 reflects the ScanData Joint Venture
partner's 49.5 % share of the losses incurred in the joint venture during
fiscal year 1995.
The fiscal year 1995 net loss of $15,608,000 resulted in a loss per share of
$0.77, compared to net income of $22,729,000 and earnings per share of $1.15
in fiscal year 1994.
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 through employee stock option and purchase plans. During the
year, the Company completed the acquisition of Recognition which was
accomplished through an exchange of stock. As a result of the acquisition, the
Company has taken a pretax charge of $85,187,000 to integrate the two
companies and to cover the cost of severance, duplicate and impaired assets,
idle facilities, loss contracts and costs incurred to complete the
acquisition. Approximately, $36,000,000 in cash will be utilized to complete
the acquisition with the cash requirements being approximately $13,000,000 in
the year ended December 31, 1995, $20,000,000 in the year ended December 31,
1996, and $3,000,000 in future periods for facility lease commitments.
At December 31, 1995, the Company had the following debt instruments in
place; 1) Acquisition Term Loan, 2) Revolving Credit Facility, 3) 7 1/4%
Convertible Subordinated Debentures, and 4) Foreign Bank Loan. The terms of
the Acquisition Term Loan and Revolving Credit Facility were amended in fiscal
year 1995 to allow borrowings in foreign currency which the Company utilizes
as part of its foreign currency risk management program. The outstanding
acquisition term loan balance as of December 31, 1995, was $43,777,000.
Pursuant to the terms of the acquisition term loan, payments commenced March
31, 1995, with equal quarterly payments due through its maturity in December
1999. As of December 31, 1995, the Company had available a $30,000,000
revolving credit facility which had an outstanding balance of $16,005,000.
This balance included $455,000 in
12
<PAGE>
recognized but unrealized losses resulting from converting certain notes under
this facility into foreign currencies. During the period ended December 31,
1995, the Company borrowed a maximum amount of $20,050,000 against this credit
facility. As of December 31, 1995, the 7 1/4% Convertible Subordinated
Debentures due in 2011 had a balance of $51,722,000. Annual sinking fund
payments of $2,250,000 commence on April 15, 1996. Also outstanding as of
December 31, 1995, was a foreign bank loan in the amount of $5,537,000. Cash,
cash equivalents and short-term investments have been pledged as collateral to
secure this loan. See Note G of Notes to Consolidated Financial Statements for
a further discussion of these debt instruments.
On February 22, 1996, the Company signed a new credit agreement increasing
its revolving credit facility to $50,000,000 and providing more favorable
terms and conditions for its existing term loan. The new credit agreement
replaced the Acquisition Term Loan and Revolving Credit Facility in place at
December 31, 1995.
The Company believes that it has sufficient financial resources available to
support its anticipated requirements to fund operations and pay out the
remaining acquisition cash obligations over the next year, 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, cash equivalents and short-term investments were $26,874,000 at
December 31, 1995, with approximately $6,398,000 committed as collateral and
compensating balances. The decrease in cash over the nine month period was
primarily the result of cash payments for severance and transaction costs
associated with the acquisition, payment of bonuses, growth in inventory for
new products to be manufactured by the Company and payment of interest and
principal on debt obligations.
Net accounts receivable decreased from the March 1995 balance due to the
combination of collection of certain large receivables, the timing of
shipments within the year and an increase in the bad debt allowance reserve.
Net inventory remained constant as the growth in raw materials purchased by
the Company for the manufacture of new products was offset by a decline in
inventory levels for some of the older product lines and additional reserves
established as part of the charge taken to facilitate the acquisition.
Net goodwill decreased from March 1995 due to the write-off of certain
goodwill balances and normal amortization.
Net fixed assets decreased as a result of reserves included in the
acquisition charge to eliminate duplicate assets and to write-off remaining
leasehold improvements in facilities being vacated.
Long-term debt decreased due to the scheduled quarterly payments made under
the term loan.
Inflation has not had a material effect on the operating results of the
Company.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
BancTec, Inc.:
We have audited the accompanying consolidated balance sheets of BancTec,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995, and
March 26, 1995, and the related consolidated statements of operations, cash
flows and stockholders' equity for the nine months ended December 31, 1995 and
each of the two years in the period ended March 26, 1995. We did not audit the
consolidated financial statements of Recognition International Inc., a company
acquired during 1995 in a transaction accounted for as a pooling of interests,
for each of the two years in the period ended October 31, 1994, as discussed
in Note C. Such statements are included in the consolidated financial
statements of BancTec, Inc. after restatement to reflect certain adjustments
also set forth in Note C and reflect total revenues of 42 percent for the year
ended March 26, 1995, and 48 percent for the year ended March 27, 1994, of the
related consolidated totals. The financial statements of Recognition
International Inc. prior to those adjustments were audited by other auditors
whose report has been furnished to us and our opinion, insofar as it relates
to amounts included for Recognition International Inc., is based solely upon
the report of the other auditors. 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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of BancTec, Inc. and subsidiaries as of
December 31, 1995, and March 26, 1995, and the results of their operations and
their cash flows for the nine months ended December 31, 1995 and each of the
two years in the period ended March 26, 1995, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
March 12, 1996
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Recognition International Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of stockholders' equity and of cash flows (not
presented separately herein) present fairly, in all material respects, the
financial position of Recognition International Inc. and its subsidiaries
(Recognition) at October 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended October 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Recognition's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Dallas, Texas,
December 7, 1994
15
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 26,
1995 1995
------------ ------------
(RESTATED)
(SEE NOTE A)
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents including restricted
amounts of $1,547 at
December 31, 1995, and $6,797 at March 26, 1995... $ 22,010 $ 52,233
Short-term investments including restricted amounts
of $4,851 at December 31, 1995, and $590 at March
26, 1995.......................................... 4,864 604
Accounts receivable, less allowance for doubtful
accounts of $11,571 at December 31, 1995, and
$4,313 at March 26, 1995.......................... 106,189 131,767
Inventories........................................ 76,930 76,831
Current deferred tax asset......................... 16,764 10,875
Other.............................................. 9,109 9,452
-------- --------
Total current assets............................. 235,866 281,762
-------- --------
PROPERTY, PLANT AND EQUIPMENT-AT COST:
Land............................................... 2,062 2,062
Field support spare parts.......................... 96,657 89,197
Machinery and equipment............................ 63,663 73,005
Furniture, fixtures and other...................... 26,515 24,658
Building........................................... 23,693 20,489
-------- --------
212,590 209,411
Less accumulated depreciation and amortization..... 137,033 129,354
-------- --------
Net property, plant and equipment................ 75,557 80,057
-------- --------
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESS,
less accumulated amortization of $19,685 at December
31, 1995, and $21,738 at March 26, 1995............. 91,503 101,497
-------- --------
OTHER INTANGIBLE ASSETS, less accumulated
amortization of $6,814 at December 31, 1995, and
$16,087 at March 26, 1995........................... 1,607 15,714
-------- --------
LONG-TERM DEFERRED TAX ASSET......................... 23,390 8,644
OTHER ASSETS......................................... 12,425 14,084
-------- --------
TOTAL ASSETS......................................... $440,348 $501,758
======== ========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 26,
1995 1995
------------ ------------
(RESTATED)
(SEE NOTE A)
(IN THOUSANDS)
<S> <C> <C>
CURRENT LIABILITIES:
Revolving credit facilities........................ $ 21,542 $ 19,383
Current maturities of long-term debt............... 13,593 22,224
Trade accounts payable............................. 24,243 35,183
Other accrued expenses and liabilities............. 87,098 74,701
Deferred revenue................................... 38,024 36,409
Income taxes....................................... 4,280 3,722
-------- --------
Total current liabilities........................ 188,780 191,622
-------- --------
LONG-TERM DEBT, less current maturities.............. 82,972 94,181
-------- --------
OTHER LIABILITIES.................................... 12,395 9,212
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock-authorized, 1,000 shares of $.01
par value:
Series A--no shares issued and outstanding....... -- --
Series B--no shares issued and outstanding....... -- --
Common stock--authorized, 45,000 shares of $.01 par
value: issued and outstanding, 19,919 shares at
December 31, 1995 and 19,681 at March 26, 1995.... 199 197
Treasury stock..................................... (388) (388)
Additional paid-in capital......................... 191,709 189,755
Retained earnings (deficit)........................ (29,134) 24,349
Foreign currency translation adjustments........... (2,866) (2,734)
Unearned compensation.............................. (3,319) (4,436)
-------- --------
Total stockholders' equity....................... 156,201 206,743
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $440,348 $501,758
======== ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
------------------------- --------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------ ------------ --------- ---------
(RESTATED--
(UNAUDITED) SEE NOTE A)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUE:
Equipment and software......... $188,107 $203,559 $266,750 $255,892
Maintenance and other services. 195,877 186,184 250,182 222,224
-------- -------- -------- --------
383,984 389,743 516,932 478,116
-------- -------- -------- --------
COST OF SALES:
Equipment and software......... 163,090 150,565 195,337 158,406
Maintenance and other services. 159,413 139,162 185,867 168,516
-------- -------- -------- --------
322,503 289,727 381,204 326,922
-------- -------- -------- --------
Gross profit................. 61,481 100,016 135,728 151,194
-------- -------- -------- --------
OPERATING EXPENSES:
Product development............ 21,455 20,899 28,072 26,100
Selling, general and
administrative................ 85,908 71,837 99,619 82,959
Goodwill amortization.......... 18,089 7,274 8,935 5,806
-------- -------- -------- --------
125,452 100,010 136,626 114,865
-------- -------- -------- --------
Income (loss) from
operations.................. (63,971) 6 (898) 36,329
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income................ 1,839 2,076 2,682 3,098
Interest expense............... (7,309) (7,311) (10,021) (7,186)
Sundry-net..................... (1,274) 1,116 2,082 66
-------- -------- -------- --------
(6,744) (4,119) (5,257) (4,022)
-------- -------- -------- --------
Income (loss) before income
taxes and minority interest. (70,715) (4,113) (6,155) 32,307
-------- -------- -------- --------
INCOME TAX PROVISION (BENEFIT):
Current........................ 3,401 8,364 9,211 16,129
Deferred....................... (20,635) 1,620 1,452 (3,926)
-------- -------- -------- --------
(17,234) 9,984 10,663 12,203
-------- -------- -------- --------
MINORITY INTEREST................ -- 1,210 1,210 2,625
-------- -------- -------- --------
NET INCOME (LOSS)................ $(53,481) $(12,887) $(15,608) $ 22,729
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE...... $ (2.63) $ (0.63) $ (0.77) $ 1.15
WEIGHTED AVERAGE SHARES.......... 20,315 20,341 20,350 19,740
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
------------------------- --------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------ ------------ --------- ---------
(RESTATED--
(UNAUDITED) SEE NOTE A)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss).............. $(53,481) $(12,887) $(15,608) $ 22,729
Adjustments to reconcile net
income to cash flows provided
by operating activities:
Recognition net income for the
five months ended March 31,
1995......................... -- -- (2,889) --
Depreciation and amortization. 50,631 33,258 45,802 38,963
Deferred income tax expense
(benefit).................... (20,635) 1,620 1,452 (3,926)
Loss due to disposition of
property, plant, and
equipment.................... 8,693 3,905 11,063 3,754
Other non-cash items.......... 2,740 5,323 5,694 2,181
(Increase) decrease in
accounts receivable.......... 23,346 (14,969) (15,686) (11,193)
(Increase) decrease in
inventories.................. (100) 9,814 2,471 ( 2,523)
Increase in other assets...... 763 (2,580) (7,993) (6,918)
Increase (decrease) in trade
accounts payable............. (8,708) (4,619) (882) 1,511
Increase (decrease) in
deferred revenue............. 661 7,333 1 ,634 5,125
Increase in other accrued
expenses and liabilities..... 15,138 8,382 15,516 8,231
Minority interest in earnings. -- (1,210) (1,210) (2,625)
Recognition change in other
operating activities for the
five months ended March 26,
1995......................... -- -- 9,286 --
-------- -------- -------- --------
Cash flows provided by
operating activities........ 19,048 33,370 48,650 55,309
-------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property, plant
and equipment................. (29,878) (33,749) (47,686) (41,691)
Purchase of businesses, net of
cash acquired................. (138) (11,487) (13,677) (49,429)
Additions to capitalized
software...................... (942) (1,244) (2,597) (4,164)
Other.......................... (3,694) (246) (182) 136
Recognition change in other
investing activities for the
five months ended March 26,
1995.......................... -- -- (6,365) --
-------- -------- -------- --------
Cash flows used in investing
activities.................. (34,652) (46,726) (70,507) (95,148)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Payments of current maturities
of long-term debt and capital
lease obligations............. (19,361) (9,899) (12,291) (22,418)
Proceeds from long-term
borrowings.................... -- 10,800 10,800 44,200
Proceeds from short-term
borrowings.................... 11,137 15,001 15,278 3,184
Payments of short-term
borrowings.................... (7,934) (3,055) (3,332) (3,897)
Repurchase of common stock..... -- (6,420) (6,994) --
Proceeds from sales and
issuances of common stock..... 1,881 3,139 4,036 33,946
Other.......................... (117) -- -- --
Recognition change in other
financing activities for the
five months ended March 26,
1995.......................... -- -- (23) --
-------- -------- -------- --------
Cash flows provided by (used
in) financing activities.... (14,394) 9,566 7,474 55,015
-------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH........................ (225) 239 638 (375)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS........... (30,223) (3,551) (13,745) 14,801
CASH AND CASH EQUIVALENTS--
BEGINNING OF YEAR.............. 52,233 46,033 65,978 51,177
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS--END
OF YEAR........................ $ 22,010 $ 42,482 $ 52,233 $ 65,978
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND THE FISCAL YEARS ENDED
MARCH 26, 1995 AND MARCH 27, 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL RETAINED CURRENCY
COMMON PAID-IN EARNINGS TRANSLATION TREASURY UNEARNED
STOCK CAPITAL (DEFICIT) ADJUSTMENTS STOCK COMPENSATION TOTAL
------ ---------- --------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 28,
1993 (includes 35,836
treasury shares)....... $ 175 $157,574 $ 20,119 $(1,926) $(465) $(6,685) $168,792
Common stock issued
principally under
employee stock plans... 20 33,971 -- -- -- -- 33,991
Common stock issued
under restricted stock
plan................... -- 490 -- -- -- (490) --
Amortization of unearned
compensation........... -- -- -- -- -- 1,194 1,194
Tax benefit from
exercise of stock
options................ -- 70 -- -- -- -- 70
Issuance of common stock
reserved for outside
directors (2,950
shares)................ -- -- -- -- 38 -- 38
Establishment of stock
rights plan............ -- -- -- -- -- (83) (83)
Foreign currency
translation
adjustments............ -- -- -- (1,802) -- -- (1,802)
Net income.............. -- -- 22,729 -- -- -- 22,729
----- -------- -------- ------- ----- ------- --------
Balance at March 27,
1994 (includes 32,886
treasury shares)....... 195 192,105 42,848 (3,728) (427) (6,064) 224,929
Common stock issued
principally under
employee stock plans... 5 3,992 -- -- -- -- 3,997
Common stock issued
under restricted stock
plan................... -- 141 -- -- -- (141) --
Amortization of unearned
compensation........... -- -- -- -- -- 1,290 1,290
Repurchase and
retirement of common
stock (333,000 shares). (3) (6,991) -- -- -- -- (6,994)
Tax benefit from
exercise of stock
options................ -- 314 -- -- -- -- 314
Issuance of common stock
reserved for outside
directors (2,950
shares)................ -- -- -- -- 39 -- 39
Foreign currency
translation adjustments
and rounding........... -- -- (2) 994 -- -- 992
Recognition net loss and
other activity for the
five months ended March
26, 1995............... -- 194 (2,889) -- -- 479 (2,216)
Net loss................ -- -- (15,608) -- -- -- (15,608)
----- -------- -------- ------- ----- ------- --------
Balance at March 26,
1995 (includes 29,936
treasury shares)....... 197 189,755 24,349 (2,734) (388) (4,436) 206,743
Common stock issued
principally under
employee stock plans... 2 1,879 -- -- -- -- 1,881
Common stock issued
/cancelled under
restricted stock plan,
net.................... -- (90) -- -- -- 90 --
Amortization of unearned
compensation........... -- -- -- -- -- 1,027 1,027
Tax benefit from
exercise of stock
options................ -- 165 -- -- -- -- 165
Foreign currency
translation adjustments
and rounding........... -- -- (2) (132) -- -- (134)
Net loss................ -- -- (53,481) -- -- -- (53,481)
----- -------- -------- ------- ----- ------- --------
Balance at December 31,
1995 (includes 29,936
treasury shares)....... $ 199 $191,709 $(29,134) $(2,866) $(388) $(3,319) $156,201
===== ======== ======== ======= ===== ======= ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The principal business of BancTec, Inc. and subsidiaries (the "Company") is
the development, manufacture and sale of integrated financial transaction
processing systems, imaging and workflow products, application software and
professional services. The Company develops solutions for the banking,
financial services, insurance, health care, government, utility,
telecommunications, grocery and retail industries. The Company also designs
and manufactures document processing equipment for value added resellers
("VARs") and original equipment manufacturers ("OEMs") and provides network
support and management services for local area networks ("LANs") and personal
computers ("PCs").
BASIS OF PRESENTATION
The Company's financial statements have been restated due to a change in the
reporting entity to reflect its merger with Recognition under the pooling of
interests method of accounting. Prior to the merger, Recognition had a year-
end of October 31, and the Company had a year-end of on or about March 31.
Since the merger was accounted for as a pooling of interests, combined results
of the two companies are presented for all periods disclosed.
The consolidated balance sheet as of December 31, 1995, and March 26, 1995,
is that of the combined Company. The consolidated statement of operations and
consolidated statement of cash flows for the nine months ended December 31,
1995, and December 31, 1994, includes the Company's results for the nine
months ended December 31, 1995, and December 26, 1994, combined with
Recognition's results for the nine months ended December 31, 1995 and December
25, 1994, respectively. For the fiscal years ended March 26, 1995, and March
27, 1994, the consolidated statement of operations and the consolidated
statement of cash flows include the Company's fiscal years ended March 26,
1995, and March 27, 1994, combined with Recognition's fiscal years ended
October 31, 1994 and 1993, respectively. The consolidated statement of
stockholders' equity for the years ended March 28, 1993, and March 27, 1994,
includes the Company's activity as of March 28, 1993, and March 27, 1994,
respectively, and Recognition's activity as of and for the years ended October
31, 1992 and 1993, respectively. The consolidated statement of stockholders'
equity as of March 26, 1995, includes the Company's activity for the fiscal
year ended March 26, 1995, and Recognition's activity for the year and five
months ended March 26, 1995. The consolidated statement of stockholders'
equity for the nine months ended December 31, 1995, is that of the combined
company.
Recognition's results of operations for the five months ended March 26, 1995
is excluded from the consolidated statement of operations in order to combine
complete twelve month periods and is therefore included in the statement of
stockholders' equity for the year ended March 26, 1995. For additional
information, see Note C.
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 in fiscal year 1992. All significant intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
21
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents are comprised of highly liquid instruments with original
maturities of three months or less. Short-term investments are similar
instruments with original maturities in excess of three months and are valued
at cost, which approximates market.
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 policies 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 December 31, 1995 and March 26, 1995, there were $1,618,000 and
$949,000, 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.
Leasing--Revenue from operating leases of equipment and temporary end-user
software licenses are recognized ratably over the terms of the related
contract. Revenue from sales type leases is recorded as the present value of
the minimum lease payments (net of executory costs), computed at the interest
rate implicit in the lease in accordance with Statement of Financial
Accounting Standards (SFAS) No. 13, "Accounting for Leases."
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
22
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
statements of operations, 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 are 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
businesses 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 feasibility has been established. At that time,
the software product development costs are capitalized in conformity with SFAS
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed." At December 31, 1995, and March 26, 1995, capitalized
software costs recorded in other long-term assets were $542,000 and
$6,155,000, respectively. Software costs are amortized to cost of sales on a
per unit basis straight-line or over a three year period, whichever is less.
The Company performs a periodic review to determine the realization of
capitalized software. When it is determined that there is an impairment,
carrying amounts are written down to their net realizable value. The amount of
software development costs charged to expense for the nine month period ended
December 31, 1995, and December 31, 1994, and in fiscal years 1995, and 1994,
were $6,555,000, $5,292,000, $5,983,000 and $2,238,000, respectively. Customer
sponsored product development costs are generally charged to cost 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 financial reporting basis of transactions and the tax basis of assets and
liabilities.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at the year-end rates of exchange. Revenue and
expenses are translated monthly at the average exchange rates for the month.
Translation gains and losses including those arising from intercompany
accounts considered to be long-term investments, are reported as a separate
component of stockholders' equity, and transaction gains and losses are
included in results of operations in sundry-net. Foreign currency transaction
losses in the nine months ended December 31, 1995, were $1,246,000. Foreign
currency transaction gains in the nine months ended December 31, 1994, were
$1,072,000. Foreign currency transaction gains in fiscal year 1995 were
$1,929,000, while foreign currency transaction losses in fiscal year 1994 were
$465,000.
NET INCOME PER SHARE
Net income per common and common equivalent share is based upon the weighted
average number of outstanding shares during the year. The number of
outstanding shares of common stock has been adjusted to reflect the assumed
exercise of all outstanding stock options which are dilutive, at the beginning
of the period or date of issuance, and the use of the proceeds of such assumed
exercise to repurchase, at market, common stock
23
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of the Company. For all periods presented, fully diluted earnings per share
are either anti-dilutive or do not affect earnings per share.
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 the Company's
customers, management does not consider there to be a concentration of risk
within any single classification.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current
year presentation.
NEWLY ISSUED ACCOUNTING STANDARDS
In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," was issued. The Company
will adopt SFAS No. 121 in calendar year 1996.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may be impaired.
The Company continually evaluates whether events and circumstances indicate
that the carrying value of an asset may be impaired; therefore, adoption is
not expected to have a significant impact on the Company's financial position
and results of operations.
NOTE B--CHANGE IN FISCAL YEAR-END
On October 12, 1995, concurrent with the consummation of the acquisition of
Recognition, the Company changed its fiscal year-end from a 52/53 week year
which ended on or about March 31 of each year to a calendar year-end of
December 31.
NOTE C--ACQUISITIONS AND EQUITY INVESTMENTS
ACQUISITION OF RECOGNITION INTERNATIONAL INC.
On October 12, 1995, the shareholders of the Company and Recognition
approved the acquisition of Recognition by the Company. The acquisition was
effected through the merger of BTEC Merger Subsidiary, Inc., a wholly-owned
subsidiary of the Company, with and into Recognition. Under the terms of the
merger agreement, Recognition stockholders received 0.59 of a share of the
Company's common stock for each share of Recognition common stock owned, for a
total of approximately 9.1 million shares. Fractional shares were not issued;
instead former Recognition stockholders were paid a fractional share
percentage of $21.00 in cash, the closing price of a share of the Company's
common stock on the date of closing.
The merger qualifies as a tax-free reorganization and was accounted for as a
pooling of interests. Accordingly, the Company's financial statements have
been restated to include the results of Recognition for all periods presented
in accordance with APB No. 16.
24
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Combined and separate results of the Company and Recognition for the periods
presented are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------
SIX NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 24, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------- ------------ --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
As Reported:
Revenue:
BancTec....................... $151,657 $220,447 $297,539 $247,538
Recognition(b)................ 108,134 169,296 219,393 230,578
-------- -------- -------- --------
Combined...................... $259,791 $389,743 $516,932 $478,116
======== ======== ======== ========
Net Income (Loss):
BancTec....................... $ 8,070 $ 12,204 $ 12,509 $ 16,343
Recognition(b)................ 1,468 (23,968) (26,580) 7,936
Adjustment (a)................ (1,200) (1,123) (1,537) (1,550)
-------- -------- -------- --------
Combined...................... $ 8,338 $(12,887) $(15,608) $ 22,729
======== ======== ======== ========
</TABLE>
- --------
(a) Effect of conforming the method of accounting for field spares.
(b) For the six months ended September 24, 1995, and the nine months ended
December 31, 1994, and the fiscal years ended October 31, 1994, and 1993.
Recognition's previously reported results have been restated to conform its
method of accounting for field spares and expendable parts inventory to be
consistent with the Company's method. Recognition had previously depreciated
field spares and expendable parts inventory over six years. The book value of
expendable parts net of reserves, determined using the dollar value FIFO
method, was charged to expense when such parts were used in the field. The
Company's policy is to depreciate field spares over three to five years, with
no depreciation provision for expendable parts inventory. Expendable parts are
charged to expense on issuance to the field and reserves for excess and
obsolete quantities are provided as necessary. The impact of this change is as
follows:
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31,
1993 1992
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Retained deficit as previously reported................ $37,367 $45,303
Cumulative effect of adjustment to conform method of
accounting for field spares........................... 4,146 2,596
------- -------
Retained deficit as adjusted and combined with the
Company............................................... $41,513 $47,899
======= =======
</TABLE>
The amounts for Recognition's revenue, operating loss, and net loss for the
five months ended March 26, 1995, not included in the Compay's consolidated
statements of operations are as follows:
<TABLE>
<CAPTION>
AS ADJUSTED
--------------
(IN THOUSANDS)
<S> <C>
Revenue.................................................... $84,170
Operating loss............................................. (1,833)
Net loss................................................... (2,889)
</TABLE>
25
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OTHER 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 provided the Company
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, the Company 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 operator as well as a
distributor of the Company's image processing systems, document processing
systems, and standalone reader/sorters to banks, service bureaus, and other
financial processors in Chile and other South American countries. The
Company'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 their
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 provider of
software products which integrate check sorting, platform automation, loan
processing, ATM and teller terminal processing and other bank operations
activities, to banks with less than $300 million in assets. The purchase price
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 G. The business combination was accounted for as a purchase and
accordingly, ACS operations are included in the Company's consolidated results
of operations from December 23, 1993, the effective date of the transaction.
The assets and liabilities acquired are recorded in the Company's consolidated
balance sheet at their assigned fair value.
During the fourth quarter of fiscal year 1994, the Company acquired 100% of
the stock of Terminal Data Corporation, Inc. ("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 their assigned fair value.
26
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited pro forma information combines the results of
operations of the Company including ACS and TDC as if the purchase
transactions had occurred at the beginning of fiscal year 1994. The pro forma
information is based on the historical financial statements of the Company,
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 the acquired businesses
and the related tax impact thereof.
Management believes that the pro forma information may not be indicative of
the results that would have occurred if the combinations had been in effect on
the date 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>
MARCH 27, 1994
--------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
Revenue.................................................... $515,348
Net income................................................. 21,863
Net income per share....................................... $ 1.11
</TABLE>
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.
<TABLE>
<CAPTION>
ACQUIRED BUSINESS GOODWILL AMORTIZATION PERIOD
----------------- ----------------------------
<S> <C>
Imagesolve................................... 20 years
ACS.......................................... 20 years
TDC.......................................... 25 years
</TABLE>
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. In December 1995,
the remaining unamortized goodwill balance of $2,014,000 for LPA was charged
to expense. Also, in December 1995 the remaining unamortized goodwill balance
of $3,429,000 from Recognition's acquisition of Hybrid Systems, Inc. was
charged to expense. No other adjustments to recorded goodwill balances have
been made as a result of these evaluations. No other adjustments to recorded
goodwill balances have been made as a result of these evaluations.
NOTE D--CHARGES
For the nine month period ended December 31, 1995, the Company incurred
pretax charges of $85,187,000 for the integration of the Company and
Recognition. The components of these charges were $17,000,000 to cover the
cost of severance, $51,687,000 for duplicate and impaired assets, $6,000,000
for loss contracts, $5,500,000 related to facilities and $5,000,000 in
transaction costs. These costs are categorized in the consolidated statement
of operations as follows: $41,838,000 in cost of sales, $6,647,000 in product
development, $23,761,000 in selling, general and administrative, $12,556,000
as amortization and $385,000 in other sundry.
As of December 31, 1995, approximately $62,000,000 (primarily professional
fees, severance, and write off of impaired assets), of such costs have been
paid or otherwise charged against the $85,187,000 accrual. The remaining
obligations are currently recorded in other accrued expenses and liabilities
and are expected to be substantially paid by the end of the fourth quarter of
1996 utilizing existing cash resources of the Company.
27
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amounts disclosed represent management's best estimate of the costs to be
incurred and the timing of such costs. The progress of the plan and the actual
amounts incurred could vary from these estimates if future developments differ
from the underlining assumptions used by management in developing the accrual.
Under Recognition's former restructuring plan, $19,732,000 was recorded in
the fiscal year ended October 31, 1994 (March 26, 1995, of the combined
Company). In order to conform the income statement presentation to the
Company's presentation, the previously reported restructuring charge has been
reclassified as follows; $15,536,000 to cost of sales, $3,693,000 to selling,
general and administrative and $503,000 for product development. As of
December 31, 1995, the Company has paid $6,580,000 in termination benefits for
the involuntary termination of 299 employees and has written down assets or
paid amounts totalling $11,596,000 related to other restructuring items. At
December 31, 1995, the Company had a remaining accrual of $3,127,000 relating
to prior restructuring plans. The remaining costs are expected to be paid by
December 31, 1996.
NOTE E--LEASING OPERATIONS
The Company leases certain products to customers with terms generally
ranging from one to five years. Transactions that do not qualify as sales-type
leases are accounted for as operating leases. As of December 31, 1995, minimum
future lease payments expected to be received were as follows:
<TABLE>
<CAPTION>
SALES-TYPE OPERATING
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
1996............................................. $ 826 $ 253
1997............................................. 565 6
1998............................................. 358 --
1999............................................. 108 --
------- -------
$ 1,857 $ 259
======= =======
The net investment in sales-type leases at December 31, 1995, and March 26,
1995, were as follows:
<CAPTION>
CURRENT NON-CURRENT
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
December 31, 1995
Future minimum lease payments receivable....... $ 826 $ 1,031
Estimated residual value of leased assets...... 20 --
Unearned interest income....................... (115) (68)
------- -------
$ 731 $ 963
======= =======
March 26, 1995
Future minimum lease payments receivable....... $ 2,408 $ 2,440
Unearned interest income....................... (470) (235)
------- -------
$ 1,938 $ 2,205
======= =======
NOTE F--INVENTORIES
<CAPTION>
DECEMBER 31, MARCH 26,
1995 1995
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.................................... $22,644 $26,832
Work-in-process.................................. 20,195 13,958
Finished goods................................... 34,091 36,041
------- -------
$76,930 $76,831
======= =======
</TABLE>
28
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE G--INDEBTEDNESS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 26,
1995 1995
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Term loans payable to banks....................... $43,777 $61,114
7 1/4% convertible subordinated debentures due
2011............................................. 51,722 51,722
Promissory note due 1995.......................... -- 1,934
Obligations under capital leases.................. 1,066 1,635
------- -------
96,565 116,405
Less current maturities........................... 13,593 22,224
------- -------
$82,972 $94,181
======= =======
</TABLE>
Future maturities of long-term debt, excluding capital lease obligations,
are as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR (IN THOUSANDS)
------------- --------------
<S> <C>
1996....................................................... $13,200
1997....................................................... 13,200
1998....................................................... 13,200
1999....................................................... 13,177
2000....................................................... 2,250
Thereafter................................................. 40,472
-------
$95,499
=======
</TABLE>
At December 31, 1995, the Company's credit agreement provided for a
$30,000,000 short-term revolving credit facility ("revolving credit
facility"), a $55,000,000 acquisition loan ("acquisition facility") and a
$51,000,000 term loan facility ("term loan") which are unsecured. The
remaining term loan balance was paid in full during the current period. 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. As a result of the acquisition of
Recognition, the Company was in violation of certain of its covenants for
which it received waivers. At December 31, 1995, the Company was in compliance
with all of the remaining covenants required under the agreement. The
agreement permits borrowing in foreign currency which the Company utilizes as
part of its foreign currency risk management program discussed in Note H.
Certain amounts due under the revolving credit facility and the acquisition
facility are payable in the following foreign currencies: Japanese Yen,
Norwegian Guilders, German Deutschemarks and Great Britain Pounds Sterling.
Therefore, the reported amounts include recognized but unrealized gains and
losses resulting from currency fluctuations. 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 quarterly. The acquisition facility bears 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 December 31, 1995, the Company's debt to capitalization ratio was .43 and
the applicable interest rate was LIBOR plus 1 3/4 points.
On February 22, 1996, the Company signed a new credit agreement raising the
revolving credit facility to $50,000,000 and replacing the acquisition
facility with a new term loan. The new agreement generally has borrowing rates
that are lower than those in place under the old credit agreement. Included in
the restrictive covenants are ratio requirements to be maintained on a
consolidated basis of a 2.0 to 1.0 minimum cash flow
29
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
coverage, maximum debt to EBITDA of not more than 2.25 to 1.0 at the end of any
fiscal quarter for the preceding 12 month period and a maximum debt to
capitalization ratio not to exceed .50 to 1.0 as of the end of any fiscal
quarter. The new credit agreement removes several restrictive covenants that
were in place with the former agreement.
At December 31, 1995, the Company was party to one interest rate cap
agreement. This agreement, which expires in May 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
exceeds 7.0%, with a ceiling of 9.5%, above which the Company would receive no
additional amount. No payments were received in the period ended December 31,
1995.
At December 31, 1995, the amount outstanding under the revolving credit
facility was $15,550,000 at a weighted average interest rate of 6.12%.
Unrealized but recognized losses of $455,000 resulting from converting certain
notes into foreign currencies are excluded. During the nine months ended
December 31, 1995, the Company borrowed a maximum amount of $20,050,000 against
this facility.
Also outstanding as of December 31, 1995, was a foreign bank loan in the
amount of $5,537,000. Cash, cash equivalents and short-term investments have
been pledged as collateral to secure this loan.
Principal payments against the outstanding balance of the acquisition
facility commenced as of March 31, 1995. The principal, plus accrued interest,
is due in 20 equal quarterly installments until December 31, 1999. At December
31, 1995, the balance of the acquisition facility was $43,777,000.
The weighted average interest rate on borrowings under the term loan and
acquisition facility was 7.06% at December 31, 1995.
The 7 1/4% convertible debentures are subordinated to all senior indebtedness
and are convertible into common stock at $28.39 per share. Annual sinking fund
payments of $2,250,000 are required beginning April 15, 1996. The debentures
are redeemable at the Company's option at 100% of face value after April 16,
1996.
In connection with the acquisition of the Lundy Financial Systems Division
(Lundy) of TransTechnology Corporation (TransTechnology), Recognition issued a
promissory note to TransTechnology for $1,934,000 due in 1995. Payment was made
during the nine months ended December 31, 1995, in accordance with the terms of
the note.
The fair market value of the acquisition loan, revolving credit facility, the
subordinated debentures and foreign bank loan as of December 31, 1995,
approximates their respective carrying values.
30
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under capital lease obligations are as
follows:
<TABLE>
<CAPTION>
CALENDAR YEAR (IN THOUSANDS)
------------- --------------
<S> <C>
1996...................................................... $ 472
1997...................................................... 373
1998...................................................... 277
1999...................................................... 97
------
Total minimum lease payments.............................. 1,219
Less amount representing interest (5.9%-16.2% rate)....... 153
------
Present value of net minimum lease payments, including
current maturities of $393,000 at December 31, 1995...... $1,066
======
</TABLE>
Property, plant and equipment recorded under capital leases are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 26,
1995 1995
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment............................ $ 977 $ 967
Furniture, fixtures and other...................... 1,915 2,290
------ ------
Total--at cost..................................... 2,892 3,257
Less accumulated depreciation...................... 1,826 1,622
------ ------
$1,066 $1,635
====== ======
</TABLE>
The Company paid cash totaling $7,228,000, $6,252,000, $8,970,000, and
$6,289,000 for interest during the nine months ended December 31, 1995, and
December 31, 1994, and in fiscal years 1995 and 1994, respectively.
NOTE H--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 G, the Company has one interest rate cap agreement in effect at December
31, 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 LIBOR interest rate has not
exceeded 7.0% since November 25, 1994, the effective date of the agreement.
The Company has utilized foreign currency forward exchange agreements in
conjunction with foreign currency borrowings discussed in Note G to hedge
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
December 31, 1995, the Company had no forward exchange agreements in effect.
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.
31
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE I--OTHER ACCRUED EXPENSES AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 26,
1995 1995
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Salaries, wages and other compensation............. $19,604 $22,703
Accrued taxes, other than income taxes............. 6,391 6,635
Advances from customers............................ 16,340 12,751
Accrued invoices and costs......................... 2,949 6,650
Accrued merger charges and other costs............. 25,426 12,010
Other.............................................. 16,388 13,952
------- -------
$87,098 $74,701
======= =======
</TABLE>
NOTE J--INCOME TAXES
The domestic and foreign components of income (loss) before income taxes and
minority interest consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
------------------------- -------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------ ------------ --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic (including
Puerto Rico)........... $(58,739) $(3,384) $(6,096) $30,940
Foreign................. (11,976) (729) (59) 1,367
-------- ------- ------- -------
$(70,715) $(4,113) $(6,155) $32,307
======== ======= ======= =======
</TABLE>
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
------------------------- -------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------ ------------ --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal (including Puerto
Rico)......................... $ 3,172 $4,556 $ 4,243 $ 8,765
State.......................... 1,117 2,122 1,597 759
Foreign........................ (888) 1,686 3,371 6,605
-------- ------ ------- -------
Total current................ 3,401 8,364 9,211 16,129
-------- ------ ------- -------
Deferred:
Federal........................ (19,125) 2,223 2,143 (972)
Foreign........................ (1,510) (603) ( 691) (2,954)
-------- ------ ------- -------
Total deferred............... (20,635) 1,620 1,452 (3,926)
-------- ------ ------- -------
$(17,234) $9,984 $10,663 $12,203
======== ====== ======= =======
</TABLE>
32
<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>
NINE MONTHS ENDED FISCAL YEARS ENDED
------------------------- -------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------ ------------ --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Provision (benefit) at U.S.
statutory rate of 35% for all
periods......................... $(24,750) $(1,440) $(2,154) $11,307
Increase (reduction) in tax
expense resulting from:
Impact of foreign and Puerto
Rico income tax rates......... (177) (788) (201) (520)
Charge/credit in lieu of taxes
for tax benefits realized from
acquisitions.................. 211 -- (1,457) 137
Foreign losses not providing a
current benefit............... 2,247 8,673 10,523 1,699
Benefit of net operating loss
carryforwards................. -- -- -- (2,431)
Domestic amortization of cost
over net assets of acquired
business...................... 1,664 -- 1,295 637
Foreign goodwill amortization.. 221 -- 642 836
State income tax, net of
federal income tax benefit.... (171) 1,012 486 493
Tax expense from foreign
subsidiaries' dividends....... -- 899 1,226 594
Other.......................... 3,521 1,628 303 (549)
-------- ------- ------- -------
$(17,234) $ 9,984 $10,663 $12,203
======== ======= ======= =======
</TABLE>
The Company paid cash totaling $2,654,000, $11,478,000, $13,666,000 and
$18,356,000 for income taxes during the nine months ended December 31, 1995,
and December 31, 1994, and in fiscal years 1995 and 1994, 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 for the periods shown represents the effect of changes in the
amounts of temporary differences during those periods.
33
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax assets (liabilities), as determined under the provisions of
SFAS 109, were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 26,
1995 1995
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Gross deferred tax liability:
Foreign and other tax credits................... $ (547) $ (547)
Depreciation.................................... -- (647)
-------- --------
Total deferred tax liability...................... (547) (1,194)
Gross deferred tax assets:
Inventory reserves.............................. 24,119 26,161
Acquisition & restructuring charges............. 18,759 1,217
Net operating losses............................ 47,418 41,448
Taxes paid on intercompany profits.............. 585 1,076
Unrealized foreign exchange gains............... 468 103
Alternative minimum tax credit carryforward..... -- 1,134
Depreciation.................................... 1,409 --
Tax deductible foreign reserves................. 422 239
Deferred revenues............................... 4,819 4,937
Other........................................... 300 445
-------- --------
Gross deferred tax assets....................... 98,299 76,760
Deferred tax assets valuation reserve........... (57,598) (56,047)
-------- --------
Net deferred tax asset............................ $ 40,154 $ 19,519
======== ========
</TABLE>
The Company has net operating loss carryforwards which expire as follows:
1996 though 1999, $23,300,000; 2000 through 2009, $65,121,000; and indefinite,
$28,405,000.
The net change in the deferred tax asset valuation reserve for the nine
months ended December 31, 1995, and in fiscal year ended March 26, 1995, was
$1,551,000, and $22,366,000, respectively, and is attributable to the increase
in the net operating loss carryforwards of the Company's domestic and various
foreign subsidiaries.
Undistributed earnings of foreign subsidiaries were approximately
$14,243,000, $18,976,000, $17,514,000 and $14,031,000 at December 31, 1995,
December 31, 1994, March 26, 1995, and March 27, 1994, respectively. No taxes
have been provided on these undistributed earnings as they are considered to
be permanently reinvested.
NOTE K--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.
34
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EMPLOYEE STOCK AWARD PLANS
At December 31, 1995, a total of 3,948,661 shares of common stock were
reserved for issuance under the Company's stock award plans. At December 31,
1995, 433,468 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
fair market value of the stock at the grant date. Options issued vest
periodically as defined in the plans. At December 31, 1995, options to
purchase 3,515,193 shares were outstanding, of which options to purchase
2,208,434 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 27, 1994............. 3,088,592 $4.83--$28.39
Granted......................................... 890,550 12.08-- 27.76
Exercised....................................... (439,187) 4.83-- 23.53
Forfeited....................................... (202,154) 5.42-- 23.53
---------
Options outstanding--March 26, 1995............. 3,337,801 4.83-- 28.39
Granted......................................... 538,050 15.38-- 19.98
Exercised....................................... (149,786) 4.83-- 16.63
Forfeited....................................... (210,872) 4.83-- 27.75
---------
Options outstanding--December 31, 1995.......... 3,515,193 $4.83--$28.39
=========
</TABLE>
Restricted Stock Awards
The Board of Directors 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 the nine months ended December 31, 1995,
22,475 shares were awarded and unearned compensation of $380,936 was recorded.
During the fiscal year ended March 26, 1995, 6,203 restricted shares were
awarded and unearned compensation of $141,118 was recorded. Vesting on such
shares ranges from 3 years to 21 years. During the nine months ended December
31, 1995, and December 31, 1994, and in fiscal years 1995 and 1994, $199,607,
$170,278, $227,037 and $188,100, respectively, was amortized to expense. Also
during the nine month period ended December 31, 1995, the Company cancelled
31,270 shares reserved for key employees who are no longer with the Company.
This resulted in a reduction to unearned compensation of $471,300.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan under which 141,257 shares
of common stock were reserved at December 31, 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 the
nine months ended December 31, 1995, and the fiscal year ended March 31, 1995,
the Company issued 21,835 and 47,630 shares, respectively, under the plan.
35
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stockholder Rights
On June 16, 1988, the Company adopted a Stockholder Rights Plan in which
common stock purchase rights were distributed as a dividend at the rate of one
right for each common share held as of the close of business on June 27, 1988.
Each share issued thereafter also received one right. As a result of the
three-for-two stock split, the number of rights associated with each share of
common stock has been adjusted from one right to two-thirds of a right. The
Stockholder Rights Plan was designed to deter coercive takeover tactics and to
prevent an acquirer from gaining control of the Company without offering a
fair price to all of the Company's stockholders. The rights will expire on May
24, 1998.
Each right will entitle stockholders to buy one and one-half shares of
common stock of the Company at an exercise price of $35.50. The rights will be
exercisable only if a person or group acquires beneficial ownership of 20% or
more of the Company's common stock or commences a tender or exchange offer
upon consummation of which such person or group would beneficially own 30% or
more of the common shares.
If any person becomes the beneficial owner of 35% or more of the Company's
common stock, other than pursuant to certain tender or exchange offers
described in the Plan, or if the Company is the surviving corporation in a
merger with a 20%-or-more stockholder and its common shares are not changed or
converted, or if a 20%-or-more stockholder engages in certain self-dealing
transactions with the Company, then each right not owned by such person or
related parties will entitle its holder to purchase, at the right's then
current exercise price, shares of the Company's 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
offer 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 by a stockholder.
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 L--EMPLOYEE BENEFIT PLANS
Through December 31, 1995, the Company had two employee savings plans for
substantially all full-time U.S. employees. The Employee Savings Plan was
available to existing Company employees prior to the acquisition of
Recognition. The ESOP Flex/Save Plan was available to existing Recognition
employees prior to the acquisition. Effective January 1, 1996, the ESOP
Flex/Save Plan has been merged with the existing Employee Savings Plan.
The Employee Savings Plan allows substantially all full-time U.S. employees
to make contributions defined by Section 401(k) of the Internal Revenue Code.
The Company elected to contribute 2.0%, 1.1%, 1.1% and 1.4% of the qualifying
participant's base salary during the nine months ended December 31, 1995, and
December 31, 1994, and in fiscal years 1995 and 1994, respectively. Amounts
expensed under the plan for the periods noted were $691,000, $450,000,
$600,000 and $597,000, respectively.
The ESOP Flex/Save Plan allowed substantially all full-time U.S. employees
to make contributions as defined by Section 401(k) of the Internal Revenue
Code. Each year an allocation of shares of stock is made to plan members.
36
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Shares allocated to the plan during the nine months ended December 31, 1995
and December 31, 1994 and in fiscal years 1995 and 1994 were 52,118, 52,118,
69,491 and 69,491, respectively. Amounts expensed under this plan for the
periods noted were $827,000, $696,000, $930,000 and $920,000, respectively.
The Company provides no material postretirement benefits to its employees.
NOTE M--COMMITMENTS AND CONTINGENCIES
The Company leases certain sales and service office facilities and equipment
under non-cancelable operating leases expiring through year 2010. Total
Company rent expense for the nine months ended December 31, 1995, and December
31, 1994, and fiscal years 1995 and 1994 was $6,772,000, $8,609,000,
$11,479,000, and $9,412,000, respectively.
Future minimum payments under non-cancelable operating leases are
approximately as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR (IN THOUSANDS)
------------- --------------
<S> <C>
1996....................................................... $ 7,759
1997....................................................... 5,746
1998....................................................... 4,029
1999....................................................... 2,819
2000....................................................... 2,192
Thereafter................................................. 4,666
-------
$27,211
=======
</TABLE>
The Company has the option to renew operating leases on its facilities at
the end of the current lease terms.
At December 31, 1995, the Company was contingently liable for approximately
$392,000 under letters of credit issued primarily in connection with
performance guarantees on customer sales contracts.
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 may ensue
would not have a significant impact on the financial position or results of
operations of the Company.
37
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE N--GEOGRAPHIC OPERATIONS
The Company operates in the following geographic areas: the United States,
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 nine months ended December 31, 1995 and
December 31, 1994 and fiscal years 1995 and 1994 , and identifiable assets at
the end of each of those periods, classified by geographic area, are as
follows:
<TABLE>
<CAPTION>
OTHER
UNITED INTER- ELIMINA- CONSOLI-
STATES EUROPE NATIONAL TIONS DATED
-------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nine months ended December
31, 1995
Sales to unaffiliated
customers................. $285,947 $56,855 $41,182 $ -- $383,984
Interarea sales to
affiliates................ 10,096 655 -- (10,751) --
Operating loss............. (52,992) (2,987) (5,235) (2,757) (63,971)
Identifiable assets........ 351,517 69,518 37,692 (18,379) 440,348
Nine months ended December
31, 1994 (Unaudited)
Sales to unaffiliated
customers................. $279,472 $56,290 $53,981 $ -- $389,743
Interarea sales to
affiliates................ 12,795 1,493 -- (14,288) --
Operating income (loss).... (8,698) 2,172 2,249 4,283 6
Identifiable assets........ 409,111 79,043 49,440 (40,161) 497,433
Fiscal Year 1995
Sales to unaffiliated
customers................. $370,809 $72,243 $73,880 $ -- $516,932
Interarea sales to
affiliates................ 18,490 2,157 1 (20,648) --
Operating income (loss).... (7,178) 2,684 3,605 (9) (898)
Identifiable assets........ 399,965 82,726 49,830 (30,763) 501,758
Fiscal Year 1994
Sales to unaffiliated
customers................. $331,820 $77,612 $68,684 $ -- $478,116
Interarea sales to
affiliates................ 34,241 1,605 -- (35,846) --
Operating income........... 26,562 1,486 4,227 4,054 36,329
Identifiable assets........ 390,941 74,281 43,567 (19,301) 489,488
</TABLE>
NOTE O--RELATED PARTIES
In fiscal 1992, the Company and Thomson established a joint venture company,
ScanData N.V., with exclusive rights to market and service various products
provided by the Company and Thomson in specified territories, consisting of
continental Europe, Scandinavia and North Africa. Included in trade accounts
payable at December 31, 1995, and March 26, 1995, are $3,051,000 and
$6,713,000, respectively, payable to Thomson.
38
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE P--SUMMARIZED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1995
------------------------------------------
Q1 Q2 Q3 TOTAL
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue.............................. $ 124,659 $ 134,322 $ 125,003 $ 383,984
Gross profit......................... 36,554 37,110 (12,183) 61,481
Net income (loss).................... 3,679 4,657 (61,817) (53,481)
Fully diluted net income (loss) per
share............................... $ 0.18 $ 0.23 $ (3.02) $ (2.63)
</TABLE>
Includes pretax charges of $85,187,000 during the third quarter. See Note D
for a further discussion of these charges.
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.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 26, 1995
---------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue......................... $119,814 $135,802 $122,873 $138,443 $516,932
Gross profit.................... 38,616 40,551 19,092 37,469 135,728
Net income (loss)............... 3,944 2,262 (22,359) 545 (15,608)
Fully diluted net income (loss)
per share...................... $ 0.19 $ 0.11 $ (1.10) $ 0.03 $ (0.77)
</TABLE>
Includes pretax charges of $24,982,000 and $650,000 during the third and
fourth quarters, respectively. See Note D for a further discussion of these
charges.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
39
<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 1996 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 1996 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 1996 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 1996 annual meeting
of stockholders, which information is incorporated herein by reference.
40
<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 44.
(b) Reports on Form 8-K:
(i) October 12, 1995, Closing of the Acquisition of Recognition
International Inc. and Change in Fiscal Year
(c) Exhibits
<TABLE>
<C> <S>
3.1 --Certificate of Incorporation.(4)
3.2 --By-Laws.(4)
4.1 --Rights Agreement dated June 16, 1988.(1)
4.2 --Indenture dated as of April 3, 1986, and First Supplemental Indenture
dated as of November 1, 1987, between Recognition International Inc. and
MBank Dallas, National Association, as Trustee, with respect to the 7
1/4% Convertible Subordinated Debentures due 2011.(4)
4.3 --Second Supplemental Indenture dated as of October 12, 1995, between the
Company and Texas Commerce Bank, National Association, as successor
trustee to MTrust Corp., as successor trustee to MBank Dallas, National
Association with respect to the 7 1/4% Convertible Subordinated
Debentures due 2011.(4)
10.1 --Credit Agreement dated February 22, 1996, among the Company, its
Subsidiaries and Texas Commerce Bank National Association, as Agent.(4)
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.2 --BancTec, Inc. 1989 Stock Plan.(4)
10.3 --BancTec, Inc. 1982 Nonqualified Stock Option Plan, as amended.(2)
10.4 --Employment Agreement with Grahame N. Clark, Jr. dated November 5,
1995.(4)
10.5 --Employment Agreement with Norton A. Stuart dated May 28, 1992.(3)
10.6 --Employment Agreement with Tod V. Mongan dated November 5, 1995.(4)
10.7 --Employment Agreement with Raghavan Rajaji dated September 27, 1995.(4)
10.8 --Form of Indemnification Agreement between the Company and each of its
Directors and Officers.(4)
10.9 --Agreement with Norton A. Stuart dated February 11, 1994.(4)
11.1 --Statement re: computation of net income per share.(4)
21.1 --Subsidiaries.(4)
23.1 --Consent of Arthur Andersen LLP.(4)
23.2 --Consent of Price Waterhouse LLP.(4)
27.0 --Selected Financial Data.(5)
</TABLE>
- --------
(1) Incorporated by reference to the Company's Form 8-A filed on July 6, 1988.
(2) Filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the
year ended March 30, 1987, and incorporated herein by reference.
(3) Filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
year ended March 28, 1993, and incorporated herein by reference.
(4) Filed herewith.
(5) Filed electronically only.
41
<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.
/s/ Grahame N. Clark, Jr.
By___________________________________
Grahame N. Clark, Jr.
Chairman of the Board,
President and Chief Executive
Officer
Dated: March 29, 1996
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>
/s/ Grahame N. Clark, Jr. Chairman of the Board, March 29, 1996
____________________________________ President and Chief
Grahame N. Clark, Jr. Executive Officer and
Director (Principal
Executive Officer)
/s/ Raghavan Rajaji Senior Vice President, March 29, 1996
____________________________________ Treasurer and Chief
Raghavan Rajaji Financial Officer (Principal
Financial Officer)
/s/ Michael D. Kubic Vice President, Controller March 29, 1996
____________________________________ and Assistant Treasurer
Michael D. Kubic (Principal Accounting
Officer)
/s/ Michael E. Faherty Director March 29, 1996
____________________________________
Michael E. Faherty
/s/ Paul J. Ferri Director March 29, 1996
____________________________________
Paul J. Ferri
/s/ Rawles Fulgham Director March 29, 1996
____________________________________
Rawles Fulgham
/s/ Thomas G. Kamp Director March 29, 1996
____________________________________
Thomas G. Kamp
/s/ A.A. Meitz Director March 29, 1996
____________________________________
A.A. Meitz
/s/ Michael A. Stone Director March 29, 1996
____________________________________
Michael A. Stone
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Norton A. Stuart, Jr. Director March 29, 1996
____________________________________
Norton A. Stuart, Jr.
/s/ Merle J. Volding Director March 29, 1996
____________________________________
Merle J. Volding
</TABLE>
43
<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............................... 14-15
Consolidated Balance Sheets at December 31, 1995, and March 26, 1995... 16-17
Consolidated Statements of Operations for the nine months ended Decem-
ber 31, 1995, and
December 31, 1994 (unaudited), and the fiscal years ended March 26,
1995, and March 27, 1994.............................................. 18
Consolidated Statements of Cash Flows for the nine months ended Decem-
ber 31, 1995, and
December 31, 1994 (unaudited), and the fiscal years ended March 26,
1995, and March 27, 1994.............................................. 19
Consolidated Statements of Stockholders' Equity for the nine months
ended December 31, 1995, and the fiscal years ended March 26, 1995,
and March 27, 1994.................................................... 20
Notes to Consolidated Financial Statements............................. 21-39
SUPPLEMENTAL SCHEDULES
Schedule II--Valuation and Qualifying Accounts for the nine months
ended December 31, 1995, and the fiscal years ended March 26, 1995,
and March 27, 1994.................................................... 47
</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.
44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of 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 March 12, 1996. We did not audit the
consolidated financial statements of Recognition International Inc., a company
acquired during 1995 in a transaction accounted for as a pooling of interests,
for each of the two years in the period ended October 31, 1994, as discussed
in Note C to Notes to the Consolidated Financial Statements. Such statements
are included in the consolidated financial statements of BancTec, Inc. after
restatement to reflect certain adjustments also set forth in Note C and
reflect total revenues of 42 percent for the year ended March 26, 1995, and 48
percent for the year ended March 27, 1994, of the related consolidated totals.
The financial statements of Recognition International Inc. prior to those
adjustments were audited by other auditors whose report has been furnished to
us and our opinion, insofar as it relates to amounts included for Recognition
International Inc., is based solely upon the report of the other auditors. 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 audit 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,
March 12, 1996
45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Recognition International Inc.
Our audits of the consolidated financial statements referred to in our
report dated December 7, 1994 appearing in the 1994 Annual Report to
Stockholders of Recognition International Inc. also included an audit of the
Financial Statement Schedules listed in Item 14(a) of such Form 10-K. In our
opinion, these Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE LLP
Dallas, Texas,
December 7, 1994
46
<PAGE>
SCHEDULE II
BANCTEC, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995, AND THE FISCAL YEARS ENDED
MARCH 26, 1995, AND MARCH 27, 1994
(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
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES OTHER(A) DEDUCTIONS(B) PERIOD
- ------------------------------- ---------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Nine months ended Decem-
ber 31, 1995........... $4,313 $8,471 $ -- $(1,213) $11,571
Year ended March 26,
1995................... $3,515 $1,953 $ 68 $(1,223) $ 4,313
Year ended March 27,
1994................... $2,940 $ 967 $ -- $ (392) $ 3,515
</TABLE>
- --------
(A) Change in the allowance account for the five month period November 1,
1994, to March 26, 1995, for Recognition.
(B) Write-off of uncollectible accounts.
47
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
BANCTEC, INC.
Under Sections 242 and 245
of the
Delaware General Corporation Law
We, G. Wesley Mayland, Senior Vice President and Tod V. Mongan, Secretary
of BancTec, Inc., a corporation existing under the laws of the State of
Delaware, do hereby certify under the seal of such corporation as follows:
FIRST: That the name of the corporation is BancTec, Inc.
SECOND: That the Certificate of Incorporation of the corporation was
filed by the Secretary of State of Del aware on January 2, 1987, under the name
of BancTec-Delaware, Inc.
THIRD: The amendments and the restatement of the Certificate of
Incorporation have been duly adopted in accordance with the provisions of the
General Corporation Law of the State of Delaware by an affirmative vote of the
holders of a majority of all outstanding shares entitled to vote at a meeting of
stockholders.
FOURTH: That the text of the Certificate of Incorporation of BancTec,
Inc. , as amended, is hereby restated as further amended by this certificate, to
read in full, as follows:
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
BANCTEC, INC.
FIRST: The name of the Corporation is BancTec, Inc.
SECOND: The registered office of the Corporation in the State of Delaware
is located at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware. The Corporation will have perpetual
existence.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is 15, 000, 000 shares, $.01 par value, designated Common
Stock and 1,000,000 shares, $. 01 value, designated Preferred Stock. The
following is a statement of the designations, preferences, limitations, and
relative rights in respect of the shares of each class of stock of the
Corporation.
A. PREFERRED STOCK
Shares of the Preferred Stock may be issued from time to time in one or
more series, the shares of each series to have such voting powers, full or
limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in a resolution or resolutions providing for the issue of such
series adopted by the board of directors of the Corporation. The board of
directors of the Corporation is hereby expressly authorized to establish
and designate series of the Preferred Stock, to fix the number of shares
constituting each series, and to fix the designations and the powers,
rights, preferences, qualifications, limitations, and restrictions of the
shares of each series and the variations of the relative powers, rights,
preferences, qualifications, limitations, and restrictions as between
series, and to increase and to decrease the number of shares constituting
each series.
2
<PAGE>
B. COMMON STOCK
1. Subject to the prior rights and preferences of the Preferred Stock and
subject to the provisions and on the conditions set forth in the foregoing
part A of this ARTICLE FOURTH, or in any resolution or resolutions
providing for the issue of a series of Preferred Stock, such dividends
(payable in cash, stock, or otherwise) as may be determined by the board of
directors may be declared and paid on the Common Stock from time to time
out of any funds legally available therefor.
2. The shares of Common Stock shall be fully voting stock at the rate of
one vote for each share of Common Stock held.
3. After payment shall have been made in full to the holders of the
Preferred Stock in the event of any liquidation, dissolution, or winding up
of the affairs of the Corporation, the remaining assets and funds of the
Corporation shall be distributed among the holders of the Common Stock
according to their respective shares.
FIFTH: No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
SIXTH: Directors of the Corporation need not be elected by written
ballot unless the Bylaws of the Corporation otherwise provide.
SEVENTH: The directors of the Corporation shall have the power to adopt,
amend, and repeal the Bylaws of the Corporation.
EIGHTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or shareholders or between the Corporation and
any person (as used herein "person" means other corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or shareholders are directors, officers or shareholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the
3
<PAGE>
board or committee which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if: (1) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the board of directors or the committee, and the
board of directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or (2)
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or (3) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
board of directors, a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
NINTH: Section 1. The number of directors of the Corporation, and the
number of directors in each class, shall be fixed from time to time by or
pursuant to the Bylaws of the Corporation but the number of directors of the
Corporation shall not be less than three or more than fifteen. The directors
shall be divided into three classes, as nearly equal in number as possible, as
shall be provided in the Bylaws of the Corporation. Unless otherwise provided in
the Bylaws, at the annual meeting of stockholders held in 1987, one class.of
three directors shall be elected for a term expiring at the annual meeting of
stockholders to be held in 1988, another class of three directors shall be
elected for a term expiring at the annual meeting of stockholders to be held in
1989 and another class of three directors shall be elected for a term expiring
at the annual meeting of stockholders to be held in 1990, with each class to
hold office until its successors are elected and qualified. At each annual
meeting of stockholders subsequent to 1987, the successors of the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election. The election of directors need not be by
written ballot. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director.
Section 2. Except as otherwise provided for or fixed by or pursuant to any
other provisions of the Certificate of Incorporation relating to the rights of
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, newly created directorships resulting
from any increase in the number of directors and any vacancies on the Board of
Directors resulting from death,
4
<PAGE>
resignation, removal or other cause shall only be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors, or by a sole remaining director. Any director
elected in accordance with the preceding sentence of this Section 2 shall hold
office for the remainder of the full term of the class of directors in which the
new directorship was created or the vacancy occurred and until such director' s
successor shall have been elected and qualified.
Section 3. Subject to the rights of the holders of the Preferred Stock or
any other class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation, any director may be removed from office only
for cause and only by the affirmative vote of the holders of a -majority of the
combined voting power of the then outstanding shares of Voting Stock, voting
together as a single class. For purposes of this Section 3, "cause" shall mean
the willful and continuous failure of a director to substantially perform such
director' s duties to the Corporation (other than any such failure resulting
from incapacity due to physical or mental illness) or the willful engaging by a
director in gross misconduct materially and demonstrably injurious to the
Corpora%ion.
Section 4. Notwithstanding any other provisions of this Certificate of
Incorporation, the provisions set forth in this Article Ninth may not be
repealed or amende& in any respect, and no article imposing cumulative voting in
the election of directors may be added, unless such action is approved by the
affirmative vote of the holders of voting shares entitling them to exercise not
less than two-thirds of the total voting power of all outstanding voting shares
of this Corporation, subject to the provisions of any series of Preferred Stock
which may at the time be outstanding.
TENTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he (i) is or was a director or officer of the Corporation or
(ii) while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietors hip,
trust, employee benefit plan, or other enterprise, to the fullest extent
permitted under the Delaware General Corporation Law, as the same exists or may
hereafter be amended. Such right shall be a contract right and shall include
the right to be paid by the Corporation expenses incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the Delaware General Corporation Law, as the same exists or may hereafter
be amended. If a claim for indemnification or advancement of
5
<PAGE>
expenses hereunder is not paid in full by the Corporation within 60 days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense are not permitted under the Delaware General Corporation Law, but the
burden of providing such defense shall be on the Corporation. Neither the
failure of the Corporation (including its board of directors or any committee
thereof, independent legal counsel, or shareholders) to have made its
determination prior to the commencement of such action that indemnification of,
or advancement of costs of defense to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
shareholders) that such indemnification or advancement is not permissible shall
be a defense to the action or create a presumption that such indemnification or
advancement is not permissible. In the event of the death of any person having a
right of indemnification under the foregoing provisions, such right shall inure
to the benefit of his heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of shareholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
ELEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or shareholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors and/or of the
shareholders or class of shareholders of the Corporation, as
6
<PAGE>
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors and/or of the shareholders or class of shareholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
shareholders or class of shareholders, of the Corporation, as the case may be,
and also on the Corporation.
IN WITNESS WHEREOF, we have signed this certificate and caused the
corporate seal of the corporation to be hereunto affixed as of the 13th day
of April, 1988.
/s/ G. Wesley Mayland
---------------------
G. Wesley Mayland,
Senior Vice President
CORPORATE SEAL
Attest:
/s/ Tod V. Mongan
- ------------------------
Tod V. Mongan, Secretary
7
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
Be if remembered that on this 13th day of April, 1988, personally came
before me Debra Jean Hill, notary public in and for the county and state
aforesaid, G. Wesley Mayland, a party to the foregoing certificate, known to me
personally to be such, and duly acknowledged such certificate to be his act and
deed, and that the facts therein stated are true.
Given under my hand and seal of office the day and year aforesaid.
/s/ Debra Jean Hill
----------------------------
Notary Public in and for the
State of Texas
NOTARY PUBLIC DEBRA JEAN HILL
STATE OF TEXAS Notary Public My Commission Expires: 7/8/90
STATE OF TEXAS
My Comm. Exp. July 8, 1990
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
Be if remembered that on this 13th day of April, 1988, personally came
before me Debra Jean Hill, a notary public in and for the county and state
aforesaid, Tod V. Mongan, a party to the foregoing certificate, known to me
personally to be such, and duly acknowledged such certificate to be his act and
deed, and that the facts therein stated are true.
Given under my hand and seal of office the day and year aforesaid.
/s/ Debra Jean Hill
----------------------------
Notary Public in and for the
State of Texas
NOTARY PUBLIC DEBRA JEAN HILL
STATE OF TEXAS Notary Public My Commission Expires: 7/8/90
STATE OF TEXAS
My Comm. Exp. July 8, 1990
8
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
BANCTEC, INC.
BancTec, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
FIRST: That, at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth proposed amendments to the
Certificate of Incorporation of the Corporation, declaring said amendments to be
advisable and calling a meeting of the stockholders of the Corporation for
consideration thereof. The resolutions setting forth the proposed amendments are
as follows:
RESOLVED, THAT THE CORPORATION AMEND ITS CERTIFICATE OF INCORPORATION AS ON
FILE WITH THE SECRETARY OF STATE OF DELAWARE TO AMEND THE FIRST SENTENCE OF
ARTICLE FOURTH OF ITS CERTIFICATE OF INCORPORATION TO READ IN ITS ENTIRETY
AS SET FORTH BELOW:
FOURTH:
"The total number of shares of stock which the Corporation shall have
authority to issue is 46,000,000 shares, divided into two classes as follows:
(i) 1,000,000 shares of Preferred Stock, par value $.01 per share; and (ii)
45,000,000 shares of Common Stock, par value $.01 per share."
RESOLVED, THAT THE CORPORATION AMEND ITS CERTIFICATE OF INCORPORATION AS ON
FILE WITH THE SECRETARY OF STATE OF DELAWARE TO ADD A NEW ARTICLE TO ITS
CERTIFICATE OF INCORPORATION, WHICH NEW ARTICLE SHALL BE ARTICLE TWELFTH
AND SHALL READ IN ITS ENTIRETY AS SET FORTH BELOW:
TWELFTH:
"I. The affirmative vote of the holders of not less than seventy-five
percent (75%) of the outstanding shares of "Voting Stock" (as hereinafter
defined) shall be required to consummate or effect any "Business Combination"
(as hereinafter defined) involving the Corporation or any "Subsidiary" (as
hereinafter defined) of the Corporation and any "Related Person" (as
<PAGE>
hereinafter defined), or any "Affiliate" or "Associate" (as hereinafter defined)
of a Related Person, notwithstanding the fact that no vote may be required or
that a lesser percentage may be specified by law, in any agreement with any
national securities exchange or otherwise; provided, however, that the
seventy-five percent (75%) voting requirement shall not be applicable and such
Business Combination shall require only such affirmative vote as is required by
law, any agreement with any national securities exchange or otherwise if:
(1) The Business Combination shall have been approved by the Board of
Directors without counting the vote of any director who is not a
"Disinterested Director" (as hereinafter defined); or
(2) All of the following conditions are met:
(i) The aggregate amount of cash or the "Fair Market Value" (as
hereinafter defined) as of the date of the consummation of the
Business Combination (the "Combination Date") of the property,
securities or other consideration to be received per share by holders
of a particular class or series of capital stock, as the case may be,
of this Corporation in the Business Combination is not less than the
highest of:
(a) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by
or on behalf of the Related Person in acquiring beneficial
ownership of any of its holdings of such class or series of
capital stock of this Corporation (A) within the two-year period
immediately prior to the first public announcement of the
proposed Business Combination (the "Announcement Date") or (B) in
the transaction or series of transactions in which the Related
Person became a Related Person, whichever is higher; or
(b) the Fair Market Value per share of the shares of capital
stock being acquired in the Business Combination as of (A) the
Announcement Date or (B) the date on which the Related Person
became a Related Person, whichever is higher; or
(c) in the case of shares of Common Stock, the per share
book value of the Common Stock as reported at the end of the
fiscal quarter immediately prior to the Announcement Date, and in
the case of shares of Preferred Stock, the highest preferential
amount per share to which the holders of shares of such class or
series of Preferred
2
<PAGE>
Stock would be entitled as of the Combination Date in the event
of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, regardless of
whether the Business Combination to be consummated constitutes
such an event.
The provisions of this paragraph I(2)(i) shall be required
to be met with respect to every class or series of outstanding
capital stock, whether or not the Related Person has previously
acquired any shares of a particular class or series of capital
stock. In all of the above instances, appropriate adjustments
shall be made for recapitalizations and for stock dividends,
stock splits and like distributions; and
(ii) The consideration to be received by holders of a particular
class or series of capital stock shall be in cash or in the same form
as previously has been paid by or on behalf of the Related Person in
connection with its direct or indirect acquisition of beneficial
ownership of shares of such class or series of stock. If the
consideration so paid for any such share varied as to form, the form
of consideration for such shares shall be either cash or the form used
to acquire beneficial ownership of the largest number of shares of
such class or series of capital stock previously acquired by the
Related Person; and
(iii) After such Related Person has become a Related Person and
prior to the consummation of such Business Combination: (a) except as
approved by the Board of Directors without counting the vote of any
director who is not a Disinterested Director, there shall have been no
failure to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on the outstanding
Preferred Stock; (b) there shall have been (A) no reduction in the
annual rate of dividends paid on the Common Stock (except as necessary
to reflect any subdivision of the Common Stock), except as approved by
the Board of Directors without counting the vote of any director who
is not a Disinterested Director, and (B) an increase in such annual
rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization
or any similar transaction which has the effect of reducing the number
of outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by the Board of Directors
without counting the vote of any director who is not a
3
<PAGE>
Disinterested Director; and (c) such Related Person shall not have become
the beneficial owner of any additional shares of Voting Stock except as
part of the transaction which results in such Related Person becoming a
Related Person; and
(iv) After such Related Person has become a Related Person, such
Related Person shall not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or
other tax advantages provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or otherwise; and
(v) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act") (or any provisions subsequently replacing the Exchange Act,
rules or regulations) shall be mailed to all stockholders of the Company at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to the Exchange Act or subsequent provisions).
II. For purposes of this Article TWELFTH:
(1) The term "Business Combination" shall mean any (i) merger or
consolidation of the Corporation or a Subsidiary of the Corporation with a
Related Person or any other corporation which is or after such merger or
consolidation would be an Affiliate or Associate of a Related Person; (ii) sale,
lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with any Related Person or any
Affiliate or Associate of any Related Person, of any assets of the Corporation
or of a Subsidiary of the Corporation having an aggregate Fair Market Value of
10% or more of the total consolidated assets of the Corporation and its
Subsidiaries taken as a whole, as of the end of its most recent fiscal year
ending prior to the time the determination is being made; (iii) sale, lease,
exchange, mortgage, pledge, transfer or other disposition (in one transaction of
a series of transactions), to the Corporation or a Subsidiary of the Corporation
of any assets of a Related Person or any Affiliate or Associate of any Related
Person having an aggregate Fair Market value of 10% or more of the total
consolidated assets of the Corporation and its Subsidiaries taken as a whole, as
of the end of its most
4
<PAGE>
recent fiscal year ending prior to the time the determination is being made;
(iv) issuance, pledge or transfer of securities of the Corporation or a
Subsidiary of the Corporation (in one transaction or a series of transactions)
to or with a Related Person or any Affiliate or Associate of any Related Person;
(v) reclassification of securities (including any reverse stock split) or
recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction (whether or
not with or into or otherwise involving a Related Person or any Affiliate or
Associate of any Related Person) that would have the effect, either directly or
indirectly, of increasing the proportionate share of any class of equity or
convertible securities of the Corporation or any Subsidiary of the Corporation
which is directly or indirectly beneficially owned by any Related Person or any
Affiliate or Associate of any Related Person; (vi) the adoption of any plan or
proposal for the liquidation or dissolution of the Corporation proposed by or on
behalf of a Related Person or any Affiliate or Associate thereof; or (vii) any
agreement, contract or other arrangement providing for or resulting in any of
the transactions described in this definition of Business Combination.
(2) The term "person" shall mean any individual, firm, corporation or other
entity and shall include any group comprised of any person and any other person
with whom such person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of Voting Stock of the Corporation.
(3) The term "Related Person" shall mean any person (other than the
Corporation, or any Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the Corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan when acting in such
capacity) who or which:
(i) is the beneficial owner (as hereinafter defined) of 20 percent
(20%) or more of the Voting Stock;
(ii) is an Affiliate or Associate of the Corporation and at any time
within the two-year period immediately prior to the date in question was
the beneficial owner of 20 percent (20%) or more of the then outstanding
Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to the beneficial
ownership of any shares of Voting
5
<PAGE>
Stock which were at any time within the two-year period immediately prior
to such time beneficially owned by any Related Person, if such assignment
or succession shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
(4) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its AFfiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such person or any of its Affiliates or Associates has,
directly or indirectly, (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the
right to vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
(5) For the purposes of determining whether a person is a Related Person
pursuant to subparagraph (3) of this paragraph II, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of subparagraph (4) of this paragraph II but shall not include any
other shares of Voting Stock which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(6) The term "Affiliate" and "Associate" shall mean the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act as in effect at the date of the adoption of this Article
TWELFTH by the stockholders of the Company.
(7) The term "Subsidiary" means any corporation of which a majority of any
class of equity securities is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Related Person set
forth in subparagraph (3) of this paragraph II,
6
<PAGE>
the term "Subsidiary" shall mean only a corporation of which a majority of each
class of equity securities is owned, directly or indirectly, by the Corporation.
(8) The term "Disinterested Director" means any member of the Board of
Directors, while such person is a member of the Board of Directors, who is not
an Affiliate, Associate or a representative of the Related Person involved in a
proposed Business Combination and was a member of the Board of Directors prior
to the time that the Related Person became a Related Person, and any successor
of a Disinterested Director, while such successor is a member of the Board of
Directors, who is not an Affiliate, Associate or a representative of the Related
Person and is recommended or elected to succeed a Disinterested Director by the
Board of Directors without counting the vote of any director who is not a
Disinterested Director.
(9) For the purposes of paragraph I(2)(i) of this Article TWELFTH, the term
"other consideration to be received" shall include, without limitation, capital
stock retained by the stockholders.
(10) The term "Voting Stock" shall mean all of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, and each reference to a proportion of shares of Voting Stock shall
refer to such proportion of the voters entitled to be cast by such shares voting
as one class (it being understood that for the purposes of this Article TWELFTH,
each share of Voting Stock shall have the number of votes granted to it in
accordance with Article FOURTH).
(11) The term "Fair Market Value" means: (i) in case of capital stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for the New York
Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Exchange Act on which such stock is listed, or, if such stock is not listed
on any such stock exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period preceding the date in question on
the National Association of Securities Dealers, Inc. Automated Quotations System
or any successor system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as determined
in good faith by the Board of Directors without counting the vote of any
director who is not a Disinterested Director; and (ii) in the case of
7
<PAGE>
property other than cash or stock, the fair market value of such property
on the date in question as determined in good faith by the Board of
Directors without counting the vote of any director who is not a
Disinterested Director.
(12) A Related Person shall be deemed to have acquired a share of the
Voting Stock of the Corporation at the time when such Related Person became
the beneficial owner thereof. If the Board of Directors without counting
the vote of any director who is not a Disinterested Director is not able to
determine the price at which a Related Person has acquired a share of
Voting Stock of the Corporation, such price shall be deemed to be the Fair
Market Value of the shares in question at the time when the Related Person
becomes the beneficial owner thereof. With respect to shares owned by
Affiliates or other persons whose ownership is attributed to a Related
Person under the foregoing definition of Related Person, the price deemed
to be paid therefor by such Related Person shall be the price paid upon the
acquisition thereof by such Affiliate, Associate or other person, or, if
such price is not determined by the Board of Directors without counting the
vote of any director who is not a Disinterested Director, the Fair Market
Value of the shares in question at the time when the Affiliate, Associate,
or other such person became the beneficial owner thereof.
III. The fact that any Business Combination complies with the provisions of
paragraph I(2) of this Article TWELFTH shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination or recommend its adoption
or approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
IV. The Board of Directors of the Corporation shall have the power and
duty to determine for the purposes of this Article TWELFTH, on the basis of
information known to them after reasonable inquiry and in accordance with the
terms of this Article TWELFTH, whether a person is a Related Person and whether
a director is a Disinterested Director. Once the Board of Directors has made a
determination pursuant to the preceding sentence that a person is a Related
Person, the Board of Directors of the Corporation, without counting the vote of
any director who is not a Disinterested Director, with respect to such Related
Person, shall have the power and duty to interpret all of the terms and
provisions of this Article TWELFTH and to determine on the basis of the
information known to them after reasonable inquiry all facts necessary to
ascertain compliance
8
<PAGE>
with this Article TWELFTH including, without limitation, (1) the number of
shares of Voting Stock beneficially owned by any person, (2) whether a person is
an Affiliate or Associate of another, (3) the Fair Market Value of assets,
property, securities or other consideration, and (4) whether all of the
applicable conditions set forth in paragraph I(2) of this Article TWELFTH have
been met with respect to any Business Combination. All actions required or
permitted to be taken pursuant to this Article TWELFTH by the Board of Directors
of the Corporation without counting the vote of any director who is not a
Disinterested Director shall be taken with or without a meeting by the vote or
written consent of a majority of such Disinterested Director, regardless of
whether the Disinterested Directors constitute a quorum of the members of the
Board of Directors then in office. Any determination pursuant to this Article
TWELFTH made in good faith shall be binding and conclusive on all parties.
V. Nothing herein shall be construed to relieve any Related Person from any
fiduciary obligation imposed by law.
VI. Notwithstanding any provisions of this Restated Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding the fact
that a lesser percentage may otherwise be specified by law, this Restated
Certificate of Incorporation or the By-laws), the affirmative vote of not less
than seventy-five percent (75%) of the total voting power of all outstanding
Voting Stock shall be required to alter, amend or repeal, or adopt any
provisions inconsistent with, the provisions set forth in this Article TWELFTH,
provided, however, that this Article TWELFTH or any provision hereof may be
altered, amended or repealed, or any inconsistent provision may be adopted, upon
the affirmative vote of the holders of not less than a majority of the total
voting power of all outstanding Voting Stock, if such alteration, amendment or
repeal, or if such adoption of any inconsistent provision, shall first have been
approved and recommended by the Board of Directors without counting the vote of
any director who is not a Disinterested Director."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
9
<PAGE>
IN WITNESS WHEREOF, BancTec, Inc. has caused this Certificate to be signed
by its Senior Vice President, and attested by its Secretary, this 12th day of
January, 1989.
BANCTEC, INC.
By: /s/ G. Wesley Mayland
--------------------------
G. Wesley Mayland,
Senior Vice President
ATTEST:
/s/ Tod V. Mongan
- ----------------------------
Tod V. Mongan, Secretary
10
<PAGE>
EXHIBIT 3.2
BYLAWS OF
BANCTEC, INC.
A Delaware Corporation
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation Law
of the State of Delaware and the certificate of incorporation of BancTec, Inc.,
a Delaware corporation (the "Corporation"). In the event of a direct conflict
between the provisions of these bylaws and the mandatory provisions of the
Delaware General Corporation Law or the provisions of the certificate of
incorporation of the Corporation, such provisions of the Delaware General
Corporation Law or the certificate of incorporation of the Corporation, as the
case may be, will be controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and registered
---------------------------
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the off ice of the Secretary of State
of the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
-------------
places, both within and without the State of Delaware, as the board of directors
may from time to time deter-mine or as the business of the Corporation may
require.
ARTICLE TWO: MEETINGS OF SHAREHOLDERS
2.1 Annual Meeting. An annual meeting of shareholders of the Corporation
--------------
shall be held each calendar year on such date and at such time as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting or in -a duly executed waiver of notice of such meeting. At such
meeting, the shareholders shall elect directors and transact such other business
as may properly be brought before the meeting.
2.2 Special Meeting. A special meeting of the shareholders may be called
---------------
at any time by the Chairman of the Board, the President, the board of directors,
or the holders of not less than 10% of all shares entitled to vote at such
meeting or as otherwise provided by the certificate of incorporation A special
meeting shall be held on such date and at such time as shall be designated by
the person(s) calling the meeting and stated in the notice of the meeting or in
a duly executed waiver of notice of
<PAGE>
such meeting. Only such business shall be transacted at a special meeting as may
be stated or indicated in the notice of such meeting.
2.3 Place of Meetings. An annual meeting of shareholders may be held at
-----------------
any place within or without the State of Delaware designated by the board of
directors. A special meeting of shareholders may be held at any place within or
without the State of Delaware designated in the notice of the meeting or a duly
executed waiver of notice of such meeting. Meetings of shareholders shall be
held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
2.4 Notice. Written or printed notice stating the place, day, and time of
------
each meeting of the shareholders and, in case of a special meeting, the purpose
or purposes for which the meeting is called shall be delivered not less than ten
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary, or the officer or
person(s) calling the meeting, to each shareholder of record entitled to vote at
such meeting.
2.5 Voting List. At least ten days before each meeting of shareholders,
-----------
the Secretary or other officer of the Corporation who has charge of the
Corporation's stock ledger, either directly or through another officer appointed
by him or through a transfer agent appointed by the board of directors, shall
prepare a complete list of shareholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each shareholder and number of
shares registered in the name of each shareholder. For a period of ten days
prior to such meeting, such list shall be kept on file at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of meeting or a duly executed waiver of notice of such meeting or, if not
so specified, at the place where the meeting is to be held and shall be open to
examination by any shareholder during ordinary business hours. Such list shall
be produced at such meeting and kept at the meeting at all times during such
meeting and may be inspected by any shareholder who is present.
2.6 Quorum. The holders of a majority of the outstanding shares entitled
------
to vote on a matter, present in person or by proxy, shall constitute a quorum at
any meeting of shareholders, except as otherwise provided by law, the
certificate of incorporation, or these bylaws. If a quorum shall not be
present, in person or by
2
<PAGE>
proxy, at any meeting of shareholders, the shareholders entitled to vote thereat
who are present, in person or by proxy, or, if no shareholder entitled to vote
is present, any officer of the Corporation may adjourn the meeting from time to
time, without notice other than announcement at the meeting (unless the board of
directors, after such adjournment, fixes a new record date for the adjourned
meeting), until a quorum shall be present, in person or by proxy. At any
adjourned meeting at which a quorum shall be present, in person or by proxy, any
business may be transacted which may have been transacted at the original
meeting had a quorum been present; provided that, if the adjournment is for more
than 30 days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at any
-----------------------------------
meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of statute, the certificate of incorporation, or these bylaws,
a different vote is required, in which case such express provision shall govern
and control the decision of such question. The shareholders present at a duly
constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
--------------------------
certificate of incorporation or by law, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of share holders. Elections of directors need not be by written ballot.
At any meeting of shareholders, every shareholder having the right to vote may
vote either in person or by a proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. Each such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after three years from the date of its execution, unless
otherwise provided in the proxy. If no date is stated on a proxy, such proxy
shall be presumed to have been executed on the date of the meeting at which it
is to be voted. Each proxy shall be revocable unless expressly provided therein
to be irrevocable and coupled with an interest sufficient in law to support an
irrevocable power or unless otherwise made irrevocable by law.
2.9 Record Date. For the purpose of determining shareholders entitled to
-----------
notice of or to vote at any meeting of shareholders, or any adjournment thereof,
or to express consent to any
3
<PAGE>
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any~change, conversion, or exchange of stock
or for the purpose of any other lawful action, the board of directors may fix in
advance a date for any such determination of shareholders, such date in any case
to be not more than 60 days and not less than ten days prior to such meeting nor
more than 60 days prior to any other action. If no record date is fixed:
(a) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business
on the day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held.
(b) The record date for determining shareholders entitled to express
consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which
the first written consent is expressed.
(c) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
(d) A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
2.10 Conduct of Meeting. The Chairman of the Board, if such office has
------------------
been filled, and, if not or if the Chairman of the Board is absent or otherwise
unable to act, the President shall preside at all meetings of shareholders. The
Secretary shall keep the records of each meeting of shareholders. In the
absence or inability to act of any such officer, such officer's duties shall be
performed by the officer given the authority to act for such absent or non-
acting officer under these bylaws or by some person appointed by the meeting.
2.11 Inspectors. The board of directors may, in advance of any meeting of
----------
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman
4
<PAGE>
of the meeting shall, or if inspectors shall not have been appointed, the
chairman of the meeting may, appoint one or more inspectors. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares of capital stock of the Corporation outstanding
and the voting power of each, the number of shares represented at the meeting,
the existence of a quorum, and the validity and effect of proxies and shall
receive votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all shareholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request, or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of an election of directors.
Inspectors need not be shareholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall be
----------
managed by the board of directors. Subject to the restrictions imposed by law,
the certificate of incorporation, or these bylaws, the board of directors may
exercise all the powers of the Corporation.
3.2 Number; Qualification; Election; Term. The number of directors which
-------------------------------------
shall constitute the entire board of directors shall be not less than one. The
first board of directors shall consist of the number of directors named in the
certificate of incorporation. Thereafter, the number of directors which shall
constitute the entire board of directors shall be determined by resolution of
the board of directors or by resolution of the shareholders at the annual
meeting thereof or at a special meeting thereof called for that purpose. Except
as otherwise required by law, the certificate of incorporation, or these bylaws,
the directors shall be elected at an annual meeting of shareholders at which a
quorum is present and the persons receiving a plurality of the votes cast at
such election shall be elected. Each director so chosen shall hold office until
the first annual meeting of shareholders held after his election or until his
successor is elected and qualified or, if earlier, until his death, resignation,
or removal from office. None of the directors need be a shareholder of the
Corporation or a resident of the State of Delaware. Each director must have
attained the age of majority.
5
<PAGE>
3.3 Change in Number. No decrease in the number of directors constituting
----------------
the entire board of directors shall have the effect of shortening the term of
any incumbent director.
3.4 Removal. Except as otherwise provided in the certificate of
-------
incorporation or these bylaws, at any meeting of shareholders called expressly
for that purpose, any director or the entire board of directors may be removed,
with or without cause, by a vote of the holders of a majority of the shares then
entitled to vote on the election of directors; provided, however, that so long
as shareholders have the right to cumulate votes in the election of directors
pursuant to the certificate of incorporation, if less than the entire board of
directors is to be removed, no one of the directors may be removed if the votes
cast against his removal would be sufficient to elect him if then cumulatively
voted at an election of the entire board of directors.
3.5 Vacancies. Vacancies and newly-created directorships resulting from
---------
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by the sole
remaining director, and each director so chosen shall hold office until the
first annual meeting of shareholders held after his election or until his
successor is elected and qualified or, if earlier, until his death, resignation,
or removal from office. If there are no directors in office, an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly-created directorship, the directors then in
office shall constitute less than a majority of the whole board of directors (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any shareholder or shareholders holding at least 10% of the
total number of the shares at the time outstanding having the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly-created directorships or to replace the directors chosen by
the directors then in office. Except as otherwise provided in these bylaws, when
one or more directors shall resign from the board of directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have the power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in these
bylaws with respect to the filling of other vacancies.
3.6 Meetings of Directors. The directors may hold their meetings and may
---------------------
have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or
6
<PAGE>
places within or without the State of Delaware as the board of directors may
from time to time determine or as shall be specified in the notice of such
meeting or duly executed waiver of notice of such meeting.
3.7 First Meeting. Each newly elected board of directors may hold its
-------------
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of shareholders, and no notice of such meeting shall be necessary.
3.8 Election of Officers. At the first meeting of the board of directors
--------------------
after each annual meeting of shareholders at which a quorum shall be present,
the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors shall be
----------------
held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall not
be required.
3.10 Special Meetings. Special meetings of the board of directors shall be
----------------
held whenever called by the Chairman of the Board, the President, or any
director.
3.11 Notice. The Secretary shall give notice of each special meeting at
------
least 24 hours before the meeting to each director. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of directors, a
---------------------
majority of the directors fixed in the manner provided in these bylaws shall
constitute a quorum for the transaction of business. If at any meeting of the
board of directors there be less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without further notice. Unless the act of a greater number is required by law,
the certificate of incorporation, or these bylaws, the act of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors.
3.13 Procedure. At meetings of the board of directors, business shall be
---------
transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President, if
7
<PAGE>
he is a director, shall preside at all meetings of the board of directors. In
the absence or inability to act of either such officer, a chairman shall be
chosen by the board of directors from among the directors present. The Secretary
of the Corporation shall act as the secretary of each meeting of the board of
directors unless the board of directors appoints another person to act as
secretary of the meeting. The board of directors shall keep regular minutes of
its proceedings which shall be placed in the minute book of the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is present
---------------------
at the meeting of the board of directors at which action on any corporate matter
is taken shall be presumed to have assented to the action unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent by certified
or registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority to fix
------------
the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted by a
-----------
majority of the entire board of directors, designate one or more committees.
4.2 Number; Qualification; Term. Each committee shall consist of one or
---------------------------
more directors appointed by resolution adopted by a majority of the entire board
of directors. The number of committee members may be increased or decreased
from time to time by resolution adopted by a majority of the entire board of
directors. Each committee member shall serve as such until the earliest of (i)
the expiration of his term as director, (ii) his resignation as a committee
member or as a director, or (iii) his removal as a committee member or as a
director.
4.3 Authority. Each committee, to the extent expressly provided in the
resolution establishing such committee, shall
8
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have and may exercise all of the authority of the board of directors in the
management of the business and property of the Corporation except to the extent
expressly restricted by law, the certificate of incorporation, or these bylaws.
4.4 Committee Changes; Removal. The board of directors shall have the
--------------------------
power at any time to fill vacancies in, to change the membership of, and to
remove the members or disband any committee.
4.5 Alternate Members of Committees. The board of directors may designate
-------------------------------
one or more directors as alternate members of any committee. Any such alternate
member may replace any absent or disqualified member at any meeting of the
committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee member is absent or disqualified, the
member or members of such committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
----------------
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be held
----------------
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least one day before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a majority of
---------------------
the number of members designated by the board of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting
of any committee, a majority of the members present may adjourn the meeting from
time to time, without notice other than an announcement at the meeting, until a
quorum is present. The act of a majority of the members present at any meeting
at which a quorum is in attendance shall be the act of a committee, unless the
act of a greater number is required by law, the certificate of incorporation, or
these bylaws.
9
<PAGE>
4.9 Minutes. Each committee shall cause minutes of its proceedings to be
-------
prepared and shall report the same to the board of directors upon the request of
the board of directors. The minutes of the proceedings of each committee shall
be delivered to the Secretary of the Corporation for placement in the minute
books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the boarD of
------------
directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the delegation
--------------
of authority to it shall not operate to relieve the board of directors or any
director of any responsibility imposed upon it or such director by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation, or
------
these bylaws, notice is required to be given to any committee member, director,
or shareholder and no provision is made as to how such notice shall be given,
personal notice shall not be required and any such notice may be given (a) in
writing, by mail, postage prepaid, addressed to such committee member, director,
or shareholder at his address as it appears on the books or (in the case of a
shareholder) the stock transfer records of the Corporation, or (b) by any other
method permitted by law (including but not limited to telegram). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by telegram shall be
deemed to be delivered and given at the time transmitted with all charges
prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
------
shareholder, director, or committee member of the Corporation by statute, the
certificate of incorporation, or these bylaws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be equivalent to the giving of such notice.
Attendance of a shareholder, director, or committee member at a meeting shall
constitute a waiver of notice of such meeting, except where such person attends
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
10
<PAGE>
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation shall
------------------------------
be a President, a Secretary, and such other officers as the board of directors
may from time to time elect or appoint, including a Chairman of the Board, one
or more Vice Presidents (with each Vice President to have such descriptive
title, if any, as the board of directors shall determine), a Treasurer, an
Assistant Secretary, and an Assistant Treasurer. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified, until
his death, or until he shall resign or shall have been removed in the manner
hereinafter provided. Any two or more offices may be held by the same person.
None of the officers need be a shareholder or a director of the Corporation or a
resident of the State of Delaware, other than the Chairman of the Board, if any,
who will be a director.
6.2 Removal. Any officer or agent elected or appointed by the board of
-------
directors may be removed by the board of directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation (by
---------
death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 Authority. Officers shall have such authority and perform such duties
---------
in the management of the Corporation as are provided in these bylaws or as may
be determined by resolution of the board of directors not inconsistent with
these bylaws.
6.5 Compensation. The compensation, if any, of officers and agents shall
------------
be fixed from time to time by the board of directors; provided, however, that
the board of directors may delegate the power to determine the compensation of
any officer and agent (other than the officer to whom such power is delegated)
to the Chairman of the Board or the President.
6.6 Chairman of the Board. The chairman of the board, if a person is
---------------------
elected to such office by the board of directors shall preside when present at
all meetings of the board of directors and shall advise and counsel the
President and other officers of the corporation. If the board of directors
provides by resolution, the chairman of the board shall be the chief executive
11
<PAGE>
officer of the Corporation and shall have general management of the business and
property of the Corporation in the ordinary course of its business with all such
powers with respect to such business and property as may be reasonably incident
to such responsibilities, including, but not limited to, the power to employ,
discharge, or suspend employees or agents of the Corporation, to fix the
compensation of officers (unless such power has been withdrawn by resolution of
the board of directors), to fix the compensation of employees and agents, and to
suspend, with or without cause, any officer of the Corporation pending final
action by the board of directors with respect to continued suspension, removal,
or reinstatement of such officer. The chairman of the board shall see that all
orders and resolutions of the board are carried into effect and shall perform
such other duties and have such other authority and powers as the board of
directors may from time to time prescribe.
6.7 President. The president shall be the chief operating and
---------
administrative officer of the Corporation and, subject to the supervision of the
board of directors and the chairman of the board, shall have charge of the
actual day to day operations and management of the Corporation and its property
with all such powers with respect to such operations and management as may be
reasonably incident to such responsibilities. The President shall be the chief
executive officer of the Corporation, unless the board of directors by
resolution has designated the chairman of the board to be the chief executive
officer. If the board of directors has not elected a person to the office of
chairman of the board, the president shall exercise all of the powers and
discharge all of the duties of the chairman of the board. As between the
Corporation and third parties, any action taken by the President in the
performance of the duties of the Chairman of the Board shall be conclusive
evidence that there is no Chairman of the Board.
6.8 Vice Presidents. Each Vice President shall have such powers and
---------------
duties as may be assigned to him by the board of directors, the Chief Executive
Officer, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
12
<PAGE>
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
---------
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other duties as may
be prescribed by the board of directors, the Chief Executive Officer, or the
President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such powers
--------------------
and duties as may be assigned to him by the board of directors, the Chief
Executive Officer, or the President. The Assistant Treasurers (in the order of
their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Treasurer) shall exercise the powers of the Treasurer during
that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these bylaws, the
---------
Secretary shall keep the minutes of all meetings of the board of directors and
any committees thereof and of the shareholders in books provided for that
purpose, and he shall attend to the giving and service of all notices. He may
sign with the Chief Executive Officer or the President, in the name of the
Corporation, all contracts of the Corporation and affix the seal of the
Corporation thereto. He may sign with the Chairman of the Board or the
President or any other officer authorized by law all certificates for shares of
stock of the Corporation, and he shall have charge of the certificate books,
transfer books, and stock papers as the board of directors may direct, all of
which shall at all reasonable times be open to inspection by any director upon
application at the office of the Corporation during business hours. He shall in
general perform all duties incident to the office of the Secretary, subject to
the control of the board of directors, the Chief Executive Officer, and the
President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
---------------------
powers and duties as may be assigned to him by the board of directors, the Chief
Executive Officer, or the President. The Assistant Secretaries (in the order of
their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Secretary) shall exercise the powers of the Secretary during
that officer's absence or inability to act.
13
<PAGE>
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
-----------------------
Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or the
President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures
on the certificate may be a facsimile and may be sealed with the seal of the
Corporation or a facsimile thereof. If any officer, transfer agent, or registrar
who has signed, or whose facsimile signature has been placed upon, a certificate
has ceased to be such officer, transfer agent, or registrar before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if he were such officer, transfer agent, or registrar at the
date of issue. The certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued and shall exhibit the
holder's name and the number of shares.
7.2 Replacement of Lost, Stolen or Destroyed Certificates. The board of
-----------------------------------------------------
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate or certificates representing shares
to be lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
------------------
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
14
<PAGE>
7.4 Registered Shareholders. The Corporation shall be entitled to treat
-----------------------
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
-----------
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and authority to
-------
provide that certificates representing shares of stock bear such legends as the
board of directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate of
---------
incorporation, dividends may be declared by the board of directors at any
regular or special meeting and may be paid in cash, in property, or in shares of
stock of the Corporation. Such declaration and payment shall be at the
discretion of the board of directors.
8.2 Books and Records. The Corporation shall keep correct and complete
-----------------
books and records of account, shall keep minutes of the proceedings of its
shareholders and board of directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of the shares held by each.
8.3 Fiscal Year. The fiscal year of the Corporation shall be fixed by the
-----------
board of directors; provided, that if such fiscal year is not fixed by the board
of directors and the selection of the fiscal year is not expressly deferred by
the board of directors, the fiscal year shall be the calendar year.
8.4 Seal. The seal of the Corporation shall be such as from time to time
----
may be approved by the board of directors.
15
<PAGE>
8.5 Resignations. Any committee member or officer may resign by so
------------
stating at any meeting of the board of directors. Any director, committee
member or officer may resign by giving written notice to the board of directors,
the Chairman of the Board, the President, or the Secretary. Such resignation
shall take effect at the time specified therein or, if no time is specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
8.6 Securities of Other Corporations. The Chairman of the Board, the
--------------------------------
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy, or
consent with respect to any such securities.
8.7 Telephone Meetings. Shareholders (acting for themselves or through a
------------------
proxy), members of the board of directors, and members of a committee of the
board of directors may participate in and hold a meeting of such shareholders,
board of directors, or committee by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other, and participation in a meeting pursuant to this section
shall constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
8.8 Action Without a Meeting. Any action required by law, by the
------------------------
certificate of incorporation, or by these bylaws to be taken at a meeting of the
shareholders, the board of directors, or a committee of the board of directors,
or any action which may be taken 'at a meeting of such shareholders, board, or
committee, may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed, in the case of shareholder action, by the
holders (acting for themselves or through a proxy) of outstanding stock owning
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which the holders of all shares entitled to
vote thereon were present and voted and, in the case of actions by the board of
directors or any committee thereof, by all members of the board of directors or
such committee, as
16
<PAGE>
the case may be, entitled to vote with respect to the subject matter thereof,
and such consent shall have the same force and effect as a vote of such
shareholders, directors, or committee members, as the case may be, and may be
stated as such in any articles or document filed with the Secretary of State of
the State of Delaware or in any certificate delivered to any person.
8.9 Invalid Provisions. If any part of these bylaws shall be held invalid
------------------
or inoperative for any reason, the remaining parts, so far as it is possible and
reasonable, shall remain valid and operative.
8.10 Mortgages, etc. With respect to any deed, deed of trust, mortgage, or
--------------
other instrument executed by the Corporation through its duly authorized officer
or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage, or other instrument a valid and binding obligation against the
Corporation unless the resolutions, if any, of the board of directors
authorizing such execution expressly state that such attestation is necessary.
8.11 Headings. The headings used in these bylaws have been inserted for
--------
administrative convenience only and do not constitute matter to be construed in
interpretation.
8.12 References. Whenever herein the singular number is used, the same
----------
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.13 Amendments. These bylaws may be altered, amended, or repealed or new
----------
bylaws may be adopted by the shareholders or by the board of directors at any
regular meeting of the shareholders or the board of directors or at any special
meeting of the shareholders or the board of directors, except as otherwise
required by law or the certificate of incorporation, if notice of such
alteration, amendment, repeal, or adoption of new bylaws be contained in the
notice of such special meeting.
The undersigned, the Secretary of the Corporation, hereby certifies that
the foregoing bylaws were adopted by the sole director of the Corporation as of
2nd January, 1987.
/s/ Tod V. Mongan
-----------------
Tod V. Mongan
Secretary
17
<PAGE>
EXHIBIT 4.2
RECOGNITION EQUIPMENT INCORPORATED
AND
MBANK DALLAS, NATIONAL ASSOCIATION,
as Trustee
INDENTURE
Dated as of April 3, 1986
$51,750,000
7 1/4% Convertible Subordinated Debentures Due 2011
<PAGE>
TABLE OF CONTENTS/*/
ARTICLE I
Definitions AND OTHER PROVISIONS OF GENERAL APPLICATIOn
PAGE
----
SECTION 1.01. Definitions.............................. 1
"This Indenture" and certain other terms 1
"Act"................................... 2
"Affiliate"............................. 2
"Authorized Newspaper".................. 2
"Board of Directors".................... 2
"Board Resolution"...................... 2
"Business day".......................... 3
"Common Stock".......................... 3
"Commission............................. 3
"Company................................ 3
"Company Request", "Company Order" and
"Company Consent...................... 3
"Current Market Price................... 3
"Debentureholder", "Registered Holder"
or "Holder"........................... 4
"Debenture Register" and
"Debenture Registrar"................... 4
"Event of Default"...................... 4
"indebtedness".......................... 4
"Independent"........................... 4
"Interest Payment Date"................. 4
"Maturity............................... 4
"Officers' Certificate.................. 4
"Opinion of Counsel".................... 5
"Outstanding"........................... 5
"Paying Agent".......................... 5
"Person"................................ 6
"Place of Payment"...................... 6
"Predecessor Debentures"................ 6
"Redemption Date"....................... 6
"Redemption Price"...................... 6
"Regular Record Date"................... 6
"Responsible Officer.................... 6
"Senior Indebtedness.................... 6
"Special Record Date"................... 7
- ---------------
/*/The Table of Contents is not part of the Indenture.
<PAGE>
ii
PAGE
----
"Stated Maturity"....................... 7
"Subsidiary............................. 8
"Trustee"............................... 8
"Trust Indenture Act" or "TIA".......... 8
SECTION 1.02. Compliance Certificates and Opinions.... 8
SECTION 1.03. Form of Documents Delivered to Trustee.. 9
SECTION 1.04. Acts of Debentureholders................ 10
SECTION 1.05. Notices, etc., to Trustee and Company... 11
SECTION 1.06. Notices to Debentureholders; Waiver..... 11
SECTION 1.07. Conflict with Trust Indenture Act....... 12
SECTION 1.08. Effect of Headings and Table of Contents 12
SECTION 1.09. Successors and Assigns.................. 12
SECTION 1.10. Separability Clause..................... 12
SECTION 1.11. Benefits of Indenture................... 13
SECTION 1.12. Governing Law........................... 13
SECTION 1.13. Rules by Trustee and Agents............. 13
SECTION 1.14. Non-Business Days....................... 13
ARTICLE II
FORM OF DEBENTURE
SECTION 2.01. Form Generally.......................... 13
SECTION 2.02. Form of Debenture....................... 14
ARTICLE III
THE DEBENTURES
SECTION 3.01. Title and Terms......................... 21
SECTION 3.02. Denominations........................... 23
SECTION 3.03. Execution, Authentication and Delivery.. 23
SECTION 3.04. Temporary Debentures.................... 23
SECTION 3.05. Registration, Registration of
Transfer and Exchange................... 24
SECTION 3.06. Mutilated, Lost, Destroyed or
Wrongfully Taken Debentures............. 25
SECTION 3.07. Payment of Interest;
Interest Rights Preserved............... 26
SECTION 3.08. Persons Deemed Owners................... 28
SECTION 3.09. Cancellation............................ 28
SECTION 3.10. Authentication and Delivery of
Original Issue.......................... 28
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture. 29
SECTION 4.02. Application of Trust Money.............. 30
<PAGE>
iii
ARTICLE V
REMEDIES
PAGE
----
SECTION 5.01. Events of Default....................... 31
SECTION 5.02. Acceleration of Maturity;
Rescission and Annulment................ 32
SECTION 5.03. Collection of Indebtedness and
Suits for Enforcement by Trustee...... 33
SECTION 5.04. Trustee May File Proofs of Claim........ 34
SECTION 5.05. Trustee May Enforce Claims
Without Possession of Debentures........ 35
SECTION 5.06. Application of Money Collected.......... 35
SECTION 5.07. Limitation on Suits..................... 36
SECTION 5.08. Unconditional Right of Debentureholders
to Receive Principal, Premium and
Interest and to Convert................. 37
SECTION 5.09. Restoration of Rights and Remedies...... 37
SECTION 5.10. Rights and Remedies Cumulative.......... 37
SECTION 5.11. Delay or Omission Not Waiver............ 37
SECTION 5.12. Control by Debentureholders............. 38
SECTION 5.13. Waiver of Past Defaults................. 38
SECTION 5.14. Undertaking for Costs................... 38
SECTION 5.15. Waiver of Stay or Extension Laws........ 39
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities..... 39
SECTION 6.02. Notice of Default....................... 41
SECTION 6.03. Certain Rights of Trustee............... 41
SECTION 6.04. No Responsibility for Recitals or
Issuance of Debenture................... 43
SECTION 6.05. May Hold Debentures..................... 43
SECTION 6.06. Money Held in Trust..................... 43
SECTION 6.07. Compensation and Reimbursement.......... 43
SECTION 6.08. Disqualification; Conflicting Interests. 44
SECTION 6.09. Corporate Trustee Required; Eligibility. 51
SECTION 6.10. Resignation and Removal;
Appointment of Successor.............. 51
SECTION 6.11. Acceptance of Appointment by Successor.. 53
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business of Trustee....... 53
SECTION 6.13. Limitation on Rights of Trustee as
Creditor.............................. 54
<PAGE>
iv
ARTICLE VII
DEBENTUREHOLDERS' LIST AND REPORTS BY
TRUSTEE AND COMPANY
PAGE
----
SECTION 7.01. Company to Furnish Trustee Names and
Addresses of Debentureholders......... 58
SECTION 7.02. Preservation of Information;
Communications to Debentureholders...... 59
SECTION 7.03. Reports by Trustee...................... 60
SECTION 7.04. Reports by Company...................... 62
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 8.01. Company May Consolidate, etc.,
Only on Certain Terms................. 63
SECTION 8.02. Successor Corporation Substituted....... 64
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without
Consent of Debentureholders........... 64
SECTION 9.02. Supplemental Indentures With
Consent of Debentureholders............. 65
SECTION 9.03. Execution of Supplemental Indentures.... 66
SECTION 9.04. Effect of Supplemental Indentures....... 66
SECTION 9.05. Conformity with Trust Indenture Act..... 66
SECTION 9.06. Reference in Debentures to
Supplemental Indentures................. 67
SECTION 9.07. Modification of Subordination Provisions 67
ARTICLE X
COVENANTS
SECTION 10.01. Payment of Principal, Premium and
Interest.............................. 67
SECTION 10.02. Maintenance of Office or Agency......... 67
SECTION 10.03. Money for Debenture Payments to be
Held in Trust......................... 68
SECTION 10.04. Statement as to Compliance............. 69
<PAGE>
v
ARTICLE XI
REDEMPTION OF DEBENTURES; SINKING FUND
PAGE
----
SECTION 11.01. Right of Redemption; Sinking Fund......... 70
SECTION 11.02. Applicability of Article.................. 72
SECTION 11.03. Election to Redeem; Notice to Trustee..... 72
SECTION 11.04. Selection by Trustee of Debentures
to be Redeemed............................ 72
SECTION 11.05. Notice of Redemption...................... 73
SECTION 11.06. Deposit of Redemption Price............... 73
SECTION 11.07. Debentures Payable on Redemption Date..... 74
SECTION 11.08. Debentures Redeemed in Part............... 74
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Exemption from Individual Liability....... 75
ARTICLE XIII
SUBORDINATION OF DEBENTURES
SECTION 13.01. Agreement of Subordination................ 76
SECTION 13.02. Priority of Senior Indebtedness
on Distribution........................... 76
SECTION 13.03. Subrogation of the Debentures............. 78
SECTION 13.04. No Impairment of Obligation to Pay........ 78
SECTION 13.05. No Payment During Defaults on
Senior Indebtedness....................... 79
SECTION 13.06. Right of Company to Make Payments
at Any Time............................... 79
SECTION 13.07. Certain Holders of Senior Indebtedness.... 80
SECTION 13.08. Trustee to Effectuate Subordination....... 80
SECTION 13.09. Trustee Not Charged with
Knowledge of Prohibition.................. 80
SECTION 13.10. Non-compliance Not to Affect Subordination 81
SECTION 13.11. No Fiduciary Duty of Trustee
to Holders of Senior Indebtedness......... 82
SECTION 13.12. Parity with 11% Convertible
Subordinated Debentures................... 82
ARTICLE XIV
CONVERSION OF DEBENTURES
SECTION 14.01. Conversion Privilege...................... 82
SECTION 14.02. Manner of Exercise of Conversion Privilege 83
SECTION 14.03. Fractional Shares......................... 84
SECTION 14.04. Conversion Price.......................... 85
SECTION 14.05. Adjustment of Conversion Price............ 85
<PAGE>
vi
PAGE
----
SECTION 14.06. Effect of Reclassifications,
Consolidations, Consolidations, Mergers
or Sales on Conversion Privilege.......... 89
SECTION 14.07. Notice of Certain Events.................. 90
SECTION 14.08. Taxes on Conversions...................... 91
SECTION 14.09. Company to Reserve Common Stock........... 91
SECTION 14.10. Disclaimer of Responsibility
for Certain Matters....................... 92
SECTION 14.11. Return of Money Deposited for
Converted Debentures...................... 93
SECTION 14.12. Cancellation of Converted Debentures...... 93
TESTIMONIUM.............................................. 93
SIGNATURES AND SEALS..................................... 93
ACKNOWLEDGMENTS.......................................... 94
<PAGE>
vii
TABLE SHOWING REFLECTION OF
TRUST INDENTURE ACT OF 1939/*/
SECTION SECTION of
of Act Indenture
- ------- ----------
(S)303(1)................................................... 1.01(4)
(4)................................................... 6.08(d)(1)
(5)................................................... 6.08(d)(2)
(6)................................................... 6.08(d)(6)
(10)................................................... 1.01
(12)................................................... 6.08(d)(5)
6.13(e)
(13)................................................... 1.01
(16)................................................... 6.08(d)(4)
6.08(e)(1)
(S)310(a)(1)................................................ 6.09
(a)(2)................................................ 6.09
(a)(3)................................................ Not Applicable
(a)(4)................................................ Not Applicable
(b)................................................... 6.08
6.10
(S)311(a)................................................... 6.13(a),(b),(c)
6.13(e)
(b)................................................... 6.13(d),(e)
(b)(2)................................................ 7.03(a)(2)
7.03(b)
(S)312(a)................................................... 7.01
7.02(a)
(b)................................................... 7.02(b)
(c)................................................... 7.02(c)
(S)313(a)................................................... 7.03(a)
(b)................................................... 7.03(b)
(c)................................................... 7.03(a)
7.03(b)
(d)................................................... 7.03(c)
(S)314(a)................................................... 7.04
(b)................................................... Not Applicable
(c)(1)................................................ 1.02
(c)(2)................................................ 1.02
(c)(3)................................................ Not Applicable
(d)................................................... Not Applicable
(e)................................................... 1.02
- ---------------
/*/This Table is not part of the Indenture.
<PAGE>
viii
TABLE SHOWING REFLECTION OF
TRUST INDENTURE ACT OF 1939/*/
SECTION SECTION of
of Act Indenture
- ------- ----------
(S)315(a)................................................... 6.01(a)
6.01(c)
(b)................................................... 6.02
7.03(a)(6)
(c)................................................... 6.01(b)
(d)................................................... 6.01
(d)(1)................................................ 6.01(a)
(d)(2)................................................ 6.01(c)(2)
(d)(3)................................................ 6.01(c)(3)
(e)................................................... 5.14
(S)316(a)................................................... 5.02
(a)(1)(A)............................................. 5.02
5.12
(a)(1)(B)............................................. 5.13
(a)(2)................................................ Not Applicable
(b)................................................... 5.08
(S)317(a)(1)................................................ 5.03
(a)(2)................................................ 5.04
(b)................................................... 10.03
(S)318(a)................................................... 1.07
<PAGE>
THIS INDENTURE dated as of April 3, 1986, is made and entered into between
Recognition Equipment Incorporated, a Delaware corporation (hereinafter called
the "Company"), and MBank Dallas, National Association, as Trustee (hereinafter
called the "Trustee").
The Company has duly authorized the creation of an issue of its 7 1/4%
Convertible Subordinated Debentures Due 2011 (hereinafter called the
"Debentures") of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture.
All things necessary to make the Debentures, when executed and issued by
the Company and authenticated and delivered by the Trustee hereunder, the valid
obligations of the Company, and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms have been done.
Now, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Debentures
by the Holders thereof, it is mutually covenanted and agreed, for the benefit of
each other party and for the equal and proportionate benefit of all Holders of
the Debentures, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the term "this Indenture" means this instrument as originally
executed or as it may from time to time be supplemented or amended by one
or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof;
(2) all references in this instrument to designated "Articles,"
"SECTIONS" and other subdivisions are to the designated Articles, SECTIONS
and other subdivisions of this Indenture. The words "herein",
<PAGE>
2
"hereof", and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, SECTION or other
subdivision;
(3) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(4) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein; and
(5) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles.
Certain terms, used principally in Article VI and Article XIV, are defined
in those Articles.
"Act" when used with respect to any Debentureholder has the meaning
specified in SECTION 1.04.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition
''control'' when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authorized Newspaper" means a newspaper of general circulation in New
York, New York, printed in the English language and customarily published on
each Business day, whether or not published on Saturdays, Sundays or holidays.
"Board of Directors" means either the Board of Directors of the Company or
the Executive Committee of that Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
<PAGE>
3
"Business day" means each day which is neither a Saturday, Sunday nor other
day on which banking institutions in the pertinent Place of Payment are
authorized or required by law to remain closed.
"Common Stock" means the Common Stock, $.25 par value per share, of the
Company, as the same exists at the date of the execution of this Indenture or as
such stock may be constituted from time to time.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties on such date.
"Company" means the corporation named as the "Company" in the first
paragraph of this instrument, until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request", "Company Order" and "Company Consent" mean,
respectively, a written request, order or consent signed in the name of the
Company by its Chairman of the Board, President, a Senior Vice President or a
Vice President, and by its Treasurer, an Assistant Treasurer, and Assistant
Controller, Secretary, or an Assistant Secretary, and delivered to the Trustee.
"Current Market Price" when used with reference to the Common Stock means
the price of a share of Common Stock on the relevant date, determined on the
basis of the last reported sale price as finally reported in the New York Stock
Exchange Composite Tape for such day (or if the Common Stock is not then listed
on that Exchange in such other transactions reports as may be designated by the
Board of Directors of the Company for the purpose here of) or, if there is no
such reported sale on the day in question, on the basis of the average of the
closing bid and asked quotations or, if no such quotations are available, the
fair market price as determined by the Company which determination shall be
conclusive and shall be described in an Officers' Certificate.
<PAGE>
4
"Debentureholder", "Registered Holder" or "Holder" when used with respect
to any Debenture means the Person in whose name such Debenture is registered on
the Debenture Register.
"Debenture Register" and "Debenture Registrar" have the respective meanings
specified in SECTION 3.05.
"Event of Default" has the meaning specified in Article V.
"indebtedness" of a corporation means any and all obligations which in
accordance with generally accepted accounting principles would be included on
the liabilities side of a balance sheet of such corporation on the date as of
which indebtedness is to be determined.
"Independent" when used with respect to any specified Person means such a
Person who (1) is in fact independent, (2) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
other obligor upon the Debentures or in any Affiliate of the Company or of such
other obligor, and (3) is not connected with the Company or such other obligor
or any Affiliate of the Company or of such other obligor, as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions. Whenever it is herein provided that any Independent Person's
opinion or certificate shall be furnished to the Trustee, such Person shall be
appointed by a Company Order and approved by the Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer has
read this definition and that the signer is Independent within the meaning
hereof.
"Interest Payment Date" means the Stated Maturity of an instalment of
interest on the Debentures.
"Maturity" when used with respect to any Debenture means the date on which
the principal of such Debenture becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, a Senior Vice President or a Vice President, and by the
Treasurer, an Assistant Treasurer, an Assistant Controller, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
<PAGE>
5
"Opinion of Counsel" means a written opinion of counsel, who may (except as
otherwise expressly provided in this Indenture) be counsel for the Company, and
who shall be acceptable to the Trustee.
"Outstanding" when used with respect to Debentures means, as of the date of
determination, all Debentures theretofore authenticated and delivered under this
Indenture, except:
(i) Debentures theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Debentures for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
in trust for the Holders of such Debentures, provided that, if such
Debentures are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provIsion therefor satisfactory to the
Trustee has been made; and
(iii) Debentures in exchange for or in lieu of which other Debentures
have been authenticated and delivered pursuant to this Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Debentures Outstanding have given any request, demand,
authentication, direction, notice, consent or waiver hereunder, Debentures owned
by the Company or any other obligor upon the Debentures or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authentication, direction, notice,
consent or waiver, only Debentures which the Trustee knows to be so owned shall
be so disregarded. Debentures so owned which have been pledged in good faith
'hay be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Debentures and
that the pledgee is not the Company or any other obligor upon the Debentures or
any Affiliate of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Debentures on behalf of
the Company.
<PAGE>
6
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment" means a city or any political subdivision thereof
designated as such in SECTION 3.01.
"Predecessor Debentures" of any particular Debenture means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by such
particular Debenture, and for the purposes of this definition, any Debenture
authenticated and delivered under SECTION 3.06 in lieu of a lost, destroyed or
stolen Debenture shall be deemed to evidence the same debt as the lost,
destroyed or stolen Debenture.
"Redemption Date" when used with respect to any Debenture to be redeemed
means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price" when used with respect to any Debenture to be redeemed
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the date specified in SECTION 3.01.
"Responsible Officer" when used with respect to the Trustee means the
chairman or vice-chairman of the board of directors, the chairman or vice-
chairman of the executive committee of the board of directors, the chairman of
the trust committee, the president or any vice-president (however titled), any
trust officer or assistant trust officer of the Trustee customarily performing
corporate trust functions.
"Senior Indebtedness" means (a) the principal of, premium, if any, and
interest on (i) indebtedness (other than the Debentures) of the Company for
money borrowed evidenced by bonds, notes, debentures or similar obligations,
including any guaranty by the Company of any indebtedness for money borrowed of
any other person, whether any such indebtedness or guaranty is outstanding on
the date of this Indenture or is hereafter created, assumed or incurred, (ii)
any obligation of the Company, as lessee or guarantor, to pay rent under a lease
of real or personal property, which obligation, in the judgment of the
Independent certified public accountants employed by the Company, is required to
be capitalized on the balance sheet
<PAGE>
7
of the Company in accordance with generally accepted accounting principles,
whether outstanding on the date of this Indenture or hereafter incurred, (iii)
indebtedness incurred, assumed or guaranteed by the Company (whether outstanding
on the date of this Indenture or hereafter created, assumed or incurred) in
connection with the acquisition or improvement of any property or asset or the
acquisition by the Company or a Subsidiary of any other business, unless, in
each case referred to in clauses (i), (ii) and (iii) above, by the terms of the
instrument creating or evidencing the indebtedness it is provided that such
indebtedness is not Senior Indebtedness with respect to the Debentures or ranks
on a parity with the Debentures and is entitled to like rights of subrogation,
or is subordinated to, or is otherwise not superior in right of payment to, the
Debentures, and (b) any other indebtedness, liability or obligation, contingent
or otherwise, of the Company (any such indebtedness, liability or obligation
being hereinafter in this definition referred to as an "Obligation"), and any
guaranty, endorsement or other contingent obligation in respect of an Obligation
of another, which is created, assumed or incurred by the Company after the date
of this Indenture and which, when created, assumed or incurred, is specifically
designated by the Company as Senior Indebtedness for the purposes here of in the
instrument creating or evidencing such Obligation or in the instrument creating
or evidencing the Company's liability with respect to the Obligation of another,
and (c) any refundings, renewals or extensions of any indebtedness, liability or
obligation described in clauses (a) and (b) above; provided, however, that
Senior Indebtedness shall not in any case include (i) indebtedness incurred in
connection with the purchase of materials or services in the ordinary course of
business or indebtedness representing amounts recorded as accounts payable on
the books of the Company and (ii) indebtedness of the Company under the
Company's 11% Convertible Subordinated Debentures Due February 15, 2006, issued
under an Indenture dated as of February 15, 1981, between the Company and First
National Bank in Dallas, as Trustee, for which MBank Dallas, National
Association, is the successor trustee.
"Special Record Date" for the payment of any Defaulted Interest (as defined
in SECTION 3.07) means the date fixed by the Trustee pursuant to SECTION 3.07.
"Stated Maturity" when used with respect to any Debenture or any instalment
of interest thereon means the date specified in such Debenture
<PAGE>
8
as the fixed date on which the principal or such instalment of interest is due
and payable.
"Subsidiary" means any corporation of which at least 50% of the outstanding
capital stock or other equity interests having by the terms thereof ordinary
voting power to elect at least 50% of the board of directors, managers or
trustees of such corporation, irrespective of whether or not at the time stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency, is at the time
directly or indirectly owned or controlled by the Company, or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provision of this Indenture, and thereafter "Trustee" shall mean such
successor Trustee.
"Trust Indenture Act" or "TEA" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as otherwise
provided in SECTION 9.05.
SECTION 1.02. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent
(including all covenants the compliance with which constitute a condition
precedent),if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent (including all covenants
the compliance with which constitute a condition precedent), if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include
<PAGE>
9
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
At the request of the Trustee, any such certificate or opinion shall
specifically address any particular condition precedent.
SECTION 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, or, insofar as it relates to accounting matters,
upon a certificate or opinion of, or representations by, Independent public
accountants, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
such certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect to
such factual matters is in the possession of the Company,
<PAGE>
10
unless such Counsel knows, or in the exercise or reasonable care should know,
that the certificate or opinion or representation with respect to such matters
are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Debentureholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Debentureholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Debentureholders in person or by
agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Debentureholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to SECTION 6.01)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this SECTION.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by (i) the affidavit of a witness of such execution or
by (ii) the certificate of any notary public or other officer authorized by law
to take acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. Where such
execution is by a person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The ownership of Debentures shall be proved by the Debenture Register.
<PAGE>
11
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Debenture shall bind the Holder of every
Debenture issued upon the transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done or suffered to be done by the Trustee or
the Company in reliance there on, whether or not notation of such action is made
upon such Debenture.
SECTION 1.05. Notices, etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Debentureholders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Debentureholder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its principal corporate trust office,
or
(2) the Company by the Trustee or by any Debentureholder shall be
sufficient for every purpose hereunder if in writing and mailed or
delivered, with postage or delivery charges prepaid, to the Company
addressed to it, in the case of mailing, at P.O. Box 660204, Dallas, Texas
75266-0204, or, in the case of delivery, at 2701 East Grauwyler Road,
Irving, Texas 75061 or at any other address previously furnished in writing
to the Trustee by the Company.
SECTION 1.06. Notices to Debentureholders; Waiver.
Where this Indenture provides for notice to Debentureholders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed or delivered, with postage or delivery
charges prepaid, to each Debentureholder affected by such-event, at his address
as it appears on the Debenture Register, not later than the latest date, and not
earlier than the earliest' date, prescribed for the giving of such notice. In
any case where notice to Debentureholders is given by mail, neither the failure
to mail such notice, nor any defect in any notice so mailed, to any particular
Debentureholder shall affect the sufficiency of such notice with respect to
other Debentureholders. If a notice or communIcation is mailed or delivered in
the manner provided within the time prescribed, it is duly given whether or not
a Debentureholder receives such
<PAGE>
12
notice or communication. where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Debentureholders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver. If the Company mails
or delivers a notice or communication to Debentureholders, the Company shall
mail or deliver a copy of such notice or communication to the Trustee at the
same time.
In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be impossible to make
publication of any notice in an Authorized Newspaper or Authorized Newspapers as
required by this Indenture, thee such method of publication or notification as
shall be made with the approval of the Trustee shall constitute a sufficient
publication of such notice.
SECTION 1.07. Conflict with Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts with
another provision hereof which is required to be included in this Indenture by
any of the provisions of TIA, such required provision shall control.
SECTION 1.08. Effect of Headings and Table of Contents.
The Article and SECTION headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
<PAGE>
13
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Debentures, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Debentureholders, any benefit or any legal or equitable right, remedy or
claim under this Indenture, other than the rights of the holders of Senior
Indebtedness under Article XIII hereof.
SECTION 1.12. Governing Law.
This Indenture shall be construed in accordance with and governed by the
laws of the State of Texas.
SECTION 1.13. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a meeting of
Debentureholders not inconsistent with the provisions here of. The Debenture
Registrar, Paying Agent or Conversion Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 1.14. Non-Business Days.
If a payment date is not a Business day at a Place of Payment, payment may
be made at the place on the next succeeding Business day, and no interest shall
accrue for the intervening period.
ARTICLE II
FORM OF DEBENTURE
SECTION 2.01. Form Generally.
The Debentures and the certificate of authentication shall be in
substantially the forms set forth in SECTION 2.02, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon, as may be
required to comply with the rules of any securities exchange, or as may,
consistently herewith, be determined by the officers executing such Debentures,
as evidenced by their signing of the Debentures.
The definitive Debentures shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved or printed
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Debentures may be listed or as may be
<PAGE>
14
appropriate under the circumstances, all as determined by the officers executing
such Debentures, as evidenced by their execution of such Debentures.
SECTION 2.02. Form of Debenture.
[FORM OF FACE OF DEBENTURE]
REGISTERED REGISTERED
NUMBER $
SEE REVERSE FOR
CERTAIN DEFINITIONS
RECOGNITION EQUIPMENT INCORPORATED
DEBENTURE
RECOGNITION EQUIPMENT INCORPORATED, a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Company"), for value received, hereby promises to pay to
or registered assigns,
the principal sum of Dollars on
April 15, 2011 (herein referred to as the "Stated Maturity" of said principal
sum), and to pay interest on said principal sum from April 3, 1986 (herein
referred to as the "Accrual Date") until the Stated Maturity thereof at the rate
of 7 1/4% per annum, such interest being payable semi-annually on April 15 and
October 15 in each year, commencing October 15, 1986 (herein referred to as the
"Interest Payment Dates"), with respect to interest accrued on this Debenture
from the immediately preceding Interest Payment Date or, in the case of the
first Interest Payment Date, from the Accrual Date, to the current Interest
Payment Date, to the registered holder of this Debenture at the close of
business on the first day of the month immediately preceding such Interest
Payment Date (herein referred to as the "Regular Record Date"); provided,
however, that if this Debenture or any portion hereof is redeemed by the Company
in accordance with the provisions of the Indenture, interest on this Debenture
or the portion hereof so redeemed shall only be paid to the applicable
Redemption Date. Any instalment of interest which is payable but not paid on an
Interest Payment Date shall forthwith cease to be payable to the registered
holder hereof on the relevant Regular Record Date and thereafter such interest
shall continue to accrue on the principal sum hereof at the rate of 7 1/4% per
<PAGE>
15
annum and shall be payable, with respect to interest accrued on this Debenture
from the last Interest Payment Date on which an instalment of interest was paid
or, if no installments of interest have been paid, from the Accrual Date, to the
date such interest is ultimately paid, only to the registered holder of this
Debenture on the date fixed by the Trustee therefor. The principal of (and
premium, if any) and interest on this Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts at the office or agency of the
Company in the Borough of Manhattan, The City of New York, and at such other
offices or agencies as the Company may from time to time designate; provided,
that interest may be paid, at the option of the Company, by check mailed to the
Person entitled thereto at his address appearing on the Debenture Register. Any
interest not punctually paid or duly provided for shall be payable as provided
in said Indenture.
Reference is made to the further provisions of this Debenture set forth on
the reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
Unless the certificate of authentication here on has been executed by the
Trustee by the manual signature of one of its authorized officers, this
Debenture shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, RECOGNITION EQUIPMENT INCORPORATED has caused this
instrument to be signed in its corporate name by the facsimile signature of its
President or one of its Vice Presidents and by its Secretary or an Assistant
Secretary by his signature or a facsimile thereof, and a facsimile of its
corporate seal to be affixed hereunto or imprinted hereon.
Dated ............................
RECOGNITION EQUIPMENT
INCORPORATED
[Seal]
By..............................
President
Attest:
By...........................
Secretary
<PAGE>
16
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Debentures referred to in the within-mentioned
Indenture.
MBANK DALLAS, NATIONAL ASSOCIATION,
as Trustee
By..............................
Authorized Signature
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To Recognition Equipment Incorporated
The undersigned holder of this Debenture hereby irrevocably exercises the
option to convert this Debenture (or portion hereof below designated) into
shares of Common Stock of RECOGNITION EQUIPMENT INCORPORATED in accordance with
the terms of the Indenture referred to in this Debenture, and directs that the
shares deliverable upon the conversion, and any Debenture representing the
unconverted portion of this Debenture, be registered in the name of and
delivered to the undersigned, together with any check in payment for any
fractional share, unless a different name has been indicated below. If shares
and any Debenture are to be registered in the name of any such other person, the
undersigned will pay all transfer taxes payable with respect thereto.
Dated:........................
..............................
Signature
..............................
Social Security
or Other Taxpayer
Identification Number
If shares and any Debenture are to be registered in the name of a person or
persons other than the above-signed holder, please print each such person's name
and address (including zip code):
................................................................................
................................................................................
................................................................................
Portion to be converted (if less than all): $ ,000.
<PAGE>
17
[FORM OF REVERSE OF DEBENTURE]
RECOGNITION EQUIPMENT INCORPORATED
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2011
This Debenture is one of a duly authorized issue of Debentures of the
Company designated as its 7 1/4% Convertible Subordinated Debentures Due 2011
(hereinafter called the "Debentures"), limited, except as provided in the
Indenture referred to below, in aggregate principal amount to $51,750,000,
issued and to be issued under an indenture dated as of April 3, 1986
(hereinafter called the "Indenture"), between the Company and MBank Dallas,
National Association, as Trustee (hereinafter called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights thereunder of the Company, the Trustee, and the Holders of the
Debentures, and the terms upon which the Debentures are, and are to be,
authenticated and delivered.
The Debentures may be redeemed, at the option of the Company, as a whole or
from time to time in part, on any date prior to Maturity, upon not less than 20
nor more than 60 days' prior notice, given as provided in the Indenture, at the
following Redemption Prices, expressed in percentages of the principal amount,
together with accrued interest to the Redemption Date:
If redeemed on or before April 15, 1987: 107.250%; and if redeemed during
the 12-month period beginning April 16 of each year indicated below:
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
---- ---------- ---- ----------
<S> <C> <C> <C>
1987..... 106.525% 1992....... 102.900%
1988..... 105.800 1993....... 102.175
1989..... 105.075 1994....... 101.450
1990..... 104.350 1995....... 100.725
1991..... 103.625
</TABLE>
and thereafter at 100% of the principal amount thereof, plus, in each case,
accrued interest to the date fixed for redemption; provided, however, that the
Debentures may not be redeemed prior to April 22, 1989, unless, for a period of
20 successive Business days ending within five days of the date of
<PAGE>
18
notice of redemption, the Current Market Price for the Common Stock has exceeded
150% of the then effective conversion price of the Debentures.
The Debentures are also subject to redemption through the operation of the
Sinking Fund provided for in the Indenture, on April 15, 1996, and on each April
15 thereafter to and including April 15, 2010, on notice as set forth above, at
a Sinking Fund Redemption Price equal to 100% of the principal amount thereof,
together with accrued interest to the Redemption Date.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture may be registered for transfer on the Debenture Register
of the Company, upon surrender of this Debenture for registration of transfer at
the office or agency for the Company in the Borough of Manhattan, The City of
New York, or at such other office or agency as the Company may from time to time
designate, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Debenture Registrar duly executed
by, the registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Debentures are issuable only as registered Debentures in the
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture, and subject to certain limitations therein set forth, Debentures are
exchangeable for a like aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentation for registration of transfer of this Debenture
the Company, the Trustee and any agent of the Company may treat the Person in
whose name this Debenture is registered as the owner here of for all purposes,
whether or not this Debenture be overdue, and neither the Company, the Trustee
nor any agent shall be affected by notice to the contrary.
<PAGE>
19
If an Event of Default, as defined in the Indenture, shall occur, the
principal of all the Debentures may be declared due and payable in the manner
and with the effect provided in the Indenture.
The indebtedness evidenced by the Debentures is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Debenture,
by accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee in his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney-in-fact for such purpose.
Subject to the provisions of the Indenture, the Holder of this Debenture is
entitled, at his option, at any time prior to the close of business on April 15,
2011 (or, if this Debenture or any portion hereof shall be called for redemption
on a Redemption Date which is prior to such date and the Company shall not
thereafter default in making payment of the Redemption Price, then with respect
to this Debenture or such portion hereof, until and including but not later than
the close of business on the third Business day immediately preceding the
Redemption Date), to convert the principal amount of this Debenture or any
portion of such principal amount (which shall be $1,000 or an integral multiple
thereof) into fully paid and nonassessable shares of Common Stock, as said
shares shall be constituted at the date of conversion, at a conversion price
equal to $16.75 aggregate principal amount of this Debenture for each share of
Common Stock (or at the current adjusted conversion price if an adjustment has
been made as provided in the Indenture), by surrender of this Debenture to the
Company at its office or agency in the Borough of Manhattan, The City of New
York, or at such other office or agency as the Company may from time to time
designate accompanied, if required by the Company or Trustee, by proper
instruments of transfer. If this Debenture, or any part here of, is surrendered
for conver-
<PAGE>
20
sion at any time after the Regular Record Date with respect to an Interest
Payment Date and before such Interest Payment Date, then (unless the Company is
in default in the payment of interest), this Debenture, or any part hereof
surrendered for conversion, shall be accompanied by cash in an amount equal to
the interest that would have accrued on this Debenture, or any portion hereof
surrendered for conversion, from the date of conversion to such Interest Payment
Date at the rate of 714% per annum. Subject to the foregoing, no adjustment is
to be made on conversion for interest accrued hereon or for dividends on
securities issued on conversion. As provided in the Indenture, the conversion
price is subject to adjustment in certain events. No fractions of shares or
scrip representing fractions of shares will be delivered on conversion, but an
adjustment in cash will be made for any fractional interest as provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company with the consent of the Holders of 66%% in aggregate
principal amount of the Debentures at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Debentures at the time Outstanding, on behalf of the
Holders of all the Debentures, to waive compliance by the Company with certain
provisions of the Indenture and certain defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Debenture shall
be conclusive and binding upon such Holder and upon all future Holders of this
Debenture and of any Debenture issued upon the registration of transfer here of
or in exchange herefor or in lieu hereof whether or not a notation of such
consent or waiver is made upon this Debenture.
Except with respect to the rights of the holders of Senior Indebtedness set
forth in this Debenture and in the Indenture, no reference herein to the
Indenture and no provision of this Debenture or of the Indenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of (and premium, if any) and interest on this Debenture at the
time, place and rate, and in the coin or currency, herein prescribed.
No recourse shall be had for the payment of the principal of (or premium,
if any) or the interest on this Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any incorporator, stockholder, officer
or director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and
<PAGE>
21
as part of the consideration for the issue here of, expressly waived and
released.
All the terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
[FORM OF ASSIGNMENT]
The form of assignment shall be in a form acceptable to the Company and the
Trustee.
ARTICLE III
THE DEBENTURES
SECTION 3.01. Title and Terms.
The aggregate principal amount of Debentures which may be authenticated and
delivered under this Indenture is limited to $51,750,000, except for Debentures
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of other Debentures, as provided herein.
The Debentures shall be known and designated as the "7%% Convertible
Subordinated Debentures Due 2011" of the Company. Their Stated Maturity shall be
April 15, 2011, and they shall bear interest as set forth below, payable semi-
annually on April 15 and October 15 of each year, at the rate set forth in the
preceding sentence, until payment of the principal thereof shall be made or duly
provided for.
Each Debenture shall be dated the date of its authentication and, except as
otherwise provided in this SECTION 3.01, shall bear interest, payable semi-
annually on April 15 and October 15 of each year, commencing October 15, 1986,
from the immediately preceding Interest Payment Date to which interest on the
Debenture has been paid or, if no interest has been paid on the Debentures, from
April 3, 1986 to the current Interest Payment Date; provided, however, that with
respect to any Debenture or portion thereof redeemed by the Company in
accordance with Article XI, interest on such Debenture or portion thereof so
redeemed shall only be paid to the applicable Redemption Date. Each Debenture
authenticated after the Regular Record Date for any Interest Payment Date but
prior to such Interest Payment Date shall be dated the date of its
authentication but, if there is
<PAGE>
22
no existing default in the payment of interest on the Debentures, such
Debentures shall bear interest from such Interest Payment Date; provided,
however, that if and to the extent that the Company shall default in the payment
of the interest due on any Interest Payment Date, then all such Debentures shall
bear interest from the immediately preceding Interest Payment Date to which
interest has been paid, unless no interest has been paid on the Debentures, in
which case from April 3, 1986 to the current Interest Payment Date.
The term "Regular Record Date" as used with respect to a semi-annual
Interest Payment Date shall mean the close of business on the April 1 or October
1, as the case may be, next preceding such Interest Payment Date, whether or not
such April 1 or October 1 is a Business day.
The Person in whose name any Debenture is registered at the Regular Record
Date with respect to any Interest Payment Date shall be entitled to receive the
interest payable on such Interest Payment Date (unless such Debenture has been
called for redemption on a Redemption Date which is prior to such Interest
Payment Date) notwithstanding the cancellation of such Debenture upon any
registration of transfer or exchange thereof or conversion thereof subsequent to
such Regular Record Date and prior to such Interest Payment Date; provided,
however, that if and to the extent the Company shall default in the payment of
the interest due on any Interest Payment Date, such Defaulted Interest shall be
paid as provided in SECTION 3.07.
The principal of (and premium, if any) and interest on the Debentures shall
be payable at the office or agency of the Company in the Borough of Manhattan,
The City of New York, and at such other location as the Company may from time to
time designate (each such place being herein called a "Place of Payment");
provided, that interest may be paid, at the option of the Company, by check
mailed to the Person entitled thereto at his address last appearing on the
Debenture Register.
The Debentures shall be redeemable, and shall be entitled to the benefit of
and be redeemable out of the Sinking Fund, all as provided in Article XI.
The Debentures shall be subordinated in right of payment to certain other
indebtedness of the Company as provided in Article XIII.
<PAGE>
23
The Debentures shall be convertible into Common Stock as provided in
Article XIV.
SECTION 3.02. Denominations.
The Debentures shall be issuable as registered Debentures without coupons
in the denominations of $1,000 and any integral multiple thereof.
SECTION 3.03. Execution, Authentication and Delivery.
The Debentures shall be executed on behalf of the Company by its Chairman
of the Board, its President, any Senior Vice President or any Vice President in
each case under its corporate seal reproduced thereon, with such corporate seal
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Debentures may be manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Debentures executed by the Company to the
Trustee, and the Trustee shall authenticate and deliver such Debentures as in
this Indenture provided and not otherwise.
No Debenture shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and delivered hereunder.
SECTION 3.04. Temporary Debentures.
Pending the preparation of definitive Debentures, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Debentures which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Debentures in lieu of which they
<PAGE>
24
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officer executing such Debentures may determine, as
evidenced by his signing of such Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation of
definitive Debentures, the temporary Debentures shall be exchange-able for
definitive Debentures upon surrender of the temporary Debentures at the office
or agency of the Company at a Place of Payment, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Debentures, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount ~f definitive Debentures of authorized
denominations. Until so exchanged, the temporary Debentures shall in all
respects be entitled to the same benefits under this Indenture as definitive
Debentures.
SECTION 3.05. Registration, Registration of Transfer and Exchange.
The Company shall cause to be maintained an office or agency where the
Debentures may be presented for transfer or exchange (herein sometimes referred
to as the "Debenture Registrar"). The Debenture Registrar may prescribe
reasonable regulations for the registration of Debentures and the registration
of transfers or exchanges of Debentures. The Debenture Registrar shall keep a
register (the "Debenture Register") of the Debentures and of their transfer and
exchange. The Trustee is hereby initially appointed "Debenture Registrar" for
the purpose of registering Debentures and transfers or exchanges of Debentures
as herein provided. The Company may from time to time change the place at which
the Debenture Register shall be kept and designate one or more additional
successor or other Debenture Registrars.
Upon surrender for registration of transfer of any Debenture at the office
or agency of the Company in a Place of Payment, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Debentures of any authorized
denominations, of a like aggregate principal amount.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Debentures to be exchanged at such office or
<PAGE>
25
agency. Whenever any Debentures are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Debentures
which the Debentureholder making the exchange is entitled to receIve.
All Debentures issued in exchange for or upon transfer of Debentures shall
be the valid obligations of the Company, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Debentures surrendered for
such exchange or transfer.
Every Debenture presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Debenture Registrar duly executed, by the Holder thereof or his attorney
duly authorized in writing.
No service charge to the Debentureholders shall be made for any
registration of transfer or exchange of Debentures, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Debentures, other than exchanges pursuant to SECTION 3.04 or SECTION 9.06 not
involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange any Debenture during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Debentures
selected for redemption hereunder and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange any Debenture
so selected for redemption in whole or in part; provided, however, that nothing
herein shall be deemed to restrict the right to convert any Debenture or portion
thereof at any time in accordance with Article XIV.
SECTION 3.06. Mutilated, Lost, Destroyed or Wrongfully Taken Debentures.
If any mutilated Debenture is surrendered to the Trustee, or if the Company
and the Trustee receive a claim from a holder that a Debenture has been lost,
destroyed or wrongfully taken, and there is delivered to the Company and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Company or the Trustee that
such Debentures have been acquired by a bona
<PAGE>
26
fide purchaser, and if the requirements of the Company and the Trustee are met,
the Company shall execute and upon its request the Trustee shall authenticate
and deliver, in exchange for any such mutilated Debenture or in lieu of any such
allegedly lost, destroyed or wrongfully taken Debenture, a new Debenture of like
tenor and principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, allegedly lost, destroyed or wrongfully taken
Debenture has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this SECTION 3.06, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this SECTION 3.06 in lieu of any
allegedly lost, destroyed or wrongfully taken Debenture shall constitute an
original additional contractual obligation of the Company, whether or not the
allegedly lost, destroyed or wrongfully taken Debenture shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Debentures duly
issued hereunder.
The provisions of this SECTION 3.06 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, allegedly lost, destroyed or wrongfully taken
Debentures.
SECTION 3.07. Payment of Interest: Interest Rights Preserved.
Interest on any Debenture which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Debenture (or one or more Predecessor Debentures) is registered on the
Regular Record Date for such interest specified in SECTION 3.01.
Any interest on any Debenture which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called
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27
"Defaulted Interest") shall forthwith cease to be payable to the Registered
Holder on the relevant Regular Record Date by virtue of having been such Holder;
and such Defaulted Interest may be paid by the Company, at its election in each
case; as provided in paragraph (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Debenture and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as provided
in this paragraph (1). Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall be not more
than 15 nor less than ten days prior to the date of the proposed payment
and not less than ten days after the receipt by the Trustee of the notice
of the proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed or delivered,
with postage or delivery charges prepaid, to each Debentureholder at his
address as it appears in the Debenture Register not less than ten days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed
as aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names the Debentures (or their respective Predecessor Debentures) are
registered on such Special Record Date and shall no longer be payable
pursuant to the following paragraph (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and upon
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28
such notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
paragraph (2), such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this SECTION 3.07 each Debenture
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Debenture shall carry the rights to interest accrued and unpaid, and
to accrue, which were carried by such other Debenture.
SECTION 3.08. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Debenture, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name any Debenture is registered as the owner of such Debenture
for the purpose of receiving payment of principal of (and premium, if any), and
(subject to SECTION 3.07) interest on, such Debenture and for all other purposes
whatsoever, whether or not such Debenture be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 3.09. Cancellation.
All Debentures surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee for cancellation and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Debentures previously authenticated and delivered here-under which the Company
may have acquired in any manner whatsoever, and all Debentures so delivered
shall be promptly canceled by the Trustee. No Debenture shall be authenticated
in lieu of or in exchange for any Debentures canceled as provided in this
SECTION 3.09, except as expressly permitted by this Indenture. All canceled
Debentures held by the Trustee shall be delivered to the Company.
SECTION 3.10. Authentication and Delivery of Original Issue.
Forthwith upon the execution and delivery of this Indenture, or from time
to time thereafter, Debentures up to the aggregate principal amount of
$51,750,000 may be executed by the Company and delivered to the Trustee
<PAGE>
29
for authentication, and shall thereupon be authenticated and delivered by the
Trustee upon Company Order, without any further action by the Company; provided,
however, that the Company shall not execute or deliver to the Trustee for
authentication Debentures in excess of the aggregate principal amount of
$45,000,000 except upon exercise of the underwriters' over-allotment option set
forth in the Underwriting Agreement dated March 26, 1986 relating to the
Debentures.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Debentures herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture (except for those surviving obligations specified
below), when
(1) either
(A) all Debentures theretofore authenticated and delivered (other
than (i) Debentures which have been lost, destroyed or wrongfully
taken and which have been replaced or paid as provided in SECTION
3.06, and (ii) Debentures for which money for their payment has
theretofore been deposited in trust or segregated and held in trust
pursuant to the Indenture and thereafter repaid to the Company or
discharged from such trust, as provided in SECTION 10.03) have been
delivered to the Trustee for cancellation; or
(B) all such Debentures not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
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30
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of clause (i), (ii) or (iii) above, has
deposited or caused to be deposited irrevocably with the Trustee, as trust
finds in trust for the purpose, an amount sufficient to pay and discharge
the entire indebtedness on such Debentures not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and interest
to the date of such deposit (in the case of Debentures which have become
due and payable), or to the Stated Maturity or Redemption Date, as the case
may be, and at the time of such deposit Article XIII does not prevent
payment of such Debentures;
(2) the Company has paid or caused to be paid all other sums payable
thereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Moneys deposited pursuant to this SECTION 4.01 are not subject to the
subordination provisions of Article XIII if, at the time of such deposit,
Article XIII does not prevent payment of the Debentures.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company under SECTIONS 3.05, 3.06, 6.07, 6.10, 6.11, 10.01,
10.02, 10.03 and Article XIV shall survive until the Debentures are no longer
Outstanding, and thereafter the obligations of the Company under SECTION 6.07
and the last paragraph of SECTION 10.03 shall survive.
SECTION 4.02. Application of Trust Money.
All money deposited with the Trustee pursuant to SECTION 4.01 shall be held
in trust and applied by it, in accordance with the provisions of the Debentures
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), a- the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such
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31
money has been deposited with the Trustee; but such money need not be segregated
from other funds except to the extent required by law.
ARTICLE V
REMEDIES
SECTION 5.01. Events of Default.
"Event of Default", wherever used herein means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body or whether or not it shall be occasioned by
the provisions of Article XIII):
(a) default in the due and punctual payment of any interest upon any
of the Debentures as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b) failure on the part of the Company to duly observe or perform any
other of the covenants or agreements on the part of the Company in the
Debentures or in this Indenture contained for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 25% in principal amount
of the Debentures at the time Outstanding; or
(c) entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, liquidation, arrangement,
adjustment or composition of or in respect of the Company under the Federal
Bankruptcy Code or any other applicable Federal or state law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(d) institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
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32
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Code or any other applicable Federal or state law, or
the consent by it to the filing of any such petition or to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company in furtherance of any such action; or
(e) default in the due and punctual payment of the principal of (and
premium, if any, on) any Debenture as and when the same shall become due
and payable either at maturity, upon redemption by declaration as
authorized by this Indenture, or otherwise; or
(f) default in making any Sinking Fund Payment (as defined in SECTION
11.01), as and when the same shall become due and payable.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Debentures Outstanding may declare the principal of all the Debentures to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Debentureholders), and upon any such declaration such
principal shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Holders of a majority
in principal amount of the Debentures Outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all Debentures
(B) the principal of (and premium, if any, on) any Debentures
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures.
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33
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne by
the Debentures, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of the principal
of Debentures which have become due solely by such acceleration, have been
cured or waived as provided in SECTION 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any instalment of interest on
any Debenture when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Debenture at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal (and premium, if any) and interest, with interest upon
the overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon overdue installments of
interest, at the rate borne by the Debentures; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustees, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and
<PAGE>
34
unpaid, and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Company or any other obligor upon the Debentures
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Debentureholders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Debentures or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Debentures
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Debentureholders allowed in
such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each
Debentureholder to make such payments to the Trustee, and in the event
<PAGE>
35
that the Trustee shall consent to the making of such payments directly to the
Debentureholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under SECTION 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Debentureholder any
plan of reorganization, arrangement, adjustment or composition, affecting the
Debentures or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Debentureholder in any such proceeding.
SECTION 5.05. Trustee May Enforce Claims Without Possession of Debentures
All rights of action and claims under this Indenture or the Debentures may
be prosecuted and enforced by the Trustee without the possession of any of the
Debentures or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Debentures in respect of which such judgment has been
recovered.
SECTION 5.06. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article V shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Debentures, and the notation
thereon of the payment if only partially paid and upon surrender thereof~ff
fully paid:
FIRST: To the payment of all amounts due the Trustee under SECTION 6.07:
SECOND: Subject to the provisions of Article XIII hereof, to the payment of
the amounts then due and unpaid upon the Debentures for principal (and premium,
if any) and interest, in respect of which or for the
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36
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Debentures, for principal (and premium, if any) and interest, respectively; and
THIRD: To the payment of the remainder, if any, to the Company.
SECTION 5.07. Limitation on Suits.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60 day period by the Holders of a majority in
principal amount of the Outstanding Debentures;
it being understood and intended that no one or more Holders of Debentures shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Debentures or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all the Holders of Debentures.
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37
SECTION 5.08. Unconditional Right of Debentureholders to Receive Principal,
Premium and Interest and to Convert.
Notwithstanding any other provision in this Indenture, the Holder of any
Debenture shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to SECTION 3.07)
interest on such Debenture on the respective Stated Maturities expressed in such
Debenture (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment and the right to convert
such Debenture in accordance with Article XIV and such rights shall not be
impaired without the consent of such Holder.
SECTION 5.09. Restoration of Rights and Remedies.
If the Trustee or any Debentureholder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Debentureholder, then and in every such case the Company,
the Trustee and the Debentureholders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Debentureholders shall continue as though no such proceeding had been
instituted.
SECTION 5.10. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shale, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Debenture to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of
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38
Default or an acquiescence therein. Every right and remedy given by this Article
V or by law to the Trustee or to the Debentureholders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Debentureholders, as the case may be.
SECTION 5.12. Control by Debentureholders.
The Holders of a majority in principal amount of the Outstanding Debentures
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) such direction shall not be prejudicial to Holders not joining
therein or expose the Trustee to personal liability.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Debentures may on behalf of the Holders of all the Debentures waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Debenture, or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Debenture affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent there on.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Debenture by
his acceptance thereof shall be deemed to have agreed, that any court
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39
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party litigant in such suit
of an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this SECTION 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders, holding in the aggregate more than 10% in principal amount of
the Outstanding Debentures, or to any suit instituted by any Debentureholder for
the enforcement of the payment of the principal of (or premium, if any) or
interest on any Debenture on or after the respective Stated Maturities expressed
in such Debenture (or in the case of redemption, on or after the Redemption
Date) or for the enforcement of a right to the conversion of any Debenture.
SECTION 5.15. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied
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40
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this subsection (c) shall not be construed to limit the effect of
subsection (a) of this SECTION 6.01;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of
the Holders under SECTION 5.12 received by the Trustee.
(d) No provisions of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
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41
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of paragraphs (a),
(b) and (c) of this SECTION 6.01.
SECTION 6.02. Notice of Default.
Within 90 days after the occurrence of any default hereunder, the Trustee
shall transmit by mail to all Debentureholders, as their names and addresses
appear in the Debenture Register, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived; provided, however,
that, except in the case of a default in the payment of the principal of (or
premium, if any) or interest on any Debenture or the making of any Sinking Fund
payment when due, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the
Debentureholders; and provided, further, that in the case of any default of the
character specified in SECTION 5.01 (b) no such notice to Debentureholders shall
be given until at least 60 days after the occurrence thereof. For the purpose of
this SECTION 6.02, the term "default" means any event which is, or after notice
or lapse of time or both would become, an Event of Default.
SECTION 6.03. Certain Rights of Trustee.
Except as otherwise provided in SECTION 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
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42
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Debentureholders pursuant to this Indenture, unless such
Debentureholders shall have offered to the Trustee reasonable security or
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, direction, consent, order, bond,
debenture or other paper or document but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized by this
Indenture or within its rights and powers hereunder.
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43
SECTION 6.04. No Responsibility for Recitals or Issuance of Debentures.
The recitals contained herein and in the Debentures, except the
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Debentures. The Trustee shall not be accountable for the use or
application by the Company of Debentures or the proceeds thereof.
SECTION 6.05. May Hold Debentures.
The Trustee, any Paying Agent, Debenture Registrar or any other agent of
the Company or the Trustee, in its individual or any other capacity, may become
the owner or pledgee of Debentures and, subject to SECTION 6.08 and SECTION
6.13, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Debenture Registrar or such other agent.
SECTION 6.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
SECTION 6.07. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributa-
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44
ble to its negligence or bad faith, all such reimbursements shall be made
with interest at the rate borne by the Debentures; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent.
The Company need not reimburse any expense or indemnity against any loss or
liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this SECTION 6.07, the
Trustee shall have a lien prior to the Debentures on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Debentures.
When the Trustee incurs expenses or renders services after an Event of
Default specified in SECTION 5.01(c) or (d) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Federal Bankruptcy Code or any other applicable Federal
or state law.
SECTION 6.08. Disqualification; Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this SECTION 6.08, it shall, within 90 days after ascertaining that
it has such conflicting interest, either eliminate such conflicting interest or
resign in the manner and with the effect hereinafter specified in this Article
VI.
(b) In the event that the Trustee shall fail to comply with the provisions
of subsection (a) of this SECTION 6.08, the Trustee shall, within ten days after
the expiration of such 90-day period, transmit by mail notice
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45
of such failure to the Debentureholders as their names and addresses appear in
the Debenture Register.
(c) For the purposes of this SECTION 6.08, the Trustee shall be deemed to
have a conflicting interest if
(1) the Trustee is trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the Company are outstanding, unless such other indenture is
a collateral trust indenture under which the only collateral consists of
Debentures issued under this Indenture, provided that there shall be
excluded from the operation of this paragraph (1) (A) the Indenture dated
as of February 15, 1981 between the Company and First National Bank in
Dallas, as Trustee, for which MBank Dallas, National Association, is the
successor trustee, pursuant to which the Company's 11% Convertible
Subordinated Debentures due February 15, 2006 were issued and (B) any other
indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are
outstanding, if
(i) this Indenture and such other indenture or indentures are
wholly unsecured and such other indenture or indentures are hereafter
qualified under the TIA, unless the Commission shall have found and
declared by order pursuant to SECTION 305(b) or SECTION 307(c) of the
TIA that differences exist between the provisions of this Indenture of
the provisions of such other indenture or indentures which are so
likely to involve a material conflict of interest as to make it
necessary in the public interest or for the protection of investors to
disqualify the Trustee from acting as such under this Indenture and
such other indenture or indentures, or
(ii) the Company shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing
thereon, that trusteeship under this Indenture and such other
indenture or indentures is not so likely to involve a material
conflict of interest as to make it necessary in the public interest or
for the protection of investors to disqualify the Trustee from acting
as such under one or more of such other indentures;
(2) the Trustee or any of its directors or executive officers is an
obligor upon the Debentures or an underwriter for the Company;
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46
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with
the Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee or representative of the
Company, or of an underwriter (other than the Trustee itself) for the Company
who is currently engaged in the business of underwriting, except that (i) one
individual may be a director or an executive officer, or both, of the Trustee
and a director or an executive officer, or both, of the Company but may not be
at the same time an executive officer of both the Trustee and the Company; (ii)
if and so long as the number of directors of the Trustee in office is more than
nine, one additional individual may be a director or an executive officer, or
both, of the Trustee and a director of the Company; and (iii) the Trustee may be
designated by the Company or by any underwriter for the Company to act in the
capacity of transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent, or depositary, or in any other similar capacity, or, subject to
the provisions of paragraph (1) of this subsection (c), to act as trustee,
whether under an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is beneficially
owned either by the Company or by any director, partner, or executive officer
thereof, or 20% or more of such voting securities is beneficially owned,
collectively, by any two or more of such persons; or 10% or more of the voting
securities of the Trustee is beneficially owned either by an underwriter for the
Company or by any director, partner or executive officer thereof, or is
beneficially owned, collectively, by any two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this subsection (c)
defined), (i) 5% or more of the voting securities, or 10% or more of any other
class of security, of the Company not including the Debentures issued under this
Indenture and securities issued under any other indenture under which the
Trustee is also trustee, or (ii) 10% or more of any class of security of an
underwriter for the Company;
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47
(7) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this subsection (c)
defined), 5% or more of the voting securities of any person who, to the
knowledge of the Trustee, owns 10% or more of the voting securities of, or
controls directly or indirectly or is under direct or indirect common control
with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral security
for an obligation which is in default (as hereinafter in this subsection (c)
defined), 10% or more of any class of security of any person who, to the
knowledge of the Trustee, owns 50% or more of the voting securities of the
Company; or
(9) the Trustee owns, on May 15 in any calendar year, in the capacity of
executor, administrator, testamentary or inter vivos trustee, guardian,
committee or conservator, or in any other similar capacity, an aggregate of 25%
or more of the voting securities, or of any class of security, of any person,
the beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraph (6), (7), or (8) of this
subsection (c). As to any such securities of which the Trustee acquired
ownership through becoming executor, administrator, or testamentary trustee of
an estate which included them, the provisions of the preceding sentence shall
not apply, for a period of two years from the date of such acquisition, to the
extent that such securities included in such estate do not exceed 25% of such
voting securities or 25% of any such class of security. Promptly after May 15 in
each calendar year, the Trustee shall make a check of its holdings of such
securities in any of the above-mentioned capacities as of such May 15. If the
Company fails to make payment in full of the principal of (or the premium, if
any), or interest on, any of the Debentures when and as the same becomes due and
payable, and such failure continues for 30 days thereafter, the Trustee shall
make a prompt check of its holdings of such securities in any of the above-
mentioned capacities as of the date of the expiration of such 30-day period, and
after such date, notwithstanding the foregoing provisions of this paragraph (9),
all such securities so held by the Trustee, with sole or joint control over such
securities vested in it, shall, but only so long as such failure shall continue,
be considered as though beneficially
<PAGE>
48
owned by the Trustee for the purposes of paragraphs (6), (7) and (8) of this
subsection (c).
The specification of percentages in paragraphs (5) to (9), inclusive, of
this subsection (c) shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this subsection (c).
For the purposes of paragraphs (6), (7), (8) and (9) of this subsection (c)
only (i) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (ii) an obligation shall be deemed to be "in default"
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (iii) the Trustee shall not be deemed to be
the owner or holder of (A) any security which it holds as collateral security,
as trustee or otherwise, for an obligation which is not in default as defined in
clause (ii) above, or (B) any security which it holds as collateral security
under this Indenture, irrespective of any default hereunder, or (C) any security
which it holds as agent for collection, or as custodian, escrow agent, or
depositary, or in any similar representative capacity.
(d) For the purposes of this SECTION 6.08:
(1) The term "underwriter" when used with reference to the Company means
every person who, within three years prior to the time as of which the
determination is made, has purchased from the Company with a view to, or has
offered or sold for the Company in connection with, the distribution of any
security of the outstanding at such time, or has participated or has had a
direct or indirect participation in any such undertaking, or has participated or
has had a participation in the direct or indirect underwriting of any such
undertaking, but such term shall not include a person whose interest was limited
to a commission from an underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission.
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49
(2) The term "director" means any director of a corporation, or any
individual performing similar functions with respect to any organIzation
whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision
thereof. As used in this paragraph (3), the term "trust" shall include only
a trust where the interest or interests of the beneficiary or beneficiaries
are evidenced by a security.
(4) The term "voting security" means any security presently entitling
the owner or holder thereof to vote in the direction or management of the
affairs of a person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or agent or agents
for the owner or holder of such security are presently entitled to vote in
the direction or management of the affairs of a person.
(5) The term "Company" means any obligor upon the Debentures.
(6) The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary, and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.
(e) The percentages of voting securities and other securities specified in
this SECTION 6.08 shall be calculated in accordance with the following
provIsions:
(1) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this SECTION 6.08 (each of
whom is referred to as a "person" in this subsection (e)) means such amount
of the outstanding voting securities of such person as entitles the holder
or holders thereof to cast such specified percentage of the aggregate votes
which the holders of all the outstanding voting securities of such person
are entitled to cast in the direction or management of the affairs of such
person.
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50
(2) A specified percentage of a class of securities of a person means such
percentage of the aggregate amount of securities of the class outstanding.
(3) The term "amount", when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of shares
if relating to capital shares, and the number of units if relating to any other
kind of security.
(4) The term "outstanding" means issued and not held by or for the account
of the issuer. The following securities shall not be deemed outstanding within
the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation evidenced by
such other class of securities is not in default as to principal or
interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(iv) securities held in escrow if placed in escrow by the issuer
thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(5) A security shall be deemed to be of the same class as another security
if both securities confer upon the holder or holders thereof substantially the
same rights and privileges; provided, however, that, in the case of secured
evidences of indebtedness, all of which are issued under a single indenture,
differences in the interest rates or maturity dates of various series thereof
shall not be deemed sufficient to constitute such series different classes and
provided, further, that, in the case of unsecured evidences of indebtedness,
differences in the interest rates or maturity dates thereof shall not be deemed
sufficient
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51
to constitute them securities of different classes, whether or not they are
issued under a single indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof or of the District of Columbia, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000, subject to supervision or examination by
Federal or state authority. If such corporation publishes reports of condition
at least annually, pursuant, to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this SECTION 6.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this SECTION 6.09, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article VI.
SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under SECTION 6.11.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by an Act of the Holders of a
majority in principal amount of the Outstanding Debentures delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with SECTION 6.08(a) after
written request therefor by the Company or by any Debentureholder who has
been a bona fide Holder of a Debenture for at least six months, or
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52
(2) the Trustee shall cease to be eligible under SECTION 6.09 and
shall fail to resign after written request therefor by the Company or by
any such Debentureholder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to SECTION 5.14, any Debentureholder who has been a
bona fide Holder of a Debenture for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company
by a Board Resolution shall promptly appoint a successor Trustee. If within one
year after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Debentures delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Debentureholders and
accepted appointment in the manner hereinafter provided, any Debentureholder who
has been a bona fide Holder of a Debenture for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing or delivering
written notice of such event, with postage or delivery charges prepaid, to the
Debentureholders as their names and addresses appear in the Debenture Register.
Each notice shall include the name of the successor Trustee and the address of
its principal corporate trust office.
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53
SECTION 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute and deliver to
the Company an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring Trustee
shale, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee, and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article VI.
SECTION 6.12. Merger, Conversion, Consolidation, or Succession
to Business of Trustee.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VI, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Debentures shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Debentures so authenticated with the same
effect as if such successor Trustee had itself authenticated such Debentures.
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54
SECTION 6.13. Limitation of Rights of Trustee as Creditor.
(a) Except as otherwise expressly provided in this SECTION 6.13, if the
Trustee in its individual capacity shall be or shall become a creditor, directly
or indirectly, secured or unsecured, of the Company within four months prior to
a default, as defined in subsection (e) of this SECTION 6.13, or subsequent to
such a default, then, unless and until such default shall be cured, the Trustee
shall set apart and hold in a special account for the benefit of the Trustee
individually, the Holders of the Debentures and the holders of other indenture
securities (as defined in subsection (e) of this SECTION 6.13):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such four months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this subsection (a), or from the exercise of any right of
set-off which the Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composItion thereof, or otherwise, after the beginning of such four months'
period, or any amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee
(3) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
(ii) the proceeds of the bona fide sale of any such claim by the Trustee to
a third person, and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganIzation pursuant to the Federal
Bankruptcy Code or applicable state law;
<PAGE>
55
(4) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such four months' period;
(5) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any claim, if such claim was created after the beginning of such four
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default as defined in
subsection (c) of this SECTION 6.13 would occur within four months; or
(6) to receive payment on any claim referred to in paragraph (4) or
(5) of this subsection (a), against the release of any property held as
security for such claim as provided in paragraph (4) or (5) of this
subsection (a), as the case may be, to the extent of the fair value of such
property.
For the purposes of paragraphs (4), (5) and (6) of this subsection (a),
property substituted after the beginning of such four months' period for
property held as security at the time of such substitution shall, to the extent
of the fair value of the property released, have the same status as the property
released, and, to the extent that any claim referred to in any such paragraphs
(4), (5) and (6) of this subsection (a) is created in renewal of or in
substitution for or for the purpose of repaying or refunding any preexisting
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
(b) If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
between the Trustee, the Debentureholders and the holders of other indenture
securities in such manner that the Trustee, the Debentureholders and the holders
of such indenture securities realize, as a result of payments from such special
account and payments of dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Federal Bankruptcy Code or applicable state law, the same percentage of their
respective claims figured before crediting to the claim of the Trustee anything
on account of the receipt by it from the Company of the funds and property in
such special account and
<PAGE>
56
before crediting to the respective claims of the Trustee and the Debenture-
holders and the holders of other indenture securities dividends on claims filed
against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Code or applicable state law,
but after crediting thereon receipts on account of the indebtedness represented
by their respective claims from all sources other than from such dividends and
from the funds and property so held in such special account. As used in this
subsection (b), with respect to any claim, the term "dividends" shall include
any distribution with respect to such claim, in bankruptcy or receivership or
proceedings for reorganization pursuant to the Federal Bankruptcy Code or
applicable state law, whether such distribution is made in cash, securities, or
other property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceedings for reorganization is pending shall have
jurisdiction (i) to apportion between the Trustee and the Debentureholders, and
the holders of other indenture securities, in accordance with the provisions of
this subsection (b), the funds and property held in such special account and
proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to
give to the provisions of this subsection (b) due consideration in determining
the fairness of the distributions to be made to the Trustee and the
Debentureholders and the holders of other indenture securities with respect to
their respective claims, in which event it shall not be necessary to liquidate
or to appraise the value of any securities or other property held in such
special account or as security for any such claim, or to make a specific
allocation of such distributions as between the secured and unsecured portions
of such claims, or otherwise to apply the provisions of this subsection (b) as a
mathematical formula.
(c) Any Trustee which has resigned or been removed after the beginning of
such four months' period shall be subject to the provisions of this SECTION 6.13
as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such four months' period, it
shall be subject to the provisions of this SECTION 6.13 if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such four months' period; and
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(ii) such receipt of property or reduction of claim occurred within four
months after such resignation or removal.
(d) There shall be excluded from the operation of this
SECTION 6.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Debentureholders as provided in SECTIONS
7.03(a), (b) and (c);
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (e) of this
SECTION 6.13;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of SECTION 25 (a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of the Company;
or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptance or obligations which fall within the
classification of self-liquidating paper as defined in subsection (e) of
this SECTION 6.13.
(e) For the purposes of this SECTION 6.13 only:
(1) The term "default" means any failure to make payment in full of
the principal of or interest on any of the Debentures or upon other
indenture securities when and as such principal or interest becomes due and
payable.
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(2) The term "other indenture securities" means securities upon which
the Company is an obligor outstanding under any other indenture (i) under
which the Trustee is also trustee, (ii) which contains provisions
substantially similar to the provisions of this SECTION 6.13, and (iii)
under which a default exists at the time of the apportionment of the funds
and property held in such special account.
(3) The term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale or the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
(5) The term "Company" means any obligor upon the Debentures.
ARTICLE VII
DEBENTUREHOLDERS LIST AND REPORTS BY TRUSTEE
AND COMPANY
SECTION 7.01. Company to Furnish Trustee Names and Addresses of
Debentureholders.
The Company will furnish or cause to be furnished to the Trustee (a) semi-
annually, not more than 15 days after each Regular Record Date, a list in such
form as the Trustee may reasonably require, of the names and addresses of the
Debentureholders as of such Regular Record Date, and (b) at such other times as
the Trustee may request in writing, within 30 days after receipt by the Company
of any such request, a list of similar form
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and content as of a date not more than 15 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Debenture
Registrar, no such list shall be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to Debentureholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Debentures contained in the
most recent list furnished to it as provided in SECTION 7.01 and the names and
addresses of Holders of Debentures received by the Trustee in its capacity as
Debenture Registrar.
The Trustee may destroy any list furnished to it as provided in SECTION
7.01 upon receipt of a new list so furnished.
(b) If three or more Holders of Debentures (hereinafter referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof satisfactory to it that each such applicant has owned a
Debenture for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Debentures with respect to their rights under
this Indenture or under the Debentures and is accompanied by a copy of the form
of proxy or other communication which such applicants propose to transmit, then
the Trustee shall, within five business days after the receipt of such
application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with SECTION 7.02(a), or
(ii) inform such applicants as to the approximate number of Holders of
Debentures whose names and addresses appear in the information preserved at
the time by the Trustee in accordance with SECTION 7.02(a), and as to the
approximate cost of mailing to such Debentureholders the form of proxy or
other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Debentureholder whose name and address appear in the information
preserved at the time by the Trustee in accordance with SECTION
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7.02(a), a copy of the form of proxy or other communication which is specified
in such request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the
reasonable expenses of mailing, unless within five days after such tender, the
Trustee shall mail to such applicants and file with the Commission together with
a copy of the material to be mailed, a written statement to the effect that, in
the opinion of the Trustee, such mailing would be contrary to the best interests
of the Holders of Debentures or would be ill violation of applicable law. Such
written statement shall specify the basis of such opinion. If the Commission,
after opportunity for a hearing upon the objections specified in the written
statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such
Debentureholders with reasonable promptness after the entry of such order and
the renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Every Holder of the Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
shall be held accountable by reason of the disclosure of any such information as
to the names and addresses of the Holders of Debentures in accordance with
SECTION 7.02 (b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under SECTION 7.02 (b).
SECTION 7.03. Reports by Trustee.
(a) The term "reporting date", as used in this SECTION 7.03 means May 15.
Within 60 days after the reporting date in each year, the Trustee shall transmit
by mail to all Debentureholders, as their names and
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addresses appear in the Debenture Register, a brief report dated as of such
reporting date with respect to:
(1) its eligibility under SECTION 6.09 and its qualifications under
SECTION 6.08, or in lieu thereof, if to the best of its knowledge it has
continued to be eligible and qualified under said SECTIONS, a written
statement to such effect;
(2) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the reporting date, and for
the reimbursement of which it claims or may claim a lien or charge, prior
to that of the Debentures, on any property or funds held or collected by it
as Trustee, except that the Trustee shall not be required (but may elect)
to report such advances if such advances so remaining unpaid aggregate not
more than 1/2 of 1% of the principal amount of the Debentures Outstanding
on the reporting date:
(3) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Debentures) to the Trustee in its individual capacity, on the reporting
date, with a brief description of any property held as collateral security
therefor, except an indebtedness based upon a creditor relationship arising
in any manner described in SECTION 6.13(b) (2), (3), (4) or (6);
(4) the property and funds, if any, physically in the possession of
the Trustee as such on the reporting date;
(5) any additional issue of Debentures which the
Trustee has not previously reported; and
(6) any action taken by the Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Debentures, except action in respect of a default,
notice of which has been or is to be withheld by the Trustee in accordance
with SECTION 6.02.
(b) the Trustee shall transmit by mail to all Debentureholders, as their
names and addresses appear in the Debenture Register, a brief report with
respect to the character and amount of any advances (and if the Trustee elects
so to state, the circumstances surrounding the making thereof) made by the
Trustee (as such) since the date of the last report transmitted
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pursuant to subsection (a) of this SECTION 7.03 (or if no such report has yet
been so transmitted, since the date of execution of this instrument) for the
reimbursement of which it claims or may claim a lien or charge, prior to that of
the Debentures, on property or funds held or collected by it as Trustee, and
which it has not previously reported pursuant to this subsection (b) except that
the Trustee shall not be required (but may elect) to report such advances if
such advances remaining unpaid at any time aggregate 10% or less of the
principal amount of the Debentures Outstanding at such time, such report to be
transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such transmission to
Debentureholders, be filed by the Trustee with each stock exchange upon which
the Debentures may be listed and also with the Commission. The Company will
notify the Trustee when the Debentures are listed on any stock exchange.
SECTION 7.04. Reports by Company.
The Company will
(a) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may for time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to SECTION 13 or SECTION 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said SECTIONS, it
will file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to SECTION 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(b) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to
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compliance by the Company with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(c) transmit by mail to all Holders of Debentures as their names and
addresses appear in the Debenture Register, within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to subsections (a) and
(b) of this SECTION 7.04 as may be required by rules and regulations
prescribed from time to time by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 8.01. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other corporation
or convey or transfer its properties and assets substantially as an entirety to
any Person, unless
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Company substantially as an entirety shall
be a corporation organized and existing under the laws of the United States
of America or any state or the District of Columbia, and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of (and premium, if any) and interest on all the
Debentures and the performance of every covenant of this Indenture on the
part of the Company to be performed or observed and all applicable
provisions of Article XIV shall be complied with by such corporation or
Person, as the case may be;
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
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(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger,
conveyance or transfer and such supplemental indenture comply with this
Article VIII and that all conditions precedent herein provided for relating
to such transaction have been complied with.
SECTION 8.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Company substantially as an entirety in accordance
with SECTION 8.01, the successor corporation formed by such consolidation or
into which the Company is merged or to which such conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein; provided, however, that no
such conveyance or transfer shall have the effect of releasing the Person named
as the "Company" in the first paragraph of this instrument or any successor
corporation which shall theretofore have become such in the manner prescribed in
this Article VIII from its liability as obligor and maker on any of the
Debentures.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Debenture holders.
Without the consent of the Holders of any Debentures, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another corporation to the Company,
and the assumption by any such successor of the covenants of the Company
herein and in the Debentures contained; or
(b) to add to the covenants of the Company, for the benefit of the
Holders of the Debentures, or to surrender any right or power herein
conferred upon the Company; or
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(c) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided such other provisions
shall not adversely affect the interests of the Holders of the Debentures;
or
(d) to secure payment of the Debentures equally and ratably with
certain other liens as and to the extent required by this Indenture; or
(e) to make provision with respect to the conversion rights of Holders
of Debentures pursuant to SECTION 14.06 hereof.
SECTION 9.02. Supplemental In dentures With Consent of Debentureholders.
With the consent of the Holders of not less than 66%% in principal amount
of the Outstanding Debentures, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of the Debentures under this Indenture; provided, however, that no
such supplemental indenture shall, without the consent of the Holder of each
Outstanding Debenture affected thereby:
(a) change the Stated Maturity of the principal of, or any instalment
of interest on, any Debenture, or reduce the principal amount thereof or
the interest there on or any premium payable upon the redemption thereof,
or change the coin or currency in which any Debenture or the interest there
on is payable or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case
of redemption, on or after the Redemption Date) or increase the principal
amount of Debentures to be redeemed by any Sinking Fund Payment (as defined
in SECTION 11.01(b)); or
(b) reduce the percentage in principal amount of the Outstanding
Debentures, the consent of whose Holders is required for any such
supplemental indenture or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or
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certain defaults hereunder and their consequences) provided for in this
Indenture; or
(c) modify any of the provisions of this SECTION 9.02 or SECTION 5.13,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Debenture affected thereby; or
(d) adversely affect the right to convert the Debentures as provided
in Article XIV hereof.
It shall not be necessary for any Act of Debentureholders under this
SECTION 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 9.03. Execution of Supplemental In dentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article IX or the modifications thereby
of the trusts created by this Indenture the Trustee shall be entitled to
receive, and (subject to SECTION 6.01) shall be fully protected in relying upon
an Officers' Certificate and Opinion of Counsel as to compliance with conditions
precedent and stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Debentures theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article IX shall
conform to the requirements of the TIA as then in effect.
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SECTION 9.06. Reference in Debentures to Supplemental Indentures.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Debentures so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Debentures.
SECTION 9.07. Modification of Subordination Provisions.
No supplemental indenture shall directly or indirectly modify any provision
of this Indenture so as to affect adversely the nature, manner or extent of the
subordination of the Debentures provided for in Article XIII hereof without the
written consent of the holders of all Senior Indebtedness then outstanding.
ARTICLE X
COVENANTS
SECTION 10.01. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium, if
any) and interest on the Debentures in accordance with the terms of the
Debentures and this Indenture.
SECTION 10.02. Maintenance of Office or Agency.
The Company will maintain one or more offices or agencies in each Place of
Payment where Debentures may be presented or surrendered for payment, where
Debentures may be surrendered for registration of transfer or for exchange or
for conversion and where notices and demands to or upon the Company in respect
of the Debentures and this Indenture may be served. The Company hereby initially
designates the principal corporate trust office of Manufacturers Hanover Trust
Company of New York and the principal corporate trust office of the Trustee as
its agencies in the Borough of Manhattan, The City of New York and in Dallas,
Texas, respectively, and
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Manufacturers Hanover Trust Company of New York and the Trustee are hereby
appointed as the Company's agents at such offices, for such purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any such office or agency.
If at any time the Company shall fail to maintain such office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the principal corporate
trust office of the Trustee, and the Company hereby appoints the Trustee its
agent to receive all such presentations, surrenders, notices and demands.
SECTION 10.03. Money for Debenture Payments to be Held iv Trust.
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of (and premium, if any) or interest
on, any of the Debentures, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the principal of (and premium, if any) or interest on, and
Debentures, deposit with a Paying Agent a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such principal, premium or interest,
and (unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this
SECTION 10.03, that such Paying Agent will
(1) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Debentures in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
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(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Debentures) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
Any money deposited with the Trustee or any Paying Agent or then held by
the Company in trust for the payment of the principal of (and premium, if any)
or interest on any Debenture and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Debenture shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once in an Authorized Newspaper in
each Place of Payment, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 10.04. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year (which on the date hereof ends on October 31, or any
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other date designated by the Company as the end of a fiscal year of the
Company), commencing following the end of fiscal year 1986 of the Company, a
written statement signed by the Chairman of the Board, the President, a Senior
Vice President or a Vice President and by the Treasurer, an Assistant Treasurer,
the Secretary, an Assistant Secretary or an Assistant Controller of the Company,
stating, as to each signer thereof, that
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision and
(2) to the best of his knowledge, based on such review, the Company
has fulfilled all its obligations under this Indenture throughout such
year, and no Event of Default exists or, if there has been a failure in the
fulfillment of any such obligation or an Event of Default exists,
specifying each such failure or existing Event of Default known to him and
the nature and status thereof.
ARTICLE XI
REDEMPTION OF DEBENTURES; SINKING FUND
SECTION 11.01. Right of Redemption; Sinking Fund.
(a) Subject to the provisions of Article XIII hereof, the Company may, at
its option, redeem all, or from time to time any part, of the Debentures on any
date prior to Maturity by payment of the applicable Redemption Price set forth
in the form of Debenture contained in SECTION 2.02 hereof, together with accrued
interest to the Redemption Date; provided, however, that the Company may not
redeem any of the Debentures prior to April 22, 1989 unless, for a period of 20
successive Business days ending within five days of the date of notice of
redemption, the Current Market Price for the Common Stock has exceeded 150% of
the then effective conversion price of the Debentures.
(b) The Company covenants to pay to the Trustee or any Paying Agent, for
application on April 15 in each year commencing with the year 1996 to and
including the year 2010 (hereinafter called a "Sinking Fund Payment Date"), as
and for a mandatory Sinking Kind for the redemption of Debentures, a sum
(hereinafter called the "Sinking Fund Payment") in cash sufficient in each
instance to redeem, at 100% of the principal amount
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thereof, together with accrued interest to the Redemption Date (said percentage
of principal amount being hereinafter called the "Sinking Fund Redemption
Price") Debentures in the principal amount of $2,250,000 (or such lesser amount
equal to the total principal amount of Debentures then Outstanding); provided,
however, that the obligation of the Company to make any Sinking Fund Payment in
cash may, at the option of the Company, and as specified by it in an Officers'
Certificate delivered to the Trustee on or before the February 15 next preceding
any such April 15, be reduced and satisfied to the extent of the aggregate
principal amount of (i) any Debentures delivered to the Trustee by the Company
for cancellation prior to such February 15, (ii) any Debentures redeemed prior
to such February 15 otherwise than through the operation of the Sinking Fund,
and (iii) any Debentures converted into Common Stock pursuant to Article XIV
here of and delivered to the Trustee for cancellation prior to such February 15
and in each case under clauses (i), (ii) and (iii) not theretofore made the
basis for the reduction of a Sinking Fund Payment, and each such Officers'
Certificate shall contain a statement that such Debentures have not theretofore
been made the basis for the reduction of a Sinking Fund Payment.
(c) As soon as practicable after February 15, in each year commencing with
1996, the Trustee shall take the action herein specified to call for redemption
on the next succeeding April 15, at the Sinking Fund Redemption Price, together
with accrued interest to the Redemption Date, an amount of Debentures sufficient
to exhaust, as nearly as practicable, the sums then held by it in the Sinking
Fund or to be paid to it prior to such April 15 for the Sinking Fund pursuant to
SECTION 11.01 (b); provided, however, that if such sums aggregate less than
$225,000, such action shall not be taken unless the Company shall so request the
Trustee in writing. The Company hereby irrevocably authorizes the Trustee to
give notice in the name of the Company of the redemption of such Debentures, in
the manner and with the effect specified in this Article XI, and stating in such
notice that such redemption is for the Sinking Fund.
(d) The Company's obligation to make a Sinking Fund Payment shall
automatically be reduced by an amount equal to the Sinking Fund Redemption Price
allocable to any Debentures or portions thereof called for redemption pursuant
to SECTION 11.01 (c) on any April 15 and converted into Common Stock pursuant to
Article XIV hereof; provided, that if the Trustee
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is not the conversion agent for the Debentures, the Company or such conversion
agent shall give the Trustee written notice prior to the Redemption Date of the
principal amount of Debentures or portions thereof so converted.
SECTION 11.02. Applicability of Article.
Redemption of Debentures at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article XI.
SECTION 11.03. Election to Redeem; Notice to Trustee.
In case of any redemption at the election of the Company of less than all
the Debentures, the Company shall, at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee) notify the Trustee of such Redemption Date and of the principal amount
of Debentures to be redeemed.
SECTION 11.04. Selection by Trustee of Debentures to be Redeemed.
If less than all the Debentures are to be redeemed, the particular
Debentures to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Debentures not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Debentures of a denomination larger than $1,000. The
portions of the principal of Debentures so selected for partial redemption shall
be equal to $1,000 or an integral multiple thereof. If any Debenture selected
for partial redemption is converted in part before the termination of the
conversion right with respect to the portion of the Debenture so selected, the
converted portion of such Debenture shall be deemed to be the portion selected
for redemption.
The Trustee shall promptly notify the Company in writing of the Debentures
selected for redemption and, in the case of any Debenture selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Debentures shall
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relate, in the case of any Debenture redeemed or to be redeemed only in part, to
the portion of the principal of such Debenture which has been or is to be
redeemed.
SECTION 11.05. Notice of Redemption.
Notice of redemption shall be mailed or delivered, with postage or delivery
charges prepaid, not less than 20 nor more than 60 days prior to the Redemption
Date, to each Holder of Debentures to be redeemed, at his address appearing in
the Debenture Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Debentures are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the Debentures to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Debenture, and that interest thereon shall cease
to accrue from and after said date,
(5) the place where such Debentures are to be surrendered for payment
of the Redemption Price, which shall be the office or agency of the Company
in each Place of Payment,
(6) if such be the case, that such Debentures are to be redeemed
through operation of the Sinking Fund, and
(7) the current conversion price or conversion rate of such
Debentures, the place or places where such Debentures may be surrendered
for conversion, that Holders who wish to convert must comply with the
eleventh paragraph on the reverse of the Debentures and the time at which
the right to convert such Debentures will terminate in accordance with this
Indenture.
Notice of redemption of Debentures to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name of and at the expense of the Company.
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SECTION 11.06. Deposit of Redemption Price.
Prior to any Redemption Date or Sinking Fund Payment Date, as the case may
be, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in SECTION 10.03) an amount of money in immediately available funds
sufficient to pay the Redemption Price, together with accrued interest to the
Redemption Date or Sinking Fund Payment Date, as the case may be, of all the
Debentures which are to be redeemed on that date.
SECTION 11.07. Debentures Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Debentures so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, together with accrued interest thereon to
the Redemption Date and from and after such date (unless the Company shall
default in the payment of the Redemption Price) such Debentures shall cease to
bear interest. Upon surrender of such Debentures for redemption in accordance
with said notice, such Debentures shall be paid by the Company at the Redemption
Price, together with accrued interest thereon to the Redemption Date.
Installments of interest on any Debenture called for redemption, the Stated
Maturity of which installments is on or prior to the Redemption Date, shall be
payable (but without interest thereon, unless the Company shall default in the
payment thereof) to the Holders of such Debentures registered as such on the
relevant Regular Record Dates according to their terms and the provisions of
SECTION 3.07.
If any Debenture called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Debentures.
SECTION 11.08. Debentures Redeemed in Part.
Any Debenture which is to be redeemed only in part shall be surrendered at
a Place of Payment (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder
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thereof or his attorney duly authorized in writing) and the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Debenture without service charge, a new Debenture or Debentures, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Debenture so surrendered.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Exemption from Individual Liability.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Debenture, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors, as such, of the Company or
of any successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Debentures
or implied therefrom. Any and all such personal liability, either at common law
or in equity or by constitution or statute, of, and any and all such rights and
claims against, every such incorporator, stockholder, officer or director, as
such, because of the creation of the indebtedness hereby authorized, or under or
by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Debentures or implied therefrom, are hereby expressly
waived and released as a condition of, and as a consideration for, the execution
of this Indenture and the issue of such Debentures.
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ARTICLE XIII
SUBORDINATION OF DEBENTURES
SECTION 13.01. Agreement of Subordination.
The Company covenants and agrees, and each holder of Debentures, by his
acceptance thereof, likewise covenants and agrees, that the indebtedness
evidenced by the Debentures and the payment of the principal thereof and
premium, if any, and interest thereon shall be subordinate and subject in right
of payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Indebtedness. The provisions of this Article XIII
are made for the benefit of the holders of Senior Indebtedness, and such holders
shall, at any time, be entitled to enforce such provisions against the Company
or any Debentureholder.
SECTION 13.02. Priority of Senior Indebtedness on Distribution.
(a) In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relative to the Company or its creditors or its property, (ii) any
proceeding for voluntary liquidation, dissolution or other winding up of the
Company whether or not involving insolvency or bankruptcy proceedings, and (iii)
any assignment for the benefit of creditors or any other marshalling of the
assets of the Company, then, and in any such event, all Senior Indebtedness
(including interest accruing on such Senior Indebtedness after the date of
filing of a petition or other action commencing any such proceeding) shall first
be paid in full before any payment or distribution of any character, whether in
cash, securities or other property (other than shares of stock of the Company,
as reorganized or readjusted, or securities of the corporation provided for by a
plan of reorganization or readjustment, the payment of which is subordinated to
the payment of the Senior Indebtedness), shall be made on account of the
Debentures; and any payment or distribution of any character, whether in cash,
securities or other property, which would otherwise, but for the provisions of
this SECTION 13.02, be payable or deliverable in respect of the Debentures shall
be paid or delivered directly to the holders of Senior Indebtedness (or their
duly authorized representatives or the trustee or trustees under any indenture
pursuant to which any Senior Indebtedness is outstanding), in the proportions in
which they hold the same, until all Senior Indebtedness shall have
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been paid in full. In case, despite the foregoing provisions, any payment or
distribution shall, in any such event, be paid or delivered to any Holder of the
Debentures or to the Trustee for their benefit before all Senior Indebtedness
shall have been paid in full, such payment or distribution shall be held in
trust for and so paid and delivered to the holders of Senior Indebtedness (or
their duly authorized representatives or the trustee or trustees under any
indenture pursuant to which any Senior Indebtedness is outstanding), in the
proportions in which they hold the same, until all Senior Indebtedness shall
have been paid in full.
(b) The Company shall give prompt written notice to the Trustee of any
insolvency, bankruptcy, liquidation, reorganization, readjustment, composition,
dissolution, assignment, marshalling of assets or similar proceeding of the
Company within the meaning of this SECTION 13.02. Upon any payment or
distribution of assets of the Company referred to in this Article XIII, the
Trustee, subject to the provisions of Article VI (as between itself and the
Debentureholders), any Paying Agent and the holders of the Debentures shall be
entitled to rely upon a certificate of the trustee in bankruptcy, receiver,
assignee for the benefit of creditors or other liquidating agent making such
payment or distribution, delivered to the Trustee or to the holders of
Debentures, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed there on and all other facts pertinent thereto or
to this Article XIII.
(c) In the event that the Trustee determines that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
SECTION 13.02, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, as to the extent to which such person is entitled to
participate in such payment or distribution, and as to other facts pertinent to
the rights of such person under this SECTION 13.02, and if such evidence is not
furnished, the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
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SECTION 13.03. Subrogation of the Debentures.
Subject to the payment in full of all Senior Indebtedness, the Holders of
the Debentures shall be subrogated equally and ratably with the holders of all
other subordinated indebtedness of the Company that by its terms or by the terms
of this Indenture ranks on a parity with the Debentures and is entitled to like
rights of subrogation (such subordinated indebtedness being hereinafter in this
SECTION 13.03 referred to as ap~~~ passu indebtedness") to the rights of the
holders of Senior Indebtedness to receive payments or distributions of assets of
the Company made on Senior Indebtedness until the principal of and premium, if
any, and interest on the Debentures shall be paid in full; and, for the purposes
of such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Debentures or a pari passu indebtedness, or the Trustee or the trustee with
respect to any pari passu indebtedness, would be entitled except for the
provisions of this Article XIII, and no payment over pursuant to the provisions
of this Article XIII to the holders of Senior Indebtedness by the Holders of the
Debentures or the Trustee, shall, as between the Company, its creditors other
than the holders of Senior Indebtedness, and the Holders of Debentures or of
pari passu indebtedness, be deemed to be a payment by the Company to or on
account of Senior Indebtedness, it being understood that the provisions of this
Article XIII are and are intended solely for the purpose of defining the
relative rights of the Holders of the Debentures, the holders of other pari
passu indebtedness and the holders of Senior Indebtedness.
SECTION 13.04. No Impairment of Obligation to Pay.
Nothing contained in this Article XIII or elsewhere in this Indenture, or
in the Debentures, is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Debentures the principal of (and premium, if any)
and interest on the Debentures, as and when the same shall become due and
payable in accordance with their terms, or to affect the relative rights of the
Holders of the Debentures and other creditors of the Company other than the
holders of the Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or
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the holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article XIII of the holders of Senior Indebtedness in respect of
cash, property or securities of the Company received upon exercise of any such
remedy.
SECTION 13.05. No Payments During Defaults on Senior Indebtedness.
In the event and during the continuation of any default or event of default
in respect of any Senior Indebtedness or under any agreement under which any
Senior Indebtedness was issued continuing beyond the period of grace, if any,
specified in such agreement, then, unless and until such default shall have been
cured or waived or shall have ceased to exist, no payment shall be made by the
Company and, except as provided in SECTION 13.09, no application of funds shall
be made by the Trustee or any Paying Agent with respect to the principal of (or
premium, if any) or interest on the Debentures or as a Sinking Fund for the
Debentures except that the Company's obligation to make Sinking Kind Payments
may be reduced in accordance with the provisions of clauses (i), (ii), and (iii)
of paragraph (b) of SECTION 11.01. Nothing in this SECTION 13.05 shall prevent
the Company from making, or the Trustee or any Paying Agent from receiving or
applying, any payment in connection with the redemption of Debentures if notice
of such redemption has been mailed pursuant to Article kl hereof prior to the
happening of such default with respect to any Senior Indebtedness.
SECTION 13.06. Right of Company to Make Payments at Any Time.
Nothing contained in this Article XIII or elsewhere in this Indenture, or
in any of the Debentures, shall prevent the Company from making payment of
principal of (or premium, if any) or interest on the Debentures or as a Sinking
Kind for the Debentures at any time except under the conditions described in
SECTION 13.02 or SECTION 13.05. Except in the circumstances described in the
preceding sentence, nothing contained in this Article XIII or elsewhere in this
Indenture, or in any of the Debentures, shall prevent the application by the
Trustee or any Paying Agent of any moneys deposited with it hereunder for the
purpose of the payment of or on account of the principal of (or premium, if any)
or interest on the Debentures or as a Sinking
Kind for the Debentures and, in any case, the
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Trustee or any Paying Agent may make any such application unless and until the
Trustee or such Paying Agent, respectively, shall have received the notice
provided for in SECTION 13.09 at the time specified therein.
SECTION 13.07. Certain Holders of Senior Indebtedness.
The Trustee, any paying or conversion agent, or Debenture Registrar may be
holders of Senior Indebtedness and shall be entitled to all the rights set forth
in this Article XIII in respect of any Senior Indebtedness at any time held by
it, to the same extent as any holder of Senior Indebtedness, and nothing in
SECTION 6.13 or elsewhere in this Indenture shall deprive the Trustee, any
Paying Agent, Debenture Registrar or conversion agent of any of its rights as
such holder. Nothing in this Article XIII shall apply to claims of or payments
to the Trustee under or pursuant to SECTION 6.07.
SECTION 13.08. Trustee to Effectuate Subordination.
Each holder of Debentures by his acceptance thereof authorizes and directs
the Trustee in his behalf to take such action as may be necessary or appropriate
to effectuate, as between Holders of the Debentures and holders of Senior
Indebtedness, the subordination as provided in this Article XIII and appoints
the Trustee his attorney-in-fact for any and all such purposes.
SECTION 13.09. Trustee Not Charged With Knowledge of Prohibition.
Notwithstanding any of the provisions of this Article XIII or any other
provision of this Indenture, neither the Trustee nor any Paying Agent shall at
any time be charged with knowledge of any default or event of default with
respect to any Senior Indebtedness as specified in SECTION 13.02 or SECTION
13.05 or the existence of any facts which would prohibit the making of any
payment of moneys to or by the Trustee or any Paying Agent, respectively, unless
and until the Trustee or such Paying Agent, respectively, shall have received
written notice thereof signed by an officer of the Company or by a holder of
Senior Indebtedness who shall have been certified by the Company or otherwise
established to the reasonable satisfaction of the Trustee to be such holder, or
by the trustee under any indenture pursuant to which Senior Indebtedness shall
be outstanding; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of SECTION 6.01 (as between itself and the
Debentureholders), or
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such Paying Agent, respectively, shall be entitled in all respects to assume
that no such default or event of default has occurred and that no such facts
exist; provided that if the Trustee or any Paying Agent shall not have received
with respect to such moneys the notice provided for in this SECTION 13.09 at
least ten days prior to the date upon which by the terms hereof any such moneys
may become payable for any purpose (including, without limitation, the payment
of either the principal of or premium, if any, or interest on any Debenture),
then, anything herein contained to the contrary notwithstanding, the Trustee or
such Paying Agent, respectively, shall have full power and authority to receive
such moneys and to apply the same to the purpose for which they were received,
and shall not be affected by any notice to the contrary which may be received by
it on or after such date; and provided that, if prior to the date of the mailing
of the notice of redemption of any Debentures pursuant to Article XI, the
Trustee or any Paying Agent shall not have received such notice with respect to
any moneys which may become payable in connection with the redemption of such
Debentures, then, anything herein contained to the contrary notwithstanding, the
Trustee or such Paying Agent, respectively, shall have full power and authority
to receive any moneys which may be paid to it for such purpose and to apply the
same to the redemption of such Debentures, and shall not be affected by any
notice to the contrary which may be received by it on or after such date of
mailing.
SECTION 13.10. Noncompliance Not to Affect Subordination.
(a) No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder of
Senior Indebtedness, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
any such holder of Senior Indebtedness may have or be otherwise charged with.
(b) Without limiting the generality of paragraph (a) of this SECTION 13.10,
the holders of Senior Indebtedness may, without affecting in any manner the
subordination of the payment of the principal of and premium, if any, and
interest on the Debentures, at any time or from time to time and in their
absolute discretion, change the manner, place or terms of payment,
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change or extend the time of payment of, or renew or alter, any Senior
Indebtedness, or release any person liable for the payment of the Senior
Indebtedness or any security therefor, or amend or supplement any instrument
pursuant to which any Senior Indebtedness is issued, or exercise or refrain from
exercising any other of their rights under the Senior Indebtedness including,
without limitation, the waiver of default or event of default thereunder, all
without notice to or assent from the Holders of the Debentures or the Trustee.
SECTION 13.11. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.
The Trustee shall not have any fiduciary duty to any holder of Senior
Indebtedness, and shall not be liable to any such holder if it shall pay over or
distribute to the Holders of the Debentures or to the Company or to any other
person, moneys or assets to which any holder of Senior Indebtedness shall be
entitled pursuant to this Article XIII or otherwise.
SECTION 13.12. Parity With 11% Convertible Subordinated Debentures.
The indebtedness evidenced by the Debentures issued hereunder shall not be
"senior indebtedness" as such term is defined in the Indenture dated as of
February 15, 1981 between the Company and First National Bank in Dallas, as
Trustee, for which MBank Dallas, National Association, is the successor trustee,
but shall rank on a parity with the debentures issued under such Indenture and
shall be entitled to like rights of subrogation.
ARTICLE XIV
CONVERSION OF DEBENTURES
SECTION 14.01. Conversion Privilege.
Subject to and upon compliance with the provisions of this Article XIV, the
Holder of any Debenture shall have the right, at his option, at any time prior
to the close of business on April 15, 2011 (or if such day is not a Business
day, on the immediately preceding Business day), or in case such Debenture or
portion thereof is called for redemption, then, in respect of such Debenture or
portion thereof called for redemption, until and including but not later than
the close of business on the third Business day immediately preceding the
Redemption Date (unless the Company shall
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default in the payment of the Redemption Price thereof, in which case at any
time prior to the close of business on the date of actual redemption), to
convert the principal amount of such Debenture, or any portion of such principal
amount (which shall be $1,000 or an integral multiple thereof), into fully paid
and nonassessable shares of Common Stock (as such Common Stock shall then be
constituted) at the Conversion Price in effect at the Date of Conversion (as
defined in SECTION 14.02).
SECTION 14.02. Manner of Exercise of Conversion Privilege
In order to exercise the conversion privilege set forth in SECTION 14.01,
the Holder of any Debenture to be converted in whole or in part shall surrender
such Debenture to the Company during usual business hours at any of its offices
or agencies maintained for the purpose as provided in SECTION 10.02, and at the
time of such surrender shall give written notice, in substantially the form set
forth on the reverse of such Debenture, to the Company at such office or agency
that the Bolder elects to convert such Debenture or the portion thereof
specified in such notice. Such notice shall also state the name or names (with
address or addresses) in which the certificate or certificates for shares of
Common Stock which shall be deliverable upon such conversion shall be
registered. If any Debenture, or part thereof, is surrendered for conversion at
any time after the Regular Record Date with respect to an Interest Payment Date
and before such Interest Payment Date, then such Debenture, or part thereof
surrendered for conversion, shall be accompanied by cash in an amount equal to
the interest that would have accrued on such Debenture, or part thereof
surrendered for conversion, from the Date of Conversion (as defined in this
SECTION 14.02) to such Interest Payment Date at the rate of 714% per annum;
provided, however, that no such payment need be made if there shall exist at the
Date of Conversion a default in the payment of interest on the Debenture. The
funds so delivered shall be paid to the Company on or after such Interest
Payment Date unless the Company shall default in the payment of interest due on
such Interest Payment Date, in which event such funds shall be repaid to the
Holder delivering the same. As promptly as practicable after the receipt of such
notice and the surrender of such Debenture as aforesaid, the Company shall,
subject to the provisions of SECTION 14.08, issue and deliver at such office or
agency to such Holder, or on his written order, a certificate or certificates
for the number of full shares of Common Stock deliverable on such conversion of
such Debenture
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or portion thereof in accordance with the provisions of this Article XIV and
cash, as provided in SECTION 14.03, in respect of any fraction of a share of
Common Stock otherwise deliverable upon such conversion. In case any Debenture
of a denomination greater than $1,000 shall be surrendered for partial
conversion, the Company shall, subject to the provisions of SECTION 14.08,
execute and register and the Trustee shall authenticate and deliver to or upon
the written order of the Holder of the Debenture so surrendered, without charge
to such Holder, except as provided in SECTION 14.08, a new Debenture or
Debentures of authorized denominations in an aggregate principal amount equal to
the unconverted portion of the Debentures so surrendered. Such conversion shall
be deemed to have been effected immediately prior to the close of business on
the date (herein called the "Date of Conversion") on which such notice shall
have been received by the Company and such Debenture shall have been surrendered
as aforesaid, and the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become on the Date of Conversion the holder
or holders of record of the shares represented thereby; provided, however, that
any such surrender on any date when the stock transfer books of the Company
shall be closed shall constitute the person or persons in whose name or names
the certificate or certificates for such shares are to be issued as the record
holder or holders thereof for all purposes at the opening of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall nevertheless be at the Conversion Price in effect at the close
of business, and such Debenture shall cease to bear interest, on the Date of
Conversion. Subject to the aforesaid requirement for a payment in the event of a
conversion after a Regular Record Date and before the related Interest Payment
Date, no payment or adjustment shall be made upon conversion on account of any
interest accrued on any Debenture converted or for dividends or distributions on
any shares of Common Stock delivered upon conversion of any Debenture.
SECTION 14.03. Fractional Shares.
No fractions of shares of Common Stock or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of Debentures. If more
than one Debenture shall be surrendered for conversion at one time by the same
Holder, the number of full shares of Common Stock which shall be deliverable
upon conversion thereof shall be computed
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on the basis of the aggregate principal amount of the Debentures (or specified
portions thereof to the extent permitted hereby) so surrendered. If any fraction
of a share of Common Stock would, except for the provisions of this SECTION
14.03, be deliverable on the conversion of any Debenture or Debentures (or
specified portions thereof), the Company shall make payment in lieu thereof in
an amount of cash equal to the value of such fraction computed on the basis of
the Current Market Price of the Common Stock on the last Business day prior to
the Date of Conversion.
SECTION 14.04. Conversion Price.
The initial Conversion Price per share of Common Stock deliverable upon
conversion of the Debentures shall be as specified in the form of Debenture
hereinabove recited.
SECTION 14.05. Adjustment of Conversion Price.
The conversion price (herein called the "Conversion Price") shall be
subject to adjustment from time to time as follows:
(a) In case the Company shall (1) pay a dividend in shares of Common
Stock to holders of any class of capital stock of the Company, (2) make a
distribution in shares of Common Stock to holders of any class of capital
stock of the Company, (3) subdivide its outstanding shares of Common Stock
into a greater number of shares of Common Stock or (4) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, the Conversion Price in effect immediately prior to such
action shall be adjusted so that the Holder of any Debenture thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock which he would have owned immediately following such
action had such Debentures been converted immediately prior thereto. An
adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date in the case of a dividend or distribution
and shall become effective immediately after the effective date in the case
of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to all holders
of Common Stock entitling them (for a period commencing no earlier than the
record date for the determination of holders of Common Stock entitled to
receive such rights or warrants and expiring not more than 45 days after
such record date) to subscribe for or
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purchase shares of Common Stock (or securities convertible into Common
Stock) at a price per share less than the current market price (as
determined pursuant to subsection (d) below) of the Common Stock on such
record date, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding on such record
date, plus the number of shares of Common Stock which the aggregate
offering price of the offered shares of Common Stock (or the aggregate
conversion price of the convertible securities so offered) would purchase
at such current market price, and of which the denominator shall be the
number of shares of Common Stock so outstanding on such record date plus
the number of additional shares of Common Stock offered (or into which the
convertible securities so offered are convertible). Such adjustment shall
become effective immediately after such record date.
(c) In case the Company shall distribute to substantially all holders of
Common Stock shares of any class of stock other than Common Stock, evidences of
indebtedness or other assets (other than cash dividends out of retained
earnings), or shall distribute to substantially all holders of Common Stock
rights or warrants to subscribe to securities (other than those referred to in
subsection (b) above), then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such distribution by
a fraction of which the numerator shall be the current market price (determined
as provided in subsection (d) below) of the Common Stock on the record date
mentioned below less the then fair market value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive evidence of
such fair market value) of the portion of the assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock, and of
which the denominator shall be such current market price of the Common Stock.
Such adjustment shall become effective immediately after the record date for the
determination of the holders of Common Stock entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants (other than those
<PAGE>
87
referred to in subsection (b) above) ("Rights") pro rata to holders of
Common Stock, the Company may, in lieu of making any adjustment pursuant to this
SECTION 14.05, make proper provision so that each holder of a Debenture who
converts such Debenture (or any portion thereof) after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
Rights to be determined as follows: (i) if such conversion occurs on or prior to
the date for the distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of Rights to
which a holder of a number of shares of Common Stock equal to the number of
Conversion Shares is entitled at the time of such conversion in accordance with
the terms and provisions of and applicable to the Rights; and (ii) if such
conversion occurs after the Distribution Date, the same number of Rights to
which a holder of the number of shares of Common Stock into which the principal
amount of the Debenture so converted was convertible immediately prior to the
Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) For the purpose of any computation under subsections (b) and (c) above,
the current market price of the Common Stock on any date shall be deemed to be
the average of the Current Market Prices of the Common Stock for 30 consecutive
trading days commencing 45 trading days before the date in question.
(e) In any case in which this SECTION 14.05 shall require that an
adjustment be made immediately following a record date, the Company may elect to
defer the effectiveness of such adjustment (but in no event until a date later
than the effective time of the event giving rise to such adjustment), in which
case the Company shall, with respect to any Debenture converted after such
record date and before such adjustment shall have become effective (i) defer
paying any cash payment pursuant to SECTION 14.03 or delivering to the Holder of
such Debenture the number of shares of Common Stock and other capital stock of
the Company deliverable upon such conversion in excess of the number of shares
of Common Stock and other capital stock of the Company
<PAGE>
88
deliverable thereupon only on the basis of the Conversion Price prior to
adjustment, and (ii) not later than five business days after such adjustment
shall have become effective, pay to the Holder of such Debenture the appropriate
cash payment pursuant to SECTION 14.03 and issue to such Holder the additional
shares of Common Stock and other capital stock of the Company deliverable
on such conversion.
(f) No adjustment in the Conversion Price shall be required unless such
adjustment would result in an increase or decrease of at least 1% thereof,
provided, however, that any adjustments which by reason of this subsection (f)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article XIV shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be. Except as provided in subsections (a) and (b) above, the Conversion Price
shall not be adjusted for the issuance of Common Stock at less than either the
Current Market Price or the current Conversion Price, whether upon exercise of
present or future options, the conversion of present or future convertible
securities, or otherwise. Anything in this SECTION 14.05 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Conversion Price, in addition to those required under this SECTION 14.05, as it
in its discretion shall determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights or warrants to purchase
stock or securities, or distribution of other assets (other than cash dividends)
hereafter made by the Company to the holders of Common Stock shall not be
taxable.
(g) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly (i) file with the Trustee and each office or agency
maintained for the purpose of conversion of Debentures as provided in SECTION
10.02 an Officers' Certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence of the correctness of
such adjustment, and (ii) mail or cause to be mailed to the Holders of the
Debentures at their last addresses as they shall appear on the Debenture
Register a notice of such adjustment.
<PAGE>
89
SECTION 14.06. Effect of Reclassifications, Consolidations, Mergers or Sales on
Conversion Privilege.
If any of the following shall occur, namely: (i) any reclassification or
change of outstanding shares of Common Stock issuable upon conversion of
Debentures (other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger to which the Company is a party
other than a merger in which the Company is the continuing corporation and which
does not result in any reclassification of, or change (other than a change in
name, or par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock or (iii) any sale or conveyance of all or substantially
all of the property or business of the Company as an entirety, then the Company,
or such successor or purchasing corporation, as the case may be, shall
as a condition precedent to such reclassification, change, consolidation,
merger, sale or conveyance, execute and deliver to the Trustee a supplemental
indenture providing that the Holder of each Debenture then outstanding shall
have the right to convert such Debenture into the kind and amount of shares of
stock and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock deliverable upon conversion of such
Debenture immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. Such supplemental indenture shall provide for
adjustments of the Conversion Price which shall be as nearly equivalent as may
be practicable to the adjustments of the Conversion Price provided for in this
Article XIV. The foregoing, however, shall not in anyway affect the right a
holder of a Debenture may otherwise have, pursuant to clause (ii) of the last
sentence of subsection (c) of SECTION 14.05, to receive Rights upon conversion
of a Debenture. If, in the case of any such consolidation, merger, sale or
conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities and property of a corporation other than the successor or
purchasing corporation, as the case may be, in such consolidation, merger, sale
or conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the Holders of the Debentures
<PAGE>
90
as the Board of Directors of the Company shall reasonably consider necessary by
reason of the foregoing. The provisions of this SECTION 14.06 shall similarly
apply to successive consolidations, mergers, sales or conveyances.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Holders of the Debentures upon the
conversion of their Debentures after any such reclassification, change,
consolidation, merger, sale or conveyance or to any adjustment to be made with
respect thereto, but may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the Officers'
Certificate (which the Company shall be obligated to file with the Trustee prior
to the execution of any such supplemental indenture) with respect thereto.
SECTION 14.07. Notice of Certain Events.
In case:
(a) the Company shall declare a dividend (or any other distribution)
payable to the holders of Common Stock otherwise than in cash; or
(b) the Company shall authorize the granting to the holders of
substantially all the Common Stock of rights to subscribe for or purchase
any shares of stock of any class or of any other rights; or
(c) the Company shall authorize any reclassification or change of
Common Stock (other than a subdivision or combination of its outstanding
shares of Common Stock), or any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the
Company is required, or the sale or conveyance of all or substantially all
the property or business of the Company; or
(d) there shall be proposed any voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, the Company shall cause to be filed with the Trustee and at each office or
agency maintained for the purpose of conversion of the Debentures as provided in
SECTION 10.02, and shall cause to be mailed to the Holders of the
<PAGE>
91
Debentures at their last addresses as they appear on the Debenture Register, at
least 20 days before the date hereinafter in this SECTION 14.07 specified (or
the earlier of the dates hereinafter in this SECTION 14.07 specified, in the
event that more than one date is specified), a notice stating the date on which
(1) a record is expected to be taken for the purpose of such dividend,
distribution or rights, or if a record is not to be taken, the date as of which
the holders of Common Stock of record are to be entitled to such dividend,
distribution or rights are to be determined, or (2) such reclassification,
change, consolidation, merger, sale, conveyance, dissolution, liquidation or
winding-up is expected to become effective and the date, if any is to be fixed,
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, change, consolidation, merger,
sale, conveyance, dissolution, liquidation or winding-up. Failure to send such
notice or any defect in it shall not affect the validity of such transaction.
SECTION 14.08. Taxes on Conversions.
The issue of stock certificates on conversions of the Debentures and of new
Debentures on partial conversions of the Debentures shall be made without charge
to the converting Debentureholder for any tax in respect of the issue thereof.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any registration of transfer involved in the issue and delivery of
Common Stock or any new Debenture in any name other than that of the Holders of
any Debenture converted, and the Company shall not be required to so issue or
deliver any stock certificate or new Debenture unless and until the Person or
Persons requesting the registration of transfer shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 14.09. Company to Reserve Common Stock.
The Company shall reserve, free from preemptive rights, out if its
authorized but unissued or treasury shares of Common Stock, sufficient shares of
Common Stock to provide for the conversion of all the Debentures as such
Debentures are from time to time presented for conversion.
<PAGE>
92
The Company covenants that it will in good faith and as expeditiously as
possible secure registration with or approval of any governmental authority
under any Federal or state law regulating offer or delivery of shares of Common
Stock upon conversion of the Debentures and to list such shares with or upon any
stock exchange on which the Common Stock is listed as of the Date of Conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the Common Stock, the
Company will take all corporate action which may, in the opinion of counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
delivered upon conversion of the Debentures will be validly issued, fully paid
and nonassessable by the Company and free from all taxes, liens, security
interests and charges with respect to the issuance thereof.
SECTION 14.10. Disclaimer of Responsibility for Certain Matters.
Neither the Trustee nor any conversion agent (other than the Company) shall
at any time be under any duty or responsibility to any Holder of a Debenture to
determine whether any facts exist which may require any adjustment of the
Conversion Price, or with respect to the Officers' Certificate referred to in
SECTION 14.05(g), or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or herein or in any
supplemental indenture provided to be employed, in making the same. Neither the
Trustee nor any conversion agent (other than the Company) shall be accountable
with respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, which may at any time be issued
or delivered upon the conversion of any Debenture; and neither the Trustee nor
any conversion agent (other than the Company) makes any representation with
respect thereto. Neither the Trustee nor any conversion agent (other than the
Company) shall be responsible for any failure of the Company to make any cash
payment or to issue, register the transfer of or deliver any shares of Common
Stock or stock certificates or other securities or property upon the surrender
of any Debenture for the purpose of
<PAGE>
93
conversion or to comply with any of the covenants of the Company contained in
this Article XIV.
SECTION 14.11. Return of Money Deposited for Converted Debentures.
Any funds which at any time shall have been deposited by the Company
or on its behalf with the Trustee or any other paying agent for the purpose of
paying the principal of (premium, if any) and interest on, any Debentures and
which shall not be required for such purposes because of the conversion of such
Debentures, as provided in this Article XIV, shall after such conversion be
repaid to the Company by the Trustee or such other payIng agent.
SECTION 14.12. Cancellation of Converted Debentures.
All Debentures delivered to the Company or any conversion agent upon
conversion pursuant to this Article XIV, shall be delivered to the Trustee for
cancellation.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
RECOGNITION EQUIPMENT INCORPORATED
[CORPORATE SEAL]
By /s/ WILLIAM G. MOORE, JR.
William G. Moore, Jr., President
Attest:
/s/ THOMAS A. LOOSE
Thomas A. Loose, Secretary
MBANK DALLAS, NATIONAL ASSOCIATION,
as Trustee
[CORPORATE SEAL]
By /s/ D. T. OBERGFELL
D. T. Obergfell, Vice President
Attest:
/s/ ROBERT PATTERSON
Robert Patterson, Trust Officer
<PAGE>
94
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
William G. Moore, Jr. and Thomas A. Loose, President and Secretary,
respectively, of Recognition Equipment Incorporated, a corporation, known to me
to be the persons whose names are subscribed to the foregoing instrument and
acknowledged to me that they executed the same as the act of said corporation
for the purposes and consideration therein expressed and in the capacities
therein stated.
Given under my hand and seal of office this 3rd day of April, 1986.
[SEAL] /s/ CAROL S. LYON
Notary Public in and for
The State of Texas
My Commission Expires:
June 29, 1989
<PAGE>
95
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared D. T.
Obergfell and Robert Patterson, Vice President and Trust Officer, respectively,
of MBank Dallas, National Association, a national banking association, known to
me to be the persons whose names are subscribed to the foregoing instrument and
acknowledged to me that they executed the same as the act of said national
banking association for the purposes and consideration therein expressed and in
the capacities therein stated.
Given under my hand and seal of office this 3rd day of April, 1986.
[SEAL]
/s/ ELIZABETH T. SELVEY
Notary Public in and for
The State of Texas
My Commission Expires:
November 28, 1988
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
This First Supplemental indenture, dated as of November l, 1987 (the
"Supplemental indenture") is entered into by and among Recognition Equipment
incorporated, a corporation organized and existing under the laws of the State
of Delaware (the "Company"), MBank Dallas, National Banking Association (the
"Resigning Trustee"), and MTrust Corp, a Texas trust company (the "Successor
Trustee") in order to supplement and amend that certain Indenture dated April 3,
1986, among the Issuer and the Resigning Trustee, as amended to date (the
"Indenture"). Terms used herein which are not separately defined are used as
defined in the Indenture.
WHEREAS, the Resigning Trustee hereby indicates its desire to resign as
Trustee and to have its affiliate, the Successor Trustee, succeed it in such
capacity, and the Company is willing to accept the resignation of the Resigning
Trustee and to appoint the Successor Trustee in its place pursuant to the terms
of this Supplemental Indenture;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto, for themselves and the benefit of the holders of the
Debentures without, preference, priority or distinction among them, agree as
follows:
1. Resignation and Appointment of Successor Trustee, Paying Agent and
------------------------------------------------------------------
Registrar. The Resigning Trustee hereby confirms its resignation as Trustee,
- ---------
Paying Agent and Registrar under the Indenture, as of the effective date of this
Supplemental Indenture and the effectiveness of the appointment of the Successor
Trustee as the Successor Trustee, Paying Agent and Registrar under the
Indenture. The Company hereby appoints and designates the Successor Trustee as
the Successor Trustee, Paying Agent and Registrar under the Indenture as of the
effective date of this Supplemental Indenture.
2. Amendments to Permit Successor Trustee to Serve. If to the extent
-----------------------------------------------
required under the Indenture in order to permit the Successor Trustee to serve
and qualify as the Trustee, the Indenture is hereby amended as follows:
(a) Notwithstanding any provision in the Indenture to the contrary,
the types of organizations permitted to serve as Trustee under the
Indenture shall be expanded to include any corporation incorporated under
Chapter 388, Acts of the 55th Legislature, Regular Session, 1957 (Article
1513a, Vernon's Texas Civil Statutes), as amended; and
<PAGE>
(b) Notwithstanding any provision in the Indenture to the contrary,
provided that the Trustee satisfies the minimum capitalization requirements
set forth in SECTION 310(a)(2) of the Trust indenture Act, the separate
eligibility requirements set forth herein with respect to the capital and
surplus of the Trustee shall be deemed to have been satisfied if the parent
corporation of the affiliated group of corporations (as defined by SECTION
1504 of the Internal Revenue Code of 1986) of which the Trustee is a member
has filed an undertaking, pursuant to the Texas Substitute Fiduciary Act of
May 25, 1987, CH. 207, 1987 Texas Laws, with the Banking Commissioner of
the State of Texas evidencing its irrevocable undertaking to be fully
responsible for the acts and omissions of the Trustee, and such parent
company and its subsidiaries satisfy such capital and surplus requirements
on a consolidated basis.
(c) Notwithstanding any provision in the Indenture to the contrary,
the Trustee shall not be required to maintain any office within any
designated city within the State of Texas so long as the Trustee maintains
at least one office within such state.
3. Further Assurances. Upon request of any party to this Supplemental
------------------
indenture, the other parties to this Supplemental Indenture shall execute and
deliver such further instruments and do such further acts as may reasonably be
necessary or advisable to more effectually carry out the purposes of this
Supplemental indenture.
4. Notices. If required by the Indenture, notices of this Supplemental
--------
Indenture, and the appointment of the Successor Trustee shall be delivered to
the holders of the Debentures.
5. Continuation. Except as supplemented hereby, the Indenture
-------------
remains in full force and effect in accordance with its terms.
6. Counterparts. This Supplemental Indenture may be executed in one or
------------
more counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts together shall constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Supplemental
Indenture to be effective as of November 1, 1987.
[ SEAL ] Recognition Equipment Incorporated
Attest:
/s/ Thomas A. Loose By: /s/ George A. O'Brien
___________________ Name: George A. O'Brien
-------------------
Title: Vice President & Chief
----------------------
Financial Officer
MBANK DALLAS, N.A.
[ SEAL ]
Attest:
/s/ By: /s/ Virginia Allan
____________________ Name: Virginia Allan
Title: Trust Officer
MTRUST CORP
[ SEAL ]
Attest:
/s/ Reanne Barber By: /s/ Robert L. Peterson
____________________ Name: Robert L. Peterson
Title: Assistant Vice President
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
Before me, the undersigned authority, on this day personally appeared
George A. O'Brien , Vice President and CFO of Recognition Equipment Incorporated
- ------------------ ---------------------- ----------------------------------
, who being by me first duly sworn declared that he/she is the person who signed
the foregoing document, and acknowledged to me that he/she executed the same for
the purposes and consideration therein expressed, in the capacity therein stated
and as the act and deed of said corporation.
Given under my hand and seal of office on this the 12th day of
December, 1987.
/s/ Helen Ray Stephens
-----------------------------
Notary Public, State of Texas
My Commission Expires: NOTARY PUBLIC HELEN RAY STEPHENS
STATE OF TEXAS Notary Public State of Texas
12-4-88 My Commission Expires
______________________
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
Before me, the undersigned authority, on this day personally appeared
Virginia Allan, a Trust Officer of MBank Dallas, N.A., who being by me first
duly sworn declared that he/she is the person who signed the foregoing document,
and acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed, in the capacity therein stated and as the act
and deed of said corporation.
Given under my hand and seal of office on this the 30th day of
October, 1987.
/s/ Teresa M. Holmes
-----------------------------
Notary Public, State of Texas
My Commission Expires: NOTARY PUBLIC TERESA M. HOLMES
STATE OF TEXAS Notary Public State of Texas
______________________ My Commission Expires 1/8/91
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
Before me, the undersigned authority, on this day personally appeared
Robert L. Patterson, an Assistant Vice President of MTrust Corp, who being by me
first duly sworn declared that he is the person who signed the foregoing
document, and acknowledged to me that he/she executed the same for the purposes
and consideration therein expressed, in the capacity therein stated and as the
act and deed of said corporation.
Given under my hand and seal of office on this the 30 day of
October, 1987.
/s/ Teresa M. Holmes
-----------------------------
Notary Public, State of Texas
My Commission Expires: NOTARY PUBLIC TERESA M. HOLMES
STATE SEAL Notary Public State of Texas
_____________________ My Commission Expires 1/8/91
<PAGE>
EXHIBIT 4.3
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of October 12, 1995 by and between
Recognition International Inc. (the "Company"), formerly Recognition Equipment
Incorporated, a corporation duly organized under the laws of the State of
Delaware, having its principal office at 2701 East Grauwyler Road, Irving, Texas
75061, BancTec, Inc. ("Banctec"), a corporation duly organized under the laws of
the State of Delaware, having its principal office at 4435 Spring Valley Road,
Dallas, Texas 75244 and Texas Commerce Bank National Association, as successor
trustee to MTrust Corp., as successor trustee to MBank Dallas, National
Association (together with any successor trustee, the "Trustee"), having its
principal corporate trust office at 2200 Ross Avenue, Dallas, Texas 75201.
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an Indenture dated as of April 3, 1986, as amended by that certain First
Supplemental Indenture dated as of November 1, 1987 (together, the "Original
Indenture"), pursuant to which the Company issued $51,750,000 aggregate
principal amount of its 7 1/4% Convertible Subordinated Debentures due 2011 (the
"Debentures"); and
WHEREAS, Section 9.01(a) of the Original Indenture provides that the
Company and the Trustee may, without the consent of the Debentureholders, enter
into a supplemental indenture to, among other things, evidence the succession of
another corporation to the Company and the assumption by such successor of the
covenants of the Company contained in the Indenture; and
WHEREAS, the Company has entered into an Agreement and Plan of Merger (the
"Agreement"), dated as of May 19, 1995, by and among BancTec, BTEC Merger
Subsidiary, Inc. and the Company, pursuant to which BTEC Merger Subsidiary, Inc.
will be merged with and into the Company with the Company being the surviving
entity and a wholly-owned subsidiary of BancTec (the "Merger"); and
WHEREAS, the Company desires to amend the Original Indenture pursuant to
Section 14.06 to provide for conversion rights of the Debentureholders in
connection with the Merger; and
WHEREAS, pursuant to this Second Supplemental Indenture the Debentures
shall be convertible into common stock of BancTec in the same ratio and on the
same terms as referenced in Article 3 of the Agreement and subject to all
provisions, rights and privileges of the Agreement; and
WHEREAS, the Company has duly authorized the execution and delivery of this
Second Supplemental Indenture;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and intending to
be legally bound, the Company, BancTec and the Trustee hereby amend and
supplement the Original Indenture as follows:
Section 1 Confirmation of Original Indenture. Except as amended and
supplemented hereby, the Original Indenture is hereby ratified, confirmed and
reaffirmed in all respects. The Original Indenture and this Second Supplemental
Indenture shall be read, taken and construed as one and the same instrument.
Section 2 Definitions. The use of terms herein is in accordance with
the definitions, uses and constructions contained in the Original Indenture.
Section 3 Amendments to Article XIV. Section 14.01 of the Original
Indenture is hereby amended so that, as amended, such paragraph shall read in
its entirety as follows:
"Section 14.01. Conversion Privilege.
Subject to and upon compliance with the provisions of this Article
XIV, the Holder of any Debenture shall have the right, at his option, at
any time prior to the close of business on April 15, 2011 (or if such day
is not a Business day, on the immediately preceding Business day), or in
case such Debenture or portion thereof is called for redemption, then, in
respect of such Debenture or portion thereof called for redemption, until
and including but not later than the close of business on the third
Business day immediately preceding the Redemption Date (unless the Company
shall default in the payment of the Redemption Price thereof, in which case
at any time prior to the close of business on the date of actual
redemption), to convert the principal amount of such Debenture, or any
portion of such principal amount (which shall be $1,000 or an integral
multiple thereof), into fully paid and nonassessable shares of Common Stock
of BancTec, Inc. ("BancTec"), a Delaware corporation, in the ratio of .59
of a share of BancTec Common Stock to 1 share of the Common Stock of the
Company at the Conversion Price in effect at the Date of Conversion (as
defined in Section 14.02), and subject to all provisions, rights and
privileges of the Agreement and Plan of Merger, dated as of May 19, 1995,
by and among BancTec, BTEC Merger Subsidiary, Inc. and Recognition
International, Inc."
Section 4 Miscellaneous.
(a) Execution as Supplemental Indenture. This Second Supplemental
-----------------------------------
Indenture is executed and shall be construed as an indenture supplemental to the
Original Indenture and, as provided in the Original Indenture, this Second
Supplemental Indenture forms a part thereof.
-2-
<PAGE>
(b) Counterparts. This Second Supplemental Indenture may be executed in
------------
any number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
(c) Effect of Headings. The headings contained in this Second
------------------
Supplemental Indenture are for convenience only and shall not be deemed to
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company, BancTec and the Trustee have caused this
Second Supplemental Indenture to be signed, sealed and attested on their behalf
by their duly authorized representatives, all as of the date first hereinabove
written, and each of the Company, BancTec and the Trustee hereby waive all
required prior notices to the execution and delivery of this Second Supplemental
Indenture.
-3-
<PAGE>
Attest: RECOGNITION INTERNATIONAL INC.
_____________________________
Secretary
By:__________________
(Seal)
Name:________________
Title:_______________
BANCTEC, INC.
Attest:
_____________________________
Secretary
By:__________________
(Seal)
Name:________________
Title:_______________
Attest:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
_____________________________
Trust Officer
By:_______________________________
(Seal)
Name:________________
Title:_______________
-4-
<PAGE>
EXHIBIT 10.1
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of February 22, 1996, is among: (i) BANCTEC
USA, INC., a Delaware corporation ("Borrower"); (ii) BANCTEC, INC., a Delaware
corporation ("Parent") which owns all of the outstanding stock of Borrower;
(iii) the current Domestic Subsidiaries (as defined below) of Parent which are
listed as such on the signature pages hereof (collectively, the "Other Domestic
Subsidiaries"); (iv) the banks listed on the signature pages hereof (the
"Banks"); and (v) TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association (in its capacity as agent for the Banks, together with its
successors and assigns in such capacity, "Agent," in its capacity as Funds
Administrator, the "Funds Administrator" and, in its individual capacity,
"TCB").
RECITALS:
A. Borrower, Parent and the Other Domestic Subsidiaries have requested
that the Banks extend credit to Borrower to enable it to borrow (i) on a
revolving credit basis up to $50,000,000 and (ii) on a term basis
$43,445,447.59, all on the terms and conditions set forth herein.
B. The Banks are willing to extend credit to Borrower, and TCB is willing
to serve as Agent and Funds Administrator, upon and subject to the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
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,
CREDIT AGREEMENT PAGE 1
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<PAGE>
that at such time was not a wholly-owned Subsidiary, whether such Investment or
acquisition was effected by purchase, exchange, Combination or otherwise.
"ADDITIONAL COSTS" has the meaning assigned to it in Section 5.1(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
-------
Articles II or 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 Credit Agreement, as it may be modified or amended
---------
from time to time hereafter in accordance with the provisions hereof.
"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%).
"ALTERNATE CURRENCY" means French francs, British pounds sterling, Japanese
------------------
yen, Australian dollars, Canadian dollars, German deutschemarks, Netherlands
guilders, Swedish krona and the currency of any other foreign country agreed to
by all of the Banks.
"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.
CREDIT AGREEMENT PAGE 2
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<PAGE>
"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. (Central 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 a rate per annum (rounded upwards, if
-----------------------
necessary, to the nearest 1/100th 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 applicable Interest Rate
Adjustment Factor as of the beginning date of such Interest Period.
"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, (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.
"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 and
327.4 (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
-------------------------
12.11(c).
"AUTHORIZATIONS" has the meaning assigned to it in Section 8.9.
--------------
"BANK" means each of the banks listed on the signature pages of this
----
Agreement.
CREDIT AGREEMENT PAGE 3
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<PAGE>
"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 4.4.
"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 obligations referred to
above in (a), (b), (c), (d) or (e).
"BUSINESS DAY" means a day other than (i) Saturday, (ii) Sunday, or (iii)
------------
any other day on which banks are required or authorized to close in Dallas or
Houston, Texas, or any city in which an Alternate Currency Loan is to be paid or
advanced.
"CASH TAXES" means income Taxes actually paid during the applicable period.
----------
"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. Central 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
CREDIT AGREEMENT PAGE 4
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<PAGE>
Section 5.4 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.
"CLOSING DATE" means February 22, 1996 or such other date upon which
------------
Borrower and Agent may agree.
"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.
----------
"COMMITMENT FEE" means the following fee per annum, based on a 360-day year
--------------
and the actual number of days elapsed, according to Borrower's Debt to
Capitalization Ratio shown below:
<TABLE>
<CAPTION>
Debt to Capitalization Ratio Commitment Fee
---------------------------- --------------
<S> <C>
Less than .25 to 1.0 .1875%
From .25 to 1.0 to .35 to 1.0 .2250%
Above .35 to 1.0 to .45 to 1.0 .2500%
Above .45 to 1.0 .3000%
</TABLE>
CREDIT AGREEMENT PAGE 5
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<PAGE>
"CONSOLIDATED TANGIBLE ASSETS" means net assets of Borrower, Parent and
----------------------------
each of their respective 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 Parent
------------------
and its Subsidiaries for the fiscal year ended March 26, 1995 and the six months
ended September 24, 1995.
"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 SERVICE" means, for any period, (a) scheduled payments of principal
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on all consolidated Debt plus (b) interest expense.
"DEBT TO CAPITALIZATION RATIO" means a ratio of (i) consolidated long term
----------------------------
Debt, including the current maturities thereof but excluding Offset Debt in an
amount not to exceed $10,000,000, to (ii) the sum of consolidated long term
Debt, including the current maturities thereof but excluding Offset Debt in an
amount not to exceed $10,000,000, plus consolidated stockholders' equity, in
each case, of Parent and its Subsidiaries.
"DEBT TO EBITDA RATIO" means the ratio of (i) consolidated long term Debt,
--------------------
including the current maturities thereof but excluding Offset Debt in an amount
not to exceed $10,000,000, of Parent and its Subsidiaries, to EBITDA.
"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
CREDIT AGREEMENT PAGE 6
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<PAGE>
equipment effected in the ordinary course of the Person's business (including,
without limitation, the sale or trade-in of equipment and the sale or other
disposal of excess, obsolete or worn out equipment).
"DISTRIBUTION" means for any Person (a) with respect to any capital stock
------------
issued by such Person, the retirement, redemption, purchase or other acquisition
for value of any such stock, (b) the declaration or payment of any dividend or
other distribution on or with respect to any such stock, other than a dividend
which takes the form of capital stock issued by such Person or a cash payment in
lieu of issuing fractional shares, not to exceed $25,000 in the aggregate in any
twelve month period, and (c) any other payment by such Person with respect to
stock.
"DOLLARS AND $" means lawful money of the U.S.
-------------
"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. (Central 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 or Parent which is
-------------------
not a Foreign Subsidiary, including those Domestic Subsidiaries listed on the
signature pages of this Agreement. Borrower and each of its Domestic
Subsidiaries is a Domestic Subsidiary of Parent.
"EBITDA" means, for any period, Parent's Net Income for such period from
------
continuing operations, exclusive (without duplication) of (i) extraordinary
items, as determined under GAAP, and (ii) $85,000,000 in pre-tax expenses and
charges accrued for the quarter ended December 31, 1995, but without deducting
from such Net Income federal, state, foreign and local income Taxes,
depreciation, amortization, and interest expense (including, without limitation,
all interest with respect to capitalized lease obligations and all capitalized
interest).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended, together with all regulations issued pursuant thereto.
CREDIT AGREEMENT PAGE 7
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<PAGE>
"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 4.4.
"EURODOLLAR RATE" means a rate per annum (rounded upwards, if necessary, to
---------------
the nearest l/100th of 1%) determined by Agent to be equal to (i) 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 (ii) the applicable Interest Rate
Adjustment Factor as of the beginning date of 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 10.1 of this
----------------
Agreement.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
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"EXISTING PARENT CREDIT AGREEMENT" means the Second Amended and Restated
---------------------------------
Credit Agreement, dated as of December 28, 1994, among Parent, Parent's Domestic
Subsidiaries named therein (including Borrower), the Banks named therein
(including Borrower), and TCB as Agent and as Funds Administrator.
"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.
CREDIT AGREEMENT PAGE 8
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<PAGE>
"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 8.14.
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"FOREIGN SUBSIDIARY" means any Subsidiary which is organized under the laws
------------------
of a jurisdiction other than the U.S. or any state thereof.
"FUNDS ADMINISTRATOR" has the meaning assigned to it in the first paragraph
-------------------
of this Agreement.
"GAAP" means generally accepted accounting principles for financial
----
reporting in the U.S.
"GUARANTORS" means Parent, the Other Domestic Subsidiaries listed on the
----------
signature pages of this Agreement and each other Domestic Subsidiary of Borrower
or Parent that becomes a Domestic Subsidiary of Borrower or Parent after the
execution of this Agreement, it being contemplated that every Domestic
Subsidiary (other than Borrower), now or hereafter existing, shall execute a
Guaranty for the benefit of the Banks.
"GUARANTY" means, collectively, a Guaranty Agreement executed by Parent for
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the benefit of the Banks, in substantially the form of EXHIBIT "C-1" hereto, and
a Guaranty Agreement executed by each other Guarantor for the benefit of the
Banks, in substantially the form of EXHIBIT "C-2" hereto, as the same may be
supplemented, amended or otherwise modified from time to time.
"IMPOSITIONS" has the meaning assigned to it in Section 9.6.
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"INITIAL NOTICE OF BORROWING" means the notice of borrowing dated as of
---------------------------
February 16, 1996 delivered by Borrower to Banks which specifies the amounts and
Interest Periods (which for the initial Advances covered thereby only may differ
from the requirements in the definition of Interest Period) for the initial
Advances to be made hereunder on the Closing Date.
"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
CREDIT AGREEMENT PAGE 9
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<PAGE>
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 5.4 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 Parent or to
------------------
one or more Subsidiaries of Borrower or Parent, or by Parent to Borrower or one
or more Other Domestic Subsidiaries of Parent, except that Intercompany Loans do
not include intercompany accounts receivable of up to $10 million reclassified
for regulatory purposes as short term intercompany advances.
"INTEREST OR CURRENCY OPTION" has the meaning assigned to it in Section
---------------------------
4.3.
"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, on the last day of the 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
CREDIT AGREEMENT PAGE 10
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<PAGE>
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;
(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:
-------------------------------
(a) With respect to the Revolving Credit Loan:
<TABLE>
<CAPTION>
Debt to Capitalization Ratio Interest Rate Adjustment Factor
---------------------------- -------------------------------
<S> <C>
Less than .25 to 1.0 .400%
From .25 to 1.0 to .35 to 1.0 .500%
Above .35 to 1.0 to .45 to 1.0 .625%
Above .45 to 1.0 .875%
(b) With respect to the Term Loan:
</TABLE>
<TABLE>
<CAPTION>
Debt to Capitalization Ratio Interest Rate Adjustment Factor
---------------------------- -------------------------------
<S> <C>
Less than .25 to 1.0 0.625%
</TABLE>
CREDIT AGREEMENT PAGE 11
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<PAGE>
<TABLE>
<S> <C>
From .25 to 1.0 to .35 to 1.0 0.750%
Above .35 to 1.0 to .45 to 1.0 0.875%
Above .45 to 1.0 1.125%
</TABLE>
"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, or
transfer of assets (other than for an amount equal to the fair value of the
assets transferred payable in cash within ninety days of such sale) by such
Person, or (b) purchase or other acquisition for consideration by such Person of
evidences of indebtedness, capital stock or other securities of any other
Person.
"LAWS" means all applicable statutes, laws, ordinances, regulations,
----
orders, writs, injunctions, or decrees of the U.S., any state or commonwealth,
any nation or country, any territory or possession, or any Tribunal, all as
amended and in effect from time to time.
"LIEN" means any claim, mortgage, pledge, assignment, hypothecation, trust,
----
security interest, encumbrance, lien or charge of any kind (including, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof, or the
interest of the lessor under any capital lease).
"LITIGATION" means any proceeding, claim, lawsuit, action or investigation
----------
by or before any Tribunal.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, and any
--------------
and all other agreements or instruments now or hereafter executed and delivered
by Borrower or any other Person in connection with guaranteeing, securing or
otherwise supporting payment or performance of, this Agreement, any Note, or any
Guaranty, as they may be supplemented, amended or otherwise modified from time
to time.
"LOAN" means the Revolving Credit Loan or the Term Loan, including the
----
Commitments, and "LOANS" means those two 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, Parent and their
respective Subsidiaries considered as a whole.
CREDIT AGREEMENT PAGE 12
- ----------------
<PAGE>
"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 Parent
----------
and its Subsidiaries for such period, provided that there shall be excluded: (a)
any net income (or net loss) of any Person in which Parent 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 Revolving Credit Notes and the Term Notes.
-----
"OBLIGATED PARTY" means Borrower and each of the Guarantors.
---------------
"OBLIGATIONS" means all loans, advances, debts, liabilities, obligations,
-----------
covenants and duties of Borrower and each other Obligated Party to Agent or the
Banks or any of them of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under any of the
Loan Documents, whether or not for the payment of money, whether arising by
reason of an extension of credit, opening of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and any other
sums chargeable to any of the Obligated Parties under any of the Loan Documents.
"OFFICERS' CERTIFICATE" means for any Person, a certificate executed by (i)
---------------------
the Chairman, President or any Vice President and (ii) the Secretary or any
Assistant Secretary of such Person.
"OFFSET DEBT" means Debt of any Foreign Subsidiary of Parent (i) that is
-----------
owed to a financial institution located outside of the U.S. that is a customer
of Parent or any of its Subsidiaries and (ii) the proceeds of which have been
deposited with and are held by the financial institutions.
"OTHER DOMESTIC SUBSIDIARY" means a Domestic Subsidiary of Parent other
-------------------------
than Borrower.
"PARENT" has the meaning assigned to it in the first paragraph of this
------
Agreement.
CREDIT AGREEMENT PAGE 13
- ----------------
<PAGE>
"PAYMENT OFFICE" means Agent's account at Texas Commerce Bank National
--------------
Association, Loan Syndication Services, 1111 Fannin, Ninth Floor, MS 46,
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 Parent,
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 &
Poor's Corporation or Moody's Investor's Service, Inc.;
(c) securities by any U.S. state or subdivision or agency thereof
rated at least AAA or the equivalent thereof by Standard & Poor's
Corporation or at least Aaa or the equivalent thereof by Moody's Investors
Service, Inc. having maturities of not more than 12 months from the date of
settlement;
(d) commercial paper issued by any Person incorporated in the U.S.
rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than 12 months after the
date of acquisition or loan participations purchased on a non-recourse
basis in unsecured loans of corporations incorporated in the U.S. which
issue commercial paper of the type described above;
(e) shares of money market funds substantially all of whose assets
are comprised of securities of the types described in clauses (a) through
(c) above;
(f) eurodollar deposits, provided that (i) such deposits mature
within 12 months or less after the date of such investment, (ii) such
deposits are issued by commercial banks whose commercial paper is rated A-2
or its equivalent or better by Standard & Poor's Corporation or P-2 or its
equivalent or better by Moody's Investors Service, Inc., and (iii) such
deposits must be purchased in the U.S.;
CREDIT AGREEMENT PAGE 14
- ----------------
<PAGE>
(g) repurchase agreements respecting any of the securities described
in clauses (a), (b), (c), and (f) 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 is actually
transferred or that the collateral therefor is 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) common stock of Parent.
"PERMITTED LIENS" means to the extent reflected and provided for on the
---------------
grantor's books and records and not impairing the operations of Borrower or any
performance hereunder or contemplated hereby, (i) Liens arising by operation of
Law for Taxes not yet due and payable, (ii) mechanic's, materialman's, shipper's
or warehouseman's Liens for services or materials for which payment is not yet
due, (iii) Liens on and limited to specific items of equipment or parcels of
real estate acquired hereafter that secure purchase money Borrowings permitted
hereunder, (iv) Liens consisting of zoning restrictions, easements or other
restrictions on the use of real estate, none of which is violated by existing
land use to the extent it could be expected to have a Material Adverse Effect,
(v) the following, if the validity or amount thereof is being contested in good
faith and by appropriate and lawful proceedings of which Borrower has given
prior notice to Agent and for which appropriate reserves have been established
and so long as levy and execution have been and continue to be effectively
stayed: Liens for taxes due and payable; Liens upon and defects in title to real
or personal property; Liens of mechanics, materialmen, shippers, warehousemen,
carriers and landlords; Liens for judgments; and (vi) pledges or deposits made
to secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, or other social
security programs.
"PERSON" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, limited liability
company, corporation, company, institution, entity, party or government (whether
national, federal, state, county, city, municipal, or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"PLAN" means any employee benefit plan or other plan maintained by any
----
Obligated Party for employees of Borrower and covered by Title IV of ERISA.
CREDIT AGREEMENT PAGE 15
- ----------------
<PAGE>
"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 sum of the Revolving Credit Commitment plus all
principal amounts outstanding under the Term Loan, expressed as a percentage of
such sum determined by Agent as of the applicable time.
"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.
"RII" means Recognition International, Inc., a Delaware corporation which
---
was acquired by Parent through the RII Merger and subsequently merged into
Borrower as of December 31, 1995.
"RII MERGER" means the merger of RII with BTEC Merger Subsidiary, Inc.
----------
pursuant to the Agreement and Plan of Merger dated as of May 19, 1995 among
Parent, BTEC Merger Subsidiary, Inc. and RII.
"REFERENCE BANKS" means TCB and NationsBank of Texas, N.A.
---------------
"REGISTER" has the meaning assigned to it in Section 12.11(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.
CREDIT AGREEMENT PAGE 16
- ----------------
<PAGE>
"REGULATION U" means Regulation U of the Board, as the same is from time to
------------
time in effect, and all official rulings and interpretations thereunder or
thereof.
"REGULATION X" means Regulation X of the Board, as the same is from time to
------------
time in effect, and all official rulings and interpretations thereunder or
thereof.
"REGULATORY CHANGE" means with respect to any Bank, any change on or after
-----------------
the date of this Agreement in any U.S. federal, state, or foreign Laws
(including Regulation D) or the adoption or making on or after such date of any
interpretation, directive, or request applying to a class of banks or other
lending institutions (including Bank) of or under any U.S. federal, state, or
foreign Laws (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REPORTABLE EVENT" 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 IX, Section 10.2, Section
10.3, Section 11.1 and Section 11.8, Requisite Banks shall be determined
pursuant to (ii) above.
"REVOLVING CREDIT COMMITMENT" has the meaning assigned to it in Section
---------------------------
2.1.
"REVOLVING CREDIT LOAN" means the loan made or to be made pursuant to
---------------------
Section 2.1.
"REVOLVING CREDIT MAXIMUM COMMITMENT" has the meaning assigned to it in
-----------------------------------
Section 2.1.
"REVOLVING CREDIT NOTE" has the meaning assigned to it in Section 2.2.
---------------------
"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, with respect to any Person, any Person of which more
----------
than fifty percent (50%) of the issued and outstanding equity interests having
voting power (without regard to the occurrence of a contingency) for the
election of directors, managers or the equivalent
CREDIT AGREEMENT PAGE 17
- ----------------
<PAGE>
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more Subsidiaries of such Person or a combination thereof.
"TAXES" means all taxes, assessments, fees, levies, imposts, duties,
-----
deductions, withholdings, or other charges of any nature whatsoever from time to
time or at anytime imposed by any Laws or Tribunal.
"TCB" means Texas Commerce Bank National Association, a national banking
---
association, in its individual capacity.
"TERM COMMITMENT" has the meaning assigned to it in Section 3.1.
---------------
"TERM LOAN" means the loan made pursuant to Section 3.1.
---------
"TERM LOAN COMMITMENT" has the meaning assigned to it in Section 3.1.
--------------------
"TERM NOTES" has the meaning assigned to it in Section 3.2.
----------
"TERMINATION DATE" means (a) with respect to the Revolving Credit
----------------
Commitment of each Bank, the earlier of (i) December 31, 2000, (ii) the date on
which the Revolving Credit Commitment of each Bank is terminated by notice from
Borrower to Agent pursuant to Section 2.6, or (iii) the date on which the
Revolving Credit Loan is terminated or accelerated pursuant to Article X; and
(b) with respect to the Term Loan, the earlier of (i) December 31, 1999, or (ii)
the date on which the Term Loan is terminated or accelerated pursuant to Article
X.
"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.
CREDIT AGREEMENT PAGE 18
- ----------------
<PAGE>
ARTICLE II.
THE REVOLVING CREDIT LOAN
SECTION 2.1. REVOLVING CREDIT LOAN. From the Closing Date 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
11.7), 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 $50,000,000 (or, as
to portions thereof which are Alternate Currency Loans, the Dollar Equivalent
thereof), subject to any reductions under Section 2.6 (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 2.2. REVOLVING CREDIT NOTES.
----------------------
(a) The Advances made by each Bank under the Revolving Credit Loan shall
be evidenced by a single promissory note (the "Revolving Credit Note")
substantially in the form of EXHIBIT "D" attached hereto, payable to the order
of each Bank in a principal amount equal to its Pro Rata share of the Revolving
Credit Maximum Commitment and dated the Closing Date.
(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.
CREDIT AGREEMENT PAGE 19
- ----------------
<PAGE>
(d) Accrued and unpaid interest on the Revolving Credit Loan shall be due
and payable on each Interest Payment Date and at maturity. All past due
principal and interest shall bear interest at the Default Rate.
SECTION 2.3. 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, Eurodollar Loans or CD Rate Loans, 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 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), (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, and (iv) the duration of
the Interest Period for any Eurodollar Loan or CD Rate Loan. Agent and the Funds
Administrator shall accept telephonic requests for such Advances, provided that
(i) Borrower promptly confirms such request by delivering an Advance Request
Form to Agent and the Funds Administrator setting forth the same information
that Borrower provided in its telephonic request, and (ii) such acceptance shall
not constitute a waiver of Agent's and the Funds Administrator's right to
require prior delivery of an Advance Request Form in connection with subsequent
Advances under the Revolving Credit Loan.
(c) With respect to Advances under the Revolving Credit Loan that are to
be Base Rate Loans, 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 2.3(b) 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's and the Funds
Administrator's right to require delivery of an Advance Request Form in
connection with subsequent Advances under the Revolving Credit Loan.
(d) The foregoing shall not be applicable to Advances requested pursuant
to the Initial Notice of Borrowing.
CREDIT AGREEMENT PAGE 20
- ----------------
<PAGE>
SECTION 2.4. DISBURSEMENT OF ADVANCES. Promptly after the Funds
------------------------
Administrator receives an Advance Request Form (or telephonic notice in lieu
thereof) requesting Advances under the Revolving Credit Loan, the Funds
Administrator shall notify each Bank of the requested Advances. Each Bank shall
make its Pro Rata portion of the aggregate amount of requested Advances
available to the Funds Administrator, at the Payment Office 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 VII, 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 2.5. 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) to 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, or (d) for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of Regulation U.
SECTION 2.6. COMMITMENT FEE; REDUCTION OR TERMINATION OF REVOLVING CREDIT
------------------------------------------------------------
COMMITMENT. Borrower agrees to pay to Agent for the account of the Banks the
- ----------
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 and including the date hereof to and including the Termination Date
applicable to the Revolving Credit Loan. Such fee shall be payable on the last
Business Day of each March, June, September, and December, with the next payment
due March 29, 1996, 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
CREDIT AGREEMENT PAGE 21
- ----------------
<PAGE>
Commitment below the aggregate principal amount of the Alternate Currency Loans
and Eurodollar Loans then outstanding may 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 III.
TERM LOAN
SECTION 3.1. TERM 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 11.7), agrees to make
the Term Loan in an aggregate principal amount not to exceed its Term Loan
Commitment. The "Term Loan Commitment" of each Bank shall equal its Pro Rata
share of $43,445,447.59. The Term Loan shall be funded in one Advance on the
Closing Date in accordance with the Initial Notice of Borrowing. The proceeds
of the Term Loan shall be loaned by Borrower to Parent and used by Parent to pay
off the Acquisition Facility Loan (as defined in the Existing Parent Credit
Agreement) in its entirety.
SECTION 3.2. TERM NOTES.
----------
(a) The obligation of Borrower to repay the Term Loan shall be evidenced by
notes (the "Term Notes"), substantially in the form of EXHIBIT "E" hereto, one
of which shall be payable to the order of each Bank in a principal amount equal
to its Pro Rata share of the Term Loan Commitment and dated the Closing Date.
The outstanding principal amount of the Term Loan shall be due and payable in 16
substantially equal consecutive quarterly installments on the last Business Day
of each March, June, September and December in each year, commencing on March
29, 1996 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 Term Loan.
(b) The outstanding principal amount 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 the 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
CREDIT AGREEMENT PAGE 22
- ----------------
<PAGE>
effective date of each change in the Applicable Term Rate or the Maximum Rate,
as the case may be.
(c) 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 IV.
PAYMENTS AND CONVERSIONS
SECTION 4.1. 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 11.3 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 4.2. OPTIONAL PREPAYMENTS. Borrower may, on at least three
--------------------
Business Days prior written notice to Agent, prepay the principal of the Term
Loan in whole or in part, at any time or from time to time, without premium or
penalty (except as provided in Sections 5.5 and
CREDIT AGREEMENT PAGE 23
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<PAGE>
12.5), with accrued interest to the date of prepayment on the principal amount
so prepaid, provided that: (a) an Alternate Currency Loan, a Eurodollar Loan 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 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 shall be applied to installments in inverse
order of their maturities and may not be reborrowed.
SECTION 4.3. SELECTION AND CONVERSION OF INTEREST OR CURRENCY OPTIONS.
--------------------------------------------------------
Subject to the terms of Section 5.4 and the other terms and provisions of this
Agreement, Borrower has the option (i) of having all or any portion of the Term
Loan 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 Term 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
CREDIT AGREEMENT PAGE 24
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<PAGE>
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
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 4.4. 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 (365 days for British
pounds sterling) 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 V.
SPECIAL PROVISIONS; ILLEGALITY
SECTION 5.1. 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
5.1(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
CREDIT AGREEMENT PAGE 25
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<PAGE>
(2) imposes or modifies any reserve, special deposit, minimum capital
ratio or similar requirements (other than any existing CD Reserve
Requirements or Eurodollar Reserve Requirements) relating to any extensions
of credit or other assets of, or any deposits with or other liabilities of,
such Bank (including any of such CD Rate Loans, Eurodollar Loans or any
deposits referred to in the definition of "CD Rate" or "Interbank Offered
Rate" in Section 1.1 hereof); or
(3) imposes any other condition affecting this Agreement (or any of
such extensions of credit or liabilities or commitments).
Each determination of the materiality of an Additional Cost shall be made by the
affected Bank in its sole judgment. A Bank's determination of the amounts
necessary to pay Additional Costs and of the reasons for the existence of
Additional Costs shall be made in such Bank's exercise of reasonableness and
good faith. Each Bank will notify Borrower through Agent of any event occurring
after the date of this Agreement which will entitle such Bank to compensation
pursuant to this Section 5.1(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 5.1(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 5.4 hereof shall be applicable). Any amounts
received by Agent from Borrower pursuant to this Section 5.1 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 5.1, 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,
CREDIT AGREEMENT PAGE 26
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<PAGE>
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 5.4 hereof shall be applicable).
(c) If Borrower becomes obligated to pay additional amounts to any Bank
pursuant to this Section 5.1 as a result of any condition described herein,
then, unless such Bank has theretofore taken steps to remove or cure, and has
removed or cured, the conditions creating the cause for such obligation to pay
such additional amounts, Borrower may designate another Bank which is entitled
to be an assignee of a Bank's interest under Section 12.11 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
12.11.
SECTION 5.2. LIMITATIONS ON TYPES OF INTEREST OR CURRENCY OPTIONS.
----------------------------------------------------
Anything herein to the contrary notwithstanding, with respect to any Alternate
Currency Loan, 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
CREDIT AGREEMENT PAGE 27
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<PAGE>
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
(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 5.3. 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 5.4 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 5.4. 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 5.1, 5.2 or 5.3 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 5.1 or 5.3 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)
CREDIT AGREEMENT PAGE 28
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<PAGE>
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 5.1(b) or 5.3 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 5.5. COMPENSATION. Within 10 Business Days after the receipt by
------------
Borrower of a certificate of a Bank containing the information described in this
Section 5.5 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
CREDIT AGREEMENT PAGE 29
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<PAGE>
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 5.5 (1) as promptly as practicable
after it obtains knowledge of the event which entitles it to compensation
pursuant to this Section 5.5, but in any event within 180 days after it obtains
such knowledge and (2) pursuant to a certificate which sets forth the amount
such Bank is entitled to receive pursuant to this Section 5.5 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 5.5 shall be disbursed by Agent in
immediately available funds to the Banks requesting such amounts.
SECTION 5.6. 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 5.6 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 5.6 shall
be disbursed by Agent in immediately available funds to the Banks requesting
such amounts.
CREDIT AGREEMENT PAGE 30
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<PAGE>
ARTICLE VI.
SET-OFF AND GUARANTIES
SECTION 6.1. 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 6.1 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, Parent or any of their respective 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 6.2. GUARANTY OF THE OBLIGATIONS.
---------------------------
(a) Parent and each current Domestic Subsidiary shall become a Guarantor by
executing and delivering to Agent a Guaranty. Borrower shall cause each Person
which becomes a Domestic Subsidiary after the execution hereof to execute a
Guaranty concurrently with becoming a Domestic Subsidiary. The validity and
enforceability of each Guaranty are not diminished, extinguished or adversely
affected by the execution of this Agreement or by the execution of subsequent
guaranties, 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 VII.
CONDITIONS PRECEDENT
SECTION 7.1. EXECUTION OF THIS AGREEMENT. In addition to the requirements
---------------------------
set forth in Section 7.2, the obligation of each Bank to make its Pro Rata share
of the Term Loan and the
CREDIT AGREEMENT PAGE 31
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<PAGE>
first Advance under the Revolving Credit Loan is subject to the conditions
precedent that Agent shall have received on or prior to the Closing Date all of
the following, each dated (unless otherwise indicated) the Closing Date, in form
and substance satisfactory to Agent and its counsel and in sufficient numbers
for each Bank and, in the case of any actions required to be taken, evidence, in
form and substance satisfactory to Agent and its counsel, that the following
required actions have been taken or conditions exist:
(a) Good Standing and Authority. Evidence from the appropriate Tribunals of
---------------------------
the jurisdiction of incorporation of each of Borrower and Parent, each dated
within 30 days of the date of this Agreement, to the effect that each such
Obligated Party is duly incorporated and existing and is in good standing with
respect to the payment of franchise and similar Taxes in such jurisdiction
(accompanied by an Officers' Certificate of such Obligated Party to the same
effect);
(b) The Notes. The Notes payable to each of the Banks, duly executed
---------
by Borrower;
(c) Guaranties. A Guaranty to Agent for the benefit of the Banks
----------
duly executed by each Guarantor;
(d) Opinion of Counsel. A legal opinion from the general counsel for
------------------
the Obligated Parties in the form attached hereto as EXHIBIT "F"; and
(e) 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 7.2. 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 2.3. The Initial Notice of
Borrowing satisfies the requirements hereof for the Advances covered thereby.
CREDIT AGREEMENT PAGE 32
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<PAGE>
(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 VIII 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 9.1(a),
the reference in the first sentence of Section 8.4(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 9.1(a) prior to the date of such Advance, and (ii) in
each representation and warranty in Article VIII that makes reference to a
Schedule, the representation under this subsection (d) that such
representation and warranty in Article VIII 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 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, Jackson & Walker, L.L.P.,
may request.
CREDIT AGREEMENT PAGE 33
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<PAGE>
ARTICLE VIII.
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 8.1. 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 8.2. 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 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.
CREDIT AGREEMENT PAGE 34
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<PAGE>
(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 8.3. 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 8.3 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 Parent 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 8.3 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 IX.
SECTION 8.4. FINANCIAL STATEMENTS AND BUSINESS CONDITION.
-------------------------------------------
(a) The Current Financials fairly present the consolidated financial condition
and the results of operations of Parent 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, Parent or any of their respective 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 their
respective Subsidiaries) will exceed Borrower's liabilities (including without
limitation contingent liabilities) by at least $10,000,000 and (ii) each of the
Obligated Parties will be able to pay its Debts as they mature. None of the
Obligated Parties intends to incur, or believes that it will incur, Debt that
will be beyond its ability to pay as such Debt matures. None of the Obligated
Parties is engaged in any 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.
CREDIT AGREEMENT PAGE 35
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<PAGE>
SECTION 8.5. 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 8.6. 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 9.21.
SECTION 8.7. 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 8.8. 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 8.9. FRANCHISES, PATENTS, TRADEMARKS AND OTHER RIGHTS. The
------------------------------------------------
Obligated Parties have all franchises, permits, licenses, patents, trademarks,
service marks, trade names, copyrights and other authority (collectively, the
"Authorizations") as are necessary to enable them to carry on their respective
businesses as now being conducted; there has not been a default under any of the
Authorizations that could be expected to have a Material Adverse Effect; and
none of the Authorizations conflict with the rights of other Persons, which
conflict could be expected to have a Material Adverse Effect.
SECTION 8.10. LITIGATION, PROCEEDINGS, ETC. As of the date hereof, except
----------------------------
as set forth on SCHEDULE 8.10 attached hereto, (a) there is no Litigation
pending, or to the knowledge of the
CREDIT AGREEMENT PAGE 36
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<PAGE>
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 8.11. 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 8.12. 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 8.13. USE OF PROCEEDS. Proceeds of the Loans shall be used as set
---------------
forth in Sections 2.5 or 3.1.
SECTION 8.14. 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 8.15. 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 8.16. PUBLIC UTILITY HOLDING COMPANY ACT. No Obligated Party or
----------------------------------
Affiliate of any Obligated Party is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 8.17. GOVERNMENT REGULATION. Neither any Obligated Party nor any
---------------------
Affiliate of any Obligated Party is subject to regulation under the Federal
Power Act, the Interstate
CREDIT AGREEMENT PAGE 37
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<PAGE>
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 8.18. 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 8.19. 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 8.20. LABOR DISPUTES; COMPLIANCE. Except as set forth on SCHEDULE
--------------------------
8.20 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 8.21. BENEFIT TO OBLIGATED PARTIES. The operations of the
----------------------------
Obligated Parties are interrelated and interdependent and, therefore, loans or
extensions of credit to any one Obligated Party will produce direct financial
benefits to the other Obligated Parties. The value of the consideration
received and to be received by Borrower and each Guarantor as a result of such
Obligated Parties entering into this Agreement and the other Loan Documents to
which they are a party is reasonably worth at least as much as its liability and
obligations of such Obligated Party hereunder and under the other Loan Documents
to which it is a party and such liability and obligations have benefited and may
reasonably be expected to benefit each Obligated Party directly.
CREDIT AGREEMENT PAGE 38
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<PAGE>
SECTION 8.22. EXISTING PARENT CREDIT AGREEMENT. As of the date of this
--------------------------------
Agreement, no Default exists under the Existing Parent Credit Agreement or any
of the documents relating thereto.
ARTICLE IX.
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 9.1. 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 Parent, Financial Statements of Parent 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 Arthur Andersen & Co. or other independent
certified public accountants of recognized standing chosen by Parent 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 Parent
and its Subsidiaries for the respective periods in conformity with GAAP
consistently applied. The report required hereby shall not be qualified on the
basis that Parent 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 Parent.
(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
Parent, Financial Statements showing on a consolidated basis the financial
position, results of operations and cash flows of Parent and its
Subsidiaries as of, and for the period from the beginning of the current
fiscal year to, such last day, in each case setting forth comparable
information for the corresponding period of the preceding fiscal year and
all in reasonable detail.
(c) As soon as available, and in any event within 60 days after the
last day of each of the first three fiscal quarters of each fiscal year of
Parent and within 120 days
CREDIT AGREEMENT PAGE 39
- ----------------
<PAGE>
after the last day of each fiscal year of Parent, balance sheets and income
statements showing on a consolidating basis the financial position and
results of operations of Borrower, Parent and each of their respective
Subsidiaries as of, and for the period from the beginning of the current
fiscal year to, such last day, in form satisfactory to Agent.
SECTION 9.2. 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 9.1(a), 9.1(b), and 9.1(c), Borrower will furnish to Agent a
certificate of an authorized officer of Borrower in the form attached hereto as
EXHIBIT "G" (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 9.15, 9.16, 9.17, 9.18,
and 9.20, using GAAP consistently applied with the Financial Statements as of
March 26, 1995, and (iii) with respect to the certificates delivered in
connection with the Financial Statements referred to in Subsection 9.1(b) and
9.1(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 Parent 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 9.1(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 9.15, 9.16, 9.17, 9.18, 9.20, 9.21 and 9.24, or, if such
accountants have knowledge of a Default with respect to any such Section,
specifying the nature thereof.
(c) As soon as available, Parent will furnish to Agent copies (i) of
Parent's SEC Filings, (ii) of Parent's annual, quarterly and other reports
to stockholders, the New York Stock Exchange 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 Parent or any of its Subsidiaries to
the public generally concerning material developments in the business or
affairs of Parent or any of its Subsidiaries.
CREDIT AGREEMENT PAGE 40
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<PAGE>
(d) Borrower will furnish promptly to Agent such additional
information concerning any of the Obligated Parties or any of their
respective Subsidiaries as Agent may reasonably request.
SECTION 9.3. TRANSACTIONS WITH AFFILIATES. No Obligated Party will
----------------------------
engage, or permit any of its Subsidiaries 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
Parent's board of directors shall be deemed to be on fair and reasonable terms.
SECTION 9.4. 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 of Parent.
SECTION 9.5. BUSINESS COMBINATIONS.
---------------------
(a) Neither Borrower nor Parent will effect any Combination with any other
Person (including any other Obligated Party) unless (i) Borrower or Parent, as
the case may be, 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 or Parent, as the case may be, 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 or Parent, as
the case may be, 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 or Parent, as the case
may be, has delivered to Agent an Officer's Certificate, in form and
CREDIT AGREEMENT PAGE 41
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<PAGE>
substance reasonably satisfactory to Agent, to the effect that the conditions
stated in clauses (i) through (v) preceding have been satisfied.
(b) No Subsidiary of Parent 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, Parent 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 Parent or such 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) Parent 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;
provided that any Foreign Subsidiary of RII may merge into, become a wholly
- --------
owned Subsidiary of, or merge with a wholly owned Subsidiary of ScanData N.V.
(c) Except as otherwise permitted herein, no Obligated Party may effect
any Disposition if such Disposition, individually and in the aggregate for all
Obligated Parties, would involve all or substantially all of the Consolidated
Tangible Assets as reflected in the most recent Financial Statement delivered to
Agent pursuant to this Agreement; provided that an Obligated Party may effect
--------
such a Disposition if the proceeds of such Disposition are either (i) reinvested
in the business of one or more Obligated Parties, (ii) used to pay or prepay
Debt of an Obligated Party or (iii) invested in Investments permitted by Section
9.20.
SECTION 9.6. 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 Parent, 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
Parent 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.
CREDIT AGREEMENT PAGE 42
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<PAGE>
SECTION 9.7. 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 or Parent, each Obligated Party will permit and will cause each
of its Subsidiaries to permit, representatives of Agent or such Bank to (a)
examine and make copies of the books and records of, and (b) to discuss the
business, operations, and financial condition of, such Obligated Party and its
Subsidiaries with their respective officers and with their independent certified
public accountants, in each case at reasonable times and at the expense of Agent
or such Bank.
SECTION 9.8. 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 9.9. 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 9.10. 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 9.11. 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 Debt 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.
CREDIT AGREEMENT PAGE 43
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<PAGE>
Any notification required by this Section 9.11 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 9.12. COMPLIANCE WITH ERISA AND THE INTERNAL REVENUE CODE. Each
---------------------------------------------------
Obligated Party will comply with all material requirements of ERISA and the
Internal Revenue Code, if applicable, so as not to give rise to any liability
thereunder for noncompliance, except to the extent that any noncompliance could
not be expected (either individually or collectively) to result in a Material
Adverse Effect.
SECTION 9.13. 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 9.14. 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 9.15. LIMITATION ON SUBSIDIARY BORROWINGS. No Subsidiary of
-----------------------------------
Parent (other than Borrower) will incur, create, assume, have outstanding,
guarantee or otherwise be or become directly or indirectly liable with respect
to any Borrowings in excess of $30,000,000 in the aggregate at any time
outstanding, other than Intercompany Loans and Offset Debt.
SECTION 9.16. MINIMUM CASH FLOW COVERAGE RATIO. Parent and its
--------------------------------
Subsidiaries will maintain on a consolidated basis: a ratio of (i) EBITDA minus
Cash Taxes to (ii) Debt Service, 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 2.0 to 1.0.
SECTION 9.17. MAXIMUM DEBT TO EBITDA RATIO. Parent and its Subsidiaries
----------------------------
will maintain, on a consolidated basis, a Debt to EBITDA Ratio, determined as of
the end of each March, June, September, and December, in each case for the
preceding 12-month period, of not more than 2.25 to 1.0.
SECTION 9.18. MAXIMUM DEBT TO CAPITALIZATION RATIO. Parent and its
------------------------------------
Subsidiaries will maintain on a consolidated basis a Debt to Capitalization
Ratio not to exceed .50 to 1.0 as of the end of any fiscal quarter.
SECTION 9.19. 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
CREDIT AGREEMENT PAGE 44
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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 9.20. 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 of Parent; provided, however, that the aggregate amount of
such Investments in Foreign Subsidiaries of Parent shall not exceed at any
one time $40,000,000 plus those Investments by RII in its Foreign
Subsidiaries made prior to the RII Merger;
(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 Parent and its Subsidiaries an amount equal to $l,000,000;
(e) promissory notes received in connection with any Disposition
permitted by Section 9.5(c);
(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 (f) shall not exceed $1,000,000; and
(g) the 7- 1/4% convertible subordinated debentures due 2011 issued
by RII, if purchased from Persons that are not Affiliates of any Obligated
Party in open-market transactions.
SECTION 9.21. 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) those Liens listed on SCHEDULE 9.21; and
CREDIT AGREEMENT PAGE 45
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<PAGE>
(c) purchase money Liens upon or in Property acquired by Borrower
after December 31, 1995 or Liens existing in such Property at the time of
acquisition thereof, or, in the case of any Person which thereafter becomes
a Subsidiary of Parent, Liens upon or in its Property existing at the time
such Person becomes such a Subsidiary, provided that (i) no such Lien
extends or shall extend to or cover any Property of Parent or any of its
Subsidiaries, 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 Parent and its Subsidiaries
secured by all Liens described in this Subsection (c) 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 9.22. 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 9.23. INSURANCE. Parent and its Subsidiaries shall each maintain,
---------
with companies rated A+ 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 Parent 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.
SECTION 9.24. PURCHASES OF PARENT STOCK. None of the Obligated Parties
-------------------------
shall repurchase any Parent stock, unless thereafter Obligated Parties will be
in compliance with all of the covenants in the Loan Documents.
ARTICLE X.
DEFAULT
SECTION 10.1. 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 VIII of this Agreement, or made (or deemed made pursuant
to Section 7.3(d)) by any of the Obligated Parties (or any of their
respective officers) in any Loan Document,
CREDIT AGREEMENT PAGE 46
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<PAGE>
certificate, report, notice or financial statement furnished at any time
pursuant to Article VII 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 9.4(c), 9.5, 9.11, 9.13, 9.15,
9.16, 9.17, 9.18, 9.19, 9.20, 9.21, 9.22 and 9.24 of this Agreement or
Borrower shall fail to comply with Section 9.4(a).
(d) Borrower shall fail to perform, observe or comply with any
covenant, agreement or term contained in this Agreement or any other Loan
Document other than those specified in Subsections (a) and (c) above, and
such failure shall remain unremedied for five consecutive Business Days
following written notice thereof by Agent to Borrower.
(e) Any of the Obligated Parties or any of their respective
Subsidiaries shall commence a voluntary proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any Debtor Relief Law or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official of it or a substantial
part of its property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it or shall make a general
assignment for the benefit of creditors or shall generally fail to pay its
debts as they become due or shall admit in writing its inability to pay its
debts as they become due or shall take any corporate action to authorize
any of the foregoing.
(f) An involuntary proceeding shall be commenced against any of the
Obligated Parties or any of their respective Subsidiaries seeking
liquidation, reorganization, or other relief with respect to it or its
debts under any Debtor Relief Law or seeking the appointment of a trustee,
receiver, liquidator, custodian, or other similar official for it or a
substantial part of its property, and such involuntary proceeding (i) shall
not have been duly contested within 30 days after the commencement of the
proceeding or (ii), if duly contested within such 30 days, shall for any
reason remain undismissed and unstayed for a period of 90 days after the
commencement of the proceeding.
(g) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to discharge within a period of 30 days after the
commencement thereof any attachment, sequestration, or similar proceeding
or proceedings involving an aggregate amount in excess of $1,000,000
against any of its assets or properties.
(h) Any of the Obligated Parties or any of their respective
Subsidiaries shall fail to satisfy and discharge any final non-appealable
judgment or judgments against it
CREDIT AGREEMENT PAGE 47
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<PAGE>
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 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.
SECTION 10.2. 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.
--------
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<PAGE>
(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 the Obligated Parties shall remain liable to Bank for any
deficiency.
Provided, however, that upon the occurrence of an Event of Default under
Subsection (e) or (f) of Section 10.1, 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 10.3. 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 XI.
THE AGENT
SECTION 11.1. APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite
----------------------------------
the various transactions contemplated by this Agreement, the Banks hereby
appoint TCB to act as their
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<PAGE>
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;
(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
CREDIT AGREEMENT PAGE 50
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<PAGE>
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 11.2. RIGHTS AS A BANK. With respect to its Commitment to lend
----------------
hereunder and Advances made by it, Agent in its capacity as a Bank and not as
Agent shall have the same rights and powers hereunder as the other Banks and may
exercise the same as though it were not Agent for the Banks, and the term "Bank"
or "Banks" shall, unless the context otherwise indicates, include Agent in its
individual capacity. Agent and its Affiliates may (without having to account
therefor to any bank) accept deposits from, lend money to, provide financial
advisory and merchant banking services to, and generally engage in any kind of
banking, depositary, trust, financial advisory or other business with Borrower,
any other Obligated Party, any of their respective Affiliates and any of their
officers, directors and employees as if it were not acting as Agent, and Agent
may accept fees and other consideration from Borrower, any other Obligated
Party, any of their respective Affiliates and any of their officers, directors
and employees (in addition to the agency or arrangements fees heretofore agreed
to between Borrower and Agent) for services in connection with this Agreement or
otherwise without having to account for the same to the Banks.
SECTION 11.3. 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
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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 11.4. NO LIABILITY OF AGENT OR FUNDS ADMINISTRATOR; INDEMNITY.
-------------------------------------------------------
Neither Agent, nor the Funds Administrator, nor any of their Affiliates,
officers, directors, employees or agents shall be liable for any action taken or
omitted to be taken by it or them hereunder or otherwise in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
The Banks hereby agree to indemnify Agent and the Funds Administrator against
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys' fees), and disbursement of any kind
or nature whatsoever (to the extent not paid by Borrower and to the extent not
attributable to Agent's, the Funds Administrator's, or their Affiliates',
officers', directors', employees' or agents' gross negligence or willful
misconduct) resulting from any action taken or omitted to be taken by Agent or
the Funds Administrator on their own behalf or on behalf of the other Banks
under the Loan Documents; provided that each Bank shall only be liable to Agent
and the Funds Administrator for its Pro Rata portion of the amounts due Agent or
the Funds Administrator as a result of the indemnification provided for herein.
THE EXPRESS INTENTION OF THE BANKS IS THAT AGENT AND THE FUNDS ADMINISTRATOR
SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND OR
NATURE ARISING OUT OF OR RESULTING FROM THE ORDINARY, 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 11.5. 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
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<PAGE>
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 11.6. 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 11.7. SEVERAL COMMITMENTS. Except as expressly provided in this
-------------------
Section 11.7, the obligations of the Banks under this Agreement are several.
The default by any Bank in making an Advance in accordance with its Commitment
shall not relieve the other Banks of their obligations under this Agreement. In
the event of any default by any Bank in making an Advance, each nondefaulting
Bank shall be obligated to make its Advance but shall not be obligated to
advance the amount which the defaulting Bank was required to advance hereunder;
provided, however, that TCB shall have the obligation to make such defaulting
Bank's Advance available to Borrower, will be entitled to all interest
attributable thereto until reimbursed therefor, and will be deemed to be the
holder of the outstanding indebtedness represented thereby for purposes of
determining Requisite Banks and for determining Pro Rata portions. In no event
shall any Bank other than TCB be required to advance any amount or amounts which
shall in the aggregate exceed such Bank's Commitment. Nothing in this Section
shall be construed as releasing, modifying, or waiving the obligation of each
Bank to forward to Agent funds to meet all requested Advances pursuant to the
terms of the Loan Documents.
SECTION 11.8. 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,
CREDIT AGREEMENT PAGE 53
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<PAGE>
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 XI 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 XII.
MISCELLANEOUS
SECTION 12.1 AMENDMENTS, ETC. No amendment or waiver of any provision of
---------------
this Agreement or any Note, nor consent to any departure by any Obligated Party
from any provision of this Agreement or any Note, is effective unless it is 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 VII (if
and to the extent that the Advance which is the subject of such waiver would
involve an increase in the aggregate outstanding amount of Loans over the
aggregate amount of Loans outstanding immediately prior to such Advance), (b)
reduce or increase the amount or alter the terms of the Commitments of any Banks
or subject any Banks to any additional obligations, (c) reduce the principal of,
or rate or amount of interest applicable to any Loan other than as provided in
this Agreement, or any fees hereunder, (d) postpone any date fixed for any
payment of principal of, or interest on, the Notes or any fees hereunder, (e)
change this Section 12.1, (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 12.2. 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.
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<PAGE>
SECTION 12.3. 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 12.4. COSTS, EXPENSES AND TAXES. Each Obligated Party agrees to
-------------------------
pay on demand (i) all costs and expenses of Agent in connection with the
preparation, execution, delivery and administration of this Agreement, the Notes
and all other Loan Documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for Agent
with respect thereto and with respect to advising Agent as to its rights and
responsibilities under this Agreement, the Notes and the other Loan Documents,
and any modification, supplement or waiver of any of the terms of this
Agreement, and (ii) all reasonable costs and expenses of Agent (including
reasonable counsels' fees) in connection with the enforcement of this Agreement,
the Notes and any other Loan Document. In addition, each Obligated Party shall
pay any and all stamp and other Taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement and the Notes and
the other documents to be delivered hereunder, and agrees to save Agent and each
Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such Taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of this Agreement, any Note and any other Loan Document. Without
prejudice to the survival of any other obligations of the Obligated Parties
under this Agreement, the Notes or any other Loan Document, the obligations of
Obligated Parties under this Section 12.4 shall survive the termination of this
Agreement and repayment of the Notes.
SECTION 12.5. 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 THE ORDINARY, SOLE OR CONTRIBUTORY 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
CREDIT AGREEMENT PAGE 55
- ----------------
<PAGE>
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 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 12.5 shall survive the termination of this
Agreement and payment of the Notes.
SECTION 12.6. FEES. In addition to any other fees provided for herein,
----
Parent agrees to pay to TCB for TCB's own account in immediately available
funds all fees described in the agreements between TCB and Parent.
SECTION 12.7. GOVERNING LAW. This Agreement, all Notes and all other
-------------
documents executed in connection herewith, shall be deemed to be contracts and
agreements executed by the Obligated Parties, Agent and the Banks under the laws
of the State of Texas and of the U.S. and for all purposes shall be construed in
accordance with, and governed by, the laws of said State and of the U.S.
Without limitation of the foregoing, nothing in this Agreement or in the Notes
shall be deemed to constitute a waiver of any rights which Bank may have under
applicable federal legislation relating to the amount of interest which Bank may
contract for, take, receive or charge in respect of any Loans, including any
right to take, receive, reserve and charge interest at the rate allowed by the
law of the state where Bank is located. Agent, the Banks and the Obligated
Parties further agree that insofar as the provisions of Article 1.4, Subtitle 1,
Title 79, of the Revised Civil Statutes of Texas, 1925, as amended, are
applicable to the determination of the Maximum Rate with respect to the Notes,
the indicated rate ceiling computed from time to time pursuant to Section (a) of
such Article shall apply to the Notes; provided, however, that to the extent
permitted by such Article, Agent may from time to time by notice from Agent to
the Obligated Parties and Borrower revise the election of such interest rate
ceiling as such ceiling affects the then current or future balances of the Loans
outstanding under the Notes. The provisions of Chapter 15 of Subtitle 3 of the
said Title 79 do not apply to this Agreement or any Note issued hereunder.
SECTION 12.8. 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
CREDIT AGREEMENT PAGE 56
- ----------------
<PAGE>
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 12.9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
------------------------------------------
representations, warranties and covenants contained herein or in any of the
Loan Documents, or made in writing by the Obligated Parties in connection
herewith, shall survive the execution and delivery of this Agreement and of the
Notes, and will bind and inure to the benefit of the respective successors and
assigns of the parties hereto, whether so expressed or not, provided that the
undertaking of the Banks to make Loans to the Obligated Parties shall not inure
to the benefit of any successor or assign of the Obligated Parties.
SECTION 12.10. 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 12.11. 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.
CREDIT AGREEMENT PAGE 57
- ----------------
<PAGE>
(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 V and Section 12.4, but only to the
extent that such protection would have been available to such Bank, calculated
as if no such participations had been sold, and (iv) the Obligated Parties,
Agent and the other Banks shall continue to deal solely and directly with such
Bank in connection with such Bank's Rights and obligations under this Agreement;
provided further, that such Bank shall retain the sole Right and responsibility
to enforce the obligations of the Obligated Parties relating to the Loans
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; but such Bank may grant a
participant rights (which shall be no greater than Bank's rights insofar as
Borrower is concerned) with respect to (y) amendments, modifications or waivers
with respect to any fees payable hereunder (including, without limitation, the
amount and the dates fixed for the payment of any such fees) or the amount of
principal or the rate of interest payable on, or the dates fixed for any payment
of principal of or interest on, the Loans and (z) any extension of the
Termination Date.
(c) Each Bank may assign, with the prior written consent of the Obligated
Parties (which shall not be unreasonably withheld) to one or more assignees, all
or a portion of its interests, Rights, and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment and the same
portion of the Loans at the time owing to it and the Notes held by it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Bank's rights and obligations under
this Agreement and shall be in a minimum principal amount of $5,000,000, (ii)
the amount of the Commitment of the assigning Bank remaining after each such
assignment (determined as of the date of the Assignment and Acceptance) shall be
in a minimum principal amount of $5,000,000 and (iii) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance in the form of EXHIBIT "H" 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; and provided, further, that in the
case of an assignment by a Bank to one or more of the Bank's Affiliates, neither
the consent of the Obligated Parties nor the $2,000 processing and recordation
fee shall be required. 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
CREDIT AGREEMENT PAGE 58
- ----------------
<PAGE>
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 8.4 or 9.1 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon Agent, such Bank assignor or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes Agent to take such
action on behalf of such assignee and to exercise such powers under this
Agreement as are delegated to Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; (vi) such assignee agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Bank and (vii)
each assignee organized under the laws of a jurisdiction outside the U.S.,
agrees to provide the forms prescribed by the Internal Revenue Service of the
U.S. certifying as to the assignee's exemption from U.S. withholding taxes with
respect to all payments to be made to the assignee under the Agreement or such
other documents as are necessary to indicate that all such payments are subject
to such tax at a rate reduced by an applicable tax treaty.
(e) Agent shall maintain at its office a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Banks and the Commitment of, and principal amount of the
Advances owing to, each Bank from time to time (the "Register"). The entries in
the Register shall be conclusive, in the absence of manifest error, and the
Obligated Parties, Agent and the Banks may treat each person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Agreement.
The Register shall be available for inspection by the Obligated Parties or any
Bank at any reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee together with any Notes subject to such
assignment and the written consent to
CREDIT AGREEMENT PAGE 59
- ----------------
<PAGE>
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" or EXHIBIT "E", 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 12.11 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 12.12. 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 and
enforceable.
SECTION 12.13. 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 12.14. 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.
CREDIT AGREEEMNT PAGE 60
- ----------------
<PAGE>
SECTION 12.15. 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 12.16. 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 X 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 12.17. ENTIRE AGREEMENT. THIS AGREEMENT (INCLUDING THE EXHIBITS
----------------
AND SCHEDULES HERETO), THE OTHER LOAN DOCUMENTS, AND THE FEE AGREEMENTS REFERRED
TO IN SECTION 12.6 CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(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.
BORROWER:
--------
BANCTEC USA, INC., a Delaware corporation
By: _____________________________________
Raghavan Rajaji
Senior Vice President
PARENT:
------
BANCTEC, INC., a Delaware corporation
CREDIT AGREEMENT PAGE 61
- ----------------
<PAGE>
By: _________________________________________
Raghavan Rajaji
Senior Vice President and Chief Financial
Officer
CREDIT AGREEMENT PAGE 62
- ----------------
<PAGE>
OTHER DOMESTIC SUBSIDIARIES:
---------------------------
BANCTEC (EXPORT), INC.,
a Virgin Islands corporation
By: _________________________________________
Raghavan Rajaji
Senior Vice President
BANCTEC (MANAGEMENT), INC.,
a Delaware corporation
By: _________________________________________
Raghavan Rajaji
Senior Vice President and Chief Financial
Officer
BANCTEC (PUERTO RICO), INC.,
a Delaware corporation
By: _________________________________________
Raghavan Rajaji
Senior Vice President
BANCTEC THIRD PARTY MAINTENANCE,
INC., a Texas corporation
By: _________________________________________
Raghavan Rajaji
Senior Vice President
CREDIT AGREEMENT PAGE 63
- ----------------
<PAGE>
RECOGNITION JAPAN INC.
a Delaware corporation
By: _________________________________________
Raghavan Rajaji
Senior Vice President
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
CREDIT AGREEMENT PAGE 64
- ----------------
<PAGE>
Pro Rata Percentage TEXAS COMMERCE BANK NATIONAL
TERM LOAN 38.68477105% ASSOCIATION
REVOLVING CREDIT LOAN 20.0%
By: __________________________________________
Mark J. Denton
Senior Vice President
Address for Notices:
c/o Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
Domestic Lending Office:
c/o Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
Eurodollar Lending Office:
c/o Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
Alternate Currency Lending Office:
c/o Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
CREDIT AGREEMENT PAGE 65
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<PAGE>
EXHIIBT 10.2
BANCTEC, INC.
1989 STOCK PLAN
Scope and Purpose of Plan
-------------------------
This BancTec, Inc. 1989 Stock Plan (the "Plan") provides for the
granting of:
(a) Incentive Options (hereinafter defined) to certain key
employees of BancTec, Inc., a Delaware corporation (the
"Corporation"), or of its Affiliates (hereinafter defined), and
(b) Nonstatutory Stock Options (hereinafter defined) to certain
key employees and nonemployee directors of the Corporation or of
its Affiliates.
(c) Restricted Stock (hereinafter defined) to certain key
employees and nonemployee directors of the Corporation or of its
Affiliates.
The purpose of the Plan is to provide an incentive for key employees and
directors of the Corporation or its Affiliates to remain in the service of the
Corporation or its Affiliates, to extend to them the opportunity to acquire a
proprietary interest in the Corporation so that they will apply their best
efforts for the benefit of the Corporation, and to aid the Corporation in
attracting able persons to enter the service of the Corporation and its
Affiliates.
SECTION 1. Definitions.
1.1. "Act" shall mean the Securities Exchange Act of 1934, as amended.
1.2. "Affiliates" shall mean (a) any corporation, other than the
Corporation, in an unbroken chain of corporations ending with the Corporation if
each of the corporations, other than the Corporation, owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain and (b) any corporation,
other than the Corporation, in an unbroken chain of corporations beginning with
the Corporation if each of the corporations, other than the last corporation in
the unbroken chain, owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
1.3. "Agreement" shall mean the written agreement between the
Corporation and a Holder evidencing the Award granted by the
<PAGE>
Corporation and the understanding of the parties with respect thereto.
1.4. "Award" shall mean an award granted in accordance with the
provisions of the Plan in the form of an Option, Restricted Stock or any
combination thereof.
1.5. "Board of Directors" shall mean the board of directors of the
Corporation.
1.6. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.7. "Committee" shall mean the committee appointed pursuant to
Section 3 hereof by the Board of Directors to administer this Plan.
1.8. "Eligible Individuals" shall mean (a) key employees, including
officers and directors who are also employees of the Corporation or of any of
its Affiliates and (b) nonemployee directors of the Corporation or of any of its
Affiliates. Notwithstanding the foregoing provisions of this Section 1.8, to
ensure that the requirements of the third sentence of Section 3.1 are satisfied,
the Board of Directors may from time to time specify individuals who shall not
be eligible for the Awards or the grant of options or stock appreciation rights
or allocations of stock under any other plan of the Corporation or its
affiliates (as such terms are used in subsection (d)(3) of Rule 16b-3
promulgated under the Act); provided, however, that the Board of Directors may
at any time determine that any individual who has been so excluded from
eligibility shall become eligible for Awards and grants of such options or stock
appreciation rights or allocations of stock under any other plans of the
Corporation and its Affiliates as it may specify.
1.9. "Fair Market Value" shall mean:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange at
the date of determining the Fair Market Value, the last reported sale price on
such exchange on the last business day prior to the date in question; or
(b) If shares of Stock of the same class shall not be listed or
admitted to unlisted trading privileges as provided in Subsection 1.9(a) and
sales prices therefor in the over-the-counter market shall be reported by the
National Association of Securities Dealers, Inc. Automated Quotations, Inc.
("NASDAQ") National Market System at the date of determining the Fair Market
Value, the last reported sale price so reported on the last business day prior
to the date in question; or
1989 STOCK PLAN NEXTRECORD
<PAGE>
(c) If shares of Stock of the same class shall not be listed or
admitted to unlisted trading privileges as provided in Subsection 1.9(a) and
sales prices therefor shall not be reported by the NASDAQ National Market System
as provided in Subsection 1.9(b), and bid and asked prices therefor in the over-
the-counter market shall be reported by NASDAQ (or, if not so reported, by the
National Quotation Bureau Incorporated) at the date of determining the Fair
Market Value, the average of the closing bid and asked prices on the last
business day prior to the date in question; and
(d) If shares of Stock of the same class shall not be listed or
admitted to unlisted trading privileges as provided in Subsection 1.9(a) and
sales prices or bid and asked prices therefor shall not be reported by NASDAQ
(or the National Quotation Bureau Incorporated) as provided in Subsection 1.9(b)
or Subsection 1.9(c) at the date of determining the Fair Market Value, the value
determined in good faith by the Board of Directors.
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one which, by its
terms, will never lapse.
1.10. "Holder" shall mean an Eligible Individual to whom an Award has
been granted.
1.11. "Incentive Options" shall mean stock options that are intended to
satisfy the requirements of section 422A of the Code.
1.12. "Nonstatutory Options" shall mean stock options that do not
satisfy the requirements of section 422A of the Code.
1.13. "Options" shall mean either Incentive Options or Nonstatutory
Options, or both.
1.14. "Restricted Stock" shall mean Stock delivered under the Plan that
is subject to (i) the requirements of Section 6 and (ii) such other restrictions
as the Committee deems appropriate or desirable.
1.15. "Restriction Period" shall mean the period or periods specified
in the Restricted Stock Agreement of the Holder, which shall specify a period
commencing on the date an Award is granted and ending on such date as the
Committee shall determine.
1.16. "Stock" shall mean the Corporation's authorized $.01 par value
common stock, together with any other securities with respect to which Options
granted hereunder may become exercisable.
1989 STOCK PLAN NEXTRECORD
<PAGE>
SECTION 2. Stock and Maximum Number of Shares Subject to the Plan.
------------------------------------------------------
2.1. Description of Stock and Maximum Shares Allocated. Both
-------------------------------------------------
Restricted Stock and Stock which Options granted hereunder give a Holder the
right to purchase may be unissued or reacquired shares of Stock, as the Board of
Directors may, in its sole and absolute discretion, from time to time determine.
Subject to the adjustments in Section 7.6 hereof, the aggregate number
of (i) shares of Restricted Stock that may be the subject of an Award hereunder
and (ii) shares of Stock that may be issued pursuant to the exercise of all
Options granted hereunder shall not exceed 1,000,000 shares of BancTec, Inc.
Stock.
2.2. Restoration of Unpurchased Shares. If an Award hereunder expires
---------------------------------
or terminates for any reason during the term of this Plan and prior to the
completion of the Restriction Period or exercise of an Option in full or if all
of the shares of Stock subject to an Award have not for any other reason been
issued pursuant to the Award, the shares of Stock subject to but not issued or
otherwise used under such Award shall be "restored" to the Plan by again being
available for Awards granted after the shares' restoration.
2.3. Maximum Number of Shares and Awards that May Be Granted to
----------------------------------------------------------
Committee Members. Notwithstanding any other provision in the Plan or any
- -----------------
Agreement, other than the provisions of Subsection 3.1(a) concerning
"disinterested persons," the maximum number of shares that any Committee member
who is not a disinterested person (as specified in Section 3) may acquire
hereunder pursuant to an Award to any Committee member who is not a
disinterested person is 200,000 shares. In addition, the maximum period that
may be specified in the Agreement of a Committee member who is not a
disinterested person within which an Option or Award granted hereunder may be
exercised is ten (10) years.
2.4. Issuance of Stock in Name of Holder. Upon issuance of Stock to
-----------------------------------
any Holder pursuant to the terms of this Plan and any Holder's Agreement, such
Stock shall only be issued into the name of the Holder or his legal
representative.
SECTION 3. Administration of the Plan.
--------------------------
3.1 Committee. The Plan shall be administered by the Committee. The
---------
Committee shall consist of all non-employee members of the Board of Directors.
In the event that the Stock is registered under Section 12 of the Act, all
members of the Committee shall be "disinterested persons," as defined in Rule
16b-3 promulgated under the Act, and shall be subject to the following
limitations:
1989 STOCK PLAN NEXTRECORD
<PAGE>
(a) Except for awards granted pursuant to Section 3.1(b), members of
the Committee shall not be eligible to receive stock options, stock
appreciation rights, or an allocation of stock under any plan of the
Corporation or its Affiliates (as such terms are used in Rule 16b-3)
while they are serving as members of the Committee, and they must not
have received such options, stock appreciation rights, or an allocation
of stock under any plan of the Corporation or its Affiliates within one
year prior to their appointment to the Committee.
(b) Options shall be granted to each current and future member of the
Committee as follows:
1. An Option to purchase 5,000 shares of Stock will be
granted to current members of the Committee and to future members
of the Committee upon appointment and participation as a member
thereof. Said Option may be exercised with respect to 20 percent
of said Stock on each of the first five anniversaries of the date
of such grant. This grant shall be effective as of the first
meeting of the Committee at which such member shall attend in
person and vote; provided, however, that for those persons who
--------
are members of the Committee at the date the stockholders of the
Corporation approve this section, this grant shall be effective
as of the first meeting of the Board of Directors in the calendar
year following the date of such approval by the stockholders.
2. For each person who is a member of the Committee both
before and after the regular annual meeting of stockholders of
the Corporation each year (beginning with the annual meeting in
1992), an Option to purchase 5,000 shares of Stock will be
granted. Said Option may be exercised with respect to 20 percent
of said Stock on each of the first five anniversaries of the date
of such grant. The grant shall be effective as of the first
meeting of the Board of Directors in each calendar year following
each such annual meeting of stockholders.
3. The Options granted pursuant to this section shall be
exercisable at 100 percent of Fair Market Value at the effective
date of the grant.
4. The number of shares exercisable hereunder and exercise
prices shall be adjusted according to the provisions of Section 7
and any other relevant provisions hereof.
1989 STOCK PLAN NEXTRECORD
<PAGE>
5. These provisions may not be amended more than once
every six months, other than to comport with changes in the Code,
the Act, or the regulations thereunder.
3.2 Duration, Removal, Etc. The members of the Committee shall serve
-----------------------
at the pleasure of the Board of Directors, which shall have the power, at any
time and from time to time, to remove members from the Committee or to add
members thereto. Vacancies on the Committee, however caused, shall be filled by
action of the Board of Directors.
3.3 Meetings and Actions of Committee. The Committee shall elect one
---------------------------------
of its members as its Chairman and shall hold its meetings at such times and
places as it may determine. All decisions and determinations of the Committee
shall be made by the majority vote or decision of all of its members present at
a meeting; provided, however, that any decision or determination reduced to
writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made at a meeting duly called and held. The
Committee may make any rules and regulations for the conduct of its business
that are not inconsistent with the provisions hereof and with the bylaws of the
Corporation as it may deem advisable.
3.4 Committee's Powers. Subject to the express provisions hereof,
------------------
the Committee shall have the authority, in its sole and absolute discretion, (a)
to adopt, amend, and rescind administrative and interpretive rules and
regulations relating to the Plan; (b) to determine the terms and provisions of
the respective Agreements (which need not be identical), including, but not
limited to provisions defining or otherwise relating to (i) subject to Section 7
of the Plan, the term and the period or periods and extent of exercisability of
the Options, (ii) the extent to which the transferability of shares of Stock
issued upon exercise of Options is restricted, (iii) the extent to which the
transferability of shares of Restricted Stock shall be restricted, (iv) the
restrictions that shall be placed upon Restricted Stock at the time of its
Award, (v) the effect of termination of employment upon the exercisability of
the Options and the termination of the Restriction Period with respect to
Restricted Stock, and (vi) the effect of approved leaves of absence (consistent
with any applicable regulations of the Internal Revenue Service); (c) to
accelerate the time of exercisability of any Option that has been granted; (d)
to construe the respective Agreements and the Plan; and (e) to make all other
determinations and perform all other acts necessary or advisable for
administering the Plan, including the delegation of such ministerial acts and
responsibilities as the Committee deems appropriate. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any Agreement in the manner and to the extent it shall deem expedient to
carry it into effect, and it shall be the sole and
1989 STOCK PLAN NEXTRECORD
<PAGE>
final judge of such expediency. The Committee shall have full discretion to
make all determinations on the matters referred to in this Section 3.4, and such
determinations shall be final, binding and conclusive.
SECTION 4. Eligibility and Participation.
-----------------------------
4.1. Eligible Individuals. Awards may be granted hereunder only to
--------------------
persons who are Eligible Individuals at the time of the grant thereof.
Notwithstanding any provision contained herein to the contrary, a person
shall not be eligible to receive an Incentive Option hereunder unless he is an
employee of the Corporation or an Affiliate, nor shall a person be eligible to
receive an Incentive Option hereunder if he, at the time such Option is granted,
would own (within the meaning of sections 422A and 425 of the Code) stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Corporation or of an Affiliate, unless at
the time such Incentive Option is granted, (i) the exercise price per share of
Stock is at least one hundred and ten percent (110%) of the Fair Market Value of
each share of Stock to which the Incentive Option relates and (ii) the Incentive
Option is not exercisable after the expiration of five (5) years from the date
it is granted.
4.2. No Right to Award. The adoption of the Plan shall not be deemed
-----------------
to give any person a right to be granted an Option or to receive an Award.
SECTION 5. Grant of Awards and Certain Terms of the Agreements.
---------------------------------------------------
Subject to the express provisions hereof, the Committee shall determine
which Eligible Individuals shall be granted Awards hereunder from time to time.
In making grants, the Committee shall take into consideration the contribution
the potential Holder has made or may make to the success of the Corporation or
its Affiliates and such other considerations as the Board of Directors may from
time to time specify. The Committee shall also determine the number of shares
subject to each such Award and shall authorize and cause the Corporation to
grant Awards in accordance with such determinations.
The date on which the Committee completes all action constituting an
offer of an Award to an individual, including the specification of the number of
shares of Stock to be subject to the Award, shall be the date on which the Award
covered by an Agreement is granted, even though certain terms of the Agreement
may not be at such time determined and even though the Agreement may not be
executed until a later time. For purposes of the preceding sentence, an offer
shall not be deemed made until the Committee has
1989 STOCK PLAN NEXTRECORD
<PAGE>
communicated the grant thereof to the potential Holder. In no event, however,
shall an Optionee gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution of the Agreement by the Corporation and
the Holder.
Each Award granted hereunder shall be evidenced by an Agreement,
executed by the Corporation and the Eligible Individual to whom the Award is
granted, incorporating such terms as the Committee shall deem necessary or
desirable. More than one Award may be granted hereunder to the same Eligible
Individual and be outstanding concurrently hereunder. In the event an Eligible
Individual is granted any combination of one or more Incentive Options, one or
more Nonstatutory Options and one or more grants of Restricted Stock, such
grants shall be evidenced by separate Agreements, one for each of the Incentive
Option grants, one for each of the Nonstatutory Option grants and one for each
of the Restricted Stock awards.
Each Agreement may contain or otherwise provide for conditions giving
rise to the forfeiture of the Stock acquired pursuant to an Award granted
hereunder or otherwise, and such restrictions on the transferability of shares
of the Stock acquired pursuant to an Award granted hereunder or otherwise as the
Committee in its sole and absolute discretion shall deem proper or advisable.
Such conditions giving rise to forfeiture may include, but need not be limited
to, the requirement that the Holder render substantial services to the
Corporation or its Affiliates for a specified period of time. Such restrictions
on transferability may include, but need not be limited to, options and rights
of first refusal in favor of the Corporation and shareholders of the Corporation
other than the Holder of such shares of Stock who is a party to the particular
Agreement or a subsequent holder of the shares of Stock who is bound by such
Agreement.
In addition, the Committee may grant cash awards payable in connection
with the exercise of an Award the terms and conditions of such awards to be such
as the Committee in its sole discretion deems appropriate; provided, however,
that no such cash award shall be effective unless it can comply and does comply
with any applicable requirements for exemption from liability pursuant to Rule
16b-3 promulgated under the Act.
Notwithstanding the foregoing provisions of this Section 5, the Chief
Executive Officer of the Corporation may, from time to time, at his sole
discretion but subject to the following provisions of this Section 5, grant
Awards to individuals who are not at the time of grant individuals subject to
liability under section 16(b) of the Act. The total number of shares of the
Restricted Stock or other Stock, as appropriate, that shall at any time be
subject to grant pursuant to the immediately preceding sentence shall be
specified from time to time by resolution of the
1989 STOCK PLAN NEXTRECORD
<PAGE>
Board of Directors, and such number of shares shall be included within the
number of shares stated in Section 2.1. The Board of Directors may further
limit the authority of the Chief Executive Officer to grant Awards and may
prescribe some or all of the terms of any such Awards to such extent as the
Board of Directors deems appropriate.
SECTION 6. Restricted Stock
----------------
6.1. Methods of Acquisition. Restricted Stock may be received by an
----------------------
Eligible Individual either as an Award or as the result of an exercise of an
Option. Restricted Stock shall be subject to a Restriction Period, after which
restrictions will lapse.
6.2. Restrictions on Disposal. Except as otherwise provided in this
------------------------
Section 6 and Section 7 of the Plan, no shares of Restricted Stock received by
an Eligible Individual shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Restriction Period.
6.3. Custody of Stock During Restriction Period. The Committee may
------------------------------------------
require under such terms and conditions as it deems appropriate or desirable
that the certificates for Restricted Stock delivered under the Plan may be held
in custody by a bank or other institution, or that the Corporation may itself
hold such shares in custody until the Restriction Period expires or until
restrictions thereon otherwise lapse, and may require, as a condition of receipt
of any Restricted Stock that the Eligible Individual shall have delivered a
stock power endorsed in blank relating to the Restricted Stock.
6.4. Limited Exchange of Restricted Stock. Nothing in this Section 6
------------------------------------
shall preclude a Eligible Individual from exchanging any shares of Restricted
Stock subject to the restrictions contained herein for any other shares of Stock
that are similarly restricted, but only to the extent such exchanges are
permitted under the terms of the Plan or his Agreement at the time of the
exchange.
SECTION 7. Terms and Conditions of Awards.
------------------------------
All Awards granted hereunder shall comply with, be deemed to include,
and shall be subject to the following terms and conditions:
7.1. Number of Shares. Each Agreement shall state the number of
----------------
shares of Stock to which it relates.
7.2. Option Exercise Price. Each Incentive Stock Option Agreement and
---------------------
Nonstatutory Stock Option Agreement shall state the exercise price per share of
Stock. The exercise price per share of
1989 STOCK PLAN NEXTRECORD
<PAGE>
Stock subject to an Incentive Option shall not be less than the greater of (a)
the par value per share of the Stock or (b) 100% of the Fair Market Value per
share of the Stock on the date of the grant of the Option. The exercise price
per share of Stock subject to a Nonstatutory Option shall not be less than fifty
percent (50%) of the Fair Market Value per share of the Stock on the date of the
grant of the Option.
7.3. Medium and Time of Payment, Method of Exercise, and Withholding
---------------------------------------------------------------
Taxes. The exercise price of an Option shall be payable upon the exercise of
- -----
the Option (i) in cash (ii) by check payable to the order of the Corporation,
(iii) with the consent of the Committee, with shares of Stock of the Corporation
owned by the Holder, including a multiple series of exchanges of such Stock, or
(iv) by a combination of cash and such shares.
Exercise of an Option shall not be effective until the Corporation has
received written notice of exercise. Such notice must specify the number of
whole shares to be purchased and be accompanied by payment in full of the
aggregate exercise price of the number of shares purchased. The Corporation
shall not in any case be required to sell, issue, or deliver a fractional share
of Stock with respect to any Award.
The Committee may, in its discretion, require a Holder to pay to the
Corporation at the time of exercise of an Option or portion thereof or the lapse
of a Restriction Period, as applicable, the amount that the Corporation deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise. Where the exercise of an
Option or lapse of a Restriction Period does not give rise to an obligation to
withhold Federal income or other taxes on the date of exercise, the Corporation
may, in its discretion, require a Holder to place unrestricted shares of Stock,
which may be the shares received upon exercise of the Option or released by the
lapse of the Restriction Period, in escrow for the benefit of the Corporation
until such time as Federal income or other tax withholding is no longer required
with respect to such shares or until such withholding is required on amounts
included in the gross income of the Holder as a result of the exercise of an
Option, the disposition of shares of Stock acquired pursuant thereto or the
lapse of the Restriction Period. At such later time, the Corporation, in its
discretion, may require a Holder to pay to the Corporation the amount that the
Corporation deems necessary to satisfy its obligation to withhold Federal, state
or local income or other taxes incurred by reason of the exercise of the Option,
the disposition of shares of Stock or the lapse of the Restriction Period. Upon
receipt of such payment by the Corporation, such shares of Stock shall be
released from escrow to the Holder.
1989 STOCK PLAN NEXTRECORD
<PAGE>
7.4. Term, Time of Exercise, and Transferability of Awards and
---------------------------------------------------------
Options. In addition to such other terms and conditions as may be included in a
- -------
particular Agreement granting an Award, the rights of a Holder under an Award
shall be exercisable during a Holder's lifetime only by him or by his guardian
or legal representative. Each Award shall also be subject to the following
terms and conditions:
(a) Termination of Employment or Directorship. The provisions of
-----------------------------------------
this Section 7.4(a) shall apply to the extent a Holder's Agreement does
not expressly provide otherwise. If a Holder ceases to be employed by at
least one of the employers in the group of employers consisting of the
Corporation and its Affiliates because the Holder voluntarily terminates
employment with such group of employers and the Holder does not remain
or thereupon become a director of the Corporation or one or more of its
Affiliates, or if a Holder voluntarily ceases to be a director of at
least one of the corporations in the group of corporations consisting of
the Corporation and its Affiliates and the Holder does not remain or
thereupon become an employee of the Corporation or one or more of it's
Affiliates, the Holder shall have the right for thirty (30) days after
such termination or cessation to exercise the Option with respect to
that portion thereof that has become exercisable and, with respect to
Restricted Stock, receive an additional thirty (30) days for
restrictions on such Restricted Stock to lapse pursuant to the Holder's
Agreement as of the date of the Holder's termination of employment or
cessation of directorship, whichever occurs latest, and thereafter (i)
that portion of the Option shall terminate and cease to be exercisable
and (ii) the shares of Restricted Stock with respect to which the
restrictions applicable to such Restricted Stock have not lapsed shall
revert to the Corporation.
If a Holder ceases to be employed by at least one of the employers in
the group of employers consisting of the Corporation and its Affiliates
because any of such entities terminates the Holder's employment for
misconduct, (i) the portion, if any, of an Award or Option that remains
unexercised, including that portion, if any, that pursuant to the
Agreement is not yet exercisable, at the time of the Holder's
termination of employment, shall terminate and cease to be exercisable
as of such time and (ii) the shares of Restricted Stock with respect to
which the restrictions applicable to such Restricted Stock have not
lapsed shall revert to the Corporation. "Misconduct" shall be as
defined in the Corporation's Personnel Policy and Procedures Manual.
1989 STOCK PLAN NEXTRECORD
<PAGE>
If a Holder ceases to be employed by at least one of the employers in
the group of employers consisting of the Corporation and its Affiliates
because one or more of such entities terminates the employment of the
Holder, but not for misconduct, and the Holder does not remain or
thereupon become a director of the Corporation or one or more of it's
Affiliates, the Holder shall have the right for ninety (90) days after
such termination or cessation to exercise the Option with respect to
that portion thereof that has become exercisable and, with respect to
Restricted Stock, receive an additional ninety (90) days for
restrictions on such Restricted Stock to lapse pursuant to the Holder's
Agreement as of the date of the Holder's termination of employment or
cessation of directorship, whichever occurs latest, and thereafter (i)
that portion of the Option shall terminate and cease to be exercisable
and (ii) the shares of Restricted Stock with respect to which the
restrictions applicable to such Restricted Stock have not lapsed shall
revert to the Corporation.
That portion of an Option which is not exercisable on the date of
termination of employment or cessation of directorship shall terminate
and be forfeited to the Corporation on the date of such termination or
cessation.
(b) Disability. The provisions of this Section 7.4(b) shall apply to
----------
the extent a Holder's Agreement does not expressly provide otherwise.
If a Holder ceases to be employed by at least one of the employers in
the group of employers consisting of the Corporation and its Affiliates
by reason of disability (as defined in section 22(e)(3) of the Code) and
does not remain or thereupon become a director of the Corporation or one
or more of its Affiliates, or if the Holder is only a director and
ceases by reason of such disability to be a director of at least one of
the corporations in the group of corporations consisting of the
Corporation and its Affiliates, the Holder shall have the right for
twelve (12) months after the date of termination of employment with or
cessation of directorship of such group of employers by reason of
disability, whichever occurs latest, to exercise an Option to the extent
such Option is exercisable and, with respect to Restricted Stock,
receive an additional twelve (12) months for restrictions on such
Restricted Stock to lapse pursuant to the terms of the Holder's
Agreement on the date of his termination of employment or cessation of
directorship, and thereafter (i) the Option shall terminate and cease to
be exercisable and (ii) the shares of Restricted Stock with respect to
which the restrictions applicable to such Restricted Stock have not
lapsed shall revert to the Corporation.
1989 STOCK PLAN NEXTRECORD
<PAGE>
(c) Death. The provisions of this Section 7.4(c) shall apply to the
-----
extent a Holder's Agreement does not expressly provide otherwise. If a
Holder dies while in the employ of the Corporation or an Affiliate or
dies while a director of the Corporation or an Affiliate, an Option
shall be exercisable by the Holder's legal representatives, heirs,
legatees, or distributees for twelve (12) months following the date of
the Holder's death to the extent such Option is exercisable and, with
respect to Restricted Stock, receive an additional twelve (12) months
for restrictions on such Restricted Stock to lapse pursuant to the
Holder's Agreement on the Holder's date of death, and thereafter (i) the
Option shall terminate and cease to be exercisable and (ii) the shares
of Restricted Stock with respect to which the restrictions applicable to
such Restricted Stock have not lapsed shall revert to the Corporation.
Notwithstanding any other provision of this Plan, including the
provisions of items (a), (b), and (c) of this Section 7.4, no Incentive Option
shall be exercisable after the expiration of the later of six (6) years from the
date it is granted, or the period specified in Section 4.1, if applicable.
The Committee shall have authority to prescribe in any Option Agreement
that the Option evidenced thereby may be exercised in full or in part as to any
number of shares subject thereto at any time or from time to time during the
term of the Option, or in such installments at such times during said term as
the Committee may prescribe. Except as provided above and unless otherwise
provided in any Agreement, an Option may be exercised at any time or from time
to time during the term of the Option. Such exercise may be as to any or all
whole (but no fractional) shares which have become purchasable under the Award
or Option.
Within a reasonable time or such time as may be permitted by law after
(i) the Corporation receives written notice that the Holder has elected to
exercise all or a portion of an Option, such notice to be accompanied by payment
in full of the aggregate Option exercise price of the number of shares of Stock
purchased or (ii) the Restriction Period with respect to a Holder's Restricted
Stock has lapsed, the Corporation shall deliver a certificate representing such
shares and pay any other amounts payable in consequence of such exercise. In
the event that a Holder is entitled to receive shares due to his exercise of any
combination of an Incentive Option, or portion thereof, or a Nonstatutory Stock
Option, or a portion thereof and the lapse of a Restriction Period, separate
Stock certificates shall be issued, one for the Stock subject to the Incentive
Option one for the Stock subject to the Award or Nonstatutory Stock Option, and
one for the released Restricted Stock. The number of the shares of Stock
transferrable due to an exercise of an Option or the lapse of a Restriction
Period under this Plan shall not be increased due to the passage of
1989 STOCK PLAN NEXTRECORD
<PAGE>
time, except as may be provided in an Agreement. However, this number of such
shares of Stock which are transferrable may increase due to the occurrence of
certain events which are fully described in Section 7.6.
Nothing herein or in any Award granted hereunder shall require the
Corporation to issue any shares pursuant to such Award if such issuance would,
in the opinion of counsel for the Corporation, constitute a violation of the
Securities Act of 1933, as amended, or any similar or superseding statute or
statutes, or any other applicable statute or regulation, as then in effect. At
the time of receipt of shares pursuant to an Award, the Corporation may, as a
condition precedent, require from the Holder of the Award (or in the event of
his death, his legal representatives, heirs, legatees, or distributees) such
written representations, if any, concerning his intentions with regard to the
retention or disposition of the shares being acquired pursuant to such Award and
such written covenants and agreements, if any, as to the manner of disposal of
such shares as, in the opinion of counsel to the Corporation, may be necessary
to ensure that any disposition by such Holder (or in the event of his death, his
legal representatives, heirs, legatees, or distributees), will not involve a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, or any other applicable state or federal
statute or regulation, as then in effect.
7.5. Limitation on Aggregate Value of Shares That May Become First
-------------------------------------------------------------
Exercisable During Any Calendar Year Under an Incentive Option. Except as is
- --------------------------------------------------------------
otherwise provided in the second paragraph of Section 7.6 hereof, with respect
to any Incentive Option granted under this Plan, the sum of:
(a) the aggregate Fair Market Value of shares of Stock subject to
such Incentive Option that first become purchasable in a calendar
year under such Incentive Option, and
(b) the aggregate Fair Market Value of shares of Stock or stock of
any Affiliate (or a predecessor of the Corporation or an
Affiliate) subject to any other incentive stock option (within
the meaning of section 422A of the Code) of the Corporation or
its Affiliates (or a predecessor corporation of any such
corporation), that first become purchasable in a calendar year
under such incentive stock option
may not (with respect to any Holder) exceed $100,000 or such other amount as may
be specified by section 422A of the Code, with such Fair Market Value to be
determined as of the date the Incentive Option or such other incentive stock
option is granted.
1989 STOCK PLAN NEXTRECORD
<PAGE>
For purposes of this Section 7.5, "predecessor corporation" means (i) a
corporation that was a party to a transaction described in section 425(a) of the
Code (or which would be so described if a substitution or assumption under such
section had been effected) with the Corporation, (ii) a corporation which, at
the time the new incentive stock option (within the meaning of section 422A of
the Code) is granted, is an Affiliate of the Corporation or a predecessor
corporation of any such corporations, or (iii) a predecessor corporation of any
such corporations.
7.6. Adjustments Upon Changes in Capitalization, Merger, Etc.
-------------------------------------------------------
Notwithstanding any other provision hereof, in the event of any change in the
number of outstanding shares of Stock
(a) effected without receipt of consideration therefor by the
Corporation, by reason of a stock dividend, or split,
combination, exchange of shares or other recapitalization,
merger, or otherwise, in which the Corporation is the surviving
corporation,
(b) by reason of a spin-off to the shareholders of a part of the
Corporation into a separate entity, or
(c) by reason of assumptions and conversions of outstanding grants
due to an acquisition by the Corporation of a separate entity,
(1) the aggregate number and class of the reserved shares, (2) the number and
class of shares subject to each outstanding Award and (3) the exercise price of
each outstanding Option shall be automatically adjusted to accurately and
equitably reflect the effect thereon of such change; provided, however, that any
fractional share resulting from such adjustment may be eliminated. In the event
of a dispute concerning such adjustment, the Committee has full discretion to
determine the resolution of the dispute. Such determination shall be final,
binding and conclusive. The number of reserved shares or the number of shares
subject to any outstanding Award shall be automatically reduced by any fraction
included therein which results from any adjustment made pursuant to this Section
7.6.
The following provisions of this Section 7.6 shall apply unless a
Holder's Agreement provides otherwise. The occurrence of:
(a) a dissolution or liquidation of the Corporation,
(b) a merger or consolidation (other than a merger effecting a
reincorporation of the Corporation in another state or any other
merger or a consolidation in which the shareholders of the
surviving corporation and their proportionate interests therein
immediately after the merger or
1989 STOCK PLAN NEXTRECORD
<PAGE>
consolidation are substantially identical to the shareholders of
the Corporation and their proportionate interests therein
immediately prior to the merger or consolidation) in which the
Corporation is not the surviving corporation (or survives only as
a subsidiary of another corporation in a transaction in which the
shareholders of the parent of the Corporation and their
proportionate interests therein immediately after the transaction
are not substantially identical to the shareholders of the
Corporation and their proportionate interests therein immediately
prior to the transaction),
(c) a transaction in which any person becomes the owner of 50% or
more of the total combined voting power of all classes of stock
of the Corporation
shall cause every Award then outstanding to terminate, but (i) the Holders of
each such then outstanding Options shall, in any event, have the right,
immediately prior to such dissolution, liquidation, merger, consolidation, or
transaction, to exercise such Options, to the extent not theretofore exercised,
without regard to the determination as to the periods and installments of
exercisability made pursuant to a Holder's Agreement if (and only if) such
Options have not at that time expired or been terminated and (ii) the
restrictions applicable to the Holders of Restricted Stock pursuant to every
such terminating award shall lapse immediately prior to such dissolution,
liquidation, merger, consolidation, or transaction without regard to the
determination as to the periods and installments of vesting of Restricted Stock
made pursuant to a Holder's Agreement if (and only if) such Restricted Stock has
not at that time otherwise reverted to the Corporation.
7.7. Rights as a Shareholder. A Holder shall have no right as a
-----------------------
shareholder with respect to any shares covered by his Award until a certificate
representing such shares is issued and delivered to him. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash or other
property) or distributions or other rights for which the record date is prior to
the date such certificate is issued, except as provided in Section 7.6 hereof.
7.8. Modification, Extension and Renewal of Awards. Subject to the
---------------------------------------------
terms and conditions of and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding Awards granted under the Plan, or accept
the surrender of Awards outstanding hereunder (to the extent not theretofore
exercised) and authorize the granting of new Awards hereunder in substitution
therefor (to the extent not theretofore exercised). The Committee may not,
however, without the consent of the Holder, modify any outstanding Awards so as
to specify a higher or lower exercise
1989 STOCK PLAN NEXTRECORD
<PAGE>
price as to Options or accept the surrender of outstanding Incentive Options and
authorize the granting of new Awards in substitution therefor specifying a
higher or lower exercise price. In addition, no modification of an Award
granted hereunder shall, without the consent of the Holder, alter or impair any
rights or obligations under any Award theretofore granted hereunder to such
Holder under the Plan, except as may be necessary, with respect to Incentive
Options, to satisfy the requirements of section 422A of the Code.
7.9. Furnish Information. Each Holder shall furnish to the
-------------------
Corporation all information requested by the Corporation to enable it to comply
with any reporting or other requirement imposed upon the Corporation by or under
any applicable statute or regulation.
7.10. Obligation to Exercise. The granting of an Option hereunder
----------------------
shall impose no obligation upon the Holder to exercise the same or any part
thereof.
7.11. Agreement Provisions. The Agreements authorized under the Plan
--------------------
shall contain such provisions in addition to those required by the Plan
(including, without limitation, restrictions or the removal of restrictions upon
(i) the exercise of an Option and the retention or transfer of shares thereby
acquired and (ii) Restricted Stock and the lapse of the Restriction Period) as
the Committee shall deem advisable. Each Option Agreement shall identify the
Option evidenced thereby as an Incentive Option or a Nonstatutory Option, as the
case may be, and no Agreement shall cover both an Incentive Option and a
Nonstatutory Option or both either type of Option and Restricted Stock. Each
Agreement relating to an Incentive Option granted hereunder shall contain such
limitations and restrictions upon the exercise of the Incentive Option to which
it relates as shall be necessary for the Incentive Option to which such
Agreement relates to constitute an incentive stock option, as defined in section
422A of the Code.
7.12. Non-Transferability of Award. An Award granted under this Plan
----------------------------
shall not be transferable except by will or by the laws of descent and
distribution. The Holder may not make any disposition of an Award or any
interest therein. As used in this Plan, "disposition" means any sale, transfer,
encumbrance, gift, donation, assignment, pledge, hypothecation, or other
disposition, whether similar or dissimilar to those previously enumerated,
whether voluntary or involuntary, and whether during the Holder's lifetime or
upon or after his death, including, but not limited to, any disposition by
operation of law, by court order, by judicial process, or by foreclosure, levy,
or attachment, except a transfer by will or by the laws of descent or
distribution. Any attempted disposition in violation of this Section 7.12 shall
be void and ineffective for all purposes.
1989 STOCK PLAN NEXTRECORD
<PAGE>
SECTION 8. Remedies
--------
8.1. Remedies. The Corporation shall be entitled to recover from a
--------
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
8.2. Specific Performance. The Corporation shall be entitled to
--------------------
enforce the terms and provisions of this Section 8, including the remedy of
specific performance, in Dallas, Dallas County, Texas.
SECTION 9. Duration of Plan.
----------------
No Incentive Options may be granted hereunder after the date that is ten
(10) years from the earlier of (i) the date the Plan is adopted by the Board of
Directors or (ii) the date the Plan is approved by the shareholders of the
Corporation.
SECTION 10. Amendment of Plan.
-----------------
The Board of Directors may, insofar as permitted by law, with respect to
any shares at the time that are not subject to Awards, suspend or discontinue
the Plan or revise or amend it in any respect whatsoever; provided, however,
that, without the approval of the holders of a majority of the outstanding
shares of voting stock of all classes of the Corporation, no such revision or
amendment shall (i) cause the Plan to no longer comply with the requirements of
Section 16(b) of the Act, any rule promulgated thereunder, any successor statute
or rule or other such regulatory requirements, or in any manner cause Incentive
Options issued under it to fail to satisfy the requirements applicable to
incentive stock options as defined in section 422A of the Code.
SECTION 11. General.
-------
11.1. Application of Funds. The proceeds received by the Corporation
--------------------
from the sale of shares pursuant to Awards and Options shall be used for general
corporate purposes.
11.2. Right of the Corporation and Affiliates to Terminate Employment.
---------------------------------------------------------------
Nothing contained in the Plan, or in any Agreement, shall confer upon any Holder
the right to continue in the employ of the Corporation or any Affiliate, or
interfere in any way with the rights of the Corporation or any Affiliate to
terminate his employment any time.
11.3. No Liability for Good Faith Determinations. Neither the members
------------------------------------------
of the Board of Directors nor any member of the Committee shall be liable, even
if negligent, for any act, omission, or determination taken or made in good
faith with respect
1989 STOCK PLAN NEXTRECORD
<PAGE>
to the Plan or any Award granted under it, and members of the Board of Directors
and the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect.
11.4. Information Confidential. As partial consideration for the
------------------------
granting of each Award hereunder, the Agreement may, in the Committee's sole and
absolute discretion, provide that the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax and financial advisors, or to a
financial institution to the extent that such information is necessary to secure
a loan. In the event any breach of this promise comes to the attention of the
Committee, it shall take into consideration such breach in determining whether
to recommend the grant of any future Award to such Holder as a factor militating
against the advisability of granting any such future Award to such individual.
11.5. Other Benefits. Participation in the Plan shall not preclude the
--------------
Holder from eligibility in any other stock option plan of the Corporation or any
Affiliate or any old age benefit, insurance, pension, profit sharing,
retirement, bonus, or other extra compensation plans which the Corporation or
any Affiliate has adopted, or may, at any time, adopt for the benefit of its
employees.
11.6. Execution of Receipts and Releases. Any payment of cash or any
----------------------------------
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
11.7. No Guarantee of Interests. The Committee, the Board of Directors
-------------------------
and the Corporation, individually and collectively, do not guarantee the Stock
---
of the Corporation from loss or depreciation.
11.8. Payment of Expenses. All expenses incident to the
-------------------
administration, termination, or protection of the Plan, including,
1989 STOCK PLAN NEXTRECORD
<PAGE>
but not limited to, legal and accounting fees, shall be paid by the Corporation
or its Affiliates; provided, however, the Corporation or an Affiliate may
recover any and all damages, fees, expenses, and/or costs arising out of any
actions taken by the Corporation to enforce its rights hereunder.
11.9. Corporation Records. Records of the Corporation or its
-------------------
Affiliates regarding the Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by the
Committee to be incorrect.
11.10. Information. The Corporation and its Affiliates shall, upon
-----------
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
11.11. No Liability of Corporation. The Corporation assumes no
---------------------------
obligation or responsibility to the Holder or his legal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.
11.12. Corporation Action. Any action required of the Corporation shall
------------------
be by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
11.13. Severability. If any provision of this Plan is held to be
------------
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions hereof, but such provision shall be fully severable,
and the Plan shall be construed and enforced as if the illegal or invalid
provision had never been included herein.
11.14. Notices. Whenever any notice is required or permitted hereunder,
-------
such notice must be in writing and personally delivered or sent by mail or by a
nationally recognized courier service. Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered on the date on which it is
personally delivered, or, if mailed, whether actually received or not, on the
third business day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at the
address which such person has previously specified by written notice delivered
in accordance herewith or, if by courier, twenty-four (24) hours after it is
sent, addressed as described in this Section. The Corporation or a Holder may
change, at any time and from time to time, by written notice to the other, the
address which it or he had previously specified for receiving notices. Until
changed in accordance herewith, the Corporation and each Holder shall specify as
its and his address for receiving notices the address set forth
1989 STOCK PLAN NEXTRECORD
<PAGE>
in the Agreement pertaining to the shares to which such notice relates.
11.15. Waiver of Notice. Any person entitled to notice hereunder may
----------------
waive such notice.
11.16. Successors. The Plan shall be binding upon the Holder, his legal
----------
representatives, heirs, legatees and distributees upon the Corporation, its
successors, and assigns, and upon the Committee, and its successors.
11.17. Headings. The titles and headings of Sections are included for
--------
convenience of reference only and are not to be considered in construction of
the provisions hereof.
11.18. Governing Law. All questions arising with respect to the
-------------
provisions of the Plan shall be determined by application of the laws of the
State of Delaware except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Agreement, except to the extent preempted by federal law and except to the
extent that Delaware corporate law conflicts with the contract law of such
state, in which event Delaware corporate law shall govern. The obligation of
the Corporation to sell and deliver Stock hereunder is subject to applicable
laws and to the approval of any governmental authority required in connection
with the authorization, issuance, sale, or delivery of such Stock.
11.19. Word Usage. Words used in the masculine shall apply to the
----------
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
SECTION 12. Approval of Shareholders.
------------------------
The Plan shall take effect on the date it is approved by the
shareholders of the Corporation. If this Plan is not approved by the holders of
a majority of the outstanding shares of equity securities of the Corporation
having voting rights within the period beginning on the date the Board of
Directors adopts the Plan and ending twelve (12) months after the date the Plan
is adopted by the Board of Directors, none of the Options granted hereunder
shall constitute Incentive Options; and in the event that the Plan is not so
approved on or before the first annual meeting of stockholders of the
Corporation following the date the Board of Directors adopts the Plan, if any
Awards or Options are granted under the Plan before the date such stockholders
do approve the Plan to individuals subject to suit under Section 16b of the Act
at the time of grant, such Awards or Options shall be null, void, and of no
force and effect as of their grant date. If subsequent to the adoption of this
Plan, the rules and regulations promulgated under
1989 STOCK PLAN NEXTRECORD
<PAGE>
the Act associated with the beneficial treatment of certain events under Section
16(b) of the Act are amended so as to remove a requirement for shareholder
approval listed in this Section 12 or in Section 10, and the Code does not
require shareholder approval, that requirement for shareholder approval in this
Section 12 and Section 10 shall be automatically deleted from this Plan.
<PAGE>
EXHIBIT 10.4
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of November 7,
1995, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4435 Spring Valley Road, Dallas, Texas 75244-3704 (the "Company"),
and Grahame N. Clark, Jr. (the "Employee") who resides at 6158 Preston Creek
Drive, Dallas, Texas 75240.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse
to the best interests of the Company and which, if the subject of a
criminal proceeding, could result in a criminal conviction for a felony or
(b) the failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than
the failure resulting from the Employee's incapacity due to physical or
mental illness), provided, however, that the Employee shall not be deemed
to be terminated for Cause under this subsection (b) unless and until (1)
after the Employee receives written notice from the Company specifying with
reasonable particularity the actions of Employee which constitute a
violation of this subsection (b) and (2) within a period of 30 days after
receipt of such notice (and during which the violation is within the
control of the Employee), Employee fails to reasonably and prospectively
cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this
Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (B) the Employee's total compensation is reduced or any
other failure by the Company to comply with Section 4 hereof, (C) any
change in any employee
<PAGE>
benefit plans or arrangements in effect on the date hereof in which the
Employee participates (including without limitation any pension and
retirement plan, savings and profit sharing plan, stock ownership or
purchase plan, stock option plan, or life, medical or disability insurance
plan), which would adversely affect the Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to
all executive officers of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to the
Employee as compared to any other executive officer of the Company, or (D)
without his prior concurrence, the Employee is required to engage in an
increased amount of travel on the Company's business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required
to be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any
person or group (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 20% of the combined voting power of the
Company's then outstanding securities, or (b) there are serving as
directors two or more persons who were elected as members of the Board of
Directors and were not nominated by management or the Board of Directors of
the Company to serve on the Board of Directors of the Company, or (c) the
Company is merged or consolidated with another corporation and as a result
of such merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for purposes
of such calculation shares of the voting securities of the Company owned by
a party to such merger or consolidation or affiliates (within the meaning
of the Exchange Act) of such party, as the same existed immediately prior
to such merger or consolidation, or (d) the Company sells all or
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of this
Agreement, the term of the Employee's employment with the Company shall commence
on the date hereof and shall terminate on November 7, 2000, unless sooner
terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices,
<PAGE>
with merit increases as may, in the sole discretion of the Board of Directors of
the Company, be approved from time to time by the Board of Directors of the
Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity which could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
<PAGE>
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date, the Company may terminate the Employee's employment
with the Company under this Agreement with or without Cause and by the
affirmative vote of two-thirds of the members of the Board of Directors of
the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days' prior
written notice of his desire to the Board of Directors of the Company and
receiving an affirmative vote of two-thirds of the members of the Board of
Directors of the Company. The Employee will continue to receive his Base
Salary and Benefits through the date of termination with no liability on
the part of the Company for further payments to the Employee unless
Employee terminates his employment pursuant to Section 9.1(c)(ii), at which
time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee
is not eligible to receive benefits under the Company's Long Term
Disability Plan; or (ii) the Employee terminates his employment as a result
of any of the following reasons: (A) without the Employee's consent the
Company materially diminishes the scope of the Employee's duties, assigns
to the Employee duties materially inconsistent with his designated
position, or reduces the Employee's Base Salary or Targeted Bonus to an
amount less than previously determined or established by the Board of
Directors, or (B) the Company breached any of its material obligations
under this Agreement and such breach is not cured within 30 days after
written notice thereof by the Employee; then the Company shall pay the
Employee severance payments in an amount equal to the sum of the (x)
Employee's annualized Base Salary in effect at the time of such
termination, and (y) an amount equal to the Employee's Targeted Bonus for
the fiscal year in which such termination occurs (provided, however, that
if the basis for Employee's termination is the reduction in his Base Salary
or the reduction of his Targeted Bonus, the severance pay shall based on
the Base Saary and the Targeted Bonus in effect prior to such reduction).
The
<PAGE>
severance payments shall be made in installments over a period of 12
months. Notwithstanding the foregoing, if the Employee terminates his
employment pursuant to clause (ii) above, he shall be entitled to the
severance payments provided for in this paragraph only if he gives written
notice to the Company of his termination of employment within 30 days after
the occurrence of the event or events specified in clause (ii) on which he
bases his termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee might
otherwise be entitled under Company severance policies from time to time in
effect, except for (i) accrued and unpaid Base Salary to the date of
termination, and (ii) any bonus due with respect to fiscal years completed
as of the date of termination pursuant to the Executive Bonus Plan.
Nothing contained in the foregoing shall be construed so as to affect the
Employee's rights or the Company's obligations relating to agreements or
benefits which are unrelated to termination of employment.
(e) In the event that the Company terminates the Employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of the
Company, then he may not vote on such termination, and the total number of
members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), the Company may terminate the Employee's employment with
the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part for
further payments to the Employee by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination, if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total number
of members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), if the Employee's employment with the Company is terminated
without Cause or if Employee terminates his employment with the Company for
Good Reason, the Employee will continue to accrue and receive his base
salary and Benefits through the date of termination and will be entitled to
receive the benefits provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his sole and
absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon twelve months' prior written notice to
the Company,
<PAGE>
terminate his employment with the Company under this Agreement for any
reason whatsoever. If the Employee's employment with the Company under this
Agreement is terminated pursuant to this Subsection 9.2(c) and subject in
all respects to the provisions of Section 9.2(a) and (b), the Employee will
continue to accrue and receive his base salary and Benefits through the
date of termination and will be entitled to receive the benefits provided
for under Section 10 hereof. No termination of the Employee's employment
with the Company pursuant to Subsections 9.2(b) or (c) shall in any way
terminate the Company's obligations under Sections 23 and 26 of this
Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether such
termination is by the Employee or by the Company) at any time on or within three
years after the Triggering Date for any reason other than (a) termination by the
Company for Cause, (b) the Employee having reached the age of 65, or (c) the
Employee's death, then, within five days after the date of such termination, the
Company shall pay the Employee a lump sum amount in cash equal to 2.99 times the
Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date.
The Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing,but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
<PAGE>
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall include each other
gender where appropriate.
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only
and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
<PAGE>
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state, city, or other taxes as shall be required pursuant to any law or
government regulation or ruling.
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
By: ______________________________
Tod V. Mongan
Senior Vice President and
General Counsel
____________________________________
Employee
<PAGE>
EXHIBIT 10.6
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of November 7,
1995, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4435 Spring Valley Road, Dallas, Texas 75244-3704 (the "Company"),
and Tod V. Mongan (the "Employee") who resides at 3712 Remington Drive,
Carrollton, Texas 75007.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse
to the best interests of the Company and which, if the subject of a
criminal proceeding, could result in a criminal conviction for a felony or
(b) the failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than
the failure resulting from the Employee's incapacity due to physical or
mental illness), provided, however, that the Employee shall not be deemed
to be terminated for Cause under this subsection (b) unless and until (1)
after the Employee receives written notice from the Company specifying with
reasonable particularity the actions of Employee which constitute a
violation of this subsection (b) and (2) within a period of 30 days after
receipt of such notice (and during which the violation is within the
control of the Employee), Employee fails to reasonably and prospectively
cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this
Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (B) the Employee's total compensation is reduced or any
other failure by the Company to comply with Section 4 hereof, (C) any
change in any employee benefit plans or arrangements in effect on the date
hereof in which the
<PAGE>
Employee participates (including without limitation any pension and
retirement plan, savings and profit sharing plan, stock ownership or
purchase plan, stock option plan, or life, medical or disability insurance
plan), which would adversely affect the Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to
all executive officers of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to the
Employee as compared to any other executive officer of the Company, or (D)
without his prior concurrence, the Employee is required to engage in an
increased amount of travel on the Company's business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required
to be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any
person or group (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 20% of the combined voting power of the
Company's then outstanding securities, or (b) there are serving as
directors two or more persons who were elected as members of the Board of
Directors and were not nominated by management or the Board of Directors of
the Company to serve on the Board of Directors of the Company, or (c) the
Company is merged or consolidated with another corporation and as a result
of such merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for purposes
of such calculation shares of the voting securities of the Company owned by
a party to such merger or consolidation or affiliates (within the meaning
of the Exchange Act) of such party, as the same existed immediately prior
to such merger or consolidation, or (d) the Company sells all or
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of this
Agreement, the term of the Employee's employment with the Company shall commence
on the date hereof and shall terminate on November 7, 2000, unless sooner
terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the
2
<PAGE>
Company, be approved from time to time by the Board of Directors of the Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity which could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
3
<PAGE>
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date, the Company may terminate the Employee's employment
with the Company under this Agreement with or without Cause and by the
affirmative vote of two-thirds of the members of the Board of Directors of
the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days' prior
written notice of his desire to the Board of Directors of the Company and
receiving an affirmative vote of two-thirds of the members of the Board of
Directors of the Company. The Employee will continue to receive his Base
Salary and Benefits through the date of termination with no liability on
the part of the Company for further payments to the Employee unless
Employee terminates his employment pursuant to Section 9.1(c)(ii), at which
time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee
is not eligible to receive benefits under the Company's Long Term
Disability Plan; or (ii) the Employee terminates his employment as a result
of any of the following reasons: (A) without the Employee's consent the
Company materially diminishes the scope of the Employee's duties, assigns
to the Employee duties materially inconsistent with his designated
position, or reduces the Employee's Base Salary or Targeted Bonus to an
amount less than previously determined or established by the Board of
Directors, or (B) the Company breached any of its material obligations
under this Agreement and such breach is not cured within 30 days after
written notice thereof by the Employee; then the Company shall pay the
Employee severance payments in an amount equal to the sum of the (x)
Employee's annualized Base Salary in effect at the time of such
termination, and (y) an amount equal to the Employee's Targeted Bonus for
the fiscal year in which such termination occurs (provided, however, that
if the basis for Employee's termination is the reduction in his Base Salary
or the reduction of his Targeted Bonus, the severance pay shall based on
the Base Saary and the Targeted Bonus in effect prior to such reduction).
The
4
<PAGE>
severance payments shall be made in installments over a period of 12
months. Notwithstanding the foregoing, if the Employee terminates his
employment pursuant to clause (ii) above, he shall be entitled to the
severance payments provided for in this paragraph only if he gives written
notice to the Company of his termination of employment within 30 days after
the occurrence of the event or events specified in clause (ii) on which he
bases his termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee might
otherwise be entitled under Company severance policies from time to time in
effect, except for (i) accrued and unpaid Base Salary to the date of
termination, and (ii) any bonus due with respect to fiscal years completed
as of the date of termination pursuant to the Executive Bonus Plan.
Nothing contained in the foregoing shall be construed so as to affect the
Employee's rights or the Company's obligations relating to agreements or
benefits which are unrelated to termination of employment.
(e) In the event that the Company terminates the Employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of the
Company, then he may not vote on such termination, and the total number of
members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), the Company may terminate the Employee's employment with
the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part for
further payments to the Employee by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination, if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total number
of members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), if the Employee's employment with the Company is terminated
without Cause or if Employee terminates his employment with the Company for
Good Reason, the Employee will continue to accrue and receive his base
salary and Benefits through the date of termination and will be entitled to
receive the benefits provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his sole and
absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon twelve months' prior written notice to
the Company,
5
<PAGE>
terminate his employment with the Company under this Agreement for any
reason whatsoever. If the Employee's employment with the Company under this
Agreement is terminated pursuant to this Subsection 9.2(c) and subject in
all respects to the provisions of Section 9.2(a) and (b), the Employee will
continue to accrue and receive his base salary and Benefits through the
date of termination and will be entitled to receive the benefits provided
for under Section 10 hereof. No termination of the Employee's employment
with the Company pursuant to Subsections 9.2(b) or (c) shall in any way
terminate the Company's obligations under Sections 23 and 26 of this
Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether such
termination is by the Employee or by the Company) at any time on or within three
years after the Triggering Date for any reason other than (a) termination by the
Company for Cause, (b) the Employee having reached the age of 65, or (c) the
Employee's death, then, within five days after the date of such termination, the
Company shall pay the Employee a lump sum amount in cash equal to 2.99 times the
Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date.
The Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
6
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing,but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
7
<PAGE>
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall include each other
gender where appropriate.
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only
and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
8
<PAGE>
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state, city, or other taxes as shall be required pursuant to any law or
government regulation or ruling.
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
By: ______________________________
Grahame N. Clark, Jr.,
Chairman of the Board
and Chief Executive Officer
____________________________________
Employee
9
<PAGE>
EXHIBIT 10.7
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of September 27,
1995, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4435 Spring Valley Road, Dallas, Texas 75244-3704 (the "Company"),
and Raghavan Rajaji (the "Employee") who resides at 2612 Regatta Drive, Plano,
Texas 75093.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company:
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse
to the best interests of the Company and which, if the subject of a
criminal proceeding, could result in a criminal conviction for a felony or
(b) the failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than
the failure resulting from the Employee's incapacity due to physical or
mental illness), provided, however, that the Employee shall not be deemed
to be terminated for Cause under this subsection (b) unless and until (1)
after the Employee receives written notice from the Company specifying with
reasonable particularity the actions of Employee which constitute a
violation of this subsection (b) and (2) within a period of 30 days after
receipt of such notice (and during which the violation is within the
control of the Employee), Employee fails to reasonably and prospectively
cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this
Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (B) the Employee's total compensation is reduced or any
other failure by the Company to comply with Section 4 hereof, (C) any
change in any employee benefit plans or arrangements in effect on the date
hereof in which the
<PAGE>
Employee participates (including without limitation any pension and
retirement plan, savings and profit sharing plan, stock ownership or
purchase plan, stock option plan, or life, medical or disability insurance
plan), which would adversely affect the Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to
all executive officers of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to the
Employee as compared to any other executive officer of the Company, or (D)
without his prior concurrence, the Employee is required to engage in an
increased amount of travel on the Company's business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required
to be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any
person or group (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 20% of the combined voting power of the
Company's then outstanding securities, or (b) there are serving as
directors two or more persons who were elected as members of the Board of
Directors and were not nominated by management or the Board of Directors of
the Company to serve on the Board of Directors of the Company, or (c) the
Company is merged or consolidated with another corporation and as a result
of such merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for purposes
of such calculation shares of the voting securities of the Company owned by
a party to such merger or consolidation or affiliates (within the meaning
of the Exchange Act) of such party, as the same existed immediately prior
to such merger or consolidation, or (d) the Company sells all or
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of this
Agreement, the term of the Employee's employment with the Company shall commence
on the date hereof and shall terminate on September 27, 2000, unless sooner
terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary of $200,000 per year, payable in
accordance with the Company's customary payroll practices, with merit increases
as may, in the sole discretion of the Board of Directors of the Company, be
approved
2
<PAGE>
from time to time by the Board of Directors of the Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity which could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
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<PAGE>
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee in which the
Company specifies with reasonable particularity the reasons for such action
and prior to the Triggering Date, the Company may terminate the Employee's
employment with the Company under this Agreement with or without Cause and
by the affirmative vote of two-thirds of the members of the Board of
Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days' prior
written notice of his desire to the Board of Directors of the Company and
receiving an affirmative vote of two-thirds of the members of the Board of
Directors of the Company. The Employee will continue to receive his Base
Salary and Benefits through the date of termination with no liability on
the part of the Company for further payments to the Employee unless
Employee terminates his employment pursuant to Section 9.1(c)(ii), at which
time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee
is not eligible to receive benefits under the Company's Long Term
Disability Plan; or (ii) the Employee terminates his employment as a result
of any of the following reasons: (A) without the Employee's consent the
Company materially diminishes the scope of the Employee's duties, assigns
to the Employee duties materially inconsistent with his designated
position, or reduces the Employee's Base Salary or Targeted Bonus to an
amount less than previously determined or established by the Board of
Directors, or (B) the Company breached any of its material obligations
under this Agreement and such breach is not cured within 30 days after
written notice thereof by the Employee; then the Company shall pay the
Employee severance payments in an amount equal to the sum of the (x)
Employee's annualized Base Salary in effect at the time of such
termination, and (y) an amount equal to the Employee's Targeted Bonus for
the fiscal year in which such termination occurs (provided, however, that
if the basis for Employee's termination is the reduction in his Base Salary
or
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<PAGE>
the reduction of his Targeted Bonus, the severance pay shall be based on
the Base Salary and the Targeted Bonus in effect prior to such reduction).
The severance payments shall be made in installments over a period of 12
months. Notwithstanding the foregoing, if the Employee terminates his
employment pursuant to clause (ii) above, he shall be entitled to the
severance payments provided for in this paragraph only if he gives written
notice to the Company of his termination of employment within 30 days after
the occurrence of the event or events specified in clause (ii) on which he
bases his termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee might
otherwise be entitled under Company severance policies from time to time in
effect, except for (i) accrued and unpaid Base Salary to the date of
termination, and (ii) any bonus due with respect to fiscal years completed
as of the date of termination pursuant to the Executive Bonus Plan.
Nothing contained in the foregoing shall be construed so as to affect the
Employee's rights or the Company's obligations relating to agreements or
benefits which are unrelated to termination of employment.
(e) In the event that the Company terminates the Employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of the
Company, then he may not vote on such termination, and the total number of
members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), the Company may terminate the Employee's employment with
the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part for
further payments to the Employee by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination, if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total number
of members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), if the Employee's employment with the Company is terminated
without Cause or if Employee terminates his employment with the Company for
Good Reason, the Employee will continue to accrue and receive his base
salary and Benefits through the date of termination and will be entitled to
receive the benefits provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his sole
and
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<PAGE>
absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon twelve months' prior written notice to
the Company, terminate his employment with the Company under this Agreement
for any reason whatsoever. If the Employee's employment with the Company
under this Agreement is terminated pursuant to this Subsection 9.2(c) and
subject in all respects to the provisions of Section 9.2(a) and (b), the
Employee will continue to accrue and receive his base salary and Benefits
through the date of termination and will be entitled to receive the
benefits provided for under Section 10 hereof. No termination of the
Employee's employment with the Company pursuant to Subsections 9.2(b) or
(c) shall in any way terminate the Company's obligations under Sections 23
and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether such
termination is by the Employee or by the Company) at any time on or within three
years after the Triggering Date for any reason other than (a) termination by the
Company for Cause, (b) the Employee having reached the age of 65, or (c) the
Employee's death, then, within five days after the date of such termination, the
Company shall pay the Employee a lump sum amount in cash equal to 2.99 times the
Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date.
The Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
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<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing,but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
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<PAGE>
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall include each other
gender where appropriate.
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only
and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
8
<PAGE>
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state, city, or other taxes as shall be required pursuant to any law or
government regulation or ruling.
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
By: ______________________________
Grahame N. Clark, Jr.,
Chairman of the Board
and Chief Executive Officer
____________________________________
Employee
9
<PAGE>
EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made this ____ day of ___________, 19___ between BancTec,
Inc., a Delaware corporation (the "Company"), and _________________________,
("Indemnified Party").
W I T N E S S E T H:
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, Indemnified Party is willing to serve, continue to serve and to
take on additional service for or on behalf of the Company on the condition that
Indemnified Party be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnified Party do hereby covenant and agree
as follows:
1. Indemnification - General.
The Company shall indemnify and advance Expenses (as hereinafter defined)
to Indemnified Party to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnified Party
provided under the preceding sentence shall include, but shall not be
limited to, the rights set forth in the other Sections of this Agreement.
2. Proceedings Other Than Proceedings by or in the Right of the Company.
Indemnified Party shall be entitled to the indemnification rights provided
in this Section 2 if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to any threatened,
pending or completed Proceeding (as hereinafter defined), other than a
Proceeding by or in the right of the Company. Pursuant to this Section 2,
Indemnified Party shall be indemnified against Expenses, judgments,
penalties, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such Proceeding or any
claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of
the Company, and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.
3. Proceedings by or in the Right of the Company.
<PAGE>
Indemnified Party shall be entitled to the indemnification rights provided
in this Section 3, if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section 3, Indemnified Party shall be
indemnified against Expenses actually and reasonably incurred by him or on
his behalf in connection with such Proceeding if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company. Notwithstanding the foregoing, no
indemnification against such Expenses shall be made in respect of any
claim, issue or matter in such Proceeding as to which Indemnified Party
shall have been adjudged to be liable to the Company if applicable law
prohibits such indemnification; provided, however, that, if applicable law
so permits, indemnification against Expenses shall nevertheless be made by
the Company, despite such adjudication of liability, if and only to the
extent that the Court of Chancery of the State of Delaware, or the court in
which such Proceedings shall have been brought or is pending, shall
determine.
4. Indemnification of Expenses of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnified Party is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or
on his behalf in connection therewith. If Indemnified Party is not wholly
successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in
such Proceeding, the Company shall indemnify Indemnified Party against all
Expenses actually and reasonably incurred by him or on his behalf in
connection with each successful resolved claim, issue or matter. For the
purposes of this Section 4 and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.
5. Contribution.
In the event that the indemnity contained in Sections 2, 3 or 4 of this
Agreement is unavailable or insufficient to hold Indemnified Party harmless
in a Proceeding described therein, then in accordance with the provisions
of Section 145(f) of the Delaware General Corporation Law, and separate
from and in addition to the indemnity provided elsewhere herein, the
Company shall contribute to Expenses, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by or on behalf
of Indemnified Party in connection with such Proceeding or any claim, issue
or matter therein, in such proportion as appropriately reflects the
relative benefits received by, and fault of, the Company on the one hand
and Indemnified Party on the other in the acts, transactions or matters to
which the Proceeding relates and other equitable considerations.
6. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Agreement, Indemnified Party
shall submit to the Company a written request, including such
documentation and information as is reasonably available to
Indemnified Party and is reasonably necessary to determine whether and
to what extent Indemnified Party is entitled to indemnification. The
determination of Indemnified Party's entitlement to indemnification
shall be made not later than 60 days after receipt by the Company of
the written request for indemnification. The Secretary of the Company
shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnified Party has
requested indemnification.
(b) Indemnified Party's entitlement to indemnification under any of
Sections 2, 3, 4 and 5 of this Agreement shall be determined in the
specific case: (i) by the Board of Directors by a majority vote of a
quorum of the Board consisting of Disinterested Directors (as
hereinafter defined); (ii)
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<PAGE>
by Independent Counsel (as hereinafter defined), in a written opinion
if a quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, such quorum of
Disinterested Directors so directs; or, (iii) by the stockholders of
the Company. If, with regard to Section 5 of this Agreement, such a
determination is not permitted by law or if a quorum of Disinterested
Directors so directs, such determination shall be made by the Chancery
Court of the State of Delaware or in the court in which the Proceeding
giving rise to the claim for indemnification is brought.
(c) In the event that the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 6(b) of this
Agreement, the Independent Counsel shall be selected as provided in
this Section 6 (c). The Independent Counsel shall be selected by the
Board of Directors, and the Company shall give written notice to
Indemnified Party advising him of the identity of the Independent
Counsel so selected. Indemnified Party may, within seven (7) days
after receipt of such written notice of selection shall have been
given, deliver to the Company a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 13 of this Agreement, and the objection
shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel
so selected shall be disqualified from acting as such. If, within
twenty (20) days after submission by Indemnified Party of a written
request for indemnification pursuant to Section 6(a) of this
Agreement, no Independent Counsel shall have been selected, or if
selected shall have been objected to, in accordance with this Section
6(c), either the Company or Indemnified Party may petition the Court
of Chancery of the State of Delaware for the appointment as
Independent Counsel of a person selected by such court or by such
other person as such court shall designate, and the person so
appointed shall act as Independent Counsel under Section 6(b) of this
Agreement, and the Company shall pay all reasonable fees and expenses
incident to the procedures of this Section 6(c), regardless of the
manner in which such Independent Counsel was selected or appointed.
7. Advancement of Expenses.
The Company shall advance all reasonable Expenses incurred by or on behalf
of Indemnified Party in connection with any Proceeding within twenty (20)
days after the receipt by the Company of a statement or statements from
Indemnified Party requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding.
Indemnified Party shall, and hereby undertakes to, repay any Expenses
advanced if it shall ultimately be determined that Indemnified Party is not
entitled to be indemnified against such Expenses.
8. Presumptions and Effect to Certain Proceedings.
The termination of any Proceeding described in any of Sections 2, 3, or 4
of this Agreement, or of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not (except as otherwise expressly provided in this
Agreement) of itself adversely affect the right of Indemnified Party to
indemnification or create a presumption that Indemnified Party did not act
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to any
criminal Proceeding, that Indemnified Party had reasonable cause to believe
that his conduct was unlawful.
9. Term of Agreement.
All agreements and obligations of the Company contained herein commence as
of the time the
3
<PAGE>
Indemnified Party commenced to serve as a director, officer, employee or
agent of the Company (or commenced to serve at the request of the Company
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise) and shall continue
for so long as Indemnified Party shall so serve or shall be, or could
become, subject to any possible Proceeding in respect of which Indemnified
Party is granted rights of indemnification or advancement of expenses
hereunder.
10. Notification and Defense of Claim.
Promptly after receipt by Indemnified Party of notice of the commencement
of any Proceeding, Indemnified Party will, if a claim in respect thereof is
to be made against the Company under this Agreement, notify the Company of
the commencement thereof; but the omission to notify the Company will not
relieve it from any liability which it may have to Indemnified Party
otherwise than under this Agreement. With respect to any such Proceeding
as to which Indemnified Party notifies the Company of the commencement
thereof:
(a) The Company will be entitled to participate therein at its own
expense.
(b) Except as otherwise provided below, to the extent that it may wish,
the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnified Party. After notice from the Company to
Indemnified Party of its election so to assume the defense thereof,
the Company will not be liable to Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by
Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below.
Indemnified Party shall have the right to employ counsel in such
Proceeding but the fees and expenses of such counsel incurred after
notice from the Company of its assumption of the defense thereof shall
be at the expense of Indemnified Party unless (i) the employment of
counsel by Indemnified Party has been authorized by the Company, (ii)
Indemnified Party shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnified Party in
the conduct of the defense of such Proceeding or (iii) the Company
shall not in fact have employed counsel to assume the defense of such
Proceeding, in each of which cases the fees and expenses of counsel
shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any Proceeding brought by or on
behalf of the Company or as to which Indemnified Party shall have made
the conclusion provided for in (ii) above.
(c) The Company shall not be liable to indemnify Indemnified Party under
this Agreement for any amounts paid in settlement of any Proceeding or
claim effected without its written consent. The Company shall not
settle any Proceeding or claim in any manner which would impose any
penalty or limitation on Indemnified Party without Indemnified Party's
written consent. Neither the Company nor Indemnified Party will
unreasonably withhold their consent to any proposed settlement.
11. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnified Party to continue as a director or officer
of the Company, and acknowledges that Indemnified Party is relying
upon this Agreement in continuing in such capacity.
(b) In the event Indemnified Party is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Company shall reimburse
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<PAGE>
Indemnified Party for all of Indemnified Party's reasonable fees and
expenses in bringing and pursuing such action.
12. Non-Exclusivity of Rights.
The rights of indemnification and to receive advancement of Expenses as
provided by this Agreement shall not be deemed exclusive of any other
rights to which Indemnified Party may at any time be entitled under
applicable law, the Certificate of Incorporation, the Bylaws, any
agreement, a vote of stockholders or a resolution of directors, or
otherwise.
13. Definitions.
For purposes of this Agreement:
(a) "Corporate Status" described the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Company or of
any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person is or was serving
at the request of the Company.
(b) "Disinterested Director" means a director of the Company who is not
and was not at any time a party to the Proceeding in respect of which
indemnification is sought by Indemnified Party.
(c) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements
or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend or
investigation a Proceeding.
(d) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to
represent: (i) the Company or Indemnified Party in any matter material
to either such party or (ii) any other party to the Proceeding giving
rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person
who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either
the Company or Indemnified Party in an action to determine Indemnified
Party's rights under this Agreement.
(e) "Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any
other proceeding whether civil, criminal administrative or
investigative.
14. Separability.
Each of the provisions of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision hereof
shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
15. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Delaware.
5
<PAGE>
(b) This Agreement shall be binding upon Indemnified Party and upon the
Company, its successors and assigns, and shall inure to the benefit of
Indemnified Party, his heirs, personal representatives and assigns and
to the benefit of the Company, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
_______________________________
Grahame N. Clark, Jr.
Chairman and Chief Executive Officer
INDEMNIFIED PARTY
_______________________________
(Name)
Address: _______________________________
_______________________________
_______________________________
6
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 11th day of
February, 1994, by and between BANCTEC, INC., A DELAWARE CORPORATION (THE
"EMPLOYER"), AND NORTON A. STUART, JR. (THE "EMPLOYEE").
RECITALS:
WHEREAS, THE EMPLOYER RESEARCHES, DEVELOPS, MANUFACTURES, MARKETS, AND MAINTAINS
COMPUTERIZED FINANCIAL DOCUMENT PROCESSING SYSTEMS;
WHEREAS, THE EMPLOYER DESIRES TO ENGAGE THE EMPLOYEE AS AN EMPLOYEE TO PERFORM
SERVICES REQUIRED OF HIM BY THE TERMS HEREOF;
WHEREAS, THE EMPLOYEE DESIRES TO REMAIN IN THE EMPLOY OF THE EMPLOYER IN THE
CAPACITIES SET FORTH BY THE TERMS HEREOF;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS HEREIN
CONTAINED, THE PARTIES DO HEREBY AGREE AS FOLLOWS:
ARTICLE ONE
EMPLOYMENT AND DUTIES
SECTION 1.1 GENERAL. THE EMPLOYER AGREES TO EMPLOY THE EMPLOYEE AND THE
EMPLOYEE AGREES TO DEVOTE HIS WORK TIME TO THE EMPLOYER AND TO DILIGENTLY AND
FAITHFULLY PERFORM TO THE BEST OF HIS ABILITIES SUCH DUTIES AND SERVICES AS MAY
BE ASSIGNED TO HIM FROM TIME TO TIME BY THE EMPLOYER. THE EMPLOYEE AGREES TO
ADHERE TO ALL POLICIES ESTABLISHED BY THE EMPLOYER AND TO AVOID ALL ACTS THAT
MIGHT INJURE THE REPUTATION OF THE EMPLOYER. THE EMPLOYEE AGREES TO PERFORM HIS
DUTIES IN ACCORDANCE WITH ANY RULES AND REGULATIONS PROMULGATED BY THE EMPLOYER.
IT IS EXPRESSLY AGREED THAT THE CONTINUED EMPLOYMENT OF THE EMPLOYEE BY THE
EMPLOYER FROM THE DATE OF THIS AGREEMENT IS PART OF THE EMPLOYEE'S CONSIDERATION
FOR THIS AGREEMENT.
ARTICLE TWO
TITLE, COMPENSATION, EXPENSES, AND VACATIONS
SECTION 2.1 APRIL 1, 1994, THROUGH MARCH 31, 1995. FOR THE PERIOD FROM MARCH
31, 1993, TO AND INCLUDING MARCH 31, 1995, THE PARTIES AGREE TO THE FOLLOWING:
Section 2.1.1 Duties. Employee shall perform such services as directed from
time to time by the Chairman of the Board of Directors of the Employer.
Section 2.1.2 Compensation. In consideration for the Employee devoting full-
time to the activities of the Employer, Employer agrees to pay Employee an
annual salary of $179,800. In addition, Employee shall be eligible for full
participation in any executive bonus plan in effect during the period, such
bonus to be paid in cash.
1
<PAGE>
Section 2.1.3 Automobile Allowance. Employee shall receive that amount
established by the Board of Directors as an automobile allowance for those
officers of the Employer on a level of Vice President or above.
Section 2.1.4 Stock Option. Employer agrees to cause the Employee to be
granted a stock option for 5,000 shares under the Employer's 1989 Stock Option
Plan. Employer further agrees that the grant shall have occurred on or before
April 1, 1995, and that the shares shall be fully vested in Employee as of the
date of grant by the Employer.
Section 2.1.5 Vacation. The Employee shall be entitled to a reasonable
vacation, consistent with the Employer's standard vacation policy.
Section 2.1.6 Other Benefits. The Employee shall be entitled to receive those
other benefits normally provided to employees of the Employer and consistent
with the position of the Employee.
Section 2.1.7 Other Expenses. The Employee shall be entitled to be reimbursed,
in accordance with the Employer's then current Travel Policy, for all reasonable
and necessary expenses incurred by Employee on behalf of the Employer, if the
Employee submits itemized receipts obtained by the Employee in connection with
such expenditures.
SECTION 2.2 APRIL 1, 1995, THROUGH MARCH 31, 1996. FOR THE PERIOD FROM APRIL
1, 1995, TO AND INCLUDING MARCH 31, 1996, THE PARTIES AGREE AS FOLLOWS:
Section 2.2.1 Duties. Employee shall perform such services as directed from
time to time by the Chairman of the Board of Directors of the Employer.
Employee shall devote at least two-thirds (2/3) of his time to the activities of
the Employer.
Section 2.2.2 Compensation. In consideration for the Employee devoting two-
thirds (2/3) time to the activities of the Employer, Employer agrees to pay
Employee an annual salary of $119,867. In addition, Employee shall be eligible
for two-thirds (2/3) participation in any executive bonus plan in effect during
the year, such bonus to be paid in cash.
Section 2.2.3 Automobile Allowance. Employee shall receive that amount
established by the Board of Directors as an automobile allowance for those
officers of the Employer on a level of Vice President or above.
Section 2.2.4 Stock Option. Employer agrees to cause the Employee to be
granted a stock option for 5,000 shares under the Employer's 1989 Stock Option
Plan. Employee shall notify the Board of Directors at least five (5) days prior
to the date the Employee would like the option to be issued. The shares granted
thereunder shall be fully vested in Employee as of the date of grant by the
Employer.
Section 2.2.5 Vacation. The Employee shall be entitled to accrue vacation
under Employer's standard vacation policy in an amount equal to two-thirds (2/3)
that accrued for employees of like longevity with Employer.
Section 2.2.6 Other Benefits. The Employee shall be entitled to receive those
other benefits normally provided to employees of the Employer and consistent
with the position of the Employee.
Section 2.2.7 Other Expenses. The Employee shall be entitled to be reimbursed,
in accordance with the Employer's then current Travel Policy, for all reasonable
and necessary expenses incurred by Employee on behalf of the Employer, if the
Employee submits itemized receipts obtained by the Employee in connection with
such expenditures.
2
<PAGE>
SECTION 2.3 APRIL 1, 1996, THROUGH MARCH 31, 1997. FOR THE PERIOD FROM APRIL
1, 1996, TO AND INCLUDING MARCH 31, 1997, THE PARTIES AGREE AS FOLLOWS:
Section 2.3.1 Duties. Employee shall perform such services as directed from
time to time by the Chairman of the Board of Directors of the Employer.
Employee shall devote at least one-third (1/3) of his time to the activities of
the Employer.
Section 2.3.2 Compensation. In consideration for the Employee devoting one-
third (1/3) time to the activities of the Employer, Employer agrees to pay
Employee an annual salary of $59,933. In addition, Employee shall be eligible
for one-third (1/3) participation in any executive bonus plan in effect during
the period, such bonus to be paid in cash.
Section 2.3.3 Automobile Allowance. Employee shall receive that amount
established by the Board of Directors as an automobile allowance for those
officers of the Employer on a level of Vice President or above.
Section 2.3.4 Stock Option. Employer agrees to cause the Employee to be
granted a stock option for 5,000 shares under the Employer's 1989 Stock Option
Plan. Employee shall notify the Board of Directors at least five (5) days prior
to the date the Employee would like the option to be issued. The shares granted
thereunder shall be fully vested in Employee as of the date of grant by the
Employer.
Section 2.3.5 Vacation. The Employee shall be entitled to accrue vacation
under the Employer's standard Vacation Policy in an amount equal to one-third
(1/3) that accrued for employees of like longevity with Employer.
Section 2.3.6 Other Benefits. The Employee shall be entitled to receive those
other benefits normally provided to employees of the Employer and consistent
with the position of the Employee.
Section 2.3.7 Other Expenses. The Employee shall be entitled to be reimbursed,
in accordance with the Employer's then current Travel Policy, for all reasonable
and necessary expenses incurred by Employee on behalf of the Employer, if the
Employee submits itemized receipts obtained by the Employee in connection with
such expenditures.
SECTION 2.4 DEATH OR DISABILITY. THIS AGREEMENT WILL TERMINATE UPON THE
DEATH OF THE EMPLOYEE OR AFTER THE EMPLOYEE HAS BECOME PERMANENTLY DISABLED.
FOR PURPOSES OF THIS AGREEMENT, THE EMPLOYEE IS "PERMANENTLY DISABLED" WHEN HE
IS UNABLE TO CONTINUE HIS NORMAL DUTIES OF EMPLOYMENT, BY REASON OF A MEDICALLY
DETERMINED PHYSICAL OR MENTAL IMPAIRMENT, FOR A CONTINUOUS PERIOD OF AT LEAST
NINETY (90) DAYS. IN DETERMINING WHETHER OR NOT THE EMPLOYEE IS PERMANENTLY
DISABLED, THE EMPLOYER MAY REASONABLY RELY UPON THE OPINION OF ANY DOCTOR OR
PRACTITIONER OF ANY RECOGNIZED FIELD OF MEDICINE OR PSYCHIATRIC PRACTICE
SELECTED BY THE EMPLOYER AND SUCH OTHER EVIDENCE AS THE EMPLOYER REASONABLY
DEEMS NECESSARY. ANY INSURANCE OR DISABILITY BENEFITS NORMALLY AFFORDED TO
EMPLOYEES OF THE EMPLOYER SHALL NOT BE AFFECTED BY THIS SECTION.
ARTICLE THREE
COVENANT NOT TO COMPETE
The Employee hereby agrees that during the term of this Agreement and for a
period of one (1) year after the termination hereof, other than a termination
according to Section 6.2, he will not, either through any kind of ownership
3
<PAGE>
(other than ownership of securities of a publicly held corporation of which the
Employee owns less than one percent (1%) of any class of outstanding
securities), or as a director, officer, principal, agent, employee, employer,
advisor, consultant, co-partner, or in any individual or representative capacity
whatever, either for his own benefit or for the benefit of any other person,
firm, or corporation, without the prior written consent of a duly authorized
officer of the Employer, compete with the Employer by engaging in any act,
including, but not limited to, any of the following:
(a) canvass, solicit, accept, or perform any type of work performed by the
Employer for any Customer of the Employer;
(b) develop, design, manufacture, or market any products or devices that
may be used for the same purposes as any product sold by the Employer
during the term of this Agreement;
(c) request or advise any firm to withdraw, curtail, or cancel its
business with the Employer;
(d) give or attempt to give any person, partnership, or corporation the
right to solicit or canvass any Customer for the performance of work
performed by the Employer; and
(e) induce or attempt to influence any employee of the Employer or any
employee of any Customer to terminate his employment with the view
toward competing with the Employer or any Customer.
As used herein, the term "Customer" includes any of the Employer's Customers at
any time during the term of this Agreement.
ARTICLE FOUR
CONFIDENTIAL INFORMATION
SECTION 4.1 NONDISCLOSURE. THE EMPLOYEE EXPRESSLY COVENANTS AND AGREES THAT
HE WILL NOT DURING HIS EMPLOYMENT FOR THE EMPLOYER HEREUNDER OR AT ANY TIME
AFTER THE TERMINATION HEREOF, IRRESPECTIVE OF THE TIME, MANNER, OR CAUSE OF
TERMINATION, REVEAL, DIVULGE, DISCLOSE, OR COMMUNICATE TO ANY PERSON, FIRM, OR
CORPORATION, OTHER THAN AUTHORIZED OFFICERS, DIRECTORS, AND EMPLOYEES OF THE
EMPLOYER, IN ANY MANNER WHATSOEVER, ANY CONFIDENTIAL INFORMATION OF THE EMPLOYER
THAT WOULD BE INCONSISTENT WITH THE POSITION HELD BY THE EMPLOYEE OR THE DUTIES
BEING PERFORMED BY THE EMPLOYEE AT THE DIRECTION OF THE EMPLOYER.
SECTION 4.2 DEFINITION OF "CONFIDENTIAL INFORMATION". AS USED HEREIN,
"CONFIDENTIAL INFORMATION" MEANS INFORMATION DISCLOSED TO OR KNOWN BY THE
EMPLOYEE AS A CONSEQUENCE OF OR THROUGH HIS EMPLOYMENT FOR THE EMPLOYER, NOT
GENERALLY KNOWN IN THE BUSINESS IN WHICH THE EMPLOYER IS OR MAY BECOME ENGAGED,
ABOUT THE EMPLOYER, ITS BUSINESS, PRODUCTS, AND PROCESSES.
SECTION 4.3 RETURN OF CONFIDENTIAL INFORMATION AND OTHER PROPERTY. UPON
TERMINATION OF THIS AGREEMENT, THE EMPLOYEE WILL SURRENDER TO THE EMPLOYER ALL
CONFIDENTIAL INFORMATION INCLUDING, WITHOUT LIMITATION, ALL LISTS, CHARTS,
SCHEDULES, REPORTS, FINANCIAL STATEMENTS, BOOKS, AND RECORDS, AND ALL COPIES
THEREOF, OF THE EMPLOYER AND ALL OTHER PROPERTY BELONGING TO THE EMPLOYER
WHATSOEVER.
4
<PAGE>
ARTICLE FIVE
ENFORCEMENT OF COVENANTS
The Employee agrees that a substantial violation on his part of any covenant
contained in Articles Three and Four of this Agreement will cause such damage to
the Employer as will be irreparable and for that reason, the Employee further
agrees that the Employer shall be entitled as a matter of right, to an
injunction out of any court of competent jurisdiction, restraining any further
violation of said covenants by the Employee, his employer, employees, partners,
or agents. Such right to injunction shall be cumulative and in addition to
whatever other remedies the Employer may have, including, specifically, recovery
of liquidated and additional damages. The Employee expressly acknowledges and
agrees that the respective covenants and agreements shall be construed in such a
manner as to be enforceable under applicable laws if a more limited scope of
time is determined by a court or competent jurisdiction to be required.
ARTICLE SIX
TERM OF AGREEMENT
SECTION 6.1 TERM. THE TERM OF THIS AGREEMENT WILL BE THROUGH MARCH 31, 1997,
UNLESS TERMINATED EARLIER AS PROVIDED BELOW, OR UNLESS TERMINATED BY THE
EMPLOYEE AT ANY TIME.
SECTION 6.2 IMMEDIATE TERMINATION. THE EMPLOYER MAY TERMINATE THIS AGREEMENT
WITHOUT NOTICE FOR CAUSE, AS HEREINAFTER DEFINED, OR IF THE EMPLOYEE IS IN
SUBSTANTIAL BREACH OF THE COVENANTS OF THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, DISCLOSING CONFIDENTIAL INFORMATION, COMMITTING ACTS OF PERSONAL OR
BUSINESS MISCONDUCT.
In the event of termination for cause, the Employer shall be under no obligation
to the Employee except to reimburse him for such expenses as he may be entitled
to receive up to the time of termination.
In the event of termination of this Agreement according to this Section 6.2,
then (a) the covenants contained in Article Three hereof shall survive for a
period of two (2) years after the date this Agreement is terminated and (b) the
covenants contained in Article Four hereof shall survive indefinitely.
"Cause" means (a) any act by the Employee that is materially adverse to the best
interests of the Company and which, if the subject of a criminal proceeding,
could result in a criminal conviction for a felony or (b) the failure by the
Employee to substantially perform his duties hereunder, which duties are within
the control of the Employee (other than the failure resulting from the
Employee's incapacity due to physical or mental illness).
SECTION 6.3 RENEWABILITY. THIS AGREEMENT MAY BE RENEWED AT THE OPTION OF THE
BOARD OF DIRECTORS OF EMPLOYER WITH THE AGREEMENT OF THE EMPLOYEE IN ONE (1)
YEAR INCREMENTS AFTER THE EXPIRATION OF THE TERM OF THIS AGREEMENT.
5
<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
-------------
SECTION 7.1 NOTICES. ALL NOTICES PROVIDED FOR BY THIS AGREEMENT SHALL BE
MADE IN WRITING (A) EITHER BY ACTUAL DELIVERY OF THE NOTICE TO THE PARTY
THEREUNTO ENTITLED OR (B) BY THE MAILING OF THE NOTICE IN THE UNITED STATES
MAIL, ADDRESSED TO THE PARTY TO BE NOTIFIED AT THE ADDRESS LISTED BELOW (OR AT
SUCH OTHER ADDRESS AS MAY HAVE BEEN DESIGNATED BY WRITTEN NOTICE), CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. THE NOTICE SHALL BE DEEMED TO BE
RECEIVED (A) IF BY PERSONAL DELIVERY, ON THE DATE OF ITS ACTUAL RECEIPT BY THE
PARTY ENTITLED THERETO OR (B) IF BY MAIL, ON THE DATE OF DEPOSIT IN THE UNITED
STATES MAIL.
To the Employer: BancTec, Inc.
4435 Spring Valley Road
Dallas, Texas 75244
Attn: General Counsel
To the Employee: Norton A. Stuart, Jr.
3124 Greenbriar
Dallas, Texas 75225
SECTION 7.2 ENTIRE AGREEMENT. THIS AGREEMENT AND THE EMPLOYMENT AGREEMENT
DATED MAY 28, 1992, CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND
SUPERSEDE ALL OTHER PRIOR AGREEMENTS AND UNDERSTANDINGS, ORAL OR WRITTEN, IF
ANY, BETWEEN THE PARTIES HERETO. NO MODIFICATION OR AMENDMENT OF ANY OF THE
TERMS, CONDITIONS, OR PROVISIONS HEREIN MAY BE MADE OTHERWISE THAN BY WRITTEN
AGREEMENT SIGNED BY THE PARTIES HERETO.
SECTION 7.3 GOVERNING LAW. THE LAWS OF THE STATE OF TEXAS SHALL GOVERN THE
VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THIS AGREEMENT.
SECTION 7.4 PARTIES BOUND. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
HEREUNDER SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE EMPLOYER, THE
EMPLOYEE, AND THEIR RESPECTIVE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS, AND
ASSIGNS; PROVIDED, HOWEVER, THAT THE EMPLOYEE MAY NOT ASSIGN ANY RIGHTS OR
OBLIGATIONS HEREUNDER WITHOUT THE EXPRESS WRITTEN CONSENT OF THE EMPLOYER. THIS
AGREEMENT SHALL ALSO BIND AND INURE TO THE BENEFIT OF ANY SUCCESSOR OF THE
EMPLOYER BY MERGER OR CONSOLIDATION, OR ANY ASSIGNEE OF ALL OR SUBSTANTIALLY ALL
OF THE EMPLOYER'S PROPERTIES.
SECTION 7.5 INVALID PROVISIONS. IF ANY PROVISION OF THIS AGREEMENT IS HELD
TO BE ILLEGAL, INVALID, OR UNENFORCEABLE UNDER PRESENT OR FUTURE LAWS EFFECTIVE
DURING THE TERM HEREOF, SUCH PROVISION SHALL BE FULLY SEVERABLE; THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED AS IF SUCH ILLEGAL, INVALID, OR UNENFORCEABLE
PROVISION HAD NEVER COMPRISED A PART HEREOF; AND THE REMAINING PROVISIONS HEREOF
SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL NOT BE AFFECTED BY THE ILLEGAL,
INVALID, OR UNENFORCEABLE PROVISION OR BY ITS SEVERANCE HEREFROM. FURTHERMORE,
IN LIEU OF SUCH ILLEGAL, INVALID, OR UNENFORCEABLE PROVISION, THERE SHALL BE
ADDED AUTOMATICALLY AS A PART OF THIS AGREEMENT A PROVISION AS SIMILAR IN TERMS
TO SUCH ILLEGAL, INVALID, OR UNENFORCEABLE PROVISION AS MAY BE POSSIBLE AND BE
LEGAL, VALID, AND ENFORCEABLE.
SECTION 7.6 WAIVER OF BREACH. THE WAIVER BY ANY PARTY HERETO OF A BREACH OF
ANY PROVISION OF THIS AGREEMENT SHALL NOT OPERATE OR BE CONSTRUED AS A WAIVER OF
ANY SUBSEQUENT BREACH BY ANY PARTY.
6
<PAGE>
SECTION 7.7 SECTION HEADINGS. THE HEADINGS CONTAINED IN THIS AGREEMENT ARE
FOR REFERENCE PURPOSES ONLY AND DO NOT AFFECT IN ANY WAY THE MEANING OR
INTERPRETATION OF THE AGREEMENT.
SECTION 7.8 MULTIPLE COUNTERPARTS. THIS AGREEMENT HAS BEEN EXECUTED IN A
NUMBER OF IDENTICAL COUNTERPARTS, EACH OF WHICH FOR ALL PURPOSES IS TO BE DEEMED
AN ORIGINAL, AND ALL OF WHICH CONSTITUTE, COLLECTIVELY, ONE AGREEMENT; BUT
MAKING PROOF OF THIS AGREEMENT, IT SHALL NOT BE NECESSARY TO PRODUCE OR ACCOUNT
FOR MORE THAN ONE (1) SUCH COUNTERPART.
IN WITNESS WHEREOF, THIS AGREEMENT IS SIGNED AND EXECUTED THE DAY AND YEAR
FIRST ABOVE WRITTEN.
EMPLOYER:
BANCTEC, INC.
By: ________________________________
Grahame N. Clark, Jr.
Chairman of the Board and Chief
Executive Officer
EMPLOYEE:
By: ________________________________
Norton A. Stuart, Jr.
7
<PAGE>
EXHIBIT 11.1
BANCTEC, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
-------------------------- -------------------------
DECEMBER 31, DECEMBER 31, MARCH 26, MARCH 27,
1995 1994 1995 1994
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
PRIMARY:
Net income (loss)....... $(53,481,000) $(12,887,000) $(15,608,000) $22,729,000
------------ ------------ ------------ -----------
Shares outstanding be-
ginning of period...... 19,681,429 19,634,486 19,634,486 18,372,336
Weighted average number
of shares repurchased
or held in treasury
stock during the year.. (29,936) (237,998) (265,603) (32,886)
Shares issued during the
year and shares issued
from assumed exercise
of stock options
reduced by the number
of shares which could
have been purchased
with the proceeds from
exercise of such
options and unearned
compensation on
restricted stock
awards................. 663,106 944,548 980,710 1,400,347
------------ ------------ ------------ -----------
Weighted average number
of shares outstanding
as adjusted............ 20,314,599 20,341,036 20,349,593 19,739,797
------------ ------------ ------------ -----------
Primary net income
(loss) per common and
common equivalent
share.................. $ (2.63) $ (0.63) $ (0.77) $ 1.15
============ ============ ============ ===========
FULLY DILUTED:
Net income (loss)....... $(53,481,000) $(12,887,000) $(15,608,000) $22,729,000
Add after tax interest
expense applicable to
the 7 1/4% convertible
subordinated deben-
tures.................. 2,126,000 2,126,000 2,835,000 2,835,000
------------ ------------ ------------ -----------
Net income (loss), as
adjusted............... $(51,355,000) $(10,761,000) $(12,773,000) $25,564,000
============ ============ ============ ===========
Shares outstanding be-
ginning of period...... 19,681,429 19,634,486 19,634,486 18,372,336
Weighted average number
of shares repurchased
or held in treasury
stock during the year.. (29,936) (237,998) (265,603) (32,886)
Shares issued during the
year and shares
issuable from assumed
exercise of stock
options reduced by the
number of shares which
could have been
purchased with the
proceeds from exercise
of such options and
unearned compensation
on restricted stock
awards................. 696,416 944,548 980,710 1,507,737
------------ ------------ ------------ -----------
Weighted average number
of shares outstanding
as adjusted excluding 7
1/4% convertible subor-
dinated debentures..... 20,347,909 20,341,036 20,349,593 19,847,187
============ ============ ============ ===========
Fully diluted
income(loss) per common
and common equivalent
share excluding 7 1/4%
subordinated deben-
tures.................. $ (2.63) $ (0.63) $ (0.77) $ 1.15
------------ ------------ ------------ -----------
Weighted average shares
issuable assuming con-
version of the 7 1/4%
convertible subordi-
nated debentures....... 1,821,920 1,821,920 1,821,920 1,821,920
Weighted average number
of shares outstanding
as adjusted............ 22,169,829 22,162,956 22,171,513 21,669,107
------------ ------------ ------------ -----------
Fully diluted net income
(loss) per common and
common equivalent
share.................. $ (2.32) $ (0.49) $ (0.58) $ 1.18
============ ============ ============ ===========
</TABLE>
48
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF BANCTEC, INC.
1. BancTec USA, Inc., a Delaware corporation.
2. BancTec (Management), Inc., a Delaware corporation.
3. BancTec (Export), Inc., a Virgin Islands corporation.
4. BancTec (Puerto Rico), Inc., a Delaware corporation.
5. BancTec (Canada), Inc., a Canadian corporation.
6. BancTec Limited, a U.K. corporation.
7. BancTec (Australia) Pty Limited, an Australian corporation.
8. BancTec Japan, Inc., a Japan corporation.
9. Recognition UK Limited, a U.K. corporation.
10. Recognition Danmark A/S, a Danish corporation.
11. Recognition Sverige A.B., a Swedish corporation.
12. Recognition Iberica S.A., a Spanish corporation.
13. Recognition Benelux B.V., a Dutch corporation.
14. Recognition Japan Inc., a Delaware corporation.
15. ScanData Holding N.V., a Netherlands corporation
ScanData GmbH, a German corporation.
ScanData France S.A., a French corporation.
ScanData B.V., a Dutch corporation.
BanTech AB, a Swedish corporation.
49
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports dated March 12, 1996, 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,
March 29, 1996
50
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated December 7, 1994, relating
to the financial statements of Recognition International Inc. and its
subsidiaries, which report appears on page 15 of this BancTec, Inc. Annual
Report on Form 10-K for the transition period March 27, 1995 to December 31,
1995, which Form 10-K we understand has in turn been incorporated by reference
into BancTec'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 (No.
33-58335). We also consent to the use of our report on the Financial Statement
Schedules, which report appears on page 46 of this Form 10-K.
PRICE WATERHOUSE LLP
Dallas, Texas
March 29, 1996
51
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial 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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 MAR-26-1995
<PERIOD-START> MAR-27-1995 MAR-28-1994
<PERIOD-END> DEC-31-1995 MAR-26-1995
<CASH> 22,010 52,233
<SECURITIES> 4,864 604
<RECEIVABLES> 117,760 136,080
<ALLOWANCES> (11,571) (4,313)
<INVENTORY> 76,930 76,831
<CURRENT-ASSETS> 235,866 281,762
<PP&E> 212,590 209,411
<DEPRECIATION> (137,033) (129,354)
<TOTAL-ASSETS> 440,348 501,758
<CURRENT-LIABILITIES> 188,780 191,622
<BONDS> 82,972 94,181
199 197
0 0
<COMMON> 0 0
<OTHER-SE> 156,002 206,546
<TOTAL-LIABILITY-AND-EQUITY> 440,348 501,758
<SALES> 188,107 266,750
<TOTAL-REVENUES> 383,984 516,932
<CGS> 163,090 195,337
<TOTAL-COSTS> 322,503 381,204
<OTHER-EXPENSES> 125,452 136,626
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,309 10,021
<INCOME-PRETAX> (70,715) (6,155)
<INCOME-TAX> (17,234) 10,663
<INCOME-CONTINUING> (3,481) (15,608)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (53,481) (15,608)
<EPS-PRIMARY> (2.63) (0.77)
<EPS-DILUTED> (2.63) (0.77)
</TABLE>
