<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BANCTEC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 3670 75-1559633
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification Code
Number)
4851 LBJ FREEWAY
DALLAS, TEXAS 75244
(972) 341-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
GRAHAME N. CLARK, JR.
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BANCTEC, INC.
4851 LBJ FREEWAY
DALLAS, TEXAS 75244
(972) 341-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
JIM A. WATSON TOD V. MONGAN
VINSON & ELKINS L.L.P. BANCTEC, INC.
3700 TRAMMELL CROW CENTER 4851 LBJ FREEWAY
2001 ROSS AVENUE DALLAS, TEXAS 75244
DALLAS, TEXAS 75201-2975 (972) 341-4000
(214) 220-7762
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<TABLE>
<CAPTION>
==============================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION FEE
PER NOTE OFFERING PRICE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7.50% Senior Notes due 2008... $150,000,000 100.00% $150,000,000 $44,250
- ----------------------------------------------------------------------------------------------
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
OFFER FOR ALL OUTSTANDING
7.50% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
7.50% SENIOR NOTES DUE 2008
OF
BANCTEC, INC.
_______________________________
Interest Payable June 1 and December 1
BancTec, Inc. ("BancTec" or the "Company") is offering upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
letter of transmittal (the "Letter of Transmittal") (which together constitute
the "Exchange Offer") to exchange $1,000 principal amount of its new 7.50%
Senior Notes due 2008 (the "New Notes") for each $1,000 principal amount of its
outstanding 7.50% Senior Notes due 2008 (the "Old Notes") in the aggregate
principal amount of $150,000,000. The form and terms of the New Notes are
identical to the form and terms of the Old Notes except that the Old Notes were
offered and sold in reliance upon certain exemptions from registration under the
Securities Act of 1933, as amended (the "Securities Act"), while the offering
and sale of the New Notes in exchange for the Old Notes has been registered
under the Securities Act, with the result that the New Notes will not bear any
legends restricting their transfer. The New Notes will evidence the same debt
as the Old Notes and will be issued pursuant to, and entitled to the benefits
of, the Indenture (as defined) governing the Old Notes. The Exchange Offer is
being made in order to satisfy certain contractual obligations of the Company.
See "The Exchange Offer" and "Description of New Notes." The New Notes and the
Old Notes are sometimes collectively referred to herein as the "Notes."
Interest on the Notes will be payable semiannually on June 1 and December 1
of each year, commencing on December 1, 1998. The Notes will mature on June 1,
2008. The Notes will be redeemable at the option of the Company, in whole or in
part, at a redemption price equal to the greater of (i) 100% of their principal
amount, and (ii) the sum of the present values of the Remaining Scheduled
Payments (as defined) discounted to the date of redemption, on a semiannual
basis, at the Treasury Rate (as defined) plus 15 basis points, plus in each case
accrued interest thereon to the date of redemption. The Notes will not be
subject to any sinking fund requirement. See "Description of New Notes." The
Notes will be senior unsecured obligations of the Company, ranking pari passu
with all existing and future senior debt of the Company and senior in right of
payment to all future subordinated debt of the Company.
The Exchange Offer will expire at 5:00 p.m., New York City time
___________, 1998, or such later date and time to which it is extended (the
"Expiration Date").
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where the Old Notes were acquired by that broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. See "The Exchange Offer"
and "Plan of Distribution."
Following the consummation of the Exchange Offer, holders of Old Notes who
were eligible to participate in the Exchange Offer but who did not tender their
Old Notes will not be entitled to certain rights under the Registration Rights
Agreement (as defined) and such Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity in the market for the Old
Notes could be adversely affected. No assurance can be given as to the
liquidity of the trading market for either the Old Notes or the New Notes.
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
<PAGE>
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________, 1998
2
<PAGE>
INCORPORATION BY REFERENCE
The following documents, which have been filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), are incorporated herein
by reference and made a part of this Prospectus: (i) the Company's Annual Report
on Form 10-K for the year ended December 31, 1997; (ii) the Company's Proxy
Statement, dated April 10, 1998, relating to the Annual Meeting of Stockholders
held on May 21, 1998; (iii) the Company's Quarterly Report on Form 10-Q for the
fiscal period ended March 31, 1998; (iv) the Company's Current Report on Form 8-
K dated May 1, 1998; and (v) the Company's Current Report on Form 8-K dated May
18, 1998.
In addition, all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the Expiration Date shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED,
UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE
DOCUMENTS REFERRED TO ABOVE THAT ARE INCORPORATED BY REFERENCE IN THE PROSPECTUS
(EXCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE). REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO
SUSAN SEITER, DIRECTOR--INVESTOR RELATIONS, BANCTEC, INC., AT (972) 341-4904.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY ______, 1998 (FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE).
3
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), with respect to the New Notes offered hereby. As permitted
by the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement. For further
information with respect to the Company and the New Notes offered hereby,
reference is made to the Registration Statement, including the exhibits and
schedules filed therewith. Statements contained in this Prospectus concerning
the provisions of any contract, agreement or other document referred to herein
or therein are not necessarily complete, but contain a summary of the material
terms of such contracts, agreements or other documents. With respect to each
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for the complete contents of the
exhibit, and each statement concerning its provisions is qualified in its
entirety by such reference. The Registration Statement may be inspected,
without charge, at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its regional offices at 7 World Trade Center, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661-2551. Copies of such materials may also be obtained by mail at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
such materials may also be obtained from the web site that the Commission
maintains at www.sec.gov.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission described above. The Company's Common Stock is
listed on the New York Stock Exchange, and such materials also can be inspected
at the offices of The New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005.
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. THE WORDS
"ANTICIPATE," "BELIEVE," "EXPECT," "PLAN," "INTEND," "ESTIMATE," "PROJECT,"
"WILL," "COULD," "MAY," "GOAL," "TARGET," "PURSUE" AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE
COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE
AND INVOLVE RISKS AND UNCERTAINTIES RELATIVE TO MARKET DEMAND AND ACCEPTANCE,
CHANGING ECONOMIC CONDITIONS, COMPETITION, RAPIDLY CHANGING TECHNOLOGY AND OTHER
RISKS DETAILED IN THE COMPANY'S COMMISSION FILINGS. SHOULD ONE OR MORE OF THESE
RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED,
BELIEVED, EXPECTED, PLANNED, INTENDED, ESTIMATED, PROJECTED, TARGETED, PURSUED
OR OTHERWISE INDICATED.
4
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus.
THE COMPANY
OVERVIEW
BancTec, Inc. (the "Company" or "BancTec") is a worldwide diversified
systems integration and services company with a 25-year history of innovation in
imaging technology, financial transaction processing and workflow productivity
improvement. The Company produces check, remittance and financial instrument
processing solutions for the banking, financial services, insurance, healthcare,
government, utility, telecommunications and retail industries. The Company is
also a leading provider of network support services for local area networks and
personal computers. Serving Fortune 1000 companies, government agencies and
leading personal computer manufacturers, BancTec provides premium service for
more than two million personal computers nationwide.
Founded in 1972, BancTec operates worldwide (with international sales in
1997 representing approximately 29% of total revenues) and serves over 5,000
customers in over 50 countries. Selected customers include the United States
Federal Reserve Bank ("Federal Reserve"), GTE Corporation ("GTE"), International
Business Machines Corporation ("IBM"), Dell Computer Corporation ("Dell"),
Metropolitan Life Insurance Co. ("MetLife"), National Westminster Bank p.l.c.
("NatWest"), NationsBank Corporation ("NationsBank"), Citicorp, Sagawa Express
Co. ("Sagawa Express"), Compaq Computer Corporation ("Compaq"), Lockheed Martin
Corporation ("Lockheed Martin"), British Telecommunications plc ("British
Telecom") and Inland Revenue of the United Kingdom ("U.K. Inland Revenue").
BUSINESS STRATEGY
Building on one of the largest installed customer bases in the industry,
BancTec plans to grow revenue and earnings by expanding the breadth of products
and services it offers its customers. For example, by incorporating its Plexus
portfolio of workflow and image management software products into customer
solutions, BancTec believes it can expand beyond traditional back office
processing applications to deliver new applications and systems for enterprise-
wide deployment by its customers. In addition, the Company is targeting new
vertical markets, such as healthcare, where BancTec's comprehensive transaction
and document processing solutions can improve efficiency and service. The
Company differentiates itself from its competitors by offering a complete suite
of advanced software applications, equipment and service designed for high
volume, mission critical processing environments.
BancTec has successfully built recurring revenue to balance the variable
nature of the systems integration business, to enhance cash flow and to lessen
the impact of economic disruptions. Today, more than 50% of the Company's
revenue is from recurring sources, and BancTec will continue to target
opportunities to further increase this percentage.
BancTec expects to continue to capitalize on the accelerating trend toward
outsourcing of services for distributed desktop computers (networks) through
direct sales efforts to Fortune 1000 corporations and government agencies, and
through strategic alliances with major information technology outsourcing
contractors. The Company plans to expand its service offerings in the areas of
network design and integration, help desk and training, remote network
monitoring, and life cycle and project management. A leading supplier of
warranty repair services for personal computers, BancTec will also continue to
pursue additional contracts with major PC manufacturers and third party warranty
administrators.
In most of its business operations, BancTec employs a multi-channel
strategy to market and distribute its products and services. Channels include
direct sales to end users by the Company's sales force and sales to other
manufacturers, systems integrators and value-added resellers. This distribution
network allows the Company to pursue business in markets where local economic
conditions preclude BancTec from having a direct presence.
5
<PAGE>
A key component of BancTec's strategy is an active research and development
program to maintain its leadership position in payment and document processing
technology. In addition, current development efforts are focused on expanding
the Company's portfolio of Internet-enabled software products and new
initiatives in the rapidly developing electronic commerce arena.
BancTec operates pursuant to a conservative financial strategy and has an
internal goal of maintaining a debt-to-capital ratio of 40% or less. While the
Company in the past has exceeded this percentage for short periods of time to
finance acquisitions, it has historically reduced leverage thereafter from free
cash flow. After the issuance of the Old Notes it was 37%.
6
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer applies to $150.0 million aggregate principal amount of
the Old Notes. The form and terms of the New Notes are identical to the form
and terms of the Old Notes except that the Old Notes were offered and sold in
reliance upon certain exemptions from registration under the Securities Act,
while the offering and sale of the New Notes in exchange for the Old Notes has
been registered under the Securities Act, with the result that the New Notes
will not bear any legends restricting their transfer. See "Description of New
Notes."
The Exchange Offer................... $1,000 principal amount of New Notes
in exchange for each $1,000 principal
amount of Old Notes. As of the date
hereof, Old Notes representing $150.0
million aggregate principal amount
were outstanding. The terms of the
New Notes and the Old Notes are
substantially identical.
Based on an interpretation by the
Commission's staff set forth in
no-action letters issued to third
parties unrelated to the Company, the
Company believes that, with the
exceptions discussed herein, New
Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may
be offered for resale, resold and
otherwise transferred by any person
receiving the New Notes, whether or
not that person is the holder (other
than any such holder or such other
person that is an "affiliate" of the
Company within the meaning of Rule
405 under the Securities Act),
without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that (i) the New Notes are
acquired in the ordinary course of
business of that holder or such other
person, (ii) neither the holder nor
such other person is engaging in or
intends to engage in a distribution
of the New Notes, and (iii) neither
the holder nor such other person has
an arrangement or understanding with
any person to participate in the
distribution of the New Notes.
However, the Company has not sought,
and does not intend to seek, its own
no-action letter, and there can be no
assurance that the Commission's staff
would make a similar determination
with respect to the Exchange Offer.
See "The Exchange Offer -- Purpose
and Effect." Each broker-dealer that
receives New Notes for its own
account in exchange for Old Notes,
where those Old Notes were acquired
by the broker-dealer as a result of
its market-making activities or other
trading activities, must acknowledge
that it will deliver a prospectus in
connection with any resale of those
New Notes. See "Plan of
Distribution."
Exchange and Registration Rights
Agreement......................... The Old Notes were sold by the
Company on May 22, 1998 in a private
placement. In connection with the
sale, the Company entered into an
Exchange and Registration Rights
Agreement with the initial purchasers
of the Old Notes (the "Registration
Rights Agreement") providing for the
Exchange Offer. See "The Exchange
Offer -- Purpose and Effect."
Expiration Date..................... The Exchange Offer will expire at
5:00 P.M., New York City
time,_______, 1998, or such later
date and time to which it is extended.
Withdrawal Rights................... The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New
York City time, on the Expiration
Date. Any Old Notes not accepted for
exchange for any reason will be
returned without expense to the
tendering holder thereof as promptly
as practicable after the expiration
or termination of the Exchange Offer.
7
<PAGE>
Interest on the New Notes
and Old Notes..................... Interest on each New Note will accrue
from the date of issuance of the Old
Note for which the New Note is
exchanged or from the date of the
last periodic payment of interest on
such Old Note, whichever is later.
No interest will be paid on Old Notes
which are exchanged for New Notes.
Conditions to the Exchange
Offer............................. The Exchange Offer is subject to
certain customary conditions, certain
of which may be waived by the
Company. See "The Exchange Offer --
Conditions."
Procedures for Tendering
Old Notes.......................... Each holder of Old Notes wishing to
accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a copy thereof, in
accordance with the instructions
contained herein and therein, and
mail or otherwise deliver the Letter
of Transmittal, or the copy, together
with the Old Notes and any other
required documentation, to the
Exchange Agent at the address set
forth herein. Persons holding Old
Notes through the Depository Trust
Company (the "DTC") and wishing to
accept the Exchange Offer must do so
pursuant to the DTC's Automated
Tender Offer Program, by which each
tendering Participant (as defined)
will agree to be bound by the Letter
of Transmittal. By executing or
agreeing to be bound by the Letter of
Transmittal, each holder will
represent to the Company that, among
other things, (i) any New Notes to be
received by it will be acquired in
the ordinary course of its business,
(ii) it has no arrangement with any
person to participate in the
distribution of the New Notes and
(iii) it is not an "affiliate," as
defined in Rule 405 of the Securities
Act, of the Company, or if it is an
affiliate, it will comply with the
registration and prospectus delivery
requirements of the Securities Act to
the extent applicable. If the holder
is not a broker-dealer, it will be
required to represent that it is not
engaged in, and does not intend to
engage in, the distribution of the
New Notes. If the holder is a
broker-dealer that will receive New
Notes for its own account in exchange
for Old Notes that were acquired as a
result of market-making activities or
other trading activities, it will be
required to acknowledge that it will
deliver a prospectus in connection
with any resale of such New Notes.
Pursuant to the Registration Rights
Agreement, the Company is required to
file a registration statement for a
continuous offering pursuant to Rule
415 under the Securities Act in
respect of the Old Notes if existing
Commission interpretations are
changed such that the New Notes
received by holders in the Exchange
Offer are not or would not be, upon
receipt, transferable by each such
holder without restriction under the
Securities Act. See "The Exchange
Offer -- Purpose and Effect."
Acceptance of Old Notes and
Delivery of New Notes.............. The Company will accept for exchange
any and all Old Notes which are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date.
The New Notes issued pursuant to the
Exchange Offer will be delivered
promptly following the Expiration
Date. See "The Exchange Offer --
Terms on the Exchange Offer."
8
<PAGE>
Exchange Agent....................... The First National Bank of Chicago is
serving as Exchange Agent in
connection with the Exchange Offer
and is also serving as Trustee under
the Indenture.
Federal Income Tax
Considerations..................... The exchange pursuant to the Exchange
Offer will not be a taxable event for
federal income tax purposes. See
"Certain United States Federal Income
Tax Considerations."
Effect of Not Tendering.............. Old Notes that are not tendered or
that are tendered but not accepted
will, following the completion of the
Exchange Offer, continue to be
subject to the existing restrictions
upon transfer thereof. The Company
will have no further obligation to
provide for the registration under
the Securities Act of such Old Notes.
Global Note.......................... The New Notes will only be issued in
registered form. Holders of
beneficial interests in the Global
Notes will not be considered the
owners or holders of any New Notes
under the Global Notes or the
Indenture for any purpose. Holders
of beneficial interests in the Global
Notes may be unable to transfer or
pledge their interest in the Global
Notes if physical delivery is
required. Payments by the
Participants (as defined) and the
Indirect Participants (as defined) to
the beneficial owners of New Notes
will be governed by standing
instructions and customary practice
and will be the responsibility of the
Participants or Indirect Participants
and not the Company or Trustee. See
"Book Entry; Delivery and Form."
9
<PAGE>
TERMS OF THE NEW NOTES
Issuer............................... BancTec, Inc.
Securities........................... $150,000,000 principal amount of
7.50% Senior Notes due 2008.
Maturity............................. June 1, 2008.
Interest Payment Dates............... Interest will accrue from the date of
original issuance of the Old Notes,
or from the most recent date to which
interest has been paid or provided
for, whichever is later, and will be
payable semiannually in arrears on
June 1 and December 1 of each year,
commencing December 1, 1998. No
interest will be paid on Old Notes
exchanged for New Notes.
Sinking Fund......................... None.
Optional Redemption.................. The New Notes may be redeemed at any
time at the option of the Company, in
whole or in part, at a redemption
price equal to the greater of (i)
100% of their principal amount, and
(ii) the sum of the present values of
the Remaining Scheduled Payments (as
defined) discounted to the date of
redemption, on a semiannual basis, at
the Treasury Rate plus 15 basis
points, plus in each case accrued
interest thereon to the date of
redemption.
Ranking.............................. The New Notes will be unsecured
obligations of the Company ranking
pari passu with all existing and
future senior debt of the Company and
senior in right of payment to all
other subordinated debt of the
Company.
Restrictive Covenants................ The Indenture contains certain
limitations on the Company's ability
to (i) permit its subsidiaries to
incur debt, (ii) incur certain liens
and (iii) engage in certain sale and
leaseback transaction.
For additional information regarding
the Notes, see "Description of New
Notes."
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND
CERTAIN OPERATING DATA
The following table sets forth summary financial information for the
Company as of and for the periods indicated, and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "The Company" and the audited and unaudited Consolidated Financial
Statements and related notes thereto.
<TABLE>
<CAPTION>
Nine Restated Fiscal
Three Months Ended Twelve Months Ended Months Years Ended
March 31, December 31, Ended March 26
---------------------- ---------------------- December 31 ---------------------------
1998 1997 1997 1996 1995(2) 1995(1)(3) 1994(1)
---------- ---------- ---------- ---------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(unaudited)
(In thousands, except per share data)
INCOME STATEMENT DATA
FOR THE PERIOD:
Revenue................ $142,382 $142,353 $603,534 $554,002 $383,984 $516,932 $478,116
Net income (loss)
before extraordinary
item.................. 10,061 10,027 42,614 37,101 (53,481) (15,608) 22,729
Net income (loss)...... 10,061 10,027 42,152 37,101 (53,481) (15,608) 22,729
Diluted income (loss)
per share before
extraordinary item.... 0.46 0.46 1.92 1.76 (2.71) (0.80) 1.19
Diluted income (loss)
per share............. 0.46 0.46 1.90 1.76 (2.71) (0.80) 1.19
BALANCE SHEET DATA AT
PERIOD END:
Total assets........... 502,752 480,374 502,039 467,295 440,348 501,758 489,488
Working capital........ 57,128 94,565 66,994 87,803 42,598 90,140 126,692
Short-term debt........ 92,008 44,520 96,027 42,330 35,135 41,607 18,359
Long-term debt, less
current maturities.... 8,871 62,916 11,854 65,891 82,972 94,181 104,220
Total debt............ 100,879 107,436 107,881 108,221 118,107 135,788 122,579
Stockholders' equity... $264,459 $217,916 $260,523 $204,720 $156,201 $206,743 $224,929
Diluted weighted
average shares........ 21,789 22,868 23,203 22,317 19,753 19,484 21,535
OTHER OPERATING AND
FINANCIAL DATA:
EBITDA(4).............. $ 27,927 $ 26,877 $112,823 $102,601 $(14,614) $ 46,986 $ 75,358
EBITDA as a
percentage of
revenues.............. 19.6% 18.9% 18.7% 18.5% (3.8)% 9.1% 15.8%
Ratio of EBITDA to
interest expense...... 16.2 15.3 14.6 12.9 (2.0) 4.7 10.5
Ratio of debt to
EBITDA................ 0.9 1.0 1.0 1.1 (8.1) 2.9 1.6
Ratio of earnings to
fixed charges(5)...... 7.3 7.4 7.2 6.2 (6.4) 0.6 4.1
</TABLE>
- --------------------------------
(1) The Company's financial statements have been restated for fiscal years 1994
and 1995, due to a change in the reporting entity to reflect its merger with
Recognition International Inc. ("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.
(2) Includes restructuring charges of $85.2 million related to the Recognition
acquisition, consisting of charges of $41.8 million allocated to cost of
sales, $43.0 million allocated to operating expenses and $0.4 million
allocated to other income (expense).
(3) Under Recognition's 1994 restructuring plan, a pre-tax charge of $19.7
million was recorded in the fiscal year ended October 31, 1994 (fiscal year
ended March 26, 1995 of the combined company), consisting of $15.5 million
allocated to cost of sales and $4.2 million allocated to operating expenses.
(4) "EBITDA" means earnings before interest, taxes, depreciation and
amortization. EBITDA is included as supplemental disclosure because it is
commonly used by certain investors and analysts to analyze and compare
operating performance, and to determine a company's ability to service and
incur debt. EBITDA, however, should not be considered in isolation, or as a
substitute for, net income, cash flow provided by operating activities or
other income, or cash flow data prepared in accordance with generally
accepted accounting principles, or as a measure of a company's profitability
or liquidity.
(5) The ratio of earnings to fixed charges is computed by dividing fixed charges
into the sum of (a) net income (loss), (b) income taxes and (c) fixed
charges. Fixed charges consist of interest on all indebtedness and the
interest component of operating rents. Earnings for the nine months ended
December 31, 1995 and for the restated fiscal year ended March 26, 1995 were
inadequate to cover fixed charges. Additional earnings of $70.7 million and
$6.2 million, respectively, were required to achieve a ratio of earnings to
fixed charges of 1.0.
11
<PAGE>
HOLDING COMPANY STRUCTURE
The Company is a holding company and its assets consist of investments in
its subsidiaries and majority-owned partnerships. The Company's rights and the
rights of its creditors, including holders of the Notes, to participate in the
distribution of assets of any person in which the Company owns an equity
interest (including any subsidiary and majority-owned partnerships) upon such
person's liquidation or reorganization will be subject to prior claims of such
person's creditors, including trade creditors, except to the extent that the
Company may itself be a creditor with recognized claims against such person (in
which case the claims of the Company would still be subject to the prior claims
of any secured creditor or such person and of any holder of indebtedness of such
person that is senior to that held by the Company). Accordingly, holders of the
Notes may be deemed to be effectively subordinated to such claims.
12
<PAGE>
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
CAPITALIZATION
The following table presents the capitalization of the Company at March 31,
1998, (i) on an actual basis, (ii) on a pro forma basis after giving effect to
the issuance of the Old Notes and the application of the proceeds therefrom and
(iii) on a pro forma basis for the Exchange Offer.
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------------------
PRO FORMA PRO FORMA
FOR ISSUANCE FOR THE
ACTUAL OF OLD NOTES EXCHANGE OFFER
--------- ------------- ---------------
<S> <C> <C> <C>
DEBT:
Short-term debt, including current portion
of long- term debt............................ $ 92,008 $ 5,306 $ 5,306
Long-term debt, net of current portion....... 8,871 1,051 1,051
Old Notes..................................... -- 150,000 --
New Notes..................................... -- -- 150,000
STOCKHOLDERS' EQUITY:
Common Stock, par value $0.01;
45,000,000 shares authorized;
21,632,000 shares issued.................... 216 216 216
Less treasury stock at cost, 243,400 shares... (5,975) (5,975) (5,975)
Additional paid-in capital.................... 216,611 216,611 216,611
Retained earnings............................. 60,180 60,180 60,180
Foreign currency translation adjustments...... (4,956) (4,956) (4,956)
Unearned compensation......................... (1,617) (1,617) (1,617)
-------- -------- --------
Total stockholders' equity............... 264,459 264,459 264,459
-------- -------- --------
TOTAL CAPITALIZATION................................ $420,816 $420,816 $420,816
======== ======== ========
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The supplementary income statements below were derived from the unaudited
statements of operations for the three months ended March 31, 1998 and 1997, the
audited statements of operations for the twelve months ended December 31, 1997
and 1996 and proforma unaudited information for the twelve months ended December
31, 1995. Management's discussion and analysis that follows is based on this
supplementary information. The Company believes the discussion is more
meaningful than a comparison of periods with dissimilar lengths.
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, DECEMBER 31,
--------------------- -----------------------------------
1998 1997 1997 1996 1995(1)
---------- --------- --------- --------- -------------
(UNAUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
REVENUE:
Equipment and software ................. $ 71,471 $ 77,448 $335,214 $312,467 $270,256
Maintenance and other services ......... 70,911 64,905 268,320 241,535 242,284
-------- -------- -------- -------- --------
142,382 142,353 603,534 554,002 512,540
COST OF SALES:
Equipment and software ................. 47,415 52,263 224,803 213,293 222,544
Maintenance and other services ......... 52,484 46,903 195,855 177,977 195,178
-------- -------- -------- -------- --------
99,899 99,166 420,658 391,270 417,722
-------- -------- -------- -------- --------
Gross profit ........................... 42,483 43,187 182,876 162,732 94,818
OPERATING EXPENSES:
Product development .................... 4,114 5,411 19,972 17,582 26,529
Selling, general and administrative .... 20,290 18,666 83,179 76,075 112,898
Goodwill amortization .................. 1,354 1,344 5,391 4,990 19,732
-------- -------- -------- -------- --------
25,758 25,421 108,542 98,647 159,159
-------- -------- -------- -------- --------
Income (loss) from operations .......... 16,725 17,766 74,334 64,085 (64,341)
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income ........................ 173 175 743 1,146 2,489
Interest expense ....................... (1,727) (1,753) (7,730) (7,927) (10,009)
Sundry-net ............................. 549 (521) (762) 666 257
-------- -------- -------- -------- --------
(1,005) (2,099) (7,749) (6,115) (7,263)
Income (loss) before income
taxes and extraordinary item ........... 15,720 15,667 66,585 57,970 (71,604)
INCOME TAX PROVISION (BENEFIT) ................ 5,659 5,640 23,971 20,869 (16,391)
EXTRAORDINARY ITEM ............................ -- -- (462) -- --
-------- -------- -------- -------- --------
NET INCOME (LOSS) ............................. $ 10,061 $ 10,027 $ 42,152 $ 37,101 $(55,213)
======== ======== ======== ======== ========
</TABLE>
- --------------
(1) Includes restructuring charges of $85.2 million related to the Recognition
acquisition, consisting of charges of $41.8 million allocated to cost of
sales, $43.0 million allocated to operating expenses and $0.4 million
allocated to other income (expense).
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
Total revenue of $142.4 million for the first quarter of 1998 was
approximately equal to total revenue for the first quarter of 1997. Revenue from
sales of equipment and software decreased $6.0 million primarily due to a
decrease in domestic orders for large systems. While the Company's systems
integration business has historically been somewhat variable, the Company
believes that additional factors contributing to lower first quarter revenues in
1998 include spending commitments by its customers to address year 2000
compliance, as well as ongoing competitive considerations. Softness in the
domestic systems business was balanced in part by international systems
operations and strong growth in network services. Revenue from maintenance and
other services increased $6.0 million from the prior period due to continued
strong growth in network services in the U.S.
14
<PAGE>
Total gross profit of $42.5 million for the first quarter of 1998 declined
$0.7 million from the first quarter of 1997. Gross profit for equipment and
software of $24.1 million was $1.1 million lower than in the first quarter of
1997. This decrease was primarily due to lower equipment and software revenue.
Gross profit for maintenance and other services of $18.4 million was $0.4
million higher than in the prior period due to the increase in network and
desktop support services revenue.
Operating expenses in the first quarter of 1998 totaled $25.8 million, an
increase of $0.3 million from the first quarter of 1997. Product development
expenses of $4.1 million decreased $1.3 million primarily due to the completion
of development work on new products introduced late in 1997. Sales and marketing
expenses of $13.4 million increased by $1.2 million primarily due to the higher
level of operating activities. General and administrative expenses of $6.9
million increased $0.4 million due to the timing of certain expenses.
First quarter results in 1998 included sundry income of $0.5 million,
primarily due to foreign currency gains. This represents a $1.0 million increase
over the prior year period, a period that included foreign currency losses.
The income tax provision of $5.7 million was comparable to that accrued in
the first quarter of 1997. The effective income tax rate was 36% for both
periods.
Net income of $10.1 million for the first quarter of 1998 was approximately
equal to net income for the first quarter of 1997. Diluted earnings per share
were $0.46 for both March 31, 1998 and 1997.
COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Consolidated revenue of $603.5 million for the twelve months ended December
31, 1997 increased by $49.5 million or 8.9% from the prior twelve month period.
Revenue from equipment and software for the twelve months ended December 31,
1997 of $335.2 million increased by $22.7 million or 7.3% from the twelve months
ended December 31, 1996. This increase was primarily due to higher systems
integration project revenues for international customers. Revenue from
maintenance and other services of $268.3 million increased by $26.8 million or
11.1% due to continued growth in domestic network maintenance operations
partially offset by the expiration of certain older document processing
maintenance contracts. Equipment and software revenue accounted for 55.5% of
total revenue for the twelve months ended December 31, 1997, compared to 56.4%
for the twelve months ended December 31, 1996.
Consolidated gross profit of $182.9 million for the twelve months ended
December 31, 1997 increased by $20.1 million or 12.4% from the prior twelve
month period. The gross profit for equipment and software of $110.4 million
increased by $11.2 million or 11.3% due to a combination of higher systems
installations and improved manufacturing performance. Gross profit for
maintenance and other services of $72.5 million increased $8.9 million or 14.0%
due to the increase in network and desktop support services revenue.
Operating expenses of $108.5 million increased by $9.9 million or 10.0%
compared to the prior twelve month period. The components of operating expenses
changed as follows: product development expenses increased by $2.4 million or
13.6% primarily due to higher spending for a new series of reader/sorters and
scanner products, the development of the Company's new check processing software
product and ongoing software enhancements. Selling, general and administrative
expenses of $83.2 million increased by $7.1 million or 9.3% due to the higher
level of revenues and operating activities. Goodwill amortization of $5.4
million increased by $0.4 million due to additional goodwill associated with two
small acquisitions during 1997.
Interest income of $0.7 million in 1997 was reduced by $0.4 million from
the prior year primarily due to lower interest rates in 1997 as compared to
1996.
Interest expense of $7.7 million in 1997 decreased by $0.2 million due to a
lower overall average balance of outstanding debt resulting from scheduled term
loan repayments. The Company also experienced lower borrowing rates during 1997.
Net sundry expense of $0.8 million in 1997 increased by $1.4 million
primarily due to foreign currency transaction losses in 1997 due to the
strengthening of the dollar over other currencies.
15
<PAGE>
The income tax provision for the twelve months ended December 31, 1997, was
$24.0 million compared to an income tax provision of $20.9 million in the prior
period. The income tax provision for 1997 resulted in an effective tax rate of
36%.
The Company recorded an extraordinary loss of $0.5 million in 1997 which
resulted from the write-off of deferred borrowing costs associated with the
$43.7 million of convertible debentures that were redeemed in December 1997.
COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Consolidated revenue for the twelve months ended December 31, 1996 of
$554.0 million increased by $41.5 million or 8.1% from the prior twelve month
period. Revenue from equipment and software increased $42.2 million due to
additional imaging software revenue and network integration revenue offset in
part by lower revenue from several mature Recognition product lines. Revenue in
1996 from maintenance and other services decreased by $0.7 million from 1995 due
to expiration of several Recognition service contracts and the sale of the Xerox
printer service business. This decrease was partially offset by an increase in
network services revenue. Equipment and software revenue accounted for 56.4% of
total revenue for the twelve months ended December 31, 1996, as compared to
52.7% for the twelve months ended December 31, 1995.
Consolidated gross profit of $162.7 million in 1996 increased $67.9 million
from the prior twelve month period. When adjusted for $41.8 million of
restructuring charges taken to facilitate the Recognition acquisition (See Note
C and Note D to the Consolidated Financial Statements for a discussion of the
acquisition and charges) in the prior twelve month period, 1996 gross profit
increased by $26.1 million or 19.1%. The gross profit for equipment and software
of $99.2 million increased by $23.3 million after adjusting for a restructuring
charge of $28.2 million in the prior period. This increase in gross profit was
primarily due to an increase in 1996 in software revenue and a related
improvement in the software gross margin. The gross margin improved due to the
mix of software products sold and cost savings associated with the acquisition.
The gross profit for maintenance and other services of $63.6 million in 1996
increased by $2.9 million after adjusting for a $13.6 million restructuring
charge. This increase in gross profit for maintenance and other services was due
to a combination of increased revenue in network services and cost savings
associated with the acquisition.
Operating expenses of $98.6 million in 1996 decreased by $60.5 million
compared to the prior twelve month period. When adjusted for restructuring
charges of $43.0 million, 1996 operating expenses decreased by $17.5 million.
The components of operating expenses changed as follows: product development
expenses in 1996 decreased by $8.9 million from the prior period. When adjusted
for restructuring charges of $6.6 million, 1996 product development expenses
decreased by $2.3 million. This decrease was due to the elimination of duplicate
development projects and from other efficiencies resulting from the Recognition
acquisition. Selling, general and administrative expenses of $76.1 million
decreased by $36.8 million from the prior period. When adjusted for
restructuring charges in the prior period of $23.8 million, selling, general and
administrative expenses in 1996 decreased by $13.0 million. This decrease in
sales, general and administrative expenses resulted primarily from consolidation
of the sales organizations and elimination of duplicate corporate office staff.
Goodwill amortization of $5.0 million in 1996 decreased by $14.7 million
compared to the prior twelve month period. When adjusted for restructuring
charges of $12.6 million, goodwill amortization in 1996 decreased by $2.1
million. The lower goodwill amortization is due primarily to assets written off
as part of the restructuring charge.
Interest income of $1.1 million was reduced by $1.3 million from the prior
year due to lower investment balances as cash was utilized for restructuring
charges, debt service and the repurchase of convertible debentures.
Interest expense of $7.9 million in 1996 was reduced by $2.1 million from
the prior year due to a lower overall average balance of outstanding debt
resulting from scheduled term loan repayments and the repurchase of $8.0 million
of convertible debentures in March 1996. Additionally, the Company experienced
lower borrowing rates during 1996.
The tax provision for the twelve months ended December 31, 1996 was $20.9
million compared to an income tax benefit of $16.4 million in the prior twelve
months. The 1996 income tax provision resulted in an effective rate of 36%. The
prior year income tax benefit was affected by certain restructuring costs that
were non-deductible for tax purposes and by the geographic mix of where income
and losses were generated.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents as of March 31, 1998 were $14.3 million compared
to $21.7 million as of December 31, 1997. Total borrowings were $100.9 million
as of March 31, 1998 compared to $107.9 million as of December 31, 1997. Total
working capital decreased to $57.1 million as of March 31, 1998 from $67.0
million as of December 31, 1997. The $9.9 million decrease in working capital
was primarily due to the use of cash for capital expenditures, repurchases of
the Company's common stock and scheduled loan repayments.
Cash provided by operations was $21.7 million for the quarter ended March
31, 1998, compared to $16.0 million for the quarter ended March 31, 1997. The
increased cash flow was due primarily to higher collections of accounts
receivable in the first quarter of 1998 as compared to the prior period.
The Company believes that it will have sufficient financial resources
available to support its requirements to fund operations, and is not aware of
any trends, demands or commitments that would have a material adverse impact on
the Company's long or short-term liquidity.
Funds to support the Company's operations, including capital expenditures,
have been derived from a combination of funds provided by operations, short-term
bank financing and, to a lesser extent, sales of capital stock under employee
stock option and purchase plans.
The Company is a party to a credit agreement dated as of February 22, 1996,
as amended, under which it has available a revolving credit facility of $70.0
million with no amounts borrowed thereunder as of June 1, 1998. The credit
agreement contains restrictive covenants which, among other things, restrict
payment of dividends, limit additional debt at the subsidiary level to the debt
permitted under the covenant described in "Description of New Notes - Certain
Covenants - Liabilities on Subsidiary Debt" and require the Company to maintain
a minimum cash flow coverage ratio of at least 2.0 to 1.0 at the end of any
fiscal quarter for the preceding twelve month period, a maximum debt to EBITDA
ratio of not more than 2.25 to 1.0 at the end of any fiscal quarter for the
preceding twelve month period and a maximum debt to capitalization ratio not to
exceed .50 to 1.0 as of the end of any fiscal quarter. At March 31, 1998, the
Company was in compliance with all 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. Therefore, the reported
amounts can include recognized but unrealized gains and losses resulting from
currency fluctuations. The revolving credit facility matures on December 31,
2000 and bears interest at the lender's prime commercial rate or, at the
Company's option, London Interbank Offered Rate on Eurocurrency borrowings plus
an adjustment factor (0.50% as of March 31, 1998) that varies depending on the
Company's debt to capitalization ratio. A commitment fee of 0.225% on the unused
revolving credit facility is payable quarterly.
The Company and a domestic subsidiary also have available uncommitted lines
of credit with a group of banks totaling $85.0 million. These lines have a
maximum term of 30 days. Under these uncommitted lines, the Company had no
amounts outstanding as of June 1, 1998. A foreign subsidiary of the Company
also has available uncommitted lines of credit with a group of banks totaling
$6.0 million. Under these uncommitted lines, the foreign subsidiary had $4.4
million outstanding as of March 31, 1998.
As part of its ongoing stock repurchase program, the Company bought 369,400
shares of common stock during the first quarter of 1998. The Company has
repurchased 1,118,200 shares of Common Stock as of June 5, 1998 under the 2.0
million share repurchase program authorized in October 1997. The share
repurchase program is intended primarily to offset dilution from the exercise of
stock options.
Inflation has not had a material effect on the operating results of the
Company.
17
<PAGE>
THE COMPANY
OVERVIEW
BancTec is a worldwide diversified systems integration and services company
with a 25-year history of innovation in imaging technology, financial
transaction processing and workflow productivity improvement. Serving a variety
of industries, including banking, financial services, insurance, healthcare,
government agencies and others, BancTec offers a comprehensive portfolio of
payment and document processing systems and services, workflow and image
management software products, and network and desktop support services.
BancTec is a leading provider of software, equipment and ongoing
maintenance of advanced systems used to process high volumes of checks and
related payment documents. The Company's integrated systems are used by many of
the largest credit card issuers and other high volume payment processors
worldwide. BancTec's leadership extends to the rapidly expanding outsourcing
market for local area networks and desktop support systems. Fortune 1000
companies, government agencies and leading personal computer manufacturers rely
on BancTec for premium service for more than two million personal computers
nationwide.
Founded in 1972, BancTec operates worldwide (with international sales in
1997 representing approximately 29% of total revenues) and serves over 5,000
customers in over 50 countries. Selected customers include the Federal Reserve,
GTE, IBM, Dell, MetLife, NatWest, NationsBank, Citicorp, Sagawa Express, Compaq,
Lockheed Martin, British Telecom and U.K. Inland Revenue.
BUSINESS STRATEGY
Building on one of the largest installed customer bases in the industry,
BancTec plans to grow revenue and earnings by expanding the breadth of products
and services it offers its customers. For example, by incorporating the Plexus
portfolio of workflow and image management software products into customer
solutions, BancTec believes it can expand beyond traditional back office
processing applications to deliver new applications and systems for enterprise-
wide deployment by its customers. The Company has specifically targeted customer
service applications, utilizing the Company's ImageFIRST(R) OpenARCHIVE/TM/
system for long-term storage and rapid retrieval of payment and document images
and related transaction data.
In addition, BancTec is targeting new vertical markets, such as healthcare,
where BancTec's comprehensive transaction and document processing solutions can
improve efficiency and service. BancTec differentiates itself from its
competitors by offering a complete suite of advanced software applications,
equipment and service designed for high volume, mission critical processing
environments.
BancTec has successfully built recurring revenue to balance the variable
nature of the systems integration business, to enhance cash flow and to lessen
the impact of economic disruptions. Today, more than 50% of the Company's
revenue is from recurring sources, including maintenance services, software
licenses, sales of consumable supplies and other services. The Company will
continue to target opportunities to increase this percentage.
BancTec expects to continue to capitalize on the accelerating trend toward
outsourcing of services for distributed desktop computers (networks) through
direct sales efforts to Fortune 1000 corporations and government agencies and
through strategic alliances with major information technology outsourcing
contractors. The Company plans to expand its service offerings in the areas of
network design and integration, help desk and training, remote network
monitoring, and life cycle and project management. A leading supplier of
warranty repair services for personal computers, BancTec intends to continue to
pursue additional contracts with major PC manufacturers and third party warranty
administrators.
In most areas of its business operations, BancTec employs a multi-channel
strategy to market and distribute its products and services. Channels include
direct sales to end users by the Company's sales force and sales to other
manufacturers, systems integrators and value-added resellers. This distribution
network allows BancTec to pursue business in markets where local economic
conditions preclude BancTec from having a direct presence.
18
<PAGE>
A key component of the Company's strategy is an active research and
development program to maintain the Company's leadership position in payment and
document processing technology. In addition to ongoing software and equipment
enhancements, current development efforts are focused on expanding the Company's
portfolio of Internet-enabled software products and new initiatives in the
rapidly developing area of electronic commerce.
BancTec operates pursuant to a conservative financial strategy and has an
internal goal of maintaining a debt-to-capital ratio of 40% or less. While the
Company in the past has exceeded this percentage for short periods of time to
finance acquisitions, it has historically reduced leverage thereafter from free
cash flow. After issuance of the Old Notes it was 37%.
RECENT DEVELOPMENTS
During the first quarter of 1998, BancTec announced that NationsBank, at
that time the nation's third largest financial institution in terms of assets,
had selected BancTec's ImageFIRST OpenARCHIVE software solution for its check
image development. BancTec and NationsBank will install a system to archive
check images at NationsBank's Atlanta, Georgia processing center. The system
will enable NationsBank customers to have on-line access to images stored for
extended periods of time and will facilitate more efficient back office
processing, customer service and research.
Also in the first quarter of 1998, the Company renewed its agreement with
Compaq's Consumer Division to provide personal computer warranty services and
the Company's contract with Dell renewed automatically for a one-year period.
In February 1998, the Company's Canadian subsidiary acquired Montreal-based
Groupe ParmaTec Inc., an item-processing software developer, for approximately
$2.0 million.
BANCTEC PRODUCTS AND SERVICES
The Company markets its products and services to specific target markets in
which it believes it has extensive business process expertise and certain
competitive advantages and is able to maintain or achieve a leadership position.
[Revenue Distribution chart appears here]
FINANCIAL TRANSACTION PROCESSING SYSTEMS. During 1997, the Company
derived approximately 41% of its revenues from sales of the following products
and services:
INTEGRATED SYSTEMS SOLUTIONS. The Company offers image technology-based
solutions, used to process a variety of financial and full-page documents. The
Company's integrated systems generally incorporate advanced applications
software developed by the Company and may also include hardware developed and
manufactured by the Company. Customers include some of the largest payment
processors worldwide, including Citicorp, GTE, MBNA
19
<PAGE>
Corp., The Bank of New York, Tele-Communication International, Inc.,
NationsBank, Novus Financial Corporation, State Farm Life Insurance Co., and
multiple districts of the Federal Reserve.
The Company's ImageFIRST 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, airline tickets and other types of financial
documents. The Company also offers the TRACE(R) family of products, which
process documents at speeds in excess of 2,000 documents per minute.
The Company's imaging systems are also 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 reprocess more efficiently items that were rejected in normal
operating cycles.
A key component of the Company's integrated systems strategy is to expand
the scope of processing solutions offered to customers with its ImageFIRST
OpenARCHIVE solution, a system specifically designed for high speed digital
archiving of financial and other 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 and data storage. ImageFIRST OpenARCHIVE systems are currently used
to increase productivity, to improve customer service capabilities and to
replace microfilm for long-term storage. The ImageFIRST OpenARCHIVE solution is
further targeted to support industry efforts to reduce and eventually eliminate
the multiple handling of checks and documents through truncation and electronic
check presentment initiatives.
The Company's financial document imaging products utilize an Open Systems
Architecture ("OSA") platform, which enables customers to add industry standard
hardware and software components to further improve processing capabilities. The
Company typically sells these products to end-users and offers a warranty for 30
days from the date of installation.
Community Banking Software Solutions. The Company provides a full range
of products and services to community banks for account management and
transaction processing. Banker-II/TM/ and ACCESS/TM/ are software products that
integrate deposit management, platform automation, loan processing, ATM and
teller processing and other bank operations. In 1997, the Company introduced
ImageFIRST TPS, a new image check processing software solution. ImageFIRST TPS,
along with the Company's PODExpress(R) 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.
Service Bureau Operations. The Company owns and operates six service
bureau facilities that provide check and data processing services primarily for
small to mid-size financial institutions and are marketed as an outsourcing
alternative to in-house processing. These service bureaus utilize the Company's
software and equipment, operations personnel and maintenance services for core
account processing and processing of checks and related documents.
Electronic Payment Processing Products and Services. The Company markets
software products for electronic credit, debit and courtesy card processing and
electronic check authorization. The Company also markets software products
relating to electronic benefits transfer ("EBT") applications, which certain
states have implemented as a replacement for traditional food stamp programs.
The Company also maintains a separate service bureau specifically for
authorizing check, credit and debit card transactions.
EQUIPMENT MAINTENANCE PRODUCTS AND SERVICES. The Company derived
approximately 27% of its revenues during the twelve months ended December 31,
1997, from the following equipment maintenance products and services:
Installation and Maintenance of BancTec Products. The Company installs
and maintains its own equipment products such as document reader/sorters and
scanners. Contracts can be tailored to meet the specific needs of individual
customers. The Company's maintenance contracts typically include both parts and
labor and generally are three to five years in duration.
Third-Party Service for Other Document Processing Equipment. The Company
provides hardware maintenance services for IBM 3800 printers and 3890 and 3890
XP reader/sorters, which are the primary products for
20
<PAGE>
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.
More than 95% of the Company's revenue from equipment maintenance services
is recurring.
NETWORK AND DESKTOP SUPPORT SERVICES. Network and desktop services
include BancTec's PC and desktop maintenance service business, one of BancTec's
fastest-growing business segments. Leveraging the national infrastructure of its
equipment maintenance business, BancTec has developed three distinct
distribution channels to grow the desktop outsourcing business: PC Vendor
Maintenance Services; Outsourced Network Management Services; and Personal
Computer support. The Company derived approximately 18% of its revenues during
1997 from the following services:
PC Vendor Maintenance Services. The Company is a leading provider of
warranty repair services in the United States for Dell, Compaq, Toshiba America
Information Systems, Inc. and other companies. The Company also provides
telephone technical support for Novell network operating systems software.
Contracts with market leaders provide the foundation to establish BancTec as a
premier provider of maintenance services in this market.
Outsourced Network Management Services and Personal Computer Support. The
Company provides large companies with on-site or on-call LAN and PC hardware
support, systems integration, asset management services, help desk and
installation coordination services. The Company's customer service engineers
provide on-site or on-call support for file servers, personal computers, laptop
computers, printers and other peripheral equipment. Direct contracting for PC
maintenance services to Fortune 1000 companies offers substantial prospects for
growth as U.S. corporations seek to standardize the look and feel of the desktop
and reduce servicing expense. Additionally, relationships with major outsourcers
such as Lockheed Martin and Amdahl Corporation continue to create opportunities
for growth through indirect channels. Major customers include MetLife, Southern
California Edison Co. and the United States Department of Housing and Urban
Development.
OEM TECHNOLOGIES AND SUPPORT PRODUCTS. BancTec believes that it provides
the industry's most complete line of equipment for high volume, high speed,
check and document processing. BancTec believes its equipment products are
considered a standard by other manufacturers and systems integrators worldwide.
External sales of these products and related supplies accounted for 9% of the
Company's revenues in 1997. Key customers include IBM, NCR Corporation and
systems integrators.
Document Processing Systems, Check Sorting Systems and Electronic
Components. The Company offers low, medium and high-speed document
reader/sorters and related components that read magnetic ink character
recognition ("MICR") and optical character recognition ("OCR") data from
financial documents and sort the documents according to established patterns.
The Company markets its products to end-users, to other manufacturers and to
various resellers and systems integrators throughout the world.
BancTec markets a full range of consumable supplies that complement the
Company's document processing systems. The Company also manufactures and markets
microfilm cameras, microfilm modules, image cameras, MICR encoders, ink jet
components and various peripheral equipment. The Company's OEM products are sold
with a 90-day warranty from the date of shipment.
Full-page Document Scanners. The Company's full line of high-speed, full-
page scanners 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. The Company's scanner products are sold through
distributors in the United States and abroad.
PLEXUS DOCUMENT IMAGING AND WORKFLOW SOFTWARE PRODUCTS. Through its
Plexus software division, the Company offers a complete family of document
imaging and workflow software products designed for high-volume, complex and
distributed environments. During 1997, the Company derived approximately 5% of
its revenues from sales of Plexus software products.
Plexus software products offer workflow, image storage, data management,
forms processing and health claims processing capabilities that enable users to
automate, coordinate and streamline business processes. Plexus software products
can be deployed in organizations ranging from single sites for departmental
workflow, storage and retrieval applications to enterprise-wide applications
across multiple hardware platforms.
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Now in use in more than 1200 sites worldwide, Plexus software products are
sold directly to end-users by the Company's own sales force, through BancTec
sales channels and through various value-added resellers and systems integrators
worldwide. In addition to BancTec systems customers, Plexus customers include
Edward Jones & Co., John Hancock Mutual Life Insurance Company, Blue Cross and
Blue Shield of Massachusetts and BankBoston, N.A.
INTERNATIONAL OPERATIONS
Internationally, the Company is a leading provider of financial transaction
processing systems and solutions, with applications tailored to meet the
localized needs of its customers. Through direct sales and other channels, the
Company markets integrated systems to process a wide variety of transaction
documents including checks, remittance documents, credit vouchers, giro
documents, freight bills and airline tickets. The Company also provides
comprehensive maintenance services for its transaction processing customers.
International customers include Japan's Sagawa Express, United Kingdom's Inland
Revenue, NatWest and British Telecommunications, Norway's Bankenes
Betalingssentral, Denmark's Den Danske Bank, Sweden's BankgiroCentralen BGC AB
and Postgira Bank and the Dutch Bankgiro.
During 1997, sales to customers outside the U.S. totaled approximately 29%
of the Company's total revenues.
PRODUCT DEVELOPMENT
The Company is engaged in ongoing software and hardware product development
activities in connection with new and existing products, employing approximately
180 persons for such activities as of February 27, 1998.
The following table sets forth certain information regarding the Company's
product development expenditures for the indicated periods:
<TABLE>
<CAPTION>
NINE MONTHS
TWELVE MONTHS ENDED
ENDED DECEMBER 31, DECEMBER 31,
--------------------------- ------------
1997 1996 1995
--------- --------- ------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Product development expenditures............. $19,972 $17,582 $21,455
Percent of total revenue..................... 3.3% 3.2% 5.6%
Percent of equipment and software revenue.... 6.0% 5.6% 11.4%
</TABLE>
Current expenditures are concentrated on developing new applications for
the Company's product lines and improving and expanding existing products, as
described below:
Software and Systems Development. In addition to ongoing software
enhancements and year 2000 compliance, the Company has focused its development
efforts primarily on electronic commerce technologies. Continued development in
the areas of a universal applications software engine, workflow integration, web
client components and frameworks is intended to allow the Company to reduce
customer delivery time, decrease support costs and leverage developer knowledge
in new software development. Enhancements to the Company's ImageFIRST
OpenARCHIVE product will improve query interfaces and enable faster search
capabilities. The Company is also developing an upgraded version of its OSA
platform to take advantage of recent industry developments.
Development efforts in 1998 will also include upgrades to the Company's
workstation software platform to provide a more flexible, efficient and
competitive document processing workstation product. In addition, the Company
will develop and release a new community banking client/server product which
combines the best features of its ACCESS and BANKER core account processing
suites, providing a migration path for existing community bank customers, as
well as a competitive product to be marketed to new customers.
Equipment Technology Development. In 1998, the Company plans to develop
and introduce enhancements to what it believes to be the industry's most
complete portfolio of document transport products by incorporating improved
document handling, double document detection and read rates.
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Key development efforts remained focused on character recognition, image
improvements (gray scale snippeting, character engine improvements, wavelet
compression, improved gray scale and color quality and delivery) and Image
Quality Assurance ("IQA") for real-time reading to improve monitoring and
detection of image quality in the Company's transport and scanner product lines.
Enhancements to the Company's scanner product line include color, improved
feeder technology and the addition of pockets for sorting documents that have
been scanned.
Plexus Document Imaging and Workflow. The Company's Plexus division
continues to develop new software products and implement changes to current
software products to further strengthen its competitive position in the imaging
and workflow software markets. Particular attention is being given to extensions
to Plexus' industry-leading internet/JAVA workflow product offerings. The
Company expects that each of Plexus' major products will receive significant
feature enhancements during the year. The Company is also conducting projects to
build horizontal and vertical applications using Plexus' core imaging and
workflow technology. These applications are intended to provide more complete
customer solutions, allowing rapid deployment and more rapid customer return on
investment.
There can be no assurance that the Company's development efforts will
result in successful commercial products. Many risks exist in developing new
product concepts, adapting 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.
International sales are subject to various risks, including fluctuations in
exchange rates, import controls and the need for export licenses. See Note L of
the Notes to the Consolidated Financial Statements for financial information
concerning the Company's international operations.
CUSTOMER DIVERSIFICATION
In 1997, no single customer accounted for more than 10% of the total
revenue of the Company. BancTec's ten largest customers accounted for 22% of the
Company's revenues in 1997.
COMPETITION
In marketing its products, the Company encounters aggressive competition
from a wide variety of companies, some of which have substantially greater
financial and other resources than the Company. 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, quality and service, and flexibility to configure
unique systems from standard products in its competitive efforts. While the
Company believes that its products compete favorably based on each of these
elements, the Company could be adversely affected if its competitors introduce
innovative or technologically superior products or offer their products at
significantly lower prices than the Company. No assurance can be given that the
Company will have the resources, marketing and service capability, or
technological knowledge to continue to compete successfully.
BACKLOG
The Company's backlog of orders believed to be firm for its products at
March 31, 1998 and December 31, 1997 was approximately $79.1 million and $71.9
million, respectively.
The Company's backlog excludes contracts for recurring hardware and
software maintenance and support products. The Company is also able to fulfill
many of its customers' requests for immediate delivery, which therefore has no
effect on ending backlog. 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
future revenue.
MANUFACTURING
23
<PAGE>
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. If the supply of certain
components or subassemblies were interrupted without sufficient notice, the
result could be an interruption of product deliveries. The Company has not
experienced, nor does it foresee, any difficulty in obtaining necessary
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 that 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.
EMPLOYEES
At February 27, 1998, the Company employed approximately 4,000 full-time
employees and considers its employee relations to be good. None of the Company's
employees is represented by a labor union. The Company has never experienced a
work stoppage.
YEAR 2000 CONSIDERATIONS
The Company has assessed the impact of the Year 2000 on its operations and
has implemented development and marketing programs to ensure that its products
and customer solutions are year 2000 compliant. Most of the products currently
offered by the Company are Year 2000 compliant, with the remaining currently
offered products expected to become compliant in 1998 and early 1999 through new
releases. Because Year 2000 compliance is integrated into its normal product
development, the Company does not expect to incur any significant incremental
expense in addressing the Year 2000 compliance issue in its products. Regardless
of whether or not the Company's products are Year 2000 compliant, there can be
no assurance that customers will not assert Year 2000 related claims against the
Company.
In addition, the Company is nearing completion of the implementation of a
new internal information system which will meet the foreseeable needs of the
Company and also be Year 2000 compliant.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on May 22, 1998 in a private
placement pursuant to certain exemptions from registration under the Securities
Act. In connection with that placement, the Company entered into the
Registration Rights Agreement which requires that the Company file a
registration statement under the Securities Act with respect to the New Notes on
or prior to 90 days after the date of issuance of the Old Notes (the "Issue
Date") and, upon the effectiveness of that registration statement, offer to the
holders of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, which will be issued without a restrictive legend
and may be reoffered and resold by the holder without registration under the
Securities Act. The Registration Rights Agreement further provides that the
Company must cause the registration statement with respect to the Exchange Offer
to be declared effective within 180 days following the Issue Date and to
consummate the Exchange Offer within 210 days of the Issue Date. A copy of the
Registration Rights Agreement has been filed as an exhibit to the registration
statement of which this Prospectus is a part.
In order to participate in the Exchange Offer, a holder must represent to
the Company, among other things, that (i) any New Notes to be received by it
will be acquired in the ordinary course of its business, (ii) it has no
arrangement with any person to participate in the distribution of the New Notes
and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities
Act, of the Company, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer should acknowledge that it acquired the
Old Notes for its own account as the result of market making activities or other
trading activities. Any holder who is unable to make the appropriate
representations to the Company will not be permitted to tender the Old Notes in
the Exchange Offer and will be required to comply with the registration and
prospectus delivery requirements of the Securities Act (or an appropriate
exemption therefrom) in connection with any sale or transfer of the Old Notes.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
New Notes. If the holder is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of market-
making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
Following the consummation of the Exchange Offer, holders of Old Notes who
were eligible to participate in the Exchange Offer but who did not tender their
Old Notes will not be entitled to certain rights under the Registration Rights
Agreement and such Old Notes will continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the market for the Old Notes could
be adversely affected. No assurance can be given as to the liquidity of the
trading market for either the Old Notes or the New Notes.
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Company, the Company believes
that, with the exceptions discussed herein, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving the New Notes, whether or not that
person is the holder (other than any such holder or such other person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that (i) the New Notes are acquired
in the ordinary course of business of that holder or such other person, (ii)
neither the holder nor such other person is engaging in or intends to engage in
a distribution of the New Notes, and (iii) neither the holder nor such other
person has an arrangement or understanding with any person to participate in the
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where those Old Notes were acquired
by the broker-dealer as a result of its market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of those New Notes. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the Securities
Act and applicable state securities laws, except pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities
25
<PAGE>
laws. The Company does not intend to register the Old Notes under the Securities
Act and, after consummation of the Exchange Offer, will not be obligated to do
so.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only
in integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are identical to the form and terms of
the Old Notes except that the Old Notes were offered and sold in reliance upon
certain exemptions from registration under the Securities Act, while the
offering and sale of the New Notes in exchange for the Old Notes has been
registered under the Securities Act, with the result that the New Notes will not
bear any legends restricting their transfer. The New Notes will evidence the
same debt as the Old Notes and will be issued pursuant to, and entitled to the
benefits of, the Indenture pursuant to which the Old Notes were, and the New
Notes will be, issued.
As of the date of this Prospectus, $150.0 million aggregate principal
amount of the Old Notes were outstanding. The Company has fixed the close of
business on ___________, 1998 as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus, together with the
Letter of Transmittal, will initially be sent. As of such date, there was one
registered holder of the Old Notes. Holders of Old Notes do not have any
appraisal or dissenters' rights under the General Corporation Law of the State
of Delaware or the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company. If any tendered
Old Notes are not accepted for exchange because of an invalid tender, the
occurrence of certain other events set forth herein or otherwise, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"The Exchange Offer -- Solicitation of Tenders; Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
__________, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. In order to extend the
Exchange Offer, the Company will notify the Exchange Agent of any extension by
oral or written notice prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. The Company
reserves the right, in its sole discretion, (i) to delay accepting any Old
Notes, to extend the Exchange Offer or, if any of the conditions set forth under
"The Exchange Offer -- Conditions" shall not have been satisfied, to terminate
the Exchange Offer, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at the rate of 7.50% per annum from May
22, 1998, the date of original issuance of the Old Notes, or from the most
recent date to which interest has been paid or provided for, whichever is
later. No interest will be paid on the Old Notes accepted for exchange.
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<PAGE>
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the Exchange Offer.
Except as set forth under "The Exchange Offer -- Book Entry Transfer," to tender
in the Exchange Offer a holder must complete, sign and date the Letter of
Transmittal, or a copy thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the Letter
of Transmittal or copy to the Exchange Agent prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if
that procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "DTC" or the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Old Notes, Letter of Transmittal and other required documents
must be received by the Exchange Agent at the address set forth under "The
Exchange Offer -- Exchange Agent" prior to the Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date
will constitute an agreement between that holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE AND
PROPER INSURANCE SHOULD BE OBTAINED. NO LETTER OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THESE
TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing the Letter of Transmittal and delivering the owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in the beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined) unless
Old Notes tendered pursuant thereto are tendered (i) by a registered holder who
has not completed the box titled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, are required to be guaranteed, the guarantee
must be by any eligible guarantor institution that is a member of or participant
in the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program, the Stock Exchange Medallion Program, or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes
27
<PAGE>
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that the Company determines are not properly tendered and as to which the
defects or irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering holders, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer -- Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, (ii) if it is not a broker-
dealer, neither the holder nor any such other person is engaging in or intends
to engage in a distribution of such New Notes, (iii) neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, and (iv) neither the holder
nor any such other person is an "affiliate" (as defined in Rule 405 of the
Securities Act) of the Company. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), may
participate in the Exchange Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal), and all other required
documents. If any tendered Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes will be returned without expense to the tendering holder thereof (or, in
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility system may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or copy thereof, with any
required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
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The DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through the DTC. To accept the Exchange Offer
through ATOP, participants in the DTC must send electronic instructions to the
DTC through the DTC's communication system in place of sending a signed, hard
copy Letter of Transmittal. The DTC is obligated to communicate those
electronic instructions to the Exchange Agent. To tender Old Notes through
ATOP, the electronic instructions sent to the DTC and transmitted by the DTC to
the Exchange Agent must contain the character by which the participant
acknowledges its receipt of and agrees to be bound by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
(for DTC participants) electronic ATOP transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender, and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, in its sole discretion, whose determination shall
be final and binding on all parties. Any Old Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer. Any Old Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "The Exchange
Offer -- Procedures for Tendering" at any time on or prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
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(b) any action or proceeding is instituted or threatened in any court
or by any governmental agency that might materially impair the ability of
the Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall deem necessary for the consummation of the Exchange
Offer.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer procedures described
above, such Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility), (ii) extend the Exchange Offer and retain all Old
Notes tendered prior to the expiration of the Exchange Offer, subject, however,
to the rights of holders to withdraw such Old Notes (see "-- Withdrawal Rights")
or (iii) waive such unsatisfied conditions with respect to the Exchange Offer
and accept all properly tendered Old Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five-to-ten-
business-day period.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. The First National Bank of Chicago has been appointed as Exchange Agent
for the Exchange Offer. Questions, requests for assistance and requests for
additional copies of this Prospectus or the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail,
by Overnight Courier or by Hand:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Hand:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
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By Overnight Courier:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Facsimile:
(312) 407-1708
Confirm by Telephone:
(312) 407-5483
SOLICITATIONS OF TENDERS; FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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DESCRIPTION OF NEW NOTES
GENERAL
The Old Notes were and the New Notes will be issued under an Indenture,
dated as of May 22, 1998 (the "Indenture"), between the Company and The First
National Bank of Chicago, as Trustee (the "Trustee"), a copy of which is filed
as an Exhibit to the registration statement of which this Prospectus is a part.
The terms of the New Notes are identical in all material respects to the Old
Notes, except that the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer. Upon the
issuance of the New Notes, the Indenture will be subject to and governed by the
TIA (as defined). The following summary of certain provisions of the Indenture
and the New Notes does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Indenture
(including the definitions of certain terms therein and those terms made a part
thereof by the TIA) and the Notes. Capitalized terms used herein and not
otherwise defined have the meanings set forth in the section "Certain
Definitions." The Old Notes and the New Notes are sometimes collectively
referred to herein as the "Notes."
The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge will be made for any registration of transfer or exchange of New
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
Old Notes that remain outstanding after the consummation of the Exchange
Offer and New Notes issued in connection with the Exchange Offer will be
entitled to vote or consent on all matters as a single class of securities under
the Indenture.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at an office or agency of the
Company, one of which will be maintained for such purposes in The City and State
of New York (which initially will be the corporate trust office of the Trustee
at 153 West 51st Street, New York, New York 10019), except that, at the option
of the Company, payment of interest may be made by check mailed to the
registered holders of the Notes at their registered addresses.
TERMS OF THE NOTES
The Notes will be unsecured senior obligations of the Company, limited to
$150.0 million aggregate principal amount, and will mature on June 1, 2008. Each
Note will bear interest at a rate per annum shown on the front cover of this
Prospectus from May 22, 1998, or from the most recent date to which interest has
been paid or provided for, to but excluding the next interest payment date, and
will be payable semiannually on June 1 and December 1 of each year, commencing
December 1, 1998, to Holders of record at the close of business on the May 15 or
November 15 immediately preceding such June 1 or December 1, respectively.
OPTIONAL REDEMPTION
The Notes may be redeemed at the option of the Company, in whole or in part
at any time or from time to time, on not less than 30 nor more than 60 days'
prior notice, at a redemption price equal to the greater of (i) 100% of their
principal amount and (ii) the sum of the present values of the Remaining
Scheduled Payments (as defined herein) thereon discounted to the date of
redemption, on a semiannual basis, at the Treasury Rate (as defined herein) plus
15 basis points, plus in each case accrued interest thereon to the date of
redemption. Interest shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
If money sufficient to pay the redemption price of and accrued interest on
all Notes (or portions thereof) to be redeemed on the redemption date is
deposited with the Trustee on or before the redemption date and certain other
conditions are satisfied, on and after such date interest will cease to accrue
on such Notes (or such portions thereof) called for redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities
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of comparable maturity to the remaining term of such Notes. "Independent
Investment Banker" means one of the Reference Treasury Dealers appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) if the
Trustee obtains three or more Reference Treasury Dealer Quotations for such
redemption date, the average of the Reference Treasury Dealer Quotations for
such redemption date, excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m., on the third business day
preceding such redemption date.
"Reference Treasury Dealer" means each of Chase Securities Inc., Goldman,
Sachs & Co. and NationsBanc Montgomery Securities LLC and their respective
successors and, at the option of the Company, additional Primary Treasury
Dealers; provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Note, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related redemption date but for
such redemption; provided, however, that, if such redemption date is not an
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
RANKING
The indebtedness evidenced by the Notes will be senior indebtedness of the
Company and will be direct unsecured obligations of the Company, ranking on a
parity with all other unsecured and unsubordinated indebtedness of the Company.
The Company is a holding company and the Notes will be effectively subordinated
to all existing and future liabilities, including indebtedness, of the Company's
subsidiaries. See "Holding Company Structure" and "--Certain Covenants--
Limitation on Subsidiary Debt."
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Subsidiary Debt. The Company shall not permit any
Subsidiary of the Company to Incur or suffer to exist any Debt or issue any
Preferred Stock except: (i) Debt or Preferred Stock outstanding on the date of
original issuance of the Notes after giving effect to the application of the
proceeds from the Notes; (ii) interest rate swap or similar agreements and
foreign currency hedge, exchange or similar agreements designed to provide
protection against fluctuations in interest rates and currency exchange rates,
respectively, provided that such agreements are entered into in, or are
incidental to, the ordinary course of business or are entered into in connection
with the incurrence of Debt permitted hereunder; (iii) Debt Incurred pursuant to
industrial revenue or development bonds in an aggregate principal amount not to
exceed $15 million at any one time outstanding; (iv) Debt Incurred or Incurrable
in respect of trade letters of credit, bankers' acceptances, surety or appeal
bonds, performance or return-of-money bonds or other obligations of a like
nature Incurred in the ordinary course of business; (v) Debt or Preferred Stock
issued to and held by the Company or a Wholly Owned Subsidiary of the Company,
but only so long as held or owned by the Company or a Wholly Owned Subsidiary of
the Company; (vi) Debt Incurred or Preferred Stock issued by a Person prior to
the time (A) such Person
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became a Subsidiary of the Company, (B) such Person merges into or consolidates
with a Subsidiary of the Company or (C) another Subsidiary of the Company merges
into or consolidates with such Person (in a transaction in which such Person
becomes a Subsidiary of the Company), or Debt Incurred or Preferred Stock issued
by a Person and thereafter assumed by a Subsidiary of the Company in a
transaction in which the property of such Person is sold, leased or otherwise
disposed of as an entirety or substantially as an entirety to such Subsidiary,
in each such case in which such Debt or Preferred Stock was not Incurred or
issued in anticipation of such transaction; (vii) Debt Incurred for the purpose
of financing all or any part of the purchase price or the cost of construction
of or improvements (or additions to improvements) to the property of the Company
or any of its Subsidiaries in an aggregate principal amount not to exceed the
fair market value of such property, construction or improvements (or additions
to improvements); (viii) Debt or Preferred Stock that is exchanged for, or the
proceeds of which are used to refinance or refund, any Debt or Preferred Stock
permitted to be outstanding pursuant to clauses (i) through (vii) (or any
extension or renewal thereof) (A) in an aggregate principal amount not to exceed
the principal amount of the Debt, in the case of Debt, or the liquidation
preference of the Preferred Stock, in the case of Preferred Stock, so exchanged,
refinanced or refunded and (B) provided that such Debt or Preferred Stock does
not require the payment of all or a portion of the principal or liquidation
value thereof (whether pursuant to purchase, redemption, defeasance, retirement,
sinking fund payment, payment at stated maturity or otherwise, but excluding any
payment or retirement required by virtue of acceleration of such Debt upon an
event of default thereunder or "change of control" or similar provision
thereunder) prior to the scheduled maturity or maturities of the Debt or
Preferred Stock being refinanced or refunded; (ix) Debt arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of any Subsidiary of the Company
pursuant to such agreements, in each case Incurred in connection with the
disposition of any business assets of any Subsidiary of the Company (other than
Guarantees of Debt or other obligations Incurred by any Person acquiring all or
any portion of such business assets for the purpose of financing such
acquisition) in a principal amount not to exceed the gross proceeds actually
received by any such Subsidiary in connection with such disposition, and (x)
Debt not otherwise permitted to be Incurred pursuant to clauses (i) through (ix)
above which, together with the sum of any other outstanding Debt Incurred
pursuant to this clause (x) and clauses (vi), (vii) and (viii) above (excluding,
for purposes of clause (viii), any Debt or Preferred Stock Incurred or issued in
exchange for, or to refinance or refund, Debt or Preferred Stock described in
clauses (i) through (v) above), has an aggregate principal amount not in excess
of the greater of $40 million or 15% of Consolidated Net Tangible Assets.
Notwithstanding the foregoing, the aggregate amount of Debt that may be
outstanding under clauses (vi), (vii), (viii) (excluding, for purposes of clause
(viii), any Debt or Preferred Stock Incurred or issued in exchange for, or to
refinance and refund, Debt or Preferred Stock described in clauses (i) through
(v) above) and (x) above shall not exceed the greater of $40 million or 15% of
Consolidated Net Tangible Assets.
Limitation on Liens. The Company shall not, and shall not permit any
Subsidiary of the Company to, Incur any Lien on any Principal Property of the
Company or such Subsidiary, to secure Debt without making, or causing such
Subsidiary to make, effective provision for securing the Notes (and, if required
by its governing instruments, any other Debt of the Company or of such
Subsidiary that is not subordinate to the Notes) equally and ratably with such
Debt as to such Principal Property for so long as such Debt will be so secured
or, in the event such Debt is Debt of the Company which is subordinate in right
of payment to the Notes, prior to such Debt as to such Principal Property for so
long as such Debt will be secured.
The foregoing restrictions will not apply to Liens existing at the date of
the Indenture, or to: (i) Liens on inventories and accounts receivable existing
from time to time; (ii) Liens securing only the Notes; (iii) Liens in favor of
the Company; (iv) Liens on property of a Person existing at the time such Person
becomes a Subsidiary of the Company, is merged into or consolidated with the
Company (or any Subsidiary of the Company) or any Subsidiary of the Company
merges into or consolidates with such Person or when the property of such Person
is sold, leased or otherwise disposed of as an entirety or substantially as an
entirety to the Company or a Subsidiary thereof, in each such case not securing
Debt Incurred in anticipation of such transaction; (v) Liens on property
existing at the time of acquisition thereof; (vi) Liens on property securing (a)
all or any portion of the cost of acquiring, constructing, altering, improving
or repairing any property, real or personal, or improvements used or to be used
in connection with such property or (b) Debt Incurred by the Company or any
Subsidiary of the Company prior to or within one year after the later of the
acquisition, the completion of construction, alteration, improvement or repair,
or the commencement of commercial operation thereof, which Debt is Incurred for
the purpose of financing all or any part of the purchase price thereof or such
construction, alteration, improvement or repair; (vii) Liens in favor of the
United States of America or any State, territory or possession thereof (or the
District of Columbia), or any department, agency, instrumentality or political
subdivision of the United
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States of America or any State, territory or possession thereof (or the District
of Columbia), to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any Debt incurred for the purpose of
financing all or any part of the purchase price or the cost of constructing or
improving the property subject to such Liens; (viii) Liens granted to any bank
or other institution on the payments to be made by such institution to the
Company or a Subsidiary of the Company pursuant to any interest rate swap or
similar agreement or foreign currency hedge, exchange or similar agreement
designed to provide protection against fluctuations in interest rates and
currency exchange rates, respectively, provided that such agreements are entered
into in, or are incidental to, the ordinary course of business or are entered
into in connection with Debt permitted by the provisions described under
"Limitation on Subsidiary Debt" above, between the Company or such Subsidiary
and such institution; (ix) Liens to secure industrial revenue or development
bonds, not to exceed $15 million at any one time outstanding; (x) mechanics',
workmen's, materialmen's or similar Liens arising in the ordinary course of
business; (xi) Liens to secure any extension, renewal, refinancing or refunding
(or successive extensions, renewals, refinancings or refundings), in whole or in
part, of any Debt secured by Liens referred to in the foregoing clauses (i) to
(x) so long as such Lien does not extend to any other property (other than
improvements to such property) and the principal amount of the Debt so secured
is not increased; (xii) Liens that do not secure Debt in an aggregate principal
amount in excess of the greater of $40 million or 15% of Consolidated Net
Tangible Assets at any one time outstanding; (xiii) any Liens securing Debt owed
by the Company to one or more Wholly Owned Subsidiaries of the Company (but only
if such Debt is held by such Wholly Owned Subsidiaries); (xiv) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure
performance, surety or appeal bonds to which such Person is a party or which are
otherwise required of such Person, or deposits as security for contested taxes
or import duties or for the payment of rent or other obligations of like nature,
in each case incurred in the ordinary course of business; (xv) Liens resulting
from the deposit of funds or evidences of Debt in trust for the purpose of
defeasing Debt of the Company or any of its Subsidiaries; and (xvi) legal or
equitable encumbrances deemed to exist by reason of negative pledges or the
existence of any litigation or other legal proceeding and any related lis
pendens (excluding any attachment prior to judgment, judgment lien or attachment
lien in aid of execution on a judgment).
Limitation on Sale and Leaseback Transactions. The Company shall not, and
shall not permit any Subsidiary of the Company to, enter into any Sale and
Leaseback Transaction with respect to any Principal Property (except for a
period not exceeding three years) unless (a) the Company or such Subsidiary
would be entitled to Incur a Lien on such Principal Property to secure Debt by
reason of the provisions described in clauses (i) through (xvi) of the second
paragraph under the "Limitation on Liens" covenant in an amount equal to the
Attributable Value of such Sale and Leaseback Transaction without equally and
ratably securing the Notes or (b) the Company applies an amount equal to the
Attributable Value with respect to such Sale and Leaseback Transaction within
six months of such sale to the defeasance or retirement (other than any
mandatory retirement, mandatory prepayment or sinking fund payment or by payment
at maturity) of Debt securities or other debt for borrowed money of the Company
or a Subsidiary thereof that matures more than one year after the creation of
such Debt or to the purchase, construction or development of other comparable
property.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due and payable, continued for 30 days,
(ii) a default in the payment of principal of any Note when due and payable at
its Stated Maturity, upon required redemption or repurchase, upon declaration or
otherwise, (iii) the failure by the Company to comply with any other covenants
in the Indenture that will not have been remedied by the end of a period of 60
days after written notice 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
outstanding Notes, (iv) acceleration of, or failure by the Company to pay when
due, any Debt within any applicable grace period after final maturity or the
acceleration of any such Debt by the holders thereof because of a default if the
total amount of such Debt unpaid or accelerated exceeds $10.0 million or its
foreign currency equivalent (the "cross acceleration provision") and such
failure continues for 20 days after receipt of the notice specified in the
Indenture, (v) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary (the "bankruptcy provisions"), or (vi) the
rendering of any judgment or decree for the payment of money in excess of $10.0
million or its foreign currency equivalent at the time it is entered against the
Company or any Significant Subsidiary and is not discharged, waived or stayed if
(A) an enforcement proceeding thereon is commenced by any creditor or (B) such
judgment or decree remains outstanding for a period of 60 days following such
judgment and is not discharged, waived or stayed and, in either case, the
default continues for ten days after the date on which written notice
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specifying the failure and requiring the Company to remedy the same 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 aggregate principal amount of the Notes at the
time outstanding (the "judgment default provision").
The Indenture will provide that if an Event of Default (other than an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the outstanding Notes by notice
to the Company may declare the principal of and accrued but unpaid interest on
all the Notes to be due and payable. Upon such a declaration, such principal and
interest will be due and payable immediately. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company
occurs, the principal of and interest on all the Notes will become immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holders. Under certain circumstances, the Holders of a majority in
principal amount of the outstanding Notes may rescind any such acceleration with
respect to the Notes and its consequences.
The Indenture will provide that the Holders of not less than a majority in
principal amount of the outstanding Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
written consent of the Holders of a majority in principal amount of the Notes
then outstanding and any past default or compliance with any provisions may also
be waived with the consent of the Holders of a majority in principal amount of
the Notes then outstanding. However, without the consent of each Holder of an
outstanding Note affected thereby, no amendment may (i) reduce the amount of
Notes whose Holders must consent to an amendment or waiver, (ii) reduce the rate
of or extend the time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption of any Note or change the time at which any Note may
be redeemed as described under "Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Note, (vi) impair the right of
any Holder to receive payment of principal of and interest on such Holder's
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes, or (vii)
make any change in the amendment provisions which require each Holder's consent
or in the waiver provisions.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to secure the Notes, to add to the covenants of the Company for the
benefit of the Noteholders or to surrender any right or power conferred upon the
Company, to make any change that does not adversely affect the rights of any
Holder in any material respect, to provide for the issuance of the Exchange
Notes or to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA.
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Holders of the Notes, or any
defect therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and
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<PAGE>
transfer documents and the Company may require a Noteholder to pay any taxes
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Note selected for redemption or to transfer or exchange
any Note for a period of 15 days prior to a selection of Notes to be redeemed.
The Notes will be issued in registered form and the registered holder of a Note
will be treated as the owner of such Note for all purposes.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "Certain Covenants", the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Significant Subsidiaries
and the judgment default provision described under "Defaults" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii), (iv), (v) or (vi) under "Defaults"
above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amounts and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
The First National Bank of Chicago is to be the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
For purposes of the Indenture, the following terms have meanings set forth
below.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with GAAP, discounted from the last date of
such initial term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease Obligation with like
term in accordance with GAAP. The net amount of rent required to be paid under
any such lease for any such period shall be the aggregate amount of rent payable
by the lessee with respect to such period after excluding amounts required to be
paid on account of insurance, taxes, assessments, utility, operating and labor
costs and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated. "Attributable Value" means, as to a Capital Lease Obligation under
which any Person is at the time liable and at any date
37
<PAGE>
as of which the amount thereof is to be determined, the capitalized amount
thereof that would appear on the face of a balance sheet of such Person in
accordance with GAAP.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with GAAP. The stated maturity of
such obligation shall be the date of the last payment of rent or any other
amount due under such lease or other Debt arrangements prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Consolidated Net Tangible Assets" means, as of any particular time, the
aggregate amount of assets (less applicable reserves and other properly
deductible items) after deducting therefrom (i) all current liabilities, except
for (a) notes and loans payable, (b) current maturities of long-term Debt and
(c) current maturities of Capital Lease Obligations and (ii) intangible assets,
to the extent included in such aggregate amount of assets, all as set forth on
the most recent consolidated balance sheet of the Company and its consolidated
subsidiaries and computed in accordance with GAAP.
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as consolidated Persons in such Person's financial
statements in accordance with GAAP.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person other than as entered into in the ordinary course of
business, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business), (v) every
Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of
determination, (vii) every payment obligation of such Person under interest rate
swap or similar agreements or foreign currency hedge, exchange or similar
agreements at the time of determination, and (viii) every obligation of the type
referred to in clauses (i) through (vii) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed
or is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise and such obligations secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become liable
for the payment of such obligation; provided that if the obligation so secured
has not been assumed in full by such Person or is otherwise not such Person's
legal liability in full, the amount of such obligation for the purposes of this
definition shall be limited to the lesser of the amount of such obligation
secured by such Lien or the fair market value of the assets or the property
securing such Lien.
"GAAP" means generally accepted accounting principles in the United States,
consistently applied, that are in effect from time to time.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any Debt
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including, without limitation, any obligation of such Person,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Debt, (ii) to purchase property, securities
or services for the purpose of assuring the holder of such Debt of the payment
of such Debt, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Debt (and "Guaranteed" and "Guaranteeing"
shall have meanings correlative to the foregoing); provided, however, that the
Guarantee by a Person shall not include endorsements by such Person for
collection or deposit in the ordinary course of business.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the registrar's books.
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<PAGE>
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such Debt or
other obligation on the balance sheet of such Person (and "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); provided, however, that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Debt shall not be
deemed an Incurrence of such Debt.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit agreement, security
interest, lien, charge, easement (other than any title defect or easement not
materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Principal Property" means any property or assets (including, without
limitation, accounts receivable and inventory) owned or leased by the Company or
any Subsidiary thereof, the gross book value of which exceeds one percent of
Consolidated Net Tangible Assets.
"Redeemable Stock" of any Person means any equity security of such Person
that by its terms or otherwise is required to be redeemed prior to the Stated
Maturity of the Notes or is redeemable at the option of the holder thereof at
any time prior to the Stated Maturity of the Notes.
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any Principal Property of such Person which
has been or is being sold or transferred by such Person more than one year after
the acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other similar amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" means, with respect to any Person, any corporation more than
50% of the outstanding voting stock of which is owned, directly or indirectly,
by such Person, and any partnership, association, joint venture or other entity
in which such Person owns more than 50% of the equity interests or has the power
(i) to elect a majority of the board of directors or other governing body or
(ii) to direct the policies, management or affairs thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb), as amended.
39
<PAGE>
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
40
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
THE GLOBAL NOTE
The certificates representing the Old Notes were issued, and the
certificates representing the New Notes will be issued, in fully registered
form, without coupons. The Old Notes are represented by one permanent global
certificate in definitive, fully registered form without interest coupons in the
amount of $150.0 million (the "Initial Global Note"). Except as described in the
next paragraph, the New Notes initially will be represented by one or more
permanent global certificates in definitive, fully registered form (the "Global
Notes") and will be deposited with, or on behalf of, the DTC (the "Depositary"),
and registered in the name of Cede & Co., as the DTC's nominee or will remain in
the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between the DTC and the Trustee. If any holder of Old Notes whose interest in
such Old Notes is represented by the Initial Global Note fails to tender in the
Exchange Offer, the Company may issue and deliver to such holder a separate
certificate representing such holder's Old Notes in registered form without
interest coupons.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The description of the operations and procedures of DTC set forth below is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to change by them from time to
time. The Company does not take any responsibility for these operations or
procedures, and holders are urged to contact DTC or its participants directly to
discuss these matters.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking organization"
within the meaning of the New York Banking Law, (iii) a member of the Federal
Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (v) a "clearing agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Holders who are not
Participants may beneficially own securities held by or on behalf of DTC only
through Participants or Indirect Participants.
Pursuant to procedures established by DTC (i) upon the issuance of the
Initial Global Certificate, DTC credited, on its internal system, the number of
Notes of the individual beneficial interests represented by such global
securities to the respective accounts of persons who have accounts with such
depositary and (ii) ownership of beneficial interests in the Initial Global
Certificate are shown on, and the transfer of such ownership are effected only
through, records maintained by DTC (with respect to interests of Participants)
and the records of Participants (with respect to interests of persons other than
Participants). Such accounts initially were designated by or on behalf of the
initial purchasers of the Notes and ownership of beneficial interests in the
Initial Global Certificate are limited to Participants or Indirect Participants.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the Indenture for any purpose,
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including with respect to the giving of any direction, instruction or approval
to the Trustee thereunder. Accordingly, each holder owning a beneficial interest
in a Global Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such holder owns its interest, to exercise any rights of a holder
of Notes under the Indenture or such Global Note. The Company understands that
under existing industry practice, in the event that the Company requests any
action of holders of Notes, or a holder that is an owner of a beneficial
interest in a Global Note desires to take any action that DTC, as the holder of
such Global Note, is entitled to take, DTC would authorize the Participants to
take such action and the Participants would authorize holders owning through
such Participants to take such action or would otherwise act upon the
instruction of such holders. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Notes by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to such Notes.
Payments with respect to the principal of, and premium, if any, and
interest on any Notes represented by a Global Note registered in the name of DTC
or its nominee on the applicable record date will be payable by the Trustee to
or at the direction of DTC or its nominee in its capacity as the registered
holder of the Global Note representing such Notes under the Indenture. Under the
terms of the Indenture, the Company and the Trustee may treat the persons in
whose names the Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving payment thereon and for any and all other
purposes whatsoever. Accordingly, neither the Company nor the Trustee has or
will have any responsibility or liability for the payment of such amounts to
owners of beneficial interests in a Global Note (including principal, premium,
if any, and interest). Payments by the Participants and the Indirect
Participants to the owners of beneficial interests in a Global Note will be
governed by standing instructions and customary industry practice and will be
the responsibility of the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same-day funds.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Notes in definitive form under the Indenture or (iii) upon the occurrence of
certain other events as provided in the Indenture, then, upon surrender by DTC
of the Global Notes, Certificated Notes will be issued to each person that DTC
identifies as the beneficial owner of the Notes represented by the Global Notes.
Upon any such issuance, the Trustee is required to register such Certificated
Notes in the name of such person or persons (or the nominee of any thereof) and
cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
42
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does not
purport to be a complete analysis of all potential tax effects. The discussion
is based upon the Internal Revenue Code of 1986, as amended, Treasury
regulations, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the New Notes.
The description does not consider the effect of any applicable foreign, state,
local or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
The exchange of Old Notes for New Notes should not be an exchange or
otherwise a taxable event to a holder for federal income tax purposes.
Accordingly, a holder should have the same adjusted issue price, adjusted basis
and holding period in the New Notes as it had in the Old Notes immediately
before the exchange.
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PLAN OF DISTRIBUTION
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such New Notes, whether or not
such person is the holder (other than any such holder or such other person which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that (i) the New Notes are
acquired in the ordinary course of business of the holder or such other person,
(ii) neither the holder nor such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, and (iii) neither the holder nor such other person has an arrangement or
understanding with any person to participate in the distribution of the New
Notes. The Company, however, has not sought, and does not intend to seek, its
own no-action letter and there can be no assurance that the Commission's staff
would make a similar determination with respect to the Exchange Offer. Any
holder who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes cannot rely on this interpretation by the
Commission's staff and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where the Old Notes were acquired by that broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will, for a period of 180 days following the Expiration Date, make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale for such period of time as such persons must
comply with such requirements in order to resell the New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers of any such New Notes. Any broker-dealer that resells
New Notes that were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution of such New
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any such resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal for such period of time as such
persons must comply with such requirements in order to resell the New Notes.
The Company has agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., Dallas, Texas.
EXPERTS
The financial statements and schedule included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts (or, as experts in accounting and auditing) in giving said reports.
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<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Audited Consolidated Financial Statements:
<S> <C>
Report of Independent Accountants.................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996......................... F-3
Consolidated Statements of Operations for the twelve months ended December 31,
1997 and 1996 and the nine months ended December 31, 1995.......................... F-4
Consolidated Statements of Cash Flows for the twelve months ended December 31,
1997 and 1996 and the nine months ended December 31, 1995.......................... F-5
Consolidated Statements of Stockholders' Equity for the twelve months ended Decem-
ber 31, 1997 and 1996 and the nine months ended December 31, 1995.................. F-6
Notes to Consolidated Financial Statements........................................... F-7
Unaudited Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997............... F-24
Consolidated Statements of Operations for the three months ended March 31, 1998 and
1997............................................................................... F-25
Consolidated Statements of Cash Flows for the three months ended March 31, 1998
and 1997........................................................................... F-26
Notes to Consolidated Financial Statements........................................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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, 1997 and 1996,
and the related consolidated statements of operations, cash flows and
stockholders' equity for the years ended December 31, 1997 and 1996, and for the
nine months ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BancTec, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years ended December 31, 1997 and 1996,
and for the nine months ended December 31, 1995, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas
January 27, 1998
F-2
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents, including restricted amounts of $717 at December 31, 1996........... $ 21,686 $ 22,872
Short-term investments including, restricted amounts of $154 at December 31, 1997, and $4,203
at December 31, 1996.......................................................................... 308 4,203
Accounts receivable, less allowance for doubtful accounts of $8,100 at December 31, 1997, and
$9,627 at December 31, 1996................................................................... 156,911 135,138
Inventories.................................................................................... 86,847 83,320
Current deferred tax asset..................................................................... 17,133 22,277
Other.......................................................................................... 7,635 7,025
-------- --------
Total current assets......................................................................... 290,520 274,835
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land........................................................................................... 3,030 3,030
Field support spare parts...................................................................... 110,297 97,350
Machinery and equipment........................................................................ 62,203 62,415
Furniture, fixtures and other.................................................................. 48,898 31,217
Buildings...................................................................................... 27,488 24,720
-------- --------
251,916 218,732
Less accumulated depreciation.................................................................. 140,613 131,579
-------- --------
Net property, plant and equipment............................................................ 111,303 87,153
GOODWILL, less accumulated amortization of $29,814 at December 31, 1997, and $24,709 at
December 31, 1996............................................................................. 89,147 93,858
LONG-TERM DEFERRED TAX ASSET.................................................................... 133 442
OTHER ASSETS.................................................................................... 10,936 11,007
-------- --------
TOTAL ASSETS.................................................................................... $502,039 $467,295
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facilities.................................................................... $ 84,139 $ 30,996
Current maturities of long-term debt........................................................... 11,888 11,334
Trade accounts payable......................................................................... 19,793 21,303
Other accrued expenses and liabilities......................................................... 71,243 81,956
Deferred revenue............................................................................... 27,278 38,196
Income taxes................................................................................... 9,185 3,247
-------- --------
Total current liabilities.................................................................... 223,526 187,032
LONG-TERM DEBT, less current maturities......................................................... 11,854 65,891
OTHER LIABILITIES............................................................................... 6,136 9,652
COMMITMENTS AND CONTINGENCIES (Note K)
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, 45,000,000 shares of $.01 par value:
issued and outstanding, 21,808,000 shares at December 31, 1997 and 20,797,000 at
December 31, 1996............................................................................. 218 208
Treasury stock--200,000 shares at December 31, 1997 and 29,936 at December 31, 1996............ (4,692) (388)
Additional paid-in capital..................................................................... 221,234 201,006
Retained earnings.............................................................................. 50,119 7,967
Foreign currency translation adjustments....................................................... (5,129) (1,612)
Unearned compensation.......................................................................... (1,227) (2,461)
-------- --------
Total stockholders' equity................................................................... 260,523 204,720
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................................... $502,039 $467,295
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NINE MONTHS
---------------------------- ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
(In thousands, except per share data)
REVENUE:
Equipment and software.................................. $335,214 $312,467 $188,107
Maintenance and other services.......................... 268,320 241,535 195,877
-------- -------- --------
603,534 554,002 383,984
COST OF SALES:
Equipment and software.................................. 224,803 213,293 163,090
Maintenance and other services.......................... 195,855 177,977 159,413
-------- -------- --------
420,658 391,270 322,503
-------- -------- --------
Gross profit......................................... 182,876 162,732 61,481
OPERATING EXPENSES:
Product development..................................... 19,972 17,582 21,455
Selling, general and administrative..................... 83,179 76,075 85,908
Goodwill amortization................................... 5,391 4,990 18,089
-------- -------- --------
108,542 98,647 125,452
-------- -------- --------
Income (loss) from operations........................ 74,334 64,085 (63,971)
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income......................................... 743 1,146 1,839
Interest expense........................................ (7,730) (7,927) (7,309)
Sundry-net.............................................. (762) 666 (1,274)
-------- -------- --------
(7,749) (6,115) (6,744)
-------- -------- --------
Income (loss) before income taxes and extraordinary
item............................................... 66,585 57,970 (70,715)
INCOME TAX PROVISION (BENEFIT):
Current................................................. 18,518 3,434 3,401
Deferred................................................ 5,453 17,435 (20,635)
-------- -------- --------
23,971 20,869 (17,234)
-------- -------- --------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............... 42,614 37,101 (53,481)
EXTRAORDINARY ITEM, NET OF TAXES OF $260.................. (462) -- --
-------- -------- --------
NET INCOME (LOSS)......................................... $ 42,152 $ 37,101 $(53,481)
======== ======== ========
INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY
ITEM
Basic................................................... $2.00 $1.82 $(2.71)
Diluted................................................. $1.92 $1.76 $(2.71)
INCOME (LOSS) PER SHARE
Basic................................................... $1.97 $1.82 $(2.71)
Diluted................................................. $1.90 $1.76 $(2.71)
WEIGHTED AVERAGE SHARES
Basic................................................... 21,359 20,341 19,753
Diluted................................................. 23,203 22,317 19,753
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
TWELVE MONTHS ENDED ENDED
---------------------------- -------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................................... $ 42,152 $ 37,101 $(53,481)
Adjustments to reconcile net income (loss) to cash
flows provided by operating activities:
Depreciation and amortization...................... 39,973 37,850 50,631
Deferred income tax expense (benefit).............. 5,453 17,435 (20,635)
Loss on disposition of property, plant
and equipment.................................... 1,429 -- 8,693
Other non-cash items............................... 2,851 964 2,740
(Increase) decrease in accounts receivable......... (21,773) (28,949) 23,346
Increase in inventories............................ (2,241) (10,878) (100)
(Increase) decrease in other assets................ (539) 5,109 763
Decrease in trade accounts payable................. (1,510) (2,940) (8,708)
Increase (decrease) in deferred revenue............ (10,918) 172 661
Increase (decrease) in other accrued expenses
and liabilities.................................. (2,815) (8,918) 15,138
-------- -------- --------
Cash flows provided by operating activities..... 52,062 46,946 19,048
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment............ (60,597) (39,968) (29,878)
Purchase of businesses, net of cash acquired.......... (1,090) (7,136) (138)
Additions to capitalized software..................... -- -- (942)
Other................................................. 53 661 (3,694)
-------- -------- --------
Cash flows used in investing activities......... (61,634) (46,443) (34,652)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of current maturities of long-term debt and
capital lease obligations........................... (11,926) (14,047) (19,361)
Payments of long-term borrowings...................... (41,428) (5,350) --
Proceeds from short-term borrowings, net.............. 53,591 10,780 3,203
Repurchase of common stock............................ (4,692) -- --
Proceeds from sale and issuances of common stock...... 15,166 9,487 1,881
Other................................................. -- -- (117)
-------- -------- --------
Cash flows provided by (used in)
financing activities........................... 10,711 870 (14,394)
EFFECT OF EXCHANGE RATE CHANGES ON CASH................. (2,325) (511) (225)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS....................................... (1,186) 862 (30,223)
CASH AND CASH EQUIVALENTS--BEGINNING
OF YEAR . 22,872 22,010 52,233
-------- -------- --------
CASH AND CASH EQUIVALENTS--END OF YEAR.................. $ 21,686 $ 22,872 $ 22,010
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND 1996, AND THE NINE MONTHS
ENDED DECEMBER 31, 1995
(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 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........................... -- -- (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
Common stock issued principally under
employee stock plans.................. 9 9,186 -- -- -- -- 9,195
Common stock issued/cancelled under
restricted stock plans, net........... -- 636 -- -- -- (636) --
Amortization of unearned
compensation.......................... -- -- -- -- -- 1,494 1,494
Foreign currency translation
adjustments........................... -- (525) -- 1,254 -- -- 729
Net income............................. -- -- 37,101 -- -- -- 37,101
---- -------- -------- ------- ------- ------- --------
Balance at December 31, 1996
(includes 29,936 treasury shares)..... 208 201,006 7,967 (1,612) (388) (2,461) 204,720
Common stock issued principally under
employee stock plans.................. 10 15,013 -- -- -- -- 15,023
Common stock issued/cancelled under
restricted stock plans, net........... -- 83 -- -- -- -- 83
Repurchase of common stock............. -- -- -- -- (4,692) -- (4,692)
Treasury stock cancelled............... -- (388) -- -- 388 -- --
Conversion of 7/1//4% debentures....... -- 60 -- -- -- -- 60
Tax benefit from exercise of
stock options......................... -- 5,460 -- -- -- -- 5,460
Amortization of unearned
compensation.......................... -- -- -- -- -- 1,234 1,234
Foreign currency translation
adjustments........................... -- -- -- (3,517) -- -- (3,517)
Net income............................. -- -- 42,152 -- -- -- 42,152
---- -------- -------- ------- ------- ------- --------
Balance at December 31, 1997
(includes 200,000 treasury shares).... $218 $221,234 $ 50,119 $(5,129) $(4,692) $(1,227) $260,523
==== ======== ======== ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF ACCOUNTING POLICIES
Description of Business
Principles of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and, for periods prior to 1996, the ScanData Joint
Venture established with Thomson-CSF ("Thomson") in fiscal year 1992. In March
1996, the Company purchased Thomson's interest in the Joint Venture. 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.
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.
F-7
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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 delivery of completed product in conformity with certain
provisions of AICPA Statement of Position No. 97-2, "Software Revenue
Recognition." Revenue for new products 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, 1997 and 1996, there were
$884,000 and $1,577,000, 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 is 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
statements of operations, as appropriate. The straight-line method of
depreciation is 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 from five to seven years. Buildings utilize a forty year
life.
Goodwill is 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 three to five
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
F-8
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
31, 1997 and 1996, capitalized software costs recorded in other long-term assets
were $181,000 and $361,000, respectively. Software costs are amortized to cost
of sales on a per unit basis or on a straight-line basis 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 twelve month
period ended December 31, 1997 and 1996, and the nine month period ended
December 31, 1995, was $180,000, $181,000, and $6,555,000, 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.
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 twelve
months ended December 31, 1997 and 1996, and the nine months ended December 31,
1995, were $741,000, $835,000 and $1,246,000, respectively.
Net Income Per Share
Basic income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period.
Diluted income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding, adjusted to reflect the
assumed exercise of all outstanding stock options which are dilutive and
adjusted for the assumed conversion of convertible debt. The Company adopted
SFAS No. 128, "Earnings per Share" effective December 15, 1997. As a result, the
Company's reported income (loss) per share for all periods ending prior to
December 31, 1997, was restated.
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 amounts have been reclassified from the prior year to conform to
the current year presentation.
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.
F-9
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
Other Acquisitions and Equity Investments
In fiscal 1992, the Company and Thomson established a joint venture
company, ScanData Holding N.V. (now BancTec 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.
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 were 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, 1997, approximately $82,929,000 (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 1998, utilizing existing cash
resources of the Company. 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 underlying assumptions used by management in
developing the accrual.
NOTE E--INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1997 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.... $41,293 $40,391
Work-in-process.. 7,883 9,321
Finished goods... 37,671 33,608
------- -------
$86,847 $83,320
======= =======
</TABLE>
F-10
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE F--DEBT
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1997 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Term loans payable to banks............................ $21,508 $32,614
7/1//4% convertible subordinated debentures due 2011.. -- 43,722
Obligations under capital leases...................... 2,234 889
------- -------
23,742 77,225
Less current maturities............................... 11,888 11,334
------- -------
$11,854 $65,891
======= =======
</TABLE>
Future maturities of long-term debt, excluding capital lease obligations,
are as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR (IN THOUSANDS)
--------------- --------------
<S> <C>
1998......... $10,950
1999......... 10,558
Thereafter... --
-------
$21,508
=======
</TABLE>
On December 5, 1997, the Company redeemed substantially all $43,700,000 of its
7/1//4% convertible subordinated debentures for cash at par plus accrued
interest. Holders of $60,000 face amount of the debentures elected to convert to
the Company's common stock at an exchange rate of 35.224 common shares per
$1,000 bond. The redemption eliminates potential dilution of the Company's
common stock of approximately 1.5 million shares. The extraordinary item of
$462,000, net of taxes of $260,000, was due to the write off of deferred loan
costs associated with the 7/1//4% convertible subordinated debentures.
At December 31, 1997, the Company's credit agreement provided for a
$50,000,000 short-term revolving credit facility ("revolving credit facility")
and a $55,000,000 term loan facility ("term loan") which are unsecured. The
agreement contains restrictive covenants which, among other things, restrict
payment of dividends, limit additional debt and require the Company to maintain
a 2.0 to 1.0 minimum cash flow coverage, maximum debt to EBITDA of not more than
2.25 to 1.0 at the end of any fiscal quarter for the preceding twelve month
period and a maximum debt to capitalization ratio not to exceed .50 to 1.0 as of
the end of any fiscal quarter. At December 31, 1997, the Company was in
compliance with all 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. Therefore, the reported amounts can
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 0.50%, depending on the Company's debt
to capitalization ratio, as defined. A commitment fee of 0.225% on the unused
revolving credit facility is payable quarterly.
The Company is seeking long-term public or private debt financing of up to
$150,000,000 in 1998 to replace the debt instruments that are currently in place
and for other anticipated requirements.
At December 31, 1997, the amount outstanding under the revolving credit
facility was $41,750,000 at a weighted average interest rate of 6.47%.
F-11
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The term loan bears interest at the lender's prime commercial rate or, at
the Company's option, LIBOR plus 0.75%, depending on the Company's debt to
capitalization ratio, as defined. Principal payments against the outstanding
balance of the term loan 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, 1997, the balance of the term loan was $21,508,000. The
weighted average interest rate on borrowings under the term loan was 6.69% at
December 31, 1997.
Also outstanding as of December 31, 1997, were foreign credit agreements in
the amount of $4,389,000 payable in Japanese yen. Cash, cash equivalents and
short-term investments of $154,000 have been pledged as collateral to secure
these credit agreements. The terms on the agreements range from three months to
one year at interest rates up to 1.75%.
The Company has agreements in place for additional lines of credit totaling
$80,000,000. The lines are uncommitted and have a maximum term of 30 days. The
weighted average interest rate on borrowings under the additional lines of
credit was 6.28% at December 31, 1997. At December 31, 1997, the Company had an
outstanding balance of $38,000,000 on the lines of credit.
The Company was party to one interest rate cap agreement which expired in
May 1997 (See Note K).
The fair market value of the term loan, revolving credit facility, the
subordinated debentures, lines of credit and foreign credit agreement as of
December 31, 1997, approximates their respective carrying values.
Future minimum lease payments under capital lease obligations are as
follows:
<TABLE>
<CAPTION>
CALENDAR YEAR (IN THOUSANDS)
- ------------- --------------
<S> <C>
1998............................................................ $1,116
1999............................................................ 934
2000............................................................ 360
Thereafter...................................................... --
------
Total minimum lease payments.................................... 2,410
Less amount representing interest (6.0%-16.2% rate)............. 176
------
Present value of net minimum lease payments, including current
maturities of $938 at December 31, 1997..................... $2,234
======
</TABLE>
Property, plant and equipment recorded under capital leases are as follows:
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1997 1996
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Furniture, fixtures and other.. $3,508 $1,385
Machinery and equipment........ 74 559
------ ------
Total--at cost................. 3,582 1,944
Less accumulated depreciation.. 915 1,025
------ ------
$2,667 $ 919
====== ======
</TABLE>
F-12
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company paid cash totaling $7,943,000, $7,972,000, and $7,228,000, for
interest during the twelve months ended December 31, 1997 and 1996, and the nine
months ended December 31, 1995, respectively.
NOTE G--OTHER ACCRUED EXPENSES AND LIABILITIES
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(IN THOUSANDS)
Salaries, wages and other compensation.. $18,878 $17,834
Advances from customers................. 16,441 21,353
Accrued taxes, other than income taxes.. 9,219 5,961
Accrued invoices and costs.............. 8,582 5,252
Accrued merger charges and other costs.. 2,902 6,431
Other................................... 15,221 25,125
------- -------
$71,243 $81,956
======= =======
NOTE H--INCOME TAXES
The domestic and foreign components of income (loss) before income taxes
and extraordinary item consisted of the following:
TWELVE MONTHS
ENDED NINE MONTHS
-------------------------- ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
(IN THOUSANDS)
Domestic (including Puerto Rico). $51,510 $47,357 $(58,739)
Foreign.......................... 15,075 10,613 (11,976)
------- ------- --------
$66,585 $57,970 $(70,715)
======= ======= ========
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED NINE MONTHS
--------------------------- ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal (including Puerto Rico).. $ 9,618 $ 974 $ 3,172
State............................ 3,240 -- 1,117
Foreign.......................... 5,660 2,460 (888)
------- ------- --------
Total current................... 18,518 3,434 3,401
------- ------- --------
Deferred:
Federal.......................... 3,709 19,906 (19,125)
Foreign.......................... 1,744 (2,471) (1,510)
------- ------- --------
Total deferred.................. 5,453 17,435 (20,635)
------- ------- --------
$23,971 $20,869 $(17,234)
======= ======= ========
</TABLE>
F-13
<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>
Twelve Months Nine
Ended Months
-------------------- Ended
December December December
31, 31, 31,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
(In thousands)
Provision (benefit) at U.S. statutory rate of 35% for
all periods.......................................... $23,305 $20,290 $(24,750)
Increase (reduction) in tax expense resulting from:
Impact of foreign and Puerto Rico income tax
rates............................................. 54 100 (177)
State income tax, net of federal income tax
benefit........................................... 2,106 -- (171)
Charge/credit in lieu of taxes for tax benefits
realized from acquisitions........................ -- -- 211
Utilization of net operating losses................. (4,291) (3,626) --
Foreign losses not providing a current
benefit........................................... 407 879 2,247
Goodwill amortization............................... 1,579 1,575 1,664
Foreign earnings and profit adjustment.............. 975 -- --
Foreign goodwill amortization....................... 142 221 221
Other............................................... (306) 1,430 3,521
------- ------- --------
$23,971 $20,869 $(17,234)
======= ======= ========
</TABLE>
The Company paid cash totaling $9,631,000, $4,651,000, and $2,654,000 for
income taxes during the twelve months ended December 31, 1997 and 1996, and the
nine months ended December 31, 1995, 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.
F-14
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax assets (liabilities), as determined under the provisions of
SFAS No. 109, "Accounting for Income Taxes", were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
(IN THOUSANDS)
Gross deferred tax assets:
<S> <C> <C>
Net operating losses............................... $ 36,715 $ 43,792
Inventory reserves................................. 3,430 4,922
Acquisition & restructuring charges................ 4,557 5,634
Receivable allowance............................... 299 2,744
Deferred revenues.................................. 2,723 3,286
Deferred compensation.............................. 4,134 3,053
Foreign timing differences, net.................... 1,144 2,618
Taxes paid on intercompany profits................. 996 585
Unrealized foreign exchange gains.................. -- 468
Tax deductible foreign reserves.................... -- 422
Other . 966 2,084
-------- --------
Total gross deferred tax asset.................. 54,964 69,608
-------- --------
Gross deferred tax liabilities:
Depreciation....................................... (330) (11)
Tax deductible deferred computer conversion costs.. (2,947) --
-------- --------
Total gross deferred tax liability.............. (3,277) (11)
Deferred tax assets valuation reserve.............. (34,421) (46,878)
-------- --------
Net deferred tax asset.......................... $ 17,266 $ 22,719
======== ========
</TABLE>
The Company has net operating loss carryforwards which expire as follows:
1998 through 2002, $33,397,000; 2003 through 2007, $22,865,000; 2008 through
2012, $19,082,000; and indefinite, $19,673,000.
The net change in the deferred tax asset valuation reserve for the twelve
months ended December 31, 1997 and 1996, was a decrease of $12,547,000 and
$10,720,000, respectively. The current year's decrease is primarily attributable
to reversal of acquisition timing differences, inventory reserves and
utilization of net operating loss carryforwards.
Undistributed earnings of foreign subsidiaries were approximately
$21,165,000, $17,922,000, and $14,243,000 at December 31, 1997, 1996 and 1995,
respectively. No taxes have been provided on these undistributed earnings as
they are considered to be permanently reinvested.
NOTE I--STOCKHOLDERS' EQUITY
Employee Stock Award Plans
At December 31, 1997, a total of 3,841,855 shares of common stock were
reserved for issuance under the Company's stock award plans. At December 31,
1997, 1,322,110 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 of award is as follows:
F-15
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 over a
five year period, with one-fifth of the shares becoming exercisable on each
anniversary. At December 31, 1997, 1996 and 1995, options to purchase 2,519,745,
2,860,586, and 3,515,193 shares, respectively, were outstanding, of which
options to purchase 844,560, 1,405,388, and 2,208,434 shares, respectively, were
vested and could be exercised at a weighted average exercise price of $17.97,
$15.74, and $14.59, respectively. The outstanding stock options at December 31,
1997 have a weighted average remaining contractual life of 4.0 years.
A summary of activity in the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION PRICE EXERCISE
SHARES PER SHARE PRICE
----------- -------------- --------
<S> <C> <C> <C>
Options outstanding--March 26, 1995..... 3,337,801 $ 4.83--$28.39 $15.19
Granted.............................. 538,050 15.38-- 19.98 17.08
Exercised............................ (149,786) 4.83-- 16.63 9.56
Forfeited............................ (210,872) 4.83-- 27.75 17.61
----------
Options outstanding--December 31, 1995.. 3,515,193 4.83-- 28.39 15.75
Granted.............................. 712,500 17.25-- 22.50 21.35
Exercised............................ (913,451) 4.83-- 22.68 9.86
Forfeited............................ (453,656) 5.42-- 28.39 20.50
----------
Options outstanding--December 31, 1996.. 2,860,586 4.83-- 28.39 17.99
Granted.............................. 865,550 21.25-- 27.00 23.61
Exercised............................ (1,035,468) 4.83-- 23.31 14.65
Forfeited............................ (170,923) 5.42-- 22.50 20.72
----------
Options outstanding--December 31, 1997.. 2,519,745 $ 5.33--$27.00 $21.09
==========
</TABLE>
Of the options exercised during 1997, 498,321 options had exercise prices
between $4.83 and $13.56, with a weighted average exercise price of $8.53. The
remaining 537,147 options exercised had exercise prices between $15.38 and
$23.31, with a weighted average exercise price of $20.34.
Of the options forfeited during 1997, 20,833 options had exercise prices
between $5.42 and $15.90, with a weighted average exercise price of $14.22. The
remaining 150,090 options forfeited had exercise prices between $16.63 and
$23.31, with a weighted average exercise price of $21.17.
Of the options outstanding at December 31, 1997, 196,300 options had
exercise prices between $5.33 and $15.90, with a weighted average exercise price
of $13.24 and a weighted average remaining contractual life of 5.5 years. The
remaining 2,323,445 options had exercise prices between $16.63 and $27.00, with
a weighted average exercise price of $21.76 and a weighted average contractual
life of 3.8 years.
The Company accounts for the stock option plans under APB Opinion No. 25,
under which no compensation has been recognized. Had compensation costs for
these plans been determined consistent with SFAS Statement No. 123, "Accounting
for Stock-Based Compensation", the Company's net income and earnings per share
would have been reduced to the following pro forma amounts:
F-16
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED NINE MONTHS
-------------------------- ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net Income (loss):
As reported...... $42,152 $37,101 $(53,481)
Pro Forma........ 40,173 36,430 (53,630)
Basic EPS:
As reported...... $ 1.97 $ 1.82 $ (2.71)
Pro Forma........ 1.88 1.79 (2.71)
Diluted EPS:
As reported...... $ 1.90 $ 1.76 $ (2.71)
Pro Forma........ 1.81 1.73 (2.71)
</TABLE>
Because the SFAS Statement No. 123 method of accounting has not been
applied to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The fair value of each stock option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions and results:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED NINE MONTHS
---------------------------- ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
WEIGHTED AVERAGE 1997 1996 1995
- ------------------------------------ ------------- ------------- -------------
<S> <C> <C> <C>
Risk free interest rate........ 5.8% 6.2% 5.8%
Expected life.................. 3.5 years 3.5 years 3.5 years
Expected volatility............ 35% 40% 40%
Fair value of options granted.. $6.88 $6.92 $5.85
</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 twelve months ended December 31, 1997, 8,695
restricted shares were awarded and unearned compensation of $184,769 was
recorded. During the twelve months ended December 31, 1996, 40,648 restricted
shares were awarded and unearned compensation of $741,266 was recorded. During
the nine months ended December 31, 1995, 22,475 restricted shares were awarded
and unearned compensation of $380,936 was recorded. The weighted average price
of the shares awarded during the twelve months ended December 31, 1997 and 1996,
and the nine months ended December 31, 1995, was $21.25, $18.24, and $16.95,
respectively. Vesting on such shares ranges from 3 years to 21 years. During the
twelve months ended December 31, 1997 and 1996, and the nine months ended
December 31, 1995, $228,413, $316,955, and $199,607, respectively, was amortized
to expense. Also during the twelve month period ended December 31, 1997 and
1996, and the nine month period ended December 31, 1995, the Company cancelled
6,193, 5,730 and 31,270 shares, respectively, reserved for key employees who are
no longer with the Company. This resulted in a reduction to unearned
compensation of $102,006, $105,000 and $471,300, respectively.
F-17
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan under which 431,208 shares
of common stock were reserved at December 31, 1997. 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
twelve months ended December 31, 1997 and 1996, and the nine months ended
December 31, 1995, the Company issued 48,455, 50,448, and 21,835 shares,
respectively, under the plan.
STOCKHOLDER RIGHTS
On June 16, 1988, the Company adopted a Stockholder Rights Plan in which
common stock purchase rights were distributed as a dividend at the rate of one
right for each common share held as of the close of business on June 27, 1988.
Each share issued thereafter also received one right. As a result of the three-
for-two stock split, the number of rights associated with each share of common
stock has been adjusted from one right to two-thirds of a right. The Stockholder
Rights Plan was designed to deter coercive takeover tactics and to prevent an
acquirer from gaining control of the Company without offering a fair price to
all of the Company's stockholders. The rights will expire on May 24, 1998. The
Board of Directors is currently reviewing the continuation of the Stockholder
Rights Plan. It is expected that the Board of Directors will adopt a resolution
to continue the Stockholder Rights Plan at the annual meeting of the Board of
Directors held on May 21, 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 J--EMPLOYEE BENEFIT PLANS
Through December 31, 1997, the Company had one employee savings plan for
substantially all full-time and part- time U.S. employees. The Employees'
Savings Plan was available to existing Company employees prior to the
F-18
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 was merged with the existing Employees' Savings Plan.
The Employees' Savings Plan allows substantially all full-time and part-
time U.S. employees to make contributions defined by Section 401(k) of the
Internal Revenue Code. During the twelve months ended December 31, 1997 and
1996, the Company elected to contribute 69,492 shares and 69,491 shares,
respectively, which were allocated based on compensation. During the nine months
ended December 31, 1995 the Company contributed 2.0% of the qualifying
participant's base salary. Amounts expensed under the plan for the period noted
were $1,863,000, $1,177,000, and $691,000, respectively.
Shares allocated to the ESOP Flex/Save Plan during the nine months ended
December 31, 1995 were 52,118. Amounts expensed under this plan for the period
noted were $827,000.
The Company provides no material postretirement benefits to its employees.
NOTE K--COMMITMENTS AND CONTINGENCIES
Leases
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 twelve months ended December 31, 1997 and
1996, and the nine months ended December 31, 1995, was $8,454,000, $9,155,000,
and $6,772,000, respectively.
Future minimum payments under non-cancelable operating leases are
approximately as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR (IN THOUSANDS)
--------------- --------------
<S> <C>
1998........... $ 9,109
---------------
1999........... 7,092
2000........... 4,693
2001........... 3,602
2002........... 2,375
Thereafter..... 4,782
-------
$31,653
=======
</TABLE>
The Company has the option to renew operating leases on its facilities at
the end of the current lease terms.
Litigation
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.
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 risks.
F-19
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 F, the Company had one interest rate cap agreement in effect at December
31, 1996, which expired in May 1997.
NOTE L--GEOGRAPHIC OPERATIONS
The Company operates in the following geographic areas: the United States,
Europe, 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 twelve months ended December 31, 1997
and 1996, and the nine months ended December 31, 1995, and identifiable assets
at the end of each of those periods, classified by geographic area, are as
follows:
<TABLE>
<CAPTION>
OTHER
UNITED STATES EUROPE INTERNATIONAL ELIMINATIONS CONSOLIDATED
-------------- --------- -------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Twelve months ended
December 31, 1997
Sales to unaffiliated customers.. $427,943 $111,891 $63,700 $ -- $603,534
Interarea sales to affiliates.... 36,518 2,985 -- (39,503) --
Operating income................. 64,050 11,863 6,170 (7,749) 74,334
Identifiable assets.............. 429,799 68,595 37,854 (34,209) 502,039
Twelve months ended
December 31, 1996
Sales to unaffiliated customers.. $393,635 $ 92,624 $67,743 $ -- $554,002
Interarea sales to affiliates.... 36,021 3,117 38 (39,176) --
Operating income................. 63,293 7,486 4,302 (10,996) 64,085
Identifiable assets.............. 411,766 68,370 36,437 (49,278) 467,295
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................... (51,073) (2,987) (5,235) (4,676) (63,971)
Identifiable assets.............. 351,517 69,518 37,692 (18,379) 440,348
</TABLE>
NOTE M--RELATED PARTIES
In fiscal 1992, the Company and Thomson established a joint venture
company, ScanData Holding N.V. (now BancTec Holding 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. On March 15, 1996, the Company purchased Thomson's interest in ScanData
Holding N.V. for cash of approximately $7,200,000.
F-20
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE N--SUMMARIZED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue............................... $142,353 $151,299 $150,530 $159,352 $603,534
Gross profit.......................... 43,187 45,295 46,314 48,080 182,876
Net income before extraordinary item.. 10,027 10,603 10,787 11,197 42,614
Net income............................ 10,027 10,603 10,787 10,735 42,152
Basic income per share before
extraordinary item................... $ 0.48 $ 0.49 $ 0.50 $ 0.52 $ 2.00
Basic income per share................ $ 0.48 $ 0.50 $ 0.50 $ 0.50 $ 1.98
Diluted income per share before
extraordinary item................... $ 0.46 $ 0.48 $ 0.48 $ 0.50 $ 1.92
Diluted income per share.............. $ 0.46 $ 0.48 $ 0.48 $ 0.48 $ 1.90
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------
Q1 Q2 Q3 Q4 TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue................... $140,053 $133,994 $136,422 $143,533 $554,002
Gross profit.............. 40,344 40,069 40,425 41,894 162,732
Net income................ 8,682 9,266 9,296 9,857 37,101
Basic income per share.... $ 0.43 $ 0.45 $ 0.46 $ 0.47 $ 1.82
Diluted income per share.. $ 0.42 $ 0.44 $ 0.44 $ 0.46 $ 1.76
</TABLE>
<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)
Basic income (loss) per share $ 0.19 $ 0.24 $ (3.12) $ (2.71)
Diluted income (loss) per share $ 0.19 $ 0.24 $ (3.12) $ (2.71)
</TABLE>
The quarter ended December 31, 1995, 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,
income per share presented may not equal the sum of the quarters.
F-21
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE O--EARNINGS PER SHARE
In accordance with SFAS 128, "Earnings Per Share", the Company has computed
basic and diluted earnings per share using the treasury stock method.
<TABLE>
<CAPTION>
TWELVE MONTHS TWELVE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
BASIC:
Net Income (loss)..................................... $42,152,000 $37,101,000 $(53,481,000)
=========== =========== ============
Shares outstanding at beginning period................ 20,796,935 19,918,735 19,681,429
Weighted average number of shares repurchased or
held in treasury stock during the period............. (59,001) (29,936) (29,936)
Weighted average shares issued during the period...... 621,375 451,762 101,975
----------- ----------- ------------
Weighted average number of shares outstanding, as
adjusted............................................. 21,359,309 20,340,561 19,753,468
=========== =========== ============
Basic income (loss) per common and common
equivalent share..................................... $ 1.97 $ 1.82 $ (2.71)
=========== =========== ============
DILUTED:
Net Income (loss)..................................... $42,152,000 $37,101,000 $(53,481,000)
Add after tax interest expense applicable to 7 1/4%
convertible subordinated debentures.................. 1,879,000 2,100,000 --
----------- ----------- ------------
Net Income (loss), as adjusted........................ $44,031,000 $39,201,000 $(53,481,000)
=========== =========== ============
Shares outstanding at beginning of period............. 20,796,935 19,918,735 19,681,429
Weighted average number of shares repurchased or
held in treasury stock during the period............. (59,001) (29,936) (29,936)
Weighted average shares issued during the period 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........................... 1,040,218 840,019 101,975
----------- ----------- ------------
Weighted average number of shares outstanding, as
adjusted excluding 7 1/4% convertible subordinated
debentures........................................... 21,778,152 20,728,818 19,753,468
=========== =========== ============
Diluted income (loss) per common and common
equivalent share excluding 7 1/4% convertible
subordinated debentures.............................. $ 1.94 $ 1.79 $ (2.71)
=========== =========== ============
Weighted average shares issuable assuming
conversion of 7 1/4% convertible subordinated
debentures........................................... 1,424,897 1,588,241 --
Weighted average number of shares outstanding, as
adjusted............................................. 23,203,049 22,317,059 19,753,468
----------- ----------- ------------
Diluted income (loss) per common and common
equivalent share..................................... $ 1.90 $ 1.76 $ (2.71)
=========== =========== ============
</TABLE>
F-22
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For the nine months ended December 31, 1995, the following items were not
considered because they were antidulitive: (1) $2,126,000 of interest expense
related to the 7/1//4% convertible subordinated debentures, (2) 539,229 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, and (3) 1,821,920 shares
issuable assuming conversion of 7/1//4% convertible subordinated debentures.
F-23
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................ $ 14,294 $ 21,686
Short-term investments including restricted amounts of $154 at
December 31, 1997....................................................... 307 308
Accounts receivable, less allowance for doubtful accounts of $8,051 at
March 31, 1998 and $8,100 at December 31, 1997......................... 154,181 156,911
Inventories.............................................................. 85,090 86,847
Current deferred tax asset............................................... 17,133 17,133
Other.................................................................... 9,565 7,635
-------- --------
TOTAL CURRENT ASSETS..................................................... 280,570 290,520
PROPERTY, PLANT AND EQUIPMENT--NET........................................ 120,520 111,303
GOODWILL, less accumulated amortization of $31,241 at March 31,
1998 and $29,814 at December 31, 1997.................................... 89,892 89,147
OTHER ASSETS.............................................................. 11,770 11,069
-------- --------
TOTAL ASSETS.............................................................. $502,752 $502,039
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facilities.............................................. $ 80,124 $ 84,139
Current maturities of long-term debt..................................... 11,884 11,888
Trade accounts payable................................................... 18,696 19,793
Other accrued expenses and liabilities................................... 59,307 71,243
Deferred revenue......................................................... 38,286 27,278
Income taxes............................................................. 15,145 9,185
-------- --------
TOTAL CURRENT LIABILITIES.............................................. 223,442 223,526
LONG-TERM DEBT, less current maturities................................... 8,871 11,854
OTHER LIABILITIES......................................................... 5,980 6,136
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, 45,000,000 shares of $.01 par value:
issued 21,632,000 at March 31, 1998 and 21,808,000 at
December 31, 1997....................................................... 216 218
Treasury stock--243,000 shares at March 31, 1998 and 200,000 shares at
December 31, 1997....................................................... (5,975) (4,692)
Additional paid-in capital............................................... 216,611 221,234
Retained earnings........................................................ 60,180 50,119
Foreign currency translation adjustments................................. (4,956) (5,129)
Unearned compensation.................................................... (1,617) (1,227)
-------- --------
Total stockholders' equity............................................. 264,459 260,523
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $502,752 $502,039
======== ========
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
March 31, March 31,
1998 1997
---------- ----------
<S> <C> <C>
REVENUE:
Equipment and software............................ $ 71,471 $ 77,448
Maintenance and other services.................... 70,911 64,905
-------- --------
142,382 142,353
COST OF SALES:
Equipment and software............................ 47,415 52,263
Maintenance and other services.................... 52,484 46,903
-------- --------
99,899 99,166
-------- --------
GROSS PROFIT................................... 42,483 43,187
OPERATING EXPENSES:
Product development............................... 4,114 5,411
Selling, general & administrative................. 20,290 18,666
Goodwill amortization............................. 1,354 1,344
-------- --------
25,758 25,421
-------- --------
INCOME FROM OPERATIONS............................ 16,725 17,766
OTHER INCOME (EXPENSE):
Interest income................................... 173 175
Interest expense.................................. (1,727) (1,753)
Sundry-net........................................ 549 (521)
-------- --------
(1,005) (2,099)
-------- --------
INCOME BEFORE INCOME TAXES..................... 15,720 15,667
INCOME TAX PROVISION................................ 5,659 5,640
-------- --------
NET INCOME.......................................... $ 10,061 $ 10,027
======== ========
NET INCOME PER SHARE:
Basic............................................. $0.47 $0.48
Diluted........................................... $0.46 $0.46
COMMON SHARES AND COMMON SHARE EQUIVALENTS USED IN
COMPUTING PER SHARE AMOUNTS:
Basic 21,541 21,012
Diluted 21,789 22,868
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................... $ 10,061 $ 10,027
Adjustments to reconcile net income to cash flows provided by operating
activities
Depreciation and amortization......................................... 10,653 9,632
Disposition of property, plant and equipment.......................... 151 345
Other non-cash items.................................................. (454) 385
(Increase) decrease in accounts receivable............................ 2,730 (9,725)
(Increase) decrease in inventories.................................... (2,576) 6,719
Increase in other assets.............................................. (2,631) (2,534)
Increase (decrease) in trade accounts payable......................... (1,097) 744
Increase (decrease) in deferred revenue............................... 11,008 (2,803)
Increase (decrease) in other accrued expenses and liabilities......... (6,132) 3,196
-------- --------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES........................ 21,729 15,986
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment............................... (14,039) (14,479)
Purchase of businesses, net of cash acquired............................. (2,041) --
Other.................................................................... -- 53
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES............................... (16,080) (14,426)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of current portion of long-term debt and capital lease
obligations............................................................ (2,987) (2,845)
Payments of long-term borrowings......................................... -- --
Net (payments) proceeds from short-term borrowings....................... (4,000) 2,459
Repurchase of common stock............................................... (9,258) --
Proceeds from sales and issuances of common stock........................ 3,350 4,503
-------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES........................................................ (12,895) 4,117
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................................... (130) (975)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... (7,392) 4,702
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................. 21,686 22,872
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................... $ 14,294 $ 27,574
======== ========
SUPPLEMENTAL DISCLOSURE INFORMATION:
Cash paid during the period for:.........................................
Interest.............................................................. $ 1,517 $ 986
Income taxes.......................................................... 1,491 1,368
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1. BASIS OF PRESENTATION AND OTHER ACCOUNTING INFORMATION
The accompanying unaudited balance sheet at March 31, 1998, and the
consolidated statements of operations and cash flows for the interim periods
ending March 31, 1998 and March 31, 1997 should be read in conjunction with
the consolidated financial statements and notes set forth in the most recent
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
In the opinion of management, the accompanying consolidated financial
statements contain all material adjustments, consisting principally of normal
recurring adjustments, necessary for a fair presentation of the results of
operations.
Basic income per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted income
per share is computed by dividing net income by the weighted average number
of common shares outstanding adjusted to reflect the assumed exercise of all
outstanding stock options which are dilutive and adjusted for the assumed
conversion of convertible debt. The Company adopted SFAS No. 128, "Earnings
per Share" effective December 31, 1997. As a result, the Company's reported
per share for all periods prior to December 31, 1997, was restated.
Certain amounts have been reclassified to conform with the current quarter
presentation.
2. INVENTORIES CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials..... $37,469 $41,293
Work-in-progress.. 8,359 7,883
Finished goods.... 39,262 37,671
------- -------
$85,090 $86,847
======= =======
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Land........................... $ 3,030 $ 3,030
Field support spare parts...... 111,296 110,297
Machinery and equipment........ 61,623 62,203
Furniture, fixtures and other.. 56,645 48,898
Building....................... 27,995 27,488
--------- ---------
260,589 251,916
Accumulated depreciation....... (140,069) (140,613)
--------- ---------
$ 120,520 $ 111,303
========= =========
</TABLE>
F-27
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
4. OTHER ACCRUED EXPENSES AND LIABILITIES CONSISTED OF THE FOLLOWING:
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(IN THOUSANDS)
Salaries, wages and other compensation.. $18,040 $18,878
Advances from customers................. 10,523 16,441
Accrued taxes, other than income taxes.. 6,919 9,219
Accrued invoices and costs.............. 9,140 8,582
Accrued merger charges and other costs.. 1,500 2,902
Other................................... 13,185 15,221
------- -------
$59,307 $71,243
======= =======
5. EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
1998 1997
------------ ------------
<S> <C> <C>
BASIC:
Net Income....................................................... $10,061,000 $10,027,000
=========== ===========
Shares issued at beginning of period............................. 21,809,678 20,796,935
Weighted average number of shares repurchased or held in
treasury stock during the period............................... (330,804) (29,936)
Weighted average shares issued during the period................. 62,411 245,472
----------- -----------
Weighted average number of shares outstanding, as adjusted....... 21,541,285 21,012,471
=========== ===========
Basic income per common and common equivalent share.............. $ 0.47 $ 0.48
=========== ===========
DILUTED:
Net Income....................................................... $10,061,000 $10,027,000
Add after tax interest expense applicable to 7 1/4% convertible
subordinated debentures........................................ -- 507,000
----------- -----------
Net Income as adjusted........................................... $10,061,000 $10,534,000
=========== ===========
Shares issued at beginning of period............................. 21,809,678 20,796,935
Weighted average number of shares repurchased or held in
treasury stock during the period............................... (330,804) (29,936)
Weighted average shares issued during the period 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........................ 310,295 562,416
----------- -----------
Weighted average number of shares outstanding, as adjusted
excluding 7 1/4% convertible subordinated debentures........... 21,789,169 21,329,415
=========== ===========
Diluted income per common and common equivalent share
excluding 7 1/4% convertible subordinated debentures........... $ 0.46 $ 0.47
=========== ===========
Weighted average shares issuable assuming conversion of
7 1/4% convertible subordinated debentures..................... -- 1,538,720
Weighted average number of shares outstanding as adjusted........ 21,789,169 22,868,135
----------- -----------
Diluted income per common and common equivalent share............ $ 0.46 $ 0.46
=========== ===========
</TABLE>
F-28
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
At March 31, 1998 and 1997, 120,948 stock options and 304,895 stock options,
respectively, were not considered to be common stock equivalents in the
computation of diluted weighted average shares outstanding because they were
antidilutive. Exercise prices on the stock options ranged from $25.81 to $27.00
per share and $22.38 to $23.31 per share, respectively, at March 31, 1998 and
1997.
6. COMPREHENSIVE INCOME
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued. The
Company has adopted this standard which requires disclosure of comprehensive
income and its components in the financial statements. For the Company,
comprehensive income includes net income and foreign currency translation
adjustments. The components of comprehensive income for the quarter ended March
31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1998 1997
----------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Net income................................ $10,061 $10,027
Foreign currency translation adjustments.. (173) (1,712)
------- -------
Total comprehensive income................ $ 9,888 $ 8,315
======= =======
</TABLE>
F-29
<PAGE>
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
INITIAL PURCHASER OF THE OLD NOTES. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Incorporation by Reference............ 3
Available Information................. 4
Forward-Looking Statements............ 4
Summary............................... 5
Holding Company Structure............. 12
Use of Proceeds....................... 13
Capitalization........................ 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations......................... 14
The Company........................... 18
The Exchange Offer.................... 25
Description of New Notes.............. 32
Book-Entry; Delivery and Form......... 41
Certain United States Federal Income
Tax Considerations.................... 43
Plan of Distribution.................. 44
Legal Matters......................... 44
Experts............................... 44
Index to Financial Statements......... F-1
================================================================================
================================================================================
$150,000,000
BANCTEC, INC.
7.50% SENIOR
NOTES DUE 2008
--------------
PROSPECTUS
, 1998
--------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DIRECTOR LIABILITY
Article Tenth of the Restated Certificate of Incorporation of the
Registrant provides that the Registrant must indemnify its officers and
directors to the fullest extent permitted by the Delaware General Corporation
Law. Pursuant to Section 145 of the Delaware General Corporation Law, the
Registrant generally has the power to indemnify its present and former directors
and officers against expenses and liabilities incurred by them in connection
with any suit to which they are, or are threatened to be made, a party by reason
of their serving in those positions so long as they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the Registrant, and with respect to any criminal action, they had no
reasonable cause to believe their conduct was unlawful. With respect to suits by
or in the right of the Registrant, however, indemnification is generally limited
to attorneys' fees and other expenses and is not available if the person is
adjudged to be liable to the registrant unless the court determines that
indemnification is appropriate. The statute expressly provides that the power to
indemnify authorized thereby is not exclusive of any rights granted under any
by-law, agreement, vote of stockholders or disinterested directors, or
otherwise. The Registrant also has the power to purchase and maintain insurance
liability insurance which indemnifies the directors and officers of the
Registrant against damages arising out of certain kinds of claims which might be
made against them based on their negligent acts or omissions while acting in
their capacity as such. The Restated Certificates of Incorporation of the
Registrant eliminates the liability of its directors for monetary damages for
breach of their fiduciary duty as directors. This provision, however, does not
eliminate a director's liability (i) for any breach of the director's duty
loyalty to the registrant or its stockholders, (ii) for acts of omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock redemptions
or repurchases, or (iv) for any transaction from which a director derived an
improper personal benefit.
The Company has entered into certain agreements ("Indemnification
Agreements") with each of its directors and officers designed to give effect to
the foregoing provisions of the Restated Certificate of Incorporation and to
provide certain additional assurances against the possibility of uninsured
liability. These provisions and the Indemnification Agreements will not alter
the liability of Directors of the Company under federal securities laws.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS:
Exhibit
Number Description of Exhibits
- ------ -----------------------
3.1(1) -- Amended and Restated Certificate of Incorporation
of the Registrant, as amended
3.2(1) -- Bylaws of the Registrant
4.1* -- Exchange and Registration Rights Agreement dated
May 22, 1998 by and among the Registrant, Chase
Securities Inc, Goldman, Sachs & Co. and
NationsBanc Montgomery Securities LLC
4.2* -- Indenture dated May 22, 1998 by and between the
Registrant and The First National Bank of Chicago
5.1* -- Opinion of Vinson & Elkins L.L.P.
10.1(1) -- Credit Agreement dated February 22, 1996, among
the Registrant, its subsidiaries and Texas
Commerce Bank National Association, as Agent
10.2* -- First Amendment to Loan Documents dated May 22,
1998, among the Registrant, its subsidiaries and
Chase Bank of Texas, N.A (formerly known as Texas
Commerce Bank National Association), as agent
10.3(1) -- BancTec, Inc. 1989 Stock Plan.
10.4(2) -- BancTec, Inc. 1994 Stock Plan.
10.5(3) -- BancTec, Inc. Deferred Compensation Plan.
10.6(3) -- BancTec, Inc. 1996 Employee Stock Purchase Plan.
10.7(1) -- Employment Agreement dated as of November 5, 1995
10.8(1) -- Employment Agreement dated November 5, 1995
between the Registrant and Tod V. Mongan.
10.9(1) -- Employment Agreement dated September 27, 1995
between the Registrant and Raghavan Rajaji.
10.10(3) -- Form of Indemnification Agreement between the
Registrant and each of its Directors and Officers.
10.11(4) -- Rights Agreement dated May 26, 1998, between the
Registrant and American Stock Transfer & Trust Company
12.1* -- Computation of Ratio of Earnings to Fixed Charges
21.1(3) -- Subsidiaries of the Company
23.1* -- Consent of Arthur Andersen LLP, Independent Public
Accountants
23.2* -- Consent of Vinson & Elkins L.L.P. (included in
Exhibit 5.1)
24.1* -- Powers of Attorney (set forth on signature page)
25.1* -- Form T-1 of The First National Bank of Chicago
27.1* -- Financial Data Schedule
99.1* -- Form of Letter of Transmittal
99.2* -- Form of Notice of Guaranteed Delivery
- ---------------------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.
(2) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended March 27, 1994.
(3) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997.
(4) Incorporated by reference to the Registrant's Registration Statement
on Form 8-A dated June 2, 1998.
(b) FINANCIAL STATEMENT SCHEDULES:
The following financial statement schedule is included in this
Registration Statement:
Report of Independent Public Accountants
II -- Valuation and Qualifying Accounts
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent post-
effective amendment hereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission pursuant to rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this Registration Statement when it becomes
effective;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Trust Indenture Act.
The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Third Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on the 10th day of June,
1998.
BANCTEC, INC.
By:/s/ Grahame N. Clark, Jr.
-----------------------------------------
Grahame N. Clark, Jr.,
Chairman of the Board, President
and Chief Executive Officer
Each person whose signature appears below authorizes Raghavan Rajaji
and Tod V. Mongan, and each of them, each of whom may act without joinder of the
other, to execute in the name of each such person who is then an officer or
director of the Company and to file any amendments to this Registration
Statement necessary or advisable to enable the Company to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the registration of the securities which are the subject of this Registration
Statement, which amendments may make such changes in the Registration Statement
as such attorney may deem appropriate. Pursuant to the requirements of the
Securities Act of 1933, this Registration Statement has been signed by the
following person in the capabilities and on the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the capacities
and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ Grahame N. Clark, Jr. Chairman of the Board, President, Chief June 10, 1998
- ------------------------------- Executive Officer and Director (Principal
Grahame N. Clark, Jr. Executive Officer)
/s/ Raghavan Rajaji Senior Vice President, Treasurer and June 10, 1998
- ------------------------------- Chief Financial Officer
Raghavan Rajaji
/s/ Scott J. Wilson (Principal Financial Officer)
- ------------------------------- Controller (Principal Accounting Officer) June 10, 1998
Scott J. Wilson
/s/ Rawles Fulgham Director June 10, 1998
- -------------------------------
Rawles Fulgham
/s/ Michael E. Faherty Director June 10, 1998
- -------------------------------
Michael E. Faherty
/s/ Paul J. Ferri Director June 10, 1998
- -------------------------------
Paul J. Ferri
/s/ A.A. Meitz Director June 10, 1998
- -------------------------------
A.A. Meitz
/s/ Michael D. Stone Director June 10, 1998
- -------------------------------
Michael D. Stone
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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 Registration
Statement on Form S-4, and have issued our report thereon dated January 27,
1998. Our audits were made for the purpose of forming an opinion on those
consolidated financial statements taken as a whole. The schedule set forth in
the registration statement 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
January 27, 1998
<PAGE>
Schedule II
BANCTEC, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Three Months Ended March 31, 1998, the Twelve
Months Ended December 31, 1997 and 1996, and the
Nine Months Ended December 31, 1995
<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 Deductions (A) period
- -------------------------------------------------- ---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Three months ended March 31, 1998 $8,100 $196 $0 $8,296
Twelve months ended December 31, 1997 $9,627 $3,091 ($4,618) $8,100
Twelve months ended December 31, 1996 $11,571 $1,252 ($3,196) $9,627
Nine months ended December 31, 1995 $4,313 $8,471 ($1,213) $11,571
- -------------------------------------------------
(A) Write-off of uncollectible accounts
</TABLE>
<PAGE>
EXHIBIT 4.1
BANCTEC, INC.
$150,000,000
7.50 % SENIOR NOTES DUE 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
May 22, 1998
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Chase Securities Inc.
270 Park Avenue, 8th floor
New York, New York 10017
Ladies and Gentlemen:
BancTec, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Chase Securities Inc. ("CSI"), Goldman, Sachs & Co. and
NationsBanc Montgomery Securities LLC (together with CSI, the "Initial
Purchasers"), upon the terms and subject to the conditions set forth in a
purchase agreement dated May 19, 1998 (the "Purchase Agreement"), $150,000,000
aggregate principal amount of its 7.50% Senior Notes due 2008 (the
"Securities"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the holders (including the Initial Purchasers) of the Securities, the
Exchange Securities (as defined herein) and the Private Exchange Securities (as
defined herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall (i) prepare and, not
later than 90 days following the date of original issuance of the Securities
(the "Issue Date"), file with the Commission a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "Registered Exchange Offer") to issue and deliver to such Holders, in
exchange for the Securities, a like aggregate principal amount of debt
securities of the Company (the "Exchange Securities") that are identical in all
material respects to the Securities, except for the transfer restrictions and
registration rights relating to the Securities, (ii) use its reasonable best
efforts to cause the Exchange Offer Registration Statement to become effective
under the Securities Act no later than 180 days after the Issue Date and the
Registered Exchange Offer to be consummated no later than 210 days after the
Issue Date and (iii) keep the Exchange Offer Registration Statement effective
for not less than 30 days (or longer, if required by applicable law) after the
date on which notice of the Registered Exchange Offer is mailed to the Holders
(such period being called the "Exchange Offer Registration Period"). The
Exchange Securities will be issued under the Indenture or an indenture (the
"Exchange Securities Indenture") between the Company and the Trustee or such
other bank or trust company that is reasonably satisfactory to the Initial
Purchasers, as trustee (the "Exchange Securities Trustee"), such indenture to be
identical in all material respects to the Indenture, except for the transfer
restrictions relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for
<PAGE>
2
Exchange Securities (assuming that such Holder (a) is not an affiliate of the
Company or an Exchanging Dealer (as defined herein) not complying with the
requirements of the next sentence, (b) is not an Initial Purchaser holding
Securities that have, or that are reasonably likely to have, the status of an
unsold allotment in an initial distribution, (c) acquires the Exchange
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) to trade such Exchange Securities from
and after their receipt without any limitations or restrictions under the
registration provisions of the Securities Act and without material restrictions
under the registration provisions of the securities laws of the several states
of the United States. The Company, the Initial Purchasers and each Exchanging
Dealer acknowledge that, pursuant to current interpretations by the Commission's
staff of Section 5 of the Securities Act, each Holder that is a broker-dealer
electing to exchange Securities, acquired for its own account as a result of
market-making activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus containing
substantially the information set forth in Annex A hereto on the cover, in Annex
B hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company (the "Private Exchange
Securities") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable
to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
<PAGE>
3
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancelation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for exchange.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company or,
if it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
<PAGE>
4
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 210 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, or (vi) the Company so elects, then the following
provisions shall apply:
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable (but in no event more than 30 days after so
required or requested pursuant to this Section 2) with the Commission, and
thereafter shall use its reasonable best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Securities (as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with
any Exchange Offer Registration Statement, a "Registration Statement").
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer
Restricted Securities for a period ending on the earlier of (i) two years
from the Issue Date or such shorter period that will terminate when all the
Transfer Restricted Securities covered by the Shelf Registration Statement
have been sold pursuant thereto and (ii) the date on which the Securities
become eligible for resale without volume restrictions pursuant to Rule
144(k) under the Securities Act (in any such case, such period being called
the "Shelf Registration Period"). The Company shall be deemed not to have
used its reasonable best efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily takes any action
that would result in Holders of Transfer Restricted Securities covered
thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable
law.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with
respect to information included therein in reliance upon or in conformity
with written information furnished to the Company by or on behalf of any
Holder specifically for use therein (the "Holders' Information")) does not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Special Interest. (a) The parties hereto agree that the Holders
of Transfer Restricted Securities will suffer damages if the Company fails to
fulfill its obligations under Section 1 or Section 2, as applicable, and that it
would not be feasible to ascertain the extent of
<PAGE>
5
such damages. Accordingly, if (i) the applicable Registration Statement is not
filed with the Commission on or prior to 90 days after the Issue Date, (ii) the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is not declared effective within 180 days after the Issue Date
(or in the case of a Shelf Registration Statement required to be filed in
response to a change in law or the applicable interpretations of Commission's
staff, if later, within 45 days after publication of the change in law or
interpretation), (iii) the Registered Exchange Offer is not consummated on or
prior to 210 days after the Issue Date, or (iv) the Shelf Registration Statement
is filed and declared effective within 180 days after the Issue Date (or in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or the applicable interpretations of Commission's staff, if later,
within 45 days after publication of the change in law or interpretation) but
shall thereafter cease to be effective (at any time that the Company is
obligated to maintain the effectiveness thereof) without being succeeded within
30 days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), the Company will be obligated to pay Special Interest to each Holder
of Transfer Restricted Securities, during the period of one or more such
Registration Defaults, in an amount equal to 0.25% per annum of the principal
amount of Transfer Restricted Securities held by such Holder for each
Registration Default (provided that in no event shall Special Interest exceed
1.00% per annum) until (i) the applicable Registration Statement is filed, (ii)
the Exchange Offer Registration Statement is declared effective and the
Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement
is declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration Defaults,
the accrual of Special Interest will cease. As used herein, the term "Transfer
Restricted Securities" means (i) each Security until the date on which such
Security has been exchanged for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) each Security or Private Exchange Security until
the date on which it has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii)
each Security or Private Exchange Security until the date on which it is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding
anything to the contrary in this Section 3(a), the Company shall not be required
to pay Special Interest to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations to make the representations set
forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the Special Interest due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
Special Interest then due. The Special Interest due shall be payable on each
interest payment date specified by the Indenture and the Securities to the
record holder entitled to receive the interest payment to be made on such date.
Each obligation to pay liquidated damages shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the Special Interest provided for in
this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
<PAGE>
6
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and shall use its reasonable best efforts to
reflect in each such document, when so filed with the Commission, such
comments as any Initial Purchaser may reasonably propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section
of the prospectus forming a part of the Exchange Offer Registration
Statement, and include the information set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered Exchange Offer;
and (iii) if requested by any Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use
of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities, the
Exchange Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
<PAGE>
7
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents to
the use of such prospectus or any amendment or supplement thereto by each
of the selling Holders of Transfer Restricted Securities in connection with
the offer and sale of the Transfer Restricted Securities covered by such
prospectus or any amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements
and schedules and, if any Initial Purchaser or Exchanging Dealer or any
such Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement
and any amendment or supplement thereto as such Initial Purchaser,
Exchanging Dealer or other persons may reasonably request; and the Company
consents to the use of such prospectus or any amendment or supplement
thereto by any such Initial Purchaser, Exchanging Dealer or other persons,
as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in
connection with the registration or qualification of, such Securities,
Exchange Securities or Private Exchange Securities for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities, Exchange Securities or Private Exchange Securities
covered by such Registration Statement; provided that the Company will not
be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject it to
general service of process or to taxation in any such jurisdiction where it
is not then so subject.
(i) The Company will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders thereof may
request in writing prior to sales of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an
effective Registration Statement, the Company will promptly prepare and
file with the Commission a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
Securities, Exchange Securities or Private Exchange Securities from a
Holder, the prospectus will not include an untrue statement of a material
fact or omit to
<PAGE>
8
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may
be, and provide the applicable trustee with printed certificates for the
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, in a form eligible for deposit with The Depository Trust
Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders
as soon as practicable after the effective date of the applicable
Registration Statement an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act; provided that in no event shall such
earnings statement be delivered later than 45 days after the end of a 12-
month period (or 90 days, if such period is a fiscal year) beginning with
the first month of the Company's first fiscal quarter commencing after the
effective date of the applicable Registration Statement, which statement
shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture
Act as required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Company may from
time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Company may exclude from such registration the Transfer
Restricted Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto and in the
case of the Exchange Offer Registration Statement, each Exchanging Dealer
agrees by acquisition of such Transfer Restricted Securities that, upon
receipt of any notice from the Company pursuant to Section 4(b)(ii) through
(v), such Holder will discontinue disposition of such Transfer Restricted
Securities until such Holder's receipt of copies of the supplemental or
amended prospectus contemplated by Section 4(j) or until advised in writing
(the "Advice") by the Company that the use of the applicable prospectus may
be resumed. If the Company shall give any notice under Section 4(b)(ii)
through (v) during the period that the Company is required to maintain an
effective Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during such
period from and including the date of the giving of such notice to and
including the date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies
of the supplemental or amended prospectus contemplated by Section 4(j) (if
an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements in underwritten offerings of debt
securities similar to the Securities (including, if requested, an
underwriting agreement in customary form) and take all such other action,
if any, as Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold
or the managing underwriters (if any) shall reasonably request in order to
facilitate
<PAGE>
9
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold and any underwriter participating in
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries and (ii) use its reasonable best
efforts to have its officers, directors, employees, accountants and counsel
supply all relevant information reasonably requested by such
representative, Special Counsel or any such underwriter (an "Inspector") in
connection with such Shelf Registration Statement; provided, however, that
-------- -------
such persons shall first agree in writing (if so requested by the Company
in writing) with the Company that any information that is reasonably and in
good faith designated by the Company in writing as confidential at the time
of delivery of such information shall be kept confidential by such persons,
unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to Federal securities laws
in connection with the filing of any Registration Statement or the use of
any Prospectus), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by
any such person or (iv) such information becomes available to any such
person from a source other than the Company and such source is not bound by
a confidentiality agreement.
(r) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection
with such Shelf Registration Statement, use its reasonable best efforts to
cause (i) its counsel to deliver an opinion relating to the Shelf
Registration Statement and the Securities, Exchange Securities or Private
Exchange Securities, as applicable, in customary form, (ii) its officers to
execute and deliver all customary documents and certificates requested by
Holders of a majority in aggregate principal amount of the Securities,
Exchange Securities and Private Exchange Securities being sold, their
Special Counsel or the managing underwriters (if any) and (iii) its
independent public accountants to provide a comfort letter or letters in
customary form, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No.
72.
5. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders
for the reasonable fees and disbursements of one firm of attorneys (in addition
to any local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Securities, the Exchange Securities and the Private Exchange
Securities to be sold pursuant to each Registration Statement (the "Special
Counsel") acting for the Initial Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this
<PAGE>
10
Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of Securities, Exchange Securities or Private Exchange
Securities), to which that Holder may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any such Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Holder promptly
upon demand for any legal or other expenses reasonably incurred by that Holder
in connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Holders' Information; and provided, further, that with respect to any such
untrue statement in or omission from any related preliminary prospectus, the
indemnity agreement contained in this Section 6(a) shall not inure to the
benefit of any Holder from whom the person asserting any such loss, claim,
damage, liability or action received Securities, Exchange Securities or Private
Exchange Securities to the extent that such loss, claim, damage, liability or
action of or with respect to such Holder results from the fact that both (A) to
the extent required by applicable law, it shall be established that a copy of
the final prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities, Exchange Securities or
Private Exchange Securities to such person and (B) the untrue statement in or
omission from the related preliminary prospectus was identified in writing to
such Initial Purchaser prior to the printing of the final prospectus, was
corrected in the final prospectus and such correction would have cured the
defect giving rise to such loss, claim, damage or liability unless, in either
case, such failure to deliver the final prospectus was a result of non-
compliance by the Company with Section 4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
<PAGE>
11
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange
<PAGE>
12
Securities or Private Exchange Securities, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, on
the one hand, and such Holder, on the other, with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and a Holder, on the
other, with respect to such offering and such sale shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Securities
(before deducting expenses) received by or on behalf of the Company as set forth
in the table on the cover of the Offering Memorandum, on the one hand, bear to
the total proceeds received by such Holder with respect to its sale of
Securities, Exchange Securities or Private Exchange Securities, on the other.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to the Company or
information supplied by the Company, on the one hand, or to any Holders'
Information supplied by such Holder, on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7 were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 7 shall be deemed to include, for purposes of this Section 7, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a Holder of Securities, Exchange Securities or
Private Exchange Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities, Exchange
Securities or Private Exchange Securities sold by such indemnifying party to any
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. The Company covenants that it will take such further action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Securities, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
<PAGE>
13
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to Chase Securities Inc., Goldman, Sachs & Co. and NationsBanc
Montgomery Securities LLC;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act.
<PAGE>
14
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(G) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Remedies. In the event of a breach by the Company or by any
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which Special Interest have been paid pursuant to Section 3 hereof),
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Company represents, warrants and
agrees that (i) it has not entered into, shall not, on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the provisions
hereof, (ii) it has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its debt
securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Securities, it
shall not grant to any person the right to request the Company to register any
debt securities of the Company under the Securities Act unless the rights so
granted are not in conflict or inconsistent with the provisions of this
Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE>
15
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
BANCTEC, INC.
by
/s/ Raghavan Rajaji
-------------------------------
Name: Raghavan Rajaji
Title: Chief Financial Officer
Accepted:
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
by: Chase Securities Inc.
by
/s/ Michael DiGiacomo
-------------------------
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until [ ]
199[ ], all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 4.2
===============================================================================
BANCTEC, INC.
7.50% Senior Notes due 2008
------------------------
INDENTURE
Dated as of May 22, 1998
------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions...................................................
SECTION 1.02. Other Definitions.............................................
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.............
SECTION 1.04. Rules of Construction.........................................
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating................................................
SECTION 2.02. Execution and Authentication...................................
SECTION 2.03. Registrar and Paying Agent.....................................
SECTION 2.04. Paying Agent To Hold Money in Trust............................
SECTION 2.05. Securityholder Lists...........................................
SECTION 2.06. Transfer and Exchange..........................................
SECTION 2.07. Replacement Securities.........................................
SECTION 2.08. Outstanding Securities.........................................
SECTION 2.09. Temporary Securities...........................................
SECTION 2.10. Cancelation....................................................
SECTION 2.11. Defaulted Interest.............................................
SECTION 2.12. CUSIP Numbers..................................................
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee.............................................
SECTION 3.02. Selection of Securities To Be Redeemed.........................
SECTION 3.03. Notice of Redemption...........................................
SECTION 3.04. Effect of Notice of Redemption.................................
SECTION 3.05. Deposit of Redemption Price....................................
SECTION 3.06. Securities Redeemed in Part....................................
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities..........................................
SECTION 4.02. SEC Reports....................................................
SECTION 4.03. Limitation on Subsidiary Debt and Preferred Stock..............
<PAGE>
SECTION 4.04. Limitation on Liens............................................
SECTION 4.05. Limitation on Sale and Leaseback Transactions..................
SECTION 4.06. Compliance Certificate.........................................
SECTION 4.07. Further Instruments and Acts...................................
ARTICLE 5
Defaults and Remedies
---------------------
SECTION 5.01. Events of Default..............................................
SECTION 5.02. Acceleration...................................................
SECTION 5.03. Other Remedies.................................................
SECTION 5.04. Waiver of Past Defaults........................................
SECTION 5.05. Control by Majority............................................
SECTION 5.06. Limitation on Suits............................................
SECTION 5.07. Rights of Holders To Receive Payment...........................
SECTION 5.08. Collection Suit by Trustee.....................................
SECTION 5.09. Trustee May File Proofs of Claim...............................
SECTION 5.10. Priorities.....................................................
SECTION 5.11. Undertaking for Costs..........................................
SECTION 5.12. Waiver of Stay or Extension Laws...............................
ARTICLE 6
Trustee
-------
SECTION 6.01. Duties of Trustee..............................................
SECTION 6.02. Rights of Trustee..............................................
SECTION 6.03. Individual Rights of Trustee...................................
SECTION 6.04. Trustee's Disclaimer...........................................
SECTION 6.05. Notice of Defaults.............................................
SECTION 6.06. Reports by Trustee to Holders..................................
SECTION 6.07. Compensation and Indemnity.....................................
SECTION 6.08. Replacement of Trustee.........................................
SECTION 6.09. Successor Trustee by Merger....................................
SECTION 6.10. Eligibility; Disqualification..................................
SECTION 6.11. Preferential Collection of Claims Against Company..............
ARTICLE 7
Discharge of Indenture; Defeasance
----------------------------------
SECTION 7.01. Discharge of Liability on Securities; Defeasance...............
SECTION 7.02. Conditions to Defeasance.......................................
SECTION 7.03. Application of Trust Money.....................................
SECTION 7.04. Repayment to Company...........................................
SECTION 7.05. Indemnity for Government Obligations...........................
SECTION 7.06. Reinstatement..................................................
<PAGE>
ARTICLE 8
Amendments
----------
SECTION 8.01. Without Consent of Holders.....................................
SECTION 8.02. With Consent of Holders........................................
SECTION 8.03. Compliance with Trust Indenture Act............................
SECTION 8.04. Revocation and Effect of Consents and Waivers..................
SECTION 8.05. Notation on or Exchange of Securities..........................
SECTION 8.06. Trustee to Sign Amendments.....................................
ARTICLE 9
Miscellaneous
-------------
SECTION 9.01. Trust Indenture Act Controls...................................
SECTION 9.02. Notices........................................................
SECTION 9.03. Communication by Holders with Other Holders....................
SECTION 9.04. Certificate and Opinion as to Conditions Precedent.............
SECTION 9.05. Statements Required in Certificate or Opinion..................
SECTION 9.06. When Securities Disregarded....................................
SECTION 9.07. Rules by Trustee, Paying Agent and Registrar...................
SECTION 9.08. Legal Holidays.................................................
SECTION 9.09. Governing Law..................................................
SECTION 9.10. No Recourse Against Others.....................................
SECTION 9.11. Successors.....................................................
SECTION 9.12. Multiple Originals.............................................
SECTION 9.13. Table of Contents; Headings....................................
Appendix A - Provisions Relating to Initial Securities, Private Exchange
Securities and Exchange Securities
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Letter of Representation
<PAGE>
INDENTURE dated as of May 22, 1998, between BANCTEC, INC., a
Delaware corporation (the "Company") and THE FIRST NATIONAL BANK
OF CHICAGO, a national banking association, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's 7.50% Senior
Notes due 2008 issued on the date hereof (the "Initial Securities"), (i) if and
when issued as provided in the Registration Agreement (as defined in Appendix A
hereto (the "Appendix"), the Company's 7.50% Senior Notes due 2008 issued in the
Registered Exchange Offer (as defined in the Appendix) in exchange for any
Initial Securities (the "Exchange Securities") and (ii) if and when issued as
provided in the Registration Agreement, the Private Exchange Securities (as
defined in the Appendix) issued in the Private Exchange (as defined in the
Appendix, and together with the Initial Securities and any Exchange Securities
issued hereunder, the "Securities"). Except as otherwise provided herein, the
Securities will be limited to $150,000,000 in aggregate principal amount
outstanding.
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.
------------
"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.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with GAAP, discounted from the last date of
such initial term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease Obligation with like
term in accordance with GAAP. The net amount of rent required to be paid under
any such lease for any such period shall be the aggregate amount of rent payable
by the lessee with respect to such period after excluding amounts required to be
paid on account of insurance, taxes, assessments, utility, operating and labor
costs and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated. "Attributable Value" means, as to a Capital Lease Obligation under
which any Person is at the time liable and at any date as of which the amount
thereof is to be determined, the capitalized amount
<PAGE>
2
thereof that would appear on the face of a balance sheet of such Person in
accordance with GAAP.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board of
Directors.
"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.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with GAAP. The stated
maturity of such obligation shall be the date of the last payment of rent or any
other amount due under such lease or other Debt arrangements prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Closing Date" means May 22, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Company Request", "Company Order" and "Company Consent" mean a
written request, order or consent, respectively, signed in the name of the
Company by its Chairman of the Board, President or a Vice President, and by its
Treasurer, an Assistant Treasurer, Controller, an Assistant Controller,
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means, as of any particular time,
the aggregate amount of assets (less applicable reserves and other properly
deductible items) after deducting therefrom (i) all current liabilities, except
for (a) notes and loans payable, (b) current maturities of long-term Debt and
(c) current maturities of Capital Lease Obligations and (ii) intangible assets,
to the extent included in such aggregate amount of assets, all as set forth on
the most recent consolidated balance sheet of the Company and its consolidated
subsidiaries and computed in accordance with GAAP.
<PAGE>
3
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as consolidated Persons in such Person's financial
statements in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office at the date hereof is located in Chicago, Illinois.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person other than as entered into in
the ordinary course of business, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every Capital Lease Obligation of such Person, (vi) the maximum
fixed redemption or repurchase price of Redeemable Stock of such Person at the
time of determination, (vii) every payment obligation of such Person under
interest rate swap or similar agreements or foreign currency hedge, and exchange
or similar agreements at the time of determination and (viii) every obligation
of the type referred to in clauses (i) through (vii) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has Guaranteed or is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise and such obligations secured by (or for which the holder
of such obligation has an existing right, contingent or otherwise, to be secured
by) any Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such obligation; provided, that if the obligation so
--------
secured has not been assumed in full by such Person or is otherwise not such
Person's legal liability in full, the amount of such obligation for the purposes
of this definition shall be limited to the lesser of the amount of such
obligation secured by such Lien or the fair market value of the assets or
property securing such Lien.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.11.
"Event of Default" has the meaning specified in Article Five.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied, that are in effect from time to time.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Debt of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person, (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purpose of assuring
the holder of
<PAGE>
4
such Debt of the payment of such Debt, or (iii) to maintain working capital,
equity capital or other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed" and "Guaranteeing" shall have meanings correlative to the
foregoing); provided, however, that the Guarantee by a Person shall not include
-------- -------
endorsements by such Person for collection or deposit in the ordinary course of
business.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such Debt or
other obligation on the balance sheet of such Person (and "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); provided, however, that a change in GAAP that results in an
-------- -------
obligation of such Person that exists at such time becoming Debt shall not be
deemed an Incurrence of such Debt.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit agreement, security
interest, lien, charge, easement (other than any title defect or easement not
materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Debt and Preferred Stock" means (i) Debt or Preferred Stock
outstanding on the date of original issuance of the Securities after giving
effect to the application of the proceeds from the Securities; (ii) interest
rate swap or similar agreements and foreign currency hedge, exchange or similar
agreements designed to provide protection against fluctuations in interest rates
and currency exchange rates, respectively, provided that such agreements are
entered into in, or are incidental to, the ordinary course of business or are
entered into in connection with the incurrence of Debt
<PAGE>
5
permitted hereunder; (iii) Debt Incurred pursuant to industrial revenue or
development bonds in an aggregate principal amount not to exceed $15 million at
any one time outstanding; (iv) Debt Incurred or Incurrable in respect of trade
letters of credit, bankers' acceptances, surety or appeal bonds, performance or
return-of-money bonds or other obligations of a like nature Incurred in the
ordinary course of business; (v) Debt or Preferred Stock issued to and held by
the Company or a Wholly Owned Subsidiary of the Company, but only so long as
held or owned by the Company or a Wholly Owned Subsidiary of the Company; (vi)
Debt Incurred or Preferred Stock issued by a Person prior to the time (A) such
Person became a Subsidiary of the Company, (B) such Person merges into or
consolidates with a Subsidiary of the Company or (C) another Subsidiary of the
Company merges into or consolidates with such Person (in a transaction in which
such Person becomes a Subsidiary of the Company), or Debt Incurred or Preferred
Stock issued by a Person and thereafter assumed by a Subsidiary of the Company
in a transaction in which the property of such Person is sold, leased or
otherwise disposed of as an entirety or substantially as an entirety to such
Subsidiary, in each such case in which such Debt or Preferred Stock was not
Incurred or issued in anticipation of such transaction; (vii) Debt Incurred for
the purpose of financing all or any part of the purchase price or the cost of
construction of or improvements (or additions to improvements) to the property
of the Company or any of its Subsidiaries in an aggregate principal amount not
to exceed the fair market value of such property, construction or improvements
(or additions to improvements); (viii) Debt or Preferred Stock that is exchanged
for, or the proceeds of which are used to refinance or refund, any Debt or
Preferred Stock permitted to be outstanding pursuant to clauses (i) through
(vii) (or any extension or renewal thereof) (A) in an aggregate principal amount
not to exceed the principal amount of the Debt, in the case of Debt, or the
liquidation preference of the Preferred Stock, in the case of Preferred Stock,
so exchanged, refinanced or refunded and (B) provided that such Debt or
Preferred Stock does not require the payment of all or a portion of the
principal or liquidation value thereof (whether pursuant to purchase,
redemption, defeasance, retirement, sinking fund payment, payment at stated
maturity or otherwise, but excluding any payment or retirement required by
virtue of acceleration of such Debt upon an event of default thereunder or
"change of control" or similar provision thereunder) prior to the scheduled
maturity or maturities of the Debt or Preferred Stock being refinanced or
refunded; (ix) Debt arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guarantees or
letters of credit, surety bonds or performance bonds securing any obligations of
any Subsidiary of the Company pursuant to such agreements, in each case Incurred
in connection with the disposition of any business assets of any Subsidiary of
the Company (other than Guarantees of Debt or other obligations Incurred by any
Person acquiring all or any portion of such business assets for the purpose of
financing such acquisition) in a principal amount not to exceed the gross
proceeds actually received by any such Subsidiary in connection with such
disposition; and (x) Debt not otherwise permitted to be Incurred pursuant to
clauses (i) through (ix) above) which, together with the sum of any other
outstanding Debt Incurred pursuant to this clause (x) and clauses (vi), (vii)
and (viii) above (excluding, for purposes of clause (viii), any Debt or
Preferred Stock Incurred or issued in exchange for, or to finance or refund,
Debt or Preferred Stock described in clauses (i) through (v) above), has an
aggregate principal amount not in excess of the greater of $40 million or 15% of
Consolidated Net Tangible Assets. Notwithstanding the foregoing, the aggregate
amount of Debt that may be outstanding under clauses (vi), (vii), (viii)
(excluding, for purposes of clause (viii), any Debt or Preferred Stock Incurred
or issued in exchange for, or to refinance and refund, Debt or Preferred Stock
described in clauses (i)
<PAGE>
6
through (v) above) and (x) above shall not exceed the greater of $40 million or
15% of Consolidated Net Tangible Assets.
"Permitted Liens" means (i) Liens on inventories and accounts
receivable existing from time to time; (ii) Liens securing only the Securities;
(iii) Liens in favor of the Company; (iv) Liens on property of a Person existing
at the time such Person becomes a Subsidiary of the Company, is merged into or
consolidated with the Company (or any Subsidiary of the Company) or any
Subsidiary of the Company merges into or consolidates with such Person or when
the property of such Person is sold, leased or otherwise disposed of as an
entirety or substantially as an entirety to the Company or a subsidiary thereof,
in each such case not securing Debt Incurred in anticipation of such
transaction; (v) Liens on property existing at the time of acquisition thereof;
(vi) Liens on property securing (a) all or any portion of the cost of acquiring,
constructing, altering, improving or repairing any property, real or personal,
or improvements used or to be used in connection with such property or (b) Debt
Incurred by the Company or any Subsidiary of the Company prior to or within one
year after the later of the acquisition, the completion of construction,
alteration, improvement or repair, or the commencement of commercial operation
thereof, which Debt is Incurred for the purpose of financing all or any part of
the purchase price thereof or such construction, alteration, improvement or
repair; (vii) Liens in favor of the United States of America or any State,
territory or possession thereof (or the District of Columbia), or any
department, agency, instrumentality or political subdivision of the United
States of America or any State, territory or possession thereof (or the District
of Columbia), to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any Debt incurred for the purpose of
financing all or any part of the purchase price or the cost of constructing or
improving the property subject to such Liens; (viii) Liens granted to any bank
or other institution on the payments to be made by such institution to the
Company or a Subsidiary of the Company pursuant to any interest rate swap or
similar agreement or foreign currency hedge, exchange or similar agreement
designed to provide protection against fluctuations in interest rates and
currency exchange rates, respectively, provided that such agreements are entered
into in, or are incidental to, the ordinary course of business or are entered
into in connection with Permitted Debt and Preferred Stock, between the Company
or such Subsidiary and such institution; (ix) Liens to secure industrial revenue
or development bonds, not to exceed $15 million at any one time outstanding; (x)
mechanics', workmen's, materialmen's or similar Liens arising in the ordinary
course of business; (xi) Liens to secure any extension, renewal, refinancing or
refunding (or successive extensions, renewals, refinancings or refundings), in
whole or in part, of any Debt secured by Liens referred to in the foregoing
clauses (i) to (x) so long as such Lien does not extend to any other property
(other than improvements to such property) and the principal amount of the Debt
so secured is not increased; (xii) Liens that do not secure Debt in an aggregate
principal amount in excess of the greater of $40 million or 15% of Consolidated
Net Tangible Assets at any one time outstanding; (xiii) any Liens securing Debt
owed by the Company to one or more Wholly Owned Subsidiaries of the Company (but
only if such Debt is held by such Wholly Owned Subsidiaries); (xiv) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure
performance, surety or appeal bonds to which such Person is a party or which are
otherwise required of such Person, or deposits as security for contested taxes
or import duties or for the
<PAGE>
7
payment of rent or other obligations of like nature, in each case incurred in
the ordinary course of business; (xv) Liens resulting from the deposit of funds
or evidence of Debt in trust for the purpose of defeasing Debt of the Company or
any of its Subsidiaries; (xvi) legal or equitable encumbrances deemed to exist
by reason of negative pledges or the existence of any litigation or other legal
proceeding and any related lis pendens filing (excluding any attachment prior to
judgment, judgment lien or attachment lien in aid of execution on a judgment);
and (xvii) Liens existing on or provided for under the terms of agreements
existing on the date the Notes are issued.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Principal Property" means any property or assets (including, without
limitation, accounts receivable and inventory) owned or leased by the Company or
any Subsidiary thereof, the gross book value of which exceeds one percent of
Consolidated Net Tangible Assets.
"Redeemable Stock" of any Person means any equity security of such
Person that by its terms or otherwise is required to be redeemed prior to the
Stated Maturity of the Securities or is redeemable at the option of the holder
thereof at any time prior to the Stated Maturity of the Securities.
"Sale and Leaseback Transaction" of any Person means an arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any Principal Property of such
Person which has been or is being sold or transferred by such Person more than
one year after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any Person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset. The stated maturity of such arrangement
shall be the date of the last payment of rent or any other similar amount due
under such arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
8
"Significant Subsidiary" means any Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subsidiary" means, with respect to any Person, any corporation more
than 50% of the outstanding voting stock of which is owned, directly or
indirectly, by such Person, and any partnership, association, joint venture or
other entity in which such Person owns more than 50% of the equity interests or
has the power (i) to elect a majority of the board of directors or other
governing body or (ii) to direct the policies, management or affairs thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb), as amended.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. Other Definitions.
------------------
Defined in
Term Section
---- -----------
"Bankruptcy Law"................................. 5.01
"covenant defeasance option"..................... 7.01(b)
"Custodian"...................................... 5.01
<PAGE>
9
"Event of Default"............................... 5.01
"legal defeasance option"........................ 7.01(b)
"Legal Holiday".................................. 9.08
"Paying Agent"................................... 2.03
"protected purchaser"............................ 2.07
"Registrar"...................................... 2.03
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
(7) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory
<PAGE>
10
redemption or mandatory repurchase price with respect to such Preferred
Stock, whichever is greater.
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating. Provisions relating to the Initial
---------------
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Appendix, which is hereby incorporated in and expressly made a part
of this Indenture. The (i) Initial Securities and the Trustee's certificate of
authentication and (ii) Private Exchange Securities and the Trustee's
certificate of authentication shall each be substantially in the form of Exhibit
A hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B hereto, which is
hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Security shall be dated the date of its authentication.
SECTION 2.02. Execution and Authentication. One or more Officers
-----------------------------
shall sign the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Any such appointment shall be
evidenced by an instrument signed by a Trust Officer, a copy of which shall be
furnished to the Company. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
---------------------------
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent, and the
term "Registrar" includes any co-registrars. The
<PAGE>
11
Company initially appoints the Trustee as (i) Registrar and Paying Agent in
connection with the Securities and (ii) the Securities Custodian (as defined in
the Appendix) with respect to the Global Securities (as defined in the
Appendix).
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall notify the Trustee of
the name and address of any such agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 6.07. The Company or
any of its domestically organized Wholly Owned Subsidiaries may act as Paying
Agent or Registrar.
The Company may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided, however,
-------- -------
that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Company and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
accordance with clause (1) above. The Registrar or Paying Agent may resign at
any time upon written notice; provided, however, that the Trustee may resign as
-------- -------
Paying Agent or Registrar only if the Trustee also resigns as Trustee in
accordance with Section 6.08.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
------------------------------------
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent (or if the Company or a Subsidiary is acting as Paying
Agent, segregate and hold in trust for the benefit of the Persons entitled
thereto) a sum sufficient to pay such principal and interest when so becoming
due. The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the
Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
---------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each interest payment
date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued
----------------------
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements
<PAGE>
12
of Section 8-401(a)(l) of the Uniform Commercial Code are met. When Securities
are presented to the Registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's request. The Company
may require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Company shall not be required to make and the Registrar need
not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or any Securities for a period of 15 days before a selection
of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent and the Registrar may deem
and treat the Person in whose name a Security is registered as the absolute
owner of such Security for the purpose of receiving payment of principal of and
interest, if any, on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the Trustee,
the Paying Agent or the Registrar shall be affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interest in such Global Security
may be effected only through a book-entry system maintained by (i) the Holder of
such Global Security (or its agent) or (ii) any Holder of a beneficial interest
in such Global Security, and that ownership of a beneficial interest in such
Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
-----------------------
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Company or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Company or the Trustee prior to the Security being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Company, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Security is replaced. The Company and the Trustee
may charge the Holder for their expenses in replacing a Security. In the event
any such mutilated, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the Company.
<PAGE>
13
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
-----------------------
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. In the event that Definitive
---------------------
Securities (as defined in the Appendix) are to be issued under the terms of this
Indenture, until such Definitive Securities are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities and deliver them in exchange for temporary
Securities upon surrender of such temporary Securities at the office or agency
of the Company, without charge to the Holder.
SECTION 2.10. Cancelation. The Company at any time may deliver
------------
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver canceled Securities to the Company pursuant to written
direction by an Officer. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancelation.
The Trustee shall not authenticate Securities in place of canceled Securities
other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
-------------------
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful)
("Defaulted Interest") in any lawful manner. The Company may pay the defaulted
interest to the Persons who are Securityholders on a subsequent special record
date. The Company shall fix or cause to be fixed any such special record date
and payment date to the reasonable satisfaction of the Trustee and shall
promptly mail or cause to be mailed to each Securityholder a notice that states
the special record date, the payment date and the amount of defaulted interest
to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
--------------
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use
<PAGE>
14
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
--------
however, that any such notice may state that no representation is made as to the
- -------
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
-------------------
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not fewer than 15 days after the date of notice to the Trustee. Any such notice
may be canceled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
---------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee in its
sole discretion shall deem to be fair and appropriate and in accordance with
methods generally used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from outstanding Securities
not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000. Securities and portions of them the Trustee selects shall be in amounts
of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
---------------------
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
<PAGE>
15
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
-------------------------------
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date; provided, however, that if the redemption date is after a regular record
-------- -------
date and on or prior to the interest payment date, the accrued interest shall be
payable to the Securityholder of the redeemed Securities registered on the
relevant record date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m.
----------------------------
(Chicago time) on the redemption date, the Company shall deposit with the Paying
Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate
and hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption that have been delivered by the
Company to the Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
----------------------------
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
<PAGE>
16
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities. The Company shall promptly pay
----------------------
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. The Company shall file with the SEC, and
------------
provide the Trustee and Securityholders within 15 days after it files them with
the SEC, copies of its annual report and the information, documents and other
reports that are specified in Section 13 and 15(d) of the Exchange Act. In
addition, the Company shall furnish to the Trustee and the Securityholders,
promptly upon their becoming available, copies of the annual report to
shareholders and any other information provided by the Company to its public
shareholders generally. The Company also shall comply with the other provisions
of TIA (S) 314(a).
SECTION 4.03. Limitation on Subsidiary Debt and Preferred Stock. The
--------------------------------------------------
Company shall not permit any Subsidiary of the Company to Incur or suffer to
exist any Debt or issue any Preferred Stock except for Permitted Debt and
Preferred Stock.
SECTION 4.04. Limitation on Liens. The Company shall not, and shall
--------------------
not permit any Subsidiary of the Company, to Incur any Lien on any Principal
Property of the Company or such Subsidiary, to secure Debt without making, or
causing such Subsidiary to make, effective provision for securing the Securities
(and, if required by its governing instruments, any other Debt of the Company or
of such Subsidiary that is not subordinate to the Securities) equally and
ratably with such Debt as to such Principal Property for so long as such Debt
will be so secured or, in the event such Debt is Debt of the Company which is
subordinate in right of payment to the Securities, prior to such Debt as to such
Principal Property for so long as such Debt will be secured; provided, however,
-------- -------
that nothing contained in this covenant shall prevent, restrict or apply to, and
there shall be excluded from secured Debt in any computation under this Section,
Liens existing on the date of this Indenture or Permitted Liens.
SECTION 4.05. Limitation on Sale and Leaseback Transactions. The
----------------------------------------------
Company shall not, and shall not permit any Subsidiary of the Company to, enter
into any Sale and Leaseback Transaction with respect to any Principal Property
(except for a period not exceeding three years) unless (a) the Company or such
Subsidiary would be entitled to Incur a Lien on such Principal Property to
secure Debt by reason of the provisions described in clauses (i) through (xvi)
of the definition of Permitted Liens in an amount equal to the Attributable
Value of such Sale and Leaseback Transaction without equally and ratably
securing the Securities or (b) the Company shall apply an amount equal to the
Attributable Value with respect to such Sale and Leaseback Transaction
<PAGE>
17
within six months of such sale to the defeasance or retirement (other than any
mandatory retirement, mandatory prepayment or sinking fund payment or by payment
at maturity) of Debt securities or other debt for borrowed money of the Company
or a Subsidiary thereof that matures more than one year after the creation of
such Debt or to the purchase, construction or development of other comparable
property.
SECTION 4.06. Compliance Certificate. The Company shall deliver to
-----------------------
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with Section 314(a)(4) of
the TIA.
SECTION 4.07. Further Instruments and Acts. Upon request of the
-----------------------------
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE 5
Defaults and Remedies
---------------------
SECTION 5.01. Events of Default. An "Event of Default" occurs if:
------------------
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, and such default continues for a
period of 30 days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise, or (ii) fails to redeem or
purchase Securities when required pursuant to this Indenture or the
Securities;
(3) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1) or (2)
above) and such failure continues for 60 days after the notice specified
below;
(4) Debt of the Company is not paid within any applicable grace period
after final maturity or the acceleration by the holders thereof because of
a default and the total amount of such Debt unpaid or accelerated exceeds
$10.0 million or its foreign currency equivalent at the time and such
failure continues for 20 days after the notice specified below;
(5) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
<PAGE>
18
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(7) any judgment or decree for the payment of money in excess of $10.0
million or its foreign currency equivalent at the time is entered against
the Company or any Significant Subsidiary and is not discharged, waived or
stayed and either (A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (B) there is a period of 60 days
following the entry of such judgment or decree during which such judgment
or decree is not discharged, waived or the execution thereof stayed and, in
either case, the default continues for ten days after the date on which the
notice specified below shall have been given.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
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.
The term "Bankruptcy Law" means Title 11, United States Code, or any
------------------
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (3), (4) or (7) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
<PAGE>
19
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice or the lapse of time would become an
Event of Default under clause (3), (4) or (7), its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration. If an Event of Default (other than an
-------------
Event of Default specified in Section 5.01(5) or (6) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event
of Default specified in Section 5.01(5) or (6) with respect to the Company
occurs, the principal of and interest on all the Securities shall ipso facto
---- -----
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Securityholders. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
SECTION 5.03. Other Remedies. If an Event of Default occurs and is
---------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 5.04. Waiver of Past Defaults. The Holders of a majority in
------------------------
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to the terms of this
Indenture or (iii) a Default in respect of a provision that under Section 8.02
cannot be amended without the consent of each Securityholder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 5.05. Control by Majority. The Holders of a majority in
--------------------
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 6.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
-------- -------
proper by the Trustee that is not inconsistent with such direction. Prior to
<PAGE>
20
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 5.06. Limitation on Suits. Except to enforce the right to
--------------------
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 5.07. Rights of Holders To Receive Payment. Notwithstanding
-------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and special interest and interest on the Securities held
by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 5.08. Collection Suit by Trustee. If an Event of Default
---------------------------
specified in Section 5.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
6.07.
SECTION 5.09. Trustee May File Proofs of Claim. The Trustee may file
---------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, any Subsidiary,
their creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 6.07.
<PAGE>
21
SECTION 5.10. Priorities. If the Trustee collects any money or
-----------
property pursuant to this Article 5, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 6.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any special interest
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, any special interest and
interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 5.11. Undertaking for Costs. 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, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 5.05 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 5.12. Waiver of Stay or Extension Laws. The Company (to the
---------------------------------
extent it may lawfully do so) shall 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 shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE 6
Trustee
-------
SECTION 6.01. Duties of Trustee. (a) If an Event of Default has
------------------
occurred and is continuing, the Trustee shall exercise 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 Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
<PAGE>
22
(b) 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 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. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) 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 this Section and to the provisions of the TIA.
SECTION 6.02. Rights of Trustee. (a) The Trustee may rely on any
------------------
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any
<PAGE>
23
action it takes or omits to take in good faith in reliance on the Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
--------- -------
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(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, request, consent, order, approval, bond, debenture,
note or other paper or document unless requested in writing to do so by the
Holders of not less than a majority in principal amount of the Securities at the
time outstanding, 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.
SECTION 6.03. Individual Rights of Trustee. The Trustee in its
-----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 6.10 and 6.11.
SECTION 6.04. Trustee's Disclaimer. The Trustee shall not be
---------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
-------------------
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 30 days after it is actually known
to a Trust Officer, but in no event later than 90 days after the occurrence of
the Event of Default. Except in the case of a Default in payment of principal
of or interest on any Security (including payments pursuant to the mandatory
redemption provisions of such Security, if any), the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Securityholders.
SECTION 6.06. Reports by Trustee to Holders. As promptly as
------------------------------
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to June 15 in each year, the Trustee
shall mail to each
<PAGE>
24
Securityholder a brief report dated as of May 15 that complies with Section
313(a) of the TIA. The Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 6.07. Compensation and Indemnity. The Company shall pay to
---------------------------
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee, its directors, officers,
employees and agents, against any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by it or in connection with the
administration of this trust and the performance of its duties hereunder. The
Trustee shall notify the Company of any claim for which it may seek indemnity
promptly upon obtaining actual knowledge thereof; provided, however, that any
-------- --------
failure so to notify the Company shall not relieve the Company of its indemnity
obligations hereunder. The Company shall defend the claim and the indemnified
party shall provide reasonable cooperation at the Company's expense in the
defense. Such indemnified parties may have separate counsel and the Company
shall pay the fees and expenses of such counsel; provided, however, that the
-------- -------
Company shall not be required to pay such fees and expenses if it assumes such
indemnified parties' defense and, in such indemnified parties' reasonable
judgment, there is no conflict of interest between the Company and such parties
in connection with such defense. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by an indemnified
party through such party's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 5.01(5) or (6) with respect to the Company,
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 6.08. Replacement of Trustee. The Trustee may resign at any
-----------------------
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
<PAGE>
25
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 6.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 6.07 shall continue for the
benefit of the retiring Trustee.
SECTION 6.09. Successor Trustee by Merger. If the Trustee
----------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
<PAGE>
26
SECTION 6.10. Eligibility; Disqualification. The Trustee shall at
------------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 6.11. Preferential Collection of Claims Against Company. The
--------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
ARTICLE 7
Discharge of Indenture; Defeasance
----------------------------------
SECTION 7.01. Discharge of Liability on Securities; Defeasance. (a)
-------------------------------------------------
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the Trustee money or U.S. Government
Obligations on which payment of principal and interest when due will be
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such redemption date (other than
Securities replaced pursuant to Section 2.07), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Section 7.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
(b) Subject to Sections 7.01(c) and 7.02, the Company at any time may
terminate (i) all of its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06 and 4.07 and the operation of Sections 5.01(3), 5.01(4),
5.01(5) (with respect to Significant Subsidiaries of the Company only), 5.01(6)
(with respect to Significant Subsidiaries of the Company only) and 5.01(7)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Sections 5.01(3),
5.01(4), 5.01(5) (with respect to Significant Subsidiaries of the Company only),
5.01(6) (with respect to Significant Subsidiaries of the Company only) or
5.01(7).
<PAGE>
27
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 6.07, 6.08 and in
this Article 7 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 6.07, 7.04 and 7.05 shall
survive.
SECTION 7.02. Conditions to Defeasance. The Company may exercise its
-------------------------
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 5.01(5) or (6) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal
<PAGE>
28
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
7 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 7.03. Application of Trust Money. The Trustee shall hold in
---------------------------
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 7. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities. Money and
securities so held in trust are not subject to Article 9.
SECTION 7.04. Repayment to Company. The Trustee and the Paying Agent
---------------------
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 7.05. Indemnity for Government Obligations. The Company
-------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 7.06. Reinstatement. If the Trustee or Paying Agent is
--------------
unable to apply any money or U.S. Government Obligations in accordance with this
Article 7 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 7 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 7; provided, however, that, if the
-------- -------
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
<PAGE>
29
ARTICLE 8
Amendments
----------
SECTION 8.01. Without Consent of Holders. The Company and the
---------------------------
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of the Company under this Indenture;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to secure the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(7) to make any change that does not adversely affect the rights of
any Securityholder in any material respect; or
(8) to provide for the issuance of the Exchange Securities or Private
Exchange Securities, which shall have terms substantially identical in all
material respects to the Initial Securities (except that the transfer
restrictions contained in the Initial Securities shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Initial Securities, as a single issue of securities.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 8.02. With Consent of Holders. The Company and the Trustee
------------------------
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a tender offer or exchange for the Securities). However,
without the consent of each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
<PAGE>
30
(2) reduce the rate of or extend the time for payment of interest or
any special interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in the
Security; or
(6) make any change in Section 5.04 or 5.07 or the second sentence of
this Section 8.02.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 8.03. Compliance with Trust Indenture Act. Every amendment
------------------------------------
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 8.04. Revocation and Effect of Consents and Waivers. A
----------------------------------------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective once both (i) the requisite number of
consents have been received by the Company or the Trustee and (ii) such
amendment or waiver has been executed by the Company and the Trustee.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 8.05. Notation on or Exchange of Securities. If an amendment
--------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to
<PAGE>
31
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Security regarding the changed terms and return it to the Holder. Alternatively,
if the Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Security shall not affect the validity of such amendment.
SECTION 8.06. Trustee To Sign Amendments. The Trustee shall sign any
---------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 6.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
is the legal, valid and binding obligation of the Company, enforceable against
it in accordance with its terms, subject to customary exceptions, and complies
with the provisions hereof (including Section 8.03).
ARTICLE 9
Miscellaneous
-------------
SECTION 9.01. Trust Indenture Act Controls. If any provision of this
-----------------------------
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 9.02. Notices. Any notice or communication shall be in
--------
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
BancTec, Inc.
4851 LBJ Freeway
Dallas, Texas 75244
Attention of: Tod Mongan
if to the Trustee:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention of: Diane Swanson
Corporate Trust Services Division
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE>
32
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 9.03. Communication by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 9.04. Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 9.05. Statements Required in Certificate or Opinion. Each
----------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(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 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 or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 9.06. When Securities Disregarded. In determining whether
----------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with
<PAGE>
33
the Company shall be disregarded and deemed not to be outstanding, except that,
for the purpose of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities which the Trustee
knows are so owned shall be so disregarded. Subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 9.07. Rules by Trustee, Paying Agent and Registrar. The
---------------------------------------------
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 9.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
---------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York or Illinois. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 9.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL
--------------
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 9.10. No Recourse Against Others. A director, officer,
---------------------------
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 9.11. Successors. All agreements of the Company in this
-----------
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 9.12. Multiple Originals. The parties may sign any number of
-------------------
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 9.13. Table of Contents; Headings. The table of contents,
----------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
34
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
BANCTEC, INC.,
by /s/ Tod V. Mongan
-----------------------------------
Name: Tod V. Mongan
Title: General Counsel
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee,
by /s/ Diana Swanson
-------------------------------------
Name: Diane Swanson
Title: AVP
<PAGE>
APPENDIX A
PROVISIONS RELATING TO INITIAL SECURITIES,
------------------------------------------
PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES
---------------------------------------------------
1. Definitions
-----------
1.1 Definitions
-----------
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Regulation S Global Security or beneficial interest
therein, the rules and procedures of the Depositary for such Global Security,
Euroclear and Cedel, in each case to the extent applicable to such transaction
and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Definitive Security" means a certificated Initial Security or
Exchange Security (bearing the Restricted Securities Legend if the transfer of
such Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Global Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Chase Securities Inc., Goldman, Sachs & Co.
and NationsBanc Montgomery Securities LLC.
"Private Exchange" means an offer by the Company, pursuant to the
Registration Agreement, to issue and deliver to certain purchasers, in exchange
for the Initial Securities held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Securities.
"Private Exchange Securities" means the Securities of the Company
issued in exchange for Initial Securities pursuant to this Indenture in
connection with the Private Exchange pursuant to the Registration Agreement.
"Purchase Agreement" means the Purchase Agreement dated May 19, 1998,
between the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
<PAGE>
2
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for their Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means the Exchange and Registration Rights
Agreement dated May 22, 1998, between the Company and the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Securities" means all Initial Securities offered and
sold outside the United States in reliance on Regulation S.
"Restricted Period", with respect to any Securities, means the period
of 40 consecutive days beginning on and including the later of (i) the day on
which such Securities are first offered to persons other than distributors (as
defined in Regulation S under the Securities Act) in reliance on Regulation S
and (ii) the Issue Date with respect to such Securities.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means all Initial Securities offered and sold
to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary) or any successor person thereto, who
shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement filed by
the Company in connection with the offer and sale of Initial Securities pursuant
to the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and any
other Securities that bear or are required to bear the Restricted Securities
Legend.
1.2 Other Definitions
-----------------
Term: Defined in Section:
---- ------------------
"Agent Members"..........................................................2.1(b)
"IAI Global Security.....................................................2.1(a)
"Global Security"........................................................2.1(a)
"Rule 144A Global Security"..............................................2.1(a)
<PAGE>
3
2. The Securities
--------------
2.1 Form and Dating
---------------
The Initial Securities issued on the date hereof will be (i) offered
and sold by the Company pursuant to the Purchase Agreement and (ii) resold,
initially only to (A) QIBs in reliance on Rule 144A and (B) Persons other than
U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such
Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501.
(a) Global Securities. Rule 144A Securities shall be issued
------------------
initially in the form of one or more permanent global Securities in definitive,
fully registered form (collectively, the "Rule 144A Global Security") and
Regulation S Securities shall be issued initially in the form of one or more
global Securities (collectively, the "Regulation S Global Security"), in each
case without interest coupons and bearing the Global Securities Legend and
Restricted Securities Legend, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Securities Custodian,
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Company and authenticated by the Trustee as provided in
this Indenture. One or more global securities in definitive, fully registered
form without interest coupons and bearing the Global Securities Legend and the
Restricted Securities Legend (collectively, the "IAI Global Security") shall
also be issued on the Closing Date, deposited with the Securities Custodian, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as provided in this
Indenture to accommodate transfers of beneficial interests in the Securities to
IAIs subsequent to the initial distribution. Beneficial ownership interests in
the Regulation S Global Security will not be exchangeable for interests in the
Rule 144A Global Security, the IAI Global Security or any other Security without
a Restricted Securities Legend until the expiration of the Restricted Period.
The Rule 144A Global Security, the IAI Global Security and the Regulation S
Global Security are each referred to herein as a "Global Security" and are
collectively referred to herein as "Global Securities." The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
----------------------
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b) and pursuant to an order of the Company, authenticate and
deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depositary for such Global Security or Global Securities or the
nominee of such Depositary and (b) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as Securities Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as Securities Custodian or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any
<PAGE>
4
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.3 or 2.4,
----------------------
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and make available for
---------------
delivery upon a written order of the Company signed by two Officers (1) Initial
Securities for original issue on the date hereof in an aggregate principal
amount of $150,000,000 and (2) the (A) Exchange Securities for issue only in a
Registered Exchange Offer and (B) Private Exchange Securities for issue only in
the Private Exchange, in the case of each of (A) and (B) pursuant to the
Registration Agreement and for a like principal amount of Initial Securities
exchanged pursuant thereto. Such order shall specify the amount of the
Securities to be authenticated, the date on which the original issue of
Securities is to be authenticated and whether the Securities are to be Initial
Securities, Exchange Securities or Private Exchange Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed
$150,000,000 except as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
---------------------- -----------------------------------
Securities. When Definitive Securities are presented to the Registrar with a
- -----------
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
-------- -------
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to clause (A),
(B) or (C) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Initial Security); or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse side of the Initial Security); or
<PAGE>
5
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification
to that effect (in the form set forth on the reverse side of the
Initial Security) and (ii) if the Company so requests, an opinion of
counsel or other evidence reasonably satisfactory to it as to the
compliance with the restrictions set forth in the legend set forth in
Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in a Global Security. A Definitive Security may not be
- -----------------------------------------
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Company and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side of the
Initial Security) that such Definitive Security is being transferred (A) to
a QIB in accordance with Rule 144A, (B) to an IAI that has furnished to the
Trustee a signed letter substantially in the form of Exhibit C or (C)
outside the United States in an offshore transaction within the meaning of
Regulation S and in compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the Depositary
account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. (i) The transfer
-------------------------------------------
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor. A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in such Global Security or
another Global Security and such account shall be credited in accordance with
such order with a beneficial interest in the applicable Global Security and the
account of the Person making the transfer shall be debited by an amount equal to
the beneficial interest in the Global Security being
<PAGE>
6
transferred. Transfers by an owner of a beneficial interest in the Rule 144A
Global Security or the IAI Global Security to a transferee who takes delivery of
such interest through the Regulation S Global Security, whether before or after
the expiration of the Restricted Period, will be made only upon receipt by the
Trustee of a certification from the transferor to the effect that such transfer
is being made in accordance with Regulation S or (if available) Rule 144 under
the Securities Act and that, if such transfer is being made prior to the
expiration of the Restricted Period, the interest transferred will be held
immediately thereafter through Euroclear or Cedel. In the case of a transfer of
a beneficial interest in either the Regulation S Global Security or the Rule
144A Global Security for an interest in the IAI Global Security, the transferee
must furnish a signed letter substantially in the form of Exhibit C to the
Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Security to a beneficial interest in another Global Security,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the principal amount of
the interest to be so transferred, and the Registrar shall reflect on its
books and records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iv) In the event that a Global Security is exchanged for Definitive
Securities pursuant to Section 2.4 prior to the consummation of the
Registered Exchange Offer or the effectiveness of the Shelf Registration
Statement with respect to such Securities, such Securities may be exchanged
only in accordance with such procedures as are substantially consistent
with the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities intended to
ensure that such transfers comply with Rule 144A, Regulation S or such
other applicable exemption from registration under the Securities Act, as
the case may be) and such other procedures as may from time to time be
adopted by the Company.
(d) Restrictions on Transfer of Regulation S Global Security. (i)
---------------------------------------------------------
Prior to the expiration of the Restricted Period, interests in the Regulation S
Global Security may only be held through Euroclear or Cedel. During the
Restricted Period, beneficial ownership interests in the Regulation S Global
Security may only be sold, pledged or transferred through Euroclear or Cedel in
accordance with the Applicable Procedures and only (A) to the Company, (B) so
long as such security is eligible for resale pursuant to Rule 144A, to a person
whom the selling holder reasonably believes is a QIB that purchases for its own
account or for the account of a QIB to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, (C) in an offshore
transaction in accordance with Regulation S, (D) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, (E) to an IAI purchasing for its own account, or for the
account of such an IAI, in a minimum principal amount of Securities of $250,000
or (F) pursuant to an effective registration statement under the Securities Act,
in
<PAGE>
7
each case in accordance with any applicable securities laws of any state of the
United States. Prior to the expiration of the Restricted Period, transfers by an
owner of a beneficial interest in the Regulation S Global Security to a
transferee who takes delivery of such interest through the Rule 144A Global
Security or the IAI Global Security will be made only in accordance with
Applicable Procedures and upon receipt by the Trustee of a written certification
from the transferor of the beneficial interest in the form provided on the
reverse of the Initial Security to the effect that such transfer is being made
to (i) a person whom the transferor reasonably believes is a QIB within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or
(ii) an IAI purchasing for its own account, or for the account of such an IAI,
in a minimum principal amount of the Securities of $250,000. Such written
certification will no longer be required after the expiration of the Restricted
Period. In the case of a transfer of a beneficial interest in the Regulation S
Global Security for an interest in the IAI Global Security, the transferee must
furnish a signed letter substantially in the form of Exhibit C to the Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Regulation S Global Security will be
transferable in accordance with applicable law and the other terms of this
Indenture.
(e) Legend.
-------
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form (each defined term in the legend being defined as such for purposes of
the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM
<PAGE>
8
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each Definitive Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that
does not bear the legends set forth above and rescind any restriction on
the transfer of such Transfer Restricted Security if the Holder certifies
in writing to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on the
reverse of the Initial Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of the Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to the
Restricted Securities Legend on such Initial Securities or such Private
Exchange Securities will cease to apply and the requirements that any such
Initial Securities or such Private Exchange Securities be issued in global
form will continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to Initial Securities that Initial
Securities be issued in global form will continue to apply, and Exchange
Securities in global form without the Restricted
<PAGE>
9
Securities Legend will be available to Holders that exchange such Initial
Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities be issued in global form will continue to apply, and
Private Exchange Securities in global form with the Restricted Securities
Legend will be available to Holders that exchange such Initial Securities
in such Private Exchange.
(vi) Upon a sale or transfer after the expiration of the Restricted
Period of any Initial Security acquired pursuant to Regulation S, all
requirements that such Initial Security bear the Restricted Securities
Legend will cease to apply and the requirements requiring any such Initial
Security be issued in global form will continue to apply.
(f) Cancelation or Adjustment of Global Security. At such time as
---------------------------------------------
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancelation or retained and canceled by the Trustee. At any time prior to such
cancelation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, transferred in exchange for an interest in another Global
Security, redeemed, repurchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of
------------------------------------------------------
Securities.
- -----------
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate, Definitive Securities and
Global Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Section 2.06 and 8.05).
(iii) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent or the Registrar
may deem and treat the person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the
Company, the Trustee, the Paying Agent or the Registrar shall be affected
by notice to the contrary.
(iv) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same
<PAGE>
10
benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
(h) No Obligation of the Trustee.
-----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or any other Person with respect to the accuracy of the records
of the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Securities or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption or repurchase) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to
the Holders and all payments to be made to Holders under the Securities
shall be given or made only to the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through
the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Definitive Securities
---------------------
(a) A Global Security deposited with the Depositary or with the
Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to
the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for such Global Security or if
at any time the Depositary ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by the Company within
90 days of such notice, or (ii) an Event of Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities under
this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to
the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate principal
amount of Definitive Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
<PAGE>
11
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security in the form of a Definitive Security delivered
in exchange for an interest in the Global Security shall, except as otherwise
provided by Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of Definitive Securities in fully registered
form without interest coupons.
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN
<PAGE>
2
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES
ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
<PAGE>
3
0 No.$__________
7.50% Senior Note due 2008
CUSIP No. ______
BANCTEC, INC., a Delaware corporation, promises to pay to Cede & Co.,
or registered assigns, the principal sum [of Dollars] [listed on
the Schedule of Increases or Decreases in Global Security attached hereto] on
June 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
<PAGE>
4
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
BANCTEC, INC.
by
-----------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE FIRST NATIONAL BANK
OF CHICAGO,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:_________________________
Authorized Signatory
<PAGE>
5
[FORM OF REVERSE SIDE OF SECURITY]
7.50% Senior Note due 2008
1. Interest
--------
(a) BANCTEC, INC., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on June 1 and December 1 of each year. Interest on the Securities
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from May 22, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
(b) Special Interest. The holder of this Security is entitled to the
----------------
benefits of an Exchange and Registration Rights Agreement, dated as of May 22,
1998, among the Company, and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b) but not
defined herein have the meanings assigned to them in the Registration Agreement.
If (i) the Shelf Registration Statement or Exchange Offer Registration
Statement, as applicable under the Registration Agreement, is not filed with the
Commission on or prior to 90 days after the Issue Date, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 180 days after the Issue Date, (iii) the
Registered Exchange Offer is not consummated on or prior to 210 days after the
Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 180 days after the Issue Date but shall thereafter cease to be
effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), interest (the "Special
-------
Interest") shall accrue on the principal amount of the Securities affected by
- --------
such Registration Default (in addition to stated interest on the Securities)
from and including the date on which any such Registration Default shall occur
to but excluding the date on which all Registration Defaults have been cured.
Special Interest shall accrue at a rate per annum equal to 0.25% of the
principal amount of the Transfer Restricted Securities for each Registration
Default. The aggregate amount of Special Interest payable shall in no event
exceed 1.00% per annum of the principal amount of the Securities. All Special
Interest shall be paid to holders in the same manner as interest payments on the
Securities on semi-annual payment dates which correspond to interest payment
dates for the Securities. Following the cure of all Registration Defaults, the
accrual of Special Interest will cease. The Trustee shall have no
responsibility with respect to the determination of the amount of any such
Special Interest. For purposes of the foregoing, "Transfer Restricted
Securities" means (i) each Initial Security until the date on which such Initial
Security has been exchanged for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) each Initial Security or Private Exchange
Security until the date on which such Initial Security or Private Exchange
Security has been effectively registered under the Securities Act and disposed
of in accordance with a Shelf Registration Statement or (iii) each Initial
Security or Private Exchange Security until the date on which such Initial
Security or Private Exchange Security is distributed to the public pursuant to
Rule 144 under the Securities Act or is salable pursuant to Rule 144(k) under
the Securities Act.
<PAGE>
6
2. Method of Payment
-----------------
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company will make all
payments in respect of a certificated Security (including principal, premium and
interest), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in the case
- -------- -------
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, The First National Bank of Chicago, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of May
22, 1998 (the "Indenture"), between the Company and the Trustee. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
------
77aaa-77bbbb), as amended (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms.
The Securities are senior unsecured obligations of the Company limited
to $150,000,000 aggregate principal amount at any one time outstanding (subject
to Section 2.07 of the Indenture). The Securities include the Initial
Securities and any Exchange Securities issued in exchange for Initial
Securities. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of the Company to, among other things, permit its
subsidiaries to incur certain Debt, incur certain Liens and engage in certain
Sale and Leaseback Transactions.
5. Optional Redemption
-------------------
The Notes will be redeemable at the option of the Company, in whole or
in part at any time or from time to time, on not less than 30 nor more than 60
days' prior notice,
<PAGE>
7
at a redemption price equal to the greater of (i) 100% of their principal amount
and (ii) the sum of the present values of the Remaining Scheduled Payments (as
hereinafter defined) thereon discounted to the date of redemption, on a
semiannual basis, at the Treasury Rate (as hereinafter defined) plus 15 basis
points, plus in each case accrued interest thereon to the date of redemption.
Interest shall be calculated on the basis of a 360-day year consisting of twelve
30-day months.
If money sufficient to pay the redemption price of and accrued
interest on all Notes (or portions thereof) to be redeemed on the redemption
date is deposited with the Trustee on or before the redemption date and certain
other conditions are satisfied, on and after such date interest will cease to
accrue on such Notes (or such portions thereof) called for redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any redemption
date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, excluding
the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the
Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the
average of all such Quotations. "Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m., on the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Chase Securities, Inc.,
Goldman, Sachs & Co. and NationsBanc Montgomery Securities LLC and their
respective successors and, at the option of the Company, additional Primary
Treasury Dealers; provided, however, that if any of the foregoing shall cease to
-------- -------
be a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Note, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related redemption date but for
such redemption; provided, however, that, if such redemption date is not an
-------- -------
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such redemption date.
<PAGE>
8
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
9. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
10. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
11. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
<PAGE>
9
12. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provision may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to provide for the assumption by a
successor corporation of the obligations of the Company under the Indenture;
(iii) to provide for uncertificated Securities in addition to or in place of
certificated Securities; (iv) to secure the Securities; (v) to add additional
covenants or to surrender rights and powers conferred on the Company; (vi) to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA; (vii) to make any change that
does not adversely affect the rights of any Securityholder in any material
respect; or (viii) to provide for the issuance of the Exchange Notes or Private
Exchange Notes.
13. Defaults and Remedies
---------------------
If an Event of Default occurs (other than an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company)
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the outstanding Securities may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs, the principal of and interest on all the Securities will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Under certain circumstances, the Holders of
a majority in principal amount of the outstanding Securities may rescind any
such acceleration with respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would involve the Trustee
in personal liability. Prior to taking any action under the Indenture, the
Trustee will be entitled to indemnification
<PAGE>
10
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.
14. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
16. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
18. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
19. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE>
11
THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY.
<PAGE>
12
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
13
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
[ ] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) [ ] to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) [ ] pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any Person
other than the
<PAGE>
14
registered holder thereof; provided, however, that if box (4), (5) or (6)
-------- -------
is checked, the Trustee may require, prior to registering any such transfer
of the Securities, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act of
1933.
________________________
Your Signature
Signature Guarantee:
Date: ___________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
____________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
15
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
No. $__________
7.50% Senior Note due 2008
CUSIP No. ______
BANCTEC, INC., a Delaware corporation, promises to pay to Cede & Co.,
or registered assigns, the principal sum [of Dollars] [listed on
the Schedule of Increases or Decreases in Global Security attached hereto] on
June 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
<PAGE>
2
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
BANCTEC, INC.,
by
---------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
_____________________________
Authorized Signatory
- ----------------------
*/ If the Security is to be issued in global form, add the Global Securities
- -
Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL
SECURITIES -SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY".
<PAGE>
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
7.50% Senior Note due 2008
1. Interest.
--------
BANCTEC, INC., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on June 1 and December 1 of each year. Interest on the Securities
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from May 22, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment
-----------------
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company will make all
payments in respect of a certificated Security (including principal, premium and
interest), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in the case
- -------- -------
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, The First National Bank of Chicago, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of May
22, 1998 (the "Indenture"), between the Company and the Trustee. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
------
77aaa-77bbbb), as amended (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the
<PAGE>
4
Indenture. The Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the TIA for a statement of those terms.
The Securities are senior unsecured obligations of the Company limited
to $150,000,000 aggregate principal amount at any one time outstanding (subject
to Section 2.07 of the Indenture). This Security is one of the Initial
Securities referred to in the Indenture issued in an aggregate principal amount
of $[ ]. The Securities include the Initial Securities and any Exchange
Securities issued in exchange for Initial Securities. The Initial Securities
and the Exchange Securities are treated as a single class of securities under
the Indenture. The Indenture imposes certain limitations on the ability of the
Company to, among other things, permit its subsidiaries to incur certain Debt,
incur certain Liens and engage in certain Sale and Leaseback Transactions.
5. Optional Redemption
-------------------
The Notes will be redeemable at the option of the Company, in whole or
in part at any time or from time to time, on not less than 30 nor more than 60
days' prior notice, at a redemption price equal to the greater of (i) 100% of
their principal amount and (ii) the sum of the present values of the Remaining
Scheduled Payments (as hereinafter defined) thereon discounted to the date of
redemption, on a semiannual basis, at the Treasury Rate (as hereinafter defined)
plus 15 basis points, plus in each case accrued interest thereon to the date of
redemption. Interest shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
If money sufficient to pay the redemption price of and accrued
interest on all Notes (or portions thereof) to be redeemed on the redemption
date is deposited with the Trustee on or before the redemption date and certain
other conditions are satisfied, on and after such date interest will cease to
accrue on such Notes (or such portions thereof) called for redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any redemption
date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, excluding
the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the
Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the
average of all such Quotations. "Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
<PAGE>
5
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m., on the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Chase Securities, Inc.,
Goldman, Sachs & Co. and NationsBanc Montgomery Securities LLC and their
respective successors and, at the option of the Company, additional Primary
Treasury Dealers; provided, however, that if any of the foregoing shall cease to
-------- -------
be a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Note, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related redemption date but for
such redemption; provided, however, that, if such redemption date is not an
-------- -------
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
<PAGE>
6
9. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
10. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
11. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
12. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and (ii)
any default or noncompliance with any provision may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Company and the
Trustee may amend the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to provide for the assumption by a
successor corporation of the obligation of the Company under the Indenture;
(iii) to provide for uncertificated Securities in addition to or in place of
certificated Securities; (iv) to secure the Securities; (v) to add additional
covenants or to surrender rights and powers conferred on the Company; (vi) to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA; or (vii) to make any change that
does not adversely affect the rights of any Securityholder in any material
respect.
13. Defaults and Remedies
---------------------
If an Event of Default occurs (other than an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company)
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the outstanding Securities may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs, the principal of and interest on all the Securities will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Under certain circumstances, the Holders of
a majority in principal amount of the outstanding Securities may rescind any
such acceleration with respect to the Securities and its consequences.
<PAGE>
7
If an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Securities unless (i) such Holder
has previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Securities
have requested the Trustee in writing to pursue the remedy, (iii) such Holders
have offered the Trustee reasonable security or indemnity against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days after the receipt of the request and the offer of security or indemnity
and (v) the Holders of a majority in principal amount of the outstanding
Securities have not given the Trustee a direction inconsistent with such request
within such 60-day period. Subject to certain restrictions, the Holders of a
majority in principal amount of the outstanding Securities are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would involve the Trustee
in personal liability. Prior to taking any action under the Indenture, the
Trustee will be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
14. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
16. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
8
18. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
19. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY.
<PAGE>
9
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
EXHIBIT C
Form of
Transferee Letter of Representation
BancTec, Inc.
In care of
[ ]
[ ]
[ ]
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $[ ] principal
amount of the 7.50% Senior Notes due 2008 (the "Notes") of BancTec, Inc. (the
"Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name:________________________
Address:_____________________
Taxpayer ID Number:__________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we invest in or purchase securities similar to the Notes in the normal course of
our business. We, and any accounts for which we are acting, are each able to
bear the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date that is two years after the later of the
date of original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Notes (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to
a registration statement that has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified
institutional investor under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that
<PAGE>
2
occur outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing
for its own account or for the account of such an institutional "accredited
investor," in each case in a minimum principal amount of Notes of $250,000, or
(f) pursuant to any other available exemption from the registration requirements
of the Securities Act, subject in each of the foregoing cases to any requirement
of law that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control and in
compliance with any applicable state securities laws. The foregoing restrictions
on resale will not apply subsequent to the Resale Restriction Termination Date.
If any resale or other transfer of the Notes is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the form
of this letter to the Company and the Trustee, which shall provide, among other
things, that the transferee is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it
is acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Company
and the Trustee reserve the right prior to the offer, sale or other transfer
prior to the Resale Termination Date of the Securities pursuant to clause (d),
(e) or (f) above to require the delivery of an opinion of counsel,
certifications or other information satisfactory to the Company and the Trustee.
TRANSFEREE:_________________,
by:_______________________
<PAGE>
EXHIBIT 5.1
(214) 220-7700 (214) 999-7716
June 10, 1998
BancTec, Inc.
4851 LBJ Freeway
Dallas, TX 75244
Ladies and Gentlemen:
We have acted as counsel for BancTec, Inc., a Delaware corporation (the
"Company"), in connection with the registration of $150 million aggregate
principal amount 7.50% Senior Notes due 2008 (the "Notes") under the Securities
Act of 1933 (the "Securities Act") on a Registration Statement on Form S-4 (the
"Registration Statement").
In reaching the opinion set forth in this letter, we have reviewed
originals or copies of the Registration Statement, an executed counterpart of
the Indenture dated as of May 22, 1998, between the Company and The First
National Bank of Chicago, as trustee (the "Indenture"), and such other
agreements, certificates of public officials, certificates of officers of the
Company, certificates of other persons, records, documents and matters of law as
we deemed relevant.
Based on and subject to the foregoing and subject further to the
assumptions, exceptions and qualifications hereinafter stated, we express the
opinion that, subject to compliance with applicable federal and state securities
laws (as to which we express no opinion), the New Notes (as defined in the
Registration Statement), when executed, authenticated, issued and delivered in
accordance with the terms of the Indenture and when delivered in exchange for
the Old Notes (as defined in the Registration Statement), will constitute
legally binding obligations of the Company, subject to bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles.
The opinion expressed above is subject to the following assumptions,
exceptions and qualifications:
(a) We have assumed that (i) all information contained in all documents
reviewed by us is true and correct, (ii all signatures on all documents reviewed
by us are genuine, (ii all documents submitted to us as originals are true and
complete, (iv all documents submitted to us as copies are true and complete
copies of the originals thereof, (v) each natural person signing any document
<PAGE>
BancTec, Inc.
June 10, 1998
Page 2
reviewed by us had the legal capacity to do so, (vi each natural person signing
in a representative capacity any document reviewed by us had authority to sign
in such capacity, and (vi the laws of any jurisdiction other than Texas that
govern any of the documents reviewed by us (other than the Company's certificate
of incorporation and bylaws) do not modify the terms that appear in any such
document.
(b) The opinion expressed in this letter is limited to the laws of the
State of Texas, the General Corporation Law of the State of Delaware, and the
federal laws of the United States of America. You should be aware that we are
not admitted to the practice of law in the State of Delaware.
(c) We note that the Indenture provides that it is governed by the laws of
the State of New York. While we express no opinion with respect to the laws of
the State of New York, we have assumed that the internal laws of the State of
New York are the same as the internal laws of the State of Texas. We have made
no investigation to confirm whether such assumption is correct.
This opinion may be filed as an exhibit to the Registration Statement.
Consent is also given to the reference to this firm under the caption "Legal
Matters" in the Prospectus included in the Registration Statement as having
passed on certain legal matters in connection with the Notes. In giving this
consent we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
This opinion speaks as of the date hereof, and we disclaim any duty to
advise you regarding any changes subsequent to the date hereof in, or to
otherwise communicate with you with respect to, the matters addressed herein.
Very truly yours,
/s/ Vinson & Elkins L.L.P.
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT TO LOAN DOCUMENTS
---------------------------------
This FIRST AMENDMENT TO LOAN DOCUMENTS (this "Agreement") is entered into
---------
as of May 22, 1998, by and among BANCTEC USA, INC., a Delaware corporation (the
"Existing Borrower"), BANCTEC, INC., a Delaware corporation ("New Borrower"),
----------------- ------------
BANCTEC (EXPORT), INC., a Virgin Islands corporation, BANCTEC (MANAGEMENT),
INC., a Delaware corporation, BANCTEC THIRD PARTY MAINTENANCE, INC., a Texas
corporation, RECOGNITION JAPAN, INC., a Delaware corporation (collectively, the
"Guarantors") banks listed on the signature pages of this Agreement
----------
(collectively, the "Banks"), CHASE BANK OF TEXAS, N.A., a national banking
-----
association (f/k/a Texas Commerce Bank National Association), individually and
as agent (the "Agent") for the Banks.
-----
R E C I T A L S :
----------------
WHEREAS, pursuant to that certain Credit Agreement (the "Credit Agreement")
----------------
dated as of February 22, 1996, executed by and among the Existing Borrower (as
Borrower), the New Borrower (as a Guarantor), the Banks, the Guarantors and the
Agent, the Banks agreed to make the Loans to the Existing Borrower on certain
terms and conditions set forth therein (each capitalized term used but not
defined herein shall have the meaning given to such term in the Credit
Agreement, as amended); and
WHEREAS, concurrently with the execution of this Agreement, New Borrower is
issuing Senior Notes (the "Offering") in the aggregate amount of $150,000,000;
--------
and
WHEREAS, a portion of the proceeds of the Offering is to be used to retire
the indebtedness evidenced by the Term Loan; and
WHEREAS, the Existing Borrower and the New Borrower have requested that (i)
the New Borrower be substituted as the "Borrower" under and as defined in the
Credit Agreement and (ii) that the Guarantors be relieved of their liability
under the "Guaranty" under and as defined in the Credit Agreement; and
WHEREAS, subject to the terms and conditions contained herein, Agent and
the Banks have agreed to such requests.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, Existing Borrower,
New Borrower, the Agent, and the Banks hereby agree as follows:
<PAGE>
A G R E E M E N T:
-----------------
1. Amendment to Definitions. The following definitions are hereby
------------------------
amended in their entirety to read as follows:
"BORROWER" means BancTec, Inc., a Delaware corporation.
--------
"INTEREST RATE ADJUSTMENT FACTOR" means the following:
-------------------------------
Debt to Capitalization Ratio Interest Rate Adjustment Factor
---------------------------- -------------------------------
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%
"LOAN" and "LOANS" means the Revolving Credit Loan, including the
---- -----
Commitments.
"LOAN DOCUMENTS" means the Credit Agreement, this Agreement, the Notes, and
--------------
any and all other agreements or instruments now or hereafter executed and
delivered by Borrower or any other Person in connection with guaranteeing,
securing or otherwise supporting payment or performance of, the Credit
Agreement, this Agreement, any Note, as they may be supplemented, amended or
otherwise modified from time to time.
"NOTES" means, collectively, the Revolving Credit Notes.
-----
"OBLIGATED PARTY" means Borrower.
---------------
"PRO RATA" means as to any Bank, such Bank's ratable share of the Revolving
--------
Credit Maximum Commitment expressed by the percentage set forth in the
Commitment Percentage column next to such Bank's name on Schedule 1 to this
Agreement.
"TERMINATION DATE" means 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.
2. Deletion of Definitions. The following definitions are hereby deleted
-----------------------
from the Credit Agreement:
A. "Applicable Term Rate";
B. "Guarantors";
C. "Guaranty";
D. "Parent";
E. "Term Commitment";
<PAGE>
F. "Term Loan";
G. "Term Loan Commitment"; and
H. "Term Notes".
3. Amendment to Section 2.1. Section 2.1 of the Credit Agreement is
------------------------
hereby amended in its entirety to read as follows:
Section 2.1. Revolving Credit Loan.
---------------------
(a) Commitment. From the Closing Date through the Termination Date,
----------
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 $70,000,000 (or, as to portions thereof
which are Alternate Currency Loans, the Dollar Equivalent thereof), subject
to any reductions under Section 2.6 or increases thereof as provided in
Section 2.1 (b) below (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.
(b) Increase in Aggregate Commitment. So long as no Default or Event
--------------------------------
of Default shall have occurred and be continuing, Borrower shall have the
right from time to time, with the prior written consent of Agent, to
increase the Revolving Credit Maximum Commitment; provided, that in no
event shall the Revolving Credit Maximum Commitment be increased to an
amount greater than $75,000,000; provided, further, that:
(i) Any increase in the Revolving Credit Maximum Commitment which
is accomplished by increasing the Commitment of any Bank(s) that are at the
time of such increase party to this Agreement (which Bank(s) shall consent
to such increase in their sole and absolute discretion) shall be subject to
the following terms: (i) this Agreement will be deemed to have been amended
by Borrower, the Agent and those Bank(s) whose Commitment(s) is or are
being increased to reflect the revised Commitment of each such Bank(s) upon
the execution of an agreement among them in the form as attached hereto as
Exhibit B, (ii) Agent will deliver an updated schedule to Borrower and each
---------
of the Banks reflecting the revised Commitment and Pro Rata percentage of
each of the Banks, (iii) the Advances under the Revolving Credit Loan and
Pro Rata percentages will be reallocated on the effective date of such
increase among the Banks in accordance with their revised Commitments, and
(iv) Borrower will deliver new Revolving Credit Note(s) to the Bank(s)
whose Commitment(s) is or are being increased reflecting the revised
Commitment of such Bank(s).
(ii) Any increase in the Revolving Credit Maximum Commitment
which is accomplished by addition of a new Bank under this Agreement shall
be subject to the following terms: (i) the addition of such new Bank shall
be subject to the provisions of Section 12.11(c) as if such increase were
being sold to such new Bank by an existing Bank,
<PAGE>
(ii) the addition of such new Bank shall be subject to the prior written
consent of Agent, (iii) this Agreement will be deemed to have been amended
by Borrower, the Agent and such new Bank to reflect the addition of such
party as a Bank hereunder upon the execution of an agreement among them in
the form as attached hereto as Exhibit B, (iv) Agent will deliver an
---------
updated schedule to Borrower and each of the Banks reflecting the revised
Commitment and Pro Rata percentages of each of the Banks, (v) the
outstanding Advances under the Revolving Credit Loan and Pro Rata
percentages will be reallocated on the effective date of such increase
among the Banks in accordance with their revised Commitments, and (vi)
Borrower will deliver a Revolving Credit Note to such new Bank in the
amount of such increase.
4. Deletion of Term Loan. Article III of the Credit Agreement is hereby
---------------------
deleted in its entirety.
5. Deletion of Guaranty. Section 6.2 of the Credit Agreement is hereby
--------------------
deleted in its entirety. Each Guarantor acknowledges, by its execution hereof,
that its respective Guaranty is being released concurrently with the execution
hereof by the Banks.
6. Limitation on Subsidiary Borrowings. Section 9.15 of the Credit
-----------------------------------
Agreement is hereby amended in its entirety to read as follows:
Section 9.15. Limitation on Subsidiary Borrowings. The Subsidiaries of
-----------------------------------
Borrower taken as a whole will not incur, create, assume, have outstanding,
guarantee or otherwise be or become directly or indirectly liable with respect
to any Borrowings in excess of (in the aggregate at any time outstanding) the
greater of (i) fifteen percent (15%) of Consolidated Net Tangible Assets of
Borrower or (ii) $40,000,000. As used herein, "Consolidated Net Tangible
Assets" means as of any particular time, the aggregate amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities, except for (a) notes and loans payable,
(b) current maturities of long-term Debt and (c) current maturities of Capital
Lease Obligations and (ii) intangible assets, to the extent included in such
aggregate amount of assets, all as set forth on the most recent consolidated
balance sheet of the Borrower and its consolidated subsidiaries and computed in
accordance with GAAP. "Capital Lease Obligation" of any Person means the
obligation to pay rent or other payment amounts under a lease of (or other Debt
arrangements conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person in accordance with
GAAP. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease or other Debt
arrangements prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
7. Banks; Notes. In connection with this Agreement, The First National
------------
Bank of Chicago and Bank of Montreal have requested that they be relieved of
their Commitments under the Credit Agreement (the "Withdrawing Banks") and the
------------------
remaining Banks (referred to herein as the "Banks") are willing to assume such
Withdrawing Bank's Commitment. Accordingly, the Withdrawing Banks shall (i) be
released from their Commitments under the Credit Agreement and this Agreement
and (ii) be repaid in full, in each instance upon the effectiveness of this
Agreement. From and after the date hereof, the Banks' respective Commitments
under the Loan are reflected on the Schedule 1
----------
<PAGE>
attached hereto and incorporated herein by this reference for all purposes. To
evidence the substitution of the New Borrower for the Existing Borrower, New
Borrower hereby assumes all of Existing Borrower's obligations under the Notes,
and acknowledges that outstanding amounts under the Credit Agreement on the date
hereof shall be considered advances under the New Notes (as hereinafter
defined). In addition, New Borrower shall execute a Revolving Credit Note to
each of the Banks in the form attached hereto as Exhibit A (the "New Notes") (in
--------- ---------
the original principal amount of such Bank's Revolving Credit Commitment, as
indicated on the Schedule 1 attached hereto).
----------
8. Amendment to Loan Documents. For purposes of this Loan, any references
---------------------------
to "Parent" in any of the Loan Documents shall now be a reference to "Borrower."
9. Amendment Fee. In consideration of the agreement by the Banks to make
-------------
the changes evidenced hereby, on or before the date hereof, the Borrower shall
pay to Agent, for the benefit of the Banks, an amendment fee in the amount of
one-tenth of one percent (0.10%) of the amount of the Revolving Credit Maximum
Commitment, such amount to be shared ratably by the Banks (other than the
Withdrawing Banks).
10. Certificates. This Agreement shall be effective as of the date first
------------
above written when executed by all parties hereto and consented to by the
Guarantors as provided on the signature pages hereto, and upon receipt by the
Agent of the following, each in form, substance and bearing a date satisfactory
to the Agent and its counsel:
(i) A certificate of the Secretary or Assistant Secretary of the
Borrower certifying (i) that, except as indicated therein, there has been
no change to the articles of incorporation or bylaws of the Borrower since
the same were furnished to the Agent in connection with the execution of
the Credit Agreement, and (ii) as to the name and title of the officers of
the Borrower and the authority of such officers to execute this Agreement.
(ii) The Officer's Certificate of Borrower for the quarter ended
March 31, 1998.
(iii) An opinion of counsel to Borrower as to the authority and
existence of the Borrower, to the enforceability of the Loan Documents, as
amended hereby, and such other matters as Agent shall require.
11. Effectiveness of Documents. Except as expressly modified hereby, all
--------------------------
terms, provisions, representations, warranties, covenants and agreements of the
Borrower related to the Loans, whether contained in the Notes, the Credit
Agreement and/or any of the other Loan Documents, are hereby ratified and
confirmed by the Borrower, and all such agreements shall be and shall remain in
full force and effect, enforceable in accordance with their terms.
12. No Claims or Defenses. The Borrower, by the execution of this
---------------------
Agreement, hereby declares that it has no offsets, claims, counterclaims,
defenses or other causes of action against the Agent or the Banks related to any
Loan, the Credit Agreement, any of the other Loan Documents or the modification
of the Credit Agreement pursuant to this Agreement.
<PAGE>
13. Payment of Expenses. Borrower agrees to pay to Agent, upon demand,
-------------------
the reasonable attorneys' fees and expenses of Agent's counsel and other
reasonable expenses incurred by Agent in connection with this Agreement.
14. Condition Precedent to Amendment. The consummation of the Offering
--------------------------------
and the use of a portion of the proceeds thereof to repay the Term Loan is a
condition precedent to the execution of this Agreement and the other agreements,
releases and covenants contained herein (including, without limitation, the
release of the Existing Borrower, the Guarantors and the Withdrawing Banks).
15. Authority. The Borrower represents and warrants that all requisite
---------
corporate action necessary for it to enter into this Agreement has been taken.
16. Binding Agreement. This Agreement shall be binding upon, and shall
-----------------
inure to the benefit of, each party hereto and such party's legal
representatives, successors and assigns.
17. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS
----------------
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS AMONG THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
18. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
-------------
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF TEXAS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
19. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
[SEE SIGNATURES ON ATTACHED PAGES]
<PAGE>
EXECUTED as of the date first above written.
EXISTING BORROWER:
-----------------
BANCTEC USA, INC., a Delaware corporation
By: /s/ Raghavan Rajaji
Name: Raghavan Rajaji
Title: Senior Vice President and Chief Financial
Officer
NEW BORROWER:
------------
BANCTEC, INC., a Delaware corporation
By: /s/ Raghavan Rajaji
Name: Raghavan Rajaji
Title: Senior Vice President and Chief Financial
Officer
GUARANTORS:
----------
BANCTEC (EXPORT), INC., a Virgin Islands
corporation
By: /s/ Raghavan Rajaji
Name: Raghavan Rajaji
Title: Senior Vice President and Chief Financial
Officer
BANCTEC (MANAGEMENT), INC., a Delaware corporation
By: /s/ Raghavan Rajaji
Name: Raghavan Rajaji
Title: Senior Vice President and Chief Financial
Officer
<PAGE>
BANCTEC THIRD PARTY MAINTENANCE,
INC., a Texas corporation
By: /s/ Raghavan Rajaji
Name: Raghavan Rajaji
Title: Senior Vice President and Chief Financial
Officer
RECOGNITION JAPAN, INC., a Delaware
corporation
By: /s/ Raghavan Rajaji
Name: Raghavan Rajaji
Title: Senior Vice President and Chief Financial
Officer
AGENT:
-----
CHASE BANK OF TEXAS, N.A.,
a national banking association (f/k/a Texas
Commerce Bank National Association)
By: /s/ John P. Dean
Name: John P. Dean
Title: Senior Vice President
BANKS:
-----
CHASE BANK OF TEXAS, N.A.,
a national banking association (f/k/a Texas
Commerce Bank National Association)
By: /s/ John P. Dean
Name: John P. Dean
Title: Senior Vice President
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Cory M. Olson
Name: Cory M. Olson
Title: First Vice President
WELLS FARGO BANK (TEXAS), N.A.,
a national banking association (f/k/a First
Interstate Bank of Texas, N.A.)
By: /s/ Carol Polasky
Name: Carol Polasky
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ Eric R. Hollingsworth
Name: Eric R. Hollingsworth
Title: Assistant Vice President
By: /s/ Diego Puiggari
Name: Diego Puiggair
Title: Vice President
NATIONSBANK, N.A., a national
banking association (successor by merger to
NationsBank of Texas, N.A.)
By: /s/ Sharon Ellis
Name: Sharon Ellis
Title:
BANK OF MONTREAL
By: /s/ Leon H. Sinclair
Name: Leon H. Sinclair
Title: Director
<PAGE>
SCHEDULE 1
----------
<TABLE>
<CAPTION>
==============================================================================
BANK COMMITMENT AMOUNT COMMITMENT PERCENTAGE
- ------------------------------------------------------------------------------
<S> <C> <C>
Chase Bank of Texas, N.A. $25,000,000.00 35.7%
- ------------------------------------------------------------------------------
The First National Bank of Chicago $ 0.00 0%
- ------------------------------------------------------------------------------
Wells Fargo Bank (Texas), N.A. $10,000,000.00 14.3%
- ------------------------------------------------------------------------------
ABN AMRO Bank, N.V. $10,000,000.00 14.3%
- ------------------------------------------------------------------------------
NationsBank, N.A. $25,000,000.00 35.7%
- ------------------------------------------------------------------------------
Bank of Montreal $ 0.00 0%
==============================================================================
TOTAL $70,000,000.00 100%
==============================================================================
</TABLE>
<PAGE>
EXHIBIT "A"
-----------
REVOLVING CREDIT NOTE
$______________ Dallas, Texas May __, 1998
FOR VALUE RECEIVED, the undersigned, BANCTEC, INC., a Delaware corporation
("Borrower"), HEREBY PROMISES TO PAY to the order of ______________________ (the
--------
"Bank"), at the account of its agent Chase Bank of Texas, N.A., a national
----
banking association (f/k/a Texas Commerce Bank National Association) ("Agent"),
-----
at Chase Bank of Texas, N.A., 2200 Ross Avenue, 3rd Floor, Dallas, Dallas
County, Texas, 75201, in lawful money of the United States of America (or such
other alternate currency as provided in the Credit Agreement), the principal sum
of _______________________ ($_________) or so much thereof as may be advanced by
Bank to Borrower as the Revolving Credit Loan under the Credit Agreement (as
defined below) and outstanding from time to time thereunder, together with
interest on the outstanding principal balance as hereinafter defined.
This promissory note (this "Note") has been executed and delivered by
----
Borrower pursuant to the terms of that certain Credit Agreement dated as of
February 22, 1996, as amended by that certain First Amendment to Loan Documents
(the "First Amendment") dated of even date herewith (as amended, the "Credit
--------------- ------
Agreement") among Borrower, Guarantors, Bank, certain other Banks named therein
- ---------
and Agent. Unless otherwise defined herein, all terms defined in the Credit
Agreement have the same respective meanings herein. This Note, together with
any and all renewals, extensions or amendments hereto, is one of the Revolving
Credit Notes provided for in the Credit Agreement. Reference is made to the
Credit Agreement for provisions affecting this Note, including provisions
regarding optional prepayments, certain rights regarding reborrowing, defaults
and the Bank's rights arising as a result of the occurrence thereof.
Subject to the terms of the Credit Agreement, including without limitation
Sections 2.3, 12.7 and 12.8 thereof, and as otherwise calculated in accordance
with the Credit Agreement, the outstanding principal balance of this Note shall
bear interest prior to maturity at a varying rate per annum from day to day
equal to the lesser of (a) the Maximum Rate, or (b) the Applicable Revolving
Credit Rate; provided, however, if at any time the rate of interest specified in
clause (b) preceding shall exceed the Maximum Rate, thereby causing the interest
rate on this Note 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 this Note below the Maximum Rate until the total amount of interest
accrued on this Note equals the amount of interest which would have accrued on
this Note if the rate specified in clause (b) preceding had at all times been in
effect. Each change in the rate of interest charged hereunder 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.
Page 1
Revolving Credit Note (_______________)
<PAGE>
The principal of this Note shall be due and payable on the Termination
Date. Accrued and unpaid interest on this Note 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.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excessive interest in such respect is
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph 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 evidenced hereby. If for any reason interest
in excess of the Maximum Rate shall be deemed charged, required or permitted by
any court of competent jurisdiction, any such excess shall be applied as a
payment and reduction of the principal amount of indebtedness evidenced by this
Note; and if the principal amount hereof 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 the Bank shall,
to the extent permitted by applicable law, (i) characterize any non-principal
payment as an expense, fee, or premium rather than as interest, (ii) exclude
voluntary payments and the effects thereof, and (iii) 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 this
Note so that the 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 Chapter
303 of the Texas Finance Code.
If the holder of this Note expends any effort in any attempt to enforce the
payment of all or any part or installment of any such sum due such holder
hereunder, or if this Note is placed in the hands of an attorney for collection,
or if it is collected through any legal proceedings, Borrower agrees to pay all
collection costs and fees incurred by the holder of this Note, including
reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the State of Texas and the applicable laws of the United States of America.
Except for the notice provisions specifically set forth in the Credit
Agreement, Borrower and each surety, guarantor, endorser, and other party ever
liable for payment of any sums of money payable on this Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, diligence in collection, grace, and all
other formalities of any kind, and consent to all extensions without notice for
any period or periods of time and partial payments, before or after maturity,
without prejudice to the holder of this Note. The holder of this Note similarly
shall have the right to deal in any way, at any time, with one or more of the
foregoing parties without notice to any other party, and to grant any such party
any extensions of time for payment of any said indebtedness, or to release any
such party or any collateral securing this Note,
Page 2
Revolving Credit Note (_______________)
<PAGE>
or to grant any other indulgences or forbearance whatsoever, without notice to
any other party and without in any way affecting the personal liability of any
party hereunder.
BANCTEC, INC., a
Delaware corporation
By:
-----------------------------------
Raghavan Rajaji
Senior Vice President
Page 3
Revolving Credit Note (_______________)
<PAGE>
Exhibit 12.1
BANCTEC, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three Months Twelve Months Nine Months Restated Fiscal
Ended Ended Ended Years Ended
March 31, December 31, December 31, March 26,
--------- ------------ ------------ ---------
1998 1997 1997 1996 1995 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest expense $ 1,727 $ 1,753 $ 7,730 $ 7,927 $ 7,309 $ 10,021 $ 7,186
Implicit interest on operating leases 759 663 2,818 3,052 2,257 3,826 3,137
Amortization of deferred debt expense 0 14 51 65 48 65 65
-------- -------- -------- -------- -------- -------- --------
Total Fixed Charges 2,486 2,430 10,599 11,044 9,614 13,912 10,388
Earnings before provision for income taxes 15,720 15,667 65,863 57,970 (70,715) (6,155) 32,307
Fixed charges 2,486 2,430 10,599 11,044 9,614 13,912 10,388
-------- -------- -------- -------- -------- -------- --------
EARNINGS, AS DEFINED 18,206 18,097 76,462 69,014 (61,101) 7,757 42,695
Ratio of earnings to fixed charges (1) 7.3 7.4 7.2 6.2 -6.4 0.6 4.1
</TABLE>
(1) Earnings for the nine months ended December 31, 1995 and for the restated
fiscal year ended March 26, 1995 were inadequate to cover fixed charges.
Additional earnings of $70.7 million and $6.2 million, respectively, were
required to achieve a ratio of earnings to fixed charges of 1.0.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Dallas, Texas
June 10, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)______
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-----------------------------------
BANCTEC, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-1559633
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4851 LBJ FREEWAY
DALLAS, TEXAS 75244
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
SENIOR NOTES
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
--------------------
INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.;
Federal Deposit Insurance Corporation, Washington,
D.C.; and The Board of Governors of the Federal
Reserve System, Washington D.C..
(b) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
------------------------------
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
-----------------
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
<PAGE>
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, The First National Bank of Chicago, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Chicago and State of
Illinois, on the 3rd day of June, 1998.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /s/ SANDRA L. CARUBA
SANDRA L. CARUBA
VICE PRESIDENT
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2,
1996 (REGISTRATION NO. 333-14201).
3
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
June 3, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
In connection with the qualification of the indenture between BancTec, Inc. and
The First National Bank of Chicago, as Trustee, the undersigned, in accordance
with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby
consents that the reports of examinations of the undersigned, made by Federal or
State authorities authorized to make such examinations, may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/ SANDRA L. CARUBA
SANDRA L. CARUBA
VICE PRESIDENT
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 7
<S> <C> <C>
LEGAL TITLE OF BANK: THE FIRST NATIONAL BANK OF CHICAGO CALL DATE: 12/31/97 ST-BK: 17-1630 FFIEC 031
ADDRESS: ONE FIRST NATIONAL PLAZA, STE 0303 PAGE RC-1
CITY, STATE ZIP: CHICAGO, IL 60670
FDIC CERTIFICATE NO.: 0/3/6/1/8
---------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31,1997
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN C400
THOUSANDS ---------
----------------- RCFD BIL MIL THOU
---- -------------
ASSETS
<S> <C> <C> <C> <C>
1. CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS (FROM
SCHEDULE RC-A):
a. NONINTEREST-BEARING BALANCES AND CURRENCY AND COIN(1)...... 0081 4,267,336 1.a.
b. INTEREST-BEARING BALANCES(2)............................... 0071 6,893,837 1.b.
2. SECURITIES
a. HELD-TO-MATURITY SECURITIES(FROM SCHEDULE RC-B, COLUMN A).. 1754 0 2.a.
b. AVAILABLE-FOR-SALE
SECURITIES (FROM
SCHEDULE RC-B, COLUMN D)...................................... 1773 5,691,722 2.b.
3. FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS
TO RESELL 1350 6,339,940 3.
4. LOANS AND LEASE FINANCING RECEIVABLES:
a. LOANS AND LEASES, NET OF UNEARNED INCOME (FROM SCHEDULE
RC-C)......................................................... RCFD 2122 25,202,984 4.a.
b. LESS: ALLOWANCE FOR LOAN AND LEASE LOSSES.................. RCFD 3123 419,121 4.b.
c. LESS: ALLOCATED TRANSFER RISK RESERVE...................... RCFD 3128 0 4.c.
d. LOANS AND LEASES, NET OF UNEARNED INCOME, ALLOWANCE, AND
RESERVE (ITEM 4.a MINUS 4.b AND 4.c)....................... 2125 24,783,863 4.d.
5. TRADING ASSETS (FROM SCHEDULE RD-D)........................... 3545 6,703,332 5.
6. PREMISES AND FIXED ASSETS (INCLUDING CAPITALIZED LEASES)...... 2145 743,426 6.
7. OTHER REAL ESTATE OWNED (FROM SCHEDULE RC-M).................. 2150 7,727 7.
8. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED
COMPANIES (FROM SCHEDULE RC-M)................................ 2130 134,959 8.
9. CUSTOMERS' LIABILITY TO THIS BANK ON ACCEPTANCES OUTSTANDING.. 2155 644,340 9.
10. INTANGIBLE ASSETS (FROM SCHEDULE RC-M)........................ 2143 268,501 10.
11. OTHER ASSETS (FROM SCHEDULE RC-F)............................. 2160 2,004,432 11.
12. TOTAL ASSETS (SUM OF ITEMS 1 THROUGH 11)...................... 2170 58,483,415 12.
- ------------------
</TABLE>
(1) INCLUDES CASH ITEMS IN PROCESS OF COLLECTION AND UNPOSTED DEBITS.
(2) INCLUDES TIME CERTIFICATES OF DEPOSIT NOT HELD FOR TRADING.
5
<PAGE>
<TABLE>
<CAPTION>
LEGAL TITLE OF BANK: THE FIRST NATIONAL BANK OF CHICAGO CALL DATE: 09/30/97 ST-BK: 17-1630 FFIEC 031
ADDRESS ONE FIRST NATIONAL PLAZA, STE 0303 PAGE RC-2
CITY, STATE ZIP: CHICAGO, IL 60670
FDIC CERTIFICATE NO.: 0/3/6/1/8
---------
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- -------------
<S> <C> <C> <C> <C>
LIABILITIES
13. DEPOSITS:
a. IN DOMESTIC OFFICES (SUM OF
TOTALS OF COLUMNS A AND C
FROM SCHEDULE RC-E, PART 1)................... RCON 2200 21,756,846 13.a
(1) NONINTEREST-BEARING(1).................... RCON 6631 9,197,227 13.a.1
(2) INTEREST-BEARING.......................... RCON 6636 559,619 13.a.2
b. IN FOREIGN OFFICES, EDGE AND
AGREEMENT SUBSIDIARIES, AND
IBFS (FROM SCHEDULE RC-E, PART II)............ RCFN 2200 14,811,410 13.b.
(1) NONINTEREST BEARING....................... RCFN 6631 332,801 13.b.1
(2) INTEREST-BEARING.......................... RCFN 6636 14,478,609 13.b.2
14. FEDERAL FUNDS PURCHASED AND
SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE: RCFD 2800 4,535,422 14
15. a. DEMAND NOTES ISSUED TO THE RCON 2840 43,763 15.a
U.S. TREASURY
b. TRADING
LIABILITIES(FROM
SCHEDULE RC-D)................................ RCFD 3548 6,523,239 15.b
16. OTHER BORROWED MONEY:
a. WITH A REMAINING MATURITY
OF ONE YEAR OR LESS........................... RCFD 2332 1,360,165 16.a
b. WITH A REMAINING MATURITY
OF MORE THAN ONE YEAR THROUGH
THREE YEARS................................... A547 576,492 16.b
. c. WITH A REMAINING MATURITY
OF MORE THAN THREE YEARS...................... A548 703,981 16.c
17. NOT APPLICABLE
18. BANK'S LIABILITY ON ACCEPTANCE
EXECUTED AND OUTSTANDING...................... RCFD 2920 644,341 18
19. SUBORDINATED NOTES AND
DEBENTURES (2)................................ RCFD 3200 1,700,000 19
20. OTHER LIABILITIES (FROM
SCHEDULE RC-G)................................ RCFD 2930 1,322,077 20
21. TOTAL LIABILITIES (SUM OF ITEMS
13 THROUGH 20)................................ RCFD 2948 53,987,736 21
22. NOT APPLICABLE
EQUITY CAPITAL
23. PERPETUAL PREFERRED STOCK AND
RELATED SURPLUS............................... RCFD 3838 0 23
24. COMMON STOCK..................................... RCFD 3230 200,858 24
25. SURPLUS (EXCLUDE ALL SURPLUS
RELATED TO PREFERRED STOCK)................... RCFD 3839 2,999,001 25
26. a. UNDIVIDED PROFITS AND CAPITAL RESERVES........ RCFD 3632 1,273,239 26.a.
b. NET UNREALIZED HOLDING GAINS
(LOSSES) ON AVAILABLE-FOR-SALE
SECURITIES.................................... RCFD 8434 24,096 26.b.
27. CUMULATIVE FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS....................... RCFD 3284 (1,515) 27
28. TOTAL EQUITY CAPITAL (SUM OF
ITEMS 23 THROUGH 27).......................... RCFD 3210 4,495,679 28
29. TOTAL LIABILITIES AND EQUITY
CAPITAL (SUM OF ITEMS 21 AND 28).............. RCFD 3300 58,483,415 29
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. INDICATE IN THE BOX AT THE RIGHT THE NUMBER OF THE STATEMENT BELOW THAT
BEST DESCRIBES THE MOST COMPREHENSIVE LEVEL OF AUDITING WORK PERFORMED FOR
THE BANK BY INDEPENDENT EXTERNAL AUDITORS AS OF ANY DATE DURING 1996 NUMBER
......................................................RCFD 6724......................N/A M.1
</TABLE>
1 = INDICATE AUDIT OF THE BANK CONDUCTED IN ACCORDANCE WITH GENERALLY ACCEPTED
AUDITING STANDARDS BY A CERTIFIED PUBLIC ACCOUNTING FIRM WHICH SUBMITS A
REPORT ON THE BANK
2 = INDEPENDENT AUDIT OF THE BANK'S PARENT HOLDING COMPANY CONDUCTED IN
ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS BY A CERTIFIED PUBLIC
ACCOUNTING FIRM WHICH SUBMITS A REPORT ON THE CONSOLIDATED HOLDING COMPANY
(BUT NOT ON THE BANK SEPARATELY)
3 = DIRECTORS' EXAMINATION OF THE BANK CONDUCTED IN ACCORDANCE WITH GENERALLY
ACCEPTED AUDITING STANDARDS BY A CERTIFIED PUBLIC ACCOUNTING FIRM (MAY BE
REQUIRED BY STATE CHARTERING AUTHORITY)
4 = DIRECTORS' EXAMINATION OF THE BANK PERFORMED BY OTHER EXTERNAL AUDITORS
(MAY BE REQUIRED BY STATE CHARTERING AUTHORITY)
5 = REVIEW OF THE BANK'S FINANCIAL STATEMENTS BY EXTERNAL AUDITORS
6 = COMPILATION OF THE BANK'S FINANCIAL STATEMENTS BY EXTERNAL AUDITORS
7 = OTHER AUDIT PROCEDURES (EXCLUDING TAX PREPARATION WORK)
8 = NO EXTERNAL AUDIT WORK
- ----------
(1) INCLUDES TOTAL DEMAND DEPOSITS AND NONINTEREST-BEARING TIME AND SAVINGS
DEPOSITS.
(2) INCLUDES LIMITED-LIFE PREFERRED STOCK AND RELATED SURPLUS.
6
<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 THE
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> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-31-1998 JAN-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 14,294 0
<SECURITIES> 307 0
<RECEIVABLES> 162,232 0
<ALLOWANCES> (8,051) 0
<INVENTORY> 85,090 0
<CURRENT-ASSETS> 280,570 0
<PP&E> 260,589 0
<DEPRECIATION> (140,069) 0
<TOTAL-ASSETS> 502,752 0
<CURRENT-LIABILITIES> 223,442 0
<BONDS> 8,871 0
0 0
0 0
<COMMON> 216 0
<OTHER-SE> 270,816 0
<TOTAL-LIABILITY-AND-EQUITY> 502,752 0
<SALES> 71,471 77,448
<TOTAL-REVENUES> 142,382 142,353
<CGS> 47,415 52,263
<TOTAL-COSTS> 99,899 99,166
<OTHER-EXPENSES> 5,468 6,755
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,727 1,753
<INCOME-PRETAX> 15,720 15,667
<INCOME-TAX> 5,659 5,659
<INCOME-CONTINUING> 10,061 10,027
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 10,061 10,027
<EPS-PRIMARY> 0.47 0.48
<EPS-DILUTED> 0.46 0.46
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
To Tender
Outstanding 7.50% Senior Notes Due 2008
of
BANCTEC, INC.
Pursuant to the Exchange Offer and Prospectus Dated ________, 1998
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _________, 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE OFFER IS
EXTENDED BY THE COMPANY.
================================================================================
The Exchange Agent for the Exchange Offer is:
THE FIRST NATIONAL BANK OF CHICAGO
By Registered or Certified Mail,
by Overnight Courier or by Hand:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Hand:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Overnight Courier:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Facsimile:
(312) 407-1708
Confirm by Telephone:
(312) 407-5483
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
IF YOU WISH TO EXCHANGE CURRENTLY OUTSTANDING 7.50% SENIOR NOTES DUE 2008
(THE "OLD NOTES") FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF NEW 7.50% SENIOR
NOTES DUE 2008 PURSUANT TO THE EXCHANGE OFFER, YOU MUST VALIDLY TENDER (AND NOT
WITHDRAW) OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE>
DESCRIPTION OF TENDERED OLD NOTES
<TABLE>
<CAPTION>
=====================================================================================
Name(s) and Address(es) of Registered Owner(s) Certificate Aggregate
(Please fill in, if blank) Number(s) Principal Amount
Tendered
- -------------------------------------------------------------------------------------
<S> <C> <C>
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Total Principal
Amount of Notes
Tendered
=====================================================================================
</TABLE>
2
<PAGE>
LADIES AND GENTLEMEN:
1. The undersigned hereby tenders to BancTec, Inc., a Delaware
corporation (the "Company"), the Old Notes described above pursuant to the
Company's offer of $1,000 principal amount of 7.50% Senior Notes due 2008 (the
"New Notes") in exchange for each $1,000 principal amount of the Old Notes, upon
the terms and subject to the conditions contained in the Prospectus dated
_________, 1998 (the "Prospectus"), receipt of which is hereby acknowledged, and
in this Letter of Transmittal (which together constitute the "Exchange Offer").
2. The undersigned hereby represents and warrants that it has full
authority to tender the Old Notes described above. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the tender of Old Notes.
3. The undersigned understands that the tender of the Old Notes pursuant
to all of the procedures set forth in the Prospectus will constitute an
agreement between the undersigned and the Company as to the terms and conditions
set forth in the Prospectus.
4. The undersigned hereby represents and warrants that:
(a) the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the
undersigned, whether or not the undersigned is the holder;
(b) neither the undersigned nor any such other person is engaging
in or intends to engage in a distribution of such New Notes;
(c) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in
the distribution of such New Notes; and
(d) neither the holder nor any such other person is an
"affiliate," as such term is defined under Rule 405 promulgated
under the Securities Act of 1933, as amended (the "Securities
Act"), of the Company.
5. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Securities. If the undersigned is a broker-dealer, the undersigned
represents that it acquired the Old Notes for its own account as a result of
market-making activities or other trading activities. If the undersigned is a
broker-dealer that will receive Exchange Securities for its own account in
exchange for Securities that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such Exchange Securities; however,
by so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
6. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and legal
and personal representatives of the undersigned.
7. Unless otherwise indicated herein under "Special Delivery
Instructions," please issue the certificates for the New Notes in the name of
the undersigned.
3
<PAGE>
===============================================================================
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 1)
To be completed ONLY IF the New Notes are to be issued or sent to someone
other than the undersigned or to the undersigned at an address other than that
provided above. Mail [_] Issue [_] (check appropriate boxes) certificates to:
Name: ____________________________________________________________________
(Please Print)
Address: _________________________________________________________________
(Including Zip Code)
_________________________________________________________________
_________________________________________________________________
===============================================================================
===============================================================================
SPECIAL BROKER-DEALER INSTRUCTIONS
(See Item 5)
[_] Check here if you are a broker-dealer and wish to receive 10 additional
copies of the Prospectus and 10 copies of any amendments or supplements thereto.
Name: ____________________________________________________________________
(Please Print)
Address: _________________________________________________________________
(Including Zip Code)
_________________________________________________________________
_________________________________________________________________
===============================================================================
4
<PAGE>
===============================================================================
SIGNATURE
To be completed by all exchanging noteholders. Must be signed by the registered
holder exactly as its name appears on the Old Notes. If signature is by
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth full title. See Instruction 3.
X ________________________________________________________________________
X ________________________________________________________________________
Signature(s) of Registered Holder(s) or Authorized Signature
Dated: ____________________________________________________________________
Name(s): __________________________________________________________________
___________________________________________________________________________
(Please Type or Print)
Capacity: _________________________________________________________________
Address: __________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.: ______________________________________________
SIGNATURE GUARANTEE (If Required by Instruction 1)
Certain Signatures Must be Guaranteed by an Eligible Institution
___________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
___________________________________________________________________________
(Address (including zip code) and
Telephone Number (including area code) of Firm)
___________________________________________________________________________
(Authorized Signature)
___________________________________________________________________________
(Printed Name)
___________________________________________________________________________
(Title)
Dated: _______________________________________________________________
===============================================================================
PLEASE READ THE INSTRUCTIONS ON THE FOLLOWING PAGE,
WHICH FORM A PART OF THIS LETTER OF TRANSMITTAL.
5
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal
must be guaranteed by an eligible guarantor institution that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (an
"Eligible Institution"), unless the box titled "Special Delivery Instructions"
above has not been completed or the Old Notes described above are tendered for
the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OLD NOTES. The Old Notes,
together with a properly completed and duly executed Letter of Transmittal (or
copy thereof), should be mailed or delivered to the Exchange Agent at the
address set forth above.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
3. SIGNATURE ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by a person other than a registered holder
of any Old Notes, such Old Notes must be endorsed or accompanied by appropriate
bond powers, signed by such registered holder exactly as such registered
holder's name appears on such Old Notes.
If this Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
4. TAX INFORMATION. Please complete the attached Substitute Form W-9.
See "Tax Information and Guidelines."
5. MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered Old Notes
will be resolved by the Company in its sole discretion, which determination will
be final and binding. The Company reserves the absolute right to reject any or
all Old Notes not properly tendered or any Old Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the right to waive any defects, irregularities, or
conditions of tender as to particular Old Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) will be final and binding. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent, nor any other person shall be under any duty to give
notification of defects in such tenders or shall incur any liability for failure
to give such notification. Tenders of Old Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holder thereof as soon as
practicable following the Expiration Date.
6
<PAGE>
TAX INFORMATION AND GUIDELINES
You must provide the Exchange Agent with your correct Taxpayer
Identification Number ("TIN") on the Substitute Form W-9 set forth below. If
you are an individual, your TIN is your social security number.
On the Substitute Form W-9, you must certify under penalties of perjury
that: (a) your TIN is correct, and (b) you are not subject to backup
withholding, either because the Internal Revenue Service ("IRS") has not
notified you that you are subject to backup withholding as a result of a failure
to report interest or dividends or because the IRS has notified you that you are
no longer subject to backup withholding. If the IRS has notified you that you
are subject to backup withholding because of under reporting of interest or
dividends, you must cross out item (2) in the "Certification" section of the
Substitute Form W-9. If subsequently, however, the IRS notifies you that you
are not longer subject to backup withholding, you should not cross out item (2).
Exempt persons, which include all corporations and certain foreign
individuals, are not subject to the backup withholding and reporting
requirements. An exempt person should furnish its TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign and date the form. To satisfy the
Exchange Agent that a foreign person qualifies as an exempt recipient, such
person must also submit to the Exchange Agent with this Letter of Transmittal a
Form W-8, Certificate of Foreign Status, signed under penalties of perjury,
attesting to such person's foreign status.
If you are required to provide a TIN, but have not been issued a TIN and
have applied for one, or intend to apply for one in the near future, you should
write "Applied For" on the line of the Substitute Form W-9 requiring a TIN.
Generally, you will then have 60 days to get a TIN and give it to the Exchange
Agent. If the Exchange Agent does not receive your TIN within 60 days, backup
withholding, if applicable, will begin.
If you do not provide the Exchange Agent with your correct TIN, you may be
subject to a $50 penalty that the IRS imposes. Failure to comply truthfully
with the backup withholding certification requirements may also result in the
imposition of criminal and civil fines and penalties.
7
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART I - PLEASE PROVIDE YOUR Social Security Number
FORM W-9 TAXPAYER IDENTIFICATION
NUMBER IN THE BOX AT
RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW.
- --------------------------------------------------------------------------------------------------------------------
Employer Identification Number
- --------------------------------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY, PART II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING, SEE
INTERNAL REVENUE SERVICE "TAX INFORMATION AND GUIDELINES" ABOVE FOR
PAYER'S REQUEST FOR TAXPAYER CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
IDENTIFICATION NUMBER (TIN) SUBSTITUTE FORM W-9 ENCLOSED HEREWITH AND COMPLETE
AS INSTRUCTED THEREIN.
- --------------------------------------------------------------------------------------------------------------------
CERTIFICATION - Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number or a taxpayer identification
number has not been issued to me and either: (a) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security
Administration office, or (b) I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made
to me thereafter will be withheld until I provide a number.
(2) I am not subject to backup withholding because I am exempt from backup withholding, I have not been
notified by the Service that I am subject to backup withholding as a result of a failure to report all interest
or dividends or the Service has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTION - You must cross out item (2) above if you have been notified by the Service that you
are subject to backup withholding because of under reporting interest or dividends on your tax return unless you
received a subsequent notification from the Service stating that you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------------------------------------------
SIGNATURE: DATE:
- --------------------------------------------------------------------------------------------------------------------
NAME:
- --------------------------------------------------------------------------------------------------------------------
ADDRESS:
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
TO TENDER
OUTSTANDING 7.50% SENIOR NOTES DUE 2008
OF
BANCTEC, INC.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED ________, 1998
As set forth in the Exchange Offer (as defined in the Prospectus (as
defined)), this form or one substantially equivalent hereto must be used to
accept the Exchange Offer if certificates for outstanding 7.50% Senior Notes due
2008 (the "Old Notes") of BancTec, Inc. are not immediately available or time
will not permit a holder's Old Notes or other required documents to reach the
Exchange Agent on or prior to the Expiration Date (as defined), or the procedure
for book-entry transfer cannot be completed on a timely basis. This form may be
delivered by facsimile transmission, by registered or certified mail, by hand,
or by overnight delivery service to the Exchange Agent. See "The Exchange Offer
- -- Procedures for Tendering" in the Prospectus.
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON ____________, 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE COMPANY.
================================================================================
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE FIRST NATIONAL BANK OF CHICAGO
By Registered or Certified Mail,
by Overnight Courier or by Hand:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Hand:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Overnight Courier:
The First National Bank of Chicago
1 North State Street, 9th Floor
Mail Suite 0126
Chicago, Illinois 60670
Attn: Diane Swanson
By Facsimile:
(312) 407-1708
Confirm by Telephone:
(312) 407-5483
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS NOTICE TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA
FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to BancTec, Inc., a Delaware corporation
(the "Company"), in accordance with the Company's offer, upon the terms and
subject to the conditions set forth in the Prospectus dated ________, 1998 (the
"Prospectus"), and in the accompanying Letter of Transmittal, receipt of which
is hereby acknowledged, $__________________________ in aggregate principal
amount of Old Notes pursuant to the guaranteed delivery procedures described in
the Prospectus.
================================================================================
Name(s) of Registered Holder(s):
------------------------------------------------
(Please Type or Print)
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code & Telephone No.:
------------------------------------------------------
Certificate Number(s) for
Old Notes (if available):
-------------------------------------------------------
Total Principal Amount
Tendered and Represented
by Certificate(s): $
------------------------------------------------------------
Signature of Registered Holder(s):
----------------------------------------------
Dated:
--------------------------------------------------------------------------
[_] The Depository Trust Company
(Check if Old Notes will be tendered
by book-entry transfer)
Account Number:
-----------------------------------------------------------------
================================================================================
THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, being a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office in the United States, hereby
guarantees (a) that the above named person(s) "own(s)" the Old Notes tendered
hereby within the meaning of Rule 14e-4 ("Rule 14e-4") under the Securities
Exchange Act of 1934, as amended, (b) that such tender of such Old Notes
complies with Rule 14e-4, and (c) to deliver to the Exchange Agent the
certificates representing the Old Notes tendered hereby or confirmation of book-
entry transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company, in proper form for transfer, together with the Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees and any other required documents, within
three New York Stock Exchange trading days after the Expiration Date.
================================================================================
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
----------------------------------------------------
Authorized Signature:
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Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Dated:
--------------------------------------------------------------------------
================================================================================
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF
OLD NOTES SHOULD BE SENT ONLY WITH A LETTER OF TRANSMITTAL.
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