<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-9859
BANCTEC, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 75-1559633
(I.R.S. Employer
(State or Other Jurisdiction of Identification No.)
Incorporation or Organization)
4851 LBJ Freeway
Dallas, Texas 75244
(Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number, including area code: (972) 341-4000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
--------------------------- -----------------------
<S> <C>
Common Stock, $.01 Par Value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [X]
Aggregate Market Value of voting stock held by non-affiliates of the
Registrant at February 26, 1999: $210,785,242. The amount was based on the
closing price of the Common Stock on the New York Stock Exchange on February
26, 1999. For purposes of this computation, only executive officers, board
members and beneficial owners of more than 5% of the Company's outstanding
stock are deemed to be affiliates.
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Number of Shares Outstanding at
Title of Each Class February 26, 1999
--------------------------- -------------------------------
<S> <C>
Common Stock, $.01 Par Value 19,450,208
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive proxy
statement to be filed for the annual meeting of stockholders scheduled to be
held on May 20, 1999.
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BancTec, Inc.
Annual Report
on
Form 10-K
Twelve Months Ended December 31, 1998
PART I
ITEM 1. The Company
Overview
BancTec, Inc., a Delaware corporation, ("BancTec" or the "Company") is a
worldwide systems integration and services company with a 26-year history of
innovation in document 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 computer and network 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 an expanding market for servicing personal
computers and networks. Fortune 1000 companies, government agencies and
leading personal computer manufacturers rely on BancTec for premium nationwide
service.
Founded in 1972, BancTec operates worldwide (with international sales in
1998 representing approximately 29% of total revenues) and serves over 5,000
customers in over 50 countries.
Business Strategy
Building on its well-established customer base in the financial transaction
processing industry, BancTec plans to expand the breadth of products and
services it offers its customers. 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, integrating the Company's
payment processing solutions with Internet-enabled workflow, image management
and long-term image storage.
In addition, BancTec is targeting other markets 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.
BancTec expects to continue to capitalize on the growing requirement for
maintenance services for desktop computers through direct sales of services 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
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computers, BancTec intends to continue to pursue additional contracts with
major personal computer ("PC") manufacturers and third party warranty
administrators.
In most areas of its business operations, BancTec employs multiple channels
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.
BancTec has 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 a new generation of software products for
high volume remittance processing and expanding the Company's portfolio of
Internet-enabled software products.
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.
Worldwide Systems
Financial Transaction Processing Systems. BancTec combines its extensive
business application knowledge with a full range of software and equipment
offerings for high volume, complex financial transaction processing
environments. 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 check and payment processors worldwide, including banks, credit card
companies, utilities, insurance companies and government agencies.
For high volume payment processors, BancTec provides image systems that
capture, digitize and process check and other document images, including
utility, telephone, retail and credit card bills, mortgage coupons, sales
drafts, airline tickets, tax notices, and other financial documents. The
Company's imaging systems are also used by banks for high volume check
processing applications such as proof-of-deposit and image statement
preparation. Other Company products provide image-based solutions for check
exception handling, enabling financial institutions that handle large volumes
of checks to reprocess more efficiently items that were rejected in normal
operating cycles.
BancTec is expanding the scope of customer solutions with the addition of
workflow and long-term image storage to increase productivity, to improve
customer service capabilities and to replace microfilm for long-term storage.
The Company's ImageFIRST(R) OpenARCHIVE(TM) solution is a multi-tiered
archival system designed for high speed digital archiving of financial and
other documents and related transaction data. BancTec image archive systems
are 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.
In addition, BancTec is working with customers and industry partners to
integrate electronic billing and payment capabilities into customers' existing
processing operations.
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 improve processing capabilities.
The Company typically sells these products to end-users and offers a warranty
for 30 days from the date of installation.
Plexus(R) Document Imaging and Workflow Software Products. Through its
Plexus software division, the Company offers a complete family of internet-
enabled document imaging and workflow software products
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designed for high-volume, complex and distributed environments. 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 and over the Internet.
Now in use in more than 1,300 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.
Community Banking Account Processing Software Solutions. BancTec's software
products for the community banking market integrate back room applications
such as check processing with front office platform applications such as
signature verification, statements, loan calculation, report generation, new
account processing and teller line information. 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 1998,
the Company introduced CORE(R) Director(TM), a new account management system
that combined features of the Banker II and ACCESS to provide a migration path
for current customers and to attract new community banking customers.
The Company owns and operates six service bureau facilities that provide
check and data processing services marketed as an outsourcing alternative to
in-house processing primarily for small to mid-size financial institutions.
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.
Manufacturing and Supplies
Hardware Systems. 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. BancTec equipment
products are used in BancTec-installed end-user solutions and also sold on an
original equipment manufacturer ("OEM") basis to other systems integrators for
use with their own software systems.
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.
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.
BancTec markets a full range of consumable supplies that complement the
Company's document processing systems. The Company also manufactures and
markets microfilm cameras, 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.
US Maintenance and Service
Installation and Maintenance of BancTec Products. The Company installs and
maintains its own equipment products such as document reader/sorters and
scanners. At February 26, 1999, the Company employed approximately 1,600
customer service engineers located in the United States and international
locations. The
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Company's maintenance contracts typically include both parts and labor and
generally are three to five years in duration.
Computer and Network Services. BancTec is a leading provider of personal
computer warranty repair services in the United States for Dell, Compaq, and
other companies. In addition, BancTec provides repair services for companies
that administer third party extended warranties on personal computers sold by
some of the nation's largest retailers.
For corporate and government customers, BancTec provides on-site or on-call
local area network ("LAN") and PC hardware support, systems integration, asset
management services, remote network monitoring, help desk and installation
coordination services. The Company's customer service engineers deliver on-
site or on-call support for file servers, personal computers, laptop
computers, printers and other peripheral equipment.
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.
During 1998, sales to customers outside the U.S. totaled approximately 29%
of the Company's total revenues.
Corporate Reorganization
In October 1998, after a strategic review of its business operations,
BancTec initiated a reorganization of its operations into two primary
businesses--Worldwide Financial Systems and Computer and Network Services. The
purpose of the reorganization was to give greater visibility to the Company's
growing computer services business and, at the same time, to create a single
organization to serve the needs of its traditional transaction processing
customer base. The reorganization will also allow the Company to reduce costs
by streamlining operations and to focus future investments in areas of the
business that offer attractive potential for growth and profitability. BancTec
expects to complete the business reorganization by the end of 1999.
Product Development
The Company is engaged in ongoing software and hardware product development
activities for both new and existing products, employing approximately 170
persons for such activities as of February 26, 1999.
The following table sets forth certain information regarding the Company's
product development expenditures for the indicated periods:
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
-------------------------
1998 1997 1996
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Product development expenditures..................... $19,981 $19,972 $17,582
Percent of total revenue............................. 3.3% 3.3% 3.2%
Percent of equipment and software revenue............ 6.4% 6.0% 5.6%
</TABLE>
5
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Current expenditures are concentrated on developing new applications for the
Company's product lines and improving and expanding existing products, as
described below:
Software and Systems Development. In addition to ongoing software
enhancements and year 2000 compliance, the Company has focused its development
efforts on electronic commerce technologies and a new generation of web-
enabled products for both the check and remittance markets. Each of these
major new applications will be further developed and deployed during 1999.
Continued development in the areas of workflow integration, web client
components and Internet processing frameworks has allowed the Company to begin
to reduce customer system delivery time, contain ongoing support costs and
leverage developer knowledge in new software development by using the latest
technologies.
Plexus Document Imaging and Workflow. The Company's Plexus unit 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 continues to be 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 including integrating these into
a new generation of BancTec item applications. These applications are intended
to provide more complete customer solutions, allowing rapid deployment and
more rapid customer return on investment.
Equipment Technology Development. In 1999, the Company plans to continue
development and enhancements to what it believes to be the industry's most
complete portfolio of document transport products.
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. Reader/sorters will be enhanced with the release of the Company's 2400-
dpm TRACE(R) Star transport, believed to be the fastest in the industry.
Enhancements to the Company's scanner product line include color, release of
the multi-pocket scanners and improved feeder technology.
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, value added resellers
("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 1998, no single customer accounted for more than 10% of the total revenue
of the Company. BancTec's ten largest customers accounted for 26% of the
Company's revenues in 1998.
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,
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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
December 31, 1998, 1997 and 1996 was approximately $88.0 million, $71.9
million and $95.5 million, respectively.
The Company's backlog excludes contracts for recurring hardware and software
maintenance and sales of supplies. 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
the level of future revenue.
Manufacturing
The Company's hardware and systems products are assembled using various
standard purchased components such as PC monitors, minicomputers, encoders,
communications equipment and other electronic devices. Certain products are
purchased from sole source suppliers. The Company generally has contracts with
these suppliers that are renewed periodically. 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 that 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 26, 1999, the Company employed approximately 4,100 full-time
employees and considers its employee relations to be good. None of the
Company's employees are represented by a labor union. The Company has never
experienced a work stoppage.
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 1999. Because Year 2000
compliance is integrated into its normal product development, the Company does
not expect to incur any significant incremental expenses 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further discussion.
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In addition, the Company has completed the implementation of a new internal
information system that will meet the foreseeable needs of the Company's
domestic operations and is Year 2000 compliant.
ITEM 2. Properties
The Company owns or leases numerous facilities throughout the world to
support its operations. The Company believes that these facilities are
adequate to meet its ongoing needs. The loss of any one facility could have an
adverse impact on operations in the short term.
The Company has the option to renew all leases on principal facilities at
the end of the lease terms.
The Dallas area manufacturing facility is the primary location for all
Company assembly and manufacturing activities. Heatstrip(R) and BancStrip(R)
products are manufactured in Puerto Rico.
ITEM 3. Legal Proceedings
None
ITEM 4. Submission of Matters to a Vote of Securities Holders
None
Executive Officers Of BancTec
Executive officers are elected annually at the first meeting of the Board of
Directors following the annual meeting of stockholders. No family
relationships exist among the executive officers of the Company.
The executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Grahame N. Clark, Jr. .. 56 Chairman of the Board, President and Chief
Executive Officer
John G. Guthrie......... 62 Senior Vice President
Don Herbener............ 51 Senior Vice President
Tod V. Mongan........... 48 Senior Vice President, Secretary, General Counsel
and Chief Administrative Officer
Raghavan Rajaji......... 52 Senior Vice President, Treasurer and Chief
Financial Officer
Kevin L. Roper.......... 44 Vice President
James E. Uren........... 62 Senior Vice President
James R. Wimberley...... 58 Senior Vice President
</TABLE>
Mr. Clark has been Chairman of the Board and Chief Executive Officer since
April 1987 and President since September 1995. Since August 1979, Mr. Clark
has been employed by the Company in various management capacities.
Mr. Guthrie has been Senior Vice President since September 1995. Since
February 1989, Mr. Guthrie has been employed by the Company in various
management capacities.
Mr. Herbener has been Senior Vice President since August 1998. Prior to that
date, Mr. Herbener was employed by Digital Equipment Corporation since 1971,
where he was most recently Vice President, Asia-Pacific Customer Services.
Mr. Mongan has been Chief Administrative Officer since January 1996, Senior
Vice President, Secretary and General Counsel since January 1993. Since
November 1979, Mr. Mongan has been employed by the Company in various
management capacities.
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Mr. Rajaji has been Senior Vice President, Treasurer and Chief Financial
Officer since September 1995. For the seven years prior to that date, Mr.
Rajaji was employed by Occidental Chemical Corporation as Senior Vice
President and Chief Financial Officer.
Mr. Roper has been Vice President since May 1996. Since March 1985, Mr.
Roper has been employed by the Company in various management capacities.
Mr. Uren has been Senior Vice President since September 1995. Since October
1988, Mr. Uren has been employed by the Company in various management
capacities.
Mr. Wimberley has been Senior Vice President since January 1993. Since
January 1984, Mr. Wimberley has been employed by the Company in various
management capacities.
PART II
ITEM 5. Market For the Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is listed on the New York Stock Exchange under
the symbol BTC. The common stock of the Company traded on the NASDAQ National
Market system under the symbol BTEC until December 28, 1995.
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1998 High Low
------------------------------------- -------- -------
<S> <C> <C>
First Quarter ended March 31, 1998......................... $28 3/8 $23 1/2
Second Quarter ended June 30, 1998......................... 26 1/16 21 1/2
Third Quarter ended September 30, 1998..................... 23 3/8 12 1/2
Fourth Quarter ended December 31, 1998..................... 15 1/4 11 3/8
<CAPTION>
Twelve Months Ended December 31, 1997
-------------------------------------
<S> <C> <C>
First Quarter ended March 31, 1997......................... $26 1/8 $19 1/8
Second Quarter ended June 30, 1997......................... 27 5/8 22 1/4
Third Quarter ended September 30, 1997..................... 27 22 3/4
Fourth Quarter ended December 31, 1997..................... 28 3/4 20 3/4
</TABLE>
The Company has not paid any cash dividends on its common stock since its
organization and currently intends to continue a policy of retaining earnings
for the Company's operations and planned expansion of its business. The number
of stockholders of record as of February 26, 1999 was approximately 2,502.
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ITEM 6. Selected Financial Data
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
Twelve Months Nine Months Restated Fiscal
Ended Ended Year Ended(a)
-------------------------------------- ------------ ---------------
December 31, December 31, December 31, December 31, March 26,
1998 1997 1996 1995 1995
------------ ------------ ------------ ------------ ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
For the period:
Revenue................. $597,920 $603,534 $554,002 $383,984 $516,932
Income (loss) before
extraordinary item..... 4,813 42,614 37,101 (53,481) (15,608)
Net income (loss)....... 4,813 42,152 37,101 (53,481) (15,608)
Basic income (loss) per
share before
extraodinary item...... 0.24 2.00 1.82 (2.71) (0.80)
Basic income (loss) per
share.................. 0.24 1.97 1.82 (2.75) (0.80)
Diluted income (loss)
per share before
extraordinary item..... 0.24 1.92 1.76 (2.71) (0.80)
Diluted income (loss)
per share.............. 0.24 1.90 1.76 (2.71) (0.80)
At period-end:
Total assets.......... 530,205 504,853 467,295 440,348 501,758
Working capital....... 163,378 69,941 87,803 42,598 90,140
Long-term debt, less
current maturities... 150,352 11,854 65,891 82,972 94,181
Stockholders' equity.. $220,081 $260,523 $204,720 $156,201 $206,743
Basic weighted average
shares................. 20,394 21,359 20,341 19,753 19,484
Diluted weighted average
shares................. 20,435 23,203 22,317 19,753 19,484
</TABLE>
- --------
(a) The Company's financial statements have been restated for fiscal year
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.
In December 1995, the Company changed its fiscal year end from a 52/53 week
year which ended on or about March 31, to a calendar year-end of December 31.
This resulted in a nine month transitional period for December 31, 1995.
The consolidated balance sheet data as of December 31, 1998, 1997 and 1996,
are those of the combined Company. The consolidated balance sheet data for
fiscal year 1995 includes the Company as of March 26, 1995 combined with the
consolidated balance sheet data of Recognition as of March 26, 1995. The
consolidated statement of operations for the twelve months ended December 31,
1998, 1997 and 1996 are those of the combined company. The consolidated
statement of operations data for the nine months ended December 31, 1995,
includes the Company's results for the nine months ended December 31, 1995,
combined with Recognition's results for the nine months ended December 31,
1995. The consolidated statement of operations data for the fiscal year ended
1995 includes the Company's fiscal year ended March 26, 1995 combined with
Recognition's fiscal year ended October 31, 1994.
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ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
BancTec believes that a number of factors heightened the already variable
nature of the systems integration business in 1998, creating a challenging and
competitive selling environment. These factors include: bank mergers and
consolidations, customer spending to address Year 2000, ongoing competitive
pressure and the changing revenue mix within the Company's service operations.
The slowdown in the Company's U.S. systems business and the ongoing
transition underway in its services business prompted a detailed evaluation of
the Company's organizational structure and long-term growth strategies
facilitated by the management consulting firm of Booz-Allen & Hamilton. As a
result, in the fourth quarter of 1998, BancTec initiated a reorganization of
its operations into two primary businesses--Worldwide Financial Systems and
Computer and Network Services. The purpose of the reorganization was to give
greater visibility to the Company's growing computer services business and, at
the same time, to create a single organization to serve the needs of its
traditional transaction processing customer base. The reorganization will also
allow the Company to reduce costs by streamlining operations and to focus
future investments in areas of the business that offer attractive potential
for growth and profitability.
Included in 1998 results were charges totaling $37.5 million recorded in the
fourth quarter. Approximately $22.1 million of the charges related to the
reorganization of the Company's operations. The Company also incurred
approximately $15.4 million of various other charges, including: the
termination of a systems contract related to a discontinued product, the
termination of a third party software product, additional accruals for
doubtful accounts, inventory obsolescence costs and various other items. These
charges, as discussed below, were recorded as adjustments to revenue, cost of
sales and operating expense in the fourth quarter.
Based on 1999 expected business conditions, the Company believes that the
same factors that affected 1998 indicate a cautious outlook regarding the
Company's near-term revenue and earnings growth prospects. While the Company's
near-term outlook remains cautious, the Company believes that a number of
factors indicate a more positive outlook for the year 2000 and beyond. These
factors include: cost savings from the Company's reorganization, planned new
product introductions, additional investments in sales and marketing and
completion of customer Year 2000 remediation projects.
Comparison of Twelve Months Ended December 31, 1998 and December 31, 1997
Consolidated revenue of $597.9 million for the twelve months ended December
31, 1998 decreased by $5.6 million or 0.9% from the prior twelve-month period.
During the fourth quarter of 1998, the Company reversed approximately $5.5
million of revenue as a result of the termination of a systems contract
related to a discontinued product. Also during the fourth quarter of 1998, the
Company recorded approximately $2.5 million in revenue allowances. Revenue
from equipment and software of $311.8 million decreased by $23.4 million or
7.0%. This decrease was due primarily to a decline in demand for large
software systems in the U.S. While the Company's systems integration business
has been somewhat variable, the Company believes that additional factors
contributing to lower revenues include spending commitments by its customers
to address year 2000 compliance, bank mergers and consolidations, and ongoing
competitive pressures. Revenue from maintenance and other services of $286.1
million increased by $17.8 million or 6.6% due to continued growth in computer
and network services, partially offset by the expiration of some maintenance
contracts on older document processing systems. Equipment and software revenue
accounted for 52.2% of total revenue for the twelve months ended December 31,
1998 compared to 55.5% for the twelve months ended December 31, 1997.
Consolidated gross profit of $132.6 million decreased by $48.9 million or
26.9% from the prior twelve-month period. Gross profit for equipment and
software of $70.4 million decreased by $40.0 million or 36.2% due to lower
sales and sales of less profitable systems upgrades rather than more
profitable new integrated systems and due to $13.6 million of inventory items
that were written off as a result of products that were discontinued in
conjunction with the Company's reorganization in the fourth quarter of 1998.
During the fourth quarter of 1998, the Company also recorded approximately
$7.1 million in charges primarily related to $1.2
11
<PAGE>
million in severance costs as a result of the reorganization and $3.6 million
in obsolete inventory costs, as well as $0.8 million related to the closure of
the Company's operations in Australia. Gross profit for maintenance and other
services of $62.2 million decreased by $8.9 million or 12.5% due to a change
in the mix of the types of services being provided and the effect of start-up
costs on certain new long-term service contracts partially offset by an
increase in network service revenue.
Operating expenses of $119.8 million increased $12.6 million or 11.8%
compared to the prior twelve-month period. Product development expenses were
comparable to the prior year. Sales and marketing expenses of $52.3 million
decreased by $1.5 million or 2.7% due to a lower level of operating
activities. General and administrative expenses of $37.4 million increased by
$8.0 million or 27.2% due to the amortization of costs incurred for the
implementation of a new internal information system which became operational
in July 1998, and approximately $4.7 million in charges during the fourth
quarter of 1998, consisting primarily of $2.2 million in severance costs.
Goodwill amortization of $10.1 million increased $4.7 million or 86.5%
primarily due to the write-off of $4.1 million of goodwill associated with the
Company's Canadian subsidiary, Banctec Canada, as a result of the Company's
reorganization in the fourth quarter of 1998.
Interest income of $1.3 million increased $0.6 million from the prior
twelve-month period due to the investment of excess cash from the proceeds of
the $150.0 million debt (senior notes) offering in May 1998.
Interest expense of $9.1 million increased $1.4 million from the prior
twelve months primarily due to an increase in outstanding debt and a higher
interest rate on the new senior notes compared to the bank debt retired in May
1998, partially offset by the capitalization of interest expense on capital
expenses incurred to implement a new internal information system during the
twelve months ended December 31, 1998.
Sundry income of $2.5 million increased $3.2 million from the prior twelve-
month period primarily due to foreign currency gains of $1.0 million in 1998
compared to $0.7 million in foreign exchange losses in 1997.
The provision for income taxes of $2.7 million decreased by $21.3 million
from the prior year due to a decrease in pre-tax income of $59.1 million. The
income tax provision as a percentage of income before income taxes is 36%,
which is consistent with the effective rate for 1997.
Net income of $4.8 million for the twelve months ended December 31, 1998
decreased $37.3 million from the prior year. Diluted earnings per share fell
from $1.90 to $0.24 in the current year.
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 some 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 $181.5 million increased by $18.8 million or
11.5% 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 $71.1 million
increased $7.5 million or 11.8% due to the increase in network and desktop
support services revenue.
Operating expenses of $107.2 million increased by $8.5 million or 8.6%
compared to the prior twelve-month period. The components of operating
expenses changed as follows: Product development expenses
12
<PAGE>
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 $81.8 million
increased by $5.7 million or 7.5% 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 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 decreased by $0.2 million due to a lower
overall average balance of outstanding debt resulting from scheduled term loan
repayments. The Company has also experienced lower borrowing rates during the
current year.
Net sundry expense of $0.8 million increased by $1.4 million primarily due
to foreign currency transaction losses in the current year due to the
strengthening of the dollar over other currencies.
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 current year income tax provision resulted in an effective
tax rate of 36%.
The Company recorded an extraordinary loss of $0.5 million at December 31,
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.
Liquidity and Capital Resources
Cash and cash equivalents as of December 31, 1998 were $25.3 million
compared to $21.7 million as of December 31, 1997. Total borrowings were
$156.3 million as of December 31, 1998, compared to $107.9 million as of
December 31, 1997. Total working capital increased to $163.4 million as of
December 31, 1998 from $69.9 million as of December 31, 1997. The $93.5
million increase in working capital was primarily due in part to the
retirement of short-term debt from the proceeds of the long-term debt and to
the increase in the current deferred tax asset.
Cash provided by operations was $54.8 million in 1998, compared to $52.1
million in 1997. The increased cash flow in 1998 was due primarily to a lower
increase in working capital as compared to 1997. See the discussion in
"Comparison of Twelve Months Ended December 31, 1998 and December 31, 1997"
for the factors contributing to the decrease in net income. Cash provided by
operations in 1996 was $46.9 million.
The Company believes that it has sufficient financial resources available to
support its anticipated requirements to fund operations and interest
obligations on debt, and is not aware of any trends, demands or commitments
which would have a material impact on the Company's long or short-term
liquidity.
At December 31, 1998, the Company had the following debt instruments in
place: 1) 7 1/2% Senior Notes due 2008, 2) Revolving Credit Facility, 3)
Foreign Credit Agreement and 4) Uncommitted Domestic Lines of Credit. As of
December 31, 1998, the Company had available a $70.0 million revolving credit
facility, which had no outstanding balance. During the period ended December
31, 1998, the Company borrowed a maximum amount of $41.8 million against this
credit facility. Also outstanding as of December 31, 1998 were foreign credit
agreements in the amount of $5.0 million. The Company had agreements in place
for lines of credit which totaled $80.0 million which were subsequently
reduced to $60.0 million during 1998. The lines are uncommitted and have a
maximum term of 30 days. The Company borrowed as much as $61.5 million against
these lines at various times throughout the twelve-month period ended December
31, 1998. At December 31, 1998, the Company had no outstanding balance on the
lines of credit. See Note E to the Consolidated Financial Statements for a
further discussion of these debt instruments.
13
<PAGE>
On May 22, 1998, the Company sold $150 million of 7 1/2% senior notes due
June 1, 2008 in a Rule 144A private offering. On August 28, 1998, the senior
notes were registered as public debt. Interest is due and payable in semi-
annual installments beginning December 1, 1998.
On December 5, 1997, the Company redeemed substantially all $43.7 million 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 shares per $1,000
bond. The redemption eliminates potential dilution of the Company's common
stock of approximately 1.5 million shares.
The Company spent $13.5 million during 1998 and $14.4 million during 1997
for computer hardware, software and consulting to implement a new information
system for the Company. The new information system became operational during
July 1998. This new system will meet the foreseeable needs of the Company and
will also be Year 2000 compliant.
As part of its stock repurchase program, the Company bought 2,506,600 shares
and 200,000 shares during the twelve months ended December 31, 1998 and 1997,
respectively. The Board of Directors has authorized the repurchase of up to an
additional million shares of the Company's common stock over the next nine
months. The repurchases will be made from time to time in the open market
using operating cash flow.
Inflation has not had a material effect on the operating results of the
Company.
Year 2000 Considerations
The Year 2000 ("Y2K") problem relates to the inability of certain technology
products to properly recognize and process date-sensitive information relative
to the year 2000 and beyond. The Y2K issue is mostly the result of a once
common computer programming convention whereby dates were expressed with six
digits (mm/dd/yy) instead of eight digits (mm/dd/yyyy). Under this programming
standard the year was coded using two digits (yy). The potential problem lies
in the fact that programs with a two-digit year may not function properly in
the future. For example, 00 in the year 2000 may be interpreted as the year
1900, 1980, 00, or "no known date". This could result in processing errors.
Y2K issues impact the Company and all companies in the industries in which
the Company operates. In fact, Y2K impacts nearly all organizations and has
become a societal issue due to the pervasive use of technology. In the
Company's case, it is both a user and supplier of technology products
potentially effected by Y2K. While simple to understand, Y2K is more difficult
to address. The difficulty arises from: (1) the large volume of systems,
applications and code involved, (2) the vast archives of data created by
programs, and (3) the large volume of interdependent systems from different
manufacturers.
During 1998, the Company developed a master plan to assess and address
potential risks it faces as a result of Y2K issues. The plan provides the
strategic guidance for all products, services, systems, relationships, and
infrastructure that may encounter a Y2K issue. The plan sets forth objectives,
scope, responsibilities, and guidelines for project management, testing,
reporting, documentation and audit. The project was sub-divided into about 20
major projects throughout the Company. A corporate Y2K compliance team was
formed to assist these various project teams in implementing their individual
Y2K plans under the master plan. The compliance team reports to a senior
officer of the Company. Y2K project teams report their progress monthly to
senior management. About 100 BancTec personnel are members of Y2K project
teams.
During the third quarter of 1998, the Company completed the implementation
of an enterprise resource planning information system ("ERP System"), for use
in all the Company's domestic operations, which is represented to be Y2K
compliant by SAP, the software vendor. The implementation of this system cost
approximately $27.9 million. The investment in this ERP system was primarily
for the domestic operations of the Company and there is no way to allocate the
portion of the $27.9 million that relates specifically to Y2K issues. SAP
replaced accounting, manufacturing, purchasing, sales and distribution, and
human resources
14
<PAGE>
systems. A new customer service call management electronic data interchange
("EDI") system that interfaces with SAP, is being implemented in 1999. The
system will cost about $1.2 million and the portion attributable to Y2K issues
is not identifiable.
Implementation of the remainder of the Y2K master plan is estimated to cost
approximately $8.2 million, of which $4.0 million relates to non-recurring
internal (mostly non-incremental) employee costs, and another $3 million is
primarily for new systems and upgrades. The remaining $1.2 million is for
incremental costs of software, consultants and other Y2K related expenses. The
largest remaining expenditure is the potential replacement of non-compliant
personal computers, which is not expected to exceed $1.5 million. This
estimate does not include all internal costs for employees working on Y2K
issues, as these costs are not tracked separately. Many systems, including the
aforementioned personal computers, may or may not have been replaced/upgraded
in the absence of the Y2K problem. These cost estimates are based on current
information and subject to change should conditions vary.
The Company has organized the overall project into five phases (awareness,
assessment, resolution, testing, and implementation) which are at various
stages of completion. Overall, the Company believes it is approximately 60%
complete with the execution of the plan. Substantial completion, or 90%
completion, of mission critical systems is expected to occur by June 30, 1999.
The Company anticipates full implementation of mission critical project tasks
by September 30, 1999. Nevertheless, the Company expects some level of project
activity to continue into the year 2000, including implementation of non-
mission critical items and ongoing customer support.
BancTec launched its Year 2000 web pages at www.banctec.com on December 21,
1998. The purpose of the Company's Y2K pages is to communicate relevant,
reliable and consistent Y2K information to customers, vendors, employees,
regulators, investors and other interested parties. The new web pages include
the Y2K status of about 150 BancTec products, plus frequently asked questions,
a worldwide contact list and links to other Y2K web resources.
The process of ensuring that the Company's major vendors are addressing
their Y2K obligations is ongoing, and substantially complete. Over 900 vendors
are being evaluated and no significant concerns have been identified.
Alternate sources and strategies will be implemented if necessary.
Notwithstanding the Company's Y2K compliance efforts to date and in the
future, achieving Y2K compliance is dependent on many factors, some of which
are not within the Company's control. Should either the Company's systems or
the systems of one or more significant customers, vendors, or suppliers fail
to achieve Y2K compliance, the Company's business and financial condition
could be materially adversely affected. Some inherent risks the Company is
aware of and managing include, but are not limited to, on-time completion,
litigation, integration and complexity of data and telecommunications
networks, and the validity of individual test plans and results.
The Company intends to develop contingency plans for those mission critical
areas that might be affected by the Y2K problem and will finalize plans after
the testing and implementation phases are complete. A major portion of these
plans will likely pertain to rapid response teams to be available to support
customer systems if necessary and reversion to manual processing where
feasible.
NOTICE: This information is a "Year 2000 Readiness Disclosure" and conforms
with the Year 2000 Information and Readiness Disclosure Act of 1998.
ITEM 7(A). Quantitative and Qualitive Disclosures About Market Risk
The Company is exposed to certain market risk primarily related to
fluctuations in interest rates. The following discussion summarizes the
Company's financial instruments which are subject to such risk.
The Company's $150 million in senior notes are issued in U.S. dollars at a
fixed interest rate of 7 1/2%. Interest is due and payable in semi-annual
installments beginning December 1, 1998. The notes mature on June 1, 2008. The
fair market value of the senior notes as of December 31, 1998, approximates
its respective carrying value.
15
<PAGE>
The Company also has yen-denominated foreign credit agreements in the amount
of $5.0 million as of December 31, 1998. The terms on the agreements range
from three months to one year at interest rates up to 1.75%. The fair market
value on the yen-denominated foreign debt approximates its respective carrying
value of as December 31, 1998.
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 and generally consist of interest rate
swap and/or interest rate cap agreements. There were no instruments in place
at December 31, 1998. As discussed in Note E to the consolidated financial
statements, the Company had one interest rate cap agreement which expired in
May 1997.
16
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
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, 1998 and
1997, and the related consolidated statements of operations, cash flows and
stockholders' equity for the three years in the period ended December 31,
1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen llp
Dallas, Texas
February 3, 1999
17
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 25,313 $ 21,686
Short-term investments..................................... 837 308
Accounts receivable, less allowance for doubtful accounts
of $10,758 at December 31, 1998, and $8,100 at December
31, 1997.................................................. 178,851 156,911
Inventories................................................ 68,535 86,847
Current deferred tax asset................................. 27,912 20,080
Other...................................................... 9,511 7,635
-------- --------
Total current assets...................................... 310,959 293,467
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land....................................................... 3,030 3,030
Field support spare parts.................................. 102,262 110,297
Systems and software....................................... 58,094 38,995
Machinery and equipment.................................... 55,431 51,929
Furniture, fixtures and other.............................. 23,967 20,177
Buildings.................................................. 28,848 27,488
-------- --------
271,632 251,916
Less accumulated depreciation.............................. 146,594 140,613
-------- --------
Net property, plant and equipment......................... 125,038 111,303
GOODWILL, less accumulated amortization of $30,205 at Decem-
ber 31, 1998, and $29,814 at December 31, 1997............. 81,075 89,147
OTHER ASSETS................................................ 13,133 10,936
-------- --------
TOTAL ASSETS................................................ $530,205 $504,853
======== ========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Revolving credit facilities............................... $ 5,024 $ 84,139
Current maturities of long-term debt...................... 878 11,888
Trade accounts payable.................................... 24,451 19,793
Other accrued expenses and liabilities.................... 77,600 71,243
Deferred revenue.......................................... 31,560 27,278
Income taxes.............................................. 8,068 9,185
-------- --------
Total current liabilities................................ 147,581 223,526
LONG-TERM DEBT, less current maturities.................... 150,352 11,854
OTHER LIABILITIES.......................................... 12,191 8,950
COMMITMENTS AND CONTINGENCIES (Note J)
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, 19,373,000 shares at December 31,
1998 and
21,808,000 at December 31, 1997.......................... 194 218
Treasury stock--no shares at December 31, 1998 and
200,000 at December 31, 1997............................. -- (4,692)
Additional paid-in capital................................ 170,318 221,234
Retained earnings......................................... 54,932 50,119
Foreign currency translation adjustments.................. (3,736) (5,129)
Unearned compensation..................................... (1,627) (1,227)
-------- --------
Total stockholders' equity............................... 220,081 260,523
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................. $530,205 $504,853
======== ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
REVENUE:
Equipment and software.............. $ 311,845 $ 335,214 $ 312,467
Maintenance and other services...... 286,075 268,320 241,535
------------ ------------ ------------
597,920 603,534 554,002
COST OF SALES:
Equipment and software.............. 241,454 224,803 213,293
Maintenance and other services...... 223,865 197,233 177,977
------------ ------------ ------------
465,319 422,036 391,270
------------ ------------ ------------
Gross profit...................... 132,601 181,498 162,732
OPERATING EXPENSES:
Product development................. 19,981 19,972 17,582
Selling, general and
administrative..................... 89,733 81,801 76,075
Goodwill amortization............... 10,056 5,391 4,990
------------ ------------ ------------
119,770 107,164 98,647
------------ ------------ ------------
Income from operations............ 12,831 74,334 64,085
OTHER INCOME (EXPENSE):
Interest income..................... 1,296 743 1,146
Interest expense.................... (9,081) (7,730) (7,927)
Sundry-net.......................... 2,474 (762) 666
------------ ------------ ------------
(5,311) (7,749) (6,115)
------------ ------------ ------------
Income before income taxes and
extraordinary item............... 7,520 66,585 57,970
INCOME TAX PROVISION (BENEFIT):
Current............................. 5,790 18,518 3,434
Deferred............................ (3,083) 5,453 17,435
------------ ------------ ------------
2,707 23,971 20,869
------------ ------------ ------------
NET INCOME BEFORE EXTRAORDINARY
ITEM................................ 4,813 42,614 37,101
EXTRAORDINARY ITEM, NET OF TAXES OF
$260................................ -- (462) --
------------ ------------ ------------
NET INCOME........................... $ 4,813 $ 42,152 $ 37,101
============ ============ ============
INCOME PER SHARE BEFORE EXTRAORDINARY
ITEM
Basic.............................. $ 0.24 $ 2.00 $ 1.82
Diluted............................ $ 0.24 $ 1.92 $ 1.76
NET INCOME PER SHARE
Basic.............................. $ 0.24 $ 1.97 $ 1.82
Diluted............................ $ 0.24 $ 1.90 $ 1.76
WEIGHTED AVERAGE SHARES
Basic.............................. 20,394 21,359 20,341
Diluted............................ 20,435 23,203 22,317
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
----------------------------
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 4,813 $ 42,152 $ 37,101
Adjustments to reconcile net income to cash
flows provided by operating activities:
Depreciation and amortization................ 64,328 39,973 37,850
Deferred income tax (benefit) expense........ (3,083) 5,453 17,435
Loss on disposition of property, plant and
equipment................................... 2,312 1,429 --
Other non-cash items......................... (1,019) 2,851 964
Increase in accounts receivable.............. (23,961) (21,773) (28,949)
(Increase) decrease in inventories........... 3,195 (2,241) (10,878)
(Increase) decrease in other assets.......... (11,905) (3,353) 5,109
Increase (decrease) in trade accounts
payable..................................... 4,658 (1,510) (2,940)
Increase (decrease) in deferred revenue...... 4,282 (10,918) 172
Increase (decrease) in other accrued expenses
and liabilities............................. 11,135 (1) (8,918)
-------- -------- --------
Cash flows provided by operating
activities................................ 54,755 52,062 46,946
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment..... (52,548) (60,597) (39,968)
Purchase of businesses, net of cash acquired... (2,041) (1,090) (7,136)
Other.......................................... -- 53 661
-------- -------- --------
Cash flows used in investing activities.... (54,589) (61,634) (46,443)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of current maturities of long-term
debt and capital lease obligations............ (11,970) (11,926) (14,047)
Proceeds from (payments of) long-term
borrowings.................................... 139,442 (41,428) (5,350)
Proceeds from (payments of) short-term
borrowings, net............................... (79,750) 53,591 10,780
Repurchase of common stock..................... (49,837) (4,692) --
Proceeds from sales and issuances of common
stock......................................... 3,531 15,166 9,487
-------- -------- --------
Cash flows provided by financing
activities................................ 1,416 10,711 870
EFFECT OF EXCHANGE RATE CHANGES ON CASH.......... 2,045 (2,325) (511)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 3,627 (1,186) 862
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR..... 21,686 22,872 22,010
-------- -------- --------
CASH AND CASH EQUIVALENTS--END OF YEAR........... $ 25,313 $ 21,686 $ 22,872
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the twelve months ended December 31, 1998, 1997 and 1996
(In thousands, except share data)
<TABLE>
<CAPTION>
Foreign
Additional Retained Currency
Common Paid-in Earnings Translation Treasury Unearned Comprehensive
Stock Capital (Deficit) Adjustments Stock Compensation Total Income
------ ---------- --------- ----------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 $ 729
Net income.............. -- -- 37,101 -- -- -- 37,101 37,101
---- -------- -------- ------- -------- ------- -------- -------
Comprehensive Income.... $37,830
=======
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) $(3,517)
Net income.............. -- -- 42,152 -- -- -- 42,152 42,152
---- -------- -------- ------- -------- ------- -------- -------
Comprehensive Income.... $38,635
=======
Balance at December 31,
1997
(includes 200,000
treasury shares)....... 218 221,234 50,119 (5,129) (4,692) (1,227) 260,523
Balance at December 31,
1997...................
Common stock issued
principally under
employee stock plans... 3 1,988 -- -- -- -- 1,991
Common stock
issued/cancelled under
restricted stock plan,
net.................... -- 1,077 -- -- -- (930) 147
Amortization of unearned
compensation........... -- -- -- -- -- 530 530
Repurchase of common
stock.................. -- -- -- -- (49,837) -- (49,837)
Treasury stock
cancelled.............. (27) (54,502) -- -- 54,529 -- --
Tax benefit from
exercise of stock
options................ -- 521 -- -- -- -- 521
Foreign currency
translation
adjustments............ -- -- -- 1,393 -- -- 1,393 $ 1,393
Net income.............. -- -- 4,813 -- -- -- 4,813 4,813
---- -------- -------- ------- -------- ------- -------- -------
Comprehensive Income.... $ 6,206
=======
Balance at December 31,
1998................... $194 $170,318 $ 54,932 $(3,736) $ -- $(1,627) $220,081
==== ======== ======== ======= ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF ACCOUNTING POLICIES
Description of Business
BancTec, Inc., a Delaware corporation, and subsidiaries (the "Company") is a
worldwide systems integration and services company with a 26-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, the Company offers a comprehensive portfolio of payment and document
processing systems and services, workflow and image management software
products, and computer and network support services.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries.
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 and weighted average methods.
Deferred Revenue
Certain of the Company's contracts permit the Company to bill the customer
in advance of the time revenue is recognized. Deferred revenue represents
billings in excess of revenue recognized. Revenue is recognized ratably over
the contract period as the services are performed, which usually occurs within
one year of billing.
Derivative Financial Instruments
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the period of the agreements. Unamortized premiums, if
any, are included in other current assets or other assets on the balance sheet
depending on the amortization period.
23
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition
The Company's revenue recognition policies for its principal sources of
revenue are:
Equipment and software sales--Revenue from sales of established products is
recognized upon shipment 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, 1998 and 1997, there
were $133,000 and $884,000, 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.
The Company evaluates the recoverability of goodwill and other long-lived
assets by measuring the carrying value amount of the assets against the
estimated undiscounted future cash flows associated with them. At the time
such evaluations indicate that the future undiscounted cash flows of certain
long-lived assets are not sufficient to recover the carrying value of such
assets, the assets are adjusted to their fair values.
During the fourth quarter of 1998, management decided not to pursue the
development of certain third party maintenance business for a Canadian
subsidiary, BancTec Canada, in conjunction with the reorganization discussed
in Note C. Consequently, the related future undiscounted cash flows of such
operations are not sufficient to cover the carrying value of the subsidiary's
goodwill. During 1998, the Company recorded a charge of approximately $4.1
million to goodwill amortization expense as a result of the impairment.
Product Development
Company sponsored software product development costs are expensed as
incurred until technological feasibility has been established. At that time,
the software product development costs are capitalized in conformity with SFAS
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed." At December 31, 1998 and 1997, capitalized software costs
recorded in other long-term assets were
24
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
$0 and $181,000, 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 periods ended December 31, 1998, 1997 and 1996, was $181,000, $180,000,
and $181,000, 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
gains/(losses) for the twelve months ended December 31, 1998, 1997 and 1996,
were $972,000, ($741,000) and ($835,000), respectively.
Net Income Per Share
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 15, 1997. As a result, the Company's reported
income 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, healthcare, government
agencies, utilities or telecommunications. 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--ACQUISITIONS AND EQUITY INVESTMENTS
During the first quarter of 1998, the Company acquired Groupe ParmaTec Inc.,
a Montreal based object-oriented software technology company for approximately
$2 million. The acquisition was accounted for under the purchase method of
accounting.
In fiscal 1992, the Company and Thomson-CSF ("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. The acquisition was accounted for under the purchase method of
accounting.
25
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE C--REORGANIZATION
In October 1998, the Company announced plans to reorganize its operations
into two primary businesses: Worldwide Financial Systems and Computer and
Network Services. In conjunction with this reorganization, the Company
recorded charges of approximately $22.1 million, of which $13.6 million
relates to inventory obsolescence costs as discussed in Note D and $4.1
million relates to the impairment of goodwill as discussed in Note A. The
remaining charges totaled approximately $4.4 million, of which $2.0 million
was recorded as cost of sales expense and $2.4 million was recorded as
selling, general and administrative expense. Included in the reorganization
charge is an accrual for approximately $1.0 million related to the closure of
the Company's operations in Australia. The remaining $3.4 million primarily
relates to severance costs that will be paid to approximately 60 employees and
management's estimate of severance to be paid to the Company's chief executive
officer who announced his retirement in the fourth quarter of 1998. Nearly all
employees were terminated in the fourth quarter of 1998 and included personnel
at the staff, management, and executive levels. As of December 31, 1998,
approximately $3.9 million of the charge was still accrued on the Company's
books.
NOTE D--INVENTORIES
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- -------
(In thousands)
<S> <C> <C>
Raw materials................................................ $28,557 $41,293
Work-in-process.............................................. 3,830 7,883
Finished goods............................................... 36,148 37,671
------- -------
$68,535 $86,847
======= =======
</TABLE>
In the fourth quarter of 1998, the Company discontinued certain product
lines in conjunction with the reorganization (see Note C) and, accordingly
expensed approximately $13.6 million of inventory.
NOTE E--DEBT
<TABLE>
<CAPTION>
December 31,
----------------
1998 1997
-------- -------
(In thousands)
<S> <C> <C>
Term loans payable to banks................................ $ -- $21,508
7 1/2% senior notes due June 1, 2008....................... 150,000 --
Obligations under capital leases........................... 1,230 2,234
-------- -------
151,230 23,742
Less current maturities.................................... 878 11,888
-------- -------
$150,352 $11,854
======== =======
</TABLE>
On May 22, 1998, the Company sold $150 million of 7 1/2% senior notes due
June 1, 2008 in a Rule 144A private offering. On August 28, 1998, the senior
notes were registered as public debt. Interest is due and payable in semi-
annual installments beginning December 1, 1998. The notes contain covenants
placing limitations on the Company's ability to permit subsidiaries to incur
certain debts, incur certain loans and engage in certain sale and leaseback
transactions. The Company is in compliance with all covenants.
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 eliminated 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.
26
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1998, the Company has an unsecured credit agreement with
financial institutions which provides for a $70,000,000 short-term revolving
credit facility ("revolving credit facility"). 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, 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 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 had
no outstanding balance on the revolving credit facility at December 31, 1998.
Also outstanding as of December 31, 1998, were foreign credit agreements in
the amount of $5,024,000 payable in Japanese yen. The terms on the agreements
range from three months to one year at interest rates up to 1.75%. There are
no covenants on these agreements.
The Company has agreements in place for additional lines of credit totaling
$60,000,000. The lines are uncommitted and have a maximum term of 30 days. The
weighted average interest rate on the additional lines of credit was 5.90% at
December 31, 1998. At December 31, 1998, the Company had no outstanding
balance on the lines of credit.
The Company was party to one interest rate cap agreement which expired in
May 1997 (See Note J).
The fair market value of the term loan, revolving credit facility, the
senior notes, lines of credit and foreign credit agreement as of December 31,
1998, approximates their respective carrying values.
Future minimum lease payments under capital lease obligations are as
follows:
<TABLE>
<CAPTION>
Calendar Year (In thousands)
------------- --------------
<S> <C>
1999....................................................... $ 929
2000....................................................... 358
------
Total minimum lease payments............................... 1,287
Less amount representing interest (6.0%-16.2% rate)........ 57
------
Present value of net minimum lease payments, including cur-
rent maturities of $878 at December 31, 1998.............. $1,230
======
</TABLE>
Property, plant and equipment recorded under capital leases are as follows:
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- -------
(In thousands)
<S> <C> <C>
Furniture, fixtures, systems and other...................... $ 3,236 $ 3,508
Machinery and equipment..................................... -- 74
------- -------
Total--at cost.............................................. 3,236 3,582
Less accumulated depreciation............................... 954 915
------- -------
$ 2,282 $ 2,667
======= =======
</TABLE>
27
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company paid cash totaling $7,856,000, $7,943,000, and $7,972,000, for
interest during the twelve months ended December 31, 1998, 1997 and 1996,
respectively. During the twelve months ended December 31, 1998, the Company
capitalized $731,000 in interest on the costs incurred to implement a new
internal information system.
NOTE F--OTHER ACCRUED EXPENSES AND LIABILITIES
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- -------
(In thousands)
<S> <C> <C>
Salaries, wages and other compensation...................... $20,332 $18,878
Advances from customers..................................... 9,493 16,441
Accrued taxes, other than income taxes...................... 5,918 9,219
Accrued invoices and costs.................................. 8,545 8,582
Accrued reorganization costs................................ 3,879 --
Other....................................................... 29,433 18,123
------- -------
$77,600 $71,243
======= =======
</TABLE>
NOTE G--INCOME TAXES
The domestic and foreign components of income (loss) before income taxes and
extraordinary item consisted of the following:
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
-----------------------
1998 1997 1996
------ ------- -------
(In thousands)
<S> <C> <C> <C>
Domestic (including Puerto Rico).................... $ (576) $51,510 $47,357
Foreign............................................. 8,096 15,075 10,613
------ ------- -------
$7,520 $66,585 $57,970
====== ======= =======
</TABLE>
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
------------------------
1998 1997 1996
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Current:
Federal (including Puerto Rico).................. $ 621 $ 9,618 $ 974
State............................................ 387 3,240 --
Foreign.......................................... 4,782 5,660 2,460
------- ------- -------
Total current.................................. 5,790 18,518 3,434
------- ------- -------
Deferred:
Federal.......................................... (2,684) 3,709 19,906
Foreign.......................................... (399) 1,744 (2,471)
------- ------- -------
Total deferred................................. (3,083) 5,453 17,435
------- ------- -------
$ 2,707 $23,971 $20,869
======= ======= =======
</TABLE>
28
<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 Ended
December 31,
------------------------
1998 1997 1996
------ ------- -------
(In thousands)
<S> <C> <C> <C>
Provision at U.S. statutory rate of 35% for all
periods........................................ $2,632 $23,305 $20,290
Increase in tax expense resulting from:
Impact of foreign and Puerto Rico income tax
rates........................................ 2,724 54 100
State income tax, net of federal income tax
benefit...................................... 426 2,106 --
Utilization of net operating losses........... (4,419) (4,291) (3,626)
Foreign losses not providing a current
benefit...................................... 2,086 407 879
Goodwill amortization......................... 1,077 1,579 1,575
Foreign earnings and profit adjustment........ -- 975 --
Other......................................... (1,819) (164) 1,651
------ ------- -------
$2,707 $23,971 $20,869
====== ======= =======
</TABLE>
The Company paid cash totaling $10,168,000, $9,631,000, and $4,651,000 for
income taxes during the twelve months ended December 31, 1998, 1997 and 1996,
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. 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,
----------------
1998 1997
------- -------
(In thousands)
<S> <C> <C>
Gross deferred tax assets:
Net operating losses..................................... $24,431 $36,715
Inventory reserves....................................... 7,399 3,430
Receivable allowance..................................... 1,378 299
Intangible assets previously deducted.................... 4,038 4,557
Deferred revenues........................................ 3,701 2,723
Deferred compensation.................................... 4,183 4,134
Foreign timing differences, net.......................... 706 1,144
Taxes paid on intercompany profits....................... 1,146 996
Other.................................................... 3,541 966
------- -------
Total gross deferred tax asset......................... 50,523 54,964
------- -------
Gross deferred tax liabilities:
Depreciation............................................. -- (330)
Tax deductible deferred computer conversion costs........ (8,037) (2,947)
------- -------
Total gross deferred tax liability..................... (8,037) (3,277)
Deferred tax asset valuation reserve....................... (22,137) (34,421)
------- -------
Net deferred tax asset................................. $20,349 $17,266
======= =======
</TABLE>
The Company has net operating loss carryforwards which expire as follows:
1999 through 2002, $20,008,000; 2003 through 2007, $19,647,000; 2008 through
2012, $19,585,000; and indefinite, $7,238,000.
29
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The net change in the deferred tax asset valuation reserve for the twelve
months ended December 31, 1998 and 1997, was a decrease of $12,284,000 and
$12,457,000, respectively. The current year's decrease is primarily
attributable to the reversal of acquisition timing differences, inventory
reserves and utilization of net operating loss carryforwards.
Undistributed earnings of foreign subsidiaries were approximately
$25,497,000, $21,165,000 and $17,922,000, at December 31, 1998, 1997, and
1996, respectively. No taxes have been provided on these undistributed
earnings as they are considered to be permanently reinvested.
NOTE H--STOCKHOLDERS' EQUITY
Employee Stock Award Plans
At December 31, 1998, a total of 4,297,454 shares of common stock were
reserved for issuance under the Company's stock award plans. At December 31,
1998, 1,266,790 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:
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, 1998, 1997 and 1996, options to purchase
3,030,664, 2,519,745, and 2,860,586 shares, respectively, were outstanding, of
which options to purchase 748,825, 844,560, and 1,405,388, respectively, were
vested and could be exercised at a weighted average exercise price of $20.36,
$17.97, and $15.74, respectively. The outstanding stock options at December
31, 1998 have a weighted average remaining contractual life of 4.6 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--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
Granted.................................... 1,812,319 12.56-- 25.81 14.40
Exercised.................................. (176,788) 5.33-- 23.31 15.59
Forfeited.................................. (1,124,612) 12.08-- 27.00 22.42
----------
Options outstanding--December 31, 1998..... 3,030,664 $ 7.09--$25.81 $16.94
==========
</TABLE>
On December 10, 1998 the Company's Board of Directors approved the
cancellation and reissuance of stock options held by 367 employees. This
transaction did not apply to the options held by officers and directors. The
30
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
pricing was determined by using the Back-Scholes valuation model so that the
value of the new grants equaled the value of the original grants which were
cancelled. The new options have terms and conditions identical to the
Company's normal practice, including an exercise price equal to fair market
price on the grant date and vesting of 20 percent per year beginning at the
end of the first year. A total of 899,802 shares with an average exercise
price of $22.27 were canceled and a total of 391,219 shares with an exercise
price of $12.56 were granted.
Of the options exercised during 1998, 59,245 options had exercise prices
between $5.33 and $11.66, with a weighted average exercise price of $9.44. The
remaining 117,543 options exercised had exercise prices between $15.38 and
$23.31, with a weighted average exercise price of $18.69.
Of the options forfeited during 1998, 152,496 options had exercise prices
between $12.08 and $18.88, with a weighted average exercise price of $16.62.
The remaining 972,116 options forfeited had exercise prices between $19.75 and
$27.00, with a weighted average exercise price of $23.33.
Of the options outstanding at December 31, 1998, 1,607,344 options had
exercise prices between $7.09 and $16.38, with a weighted average exercise
price of $12.84 and a weighted average remaining contractual life of 5.8
years. The remaining 1,423,320 options had exercise prices between $16.63 and
$25.81, with a weighted average exercise price of $22.14 and a weighted
average contractual life of 3.2 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:
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
-------------------------------------
1998 1997 1996
------------------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
Net Income:
As reported.......................... $ 4,813 $ 42,152 $ 37,101
Pro Forma............................ $ 2,093 $ 40,173 $ 36,430
Basic EPS:
As reported.......................... $ 0.24 $ 1.97 $ 1.82
Pro Forma............................ $ 0.10 $ 1.88 $ 1.79
Diluted EPS:
As reported.......................... $ 0.24 $ 1.90 $ 1.76
Pro Forma............................ $ 0.10 $ 1.81 $ 1.73
</TABLE>
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
December 31,
-------------------------------
Weighted Average 1998 1997 1996
---------------- --------- --------- ---------
<S> <C> <C> <C>
Risk free interest rate..................... 4.8% 5.8% 6.2%
Expected life............................... 3.5 years 3.5 years 3.5 years
Expected volatility......................... 64% 35% 40%
Fair value of options granted............... $6.91 $6.88 $6.92
</TABLE>
31
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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, 1998,
48,822 restricted shares were awarded and unearned compensation of $1,047,240
was recorded. 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. The
weighted average price of the shares awarded during the twelve months ended
December 31, 1998, 1997 and 1996, was $24.47, $21.25, and $18.24,
respectively. Vesting on such shares ranges from 3 years to 21 years. During
the twelve months ended December 31, 1998, 1997 and 1996, $529,827, $228,413,
and $316,955, respectively, was amortized to expense. Also during the twelve
month period ended December 31, 1998, 1997 and 1996, the Company cancelled
6,360, 6,193, and 5,730 shares, respectively, reserved for key employees who
are no longer with the Company. This resulted in a reduction to unearned
compensation of $117,751, $102,006, and $105,000, respectively.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan under which 357,431 shares
of common stock were reserved at December 31, 1998. 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, 1998, 1997 and 1996, the Company issued
73,777, 48,455, and 50,448 shares, respectively, under the plan.
Stockholder Rights
On May 21, 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 one and one-half shares of common stock held as of the close of
business on May 26, 1988. Each share issued thereafter also received such
rights. 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 20, 2008.
Each right will entitle stockholders to buy one and one-half shares of
common stock of the Company at an exercise price of $85.00. 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
32
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 I--EMPLOYEE BENEFIT PLANS
The Company's 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, 1998,
the Company elected to contribute 50% of the qualifying participants' total
pre-tax contributions. 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. Amounts expensed
under the plan for the twelve months ended December 31, 1998, 1997 and 1996
were $2,768,000, $1,863,000, and $1,177,000, respectively.
The Company provides no material postretirement benefits to its employees.
NOTE J--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, 1998, 1997 and
1996, was $11,056,000, $8,454,000, and $9,155,000, respectively.
Future minimum payments under non-cancelable operating leases are
approximately as follows:
<TABLE>
<CAPTION>
Calendar Year (In thousands)
------------- --------------
<S> <C>
1999.......................................................... $10,219
2000.......................................................... 7,075
2001.......................................................... 5,640
2002.......................................................... 3,818
2003.......................................................... 2,534
Thereafter.................................................... 3,317
-------
$32,603
=======
</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.
33
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 E, the Company had one interest rate cap agreement in effect at December
31, 1996, which expired in May 1997.
NOTE K--BUSINESS SEGMENT DATA
As of December 31, 1998 the Company adopted SFAS No. 131, which requires
disclosure of business segment data in accordance with the "management
approach". The management approach is based on the way segments are organized
within the Company for making operating decisions and assessing performance.
The Company's business operations are organized into three business units as
follows:
<TABLE>
<CAPTION>
Manfacturing & US Maintenance Worldwide Corporate/
Supplies & Service Systems Eliminations Total
-------------- -------------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
For the twelve months
ended December 31, 1998
Revenues from external
customers............. $49,880 $238,335 $309,705 $ -- $597,920
Intersegment revenues.. 55,179 1,311 7,480 (63,970) --
Segment operating
income (loss)......... (7,754) 42,653 (4,718) (17,350) 12,831
Segment identifiable
assets................ 65,058 142,921 236,453 85,773 530,205
Capital expenditures... 1,656 25,003 10,758 17,172 54,589
For the twelve months
ended December 31, 1997
Revenues from external
customers............. $57,214 $219,902 $326,418 $ -- $603,534
Intersegment revenues.. 53,986 10 14,746 (68,742) --
Segment operating
income (loss)......... 6,552 53,152 22,288 (7,658) 74,334
Segment identifiable
assets................ 90,746 139,871 217,625 56,611 504,853
Capital expenditures... 2,067 27,647 10,499 21,474 61,687
For the twelve months
ended December 31, 1996
Revenues from external
customers............. $54,098 $190,915 $308,989 $ -- $554,002
Intersegment revenues.. 54,703 185 14,941 (69,829) --
Segment operating
income (loss)......... 7,768 26,585 45,544 (15,812) 64,085
Segment identifiable
assets................ 71,287 126,154 206,223 63,631 467,295
Capital expenditures... 313 19,220 10,079 17,492 47,104
</TABLE>
The Company's manufacturing and supplies segment provides document-
processing systems, check sorting systems and electronic components, which are
marketed to its end-users, other manufacturers and various resellers and
systems integrators worldwide. In addition, the manufacturing and supplies
segment provides full-page document scanners that are sold worldwide through
distributors.
The Company's U.S. maintenance and service segment installs and maintains
its own equipment products such as document reader/sorters and scanners. In
addition, the maintenance and service segment provides
34
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
personal computer warranty repair services for companies and administers third
party extended warranties on personal computers sold by some of the nation's
largest retailers. The Company provides a variety of personal computer
services to Fortune 1000 companies and government agencies.
The Company's worldwide systems segment provides integration services
related to a full range of software and equipment for high volume, complex
financial transaction processing environments. Customers include some of the
largest check and payment processors worldwide, including banks, credit card
companies, utilities, insurance companies and government agencies.
In October 1998, the Company announced plans to reorganize its operations
into two primary businesses--Worldwide Financial Systems and Computer and
Network Services. Worldwide Financial Systems will include the following
operations: financial transaction processing, manufacturing and supplies, and
installation and maintenance of BancTec equipment products and Plexus.
Computer and network services will include personal computer warranty repair
services and administration of third party extended warranties. The Company
provides a variety of personal computer services to Fortune 1000 companies and
government agencies. The purpose of the reorganization was to give greater
visibility to the Company's growing computer services business and, at the
same time, to create a single organization to serve the needs of its
traditional transaction processing customer base. The Company will begin
reporting segment data under the new organization in 1999.
Whenever possible, the Company uses market prices to determine intersegment
pricing. Other products are transferred at cost or cost plus an agreed upon
mark-up.
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 to unaffiliated customers and affiliates for the twelve months ended
December 31, 1998, 1997 and 1996, and long-lived assets, other than deferred
taxes, at the end of each of those periods, classified by geographic area, are
as follows:
<TABLE>
<CAPTION>
Other
United Inter- Elimina- Consoli-
States Europe national tions dated
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Twelve months ended December 31,
1998
Sales to unaffiliated
customers...................... $422,675 $108,375 $66,870 $ -- $597,920
Interarea sales to affiliates... 61,568 2,402 -- (63,970) --
Long-lived assets other than
deferred taxes................. 224,907 11,231 12,595 (29,487) 219,246
Twelve months ended December 31,
1997
Sales to unaffiliated
customers...................... $427,943 $111,891 $63,700 $ -- $603,534
Interarea sales to affiliates... 65,757 2,985 -- (68,742) --
Long-lived assets other than
deferred taxes................. 219,372 11,438 10,127 (29,551) 211,386
Twelve months ended December 31,
1996
Sales to unaffiliated
customers...................... $393,635 $ 92,624 $67,743 $ -- $554,002
Interarea sales to affiliates... 66,674 3,117 38 (69,829) --
Long-lived assets other than
deferred taxes................. 199,605 12,908 9,013 (29,508) 192,018
</TABLE>
35
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE M--SUMMARIZED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
---------------------------------------------
Q1 Q2 Q3 Q4(A) Total
-------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenue...................... $142,379 $145,956 $157,484 $152,101 $597,920
Gross profit................. 41,960 40,028 41,713 8,900 132,601
Net income................... 10,055 7,577 7,250 (20,069) 4,813
Basic income per share....... $ 0.47 $ 0.36 $ 0.36 $ (1.04) $ 0.24
Diluted income per share..... $ 0.46 $ 0.36 $ 0.36 $ (1.04) $ 0.24
<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 $ 1.97
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
<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>
- --------
(A) During the fourth quarter of 1998, the Company recorded approximately $22.1
million of charges related to the reorganization of the Company's
operations and approximately $15.4 million of various other charges,
including: the termination of a systems contract related to a discontinued
product, the termination of a third party maintenance contract, additional
provisions for doubtful accounts, inventory obsolescence costs and various
other items.
36
<PAGE>
BANCTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE N--EARNINGS PER SHARE
In accordance with SFAS 128, "Earnings Per Share", diluted earnings per share
are calculated as follows:
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-----------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Income.............................. $ 4,813,000 $42,152,000 $37,101,000
Add after tax interest expense
applicable to 7 1/4% convertible
subordinated debentures................ -- 1,879,000 2,100,000
----------- ----------- -----------
Net Income, as adjusted................. $ 4,813,000 $44,031,000 $39,201,000
=========== =========== ===========
Weighted average number of shares
outstanding during the period.......... 20,393,751 21,359,309 20,340,561
Effect of diluted securities
attributable to stock options and
unearned compensation from restricted
stock awards........................... 41,696 418,843 388,257
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................ 20,435,447 23,203,049 22,317,059
----------- ----------- -----------
Diluted income per common and common
equivalent share....................... $ 0.24 $ 1.90 $ 1.76
=========== =========== ===========
</TABLE>
For the twelve months ended December 31, 1998, 1997 and 1996, options to
purchase 2,067,332, 40,503 and 1,406,516 shares of common stock, respectively,
were not included in the computation of diluted income per share because to do
so would have been anti-dilutive for the periods presented.
37
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1999 annual meeting
of stockholders, except for the information regarding executive officers of
the Company which is contained in Part I of this Annual Report on Form 10-K.
The information required by this item contained in such definitive proxy
material is incorporated herein by reference.
ITEM 11. Executive Compensation
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1999 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1999 annual meeting
of stockholders, which information is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1999 annual meeting
of stockholders, which information is incorporated herein by reference.
38
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2) Financial Statements: See Index to Financial Statements and
Schedules on page 41.
(b) Reports on Form 8-K:
(c) Exhibits
<TABLE>
<C> <S>
3.1 --Certificate of Incorporation.(1)
3.2 --By-Laws.(1)
4.1 --Rights Agreement dated May 26, 1998.(4)
4.2 --Indenture dated May 22, 1998 by and between the Company and The
First National Bank of Chicago.(5)
4.3 --Exchange and Registration Rights Agreement dated May 22, 1998 by and
among the Company, Chase Securities, Inc., Goldman, Sachs & Co. and
NationsBanc Montgomery Securities LLC.(5)
10.1 --First Amendment to Loan Documents dated May 22, 1998, among the
Company, its Subsidiaries, the Banks and Chase Bank of Texas, as
Agent.(5)
10.2 --Credit Agreement dated February 22, 1996, among the Company, its
Subsidiaries and Chase Bank of Texas, formerly known as Texas
Commerce Bank National Association, as Agent.(1)
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.3 --BancTec, Inc. 1989 Stock Plan.(1)
10.4 --BancTec, Inc. 1994 Stock Plan.(2)
10.5 --BancTec, Inc. Deferred Compensation Plan.(3)
10.6 --BancTec, Inc. 1996 Employee Stock Purchase Plan.(3)
10.7 --Employment Agreement with Grahame N. Clark, Jr. dated October 23,
1998.*
10.8 --Employment Agreement with Tod V. Mongan dated October 23, 1998.*
10.9 --Employment Agreement with Raghavan Rajaji dated October 23, 1998.*
10.10 --Employment Agreement with Donald D. Herbener dated October 23, 1998.*
10.11 --Employment Agreement with John A. Torkelson dated October 23, 1998.*
10.12 --Employment Agreement with James R. Wimberley dated October 23, 1998.*
10.13 --Employment Agreement with Kevin L. Roper dated October 23, 1998.*
10.14 --Employment Agreement with Scott J. Wilson dated October 23, 1998.*
10.15 --Employment Agreement with James E. Uren dated October 23, 1998.*
10.16 --Form of Indemnification Agreement between the Company and each of
its Directors and Officers.(1)
21.1 --Subsidiaries.*
23.1 --Consent of Arthur Andersen LLP.*
27.0 --Selected Financial Data.*
</TABLE>
- --------
* Filed herewith.
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended March 27, 1994.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
(4) Incorporated by reference to the Company's Registration Statement on Form
8-A dated June 2, 1998.
(5) Incorporated by reference to the Company's Registration Statement on Form
S-4 dated August 28, 1998.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BancTec, Inc.
/s/ Grahame N. Clark, Jr.
By: _________________________________
Grahame N. Clark, Jr.
Chairman of the Board,
President and Chief Executive
Officer
Dated: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Grahame N. Clark, Jr. Chairman of the Board, March 31, 1999
____________________________________ President and Chief
Grahame N. Clarke, Jr. Executive Officer and
Director (Principal
Executive Officer)
/s/ Raghavan Rajaji Senior Vice President, March 31, 1999
____________________________________ Treasurer and Chief
Raghaven Rajaji Financial Officer
(Principal Financial
Officer)
/s/ Scott J. Wilson Controller (Principal March 31, 1999
____________________________________ Accounting Officer)
Scott J. Wilson
/s/ Michael E. Faherty Director March 31, 1999
____________________________________
Michael E. Faherty
/s/ Paul J. Ferri Director
____________________________________
Paul J. Ferri
/s/ Rawles Fulgham Director March 31, 1999
____________________________________
Rawles Fulgham
/s/ A.A. Meitz Director March 31, 1999
____________________________________
A.A. Meitz
/s/ Michael A. Stone Director March 31, 1999
____________________________________
Michael A. Stone
</TABLE>
40
<PAGE>
BANCTEC, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Financial Statements and Report of Independent Public Accountants
Reports of Independent Public Accountants.............................. 17, 42
Consolidated Balance Sheets at December 31, 1998, and December 31,
1997.................................................................. 18-19
Consolidated Statements of Operations for the twelve months ended
December 31, 1998, 1997 and 1996...................................... 20
Consolidated Statements of Cash Flows for the twelve months ended
December 31, 1998, 1997 and 1996...................................... 21
Consolidated Statements of Stockholders' Equity for the twelve months
ended December 31, 1998, 1997 1996.................................... 22
Notes to Consolidated Financial Statements............................. 23-37
Supplemental Schedules
Schedule II--Valuation and Qualifying Accounts for the twelve months
ended December 31, 1998, 1997 and 1996................................ 43
</TABLE>
All other schedules have been omitted as the required information is
inapplicable, not required, or the information is included in the financial
statements and notes thereto.
41
<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 of BancTec, Inc. (the "Company")
included in this Form 10-K, and have issued our report thereon dated February
3, 1999. Our audits were made for the purpose of forming an opinion on those
consolidated financial statements taken as a whole. The schedule listed in the
Index to Financial Statements and Schedules is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen llp
Dallas, Texas
February 3, 1999
42
<PAGE>
Schedule II
BANCTEC, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Twelve Months Ended December 31, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- ---------- ------------------- ----------
Additions
Balance at charged to Balance at
beginning costs and end of
of period expenses Deductions(A)(B)(C) period
---------- ---------- ------------------- ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful
Accounts
Twelve months ended
December 31, 1998....... $ 8,100 4,240 (1,582) $10,758
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
Reorganization Accrual
Twelve months ended
December 31, 1998....... $ -- 4,401 (522) $ 3,879
Accrued Merger Charges
and Costs
Twelve months ended
December 31, 1998....... $ 2,902 -- (2,570) $ 332
Twelve months ended
December 31, 1997....... $ 6,431 1,542 (5,071) $ 2,902
Twelve months ended
December 31, 1996....... $25,426 2,850 (21,845) $ 6,431
</TABLE>
- --------
(A)Write-off of uncollectible accounts.
(B)Severance and related payments.
(C)Payment of merger charges.
43
<PAGE>
Exhibit 10.7
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 23,
1998, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and Grahame N.
Clark, Jr. (the "Employee") who resides at 6620 Glenhurst, Dallas, Texas 75240.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse
to the best interests of the Company and which, if the subject of a
criminal proceeding, could result in a criminal conviction for a felony or
(b) the failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than
the failure resulting from the Employee's incapacity due to physical or
mental illness), provided, however, that the Employee shall not be deemed
to be terminated for Cause under this subsection (b) unless and until (1)
after the Employee receives written notice from the Company specifying with
reasonable particularity the actions of Employee which constitute a
violation of this subsection (b) and (2) within a period of 30 days after
receipt of such notice (and during which the violation is within the
control of the Employee), Employee fails to reasonably and prospectively
cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this
Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (B) the Employee's total compensation is reduced or any
other failure by the Company to comply with Section 4 hereof, (C) any
change in any employee benefit plans or arrangements in effect on the date
hereof in which the Employee participates (including without limitation any
pension and retirement plan, savings and profit sharing plan, stock
ownership or purchase plan, stock option
<PAGE>
plan, or life, medical or disability insurance plan), which would adversely
affect the Employee's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to all executive officers of the
Company and does not result in a proportionately greater reduction in the
rights of or benefits to the Employee as compared to any other executive
officer of the Company, or (D) without his prior concurrence, the Employee
is required to engage in an increased amount of travel on the Company's
business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required
to be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any
person or group (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 20% of the combined voting power of the
Company's then outstanding securities, or (b) there are serving as
directors two or more persons who were elected as members of the Board of
Directors and were not nominated by management or the Board of Directors of
the Company to serve on the Board of Directors of the Company, or (c) the
Company is merged or consolidated with another corporation and as a result
of such merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for purposes
of such calculation shares of the voting securities of the Company owned by
a party to such merger or consolidation or affiliates (within the meaning
of the Exchange Act) of such party, as the same existed immediately prior
to such merger or consolidation, or (d) the Company sells all or
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of this
Agreement, the term of the Employee's employment with the Company shall commence
on the date hereof and shall terminate on October 23, 2003, unless sooner
terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
2
<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity that could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date,
3
<PAGE>
the Company may terminate the Employee's employment with the Company under
this Agreement with or without Cause and by the affirmative vote of two-
thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days' prior
written notice of his desire to the Board of Directors of the Company and
receiving an affirmative vote of two-thirds of the members of the Board of
Directors of the Company. The Employee will continue to receive his Base
Salary and Benefits through the date of termination with no liability on
the part of the Company for further payments to the Employee unless
Employee terminates his employment pursuant to Section 9.1(c)(ii), at which
time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee
is not eligible to receive benefits under the Company's Long Term
Disability Plan; or (ii) the Employee terminates his employment as a result
of any of the following reasons: (A) without the Employee's consent the
Company materially diminishes the scope of the Employee's duties, assigns
to the Employee duties materially inconsistent with his designated
position, or reduces the Employee's Base Salary or Targeted Bonus to an
amount less than previously determined or established by the Board of
Directors, or (B) the Company breached any of its material obligations
under this Agreement and such breach is not cured within 30 days after
written notice thereof by the Employee; then the Company shall pay the
Employee severance payments in an amount equal to the sum of the (x)
Employee's annualized Base Salary in effect at the time of such
termination, and (y) an amount equal to the Employee's Targeted Bonus for
the fiscal year in which such termination occurs (provided, however, that
if the basis for Employee's termination is the reduction in his Base Salary
or the reduction of his Targeted Bonus, the severance pay shall be based on
the Base Salary and the Targeted Bonus in effect prior to such reduction).
The severance payments shall be made in installments over a period of 12
months. Notwithstanding the foregoing, if the Employee terminates his
employment pursuant to clause (ii) above, he shall be entitled to the
severance payments provided for in this paragraph only if he gives written
notice to the Company of his termination of employment within 30 days after
the occurrence of the event or events specified in clause (ii) on which he
bases his termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee might
otherwise be entitled under Company severance policies from time to time in
effect, except for (i) accrued and unpaid Base Salary to the date of
termination, and (ii) any bonus due with respect to fiscal years completed
as of the date of termination pursuant to the Executive Bonus Plan. Nothing
contained in the foregoing shall be construed so as to affect the
Employee's rights or the Company's obligations relating to agreements or
benefits that are unrelated to termination of employment.
(e) In the event that the Company terminates the Employee's employment
for Cause, the Company will have no liability on its part for further
payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a) or
(b), if the Employee is also a member of the Board of Directors of the
Company, then he may not vote on such termination, and the total number of
members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
4
<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or not
the Employee has given notice of termination of employment pursuant to
Section 9.2(c), the Company may terminate the Employee's employment with
the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part for
further payments to the Employee by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination, if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total number
of members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or not
the Employee has given notice of termination of employment pursuant to
Section 9.2(c), if the Employee's employment with the Company is terminated
without Cause or if Employee terminates his employment with the Company for
Good Reason, the Employee will continue to accrue and receive his base
salary and Benefits through the date of termination and will be entitled to
receive the benefits provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his sole and
absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon twelve months' prior written notice to
the Company, terminate his employment with the Company under this Agreement
for any reason whatsoever. If the Employee's employment with the Company
under this Agreement is terminated pursuant to this Subsection 9.2(c) and
subject in all respects to the provisions of Section 9.2(a) and (b), the
Employee will continue to accrue and receive his base salary and Benefits
through the date of termination and will be entitled to receive the
benefits provided for under Section 10 hereof. No termination of the
Employee's employment with the Company pursuant to Subsections 9.2(b) or
(c) shall in any way terminate the Company's obligations under Sections 23
and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether such
termination is by the Employee or by the Company) at any time on or within three
years after the Triggering Date for any reason other than (a) termination by the
Company for Cause, (b) the Employee having reached the age of 65, or (c) the
Employee's death, then, within five days after the date of such termination, the
Company shall pay the Employee a lump sum amount in cash equal to 2.99 times the
Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date.
The Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
5
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall include each other
gender where appropriate.
6
<PAGE>
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only
and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state, city, or other taxes as shall be required pursuant to any law or
government regulation or ruling.
7
<PAGE>
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
By: /s/ TOD V. MONGAN
-------------------------------
Tod V. Mongan
Senior Vice President and
General Counsel
/s/ GRAHAME N. CLARK, JR.
-------------------------------
Employee
8
<PAGE>
Exhibit 10.8
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 23, 1998,
between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and Tod V.
Mongan (the "Employee") who resides at 4804 Cypress Point, Frisco, Texas 75034.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse to
the best interests of the Company and which, if the subject of a criminal
proceeding, could result in a criminal conviction for a felony or (b) the
failure by the Employee to substantially perform his duties hereunder, which
duties are within the control of the Employee (other than the failure
resulting from the Employee's incapacity due to physical or mental illness),
provided, however, that the Employee shall not be deemed to be terminated
for Cause under this subsection (b) unless and until (1) after the Employee
receives written notice from the Company specifying with reasonable
particularity the actions of Employee which constitute a violation of this
subsection (b) and (2) within a period of 30 days after receipt of such
notice (and during which the violation is within the control of the
Employee), Employee fails to reasonably and prospectively cure such
violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this
Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (B) the Employee's total compensation is reduced or any
other failure by the Company to comply with Section 4 hereof, (C) any change
in any employee benefit plans or arrangements in effect on the date hereof
in which the Employee participates (including without limitation any pension
and retirement plan, savings and profit sharing plan, stock ownership or
purchase plan, stock option
<PAGE>
plan, or life, medical or disability insurance plan), which would adversely
affect the Employee's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to all executive officers of the
Company and does not result in a proportionately greater reduction in the
rights of or benefits to the Employee as compared to any other executive
officer of the Company, or (D) without his prior concurrence, the Employee
is required to engage in an increased amount of travel on the Company's
business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required to
be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any person
or group (as such terms are used in Section 13(d) and 14(d) of the Exchange
Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 20% of the combined voting power of the Company's
then outstanding securities, or (b) there are serving as directors two or
more persons who were elected as members of the Board of Directors and were
not nominated by management or the Board of Directors of the Company to
serve on the Board of Directors of the Company, or (c) the Company is merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 51% of the outstanding voting securities of the
surviving or resulting corporation are owned in the aggregate by the former
shareholders of the Company, excluding for purposes of such calculation
shares of the voting securities of the Company owned by a party to such
merger or consolidation or affiliates (within the meaning of the Exchange
Act) of such party, as the same existed immediately prior to such merger or
consolidation, or (d) the Company sells all or substantially all of its
assets to another corporation which is not a wholly-owned subsidiary of the
Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of
this Agreement, the term of the Employee's employment with the Company shall
commence on the date hereof and shall terminate on October 23, 2003, unless
sooner terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
2
<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity that could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date,
3
<PAGE>
the Company may terminate the Employee's employment with the Company
under this Agreement with or without Cause and by the affirmative vote
of two-thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days'
prior written notice of his desire to the Board of Directors of the
Company and receiving an affirmative vote of two-thirds of the members
of the Board of Directors of the Company. The Employee will continue to
receive his Base Salary and Benefits through the date of termination
with no liability on the part of the Company for further payments to the
Employee unless Employee terminates his employment pursuant to Section
9.1(c)(ii), at which time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when
Employee is not eligible to receive benefits under the Company's Long
Term Disability Plan; or (ii) the Employee terminates his employment as
a result of any of the following reasons: (A) without the Employee's
consent the Company materially diminishes the scope of the Employee's
duties, assigns to the Employee duties materially inconsistent with his
designated position, or reduces the Employee's Base Salary or Targeted
Bonus to an amount less than previously determined or established by the
Board of Directors, or (B) the Company breached any of its material
obligations under this Agreement and such breach is not cured within 30
days after written notice thereof by the Employee; then the Company
shall pay the Employee severance payments in an amount equal to the sum
of the (x) Employee's annualized Base Salary in effect at the time of
such termination, and (y) an amount equal to the Employee's Targeted
Bonus for the fiscal year in which such termination occurs (provided,
however, that if the basis for Employee's termination is the reduction
in his Base Salary or the reduction of his Targeted Bonus, the severance
pay shall be based on the Base Salary and the Targeted Bonus in effect
prior to such reduction). The severance payments shall be made in
installments over a period of 12 months. Notwithstanding the foregoing,
if the Employee terminates his employment pursuant to clause (ii) above,
he shall be entitled to the severance payments provided for in this
paragraph only if he gives written notice to the Company of his
termination of employment within 30 days after the occurrence of the
event or events specified in clause (ii) on which he bases his
termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee
might otherwise be entitled under Company severance policies from time
to time in effect, except for (i) accrued and unpaid Base Salary to the
date of termination, and (ii) any bonus due with respect to fiscal years
completed as of the date of termination pursuant to the Executive Bonus
Plan. Nothing contained in the foregoing shall be construed so as to
affect the Employee's rights or the Company's obligations relating to
agreements or benefits that are unrelated to termination of employment.
(e) In the event that the Company terminates the Employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total
number of members of the Board of Directors will be reduced by one for
purposes of voting on such termination.
4
<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant
to Section 9.2(c), the Company may terminate the Employee's employment
with the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part
for further payments to the Employee by the affirmative vote of
two-thirds of the members of the Board of Directors of the Company. In
voting upon such termination, if the Employee is also a member of the
Board of Directors of the Company, then he may not vote on such
termination, and the total number of members of the Board of Directors
will be reduced by one for purposes of voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant
to Section 9.2(c), if the Employee's employment with the Company is
terminated without Cause or if Employee terminates his employment with
the Company for Good Reason, the Employee will continue to accrue and
receive his base salary and Benefits through the date of termination and
will be entitled to receive the benefits provided for under Section 10
hereof.
(c) On or after the Triggering Date, the Employee may, in his sole
and absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon twelve months' prior written notice
to the Company, terminate his employment with the Company under this
Agreement for any reason whatsoever. If the Employee's employment with
the Company under this Agreement is terminated pursuant to this
Subsection 9.2(c) and subject in all respects to the provisions of
Section 9.2(a) and (b), the Employee will continue to accrue and receive
his base salary and Benefits through the date of termination and will be
entitled to receive the benefits provided for under Section 10 hereof.
No termination of the Employee's employment with the Company pursuant to
Subsections 9.2(b) or (c) shall in any way terminate the Company's
obligations under Sections 23 and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether such
termination is by the Employee or by the Company) at any time on or within three
years after the Triggering Date for any reason other than (a) termination by the
Company for Cause, (b) the Employee having reached the age of 65, or (c) the
Employee's death, then, within five days after the date of such termination, the
Company shall pay the Employee a lump sum amount in cash equal to 2.99 times the
Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date. The
Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
5
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall include each other
gender where appropriate.
6
<PAGE>
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only
and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state, city, or other taxes as shall be required pursuant to any law or
government regulation or ruling.
7
<PAGE>
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
By: /s/ GRAHAME N. CLARK, JR.
------------------------------------
Grahame N. Clark, Jr.
Chairman of the Board
and Chief Executive Officer
/s/ TOD V. MONGAN
------------------------------------
Employee
8
<PAGE>
Exhibit 10.9
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 23,
1998, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and Raghavan
Rajaji (the "Employee") who resides at 2612 Regatta Drive, Plano, Texas 75093.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse
to the best interests of the Company and which, if the subject of a
criminal proceeding, could result in a criminal conviction for a felony or
(b) the failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than
the failure resulting from the Employee's incapacity due to physical or
mental illness), provided, however, that the Employee shall not be deemed
to be terminated for Cause under this subsection (b) unless and until (1)
after the Employee receives written notice from the Company specifying with
reasonable particularity the actions of Employee which constitute a
violation of this subsection (b) and (2) within a period of 30 days after
receipt of such notice (and during which the violation is within the
control of the Employee), Employee fails to reasonably and prospectively
cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as
defined below) and (A) without his prior concurrence, the Employee is
assigned any duties or responsibilities that are inconsistent with his
position, duties, responsibilities or status at the commencement of the
term of this Agreement, or his reporting responsibilities or titles in
effect at such time are changed, (B) the Employee's total compensation is
reduced or any other failure by the Company to comply with Section 4
hereof, (C) any change in any employee benefit plans or arrangements in
effect on the date hereof in which the Employee participates (including
without limitation any pension and retirement plan, savings and profit
sharing plan, stock ownership or purchase plan, stock option
1
<PAGE>
plan, or life, medical or disability insurance plan), which would adversely
affect the Employee's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to all executive officers of the
Company and does not result in a proportionately greater reduction in the
rights of or benefits to the Employee as compared to any other executive
officer of the Company, or (D) without his prior concurrence, the Employee
is required to engage in an increased amount of travel on the Company's
business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required
to be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any
person or group (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 20% of the combined voting power of the
Company's then outstanding securities, or (b) there are serving as
directors two or more persons who were elected as members of the Board of
Directors and were not nominated by management or the Board of Directors of
the Company to serve on the Board of Directors of the Company, or (c) the
Company is merged or consolidated with another corporation and as a result
of such merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for purposes
of such calculation shares of the voting securities of the Company owned by
a party to such merger or consolidation or affiliates (within the meaning
of the Exchange Act) of such party, as the same existed immediately prior
to such merger or consolidation, or (d) the Company sells all or
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of this
Agreement, the term of the Employee's employment with the Company shall commence
on the date hereof and shall terminate on October 23, 2003, unless sooner
terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
2
<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity that could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date,
3
<PAGE>
the Company may terminate the Employee's employment with the Company under
this Agreement with or without Cause and by the affirmative vote of two-
thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days' prior
written notice of his desire to the Board of Directors of the Company and
receiving an affirmative vote of two-thirds of the members of the Board of
Directors of the Company. The Employee will continue to receive his Base
Salary and Benefits through the date of termination with no liability on
the part of the Company for further payments to the Employee unless
Employee terminates his employment pursuant to Section 9.1(c)(ii), at which
time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee
is not eligible to receive benefits under the Company's Long Term
Disability Plan; or (ii) the Employee terminates his employment as a result
of any of the following reasons: (A) without the Employee's consent the
Company materially diminishes the scope of the Employee's duties, assigns
to the Employee duties materially inconsistent with his designated
position, or reduces the Employee's Base Salary or Targeted Bonus to an
amount less than previously determined or established by the Board of
Directors, or (B) the Company breached any of its material obligations
under this Agreement and such breach is not cured within 30 days after
written notice thereof by the Employee; then the Company shall pay the
Employee severance payments in an amount equal to the sum of the (x)
Employee's annualized Base Salary in effect at the time of such
termination, and (y) an amount equal to the Employee's Targeted Bonus for
the fiscal year in which such termination occurs (provided, however, that
if the basis for Employee's termination is the reduction in his Base Salary
or the reduction of his Targeted Bonus, the severance pay shall be based on
the Base Salary and the Targeted Bonus in effect prior to such reduction).
The severance payments shall be made in installments over a period of 12
months. Notwithstanding the foregoing, if the Employee terminates his
employment pursuant to clause (ii) above, he shall be entitled to the
severance payments provided for in this paragraph only if he gives written
notice to the Company of his termination of employment within 30 days after
the occurrence of the event or events specified in clause (ii) on which he
bases his termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee might
otherwise be entitled under Company severance policies from time to time in
effect, except for (i) accrued and unpaid Base Salary to the date of
termination, and (ii) any bonus due with respect to fiscal years completed
as of the date of termination pursuant to the Executive Bonus Plan. Nothing
contained in the foregoing shall be construed so as to affect the
Employee's rights or the Company's obligations relating to agreements or
benefits that are unrelated to termination of employment.
(e) In the event that the Company terminates the Employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of the
Company, then he may not vote on such termination, and the total number of
members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
4
<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), the Company may terminate the Employee's employment with
the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part for
further payments to the Employee by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination, if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total number
of members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), if the Employee's employment with the Company is terminated
without Cause or if Employee terminates his employment with the Company for
Good Reason, the Employee will continue to accrue and receive his base
salary and Benefits through the date of termination and will be entitled to
receive the benefits provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his sole
and absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon twelve months' prior written notice to
the Company, terminate his employment with the Company under this Agreement
for any reason whatsoever. If the Employee's employment with the Company
under this Agreement is terminated pursuant to this Subsection 9.2(c) and
subject in all respects to the provisions of Section 9.2(a) and (b), the
Employee will continue to accrue and receive his base salary and Benefits
through the date of termination and will be entitled to receive the
benefits provided for under Section 10 hereof. No termination of the
Employee's employment with the Company pursuant to Subsections 9.2(b) or
(c) shall in any way terminate the Company's obligations under Sections 23
and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether such
termination is by the Employee or by the Company) at any time on or within three
years after the Triggering Date for any reason other than (a) termination by the
Company for Cause, (b) the Employee having reached the age of 65, or (c) the
Employee's death, then, within five days after the date of such termination, the
Company shall pay the Employee a lump sum amount in cash equal to 2.99 times the
Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date. The
Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
5
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall include each other
gender where appropriate.
6
<PAGE>
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only
and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state, city, or other taxes as shall be required pursuant to any law or
government regulation or ruling.
7
<PAGE>
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
BANCTEC, INC.
By: /s/ GRAHAME N. CLARK, JR.
-------------------------------------
Grahame N. Clark, Jr.
Chairman of the Board
and Chief Executive Officer
/s/ RAGHAVAN RAJAJI
-------------------------------------
Employee
8
<PAGE>
Exhibit 10.10
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 23, 1998,
between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and Donald H.
Herbener (the "Employee") who resides at 914 Glen Rose Drive, Allen, Texas
75013.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse
to the best interests of the Company and which, if the subject of a
criminal proceeding, could result in a criminal conviction for a felony or
(b) the failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than
the failure resulting from the Employee's incapacity due to physical or
mental illness), provided, however, that the Employee shall not be deemed
to be terminated for Cause under this subsection (b) unless and until (1)
after the Employee receives written notice from the Company specifying with
reasonable particularity the actions of Employee which constitute a
violation of this subsection (b) and (2) within a period of 30 days after
receipt of such notice (and during which the violation is within the
control of the Employee), Employee fails to reasonably and prospectively
cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this
Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (B) the Employee's total compensation is reduced or any
other failure by the Company to comply with Section 4 hereof, (C) any
change in any employee benefit plans or arrangements in effect on the date
hereof in which the Employee participates (including without limitation any
pension and retirement plan, savings and profit sharing plan, stock
ownership or purchase plan, stock option
<PAGE>
plan, or life, medical or disability insurance plan), which would adversely
affect the Employee's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to all executive officers of the
Company and does not result in a proportionately greater reduction in the
rights of or benefits to the Employee as compared to any other executive
officer of the Company, or (D) without his prior concurrence, the Employee
is required to engage in an increased amount of travel on the Company's
business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required
to be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any
person or group (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 20% of the combined voting power of the
Company's then outstanding securities, or (b) there are serving as
directors two or more persons who were elected as members of the Board of
Directors and were not nominated by management or the Board of Directors of
the Company to serve on the Board of Directors of the Company, or (c) the
Company is merged or consolidated with another corporation and as a result
of such merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for purposes
of such calculation shares of the voting securities of the Company owned by
a party to such merger or consolidation or affiliates (within the meaning
of the Exchange Act) of such party, as the same existed immediately prior
to such merger or consolidation, or (d) the Company sells all or
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of this
Agreement, the term of the Employee's employment with the Company shall commence
on the date hereof and shall terminate on October 23, 2003, unless sooner
terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
2
<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity that could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date,
3
<PAGE>
the Company may terminate the Employee's employment with the Company under
this Agreement with or without Cause and by the affirmative vote of two-
thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days' prior
written notice of his desire to the Board of Directors of the Company and
receiving an affirmative vote of two-thirds of the members of the Board of
Directors of the Company. The Employee will continue to receive his Base
Salary and Benefits through the date of termination with no liability on
the part of the Company for further payments to the Employee unless
Employee terminates his employment pursuant to Section 9.1(c)(ii), at which
time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee
is not eligible to receive benefits under the Company's Long Term
Disability Plan; or (ii) the Employee terminates his employment as a result
of any of the following reasons: (A) without the Employee's consent the
Company materially diminishes the scope of the Employee's duties, assigns
to the Employee duties materially inconsistent with his designated
position, or reduces the Employee's Base Salary or Targeted Bonus to an
amount less than previously determined or established by the Board of
Directors, or (B) the Company breached any of its material obligations
under this Agreement and such breach is not cured within 30 days after
written notice thereof by the Employee; then the Company shall pay the
Employee severance payments in an amount equal to the sum of the (x)
Employee's annualized Base Salary in effect at the time of such
termination, and (y) an amount equal to the Employee's Targeted Bonus for
the fiscal year in which such termination occurs (provided, however, that
if the basis for Employee's termination is the reduction in his Base Salary
or the reduction of his Targeted Bonus, the severance pay shall be based on
the Base Salary and the Targeted Bonus in effect prior to such reduction).
The severance payments shall be made in installments over a period of 12
months. Notwithstanding the foregoing, if the Employee terminates his
employment pursuant to clause (ii) above, he shall be entitled to the
severance payments provided for in this paragraph only if he gives written
notice to the Company of his termination of employment within 30 days after
the occurrence of the event or events specified in clause (ii) on which he
bases his termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee might
otherwise be entitled under Company severance policies from time to time in
effect, except for (i) accrued and unpaid Base Salary to the date of
termination, and (ii) any bonus due with respect to fiscal years completed
as of the date of termination pursuant to the Executive Bonus Plan. Nothing
contained in the foregoing shall be construed so as to affect the
Employee's rights or the Company's obligations relating to agreements or
benefits that are unrelated to termination of employment.
(e) In the event that the Company terminates the employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of the
Company, then he may not vote on such termination, and the total number of
members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
4
<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), the Company may terminate the Employee's employment with
the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part for
further payments to the Employee by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination, if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total number
of members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 9.2(c), if the Employee's employment with the Company is terminated
without Cause or if Employee terminates his employment with the Company for
Good Reason, the Employee will continue to accrue and receive his base
salary and Benefits through the date of termination and will be entitled to
receive the benefits provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his sole
and absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon 12 months' prior written notice to the
Company, terminate his employment with the Company under this Agreement for
any reason whatsoever. If the Employee's employment with the Company under
this Agreement is terminated pursuant to this Subsection 9.2(c) and subject
in all respects to the provisions of Section 9.2(a) and (b), the Employee
will continue to accrue and receive his base salary and Benefits through
the date of termination and will be entitled to receive the benefits
provided for under Section 10 hereof. No termination of the Employee's
employment with the Company pursuant to Subsections 9.2(b) or (c) shall in
any way terminate the Company's obligations under Sections 23 and 26 of
this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether
such termination is by the Employee or by the Company) at any time on or within
three years after the Triggering Date for any reason other than (a) termination
by the Company for Cause, (b) the Employee having reached the age of 65, or (c)
the Employee's death, then, within five days after the date of such termination,
the Company shall pay the Employee a lump sum amount in cash equal to 2 times
the Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date. The
Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
5
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall
6
<PAGE>
include each other gender where appropriate.
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only
and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state,
7
<PAGE>
city, or other taxes as shall be required pursuant to any law or government
regulation or ruling.
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
BANCTEC, INC.
By: /s/ GRAHAME N. CLARK, JR.
----------------------------------
Grahame N. Clark, Jr.,
Chairman of the Board
and Chief Executive Officer
/s/ DONALD H. HERBENER
----------------------------------
Employee
8
<PAGE>
Exhibit 10.11
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 23,
1998, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and John A.
Torkelson (the "Employee") who resides at 6297 Dial Way, San Jose, California
95129.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse to
the best interests of the Company and which, if the subject of a criminal
proceeding, could result in a criminal conviction for a felony or (b) the
failure by the Employee to substantially perform his duties hereunder, which
duties are within the control of the Employee (other than the failure
resulting from the Employee's incapacity due to physical or mental illness),
provided, however, that the Employee shall not be deemed to be terminated
for Cause under this subsection (b) unless and until (1) after the Employee
receives written notice from the Company specifying with reasonable
particularity the actions of Employee which constitute a violation of this
subsection (b) and (2) within a period of 30 days after receipt of such
notice (and during which the violation is within the control of the
Employee), Employee fails to reasonably and prospectively cure such
violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this
Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (B) the Employee's total compensation is reduced or any
other failure by the Company to comply with Section 4 hereof, (C) any change
in any employee benefit plans or arrangements in effect on the date hereof
in which the Employee participates (including without limitation any pension
and retirement plan, savings and profit sharing plan, stock ownership or
purchase plan, stock option
<PAGE>
plan, or life, medical or disability insurance plan), which would adversely
affect the Employee's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to all executive officers of the
Company and does not result in a proportionately greater reduction in the
rights of or benefits to the Employee as compared to any other executive
officer of the Company, or (D) without his prior concurrence, the Employee
is required to engage in an increased amount of travel on the Company's
business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be required to
be reported by the Company in response to Item 6(d) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; provided that, without
limitation, such an event shall be deemed to have occurred if (a) any person
or group (as such terms are used in Section 13(d) and 14(d) of the Exchange
Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 20% of the combined voting power of the Company's
then outstanding securities, or (b) there are serving as directors two or
more persons who were elected as members of the Board of Directors and were
not nominated by management or the Board of Directors of the Company to
serve on the Board of Directors of the Company, or (c) the Company is merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 51% of the outstanding voting securities of the
surviving or resulting corporation are owned in the aggregate by the former
shareholders of the Company, excluding for purposes of such calculation
shares of the voting securities of the Company owned by a party to such
merger or consolidation or affiliates (within the meaning of the Exchange
Act) of such party, as the same existed immediately prior to such merger or
consolidation, or (d) the Company sells all or substantially all of its
assets to another corporation which is not a wholly-owned subsidiary of the
Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of this
Agreement, the term of the Employee's employment with the Company shall commence
on the date hereof and shall terminate on October 23, 2003, unless sooner
terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive benefits
under any employee benefit or bonus plan or arrangement (collectively referred
to as "Benefits") made available by the Company in the future to its executive
officers and key management personnel, subject to and on a basis consistent with
the terms, conditions and overall administration of such plan or arrangement.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Employee pursuant to Subsection 4(a).
2
<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with the
Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the business
and affairs of the Company as are necessary to the performance and discharge of
the duties assigned to Employee under this Agreement. Employee shall not during
the term of his employment under this Agreement engage in any other business
activity that could constitute a conflict of interest, whether or not such
business activity is pursued for gain, profit, or other pecuniary advantage.
This shall not be construed as preventing the Employee from managing his current
investments or investing his assets in such form or manner as will not require
any services on the part of the Employee in the operation and the affairs of the
companies in which such investments are made. On or after the Triggering Date,
the Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness or
incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company shall
pay to such person as the Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to his estate as a lump sum
death benefit, his base salary which would otherwise be payable to the Employee
at the time of his death, in equal semi-monthly installments on the first and
fifteenth day of each and every month, for a period of months (not exceeding 12)
determined by multiplying two times the number of complete 12-month periods of
employment of the Employee commencing from the date of such employment by the
Company, in addition to any payments the Employee's spouse, beneficiaries, or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy which may be maintained by the Company, and such
payments shall fully discharge the Company's obligations hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date,
3
<PAGE>
the Company may terminate the Employee's employment with the Company
under this Agreement with or without Cause and by the affirmative vote
of two-thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days'
prior written notice of his desire to the Board of Directors of the
Company and receiving an affirmative vote of two-thirds of the members
of the Board of Directors of the Company. The Employee will continue to
receive his Base Salary and Benefits through the date of termination
with no liability on the part of the Company for further payments to the
Employee unless Employee terminates his employment pursuant to Section
9.1(c)(ii), at which time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when
Employee is not eligible to receive benefits under the Company's Long
Term Disability Plan; or (ii) the Employee terminates his employment as
a result of any of the following reasons: (A) without the Employee's
consent the Company materially diminishes the scope of the Employee's
duties, assigns to the Employee duties materially inconsistent with his
designated position, or reduces the Employee's Base Salary or Targeted
Bonus to an amount less than previously determined or established by the
Board of Directors, or (B) the Company breached any of its material
obligations under this Agreement and such breach is not cured within 30
days after written notice thereof by the Employee; then the Company
shall pay the Employee severance payments in an amount equal to the sum
of the (x) Employee's annualized Base Salary in effect at the time of
such termination, and (y) an amount equal to the Employee's Targeted
Bonus for the fiscal year in which such termination occurs (provided,
however, that if the basis for Employee's termination is the reduction
in his Base Salary or the reduction of his Targeted Bonus, the severance
pay shall be based on the Base Salary and the Targeted Bonus in effect
prior to such reduction). The severance payments shall be made in
installments over a period of 12 months. Notwithstanding the foregoing,
if the Employee terminates his employment pursuant to clause (ii) above,
he shall be entitled to the severance payments provided for in this
paragraph only if he gives written notice to the Company of his
termination of employment within 30 days after the occurrence of the
event or events specified in clause (ii) on which he bases his
termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee
might otherwise be entitled under Company severance policies from time
to time in effect, except for (i) accrued and unpaid Base Salary to the
date of termination, and (ii) any bonus due with respect to fiscal years
completed as of the date of termination pursuant to the Executive Bonus
Plan. Nothing contained in the foregoing shall be construed so as to
affect the Employee's rights or the Company's obligations relating to
agreements or benefits that are unrelated to termination of employment.
(e) In the event that the Company terminates the employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total
number of members of the Board of Directors will be reduced by one for
purposes of voting on such termination.
4
<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant
to Section 9.2(c), the Company may terminate the Employee's employment
with the Company under this Agreement only for Cause and, subject to the
provisions of Sections 23 and 26 hereof, with no liability on its part
for further payments to the Employee by the affirmative vote of
two-thirds of the members of the Board of Directors of the Company. In
voting upon such termination, if the Employee is also a member of the
Board of Directors of the Company, then he may not vote on such
termination, and the total number of members of the Board of Directors
will be reduced by one for purposes of voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant
to Section 9.2(c), if the Employee's employment with the Company is
terminated without Cause or if Employee terminates his employment with
the Company for Good Reason, the Employee will continue to accrue and
receive his base salary and Benefits through the date of termination and
will be entitled to receive the benefits provided for under Section 10
hereof.
(c) On or after the Triggering Date, the Employee may, in his sole
and absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon 12 months' prior written notice to
the Company, terminate his employment with the Company under this
Agreement for any reason whatsoever. If the Employee's employment with
the Company under this Agreement is terminated pursuant to this
Subsection 9.2(c) and subject in all respects to the provisions of
Section 9.2(a) and (b), the Employee will continue to accrue and receive
his base salary and Benefits through the date of termination and will be
entitled to receive the benefits provided for under Section 10 hereof.
No termination of the Employee's employment with the Company pursuant to
Subsections 9.2(b) or (c) shall in any way terminate the Company's
obligations under Sections 23 and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether such
termination is by the Employee or by the Company) at any time on or within three
years after the Triggering Date for any reason other than (a) termination by the
Company for Cause, (b) the Employee having reached the age of 65, or (c) the
Employee's death, then, within five days after the date of such termination, the
Company shall pay the Employee a lump sum amount in cash equal to one times the
Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of the
occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date. The
Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
5
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and shall be
governed, construed, and enforced in accordance with the laws of the State of
Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement nor
any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this Agreement
shall be binding upon and shall inure to the benefit of the Company and the
Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are, unless
specifically indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall include
the plural where appropriate, and words of any gender shall
6
<PAGE>
include each other gender where appropriate.
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective unless
the same is set forth in writing and signed by the party giving such waiver, and
no waiver of any right shall be deemed to be a waiver of any such right in the
future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes only and
do not constitute substantive matter to be considered in construing the terms of
this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of this
Agreement held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no provision of
this Agreement is intended, nor shall it be construed, to reduce or in any way
restrict any benefit to which the Employee may be entitled under any agreement,
plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall together constitute one and
the same instrument. The terms of this Agreement shall become binding upon each
party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement all
federal, state,
7
<PAGE>
city, or other taxes as shall be required pursuant to any law or government
regulation or ruling.
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and expenses
which the Employee may incur as a result of the Company's failure to perform
under this Agreement or as a result of the Company or any successor contesting
the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of the
Employee properly recorded on the books and records of the Company prior to the
Triggering Date, there shall be no right of set off or counterclaim against, or
delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
By: /s/ GRAHAME N. CLARK, JR.
-------------------------------------
Grahame N. Clark, Jr.,
Chairman of the Board
and Chief Executive Officer
/s/ JOHN A. TORKELSON
-------------------------------------
Employee
8
<PAGE>
Exhibit 10.12
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
---------------------
This Employment Agreement (the "Agreement") is dated as of October 23, 1998,
between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and James R.
Wimberley (the "Employee") who resides at 13210 Glad Acres Drive, Farmers
Branch, Texas 75234.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
Employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement, the
following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially adverse to
the best interests of the Company and which, if the subject of a
criminal proceeding, could result in a criminal conviction for a felony
or (b) the failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other
than the failure resulting from the Employee's incapacity due to
physical or mental illness), provided, however, that the Employee shall
not be deemed to be terminated for Cause under this subsection (b)
unless and until (1) after the Employee receives written notice from the
Company specifying with reasonable particularity the actions of Employee
which constitute a violation of this subsection (b) and (2) within a
period of 30 days after receipt of such notice (and during which the
violation is within the control of the Employee), Employee fails to
reasonably and prospectively cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (A) without his prior concurrence, the Employee is assigned
any duties or responsibilities that are inconsistent with his position,
duties, responsibilities or status at the commencement of the term of
this Agreement, or his reporting responsibilities or titles in effect at
such time are changed, (B) the Employee's total compensation is reduced
or any other failure by the Company to comply with Section 4 hereof, (C)
any change in any employee benefit plans or arrangements in effect on
the date hereof in which the Employee participates (including without
limitation any pension and retirement plan, savings and profit sharing
plan, stock ownership or purchase plan, stock option
1
<PAGE>
plan, or life, medical or disability insurance plan), which would
adversely affect the Employee's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executive
officers of the Company and does not result in a proportionately greater
reduction in the rights of or benefits to the Employee as compared to
any other executive officer of the Company, or (D) without his prior
concurrence, the Employee is required to engage in an increased amount
of travel on the Company's business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be
required to be reported by the Company in response to Item 6(d) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act;
provided that, without limitation, such an event shall be deemed to
have occurred if (a) any person or group (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more
than 20% of the combined voting power of the Company's then outstanding
securities, or (b) there are serving as directors two or more persons
who were elected as members of the Board of Directors and were not
nominated by management or the Board of Directors of the Company to
serve on the Board of Directors of the Company, or (c) the Company is
merged or consolidated with another corporation and as a result of such
merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for
purposes of such calculation shares of the voting securities of the
Company owned by a party to such merger or consolidation or affiliates
(within the meaning of the Exchange Act) of such party, as the same
existed immediately prior to such merger or consolidation, or (d) the
Company sells all or substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of
this Agreement, the term of the Employee's employment with the Company shall
commence on the date hereof and shall terminate on October 23, 2003, unless
sooner terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement,
the Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive
benefits under any employee benefit or bonus plan or arrangement (collectively
referred to as "Benefits") made available by the Company in the future to its
executive officers and key management personnel, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Subsection 4(a).
2
<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with
the Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the
business and affairs of the Company as are necessary to the performance and
discharge of the duties assigned to Employee under this Agreement. Employee
shall not during the term of his employment under this Agreement engage in any
other business activity that could constitute a conflict of interest, whether or
not such business activity is pursued for gain, profit, or other pecuniary
advantage. This shall not be construed as preventing the Employee from managing
his current investments or investing his assets in such form or manner as will
not require any services on the part of the Employee in the operation and the
affairs of the companies in which such investments are made. On or after the
Triggering Date, the Employee shall not be required to change the situs of his
employment from his permanent place of employment immediately prior to the
Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness
or incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company
shall pay to such person as the Employee shall designate in a notice filed with
the Company, or, if no such person shall be designated, to his estate as a lump
sum death benefit, his base salary which would otherwise be payable to the
Employee at the time of his death, in equal semi-monthly installments on the
first and fifteenth day of each and every month, for a period of months (not
exceeding 12) determined by multiplying two times the number of complete 12-
month periods of employment of the Employee commencing from the date of such
employment by the Company, in addition to any payments the Employee's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any pension or
employee benefit plan or life insurance policy which may be maintained by the
Company, and such payments shall fully discharge the Company's obligations
hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and
prior to the Triggering Date,
3
<PAGE>
the Company may terminate the Employee's employment with the Company
under this Agreement with or without Cause and by the affirmative vote
of two-thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days'
prior written notice of his desire to the Board of Directors of the
Company and receiving an affirmative vote of two-thirds of the members
of the Board of Directors of the Company. The Employee will continue to
receive his Base Salary and Benefits through the date of termination
with no liability on the part of the Company for further payments to the
Employee unless Employee terminates his employment pursuant to Section
9.1(c)(ii), at which time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when
Employee is not eligible to receive benefits under the Company's Long
Term Disability Plan; or (ii) the Employee terminates his employment as
a result of any of the following reasons: (A) without the Employee's
consent the Company materially diminishes the scope of the Employee's
duties, assigns to the Employee duties materially inconsistent with his
designated position, or reduces the Employee's Base Salary or Targeted
Bonus to an amount less than previously determined or established by the
Board of Directors, or (B) the Company breached any of its material
obligations under this Agreement and such breach is not cured within 30
days after written notice thereof by the Employee; then the Company
shall pay the Employee severance payments in an amount equal to the sum
of the (x) Employee's annualized Base Salary in effect at the time of
such termination, and (y) an amount equal to the Employee's Targeted
Bonus for the fiscal year in which such termination occurs (provided,
however, that if the basis for Employee's termination is the reduction
in his Base Salary or the reduction of his Targeted Bonus, the severance
pay shall be based on the Base Salary and the Targeted Bonus in effect
prior to such reduction). The severance payments shall be made in
installments over a period of 12 months. Notwithstanding the foregoing,
if the Employee terminates his employment pursuant to clause (ii) above,
he shall be entitled to the severance payments provided for in this
paragraph only if he gives written notice to the Company of his
termination of employment within 30 days after the occurrence of the
event or events specified in clause (ii) on which he bases his
termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee
might otherwise be entitled under Company severance policies from time
to time in effect, except for (i) accrued and unpaid Base Salary to the
date of termination, and (ii) any bonus due with respect to fiscal years
completed as of the date of termination pursuant to the Executive Bonus
Plan. Nothing contained in the foregoing shall be construed so as to
affect the Employee's rights or the Company's obligations relating to
agreements or benefits that are unrelated to termination of employment.
(e) In the event that the Company terminates the employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total
number of members of the Board of Directors will be reduced by one for
purposes of voting on such termination.
4
<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of
whether or not the Employee has given notice of termination of
employment pursuant to Section 9.2(c), the Company may terminate the
Employee's employment with the Company under this Agreement only for
Cause and, subject to the provisions of Sections 23 and 26 hereof, with
no liability on its part for further payments to the Employee by the
affirmative vote of two-thirds of the members of the Board of Directors
of the Company. In voting upon such termination, if the Employee is
also a member of the Board of Directors of the Company, then he may not
vote on such termination, and the total number of members of the Board
of Directors will be reduced by one for purposes of voting on such
termination.
(b) On or after the Triggering Date and irrespective of
whether or not the Employee has given notice of termination of
employment pursuant to Section 9.2(c), if the Employee's employment
with the Company is terminated without Cause or if Employee terminates
his employment with the Company for Good Reason, the Employee will
continue to accrue and receive his base salary and Benefits through the
date of termination and will be entitled to receive the benefits
provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his
sole and absolute discretion and without any prior approval by the
Board of Directors of the Company, and upon 12 months' prior written
notice to the Company, terminate his employment with the Company under
this Agreement for any reason whatsoever. If the Employee's employment
with the Company under this Agreement is terminated pursuant to this
Subsection 9.2(c) and subject in all respects to the provisions of
Section 9.2(a) and (b), the Employee will continue to accrue and
receive his base salary and Benefits through the date of termination
and will be entitled to receive the benefits provided for under Section
10 hereof. No termination of the Employee's employment with the Company
pursuant to Subsections 9.2(b) or (c) shall in any way terminate the
Company's obligations under Sections 23 and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether
such termination is by the Employee or by the Company) at any time on or within
three years after the Triggering Date for any reason other than (a) termination
by the Company for Cause, (b) the Employee having reached the age of 65, or (c)
the Employee's death, then, within five days after the date of such termination,
the Company shall pay the Employee a lump sum amount in cash equal to one times
the Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of
the occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date. The
Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
5
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and
shall be governed, construed, and enforced in accordance with the laws of the
State of Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement
nor any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this
Agreement shall be binding upon and shall inure to the benefit of the Company
and the Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are,
unless specifically indicated otherwise, references to sections and subsections
of this Agreement. Whenever herein the singular number is used, the same shall
include the plural where appropriate, and words of any gender shall include each
other gender where appropriate.
6
<PAGE>
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes
only and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of
this Agreement held by a court of competent jurisdiction to be invalid,
illegal, or ineffective shall not impair, invalidate, or nullify the remainder
of this Agreement, but the effect thereof shall be confined to the clause,
sentence, provision, section, subsection, or paragraph so held to be invalid,
illegal, or ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no
provision of this Agreement is intended, nor shall it be construed, to reduce or
in any way restrict any benefit to which the Employee may be entitled under any
agreement, plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument. The terms of this Agreement shall become binding upon
each party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement
all federal, state, city, or other taxes as shall be required pursuant to any
law or government regulation or ruling.
7
<PAGE>
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and
expenses which the Employee may incur as a result of the Company's failure to
perform under this Agreement or as a result of the Company or any successor
contesting the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of
the Employee properly recorded on the books and records of the Company prior to
the Triggering Date, there shall be no right of set off or counterclaim against,
or delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BANCTEC, INC.
By: /s/ TOD V. MONGAN
-----------------------------------
Tod V. Mongan
Senior Vice President
General Counsel
/s/ JAMES R. WIMBERLEY
-----------------------------------
Employee
8
<PAGE>
Exhibit 10.13
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 23,
1998, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and Kevin L.
Roper (the "Employee") who resides at 120 Dickens Drive, Coppell, Texas 75019.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
-----------
In addition to the words and terms elsewhere defined in this Agreement,
the following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially
adverse to the best interests of the Company and which, if the subject
of a criminal proceeding, could result in a criminal conviction for a
felony or (b) the failure by the Employee to substantially perform his
duties hereunder, which duties are within the control of the Employee
(other than the failure resulting from the Employee's incapacity due to
physical or mental illness), provided, however, that the Employee shall
not be deemed to be terminated for Cause under this subsection (b)
unless and until (1) after the Employee receives written notice from
the Company specifying with reasonable particularity the actions of
Employee which constitute a violation of this subsection (b) and (2)
within a period of 30 days after receipt of such notice (and during
which the violation is within the control of the Employee), Employee
fails to reasonably and prospectively cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as
defined below) and (A) without his prior concurrence, the Employee is
assigned any duties or responsibilities that are inconsistent with his
position, duties, responsibilities or status at the commencement of the
term of this Agreement, or his reporting responsibilities or titles in
effect at such time are changed, (B) the Employee's total compensation
is reduced or any other failure by the Company to comply with Section 4
hereof, (C) any change in any employee benefit plans or arrangements in
effect on the date hereof in which the Employee participates (including
without limitation any pension and retirement plan, savings and profit
sharing plan, stock ownership or purchase plan, stock option
<PAGE>
plan, or life, medical or disability insurance plan), which would
adversely affect the Employee's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executive
officers of the Company and does not result in a proportionately
greater reduction in the rights of or benefits to the Employee as
compared to any other executive officer of the Company, or (D) without
his prior concurrence, the Employee is required to engage in an
increased amount of travel on the Company's business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be
required to be reported by the Company in response to Item 6(d) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act;
provided that, without limitation, such an event shall be deemed to
have occurred if (a) any person or group (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more
than 20% of the combined voting power of the Company's then outstanding
securities, or (b) there are serving as directors two or more persons
who were elected as members of the Board of Directors and were not
nominated by management or the Board of Directors of the Company to
serve on the Board of Directors of the Company, or (c) the Company is
merged or consolidated with another corporation and as a result of such
merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for
purposes of such calculation shares of the voting securities of the
Company owned by a party to such merger or consolidation or affiliates
(within the meaning of the Exchange Act) of such party, as the same
existed immediately prior to such merger or consolidation, or (d) the
Company sells all or substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of
this Agreement, the term of the Employee's employment with the Company shall
commence on the date hereof and shall terminate on October 23, 2003, unless
sooner terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive
benefits under any employee benefit or bonus plan or arrangement (collectively
referred to as "Benefits") made available by the Company in the future to its
executive officers and key management personnel, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Subsection 4(a).
2
<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with
the Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the
business and affairs of the Company as are necessary to the performance and
discharge of the duties assigned to Employee under this Agreement. Employee
shall not during the term of his employment under this Agreement engage in any
other business activity that could constitute a conflict of interest, whether or
not such business activity is pursued for gain, profit, or other pecuniary
advantage. This shall not be construed as preventing the Employee from managing
his current investments or investing his assets in such form or manner as will
not require any services on the part of the Employee in the operation and the
affairs of the companies in which such investments are made. On or after the
Triggering Date, the Employee shall not be required to change the situs of his
employment from his permanent place of employment immediately prior to the
Triggering Date.
7. DISABILITY.
----------
If the Employee is unable to perform his services by reason of illness
or incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company
shall pay to such person as the Employee shall designate in a notice filed with
the Company, or, if no such person shall be designated, to his estate as a lump
sum death benefit, his base salary which would otherwise be payable to the
Employee at the time of his death, in equal semi-monthly installments on the
first and fifteenth day of each and every month, for a period of months (not
exceeding 12) determined by multiplying two times the number of complete
12-month periods of employment of the Employee commencing from the date of such
employment by the Company, in addition to any payments the Employee's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any pension or
employee benefit plan or life insurance policy which may be maintained by the
Company, and such payments shall fully discharge the Company's obligations
hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
----------------------------------------
(a) Upon 30 days' prior written notice to the Employee and
prior to the Triggering Date,
3
<PAGE>
the Company may terminate the Employee's employment with the Company
under this Agreement with or without Cause and by the affirmative vote
of two-thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days'
prior written notice of his desire to the Board of Directors of the
Company and receiving an affirmative vote of two-thirds of the members
of the Board of Directors of the Company. The Employee will continue to
receive his Base Salary and Benefits through the date of termination
with no liability on the part of the Company for further payments to the
Employee unless Employee terminates his employment pursuant to Section
9.1(c)(ii), at which time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when
Employee is not eligible to receive benefits under the Company's Long
Term Disability Plan; or (ii) the Employee terminates his employment as
a result of any of the following reasons: (A) without the Employee's
consent the Company materially diminishes the scope of the Employee's
duties, assigns to the Employee duties materially inconsistent with his
designated position, or reduces the Employee's Base Salary or Targeted
Bonus to an amount less than previously determined or established by the
Board of Directors, or (B) the Company breached any of its material
obligations under this Agreement and such breach is not cured within 30
days after written notice thereof by the Employee; then the Company
shall pay the Employee severance payments in an amount equal to the sum
of the (x) Employee's annualized Base Salary in effect at the time of
such termination, and (y) an amount equal to the Employee's Targeted
Bonus for the fiscal year in which such termination occurs (provided,
however, that if the basis for Employee's termination is the reduction
in his Base Salary or the reduction of his Targeted Bonus, the severance
pay shall be based on the Base Salary and the Targeted Bonus in effect
prior to such reduction). The severance payments shall be made in
installments over a period of 12 months. Notwithstanding the foregoing,
if the Employee terminates his employment pursuant to clause (ii) above,
he shall be entitled to the severance payments provided for in this
paragraph only if he gives written notice to the Company of his
termination of employment within 30 days after the occurrence of the
event or events specified in clause (ii) on which he bases his
termination and such notice specifies such event or events.
(d) The severance payments provided for in this Section 9.1 shall be
in lieu of all severance payments or benefits to which the Employee
might otherwise be entitled under Company severance policies from time
to time in effect, except for (i) accrued and unpaid Base Salary to the
date of termination, and (ii) any bonus due with respect to fiscal years
completed as of the date of termination pursuant to the Executive Bonus
Plan. Nothing contained in the foregoing shall be construed so as to
affect the Employee's rights or the Company's obligations relating to
agreements or benefits that are unrelated to termination of employment.
(e) In the event that the Company terminates the employee's
employment for Cause, the Company will have no liability on its part for
further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections 9.1(a)
or (b), if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total
number of members of the Board of Directors will be reduced by one for
purposes of voting on such termination.
4
<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of
whether or not the Employee has given notice of termination of
employment pursuant to Section 9.2(c), the Company may terminate the
Employee's employment with the Company under this Agreement only for
Cause and, subject to the provisions of Sections 23 and 26 hereof, with
no liability on its part for further payments to the Employee by the
affirmative vote of two-thirds of the members of the Board of Directors
of the Company. In voting upon such termination, if the Employee is
also a member of the Board of Directors of the Company, then he may not
vote on such termination, and the total number of members of the Board
of Directors will be reduced by one for purposes of voting on such
termination.
(b) On or after the Triggering Date and irrespective of
whether or not the Employee has given notice of termination of
employment pursuant to Section 9.2(c), if the Employee's employment
with the Company is terminated without Cause or if Employee terminates
his employment with the Company for Good Reason, the Employee will
continue to accrue and receive his base salary and Benefits through the
date of termination and will be entitled to receive the benefits
provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his
sole and absolute discretion and without any prior approval by the
Board of Directors of the Company, and upon 12 months' prior written
notice to the Company, terminate his employment with the Company under
this Agreement for any reason whatsoever. If the Employee's employment
with the Company under this Agreement is terminated pursuant to this
Subsection 9.2(c) and subject in all respects to the provisions of
Section 9.2(a) and (b), the Employee will continue to accrue and
receive his base salary and Benefits through the date of termination
and will be entitled to receive the benefits provided for under Section
10 hereof. No termination of the Employee's employment with the Company
pursuant to Subsections 9.2(b) or (c) shall in any way terminate the
Company's obligations under Sections 23 and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether
such termination is by the Employee or by the Company) at any time on or within
three years after the Triggering Date for any reason other than (a) termination
by the Company for Cause, (b) the Employee having reached the age of 65, or (c)
the Employee's death, then, within five days after the date of such termination,
the Company shall pay the Employee a lump sum amount in cash equal to 2 times
the Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of
the occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date. The
Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
5
<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and
shall be governed, construed, and enforced in accordance with the laws of the
State of Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement
nor any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this
Agreement shall be binding upon and shall inure to the benefit of the Company
and the Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are,
unless specifically indicated otherwise, references to sections and subsections
of this Agreement. Whenever herein the singular number is used, the same shall
include the plural where appropriate, and words of any gender shall
6
<PAGE>
include each other gender where appropriate.
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes
only and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of
this Agreement held by a court of competent jurisdiction to be invalid, illegal,
or ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no
provision of this Agreement is intended, nor shall it be construed, to reduce or
in any way restrict any benefit to which the Employee may be entitled under any
agreement, plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument. The terms of this Agreement shall become binding upon
each party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement
all federal, state,
7
<PAGE>
city, or other taxes as shall be required pursuant to any law or government
regulation or ruling.
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and
expenses which the Employee may incur as a result of the Company's failure to
perform under this Agreement or as a result of the Company or any successor
contesting the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of
the Employee properly recorded on the books and records of the Company prior to
the Triggering Date, there shall be no right of set off or counterclaim against,
or delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
BANCTEC, INC.
By: /s/ GRAHAME N. CLARK, JR.
------------------------------------
Grahame N. Clark, Jr.,
Chairman of the Board
and Chief Executive Officer
/s/ KEVIN L. ROPER
------------------------------------
Employee
8
<PAGE>
Exhibit 10.14
BANCTEC, INC.
SENIOR EXECUTIVE
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 23,
1998, between BancTec, Inc., a Delaware corporation with its principal executive
offices at 4851 LBJ Freeway, Dallas, Texas 75244 (the "Company"), and Scott J.
Wilson (the "Employee") who resides at 6306 Kenshire Court, Colleyville, Texas
76034.
W I T N E S S E T H:
WHEREAS, the Employee and the Company desire to define the terms of the
employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
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In addition to the words and terms elsewhere defined in this Agreement,
the following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially
adverse to the best interests of the Company and which, if the subject
of a criminal proceeding, could result in a criminal conviction for a
felony or (b) the failure by the Employee to substantially perform his
duties hereunder, which duties are within the control of the Employee
(other than the failure resulting from the Employee's incapacity due to
physical or mental illness), provided, however, that the Employee shall
not be deemed to be terminated for Cause under this subsection (b)
unless and until (1) after the Employee receives written notice from
the Company specifying with reasonable particularity the actions of
Employee which constitute a violation of this subsection (b) and (2)
within a period of 30 days after receipt of such notice (and during
which the violation is within the control of the Employee), Employee
fails to reasonably and prospectively cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as
defined below) and (A) without his prior concurrence, the Employee is
assigned any duties or responsibilities that are inconsistent with his
position, duties, responsibilities or status at the commencement of the
term of this Agreement, or his reporting responsibilities or titles in
effect at such time are changed, (B) the Employee's total compensation
is reduced or any other failure by the Company to comply with Section 4
hereof, (C) any change in any employee benefit plans or arrangements in
effect on the date hereof in which the Employee participates (including
without limitation any pension and retirement plan, savings and profit
sharing plan, stock ownership or purchase plan, stock option
<PAGE>
plan, or life, medical or disability insurance plan), which would
adversely affect the Employee's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executive
officers of the Company and does not result in a proportionately
greater reduction in the rights of or benefits to the Employee as
compared to any other executive officer of the Company, or (D) without
his prior concurrence, the Employee is required to engage in an
increased amount of travel on the Company's business.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be
required to be reported by the Company in response to Item 6(d) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act;
provided that, without limitation, such an event shall be deemed to
have occurred if (a) any person or group (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more
than 20% of the combined voting power of the Company's then outstanding
securities, or (b) there are serving as directors two or more persons
who were elected as members of the Board of Directors and were not
nominated by management or the Board of Directors of the Company to
serve on the Board of Directors of the Company, or (c) the Company is
merged or consolidated with another corporation and as a result of such
merger or consolidation less than 51% of the outstanding voting
securities of the surviving or resulting corporation are owned in the
aggregate by the former shareholders of the Company, excluding for
purposes of such calculation shares of the voting securities of the
Company owned by a party to such merger or consolidation or affiliates
(within the meaning of the Exchange Act) of such party, as the same
existed immediately prior to such merger or consolidation, or (d) the
Company sells all or substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of the Company.
2. EMPLOYMENT.
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
----
Subject to the provisions of termination as provided in Section 9 of
this Agreement, the term of the Employee's employment with the Company shall
commence on the date hereof and shall terminate on October 23, 2003, unless
sooner terminated as provided for herein.
4. SALARY.
------
(a) For all services rendered by the Employee under this Agreement, the
Company shall pay the Employee a base salary as established each year by the
Board of Directors, payable in accordance with the Company's customary payroll
practices, with merit increases as may, in the sole discretion of the Board of
Directors of the Company, be approved from time to time by the Board of
Directors of the Company.
(b) The Employee shall be entitled to participate in or receive
benefits under any employee benefit or bonus plan or arrangement (collectively
referred to as "Benefits") made available by the Company in the future to its
executive officers and key management personnel, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to Subsection 4(a).
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<PAGE>
5. DUTIES.
------
The Employee shall continue to be engaged in a managerial capacity with
the Company to supervise and direct the activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee may
be extended or curtailed from time to time at the direction of the Board of
Directors of the Company.
6. EXTENT OF SERVICES AND SITUS.
----------------------------
The Employee shall devote such time, attention, and energy to the
business and affairs of the Company as are necessary to the performance and
discharge of the duties assigned to Employee under this Agreement. Employee
shall not during the term of his employment under this Agreement engage in any
other business activity that could constitute a conflict of interest, whether or
not such business activity is pursued for gain, profit, or other pecuniary
advantage. This shall not be construed as preventing the Employee from managing
his current investments or investing his assets in such form or manner as will
not require any services on the part of the Employee in the operation and the
affairs of the companies in which such investments are made. On or after the
Triggering Date, the Employee shall not be required to change the situs of his
employment from his permanent place of employment immediately prior to the
Triggering Date.
7. DISABILITY.
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If the Employee is unable to perform his services by reason of illness
or incapacity for a continuous period in excess of six months, unless otherwise
required by the provisions of Sections 10 or 25 of this Agreement, compensation
otherwise payable by the Company shall cease and any future payments to the
Employee shall be subject to the terms and provisions of long-term disability
insurance coverage, if any, maintained by the Company. Notwithstanding anything
herein to the contrary, the Board of Directors of the Company may terminate the
Employee's employment with the Company under this Agreement at any time after
the Employee shall be absent from his employment, for whatever reason, for a
continuous period of more than six months, and, except for any obligations of
the Company under Sections 10, 23, and 26 of this Agreement, all other
obligations of the Company hereunder shall cease upon such termination.
8. COMPENSATION AFTER DEATH.
------------------------
If the Employee dies during the term of his employment, the Company
shall pay to such person as the Employee shall designate in a notice filed with
the Company, or, if no such person shall be designated, to his estate as a lump
sum death benefit, his base salary which would otherwise be payable to the
Employee at the time of his death, in equal semi-monthly installments on the
first and fifteenth day of each and every month, for a period of months (not
exceeding 12) determined by multiplying two times the number of complete
12-month periods of employment of the Employee commencing from the date of such
employment by the Company, in addition to any payments the Employee's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any pension or
employee benefit plan or life insurance policy which may be maintained by the
Company, and such payments shall fully discharge the Company's obligations
hereunder.
9. TERMINATION.
-----------
9.1 Termination Prior to the Triggering Date.
(a) Upon 30 days' prior written notice to the Employee and
prior to the Triggering Date,
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the Company may terminate the Employee's employment with the Company
under this Agreement with or without Cause and by the affirmative vote
of two-thirds of the members of the Board of Directors of the Company.
(b) Prior to the Triggering Date, the Employee may terminate
his employment with the Company under this Agreement by giving 30 days'
prior written notice of his desire to the Board of Directors of the
Company and receiving an affirmative vote of two-thirds of the members
of the Board of Directors of the Company. The Employee will continue to
receive his Base Salary and Benefits through the date of termination
with no liability on the part of the Company for further payments to
the Employee unless Employee terminates his employment pursuant to
Section 9.1(c)(ii), at which time Sections 9.1(c) and (d) shall apply.
(c) In the event that (i) the Company terminates the
Employee's employment for any reason other than for Cause and at a time
when Employee is not eligible to receive benefits under the Company's
Long Term Disability Plan; or (ii) the Employee terminates his
employment as a result of any of the following reasons: (A) without the
Employee's consent the Company materially diminishes the scope of the
Employee's duties, assigns to the Employee duties materially
inconsistent with his designated position, or reduces the Employee's
Base Salary or Targeted Bonus to an amount less than previously
determined or established by the Board of Directors, or (B) the Company
breached any of its material obligations under this Agreement and such
breach is not cured within 30 days after written notice thereof by the
Employee; then the Company shall pay the Employee severance payments in
an amount equal to the sum of the (x) Employee's annualized Base Salary
in effect at the time of such termination, and (y) an amount equal to
the Employee's Targeted Bonus for the fiscal year in which such
termination occurs (provided, however, that if the basis for Employee's
termination is the reduction in his Base Salary or the reduction of his
Targeted Bonus, the severance pay shall be based on the Base Salary and
the Targeted Bonus in effect prior to such reduction). The severance
payments shall be made in installments over a period of 12 months.
Notwithstanding the foregoing, if the Employee terminates his
employment pursuant to clause (ii) above, he shall be entitled to the
severance payments provided for in this paragraph only if he gives
written notice to the Company of his termination of employment within
30 days after the occurrence of the event or events specified in clause
(ii) on which he bases his termination and such notice specifies such
event or events.
(d) The severance payments provided for in this Section 9.1
shall be in lieu of all severance payments or benefits to which the
Employee might otherwise be entitled under Company severance policies
from time to time in effect, except for (i) accrued and unpaid Base
Salary to the date of termination, and (ii) any bonus due with respect
to fiscal years completed as of the date of termination pursuant to the
Executive Bonus Plan. Nothing contained in the foregoing shall be
construed so as to affect the Employee's rights or the Company's
obligations relating to agreements or benefits that are unrelated to
termination of employment.
(e) In the event that the Company terminates the employee's
employment for Cause, the Company will have no liability on its part
for further payments after the termination date to the Employee.
(f) In voting upon such termination described in Subsections
9.1(a) or (b), if the Employee is also a member of the Board of
Directors of the Company, then he may not vote on such termination, and
the total number of members of the Board of Directors will be reduced
by one for purposes of voting on such termination.
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<PAGE>
9.2 Termination After the Triggering Date.
-------------------------------------
(a) On or after the Triggering Date and irrespective of
whether or not the Employee has given notice of termination of
employment pursuant to Section 9.2(c), the Company may terminate the
Employee's employment with the Company under this Agreement only for
Cause and, subject to the provisions of Sections 23 and 26 hereof, with
no liability on its part for further payments to the Employee by the
affirmative vote of two-thirds of the members of the Board of Directors
of the Company. In voting upon such termination, if the Employee is
also a member of the Board of Directors of the Company, then he may not
vote on such termination, and the total number of members of the Board
of Directors will be reduced by one for purposes of voting on such
termination.
(b) On or after the Triggering Date and irrespective of
whether or not the Employee has given notice of termination of
employment pursuant to Section 9.2(c), if the Employee's employment
with the Company is terminated without Cause or if Employee terminates
his employment with the Company for Good Reason, the Employee will
continue to accrue and receive his base salary and Benefits through the
date of termination and will be entitled to receive the benefits
provided for under Section 10 hereof.
(c) On or after the Triggering Date, the Employee may, in his
sole and absolute discretion and without any prior approval by the
Board of Directors of the Company, and upon 12 months' prior written
notice to the Company, terminate his employment with the Company under
this Agreement for any reason whatsoever. If the Employee's employment
with the Company under this Agreement is terminated pursuant to this
Subsection 9.2(c) and subject in all respects to the provisions of
Section 9.2(a) and (b), the Employee will continue to accrue and
receive his base salary and Benefits through the date of termination
and will be entitled to receive the benefits provided for under Section
10 hereof. No termination of the Employee's employment with the Company
pursuant to Subsections 9.2(b) or (c) shall in any way terminate the
Company's obligations under Sections 23 and 26 of this Agreement.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
---------------------------------------
If the Employee's employment with the Company is terminated (whether
such termination is by the Employee or by the Company) at any time on or within
three years after the Triggering Date for any reason other than (a) termination
by the Company for Cause, (b) the Employee having reached the age of 65, or (c)
the Employee's death, then, within five days after the date of such termination,
the Company shall pay the Employee a lump sum amount in cash equal to one times
the Employee's annualized includable compensation (within the meaning of Section
280G(d)(1) of the Internal Revenue Code of 1986, as amended) from the Company
during the period consisting of the five full taxable years of the Employee
ending immediately prior to the year in which the Triggering Date occurred (or
such portion of such period during which the Employee was an employee of the
Company).
11. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
---------------------------------------
On the Triggering Date or as soon thereafter as the Company knows of
the occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed copy
of which is attached hereto as Exhibit A, in an amount no less than the total
amount which would be payable to the Employee pursuant to Section 10 of this
Agreement as if the Employee's employment terminated on the Triggering Date. The
Company shall take whatever steps are necessary to maintain the trust
established pursuant to the Irrevocable Trust Agreement and shall comply with
the terms of the Irrevocable Trust Agreement both before and after the
Triggering Date and until the Irrevocable Trust terminates by its own terms.
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<PAGE>
12. MITIGATION.
----------
The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
13. ENTIRE AGREEMENT.
----------------
This Agreement embodies the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
14. LAW TO GOVERN.
-------------
This Agreement is executed and delivered in the State of Texas and
shall be governed, construed, and enforced in accordance with the laws of the
State of Texas.
15. ASSIGNMENT.
----------
This Agreement is personal to the parties, and neither this Agreement
nor any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, but
subject to satisfaction of the Company's obligation to fund the Irrevocable
Trust as provided in Section 11, the Company shall be permitted to assign this
Agreement to any corporation or other business entity succeeding to
substantially all of the business and assets of the Company by merger,
consolidation, sale of assets, or otherwise, but only if by written agreement
the Company's successor assumes in full all of the Company's obligations under
this Agreement. From and after assignment of this Agreement by the Company in
accordance with the foregoing provisions, a Triggering Event shall be deemed to
have occurred. Failure by the Company to obtain such assumption prior to the
effectiveness of such succession shall be a breach of this Agreement and shall
entitle the Employee to immediately receive compensation under this Agreement
from the Company and from the Company's successor in the same aggregate amount
and on the same terms as he would be entitled to hereunder if he had voluntarily
terminated his employment with the Company for Good Reason after the Triggering
Date, and, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Triggering Date.
16. BINDING AGREEMENT.
-----------------
Subject to the provisions of Section 15 of this Agreement, this
Agreement shall be binding upon and shall inure to the benefit of the Company
and the Employee and their respective representatives, successors, and assigns.
17. REFERENCES AND GENDER.
---------------------
All references to "Sections" and "Subsections" contained herein are,
unless specifically indicated otherwise, references to sections and subsections
of this Agreement. Whenever herein the singular number is used, the same shall
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<PAGE>
include the plural where appropriate, and words of any gender shall include each
other gender where appropriate.
18. WAIVER.
------
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future.
19. NOTICES.
-------
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties
at the respective addresses set forth herein, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
20. OTHER INSTRUMENTS.
-----------------
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out the terms of this Agreement.
21. HEADINGS.
--------
The headings used in this Agreement are used for reference purposes
only and do not constitute substantive matter to be considered in construing the
terms of this Agreement.
22. INVALID PROVISION.
-----------------
Any clause, sentence, provision, section, subsection, or paragraph of
this Agreement held by a court of competent jurisdiction to be invalid, illegal,
or ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal, or
ineffective.
23. RIGHTS UNDER PLANS AND PROGRAMS.
-------------------------------
Anything in this Agreement to the contrary notwithstanding, no
provision of this Agreement is intended, nor shall it be construed, to reduce or
in any way restrict any benefit to which the Employee may be entitled under any
agreement, plan, arrangement, or program providing benefits for the Employee.
24. MULTIPLE COPIES.
---------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument. The terms of this Agreement shall become binding upon
each party from and after the time that he or it executed a copy hereof. In like
manner, from and after the time that any party executes a consent or other
document, such consent or other document shall be binding upon such parties.
25. WITHHOLDING OF TAXES.
--------------------
The Company may withhold from any amounts payable under this Agreement
all federal, state,
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city, or other taxes as shall be required pursuant to any law or government
regulation or ruling.
26. LEGAL FEES AND EXPENSES.
-----------------------
The Company shall pay and be responsible for all legal fees and
expenses which the Employee may incur as a result of the Company's failure to
perform under this Agreement or as a result of the Company or any successor
contesting the validity or enforceability of this Agreement.
27. SET OFF OR COUNTERCLAIM.
-----------------------
Except with respect to any claim against or debt or other obligation of
the Employee properly recorded on the books and records of the Company prior to
the Triggering Date, there shall be no right of set off or counterclaim against,
or delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
BANCTEC, INC.
By: /s/ GRAHAME N. CLARK, JR.
------------------------------
Grahame N. Clark, Jr.,
Chairman of the Board
and Chief Executive Officer
/s/ SCOTT J. WILSON
------------------------------
Employee
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Exhibit 10.15
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 23rd day of
October, 1998, by and between BancTec, Inc., a Delaware corporation (hereinafter
"BancTec"), and James E. Uren (hereinafter "Uren").
RECITALS:
WHEREAS, BancTec researches, develops, manufactures, markets, and maintains
computerized financial document processing systems;
WHEREAS, BancTec desires to engage Uren as an employee to perform services
required of him by the terms hereof;
WHEREAS, Uren desires to remain in the employ of BancTec in the capacities
set forth by the terms hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby agree as follows:
ARTICLE ONE
EMPLOYMENT AND DUTIES
---------------------
Section 1.1 General. BancTec agrees, during the periods specified
-------
below, to employ Uren and Uren agrees to devote his work time to BancTec and to
diligently and faithfully perform to the best of his abilities such duties and
services as may be assigned to him from time to time by BancTec. Uren agrees to
adhere to all policies established by BancTec and to avoid all acts that might
injure the reputation of BancTec. Uren agrees to perform his duties in
accordance with any rules and regulations promulgated by BancTec. It is
expressly agreed that the continued employment of Uren by BancTec from the date
of this Agreement is part of Uren's consideration for this Agreement.
ARTICLE TWO
TITLE, COMPENSATION, EXPENSES, AND VACATIONS
--------------------------------------------
Section 2.1 January 1, 1999, through December 31, 1999.
------------------------------------------
For the period from January 1, 1999, to and including December 31, 1999, the
parties agree to the following:
Section 2.1.1 Duties. Uren shall perform such services as directed
------
from time to time by the Chairman of the Board of Directors of BancTec.
Section 2.1.2 Compensation. In consideration for Uren devoting full
------------
time to the activities of BancTec, BancTec agrees to pay Uren a bi-weekly salary
of $6730.76. In addition, Uren shall be eligible for full participation in any
executive bonus plan in effect during the period, such bonus to be paid in cash.
<PAGE>
Section 2.1.3 Vacation. Uren shall be entitled to a reasonable
--------
vacation, consistent with BancTec's standard vacation policy.
Section 2.1.4 Other Benefits. Uren shall be entitled to receive
--------------
those other benefits normally provided to employees of BancTec and consistent
with the position of Uren.
Section 2.1.5 Other Expenses. Uren shall be entitled to be reimbursed,
--------------
in accordance with BancTec's then current Travel Policy, for all reasonable and
necessary expenses incurred by Uren on behalf of BancTec, if Uren submits
itemized receipts obtained by Uren in connection with such expenditures.
Section 2.2 January 1, 2000, through March 31, 2000. For the
---------------------------------------
period from January 1, 2000, to and including March 31, 2000, the parties agree
as follows:
Section 2.2.1 Duties. Uren shall perform such services as directed
------
from time to time by the Chairman of the Board of Directors of BancTec.
Section 2.2.2 Compensation. In consideration for Uren devoting full
------------
time to the activities of BancTec, BancTec agrees to pay Uren a bi-weekly salary
of $6730.76. Uren shall not be eligible to participate in any executive bonus
plan in effect during the year.
Section 2.2.3 Vacation. Uren shall be entitled to accrue vacation
--------
under BancTec's standard vacation policy.
Section 2.2.4 Other Benefits. Uren shall be entitled to receive those
--------------
other benefits normally provided to employees of BancTec and consistent with the
position of Uren.
Section 2.2.5 Other Expenses. Uren shall be entitled to be reimbursed,
--------------
in accordance with BancTec's then current Travel Policy, for all reasonable and
necessary expenses incurred by Uren on behalf of BancTec, if Uren submits
itemized receipts obtained by Uren in connection with such expenditures.
Section 2.3 April 1, 2000, through December 31, 2000. For
----------------------------------------
the period from April 1, 2000, to and including December 31, 2000, the parties
agree as follows:
Section 2.3.1 Duties. Uren shall not be required to perform services
------
as an employee of BancTec and shall not be considered nor hold himself out as an
employee of BancTec.
Section 2.3.2 Compensation. In consideration for the Covenant not to
------------
Compete, as set forth in Article Three, hereinafter, BancTec agrees to pay Uren
a bi-weekly amount of $6730.76.
Section 2.4 Death or Disability. This Agreement will
-------------------
terminate upon the death of Uren or after Uren has become permanently disabled.
For purposes of this Agreement, Uren is "permanently disabled" when he is unable
to continue his normal duties of employment, by reason of a medically determined
physical or mental impairment, for a continuous period of at least ninety (90)
days. In determining whether or not Uren is permanently disabled, BancTec may
reasonably rely upon the opinion of any doctor or practitioner of any recognized
field of medicine or psychiatric practice selected by BancTec and such other
evidence as BancTec reasonably deems necessary. ANY INSURANCE OR DISABILITY
BENEFITS NORMALLY AFFORDED TO EMPLOYEES OF THE EMPLOYER SHALL NOT BE AFFECTED BY
THIS SECTION.
ARTICLE THREE
COVENANT NOT TO COMPETE
-----------------------
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<PAGE>
Uren hereby agrees that during the term of his employment and for the
period from April 1, 2000 through December 31, 2000, he will not, either through
any kind of ownership (other than ownership of securities of a publicly held
corporation of which Uren owns less than one percent (1%) of any class of
outstanding securities), or as a director, officer, principal, agent, employee,
employer, advisor, consultant, co-partner, or in any individual or
representative capacity whatever, either for his own benefit or for the benefit
of any other person, firm, or corporation, without the prior written consent of
a duly authorized officer of BancTec, compete with BancTec by engaging in any
act, including, but not limited to, any of the following:
(a) canvass, solicit, accept, or perform any type of work performed
by BancTec for any Customer of BancTec;
(b) develop, design, manufacture, or market any products or devices
that may be used for the same purposes as any product sold by BancTec during the
term of this Agreement;
(c) request or advise any firm to withdraw, curtail, or cancel its
business with BancTec;
(d) give or attempt to give any person, partnership, or corporation
the right to solicit or canvass any Customer for the performance of work
performed by BancTec; and
(e) induce or attempt to influence any employee of BancTec or any
employee of any Customer to terminate his employment with the view toward
competing with BancTec or any Customer.
As used herein, the term "Customer" includes any of BancTec's Customers at
any time during the term of this Agreement.
ARTICLE FOUR
CONFIDENTIAL INFORMATION
------------------------
Section 4.1 Nondisclosure. Uren expressly covenants and agrees that
-------------
he will not during his employment for BancTec hereunder or at any time after the
termination thereof, irrespective of the time, manner, or cause of termination,
reveal, divulge, disclose, or communicate to any person, firm, or corporation,
other than authorized officers, directors, and employees of BancTec, in any
manner whatsoever, any Confidential Information of BancTec that would be
inconsistent with the position held by Uren or the duties being performed by
Uren at the direction of BancTec.
Section 4.2 Definition of "Confidential Information". As used
---------------------------------------
herein,"Confidential Information" means information disclosed to or known by
Uren as a consequence of or through his employment for BancTec, not generally
known in the business in which BancTec is or may become engaged, about BancTec,
its business, products, and processes.
Section 4.3 Return of Confidential Information and Other Property.
-----------------------------------------------------
Upon termination of this Agreement, Uren will surrender to BancTec all
Confidential Information including, without limitation, all lists, charts,
schedules, reports, financial statements, books, and records, and all copies
thereof, of BancTec and all other property belonging to BancTec whatsoever.
ARTICLE FIVE
ENFORCEMENT OF COVENANTS
--------------------------
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Uren agrees that a substantial violation on his part of any covenant
contained in Articles Three and Four of this Agreement will cause such damage to
BancTec as will be irreparable and for that reason, Uren further agrees that
BancTec shall be entitled as a matter of right, to an injunction out of any
court of competent jurisdiction, restraining any further violation of said
covenants by Uren, his employer, employees, partners, or agents. Such right to
injunction shall be cumulative and in addition to whatever other remedies
BancTec may have, including, specifically, recovery of liquidated and additional
damages. Uren expressly acknowledges and agrees that the respective covenants
and agreements shall be construed in such a manner as to be enforceable under
applicable laws if a more limited scope of time is determined by a court or
competent jurisdiction to be required.
ARTICLE SIX
TERM OF AGREEMENT
-----------------
Section 6.1 Term. The term of this Agreement will be through
----
December 31, 2000, unless terminated earlier as provided below, or unless
terminated by Uren at any time.
Section 6.2 Immediate Termination. BancTec may terminate this
---------------------
Agreement without notice for cause, as hereinafter defined, or if Uren is in
substantial breach of the covenants of this Agreement, including, without
limitation, disclosing Confidential Information or committing acts of personal
or business misconduct.
In the event of termination for cause, BancTec shall be under no obligation
to Uren except to reimburse him for such expenses as he may be entitled to
receive up to the time of termination.
In the event of termination of this Agreement according to this Section
6.2, then (a) the covenants contained in Article Three hereof shall survive for
a period of two (2) years after the date this Agreement is terminated and (b)
the covenants contained in Article Four hereof shall survive indefinitely.
"Cause" means (a) any act by Uren that is materially adverse to the best
interests of the Company and which, if the subject of a criminal proceeding,
could result in a criminal conviction for a felony or (b) the failure by Uren to
substantially perform his duties hereunder, which duties are within the control
of Uren (other than the failure resulting from Uren's incapacity due to physical
or mental illness).
ARTICLE SEVEN
MISCELLANEOUS
-------------
Section 7.1 Notices. All notices provided for by this Agreement
-------
shall be made in writing (a) either by actual delivery of the notice to the
party thereunto entitled or (b) by the mailing of the notice in the United
States mail, addressed to the party to be notified at the address listed below
(or at such other address as may have been designated by written notice),
certified or registered mail, return receipt requested. The notice shall be
deemed to be received (a) if by personal delivery, on the date of its actual
receipt by the party entitled thereto or (b) if by mail, on the date of deposit
in the United States mail.
To BancTec: BancTec, Inc.
4851 LBJ Freeway
Dallas, Texas 75244
4
<PAGE>
Attn: General Counsel
To Uren: James E. Uren
3112 Oak Grove Dr.
Plano, Texas 75074
Section 7.2 Entire Agreement. This Agreement contains the entire
----------------
agreement of the parties hereto and supersedes all other prior agreements and
understandings, oral or written, if any, between the parties hereto. No
modification or amendment of any of the terms, conditions, or provisions herein
may be made otherwise than by written agreement signed by the parties hereto.
Section 7.3 Governing Law. The laws of the State of Texas shall
-------------
govern the validity, construction, enforcement, and interpretation of this
Agreement.
Section 7.4 Parties Bound. This Agreement and the rights and
-------------
obligations hereunder shall be binding upon and inure to the benefit of BancTec,
Uren, and their respective heirs, personal representatives, successors, and
assigns; provided, however, that Uren may not assign any rights or obligations
hereunder without the express written consent of BancTec. This Agreement shall
also bind and inure to the benefit of any successor of BancTec by merger or
consolidation, or any assignee of all or substantially all of BancTec's
properties.
Section 7.5 Invalid Provisions. If any provision of this Agreement
------------------
is held to be illegal, invalid, or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
Section 7.6 Waiver of Breach. The waiver by any party hereto of a
----------------
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by any party.
Section 7.7 Section Headings. The headings contained in this
----------------
Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of the Agreement.
Section 7.8 Multiple Counterparts. This Agreement has been executed
---------------------
in a number of identical counterparts, each of which for all purposes is to be
deemed an original, and all of which constitute, collectively, one agreement;
but making proof of this Agreement, it shall not be necessary to produce or
account for more than one (1) such counterpart.
IN WITNESS WHEREOF, this Agreement is signed and executed the day and year
first above written.
BANCTEC, INC.
By: /s/ GRAHAME N. CLARK, JR.
----------------------------
Grahame N. Clark, Jr.
Chairman of the Board and
Chief Executive Officer
UREN
By: /s/ JAMES E. UREN
----------------------------
James E. Uren
5
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF BANCTEC, INC.
BancTec USA, Inc., a Delaware corporation.
BancTec (Management), Inc., a Delaware corporation.
BancTec (Export), Inc., a Virgin Islands corporation.
BancTec (Puerto Rico), a Delaware corporation.
BancTec (Canada), Inc., a Canadian corporation.
BancTec Limited, a U.K. corporation.
BancTec (Australia) Pty Limited, an Australian corporation.
BancTec Japan, Inc., a Delaware corporation.
BancTec Holding N.V., a Netherlands corporation.
BancTec GmbH, a German corporation.
BancTec S.A. a French corporation.
BancTec B.V., a Netherlands corporation.
BancTec AB, a Swedish corporation.
BancTec Danmark A/S, a Danish corporation.
BancTec Iberica S.A., a Spanish corporation.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 3, 1999, included in this Form 10-K,
into the Company's previously filed Registration Statement Form S-3 (No. 33-
28942); Registration Statement Form S-8 (No. 33-28939); Registration Statement
Form S-8 (No. 33-29163); Registration Statement Form S-8 (No. 33-32824);
Registration Statement Form S-3 (No. 33-35988); Registration Statement Form S-8
(No. 33-37377); Registration Statement Form S-3 (No. 33-49918); Registration
Statement Form S-8 (No. 33-71114); Registration Statement Form S-8 (33-58335);
Registration Statement Form S-4 (33-60391); Registration Statement Form S-8 (33-
63699); Registration Statement Form S-8 (333-25509); Registration Statement Form
S-8 (333-25667); Registration Statement Form S-8 (333-29835); Registration
Statement Form S-8 (333-68295); and Registration Statement Form S-4 (333-
956497).
ARTHUR ANDERSEN LLP
Dallas, Texas
March 31, 1999
<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.
</LEGEND>
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<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 25,313 0
<SECURITIES> 837 0
<RECEIVABLES> 189,609 0
<ALLOWANCES> (10,758) 0
<INVENTORY> 68,535 0
<CURRENT-ASSETS> 310,959 0
<PP&E> 271,632 0
<DEPRECIATION> (146,594) 0
<TOTAL-ASSETS> 530,205 0
<CURRENT-LIABILITIES> 147,581 0
<BONDS> 150,352 0
0 0
0 0
<COMMON> 194 0
<OTHER-SE> 219,887 0
<TOTAL-LIABILITY-AND-EQUITY> 530,205 0
<SALES> 311,845 335,214
<TOTAL-REVENUES> 597,920 603,534
<CGS> 241,454 224,803
<TOTAL-COSTS> 465,319 422,036
<OTHER-EXPENSES> 30,037 25,363
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,081 7,730
<INCOME-PRETAX> 7,520 66,585
<INCOME-TAX> 2,707 23,971
<INCOME-CONTINUING> 4,813 42,614
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 462
<CHANGES> 0 0
<NET-INCOME> 4,813 42,152
<EPS-PRIMARY> 0.24 1.97
<EPS-DILUTED> 0.24 1.90
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