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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1999
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
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2701 East Grauwyler 75061
Irving, Texas (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (972) 579-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------------------------ ---------------------
Common Stock, $.01 Par Value Privately Held
Class A common stock, $.01 Par Value
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.
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.
Number of Shares Outstanding at
Title of Each Class February 29, 2000
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Common Stock, $.01 Par Value 17,003,838
Class A common stock, $.01 Par Value 1,181,946
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BancTec, Inc.
Annual Report
on
Form 10-K
Twelve Months Ended December 31, 1999
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PART I
ITEM 1. The Company
Overview
BancTec, Inc., a Delaware corporation, (the "Company") is a worldwide
systems integration and services company that delivers solutions which solve
complex data and paper-intensive business problems using advanced imaging,
workflow, and business technologies. The Company is also a leading provider of
maintenance services for major computer companies, government and corporate
customers. The Company employs approximately 3,900 people and is headquartered
in Dallas, Texas.
Founded in 1972, the Company operates worldwide (with international sales
in 1999 representing approximately one-third of total revenues) and has served
over 5,000 customers in over 50 countries.
In July 1999, the Company was taken private by Welsh, Carson, Anderson &
Stowe ("WCAS"), a New York-based private investment firm, which now holds a
93.5% interest in the Company. WCAS is strategically focused on the acquisition
of information services and health care companies, traditionally investing for
growth. The firm manages more than $8.0 billion for corporate and public pension
funds, university endowment funds and other institutional investors. The
remaining 6.5% interest is held by Convergent Equity Partners, L.P.
("Convergent"), a Dallas-based private investment firm.
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.
Reporting Structure
The Company's operations historically have been organized into three
business segments as follows: Manufacturing and Supplies, U.S. Maintenance and
Service ("USMS"), and Worldwide Systems ("WS"). In the 1998 fourth quarter, the
Company announced a reorganization of its operations into two primary
businesses, Worldwide Financial Systems ("WFS") and Computer and Network
Services ("CNS"). The operations of WFS include financial transaction
processing, manufacturing and supplies, installation and maintenance of BancTec
manufactured equipment, integrated systems, and Plexus /R/, while the CNS
operations include personal computer warranty repair services and administration
of third party extended warranties. Subsequently, the Company decided to
separate WFS into two reportable segments which are managed separately based on
geographical areas, North American Systems ("NAS") and International Systems
("INTL"). INTL consists of operations throughout the world excluding North
America. See also Note M to the Consolidated Financial Statements for additional
information regarding the Company's reportable segments.
North American Systems and International Systems. Both NAS and INTL offer
similar systems integration and business process services and solutions and
market to similar types of customers. The solutions offered primarily involve
high volume transaction processing using advanced technologies and processes.
Key applications include payment and check processing, document imaging and
workflow, and ongoing service and support. The Company's powerful, high-volume
integrated systems deliver important benefits to some of the world's largest
credit card companies and major airlines. In addition, these segments provide
their products and services to other customers, including banks, financial
services companies and
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insurance providers, as well as utility companies, governmental agencies and
transportation firms.
The Company combines its extensive business application knowledge with a
full range of software and equipment offerings for high volume, complex
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.
For high volume processors, the Company 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 offerings 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.
The Company is expanding the scope of customer solutions with the addition
of web-enabled 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 OpenARCHIVE solution is a multi-tiered
archival system designed for high-speed digital archiving of financial and other
documents and related transaction data. The Company 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, the Company 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 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 Document Imaging and Workflow Software Products. The Company offers
a complete family of internet-enabled document imaging and workflow software
products under the Plexus brand 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 the Company
sales channels and through various value-added resellers and systems integrators
worldwide. Plexus software products are also incorporated into the Company's
application solutions to enhance functionality and provide competitive
distinction.
Document and Check Processing Equipment Products. The Company manufactures
low, medium and high-speed document reader/sorters and related components that
read magnetic ink character recognition and optical character recognition data
from financial documents and sort the documents according to established
patterns. The Company's 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
markets its products and solutions to end-users, to other manufacturers and to
various resellers and systems integrators throughout the world.
The Company 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,
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MICR encoders, ink jet components and various peripheral equipment. The
Company's original equipment manufacturer ("OEM") products are sold with a
90-day warranty from the date of shipment.
Installation and Maintenance of the Company's Products. The Company
installs and maintains its own equipment products including document
reader/sorters and scanners. At February 29, 2000, the Company employed
approximately 700 customer service engineers located in the United States and
international locations to service the Company's installed equipment. The
Company's maintenance contracts typically include both parts and labor and
generally are three to five years in duration.
Computer and Network Services. The Company is a leading provider of
personal computer repair services in the United States for many companies,
including Dell, Compaq, Galileo International, and many Fortune 100 companies.
BancTec's CNS segment is structured around the following three customer areas:
Strategic alliances (outsource and system integration partners): Strategic
alliances focus on establishing and maintaining partnerships with industry-
recognized providers of outsourcing services as well as with system integrators
offering specific support to their customer base. The partnerships with these
organizations enable BancTec to provide services consistent with its core
competencies for desktop/enterprise applications, while enabling the strategic
alliance partners to focus on program management and specific services.
OEM partner relationships: The focus of the BancTec OEM partner
relationship group is on providing warranty fulfillment services and related
support to manufacturers of desktop/enterprise products. BancTec's
relationship with these OEMs allows access to BancTec's pervasive national
field service organization, while enabling the OEMs to focus on customer needs
and demands for responsive and effective resolution to product defects and/or
application issues.
Fortune and retail market accounts: The Fortune and retail accounts group
is chartered with serving those customers that have support needs consistent
with their core competencies in desktop/enterprise applications while
leveraging BancTec's nationwide service organization. Typical customers
require national service in order to support their operational sites. The
Service Level Agreements of these customers require flexibility to manage
support needs ranging from high-priority mission-critical systems to office
automation with lower-priority support requirements.
Product Development
The Company has an active research and development program to maintain the
Company's leadership position in payment and document processing technology.
The Company is engaged in ongoing software and hardware product development
activities for both new and existing products, employing approximately 281
people for such activities as of February 29, 2000.
The following table sets forth certain information regarding the Company's
product development expenditures for the indicated periods:
Twelve Months Ended
December 31,
----------------------------
1999 1998 1997
----------------------------
(Dollars in thousands)
Product development expenditures $15,917 $17,732 $17,850
Percent of total revenue 3.0% 3.2% 3.2%
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, the Company has focused its development efforts on electronic
commerce technologies and a new generation of web-
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enabled products for both the check and remittance markets. Each of these major
new applications will be further developed and deployed during 2000. 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 web-enabled software products and implement changes to current
software products to further strengthen its competitive position in the
business, imaging and workflow software markets. 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,
as well as new vertical application solutions. These applications are intended
to provide more complete customer solutions, allowing rapid deployment and more
rapid customer return on investment.
Equipment Technology Development. In 2000, 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
remain 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 for real-time
reading to improve monitoring and detection of image quality in the Company's
transport and scanner product lines.
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
For systems integration and CNS sales, the Company relies on its internal
sales forces. For its document and check processing products, the Company's
distribution strategy is to employ multiple sales channels to achieve the widest
possible distribution. The Company's products are sold to end-users,
distributors, OEMs, value-added resellers 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 N of
the Notes to the Consolidated Financial Statements for financial information
concerning the Company's international operations.
Customer Diversification
In 1999, no single customer accounted for more than 10% of the total
revenue of the Company. The Company's ten largest customers accounted for 25%
of the Company's revenues in 1999.
Competition
In marketing its products and services, 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 performance, quality, service and price are important competitive factors
in the markets in which it competes. Generally, the Company emphasizes industry
knowledge, unique product features, quality and service, and flexibility to
configure unique systems from standard components in its competitive efforts.
While the Company believes that its offerings compete favorably based on each of
these elements, the Company could be adversely affected if its competitors
introduce innovative or technologically superior solutions 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.
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Backlog
The Company's backlog of orders believed to be firm for its products at
December 31, 1999, 1998, and 1997 was approximately $89.9 million, $82.8
million, and $65.3 million, respectively.
The Company's backlog excludes CNS contracts, recurring hardware and
software maintenance contracts, and also excludes contracts for 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 was 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 29, 2000, the Company employed approximately 3,900 full-time
employees and considers its employee relations to be good. None of the
Company's employees is represented by a labor union. The Company has never
experienced a work stoppage.
Year 2000
The Company's Year 2000 ("Y2K") disclosure is included under the heading,
"Year 2000 Considerations" in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Item 7, hereof.
ITEM 2. Properties
During the second quarter of 2000, the Company plans to move its corporate
headquarters from leased space in Dallas, Texas, to its Irving, Texas
facilities. The currently leased corporate space of approximately 30,000
square feet has been sublet effective May 1, 2000.
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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 Irving manufacturing facility, which the Company owns, 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
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PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
None
ITEM 6. Selected Financial Data
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
--------------------------------------------------------------- ------------
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
For the period:
Revenue $ 534,590 $ 556,097 $ 560,996 $ 511,903 $ 352,074
Income (loss) from continuing
Operations before income taxes (35,842) 11,546 69,353 31,736 (67,737)
Income (loss) before extraordinary item (11,197) 4,813 42,614 37,101 (53,481)
Net income (loss) (11,197) 4,813 42,152 37,101 (53,481)
At period-end:
Total assets 473,105 520,312 498,343 455,703 428,939
Working capital 130,448 144,405 61,335 78,438 37,173
Long-term debt, less current maturities 350,500 150,352 11,854 65,891 82,972
Stockholders' equity (deficit) (21,738) 220,081 260,523 204,720 156,201
</TABLE>
In September 1999, the Company completed the sale of its community banking
business to Jack Henry and Associates. For financial statement purposes, the
sale was treated as a discontinued operation, and accordingly, the financial
data above has been restated to reflect the continuing operations of the
Company.
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 ending December 31, 1995.
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ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
BancTec has experienced a number of changes during 1999. Among the more
significant of these changes were the Company's merger with WCAS, a focus on
the on-going changes in strategic direction of the Company, and the sale of
BancTec's community banking business to Jack Henry and Associates ("JHA").
The Merger. On July 22, 1999, the Company was acquired by WCAS and
Convergent. WCAS, Convergent, and their respective related entities are now the
sole shareholders of BancTec, with WCAS owning 17,003,838 shares of New Common
Stock and Convergent owning 1,181,946 shares of Class A common stock. The
transaction was accounted for as a re-capitalization in which the historical
basis of the Company's assets and liabilities were not affected and no new
goodwill related to the merger was created. See also Notes C and P to the
Consolidated Financial Statements.
Focus on On-going Change in Strategic Direction. The slowdown in the
Company's U.S. systems business and the ongoing transition underway in its
services business prompted a detailed evaluation in 1998 of the Company's
organizational structure and long-term growth strategies, facilitated by the
management consulting firm of Booz-Allen & Hamilton. Prior to the evaluation,
the Company's operations historically had been organized into three business
segments as follows: Manufacturing and Supplies, U.S. Maintenance and Service
and Worldwide Systems. As a result of the evaluation, in the fourth quarter of
1998, BancTec initiated a reorganization of its operations into two primary
businesses - WFS and CNS. The purpose of the reorganization was to give greater
visibility to the Company's personal 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 focus future investments in areas of the business that
offer attractive potential for growth and profitability. The operations of WFS
include manufacturing and supplies, financial transaction processing,
installation and maintenance of BancTec equipment, integrated systems, and
Plexus, while the CNS operations include personal computer warranty repair
services and administration of third party extended warranties. Subsequently,
the Company decided to separate WFS into two reportable segments which are
managed separately based on geographical areas, North American Systems and
International Systems. INTL consists of operations throughout the world
excluding North America. See also Note M to the Consolidated Financial
Statements for additional information regarding the Company's reportable
segments.
Sale of Community Banking Business. In line with the revised strategic
focus on its core competencies, on September 9, 1999, BancTec sold
substantially all of the net assets of its community banking business to JHA of
Monett, Missouri. The Company received proceeds of $50.0 million in cash from
the sale and recorded a pre-tax gain of approximately $20.3 million. See also
Note D to the Consolidated Financial Statements.
Based on fiscal 2000 expected business conditions, the Company believes
that the same factors that affected 1999 warrant a cautious outlook for the
Company's near-term revenue and earnings growth prospects. While the short-
term outlook remains cautious, management believes that a number of dynamics
point toward a more positive outlook for the second half of 2000 and beyond.
These factors include certain planned new solution introductions such as
additions to the PayCourier series which provide payment processing solutions,
the ImageFIRST OpenARCHIVE products for high-speed digital archiving of
transaction data, and the new X-Series Single-Step Reject Repair System. Other
factors pointing toward a more favorable outlook include additional investments
in sales and marketing accomplished through strategic hiring in these
disciplines, and completion of customer Year 2000 remediation projects. These
new offerings leverage BancTec's already-extensive business application
knowledge and business process expertise with the Company's broad range of
solutions.
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Comparison of Twelve Months Ended December 31, 1999 and Twelve Months Ended
December 31, 1998
Consolidated revenue of $534.6 million for the twelve months ended December
31, 1999 decreased by $21.5 million or 3.9% from the prior twelve-month period.
In 1999, NAS revenue decreased by 8.5% to $251.7 million compared to the prior
year due a decline in revenues for maintenance on BancTec-manufactured products
compared to 1998 and customer spending cautions related to Y2K concerns. CNS
revenues decreased by 10.4% to $109.7 million for the same period due primarily
to contract expirations and non-renewals. International revenues increased by
9.2% to $173.2 million in 1999 compared to 1998 due to increased shipments to
worldwide customers of financial transaction and document management systems.
Due to the lack of comparative data for the new segments, the Company has
included below, as supplemental comparative information, a discussion using
historical segment data.
Revenue from Manufacturing and Supplies decreased by $2.4 million to $47.4
million compared to the prior year due to customer spending cautions related to
Y2K concerns. Revenue for WS increased by approximately $9.6 million to $277.4
million due primarily to increased shipments of financial transaction and
document management systems to worldwide customers and increased Plexus
software sales. Offsetting the WS increase was a revenue decrease in USMS of
$28.6 million to $209.7 million as compared to the prior year. The decrease was
mainly attributable to the non-renewal of some large contracts and the
expiration of some maintenance contracts on older document processing systems.
Now that the Y2K event has ended, management believes a higher rate of revenue
growth should occur in the future. A major equipment maintenance and
installation project for Galileo International is expected to return revenues
for personal computer services to 1998 levels in 2000.
Consolidated gross profit of $104.0 million decreased by $19.4 million or
15.7% from the prior twelve-month period. Gross profit for Manufacturing and
Supplies was $13.8 million, representing an increase of $8.9 million from the
prior year, and gross profit for WS of $76.7 million increased $11.4 million
from the prior year. The increases in gross profit were due primarily to
charges incurred in connection with the 1998 reorganization that were not
incurred in 1999 and to improved product mix. Gross profit for USMS of $13.5
million decreased by $39.7 million due primarily to lower revenues,
particularly related to non-renewals of two strategic contracts and the decline
in revenues for maintenance on BancTec-manufactured products, without a
corresponding decrease in fixed costs. Based on management's belief that the
current profit declines are temporary, management made no significant
mitigating adjustments to the fixed cost structure to compensate for the
revenue decrease.
Operating expenses of $118.3 million increased $12.0 million or 11.3%
compared to the prior twelve-month period. Product development expenses of
$15.9 million decreased by $1.8 million from the comparative prior year due to
completion of certain new product developments and a refocus on a narrower set
of strategic initiatives. Sales and marketing expenses of $47.3 million
increased by $2.7 million or 6.0% due to management's decision to increase its
marketing efforts. General and administrative expenses of $48.8 million
increased by $13.5 million or 38.2% primarily due to $6.4 million of merger-
related expenses, $4.5 million in additional provisions for accounts
receivable, and a full year of amortization related to the implementation costs
of a new internal information system. The increased expense for doubtful
accounts was due to the increasingly competitive environment in which the
Company operates. Goodwill amortization of $6.2 million decreased $2.4 million
or 27.8% due primarily to the prior year $4.1 million write-off related to the
Company's Canadian subsidiary. The decrease was offset by a current year
write-down of $2.1 million associated with the discontinuance of a product line
previously sold by the Company's United Kingdom ("UK") subsidiary, BancTec
Limited.
Interest income of $0.5 million decreased $0.8 million from the prior
twelve-month period primarily due to the use of excess cash in 1999 in
conjunction with the merger.
Interest expense of $22.7 million increased $13.7 million from the prior
year due to additional debt incurred by the Company in the July 1999 merger and
to interest expense on the $150.0 million Senior Notes issued in May 1998. The
Senior Notes replaced $105.0 million of bank debt with a lower effective
interest
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rate.
Sundry income of $0.5 million decreased $1.6 million primarily due to
foreign currency activity, which resulted in losses of $0.4 million in 1999
compared to gains of $1.0 million in 1998.
A pre-tax loss from continuing operations of $35.8 million for the twelve-
month period ended December 31, 1999 resulted in an income tax benefit of $13.3
million as compared to an income tax provision of $4.2 million on pre-tax
income from continuing operations of $11.5 million for the corresponding prior
year. The effective tax rates are 37% and 36% for the twelve-month periods
ended December 31, 1999 and 1998, respectively.
Comparison of Twelve Months Ended December 31, 1998 and Twelve Months Ended
December 31, 1997
Consolidated revenue of $556.1 million for the twelve months ended December
31, 1998 decreased slightly by $4.9 million from the prior year. During the
fourth quarter of 1998, the Company reversed approximately $5.5 million of
revenue as a result of the cancellation of a systems contract related to a
discontinued product. In 1998, NAS revenue decreased by $22.0 million to
$274.9 million compared to the prior year due primarily to the decline in
demand for large software systems in the U.S and to the expiration of some
maintenance contracts on older document processing systems. While the volume
of the systems integration business had been somewhat variable, the Company
believed that additional factors contributed to the lower revenues, including
bank mergers and consolidations and ongoing competitive pressures. CNS
revenues increased by $21.6 million to $122.5 million for the same period due
to continued growth in in the CNS warranty and repair services. INTL revenues
decreased slightly by $4.5 million to $158.7 million due also to the lower
demand for large systems. Due to the lack of comparative data for the new
segments, the Company has included below, as supplemental comparative
information, a discussion using historical segment data.
Revenue from Manufacturing and Supplies decreased by $7.3 million to $49.9
million compared to the prior year, and revenue for WS decreased by
approximately $16.0 million to $267.9 million for the period. The decreases
were due to ongoing competitive pressures, lower demands for large systems,
particularly in the U.S., customer spending commitments to address Y2K
compliance, and bank mergers and consolidations. Offsetting these decreases was
an increase in USMS revenue of $18.4 million to $238.3 million as compared to
the prior year. The increase was due to an increase in personal computer
services revenues of $21.6 million, partially offset by the expiration of some
maintenance contracts on older BancTec document processing systems.
Consolidated gross profit of $123.4 million decreased by $46.3 million or
27.3% from the prior twelve-month period. Gross profit for manufacturing and
supplies decreased by $20.3 million to $4.9 million for the period, and WS
gross profit decreased $18.3 million to $65.3 million during the same period.
The decreases were due to lower sales volumes and sales of less profitable
systems upgrades, rather than the more profitable new integrated systems. Also
contributing significantly was a $13.6 million write-off of inventory items for
products that were discontinued in conjunction with the Company's
reorganization in the fourth quarter of 1998. Also during the fourth quarter of
1998, the Company recorded approximately $5.6 million in charges, primarily
related to severance, obsolete inventory and closure of the Company's
operations in Australia. Substantially all severance costs had been paid by the
1999 year-end, and the Australian operations were closed early in the 1999
third quarter. The $5.6 million in charges was comprised primarily of the
following: $1.2 million in severance costs as a result of the reorganization,
$3.6 million in obsolete inventory costs, and $0.8 million related to the
closure of the Company's operations in Australia. Gross profit for USMS of
$53.2 million decreased by $7.7 million due to a change in the mix of services
being provided and the effect of start-up costs on certain new long-term
service contracts, partially offset by an increase in personal computer
services revenue.
Operating expenses of $106.3 million increased $13.7 million or 14.8%
compared to the prior twelve-month period. Product development expenses were
comparable to the prior year. Sales and marketing expenses of $44.6 million
increased by $1.4 million or 3.3% due to a higher level of operating
11
<PAGE>
activities. General and administrative expenses of $35.4 million increased by
$7.8 million or 28.2% due to the amortization of six months of costs incurred
for the implementation of a new internal information system, certain functional
modules of which became substantially 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 $8.6 million increased $4.6 million primarily due to the write-off of $4.1
million of goodwill associated with the Company's Canadian subsidiary, BancTec
Canada, also in conjunction with the Company's reorganization in the fourth
quarter of 1998.
Interest income of $1.3 million increased $0.6 million from the prior
twelve months due to the investment of excess cash from the proceeds of the
$150.0 million debt offering in May 1998.
Interest expense of $9.0 million increased $1.3 million from the prior
twelve months primarily due to the increase in outstanding debt and a higher
interest rate on the new Senior Notes compared to the rate on 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 $2.1 million increased $2.9 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 1997.
The provision for income taxes of $4.2 million decreased by $20.8 million
from the prior year due to a decrease in pre-tax income from continuing
operations of $57.8 million. The income tax provision, as a percentage of
income before income taxes is 36.0%, which is consistent with the effective
rate for 1997.
Liquidity and Capital Resources
Cash and cash equivalents, as of December 31, 1999, were $20.3 million
compared to $25.3 million as of December 31, 1998. Total borrowings were
$365.8 million as of December 31, 1999, compared to $156.3 million as of
December 31, 1998. Total working capital decreased to $130.4 million as of
December 31, 1999 from $144.4 million as of December 31, 1998. The $17.0
million decrease in working capital was primarily due to the decrease in
accounts receivable resulting from lower revenues and improved collections.
Cash provided by operations was $19.5 million in 1999, compared to $57.6
million in 1998. The decreased cash flow in 1999 was due primarily to lower
net income from continuing operations offset by a decrease in working capital
as compared to 1998. See the discussion in "Comparison of Twelve Months Ended
December 31, 1999 and Twelve Months Ended December 31, 1998" for the factors
contributing to the decrease in net income.
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 $144.4 million as of
December 31, 1998, from $61.3 million as of December 31, 1997. The $83.1
million increase in working capital was primarily due 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 $57.6 million in 1998, compared to $54.7
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 Twelve Months Ended
December 31, 1997" for the factors contributing to the decrease in net income.
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
that would have a material impact on the Company's long or short-term
liquidity.
12
<PAGE>
On July 22, 1999, the merger of the Company with WCAS was completed.
Subsequent to, and as a result of the merger, the following debt instruments
were put into place: 1) $75.0 million Tranche A Term Loan due June 2004 payable
to a bank in sixteen consecutive quarterly installments beginning September 30,
2000, bearing interest, at the Company's option, of either London Interbank
Offered Rate ("LIBOR") plus 2.75% or prime plus 1.75% (10.25% at December 31,
1999), and 2) $160.0 million subordinated unsecured "Sponsor" notes due 2009,
bearing interest at 10.0%. The $160.0 million is payable to WCAS, a related
party. The Company used $30.0 million of the cash proceeds from the sale of its
community banking business to pay down the term loan to $45.0 million in the
fourth quarter of 1999. Collateral for the term loan includes all tangible and
intangible assets of the Company.
On May 22, 1998, the Company sold $150.0 million of 7.5% 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.
At December 31, 1999, the Company has a secured credit agreement with
financial institutions, which provides for a $50.0 million short-term revolving
credit facility (the "agreement", or the "revolver"). The agreement contains
restrictive covenants which also apply to the Tranche A Term Loan. The
covenants have variable parameters which, among other things, restrict payment
of dividends, require the Company to maintain a minimum EBITDA to interest
expense ratio, as defined, limit the maximum debt to EBITDA, restrict the
minimum fixed charge to interest expense ratio and limit capital expenditures.
At December 31, 1999, the Company is in compliance with all covenants required
under the agreement. The revolver bears interest at the lender's prime
commercial rate plus 1.75%, or at the Company's option, the LIBOR on
Eurocurrency borrowings plus 2.75%, depending on the Company's debt to
capitalization ratio (10.25% at December 31, 1999). A commitment fee of 0.5% on
the unused revolving credit facility is payable quarterly. The Company had an
outstanding balance of $9.0 million under the agreement at December 31, 1999.
Also outstanding as of December 31, 1999, were foreign credit agreements in
the amount of $1.5 million 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 restrictive covenants related to these agreements.
On December 5, 1997, the Company redeemed substantially all $43.7 million
of its 7.25% 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 Company spent $3.8 million, $13.5 million, and $14.4 million during
1999, 1998, and 1997 for computer hardware, software and consulting to
implement a new information system for the Company. Primary functionality of
the new information system became operational during July 1998. This new
system will meet the foreseeable needs of the Company and is Y2K 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.
Inflation has not had a material effect on the operating results of the
Company.
Year 2000 Considerations
With the exception of a few minor issues that have been or are being
resolved, BancTec, its customers and suppliers have all reported business as
usual since the rollover of the clock from 1999 to 2000 (millennium rollover)
and February to March 2000 (leap year rollover). Following is a detailed
account of BancTec's Y2K preparations.
13
<PAGE>
During 1998, the Company developed a master plan to assess and address
potential risks it faced as a result of Y2K issues. The plan provided strategic
guidance for all products, services, systems, relationships, and infrastructure
that may encounter a Y2K issue. 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.
During the third quarter of 1998, the Company substantially completed the
implementation of SAP, an enterprise resource planning information system, for
use in all the Company's domestic operations, which is represented to be Y2K
compliant by the software vendor. The implementation of this system cost
approximately $31.7 million and the cost cannot reasonably be allocated to the
portion attributable to Y2K issues. SAP replaced accounting, manufacturing,
purchasing, sales and distribution, and human resources systems. A new customer
service electronic data interchange system that interfaces with SAP was
implemented in 1999. The system cost about $1.2 million and the portion
attributable to Y2K issues is not identifiable. Internationally, the Company
has implemented Y2K compliant management information systems and service
management systems, the costs of which are included in the amounts below.
The implementation cost of the Y2K master plan is estimated at $7.0 million,
of which $4.0 million relates to non-recurring internal (mostly non-incremental)
employee costs. Another $1.8 million was for new systems and upgrades. The
remaining $1.2 million relates to the incremental costs of software,
consultants, and other Y2K-related expenses. This estimate may not include all
internal costs of employees working on Y2K issues, as these costs were not
tracked separately. As a result of implementing the master plan during 1999,
the Company does not expect to incur future significant costs as a result of Y2K
issues.
The process of ensuring that the Company's major vendors are addressing
their Y2K concerns is complete. Nearly all vendors (over 1,000) and key
customers were evaluated and no significant concerns have been identified.
Alternate vendors and strategies were considered and would have been 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 completely 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 is at risk as the business
and financial condition could be materially adversely affected.
BancTec has business continuity and contingency plans ("BCCPs") for Y2K.
The purpose of our BCCPs is to ensure that, should unexpected Y2K failures occur
or outside suppliers fail, a minimum acceptable level of processes and services
will be functioning for the business on a short-term basis until permanent fixes
are implemented.
NOTICE: This information is a "Year 2000 Readiness Disclosure" and conforms
to the Year 2000 Information and Readiness Disclosure Act of 1998.
ITEM 7(A). Quantitative and Qualitative 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 risks.
The Company's $160.0 million in Sponsor notes were issued in U.S. dollars at
a fixed interest rate of 10.0%. Interest is due and payable quarterly beginning
September 30, 1999. The notes mature in July 2009. The fair market value of the
Sponsor notes approximates its carrying value as of December 31, 1999.
The Company's $150.0 million in Senior Notes were issued in U.S. dollars at
a fixed interest rate of 7.5%. Interest is due and payable in semi-annual
installments beginning December 1, 1998. The notes mature on June 1, 2008. As
of December 31, 1999, the Senior Notes have a market value of approximately
$130.0 million based on an estimated yield of 10.0%.
14
<PAGE>
The Company also has Japanese yen-denominated foreign credit agreements in
the amount of $1.5 million as of December 31, 1999. 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 carrying value
of as December 31, 1999.
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, 1999.
15
<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, 1999 and
1998, and the related consolidated statements of operations, cash flows and
stockholders' equity (deficit) for the three years in the period ended December
31, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the results of their
operations and their cash flows for the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Arthur Andersen LLP
Dallas, Texas
February 16, 2000
(except with respect to the matters discussed in Note P,
as to which the date is February 25, 2000).
16
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of $2,694
at December 31, 1999 $ 20,292 $ 25,313
Short-term investments 440 837
Accounts receivable, less allowance for doubtful accounts of
$12,790 at December 31, 1999 and $9,333 at December 31,
1998 143,745 166,554
Inventories 64,193 66,590
Current deferred tax asset 26,803 20,762
Other 11,851 9,157
------------- -------------
Total current assets 267,324 289,213
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 2,860 3,030
Field support spare parts 117,010 102,262
Systems and software 62,809 53,150
Machinery and equipment 54,454 53,436
Furniture, fixtures and other 27,262 23,151
Buildings 29,637 28,848
------------- -------------
294,032 263,877
Less accumulated depreciation 168,130 141,154
------------- -------------
Net property, plant and equipment 125,902 122,723
GOODWILL, less accumulated amortization of $28,200 at
December 31, 1999 and $22,448 at December 31, 1998 54,903 60,818
OTHER ASSETS 24,976 13,133
NET ASSETS OF DISCONTINUED OPERATIONS -- 34,425
------------- -------------
TOTAL ASSETS $ 473,105 $ 520,312
============= =============
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
BANCTEC, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Revolving credit facilities $ 10,468 $ 5,024
Current maturities of long-term debt 4,854 878
Trade accounts payable 24,978 23,052
Other accrued expenses and liabilities 61,181 76,267
Deferred revenue 29,420 31,519
Income taxes 5,975 8,068
------------ ------------
Total current liabilities 136,876 144,808
LONG-TERM DEBT, less current maturities 350,500 150,352
OTHER LIABILITIES 7,467 5,071
COMMITMENTS AND CONTINGENCIES (Note L)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - authorized, 1,000,000 new shares and 1,000
old shares of $.01 par value at December 31, 1999 and 1998:
Series A - no shares issued and outstanding - -
Series B - no shares issued and outstanding - -
Common stock authorized, 32,000,000 new shares and
45,000,000 old shares of $.01 par value at December 31,
1999 and 1998, respectively
Old Common stock-issued and outstanding 19,373,000 shares
at December 31, 1998 - 194
New Common stock-issued and outstanding 17,003,838 shares
at December 31,1999 170 -
Class A common stock-issued and outstanding 1,181,946 shares
at December 31, 1999 12 -
Additional paid-in capital 137,180 170,318
Retained earnings (deficit) (155,296) 54,932
Foreign currency translation adjustments (3,804) (3,736)
Unearned compensation - (1,627)
------------ ------------
Total stockholders' equity (deficit) (21,738) 220,081
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 473,105 $ 520,312
============ ============
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
--------------------------------------------
1999 1998 1997
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
REVENUE $ 534,590 $ 556,097 $ 560,996
COST OF SALES 430,558 432,694 391,339
---------- ---------- ----------
Gross profit 104,032 123,403 169,657
OPERATING EXPENSES:
Product development 15,917 17,732 17,850
Selling, general and administrative 96,146 79,969 70,773
Goodwill amortization 6,188 8,568 3,929
---------- ---------- ----------
118,251 106,269 92,552
---------- ---------- ----------
Income (loss) from operations (14,219) 17,134 77,105
OTHER INCOME (EXPENSE):
Interest income 546 1,296 740
Interest expense (22,685) (9,024) (7,730)
Sundry, net 516 2,140 (762)
---------- ---------- ----------
(21,623) (5,588) (7,752)
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (35,842) 11,546 69,353
INCOME TAX PROVISION (BENEFIT) (13,262) 4,154 24,967
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (22,580) 7,392 44,386
LOSS FROM DISCONTINUED OPERATIONS, NET
OF TAX BENEFIT OF $830, $1,447 AND $996 at
DECEMBER 31, 1999, 1998 AND 1997,
RESPECTIVELY (1,415) (2,579) (1,772)
GAIN ON DISPOSAL OF BUSINESS UNIT, NET OF
TAX PROVISION OF $7,516 12,798 -- --
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (11,197) 4,813 42,614
EXTRAORDINARY ITEM, NET OF TAXES OF $260 -- -- (462)
---------- ---------- ----------
NET INCOME (LOSS) $ (11,197) $ 4,813 $ 42,152
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
--------------------------------------------
1999 1998 1997
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations $ (22,580) $ 7,392 $ 44,386
Adjustments to reconcile net income (loss) to cash flows provided
by operating activities:
Depreciation and amortization 43,341 61,412 37,246
Deferred income tax (benefit) expense (17,913) (3,083) 5,453
Loss on disposition of property, plant and equipment 1,929 2,312 1,427
Other non-cash items 2,323 (1,032) 3,353
(Increase) decrease in accounts receivable 24,909 (23,711) (23,719)
(Increase) decrease in inventories 1,041 2,918 (2,802)
Increase in other assets (9,014) (5,334) (2,839)
Increase (decrease) in trade accounts payable 1,926 5,821 (969)
Increase (decrease) in deferred revenue (2,099) 4,604 (5,120)
Increase (decrease) in other accrued expenses and liabilities (4,386) 6,265 (1,720)
---------- ---------- ----------
Cash flows provided by operating activities 19,477 57,564 54,696
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (45,880) (51,378) (59,199)
Purchase of businesses, net of cash acquired (779) (2,041) (724)
Proceeds from disposal of business unit 50,000 -- --
Change in net assets of discontinued operations 3,324 (3,976) (731)
Investment in unconsolidated subsidiary (2,375) -- --
Other -- -- 53
---------- ---------- ----------
Cash flows provided by (used in) investing activities 4,290 (57,395) (60,601)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of current maturities of long-term debt and capital lease obligations (884) (11,970) (11,926)
Proceeds from long-term borrowings 228,851 150,000 2,294
Payments on long-term borrowing (30,000) (10,558) (43,722)
Proceeds from (payments on) short-term borrowings, net 5,584 (79,750) 53,591
Repurchase of common stock (370,497) (49,837) (4,692)
Net proceeds from sales and issuances of common stock 138,316 3,531 15,166
---------- ---------- ----------
Cash flows provided by (used in) financing activities (28,630) 1,416 10,711
EFFECT OF EXCHANGE RATE CHANGES ON CASH (158) 2,045 (2,325)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,021) 3,630 2,481
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR 25,313 21,683 19,202
---------- ---------- ----------
CASH AND CASH EQUIVALENTS--END OF YEAR $ 20,292 $ 25,313 $ 21,683
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
BANCTEC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the twelve months ended December 31, 1999, 1998 and 1997
(In thousands, except share data)
<TABLE>
<CAPTION>
Foreign
Common Additional Retained Currency
Stock Paid Earnings Translation
Old New Capital (Deficit) Adjustments
--------------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996
(includes 29,936 treasury shares) $ 208 $ - $ 201,006 $ 7,967 $ (1,612)
Common stock issued principally
under employee stock plan 10 - 15,013 - -
Common stock issued/cancelled
under restricted stock plans, net - - 83 - -
Repurchase of common stock - - - - -
Treasury stock cancelled - - (388) - -
Conversion of 7.25% debentures - - 60 - -
Tax benefit from exercise of
stock options - - 5,460 - -
Amortization of unearned
compensation - - - - -
Foreign currency translation
adjustments - - - - (3,517)
Net income - - - 42,152 -
--------------- ---------- --------- -----------
Comprehensive Income
Balance at December 31, 1997
(includes 200,000 treasury shares) 218 - 221,234 50,119 (5,129)
Common stock issued principally
under employee stock plan 3 - 1,988 - -
Common stock issued/cancelled
under restricted stock plan, net - - 1,077 - -
Amortization of unearned
compensation - - - - -
Repurchase of common stock - - - - -
Treasury stock cancelled (27) - (54,502) - -
Tax benefit from exercise of
stock options - - 521 - -
Foreign currency translation
adjustments - - - - 1,393
Net income - - - 4,813 -
--------------- ---------- --------- -----------
Comprehensive Income
Balance at December 31, 1998 194 - 170,318 54,932 (3,736)
Net proceeds from common
stock issued pursuant to merger - 182 137,180 - -
Common stock issued principally
under employee stock plans 1 - 866 - -
Common stock issued/cancelled
under restricted stock plan, net - - 87 - -
Amortization of unearned
compensation - - - - -
Repurchase of common stock (195) - (171,271) (199,031) -
Foreign currency translation
adjustments - - - - (68)
Net loss - - - (11,197) -
--------------- ---------- --------- -----------
Comprehensive Income (loss)
Balance at December 31, 1999 $ - $ 182 $ 137,180 $(155,296) $ (3,804)
=============== ========== ========= ===========
Compre-
Unearned hensive
Treasury Compen- Income
Stock sation Total (Loss)
--------------- ---------- --------- -----------
Balance at December 31, 1996
(includes 29,936 treasury shares) $ (388) $ (2,461) $ 204,720
Common stock issued principally
under employee stock plan - - 15,023
Common stock issued/cancelled
under restricted stock plans, net - - 83
Repurchase of common stock (4,692) - (4,692)
Treasury stock cancelled 388 - -
Conversion of 7.25% debentures - - 60
Tax benefit from exercise of
stock options - - 5,460
Amortization of unearned
compensation - 1,234 1,234
Foreign currency translation
adjustments - - (3,517) $ (3,517)
Net income - - 42,152 42,152
--------------- ---------- --------- -----------
Comprehensive Income $ 38,635
===========
Balance at December 31, 1997
(includes 200,000 treasury shares) (4,692) (1,227) 260,523
Common stock issued principally
under employee stock plan - - 1,991
Common stock issued/cancelled
under restricted stock plan, net - (930) 147
Amortization of unearned
compensation - 530 530
Repurchase of common stock (49,837) - (49,837)
Treasury stock cancelled 54,529 - -
Tax benefit from exercise of
stock options - - 521
Foreign currency translation
adjustments - - 1,393 $ 1,393
Net income - - 4,813 4,813
--------------- ---------- --------- -----------
Comprehensive Income $ 6,206
===========
Balance at December 31, 1998 - (1,627) 220,081
Net proceeds from common
stock issued pursuant to merger - - 137,362
Common stock issued principally
under employee stock plans - - 867
Common stock issued/cancelled
under restricted stock plan, net - (126) (39)
Amortization of unearned
compensation - 1,753 1,753
Repurchase of common stock - - (370,497)
Foreign currency translation
adjustments - - (68) $ (68)
Net loss - - (11,197) (11,197)
--------------- ---------- --------- -----------
Comprehensive Income (loss) $ (11,265)
===========
Balance at December 31, 1999 $ - $ - $ (21,738)
=============== ========== =========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
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 27-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, governmental 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. All significant inter-company balances and
transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
Cash equivalents are comprised of highly liquid instruments with original
maturities of three months or less. Short-term investments are similar
instruments with original maturities in excess of three months and are valued
at cost, which approximates market.
Inventories
Inventories are valued at the lower of cost or market and include the cost
of raw materials, labor, factory overhead and purchased subassemblies. Cost is
determined using the first-in, first-out and weighted average methods. The
Company continually assesses the appropriateness of inventory valuations giving
consideration to obsolete and slow-moving inventories.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost less accumulated
depreciation and amortization. Provision for depreciation and amortization is
based on the estimated useful lives of the assets and is computed using the
straight line method.
Deferred Revenue
Certain of the Company's contracts permit the Company to bill the customer
in advance of the time revenue is recognized. Deferred revenue represents
billings in excess of revenue recognized. Revenue is recognized ratably over
the contract period as the services are performed, which usually occurs within
one year of billing.
22
<PAGE>
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.
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-Type Contracts." Under such contracts, the costs in
excess of billings were immaterial at December 31, 1999 and 1998. All contract
costs, including equipment and software, are charged to cost of sales at the
time the related revenue is recognized.
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 are depreciated over a 40-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 five 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 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 1999 fourth quarter, the Company wrote down $2.1 million of
goodwill associated with its United Kingdom ("UK") subsidiary, BancTec Ltd.
The write-down was associated with the discontinuance
23
<PAGE>
of a product line sold by the UK subsidiary. The loss is included in goodwill
amortization in the Consolidated Statements of Operations.
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 E. Consequently, the related future undiscounted cash flows of such
operations were 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. The
loss is included in goodwill amortization in the Consolidated Statements of
Operations.
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, 1999 and 1998, the Company had no
capitalized software costs. 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 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 and 1997 was $181,000, and $180,000, respectively. There was
no amortization for software development costs for the twelve-month period
ended December 31, 1999. 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 inter-company
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, 1999, 1998 and 1997,
were ($445,000), $972,000 and ($741,000), respectively.
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 years 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 $2.0 million. The acquisition was accounted for under the
purchase method of accounting.
24
<PAGE>
NOTE C--MERGER
On July 22, 1999, the merger of BancTec with Colonial Acquisition Corp.,
("Colonial") was completed. Colonial, created only to engage in the merger,
was organized and owned 93.5% by Welsh, Carson, Anderson & Stowe ("WCAS"), a
private investment partnership. Convergent Equity Partners L.P. ("Convergent")
owned approximately 6.5% of Colonial's capital stock prior to the merger. The
above-named entities and related parties are now the sole shareholders of
BancTec, with WCAS owning 17,003,838 shares of New Common Stock and Convergent
owning 1,181,946 shares of Class A common stock. Holders of both New Common
Stock and Class A common stock are entitled to one vote per share. The Class A
common stockholder is entitled to one seat on the Company's Board of Directors.
The former BancTec shareholders received $18.50 per common share in cash,
or approximately $360.2 million. Funding for the distribution to the former
BancTec shareholders was provided by a $145.0 million capital contribution from
WCAS and Convergent, by the Tranche A Term Loan, the Sponsor notes, and the
Revolving Credit Facility discussed in Note G. The transaction was accounted
for as a recapitalization in which the historical basis of the Company's assets
and liabilities was not affected and no new goodwill related to the merger was
created. In addition to the funds that were paid for the shares, cash payments
were made for employee stock options of $9.3 million and an employee stock
purchase plan of $0.3 million. The options and the employee stock purchase
plan payments were recorded as a reduction to stockholders' equity.
Under the terms of the merger agreement, a Rabbi Trust in the approximate
amount of $5.5 million was established for potential senior management
separation payout pursuant to related employment agreements. The $5.5 million
was segregated as restricted cash, and the year-end restricted cash balance was
approximately $2.7 million. Under the agreements, certain BancTec executives
are eligible to receive separation pay, as defined, from one to three years
after the merger date if certain separation criteria are met. BancTec expects
to pay at least $3.4 million pursuant to the agreements, and accordingly,
recorded a corresponding accrual in the third quarter. The balance of the
accrual was approximately $2.5 million at December 31, 1999 and is expected to
be paid in fiscal 2000. Merger-related fees totaling $17.8 million were paid
to various organizations in conjunction with closing. Of this amount, $11.4
million was allocated to the capital portion of the transaction and reflected
as a reduction to stockholders' equity, $6.2 million was allocated to the
Company's new debt instruments to be amortized over their respective lives, and
approximately $0.2 million of additional merger-related fees were expensed in
the fourth quarter. Included in the above-referenced fees were payments to WCAS
in the amount of $5.8 million and to Convergent in the amount of $0.2 million.
See also Note G for additional related party information.
NOTE D--DISCONTINUED OPERATIONS
On September 9, 1999, BancTec completed the sale of substantially all of
the net assets of its community banking business to Jack Henry and Associates
("JHA") of Monett, Missouri. The transaction was effective August 31, 1999.
The Company received proceeds of $50.0 million in cash from the sale and
recorded a pre-tax gain of approximately $20.3 million. For financial
statement purposes, the Company treated the sale as a discontinued operation,
and accordingly, financial statement presentation is made in accordance with
APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." Under this Opinion, the net
assets of discontinued operations have been shown as a single line item on the
Consolidated Balance Sheets. Revenues from the community banking business were
$20.7 million, $41.8 million, and $42.5 million in fiscal 1999, 1998, and 1997,
respectively.
NOTE E--REORGANIZATION
In October 1998, the Company announced plans to reorganize its operations
into two primary businesses: Worldwide Financial Systems ("WFS") and Computer
and Network Services ("CNS"). 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 F and $4.1 million
relates
25
<PAGE>
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 were paid to approximately 60 employees and management's estimate of
severance paid to the Company's chief executive officer who announced his
retirement in the fourth quarter of 1998. Nearly all affected employees were
terminated. As of December 31, 1999, substantially all amounts had been paid.
NOTE F--INVENTORIES
In the fourth quarter of 1998, the Company discontinued certain product
lines in conjunction with the reorganization (see Note E) and, accordingly
expensed approximately $13.6 million of inventory.
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------- ----------------
(In thousands)
<S> <C> <C>
Raw materials $ 18,740 $ 27,840
Work-in-process 4,429 3,830
Finished goods 41,024 34,920
---------------- ---------------
$ 64,193 $ 66,590
================ ===============
</TABLE>
NOTE G--DEBT
Long-term debt is presented in the following table:
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------- ------------------
(In thousands)
<S> <C> <C>
Term loan payable to banks due June 2004 $ 45,000 $ -
7.5% senior notes due June 1, 2008 150,000 150,000
Subordinated unsecured "Sponsor" notes due 2009 160,000 -
Obligations under capital leases 354 1,230
----------------- ----------------
355,354 151,230
Less current maturities 4,854 878
----------------- ----------------
$ 350,500 $ 150,352
================= ================
</TABLE>
Future maturities of long-term debt, excluding capital lease obligations are as
follows:
Year (In thousands)
------------- -------------------
2000 $ 4,500
2001 9,000
2002 10,500
2003 13,500
2004 7,500
Thereafter 310,000
-------------------
$ 355,000
===================
26
<PAGE>
On July 22, 1999, the merger of the Company with WCAS was completed (see
Note C). Subsequent to, and as a result of the merger, the following debt
instruments were put into place: 1) $75.0 million Tranche A Term Loan due June
2004 payable to a bank in sixteen consecutive quarterly installments beginning
September 30, 2000, bearing interest, at the Company's option, of either London
Interbank Offered Rate ("LIBOR") plus 2.75% or prime plus 1.75% (10.25% at
December 31, 1999), and 2) $160.0 million subordinated unsecured "Sponsor"
notes due 2009, bearing interest at 10.0%. The $160.0 million is payable to
WCAS, a related party. The Company used $30.0 million of the cash proceeds from
the sale of its community banking business to pay down the term loan to $45.0
million in the fourth quarter of 1999. Collateral for the term loan includes
all tangible and intangible assets of the Company.
On May 22, 1998, the Company sold $150.0 million of 7.5% 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.
At December 31, 1999, the Company has a secured credit agreement with
financial institutions, which provides for a $50.0 million short-term revolving
credit facility (the "agreement", or the "revolver"). The agreement contains
restrictive covenants which also apply to the Tranche A Term Loan. The
covenants have variable parameters which, among other things, restrict payment
of dividends, require the Company to maintain a minimum EBITDA to interest
expense ratio, as defined, limit the maximum debt to EBITDA, restrict the
minimum fixed charge to interest expense ratio and limit capital expenditures.
The agreement also allows for an Adjusted EBITDA calculation which excludes
certain expense items in accordance with the contract's provisions. Capital
expenditures at a quarter end for the preceding twelve-month period are not to
exceed $50.0 million. At December 31, 1999, the Company is in compliance with
all covenants required under the agreement. The revolver bears interest at the
lender's prime commercial rate plus 1.75%, or at the Company's option, the
LIBOR on Eurocurrency borrowings plus 2.75%, depending on the Company's debt to
capitalization ratio (10.25% at December 31, 1999). A commitment fee of 0.5%
on the unused revolving credit facility is payable quarterly. The Company had
an outstanding balance of $9.0 million under the agreement at December 31,
1999.
Also outstanding as of December 31, 1999, were foreign credit agreements in
the amount of $1.5 million 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 restrictive covenants related to these agreements.
Except for the Senior Notes which, as of December 31, 1999, have a fair
market value of approximately $130.0 million based on an estimated yield of
10.0%, the fair market value of the Company's debt instruments approximates
their respective carrying values.
The Company paid cash totaling $21,203,000, $7,856,000, $7,943,000, for
interest during the twelve months ended December 31, 1999, 1998 and 1997,
respectively. During the twelve months ended December 31, 1999 and 1997, the
Company capitalized no interest costs. 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.
27
<PAGE>
NOTE H--OTHER ACCRUED EXPENSES AND LIABILITIES
<TABLE>
<CAPTION>
December 31,
1999 1998
---------------------- -------------------
(In thousands)
<S> <C> <C>
Salaries, wages and other compensation $ 15,899 $ 19,105
Advances from customers 9,543 9,479
Accrued taxes, other than income taxes 5,688 5,918
Accrued interest payable 1,157 969
Accrued invoices and costs 5,892 8,545
Accrued reorganization costs 215 3,879
Other 22,787 28,372
----------------- -----------------
$ 61,181 $ 76,267
================= =================
</TABLE>
NOTE I--INCOME TAXES
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
----------------------------------------------------------------------
1999 1998 1997
------------------------ ------------------- -------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 3,205 $ 621 $ 9,358
State 231 387 3,240
Foreign 7,901 4,782 5,660
---------------------- ----------------- -----------------
Total current 11,337 5,790 18,258
---------------------- ----------------- -----------------
Deferred:
Federal (15,744) (2,684) 3,709
Foreign (2,169) (399) 1,744
---------------------- ----------------- -----------------
Total deferred (17,913) (3,083) 5,453
---------------------- ----------------- -----------------
$ (6,576) $ 2,707 $ 23,711
======================== ================= =================
</TABLE>
28
<PAGE>
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,
-----------------------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
(In thousands)
<S> <C> <C> <C>
Provision (benefit) at U.S. statutory rate of 35% for
all periods $ (6,221) $ 2,632 $ 23,305
Increase in tax expense resulting from:
Impact of foreign and Puerto Rico income tax rates 1,310 2,724 54
State income tax, net of federal income tax benefit 150 426 2,106
Utilization of net operating losses - (4,419) (4,291)
Foreign losses not providing a current benefit - 2,086 407
Goodwill amortization 7,481 1,077 1,579
Valuation allowance (8,103) - -
Other (1,193) (1,819) 551
-------------- -------------- --------------
$ (6,576) $ 2,707 $ 23,711
============== ============== ==============
</TABLE>
The Company paid cash totaling $14,614,000, $10,168,000 and $9,631,000, for
income taxes during the twelve months ended December 31, 1999, 1998 and 1997,
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,
-----------------------------------------------
1999 1998
----------------- ----------------
(In thousands)
<S> <C> <C>
Gross deferred tax assets:
Net operating losses $ 26,946 $ 24,431
Inventory reserves 9,673 7,399
Depreciation 1,641 151
Receivable allowance 2,642 1,378
Intangible assets previously deducted 2,890 4,038
Deferred revenues 3,413 3,701
Deferred compensation 1,481 4,183
Foreign timing differences, net 784 706
Taxes paid on intercompany profits 1,330 1,146
Other 4,361 3,390
----------------- ----------------
Total gross deferred tax asset 55,161 50,523
----------------- ----------------
Gross deferred tax liabilities:
Tax deductible deferred computer conversion costs (7,909) (8,037)
----------------- ----------------
Total gross deferred tax liability (7,909) (8,037)
Deferred tax asset valuation reserve (8,990) (22,137)
----------------- ----------------
Net deferred tax asset $ 38,262 $ 20,349
================= ================
</TABLE>
The Company has net operating loss carryforwards which expire as follows:
2000 through 2004, $39,649,000; 2005 through 2009, $24,065,000; 2010 through
2014, $503,000; 2015 through 2019, $2,419,000; and indefinite, $6,052,000.
29
<PAGE>
The net change in the deferred tax asset valuation reserve for the twelve
months ended December 31, 1999 and 1998, was a decrease of $13,147,000 and
$12,284,000, respectively. During 1999, federal revenue agent reviews were
completed; consequently, management reduced the estimated valuation allowance
related to certain deferred tax assets. In 1998, the decrease was primarily
attributable to the reversal of acquisition timing differences, inventory
reserves, and utilization of net operating loss carry forwards.
Undistributed earnings of foreign subsidiaries were approximately
$30,338,000 and $25,497,000 and $21,165,000 at December 31, 1999, 1998 and
1997, respectively. No taxes have been provided on these undistributed
earnings as they are considered to be permanently reinvested.
NOTE J--STOCKHOLDERS' EQUITY
Employee Stock Award Plans
Prior to July 22, 1999, the date of the merger, the Company had various
stock award plans. In general, the plans provided for the granting of options
or restricted shares to key employees. As a result of the merger, all options
and restricted shares became fully vested and were converted into the right to
receive $18.50 in cash per common share. A summary of the key provisions of
each type of award is as follows:
Stock Options
In general, the plans provided for the granting of options at not less than
fair market value of the stock at the grant date. Options issued vested over a
five-year period, with one-fifth of the shares becoming exercisable on each
anniversary. At December 31, 1998 and 1997 options to purchase 3,030,664 shares
and 2,519,745 shares, respectively, were outstanding, of which options to
purchase 748,825 shares and 844,560 shares, respectively, were vested and could
be exercised at a weighted average exercise price of $20.36 and $17.97,
respectively.
A summary of activity in the Company's stock option plans follows:
<TABLE>
<CAPTION>
Weighted
Range of Average
Exercise Prices Exercise
Shares Per Share Price
----------------- ---------------------------- -------------
<S> <C> <C> <C> <C>
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
Granted 87,000 13.25 13.25 13.25
Exercised or surrendered (1,722,854) 12.56 18.00 13.16
Forfeited (1,394,810) $ 12.56 $ 25.81 $ 21.01
-----------------
Options outstanding--December 31, 1999 $ 0
=================
</TABLE>
30
<PAGE>
Of the options forfeited during 1999, options for 217,195 shares had
exercise prices between $12.56 and $18.83, with a weighted average exercise
price of $18.72. The remaining 1,177,615 options forfeited had exercise prices
between $19.88 and $25.81, with a weighted average exercise price of $21.43.
Of the options exercised during 1999, options for 1,543,795 shares had
exercise prices between $12.56 and $13.25 with a weight exercise price of
$12.73. The remaining 179,059 options had exercise prices between $13.44 and
$17.38 with a weighted average exercise price of $17.01.
The Company accounted 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 FAS Statement No. 123, "Accounting
for Stock-Based Compensation", the Company's net income (loss) would have been
reduced to the following pro forma amounts in thousands:
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
--------------------------------------------------------
1999 1998 1997
------------------- ----------------- --------------
Net Income (loss):
<S> <C> <C> <C>
As reported $ (11,197) $ 4,813 $ 42,152
Pro Forma $ (13,194) $ 2,093 $ 40,173
</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 1999 1998 1997
- ----------------------------- -------------------------- --------------------- -----------------
<S> <C> <C> <C>
Risk free interest rate 6.3% 4.8% 5.8%
Expected life 3.5 years 3.5 years 3.5 years
Expected volatility 58% 64% 35%
Fair value of options granted (in millions) $6.15 $6.91 $6.88
</TABLE>
Restricted Stock Awards
The Board of Directors periodically awarded restricted stock to key
employees as compensation, and vesting was pro rata and subject to future
service. In conjunction with the merger, all restricted shares became fully
vested and were purchased by WCAS and Convergent. Accordingly, there was no
restricted stock outstanding at December 31, 1999. Unearned compensation was
charged for the market value of the shares on the date of grant and was
amortized to expense over the vesting period. Such amounts were shown as a
reduction of stockholders' equity in the accompanying consolidated balance
sheets. During the twelve months ended December 31, 1999, 9,518 restricted
shares were awarded and unearned compensation of $126,114 was recorded. 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. The weighted average price of
the shares awarded during the twelve months ended December 31, 1999, 1998 and
1997, was $13.25, $24.47 and $21.25, respectively. Vesting on such shares
ranged from 3 years to 21 years. In conjunction with the merger, all restricted
shares became fully vested and were purchased by WCAS and Convergent. During
the twelve months ended December 31, 1999, 1998 and 1997, $1,752,928, $529,827
and $228,413, respectively, were amortized to expense. Also during the twelve-
month period ended December 31, 1998 and 1997, the Company cancelled 6,360
shares and 6,193 shares, respectively, reserved for key employees who are no
longer with the Company. This resulted in a reduction to unearned compensation
of $117,751 and $102,006, respectively.
31
<PAGE>
NOTE K--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, 1999 and
1998 the Company elected to contribute 50% of the qualifying participants'
total pre-tax contributions. During the twelve months ended December 31, 1997,
the Company elected to contribute 69,492 shares which were allocated based on
compensation. Amounts expensed under the plan for the twelve months ended
December 31, 1999, 1998 and 1997 were $2,810,000, $2,768,000 and $1,863,000,
respectively.
The Company provides no material post retirement benefits to its employees.
NOTE L--COMMITMENTS AND CONTINGECIES
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, 1999, 1998
and 1997 was $9,345,000, $11,056,000 and $8,454,000, respectively.
Future minimum payments under non-cancelable operating leases are as
follows:
Calendar Year (In thousands)
2000 $ 8,476
2001 7,060
2002 5,026
2003 3,875
2004 2,474
Thereafter 3,584
------------------
$ 30,495
==================
The Company has the option to renew operating leases on its facilities at
the end of the current lease terms.
Litigation
The Company and its subsidiaries are parties to various legal proceedings.
Although the ultimate disposition of such proceedings is not presently
determinable, in the opinion of the Company, any liability that may ensue would
not have a significant impact on the financial position or results of
operations of the Company.
Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate risks.
Interest rate cap agreements are used to reduce the potential impact of
increases in interest rates on floating-rate long-term debt.
32
<PAGE>
NOTE M--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 operations historically have been organized into three
business segments as follows: Manufacturing and Supplies, U.S. Maintenance and
Service ("USMS"), and Worldwide Systems ("WS"). In the 1998 fourth quarter,
the Company announced a reorganization of its operations into two primary
businesses, WFS and CNS. The operations of WFS include financial transaction
processing, manufacturing and supplies, and installation and maintenance of
BancTec manufactured products and Plexus. The operations of CNS include
personal computer warranty repair services and administration of third party
extended warranties. The operations of WFS include two reportable segments that
are managed separately based on geographical areas. North American Systems
("NAS") consists of WFS operations in North America and International Systems
("INTL") consists of WFS operations in Europe and Japan.
Only revenue data for the new segments is available for fiscal 1999 and is
presented below. The Company has also included tables reflecting historical
segment data on a comparative basis.
Historical Segments
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 USMS segment installs and maintains its own equipment
products such as document reader/sorters and scanners. In addition, the
maintenance and service segment provides 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 WS 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.
Whenever possible, the Company uses market prices to determine inter-
segment pricing. Other products are transferred at cost or cost plus an agreed
upon mark-up.
33
<PAGE>
Table 1- New Segments
<TABLE>
<CAPTION>
North Computer
American and Network
Systems Services International Total
--------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
For the twelve months ended December 31, 1999
Revenues from
external customers $ 251,656 $ 109,738 $ 173,196 $ 534,590
For the twelve months ended December 31, 1998
Revenues from
external customers $ 274,946 $ 122,500 $ 158,651 $ 556,097
For the twelve months ended December 31, 1997
Revenues from
external customers $ 296,925 $ 100,900 $ 163,171 $ 560,996
</TABLE>
34
<PAGE>
Table 2- Historical Segments
<TABLE>
<CAPTION>
Manfacturing & US Maintenance Worldwide Corporate/
Supplies & Service Systems Eliminations Total
-------------- -------------- -------- ------------ -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
For the twelve months ended December 31, 1999
Revenues from
external customers $ 47,443 $ 209,711 $ 277,436 $ - $ 534,590
Intersegment
revenues 53,663 103 16,888 (70,654) -
Segment gross profit 13,799 13,486 76,747 - 104,032
Income (loss) from
operations 1,195 847 16,195 (32,456) (14,219)
Total assets 51,843 121,238 207,184 92,840 473,105
Capital
expenditures 385 29,469 9,828 6,977 46,659
For the twelve months ended December 31, 1998
Revenues from
external customers $ 49,880 $ 238,335 $ 267,882 $ - $ 556,097
Intersegment
revenues 55,179 1,311 7,480 (63,970) -
Segment gross profit 4,864 53,229 65,310 - 123,403
Income (loss) from
operations (7,754) 42,653 (415) (17,350) 17,134
Total assets 65,058 142,921 199,285 113,048 520,312
Capital
expenditures 1,656 25,003 9,588 17,172 53,419
For the twelve months ended December 31, 1997
Revenues from
external customers $ 57,214 $ 219,902 $ 283,880 $ - $ 560,996
Intersegment
revenues 53,986 10 14,746 (68,742) -
Segment gross profit 25,122 60,891 83,644 - 169,657
Income (loss) from
operations 6,552 53,152 25,059 (7,658) 77,105
Total assets 90,746 139,871 178,087 89,639 498,343
Capital
expenditures 2,067 27,647 8,735 21,474 59,923
</TABLE>
35
<PAGE>
NOTE N--GEOGRAPHIC OPERATIONS
The Company operates in the following geographic areas: the United States,
Japan, the UK, and other international areas consisting primarily of Canada,
France, Germany, and other Northern European countries. Inter-area sales to
affiliates are accounted for at established transfer prices.
Sales to unaffiliated customers and affiliates for the twelve months ended
December 31, 1999, 1998 and 1997, 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 United inter- Elimina- Consoli-
States Japan Kingdom national tions dated
------ ------ ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Twelve months ended December 31, 1999
Sales to unaffiliated customers $ 345,977 $ 59,585 $ 55,862 $ 73,166 $ - $ 534,590
Inter-area sales to affiliates 65,393 - 4,785 476 (70,654) -
Long-lived assets other than
deferred taxes 203,216 5,960 6,142 6,183 (27,179) 194,322
Twelve months ended December 31, 1998
Sales to unaffiliated customers $ 380,852 $ 46,713 $ 61,076 $ 67,456 $ - $ 556,097
Inter-area sales to affiliates 61,568 - 2,402 - (63,970) -
Long-lived assets other than
deferred taxes 202,335 4,687 7,913 11,226 (29,487) 196,674
Twelve months ended December 31, 1997
Sales to unaffiliated customers $ 385,405 $ 41,320 $ 61,051 $ 73,220 $ - $ 560,996
Inter-area sales to affiliates 65,757 - 2,982 3 (68,742) -
Long-lived assets other than
deferred taxes 194,917 3,365 7,629 10,571 (29,551) 186,931
</TABLE>
NOTE O--SUMMARIZED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1999
-----------------------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
-------------------- --------------- ----------------- --------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenue $ 139,489 $ 140,827 $ 126,954 $ 127,320 $ 534,590
Gross profit 35,595 35,817 30,764 1,856 104,032
Income (loss) from
continuing operations 4,972 5,889 (4,693) (28,748) (22,580)
Net income (loss) 4,818 5,521 7,464 (29,000) (11,197)
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-----------------------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4(A) Total
-------------------- --------------- ----------------- --------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenue $ 131,175 $ 135,953 $ 146,530 $ 142,439 $ 556,097
Gross profit 38,624 37,511 38,377 8,891 123,403
Income (loss) from
continuing operations 10,121 7,813 7,424 (17,966) 7,392
Net income (loss) 10,055 7,577 7,250 (20,069) 4,813
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
-------------------- --------------- ----------------- --------------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenue $ 131,391 $ 142,320 $ 139,375 $ 147,910 $ 560,996
Gross profit 36,598 40,506 49,158 43,395 169,657
Income from
continuing operations 5,691 7,261 19,757 11,677 44,386
Net income 10,027 10,603 10,787 10,735 42,152
</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 $12.1 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.
NOTE P--SUBSEQUENT EVENTS
In February 2000, the Company authorized a two-for-one stock split payable
in the form of a 100% stock dividend to shareholders of record on February 25,
2000. A total of 9,092,892 shares of common stock were issued in connection
with the split, comprised of 8,501,919 shares of New Common Stock and 590,973
shares of Class A common stock. Consequently, all references to shares of New
Common Stock and Class A common stock included in the accompanying consolidated
financial statements and notes thereto reflect the 100% stock dividend and its
retroactive effect.
Also in February 2000, the Company decided to move its corporate leased-
space headquarters from its Dallas, Texas, location to an owned facility in
Irving, Texas. The move is expected to occur during the second quarter of
2000. In conjunction with the move, the Company has entered into an agreement
to sublease the office space currently being used by corporate headquarters'
staff. The Company expects to incur a pre-tax loss on the lease of
approximately $1.0 million, which will be recorded in the first quarter of
2000.
37
<PAGE>
================================================================================
PART III
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
ITEM 10. Directors and Executive Officers of BancTec, Inc.
The following table sets forth the names, ages, and positions of each of
the directors and executive officers of the Company as of February 29, 2000.
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.
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------------- ---------------------------------------------------------
<S> <C> <C>
John D. Staedke..................... 59 President and Chief Executive Officer
John G. Guthrie..................... 63 Senior Vice President
Tod V. Mongan....................... 49 Senior Vice President, Secretary, General Counsel and
Chief Administrative Officer
Kevin L. Roper...................... 45 Vice President
James E. Uren....................... 63 Senior Vice President
Robert A. Minicucci................. 47 Chairman of the Board and Director
Anthony J. de Nicola................ 35 Director
Murray Holland...................... 46 Director
</TABLE>
Mr. Staedke has been President and Chief Executive Officer since December
1999. Mr. Staedke served as the Client Executive responsible for global
information technology services provided to the Xerox Corporation for EDS (an
information technology and systems integration company) from 1996 to December
1999. Mr. Staedke also served as President and Chief Executive Officer of
Hitachi Data Systems Corporation (a mainframe and computer storage company) from
1992 to 1996.
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. Mongan has been Chief Administrative Officer since January 1996, Vice
President, Secretary and General Counsel since April 1984 and Senior Vice
President since January 1993. Since November 1979, Mr. Mongan has been employed
by the Company in various management capacities.
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. Minicucci has been a director of the Company since July 22, 1999. Mr.
Minicucci also serves as General Partner of Welsh, Carson, Anderson & Stowe
VIII, L.P. (a private investment company) and as a director of Amdocs Limited
(a telecom customer care and billing software and services company). Mr.
Minicucci has served as General Partner of Welsh, Carson, Anderson & Stowe
since 1993.
Mr. de Nicola has been a director of the Company since July 22, 1999. Mr.
de Nicola also serves as General Partner of Welsh, Carson, Anderson & Stowe
VIII, L.P. (a private investment company) and of Centennial Communications (a
wireless rural telephone systems and integrated communications services
company). Mr. de Nicola has served as General Partner of Welsh, Carson,
Anderson & Stowe since 1994.
Mr. Holland has been a director of the Company since July 22, 1999. Mr.
Holland also serves as Principal of Convergent Equity Partners L.P. (a private
investment company) and has served as Chairman and Chief Executive Officer of
Convergent Media Systems Corporation (a provider of interactive distance
38
<PAGE>
learning solutions) since 1992. Mr. Holland also served as Chairman of
Convergent Group Corporation (an independent systems integrator for geographic
information systems) from June 1993 through August 1999, when the company was
sold, and as Chairman and Chief Executive Officer of BTI Americas, Inc. (a
travel agency) from February 1995 through June 1998, when the company was sold.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in such ownership. Officers, directors, and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms that they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the Company's fiscal year ended December 31,
1999, the applicable Section 16(a) filing requirements were complied with for
all transactions.
ITEM 11. Executive Compensation
Summary Compensation Table
The following table sets forth certain information regarding compensation
earned during 1999, the year ended December 31, 1998 ("1998"), and the year
ended December 31, 1997 ("1997"), by the Company's Chief Executive Officer and
each of the Company's four other most highly compensated executive officers
(based upon salary and bonus earned during 1999). All information relating to
shares of Common Stock and options to purchase Common Stock contained herein
has been adjusted to reflect the three-for-two stock split of Common Stock
effected in February 1993.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
------------------- ---------------------------
Restricted All Other
Fiscal Bonus Long Term Stock Options Compensa-
Name and Principal Position(s) Year Salary($) ($)(1) Bonus(2) Award(s)($) (#)(3) tion($)(4)
- ----------------------------- ------ ---------- ------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Grahame N. Clark, Jr.(5) 1999 333,775 - - 35,695 - 2,715,898
President and Chief Executive 1998 281,390 202,300 107,100 54,820 150,000 -
Officer 1997 281,390 310,675 164,475 51,000 100,000 -
Raghavan Rajaji(6) 1999 230,479 - - 16,496 - 699,395
Senior Vice President, Chief 1998 200,278 93,500 38,500 26,249 121,000 -
Financial Officer and Treasurer 1997 200,278 148,750 43,750 25,500 40,000 -
Tod V. Mongan 1999 190,305 - - 13,607 - 553,920
Senior Vice President, Secretary 1998 140,949 77,138 31,762 21,654 94,000 -
and Chief Administrative Officer 1997 140,707 122,719 50,531 21,037 40,000 -
James E. Uren 1999 188,739 - - 15,754 - 223,770
Senior Vice President 1998 175,000 89,250 47,250 20,880 33,000 -
1997 136,307 118,405 62,685 23,630 10,000 -
Kevin L. Roper 1999 187,651 - - 15,754 - 519,240
Vice President 1998 158,169 89,250 26,250 396,999 89,000 -
1997 131,307 87,351 25,691 6,012 40,000 -
</TABLE>
39
<PAGE>
______________
(1) Reflects bonus earned during the fiscal year. In some instances, all or a
portion of the bonus was paid during the next fiscal year.
(2) Bonus vests ratably over a period of three years and is not available to
the individual until the later of retirement from the Company or attainment
of the age of 62.
(3) Options to acquire shares of Common Stock.
(4) Includes cash compensation received for: surrender of vested and
unexercised stock options by all executive officers; surrender of
unexercised option to purchase Employee Stock Purchase Plan shares by Mr.
Rajaji; and severance by Mr. Clark.
(5) Mr. Clark's employment with the Company terminated effective December 1,
1999.
(6) Mr. Rajaji's employment with the Company terminated effective December 31,
1999.
Option Grants in 1999
The following table sets forth information related to options granted to the
named executive officers during 1999.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term(1)
----------------------------
Options Percent of Total Options Exercise or
Granted Granted to Employees Base Price Expiration
Name (#) In Fiscal Year (%) ($/Sh) Date 5%($) 10%($)
- ------------------------------- ------- ------------------------ ----------- ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Grahame N. Clark, Jr. - - - N/A - -
Raghavan Rajaji - - - N/A - -
Tod V. Mongan - - - N/A - -
James E. Uren - - - N/A - -
Kevin L. Roper - - - N/A - -
</TABLE>
____________
(1) The potential realizable value portion of the foregoing table
illustrates the value that might be realized upon exercise of the options
immediately prior to the expiration of their term, assuming the specified
compound rates of appreciation of the Common Stock over the term of the
options. These amounts do not take into account provisions of certain options
providing for termination of the options following termination of employment,
nontransferability, or vesting periods of up to five years. These amounts
represent certain assumed rates of appreciation only. Actual gains on stock
option exercises are dependent on the future performance of the Common Stock
and overall stock market conditions. There can be no assurance that the
potential values reflected in this table will be achieved. All amounts have
been rounded to the nearest whole dollar amount.
40
<PAGE>
Aggregated Option Exercises in 1999 and Fiscal Year-End Option Values
The following table sets forth information related to the number of options
exercised in 1999 and the value realized by the named executive officers.
Further, the table provides information related to the number and value of
options held by the named executive officer at the end of 1999.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options In-the-Money Options
Shares at Fiscal Year-End at Fiscal Year-End
Acquired Value ------------------------------- ------------------------
Name on Exercise(#) Realized($) Exercisable(#) Unexercisable (#) Exercisable($) Unexercisable($)
- ---- ------------- ---------- ------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Grahame N. Clark, Jr. - - - - - -
Raghavan Rajaji - - - - - -
Tod V. Mongan - - - - - -
James E. Uren - - - - - -
Kevin L. Roper - - - - - -
</TABLE>
Compensation of Directors
The directors of the Company are not compensated for their services.
Employment Agreements
The Company has entered into employment agreements (the "Agreements") with
Tod V. Mongan, Kevin L. Roper, and Scott J. Wilson. Each of the Agreements
provides for the payment of base salary amounts and the participation in any
employee benefit or bonus plan or arrangement made available by the Company on
a basis consistent with the terms, conditions, and overall administration of
such plan or arrangement. The Agreements expire on October 23, 2003. On July
22, 1999, a Triggering Event, as defined in the Agreements, occurred.
Upon the death of an executive during the term of that executive's
Agreement, the Company is obligated to pay the executive's base salary for a
period of months (not to exceed twelve months) determined by multiplying two
times the number of complete twelve-month periods of employment of the
executive with the Company. If the Company terminates the executive's
employment for any reason other than for cause (and at a time when the
executive is not eligible to receive benefits under the Company's long-term
disability plan) or the executive terminates his employment upon 30 days'
notice for specified types of changes in duties or compensation or due to the
Company's breach of material obligations without cure, then the Company will
pay the executive severance payments over a period of twelve months equal to
the sum of the executive's annualized base salary and the amount of the
executive's targeted bonus for the fiscal year in which the termination occurs.
Each Agreement further provides that if the executive's employment is
terminated (whether such termination is by the executive or by the Company)
within three years after a Triggering Event (which, generally speaking, is
defined in the Agreement as a change in control of the Company) for any reason
other than (i) termination by the Company for cause (as defined in the
Agreement), (ii) the executive having reached the age of 65, or (iii) the
executive's death, the Company is obligated to make a lump sum cash payment
equal to either 2.99, 2.00, or 1.00 times the average of the executive's
annualized includable compensation (as defined in the Agreement) received from
the Company during the period consisting of the five full taxable years ending
immediately preceding the Triggering Event. The Company is obligated to
transfer to an irrevocable trust upon the occurrence of a Triggering Event, or
as soon thereafter as the Company knows of the Triggering Event, the amount of
cash that the Company would be obligated to pay under the Agreement if such
executive's employment were terminated on that date.
41
<PAGE>
The Company has also entered into an employment agreement with James E.
Uren under which Mr. Uren receives a bi-weekly salary of $6,730.76 and is
eligible for full participation in any executive bonus plan offered by the
Company. This employment agreement provides that, through December 31, 2000,
Mr. Uren will not, through ownership (other than the ownership of less than 1%
of securities of a publicly held corporation) or otherwise, compete with the
Company by engaging in any act, including specified acts described in the
employment agreement. The term of the employment agreement is through December
31, 2000.
Compensation Committee and Option Committee Interlocks and Insider
Participation
From January 1, 1999 through July 22, 1999, the Compensation Committee was
composed of Michael E. Faherty, Paul J. Ferri, Rawles Fulgham, A.A. Meitz, and
Michael A. Stone and the Option Committee was composed of Michael E. Faherty,
Paul J. Ferri, Rawles Fulgham, A.A. Meitz, and Michael A. Stone. No member of
the Compensation Committee or the Option Committee was an officer of the
Company. No member of the Compensation Committee or the Option Committee was
formerly an officer of the Company. The Company does not currently have a
Compensation Committee.
42
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of February 29, 2000
regarding the ownership of Common Stock and Class A Common Stock of: (i) each
person who is known by the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock or Class A Common Stock; (ii)
each director of the Company; (iii) each executive officer named in the Summary
Compensation Table; and (iv) all executive officers and directors of the
Company as a group. Percentage of ownership is based on 18,185,784 shares of
Common Stock outstanding as of February 29, 2000, which shares are comprised of
17,003,838 shares of Common Stock and 1,181,946 shares of Class A Common Stock.
<TABLE>
<CAPTION>
Number of Percent of
Shares of Outstanding
Name of Beneficial Owner (1) Common Stock Common Stock
- ---------------------------- ------------ -------------
<S> <C> <C>
Welsh, Carson, Anderson & Stowe VIII, L.P. 13,754,070 75.6%
320 Park Avenue, Suite 2500
New York, NY 10022
WCAS Capital Partners III, L.P. 2,508,108 13.7%
320 Park Avenue, Suite 2500
New York, NY 10022
Convergent Equity Partners, L.P.(2) 1,181,946 6.5%
100 Crescent Court, Suite 230
Dallas, TX 75201
WCAS Information Partners, L.P. 54,056 *
320 Park Avenue, Suite 2500
New York, NY 10022
Robert A. Minicucci(3) 16,316,232 89.7%
320 Park Avenue, Suite 2500
New York, NY 10022
Anthony J. de Nicola(4) 16,275,692 89.5%
320 Park Avenue, Suite 2500
New York, NY 10022
Murray Holland(5) 1,181,946 6.5%
100 Crescent Court, Suite 230
Dallas, TX 75201
John D. Staedke -
John G. Guthrie -
Tod V. Mongan -
Kevin L. Roper -
James E. Uren -
All executive officers and directors as a group 17,511,692 96.3
(8 persons)
</TABLE>
____________
* Less than one percent.
(1) Except as otherwise indicated, each stockholder has sole investment and
sole voting power with respect to the shares of Common Stock shown.
43
<PAGE>
(2) Convergent Equity Partners, L.P. holds shares of Class A Common Stock. All
others hold shares of Common Stock.
(3) Includes 13,754,070 shares of Common Stock held by Welsh, Carson, Anderson
& Stowe VIII, L.P. and 2,508,108 shares of Common Stock held by WCAS
Capital Partners III, L.P. Mr. Minicucci is a general partner of each of
Welsh, Carson, Anderson & Stowe VIII, L.P. and WCAS Capital Partners III,
L.P. Mr. Minicucci disclaims beneficial ownership of such shares.
(4) Includes 13,754,070 shares of Common Stock held by Welsh, Carson, Anderson
& Stowe VIII, L.P. and 2,508,108 shares of Common Stock held by WCAS
Capital Partners III, L.P. Mr. de Nicola is a general partner of each of
Welsh, Carson, Anderson & Stowe VIII, L.P. and WCAS Capital Partners III,
L.P. Mr. de Nicola disclaims beneficial ownership of such shares.
(5) Includes 1,181,946 shares of Class A Common Stock held by Convergent Equity
Partners, L.P. Mr. Holland is a principal of Convergent Equity Partners,
L.P. Mr. Holland disclaims beneficial ownership of such shares.
ITEM 13. Certain Relationships and Related Transactions
None.
44
<PAGE>
================================================================================
PART IV
<TABLE>
<S> <C>
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 47.
(b) Reports on Form 8-K: None
(c) Exhibits:
3.1 -- Certificate of Incorporation.(*)
3.2 -- Amendment to Certificate of Incorporation.(*)
3.3 -- By-Laws.(*)
4.2 -- Indenture dated May 22, 1998 by and between the Company and The First National Bank of
Chicago. (2)
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. (2)
10.1 -- Loan Documents dated July 22, 1999, among the Company, Chase Bank of Texas, as Agent, and
Welsh, Carson, Anderson & Stowe, as amended.(*)
10.2 -- First Amendment and Waiver dated January 21, 2000 to Loan Documents.(*)
</TABLE>
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
<TABLE>
<S> <C>
10.8 -- Employment Agreement with Tod V. Mongan dated October 23, 1998.(3)
10.13 -- Employment Agreement with Kevin L. Roper dated October 23, 1998.(3)
10.14 -- Employment Agreement with Scott J. Wilson dated October 23, 1998.(3)
10.15 -- Employment Agreement with James E. Uren dated October 23, 1998.(3)
10.16 -- Form of Indemnification Agreement between the Company and each of its Directors and
Officers.(1)
21.1 -- Subsidiaries.(*)
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 Registration Statement on Form
S-4 dated August 28, 1998.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
45
<PAGE>
================================================================================
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BancTec, Inc.
By /s/ JOHN D. STAEDKE
--------------------------------
John D. Staedke
President and Chief Executive Officer
Dated: March 29, 2000
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/ John D. Staedke President and Chief Executive March 29, 2000
- ------------------------------------------------ Officer (Principal Executive
John D. Staedke Officer)
/s/ Tod V. Mongan Senior Vice President, Treasurer March 29, 20000
- ------------------------------------------------ and Chief Administrative Officer
Tod V. Mongan
/s/ Scott J. wilson Vice President and Controller March 29, 2000
- ------------------------------------------------ (Principal Accounting Officer)
Scott J. Wilson
/s/ Robert A. Minicucci Chairman of the Board and March 29, 2000
- ------------------------------------------------ Director
Robert A. Minicucci
/s/ Anthony. de Nicola Director March 29, 2000
- ------------------------------------------------
Anthony J. de Nicola
/s/ Murray Holland Director March 29, 2000
- ------------------------------------------------
Murray Holland
</TABLE>
46
<PAGE>
BANCTEC, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
Number
------
Financial Statements and Report of Independent Public Accountants
Reports of Independent Public Accountants................................. 16
Consolidated Balance Sheets at December 31, 1999, and December 31, 1998... 17-18
Consolidated Statements of Operations for the twelve months ended
December 31, 1999, 1998 and 1997........................................ 19
Consolidated Statements of Cash Flows for the twelve months ended
December 31, 1999, 1998 and 1997........................................ 20
Consolidated Statements of Stockholders' Equity (Deficit) for the
twelve months ended December 31, 1999, 1998 and 1997.................... 21
Notes to Consolidated Financial Statements................................ 22-37
Supplemental Schedules
Schedule II--Valuation and Qualifying Accounts for the twelve months
ended December 31, 1999, 1998 and 1997.................................. 49
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.
47
<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 16, 2000
(except with respect to the matters discussed in Note P to the financial
statements, as to which the date is February 25, 2000). 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 16, 2000
48
<PAGE>
Schedule II
BANCTEC, INC
VALUATION AND QUALIFYING ACCOUNTS
For the Twelve Months Ended December 31, 1999, 1998 and 1997
(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, 1999 $ 9,333 $ 10,914 $ (7,457) $ 12,790
Twelve months ended December 31, 1998 5,642 4,240 (549) 9,333
Twelve months ended December 31, 1997 7,669 3,091 (5,118) 5,642
Reorganization Accrual
- -------------------------------------
Twelve months ended December 31, 1999 3,879 - (3,664) 215
Twelve months ended December 31, 1998 - 4,401 (522) 3,879
Twelve months ended December 31, 1997 - - - -
Accrued Merger Charges and Costs
- -------------------------------------
Twelve months ended December 31, 1999 332 - (332) -
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
</TABLE>
- ---------------
(a) Write-off of uncollectible accounts.
(b) Severance and related payments.
(c) Payment of merger charges.
49
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BANCTEC, INC.
--------------------
FIRST: The name of the Corporation is BANCTEC, INC.
SECOND: The address of the registered office of the Corporation
in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County
of New Castle. The name of the Corporation's registered agent at such address is
Corporation Service Company.
THIRD: The purposes for which the Corporation is formed are
to engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 32,000,000 shares, consisting
of 1,000,000 shares of Preferred Stock, $.01 par value ("Preferred Stock"),
30,000,000 shares of Common Stock, $.01 par value ("Common Stock"), and
1,000,000 shares of Class A Common Stock, $.01 par value ("Class A Common
Stock").
I. Common Stock and Class A Common Stock.
-------------------------------------
Except as otherwise expressly provided herein, all shares of
Common Stock and Class A Common Stock shall be identical and shall entitle the
holders thereof to the same rights and privileges. The following is a statement
of the designations, and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, in respect of each class of
common stock of the Corporation:
1. Dividends. The holders of shares of Common Stock and Class A
---------
Common Stock shall be entitled to receive such dividends as from time
to time may be declared by the Board of Directors of the Corporation
out of any funds legally available therefor; provided that any
--------
dividends declared with respect to shares of Common Stock and Class A
Common Stock shall be the same.
2. Liquidation. Upon any liquidation, dissolution or winding up
-----------
of the Corporation, whether voluntary or involuntary, the holders of
the shares of Class A Common Stock and Common Stock, according to the
number of shares of Class A Common Stock and Common Stock then
outstanding, shall be entitled to share ratably in all assets of the
Corporation available for distribution to its stockholders.
<PAGE>
3. Conversion.
----------
3A. Optional Conversion of Class A Common Stock. Subject to and
-------------------------------------------
upon compliance with the provisions of this paragraph 3, the holder of
any share or shares of Class A Common Stock shall have the right, at
its option, to convert such shares of Class A Common Stock (except
that upon any liquidation, dissolution or winding up of the
Corporation the right of conversion shall terminate at the close of
business on the last full business day next preceding the date fixed
for payment of the amount distributable on Class A Common Stock) into
an equal number of fully paid and nonassessable whole shares of Common
Stock. Such rights of conversion shall be exercised by the holder
thereof by giving written notice that the holder elects to convert a
stated number of shares of Class A Common Stock into Common Stock and
by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other
office or agency of the Corporation as the Corporation may designate
by notice in writing to the holder or holders of the Class A Common
Stock) at any time during its usual business hours on the date set
forth in such notice, together with a statement of the name or names
(with address), subject to compliance with applicable laws to the
extent such designation shall involve a transfer, in which the
certificate or certificates for shares of Common Stock shall be
issued.
3B. Automatic Conversion of Class A Common Stock.
--------------------------------------------
Notwithstanding anything else herein to the contrary in this Section
3, in the event that, at any time while any of the Class A Common
Stock shall be outstanding, (i)(A) the Corporation shall complete a
firm commitment underwritten public offering of Common Stock
registered under the Securities Act of 1933, as amended, in which the
aggregate price paid for such shares by the public shall be at least
$50,000,000 (a "Qualified Offering"), or (B) greater than 50% of the
outstanding shares of Class A Common Stock shall have been converted
into Common Stock, then all outstanding shares of Class A Common Stock
shall be automatically and without further action on the part of the
holders of the Class A Common Stock converted into an equal number of
fully paid and nonassessable whole shares of Common Stock, such
conversion to be effective immediately prior to the closing of such
Qualified Offering or immediately prior to the conversion of Class A
Common Stock satisfying clause (B) above, as the case may be, and (ii)
the original purchaser of any shares of Class A Common Stock named in
the Securities Purchase Agreement, dated as of June 17, 1999, by and
between Colonial Acquisition Corp. and the purchaser named therein,
shall sell, transfer or otherwise convey to any party other than to
any affiliates (as defined in Rule 405 promulgated under the
Securities Act) of such original purchaser or to members or partners
of such affiliates, such shares of Class A Common Stock shall be
automatically and without further action on the part of the holders of
such Class A Common Stock converted into an equal number of fully paid
and nonassessable whole shares of Common Stock, with the same effect
as if the certificates evidencing such shares had been surrendered for
conversion; provided, however, that certificates evidencing the shares
-------- -------
of Common Stock issuable upon such conversion shall not be issued
except on surrender of the certificates for the shares of the Class A
Common Stock so converted.
3C. Issuance of Certificates; Time Conversion Effected.
--------------------------------------------------
Promptly after the receipt by the Corporation of the written notice
referred to in subparagraph 3A and surrender of the certificate or
certificates for the share or shares of the Class A Common Stock to be
converted, the Corporation shall issue and deliver, or cause to be
issued and
2
<PAGE>
delivered, to the holder, registered in such name or names as such
holder may direct, subject to compliance with applicable laws to the
extent such designation shall involve a transfer, a certificate or
certificates for the number of whole shares of Common Stock issuable
upon the conversion of such share or shares of Class A Common Stock.
To the extent permitted by law, such conversion shall be deemed to
have been effected immediately prior to the close of business on the
day the certificate or certificates for such share or shares shall
have been surrendered as aforesaid, and at such time the rights of the
holder of such share or shares of Class A Common Stock shall cease,
and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.
3D. Fractional Shares; Dividends; Partial Conversion. No
------------------------------------------------
fractional shares shall be issued upon conversion of the Class A
Common Stock into Common Stock and no payment or adjustment shall be
made upon any conversion on account of any cash dividends on the Class
A Common Stock so converted or the Common Stock issued upon such
conversion. In case the number of shares of Class A Common Stock
represented by the certificate or certificates surrendered pursuant to
subparagraph 3A exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the
holder thereof, at the expense of the Corporation, a new certificate
or certificates for the number of shares of Class A Common Stock,
represented by the certificate or certificates surrendered which are
not to be converted. If any fractional interest in a share of Common
Stock would, except for the provisions of the first sentence of this
subparagraph 3D, be deliverable upon any such conversion, the
Corporation, in lieu of delivering the fractional share thereof, shall
pay to the holder surrendering the Class A Common Stock for conversion
an amount in cash equal to the current fair value of such fractional
interest as determined in good faith by the Board of Directors of the
Corporation.
3E. Subdivision or Combination of Stock. In case the
-----------------------------------
Corporation shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares or shall declare or pay a
dividend on its outstanding shares of Common Stock payable in shares
of Common Stock, then in each case the Class A Common Stock shall be
similarly subdivided or entitled to such dividend, and conversely, in
case the outstanding shares of Common Stock of the Corporation shall
be combined into a smaller number of shares, the Class A Common Stock
shall be similarly combined.
3F. Reorganization or Reclassification. If any capital
----------------------------------
reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way (including, without
limitation, by way of consolidation or merger) that holders of Common
Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of
such reorganization or reclassification, lawful and adequate provision
shall be made whereby each holder of a share or shares of Class A
Common Stock shall thereafter only have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu
of the shares of Common Stock of the Corporation immediately
theretofore receivable upon the conversion of such share or shares of
Class A Common Stock, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of
shares of
3
<PAGE>
such stock immediately theretofore so receivable had such
reorganization or reclassification not taken place, and in any such
case appropriate provision shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof
shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock, securities or assets thereafter deliverable upon
the exercise of such conversion rights. In the event of a merger or
consolidation of the Corporation as a result of which a greater or
lesser number of shares of common stock of the surviving corporation
are issuable to holders of Common Stock of the Corporation outstanding
immediately prior to such merger or consolidation, the number of
shares of Common Stock into which Class A Common Stock may be
converted shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding shares of Common Stock
of the Corporation.
3G. Notice of Adjustment. Upon any adjustment made pursuant to
--------------------
3E or 3F, then and in each such case the Corporation shall give
written notice thereof, by first class mail, postage prepaid,
addressed to each holder of shares of Class A Common Stock at the
address of such holder as shown on the books of the Corporation, which
notice shall state the number of shares of Common Stock or other
securities, cash or property issuable upon conversion of the Class A
Common Stock resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based.
3H. Stock to be Reserved. The Corporation will at all times
--------------------
reserve and keep available out of its authorized but unissued Common
Stock, solely for the purpose of issuance upon the conversion of the
Class A Common Stock as herein provided, such number of shares of
Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Class A Common Stock. All shares of Common Stock
which shall be so issued shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges
arising out of or by reason of the issue thereof. The Corporation will
take all such action within its control as may be necessary on its
part to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common
Stock of the Corporation may be listed.
3I. No Reissuance of Class A Common Stock. Shares of Class A
-------------------------------------
Common Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
3J. Issue Tax. The issuance of certificates for shares of Common
---------
Stock upon conversion of the Class A Common Stock shall be made
without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in
the issuance and delivery of any certificate in a name other than that
of the holder of the Class A Common Stock which is being converted.
3K. Closing of Books. The Corporation will at no time close
----------------
its transfer books against the transfer of any Class A Common Stock or
of any shares of Common Stock issued or issuable upon the conversion
of any shares of Class A Common Stock in any manner which interferes
with the timely conversion of such Class A Common Stock.
4
<PAGE>
3L. Definition of Common Stock. As used in this paragraph 3, the
--------------------------
term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, $.01 par value, as constituted on the date of
filing of this Amended and Restated Certificate of Incorporation and
shall also include any capital stock of any class of the Corporation
thereafter authorized which shall not be limited to a fixed sum or
percentage of par value in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding
up of the Corporation; provided that the shares of Common Stock
receivable upon conversion of shares of the Class A Common Stock, or
in case of any reorganization or reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in
subparagraphs 3E or 3F, shall include only shares designated as Common
Stock of the Corporation on the date of filing of this Amended and
Restated Certificate of Incorporation.
4. Voting. Except as otherwise provided by law or this
------
Certificate of Incorporation, the holders of Common Stock and Class A
Common Stock shall vote together as a class on all matters to be voted
on by the stockholders of the Corporation on the following basis: (1)
each holder of Class A Common Stock shall be entitled to one vote for
each share of Common Stock which would be issuable to such holder upon
the conversion of all the shares of Class A Common Stock so held on
the record date for the determination of stockholders entitled to vote
and (2) each holder of Common Stock shall be entitled to one vote per
share. So long as shares of Class A Common Stock are outstanding, at
any annual meeting of stockholders for the election of directors of
the Corporation, one director (the "Class A Director") shall be
elected by the holders of Class A Common Stock voting together as a
single class, to the exclusion of the holders of Common Stock and any
other class of capital stock of the Corporation that has the right to
vote at such meeting. The holders of Common Stock and any other class
of capital stock of the Corporation which has the right to vote at
such meeting (other than Class A Common Stock) shall elect the
remaining directors. So long as shares of Class A Common Stock are
outstanding, the Class A Director may be removed by, with or without
cause, the vote or consent of the holders of record of the outstanding
shares of Class A Common Stock, voting together as a single class. So
long as shares of Class A Common Stock are outstanding, any vacancy in
the office of the Class A Director may be filled by the person elected
by the vote of the holders of record of the outstanding shares of
Class A Common Stock, voting together as a single class. So long as
shares of Class A Common Stock are outstanding, the Corporation shall
not, without the affirmative vote or consent of a majority of the
holders of shares of Class A Common Stock outstanding at the time (1)
amend, alter or repeal the provisions of this Section I of Article
FOURTH of this Amended and Restated Certificate of Incorporation or
(2) issue, authorize or propose the issuance of any shares of Class A
Common Stock.
II. Preferred Stock.
---------------
The Board of Directors is authorized to provide for the
issuance of the shares of Preferred Stock in series and, by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof. The authority of
the Board of Directors
5
<PAGE>
with respect to the Preferred Stock shall include, but not be limited to,
determination of the following:
1. The number of shares constituting that series and the
distinctive designation of that series;
2. The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on
share of that series;
3. Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting
rights;
4. Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
5. Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
6. Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
7. The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
8. Any other relative rights, preferences and limitations of
that series.
FIFTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors of the
Corporation is expressly authorized and empowered to make, alter or repeal the
By-laws of the Corporation, subject to the power of the stockholders of the
Corporation to alter or repeal any By-law made by the Board of Directors.
SIXTH: The Corporation reserves the right at any time and from
time to time to amend, alter, change or repeal any provisions contained in this
Amended and Restated Certificate of Incorporation; and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed by law; and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Amended and Restated Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article.
SEVENTH: (a) A director of the Corporation shall not be
personally liable either to the Corporation or to any stockholder for monetary
damages for breach of fiduciary duty as a director, except for (i) any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) acts
or omissions which are not in good faith or which involve intentional
6
<PAGE>
misconduct or knowing violation of the law, (iii) any matter in respect of which
such director shall be liable under Section 174 of Title 8 of the General
Corporation Law of the State of Delaware or any amendment thereto or successor
provision thereto, or (iv) any transaction from which the director shall have
derived an improper personal benefit. Neither amendment nor repeal of this
paragraph (a) nor the adoption of any provision of the Amended and Restated
Certificate of Incorporation inconsistent with this paragraph (a) shall
eliminate or reduce the effect of this paragraph (a) in respect of any matter
occurring, or any cause of action, suit or claim that, but for this paragraph
(a) of this Article, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to, or testifies in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative in nature, by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the full extent permitted by law, and the Corporation may adopt by-laws or enter
into agreements with any such person for the purpose of providing for such
indemnification.
(c) To the extent that a director or officer of the Corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraph (b) of this Article, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(d) Expenses incurred by an officer, director, employee or agent
in defending or testifying in a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such officer, director, employee or agent to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation against such expenses as
authorized by this Article, and the Corporation may adopt by-laws or enter into
agreements with such persons for the purpose of providing for such advances.
(e) The indemnification permitted by this Article shall not be
deemed exclusive of any other rights to which any person may be entitled under
any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding an office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(f) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
7
<PAGE>
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article or otherwise.
(g) If a claim for indemnification or advancement of expenses
under this Article is not paid in full by the Corporation within 60 days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense are not permitted under the Delaware General Corporation Law, but the
burden of providing such defense shall be on the Corporation. Neither the
failure of the Corporation (including its board of directors or any committee
thereof, independent legal counsel or stockholders) to have made its
determination prior to the commencement of such action that indemnification of,
or advancement of cost of defense to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including its
board of directors or any committee thereof, independent legal counsel or
stockholders) that such indemnification or advancement is not permissible shall
be a defense to the action or create a presumption that such indemnification or
advancement is not permissible.
8
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
to
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
of
BANCTEC, INC.
UNDER SECTION 242 OF THE DELAWARE GENERAL CORPORATION LAW,
BANCTEC, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
FIRST: that the following resolutions were duly adopted by
unanimous written consent of the Board of Directors of the Corporation, setting
forth proposed amendments to the Certificate of Incorporation of the
Corporation; determining that the capital of the Corporation will not be
decreased on account of such amendment; and declaring such amendments to be
advisable and directing that such amendments be submitted to the stockholders of
the Corporation for their approval. The resolutions are as follows:
"RESOLVED, that there is hereby adopted an amendment to the
Corporation's Amended and Restated Certificate of Incorporation
pursuant to which the authorized capital stock of the Corporation shall
be changed from 32,000,000 shares, consisting of 1,000,000 shares of
Preferred Stock, $.01 par value ("Preferred Stock"), 30,000,000 shares
of Common Stock, $.01 par value ("Common Stock"), and 1,000,000 shares
of Class A Common Stock, $.01 par value ("Class A Common Stock"), to
33,000,000 shares, consisting of 1,000,000 shares of Preferred Stock,
30,000,000 shares of Common Stock and 2,000,000 shares of Class A
Common Stock; and, in connection with such change, the first paragraph
of Article FOURTH of the Amended and Restated Certificate of
Incorporation of the Corporation shall be amended to read in its
entirety as follows:
"FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 33,000,000
shares, consisting of 1,000,000 shares of Preferred Stock, $.01 par
value ("Preferred Stock"), 30,000,000 shares of Common Stock, $.01 par
value ("Common Stock"), and 2,000,000 shares of Class A Common Stock,
$.01 par value ("Class A Common Stock")."
RESOLVED that the Board of Directors determines that the
capital of the Corporation will not be decreased on account of the
foregoing amendment, declares the foregoing amendment to the
Corporation's Amended and Restated Certificate of Incorporation to be
advisable and directs that the amendment be submitted to the
<PAGE>
stockholders of the Corporation for their approval pursuant to Section
242(b) of the General Corporation Law of the State of Delaware."
SECOND: that the Amendment of the Amended and Restated
Certificate of Incorporation effected by this Certificate was duly authorized by
the stockholders of the Corporation, after first having been declared advisable
by the Board of Directors of the Corporation, all in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
THIRD: that the capital of the Corporation will not be
reduced under, or by reason of, the foregoing amendments to the Amended and
Restated Certificate of Incorporation of the Corporation.
2
<PAGE>
IN WITNESS WHEREOF, BANCTEC, INC., has caused this certificate to
be signed by Tod V. Mongan, its Senior Vice President, Secretary and General
Counsel, who hereby acknowledges under penalties of perjury that the facts
herein stated are true and that this certificate is his act and deed, this
_______ day of February, 2000.
BANCTEC, INC.
_______________________________________
By: Tod V. Mongan
Senior Vice President, Secretary and
General Counsel
3
<PAGE>
Exhibit 3.3
BY-LAWS
OF
BANCTEC, INC.
Incorporated under the Laws of the
State of Delaware
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES......................................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS........................................................ 1
Section 1. Place of Meetings............................................................... 1
Section 2. Annual Meeting.................................................................. 1
Section 3. Special Meetings................................................................ 1
Section 4. Notice of Meetings.............................................................. 2
Section 5. List of Stockholders............................................................ 2
Section 6. Quorum.......................................................................... 2
Section 7. Voting.......................................................................... 3
Section 8. Proxies......................................................................... 3
Section 9. Action Without a Meeting........................................................ 3
ARTICLE III BOARD OF DIRECTORS.............................................................. 4
Section 1. Powers.......................................................................... 4
Section 2. Election and Term............................................................... 4
Section 3. Number.......................................................................... 4
Section 4. Quorum and Manner of Acting..................................................... 4
Section 5. Organization Meeting............................................................ 4
Section 6. Regular Meetings................................................................ 5
Section 7. Special Meetings; Notice........................................................ 5
Section 8. Removal of Directors............................................................ 5
Section 9. Resignations.................................................................... 5
Section 10. Vacancies....................................................................... 5
Section 11. Committees...................................................................... 6
Section 12. Compensation of Directors....................................................... 6
Section 13. Action Without a Meeting........................................................ 6
Section 14. Telephonic Participation in Meetings............................................ 7
ARTICLE IV OFFICERS........................................................................ 7
Section 1. Principal Officers.............................................................. 7
Section 2. Election and Term of Office..................................................... 7
Section 3. Other Officers.................................................................. 7
Section 4. Removal......................................................................... 7
Section 5. Resignations.................................................................... 7
Section 6. Vacancies....................................................................... 7
Section 7. Chairman of the Board........................................................... 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 8. President....................................................................... 8
Section 9. Vice President.................................................................. 8
Section 10. Treasurer....................................................................... 8
Section 11. Secretary....................................................................... 9
Section 12. Salaries........................................................................ 9
ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS....................................... 9
Section 1. Right of Indemnification........................................................ 9
Section 2. Expenses........................................................................ 9
Section 3. Other Rights of Indemnification................................................. 10
ARTICLE VI SHARES AND THEIR TRANSFER....................................................... 11
Section 1. Certificate for Stock........................................................... 11
Section 2. Stock Certificate Signature..................................................... 11
Section 3. Stock Ledger.................................................................... 11
Section 4. Cancellation.................................................................... 11
Section 5. Registrations of Transfers of Stock............................................. 11
Section 6. Regulations..................................................................... 12
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates............................... 12
Section 8. Record Dates.................................................................... 12
ARTICLE VII MISCELLANEOUS PROVISIONS........................................................ 12
Section 1. Corporate Seal.................................................................. 12
Section 2. Voting of Stocks Owned by the Corporation....................................... 13
Section 3. Dividends....................................................................... 13
ARTICLE VIII AMENDMENTS...................................................................... 13
</TABLE>
ii
<PAGE>
BY-LAWS
OF
BANCTEC, INC.
(a Delaware corporation)
__________
ARTICLE I
OFFICES
-------
The registered office of the Corporation in the State of Delaware
shall be located in the City of Wilmington, County of New Castle. The
Corporation may establish or discontinue, from time to time, such other offices
within or without the State of Delaware as may be deemed proper for the conduct
of the Corporation's business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. All meetings of stock holders shall be
--------- -----------------
held at such place or places, within or without the State of Delaware, as may
from time to time be fixed by the Board of Directors, or as shall be specified
in the respective notices, or waivers of notice, thereof.
Section 2. Annual Meeting. The annual meeting of stockholders for the
--------- --------------
election of Directors and the transaction of other business shall be held on
such date and at such place as may be designated by the Board of Directors. At
each annual meeting the stockholders entitled to vote shall elect a Board of
Directors and may transact such other proper business as may come before the
meeting.
Section 3. Special Meetings. A special meeting of the stockholders, or
--------- ----------------
of any class thereof entitled to vote, for any purpose or purposes, may be
called at any time by the Chairman of the Board, if any, the President or by
order of the Board of Directors and shall be called by the Secretary upon the
written request of stockholders holding of record at least 50% of the
outstanding shares of stock of the Corporation entitled to vote at such meeting.
Such written request shall state the purpose or purposes for which such meeting
is to be called.
<PAGE>
Section 4. Notice of Meetings. Except as otherwise provided by law,
--------- ------------------
written notice of each meeting of stockholders, whether annual or special,
stating the place, date and hour of the meeting shall be given not less than
twenty days or more than sixty days before the date on which the meeting is to
be held to each stockholder of record entitled to vote thereat by delivering a
notice thereof to him personally or by mailing such notice in a postage prepaid
envelope directed to him at his address as it appears on the records of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices intended for him be directed to another address, in
which case such notice shall be directed to him at the address designated in
such request. Notice shall not be required to be given to any stockholder who
shall waive such notice in writing, whether prior to or after such meeting, or
who shall attend such meeting in person or by proxy unless such attendance is
for the express purpose of objecting, at the beginning of such meeting, to the
transactions of any business because the meeting is not lawfully called or
convened. Every notice of a special meeting of the stockholders, besides the
time and place of the meeting, shall state briefly the objects or purposes
thereof.
Section 5. List of Stockholders. It shall be the duty of the
--------- --------------------
Secretary or other officer of the Corporation who shall have charge of the stock
ledger to prepare and make, at least ten days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in his name. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall be kept and produced at
the time and place of the meeting during the whole time thereof and subject to
the inspection of any stockholder who may be present. The original or duplicate
ledger shall be the only evidence as to who are the stockholders entitled to
examine such list or the books of the Corporation or to vote in person or by
proxy at such meeting.
Section 6. Quorum. At each meeting of the stockholders, the
--------- ------
holders of record of a majority of the issued and outstanding stock of the
Corporation entitled to vote at such meeting, present in person or by proxy,
shall constitute a quorum for the transaction of business, except where
otherwise provided by law, the Articles of Incorporation or these By-laws. In
the absence of a quorum, any officer entitled to preside at, or act as Secretary
of, such meeting shall have the power to adjourn the meeting from time to time
until a quorum shall be constituted.
Section 7. Voting. Every stockholder of record who is entitled
--------- ------
to vote shall at every meeting of the stockholders be entitled to one vote for
each share of stock held by him on the record date; except, however, that shares
------ -------
of its own stock belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held by the Corporation, shall neither be entitled to vote
nor counted for quorum purposes. Nothing in this Section shall be construed as
limiting the right of the Corporation to vote its own stock held by it in a
fiduciary capacity. At all meetings of the
2
<PAGE>
stockholders, a quorum being present, all matters shall be decided by majority
vote of the shares of stock entitled to vote held by stockholders present in
person or by proxy, except as otherwise required by law or the Articles of
Incorporation. Unless demanded by a stockholder of the Corporation present in
person or by proxy at any meeting of the stockholders and entitled to vote
thereat or so directed by the chairman of the meeting or required by law, the
vote thereat on any question need not be by written ballot. On a vote by written
ballot, each ballot shall be signed by the stockholder voting, or in his name by
his proxy, if there be such proxy, and shall state the number of shares voted by
him and the number of votes to which each share is entitled.
Section 8. Proxies. Each stockholder entitled to vote at a
--------- -------
meeting of stockholders or to express consent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. A proxy acting for any stockholder shall be duly appointed by an
instrument in writing subscribed by such stockholder. No proxy shall be valid
after the expiration of three years from the date thereof unless the proxy
provides for a longer period and conforms with applicable law.
Section 9. Action Without a Meeting. Any action required to be
--------- ------------------------
taken at any annual or special meeting of stockholders or any action which may
be taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing
setting forth the action so taken shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Powers. The business and affairs of the Corporation
-------- ------
shall be managed under the direction of the Board of Directors.
Section 2. Election and Term. Except as otherwise provided by
--------- -----------------
law, Directors shall be elected at the annual meeting of stockholders and shall
hold office until the next annual meeting of stockholders and until their
successors are elected and qualify, or until they sooner die, resign or are
removed. At each annual meeting of stockholders, at which a quorum is present,
the persons receiving a plurality of the votes cast shall be the Directors.
Acceptance of the office of Director may be expressed orally or in writing, and
attendance at the organization meeting shall constitute such acceptance.
Section 3. Number. The number of Directors shall be such
--------- ------
number as determined from time to time by the Board of Directors, but shall be
not less than three (3) nor more than nine (9), and initially shall be three
(3).
3
<PAGE>
Section 4. Quorum and Manner of Acting. Unless otherwise
--------- ---------------------------
provided by law, the presence of a majority of the whole Board of Directors
shall be necessary to constitute a quorum for the transaction of business. In
the absence of a quorum, a majority of the Directors present may adjourn the
meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given. At all meetings of Directors, a quorum
being present, all matters shall be decided by the affirmative vote of a
majority of the Directors present, except as otherwise required by law. The
Board of Directors may hold its meetings at such place or places within or
without the State of Delaware as the Board of Directors may from time to time
determine or as shall be specified in the respective notices, or waivers of
notice, thereof.
Section 5. Organization Meeting. Immediately after each annual
--------- --------------------
meeting of stockholders for the election of Directors the Board of Directors
shall meet at the place of the annual meeting of stockholders for the purpose of
organization, the election of officers and the transaction of other business.
Notice of such meeting need not be given. If such meeting is held at any other
time or place, notice thereof must be given as hereinafter provided for special
meetings of the Board of Directors, subject to the execution of a waiver of the
notice thereof signed by, or the attendance at such meeting of, all Directors
who may not have received such notice.
Section 6. Regular Meetings. Regular meetings of the Board of
--------- ----------------
Directors may be held at such place, within or without the State of Delaware, as
shall from time to time be determined by the Board of Directors. After there has
been such determination, and notice thereof has been once given to each member
of the Board of Directors as hereinafter provided for special meetings, regular
meetings may be held without further notice being given.
Section 7. Special Meetings; Notice. Special meetings of the
--------- ------------------------
Board of Directors shall be held whenever called by the Chairman of the Board,
if any, the President or by any three Directors. Notice of each such meeting
shall be mailed to each Director, addressed to him at his residence or usual
place of business, at least five days before the date on which the meeting is to
be held, or shall be sent to him at such place by telegraph, cable, radio or
wireless, or be delivered personally or by telephone, not later than the day
before the day on which such meeting is to be held. Each such notice shall state
the time and place of the meeting and, as may be required, the purposes thereof.
Notice of any meeting of the Board of Directors need not be given to any
Director if he shall sign a written waiver thereof either before or after the
time stated therein for such meeting, or if he shall be present at the meeting.
Unless limited by law, the Articles of Incorporation, these By-laws or the terms
of the notice thereof, any and all business may be transacted at any meeting
without the notice thereof having specifically identified the matters to be
acted upon.
Section 8. Removal of Directors. Any Director or the entire
--------- --------------------
Board of Directors may be removed, with or without cause, at any time, by action
of the holders of record of the majority of the issued and outstanding stock of
the Corporation (a) present in person or by proxy at a meeting of holders of
such stock and entitled to vote thereon or (b) by a consent in writing in the
manner contemplated in Section 9 of Article II, and the vacancy or vacancies in
the Board of
4
<PAGE>
Directors caused by any such removal may be filled by action of such a majority
at such meeting or at any subsequent meeting or by consent.
Section 9. Resignations. Any Director of the Corporation may
--------- ------------
resign at any time by giving written notice to the Chairman of the Board, if
any, the Board, the President or the Secretary of the Corporation. The
resignation of any Director shall take effect upon receipt of notice thereof or
at such later time as shall be specified in such notice; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 10. Vacancies. Any newly created director ships and
---------- ---------
vacancies occurring in the Board by reason of death, resignation, retirement,
disqualification or removal, with or without cause, may be filled (i) by the
action of a majority of the directors then in office, though less than a quorum,
or by a sole remaining director, or (ii) by the action of the holders of record
of the majority of the issued and outstanding stock of the Corporation (a)
present in person or by proxy at a meeting of holders of such stock and entitled
to vote thereon or (b) by a consent in writing in the manner contemplated in
Section 9 of Article II. The Director so chosen, whether selected to fill a
vacancy or elected to a new directorship, shall hold office until the next
meeting of stockholders at which the election of Directors is in the regular
order of business, and until his successor has been elected and qualifies, or
until he sooner dies, resigns or is removed.
Section 11. Committees. The Board of Directors may, by
---------- ----------
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of such committee. In the absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 12. Compensation of Directors. Directors, as such,
---------- -------------------------
shall not receive any stated salary for their services, but, by resolution of
the Board of Directors, a specific sum fixed by the Board plus expenses may be
allowed for attendance at each regular or special meeting of the Board or any
committee thereof, provided, however, that nothing herein contained shall be
-------- -------
construed to preclude any Director from serving the Corporation or any parent or
subsidiary corporation thereof in any other capacity and receiving compensation
therefor.
Section 13. Action Without a Meeting. Any action required or
---------- ------------------------
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written
5
<PAGE>
consent thereto is signed by all members of the Board, and such written consent
is filed with the minutes or proceedings of the Board.
Section 14. Telephonic Participation in Meetings. Members of
---------- ------------------------------------
the Board of Directors may participate in a meeting of the Board by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
ARTICLE IV
OFFICERS
--------
Section 1. Principal Officers. The Board of Directors shall
--------- ------------------
elect a President, a Secretary and a Treasurer, and may in addition elect one or
more Vice Presidents and such other officers as it deems fit; the President, the
Secretary, the Treasurer, and the Vice Presidents (if any) being the principal
officers of the Corporation. One person may hold, and perform the duties of, any
two or more of said offices.
Section 2. Election and Term of Office. The principal officers
--------- ---------------------------
of the Corporation shall be elected annually by the Board of Directors at the
organization meeting thereof. Each such officer shall hold office until his
successor shall have been elected and shall qualify, or until his earlier death,
resignation or removal.
Section 3. Other Officers. In addition, the Board of Directors
--------- --------------
may elect such other officers as they deem fit. Any such other officers chosen
by the Board of Directors shall be subordinate officers and shall hold office
for such period, have such authority and perform such duties as the Board of
Directors or the President from time to time determine.
Section 4. Removal. Any officer may be removed, either with or
--------- -------
without cause, at any time, by resolution adopted by the Board of Directors at
any regular meeting of the Board, or at any special meeting of the Board called
for that purpose, at which a quorum is present.
Section 5. Resignations. Any officer may resign at any time by
--------- ------------
giving written notice to the President, the Secretary or the Board of Directors.
Any such resignation shall take effect upon receipt of such notice or at any
later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 6. Vacancies. A vacancy in any office may be filled for
--------- ---------
the unexpired portion of the term in the manner prescribed in these By-laws for
election or appointment to such office for such term.
Section 7. Chairman of the Board. The Chairman of the Board of
--------- ---------------------
Directors, if one has been elected, shall preside if present at all meetings of
the Board of Directors, and he shall have and perform such other duties as from
time to time may be assigned to him by the Board of Directors.
6
<PAGE>
Section 8. President. The President shall be the chief
--------- ---------
executive officer of the Corporation and shall have the general powers and
duties of supervision and management usually vested in the office of president
of a corporation. He shall preside at all meetings of the stockholders if
present thereat, and at all meetings of the Board of Directors, and shall have
general supervision, direction and control of the operations and business
activities of the Corporation through his control and supervision of the
President of the Corporation. Except as the Board of Directors shall authorize
the execution thereof in some other manner, he shall execute bonds, mortgages,
and other contracts on behalf of the Corporation, and shall cause the seal to be
affixed to any instrument requiring it and when so affixed the seal shall be
attested by the signature of the Secretary or the Treasurer.
Section 9. Vice President. Each Vice President, if any have
--------- --------------
been elected, shall have such powers and shall perform such duties as shall be
assigned to him by the President or the Board of Directors.
Section 10. Treasurer. The Treasurer shall have charge and
---------- ---------
custody of, and be responsible for, all funds and securities of the Corporation.
He shall exhibit at all reasonable times his books of account and records to any
of the Directors of the Corporation upon application during business hours at
the office of the Corporation where such books and records shall be kept; when
requested by the Board of Directors, he shall render a statement of the
condition of the finances of the Corporation at any meeting of the Board or at
the annual meeting of stockholders; he shall receive, and give receipt for,
moneys due and payable to the Corporation from any source whatsoever; in
general, he shall perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the President
or the Board of Directors. The Treasurer shall give such bond, if any, for the
faithful discharge of his duties as the Board of Directors may require.
Section 11. Secretary. The Secretary, if present, shall act as
---------- ---------
secretary at all meetings of the Board of Directors and of the stockholders and
keep the minutes thereof in a book or books to be provided for that purpose; he
shall see that all notices required to be given by the Corporation are duly
given and served; he shall have charge of the stock records of the Corporation;
he shall see that all reports, statements and other documents required by law
are properly kept and filed; and in general he shall perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or the Board of Directors.
Section 12. Salaries. The salaries of the principal officers
---------- --------
shall be fixed from time to time by the Board of Directors or, if one has been
established, the Compensation Committee of the Board of Directors, and the
salaries of any other officers may be fixed by the President.
ARTICLE V
INDEMNIFICATION OF OFFICERS AND DIRECTORS
7
<PAGE>
Section 1. Right of Indemnification. Every person now or
--------- ------------------------
hereafter serving as a Director or officer of the Corporation and every such
Director or officer serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall be indemnified by the Corporation in accordance
with and to the fullest extent permitted by law for the defense of, or in
connection with, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
Section 2. Expenses. Expenses (including attorneys' fees)
--------- --------
incurred in defending a civil, criminal, administrative, or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article V.
Section 3. Other Rights of Indemnification. The right of
--------- -------------------------------
indemnification herein provided shall not be deemed exclusive of any other
rights to which any such Director or officer may now or hereafter be entitled
under any provision of the Corporation's Certificate of Incorporation or any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a Director or officer and shall inure to the benefit of the heirs, executors
and administrators of such person.
8
<PAGE>
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 1. Certificate for Stock. Every stockholder of the
--------- ---------------------
Corporation shall be entitled to a certificate or certificates, to be in such
form as the Board of Directors shall prescribe, certifying the number of shares
of the capital stock of the Corporation owned by him. No certificate shall be
issued for partly paid shares.
Section 2. Stock Certificate Signature. The certificates for
--------- ---------------------------
such stock shall be numbered in the order in which they shall be issued and
shall be signed by the President or any Vice President and by the Secretary or
an Assistant Secretary or the Treasurer of the Corporation, and its seal shall
be affixed thereto. If such certificate is countersigned (1) by a transfer agent
other than the Corporation or its employee, or, (2) by a registrar other than
the Corporation or its employee, the signatures of such officers of the
Corporation may be facsimiles. In case any officer of the Corporation who has
signed, or whose facsimile signature has been placed upon, any such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of issue.
Section 3. Stock Ledger. A record shall be kept by the
--------- ------------
Secretary or by any other officer, employee or agent designated by the Board of
Directors of the name of each person, firm or corporation holding capital stock
of the Corporation, the number of shares represented by, and the respective
dates of, each certificate for such capital stock, and in case of cancellation
of any such certificate, the respective dates of cancellation.
Section 4. Cancellation. Every certificate surrendered to the
--------- ------------
Corporation for exchange or registration of transfer shall be canceled, and no
new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so canceled, except,
subject to Section 7 of this Article VI, in cases provided for by applicable
law.
Section 5. Registrations of Transfers of Stock. Registrations
--------- -----------------------------------
of transfers of shares of the capital stock of the Corporation shall be made on
the books of the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the Corporation or with a transfer clerk or a transfer agent
appointed as in Section 6 of this Article VI provided, and on surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation, provided, however, that whenever any transfer of shares shall
-------- -------
be made for collateral security, and not absolutely, it shall be so expressed in
the entry of the transfer if, when the certificates are presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
Section 6. Regulations. The Board of Directors may make such
--------- -----------
rules and regulations as it may deem expedient, not inconsistent with the
Articles of Incorporation or these By-laws, concerning the issue, transfer and
registration of certificates for shares of the stock of
9
<PAGE>
the Corporation. It may appoint, or authorize any principal officer or officers
to appoint, one or more transfer clerks or one or more transfer agents and one
or more registrars, and may require all certificates of stock to bear the
signature or signatures of any of them.
Section 7. Lost, Stolen, Destroyed or Mutilated Certificates.
-------- -------------------------------------------------
Before any certificates for stock of the Corporation shall be issued in exchange
for certificates which shall become mutilated or shall be lost, stolen or
destroyed, proper evidence of such loss, theft, mutilation or destruction shall
be procured for the Board of Directors, if it so requires.
Section 8. Record Dates. For the purpose of determining the
--------- ------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a date as a
record date for any such determination of stockholders. Such record date shall
not be more than sixty or less than twenty days before the date of such meeting,
or more than sixty days prior to any other action.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. Corporate Seal. The Board of Directors shall
--------- --------------
provide a corporate seal, which shall be in such form as the Board of Directors
may decide. The Secretary shall be the custodian of the seal. The Board of
Directors may authorize a duplicate seal to be kept and used by any other
officer.
Section 2. Voting of Stocks Owned by the Corporation. The
--------- -----------------------------------------
Board of Directors may authorize any person on behalf of the Corporation to
attend, vote and grant proxies to be used at any meeting of stockholders of any
corporation (except the Corporation) in which the Corporation may hold stock.
Section 3. Dividends. Subject to the provisions of the
--------- ---------
Articles of Incorporation, the Board of Directors may, out of funds legally
available therefor, at any regular or special meeting declare dividends upon the
capital stock of the Corporation as and when they deem expedient. Before
declaring any dividend there may be set apart out of any funds of the
Corporation available for dividends such sum or sums as the Directors from time
to time in their discretion deem proper for working capital or as a reserve fund
to meet contingencies or for equalizing dividends or for such other purposes as
the Board of Directors shall deem conducive to the interests of the Corporation.
10
<PAGE>
ARTICLE VIII
AMENDMENTS
These By-laws of the Corporation may be altered, amended or
repealed by the Board of Directors at any regular or special meeting of the
Board of Directors or by the affirmative vote of the holders of record of a
majority of the issued and outstanding stock of the Corporation (i) present in
person or by proxy at a meeting of holders of such stock and entitled to vote
thereon or (ii) by a consent in writing in the manner contemplated in Section 9
of Article II, provided, however, that notice of the proposed alteration,
-------- -------
amendment or repeal is contained in the notice of such meeting. By-laws, whether
made or altered by the stockholders or by the Board of Directors, shall be
subject to alteration or repeal by the stockholders as in this Article VIII
above provided.
11
<PAGE>
EXHIBIT 10.1
================================================================================
$125,000,000
CREDIT AGREEMENT
among
BANCTEC, INC.,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
ABN AMRO BANK N.V.,
as Co-Agent
and
CHASE BANK OF TEXAS, N.A.,
as Syndication Agent and as Administrative Agent
Dated as of July 22, 1999.
================================================================================
CHASE SECURITIES INC., as Lead Arranger and Book Manager
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
SECTION 1. DEFINITIONS.................................................... 1
1.1 Defined Terms.................................................. 1
1.2 Other Definitional Provisions.................................. 19
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS............................... 20
2.1 Term Commitments............................................... 20
2.2 Procedure for Term Loan Borrowing.............................. 20
2.3 Repayment of Term Loans........................................ 20
2.4 Revolving Commitments.......................................... 20
2.5 Procedure for Revolving Loan Borrowing......................... 21
2.6 Commitment Fees, etc........................................... 21
2.7 Termination or Reduction of Revolving Commitments.............. 21
2.8 Optional Prepayments........................................... 22
2.9 Mandatory Prepayments and Commitment Reductions................ 22
2.10 Conversion and Continuation Options............................ 23
2.11 Limitations on Eurodollar Tranches............................. 24
2.12 Interest Rates and Payment Dates............................... 24
2.13 Computation of Interest and Fees............................... 24
2.14 Inability to Determine Interest Rate........................... 25
2.15 Pro Rata Treatment and Payments................................ 25
2.16 Requirements of Law............................................ 26
2.17 Taxes.......................................................... 27
2.18 Indemnity...................................................... 29
2.19 Change of Lending Office....................................... 29
2.20 Replacement of Lenders......................................... 29
SECTION 3. LETTERS OF CREDIT.............................................. 30
3.1 L/C Commitment................................................. 30
3.2 Procedure for Issuance of Letter of Credit..................... 30
3.3 Fees and Other Charges......................................... 31
3.4 L/C Participations............................................. 31
3.5 Reimbursement Obligation of the Borrower....................... 32
3.6 Obligations Absolute........................................... 32
3.7 Letter of Credit Payments...................................... 32
3.8 Applications................................................... 32
SECTION 4. REPRESENTATIONS AND WARRANTIES................................. 32
4.1 Financial Condition............................................ 33
4.2 No Change...................................................... 33
4.3 Corporate Existence; Compliance with Law....................... 33
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.4 Corporate Power; Authorization; Enforceable Obligations......... 34
4.5 No Legal Bar.................................................... 34
4.6 Litigation...................................................... 34
4.7 No Default...................................................... 34
4.8 Ownership of Property; Liens.................................... 34
4.9 Intellectual Property........................................... 34
4.10 Taxes........................................................... 35
4.11 Federal Regulations............................................. 35
4.12 Labor Matters................................................... 35
4.13 ERISA........................................................... 35
4.14 Investment Company Act; Other Regulations....................... 35
4.15 Subsidiaries.................................................... 36
4.16 Use of Proceeds................................................. 36
4.17 Environmental Matters........................................... 36
4.18 Accuracy of Information, etc.................................... 37
4.19 Security Documents.............................................. 37
4.20 Solvency........................................................ 38
4.21 Senior Indebtedness............................................. 38
4.22 Year 2000 Matters............................................... 38
4.23 Regulation H.................................................... 38
4.24 Insurance....................................................... 38
4.25 Certain Documents............................................... 38
SECTION 5. CONDITIONS PRECEDENT........................................... 39
5.1 Conditions to Initial Extension of Credit....................... 39
5.2 Conditions to Each Extension of Credit.......................... 43
SECTION 6. AFFIRMATIVE CONVENANTS......................................... 43
6.1 Financial Statements............................................ 43
6.2 Certificates; Other Information................................. 44
6.3 Payment of Obligations.......................................... 45
6.4 Maintenance of Existence; Compliance........................... 45
6.5 Maintenance of Property; Insurance.............................. 45
6.6 Inspection of Property; Books and Records; Discussions.......... 45
6.7 Notices......................................................... 46
6.8 Environmental Laws.............................................. 46
6.9 Additional Collateral, etc...................................... 47
SECTION 7. NEGATIVE CONVENANTS............................................ 48
7.1 Financial Condition Covenants................................... 48
7.2 Indebtedness.................................................... 49
7.3 Liens........................................................... 50
7.4 Fundamental Changes............................................. 51
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.5 Disposition of Property..................................................... 51
7.6 Restricted Payments......................................................... 52
7.7 Capital Expenditures........................................................ 52
7.8 Investments................................................................. 52
7.9 Optional Payments and Modifications of Certain Debt Instruments............. 53
7.10 Transactions with Affiliates................................................ 53
7.11 Sales and Leasebacks........................................................ 53
7.12 Changes in Fiscal Periods................................................... 54
7.13 Negative Pledge Clauses..................................................... 54
7.14 Clauses Restricting Sudsidiary Distributions................................ 54
7.15 Lines of Business........................................................... 54
7.16 Amendments to Acquisition Documentation..................................... 54
SECTION 8. EVENTS OF DEFAULT........................................................... 54
SECTION 9. THE AGENTS.................................................................. 57
9.1 Appointment................................................................. 57
9.2 Delegation of Duties........................................................ 58
9.3 Exculpatory Provisions...................................................... 58
9.4 Reliance by Administrative Agent............................................ 58
9.5 Notice of Default........................................................... 58
9.6 Non-Reliance on Agents and Other Lenders.................................... 59
9.7 Indemnification............................................................. 59
9.8 Agent in Its Individual Capacity............................................ 60
9.9 Successor Administrative Agent.............................................. 60
9.10 Syndication Agent........................................................... 60
SECTION 10. MISCELLANEOUS.............................................................. 60
10.1 Amendments and Waivers...................................................... 60
10.2 Notices..................................................................... 61
10.3 No Waiver; Cumulative Remedies.............................................. 61
10.4 Survival of Representations and Warranties.................................. 62
10.5 Payment of Expenses and Taxes............................................... 62
10.6 Successors and Assigns; Participations and Assignments...................... 63
10.7 Adjustments; Set-off........................................................ 64
10.8 Counterparts................................................................ 65
10.9 Severability................................................................ 65
10.10 Integration................................................................. 65
10.11 GOVERNING LAW............................................................... 65
10.12 Submission To Jurisdiction; Waivers......................................... 65
10.13 Acknowledgements............................................................ 66
10.14 Releases of Guarantees and Liens............................................ 66
10.15 Confidentiality............................................................. 67
10.16 WAIVERS OF JURY TRIAL....................................................... 67
</TABLE>
<PAGE>
CREDIT AGREEMENT, dated as of July 22, 1999, among BANCTEC, INC., a Delaware
corporation (the "Borrower"), the several banks and other financial institutions
--------
or entities from time to time parties to this Agreement (the "Lenders"), ABN
-------
AMRO Bank N.V., as Co-Agent, CHASE BANK OF TEXAS, N.A. ("CHASE"), as syndication
-----
agent, and CHASE BANK OF TEXAS, N.A., as administrative agent.
RECITALS
A. WHEREAS, Welsh, Carson, Anderson & Stowe VIII, L.P., together with
its Affiliates (collectively, the "Sponsor"), proposes to acquire and effect the
-------
recapitalization (the "Acquisition") of the Borrower through a wholly owned
-----------
subsidiary, Colonial Acquisition Corp. ("Newco"). The acquisition and
-----
recapitalization will be effected by a merger of Newco with and into the
Borrower, as a result of which the Sponsor will own approximately 93.5% of the
common stock of the Borrower and Convergent Equity Partners L.L.C. (the "Other
-----
Investor") will own approximately 6.5% of such common stock. All of the existing
- --------
stockholders of the Borrower will receive cash consideration in exchange for
their common stock in the Borrower.
B. WHEREAS, concurrently with the Acquisition, BancTec USA, Inc.
will be merged with or liquidated into (the "Subsidiary Merger") the Borrower;
------------------
C. WHEREAS, in connection with the Acquisition and the Subsidiary
Merger, all amounts outstanding under the Existing Credit Agreements (as defined
herein), which shall not be greater than $6,500,000, will be refinanced (the
"Refinancing"; together with the Acquisition and the Subsidiary Merger, the
-----------
"Transactions");
------------
D. WHEREAS, in order to finance a portion of the purchase price of,
and to pay and reimburse certain costs and expenses incurred in connection with,
the Transactions, and to provide for certain ongoing working capital needs of
the Borrower and its Subsidiaries, the Borrower desires to obtain financing
through (i) the issuance of subordinated unsecured notes by the Borrower for an
aggregate principal amount of not more than $160,000,000 and (ii) the incurrence
of senior secured Indebtedness of an aggregate principal amount of not more than
$125,000,000 by entering into this Agreement with the Lenders hereto;
E. NOW, THEREFORE, in consideration of the mutual provisions,
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
SECTION I. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
-------------
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
---
to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on
such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per
----------
annum publicly announced from time to time by the Reference Lender as its prime
rate in effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by the Reference Lender
in connection with extensions of credit to debtors). Any change in the ABR due
to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change in
the Prime Rate or the Federal Funds Effective Rate, respectively.
<PAGE>
2
"ABR Loans": Loans the rate of interest applicable to which is based
---------
upon the ABR.
"Acquisition": as defined in Section 5.1.
-----------
"Acquisition Agreement": the Amended and Restated Agreement and Plan
---------------------
of Merger, dated as of June 17, 1999, by and between Newco and the Borrower
(prior to the Acquisition).
"Acquisition Documentation": collectively, the Acquisition Agreement
-------------------------
and all schedules, exhibits and annexes thereto and all side letters and
agreements affecting the terms thereof or entered into in connection therewith,
in each case as amended, supplemented or otherwise modified from time to time in
accordance with Section 7.16.
"Adjustment Date": as defined in the Pricing Grid.
---------------
"Administrative Agent": Chase, together with its affiliates, as the
--------------------
administrative agent for the Lenders under this Agreement and the other Loan
Documents, together with any of its permitted successors hereunder.
"Affiliate": as to any Person, any other Person that, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Agents": the collective reference to the Syndication Agent and the
------
Administrative Agent.
"Aggregate Exposure": with respect to any Lender at any time, an
------------------
amount equal to (a) until the Closing Date, the aggregate amount of such
Lender's Commitments at such time and (b) thereafter, the sum of (i) the
aggregate then unpaid principal amount of such Lender's Term Loans and (ii) the
amount of such Lender's Revolving Commitment then in effect or, if the Revolving
Commitments have been terminated, the amount of such Lender's Revolving
Extensions of Credit then outstanding.
"Aggregate Exposure Percentage": with respect to any Lender at any
-----------------------------
time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure
at such time to the Aggregate Exposure of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented or
---------
otherwise modified from time to time.
"Applicable Margin": for each Type of Loan, the rate per annum set
-----------------
forth under the relevant column heading below:
ABR Loans Eurodollar Loans
--------- ----------------
Revolving Loans 1.75% 2.75%
Tranche A Term Loans 1.75% 2.75%
; provided, that on and after the first Adjustment Date occurring after the
--------
completion of two full fiscal quarters of the Borrower after the Closing Date,
the Applicable Margin with respect to Revolving Loans and Tranche A Term Loans
will be determined pursuant to the Pricing Grid.
<PAGE>
3
"Application": an application, in such form as the Issuing Lender may
-----------
specify from time to time, requesting the Issuing Lender to open a Letter of
Credit.
"Asset Coverage Ratio": at any date, the ratio of (a) the sum of (i)
--------------------
100% of the book accounts receivable and inventory (less obsolete inventory)
plus (ii) the greater of $40,000,000 and 15% of Consolidated Net Tangible Assets
to (b) outstanding Term Loans and Revolving Extensions of Credit, as of such
date.
"Asset Sale": any Disposition of property or series of related
----------
Dispositions of property (excluding any such Disposition permitted by clause
(a), (b), (c) or (d) of Section 7.5).
"Assignee": as defined in Section 10.6(c).
--------
"Assignment and Acceptance": an Assignment and Acceptance,
-------------------------
substantially in the form of Exhibit E.
"Assignor": as defined in Section 10.6(c).
--------
"Available Revolving Commitment": as to any Revolving Lender at any
------------------------------
time, an amount equal to the excess, if any, of (a) such Lender's Revolving
Commitment then in effect over (b) such Lender's Revolving Extensions of Credit
then outstanding.
"Benefitted Lender": as defined in Section 10.7(a).
-----------------
"Board": the Board of Governors of the Federal Reserve System of the
-----
United States (or any successor).
"Borrower": as defined in the preamble hereto.
--------
"Borrowing Date": any Business Day specified by the Borrower as a date
--------------
on which the Borrower requests the relevant Lenders to make Loans hereunder.
"Business": as defined in Section 4.17(b).
--------
"Business Day": a day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law to
close, provided, that with respect to notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, such day is
also a day for trading by and between banks in Dollar deposits in the interbank
eurodollar market.
"Capital Expenditures": for any period, with respect to any Person,
--------------------
the aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of such
-------------------------
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP and, for the purposes of
this Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with GAAP.
<PAGE>
4
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
----------------
unconditionally guaranteed by, (i) the government of (X) the United States or
(Y) any other country in which any Subsidiary has operations, provided the
--------
investment in such obligations is made by the Subsidiary having such operations
or (ii) any agency or instrumentality of any of the foregoing, provided, that
--------
the full faith and credit of the relevant jurisdiction is pledged in support
thereof, and, in the case of each of (i) and (ii), maturing within one year from
the date of acquisition; (b) certificates of deposit, time deposits, eurodollar
time deposits or overnight bank deposits having maturities of one year or less
from the date of acquisition issued by (i) any Lender or (ii) by any commercial
bank organized under the laws of (X) the United States or any state thereof or
(Y) any other country in which any Subsidiary has operations, provided the
--------
investment in such obligations is made by the Subsidiary having such operations,
and, in the case of each of (X) and (Y), having combined capital and surplus of
not less than $500,000,000 (or its foreign currency equivalent as determined by
reference to the exchange rate most recently reported in The Wall Street
Journal); (c) commercial paper of an issuer rated at least A-1 by Standard &
Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc.
("Moody's"), or carrying an equivalent rating by a nationally recognized rating
-------
agency, if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally, and maturing within one year from the date
of acquisition; (d) repurchase obligations of any Lender or of any commercial
bank satisfying the requirements of clause (b) of this definition, having a term
of not more than 90 days, with respect to securities issued or fully guaranteed
or insured by the United States government; (e) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's; (f) securities with
maturities of one year or less from the date of acquisition backed by standby
letters of credit issued by any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition; or (g) shares of money market
mutual or similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition.
"Chase": as defined in the preamble hereto.
-----
"Closing Date": the date on which the conditions precedent set forth
------------
in Section 5.1 shall have been satisfied, which date is July 22, 1999.
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral": all of the property of the Loan Parties, now owned or
----------
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.
"Collateral Agreement": the Collateral Agreement to be executed and
--------------------
delivered by the Borrower, substantially in the form of Exhibit A, as the same
may be amended, supplemented or otherwise modified from time to time.
"Commitment": as to any Lender, the sum of the Tranche A Term
----------
Commitment and the Revolving Commitment of such Lender.
<PAGE>
5
"Commitment Fee Rate": 1/2 of 1% per annum; provided, that on and
------------------- --------
after the first Adjustment Date occurring after the completion of two full
fiscal quarters of the Borrower after the Closing Date, the Commitment Fee Rate
will be determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
that is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group that includes the Borrower and that is
treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible
----------------------
Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information
-----------------------------------
Memorandum dated June 1999 and furnished to the Lenders.
"Consolidated Current Assets": at any date, all amounts (other than
---------------------------
cash and Cash Equivalents) that would, in conformity with GAAP, be set forth
opposite the caption "total current assets" (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts that
--------------------------------
would, in conformity with GAAP, be set forth opposite the caption "total current
liabilities" (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date, but excluding (a) the current
portion of any Funded Debt of the Borrower and its Subsidiaries and (b) without
duplication of clause (a) above, all Indebtedness consisting of Revolving Loans
to the extent otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income for
-------------------
such period plus, without duplication and to the extent reflected as a charge in
----
the statement of such Consolidated Net Income for such period, the sum of (a)
income tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring non-cash expenses or losses (including, whether or not otherwise
reportable as a separate item in the statement of such Consolidated Net Income
for such period, non-cash losses on sales of assets outside of the ordinary
course of business), (f) fees and expenses and other costs and charges incurred
or reserved, and any other charges required by the SEC to be taken, in
connection with the consummation of the Acquisition, and (g) any other non-cash
charges, and minus, to the extent included in the statement of such Consolidated
-----
Net Income for such period, the sum of (a) interest income, (b) any
extraordinary, unusual or non-recurring income or gains (including, whether or
not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, gains on the sales of assets outside of
the ordinary course of business) and (c) any other non-cash income earned
outside of the ordinary course of business, all as determined on a consolidated
basis. For any period of four consecutive fiscal quarters which includes the
fiscal quarter ended December 31, 1998, Consolidated EBITDA shall exclude
$37,500,000 in pretax expenses and charges accrued for such fiscal quarter. For
the purposes of calculating Consolidated EBITDA for any period of four
consecutive fiscal quarters (each, a "Reference Period") pursuant to any
determination of the Consolidated Leverage Ratio, (i) if at any time during such
Reference Period the Borrower or any Subsidiary shall have made any Material
Disposition, the Consolidated EBITDA for such Reference Period shall be reduced
by an amount equal to the Consolidated EBITDA (if positive) attributable to the
property that is the subject of such Material Disposition for such Reference
Period or increased by an amount equal to the Consolidated EBITDA (if negative)
attributable thereto for such Reference Period and (ii) if during such Reference
Period the Borrower or any Subsidiary shall have made a Material Acquisition,
Consolidated EBITDA for such Reference Period shall be calculated after giving
pro forma effect thereto as if such Material Acquisition occurred on the first
- --- -----
day of
<PAGE>
6
such Reference Period. As used in this definition, "Material Acquisition" means
any acquisition of property or series of related acquisitions of property that
(a) constitutes assets comprising all or substantially all of an operating unit
of a business or constitutes all or substantially all of the common stock of a
Person and (b) involves the payment of consideration by the Borrower and its
Subsidiaries in excess of $5,000,000; and "Material Disposition" means any
Disposition of property or series of related Dispositions of property that (x)
constitutes assets comprising all or substantially all of an operating unit of a
business or constitutes all or substantially all of the common stock of a person
and (y) yields gross proceeds to the Borrower or any of its Subsidiaries in
excess of $5,000,000.
"Consolidated Fixed Charge Coverage Ratio": for any period, the ratio
----------------------------------------
of (a) Consolidated EBITDA for such period less the aggregate amount actually
paid by the Borrower and its Subsidiaries during such period on account of
Capital Expenditures (excluding the principal amount of Indebtedness incurred in
connection with such expenditures) to (b) Consolidated Interest Expense for such
period.
"Consolidated Interest Coverage Ratio": for any period, the ratio of
------------------------------------
(a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.
"Consolidated Interest Expense": for any period, total cash interest
-----------------------------
expense (including that attributable to Capital Lease Obligations), net of cash
interest income, of the Borrower and its Subsidiaries for such period with
respect to all outstanding Indebtedness of the Borrower and its Subsidiaries.
Consolidated Interest Expense shall include, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and net costs under Hedge Agreements
in respect of interest rates to the extent such net costs are allocable to such
period in accordance with GAAP, but shall exclude net payments received under
such Hedge Agreements.
"Consolidated Leverage Ratio": as at the last day of any period, the
---------------------------
ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for
such period.
"Consolidated Net Income": for any period, the consolidated net income
-----------------------
(or loss) of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded (a) the
--------
income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Borrower or is merged into or consolidated with the Borrower
or any of its Subsidiaries, (b) the income (or deficit) of any Person (other
than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Net Tangible Assets" as defined in the Senior Indenture.
--------------------------------
"Consolidated Total Debt": at any date, the aggregate principal amount
-----------------------
of all Indebtedness of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital": at any date, the excess of
----------------------------
Consolidated Current Assets on such date over Consolidated Current Liabilities
----
on such date.
<PAGE>
7
"Continuing Directors": the directors of the Borrower on the Closing
--------------------
Date, after giving effect to the Transactions and the other transactions
contemplated hereby, and each other director, if, in each case, such other
director's nomination for election to the board of directors of the Borrower is
recommended by at least a majority of the then Continuing Directors (provided,
--------
that the act or vote of a majority of the directors is sufficient to constitute
such act or vote as that of the board of directors of the Borrower, otherwise,
such nomination for election of directors of the Borrower shall be by at least
the requisite number of the then Continuing Directors as is required therefor)
or such other director receives the vote of the Permitted Investors in his or
her election by the shareholders of the Borrower.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Control Investment Affiliate": as to any Person, any other Person
----------------------------
that (a) directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person and (b) is organized by such Person primarily
for the purpose of making equity or debt investments in one or more companies.
For purposes of this definition, "control" of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Default": any of the events specified in Section 8, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Designated Lender": as defined in Section 5.1(a).
-----------------
"Disposition": with respect to any property, any sale, lease, sale and
-----------
leaseback, assignment, conveyance, transfer or other disposition thereof. The
terms "Dispose" and "Disposed of" shall have correlative meanings.
------- -----------
"Dollars" and "$": dollars in lawful currency of the United States.
------- -
"Domestic Subsidiary": any Subsidiary of the Borrower organized under
-------------------
the laws of any jurisdiction within the United States.
"ECF Percentage": 50%.
--------------
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of human health
as affected by the environment, as now or may at any time hereafter be in
effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as
<PAGE>
8
"Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member
bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
--------------------
Period pertaining to a Eurodollar Loan, the rate per annum determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest Period appearing on Page
3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period. In the event that such rate
does not appear on Page 3750 of the Dow Jones Markets screen (or otherwise on
such screen), the "Eurodollar Base Rate" shall be determined by reference to
--------------------
such other comparable publicly available service for displaying eurodollar rates
as may be selected by the Administrative Agent or, in the absence of such
availability, by reference to the rate at which the Administrative Agent is
offered Dollar deposits at or about 11:00 A.M., New York City time, two Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where its eurodollar and foreign currency and exchange operations are
then being conducted for delivery on the first day of such Interest Period for
the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which is
----------------
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
------------------
under a particular Facility the then current Interest Periods with respect to
all of which begin on the same date and end on the same later date (whether or
not such Loans shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 8, provided
---------------- --------
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the excess,
----------------
if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for
such fiscal year, (ii) an amount equal to the amount of all non-cash charges
(including depreciation and amortization) deducted in arriving at such
Consolidated Net Income, (iii) decreases in Consolidated Working Capital for
such fiscal year, and (iv) an amount equal to the aggregate net non-cash loss on
the Disposition of property by the Borrower and its Subsidiaries during such
fiscal year (other than sales of inventory in the ordinary course of business),
to the extent deducted in arriving at such Consolidated Net Income over (b) the
----
sum, without duplication, of (i) an amount equal to the amount of all non-cash
credits included in arriving at such Consolidated Net Income, (ii) the aggregate
amount actually paid by the Borrower and its Subsidiaries in cash during such
fiscal year on account of Capital Expenditures and, without duplication,
Permitted Acquisitions (excluding the principal amount of Indebtedness incurred
in connection with such expenditures and any such expenditures financed with (x)
the proceeds of any Reinvestment Deferred Amount, (y) any Net Cash Proceeds of
an Asset Sale retained by the Borrower or any of its Subsidiaries pursuant to
Section 2.9(b) and (z) the proceeds of any issuance of Capital Stock by the
Borrower or its Subsidiaries), (iii) the aggregate amount of all prepayments of
Revolving Loans during such fiscal year to the extent accompanying permanent
optional reductions of the Revolving Commitments and all optional prepayments of
the Term Loans during such fiscal year, (iv) the aggregate amount of all
regularly scheduled principal payments of Funded Debt (including the Term Loans)
of the Borrower and its Subsidiaries made during
<PAGE>
9
such fiscal year (other than in respect of any revolving credit facility to the
extent there is not an equivalent permanent reduction in commitments
thereunder), (v) increases in Consolidated Working Capital for such fiscal year,
(vi) an amount equal to the aggregate net non-cash gain on the Disposition of
property by the Borrower and its Subsidiaries during such fiscal year (other
than sales of inventory in the ordinary course of business), to the extent
included in arriving at such Consolidated Net Income, and (vii) without
duplication, an amount equal to the amount of all Restricted Payments actually
paid to the Borrower pursuant to Section 7.6 during such fiscal year, including,
without limitation, management fees paid by the Borrower as set forth in Section
7.6(b).
"Excess Cash Flow Application Date": as defined in Section 2.9(c).
---------------------------------
"Exchange Act": as defined in Section 8(k).
------------
"Excluded Foreign Subsidiary": any Foreign Subsidiary in respect of
---------------------------
which the pledge of all of the Capital Stock of such Subsidiary as Collateral
would result in adverse tax consequences to the Borrower.
"Existing Credit Agreements": the Credit Agreement, dated as of
--------------------------
February 22, 1996, among BancTec USA, Inc, the Borrower, certain Subsidiaries,
the banks listed therein and Chase Bank of Texas, N.A. (formerly known as Texas
Commerce Bank, National Association), as amended, and any of the Borrower's
other existing uncommitted lines of credit.
"Facility": each of (a) the Tranche A Term Commitments and the Tranche
--------
A Term Loans made thereunder (the "Tranche A Term Facility") and (b) the
Revolving Commitments and the extensions of credit made thereunder (the
"Revolving Facility").
"Federal Funds Effective Rate": for any day, the weighted average of
----------------------------
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by the Reference Lender
from three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
------------------
Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of such Person that
-----------
matures more than one year from the date of its creation or matures within one
year from such date but is renewable or extendible, at the option of such
Person, to a date more than one year from such date or arises under a revolving
credit or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date, including all
current maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from the date of
its creation and, in the case of the Borrower, Indebtedness in respect of the
Loans.
"Funding Office": the office of the Administrative Agent specified in
--------------
Section 10.2 or such other office as may be specified from time to time by the
Administrative Agent as its funding office by written notice to the Borrower and
the Lenders.
"GAAP": generally accepted accounting principles in the United States
----
as in effect from time to time, except that for purposes of Section 7.1, GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent with those used in the preparation of the most recent audited
financial statements delivered pursuant to Section 4.1(b). In the event that any
"Accounting
<PAGE>
10
Change" (as defined below) shall occur and such change results in a change in
the method of calculation of financial covenants, standards or terms in this
Agreement, then the Borrower and the Administrative Agent agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the Borrower's financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
Until such time as such an amendment shall have been executed and delivered by
the Borrower, the Administrative Agent and the Required Lenders, all financial
covenants, standards and terms in this Agreement shall continue to be calculated
or construed as if such Accounting Changes had not occurred. "Accounting
Changes" refers to changes in accounting principles required by the promulgation
of any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC.
"Governmental Authority": any nation or government, any state or other
----------------------
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
-------------------- -------------------
any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
-------------------
of any other third Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
-------- -------
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable (or is limited
to certain property or the value thereof), in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the board of directors
of the Borrower in good faith or, with respect to any property, the fair market
value of such property or, if such fair market value is not readily
determinable, the maximum value of such property as determined by the board of
directors of the Borrower in good faith.
"Hedge Agreements": all interest rate swaps, caps or collar agreements
----------------
or similar arrangements providing for protection against fluctuations in
interest rates or currency exchange rates or the exchange of nominal interest
obligations, either generally or under specific contingencies.
"Indebtedness": of any Person at any date, without duplication, (a)
------------
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than
current trade payables incurred in the ordinary course of such Person's
<PAGE>
11
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations of
such Person, (f) all obligations of such Person, contingent or otherwise, as an
account party under acceptances, letters of credit, surety bonds or similar
arrangements, (g) the liquidation value of all mandatorily redeemable preferred
Capital Stock of such Person, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through (g) above,
(i) all obligations of the kind referred to in clauses (a) through (h) above
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, whether or not such Person
has assumed or become liable for the payment of such obligation, and (j) for the
purposes of Section 8(e) only, all obligations of such Person in respect of
Hedge Agreements. With respect to any obligations for which recourse is limited
to certain property or the value thereof, the amount of such Person's
Indebtedness shall be the fair market value of such property or, if such fair
market value is not readily determinable, the maximum value of such property as
determined by the board of directors of the Borrower in good faith. In
calculating Indebtedness of the Borrower and its Subsidiaries on a consolidated
basis for any purpose herein, any Guarantee Obligation of the Borrower or any
Subsidiary in respect of any other Indebtedness of the Borrower or any
Subsidiary shall be disregarded.
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, quarterly in arrears
---------------------
on the last day of each quarter following the Closing Date while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day that is three months, or a whole multiple thereof,
after the first day of such Interest Period and the last day of such Interest
Period and (d) as to any Loan, the date of any repayment or prepayment made in
respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
---------------
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of
<PAGE>
12
such extension would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) the Borrower may not select an Interest Period under a
particular Facility that would extend beyond the Scheduled Revolving
Termination Date or beyond the date final payment is due on the Term Loans;
(iii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest
Period for such Loan.
"Investments": as defined in Section 7.8.
-----------
"IPO": the issuance by the Borrower of shares of its common stock to
---
the public pursuant to a bona fide underwritten public offering, resulting in at
least 15% of the Borrower's outstanding shares of common stock having been
issued to the public by the Borrower.
"Issuing Lender": Chase, in its capacity as issuer of any Letter of
--------------
Credit.
"L/C Commitment": $20,000,000.
--------------
"L/C Fee Payment Date": the last day of each quarter following the
--------------------
Closing Date and the last day of the Revolving Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit that
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Revolving
----------------
Lenders other than the Issuing Lender.
"Lenders": as defined in the preamble hereto.
-------
"Letters of Credit": as defined in Section 3.1(a).
-----------------
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
----
"Loan Documents": this Agreement, the Security Documents and the
--------------
Notes, if any.
"Loan Parties": the Borrower and each Subsidiary of the Borrower that
------------
is a party to a Loan Document.
<PAGE>
13
"Majority Facility Lenders": with respect to any Facility, the holders
-------------------------
of more than 50% of the aggregate unpaid principal amount of the Term Loans or
the Total Revolving Extensions of Credit, as the case may be, outstanding under
such Facility (or, in the case of the Revolving Facility, prior to any
termination of the Revolving Commitments, the holders of more than 50% of the
Total Revolving Commitments).
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
Acquisition and the other Transactions, (b) the business, property, operations,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole or (c) the validity or enforceability of this
Agreement or any of the other Loan Documents.
"Materials of Environmental Concern": any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation, and any other substance the presence of or
exposure to which could reasonably be expected to result in liability under any
applicable Environmental Law.
"Mortgaged Properties": the real properties listed on Schedule 1.1B,
--------------------
as to which the Administrative Agent for the benefit of the Lenders shall be
granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by any Loan
---------
Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Lenders, substantially in the form of Exhibit D (with such
changes thereto as shall be advisable under the law of the jurisdiction in which
such mortgage or deed of trust is to be recorded), as the same may be amended,
supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
-----------------
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, other consultants' fees in connection therewith not already set forth
herein and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien expressly permitted hereunder on
any asset that is the subject of such Asset Sale or Recovery Event (other than
any Lien pursuant to a Security Document) including amounts paid as penalties or
premiums on the repayment of such Indebtedness, amounts of any reserves
reasonably estimated to be paid out within eighteen months from the date of the
occurrence of such Asset Sale or Recovery Event that are directly attributable
to such event and (b) in connection with any issuance or sale of equity
securities or debt securities or instruments or the incurrence of loans, the
cash proceeds received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, other consultants' fees in
connection therewith not already set forth herein, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"Newco": as defined in the Recitals hereto.
-----
"Non-Excluded Taxes": as defined in Section 2.17(a).
------------------
<PAGE>
14
"Non-Executing Persons": as defined in Section 5.1(a).
---------------------
"Non-U.S. Lender": as defined in Section 2.17(d).
---------------
"Notes": the collective reference to any promissory note evidencing
-----
Loans.
"Obligations": the unpaid principal of and interest on (including
-----------
interest accruing after the maturity of the Loans and Reimbursement Obligations
and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Loans and all other obligations and
liabilities of the Borrower to the Administrative Agent or to any Lender (or, in
the case of Hedge Agreements, any affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, the Letters of Credit, any Hedge Agreement
entered into with any Lender or any affiliate of any Lender or any other
document made, delivered or given in connection herewith or therewith, whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including all reasonable fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender that are required to be
paid by the Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
-----------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Acquisitions": any acquisition by the Borrower or a
----------------------
Subsidiary of all or substantially all of the assets of, or all the Capital
Stock of, a Person or division or line of business of a Person if, immediately
after giving effect thereto, (a) no Default or Event of Default has occurred and
is continuing or would result therefrom, (b) all transactions related thereto
are consummated in accordance with applicable laws, except where any non-
compliance could not, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect, (c) all of the Capital Stock in each Subsidiary
formed for the purpose of or resulting from such acquisition shall be owned
directly by the Borrower or a Subsidiary of the Borrower and all actions
required to be taken with respect to such acquired or newly created Subsidiary
under Section 6.10 have been taken, (d) the Borrower and its Subsidiaries are in
compliance, on a pro forma basis as at the end of the last fiscal quarter of the
Borrower for which financial statements are available after giving effect to
such acquisition, with the covenants contained in Section 7.1 calculated as at
the last day of the most recently ended fiscal quarter of the Borrower for which
financial statements are available, as if such acquisition (and any related
incurrence or repayment of Indebtedness, with any new Indebtedness being deemed
amortized over the applicable testing period in accordance with its terms, and
with any Revolving Loans borrowed in connection with such acquisition being
deemed to be repaid with excess cash balances as available) had occurred on the
first day of each relevant period for testing such compliance and (e) the
Borrower has delivered to the Administrative Agent an officers' certificate to
the effect set forth in clauses (a), (b), (c) and (d) above, together with all
relevant financial information for the Person or assets to be acquired.
<PAGE>
15
"Permitted Investors": the collective reference to the Sponsor and its
-------------------
Control Investment Affiliates.
"Person": an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that is
----
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pricing Grid": the pricing grid attached hereto as Annex A.
------------
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
-----------------------
"Projections": as defined in Section 6.2(c).
-----------
"Properties": as defined in Section 4.17(a).
----------
"Proxy Statement": The proxy statement, dated June 23, 1999, filed by
---------------
the Borrower with the SEC in connection with the Transactions.
"Recovery Event": any settlement of or payment in respect of any
--------------
property or casualty insurance claim or any condemnation proceeding relating to
any asset of the Borrower or any of its Subsidiaries.
"Reference Lender": Chase.
----------------
"Refinancing": as defined in the recitals hereto.
-----------
"Register": as defined in Section 10.6(d).
--------
"Regulation U": Regulation U of the Board as in effect from time to
------------
time.
"Reimbursement Obligation": the obligation of the Borrower to
------------------------
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
----------------------------
Event, the aggregate Net Cash Proceeds received by the Borrower or any of its
Subsidiaries in connection therewith that are not applied to prepay the Term
Loans or reduce the Revolving Commitments pursuant to Section 2.9(b) as a result
of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Recovery Event in respect of which the
------------------
Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
-------------------
Officer stating that no Default or Event of Default has occurred and is
continuing and that the Borrower (directly or indirectly through a Subsidiary)
intends and expects to use all or a specified portion of the Net Cash Proceeds
of a Recovery Event to acquire, repair or replace assets useful in its business.
<PAGE>
16
"Reinvestment Prepayment Amount": with respect to any Reinvestment
------------------------------
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire, repair
or replace assets useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
----------------------------
Event, the earlier of (a) the date occurring six months after such Reinvestment
Event and (b) the date on which the Borrower shall have determined not to, or
shall have otherwise ceased to, acquire, repair or replace assets useful in the
Borrower's business with all or any portion of the relevant Reinvestment
Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC
Reg.ss. 4043.
"Required Lenders": at any time, the holders of more than 50% of (a)
----------------
until the Closing Date, the Commitments then in effect and (b) thereafter, the
sum of (i) the aggregate unpaid principal amount of the Term Loans then
outstanding and (ii) the Total Revolving Commitments then in effect or, if the
Revolving Commitments have been terminated, the Total Revolving Extensions of
Credit then outstanding.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chief executive officer, president, chief
-------------------
financial officer, treasurer or controller of the Borrower, but in any event,
with respect to financial matters, the chief financial officer, treasurer or
controller of the Borrower.
"Restricted Payments": as defined in Section 7.6.
-------------------
"Revolving Commitment": as to any Lender, the obligation of such
--------------------
Lender, if any, to make Revolving Loans and Letters of Credit in an aggregate
principal and/or face amount not to exceed the amount set forth under the
heading "Revolving Commitment" opposite such Lender's name on Schedule 1.1A or
in the Assignment and Acceptance pursuant to which such Lender became a party
hereto, as the same may be changed from time to time pursuant to the terms
hereof. The original amount of the Total Revolving Commitments is $50,000,000.
"Revolving Commitment Period": the period from and including the
---------------------------
Closing Date to the Scheduled Revolving Termination Date.
"Revolving Extensions of Credit": as to any Revolving Lender at any
------------------------------
time, an amount equal to the sum of (a) the aggregate principal amount of all
Revolving Loans held by such Lender then outstanding and (b) such Lender's
Revolving Percentage of the L/C Obligations then outstanding.
"Revolving Lender": each Lender that has a Revolving Commitment or
----------------
that holds Revolving Loans.
"Revolving Loans": as defined in Section 2.4(a).
---------------
<PAGE>
17
"Revolving Percentage": as to any Revolving Lender at any time, the
--------------------
percentage which such Lender's Revolving Commitment then constitutes of the
Total Revolving Commitments (or, at any time after the Revolving Commitments
shall have expired or terminated, the percentage which the aggregate principal
amount of such Lender's Revolving Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Loans then outstanding).
"Scheduled Revolving Termination Date": July 22, 2004.
------------------------------------
"SEC": the Securities and Exchange Commission, any successor thereto
---
and any analogous Governmental Authority.
"Security Documents": the collective reference to the Collateral
------------------
Agreement, the Mortgages and all other security documents hereafter delivered to
the Administrative Agent granting a Lien on any property of any Person to secure
the obligations and liabilities of any Loan Party under any Loan Document.
"Senior Indenture": the indenture, dated as of May 22, 1998, between
----------------
BancTec, Inc. and The First National Bank of Chicago, as Trustee, as the same
maybe amended, supplemented or otherwise modified from time to time
"Senior Notes": the notes issued pursuant to the Senior Indenture.
------------
"Single Employer Plan": any Plan that is covered by Title IV of ERISA,
--------------------
but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of any
-------
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Specified Change of Control": a "Change of Control" as defined in the
---------------------------
Sponsor Notes.
"Sponsor": as defined in the recitals hereto.
-------
"Sponsor Notes": the $160,000,000 subordinated unsecured notes of the
--------------
Borrower due 2009, issued on the Closing Date in form and substance
substantially similar to the draft dated July 16, 1999 provided to the
Administrative Agent, bearing cash interest at a rate of 10%, and payment-in-
kind interest at a rate equal to 13% minus 10%. The Sponsor Notes shall not be
guaranteed by any Subsidiary.
"Subsidiary": as to any Person, a corporation, partnership, limited
----------
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than
<PAGE>
18
stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Syndication Agent": Chase, together with its affiliates, as the
-----------------
administrative agent for the Lenders under this Agreement and the other Loan
Documents, together with any of its successors.
"Term Lenders": the collective reference to the Tranche A Term
------------
Lenders.
"Term Loans": the collective reference to the Tranche A Term Loans.
----------
"Total Revolving Commitments": at any time, the aggregate amount of
---------------------------
the Revolving Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate
------------------------------------
amount of the Revolving Extensions of Credit of the Revolving Lenders
outstanding at such time.
"Tranche A Term Commitment": as to any Lender, the obligation of such
-------------------------
Lender, if any, to make a Tranche A Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading "Tranche A
Term Commitment" opposite such Lender's name on Schedule 1.1A. The original
aggregate amount of the Tranche A Term Commitments is $75,000,000.
"Tranche A Term Lender": each Lender that has a Tranche A Term
---------------------
Commitment or is the holder of a Tranche A Term Loan.
"Tranche A Term Loan": as defined in Section 2.1.
-------------------
"Tranche A Term Percentage": as to any Tranche A Term Lender at any
-------------------------
time, the percentage which such Lender's Tranche A Term Commitment then
constitutes of the aggregate Tranche A Term Commitments (or, at any time after
the Closing Date, the percentage which the aggregate principal amount of such
Lender's Tranche A Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche A Term Loans then outstanding).
"Transactions": as defined in the recitals hereto.
------------
"Transferee": any Assignee or Participant.
----------
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
----
Loan.
"United States": the United States of America.
-------------
1.2 Other Definitional Provisions. (a) Unless otherwise specified
----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
<PAGE>
19
not defined, shall have the respective meanings given to them under GAAP, (ii)
the words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation", (iii) the word "incur" shall be construed to
mean incur, create, issue, assume, become liable in respect of or suffer to
exist (and the words "incurred" and "incurrence" shall have correlative
meanings), (iv) the words "asset" and "property" shall be construed to have the
same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, Capital Stock, securities, revenues,
accounts, leasehold interests and contract rights, and (v) the Borrower, any of
its respective Subsidiaries or any Loan Party shall be deemed to have
"knowledge" or "know" of a particular matter, or such matter shall be deemed
"known" to any of them if any of their respective directors, chief executive
officer, president, chief financial officer, treasurer, controller, general
counsel, corporate secretary or other senior officers shall have actual
knowledge or actually know of such matter or such matter is actually known to
any of them.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Commitments. Subject to the terms and conditions hereof,
----------------
each Tranche A Term Lender severally agrees to make a term loan (a "Tranche A
---------
Term Loan") to the Borrower on the Closing Date in an amount not to exceed the
- ---------
amount of the Tranche A Term Commitment of such Lender. The Term Loans may from
time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.2 and 2.10.
2.2 Procedure for Term Loan Borrowing. The Borrower shall give the
---------------------------------
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, on the anticipated
Closing Date) requesting that the Term Lenders make the Term Loans on the
Closing Date and specifying the amount to be borrowed. The Term Loans made on
the Closing Date shall initially be ABR Loans. Upon receipt of such notice the
Administrative Agent shall promptly notify each Term Lender thereof. Not later
than 12:00 Noon, New York City time, on the Closing Date each Term Lender shall
make available to the Administrative Agent at the Funding Office an amount in
immediately available funds equal to the Term Loan or Term Loans to be made by
such Lender. The Administrative Agent shall credit the account of the Borrower
on the books of such office of the Administrative Agent with the aggregate of
the amounts made available to the Administrative Agent by the Term Lenders in
immediately available funds.
2.3 Repayment of Term Loans. The Tranche A Term Loan of each Tranche
-----------------------
A Lender shall mature in 16 consecutive quarterly installments, commencing on
September 30, 2000, each of which shall be in an amount equal to such Lender's
Tranche A Term Percentage multiplied by the amount set forth below opposite such
installment:
Installment Principal Amount
----------- ----------------
September 30, 2000 $3,750,000
December 31, 2000 $3,750,000
March 31, 2001 $3,750,000
June 30, 2001 $3,750,000
September 30, 2001 $3,750,000
<PAGE>
20
December 31, 2001 $3,750,000
March 31, 2002 $3,750,000
June 30, 2002 $3,750,000
September 30, 2002 $5,000,000
December 31, 2002 $5,000,000
March 31, 2003 $5,000,000
June 30, 2003 $5,000,000
September 30, 2003 $6,250,000
December 31, 2003 $6,250,000
March 31, 2004 $6,250,000
June 30, 2004 $6,250,000
2.4 Revolving Commitments. (a) Subject to the terms and conditions
---------------------
hereof, each Revolving Lender severally agrees to make revolving credit loans
("Revolving Loans") to the Borrower from time to time during the Revolving
---------------
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Revolving Percentage of the L/C Obligations
then outstanding, does not exceed the amount of such Lender's Revolving
Commitment. During the Revolving Commitment Period the Borrower may use the
Revolving Commitments by borrowing, prepaying the Revolving Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
The Revolving Loans may from time to time be Eurodollar Loans or ABR Loans, as
determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.5 and 2.10.
(b) The Borrower shall repay all outstanding Revolving Loans on the
Scheduled Revolving Termination Date.
2.5 Procedure for Revolving Loan Borrowing. The Borrower may borrow
--------------------------------------
under the Revolving Commitments during the Revolving Commitment Period on any
Business Day, provided that the Borrower shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 12:00 Noon, New York City time, (a) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Loans, or (b) prior to 9:00
A.M., New York City time, on the requested Borrowing Date, in the case of ABR
Loans), specifying (i) the amount and Type of Revolving Loans to be borrowed,
(ii) the requested Borrowing Date and (iii) in the case of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths of the
initial Interest Period therefor. Revolving Loans in an amount not to exceed
$7,500,000 may be made on the Closing Date and any Revolving Loans made on the
Closing Date shall initially be ABR Loans. Each borrowing under the Revolving
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$1,000,000 or a multiple of $500,000 in excess thereof (or, if the then
aggregate Available Revolving Commitments are less than $1,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $2,500,000 or a whole multiple
of $500,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Administrative Agent shall promptly notify each Revolving Lender
thereof. Each Revolving Lender will make the amount of its pro rata share of
--- ----
each borrowing available to the Administrative Agent for the account of the
Borrower at the Funding Office prior to 12:00 Noon, New York City time, on the
Borrowing Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent crediting the account of the Borrower on the books
of such office with the aggregate of the amounts made available to the
Administrative Agent by the Revolving Lenders and in like funds as received by
the Administrative Agent.
2.6 Commitment Fees, etc. The Borrower agrees to pay to the
--------------------
Administrative Agent for the account of each Revolving Lender a commitment fee
for the period from and including the Closing Date to the last day of the
Revolving Commitment Period, computed at the Commitment Fee Rate on the
<PAGE>
21
average daily amount of the Available Revolving Commitment of such Lender during
the period for which payment is made, payable quarterly in arrears on the last
day of each March, June, September and December and on the Scheduled Revolving
Termination Date, commencing on the first of such dates to occur after the date
hereof.
(b) The Borrower agrees to pay to the Administrative Agent the fees
in the amounts and on the dates previously agreed to in writing by the Borrower
and the Administrative Agent.
2.7 Termination or Reduction of Revolving Commitments. The Borrower
-------------------------------------------------
shall have the right, upon not less than three Business Days' notice to the
Administrative Agent, to terminate the Revolving Commitments or, from time to
time, to reduce the amount of the Revolving Commitments; provided that no such
--------
termination or reduction of Revolving Commitments shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Loans made on the
effective date thereof, the Total Revolving Extensions of Credit would exceed
the Total Revolving Commitments. Any such reduction shall be in an amount equal
to $1,000,000, or a whole multiple thereof, and shall reduce permanently the
Revolving Commitments then in effect.
2.8 Optional Prepayments. The Borrower may at any time and from time
--------------------
to time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent at least three Business
Days prior thereto in the case of Eurodollar Loans and at least one Business Day
prior thereto in the case of ABR Loans, which notice shall specify the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans or ABR
Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the
last day of the Interest Period applicable thereto, the Borrower shall also pay
any amounts owing pursuant to Section 2.18. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of
Revolving Loans that are ABR Loans) accrued interest to such date on the amount
prepaid. Partial prepayments of Term Loans and Revolving Loans shall be in an
aggregate principal amount of $1,000,000 or a whole multiple thereof and shall
be applied as set forth in Section 2.15(b) or (c), as the case may be.
2.9 Mandatory Prepayments and Commitment Reductions. If any Capital
-----------------------------------------------
Stock or Indebtedness shall be issued or incurred by the Borrower or any of its
Subsidiaries (other than the Capital Stock issued to (i) directors and employees
of the Borrower or any of its Subsidiaries under employee benefit plans, (ii)
sellers as consideration in acquisitions of equity or ownership interests in, or
assets of, other Persons, or (iii) existing stockholders of the Borrower or
other investors in private placements of the Capital Stock organized by the
Sponsor in connection with the financing of Permitted Acquisitions) an amount
equal to 50% of the Net Cash Proceeds from the issuance of such Capital Stock
shall be applied on the date of such issuance toward the prepayment of the Term
Loans and the reduction of the Revolving Commitments as set forth in Section
2.9(d). If any Indebtedness shall be incurred by the Borrower or any of its
Subsidiaries (other than the Sponsor Notes and other Indebtedness permitted in
accordance with Section 7.2 as in effect on the date hereof) an amount equal to
100% of the Net Cash Proceeds from the incurrence of such Indebtedness shall be
applied on the date of such issuance or incurrence toward the prepayment of the
Term Loans and the reduction of the Revolving Commitments as set forth in
Section 2.9(d).
(b) If on any date the Borrower or any of its Subsidiaries shall
receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a
Reinvestment Notice in respect of any Recovery Event shall be delivered in
respect thereof, such Net Cash Proceeds shall be applied on such date toward the
prepayment of the Term Loans and the reduction of the Revolving Commitments as
set forth in Section 2.9(d); provided, that, notwithstanding the foregoing, (i)
an aggregate amount not to exceed $2,000,000 of
<PAGE>
22
Net Cash Proceeds from Asset Sales in any fiscal year of the Borrower may be
retained by the Borrower or any of its Subsidiaries, as the case may be; (ii) on
each Reinvestment Prepayment Date, an amount equal to the Reinvestment
Prepayment Amount with respect to the relevant Reinvestment Event shall be
applied toward the prepayment of the Term Loans and the reduction of the
Revolving Commitments as set forth in Section 2.9(d); and (iii) Net Cash
Proceeds of any sale or other disposition of the assets of the Computer &
Network Services or BancTec Financial Systems division of the Borrower shall be
applied toward the prepayment of the Term Loans and the prepayment of the
Revolving Loans then outstanding as set forth in Section 2.9(d), and, following
such prepayment, any remaining Net Cash Proceeds may be applied to the
prepayment of the Sponsor Notes, if immediately after giving effect to the
prepayment of the Sponsor Notes, the Borrower and its Subsidiaries are in
compliance, on a pro forma basis as at the end of the last fiscal quarter of the
Borrower for which financial statements are available after giving effect to all
prepayments described in this clause (iii), with the covenants contained in
Section 7.1 calculated as at the last day of the most recently ended fiscal
quarter of the Borrower for which financial statements are available, as if all
such prepayments had occurred on the first day of each relevant period for
testing such compliance and the Borrower has delivered to the Administrative
Agent an officers' certificate to that effect.
(c) If, for any fiscal year of the Borrower commencing with the
fiscal year ending December 31, 2000, there shall be Excess Cash Flow, the
Borrower shall, on the relevant Excess Cash Flow Application Date, apply the ECF
Percentage of such Excess Cash Flow toward the prepayment of the Term Loans and
the reduction of the Revolving Commitments as set forth in Section 2.9(d). Each
such prepayment and commitment reduction shall be made on a date (an "Excess
------
Cash Flow Application Date") no later than five days after the earlier of (i)
- --------------------------
the date on which the financial statements of the Borrower referred to in
Section 6.1(a), for the fiscal year with respect to which such prepayment is
made, are required to be delivered to the Lenders and (ii) the date such
financial statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to this Section 2.9 shall be applied, first,
-----
to the prepayment of the Term Loans and, second, to reduce permanently the
------
Revolving Commitments (or, in the case of an Asset Sale described in Section
2.9(b)(iii), to the prepayment of the Revolving Loans then outstanding and not
to reduce permanently the Revolving Commitments). Any such reduction of the
Revolving Commitments shall be accompanied by prepayment of the Revolving Loans
to the extent, if any, that the Total Revolving Extensions of Credit exceed the
amount of the Total Revolving Commitments as so reduced, provided that if the
--------
aggregate principal amount of Revolving Loans then outstanding is less than the
amount of such excess (because L/C Obligations constitute a portion thereof),
the Borrower shall, to the extent of the balance of such excess, replace
outstanding Letters of Credit and/or deposit an amount in cash in a cash
collateral account established with the Administrative Agent for the benefit of
the Lenders on terms and conditions satisfactory to the Administrative Agent.
The application of any prepayment pursuant to this Section 2.9 shall
be made, first, to ABR Loans and, second, to Eurodollar Loans and shall be
----- ------
applied as set forth in Sections 2.15(b) or (c), as the case may be. Each
prepayment of the Loans under this Section 2.9 (except in the case of Revolving
Loans that are ABR Loans) shall be accompanied by accrued interest to the date
of such prepayment on the amount prepaid.
2.10 Conversion and Continuation Options. The Borrower may elect from
-----------------------------------
time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
--------
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election (which notice shall specify the length of the initial Interest
Period therefor), provided that no ABR Loan under a particular Facility may be
--------
converted into a
<PAGE>
23
Eurodollar Loan when any Event of Default has occurred and is continuing and, so
long as any Event of Default has occurred and is continuing, the Administrative
Agent or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such conversions. Upon
receipt of any such notice the Administrative Agent shall promptly notify each
relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans, provided
--------
that no Eurodollar Loan under a particular Facility may be continued as such
when any Event of Default has occurred and is continuing and, so long as any
Event of Default has occurred and is continuing, the Administrative Agent has or
the Majority Facility Lenders in respect of such Facility have determined in its
or their sole discretion not to permit such continuations, and provided,
further, that if the Borrower shall fail to give any required notice as
described above in this paragraph or if such continuation is not permitted
pursuant to the preceding proviso such Loans shall be automatically converted to
ABR Loans on the last day of such then expiring Interest Period. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
2.11 Limitations on Eurodollar Tranches. Notwithstanding anything to
----------------------------------
the contrary in this Agreement, all borrowings, conversions and continuations of
Eurodollar Loans hereunder and all selections of Interest Periods hereunder
shall be in such amounts and be made pursuant to such elections so that, (a)
after giving effect thereto, the aggregate principal amount of the Eurodollar
Loans comprising each Eurodollar Tranche shall be equal to $2,500,000 or a whole
multiple of $500,000 in excess thereof and (b) no more than eight.
2.12 Interest Rates and Payment Dates. Each Eurodollar Loan shall bear
--------------------------------
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear interest at a rate per annum
equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section plus 2%
----
or (y) in the case of Reimbursement Obligations, the rate applicable to ABR
Loans under the Revolving Facility plus 2%, and (ii) if all or a portion of any
----
interest payable on any Loan or Reimbursement Obligation or any commitment fee
or other amount payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum equal to the rate then applicable to ABR Loans
under the relevant Facility plus 2% (or, in the case of any such other amounts
----
that do not relate to a particular Facility, the rate then applicable to ABR
Loans under the Revolving Facility plus 2%), in each case, with respect to
----
clauses (i) and (ii) above, from the date of such non-payment until such amount
is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
--------
shall be payable from time to time on demand.
<PAGE>
24
2.13 Computation of Interest and Fees. Interest and fees payable
--------------------------------
pursuant hereto shall be calculated on the basis of a 360-day year for the
actual days elapsed, except that, with respect to ABR Loans the rate of interest
on which is calculated on the basis of the Prime Rate, the interest thereon
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of the effective date and the amount of each
such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.12(a).
2.14 Inability to Determine Interest Rate. If prior to the first day
------------------------------------
of any Interest Period:
(a) the Administrative Agent shall have determined in good faith
(which determination shall be conclusive and binding upon the Borrower)
that, by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as ABR Loans,
(y) any Loans under the relevant Facility that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be continued as
ABR Loans and (z) any outstanding Eurodollar Loans under the relevant Facility
shall be converted, on the last day of the then-current Interest Period, to ABR
Loans. Until such notice has been withdrawn by the Administrative Agent, no
further Eurodollar Loans under the relevant Facility shall be made or continued
as such, nor shall the Borrower have the right to convert Loans under the
relevant Facility to Eurodollar Loans.
2.15 Pro Rata Treatment and Payments. Each borrowing by the Borrower
-------------------------------
from the Lenders hereunder, each payment by the Borrower on account of any
commitment fee and any reduction of the Commitments of the Lenders shall be made
pro rata according to the respective Tranche A Term Percentages or Revolving
- --- ----
Percentages, as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Term Loans shall be made pro rata
--- ----
according to the respective outstanding principal amounts of the Term Loans then
held by the Term Lenders. The amount of each principal prepayment of the Term
Loans shall be applied to reduce the then remaining installments of the Tranche
A Term Loans then held by the Term Lenders. Prepayments of the Term Loans shall
be made pro rata according to the respective outstanding principal amounts
--- ----
thereof. The amount of each such principal prepayment shall be
<PAGE>
25
applied to ratably reduce the then remaining installments of the Tranche A Term
Loan, except that the first $7,500,000 of prepayments allocated to the Tranche A
Term Loans may be applied to installments thereof at the direction of the
Borrower. Amounts prepaid on account of the Term Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Revolving Loans shall be made pro
---
rata according to the respective outstanding principal amounts of the Revolving
- ----
Loans then held by the Revolving Lenders.
(d) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Funding Office, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate during
such extension.
(e) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this paragraph shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans under the relevant Facility, on demand, from the Borrower.
(f) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
--- ----
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.
2.16 Requirements of Law. If the adoption of or any change in any
-------------------
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or
<PAGE>
26
directive (whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Letter of Credit, any Application or any
Eurodollar Loan made by it, or change the basis of taxation of payments to
such Lender in respect thereof (except for Non-Excluded Taxes covered by
Section 2.17 and changes in the rate of tax on the overall net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender that is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems in good faith to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or issuing or
participating in Letters of Credit, or to reduce any amount receivable hereunder
in respect thereof, then, in any such case, the Borrower shall promptly pay such
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for such increased cost or reduced amount receivable. If any Lender
becomes entitled to claim any additional amounts pursuant to this paragraph, it
shall promptly notify the Borrower (with a copy to the Administrative Agent) of
the event by reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation reasonably
believes it could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, after submission by such Lender to the Borrower (with a
copy to the Administrative Agent) of a written request therefor, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction; provided that the Borrower shall not be required
--------
to compensate a Lender pursuant to this paragraph for any amounts incurred more
than six months prior to the date that such Lender notifies the Borrower of such
Lender's intention to claim compensation therefor; and provided further that, if
-------- -------
the circumstances giving rise to such claim have a retroactive effect, then such
six-month period shall be extended to include the period of such retroactive
effect.
(c) A certificate as to any additional amounts payable pursuant to
this Section submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.17 Taxes. All payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
<PAGE>
27
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Administrative Agent or any Lender as a result of a
present or former connection between the Administrative Agent or such Lender and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such non-
excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld
------------------
from any amounts payable to the Administrative Agent or any Lender hereunder,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that the Borrower shall not be required to
-------- -------
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the
requirements of paragraph (d) or (e) of this Section or (ii) that are United
States withholding taxes imposed on amounts payable to such Lender at the time
the Lender becomes a party to this Agreement, except to the extent that such
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower with respect to such Non-Excluded Taxes
pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for its own account or for the account of the relevant
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure.
(d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
---------------
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit G and a Form W-8, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this
<PAGE>
28
paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant
to this paragraph that such Non-U.S. Lender is not legally able to deliver.
(e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender is
--------
legally entitled to complete, execute and deliver such documentation and in such
Lender's good faith judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
(f) If the Administrative Agent or any Lender receives a refund in
respect of Non-Excluded Taxes or Other Taxes paid by the Borrower, which in the
sole judgment of such Lender is allocable to such payment, it shall promptly pay
such refund, together with any other amounts paid by the Borrower in connection
with such refunded Taxes or Other Taxes, to the Borrower, net of all out-of-
pocket expenses of such Lender incurred in obtaining such refund, provided,
however, that such Borrower agrees to promptly return such refund to the
Administrative Agent or the applicable Lender, as the case may be, if it
receives notice from the Administrative Agent or applicable Lender that such
Administrative Agent or Lender is required to repay such refund.
(g) The agreements in this Section shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
2.18 Indemnity. The Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense that such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment of or conversion
from Eurodollar Loans after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day that is not the last day of an Interest
Period with respect thereto. Such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest that would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
----
determined by such Lender) that would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable period with leading banks in
the interbank eurodollar market. A certificate as to any amounts payable
pursuant to this Section submitted to the Borrower by any Lender shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.19 Change of Lending Office. Each Lender agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 2.16 or 2.17(a)
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
--------
designation is made on terms that, in the sole good faith judgment of such
Lender, cause such Lender and its lending office(s) to suffer no economic, legal
or
<PAGE>
29
regulatory disadvantage, and provided, further, that nothing in this Section
-------- -------
shall affect or postpone any of the obligations of any Borrower or the rights of
any Lender pursuant to Section 2.16 or 2.17(a).
2.20 Replacement of Lenders. The Borrower shall be permitted to
----------------------
replace any Lender that (a) requests reimbursement for amounts owing pursuant to
Section 2.16 or 2.17(a) or (b) defaults in its obligation to make Loans
hereunder, with a replacement financial institution; provided that (i) such
--------
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to any such replacement, such Lender shall have taken no action
under Section 2.19 so as to eliminate the continued need for payment of amounts
owing pursuant to Section 2.16 or 2.17(a), (iv) the replacement financial
institution shall purchase, at par, all Loans and other amounts owing to such
replaced Lender on or prior to the date of replacement, (v) the Borrower shall
be liable to such replaced Lender under Section 2.18 if any Eurodollar Loan
owing to such replaced Lender shall be purchased other than on the last day of
the Interest Period relating thereto, (vi) the replacement financial
institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, which determination shall not be unreasonably delayed,
(vii) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 10.6 (provided that the Borrower shall
be obligated to pay the registration and processing fee referred to therein),
(viii) until such time as such replacement shall be consummated, the Borrower
shall pay all additional amounts (if any) required pursuant to Section 2.16 or
2.17(a), as the case may be, and (ix) any such replacement shall not be deemed
to be a waiver of any rights that the Borrower, the Administrative Agent or any
other Lender shall have against the replaced Lender.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. Subject to the terms and conditions hereof, the
--------------
Issuing Lender, in reliance on the agreements of the other Revolving Lenders set
forth in Section 3.4(a), agrees to issue letters of credit ("Letters of Credit")
-----------------
for the account of the Borrower on any Business Day during the Revolving
Commitment Period in such form as may be approved from time to time by the
Issuing Lender; provided that the Issuing Lender shall have no obligation to
--------
issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the
Available Revolving Commitments would be less than zero. Each Letter of Credit
shall (i) be denominated in Dollars and (ii) expire no later than the earlier of
(x) the first anniversary of its date of issuance (unless extended with the
consent of the Majority Facility Lenders in respect of the Revolving Facility)
and (y) the date that is five Business Days prior to the Scheduled Revolving
Termination Date, provided that any Letter of Credit with a one-year term may
--------
provide for the renewal thereof, with or without notice from the Issuing Lender,
for additional one-year periods (which shall in no event extend beyond the date
referred to in clause (y) above).
(b) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may from
------------------------------------------
time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the reasonable satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may reasonably request. Upon receipt of any Application,
the Issuing Lender will promptly process such Application and the certificates,
documents and other papers and information delivered to it in connection
therewith in accordance with its customary procedures and shall promptly issue
the Letter of Credit requested thereby (but in no event shall the Issuing Lender
be required to issue any Letter of Credit earlier than three Business Days after
its receipt of the Application therefor and all such other certificates,
<PAGE>
30
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed to by the Issuing Lender and the Borrower. The Issuing Lender shall
furnish a copy of such Letter of Credit to the Borrower promptly following the
issuance thereof. The Issuing Lender shall promptly furnish to the
Administrative Agent, which shall in turn promptly furnish to the Lenders,
notice of the issuance of each Letter of Credit (including the amount thereof).
3.3 Fees and Other Charges. The Borrower will pay a fee on all
----------------------
outstanding Letters of Credit at a per annum rate equal to the Applicable Margin
then in effect with respect to Eurodollar Loans under the Revolving Facility,
shared ratably among the Revolving Lenders and payable quarterly in arrears on
each L/C Fee Payment Date after the issuance date. In addition, the Borrower
shall pay to the Issuing Lender for its own account a fronting fee of 1/8 of 1%
per annum on the average daily undrawn and unexpired amount of each Letter of
Credit, payable quarterly in arrears on each L/C Fee Payment Date after the
Issuance Date.
(b) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses as
are incurred or charged by the Issuing Lender in issuing, negotiating, effecting
payment under, amending or otherwise administering any Letter of Credit.
3.5 L/C Participations. The Issuing Lender irrevocably agrees to
------------------
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Percentage in the Issuing Lender's obligations and
rights under each Letter of Credit issued hereunder and the amount of each draft
paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Lender that, if a draft is paid under any
Letter of Credit for which the Issuing Lender is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C Participant
shall pay to the Issuing Lender upon demand at the Issuing Lender's address for
notices specified herein an amount equal to such L/C Participant's Revolving
Percentage of the amount of such draft, or any part thereof, that is not so
reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of such amount, times the daily average Federal Funds
Effective Rate during the period from and including the date such payment is
required to the date on which such payment is immediately available to the
Issuing Lender, times a fraction the numerator of which is the number of days
that elapse during such period and the denominator of which is 360. If any such
amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is
not made available to the Issuing Lender by such L/C Participant within three
Business Days after the date such payment is due, the Issuing Lender shall be
entitled to recover from such L/C Participant, on demand, such amount with
interest thereon calculated from such due date at the rate per annum applicable
to ABR Loans under the Revolving Facility. A certificate of the Issuing Lender
submitted to any L/C Participant with respect to any amounts owing under this
Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
---
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
- ----
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Lender), or
<PAGE>
31
any payment of interest on account thereof, the Issuing Lender will distribute
to such L/C Participant its pro rata share thereof; provided, however, that in
--- ---- -------- -------
the event that any such payment received by the Issuing Lender shall be required
to be returned by the Issuing Lender, such L/C Participant shall return to the
Issuing Lender the portion thereof previously distributed by the Issuing Lender
to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
----------------------------------------
reimburse the Issuing Lender on the Business Day immediately following the date
on which the Issuing Lender notifies the Borrower of the date and amount of a
draft presented under any Letter of Credit and paid by the Issuing Lender for
the amount of (a) such draft so paid and (b) any taxes, fees, charges or other
costs or expenses incurred by the Issuing Lender in connection with such
payment. Each such payment shall be made to the Issuing Lender at its address
for notices specified herein in lawful money of the United States and in
immediately available funds. Interest shall be payable on any and all amounts
remaining unpaid by the Borrower under this Section from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate set forth in (i) until the second Business Day
following the date of the applicable drawing, Section 2.12(b) and (ii)
thereafter, Section 2.12(c).
3.6 Obligations Absolute. The Borrower's obligations under this
--------------------
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment that the
Borrower may have or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also agrees with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrower's
Reimbursement Obligations under Section 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee. The Issuing Lender
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions resulting from the gross negligence or willful misconduct of the
Issuing Lender. The Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any Application
------------
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Lender that:
<PAGE>
32
4.1 Financial Condition. The unaudited pro forma consolidated balance
-------------------
sheet of the Borrower and its consolidated Subsidiaries as at June 30, 1999
(including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which
-----------------------
have heretofore been furnished to each Lender, has been prepared giving effect
(as if such events had occurred on such date) to (i) the consummation of the
Transactions, (ii) the Loans to be made hereunder and the Sponsor Notes to be
issued on the Closing Date and the use of proceeds thereof and (iii) the payment
of fees and expenses in connection with the foregoing. The Pro Forma Balance
Sheet has been prepared based on the best information available to the Borrower
as of the date of delivery thereof, and presents fairly on a pro forma basis the
--- -----
estimated financial position of Borrower and its consolidated Subsidiaries as at
June 30, 1999, assuming that the events specified in the preceding sentence had
actually occurred at such date.
(b) The audited consolidated balance sheets of the Borrower as at
December 31, 1998, December 31, 1997 and December 31, 1996 and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
Arthur Andersen LLP, present fairly the consolidated financial condition of the
Borrower as at such date, and the consolidated results of its operations and its
consolidated cash flows for the respective fiscal years then ended. The
unaudited consolidated balance sheet of the Borrower as at March 31, 1999, and
the related unaudited consolidated statements of income and of cash flows for
the three-month period ended on such date, present fairly the consolidated
financial condition of the Borrower as at such date, and the consolidated
results of its operations and its consolidated cash flows for the three-month
period then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein, and, in the case of the unaudited financial statements,
subject to normal year-end adjustments and the absence of notes thereto) and
comply as to form in all material respects with the published rules and
regulations of the SEC with respect thereto. The Borrower and its Subsidiaries
do not have any material Guarantee Obligations, contingent liabilities and
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, that are not
reflected in the most recent financial statements referred to in this paragraph.
During the period from March 31, 1999 to and including the date hereof there has
been no Disposition by the Borrower of any material part of its business or
property.
4.2 No Change. Since December 31, 1998 there has been no development
---------
or event that has had or is reasonably expected to have a Material Adverse
Effect.
4.3 Corporate Existence; Compliance with Law. Each of the Borrower
----------------------------------------
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the failure to qualify as
a foreign corporation or be in good standing could not reasonably be expected to
have a Material Adverse Effect, and (d) is in compliance with all Requirements
of Law except to the extent that the failure to comply therewith could not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each
-------------------------------------------------------
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to
<PAGE>
33
which it is a party and, in the case of the Borrower, to authorize the
borrowings on the terms and conditions of this Agreement. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
Acquisition and the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement or any of the Loan
Documents, except (i) consents, authorizations, filings and notices described in
Schedule 4.4, which consents, authorizations, filings and notices have been
obtained or made and are in full force and effect and (ii) the filings referred
to in Section 4.19. Each Loan Document has been duly executed and delivered on
behalf of each Loan Party party thereto. This Agreement constitutes, and each
other Loan Document upon execution will constitute, a legal, valid and binding
obligation of each Loan Party party thereto, enforceable against each such Loan
Party in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate or
conflict with any Requirement of Law or any material Contractual Obligation of
the Borrower or any of its Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any Requirement of Law or any such Contractual Obligation
(other than the Liens created by the Security Documents).
4.6 Litigation. No litigation, investigation or proceeding of or
----------
before any arbitrator or Governmental Authority is pending or, to the knowledge
of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) that is reasonably expected to have a Material Adverse
Effect.
4.7 No Default. Neither the Borrower nor any of its Subsidiaries is
----------
in default under or with respect to anyof its Contractual Obligations in any
respect that is reasonably expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. The Borrower and its Subsidiaries
----------------------------
has title in fee simple to, or a valid leasehold interest in, all its real
property, and good title to, or a valid leasehold interest in, all its other
material property, and none of such property is subject to any Lien except as
permitted by Section 7.3.
4.9 Intellectual Property. The Borrower and each of its Subsidiaries
---------------------
owns, or is licensed to use, all Intellectual Property material in the conduct
of its business as currently conducted. No material claim has been asserted and
is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does the Borrower know of any valid basis for any such claim. The
use of such Intellectual Property by the Borrower and its Subsidiaries does not,
to the Borrower's knowledge, infringe on the rights of any Person in any
material respect.
4.10 Taxes. The Borrower and each of its Subsidiaries has filed or
-----
caused to be filed all Federal, state and other material tax returns that are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of that are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the
<PAGE>
34
Borrower, no claim is being asserted, with respect to any such tax, fee or other
charge. Such tax returns accurately reflect in all material respects all
liability for taxes of the Borrower and its Subsidiaries for the periods covered
thereby.
4.11 Federal Regulations. No part of the proceeds of any Loans will be
-------------------
used for "buying" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U in any manner that
violates the provisions of the Regulations of the Board. On the Closing Date,
the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1, as applicable, referred to in Regulation U.
4.12 Labor Matters. Except as, in the aggregate, could not reasonably
-------------
be expected to have a Material Adverse Effect: (a) there are no strikes or other
labor disputes against the Borrower or any of its Subsidiaries pending or, to
the knowledge of the Borrower, threatened; (b) hours worked by and payment made
to employees of the Borrower and its Subsidiaries have not been in violation of
the Fair Labor Standards Act or any other applicable Requirement of Law dealing
with such matters; and (c) all payments due from the Borrower or any of its
Subsidiaries on account of employee health and welfare insurance have been paid
or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or could reasonably be expected to result in a material liability
under ERISA, and neither the Borrower nor any Commonly Controlled Entity would
become subject to any material liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.
4.15 Subsidiaries. Except as disclosed to the Administrative Agent by
------------
the Borrower in writing from time to time after the Closing Date, Schedule 4.15
sets forth the name and jurisdiction of incorporation of each Subsidiary and, as
to each such Subsidiary, the percentage of each class of Capital Stock owned by
any Loan Party and there are no outstanding subscriptions, options, warrants,
calls, rights or other agreements or commitments (other than stock options
granted to employees or directors and directors' qualifying shares) of any
nature relating to any Capital Stock of the Borrower or any Subsidiary, except
as created by the Loan Documents and the Sponsor Notes.
4.16 Use of Proceeds. The proceeds of the Term Loans and of the
---------------
Revolving Credit Loans made on the Closing Date shall be used to finance a
portion of the Transactions and to pay related fees and expenses. The proceeds
of the Revolving Loans to be made and the Letters of Credit to be issued
<PAGE>
35
after the Closing Date, shall be used for general corporate purposes, including
to finance the working capital needs of the Borrower and its Subsidiaries and,
subject to Section 7.8, their acquisitions of Capital Stock or ownership
interests of, and investments in, other Persons.
4.17 Environmental Matters. Except as, in the aggregate, could not
---------------------
reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by
the Borrower or any of its Subsidiaries (the "Properties") do not
----------
contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations or under
circumstances that constitute or constituted a violation of, or could
reasonably be expected to give rise to liability under, any
Environmental Law;
(b) neither the Borrower nor any of its Subsidiaries has
received or is aware of any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard
to any of the Properties or the business operated by the Borrower or
any of its Subsidiaries (the "Business"), nor does the Borrower have
--------
knowledge or reason to believe that any such notice will be received or
is being threatened;
(c) Materials of Environmental Concern have not been transported
or disposed of from the Properties in violation of, or in a manner or
to a location that could reasonably be expected to give rise to
liability under, any Environmental Law, nor have any Materials of
Environmental Concern been generated, treated, stored or disposed of
at, on or under any of the Properties in violation of, or in a manner
that could give rise to liability under, any applicable Environmental
Law;
(d) no judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened,
under any Environmental Law to which the Borrower or any Subsidiary is
or will be named as a party, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business;
(e) there has been no release or threat of release of Materials
of Environmental Concern at or from the Properties, or arising from or
related to the operations of the Borrower or any Subsidiary in
connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws;
(f) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with
all applicable Environmental Laws, and there is no contamination at,
under or about the Properties or violation of any Environmental Law
with respect to the Properties or the Business; and
(g) neither the Borrower nor any of its Subsidiaries has
retained or assumed any liability of any other Person under
Environmental Laws.
4.18 Accuracy of Information, etc. No statement or information
----------------------------
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or written statement
furnished by or on behalf of any Loan Party to the Administrative Agent or the
Lenders, or any of them (including, without limitation, the Proxy Statement),
for use in connection with
<PAGE>
36
the transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate
was so furnished (or, in the case of the Confidential Information Memorandum and
the Proxy Statement, as of the date of this Agreement), any untrue statement of
a material fact or omitted to state a material fact necessary to make the
statements contained herein or therein not misleading, provided, that with
--------
respect to any statement or information furnished on behalf of any Loan Party by
any other Person that is not a Loan Party, the representation and warranty set
forth in this Section 4.18 is limited to such Loan Party's best knowledge. The
projections and pro forma financial information contained in the materials
--- -----
referenced above are based upon good faith estimates and assumptions believed by
management of the Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. As of the date hereof,
the representations and warranties contained in the Acquisition Documentation
and the Proxy Statement are true and correct in all material respects. There is
no fact known to any Loan Party that is reasonably expected to have a Material
Adverse Effect that has not been expressly disclosed herein, in the other Loan
Documents, in the Confidential Information Memorandum or in any other documents,
certificates and written statements furnished to the Administrative Agent and
the Lenders (including, without limitation, the Proxy Statement) for use in
connection with the transactions contemplated hereby and by the other Loan
Documents.
4.19 Security Documents. The Collateral Agreement is effective to
------------------
create in favor of the Administrative Agent, for the benefit of the Lenders, a
legal, valid and enforceable security interest in the Collateral described
therein, all rights, title or interest thereto and proceeds thereof. In the case
of the Pledged Stock described in the Collateral Agreement, when stock
certificates representing such Pledged Stock are delivered to the Administrative
Agent, and in the case of the other Collateral described in the Collateral
Agreement, when financing statements and other filings specified on Schedule
4.19(a) in appropriate form are filed in the offices specified on Schedule
4.19(a), the Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Collateral and the proceeds thereof, as security for the Obligations (as
defined in the Collateral Agreement), in each case prior and superior in right
to any other Person (except, in the case of Collateral other than Pledged Stock,
Liens permitted by Section 7.3).
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b), each such Mortgage shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Mortgaged Properties and the proceeds thereof, as security for the Obligations
(as defined in the relevant Mortgage), in each case prior and superior in right
to any other Person. As of the Closing Date, Schedule 1.1B lists each of the
real properties in the United States owned in fee simple by the Borrower having
a value, in the reasonable opinion of the Borrower, in excess of $1,000,000.
4.20 Solvency. Each Loan Party is, and after giving effect to the
--------
Acquisition and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
4.21 Senior Indebtedness. The Obligations constitute "Senior
-------------------
Indebtedness" of the Borrower under and as defined in the Sponsor Notes.
4.22 Year 2000 Matters. Any reprogramming required to permit the
-----------------
proper functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following the
year 2000 of computer systems and other equipment containing embedded
<PAGE>
37
microchips, in either case owned or operated by the Borrower or any of its
Subsidiaries or used or relied upon in the conduct of, and material to, their
business (including any such systems and other equipment supplied by others or
with which the computer systems of the Borrower or any of its Subsidiaries
interface), and the testing of all such systems and other equipment as so
reprogrammed, will be completed by September 30, 1999. The costs to the Borrower
and its Subsidiaries that have not been incurred as of the date hereof for such
reprogramming and testing and for the other reasonably foreseeable consequences
to them of any improper functioning of other computer systems and equipment
material to the conduct of their respective businesses containing embedded
microchips due to the occurrence of the year 2000 could not reasonably be
expected to result in a Default or Event of Default or to have a Material
Adverse Effect. Except for any reprogramming referred to above, the computer
systems of the Borrower and its Subsidiaries material to each of their
respective businesses are and, with ordinary course upgrading and maintenance,
will continue for the term of this Agreement to be, sufficient for the conduct
of their business as currently conducted.
4.23 Regulation H. No Mortgage encumbers improved real property that
------------
is located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
4.24 Insurance. The insurance maintained by or reserved against on the
---------
books of the Borrower and its Subsidiaries is sufficient to protect the Borrower
and its Subsidiaries against such risks as are usually insured against in the
same general area by companies engaged in the same or similar business. None of
the Loan Parties or any of their Subsidiaries is in default under any provisions
of any such policy of insurance the result of which could reasonably be expected
to cause a cancellation of such policy of insurance or to limit or delay the
entitlement to any payment thereunder or has received notice of cancellation of
any such insurance (other than in connection with the replacement of any such
policy). None of the Loan Parties or any of their Subsidiaries has made any
material claims under any policy of insurance with respect to which the
insurance carrier has denied liability.
4.25 Certain Documents. The Borrower has delivered to the
-----------------
Administrative Agent a complete and correct copy of the Acquisition
Documentation, the Sponsor Notes, the Proxy Statement and all other documents
reasonably requested by the Administrative Agent, including any amendments,
supplements or modifications with respect to any of the foregoing.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
-----------------------------------------
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date (but in any event no later than
September 15, 1999), of the following conditions precedent:
(a) Credit Agreement; Collateral Agreement. The Administrative Agent
--------------------------------------
shall have received (i) this Agreement, executed and delivered by the
Administrative Agent, the Borrower and each Person listed on Schedule 1.1A,
(ii) each Note requested by a Lender, the Collateral Agreement, executed
and delivered by the Borrower and (iii) an Acknowledgment and Consent in
the form attached to the Collateral Agreement, executed and delivered by
each Issuer (as defined therein), if any, that is not a Loan Party.
In the event that this Agreement has not been duly executed and
delivered by each Person listed on Schedule 1.1A on the date scheduled to
be the Closing Date, the condition referred to in clause (i) above shall
nevertheless be deemed satisfied if on such date the Borrower and the
<PAGE>
38
Administrative Agent shall have designated one or more Persons (the
"Designated Lenders") to assume, in the aggregate, all of the Commitments
that would have been held by the Persons listed on Schedule 1.1A (the "Non-
Executing Persons") which have not so executed and delivered this Agreement
(subject to each such Designated Lender's consent and its execution and
delivery of this Agreement). Schedule 1.1A shall automatically be deemed to
be amended to reflect the respective Commitments of the Designated Lenders
and the omission of the Non-Executing Persons as Lenders hereunder.
(b) Acquisition, etc. The following transactions shall have been
----------------
consummated, in each case on terms and conditions reasonably satisfactory
to the Lenders:
(i) The transactions contemplated by the Acquisition Agreement
shall have been consummated in substantially the manner set forth therein,
and the Administrative Agent shall have received true and correct copies,
certified as to authenticity by the Borrower, of the Acquisition
Documentation pursuant to which the Acquisition is to be consummated, the
terms and structure (including, without limitation, the mechanism thereof)
of which shall be satisfactory to the Administrative Agent;
(ii) BancTec USA, Inc. shall have been merged with or
liquidated into the Borrower;
(iii) Newco shall have received from the Sponsor and the Other
Investor at least $145,000,000 in cash from the proceeds of equity issued,
directly or indirectly, by it, on terms and conditions satisfactory to the
Required Lenders and the Administrative Agent, and all such proceeds shall
have been contributed as equity to the Borrower;
(iv) the Borrower shall have received no more than $160,000,000
in gross cash proceeds from the issuance of the Sponsor Notes, the issuance
of which shall be on terms and conditions satisfactory to the Required
Lenders and the Administrative Agent as evidenced by their prior written
approval thereof, and shall have used all such proceeds to consummate the
Transactions;
(v) the Other Investor shall own approximately 6 1/2% of the
Capital Stock of the Borrower after the Acquisition which shall have an
aggregate value of approximately $9,400,000;
(vi) the Administrative Agent shall have received satisfactory
evidence that the fees and expenses to be incurred in connection with the
Transactions and the financing thereof shall not exceed $18,000,000 in the
aggregate; and
(vii) (i) The Administrative Agent shall have received
satisfactory evidence that the Existing Credit Agreements shall have been
terminated and all amounts thereunder shall have been paid in full and (ii)
satisfactory arrangements shall have been made for the termination of all
Liens granted in connection therewith. Immediately after the Closing Date,
neither the Borrower nor any of its Subsidiaries shall have any
Indebtedness other than (A) Indebtedness in an aggregate principal amount
to be agreed to by the Required Lenders and the Administrative Agent and
which terms and conditions shall be satisfactory to the Administrative
Agent, (B) the Sponsor Notes, (C) the Term Loans, (D) the Revolving Loans
made on the Closing Date in an aggregate principal amount not to exceed
$7,500,000 and (E) the Senior Notes.
<PAGE>
39
(c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall
---------------------------------------------
have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated
financial statements of the Borrower for the 1998 fiscal year and (iii)
unaudited interim consolidated financial statements of the Borrower for
each fiscal month and quarterly period ended subsequent to the date of the
latest applicable financial statements delivered pursuant to clause (ii) of
this paragraph as to which such financial statements are available, and
such financial statements shall not, in the reasonable judgment of the
Lenders, reflect any material adverse change in the consolidated financial
condition of the Borrower, as reflected in the financial statements or
projections contained in the Confidential Information Memorandum.
(d) Approvals. All governmental and third party approvals necessary
---------
or in the reasonable judgment of the Administrative Agent, advisable in
connection with the Transactions, the continuing operations of the Borrower
and its Subsidiaries and the transactions contemplated hereby shall have
been obtained and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened by
any competent authority that would restrain, prevent or otherwise impose
materially adverse conditions on the Transactions or the financings and
transactions contemplated hereby.
(e) Lien Searches. The Administrative Agent shall have received the
-------------
results of a recent lien search in each of the jurisdictions listed for
each of the Loan Parties on Schedule 4.19(a), and such search shall reveal
no liens on any of the assets of the Borrower or its Subsidiaries except
for liens permitted by Section 7.3 or discharged on or prior to the Closing
Date pursuant to documentation satisfactory to the Administrative Agent.
(f) Environmental Audit. The Administrative Agent shall have
-------------------
received an environmental audit with respect to the real properties of the
Borrower and its Subsidiaries specified by the Administrative Agent.
(g) Fees. The Lenders and the Administrative Agent shall have
----
received all fees required to be paid pursuant to this Agreement, and all
expenses required to be reimbursed pursuant to this Agreement and for which
invoices have been presented (including the reasonable fees and expenses of
legal counsel), on or before the Closing Date. All such amounts will be
paid with proceeds of Loans made on the Closing Date and will be reflected
in the funding instructions given by the Borrower to the Administrative
Agent on or before the Closing Date.
(h) Closing Certificate. The Administrative Agent shall have
-------------------
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C, with
appropriate insertions and attachments.
(i) Legal Opinions. The Administrative Agent shall have received the
--------------
following executed legal opinions:
(i) the legal opinion of Reboul, MacMurray, Hewitt, Maynard &
Kristol, counsel to the Borrower and its Subsidiaries, substantially
in the form of Exhibit F-1;
(ii) the legal opinion of Tod Mongan, general counsel of the
Borrower and its Subsidiaries, substantially in the form of Exhibit F-
2;
(iii) each legal opinion, if any, delivered in connection with
the Acquisition Agreement (including, without limitation, the legal
opinion delivered to Newco by counsel
<PAGE>
40
to the Borrower), each accompanied by, to the extent reasonably
available, a reliance letter in favor of the Lenders; and
(iv) the legal opinion of local counsel in Texas and of such
other special and local counsel as may be reasonably required by the
Administrative Agent.
Each such legal opinion, reports and other documents shall cover such other
matters incident to the transactions contemplated by this Agreement as the
Administrative Agent may reasonably require.
(j) Pledged Stock; Stock Powers; Pledged Notes. The Administrative
------------------------------------------
Agent shall have received (i) the certificates representing the shares of
Capital Stock pledged pursuant to the Collateral Agreement, together with
an undated stock power for each such certificate executed in blank by a
duly authorized officer of the pledgor thereof and (ii) each promissory
note (if any) pledged to the Administrative Agent pursuant to the
Collateral Agreement endorsed (without recourse) in blank (or accompanied
by an executed transfer form in blank) by the pledgor thereof.
(k) Filings, Registrations and Recordings. Each document (including
-------------------------------------
any Uniform Commercial Code financing statement) required by the Security
Documents or under law or reasonably requested by the Administrative Agent
to be filed, registered or recorded in order to create in favor of the
Administrative Agent, for the benefit of the Lenders, a perfected Lien on
the Collateral described therein, prior and superior in right to any other
Person (other than with respect to Liens expressly permitted by Section
7.3), shall be in proper form for filing, registration or recordation.
(l) Mortgages, etc. (i) The Administrative Agent shall have received
--------------
a Mortgage with respect to each Mortgaged Property, executed and delivered
by a duly authorized officer of each party thereto.
(ii) If requested by the Administrative Agent, the Administrative
Agent shall have received, and the title insurance company issuing the
policy referred to in clause (iii) below (the "Title Insurance Company")
-----------------------
shall have received, maps or plats of an as-built survey of the sites of
the Mortgaged Properties certified to the Administrative Agent and the
Title Insurance Company in a manner satisfactory to them, dated a date
satisfactory to the Administrative Agent and the Title Insurance Company by
an independent professional licensed land surveyor satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats
and the surveys on which they are based shall be made in accordance with
the Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without limiting
the generality of the foregoing, there shall be surveyed and shown on such
maps, plats or surveys the following: (A) the locations on such sites of
all the buildings, structures and other improvements and the established
building setback lines; (B) the lines of streets abutting the sites and
width thereof; (C) all access and other easements appurtenant to the sites;
(D) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the site,
whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (E) any encroachments on any adjoining
property by the building structures and improvements on the sites; (F) if
the site is described as being on a filed map, a legend relating the survey
to said map; and (G) the flood zone designations, if any, in which the
Mortgaged Properties are located.
(iii) The Administrative Agent shall have received in respect of each
Mortgaged Property a mortgagee's title insurance policy (or policies) or
marked up unconditional binder for such
<PAGE>
41
insurance. Each such policy shall (A) be in an amount satisfactory to the
Administrative Agent; (B) be issued at ordinary rates; (C) insure that the
Mortgage insured thereby creates a valid first Lien on such Mortgaged
Property free and clear of all defects and encumbrances, except as
disclosed therein; (D) name the Administrative Agent for the benefit of the
Lenders as the insured thereunder; (E) be in the form of ALTA Loan Policy -
1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain
such endorsements and affirmative coverage as the Administrative Agent may
reasonably request and (G) be issued by title companies satisfactory to the
Administrative Agent (including any such title companies acting as co-
insurers or reinsurers, at the option of the Administrative Agent). The
Administrative Agent shall have received evidence satisfactory to it that
all premiums in respect of each such policy, all charges for mortgage
recording tax, and all related expenses, if any, have been paid.
(iv) If requested by the Administrative Agent, the Administrative
Agent shall have received (A) a policy of flood insurance that (1) covers
any parcel of improved real property that is encumbered by any Mortgage (2)
is written in an amount not less than the outstanding principal amount of
the indebtedness secured by such Mortgage that is reasonably allocable to
such real property or the maximum limit of coverage made available with
respect to the particular type of property under the National Flood
Insurance Act of 1968, whichever is less, and (3) has a term ending not
later than the maturity of the Indebtedness secured by such Mortgage and
(B) confirmation that the Borrower has received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board.
(v) The Administrative Agent shall have received a copy of all
recorded documents referred to, or listed as exceptions to title in, the
title policy or policies referred to in clause (iii) above and a copy of
all other material documents affecting the Mortgaged Properties.
(m) Solvency Opinion. The Administrative Agent shall have received a
----------------
solvency opinion from Valuation Research Corporation, in substantially the
form of the draft thereof dated July 14, 1999, as to the solvency of the
Borrower (on a consolidated basis) after giving effect to the Transactions
and the financings and transactions contemplated herein.
(n) Insurance. The Administrative Agent shall have received insurance
---------
certificates satisfying the requirements of Section 4.2(b) of the
Collateral Agreement, which insurance (applicable before and after the
Closing Date) shall be reasonably satisfactory to the Administrative Agent.
(o) Consolidated EBITDA. The Borrower shall have Consolidated EBITDA
-------------------
for the twelve months ending June 30, 1999 of not less than $88,000,000.
5.2 Conditions to Each Extension of Credit. The agreement of each
--------------------------------------
Lender to make any extension of credit requested to be made by it on any date
(including its initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct on and as of such date as if made on and as of
such date, except to the extent that such representation and warranty is
expressly limited by its terms to an earlier date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
<PAGE>
42
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding (unless cash in an amount equal
to the aggregate amount of the L/C Obligations outstanding has been deposited in
a cash collateral account established by the Administrative Agent) or any Loan
or other amount is owing to any Lender or the Administrative Agent hereunder, it
shall and shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent and
--------------------
each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, copies of (A) the audited
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related audited
consolidated statements of income and of cash flows for such year, setting
forth in each case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or exception,
or qualification arising out of the scope of the audit, by Arthur Andersen
LLP or other independent certified public accountants of nationally
recognized standing and (B) the unaudited consolidating balance sheet at
the end of such year and the related statements of income and cash flow of
the Borrower for such year (calculated on a business unit basis), setting
forth in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments and the absence of
notes thereto); and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, a copy of the unaudited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at the end of such
quarter and the related unaudited consolidated statements of income and of
cash flows for such quarter and the portion of the fiscal year through the
end of such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein and, with respect to unaudited financial statements as set
forth in this Section 6.1, subject, where appropriate, to normal year-end audit
adjustments and the absence of notes thereto) .
6.2 Certificates; Other Information. Furnish to the Administrative
-------------------------------
Agent and each Lender (or, in the case of clause (g), to the relevant Lender):
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
that, to the best of each such Responsible Officer's
<PAGE>
43
knowledge, each Loan Party during such period has observed or performed all
of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to which it is a
party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate and (ii) in the case of
quarterly or annual financial statements, (x) a Compliance Certificate
containing all information and calculations necessary for determining
compliance by the Borrower and its Subsidiaries with the provisions of this
Agreement referred to therein as of the last day of the fiscal quarter or
fiscal year of the Borrower, as the case may be, and (y) to the extent not
previously disclosed to the Administrative Agent, a listing of any county
or state within the United States where any Loan Party keeps inventory or
equipment (provided, however, that the Administrative Agent and each Lender
acknowledge that any equipment, including, without limitation, any portable
computer, which by its nature is expressly designed and intended to be
moved around may be temporarily moved to a location other than as set forth
in such listing) and of any Intellectual Property acquired by any Loan
Party since the date of the most recent list delivered pursuant to this
clause (y) (or, in the case of the first such list so delivered, since the
Closing Date);
(c) as soon as available, and in any event within 60 days after the
beginning of each fiscal year of the Borrower, a detailed consolidated
budget for the following fiscal year (including a projected consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of the
following fiscal year, the related consolidated statements of projected
cash flow and projected income and a description of the underlying
assumptions applicable thereto), and, as soon as available, significant
revisions, if any, of such budget and projections, which revisions, in the
reasonable judgment of the Borrower, are necessary to make the information
contained in such budget and projections not materially misleading or
inaccurate, with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by a
-----------
certificate of a Responsible Officer stating that such Projections are
based on reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(d) within 50 days after the end of each fiscal quarter of the
Borrower, a narrative discussion and analysis of the financial condition
and results of operations of the Borrower and its Subsidiaries for such
fiscal quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter, as compared to the portion
of the Projections covering such periods and to the comparable periods of
the previous year;
(e) no later than five Business Days prior to the effectiveness
thereof, copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification with respect to the Sponsor Notes,
the Senior Notes or the Acquisition Documentation;
(f) within 10 days after the same are sent, copies of all financial
statements and reports that the Borrower sends to the holders, in their
capacities as such, of any class of its debt securities or public equity
securities and, within 10 days after the same are filed, copies of all
financial statements and reports that the Borrower may make to, or file
with, the SEC; and
(g) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
----------------------
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and
<PAGE>
reserves in conformity with GAAP with respect thereto have been provided on the
books of the Borrower or its Subsidiaries, as the case may be, and except where
the failure to pay, discharge or satisfy the obligations could not reasonably be
expected to have a Material Adverse Effect.
6.4 Maintenance of Existence; Compliance. (a)(i) Preserve, renew and
------------------------------------
keep in full force and effect its corporate existence and business and (ii) take
all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business, except, in each
case, as otherwise permitted by Section 7.4 and except, in the case of clause
(ii) above, to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.5 Maintenance of Property; Insurance. Keep all property material
----------------------------------
and necessary in its business in good working order and condition, ordinary wear
and tear excepted and (b) maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks (but including in any event public liability,
product liability and business interruption) as are usually insured against in
the same general area by companies engaged in the same or a similar business.
6.7 Inspection of Property; Books and Records; Discussions. (a) Keep
------------------------------------------------------
proper books of records and account in which entries in conformity with GAAP and
all Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities and (b) permit representatives of any
Lender to visit and inspect any of its properties and examine and make abstracts
from any of its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations, properties and
financial and other condition of the Borrower and its Subsidiaries with officers
and employees of the Borrower and its Subsidiaries and with its independent
certified public accountants. In the event multiple Lenders separately request
such a visit, inspection or discussion in substantially the same time period,
such Lenders shall comply with reasonable requests by the Borrower to coordinate
the same.
6.6 Notices. Promptly after the Borrower or any Subsidiary has
-------
obtained knowledge thereof, give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding that may exist at any time between the Borrower
or any of its Subsidiaries and any Governmental Authority, that in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries in which the amount involved is $5,000,000 or more and not
covered by insurance or in which injunctive or similar relief (the result
of which could reasonably be expected to have a Material Adverse Effect) is
sought;
(d) any of the following events that could reasonably be expected to
create or be a material liability, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof: (i)
the occurrence of any Reportable Event with respect to any Plan, a failure
to make any required contribution to a Plan, the creation of any Lien in
favor of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any
<PAGE>
45
Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or the Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the termination, Reorganization or Insolvency of, any Plan; and
(e) any other development or event that has had or could reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary proposes
to take with respect thereto.
6.8 Environmental Laws. Comply in all material respects with, and use
------------------
all reasonable efforts to ensure compliance in all material respects by all
tenants and subtenants, if any, with, all applicable Environmental Laws, and
obtain and comply in all material respects with and maintain, and use all
reasonable efforts to ensure that all tenants and subtenants obtain and comply
in all material respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.9 Additional Collateral, etc. With respect to any property acquired
--------------------------
after the Closing Date by the Borrower (other than (x) any property described in
paragraph (b), (c) or (d) below and (y) any property subject to a Lien expressly
permitted by Section 7.3(g)) as to which the Administrative Agent, for the
benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Collateral Agreement
or such other documents as the Administrative Agent deems necessary or advisable
to grant to the Administrative Agent, for the benefit of the Lenders, a security
interest in such property and (ii) take all actions necessary or advisable to
grant to the Administrative Agent, for the benefit of the Lenders, a perfected
first priority security interest in such property, including the filing of
Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Collateral Agreement or by law or as may be requested by the
Administrative Agent. Notwithstanding the foregoing, the Borrower shall not be
required, and the Borrower shall not be required to cause any of its
Subsidiaries, to take any actions or accept any contract terms which could
reasonably be expected to have a Material Adverse Effect or cause undue hardship
or excessive costs to the Borrower or such Subsidiary, as the case may be, in
order to obtain the necessary consents to an assignment of its rights, title and
interest in the Collateral.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $10,000,000 acquired
after the Closing Date by the Borrower (other than any such real property
subject to a Lien expressly permitted by Section 7.3(g)), promptly (i) execute
and deliver a first priority Mortgage, in favor of the Administrative Agent, for
the benefit of the Lenders, covering such real property, (ii) if requested by
the Administrative Agent, provide the Lenders with (x) title and extended
coverage insurance covering such real property in an amount at least equal to
the purchase price of such real property (or such other amount as shall be
reasonably specified by the Administrative Agent) as well as a current ALTA
survey thereof, together with a surveyor's certificate and (y) any consents or
estoppels (which may be obtained without undue hardship or excessive costs)
reasonably deemed necessary or advisable by the Administrative Agent in
connection with such mortgage or deed of trust, each of the foregoing in form
and substance reasonably satisfactory to the Administrative Agent and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
<PAGE>
46
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary) created or acquired after the Closing Date by the Borrower (which,
for the purposes of this paragraph (c), shall include any existing Subsidiary
that ceases to be an Excluded Foreign Subsidiary), promptly (i) execute and
deliver to the Administrative Agent such amendments to the Collateral Agreement
as the Administrative Agent deems necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in the Capital Stock of such new Subsidiary that is owned by
the Borrower, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of the Borrower, and (iii)
if requested by the Administrative Agent, deliver to the Administrative Agent
legal opinions relating to the matters described above, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Borrower, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Collateral Agreement
as the Administrative Agent deems necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in the Capital Stock of such new Subsidiary that is owned by
the Borrower (provided that in no event shall more than 65% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, and take such other action as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable to perfect the
Administrative Agent's security interest therein, and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding (unless cash in an amount equal
to the aggregate amount of the L/C Obligations outstanding has been deposited in
a cash collateral account established by the Administrative Agent) or any Loan
or other amount is owing to any Lender or the Administrative Agent hereunder, it
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
7.1 Financial Condition Covenants.
-----------------------------
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
---------------------------
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter ending during any period set forth
below to exceed the ratio set forth below opposite such period:
Consolidated
Fiscal Period Leverage Ratio
------------- --------------
9/30/99 to 12/31/99 4.50 to 1.0
1/1/00 to 12/31/00 4.25 to 1.0
1/1/01 to 12/31/01 4.0 to 1.0
1/1/02 to 12/31/02 3.75 to 1.0
1/1/03 and thereafter 3.50 to 1.0
<PAGE>
47
; provided, that for the purposes of determining the ratio described above as at
--------
the last day of any of the fiscal quarters of the Borrower ending September 30,
1999, December 31, 1999 and March 31, 2000, such ratio shall be calculated on a
pro forma basis as if the Transactions had occurred on the first day of the
- ---------
four-quarter period then ended for testing such compliance.
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
------------------------------------
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter ending during any period set forth
below to be less than the ratio set forth below opposite such period:
Consolidated Interest
Fiscal Period Coverage Ratio
------------- ---------------------
9/30/99 to 12/31/99 2.50 to 1.0
1/1/00 to 12/31/00 2.75 to 1.0
1/1/01 and thereafter 3.0 to 1.0
; provided, that for the purposes of determining the ratio described above as at
--------
the last day of any of the fiscal quarters of the Borrower ending September 30,
1999, December 31, 1999 and March 31, 2000, such ratio shall be calculated on a
pro forma basis as if the Transactions had occurred on the first day of the
- ---------
four-quarter period then ended for testing such compliance.
(c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated
----------------------------------------
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
of the Borrower ending with any fiscal quarter ending during any period set
forth below to be less than the ratio set forth below opposite such period:
Consolidated Fixed
Fiscal Period Charge Coverage Ratio
------------- ---------------------
9/30/99 to 12/31/99 1.25 to 1.0
1/1/00 to 12/31/00 1.50 to 1.0
1/1/01 and thereafter 1.75 to 1.0
; provided, that for the purposes of determining the ratio described above as at
--------
the last day of any of the fiscal quarters of the Borrower ending September 30,
1999, December 31, 1999 and March 31, 2000, such ratio shall be calculated on a
pro forma basis as if the Transactions had occurred on the first day of the
- ---------
four-quarter period then ended for testing such compliance.
(d) Asset Coverage Ratio. Permit the Asset Coverage Ratio to be
--------------------
less than 2.0 to 1.0 at any time.
7.2 Indebtedness. Create, issue, incur, assume, become liable in
------------
respect of or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) (i) Indebtedness of any Subsidiary to the Borrower in an aggregate
principal amount not to exceed $20,000,000 at any one time outstanding and
(ii) Indebtedness of any Foreign Subsidiary to the Borrower which (x)
consists of trade payables incurred in the ordinary course of business and
(y) the Borrower has recharacterized as Indebtedness to avoid adverse tax
consequences to the Borrower or such Foreign Subsidiary;
<PAGE>
48
(c) Indebtedness of the Borrower to any Subsidiary, provided, however
that:
(i) if the Borrower is the obligor under such Indebtedness,
such Indebtedness must be expressly subordinated to the prior
payment in full of all Obligations hereunder; and
(ii) (A) any subsequent issuance or transfer of Capital Stock or
ownership interests that results in any such Indebtedness being
held by a Person other than the Borrower and (B) any sale or
other transfer of any such Indebtedness to a Person that is not
the Borrower shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Borrower that is not
permitted by this Section 7.2(b);
(d) Guarantee Obligations incurred in the ordinary course of business
by the Borrower or any of its Subsidiaries of obligations of any
Subsidiary;
(e) Indebtedness outstanding on the date hereof and listed on Schedule
7.2(e), including the Senior Notes, and any refinancings, refundings,
renewals or extensions thereof (without increasing, or shortening the
maturity of, the principal amount thereof) and which shall not be adverse
to the Borrower or shall have a negative impact on the Lenders);
(f) Indebtedness (including, without limitation, Capital Lease
Obligations) of the Borrower and its Subsidiaries secured by Liens
permitted by Section 7.3(g) in an aggregate principal amount not to exceed
$5,000,000 at any one time outstanding;
(g) Indebtedness of the Borrower in respect of the Sponsor Notes, as
the case may be, in an aggregate principal amount not to exceed
$160,000,000;
(h) Indebtedness incurred by the Borrower or assumed by the Borrower
or any Subsidiary in connection with, or resulting from, Permitted
Acquisitions, provided, that the aggregate principal amount of Indebtedness
--------
permitted by this Section 7.2(h) shall be subject to the limitations set
forth in Section 7.8(g), provided, further, that any Indebtedness assumed
-------- -------
by any Subsidiary in connection with, or resulting from, a Permitted
Acquisition, shall have existed at the time of the consummation of such
Permitted Acquisition and shall not have been created in anticipation
thereof;
(i) Indebtedness of any Subsidiary organized under the laws of Japan,
the proceeds of which are necessary for and are applied to the payment of
taxes imposed by any Japanese Governmental Authority in an aggregate
principal amount at any one time not to exceed $5,000,000; and
(j) additional Indebtedness of the Borrower or any of its Subsidiaries
in an aggregate principal amount (for the Borrower and all Subsidiaries)
not to exceed $5,000,000 at any one time outstanding.
7.3 Liens. Create, incur, assume or suffer to exist any Lien upon
-----
any of its property, whether now owned or hereafter acquired, except for:
<PAGE>
49
(a) Liens for taxes not yet due or that are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
--------
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the
aggregate, are not substantial in amount and that do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f),
securing Indebtedness permitted by Section 7.2(d), provided that no such
--------
Lien is spread to cover any additional property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any of its
Subsidiaries incurred pursuant to Section 7.2(e) to finance the acquisition
of fixed or capital assets, provided that (i) such Liens shall be created
--------
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease entered into by
the Borrower or any of its Subsidiaries in the ordinary course of its
business and covering only the assets so leased; and
(j) Liens not otherwise permitted by this Section so long as neither
(i) the aggregate outstanding principal amount of the obligations secured
thereby nor (ii) the aggregate fair market value (determined as of the date
such Lien is incurred) of the assets subject thereto exceeds (as to the
Borrower and its Subsidiaries) $2,000,000 at any one time.
7.4 Fundamental Changes. Enter into any merger, consolidation or
-------------------
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except that:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
--------
surviving corporation) or with or into any other Subsidiary which is wholly
owned by the Borrower; and
<PAGE>
50
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
other Subsidiary which is wholly owned by the Borrower.
7.5 Disposition of Property. Dispose of any of its property, whether
-----------------------
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the ordinary
course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any other Subsidiary;
(e) any Disposition for cash consideration of the assets of the
Computer & Network Services or BancTec Financial Systems division of the
Borrower; and
(f) the Disposition of other property having a fair market value not
to exceed $5,000,000 in the aggregate for any fiscal year of the Borrower.
7.6 Restricted Payments. Declare or pay any dividend (other than
-------------------
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of the Borrower or any Subsidiary, whether now
or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower or any Subsidiary (collectively, "Restricted Payments"), except
that:
(a) any Subsidiary may make Restricted Payments to the Borrower or any
other Subsidiary; and
(b) so long as no Default or Event of Default shall have occurred and
be continuing, the Borrower may (i) purchase its common stock or common
stock options from present or former officers or employees of the Borrower
or any Subsidiary upon the death, disability or termination of employment
of such officer or employee, provided, that the aggregate amount of
--------
payments under this clause after the date hereof (net of any proceeds
received by the Borrower after the date hereof in connection with resales
of any common stock or common stock options so purchased) shall not exceed
$5,000,000, and (ii) pay management fees expressly permitted by the last
sentence of Section 7.10.
7.7 Capital Expenditures. Make or commit to make any Capital
--------------------
Expenditure in one fiscal year of the Borrower, except Capital Expenditures of
the Borrower and its Subsidiaries not exceeding the amount set forth opposite
such fiscal year set forth below:
Fiscal Year Capital Expenditures
----------- --------------------
1999 $50,000,000
2000 $55,000,000
<PAGE>
2001 $55,000,000
2002 and thereafter $60,000,000
7.8 Investments. Make any advance, loan, extension of credit (by
-----------
way of guaranty or otherwise) or capital contribution to, or purchase any
Capital Stock, bonds, notes, debentures or other debt securities of, or any
assets constituting a business unit of, or make any other investment in, any
Person (all of the foregoing, "Investments"), except:
-----------
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of the Borrower or any
Subsidiary of the Borrower in the ordinary course of business (including
for travel, entertainment and relocation expenses) in an aggregate amount
for the Borrower or any Subsidiary of the Borrower not to exceed $1,000,000
at any one time outstanding;
(e) the Acquisition and the other Transactions;
(f) loans by the Borrower to any of its Subsidiaries permitted
by Section 7.2(h); and
(g) Permitted Acquisitions; provided that the sum of all
consideration paid or otherwise delivered in connection with Permitted
Acquisitions (including the principal amount of any Indebtedness issued as
deferred purchase price and the fair market value of any other non-cash
consideration, but excluding common stock issued by the Borrower), plus the
aggregate principal amount of all Indebtedness otherwise incurred or
assumed in connection with, or resulting from Permitted Acquisitions
(including continuing Indebtedness of any acquired Person outstanding at
the time of its Permitted Acquisition), shall not exceed $25,000,000.
7.9 Optional Payments and Modifications of Certain Debt
---------------------------------------------------
Instruments. (a) Make or offer to make any optional or voluntary payment,
- -----------
prepayment, repurchase or redemption of or otherwise optionally or voluntarily
defease or segregate funds with respect to the Sponsor Notes or the Senior
Notes, (b) make any payment of interest on the Sponsor Notes or Senior Notes in
cash to the extent that such payment may be made, pursuant to the Sponsor Notes
or the Senior Indenture, as the case may be, in kind, or (c) amend, modify,
waive or otherwise change, or consent or agree to any amendment, modification,
waiver or other change to, any of the terms of the Sponsor Notes or the Senior
Notes, as the case may be (other than any such amendment, modification, waiver
or other change that (i) would extend the maturity or reduce the amount of any
payment of principal thereof or reduce the rate or extend any date for payment
of interest thereon and (ii) does not involve the payment of a material consent
fee).
7.10 Transactions with Affiliates. Enter into any transaction,
----------------------------
including any purchase, sale, lease or exchange of property, the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliate (other than the Borrower or any Subsidiary) unless such transaction is
(a) otherwise permitted under this Agreement, (b) in the ordinary course of
business of the Borrower or such Subsidiary, as the case may be, and (c) upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person that is not an Affiliate. Notwithstanding the
foregoing, the Borrower and its Subsidiaries may pay to the Sponsor and its
Control Investment Affiliates fees and expenses pursuant to a management
agreement approved by the board of directors of the Borrower, as the case may
be, in an
<PAGE>
aggregate amount not to exceed $1,000,000 per annum in any fiscal year of the
Borrower, provided, that (x) such management agreement may not be amended in any
manner the result of which shall be to increase the aggregate amount of fees and
expenses payable thereunder to the Sponsor and its Control Investment Affiliates
and (y) at any time such fees and expenses are to be paid, no Default or Event
of Default shall have occurred and be continuing.
7.11 Sales and Leasebacks. Enter into any arrangement with any
--------------------
Person providing for the leasing by the Borrower or any Subsidiary of real or
personal property that has been or is to be sold or transferred by the Borrower
or such Subsidiary to such Person or to any other Person to whom funds have been
or are to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary; provided that any arrangement
--------
under which the Borrower or any Subsidiary purchases personal computers from a
customer or a vendor, sells the same such computers to a third-party, leases the
same such computers from such third-party and then subleases the same such
computers to a customer for an identical lease period as part of the "Tech
Refresh" program shall not be prohibited by this Section 7.11.
7.12 Changes in Fiscal Periods. Permit the fiscal year of the
-------------------------
Borrower to end on a day other than December 31 or change the Borrower's method
of determining fiscal quarters.
7.13 Negative Pledge Clauses. Enter into or suffer to exist or
-----------------------
become effective any agreement that prohibits or limits the ability of the
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any of its property or revenues, whether now owned or hereafter
acquired, other than (a) this Agreement and the other Loan Documents and (b) any
agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby).
7.14 Clauses Restricting Subsidiary Distributions. Enter into or
--------------------------------------------
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in
respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness
owed to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or
advances to, or other Investments in, the Borrower or any other Subsidiary of
the Borrower or (c) transfer any of its assets to the Borrower or any other
Subsidiary of the Borrower, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents, (ii) any restrictions with respect to a Subsidiary imposed pursuant
to an agreement that has been entered into in connection with the Disposition of
all or substantially all of the Capital Stock or assets of such Subsidiary and
(iii) any restrictions imposed by any agreement related to secured Indebtedness
permitted by this Agreement if such restrictions apply only to the property or
assets securing such Indebtedness.
7.15 Lines of Business. Enter into any business, either directly
-----------------
or through any Subsidiary, except for those businesses in which the Borrower and
its Subsidiaries are engaged on the date of this Agreement (after giving effect
to the Transactions) or that are reasonably related thereto or ancillary
thereto.
7.16 Amendments to Acquisition Documentation. (a) Amend,
---------------------------------------
supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and
conditions of the indemnities and licenses furnished to the Borrower or any of
its Subsidiaries pursuant to the Acquisition Documentation or any other document
delivered by the Borrower or any of its Affiliates in connection therewith such
that after giving effect thereto such indemnities or licenses shall be
materially less favorable to the interests of the Loan Parties or the Lenders
with respect thereto or (b) otherwise amend, supplement or otherwise modify the
terms and conditions of the Acquisition Documentation or any such other
documents except for any
<PAGE>
such amendment, supplement or modification that (i) becomes effective after the
Closing Date and (ii) could not reasonably be expected to have a Material
Adverse Effect.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within three days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) any representation or warranty made or, pursuant to the last
sentence of Section 5.2, deemed made by any Loan Party herein or in any
other Loan Document or that is contained in any certificate, document or
financial or other written statement furnished by it at any time under or
in connection with this Agreement or any such other Loan Document shall
prove to have been inaccurate in any material respect on or as of the date
made or deemed made; or
(c) (i) any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of Section
6.4(a) (with respect to the Borrower only), Section 6.7(a) or Section 7 of
this Agreement or Sections 4.5 and 4.7(b) of the Collateral Agreement or
(ii) an "Event of Default" under and as defined in any Mortgage shall have
occurred and be continuing; or
(d) any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or any other
Loan Document (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of 30
days; or
(e) the Borrower or any of its Subsidiaries shall (i)
default in making any payment of any principal of any Indebtedness
(including any Guarantee Obligation, but excluding the Loans) on the
scheduled or original due date with respect thereto; or (ii) default in
making any payment of any interest on any such Indebtedness beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (iii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or beneficiary of such Indebtedness (or a trustee
or agent on behalf of such holder or beneficiary) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; provided, that a default, event or condition
--------
described in clause (i), (ii) or (iii) of this paragraph (e) shall not at
any time constitute an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in clauses (i), (ii)
and (iii) of this paragraph (e) shall have occurred and be continuing with
respect to Indebtedness the outstanding principal amount of which exceeds
in the aggregate $5,000,000; or
(e) (i) the Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee,
<PAGE>
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any of its Subsidiaries
shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against the Borrower or any of its Subsidiaries
any case, proceeding or other action of a nature referred to in clause (i)
above that (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets that
results in the entry of an order for any such relief that shall not have
been vacated, discharged, or stayed or bonded pending appeal within 45 days
from the entry thereof; or (iv) the Borrower or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, shall exist with respect to any Plan
or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could, in the sole judgment of the Required Lenders, reasonably be expected
to have a Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance as to which the relevant
insurance company has acknowledged coverage) of $5,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 45 days from the entry thereof; or
(i) any of the Security Documents shall cease, for any reason,
to be in full force and effect, or any Loan Party or any Affiliate of any
Loan Party shall so assert, or any Lien created by any of the Security
Documents shall cease to be enforceable and of the same effect and priority
purported to be created thereby; or
(j) (i) prior to an IPO, (A) the Permitted Investors shall cease
collectively to own, of record and beneficially, shares of the common stock
of the Borrower equal to at least 51% of all of the issued and outstanding
shares of the common stock of the Borrower on a fully diluted basis and (B)
the Permitted Investors shall cease to have the power to vote or direct the
voting of securities having a majority of the aggregate ordinary voting
power for the election of directors of the Borrower (determined on a fully
diluted basis); (ii) after an IPO, (X) the Permitted Investors shall cease
collectively to own, of record and beneficially, shares of the common stock
of the Borrower equal to at least 35% of all of the issued and outstanding
shares of the common stock of the
<PAGE>
Borrower on a fully diluted basis, (Y) the Permitted Investors shall cease
to have the power to vote or direct the voting of securities having at
least 35% of the aggregate ordinary voting power for the election of
directors of the Borrower (determined on a fully diluted basis) and (Z) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
excluding the Permitted Investors, shall become, or obtain rights (whether
by means or warrants, options or otherwise) to become, the "beneficial
owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
directly or indirectly, of more than 15% of the outstanding common stock of
the Borrower; (iii) the board of directors of the Borrower shall cease to
consist of a majority of Continuing Directors; or (iv) a Specified Change
of Control shall occur; or
(k) the Sponsor Notes shall cease, for any reason, to be validly
subordinated to the Obligations, as provided in the Sponsor Notes, or any
Loan Party, any Affiliate of any Loan Party, the trustee in respect of the
Sponsor Notes or the holders of at least 25% in aggregate principal amount
of the Sponsor Notes shall so assert;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Revolving Commitments to be terminated forthwith, whereupon the
Revolving Commitments shall immediately terminate; and (ii) with the consent of
the Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents (including all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this paragraph, the Borrower shall at such time deposit
in a cash collateral account opened by the Administrative Agent an amount equal
to the aggregate then undrawn and unexpired amount of such Letters of Credit.
Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents,
provided, however, that in the event any and all Events of Default shall have
- -------- -------
been waived or cured prior to the application of all amounts held in such cash
collateral account to the payment of drafts drawn under such Letters of Credit
or the repayment of other obligations of the Borrower hereunder and under the
other Loan Documents, such remaining amounts in such cash collateral account
shall be paid back to the Borrower. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the
other Loan Documents shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower (or such other Person
as may be lawfully entitled thereto). Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived by the Borrower.
<PAGE>
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute
--------------------
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
----------------------
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of any Loan Party a party thereto to perform its obligations
hereunder or thereunder. The Agents shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent
--------------------------------
shall be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so specified
by this Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders), and such
<PAGE>
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be
-----------------
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders); provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender
----------------------------------------
expressly acknowledges that neither the Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by any Agent
hereinafter taken, including any review of the affairs of a Loan Party or any
affiliate of a Loan Party, shall be deemed to constitute any representation or
warranty by any Agent to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any affiliate of
a Loan Party that may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent
---------------
in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Aggregate Exposure Percentages in effect on the date on which
indemnification is sought under this Section (or, if indemnification is sought
after the date upon which the Commitments shall have terminated and the Loans
shall have been paid in full, ratably in accordance with such Aggregate Exposure
Percentages immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever that may at any time
(whether before or after the payment of the Loans) be imposed on, incurred by or
asserted against such Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements that are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from such Agent's gross negligence or
willful
<PAGE>
misconduct. The agreements in this Section shall survive the payment of the
Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its
--------------------------------
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any Loan Party as though such Agent was not an Agent. With
respect to its Loans made or renewed by it and with respect to any Letter of
Credit issued or participated in by it, each Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not an Agent, and the terms "Lender" and
"Lenders" shall include each Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent may
------------------------------
resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 8(a) or Section
8(f) with respect to the Borrower shall have occurred and be continuing) be
subject to approval by the Borrower (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor agent
has accepted appointment as Administrative Agent by the date that is 10 days
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall assume and perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above. After any retiring Administrative Agent's
resignation as Administrative Agent, the provisions of this Section 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Loan Documents.
9.10 Syndication Agent. The Syndication Agent shall have no
-----------------
duties or responsibilities hereunder in its capacity as such.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other
----------------------
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) forgive or reduce the principal amount or
extend the final scheduled date of maturity of any Loan, extend the scheduled
date of any amortization payment in respect of any Term Loan, reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date of
any payment thereof, or increase the amount or extend the expiration date of any
Lender's Revolving
<PAGE>
Commitment, in each case without the consent of each Lender directly affected
thereby; (ii) eliminate or reduce any voting rights under this Section 10.1,
reduce any percentage specified in the definition of Required Lenders, consent
to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents, release all or
substantially all of the Specified Collateral (as such term is defined in the
Collateral Agreement) or all or substantially all of the General Collateral (as
such term is defined in the Collateral Agreement), in each case without the
consent of all Lenders; (iii) amend, modify or waive any condition precedent to
any extension of credit under the Revolving Facility set forth in Section 5.2
(including in connection with any waiver of an existing Default or Event of
Default) without the written consent of the Majority Facility Lenders in respect
of the Revolving Facility; (iv) amend, modify or waive any provision of Section
2.15 without the consent of the Majority Facility Lenders in respect of each
Facility adversely affected thereby; (v) reduce the amount of Net Cash Proceeds
or Excess Cash Flow required to be applied to prepay Loans under this Agreement
without the consent of the Majority Facility Lenders under each Facility; (vi)
reduce the percentage specified in the definition of Majority Facility Lenders
with respect to any Facility without the consent of all Lenders under such
Facility; (vii) amend, modify or waive any provision of Section 9 without the
consent of the Administrative Agent; or (viii) amend, modify or waive any
provision of Section 3 without the consent of the Issuing Lender. Any such
waiver and any such amendment, supplement or modification shall apply equally to
each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of any
waiver, the Loan Parties, the Lenders and the Administrative Agent shall be
restored to their former position and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
electronic transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or three Business Days
after being deposited in the mail, postage prepaid, or, in the case of
electronic transmission notice, when received, addressed as follows in the case
of the Borrower and the Administrative Agent, and as set forth in an
administrative questionnaire delivered to the Administrative Agent in the case
of the Lenders, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: BancTec, Inc.
Address: 4851 LBJ Freeway
Dallas, TX 75244
Attention: Chief Financial Officer
Telecopy: 972-341-4882
Telephone: 972-341-4942
The Administrative Agent: Chase Bank of Texas, N.A.
Address: Agency Services
Chase Bank of Texas, N.A.
One Chase Manhattan Plaza,
8th Floor
New York, NY 10081
Attention: Muniram Appanna
Telecopy: 212-552-7490
Telephone: 212-552-7943
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders shall not be effective until received.
<PAGE>
60
10.3 No Waiver; Cumulative Remedies. No failure to exercise and
------------------------------
no delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans and other extensions of credit hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
-----------------------------
pay or reimburse the Agents for all their respective out-of-pocket costs and
expenses incurred in connection with the syndication and financing of the
Facilities and the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement and the other Loan Documents and
any other documents prepared in connection herewith or therewith, the
syndication of the Facilities and the consummation and administration of the
transactions contemplated hereby and thereby, including the reasonable fees and
disbursements of counsel to the Administrative Agent and filing and recording
fees and expenses, with statements with respect to the foregoing to be submitted
to the Borrower prior to the Closing Date (in the case of amounts to be paid on
the Closing Date) and from time to time thereafter on a quarterly basis or such
other periodic basis as the Administrative Agent shall deem appropriate, (b) to
pay or reimburse each Lender and the Administrative Agent for all its reasonable
costs and expenses incurred in connection with the enforcement or preservation
of any rights under this Agreement, the other Loan Documents and any such other
documents, including the reasonable fees and disbursements of counsel to each
Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and
hold each Lender and the Administrative Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, that
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
the Agents and their respective officers, directors, employees, affiliates,
agents and controlling persons (each, an "Indemnitee") harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments or suits of any kind or nature whatsoever with respect to the
syndication and financing of the Facilities, and the execution, delivery,
enforcement, performance and administration of this Agreement, the other Loan
Documents and any such other documents, including any of the foregoing relating
to the use of proceeds of the Loans or the violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations of the
Borrower any of its Subsidiaries or any of the Properties and the reasonable
fees and expenses of legal counsel in connection with claims, actions or
proceedings by any Indemnitee against any Loan Party under any Loan Document
(all the foregoing in this clause (d), collectively, the "Indemnified
-----------
Liabilities"), provided, that the Borrower shall have no obligation hereunder to
- ----------- --------
any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnitee. Without limiting the foregoing, and to
the extent permitted by applicable law, the Borrower agrees not to assert and to
cause its Subsidiaries not to assert, and hereby waives and agrees to cause its
Subsidiaries to so waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, under or
related to Environmental Laws, that any of them might have by statute or
otherwise against any Indemnitee. All amounts due under this Section 10.5 shall
be payable not later than
<PAGE>
61
10 days after written demand therefor. Statements payable by the Borrower
pursuant to this Section 10.5 shall be submitted to Chief Financial Officer
(Telephone No. 972-341-4942) (Telecopy No.972-341-4882), at the address of the
Borrower set forth in Section 10.2, or to such other Person or address as may be
hereafter designated by the Borrower in a written notice to the Administrative
Agent. The agreements in this Section 10.5 shall survive repayment of the Loans
and all other amounts payable hereunder.
10.9 Successors and Assigns; Participations and Assignments. This
------------------------------------------------------
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent, all future holders of the Loans and their
respective permitted successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender.
(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
-----------
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Loans or any fees
payable hereunder, or postpone the date of the final maturity of the Loans, in
each case to the extent subject to such participation. The Borrower agrees that
if amounts outstanding under this Agreement and the Loans are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
--------
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as
if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it was a Lender; provided that, in the case of Section 2.17, such
--------
Participant shall have complied with the requirements of said Section and
provided, further, that no Participant shall be entitled to receive any greater
- -------- -------
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with
--------
applicable law, at any time and from time to time assign to any Lender or any
Affiliate thereof or, with the consent of the Borrower and the Administrative
Agent (which, in each case, shall not be unreasonably withheld or delayed), to
an additional bank, financial institution or other entity (an "Assignee") all or
--------
any part of its rights and obligations under this Agreement pursuant to an
Assignment and Acceptance, executed by such Assignee, such Assignor and any
other Person whose consent is required pursuant to this paragraph, and delivered
to the Administrative Agent for its acceptance and recording in the Register;
provided that no such assignment to an Assignee (other than any Lender or any
- --------
affiliate thereof) shall be in an aggregate principal amount of less than
$5,000,000 (other than in the case of an assignment of all of a Lender's
interests under this Agreement), unless otherwise agreed by the Borrower and the
Administrative Agent. Any such assignment need not be
<PAGE>
62
ratable as among the Facilities. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with a Commitment and/or Loans as set
forth therein, and (y) the Assignor thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of an
Assignor's rights and obligations under this Agreement, such Assignor shall
cease to be a party hereto). Notwithstanding any provision of this Section 10.6,
the consent of the Borrower shall not be required for any assignment that occurs
when an Event of Default pursuant to Section 8(f) shall have occurred and be
continuing with respect to the Borrower.
(d) The Administrative Agent shall, on behalf of the Borrower,
maintain at its address referred to in Section 10.2 a copy of each Assignment
and Acceptance delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the Commitment of, and
the principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, each other Loan Party, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of the Loans and any Notes evidencing the Loans recorded therein for all
purposes of this Agreement. Any assignment of any Loan, whether or not evidenced
by a Note, shall be effective only upon appropriate entries with respect thereto
being made in the Register (and each Note, if any, shall expressly so provide).
Any assignment or transfer of all or part of a Loan evidenced by a Note shall be
registered on the Register only upon surrender for registration of assignment or
transfer of the Note evidencing such Loan, accompanied by a duly executed
Assignment and Acceptance, and thereupon one or more new Notes, upon request,
shall be issued to the designated Assignee.
(e) Upon its receipt of an Assignment and Acceptance executed by
an Assignor, an Assignee and any other Person whose consent is required by
Section 10.6(c), together with payment to the Administrative Agent of a
registration and processing fee of $4,000, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) record the information
contained therein in the Register on the effective date determined pursuant
thereto.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 10.6 concerning assignments of
Loans and Notes, if any, relate only to absolute assignments and that such
provisions do not prohibit assignments creating security interests, including
any pledge or assignment by a Lender of any Loan or Note, if any, to any Federal
Reserve Bank in accordance with applicable law.
(g) The Borrower, upon receipt of written notice from the
relevant Lender, agrees to issue Notes to any Lender requiring Notes to
facilitate transactions of the type described in paragraph (f) above.
10.7 Adjustments; Set-off. Except to the extent that this
--------------------
Agreement expressly provides for payments to be allocated to a particular Lender
or to the Lenders under a particular Facility, if any Lender (a "Benefitted
----------
Lender") shall, at any time after the Loans and other amounts payable hereunder
- ------
shall immediately become due and payable pursuant to Section 8, receive any
payment of all or part of the Obligations owing to it, or receive any collateral
in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant
to events or proceedings of the nature referred to in Section 8(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of the Obligations owing to
such other Lender, such Benefitted Lender shall purchase for cash from the other
Lenders a participating interest in such portion of the Obligations owing to
each such other Lender, or shall provide such other Lenders with the benefits of
any such collateral, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral ratably with each of the
<PAGE>
63
Lenders; provided, however, that if all or any portion of such excess payment or
-----------------
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise), to set off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower, as the case may be.
Each Lender agrees promptly to notify the Borrower and the Administrative Agent
after any such setoff and application made by such Lender, provided that the
--------
failure to give such notice shall not affect the validity of such setoff and
application.
10.8 Counterparts. This Agreement may be executed by one or more
------------
of the parties to this Agreement on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. The Borrower hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States for the Southern
District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in
<PAGE>
64
any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower, as the case may be at its address set forth in
Section 10.2 or at such other address of which the Administrative Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
10.13 Acknowledgments. The Borrower hereby acknowledges that:
---------------
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders.
10.14 Releases of Guarantees and Liens. (a) Notwithstanding
--------------------------------
anything to the contrary contained herein or in any other Loan Document, the
Administrative Agent is hereby irrevocably authorized by each Lender (without
requirement of notice to or consent of any Lender except as expressly required
by Section 10.1) to take any action requested by the Borrower having the effect
of releasing any Collateral or guarantee obligations (i) to the extent
necessary to permit consummation of any transaction not prohibited by any Loan
Document or that has been consented to in accordance with Section 10.1 or (ii)
under the circumstances described in paragraph (b) below.
(b) At such time as the Loans, the Reimbursement Obligations
and the other obligations under the Loan Documents (other than obligations under
or in respect of Hedge Agreements) shall have been paid in full, the Commitments
have been terminated and no Letters of Credit shall be outstanding, the
Collateral shall be released from the Liens created by the Security Documents,
and the Security Documents and all obligations (other than those expressly
stated to survive such termination) of the Administrative Agent and each Loan
Party under the Security Documents shall terminate, all without delivery of any
instrument or performance of any act by any Person and at such time, the
Administrative Agent agrees to promptly take such actions and execute and
deliver such instruments and documents as shall be necessary to release the
Liens and security interests created by the Security Documents, including,
without limitation, any Uniform Commercial Code release or termination
statements.
10.15 Confidentiality. Each of the Administrative Agent and each
---------------
Lender agrees to keep confidential all non-public information provided to it by
any Loan Party pursuant to this Agreement that is
<PAGE>
65
designated by such Loan Party as confidential; provided that nothing herein
--------
shall prevent the Administrative Agent or any Lender from disclosing any such
information (a) to the Administrative Agent, any other Lender or any affiliate
of any Lender, (b) to any Transferee or prospective Transferee that agrees to
comply with the provisions of this Section, (c) to its employees, directors,
agents, attorneys, accountants and other professional advisors or those of any
of its affiliates, (d) upon the request or demand of any Governmental Authority,
(e) in response to any order of any court or other Governmental Authority or as
may otherwise be required pursuant to any Requirement of Law, (f) if requested
or required to do so in connection with any litigation or similar proceeding,
(g) that has been publicly disclosed without violation of this Section 10.15,
(h) to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's investment portfolio in connection with ratings
issued with respect to such Lender, or (i) in connection with the exercise of
any remedy hereunder or under any other Loan Document. Each of the
Administrative Agent and each Lender agrees that in the event it is requested,
required or demanded to disclose such non-public information pursuant to clause
(d), (e) or (f) above, it shall, to the extent permitted by law, promptly notify
the applicable Loan Party thereof, to enable such Loan Party to obtain a
protective order with respect to such information.
10.16 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
---------------------
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
BANCTEC, INC.
By:_________________________________
Name:
Title:
CHASE BANK OF TEXAS, N.A., as Administrative
Agent, Syndication Agent and as a Lender
By:__________________________________
Name:
Title:
<PAGE>
ABN AMRO BANK N.V., as Co-Agent and as a
Lender
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
By:___________________________________
Name:
Title:
<PAGE>
BANK ONE, TEXAS, N.A.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
<PAGE>
COMERICA BANK
By:___________________________________
Name:
Title:
<PAGE>
GUARANTY FEDERAL BANK, F.S.B.
By:___________________________________
Name:
Title:
<PAGE>
IBM CREDIT CORPORATION
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By:___________________________________
Name:
Title:
<PAGE>
WELLS FARGO BANK (TEXAS) N.A.
By:___________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT AND WAIVER
FIRST AMENDMENT AND WAIVER, dated as of January 21, 2000 (the "First
-----
Amendment"), to the Credit Agreement, dated as of July 22, 1999 (as amended,
- ---------
supplemented or otherwise modified, the "Credit Agreement"), among BANCTEC,
----------------
INC., a Delaware corporation (the "Borrower"), the several banks and other
--------
financial institutions or entities from time to time parties thereto (the
"Lenders"), ABN AMRO Bank N.V., as Co-Agent, CHASE BANK OF TEXAS, N.A.
-------
("CHASE"), as syndication agent (in such capacity, the "Syndication Agent"), and
----- -----------------
CHASE BANK OF TEXAS, N.A., as administrative agent (in such capacity, the
"Administrative Agent").
--------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders, the Administrative Agent and the
Syndication Agent are parties to the Credit Agreement;
WHEREAS, the Borrower has requested certain amendments to the Credit
Agreement as set forth herein; and
WHEREAS, the Required Lenders have consented to the requested
amendments as set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto hereby agree as follows:
1. Definitions. Terms defined in the Credit Agreement are used
-----------
herein with the respective meanings given to them therein.
2. Amendments to Section 1 of the Credit Agreement. (a) Subsection
-----------------------------------------------
1.1 of the Credit Agreement is hereby amended by (i) deleting in its entirety
the definition of Pricing Grid and, (ii) inserting the following new definition
in the appropriate alphabetical order:
"Pricing Grid": the pricing grid attached to the First Amendment as
------------
Exhibit A.
(b) Subsection 1.1 of the Credit Agreement is hereby further
amended by adding at the end of the definition of "Consolidated EBITDA" the
-------------------
following:
For any period of four consecutive fiscal quarters which includes the
fiscal quarter ended December 31, 1999, up to $2,000,000 in
extraordinary, unusual or non-recurring cash expenses or losses may be
added to Consolidated Net Income in determining Consolidated EBITDA.
3. Amendments to Section 6 of the Credit Agreement. (a) Section
-----------------------------------------------
6.2(b) of the Credit Agreement is hereby amended by adding at the end of such
Section the following: "and (z) an accounts receivable aging report."
(b) Section 6.6 of the Credit Agreement is hereby amended by
deleting such Section in its entirety and substituting the following in lieu
thereof:
<PAGE>
Page 2
6.6 Inspection of Property; Books and Records; Discussions. (a)
------------------------------------------------------
Keep proper books of records and account in which entries in conformity
with GAAP and all Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities.
(b) Permit representatives of any Lender to visit and
inspect any of its properties and examine and make abstracts from
any of its books and records at any reasonable time and as often
as may be reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the
Borrower and its Subsidiaries with officers and employees of the
Borrower and its Subsidiaries and with its independent certified
public accountants. In the event multiple Lenders separately
request such a visit, inspection or discussion in substantially
the same time period, such Lenders shall comply with reasonable
requests by the Borrower to coordinate the same.
(c) Permit the Administrative Agent to conduct, or to
cause a third party to conduct, annual audits of the Collateral
(the "Annual Collateral Audit") at the expense of the Borrower
-----------------------
and any of the Lenders may accompany the Administrative Agent and
participate in such audits to the extent desired by such Lender.
The Annual Collateral Audit may be performed by the
Administrative Agent's in-house audit and asset management review
staff. The Borrower agrees to pay to the Administrative Agent on
demand all fees, charges and out-of-pocket expenses of the
Administrative Agent in connection with each Annual Collateral
Audit, provided, however, that the Borrower shall not be
-------- -------
obligated to reimburse the expenses for more than one Annual
Collateral Audit during any fiscal year, unless an Event of
Default is continuing, in which case the foregoing limitation
shall not apply.
4. Amendments to Section 7.1 of the Credit Agreement. (a) Section 7.1(a)
--------------------------------------------------
of the Credit Agreement is hereby amended by deleting the table set forth
therein in its entirety, and inserting in lieu thereof the following:
Consolidated
Fiscal Period Leverage Ratio
------------- --------------
9/30/99 to 12/31/99 5.50 to 1.0
1/1/00 to 3/31/00 6.25 to 1.0
4/1/00 to 6/30/00 6.65 to 1.0
7/1/00 to 9/30/00 6.35 to 1.0
10/1/00 to 12/31/00 5.50 to 1.0
1/1/01 to 3/31/01 4.75 to 1.0
4/1/01 to 6/30/01 4.50 to 1.0
7/1/01 to 9/30/01 4.25 to 1.0
10/1/01 to 12/31/01 4.00 to 1.0
1/1/02 to 12/31/02 3.75 to 1.0
1/1/03 and thereafter 3.50 to 1.0
(b) Section 7.1(b) of the Credit Agreement is hereby amended by deleting
the table set forth therein in its entirety, and inserting in lieu thereof the
following:
<PAGE>
Page 3
Consolidated
Fiscal Period Interest Coverage Ratio
------------- -----------------------
9/30/99 to 12/31/99 2.15 to 1.0
1/1/00 to 3/31/00 1.85 to 1.0
4/1/00 to 9/30/00 1.75 to 1.0
10/1/00 to 12/31/00 2.00 to 1.0
1/1/01 to 3/31/01 2.25 to 1.0
4/1/01 to 6/30/01 2.50 to 1.0
7/1/01 to 9/30/01 2.60 to 1.0
10/1/01 to 12/31/01 2.75 to 1.0
1/1/02 and thereafter 3.00 to 1.0
(c) Section 7.1(c) of the Credit Agreement is hereby amended
by deleting the table set forth therein in its entirety, and inserting in lieu
thereof the following:
Consolidated Fixed
Fiscal Period Charge Coverage Ratio
------------- ---------------------
9/30/99 to 12/31/99 0.75 to 1.0
1/1/00 to 3/31/00 0.50 to 1.0
4/1/00 to 9/30/00 0.35 to 1.0
10/1/00 to 12/31/00 0.75 to 1.0
1/1/01 to 3/31/01 1.15 to 1.0
4/1/01 to 6/30/01 1.35 to 1.0
7/1/01 to 9/30/01 1.45 to 1.0
10/1/00 to 12/31/01 1.55 to 1.0
1/1/02 and thereafter 1.75 to 1.0
5. Conditions to Effectiveness of this Amendment. This First
---------------------------------------------
Amendment shall become effective on and as of the date hereof upon the
satisfaction of the following conditions precedent (such date the "First
-----
Amendment Effective Date"):
- ------------------------
(a) The execution and delivery of the First Amendment by the
Borrower, the Administrative Agent and the Required Lenders.
(b) The Borrower shall have paid all fees and expenses in connection
with the First Amendment.
(c) No Default or Event of Default shall have occurred and be
continuing after giving effect to the amendments contemplated herein.
(d) Each of the representations and warranties made by the Loan
Parties and their Subsidiaries in or pursuant to the Loan Documents shall be
true and correct in all material respects on and as of the date hereof as if
made on and as of the date hereof, except for any representation and warranty
which is expressly made as of an earlier date, which representation and warranty
shall have been true and correct in all material respects as of such earlier
date.
<PAGE>
Page 4
6. Waiver. The Lenders hereby waive (a) any violation, prior to the
------
First Amendment Effective Date, of any covenant set forth in Section 7.1(a), (b)
or (c) as in effect prior to the First Amendment Effective Date and (b) any
Event of Default which has occurred by virtue of such violation. Any violation,
prior to the First Amendment Effective Date, of any covenant set forth in
Section 7.1(a), (b) or (c) shall not be deemed an Event of Default.
7. Amendment Fee. The Borrower agrees to pay to each Lender which
-------------
executes and delivers this First Amendment to the Administrative Agent on or
prior to January 20, 2000 an amendment fee in an amount equal to 0.25% of the
amount of such Lender's Commitment, payable in immediately available funds on or
before the First Amendment Effective Date.
8. Miscellaneous.
-------------
(a) Effect. Except as expressly amended hereby, all of the
------
representations, warranties, terms, covenants and conditions of the Loan
Documents shall remain unamended and not waived and shall continue to be in full
force in effect.
(b) Counterparts. This First Amendment may be executed by one or
------------
more of the parties to this First Amendment on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this First
Amendment signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
(c) Severability. Any provision of this First Amendment which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(d) Integration. This First Amendment and the other Loan
-----------
Documents represent the agreement of the Loan Parties, the Administrative Agent
and the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
(e) GOVERNING LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment and Waiver to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
BANCTEC, INC.
By:_______________________________
Name:
Title:
CHASE BANK OF TEXAS, N.A., as Administrative
Agent, Syndication Agent and as a Lender
By:_______________________________
Name:
Title:
<PAGE>
ABN AMRO BANK N.V., as Co-Agent and as a Lender
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
<PAGE>
BANK ONE, TEXAS, N.A.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
<PAGE>
BANK ONE, TEXAS, N.A.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
<PAGE>
COMERICA BANK
By:_______________________________
Name:
Title:
<PAGE>
GUARANTY FEDERAL BANK, F.S.B.
By:_______________________________
Name:
Title:
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By:_______________________________
Name:
Title:
<PAGE>
WELLS FARGO BANK (TEXAS), N.A.
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT 21.1
BANCTEC, INC.
Founded: 1972
Incorporated (Delaware): January 2, 1987
PLACE OF DATE OF
SUBSIDIARY NAME INCORPORATION INCORPORATION
--------------- ------------- -------------
BancTec Limited England October 27, 1976
BancTec (Canada), Inc. Canada June 11, 1986
BancTec (Puerto Rico), Inc. Delaware February 24, 1988
BancTec (Export), Inc. U.S. Virgin Islands January 22, 1990
BancTec Holding N.V. The Netherlands May 24, 1991
BancTec A/S Denmark January 8, 1971
BancTec Iberica S.A. Spain April 9, 1981
BancTec AB Sweden September 30, 1992
BancTec S.A. France December 31, 1990
BancTec GmbH Germany December 14, 1976
BancTec B.V. The Netherlands June 4, 1991
BancTec Third Party Maintenance, Inc. Texas February 26, 1992
BancTec Japan Inc. Japan June 30, 1994
Recognition Mexico Holding Inc. Delaware September 30, 1994
Recognition de Mexico S.A. de C.V. Mexico November 16, 1994
Servibanca Chile January 18, 1990
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF OPERATIONS, AND NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND FOOTNOTES.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 20,292 25,313
<SECURITIES> 440 837
<RECEIVABLES> 156,535 176,387
<ALLOWANCES> (12,790) (9,833)
<INVENTORY> 64,193 66,590
<CURRENT-ASSETS> 267,324 289,213
<PP&E> 294,032 263,877
<DEPRECIATION> (168,130) (141,154)
<TOTAL-ASSETS> 473,105 520,312
<CURRENT-LIABILITIES> 136,876 144,808
<BONDS> 350,500 150,352
0 0
0 0
<COMMON> 182 194
<OTHER-SE> (21,920) 219,887
<TOTAL-LIABILITY-AND-EQUITY> 473,105 520,312
<SALES> 274,989 270,234
<TOTAL-REVENUES> 534,590 556,097
<CGS> 196,027 208,917
<TOTAL-COSTS> 430,558 432,694
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 22,685 9,024
<INCOME-PRETAX> (35,842) 11,546
<INCOME-TAX> (13,262) 4,154
<INCOME-CONTINUING> (22,580) 7,392
<DISCONTINUED> 11,383 (2,579)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,197) 4,813
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
