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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 1997.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________________
COMMISSION FILE NO. 0-20189
EQUITRAC CORPORATION
(Exact name of Registrant as specified in its charter)
FLORIDA 59-1797862
(State or other jurisdiction of (IRS Employee Identification Number)
incorporation or organization)
836 PONCE DE LEON BOULEVARD
CORAL GABLES, FLORIDA 33134
(305) 442-2060
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
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 the
filing requirements for at least the past 90 days. Yes X No .
---- ----
As of July 8, 1997, there were 3,478,900 shares of the Registrant's common
stock, par value $.01, outstanding.
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EQUITRAC CORPORATION
INDEX
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
as of May 31, 1997
and February 28, 1997 2
Condensed Statements of Income
for the three months ended
May 31, 1997 and 1996 3
Condensed Statement of
Stockholders' Equity for the
three months ended May 31, 1997 4
Condensed Statements of Cash Flows
for the three months ended
May 31, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EQUITRAC CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1997 1997
------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,645 $ 4,755
Investment securities 3,938 4,817
Accounts receivable, net of allowances of $650 and $550 at
May 31, and February 28, respectively 7,234 6,117
Inventories 2,388 2,483
Deferred income taxes 584 581
Other current assets 347 313
-------- --------
Total current assets 18,136 19,066
Investment securities 1,783 1,330
Property and equipment, net 6,323 6,317
Intangible assets, net 3,959 3,378
Deferred income taxes 365 397
Other assets 203 194
-------- --------
Total assets $ 30,769 $ 30,682
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 767 $ 1,095
Accrued expenses and other current liabilities 3,584 3,930
Unearned income 1,073 882
-------- --------
Total current liabilities 5,424 5,907
-------- --------
Total liabilities 5,424 5,907
-------- --------
Stockholders' equity:
Common stock, $.01 par value; 15,000,000 shares
authorized; 3,829,300 and 3,800,300 shares issued
at May 31, and February 28, respectively 38 38
Additional paid-in capital 10,901 10,741
Retained earnings 16,378 15,672
Cumulative translation adjustment (20) (23)
Unrealized loss on investment securities, net of tax (5) --
Treasury stock, at cost (355,800 and 330,800 shares at May 31,
and February 28, respectively) (1,947) (1,653)
-------- --------
Total stockholders' equity 25,345 24,775
-------- --------
Total liabilities and stockholders' equity $ 30,769 $ 30,682
======== ========
</TABLE>
See accompanying notes.
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EQUITRAC CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except earnings per share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
------------------
1997 1996
----- ----
<S> <C> <C>
Revenues:
Sales $ 5,240 $ 3,965
Service and support 3,902 3,110
Rental 2,588 2,588
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Total revenues 11,730 9,663
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Expenses:
Cost of revenues 4,739 3,554
Product development 773 432
Selling expenses 1,725 1,568
General and administrative 3,488 3,297
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Total expenses 10,725 8,851
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Operating income 1,005 812
Interest income 134 126
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Income before income taxes 1,139 938
Income taxes 433 364
------- -------
Net income $ 706 $ 574
======= =======
Earnings per share $ 0.19 $ 0.16
======= =======
Weighted average common and common equivalent
shares used in per share calculation 3,700 3,516
======= =======
</TABLE>
See accompanying notes.
3
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EQUITRAC CORPORATION
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands, except number of shares)
<TABLE>
<CAPTION>
COMMON UNREALIZED
STOCK AND LOSS ON
ADDITIONAL CUMULATIVE INVESTMENT TOTAL
COMMON PAID-IN RETAINED TRANSLATION SECURITIES, TREASURY STOCKHOLDERS'
SHARES CAPITAL EARNINGS ADJUSTMENT NET OF TAX STOCK EQUITY
------ ------- -------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1997 3,800,300 $ 10,779 $ 15,672 $ (23) $ -- $ (1,653) $ 24,775
Purchase of Treasury
Stock
25,000 Shares -- -- -- -- -- (294) (294)
Unrealized loss on marketable
securities, net of tax -- -- -- -- (5) -- (5)
Translation Adjustment -- -- -- 3 -- -- 3
Exercise of employee
stock options 29,000 160 -- -- -- -- 160
Net income for the three months
ended May 31, 1997 -- -- 706 -- -- -- 706
--------- --------- --------- --------- --------- --------- ---------
Balance, May 31, 1997 3,829,300 $ 10,939 $ 16,378 $ (20) $ (5) $ (1,947) $ 25,345
========= ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
4
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EQUITRAC CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
---------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 706 $ 574
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 714 628
Amortization 338 276
Provision for doubtful accounts 100 --
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable (846) (1,504)
Inventories 121 (315)
Other current assets (6) (49)
Other assets (9) (10)
Increase (decrease) in:
Accounts payable (473) 131
Accrued expenses (345) (184)
Unearned income 69 271
------- -------
Net cash provided by (used in) operating activities 369 (182)
------- -------
Cash flows from investing activities:
Purchases of property and equipment (713) (688)
Acquisitions, principally intangible assets (1,053) (1,834)
Sales and maturities of investment securities 1,278 544
Purchases of investment securities (860) (771)
Decrease in restricted cash -- 1,450
------- -------
Net cash used in investing activities (1,348) (1,299)
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Cash flows from financing activities:
Proceeds from issuance of common stock 160 15
Purchase of treasury stock (294) --
------- -------
Net cash (used in) provided by financing activities (134) 15
------- -------
Exchange rate effect on cash 3 4
------- -------
Net decrease in cash and cash equivalents (1,110) (1,462)
Cash and cash equivalents at beginning of period 4,755 3,581
------- -------
Cash and cash equivalents at end of period $ 3,645 $ 2,119
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 613 $ 550
</TABLE>
Non-cash investing and financing activities during the three months ended
May 31, 1996 included the assumption of a $611,000 liability to fulfill service
contracts in connection with the Infortext Acquisition.
See accompanying notes.
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EQUITRAC CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by the Company, in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the accompanying financial statements
include all adjustments (of a normal recurring nature) which are necessary to
state fairly the results for the interim periods presented. The results for the
three months ended May 31, 1997 are not necessarily indicative of the results to
be expected for the full fiscal year. These unaudited condensed financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Annual Report on Form 10-K for the fiscal year ended
February 28, 1997, filed with the Securities and Exchange Commission.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. REVENUE RECOGNITION
Sales revenue is recognized upon installation and customers' acceptance.
Service and support revenues are recognized ratably over the period in which the
service and support are provided. Rental contract revenue, which includes
service and support on the underlying rental equipment and software, is
recognized ratably over the term of the respective lease.
Rental contracts are accounted for as operating leases.
4. CASH AND CASH EQUIVALENTS
All investments in highly liquid marketable securities with a maturity of
three months or less at the time of purchase are classified as cash equivalents.
5. INVESTMENT SECURITIES
The Company's investment securities consist primarily of municipal bonds,
U.S. Treasury obligations and investment grade corporate bonds with maturities
ranging from one to twenty-one years. These investments are classified as
available-for-sale and are recorded at fair value with unrealized gains and
losses included in stockholders' equity. Interest income is recognized when
earned.
6
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6. INVENTORIES
Inventories comprised primarily of system components, parts and supplies
are carried at the lower of weighted average cost or market. The weighted
average cost of inventories approximates the "first in-first out" (FIFO) method.
7. PROPERTY AND EQUIPMENT
Property and equipment consist primarily of system rental equipment under
operating leases and service equipment used in connection with service
contracts, and are stated at cost less accumulated depreciation. Additions,
major renewals and improvements are capitalized, and repair and maintenance
costs are expensed. Upon retirement or sale, the cost of the assets disposed of
and the related accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the determination of net income. Property
and equipment are depreciated using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized using the
straight-line method over the shorter of the estimated life of the asset or the
remaining term of the lease.
8. PRODUCT DEVELOPMENT COSTS
Product development costs are expensed as incurred.
9. FOREIGN CURRENCY TRANSLATION
Translation of foreign currencies into U.S. dollars is computed for revenue
and expense accounts using average exchange rates during the year. Net assets of
the Company's Canadian operations, whose "functional currency" is the Canadian
dollar are translated at current rates of exchange, with the resulting
translation adjustment recorded directly into a separate component of
stockholders' equity. The functional currency for the Company's other foreign
operations is the U.S. dollar. Net assets of these operations are translated at
current rates of exchange, with the resulting translation gains and losses
included in the statement of income.
10. EARNINGS PER SHARE
Earnings per share (EPS) are based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the year. Common
stock equivalents consist of stock options.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), Earnings Per Share. SFAS
128 specifies new standards designed to improve the earnings per share
information provided in financial statements by simplifying the existing
computational guidelines, revising the disclosure requirements and increasing
the comparability of EPS data on an international basis. Some of the changes
made to simplify the EPS computations include (i) eliminating the presentation
of primary EPS and replacing it with basic EPS, (ii) eliminating the modified
treasury stock method and the three percent materiality provision and (iii)
revising the contingent share provisions and the supplemental EPS data
requirements. SFAS 128 also makes a number of changes to existing disclosure
requirements. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. The Company does not
believe that the adoption of SFAS 128 in fiscal 1998 will have a significant
impact on the Company's reported EPS.
7
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11. ACQUISITIONS
In March 1996, the Company acquired the cost recovery customer base of ISI
Infortext, Inc. (ISI). Pursuant to the acquisition agreement, additional
purchase price consideration of $625,000 was paid to ISI in March 1997. The
Company also repurchased 25,000 shares of Equitrac common stock from ISI at the
fair market value of the shares at the time of repurchase.
Intangible assets recorded in connection with acquisitions represent costs
allocated to specifically identifiable intangible assets and the excess of cost
over the fair value of tangible and identifiable intangible assets arising from
acquisitions ("goodwill"). The costs of all identifiable intangible assets and
goodwill are amortized on a straight-line basis over their respective estimated
useful lives, ranging from three to seven years.
12. CONTINGENCIES
The Company is involved from time to time in legal proceedings incident to
the normal course of its business. Management believes that adverse decisions in
any pending or threatened proceedings would not have a material adverse effect
on the Company's financial positions or results of operations.
13. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with current
year presentation.
14. SUBSEQUENT EVENT
In June 1997, the Company entered into employment agreements with two of
its officers. The term of each agreement expires February 29, 2000. Pursuant to
the agreements, the Company is obligated to pay each of these officers an annual
salary of $340,000, subject to cost-of-living increases. The Company is also
obligated to pay each of these officers post-retirement payments of $100,000 per
year for a period of 10 years after each reaches age 58 1/2.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company's revenues are derived from three principal sources: (1) sales
of new systems, upgrades and add-ons of equipment or software; (2) monthly
revenues from service and software support agreements and (3) monthly revenues
from leases of its systems. The Company offers its customers the option of
purchasing a system or leasing a system pursuant to an operating lease (the term
of which is typically 36 months or longer), which includes all service and
software support. The Company offers its purchase customers service and software
support agreements (the terms of which are typically for 36 months or longer).
Systems that are not purchased in conjunction with a service agreement are
serviced by the Company on a time-and-materials basis. The Company's computer
service division offers its customers service agreements (the terms of which are
typically for 12 months) and also provides service on a time-and-materials
basis.
The following table sets forth, for the periods presented, selected items
from the Condensed Statements of Income as a percentage of total revenues.
PERCENTAGE OF TOTAL REVENUES
FOR THE THREE MONTHS ENDED
MAY 31,
----------------------------
1997 1996
----- -----
Revenues:
Sales 44.7% 41.0%
Service and support 33.2 32.2
Rental 22.1 26.8
----- -----
Total revenues 100.0 100.0
----- -----
Expenses:
Cost of revenues 40.4 36.8
Product development 6.6 4.5
Selling expenses 14.7 16.2
General and administrative 29.7 34.1
----- -----
Total expenses 91.4 91.6
----- -----
Operating income 8.6 8.4
Interest income 1.2 1.3
----- -----
Income before income taxes 9.8 9.7
Income taxes 3.7 3.8
----- -----
Net income 6.1% 5.9%
===== =====
9
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REVENUES
Total revenues for the quarter ended May 31, 1997 increased 21% to
$11,730,000 from $9,663,000 in the same quarter last fiscal year. The Company's
total revenues increased as a result of increases in sales revenues and service
and support revenues. System sales revenues were comprised primarily of revenues
from sales of new systems to existing and acquired customers and, to a lesser
extent, from sales of systems to new customers and sales of add-on equipment to
existing customers. Service and support revenues and rental revenues were
comprised primarily of recurring revenues from existing and acquired service and
lease agreements.
SALES REVENUES. Sales revenues for the quarter ended May 31, 1997 increased
32% to $5,240,000 from $3,965,000 in the same quarter last fiscal year. This
increase resulted primarily from incremental revenues derived from customers
acquired in the Infortext acquisition and an increase in computer equipment
resale revenues from the ECS division. Sales revenues derived from customers
acquired in the Infortext acquisition for the quarter ended May 31, 1997
increased to $856,000 from $357,000 in the same quarter of last fiscal year. ECS
computer equipment resale revenues increased to $726,000 for the quarter ended
May 31, 1997 from $232,000 in the same quarter of last fiscal year.
SERVICE AND SUPPORT REVENUES. Service and support revenues for the quarter
ended May 31, 1997 increased 25% to $3,902,000 from $3,110,000 in the same
quarter last fiscal year. This increase resulted primarily from an increase in
service and support revenues in the Company's previously existing cost recovery
divisions and an increase in service and support revenues generated by the ECS
division. Service and support revenues from the Company's previously existing
cost recovery divisions increased 15% to $2,961,000 for the quarter ended May
31, 1997 from $2,574,000 in the same quarter of last fiscal year. ECS service
and support revenues increased to $528,000 for the quarter ended May 31, 1997
from $148,000 in the same quarter of the last fiscal year, primarily as a result
of signing an agreement with IDEA Corporation to provide on-site warranty
maintenance service on equipment manufactured and sold by IDEA in the United
States and Canada.
RENTAL REVENUES. Rental revenues were $2,588,000 for the quarters ended May
31, 1997 and 1996. As a percentage of total revenues, rental revenues were 22%
for the quarter ended May 31, 1997 compared to 27% in the same quarter last
fiscal year. Management anticipates that rental revenues will decline in future
periods as customer rental contracts expire and customers elect to purchase new
systems and related service contracts rather than enter into new lease
agreements.
EXPENSES
COST OF REVENUES. Cost of revenues is comprised primarily of (i) payroll
and other expenses related to the Company's manufacturing, customer support and
service personnel, (ii) the cost of hardware and other system components
associated with system sales and service and (iii) depreciation of system rental
and service units. Cost of revenues for the quarter ended May 31, 1997 increased
to $4,739,000 from $3,554,000 in the same quarter last fiscal year, primarily as
a result of increased revenues. Cost of revenues as a percentage of total
revenues was 40% for the quarter ended May 31, 1997 compared to 37% in the same
quarter last fiscal year. This increase in cost of revenues resulted primarily
from (i) the higher cost of revenues in the Company's ECS division than in the
cost recovery divisions of the Company and (ii) the higher cost of revenues in
the Company's Infortext Group division compared to the Company's existing cost
recovery
10
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divisions. Management anticipates that the cost of revenues may increase in
future periods, as the Company expands it ECS division into new geographical
territories and to the extent that the ECS division contributes a higher
percentage of the Company's revenues.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses for the quarter
ended May 31, 1997 increased to $773,000 from $432,000 in the same quarter last
fiscal year. Product development expenses as a percentage of total revenues was
6.6% for the quarter ended May 31, 1997 compared to 4.5% for the same quarter
last fiscal year. Current development efforts are focused on enhancing and
expanding the Equitrac and Infortext cost recovery product lines as well as
developing several new products. Products under development during these periods
include (i) Equitrac's Professional Internet Client(TM) (E.P.I.C.), a
full-featured Internet browser designed to control Internet access and track
on-line research and e-mail for billing and management purposes, (ii)
TelemeTrac(TM), a product which collects and consolidateS photocopier meter
totals remotely through cellular telephone networks, (iii) PrintLog(TM), a
digital output tracking application designed to track all pages printed from a
workstation to laser printers and network photocopiers and assign each
transaction to a client, project or department and (iv) OneTrac(TM), an
inexpensive copy and fax control product line developed for resale through both
the Equitrac direct sales force and through copier dealers. Management
anticipates deriving revenues from these products during the second half of
fiscal 1998. The Company does not capitalize any of its software product
development costs since software development costs incurred subsequent to
attainment of technological feasibility of a new product line are not deemed to
be significant; accordingly, product development expenses for each period
include all hardware and software development costs incurred during the period.
Management anticipates that product development costs will increase during
fiscal 1998 compared to respective periods last fiscal year, as the projects
under development are completed and the Company invests in the development of
additional products.
SELLING EXPENSES. Selling expenses for the quarter ended May 31, 1997
increased 10% to $1,725,000 from $1,568,000 last fiscal year, primarily as a
result of increased revenues. Selling expenses as a percentage of total revenues
was 15% for the quarter ended May 31, 1997 compared to 16% for the same quarter
last fiscal year.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the quarter ended May 31, 1997 increased 6% to $3,488,000 from $3,297,000 in
the same quarter last fiscal year. General and administrative expenses as a
percentage of total revenues was 30% for the quarter ended May 31, 1997 compared
to 34% in the same quarter last fiscal year. The decrease in general and
administrative expenses as a percentage of revenues resulted primarily from the
Company's ability to increase revenues without adding a commensurate level of
support and administrative positions.
INTEREST INCOME. The Company's interest income increased to $134,000 during
the quarter ended May 31, 1997 from $126,000 during the same quarter last fiscal
year.
INCOME TAXES. The Company's effective income tax rate was 38% for the
quarter ended May 31, 1997 compared to 39% in the same quarter last fiscal year.
The decrease in the Company's effective tax rate resulted primarily from the
increase in the Company's research and development tax credit due to the
increase in product development expenditures.
11
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LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations over the past several years
principally from cash flow from operations. The Company's cash and cash
equivalents and investment securities decreased to $9,366,000 at May 31, 1997
from $10,902,000 at February 28, 1997. This decrease in cash and cash
equivalents and investment securities resulted primarily from payment of
acquisition obligations. Other significant uses of cash included a payment to
the IRS, as a result of a settlement of prior year income taxes, the liability
for which had been accrued in prior years.
In April 1997, the Board of Directors authorized the Company to spend an
additional $2,500,000 to repurchase shares of the Company's issued and
outstanding common stock, based upon consideration of the Company's current cash
position, management's expectations of future cash flows from operating
activities and the level of cash required to fund future growth opportunities.
Through May 31, 1997, the Company repurchased 355,800 shares of its outstanding
common stock at an aggregate purchase price of $1,947,000. Future purchases will
be made from time to time subject to prevailing market conditions in open market
or privately negotiated transactions.
The Company anticipates that its cash and cash equivalents and marketable
securities and cash flow from operating activities will be adequate to meet the
Company's cash requirements for the foreseeable future.
FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-Q, including statements contained herein
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations", constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements express or implied by such forward-looking statements. Such factors
include, but are not limited to the following: general economic and business
conditions; charges and costs related to acquisitions; and the ability of the
Company to develop and market products for the markets in which it operates, to
successfully integrate its acquired products and services, to adjust to changes
in technology, customer preferences, enhanced competition and new competitors in
the markets in which it operates.
12
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PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits
10.1(e) Employment Agreement, dated as of June 12, 1997
between the Company and John T. Kane
10.1(f) Employment Agreement, dated as of June 12, 1997
between the Company and George P. Wilson
11. Statement of Computation of Earnings per Share
B. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf thereunto duly
authorized.
EQUITRAC CORPORATION
Date: July 14, 1997 By: /s/ GEORGE P. WILSON
-----------------------------------
George P. Wilson
President and Chief
Executive Officer
Date: July 14, 1997 By: /s/ SCOTT J. MODIST
-----------------------------------
Scott J. Modist
Vice President - Finance, Treasurer
and Chief Financial Officer
13
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EXHIBIT 10.1(e)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") dated as of June 12, 1997,
between EQUITRAC CORPORATION, a Florida corporation (the "Company"), and John T.
Kane (the "Executive").
PRELIMINARY STATEMENTS
A. The Executive is currently Chairman of the Board of the Company.
B. The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company has been
substantial and desires to assure the Company of the Executive's continued
employment in an executive capacity and to compensate him therefor.
C. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
D. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth in this Agreement.
2. TERM OF AGREEMENT. Subject to the terms and conditions hereof, the
term of the Executive's employment pursuant to this Agreement (the "Term") shall
commence on the date hereof and shall continue in effect through February 29,
2000; provided, however, that on February 29, 1998 and on the last day of each
February thereafter, the Term automatically shall be extended for an additional
one-year period unless, at least ninety (90) days prior to such date, either
party shall have given written notice to the other stating that the Term shall
not be so extended; provided, further, that notwithstanding the foregoing, if a
Change in Control of the Company (as defined in Section 11 hereof) shall have
occurred prior to the end of the Term as it may be so extended, the Term shall
continue in effect for a period of three years beyond the month in which such
Change of Control of the Company occurred.
3. POSITION AND DUTIES. The Executive shall serve as the Chairman of
the Board of the Company and shall have powers and authority superior to any
other officer or employee of the Company or of any subsidiary of the Company.
The Executive shall also have such other powers and duties as may from time to
time be delegated to him by the Board, provided that such duties are consistent
with his present duties and with the Executive's position. The Executive shall
report to the Board. The Executive shall devote substantially all of his working
time and efforts during normal business hours to the business and affairs of the
Company in substantially the same manner (both as to working time and
<PAGE> 2
effort) as the Executive has devoted to the Company in the past.
4. PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations. The Company shall
not, without the written consent of the Executive, relocate or transfer its
principal executive offices outside Coral Gables, Florida.
5. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. The Executive shall receive a base salary, payable
in substantially equal bi-weekly installments, at the annual rate of at least
$340,000 during each fiscal year during the Term, or such greater amount as
shall be determined by the Compensation Committee ("Compensation Committee") of
the Board or the entire Board, in its sole discretion (the "Base Salary"). On
March 1, 1998 and on each March 1 thereafter (the "Salary Adjustment Date"), the
Executive's then Base Salary shall be adjusted (but not decreased) to reflect
the increase, if any, in the "Consumer Price Index: Dade County, All Items -
Urban Wage Earners and Clerical Workers," published by the Bureau of Labor
Statistics of the United States Department of Labor (the "CPI"), during the most
recent twelve month period prior to the Salary Adjustment Date. In the event
that there is a change in the basis of calculating the CPI, or if a change is
made in the terms or number of items contained in the CPI, or if the CPI is
discontinued, the Company shall, in good faith, designate a substitute index or
formula, and such substitute index or formula shall have the same effect as if
it had been originally designated herein. The Base Salary shall also be
reviewed, at least annually, for merit increases and may, by action and in the
discretion of the Compensation Committee or the Board, be increased at any time
or from time to time. Any increase in the Base Salary or other compensation
granted by the Compensation Committee or the Board shall in no way limit or
reduce any other obligation of the Company under this Agreement and, once
established at an increased specified rate, the Base Salary shall not thereafter
be reduced.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be entitled to receive annual incentive compensation (the "Annual Bonus")
for each fiscal year based upon increases in the Company's Earnings Per Share
and/or Market Price during such fiscal year. The Executive's Annual Bonus for
each fiscal year shall equal the product of (x) the Executive's Base Salary for
the applicable fiscal year, MULTIPLIED BY (y) the greater of (1) the percentage
increase in Earnings Per Share for such fiscal year over Earnings Per Share for
the immediately preceding fiscal year and (2) the percentage increase in the
Market Price as of the end of such fiscal year over the Market Price as of the
end of the immediately preceding fiscal year; provided, however, that in no
event shall any Annual Bonus be payable unless the amount determined in
accordance with clause (y)(1) or (2) is at least fifteen percent (15%), and in
no event shall the Executive's Annual Bonus for any fiscal year exceed one
hundred percent (100%) of his Base Salary for such fiscal year; provided,
further, that if (A) the Earnings Per Share or Market Price for the fiscal year
for which the Annual Bonus is being calculated is higher than the
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Earnings Per Share or Market Price, respectively, for the immediately preceding
fiscal year, and (B) either the Earnings Per Share or Market Price for such
immediately preceding fiscal year was lower than the Earnings Per Share or
Market Price, respectively, in the second preceding fiscal year, then for
purposes of calculating the Executive's Annual Bonus for the current fiscal
year, the higher Earnings Per Share or Market Price, if applicable, for the
second preceding fiscal year shall be used in lieu of the Earnings Per Share or
Market Price, as the case may be, for the immediately preceding fiscal year.
Except as otherwise provided herein, the amount of Annual Bonus payable
with respect to any fiscal year (net of any tax or other amount properly
withheld therefrom) shall be paid by the Company to the Executive within one
hundred twenty (120) days after the end of the fiscal year; provided, however,
that any amount paid shall be subject to increase or decrease based upon the
results of any audited financial statements with respect to such year.
For purposes of this Section 5(b):
(i) the term "Earnings Per Share" shall mean the earnings per
share of the Company as determined in accordance with generally accepted
accounting principles, consistently applied with the Company's past practices,
and as reflected in the Company's audited financial statements for the relevant
fiscal year; and
(ii) the term "Market Price" shall mean, for any fiscal year, the
average of the Closing Prices (as hereinafter defined) of a share of the
Company's Common Stock during the twenty trading days immediately preceding the
end of such; the "Closing Price" of the Common Stock on any trading day shall be
(A) if the Common Stock is listed or admitted for trading on any United States
national securities exchange, or if actual transactions are otherwise reported
on a consolidated transaction reporting system, the last reported sale price of
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (B) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("Nasdaq"), or any
similar system of automated dissemination of quotations of securities prices in
common use, the mean between the closing high bid and low asked quotations for
such day of Common Stock on such system, or (C) if neither clause (A) or (B) is
applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated.
(c) EXPENSES. During the Term, the Company, upon the submission of
supporting documentation by the Executive, shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive in the course of
and pursuant to the business of the Company, including expenses for travel and
entertainment.
(d) OTHER BENEFITS. The Company shall not make any changes in any
employee benefit plans or arrangements in effect on the date of this Agreement
in which the Executive participates, (including without limitation, to the
extent in effect, each pension and retirement plan, supplemental pension and
retirement plan, savings and profit sharing plan, life insurance policies,
officers and directors policies, stock option plan, life insurance plan, medical
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and health insurance plan, disability plan, dental plan, health-and-accident
plan or, similar plans or arrangements) which would adversely affect the
Executive's rights or benefits thereunder, unless such change occurs pursuant to
an amendment applicable to all senior executives and/or employees of the Company
and does not result in a proportionately greater reduction in the rights of or
benefits to the Executive as compared with any other senior executives and/or
employees of the Company. The Executive shall be entitled to participate in or
receive benefits under any employee benefit plan or arrangement made available
by the Company in the future to its executives and key management employees,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plan or arrangement. Nothing paid to the Executive under
any plan or arrangement presently in effect or made available in the future
shall be deemed to be in lieu of the Base Salary or any other obli gation
payable to the Executive pursuant to this Agreement.
(e) VACATION. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers, but not less than one month in any calendar
year (prorated in any calendar year during which the Executive is employed under
this Agreement for less than the entire such year in accordance with the number
of days in such calendar year during which he is so employed). The Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
(f) PERQUISITES AND FRINGE BENEFITS. The Executive shall be entitled
to continue to receive all perquisites and fringe benefits provided or available
to senior executive officers of the Company in accordance with present practice
and as may be changed from time to time with respect to all senior executive
officers of the Company.
6. WORKING FACILITIES. The Company shall furnish the Executive with an
office, a secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
7. RESTRICTIVE COVENANTS.
(a) NO MATERIAL COMPETITION. The Executive agrees that at no time
during the Term or, for a period of one year immediately following any
termination of this Agreement, other than a termination by the Executive for
Good Reason (as hereinafter defined) or a termination by the Company without
Cause (as hereinafter defined), will he, for himself or on behalf of any other
person, persons, firm, partnership, corporation or company, engage, directly or
indirectly, in any business if, within 30 days of the Executive advising the
Company in writing of his proposed business activity, the Board determines in
good faith that such proposed business activity is directly competitive with a
material part of the business of the Company and its subsidiaries (in the
aggregate) and such competitive business activity is likely to affect in an
adverse manner the business, sales, profits or financial condition of the
Company.
(b) UNAUTHORIZED DISCLOSURE. During the period of his employment
under this Agreement, the Executive shall not, without the written consent of
the Board or a person
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authorized thereby, disclose to any person, other than an employee of the
Company (or its subsidiaries) or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by the Executive of
his duties as an executive of the Company, any confidential information obtained
by him while in the employ of the Company with respect to any of the Company's
customers, suppliers, creditors, lenders, investment bankers, methods of
distribution or methods of marketing, the disclosure of which he knows will be
damaging to the Company; provided, however, that confidential information shall
not include any information known generally to the public (other than as a
result of unauthorized disclosure by the Executive) or any information of a type
not otherwise considered confidential by persons engaged in the same business or
a business similar to that conducted by the Company. For the period ending one
year following any termination of this Agreement, the Executive shall not
disclose any confidential information of the type described above.
(c) NONSOLICITATION OF EMPLOYEES. While employed by the Company and
for a period of one year thereafter, the Executive shall not directly or
indirectly, for himself or for any other person, firm, corporation, partnership,
association or other entity, attempt to employ or enter into any contractual
arrangement with any employee or former employee of the Company, unless such
employee or former employee has not been employed by the Company for a period in
excess of six months.
(d) BOOKS AND RECORDS. All books, records, accounts and similar
repositories of confidential information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of this Agreement or on the Board's request at any time.
(e) INJUNCTION. It is recognized and hereby acknowledged by the
Company and the Executive that a breach by the Executive of any of the
agreements contained in this Section 7 may cause irreparable harm or damage to
the Company, or its subsidiaries, the monetary amount of which may be virtually
impossible to ascertain. As a result, the Executive and the Company agree that
the Company and any of its subsidiaries shall be entitled to an injunction
issued by any court of competent jurisdiction enjoining and restraining any and
all violations of such agreements by the Executive or his associates,
affiliates, partners or agents, and that such right to an injunction shall be
cumulative and in addition to whatever other remedies the Company may possess.
(f) CERTAIN PROVISIONS. The limitations of Section 7(a) shall
terminate if upon termination of this Agreement for any reason the Company does
not fulfill its obligations as required by Section 9 hereof; however, such
termination shall not affect the rights of the Executive to receive all
payments, undiminished in any way, provided by such Section 9. The provisions of
Section 7 shall apply during the time the Executive is receiving any payments
from the Company as a result of a termination resulting from Disability.
8. TERMINATION. The Executive's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
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(a) DEATH. The Executive's employment under this Agreement shall
terminate automatically upon his death.
(b) DISABILITY. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from the
performance of his duties under this Agreement for six consecutive months during
any calendar year, and within 30 days after written notice of termination is
given (which notice may only be given after the end of such six-month period),
the Executive shall not have returned to the performance of his duties under
this Agreement, the Company may terminate the Executive's employment under this
Agreement for "Disability."
(c) CAUSE. The Company may terminate the Executive's employment
under this Agreement for Cause. For purposes of this Agreement, the term "Cause"
shall mean (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or from the termination of this Agreement by the Executive for Good
Reason), after a demand for substantial performance is delivered to the
Executive by the Company specifically identifying the manner in which the
Company believes the Executive has not substantially performed his duties, and
the Executive shall have failed to resume substantial performance of such duties
within thirty (30) days of receiving such demand, (ii) the willful engaging by
the Executive in criminal conduct (including embezzlement and criminal fraud)
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, or (iii) the conviction of the Executive of a felony or the
conviction of the Executive of a misdemeanor which impairs the Executive's
ability substantially to perform his duties with the Company. For purposes of
this paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding anything herein to the contrary, the
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the members of
the Board then in office (other than the Executive) at a meeting of the Board
called and held for such purpose (after reasonable notice to the Executive and
an opportunity for him, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in clause (i), (ii) or (iii), above, and specifying
the particulars thereon in detail.
(d) TERMINATION BY THE EXECUTIVE; RETIREMENT. The Executive may
terminate his employment under this Agreement (i) for Good Reason or (ii) if his
health should become impaired to any extent that makes the continued performance
of his duties under this Agreement hazardous to his physical or mental health or
his life, provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that at the Company's request and expense the Executive shall submit to an
examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor. In addition, at any time
after the Executive reaches age 55,
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he shall have the right to terminate his employment under this Agreement due to
his decision to retire from active and continued employment with the Company
("Retirement"). If the Executive elects to retire prior to reaching age 58 1/2,
the Executive, until he reaches age 58 1/2, agrees to provide the Company on a
consulting basis such advice and assistance concerning the business and
operations of the Company as the Company may request from time to time (the
"Consulting Services"). In connection with any Consulting Services, the
Executive shall use his best efforts to give the Company the benefit of his
special knowledge, skill and business expertise to the extent relevant to the
Company's business and operations. To the extent the Executive provides any
Consulting Services following his Retirement, the Company shall compensate the
Executive for such Consulting Services at the rate of $300 per hour.
For purposes of this Agreement the term "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any one or
more of the following: (i) the assignment to the Executive of any duties or
reporting obligations other than those contemplated by, or any limitation of the
powers of the Executive in any respect not contemplated by, Section 3 hereof, or
any other action by the Company which results in a diminution in the nature or
status Executive's position, authority, duties or responsibilities; (ii) a
reduction by the Company in the Executive's Base Salary as the same shall be
increased from time to time; (iii) the Company's requiring the Executive to be
based at a location in excess of forty-five miles from the location where he is
currently based; (iv) a failure by the Company to comply with its material
obligations and agreements contained herein, including but not limited to any
failure by the Company to comply with any of the provisions of Section 5 hereof;
(v) a failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 10(c) hereof; or (vi) any purported termination by the
Company of the Executive's employment that is not effected pursuant to a Notice
of Termination satisfying the requirements of subsection 8(e) hereof, and for
purposes of this Agreement, no such termination shall be effective.
The Executive's right to terminate his employment for Good Reason or
Retirement shall not be affected by his incapacity due to physical or mental
illness, nor shall the Executive's continued employment constitute consent to,
or a waiver of rights with respect to, any circumstances constituting Good
Reason hereunder. With respect to the matters set forth in clauses (i), (ii) and
(iii), above, the Executive must give the Company thirty (30) days prior written
notice of his intent to terminate this Agreement as a result of any breach or
alleged breach of the applicable provision and the Company shall have the right
to cure any such breach or alleged breach within such 30-day period; provided,
that no such prior written notice or opportunity to cure shall be required
following a Change in Control of the Company.
(e) NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 8(a), above) shall be communicated by written Notice of Termination
to the other party hereto given in accordance with Section 13. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. The
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failure by the Executive to set forth in any Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from asserting such
fact or circumstance in enforcing his rights hereunder.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties during such thirty (30) day period),
(iii) if the Executive's employment is terminated by the Company for Cause, the
date specified in the Notice of Termination after the expiration of any cure
periods, (iv) if the Executive's employment is terminated as a result of his
Retirement, the date set forth in the Executive's Notice of Termination (but not
beyond the then expiration date of the Term), and (v) if the Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given after the expiration of any cure periods; provided, that if
within thirty (30) days after any Notice of Termination one party notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date finally determined to be the Date of Termination,
either by mutual written agreement of the parties or by a binding and final
arbitration award or an adjudication by a court of competent jurisdiction.
9. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DEATH. If the Executive's employment shall be terminated by
reason of his death, the Company shall pay to such person as the Executive shall
have designated in a notice filed with the Company, or, if no such person shall
have been designated, to his estate, (i) any unpaid amounts of his Base Salary
or Annual Bonus accrued prior to the date of his death and (ii) in addition to
any payments the Executive's spouse, beneficiaries or estate may be entitled to
receive pursuant to any pension or employee benefit plan, life insurance policy
or other plan, program or policy then maintained or provided by the Company, or
any other agreement between the Executive and the Company, a lump sum death
benefit equal to the sum of the Executive's then current Base Salary and most
recent Annual Bonus; and upon making such payments, the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of the Executive's death pursuant
to Section 5(c)).
(b) DISABILITY. During any period that the Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his full Base Salary until the
Executive's employment is terminated pursuant to Section 8(b) hereof, or until
the Executive terminates his employment pursuant to Section 8(d)(iii) hereof,
whichever first occurs. The Executive shall be paid in equal monthly
installments an amount equal to his Base Salary at the rate in effect at the
time Notice of Termination is given until the later of one year after
termination of his employment or the expiration of the Term (as in effect on the
date of termination), plus any disability payments otherwise payable by or
pursuant to plans provided by the Company. Thereafter, the Executive shall
receive the payments that would have been made to the Executive pursuant to
Section 9(d) had the Executive terminated his employment due to Retirement.
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(c) CAUSE; OTHER THAN FOR GOOD REASON OR RETIREMENT. If the
Executive's employment shall be terminated by the Company for Cause, or by the
Executive for other than Good Reason or Retirement, the Company shall pay the
Executive his full Base Salary and accrued vacation pay through the Date of
Termination at the rate in effect at the time Notice of Termination is given (or
on the Date of Termination if no Notice of Termination is required hereunder)
plus all other amounts to which the Executive is entitled under any plan,
program, policy or practice of the Company or otherwise at the time such
payments are due and such payments shall, assuming the Company is in compliance
with the provisions of this Agreement, fully discharge the Company's obligations
hereunder.
(d) RETIREMENT. If the Executive's employment shall be terminated by
reason of his Retirement, in addition to any payments the Executive's spouse,
beneficiaries or estate may be entitled to receive pursuant to any pension or
employee benefit plan, life insurance policy or other plan, program or policy
then maintained or provided by the Company, or any other agreement between the
Executive and the Company, the Company shall pay to the Executive or (if the
Executive shall thereafter die) to such person as the Executive shall have
designated in a notice filed with the Company (or, if no such person shall have
been designated, to his estate), an amount equal to One Hundred Thousand Dollars
($100,000) per calendar year, for a period of ten (10) years commencing on the
date that the Executive reaches (or would have reached) age 58 1/2.
(e) GOOD REASON; OTHER THAN CAUSE OR DISABILITY.
(i) PRIOR TO CHANGE IN CONTROL. If, prior to the occurrence of a
Change in Control of the Company, the Company shall terminate the Executive's
employment other than for Cause or Disability (it being understood that a
purported termination for Cause or Disability which is disputed and finally
determined not to have been proper shall be a termination by the Company in
breach of this Agreement), or the Executive shall terminate his employment for
Good Reason, then the Company shall pay the Executive, not later than the fifth
day following the Date of Termination, the aggregate of the following amounts:
(A) his full Base Salary and accrued vacation pay through the Date
of Termination at the rate in effect at the time Notice of Termination is
given, or the Date of Termination where no Notice of Termination is
required hereunder, and any other amounts to which the Executive is
entitled under any plan, policy, practice or program of the Company or
otherwise at the time such payments are due;
(B) the product of (x) the Executive's most recent Annual Bonus (the
"Recent Bonus"), times (y) a fraction, the numerator of which is the number
of days in the current fiscal year through the Date of Termination and the
denominator of which is 365;
(C) in lieu of any further salary or bonus payments to the Executive
for periods subsequent to the Date of Termination, and as a severance
benefit to the Executive, a lump sum amount equal to two times the
Executive's annual Base Salary in
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effect immediately prior to the occurrence of the circumstances giving rise
to such termination; and
(D) commencing on the date two years after the Date of Termination,
the payments that would have been made to the Executive pursuant to Section
9(d) had the Executive terminated his employment due to Retirement on such
date.
(ii) FOLLOWING CHANGE IN CONTROL. If, following a Change in
Control of the Company, the Company shall terminate the Executive's employment
other than for Cause or Disability (it being understood that a purported
termination for Cause or Disability which is disputed and finally determined not
to have been proper shall be a termination by the Company in breach of this
Agreement), or the Executive shall terminate his employment for Good Reason,
then the Company shall pay the Executive, not later than the fifth day following
the Date of Termination, the aggregate of the following amounts:
(A) his full Base Salary and accrued vacation pay through the Date
of Termination at the rate in effect at the time Notice of Termination is
given, or the Date of Termination where no Notice of Termination is
required hereunder, and any other amounts which the Executive is entitled
under any plan, policy, practice or program of the Company or otherwise at
the time such payment is due;
(B) the product of (x) the Recent Bonus, times (y) a fraction, the
numerator of which is the number of days in the current fiscal year through
the Date of Termination and the denominator of which is 365;
(C) in lieu of any further salary or bonus payments to the Executive
for periods subsequent to the Date of Termination, and as a severance
benefit to the Executive, a lump sum amount equal to three times the
Executive's annual Base Salary in effect immediately prior to the
occurrence of the circumstances giving rise to such termination or, if
greater, at the time of the Change in Control, plus three times the Recent
Bonus; and
(D) commencing on the date two years after the Date of Termination,
the payments that would have been made to the Executive pursuant to Section
9(d) had the Executive terminated his employment due to Retirement on such
date.
(f) MAINTENANCE OF BENEFIT. Unless the Executive is terminated for
Cause, the Company shall maintain in full force and effect, for the continued
benefit of the Executive and/or his family for two (2) years after termination
for any reason, all employee medical, health and hospitalization plans and
programs in which the Executive and/or his family was entitled to participate in
immediately prior to the Date of Termination provided that the continued
participation of the Executive and/or his family is possible under the general
terms and provisions of such plans and programs. In the event that the
participation of the Executive and/or his family in any such plan or program is
barred, the Company shall arrange to provide the Executive and/or his family
with benefits substantially similar to those which the Executive and/or his
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family would otherwise have been entitled to receive under such plans and
programs from which his or their continued participation is barred.
(g) FULL SETTLEMENT. The Company's obligation to make the payments
provided for herein and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others,
except claims in respect of the Executive's gross negligence, wilful misconduct
or violation of any applicable law. The Executive shall not be required to
mitigate the amount of any payment provided for in Section 9 hereof by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in Section 9 hereof be reduced by any compensation earned by the Executive as
the result of employment by another employer or business, by profits earned by
the Executive from any source at any time before or after the Date of
Termination, or otherwise. Unless the Executive is found by a court of competent
jurisdiction to have committed an act that constitutes wilful misconduct or a
violation of applicable law, the Company agrees to pay, to the fullest extent
permitted by law, all legal fees and expenses incurred by the Executive as a
result of any contest or dispute (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement, or by the Executive in seeking to obtain or enforce
any right or benefit provided by this Agreement (including the amount of any
payment pursuant to Section 9 hereof or the validity of any purported
termination by the Company hereunder).
(h) LIMITATION ON CERTAIN PAYMENTS. Notwithstanding anything herein
to the contrary, in the event that the Executive shall become entitled to
payments pursuant to Section 9(d)(ii) hereof ("Change of Control Payments"), if
the value of the Change of Control Payments plus any other amount that is paid
or distributed or distributable to the Executive would constitute an excess
parachute payment under Section 280G of the Code, the amount payable or
distributable to or for the benefit of the Executive hereunder shall be reduced
to the Alternate Payment. The "Alternate Payment" shall be an amount expressed
in present value which maximizes the aggregate present value of the amounts
payable or distributable to the Executive hereunder without causing any such
amounts to be nondeductible by the Company pursuant to Section 280G of the Code.
The value of the Change of Control Payments shall be determined in accordance
with temporary or final regulations, if any, promulgated under Section 280G of
the Code and based upon the advice of counsel selected by the Company's
independent auditors. The value of any noncash benefit or any deferred payment
or benefit shall be determined in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
10. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
other than by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforce able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If the
Executive should die while any amounts would still be payable to him hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the
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Executive's personal or legal representatives or, if there be no such persons,
the Executive's estate.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers an assumption and agreement provided for
in this Section 10(c) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, or otherwise.
11. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a
"Change in Control of the Company" shall mean and be deemed to have occurred if:
(i) any person, entity or "group", within the meaning of Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than (A) the Company, its subsidiaries or any employee
benefit plan established and maintained by the Company or its subsidiaries, or
(B) John T. Kane or George P. Wilson, or any affiliate of either of the
foregoing individuals, becomes the "beneficial owner" (within the meaning of
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing forty percent (40%) or more of the
combined voting power of the Company's then outstanding securities; or
(ii) individuals who, as of the date hereof constitute the Board
(as of the date hereof, the "Incumbent Board") cease for any reason to
constitute a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than the election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the Incumbent
Board.
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12. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Except as herein specifically provided, amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its subsidiaries at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
13. NOTICE. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
----------------------------
----------------------------
If to the Company: Equitrac Corporation
836 Ponce de Leon Blvd
Coral Gables, Florida 33134
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
14. MISCELLANEOUS.
(a) This Agreement has been approved by the Board. No provisions of
this Agreement may be modified, waived or discharged unless such modification,
waiver or discharge is agreed to in a writing signed by the Executive and such
officer as may be specifically designed by the Board.
(b) The failure by either party hereto to insist upon compliance
with any condition or provision of this Agreement shall not be deemed a waiver
of such condition or provision or any other provision hereof.
(c) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and this Agreement
supersedes any other employment agreement between the Company and the Executive.
(d) The Company may withhold from any accounts payable under this
Agreement all Federal, State or other taxes as legally shall be required.
(e) The validity, interpretation, construction and performance of
this
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Agreement shall be governed by the laws of the State of Florida, without
reference to principles of conflicts of laws.
(f) The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement as of the date and year first above written.
EQUITRAC CORPORATION
By:
------------------------------------
Title:
Executive
-----------------------------------------
John T. Kane
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<PAGE> 1
EXHIBIT 10.1(f)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") dated as of June 12, 1997,
between EQUITRAC CORPORATION, a Florida corporation (the "Company"), and George
P. Wilson (the "Executive").
PRELIMINARY STATEMENTS
A. The Executive is currently President and Chief Executive Officer of
the Company.
B. The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company has been
substantial and desires to assure the Company of the Executive's continued
employment in an executive capacity and to compensate him therefor.
C. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
D. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth in this Agreement.
2. TERM OF AGREEMENT. Subject to the terms and conditions hereof, the
term of the Executive's employment pursuant to this Agreement (the "Term") shall
commence on the date hereof and shall continue in effect through February 29,
2000; provided, however, that on February 29, 1998 and on the last day of each
February thereafter, the Term automatically shall be extended for an additional
one-year period unless, at least ninety (90) days prior to such date, either
party shall have given written notice to the other stating that the Term shall
not be so extended; provided, further, that notwithstanding the foregoing, if a
Change in Control of the Company (as defined in Section 11 hereof) shall have
occurred prior to the end of the Term as it may be so extended, the Term shall
continue in effect for a period of three years beyond the month in which such
Change of Control of the Company occurred.
3. POSITION AND DUTIES. The Executive shall serve as the President and
Chief Executive Officer of the Company and shall have powers and authority
superior to any other officer or employee of the Company or of any subsidiary of
the Company other than the Chairman of the Board. The Executive shall also have
such other powers and duties as may from time to time be delegated to him by the
Board, provided that such duties are consistent with his present duties and with
the Executive's position. The Executive shall report to the Chairman of
<PAGE> 2
the Board. The Executive shall devote substantially all of his working time and
efforts during normal business hours to the business and affairs of the Company
in substantially the same manner (both as to working time and effort) as the
Executive has devoted to the Company in the past.
4. PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations. The Company shall
not, without the written consent of the Executive, relocate or transfer its
principal executive offices outside Coral Gables, Florida.
5. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. The Executive shall receive a base salary, payable
in substantially equal bi-weekly installments, at the annual rate of at least
$340,000 during each fiscal year during the Term, or such greater amount as
shall be determined by the Compensation Committee ("Compensation Committee") of
the Board or the entire Board, in its sole discretion (the "Base Salary"). On
March 1, 1998 and on each March 1 thereafter (the "Salary Adjustment Date"), the
Executive's then Base Salary shall be adjusted (but not decreased) to reflect
the increase, if any, in the "Consumer Price Index: Dade County, All Items -
Urban Wage Earners and Clerical Workers," published by the Bureau of Labor
Statistics of the United States Department of Labor (the "CPI"), during the most
recent twelve month period prior to the Salary Adjustment Date. In the event
that there is a change in the basis of calculating the CPI, or if a change is
made in the terms or number of items contained in the CPI, or if the CPI is
discontinued, the Company shall, in good faith, designate a substitute index or
formula, and such substitute index or formula shall have the same effect as if
it had been originally designated herein. The Base Salary shall also be
reviewed, at least annually, for merit increases and may, by action and in the
discretion of the Compensation Committee or the Board, be increased at any time
or from time to time. Any increase in the Base Salary or other compensation
granted by the Compensation Committee or the Board shall in no way limit or
reduce any other obligation of the Company under this Agreement and, once
established at an increased specified rate, the Base Salary shall not thereafter
be reduced.
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be entitled to receive annual incentive compensation (the "Annual Bonus")
for each fiscal year based upon increases in the Company's Earnings Per Share
and/or Market Price during such fiscal year. The Executive's Annual Bonus for
each fiscal year shall equal the product of (x) the Executive's Base Salary for
the applicable fiscal year, MULTIPLIED BY (y) the greater of (1) the percentage
increase in Earnings Per Share for such fiscal year over Earnings Per Share for
the immediately preceding fiscal year and (2) the percentage increase in the
Market Price as of the end of such fiscal year over the Market Price as of the
end of the immediately preceding fiscal year; provided, however, that in no
event shall any Annual Bonus be payable unless the amount determined in
accordance with clause (y)(1) or (2) is at least fifteen percent (15%), and in
no event shall the Executive's Annual Bonus for any fiscal year exceed one
hundred percent (100%) of his Base Salary for such fiscal year; provided,
further, that if (A) the Earnings Per Share or
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<PAGE> 3
Market Price for the fiscal year for which the Annual Bonus is being calculated
is higher than the Earnings Per Share or Market Price, respectively, for the
immediately preceding fiscal year, and (B) either the Earnings Per Share or
Market Price for such immediately preceding fiscal year was lower than the
Earnings Per Share or Market Price, respectively, in the second preceding fiscal
year, then for purposes of calculating the Executive's Annual Bonus for the
current fiscal year, the higher Earnings Per Share or Market Price, if
applicable, for the second preceding fiscal year shall be used in lieu of the
Earnings Per Share or Market Price, as the case may be, for the immediately
preceding fiscal year.
Except as otherwise provided herein, the amount of Annual Bonus payable
with respect to any fiscal year (net of any tax or other amount properly
withheld therefrom) shall be paid by the Company to the Executive within one
hundred twenty (120) days after the end of the fiscal year; provided, however,
that any amount paid shall be subject to increase or decrease based upon the
results of any audited financial statements with respect to such year.
For purposes of this Section 5(b):
(i) the term "Earnings Per Share" shall mean the earnings per
share of the Company as determined in accordance with generally accepted
accounting principles, consistently applied with the Company's past practices,
and as reflected in the Company's audited financial statements for the relevant
fiscal year; and
(ii) the term "Market Price" shall mean, for any fiscal year, the
average of the Closing Prices (as hereinafter defined) of a share of the
Company's Common Stock during the twenty trading days immediately preceding the
end of such; the "Closing Price" of the Common Stock on any trading day shall be
(A) if the Common Stock is listed or admitted for trading on any United States
national securities exchange, or if actual transactions are otherwise reported
on a consolidated transaction reporting system, the last reported sale price of
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (B) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("Nasdaq"), or any
similar system of automated dissemination of quotations of securities prices in
common use, the mean between the closing high bid and low asked quotations for
such day of Common Stock on such system, or (C) if neither clause (A) or (B) is
applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated.
(c) EXPENSES. During the Term, the Company, upon the submission of
supporting documentation by the Executive, shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive in the course of
and pursuant to the business of the Company, including expenses for travel and
entertainment.
(d) OTHER BENEFITS. The Company shall not make any changes in any
employee benefit plans or arrangements in effect on the date of this Agreement
in which the Executive participates, (including without limitation, to the
extent in effect, each pension and retirement plan, supplemental pension and
retirement plan, savings and profit sharing plan, life
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<PAGE> 4
insurance policies, officers and directors policies, stock option plan, life
insurance plan, medical and health insurance plan, disability plan, dental plan,
health-and-accident plan or, similar plans or arrangements) which would
adversely affect the Executive's rights or benefits thereunder, unless such
change occurs pursuant to an amendment applicable to all senior executives
and/or employees of the Company and does not result in a proportionately greater
reduction in the rights of or benefits to the Executive as compared with any
other senior executives and/or employees of the Company. The Executive shall be
entitled to participate in or receive benefits under any employee benefit plan
or arrangement made available by the Company in the future to its executives and
key management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plan or arrangement. Nothing paid
to the Executive under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of the Base Salary or any
other obli gation payable to the Executive pursuant to this Agreement.
(e) VACATION. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers, but not less than one month in any calendar
year (prorated in any calendar year during which the Executive is employed under
this Agreement for less than the entire such year in accordance with the number
of days in such calendar year during which he is so employed). The Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
(f) PERQUISITES AND FRINGE BENEFITS. The Executive shall be entitled
to continue to receive all perquisites and fringe benefits provided or available
to senior executive officers of the Company in accordance with present practice
and as may be changed from time to time with respect to all senior executive
officers of the Company.
6. WORKING FACILITIES. The Company shall furnish the Executive with an
office, a secretary and such other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
7. RESTRICTIVE COVENANTS.
(a) NO MATERIAL COMPETITION. The Executive agrees that at no time
during the Term or, for a period of one year immediately following any
termination of this Agreement, other than a termination by the Executive for
Good Reason (as hereinafter defined) or a termination by the Company without
Cause (as hereinafter defined), will he, for himself or on behalf of any other
person, persons, firm, partnership, corporation or company, engage, directly or
indirectly, in any business if, within 30 days of the Executive advising the
Company in writing of his proposed business activity, the Board determines in
good faith that such proposed business activity is directly competitive with a
material part of the business of the Company and its subsidiaries (in the
aggregate) and such competitive business activity is likely to affect in an
adverse manner the business, sales, profits or financial condition of the
Company.
(b) UNAUTHORIZED DISCLOSURE. During the period of his employment
under this
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<PAGE> 5
Agreement, the Executive shall not, without the written consent of the Board or
a person authorized thereby, disclose to any person, other than an employee of
the Company (or its subsidiaries) or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by the Executive of
his duties as an executive of the Company, any confidential information obtained
by him while in the employ of the Company with respect to any of the Company's
customers, suppliers, creditors, lenders, investment bankers, methods of
distribution or methods of marketing, the disclosure of which he knows will be
damaging to the Company; provided, however, that confidential information shall
not include any information known generally to the public (other than as a
result of unauthorized disclosure by the Executive) or any information of a type
not otherwise considered confidential by persons engaged in the same business or
a business similar to that conducted by the Company. For the period ending one
year following any termination of this Agreement, the Executive shall not
disclose any confidential information of the type described above.
(c) NONSOLICITATION OF EMPLOYEES. While employed by the Company and
for a period of one year thereafter, the Executive shall not directly or
indirectly, for himself or for any other person, firm, corporation, partnership,
association or other entity, attempt to employ or enter into any contractual
arrangement with any employee or former employee of the Company, unless such
employee or former employee has not been employed by the Company for a period in
excess of six months.
(d) BOOKS AND RECORDS. All books, records, accounts and similar
repositories of confidential information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of this Agreement or on the Board's request at any time.
(e) INJUNCTION. It is recognized and hereby acknowledged by the
Company and the Executive that a breach by the Executive of any of the
agreements contained in this Section 7 may cause irreparable harm or damage to
the Company, or its subsidiaries, the monetary amount of which may be virtually
impossible to ascertain. As a result, the Executive and the Company agree that
the Company and any of its subsidiaries shall be entitled to an injunction
issued by any court of competent jurisdiction enjoining and restraining any and
all violations of such agreements by the Executive or his associates,
affiliates, partners or agents, and that such right to an injunction shall be
cumulative and in addition to whatever other remedies the Company may possess.
(f) CERTAIN PROVISIONS. The limitations of Section 7(a) shall
terminate if upon termination of this Agreement for any reason the Company does
not fulfill its obligations as required by Section 9 hereof; however, such
termination shall not affect the rights of the Executive to receive all
payments, undiminished in any way, provided by such Section 9. The provisions of
Section 7 shall apply during the time the Executive is receiving any payments
from the Company as a result of a termination resulting from Disability.
8. TERMINATION. The Executive's employment under this Agreement may be
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terminated without any breach of this Agreement only on the following
circumstances:
(a) DEATH. The Executive's employment under this Agreement shall
terminate automatically upon his death.
(b) DISABILITY. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from the
performance of his duties under this Agreement for six consecutive months during
any calendar year, and within 30 days after written notice of termination is
given (which notice may only be given after the end of such six-month period),
the Executive shall not have returned to the performance of his duties under
this Agreement, the Company may terminate the Executive's employment under this
Agreement for "Disability."
(c) CAUSE. The Company may terminate the Executive's employment
under this Agreement for Cause. For purposes of this Agreement, the term "Cause"
shall mean (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or from the termination of this Agreement by the Executive for Good
Reason), after a demand for substantial performance is delivered to the
Executive by the Company specifically identifying the manner in which the
Company believes the Executive has not substantially performed his duties, and
the Executive shall have failed to resume substantial performance of such duties
within thirty (30) days of receiving such demand, (ii) the willful engaging by
the Executive in criminal conduct (including embezzlement and criminal fraud)
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, or (iii) the conviction of the Executive of a felony or the
conviction of the Executive of a misdemeanor which impairs the Executive's
ability substantially to perform his duties with the Company. For purposes of
this paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding anything herein to the contrary, the
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the members of
the Board then in office (other than the Executive) at a meeting of the Board
called and held for such purpose (after reasonable notice to the Executive and
an opportunity for him, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in clause (i), (ii) or (iii), above, and specifying
the particulars thereon in detail.
(d) TERMINATION BY THE EXECUTIVE; RETIREMENT. The Executive may
terminate his employment under this Agreement (i) for Good Reason or (ii) if his
health should become impaired to any extent that makes the continued performance
of his duties under this Agreement hazardous to his physical or mental health or
his life, provided that the Executive shall have furnished the Company with a
written statement from a qualified doctor to such effect and provided, further,
that at the Company's request and expense the Executive shall submit to an
examination by a doctor selected by the Company and such doctor shall have
concurred in the
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conclusion of the Executive's doctor. In addition, at any time after the
Executive reaches age 55, he shall have the right to terminate his employment
under this Agreement due to his decision to retire from active and continued
employment with the Company ("Retirement"). If the Executive elects to retire
prior to reaching age 58 1/2, the Executive, until he reaches age 58 1/2, agrees
to provide the Company on a consulting basis such advice and assistance
concerning the business and operations of the Company as the Company may request
from time to time (the "Consulting Services"). In connection with any Consulting
Services, the Executive shall use his best efforts to give the Company the
benefit of his special knowledge, skill and business expertise to the extent
relevant to the Company's business and operations. To the extent the Executive
provides any Consulting Services following his Retirement, the Company shall
compensate the Executive for such Consulting Services at the rate of $300 per
hour.
For purposes of this Agreement the term "Good Reason" shall mean,
without the Executive's express written consent, the occurrence of any one or
more of the following: (i) the assignment to the Executive of any duties or
reporting obligations other than those contemplated by, or any limitation of the
powers of the Executive in any respect not contemplated by, Section 3 hereof, or
any other action by the Company which results in a diminution in the nature or
status Executive's position, authority, duties or responsibilities; (ii) a
reduction by the Company in the Executive's Base Salary as the same shall be
increased from time to time; (iii) the Company's requiring the Executive to be
based at a location in excess of forty-five miles from the location where he is
currently based; (iv) a failure by the Company to comply with its material
obligations and agreements contained herein, including but not limited to any
failure by the Company to comply with any of the provisions of Section 5 hereof;
(v) a failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 10(c) hereof; or (vi) any purported termination by the
Company of the Executive's employment that is not effected pursuant to a Notice
of Termination satisfying the requirements of subsection 8(e) hereof, and for
purposes of this Agreement, no such termination shall be effective.
The Executive's right to terminate his employment for Good Reason or
Retirement shall not be affected by his incapacity due to physical or mental
illness, nor shall the Executive's continued employment constitute consent to,
or a waiver of rights with respect to, any circumstances constituting Good
Reason hereunder. With respect to the matters set forth in clauses (i), (ii) and
(iii), above, the Executive must give the Company thirty (30) days prior written
notice of his intent to terminate this Agreement as a result of any breach or
alleged breach of the applicable provision and the Company shall have the right
to cure any such breach or alleged breach within such 30-day period; provided,
that no such prior written notice or opportunity to cure shall be required
following a Change in Control of the Company.
(e) NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 8(a), above) shall be communicated by written Notice of Termination
to the other party hereto given in accordance with Section 13. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide
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<PAGE> 8
a basis for termination of the Executive's employment under the provision so
indicated. The failure by the Executive to set forth in any Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties during such thirty (30) day period),
(iii) if the Executive's employment is terminated by the Company for Cause, the
date specified in the Notice of Termination after the expiration of any cure
periods, (iv) if the Executive's employment is terminated as a result of his
Retirement, the date set forth in the Executive's Notice of Termination (but not
beyond the then expiration date of the Term), and (v) if the Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given after the expiration of any cure periods; provided, that if
within thirty (30) days after any Notice of Termination one party notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date finally determined to be the Date of Termination,
either by mutual written agreement of the parties or by a binding and final
arbitration award or an adjudication by a court of competent jurisdiction.
9. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DEATH. If the Executive's employment shall be terminated by
reason of his death, the Company shall pay to such person as the Executive shall
have designated in a notice filed with the Company, or, if no such person shall
have been designated, to his estate, (i) any unpaid amounts of his Base Salary
or Annual Bonus accrued prior to the date of his death and (ii) in addition to
any payments the Executive's spouse, beneficiaries or estate may be entitled to
receive pursuant to any pension or employee benefit plan, life insurance policy
or other plan, program or policy then maintained or provided by the Company, or
any other agreement between the Executive and the Company, a lump sum death
benefit equal to the sum of the Executive's then current Base Salary and most
recent Annual Bonus; and upon making such payments, the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of the Executive's death pursuant
to Section 5(c)).
(b) DISABILITY. During any period that the Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness, the Executive shall continue to receive his full Base Salary until the
Executive's employment is terminated pursuant to Section 8(b) hereof, or until
the Executive terminates his employment pursuant to Section 8(d)(iii) hereof,
whichever first occurs. The Executive shall be paid in equal monthly
installments an amount equal to his Base Salary at the rate in effect at the
time Notice of Termination is given until the later of one year after
termination of his employment or the expiration of the Term (as in effect on the
date of termination), plus any disability payments otherwise payable by or
pursuant to plans provided by the Company. Thereafter, the Executive shall
receive the payments that would have been made to the Executive pursuant to
Section 9(d) had the Executive terminated his
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employment due to Retirement.
(c) CAUSE; OTHER THAN FOR GOOD REASON OR RETIREMENT. If the
Executive's employment shall be terminated by the Company for Cause, or by the
Executive for other than Good Reason or Retirement, the Company shall pay the
Executive his full Base Salary and accrued vacation pay through the Date of
Termination at the rate in effect at the time Notice of Termination is given (or
on the Date of Termination if no Notice of Termination is required hereunder)
plus all other amounts to which the Executive is entitled under any plan,
program, policy or practice of the Company or otherwise at the time such
payments are due and such payments shall, assuming the Company is in compliance
with the provisions of this Agreement, fully discharge the Company's obligations
hereunder.
(d) RETIREMENT. If the Executive's employment shall be terminated by
reason of his Retirement, in addition to any payments the Executive's spouse,
beneficiaries or estate may be entitled to receive pursuant to any pension or
employee benefit plan, life insurance policy or other plan, program or policy
then maintained or provided by the Company, or any other agreement between the
Executive and the Company, the Company shall pay to the Executive or (if the
Executive shall thereafter die) to such person as the Executive shall have
designated in a notice filed with the Company (or, if no such person shall have
been designated, to his estate), an amount equal to One Hundred Thousand Dollars
($100,000) per calendar year, for a period of ten (10) years commencing on the
date that the Executive reaches (or would have reached) age 58 1/2.
(e) GOOD REASON; OTHER THAN CAUSE OR DISABILITY.
(i) PRIOR TO CHANGE IN CONTROL. If, prior to the occurrence of a
Change in Control of the Company, the Company shall terminate the Executive's
employment other than for Cause or Disability (it being understood that a
purported termination for Cause or Disability which is disputed and finally
determined not to have been proper shall be a termination by the Company in
breach of this Agreement), or the Executive shall terminate his employment for
Good Reason, then the Company shall pay the Executive, not later than the fifth
day following the Date of Termination, the aggregate of the following amounts:
(A) his full Base Salary and accrued vacation pay through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, or the Date of Termination where no Notice of
Termination is required hereunder, and any other amounts to which the
Executive is entitled under any plan, policy, practice or program of
the Company or otherwise at the time such payments are due;
(B) the product of (x) the Executive's most recent Annual
Bonus (the "Recent Bonus"), times (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date
of Termination and the denominator of which is 365;
(C) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the Date of Termination, and as a
severance benefit to
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<PAGE> 10
the Executive, a lump sum amount equal to two times the Executive's
annual Base Salary in effect immediately prior to the occurrence of the
circumstances giving rise to such termination; and
(D) commencing on the date two years after the Date of
Termination, the payments that would have been made to the Executive
pursuant to Section 9(d) had the Executive terminated his employment
due to Retirement on such date.
(ii) FOLLOWING CHANGE IN CONTROL. If, following a Change in
Control of the Company, the Company shall terminate the Executive's employment
other than for Cause or Disability (it being understood that a purported
termination for Cause or Disability which is disputed and finally determined not
to have been proper shall be a termination by the Company in breach of this
Agreement), or the Executive shall terminate his employment for Good Reason,
then the Company shall pay the Executive, not later than the fifth day following
the Date of Termination, the aggregate of the following amounts:
(A) his full Base Salary and accrued vacation pay through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, or the Date of Termination where no Notice of
Termination is required hereunder, and any other amounts which the
Executive is entitled under any plan, policy, practice or program of
the Company or otherwise at the time such payment is due;
(B) the product of (x) the Recent Bonus, times (y) a fraction,
the numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365;
(C) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the Date of Termination, and as a
severance benefit to the Executive, a lump sum amount equal to three
times the Executive's annual Base Salary in effect immediately prior to
the occurrence of the circumstances giving rise to such termination or,
if greater, at the time of the Change in Control, plus three times the
Recent Bonus; and
(D) commencing on the date two years after the Date of
Termination, the payments that would have been made to the Executive
pursuant to Section 9(d) had the Executive terminated his employment
due to Retirement on such date.
(f) MAINTENANCE OF BENEFIT. Unless the Executive is terminated for
Cause, the Company shall maintain in full force and effect, for the continued
benefit of the Executive and/or his family for two (2) years after termination
for any reason, all employee medical, health and hospitalization plans and
programs in which the Executive and/or his family was entitled to participate in
immediately prior to the Date of Termination provided that the continued
participation of the Executive and/or his family is possible under the general
terms and provisions of such plans and programs. In the event that the
participation of the Executive and/or his family in any such plan or program is
barred, the Company shall arrange to provide the
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<PAGE> 11
Executive and/or his family with benefits substantially similar to those which
the Executive and/or his family would otherwise have been entitled to receive
under such plans and programs from which his or their continued participation is
barred.
(g) FULL SETTLEMENT. The Company's obligation to make the payments
provided for herein and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others,
except claims in respect of the Executive's gross negligence, wilful misconduct
or violation of any applicable law. The Executive shall not be required to
mitigate the amount of any payment provided for in Section 9 hereof by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in Section 9 hereof be reduced by any compensation earned by the Executive as
the result of employment by another employer or business, by profits earned by
the Executive from any source at any time before or after the Date of
Termination, or otherwise. Unless the Executive is found by a court of competent
jurisdiction to have committed an act that constitutes wilful misconduct or a
violation of applicable law, the Company agrees to pay, to the fullest extent
permitted by law, all legal fees and expenses incurred by the Executive as a
result of any contest or dispute (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement, or by the Executive in seeking to obtain or enforce
any right or benefit provided by this Agreement (including the amount of any
payment pursuant to Section 9 hereof or the validity of any purported
termination by the Company hereunder).
(h) LIMITATION ON CERTAIN PAYMENTS. Notwithstanding anything herein
to the contrary, in the event that the Executive shall become entitled to
payments pursuant to Section 9(d)(ii) hereof ("Change of Control Payments"), if
the value of the Change of Control Payments plus any other amount that is paid
or distributed or distributable to the Executive would constitute an excess
parachute payment under Section 280G of the Code, the amount payable or
distributable to or for the benefit of the Executive hereunder shall be reduced
to the Alternate Payment. The "Alternate Payment" shall be an amount expressed
in present value which maximizes the aggregate present value of the amounts
payable or distributable to the Executive hereunder without causing any such
amounts to be nondeductible by the Company pursuant to Section 280G of the Code.
The value of the Change of Control Payments shall be determined in accordance
with temporary or final regulations, if any, promulgated under Section 280G of
the Code and based upon the advice of counsel selected by the Company's
independent auditors. The value of any noncash benefit or any deferred payment
or benefit shall be determined in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
10. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
other than by will or the laws of descent and distribution. This Agreement and
all rights of the Executive hereunder shall inure to the benefit of and be
enforce able by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If the
Executive should die while any amounts would still be payable to him hereunder,
all such amounts, unless
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<PAGE> 12
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's personal or legal representatives or, if there be
no such persons, the Executive's estate.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers an assumption and agreement provided for
in this Section 10(c) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, or otherwise.
11. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a
"Change in Control of the Company" shall mean and be deemed to have occurred if:
(i) any person, entity or "group", within the meaning of Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than (A) the Company, its subsidiaries or any employee
benefit plan established and maintained by the Company or its subsidiaries, or
(B) John T. Kane or George P. Wilson, or any affiliate of either of the
foregoing individuals, becomes the "beneficial owner" (within the meaning of
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing forty percent (40%) or more of the
combined voting power of the Company's then outstanding securities; or
(ii) individuals who, as of the date hereof constitute the Board
(as of the date hereof, the "Incumbent Board") cease for any reason to
constitute a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than the election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the Incumbent
Board.
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<PAGE> 13
12. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Except as herein specifically provided, amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its subsidiaries at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
13. NOTICE. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
----------------------------
----------------------------
If to the Company: Equitrac Corporation
836 Ponce de Leon Blvd
Coral Gables, Florida 33134
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
14. MISCELLANEOUS.
(a) This Agreement has been approved by the Board. No provisions of
this Agreement may be modified, waived or discharged unless such modification,
waiver or discharge is agreed to in a writing signed by the Executive and such
officer as may be specifically designed by the Board.
(b) The failure by either party hereto to insist upon compliance
with any condition or provision of this Agreement shall not be deemed a waiver
of such condition or provision or any other provision hereof.
(c) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement and this Agreement
supersedes any other employment agreement between the Company and the Executive.
(d) The Company may withhold from any accounts payable under this
Agreement all Federal, State or other taxes as legally shall be required.
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<PAGE> 14
(e) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Florida, without
reference to principles of conflicts of laws.
(f) The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement as of the date and year first above written.
EQUITRAC CORPORATION
By:
---------------------------------
Title:
Executive
-------------------------------------
George P. Wilson
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<PAGE> 1
EXHIBIT 11
EQUITRAC CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except earnings per share)
THREE MONTHS ENDED MAY 31,
--------------------------
1997 1996
----- -----
Weighted average number of common
shares outstanding 3,471 3,391
Common share equivalents arising
from dilutive options 229 125
----- -----
3,700 3,516
----- -----
Earnings per share $0.19 $0.16
===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 3,645
<SECURITIES> 3,938
<RECEIVABLES> 7,884
<ALLOWANCES> 650
<INVENTORY> 2,388
<CURRENT-ASSETS> 18,136
<PP&E> 12,885
<DEPRECIATION> 6,562
<TOTAL-ASSETS> 30,769
<CURRENT-LIABILITIES> 5,424
<BONDS> 0
0
0
<COMMON> 38
<OTHER-SE> 25,307
<TOTAL-LIABILITY-AND-EQUITY> 25,345
<SALES> 5,240
<TOTAL-REVENUES> 11,730
<CGS> 4,739
<TOTAL-COSTS> 1,725
<OTHER-EXPENSES> 3,488
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,139
<INCOME-TAX> 433
<INCOME-CONTINUING> 706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 706
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
