<PAGE>
As filed with the Securities Exchange Commission on June 28, 1999
Registration No. 333-77253
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
TOKHEIM CORPORATION
(Exact name of registrant as specified in its charter)
---------------
Indiana 3580 35-0712500
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
10501 Corporate Drive
Fort Wayne, IN 46845
(219) 470-4600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Copy to:
Douglas K. Pinner Chairman of the William R. Kunkel Skadden, Arps, Slate,
Board, President and Chief Executive Meagher & Flom (Illinois)
Officer 10501 Corporate Drive Fort 333 West Wacker Drive Chicago, IL 60606
Wayne, IN 46845 (219) 470-4600 (312) 407-0700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
<TABLE>
<CAPTION>
Jurisdiction Primary Standard I.R.S. Employer
of Industrial Classification Identification
Exact Name of Additional Registrants Incorporation Code Number Number
------------------------------------ ------------- ------------------------- ---------------
<S> <C> <C> <C>
Envirotronic Systems, Inc.* Indiana 3823 35-1753684
Gasboy International, Inc. Pennsylvania 3586 23-1265426
P.O. Box 309, Lansdale, PA 19664
(215) 855-4631
Management Solutions, Inc. Colorado 3824 84-1007527
5351 S. Roslyn St., Suite 200, Greenwood Village, CO 80111
(303) 773-9300
Sunbelt Hose & Petroleum Equipment, Inc.* Georgia 5084 35-1682561
Tokheim Automation Corporation* Texas 5084 76-0261484
Tokheim Equipment Corporation* Delaware 3586 36-4250806
Tokheim Investment Corp.* Texas 6726 74-2137031
Tokheim RPS, LLC* Delaware 6726 36-5250803
Tokheim Services LLC* Indiana 6726 36-4260132
</TABLE>
*Address and telephone of principal executive offices are the same as those of
Tokheim Corporation.
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
The registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment that specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.
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<PAGE>
TOKHEIM CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form S-4 Item Location in Prospectus
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<S> <C>
A. INFORMATION ABOUT THE
TRANSACTION
Item 1:Forepart Of Registration
Statement And
Outside Front Cover Page Of
Prospectus................... Outside Front Cover Page
Item 2:Inside Front And Outside
Back Cover Pages Inside Front Cover Page; Outside Back Cover
Of Prospectus................ Page
Item 3:Risk Factors, Ratio Of
Earnings To Fixed Prospectus Summary; Risk Factors; Unaudited
Charges, And Other Pro Forma Consolidated Condensed Financial
Information.................. Statements; Selected Financial Data of
Tokheim Corporation and Subsidiaries;
Selected Financial Data of the RPS Division
Item 4:Terms Of The Transaction.... Prospectus Summary; The Exchange Offer;
Important United States Federal Income Tax
Considerations; The Transactions;
Description of the Exchange Notes; Plan of
Distribution
Item 5:Pro Forma Financial Prospectus Summary; Unaudited Pro Forma
Information.................. Consolidated Condensed Financial
Statements; Selected Financial Data of
Tokheim Corporation and Subsidiaries;
Selected Financial Data of the RPS Division
Item 6:Material Contacts With The
Company Being
Acquired..................... Not Applicable
Item 7:Additional Information
Required For
Reoffering By Persons And
Parties Deemed
to Be Underwriters........... Not Applicable
Item 8:Interests Of Named Experts
And Counsel.................. Not Applicable
Item 9:Disclosure Of Commission
Position On
Indemnification For
Securities Act Liabilities... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
Item 10:Information With Respect To Summary; Unaudited Pro Forma Consolidated
S-3 Registrants.............. Condensed Financial Statements
Item 11:Incorporation Of Certain
Information By
Reference.................... Information Incorporated by Reference
Item 12:Information With Respect To
S-2 Or S-3
Registrants.................. Not Applicable
Item 13:Incorporation Of Certain
Information By
Reference.................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form S-4 Item Location in Prospectus
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<S> <C>
Item 14:Information With Respect To
Registrants Other Than S-3 Or S-2
Registrants.......................... Not Applicable
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
Item 15:Information With Respect To S-3
Companies............................ Not Applicable
Item 16:Information With Respect To S-2 Or
S-3 Companies........................ Not Applicable
Item 17:Information With Respect To
Companies Other Than S-3 Or S-2
Companies............................ Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
Item 18:Information If Proxies, Consents Or
Authorizations Are To Be Solicited... Not Applicable
Item 19:Information If Proxies, Consents Or
Authorizations Are Not To Be
Solicited............................ Management; Principal Shareholders
</TABLE>
<PAGE>
Prospectus
[LOGO OF TOKHEIM CORPORATION]
Tokheim Corporation
Exchange offer for
$123,000,000 and (Euro)75,000,000
11 3/8% senior 11 3/8% senior
subordinated notes subordinated notes
due 2008 due 2008
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Terms of the Exchange Offer
. The exchange offer expires at
5:00 p.m. New York City time for . We will not receive any proceeds
the outstanding dollar notes and from the exchange offer.
at 5:00 p.m., London time for the
outstanding euro notes, on
, 1999, unless we extend
the expiration date.
. Your exchange of outstanding
notes for exchange notes will not
be a taxable exchange for U.S.
federal income tax purposes.
. We will exchange all outstanding . The terms of the exchange notes
notes that you validly tender and and the outstanding notes are
do not validly withdraw. substantially identical, except
for transfer restrictions,
. You may withdraw tenders of registration rights and
outstanding notes any time prior liquidated damages that apply to
to the expiration of the exchange the outstanding notes.
offer.
. There is no existing market for
. The exchange offer is not subject the exchange notes, and we do not
to any condition, other than that currently intend to apply for
it not violate applicable law or their listing on any securities
any applicable interpretation of exchange.
the staff of the Securities and
Exchange Commission.
- -------------------------------------------------------------------------------
For a discussion of factors that you should consider before exchanging your
outstanding notes, see "Risk Factors" beginning on page 14.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these notes or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
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, 1999
<PAGE>
This prospectus incorporates by reference documents that are not contained
in or delivered with the prospectus. These documents are available without
charge upon request to Tokheim Corporation, 10501 Corporate Drive, Fort Wayne,
IN, 46845, Attention: Executive Vice President, Finance and Administration and
Chief Financial Officer, telephone number (219) 470-4600. To ensure timely
delivery of the documents, any request should be made by , 1999.
----------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 14
Risks associated with debt financing.................................... 14
Risks associated with the operation of the business..................... 16
Risks associated with government regulation............................. 20
Risks associated with the exchange offer................................ 20
Forward-Looking Statements................................................ 21
Exchange Rates............................................................ 21
The Exchange Offer........................................................ 22
The Transactions.......................................................... 31
Sources and Uses of Funds................................................. 33
Capitalization............................................................ 34
Unaudited Pro Forma Consolidated Condensed Financial Statements........... 35
Selected Financial Data of Tokheim Corporation and Subsidiaries .......... 42
Selected Financial Data of the RPS Division............................... 44
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 45
Business.................................................................. 55
Management................................................................ 70
Principal Shareholders.................................................... 72
Description of Other Indebtedness......................................... 74
Description of the Warrants............................................... 77
Description of the Exchange Notes......................................... 78
Important United States Federal Income Tax Considerations................. 117
Plan of Distribution...................................................... 122
Legal Matters............................................................. 123
Independent Accountants................................................... 123
General Listing Information............................................... 124
Where You Can Find More Information....................................... 125
Information Incorporated by Reference..................................... 125
Index to Financial Statements............................................. F-1
</TABLE>
i
<PAGE>
SUMMARY
The following summary highlights selected information from this prospectus.
The summary may not contain all of the information that is important to you.
This prospectus includes the terms of the notes we are offering, as well as
business and detailed financial information. We encourage you to read this
prospectus in its entirety. In this prospectus, "Tokheim" refers to Tokheim
Corporation and its subsidiaries after our acquisition of the RPS division of
Schlumberger Limited unless we indicate otherwise. We have derived the market
share and other data contained in this prospectus relating to the petroleum
dispenser and related industries, both in the United States and
internationally, from industry and other sources available to us. While we
believe that our estimates derived from these sources, including as to market
share data, are reasonable, we cannot ensure their accuracy.
The exchange offer
On January 29, 1999, we privately placed $123.0 million of 11 3/8% senior
subordinated notes due 2008 and (Euro)75.0 million of 11 3/8% senior
subordinated notes due 2008. We sold the outstanding notes to the following
initial purchasers:
. BT Alex. Brown,
. Credit Lyonnais Securities,
. First Chicago Capital Markets, Inc.,
. Gleacher NatWest International,
. ABN AMRO Incorporated,
. PaineWebber Incorporated and
. Schroder & Co. Inc.
These initial purchasers then sold the outstanding notes to institutional
investors.
Simultaneously with the private placement, the subsidiary guarantors and
Tokheim Corporation entered into two registration rights agreements with the
initial purchasers of the outstanding notes, one agreement for the notes issued
in dollars and one for the notes issued in euros. Under these registration
rights agreements, we must deliver this prospectus to you and must complete
this exchange offer on or before August 12, 1999. If this exchange offer does
not take place on or before August 12, 1999, we must pay liquidated damages to
the holders of the outstanding notes until this exchange offer is completed.
You may exchange your outstanding notes for exchange notes, which have
substantially identical terms. The exchange offer satisfies your rights under
the registration rights agreements. After the exchange offer is over, you will
not be entitled to any exchange or registration rights with respect to your
outstanding notes, except under limited circumstances.
Summary of the exchange offer
The exchange offer............... We are offering to exchange:
. $123.0 million total principal
amount of 11 3/8% senior
subordinated exchange notes which
have been registered under the
Securities Act, for your outstanding
11 3/8% senior subordinated dollar
notes; and
. (Euro)75.0 million total principal
amount of 11 3/8% senior
subordinated exchange notes, which
have been registered under the
Securities Act, for your outstanding
11 3/8% senior subordinated euro
notes.
1
<PAGE>
To exchange your outstanding notes, you
must properly tender them, and we must
accept them. We will exchange all
outstanding notes that you validly tender
and do not validly withdraw.
Resales.......................... We believe that you can offer for resale,
resell and otherwise transfer the exchange
notes without complying with the
registration and prospectus delivery
requirements of the Securities Act if:
. you acquire the exchange notes in
the ordinary course of your
business;
. you are not participating, do not
intend to participate, and have no
arrangement or understanding with
any person to participate, in the
distribution of the exchange notes;
and
. you are not an "affiliate" of ours,
as defined in Rule 405 of the
Securities Act.
By executing the letter of transmittal, or
by agreeing to the terms of the letter of
transmittal, you represent to us that you
satisfy each of these conditions. If you do
not satisfy any of these conditions and you
transfer any exchange note without
delivering a proper prospectus or without
qualifying for a registration exemption,
you may incur liability under the
Securities Act. We do not assume or
indemnify you against this liability.
If a broker-dealer acquires exchange notes
for its own account in exchange for
outstanding notes, and it acquired the
outstanding notes through market-making or
other trading activities, the broker-dealer
must acknowledge that it will deliver a
proper prospectus when any exchange notes
are transferred. A broker-dealer may use
this prospectus for an offer to resell, a
resale or other retransfer of the exchange
notes.
Expiration date; Withdrawal The exchange offer expires at, and you may
rights..................... withdraw your tender of outstanding notes
at any time before, 5:00 p.m., New York
City time for the outstanding dollar notes
and 5:00 p.m., London time for the
outstanding euro notes, on ,
1999, unless we extend the expiration date.
Procedures for tendering We issued the outstanding notes as global
outstanding notes............... securities.
When we issued the outstanding dollar
notes, we deposited them with U.S. Bank
Trust National Association, as custodian.
U.S. Bank issued a certificateless
depositary interest in the outstanding
dollar notes, which represents a 100%
interest in the outstanding dollar notes,
to DTC. Beneficial interests in the
2
<PAGE>
outstanding dollar notes, which direct or
indirect participants in DTC hold through
the certificateless depositary interest,
are shown on records that DTC maintains in
book-entry form.
When we issued the outstanding euro notes,
we deposited them with Midland Bank plc,
HSBC Issuer Services, as common depositary
for the Euroclear System and Cedel Bank.
Security entitlements with respect to the
outstanding euro notes are shown on records
in book-entry form that Euroclear, Cedel
Bank or your securities intermediary
maintain.
If you wish to accept the exchange offer,
you must take the following steps, unless
you use an agent's message in connection
with a book-entry transfer:
. complete and sign the letter of
transmittal or a facsimile thereof,
in accordance with the instructions
contained in this prospectus and the
letter of transmittal, and
. mail or deliver the letter of
transmittal, together with the
outstanding notes and any other
required documents, to the
appropriate exchange agent at the
addresses set forth in this
prospectus and in the letter of
transmittal.
You must deliver these documents before
5:00 p.m., New York City time in the case
of outstanding dollar notes, or 5:00 p.m.,
London time in the case of outstanding euro
notes on the expiration date.
Do not send letters of transmittal and
certificates representing outstanding notes
to us or to DTC or to Euroclear or Cedel
Bank. Send these documents only to the
appropriate exchange agent.
Special procedures for If:
beneficial owners...............
. you beneficially own outstanding
notes,
. these notes are registered in the
name of a broker, dealer, commercial
bank, trust company or other
nominee, and
. you wish to tender your outstanding
notes in the exchange offer,
please contact the registered holder as
soon as possible and instruct it to tender
on your behalf and comply with our
instructions set forth elsewhere in this
prospectus.
Guaranteed delivery procedures
for outstanding notes...........
If you wish to tender your outstanding
notes, and:
. time will not permit you to deliver
your required documents to the
appropriate exchange agent by the
expiration date, or
3
<PAGE>
. you cannot complete the procedure
for book-entry transfer on time, or
. you cannot deliver certificates for
registered notes on time,
you may tender your outstanding notes
pursuant to the procedures described in the
section entitled "The Exchange Offer" under
the heading "Procedures for tendering
outstanding notes--Guaranteed delivery."
Appraisal or dissenters' rights..
You do not have any appraisal or
dissenters' rights in the exchange offer.
If you do not tender your outstanding notes
or we reject your tender, you will not be
entitled to any further registration rights
under the registration rights agreements,
except under limited circumstances.
However, your notes will remain outstanding
and entitled to the benefits of the
indentures.
U.S. federal income tax Your exchange of outstanding notes for
considerations.................. exchange notes is not a taxable exchange
for United States federal income tax
purposes. You will not recognize any
taxable gain or loss or any interest income
as a result of the exchange.
Exchange agents.................. U.S. Bank Trust National Association is
serving as the exchange agent for the
outstanding dollar notes in the exchange
offer. Midland Bank plc, HSBC Issuer
Services is serving as the exchange agent
for the outstanding euro notes in the
exchange offer. The addresses, telephone
numbers and facsimile numbers of the
exchange agents are listed in the section
of this prospectus entitled "The Exchange
Offer" under the heading "Exchange agents"
and in the letter of transmittal.
Summary of terms of the exchange notes
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes, except that the exchange notes will be registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damage provisions contained in the outstanding notes. The exchange
notes represent the same debt as the outstanding notes. Both the outstanding
notes and the exchange notes are governed by the same indentures, and each
indenture is governed by New York law.
Maturity date.................... August 1, 2008.
Interest rate.................... 11 3/8% per year, calculated using a 360-
day year.
Interest payment dates........... February 1 and August 1.
Ranking.......................... The exchange notes will:
. be unsecured senior subordinated
obligations of Tokheim;
. rank junior to our existing and
future senior debt, including our
obligations under our credit
agreement;
4
<PAGE>
. rank equally in right of payment
with any of our other senior
subordinated obligations; and
. rank senior to all of our junior
subordinated indebtedness, including
the junior subordinated notes issued
to Schlumberger.
As of February 28, 1999, on a pro forma
basis for the issuance of the outstanding
notes and the application of the proceeds
from the issuance, we had approximately
$212.4 million of senior debt outstanding.
Substantially all of this senior debt was
secured by our assets and the assets of
several of our subsidiaries.
Guarantees.......................
All of our existing and future U.S.
subsidiaries will guarantee the exchange
notes. They will make these guarantees on a
senior subordinated basis. The guarantees
are unsecured and subordinated to their
existing and future senior debt. Our
existing U.S. subsidiaries are:
. Envirotronic Systems, Inc.;
. Gasboy International, Inc.;
. Management Solutions, Inc.;
. Sunbelt Hose & Petroleum Equipment,
Inc.;
. Tokheim Automation Corporation;
. Tokheim Equipment Corporation;
. Tokheim Investment Corp.;
. Tokheim RPS, LLC; and
. Tokheim Services LLC.
Optional redemption..............
Except as we describe in the next section,
we cannot redeem the exchange notes until
February 1, 2004. After February 1, 2004,
we may redeem some or all of the notes:
. at the redemption prices listed in
the "Description of the Exchange
Notes" section of this prospectus
under the heading "Optional
redemption," plus
. accrued and unpaid interest.
Optional redemption after public
equity offerings................
At any time, and from time to time, before
February 1, 2002, we can choose to redeem
up to a total of 35% of the original
principal amount of each series of exchange
notes with money that we raise in one or
more public equity offerings. If we choose
to redeem exchange notes:
. we must redeem them within 120 days
of completing the public equity
offering,
. we must pay 111.375% of the face
amount of the exchange notes we are
redeeming plus interest, and
5
<PAGE>
. at least 55% of the original
principal amount of the series of
exchange notes we are redeeming must
remain outstanding afterwards.
Change of control................ If a change of control of Tokheim occurs,
you will have the right to require us to
repurchase all of the outstanding exchange
notes that you hold at a price equal to
101% of their face amount plus accrued and
unpaid interest to the date of repurchase.
Covenants........................ The indentures that govern the outstanding
notes, and that will govern the exchange
notes, contain covenants for your benefit
that, among other things, limit our
ability, and the ability of most of our
subsidiaries, to:
. incur additional debt;
. pay dividends on capital stock,
repurchase capital stock or make
other restricted payments;
. make investments;
. create liens on our assets to secure
debt;
. enter into transactions with
affiliates;
. merge or consolidate with another
company; and
. transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
Asset sale proceeds..............
If we or our subsidiaries sell our assets,
we generally must either invest the net
cash proceeds from these sales in our
business, prepay senior debt or make an
offer to purchase a principal amount of the
exchange notes equal to the excess net cash
proceeds. The purchase price of the
exchange notes will be 100% of their
principal amount, plus accrued and unpaid
interest.
Trustee, paying and transfer
agent and registrar.............
U.S. Bank Trust National Association.
Luxembourg paying and transfer Bankers Trust Luxembourg S.A., if the
agent........................... exchange notes are listed on the Luxembourg
Stock Exchange.
London paying agent and common
depositary......................
Midland Bank plc, HSBC Issuer Services.
Form of the exchange notes.......
The dollar-denominated exchange notes will
be represented by one or more securities in
registered, global form that we will
deposit with U.S. Bank, as custodian for
DTC. The euro-denominated exchange notes
will be represented by one or more
securities in registered, global form, that
we will deposit with Midland Bank plc, HSBC
Issuer Services as common depositary for
Euroclear and Cedel Bank. You will not
receive notes in certificated
6
<PAGE>
will be represented by one or more
securities in registered, global form. We
will deposit these securities with Midland
Bank plc, HSBC Issuer Services as common
depositary for Euroclear and Cedel Bank.
You will not receive notes in certificated
form unless one of the events described in
the section of this prospectus entitled
"Description of the Exchange Notes" under
the heading "Form of exchange notes,
clearance and settlement--Certificated
notes" occurs. Instead:
. beneficial interests in the dollar-
denominated exchange notes will be
shown on, and transfers of these
interests will be effected only
through, records that DTC maintains
in book-entry form with respect to
its participants; and
. security entitlements with respect
to the euro-denominated exchange
notes will be shown on, and
transfers of these entitlements will
be effected only through, records
that Euroclear, Cedel Bank or your
securities intermediary maintain in
book-entry form.
Tokheim
General
We are the largest global competitor in the petroleum dispenser business. We
have an estimated 37% share of the world market. We have the ability to provide
both products and services to customers in over 80 countries.
We are the largest supplier of petroleum dispensing systems in:
. Europe,
. Africa,
. Canada and
. Mexico,
and one of the largest suppliers in the United States. We also have established
operations in Asia and Latin America.
Our products
We manufacture and service electronic and mechanical petroleum dispensing
systems. These systems include:
. petroleum dispensers and pumps,
. retail automation systems, including point-of-sale systems,
. dispenser payment or "pay-at-the-pump" terminals,
. replacement parts and
. upgrade kits.
Our services
We believe that Tokheim offers superior customer service and support. In
western Europe and Africa, we provide support through our extensive, Tokheim-
direct service organization. Throughout the rest of the world, we provide
service through authorized service representatives and distributors. Customer
service includes the installation, maintenance, certification and calibration
of, and technical support for, petroleum dispensers, pumps,
7
<PAGE>
electronic hardware and software systems. We offer 24-hour, seven day-per-week
support by telephone and over the Internet via our FASRLINK(TM) help desk to
authorized service representatives, distributors and customers in major
markets.
Our industry and customers
Petroleum dispensing systems are designed for and sold principally to owners
of retail service stations. These owners include:
. major oil companies,
. national oil companies,
. independent owners operating under a major oil company brand, or
jobbers,
. independent oil companies,
. convenience store stations,
. hypermarkets and
. other retailers.
We also sell petroleum dispensing systems to commercial customers. As a result
of industry consolidation, we estimate that the top three manufacturers of
petroleum dispensing equipment account for approximately 75% of worldwide
annual sales. We estimate that the combined annual sales of the top five
manufacturers in our industry is approximately $2 billion.
In 1998, approximately 88% of our sales were to retail owners, such as:
. Arco,
. BP Amoco,
. Elf Aquitaine,
. Esso,
. Fina,
. Marathon,
. Shell,
. SuperAmerica and
. Total and their affiliated jobbers,
Approximately 12% of our sales were to commercial customers, such as:
. Federal Express,
. United Parcel Service,
. Penske Corporation and
. municipalities.
The acquisition of the RPS division
On September 30, 1998, we completed the acquisition of the RPS division for a
price equal to $330.0 million in cash, notes, and warrants. Of the $330.0
million purchase price, we paid $100.0 million in cash borrowed under the terms
of a credit agreement with a consortium of banks, including $22.5 million from
our 12.5% of senior notes due 2005. The seller note portion of the purchase
price consisted of $40.0 million in ten year, 12.0% junior subordinated
payment-in-kind notes we issued to Schlumberger and $170.0 million in 12.0%
senior subordinated notes due January 29, 1999, that we issued to Schlumberger.
We paid the remaining $20.0 million of the purchase price with common stock
warrants exercisable for five years, beginning January 30, 1999 to purchase, at
a nominal price, 2,526,923 shares of Tokheim's common stock. We repaid the
12.0% senior subordinated notes, along with the senior notes, on January 29,
1999 with the proceeds from the sale of the outstanding notes.
Risk factors
See the section entitled "Risk Factors," beginning on page 14, for a
discussion of important factors that you should consider before deciding
whether to participate in the exchange offer.
Principal executive office
Tokheim was formed in 1901 and our principal executive offices are located at
10501 Corporate Drive, Fort Wayne, Indiana 46845. Our telephone number is (219)
470-4600.
8
<PAGE>
Summary Unaudited Pro Forma Consolidated Financial Data
(dollars in thousands)
The following table sets forth summary unaudited pro forma consolidated
financial data of Tokheim. You should read this information along with the
sections of this prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Risk Factors" and the
financial statements of Tokheim and the RPS division, including the notes to
the financial statements, appearing elsewhere or incorporated by reference in
this prospectus.
The summary unaudited pro forma statement of earnings data and other data
give effect to the following as if they had occurred as of December 1, 1997:
(1) our March 1998 public offering of our common stock,
(2) our issuance of, and application of the proceeds from, the outstanding
notes,
(3) the execution of our credit agreement,
(4) our acquisition of the RPS division, and
(5) our sale of senior notes, senior subordinated notes, junior
subordinated notes and warrants in connection with the acquisition of
the RPS division.
The summary unaudited pro forma balance sheet data as of February 28, 1999
includes the transactions described in (2) through (5) above. The summary
unaudited pro forma consolidated financial data do not purport to represent
what our results of operations actually would have been if the transactions
described above had occurred as of such dates and are not necessarily
indicative of our future operating results or financial position.
In the table below, operating income (loss) equals net sales less cost of
sales, selling, general and administrative expenses, depreciation and
amortization, and merger and acquisition costs and other unusual items.
Preferred stock dividends refer to dividends that are payable on Tokheim's ESOP
preferred stock, the dividends of which the ESOP uses to service the guaranteed
ESOP obligation. In addition, total debt includes:
. these dollar exchange notes and these euro exchange notes;
. long-term borrowings under our credit agreement and other credit
facilities;
. the current portion of the borrowings under our credit agreement and
other credit facilities;
. cash overdraft facilities;
. the junior subordinated notes issued in connection with the acquisition
of the RPS division; and
. the guarantee of debt incurred by our ESOP to purchase our preferred
stock.
Common shareholders' equity, net includes amounts attributable to the
warrants issued in connection with the acquisition of the RPS division. The
indentures under which we issued the outstanding notes, and will issue the
exchange notes, will permit us, subject to various conditions, to refinance the
junior subordinated notes and reacquire the warrants with junior subordinated
debt.
9
<PAGE>
<TABLE>
<CAPTION>
Three Months
Year Ended Ended
November 30, February 28,
1998 1999
------------ ------------
<S> <C> <C>
Statement of Earnings Data:
Net sales.......................................... $743,623 $166,193
Merger and acquisition costs and other unusual
items............................................. 15,603 1,123
Operating income (loss)............................ 4,313 (886)
Interest expense, net.............................. 50,609 12,421
Loss before income taxes........................... (48,036) (14,685)
Net loss(1)........................................ (46,572) (14,292)
Preferred stock dividends.......................... 1,484 374
Net loss applicable to common stock(1)............. (48,056) (14,666)
Other Data:
Capital expenditures............................... $ 20,640 $ 12,341
Depreciation and amortization...................... 24,423 6,892
Interest expense and preferred stock dividends..... 52,930 13,424
Ratio of earnings to fixed charges(2).............. --x --x
<CAPTION>
As of
February 28,
1999
------------
<S> <C> <C>
Balance Sheet Data:
Working capital................................................. $ 88,868
Property, plant and equipment, net.............................. 75,874
Total assets.................................................... 724,906
Total debt...................................................... 459,259
ESOP preferred stock, net....................................... 12,941
Common shareholders' equity, net................................ 18,572
</TABLE>
- --------
(1) Excludes extraordinary loss from debt extinguishment of $23,924 for the
twelve months ended November 30, 1998 and $6,249 for the three months ended
February 28, 1999.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings (loss) before income taxes and extraordinary loss plus
fixed charges. Fixed charges consist of interest expense, amortization of
deferred debt issuance, the portion of rental expense assumed to represent
interest and dividends on the ESOP preferred stock, which dividends service
the guaranteed ESOP obligation. Earnings were insufficient to cover fixed
charges by $48,036 and $14,685 for the twelve months ended November 30,
1998 and the three months ended February 28, 1999, respectively.
10
<PAGE>
Summary Financial Data of Tokheim Corporation and Subsidiaries
(dollars in thousands)
The following table sets forth summary financial data of Tokheim. We derived
the summary statement of earnings data, other data and balance sheet data as of
and for each of the fiscal years in the five-year period ended November 30,
1998 from the audited consolidated financial statements of Tokheim. You should
read the information contained in this table in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of Tokheim, including the notes to the
financial statements, appearing elsewhere or incorporated by reference in this
prospectus. We derived the summary historical financial data as of and for the
three months ended February 28, 1998 and 1999 from unaudited interim
consolidated condensed financial statements of Tokheim. In the opinion of
management, such unaudited interim consolidated condensed financial statements
contain all adjustments, consisting of only normal recurring items with the
exception of merger and acquisition costs and other unusual items and the
extraordinary items, necessary to present fairly Tokheim's financial position
and results of operations as of and for the periods presented.
The summary financial data presented below for 1996 include three months of
Sofitam operations from the date of the acquisition of Sofitam. The results for
1998 include two months of the RPS division's operations from the date of
acquisition.
In the table below, operating income (loss) equals net sales less cost of
products sold, selling, general and administrative expenses, depreciation and
amortization, and merger and acquisition costs and other unusual items. In
addition, total debt includes:
. the dollar exchange notes and the euro exchange notes;
. the 11.5% senior subordinated notes;
. the senior subordinated notes we issued in connection with the
acquisition of the RPS division;
. the senior notes we issued in connection with the acquisition of the RPS
division;
. the junior subordinated notes we issued in connection with the
acquisition of the RPS division;
. long term borrowings under the credit agreement and other credit
facilities;
. the current portion of borrowings under the credit agreement and other
credit facilities;
. cash overdraft facilities; and
. the guaranteed employees' stock ownership plan obligations.
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended November 30, February 28,
------------------------------------------------ -----------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Net sales.............. $202,134 $221,573 $279,733 $385,469 $466,440 $90,852 $166,193
Merger and acquisition
costs and other
unusual items......... 820 2,680 6,459 3,493 13,685 5,987 1,123
Operating income
(loss)................ 3,780 5,811 6,356 20,645 14,769 (966) (886)
Interest expense, net.. 2,806 3,319 7,191 16,451 19,257 4,011 12,307
Earnings (loss) before
income taxes(1)....... 1,932 3,270 (1,229) 5,197 (2,698) (5,306) (14,571)
Earnings (loss)(1)..... 1,675 3,231 (2,009) 3,980 (3,744) (5,606) (14,178)
Preferred stock
dividends............. 1,617 1,580 1,543 1,512 1,484 374 374
Earnings (loss)
applicable to common
stock(1).............. 58 1,651 (3,552) 2,468 (5,228) (5,980) (14,552)
Other Data:
Capital expenditures... $ 2,757 $ 5,559 $ 3,061 $ 11,154 $ 14,548 $ 1,885 $ 4,996
Depreciation and
amortization.......... 4,672 4,857 5,028 9,232 13,136 2,500 6,892
Interest expense and
preferred stock
dividends............. 4,219 4,604 9,336 18,800 21,563 4,518 12,842
Ratio of earnings to
fixed charges(2)...... 1.4x 1.6x -- x 1.3x -- x -- x -- x
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
As of As of
November 30, February 28,
1998 1999
------------ ------------
(unaudited)
<S> <C> <C>
Balance Sheet Data:
Working capital..................................... $92,596 $88,868
Property, plant and equipment, net.................. 77,905 75,874
Total assets........................................ 776,642 724,906
Total debt.......................................... 443,331 459,259
ESOP preferred stock, net........................... 12,130 12,941
Common shareholders' equity, net.................... 64,631 18,572
</TABLE>
- --------
(1) The amounts for the years ended November 30, 1998 and November 30, 1997 and
the three months ended February 28, 1999 exclude $23,924, $1,886 and
$6,249, respectively, for extraordinary loss from debt extinguishment. The
amounts for the year ended November 30, 1994 exclude the cumulative effect
of change in method of accounting for post-retirement benefits other than
pensions of $13,416.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings (loss) before income taxes and extraordinary loss plus
fixed charges. Fixed charges consist of interest expense, amortization of
deferred debt issuance expense, the portion of rental expense assumed to
represent interest and dividends on the ESOP preferred stock, which
dividends service the guaranteed ESOP obligation. Earnings were
insufficient to cover fixed charges by $1,229, $2,698, $5,306 and $14,571
for the fiscal years ended 1996 and 1998 and for the three months ended
February 28, 1998 and 1999, respectively.
12
<PAGE>
Summary Financial Data of the RPS Division
(dollars in thousands)
The following table sets forth selected summary financial data of the RPS
division. We derived the summary statement of income data, other data and
balance sheet data as of and for each fiscal year in the three year period
ended December 31, 1997 from the audited combined financial statements of the
RPS division. We derived the summary financial data as of and for the nine
months ended September 30, 1997 and 1998 from the unaudited combined condensed
financial statements of the RPS division. You should read the information
contained in this table in conjunction with the combined financial statements
of the RPS division, including the notes to the financial statements, appearing
elsewhere in this prospectus.
In the table below, total debt includes bank overdrafts and short-term loans
plus the current portion of long-term debt.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales.................. $303,668 $333,915 $344,248 $231,978 $231,764
Restructuring charges...... -- 9,978 -- -- --
Operating loss............. (7,446) (17,197) (11,648) (10,210) (15,737)
Interest expense, net...... 1,257 1,652 1,418 945 1,586
Loss before income taxes... (10,008) (20,424) (13,499) (14,462) (20,593)
Net loss................... (7,721) (16,366) (6,720) (9,216) (15,730)
Other Data:
Capital expenditures....... $ 11,389 $ 14,736 $ 9,486 $ 6,810 $ 4,951
Depreciation and
amortization.............. 10,084 10,780 11,777 8,476 8,766
</TABLE>
<TABLE>
<CAPTION>
As of As of
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Balance Sheet Data:
Working capital.................................... $ 73,406 $101,282
Property, plant and equipment, net................. 32,183 31,735
Total assets....................................... 269,434 260,342
Total debt......................................... 12,614 2,289
Equity and retained earnings (deficit)............. 154,270 178,805
</TABLE>
13
<PAGE>
RISK FACTORS
You should consider the following risk factors, as well as the other
information contained in this prospectus, before making a decision to exchange
your outstanding notes in the exchange offer.
Risks associated with debt financing
If we cannot generate enough cash to pay principal and interest on the
exchange notes and our other substantial debt, we may have to restructure our
company or our debt, including the terms of your exchange notes.
We have a significant level of debt. As of February 28, 1999, we had
approximately $459.3 million of debt and approximately $18.6 million of common
shareholders' equity. If our acquisition of the RPS division and the related
financing were consummated on December 1, 1997, our earnings before income
taxes and fixed charges would have been insufficient to cover fixed charges by
approximately $48.0 million for the year ended November 30, 1998.
Our ability to generate cash to make payments on the exchange notes and our
other debt obligations will depend partly on economic conditions, interest
rates, and other financial and business factors beyond our control.
If we are unable to make our debt payments, we may be forced to try to:
. reduce or delay capital or research and development expenditures;
. sell assets;
. restructure or refinance our indebtedness; or
. seek additional equity capital.
We may not be able to implement any of these strategies on satisfactory terms,
or at all.
We may not be able to cover our interest payments, including on the exchange
notes, if interest rates increase on our variable rate debt.
Our borrowings under the credit agreement bear interest at variable rates. If
market interest rates increase, the credit agreement will require us to make
higher payments. If these payment increases reduce our cash too much, we may
not be able to pay interest on the exchange notes and cover our other
obligations.
The exchange notes will be subordinate to our debt under the credit agreement
and possibly all of our future borrowings.
If we declare bankruptcy, liquidate or reorganize, we must pay all senior
debt in full before we pay our obligations on the exchange notes. There may not
be sufficient assets remaining for us to be able to pay amounts due on the
exchange notes.
The exchange notes will be subordinate in right of payment to all of our
existing and future senior debt, including our obligations under the credit
agreement, and to all existing and future senior debt of our subsidiaries. By
contrast, the exchange notes will be general unsecured obligations of Tokheim.
As of February 28, 1999, we had approximately $212.4 million of senior debt.
Moreover, we may incur additional senior debt under the indentures. This debt
is guaranteed by Tokheim's U.S. subsidiaries and is secured by:
. real and personal property assets of Tokheim and its material U.S.
subsidiaries;
. 100% of Tokheim's stock in its material U.S. subsidiaries; and
. 65% of Tokheim's stock in its foreign subsidiaries.
We are not permitted to pay any principal, premium, interest, or other
amounts on the exchange notes, or purchase, redeem or otherwise retire the
exchange notes, if there is a payment default or a non-payment default with
respect to our senior debt.
14
<PAGE>
Our obligations under the credit agreement are guaranteed, jointly and
severally, by all of our U.S. subsidiaries. Some of our non-United States
subsidiaries are direct borrowers under the credit agreement, and we have
guaranteed those borrowings.
The indentures and the credit agreement limit our ability to conduct our
business and could prevent us from obtaining additional financing, paying for
needed capital expenditures or withstanding downturns in our business.
The indentures and the credit agreement contain covenants and restrictions
that limit our ability and the ability of our subsidiaries to, among other
things:
. incur additional debt;
. pay dividends on capital stock or repurchase capital stock or make other
restricted payments;
. use the proceeds of asset sales;
. make investments;
. create liens on our assets to secure debt;
. enter into transactions with affiliates;
. merge or consolidate with another company; and
. transfer and sell assets.
Any of the above factors could limit our ability to obtain future financing,
make capital investments or survive economic downturns.
In addition, in some situations we must prepay our loans under the credit
agreement in an amount equal to:
. all net proceeds from the sale or issuance of debt or equity; and
. a percentage of excess cash flow for each fiscal year based upon our
leverage ratio.
If we do not satisfy the financial tests in the credit agreement, we would be
in default, and our lenders could accelerate our debt payments.
The credit agreement requires us to satisfy financial tests. We may not be
able to meet these financial tests because of events beyond our control. If we
were unable to pay our debts or to comply with these tests, we would default
under the credit agreement. If our lenders did not waive this default, our
lenders could accelerate payments on our debt and terminate all commitments
under the revolving credit facility. If we were unable to pay the accelerated
debt, the lenders could proceed against the collateral granted to them.
Substantially all of our assets and the assets of our U.S. subsidiaries are
pledged as security under the credit agreement. Our assets may not be
sufficient to repay our debt, including the exchange notes, if the credit
agreement indebtedness is accelerated.
If we experience a change of control, we may be unable to repurchase the
exchange notes. A change of control will also cause a default under the credit
agreement, which would allow lenders to accelerate our payments and block
payments on the exchange notes.
If there is a change of control under the indentures, we are required to
offer to purchase all exchange notes. We may not have sufficient funds
available to purchase the exchange notes.
15
<PAGE>
In addition, any change of control, and any repurchase of the exchange notes
required under the indentures upon a change of control, will constitute an
event of default under the credit agreement. An event of default could cause
our obligations under the credit agreement to be accelerated and become due and
payable. The lenders under the credit agreement would be entitled to receive
payment of all outstanding amounts before we could repurchase any of the
exchange notes. If an event of default occurs, the lenders under the credit
agreement could block repurchases of the exchange notes.
A court could void our obligations under the exchange notes and the subsidiary
guarantees if they resulted from a fraudulent conveyance.
Our creditors may file a lawsuit objecting to our obligations under the
exchange notes or the use of proceeds of the outstanding notes. A court could:
. void our obligations under the exchange notes or the obligations of
our guarantor subsidiaries under their guarantees,
. subordinate the exchange notes or guarantees to our or their other
debt, or
. order the holders to return any amounts paid for the outstanding
notes to Tokheim or to a fund benefitting the creditors,
if the court finds we or they:
(1) intended to defraud a creditor or
(2) did not receive fair value for the outstanding notes and we
. were insolvent or became insolvent by offering the outstanding
notes, or
. did not have enough capital to engage in the acquisition of the RPS
division, or
. intended to or believed that we overextended our debt obligations.
If creditors of our subsidiary guarantors object to their guarantees of the
exchange notes, a court could order the relief discussed above for the same
reasons discussed above. In addition, the guarantors' creditors could claim
that since the guarantees were made for our benefit, the guarantors did not
receive fair value for the guarantees.
Risks associated with the operation of the business
Management may not have the time to focus on both the normal, day-to-day
operations of Tokheim and the realization of the efficiencies and cost
reductions we expect from combining the RPS division's operations with ours. If
we are not successful in these efforts, we may not be able to repay our debt.
Achieving the full benefits from combining Tokheim and the RPS division and
capturing the efficiencies and cost reductions expected as a result of the
acquisition of the RPS division depends, in large part, on our ability to
coordinate and integrate the operations of each company. Achieving the
remaining benefits to be derived from the acquisition of Sofitam also depends
on this coordination and integration. We may not be successful in these
efforts. The combination will require substantial attention of management,
which has limited experience integrating the operations of companies the size
of Tokheim and the RPS division. Management may not be able to focus on
completing the integration of Sofitam's operations as a result of the
acquisition of the RPS division. Management will have less time to focus on the
normal, day-to-day operations of Tokheim, especially if there are any other
difficulties encountered in the transition and integration process. Business,
competitive, financial, general economic and other factors, many of which will
be beyond management's control, will affect the timing and ultimate success of
the integration of the companies and the realization of benefits.
If management is unable to effectively integrate the business of the two
companies, the quality of our products could also decline. Any unexpected
difficulties may cause a material reduction in our sales, revenues or profits.
16
<PAGE>
Our substantial international sales expose us to political and economical
risks that could limit our sales and international growth and decrease our
profits.
International sales represent a substantial portion of our total sales. Pro
forma for the acquisition of the RPS division, 73% of our total sales in 1998
consisted of international sales. We plan to continue expanding our
international sales. Foreign sales are subject to more risks than domestic
sales. These additional risks include:
. political and economic instability in foreign markets;
. restrictive trade policies of foreign governments;
. increased costs of maintaining international marketing efforts; and
. difficulties in enforcing contractual obligations and intellectual
property rights;
Future sales to operators in emerging markets will depend upon the continued
privatization and deregulation of energy and retail petroleum markets in
eastern Europe, Latin America, Africa and Asia, as well as the strength of
their local economies. Our operations in emerging markets will be subject to
the inherent risks of doing business in markets with financial, political and
legal systems that may be unstable or unpredictable. In addition, current local
market conditions have slowed our business in Asia. These market conditions
may not improve and may spread to other regions.
We may not be able to obtain enough cash from our subsidiaries to pay
principal and interest on our debt.
Our ability to pay our debt will depend, in substantial part, on our ability
to obtain the cash flow that our international operations generate, including
the RPS division. We lent money and made capital contributions to our
subsidiaries in connection with the acquisition of the RPS division. We expect
that our international subsidiaries' interest payments on these intercompany
loans will help pay our debt. In addition, some subsidiaries will pay us fees
under management agreements executed at the same time as the acquisition of the
RPS division. The U.S. and other countries may recharacterize these interest
payments and management fees in a way that has adverse tax or other
consequences for us. These fees and payments also may become subject to
exchange control restrictions on the transfer of funds into or out of foreign
countries. The failure of our subsidiaries to pay interest and fees may cause
us to be unable to pay our outstanding indebtedness, including the exchange
notes. Under French law, the trustee or receiver in bankruptcy or the court in
any bankruptcy proceeding may also be in a position to seek either the
nullification or the non-enforceability, depending on the situation, of any
legal acts undertaken by a company with third parties, such as the increase of
intercompany obligations, including intercompany notes, and the payment of
management or other fees. This act may decrease our cash flow and prevent us
from paying our obligations, including the exchange notes. In addition,
declines in the value of the euro, or any other currency in which we make
sales, relative to the U.S. dollar, reduce the amount of funds that we can
repatriate from our international subsidiaries to help pay our debt.
Substantially all of our sales are to customers in the retail petroleum
industry. Changes in the retail petroleum industry could significantly decrease
demand for our products.
Substantially all of our net sales are derived from the sale and servicing of
petroleum dispensing equipment to the retail petroleum industry. Our results of
operations depend on demand for equipment from the retail petroleum industry in
developed and emerging markets. Several factors affect the retail petroleum
industry's demand for our equipment, including:
. environmental regulations;
. technological improvements;
. consolidation trends among major oil companies in developed markets;
. the pace of development in emerging markets; and
. general economic and industry conditions.
Any of these factors could lead to a significant decrease in demand for our
products.
17
<PAGE>
The loss of one of our large customers, or our failure to win national,
regional and global contracts from an existing customer, could significantly
reduce our cash flow, market share and profits.
Some of our customers contribute a substantial amount to our revenues. The
loss of any of these customers, or class of customers, or decreases in these
customers' capital expenditures, could decrease our cash flow, market share and
profits. As a result of consolidation in the oil industry, especially among
major oil companies, Tokheim is at risk of losing large customers through
merger or consolidation. Recently, major oil companies and national oil
companies have moved toward granting national, regional and global contracts,
or tenders, and toward creating alliances and preferred supplier relationships
with suppliers. Typically, a customer can terminate these arrangements at any
time. The loss of a customer, or the award of a contract to a competitor, could
more significantly reduce Tokheim's cash flow, market share and profits as
these arrangements become more common.
Intense competition in our industry has caused a general decline in the price
of our products.
Competition within the retail petroleum dispensing equipment industry is
intense, and has caused the average price of our products to fall significantly
over the past few years. Prices may continue to fall in the future. Our primary
competitors include, among others:
. Gilbarco Inc., a division of GEC Plc;
. Wayne, a division of Halliburton Co.;
. Scheidt & Bachmann GmbH; and
. Tatsuno Corporation.
We could potentially lose market share if competitors are able to form
alliances with major oil companies or respond to their contract proposals more
quickly or on more favorable terms than we can. Any increase in competition
could cause further price reductions, reduced gross margins and loss of market
share for Tokheim.
If we are not able to apply new technology and software in our products or
develop new products, we may not be able to generate new sales.
Our success depends, in significant part, on our ability to develop products
and services that customers will accept. We may not be able to develop
successful new products in a timely fashion. Our commitment to customizing
products to address particular needs of our customers could burden our
resources or delay the delivery or installation of products. Our products may
not be marketed properly or satisfy the needs of the worldwide market.
In addition, there is intense competition to establish proprietary rights to
these new products and the related technologies. The technology and software in
our products, including electronic components, point-of-sale systems and
related products, is growing increasingly sophisticated and expensive. Several
of our competitors have significantly greater financial, technical and
marketing resources than we do. These competitors may develop proprietary
products that are superior to ours or integrate new technologies more quickly
than we do. We may not be able to obtain rights to this technology. We may also
face claims that our products infringe patents that our competitors hold. Any
of these factors could harm our relationship with customers and reduce our
sales and profits.
Fluctuations in exchange rates may decrease our revenues, cash flows and
earnings. Adapting to the euro may impose transition costs on us.
A substantial portion of our expenses and sales are denominated in foreign
currencies. Thus, our revenues, cash flows and earnings are affected by
fluctuations in some exchange rates, primarily the rates between the U.S.
dollar and the French franc or euro and between the British pound and the U.S.
dollar and the euro.
18
<PAGE>
During 1998, approximately 26% of Tokheim's total revenue was denominated in
French francs, which have significantly depreciated against the U.S. dollar in
recent years. Moreover, we conduct a substantial portion of our European
manufacturing at our Dundee, Scotland facility, primarily for export. The
British pound has recently appreciated against other European currencies. If
foreign currencies continue to decline in value relative to the U.S. dollar or
the British pound, our U.S. or British exports could become more expensive and
potentially less competitive in those markets.
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency, the euro. We are likely to be financially
affected by the introduction of the euro because we have subsidiaries and
business in many of the member states. We could face substantial transition
costs as we redesign our software systems to reflect the adoption of the new
currency.
We may not be able to attract enough highly skilled employees. A loss of key
personnel could substantially disrupt our business.
Our success depends in large part upon our ability to attract, retain and
motivate highly skilled employees from a competitive labor market. We may not
be able to continue to attract and retain sufficient numbers of highly skilled
employees. We are leanly staffed and do not generally have duplicative
personnel. As a result, the loss of Douglas K. Pinner, our Chairman of the
Board, President and Chief Executive Officer, or other key personnel, could
substantially disrupt our business operations and harm our relationships with
customers and suppliers.
Any defect in our products could substantially damage people and the
environment, and could result in costly recalls and litigation.
A product defect could pose a significant risk of injury or environmental
contamination because our products are used primarily in connection with
highly combustible, toxic materials. We also face the possibility of a product
recall if there are defects in the design or manufacture of our products.
Product liability claims or recalls could cost us a substantial amount of
money. These cases could result in substantial claims against Tokheim.
The failure of our computer systems or those of our vendors to process dates
related to the year 2000 could severely disrupt our operations or cause our
products to malfunction.
Many computer systems, software products and other business systems with
embedded chips or processors use only two digits to represent the year. As a
result, they may be unable to accurately process data before, during or after
the year 2000. Business and governmental entities are at risk for possible
miscalculations or system failures causing disruptions in their operations.
This is commonly known as the Year 2000 issue. This issue can arise at any
point in our supply, manufacturing, processing, distribution and financial
chains.
We have conducted a review of our business systems, including our computer
systems. We may not identify all Year 2000 problems in our computer systems or
those of our customers, vendors and resellers in advance of their occurrence.
We may not be able to successfully remedy any problems that are discovered.
Our expenses in identifying and addressing such problems, or the expenses or
liabilities to which we may become subject as a result of such problems, could
disrupt our operations and cause us to lose customers and market share.
Furthermore, we rely on outside vendors to provide computer hardware
components that we sell to our customers. Many of our products and services
integrate or interface with software systems of a customer. As a result, the
failure of third-party systems to be Year 2000 ready could also disrupt our
operations.
We may have to amortize purchased goodwill associated with future
acquisitions over a maximum of twenty years instead of over the current
maximum of forty years. This could reduce our profitability.
19
<PAGE>
The Financial Accounting Standards Board is currently considering changing
the maximum amortization period for purchased goodwill from forty years to not
more than twenty years for future acquisitions. Tokheim's current accounting
practice is to amortize goodwill over a maximum of 40 years. If this change
becomes effective, we would have to amortize any purchased goodwill associated
with future acquisitions over a much shorter life than we currently do. This
would increase the amount of amortization expense charged to income and reduce
our profitability levels compared to levels we achieve under current rules.
Risks associated with government regulation
A substantial change in environmental laws could require us to redesign our
products or cause our customers to stop buying our products.
Our operations, and those of our principal customers, are subject to local,
regional and national regulations, laws and standards, including those
concerning the environment. Changes in environmental regulation of the
petroleum exploration, manufacturing, distribution and sales businesses could
require our customers to increase their capital spending to comply with such
regulations. Customers may consequently decrease their capital spending on our
products. Additionally, we may have significant costs and liabilities relating
to compliance with environmental regulations.
Restrictions on new hypermarkets may slow our sales to customers in this
market.
A 1996 French regulation restricting the construction of new hypermarkets has
limited new service station growth and our sales to this important, previously
expanding segment of the French market. It is possible that other countries
where hypermarkets operate will also adopt restrictive laws, which could limit
our growth and ability to generate additional sales in these countries.
Risks associated with the exchange offer.
Your failure to exchange your outstanding notes may limit your ability to
transfer your notes.
Tokheim did not register the outstanding notes under the Securities Act or
any state securities laws, and it does not intend to do so after the exchange
offer. As a result, outstanding notes may be transferred only in limited
circumstances under the securities laws. If you do not exchange your
outstanding notes in the exchange offer by following the procedures described
in this prospectus, you will lose your right to have the outstanding notes
registered under the Securities Act, with some exceptions. If you continue to
hold outstanding notes after the exchange offer, you may be unable to sell
them. Outstanding notes that are not tendered or are tendered but not accepted
will, following the exchange offer, continue to be subject to the existing
transfer restrictions.
The market price and liquidity of your exchange notes may decrease if an
active public market does not develop or is not maintained.
While the outstanding dollar notes are presently eligible for trading in the
PORTAL market of the NASD by qualified institutional buyers, there is no
existing market for the exchange notes. The initial purchasers of the
outstanding notes have advised Tokheim that they currently intend to make a
market in the exchange notes following the exchange offer, but they are not
obligated to do so. Furthermore, they may discontinue any market-making at any
time without notice. Tokheim does not currently intend to apply for a listing
of the exchange notes on any securities exchange. An active public market for
the exchange notes may not develop. Moreover, if one develops, it may not
continue.
You may be subject to backup withholding on your exchange notes.
Backup withholding at a 31% rate will generally apply to payments with
respect to the exchange notes to non-U.S. holders if the non-U.S. holder fails
to furnish required information certification to Tokheim or its paying agent
and fails to otherwise establish an exemption. Any amounts withheld will be
allowed as a refund or a credit against your federal income tax liability, if
any, if you follow the procedures of the IRS for obtaining refunds or credits.
You should read the section entitled "Important United States Federal Income
Tax Considerations" under the heading "Information reporting and backup
withholding" for information on how you can avoid backup withholding
requirements.
20
<PAGE>
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included in this
prospectus, including statements regarding our future financial position,
business strategy, budgets, projected costs and cost savings and plans and
objectives of management for future operations, are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. You can generally identify forward-looking statements
by the use of forward-looking words, such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe" or "continue," or the negative of or
variations on these words or similar terminology. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will be correct. Important
factors that could cause our actual results to differ materially from our
expected results are discussed in the section entitled "Risk Factors" and
elsewhere in this prospectus, including in conjunction with the forward-looking
statements themselves. We do not undertake any obligation to update any
forward-looking statements. Given the uncertainties associated with forward-
looking statements, you should not unduly rely on them.
EXCHANGE RATES
References in this prospectus to "euro" and "(Euro)" are to the currency that
was introduced at the start of the third stage of economic and monetary union
pursuant to the treaty establishing the European Economic Community, which was
amended by the Treaty on European Union, signed at Maastricht, the Netherlands
on February 7, 1992. Except as otherwise stated in this prospectus, conversions
of non-U.S. dollar currencies to U.S. dollars in the financial statements and
other information included in this prospectus have been calculated, for income
statement purposes, on the basis of average exchange rates over the related
periods and, for balance sheet purposes, on the date of the balance sheet.
On May 3, 1998, the Council of the European Union adopted Council Regulation
(EC) No. 974/98, which defines the initial participants in Stage III of
European Monetary Union as Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, The Netherlands, Portugal and Spain. This definition of
initial participants does not include England, Denmark and Greece. Thus, their
currencies--the British pound, the Danish krone, and the Greek drachma--were
not among those that were converted to the euro.
The euro was introduced on January 1, 1999 at an exchange rate of
(Euro)1.00=$1.17. As of April 26, 1999 the noon buying rate for the euro was
(Euro)1.00=$1.06. Unless otherwise indicated, the exchange rate used in this
prospectus is (Euro)1.00=$1.1553.
The following table sets forth, for the periods and dates indicated,
information concerning the French franc exchange rate, set forth in French
francs per dollar.
<TABLE>
<CAPTION>
French francs per dollar
--------------------------------
Year/Period
Calendar Period End High Low Average(1)
--------------- ----------- ---- ---- ----------
<S> <C> <C> <C> <C>
1994..................................... 5.34 5.98 5.10 5.54
1995..................................... 4.91 5.40 4.76 4.99
1996..................................... 5.19 5.27 4.88 5.11
1997..................................... 5.99 6.35 5.19 5.84
1998..................................... 5.62 6.21 5.42 5.90
1999 (through April 26).................. 6.20 6.20 5.54 5.91
</TABLE>
- --------
(1) Average of the closing rates for each business day during the period. On
April 26, 1999, the noon buying rate with respect to the French franc was
$1.00 = 6.20 French francs.
We make no representation that the amounts referred to in this prospectus
could have been or could be converted into other currencies at any particular
rate or at all.
21
<PAGE>
THE EXCHANGE OFFER
Purpose of the exchange offer
On January 29, 1999, we privately placed $123.0 million of 11 3/8% senior
subordinated notes due 2008 and (Euro)75.0 million of 11 3/8% senior
subordinated notes due 2008. Simultaneously with the sale of the outstanding
notes, we entered into two registration rights agreements--one relating to the
outstanding dollar notes and one relating to the outstanding euro notes. We
entered into the registration rights agreements with the subsidiary guarantors
and the initial purchasers of the outstanding notes--BT Alex. Brown, Credit
Lyonnais Securities, First Chicago Capital Markets, Inc., Gleacher NatWest
International, ABN AMRO Incorporated, PaineWebber Incorporated and Schroder &
Co. Inc. Under these registration rights agreements, we agreed to file a
registration statement regarding the exchange of the outstanding notes for
notes with terms identical in all material respects. We also agreed to use our
reasonable best efforts to cause that registration statement to become
effective with the SEC. Copies of the registration rights agreements have been
filed as exhibits to our Annual Report on Form 10-K filed with the SEC on March
1, 1999 and are incorporated by reference as exhibits to the registration
statement of which this prospectus is a part.
We are conducting the exchange offer to satisfy our contractual obligations
under the registration rights agreements. The form and terms of the exchange
notes are the same as the form and terms of the outstanding notes, except that
the exchange notes will be registered under the Securities Act. As a result,
the exchange notes will not bear legends restricting their transfer and will
not contain the registration rights and liquidated damage provisions contained
in the outstanding notes. The outstanding notes provide that, if a registration
statement relating to the exchange offer has not been filed by April 29, 1999
and declared effective by June 28, 1999, we will pay liquidated damages on the
outstanding notes. Upon the completion of the exchange offer, you will not be
entitled to any liquidated damages on your outstanding notes or any further
registration rights under the registration rights agreements, except under
limited circumstances. The exchange offer is not extended to holders of
outstanding notes in any jurisdiction where the exchange offer does not comply
with the securities or blue sky laws of that jurisdiction.
If:
.the applicable interpretations of the staff of the SEC do not permit us to
conduct the exchange offer, or
.the exchange offer is not consummated on or before August 12, 1999, or
. holders of the outstanding notes notify us that they are not eligible to
participate in the exchange offer, or would not receive freely tradeable
exchange notes in exchange for tendered outstanding notes
we will use our best efforts to cause to become effective a shelf registration
statement for the resale of the outstanding notes. We also agreed to use our
best efforts to keep the shelf registration statement effective until the
earlier of three years after the issue date of the outstanding notes and such
time as all of the outstanding notes have been sold thereunder.
In this section entitled "The Exchange Offer," the term "holder" means:
.any person in whose name the outstanding notes are registered on the books
of Tokheim, or
.any other person who has obtained a properly completed bond power from the
registered holder, or
. any person whose outstanding notes are held of record by DTC, Euroclear
or Cedel Bank and who wants to deliver these outstanding notes by book-
entry transfer at DTC, Euroclear or Cedel Bank.
Terms of the exchange offer
We are offering to exchange up to $123.0 million total principal amount of
dollar exchange notes for the same total principal amount of outstanding dollar
notes. The outstanding dollar notes must be tendered properly on or before the
expiration date, which is defined below, and not withdrawn. In exchange for
outstanding dollar notes properly tendered and accepted, we will issue a like
total principal amount of up to $123.0 million in dollar exchange notes.
22
<PAGE>
In addition, we are offering to exchange up to (Euro)75.0 million total
principal amount of euro exchange notes for the same total principal amount of
outstanding euro notes. The outstanding euro notes also must be tendered
properly on or before the expiration date and not withdrawn. In exchange for
outstanding euro notes properly tendered and accepted, we will issue a like
total principal amount of up to (Euro)75.0 million in euro exchange notes.
The expiration date of the exchange offer is 5:00 p.m., New York City time
for the outstanding dollar notes, and 5:00 p.m., London time for the
outstanding euro notes, on , 1999 unless we extend the exchange
offer.
The exchange offer is not conditioned upon holders tendering a minimum
principal amount of outstanding notes. As of the date of this prospectus,
$123.0 million aggregate principal amount of dollar notes are outstanding, and
(Euro)75.0 million aggregate principal amount of euro notes are outstanding.
You do not have any appraisal or dissenters' rights in the exchange offer.
If you do not tender outstanding notes or you tender outstanding notes that we
do not accept, your outstanding notes will remain outstanding. Any outstanding
notes will be entitled to the benefits of the indenture under which they were,
and the exchange notes will be, issued. The outstanding notes will not,
however, be entitled to any further registration rights under the registration
rights agreements, except under limited circumstances. See the section
entitled "Risk Factors" under the heading "Risks associated with the exchange
offer--Your failure to exchange your notes may limit your ability to transfer
your notes" for more information regarding notes outstanding after the
exchange offer.
After the expiration date, we will return to you any tendered outstanding
notes that we did not accept for exchange.
You will not have to pay brokerage commissions or fees or transfer taxes for
exchanging your notes if you follow the instructions in the letter of
transmittal. We will pay the charges and expenses, other than those taxes
described below, in the exchange offer. See "--Fees and expenses" below for
further information regarding fees and expenses.
Neither Tokheim nor Tokheim's board of directors recommends you to tender or
not tender outstanding notes in the exchange offer. In addition, Tokheim has
not authorized anyone to make any recommendation. You must decide whether to
tender in the exchange offer and, if so, the aggregate amount of outstanding
notes to tender.
We have the right, in accordance with applicable law, at any time:
. to delay the acceptance of the outstanding notes;
. to terminate the exchange offer if we determine that any of the
conditions to the exchange offer have not occurred or have not been
satisfied;
. to extend the expiration date of the exchange offer and keep all
outstanding notes tendered other than those notes properly withdrawn;
and
. to waive any condition or amend the terms of the exchange offer.
If we materially change the exchange offer, or if we waive a material
condition of the exchange offer, we will promptly distribute a prospectus
supplement to you disclosing the change or waiver. We also will extend the
exchange offer as required by Rule 14e-1 under the Securities Exchange Act of
1934.
If we exercise any of the rights listed above, we will promptly give oral or
written notice of the action to the exchange agents, as defined below under
the heading "--Exchange agents", and we will issue a release to appropriate
news agencies. In the case of an extension, an announcement will be made no
later than 9:00 a.m., New York City time in the case of outstanding dollar
notes, or 9:00 a.m., London time in the case of outstanding euro notes, on the
next business day after the previously scheduled expiration date.
23
<PAGE>
Acceptance of outstanding notes for exchange, and issuance of exchange notes
Tokheim will issue to the exchange agents exchange notes for outstanding
notes tendered and accepted and not withdrawn promptly after the expiration
date. The exchange agents might not deliver the exchange notes to all tendering
holders at the same time. The timing of delivery depends upon when the exchange
agents receive and process the required documents.
Tokheim will be deemed to have exchanged outstanding notes validly tendered
and not withdrawn when it gives oral or written notice to the exchange agents
of their acceptance. The exchange agents are agents for Tokheim for receiving
tenders of outstanding notes, letters of transmittal and related documents. The
exchange agents are also agents for tendering holders for receiving outstanding
notes, letters of transmittal and related documents and transmitting exchange
notes to validly tendering holders. If for any reason, Tokheim:
.delays the acceptance or exchange of any outstanding notes, or
.extends the exchange offer, or
.is unable to accept or exchange notes,
then the exchange agents may, on behalf of Tokheim and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered notes. Notes that the exchange agents
retain may not be withdrawn, except according to the withdrawal procedures
outlined below in the section entitled "--Withdrawal rights."
In tendering outstanding notes, you must warrant in the letter of transmittal
or in an agent's message, which is described below, that:
. you have full power and authority to tender, exchange, sell, assign and
transfer outstanding notes,
. Tokheim will acquire good, marketable and unencumbered title to the
tendered outstanding notes, free and clear of all liens, restrictions,
charges and other encumbrances, and
. the outstanding notes tendered for exchange are not subject to any
adverse claims or proxies.
You also must warrant and agree that you will, upon request, execute and
deliver any additional documents that Tokheim or the exchange agents request to
complete the exchange, sale, assignment, and transfer of the outstanding notes.
Procedures for Tendering Outstanding Notes
Valid Tender
You may tender your outstanding notes by book-entry transfer or by other
means. For book-entry transfer, you must deliver to the appropriate exchange
agent either:
. a properly completed and duly executed letter of transmittal, including
all other documents that the letter of transmittal requires, or
. an agent's message, meaning a message transmitted to the appropriate
exchange agent by DTC, Euroclear or Cedel Bank, as applicable, and
forming a part of a book-entry confirmation, stating that you agree to
be bound by the terms of the letter of transmittal.
You must deliver your letter of transmittal or agent's message by mail,
facsimile, hand delivery or overnight carrier to the appropriate exchange agent
on or before the expiration date.
In addition, to complete a book-entry transfer, you must also either:
. have DTC transfer the outstanding dollar notes into the dollar exchange
agent's account at DTC using the ATOP procedures for transfer, and
obtain a confirmation of the transfer, or
24
<PAGE>
. have Euroclear or Cedel Bank transfer the outstanding euro notes into
the euro exchange agent's account at Euroclear or Cedel Bank, as
applicable, using their procedures for transfer, and obtain a
confirmation of the transfer, or
. follow the guaranteed delivery procedures described below under the
heading "--Guaranteed delivery."
If you tender fewer than all of your outstanding notes, you should fill in
the amount of notes tendered in the appropriate box on the letter of
transmittal. If you do not indicate the amount tendered in the appropriate
box, we will assume you are tendering all outstanding notes that you hold.
For tendering your outstanding notes other than by book-entry transfer, you
must deliver a completed and signed letter of transmittal to the appropriate
exchange agent. Again, you must deliver the letter of transmittal by mail,
facsimile, hand delivery or overnight carrier to the appropriate exchange
agent on or before the expiration date. In addition, to complete a valid
tender, you must:
. deliver your outstanding dollar notes to the dollar exchange agent on or
before the expiration date, or
. deliver your outstanding euro notes to the euro exchange agent on or
before the expiration date, or
. follow the guaranteed delivery procedures set forth below under the
heading "--Guaranteed delivery."
Delivery of required documents by whatever method you choose is at your sole
risk. Delivery is complete when the exchange agents actually receive the items
to be delivered. Delivery of documents to DTC, Euroclear or Cedel Bank in
accordance with their procedures or to Tokheim does not constitute delivery to
the exchange agents. If delivery is by mail, we recommend registered mail,
return receipt requested, properly insured, or an overnight delivery service.
In all cases, you should allow sufficient time to ensure timely delivery.
Signature guarantees
You do not need to endorse certificates for the outstanding notes or provide
signature guarantees on the letter of transmittal unless:
(1) someone other than the registered holder tenders the certificate, or
(2) you complete the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the letter of transmittal.
In the case of (1) or (2) above, you must sign your outstanding note or
provide a properly executed bond power. The signature on the bond power and on
the letter of transmittal must be guaranteed by a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor
institution." Eligible guarantor institutions include:
. a bank;
. a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer;
. a credit union;
. a national securities exchange, registered securities association or
clearing agency; or
. a savings association that is a participant in a securities transfer
association.
Guaranteed delivery
If you want to tender outstanding notes in the exchange offer and:
. the certificates for the outstanding notes are not immediately
available, or
. all required documents are unlikely to reach the exchange agents on or
before the expiration date, or
. a book-entry transfer cannot be completed in time,
25
<PAGE>
the outstanding notes may be tendered if you comply with the following
guaranteed delivery procedures:
. your tender is made by or through an eligible guarantor institution;
. you deliver a properly completed and signed notice of guaranteed
delivery, like the form provided with the letter of transmittal, to the
appropriate exchange agent on or before the expiration date; and
. you deliver the certificates or a confirmation of book-entry transfer
and a properly completed and signed letter of transmittal to the
appropriate exchange agent within three New York Stock Exchange trading
days after the notice of guaranteed delivery is executed.
You may deliver the notice of guaranteed delivery by hand, facsimile or mail
to the appropriate exchange agent. You must include a guarantee by an eligible
guarantor institution in the form described in the notice.
Our acceptance of properly tendered outstanding notes is a binding agreement
between you and Tokheim upon the terms and subject to the conditions of the
exchange offer.
Determination of validity
We will resolve all questions regarding the form of documents, validity,
eligibility, time of receipt and acceptance for exchange of any tendered
outstanding notes. Our resolution of these questions as well as our
interpretation of the terms and conditions of the exchange offer, including the
letter of transmittal, is final and binding on all parties. A tender of
outstanding notes is invalid until all irregularities have been cured or
waived. Neither Tokheim, any affiliates or assigns of Tokheim, the exchange
agents nor any other person is under any obligation to give notice of any
irregularities in tenders, and they are not liable for failing to give any such
notice. Tokheim reserves the absolute right, in its sole and absolute
discretion, to reject any tenders determined to be in improper form or
unlawful. We also reserve the absolute right to waive any of the conditions of
the exchange offer or any condition or irregularity in the tender of
outstanding notes by any holder. We need not waive similar conditions or
irregularities in the case of other holders.
If any letter of transmittal, endorsement, bond power, power of attorney, or
any other document required by the letter of transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
that person must indicate that capacity when signing. In addition, unless
waived by Tokheim, the person must submit proper evidence satisfactory to
Tokheim, in its sole discretion, of his or her authority to so act.
If you beneficially own outstanding notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian, you should contact that entity promptly if you want to
participate in the exchange offer.
Resales of exchange notes
We are exchanging the outstanding notes for exchange notes in reliance upon
the staff of the SEC's position, set forth in interpretive letters to third
parties in other similar transactions. We will not seek our own interpretive
letter. As a result, we cannot assure you that the staff will take the same
position on this exchange offer as it did in interpretive letters to other
parties. Based on the staff's letters to other parties, we believe that holders
of exchange notes, other than broker-dealers, can offer the exchange notes for
resale, resell and otherwise transfer the exchange notes without delivering a
prospectus to prospective purchasers. However, you must acquire the exchange
notes in the ordinary course of business and have no intention of engaging in a
distribution of the exchange notes, as a "distribution" is defined by the
Securities Act.
If you are an "affiliate" of Tokheim or you intend to distribute exchange
notes, or if you are a broker-dealer who purchased outstanding notes from
Tokheim to resell pursuant to Rule 144A or any other available exemption under
the Securities Act, you:
. cannot rely on the staff's interpretations in the above mentioned
interpretive letters;
. cannot tender outstanding notes in the exchange offer; and
26
<PAGE>
. must comply with the registration and prospectus delivery requirements
of the Securities Act to transfer the outstanding notes, unless the sale
is exempt.
In addition, if you are a broker-dealer who acquired outstanding notes for
your own account as a result of market-making or other trading activities and
you exchange the outstanding notes for exchange notes, you must deliver a
prospectus with any resales of the exchange notes.
If you want to exchange your outstanding notes for exchange notes, you will
be required to affirm that you:
. are not an "affiliate" of Tokheim;
. are acquiring the exchange notes in the ordinary course of your
business;
. have no arrangement or understanding with any person to participate in a
distribution of the exchange notes, within the meaning of the Securities
Act; and
. are not a broker-dealer, are not engaged in, and do not intend to engage
in, a distribution of the exchange notes, within the meaning of the
Securities Act.
In addition, we may require you to provide information regarding the number
of "beneficial owners" of the outstanding notes within the meaning of Rule 13d-
3 under the Exchange Act. Each broker-dealer that receives exchange notes for
its own account must acknowledge that it acquired the outstanding notes for its
own account as the result of market-making activities or other trading
activities. Each broker-dealer must further agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of exchange notes. By making this acknowledgment and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" under the Securities Act. Based on the staff's position in
interpretive letters issued to third parties, we believe that broker-dealers
who acquired outstanding notes for their own accounts as a result of market-
making activities or other trading activities may fulfill their prospectus
delivery requirements with respect to the exchange notes with a prospectus
meeting the requirements of the Securities Act. Accordingly, a broker-dealer
may use this prospectus to satisfy such requirements. We have agreed that a
broker-dealer may use this prospectus for a period ending 180 days after the
expiration date of the exchange offer. You should read the section entitled
"Plan of Distribution" for further information about the use of this prospectus
by broker-dealers. A broker-dealer intending to use this prospectus in the
resale of exchange notes must notify us, on or prior to the expiration date,
that it is a participating broker-dealer. This notice may be given in the
letter of transmittal or may be delivered to the appropriate exchange agent.
Any participating broker-dealer who is an "affiliate" of Tokheim may not rely
on the staff's interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act when reselling exchange
notes.
Each participating broker-dealer exchanging outstanding notes for exchange
notes agrees that, upon receipt of notice from Tokheim:
(a) that any statement contained or incorporated by reference in this
prospectus makes the prospectus untrue in any material respect, or
(b) that this prospectus omits to state a material fact necessary to make
the statements contained or incorporated by reference in this prospectus,
in light of the circumstances under which they were made, not misleading,
or
(c) of the occurrence of other events specified in the registration
rights agreements,
the participating broker-dealer will suspend the sale of exchange notes. Each
participating broker-dealer agrees not to resell the exchange notes until:
(1) Tokheim has amended or supplemented this prospectus to correct the
misstatement or omission and Tokheim furnishes copies of the amended or
supplemented prospectus to the participating broker-dealer, or
27
<PAGE>
(2) Tokheim gives notice that the sale of the exchange notes may be
resumed.
If Tokheim gives notice suspending the sale of exchange notes, it shall extend
the 180-day period during which this prospectus may be used by a participating
broker-dealer by the number of days between the date Tokheim gives notice of
suspension and the date participating broker-dealers receive copies of the
amended or supplemented prospectus or the date Tokheim gives notice resuming
the sale of exchange notes.
Withdrawal rights
You can withdraw tenders of outstanding notes at any time on or before the
expiration date.
For a withdrawal to be effective, you must deliver a written, telegraphic,
telex or facsimile transmission of a notice of withdrawal or an agent's message
to the appropriate exchange agent on or before the expiration date. The notice
of withdrawal must specify the name of the person tendering the outstanding
notes to be withdrawn, the total principal amount of outstanding notes
withdrawn, and the name of the registered holder of the outstanding notes if
different from the name of the person tendering the outstanding notes. If you
delivered outstanding notes to an exchange agent, you must submit the serial
numbers of the outstanding notes to be withdrawn, and the signature on the
notice of withdrawal must be guaranteed by an eligible guarantor institution,
except in the case of outstanding notes tendered for the account of an eligible
guarantor institution. If you tendered outstanding notes as a book-entry
transfer, the notice of withdrawal must specify the name and number of the
account at DTC, Euroclear or Cedel Bank, as applicable, to be credited with the
withdrawal of outstanding notes. You must deliver the notice of withdrawal to
the appropriate exchange agent by written, telegraphic, telex or facsimile
transmission, or by an agent's message. You may not rescind withdrawals of
tender. Outstanding notes properly withdrawn may again be tendered at any time
on or before the expiration date.
We will determine all questions regarding the validity, form and eligibility
of withdrawal notices. Our determination will be final and binding on all
parties. Neither Tokheim, any affiliate or assign of Tokheim,
the exchange agents nor any other person is under any obligation to give you
notice of any irregularities in any notice of withdrawal, and they are not
liable for failing to give any such notice. Withdrawn outstanding notes will be
returned to you after withdrawal.
Interest on exchange notes
The dollar exchange notes will bear interest at a rate of 11 3/8% per annum
and the euro exchange notes will bear interest at a rate of 11 3/8% per annum.
Interest is both payable semi-annually on February 1 and August 1 of each year.
Holders of exchange notes will receive interest from the date of initial
issuance of the exchange notes, plus an amount equal to the accrued interest on
the outstanding notes. Interest on the outstanding notes accepted for exchange
will cease to accrue upon issuance of the exchange notes.
Conditions to the exchange offer
We do not need to exchange any outstanding notes, may terminate the exchange
offer or may waive any conditions to the exchange offer or amend the exchange
offer, if any of the following conditions has occurred:
. the staff of the SEC no longer allows the exchange notes to be offered
for resale, resold and otherwise transferred by holders without
compliance with the registration and prospectus delivery provisions of
the Securities Act; or
. a governmental body passes any law, statute, rule or regulation which,
in our opinion, prohibits or prevents the exchange offer; or
. the SEC or any state securities authority issues a stop order suspending
the effectiveness of the registration statement or initiates or
threatens to initiate a proceeding to suspend the effectiveness of the
registration statement; or
28
<PAGE>
. we are unable to obtain any governmental approval that we believe is
necessary to complete the exchange offer.
If we reasonably believe that any of the above conditions has occurred, we
may:
. terminate the exchange offer, whether or not any outstanding notes have
been accepted for exchange,
. waive any condition to the exchange offer; or
. amend the terms of the exchange offer in any respect.
If our waiver or amendment materially changes the exchange offer, we will
promptly disclose the waiver or amendment through a prospectus supplement. We
will distribute the prospectus supplement to the registered holders of the
outstanding notes. The prospectus supplement will also extend the exchange
offer as required by Rule 14d-1 of the Exchange Act.
Exchange agents
We appointed U.S. Bank Trust National Association as dollar exchange agent
for the outstanding dollar notes for the exchange offer. We appointed Midland
Bank plc, HSBC Issuer Services as euro exchange agent for the outstanding euro
notes. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for a notice of guaranteed delivery to the appropriate exchange agent
addressed as follows:
Dollar exchange agent
By registered or certified Confirm by telephone: By hand or overnight
mail: (651) 244-4512 delivery:
U.S. Bank Trust National Facsimile transmissions: U.S. Bank Trust National
Association (651) 244-1537 Association
P.O. Box 64485 (Eligible guarantor Fourth Floor--Bond Drop
St. Paul, Minnesota 55164- institutions only) Window
9549 180 East Fifth Street
Attention: Specialized St. Paul, Minnesota 55101
Finance Attention: Specialized
Finance
Euro exchange agent
By registered or certified Confirm by telephone: By hand or overnight
mail: 0171-260-7679 delivery:
Midland Bank plc Facsimile transmissions: Midland Bank plc
HSBC Issuer Services 0171-260-8086 HSBC Issuer Services
Mariner House, Pepys (Eligible guarantor Mariner House, Pepys
Street institutions only) Street
London, EC3N 4DA London, EC3N 4DA
Attention: Phil Dainesi Attention: Phil Dainesi
If you deliver letters of transmittal or any other required documents to an
address or facsimile number other than those listed above, your tender is
invalid.
Fees and expenses
We will pay the exchange agents reasonable and customary fees for their
services and reasonable out-of-pocket expenses. We will also pay brokerage
houses and other custodians, nominees and fiduciaries their reasonable out-of-
pocket expenses for sending copies of this prospectus and related documents to
holders of outstanding notes, and for handling or tendering for their
customers.
We will pay the transfer taxes for the exchange of the outstanding notes in
the exchange offer. If, however, exchange notes are delivered to or issued in
the name of a person other than the registered holder, or
29
<PAGE>
if a transfer tax is imposed for any reason other than for the exchange of
outstanding notes in the exchange offer, then the tendering holder will pay the
transfer taxes. If a tendering holder does not submit satisfactory evidence of
payment of taxes or exemption from taxes with the letter of transmittal, the
taxes will be billed directly to the tendering holder.
We will not make any payment to brokers, dealers or other nominees soliciting
acceptances in the exchange offer.
Accounting treatment
The exchange notes will be recorded at the same carrying value as the
outstanding notes. Accordingly, Tokheim will not recognize any gain or loss on
the exchange for accounting purposes. We intend to amortize the expenses of the
exchange offer and issuance of the outstanding notes over the respective terms
of the dollar notes and euro notes.
30
<PAGE>
THE TRANSACTIONS
The acquisition and related financings
On September 30, 1998, we completed the acquisition of the RPS division of
Schlumberger Limited for a price equal to $330.0 million in cash, notes, and
warrants. Of the $330.0 million purchase price, $100.0 million was paid in cash
borrowed under the credit agreement including $22.5 million from our 12.5%
senior notes. The seller note portion of the purchase price consisted of $40.0
million in ten year, 12.0% junior subordinated notes, payable in kind, and
$170.0 million in 12.0% senior subordinated notes due January 29, 1999. The
remaining $20.0 million of the purchase price was paid with common stock
warrants exercisable for five years, beginning January 30, 1999 to purchase at
a nominal price 2,526,923 shares of Tokheim's common stock. The 12.0% senior
subordinated notes, along with the senior notes, were repaid on January 29,
1999 with the proceeds from the sale of the outstanding notes. We have the
option, subject to bank approval, to redeem, in whole or in part, the junior
subordinated notes.
Tokheim is to reimburse Schlumberger for the net cash that remained in the
RPS division on the effective date of the acquisition, net of adjustments. We
currently estimate this amount to be up to approximately $6.5 million. We
anticipate that this payment to Schlumberger will be made in the third or
fourth quarter of 1999 from funds available through the revolving working
capital facility under the credit agreement.
On the closing date of the acquisition, we entered into a technology and
licensing agreement with Schlumberger under which Schlumberger will pay us a
minimum fee of approximately $0.9 million a year, regardless of use, for a
period of five years, payable monthly. The payments under the agreement are due
in full even if Schlumberger terminates the agreement or discontinues use of
the services at any time during the five year payment period.
Also at the closing of the acquisition, we entered into a new credit
agreement. The credit agreement currently provides for a six year, $110.0
million revolving working capital facility and a six year, $120.0 million term
loan facility. An additional agreement provides for the assignment of a three
year, $7.6 million ESOP loan facility. At February 28, 1999, the outstanding
borrowings were $65.1 million under the revolving working capital facility,
$120.0 million under the term loan, and $6.3 million under the ESOP facility.
Available borrowings under the revolving working capital facility were $44.9
million at February 28, 1999.
Also, simultaneously with the acquisition, we entered into a note purchase
agreement, pursuant to which we issued $22.5 million aggregate principal amount
of 12.5% senior notes. Proceeds from the senior notes were used in connection
with our refinancing of existing indebtedness.
Also, on September 30, 1998, we completed the repurchase of the final $55.0
million of our 11.5% senior subordinated notes that were then outstanding.
These notes were redeemed at an aggregate premium and consent payment of
approximately $12.3 million along with accrued interest of approximately $1.1
million.
The proceeds from the issuance of the outstanding notes were used to:
. redeem the 12.0% senior subordinated notes; these notes were redeemed at
an aggregate price of $176.7 million, representing principal of $170.0
million and accrued and unpaid interest of $6.7 million;
. redeem the senior notes; these notes were redeemed at an aggregate price
of $23.2 million, representing principal of $22.5 million, accrued and
unpaid interest of $0.2 million and an applicable call premium of $0.5
million;
. reduce borrowings under the revolving working capital facility of the
credit agreement by $3.4 million; and
. pay discounts, fees and expenses associated with the offering of the
outstanding notes of $6.3 million.
31
<PAGE>
In addition, total availability under the revolving working capital facility
of the credit agreement was permanently reduced from $120.0 million to $110.0
million.
The indentures under which the outstanding notes were, and the exchange notes
will be, issued permit us, subject to various conditions, to refinance the
junior subordinated notes and reacquire the warrants with junior subordinated
debt.
Since completing the acquisition, we have begun to implement a plan to cut
costs and integrate the RPS division. You should read the section entitled
"Business" under the heading "Business strategy--Realize operating synergies
and cost savings" for more information about this plan.
32
<PAGE>
SOURCES AND USES OF FUNDS
The exchange offer will not generate cash proceeds for Tokheim. The net
proceeds from the offering of the outstanding dollar notes and the outstanding
euro notes were $119.2 million and $84.0 million (1), respectively, after
discounts and expenses. These proceeds were used to redeem the 12% senior
subordinated notes and the senior notes and to repay borrowings under the
credit agreement.
The following table shows the sources and uses of funds from the offering of
the outstanding notes in millions of dollars:
<TABLE>
<S> <C>
Sources of funds:
Outstanding dollar notes..................................... $123.0
Outstanding euro notes....................................... 86.6(1)
------
Total sources of funds..................................... $209.6
======
Uses of funds:
Refinancing of 12.0% senior subordinated notes............... $170.0
Refinancing of 12.5% senior notes............................ 22.5
Payment of accrued interest.................................. 6.9
Premiums paid to redeem 12.5% senior notes................... 0.5
Reduce borrowings under the revolving working capital
facility of the credit agreement............................ 3.4
Fees and expenses............................................ 6.3
------
Total uses of funds........................................ $209.6
======
</TABLE>
- --------
(1) Calculated using an exchange rate of (Euro)1.00=$1.1553.
33
<PAGE>
CAPITALIZATION
(dollars in millions)
The following table sets forth the consolidated capitalization of Tokheim as
of February 28, 1999 which gives effect to the following:
. the exchange offer,
. the issuance of, and the application of the proceeds from, the
outstanding notes,
. the execution of the credit agreement,
. the consummation of the acquisition of the RPS division, and
. the sale of the senior notes, the 12.0% senior subordinated notes, the
junior subordinated notes and the warrants in connection with the
acquisition.
This table should be read in conjunction with Tokheim's interim Consolidated
Condensed Financial Statements and the Unaudited Pro Forma Consolidated
Condensed Financial Statements, and the respective notes related to the
financial statements, appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of
February 28,
1999
------------
Actual
------------
<S> <C>
Total debt:
Cash overdraft facilities................................. $ 15.0
Credit agreement:
Revolving loans......................................... 65.1
Term loan............................................... 120.0
Guaranteed ESOP obligation................................ 6.3
Other debt................................................ 6.0
11 3/8% outstanding dollar notes.......................... 123.0
11 3/8% outstanding euro notes (1)........................ 82.7
12% junior subordinated notes............................. 41.2
------
Total debt............................................ 459.3
Shareholders' equity:
ESOP preferred stock, net................................. 12.9
Common shareholders' equity, net (30,000,000 shares
authorized, 12,698,106 shares issued) (2)................ 18.6
------
Total shareholders' equity............................ 31.5
------
Total capitalization................................ $490.8
======
</TABLE>
- --------
(1) Calculated using an exchange rate of (Euro)1.00=$1.077.
(2) Includes amounts attributable to the warrants. The indentures under which
the outstanding notes were, and the exchange notes will be, issued permit
us, subject to certain conditions, to refinance the junior subordinated
notes and reacquire the warrants with junior subordinated debt.
34
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Amounts in thousands except amounts per share)
The following unaudited pro forma consolidated condensed financial statements
of Tokheim are derived from the audited and unaudited financial statements of
Tokheim and the RPS division, which are included elsewhere in this prospectus,
and have been adjusted to illustrate the effects of the following:
(1) the issuance of, and the application of the proceeds from, the
outstanding notes,
(2) the execution of the credit agreement,
(3) the consummation of the acquisition of the RPS division, and
(4) the sale of the senior notes, the 12.0% senior subordinated notes,
the junior subordinated notes and the warrants in connection with the
acquisition.
These pro forma financial statements and accompanying notes should be read in
conjunction with the consolidated financial statements of Tokheim and the
combined financial statements of the RPS division, including the notes to the
financial statements, appearing elsewhere in this prospectus. The pro forma
statement of earnings for the year ended November 30, 1998 includes the RPS
division's combined statement of income for the ten months ended September 30,
1998 and Tokheim's consolidated statement of earnings for the year ended
November 30, 1998. Tokheim's unaudited interim balance sheet as of February 28,
1999, appearing elsewhere in this prospectus, includes the effects of the
acquisition of the RPS division and related financing and the offering of, and
the application of the proceeds from, the outstanding notes. The pro forma
adjustments necessary to give effect to the exchange offer would be to increase
"Other noncurrent assets and deferred charges" by approximately $1,000 and to
reduce "Cash" by $1,000 to reflect additional fees and expenses associated with
this exchange offer. These pro forma statements of earnings give effect to our
March 1998 common stock offering and the transactions listed in (1)-(4) above,
and related purchase accounting adjustments, as if these events had taken place
on December 1, 1997. These pro forma financial statements are not necessarily
indicative of either future results of operations or the results that might
have occurred if the March 1998 common stock offering and the transactions
listed in (1)-(4) above had been consummated on December 1, 1997.
The acquisition of the RPS division has been accounted for using the purchase
method of accounting. The allocation of the aggregate purchase price included
in these pro forma financial statements is preliminary and therefore some
amounts will change when such allocation is finalized.
Though not reflected in the Unaudited Pro Forma Consolidated Condensed
Financial Statements, Tokheim believes that through successful integration and
consolidation of the RPS division estimated cost savings of approximately
$28,700 in the first year and $47,300 per annum after three years can be
achieved. Management believes that these cost savings initiatives will not
materially reduce historical Tokheim and RPS division combined revenues. The
majority of all products currently being offered for sale by Tokheim
Corporation and the RPS division will still be offered for sale to our existing
customer base. The products that will no longer be produced or offered for sale
will be replaced by existing or new product offerings that are considered to be
more technologically advantageous to our customers. All anticipated cost
savings are presented net of any additional costs expected to be incurred at
facilities that will increase production from historical levels.
To date, we have initiated and accelerated various closures and
consolidations which we believe will yield first year cost savings of
approximately $30,000. These cost savings programs include the closure of
manufacturing facilities in Bohnam, Texas and Glenrothes, Scotland and the
consolidation of operations in Spain, Italy, France, the Netherlands, Germany
and Belgium.
35
<PAGE>
Unaudited Pro Forma Consolidated Condensed Statement of Earnings
for the three months ended February 28, 1999
<TABLE>
<CAPTION>
Tokheim
Corporation
And
(b) Offering Of Subsidiaries
Tokheim Outstanding Pro Forma
Corporation Notes Pro Offering Of
And Forma Outstanding
Subsidiaries Adjustments Notes
------------ ----------- ------------
<S> <C> <C> <C>
Net sales............................... $166,193 $ -- $166,193
Cost of sales, exclusive of items listed
below.................................. 133,297 -- 133,297
Selling, general, and administrative
expenses............................... 25,767 -- 25,767
Depreciation and amortization........... 6,892 -- 6,892
Merger and acquisition costs and other
unusual items.......................... 1,123 -- 1,123
-------- ------ --------
Operating loss.......................... (886) -- (886)
Interest expense, net................... 12,307 114 (g) 12,421
Other expense, net...................... 1,378 -- 1,378
-------- ------ --------
Loss before income taxes and
extraordinary loss..................... (14,571) (114) (14,685)
Income taxes............................ (393) -- (393)
-------- ------ --------
Loss before extraordinary loss.......... (14,178) $ (114) (14,292)
======
Preferred stock dividends ($1.94 per
share)................................. (374) (374)
-------- --------
Loss before extraordinary loss
applicable to common stock............. $(14,552) $(14,666)
======== ========
Loss per common share:
Basic:
Before extraordinary loss........... $ (1.15) $ (1.16)
======== ========
Weighted average shares outstanding. 12,662 12,662
======== ========
Diluted:
Before extraordinary loss........... $ (1.15) $ (1.16)
======== ========
Weighted average shares outstanding. 12,662 12,662
======== ========
</TABLE>
36
<PAGE>
Unaudited Pro Forma Consolidated Condensed Statement of Earnings
for the year ended November 30, 1998
<TABLE>
<CAPTION>
Tokheim
Corporation
And
Tokheim Subsidiaries
Corporation Pro Forma
And Acquisition
Acquisition Subsidiaries Of RPS
Of RPS Pro Forma Division,
Division Acquisition Offering Of Related
(a) 10 Months (b) Tokheim And Related Of RPS Outstanding Financing &
10 Months RPS RPS Corporation Financing Division Notes Offering Of
RPS Division Division And Pro Forma & Related Pro Forma Outstanding
Division Adjustments Adjusted Subsidiaries Adjustments Financing Adjustments Notes
--------- ----------- --------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $277,183 $ -- $277,183 $466,440 $ -- $743,623 $-- $743,623
Cost of sales,
exclusive of items
listed below.......... 249,461 (5,893) 243,568 345,031 (708)(c) 587,891 -- 587,891
Selling, general, and
administrative
expenses.............. 38,110 (6,536) 31,574 79,819 -- 111,393 -- 111,393
Depreciation and
amortization.......... 3,251 2,549 5,800 13,136 5,487 (d) 24,423 -- 24,423
Merger and acquisition
costs and other
unusual items......... -- 1,918 1,918 13,685 -- 15,603 -- 15,603
-------- ------- -------- -------- -------- -------- ---- --------
Operating profit
(loss)................ (13,639) 7,962 (5,677) 14,769 (4,779) 4,313 -- 4,313
Interest expense, net.. 1,833 -- 1,833 19,257 29,537 (e) 50,627 (18)(g) 50,609
Other expense (income),
net................... 3,555 (25) 3,530 (1,790) -- 1,740 -- 1,740
-------- ------- -------- -------- -------- -------- ---- --------
Earnings (loss) before
income taxes and
extraordinary loss.... (19,027) 7,987 (11,040) (2,698) (34,316) (48,054) 18 (48,036)
Income taxes........... (5,353) 2,843 (2,510) 1,046 -- (1,464) -- (1,464)
-------- ------- -------- -------- -------- -------- ---- --------
Earnings (loss) before
extraordinary loss.... $(13,674) $ 5,144 $ (8,530) (3,744) $(34,316) (46,590) $ 18 (46,572)
======== ======= ======== ======== ====
Preferred stock
dividends ($1.94 per
share)................ (1,484) (1,484) (1,484)
-------- -------- --------
Earnings (loss) before
extraordinary loss
applicable to common
stock................. $ (5,228) $(48,074) $(48,056)
======== ======== ========
Earnings (loss) per
common share:
Basic:
Before extraordinary
loss................. $ (0.46) $ (3.81) $ (3.81)
======== ======== ========
Weighted average
shares outstanding... 11,371 1,690 (f) 12,615 12,615
======== ======== ======== ========
Diluted:
Before extraordinary
loss................. $ (0.46) $ (3.81) $ (3.81)
======== ======== ========
Weighted average
shares outstanding... 11,371 1,690 (f) 12,615 12,615
======== ======== ======== ========
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
February 28, November 30,
1999 1998
------------ ------------
(expense, (income))
<S> <C> <C>
(a) The adjustments to the RPS division's financial
statements reflect amounts that have been
reclassified to conform to Tokheim's presentation
and to remove certain costs associated with
operations as a division of Schlumberger. The
details of these reclassifications and adjustments
are as follows:
Cost of sales:
Reclassification of manufacturing depreciation and
amortization to depreciation and amortization.... $-- $(4,200)
Reflects an adjustment to operations of
Schlumberger's Abbeville facility for the ten
months of 1998 which was not purchased by
Tokheim.......................................... -- (700)
Reclassification of nonrecurring warranty cost
associated with design flaws in new product
launches. These design flaws were corrected and
are not expected to impact ongoing operations.... -- (993)
---- -------
Total adjustments and reclassifications from
cost of sales.................................. -- (5,893)
==== =======
Selling, general, and administrative expenses:
Adjustments to management and technical fees
charged by Schlumberger to its subsidiaries net
of expenses Tokheim expects to incur (see Note 1
below)........................................... -- (4,011)
Reclassification of selling, general and
administrative depreciation and amortization to
depreciation and amortization.................... -- (1,600)
Reclassification of personnel reductions to merger
and acquisition costs and other unusual items.... -- (475)
Reclassification of other miscellaneous items to
merger and acquisition costs and other unusual
items............................................ -- (450)
---- -------
Total adjustments and reclassification from
selling, general and administrative expenses... -- (6,536)
==== =======
Depreciation and amortization:
Reclassification of manufacturing depreciation and
amortization..................................... -- 4,200
Reclassification of selling, general and
administrative depreciation and amortization .... -- 1,600
Elimination of preexisting RPS division goodwill
amortization that Tokheim did not purchase....... -- (3,251)
---- -------
Total adjustments and reclassifications to
depreciation and amortization.................. -- 2,549
==== =======
Merger and acquisition costs and other unusual
items:
Reclassification of personnel reductions from
selling, general and administrative expenses..... -- 475
Reclassification of nonrecurring warranty cost
associated with design flaws in new product
launches. These design flaws were corrected and
are not expected to impact ongoing operations.... -- 993
Reclassification of other miscellaneous items from
selling, general and administrative costs........ -- 450
---- -------
Total adjustments and reclassification to merger
and acquisition costs and other unusual items.. -- 1,918
---- -------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
February 28, November 30,
1999 1998
------------ ------------
(expense, (income))
<S> <C> <C>
Other expense (income), net:
Elimination of the minority interest expense in
net earnings. Tokheim acquired 100% of all RPS
subsidiaries.................................... $-- $ (25)
---- -------
Effect of all adjustments on pretax income......... -- (7,987)
Tax effect on adjustments using the RPS division's
reported tax rate of 35.6%........................ -- 2,843
---- -------
Effect of all adjustments on net earnings...... $-- $(5,144)
==== =======
NOTE 1: Schlumberger historically charged the RPS division an administrative
fee based on a percentage of sales in an effort to allocate the Schlumberger
corporate overhead back to the subsidiaries. These fees were for
administration, treasury, tax, accounting and legal assistance provided by
the parent company to the RPS subsidiaries. In addition to bearing these
administrative fees charged by Schlumberger, the RPS division subsidiaries
were solely responsible for, and were required to pay for, any external
expenses for legal, tax and consulting work performed on its behalf. The fees
for the external expenses have not been removed from the RPS division's
operating results since these represent on-going expenses.
After nine months of ownership and management of the RPS division, Tokheim
has added one additional assistant treasurer and one consolidations person,
and has incurred additional outside legal, tax and consulting expenses that
are directly attributable to the RPS division. These additional charges for
personnel and outside services, a portion of which are actual and the
remainder of which are estimated based on nine months of experience, were
considered in calculating the pro forma adjustment as illustrated in the
table below.
</TABLE>
<TABLE>
<S> <C> <C>
Historical administrative fees charged by Schlumberger.......... $4,949
Less:
Salaries and benefits for the additional employees hired...... (188)
Additional external legal fees................................ (300)
Additional external tax consulting............................ (350)
Additional management consulting.............................. (100)
------
Net pro forma adjustment to administrative fees............. $4,011
======
(b) The Unaudited Pro Forma Consolidated Condensed Statement of
Earnings for the three months ended February 28, 1999 includes
the acquisition of the RPS division and related financing and
subsequent refinancing of the initial debt structure on
January 29, 1999 with proceeds from the offering of the
outstanding notes. As such, interest expense is the only
amount for the three months ended February 28, 1999 that
requires a pro forma adjustment to reflect the new interest
rates. The Unaudited Pro Forma Consolidated Condensed
Statement of Earnings includes Tokheim's year ended November
30, 1998 audited Consolidated Statement of Earnings, which
includes two months of operations for the newly acquired RPS
division since the date of its acquisition, September 30,
1998.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
February 28, November 30,
1999 1998
------------ ------------
<S> <C> <C>
(c) Reflects a pro forma adjustment for technology
and licensing fees contractually payable by
Schlumberger to Tokheim. These fees relate to
certain services and licenses provided to
Schlumberger by Tokheim. The contract is
noncancelable and requires minimum annual
payments of $850 per annum to Tokheim during
the next 5 years.............................. $-- $708
==== ====
(d) Reflects a pro forma adjustment for the
amortization of purchased goodwill associated
with the Acquisition as follows:
</TABLE>
<TABLE>
<CAPTION>
Anticipated Three Month Ten Month
Gross Amortization Amortization Amortization
Amount Period Amount Amount
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Goodwill...................... $263,389 40 years $-- $5,487
======== ==== ======
</TABLE>
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
February 28, November 30,
1999 1998
------------ ------------
<S> <C> <C>
(e) The pro forma adjustments to interest expense,
net, for the acquisition of the RPS division and
related financing were calculated as follows:
Tokheim's historical interest expense, net......... $-- $19,257
RPS division's historical interest expense, net.... -- 1,833
---- -------
Total............................................ -- 21,090
Plus: Interest expense for 10 additional months on
borrowings under:
New credit agreement, at interest rates ranging
from 7.65% to 9.9%, spread among three different
facilities....................................... -- 14,836
12.0% senior subordinated notes, increasing rate
by 0.5% after 4 months and every 3 months
thereafter....................................... -- 17,496
12.5% senior notes, increasing rate by 0.5% after
2 months and every 3 months thereafter........... -- 2,550
12.0% junior subordinated notes................... -- 4,117
---- -------
Total............................................ -- 38,999
Less: Interest expense on:
Tokheim's debt refinanced:
Old credit agreement............................. -- (1,717)
11.5% senior subordinated notes.................. -- (6,325)
RPS division..................................... -- (1,833)
---- -------
Total............................................ -- (9,875)
Sub-total........................................ -- 50,214
Amortization of deferred financing costs:
Remove:
Old credit agreement............................. -- (1,380)
11.5% senior subordinated notes.................. -- (307)
Add:
Credit agreement................................. -- 1,413
12.5% senior notes............................... -- 566
12.0% senior subordinated notes.................. -- 121
---- -------
Pro forma interest expense, net.................... -- 50,627
---- -------
Pro forma adjustment to interest expense, net...... $-- $29,537
==== =======
</TABLE>
40
<PAGE>
Interest expense, net, includes that portion of interest with respect to the
guaranteed ESOP obligation which is not paid through dividends on, or
redemptions of, the ESOP preferred stock.
<TABLE>
<S> <C> <C>
(f) Represents the incremental weighted average
shares for Tokheim's March 1998 common stock
offering. In addition, per the terms of the
letter agreement, Tokheim has financed $20,000 of
the RPS division purchase price by issuing
warrants to purchase, for a nominal value,
2,526,923 shares of Tokheim common stock. The
Tokheim warrants are exercisable at any time up
to and including January 29, 2003. Tokheim is
currently in negotiations with Schlumberger to
repurchase in whole or in part the outstanding
warrants. The warrants are considered potential
common stock under the guidelines of SFAS No. 128
"Earnings Per Share" and will be reflected in the
calculation of shares outstanding when Tokheim is
in an earnings position.
<CAPTION>
Three Months
Ended Year Ended
February 28, November 30,
1999 1998
------------ ------------
<S> <C> <C>
(g) The pro forma adjustments to interest expense,
net, for the offering of the outstanding notes
were calculated as follows:
Tokheim's actual interest expense, net for the
three months ended February 28, 1999.............. $12,307 --
Tokheim's pro forma interest expense, net for the
acquisition of the RPS division and related
financing......................................... -- $50,627
Plus: two and twelve months, respectively, of
interest expense on borrowings under:
11.375% senior subordinated dollar notes.......... 2,332 13,991
11.375% senior subordinated euro notes, calculated
using a standard rate of exchange of 1.1553 euro
to 1 U.S. dollar................................. 1,643 9,857
------- -------
Less: two and twelve months, respectively, of
interest expense on:
12.0% senior subordinated notes, increasing rate
by 0.5% after 4 months and every 3 months
thereafter....................................... (3,400) (20,896)
12.5% senior notes, increasing rate by 0.5% after
2 months and every 3 months thereafter........... (469) (3,019)
------- -------
Total............................................ (3,869) (23,915)
------- -------
Sub-total........................................ 12,413 50,560
Amortization of deferred financing costs:
Remove:
12.5% senior notes................................ (113) (679)
12.0% senior subordinated notes................... (24) (145)
Add:
11.375% senior subordinated dollar notes.......... 82 494
11.375% senior subordinated euro notes............ 63 379
------- -------
Pro forma interest expense, net for the
refinancing...................................... $12,421 $50,609
======= =======
Pro forma adjustment to interest expense, net..... $ 114 $ (18)
======= =======
</TABLE>
Interest expense, net, includes that portion of interest with respect to the
guaranteed ESOP obligation which is not paid through dividends on, or
redemptions of, the ESOP preferred stock.
41
<PAGE>
SELECTED FINANCIAL DATA OF TOKHEIM CORPORATION AND SUBSIDIARIES
(Amounts in thousands except dollars per share)
The following table sets forth selected historical financial data of Tokheim.
The statement of earnings data, other data and balance sheet data as of and for
each of the fiscal years in the five-year period ended November 30, 1998 were
derived from the audited consolidated financial statements of Tokheim. The
information contained in this table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of Tokheim, including the
notes to the financial statements, appearing elsewhere or incorporated by
reference in this prospectus. The selected historical financial data as of and
for the three months ended February 28, 1998 and 1999 were derived from
unaudited interim financial statements of Tokheim. In the opinion of
management, such unaudited interim consolidated condensed financial statements
contain all adjustments, which consist of only normal recurring items with the
exception of merger and acquisition costs and other unusual items and the
extraordinary items, necessary to present fairly Tokheim's financial position
and results of operations as of and for the periods presented.
The summary financial data presented below for 1996 include three months of
Sofitam operations from the date of the acquisition of Sofitam. The results for
1998 include two months of the RPS division's operations from the date of
acquisition.
In the table below, operating income (loss) equals net sales less cost of
products sold, selling, general and administrative expenses, depreciation and
amortization, and merger and acquisition costs and other unusual items. In
addition, total debt includes:
. the dollar exchange notes and the euro exchange notes;
. the 11.5% senior subordinated notes;
. the senior subordinated notes issued in connection with the acquisition
of the RPS division;
. the senior notes issued in connection with the acquisition of the RPS
division;
. the junior subordinated notes issued in connection with the acquisition
of the RPS division;
. long term borrowings under the credit agreement and other credit
facilities;
. the current portion of borrowings under the credit agreement and other
credit facilities;
. cash overdraft facilities; and
. the guaranteed employees' stock ownership plan obligations.
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended November 30, February 28,
------------------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- --------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Net sales.............. $202,134 $221,573 $279,733 $385,469 $ 466,440 $ 90,852 $166,193
Merger and acquisition
costs and other
unusual items......... 820 2,680 6,459 3,493 13,685 5,987 1,123
Operating income
(loss)................ 3,780 5,811 6,356 20,645 14,769 (966) (866)
Interest expense, net.. 2,806 3,319 7,191 16,451 19,257 4,011 12,307
Earnings (loss) before
income taxes(1)....... 1,932 3,270 (1,229) 5,197 (2,698) (5,306) (14,571)
Earnings (loss)(1)..... 1,675 3,231 (2,009) 3,980 (3,744) (5,606) (14,178)
Preferred stock
dividends............. 1,617 1,580 1,543 1,512 1,484 374 374
Earnings (loss)
applicable to common
stock(1).............. 58 1,651 (3,552) 2,468 (5,228) (5,980) (14,552)
Other Data:
Capital expenditures... $ 2,757 $ 5,559 $ 3,061 $ 11,154 $ 14,548 $ 1,885 $ 4,996
Depreciation and
amortization.......... 4,672 4,857 5,028 9,232 13,136 2,500 6,892
Interest expense and
preferred stock
dividends............. 4,219 4,604 9,336 18,800 21,563 4,518 12,842
Ratio of earnings to
fixed charges(2)...... 1.4x 1.6x -- x 1.3x -- x -- x -- x
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
As of As of
November 30, February 28,
1998 1999
------------ ------------
<S> <C> <C>
Balance Sheet Data (at period end): (unaudited)
Working capital..................................... $ 92,596 $ 88,868
Property, plant and equipment, net.................. 77,905 75,874
Total assets........................................ 776,642 724,906
Total debt.......................................... 443,331 459,259
ESOP preferred stock, net........................... 12,130 12,941
Common shareholders' equity, net.................... 64,631 18,572
</TABLE>
- --------
(1) The amounts for the years ended November 30, 1998 and November 30, 1997 and
the three months ended February 28, 1999 exclude $23,924, $1,886 and
$6,249, respectively, for extraordinary loss on debt extinguishment. The
amounts for the year ended November 30, 1994 exclude the cumulative effect
of change in method of accounting for post-retirement benefits other than
pensions of $13,416.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings (loss) before income taxes and extraordinary loss plus
fixed charges. Fixed charges consist of interest expense, amortization of
deferred debt issuance expense, the portion of rental expense assumed to
represent interest and dividends on the ESOP preferred stock, which
dividends service the guaranteed ESOP obligation. Earnings were
insufficient to cover fixed charges by $1,229, $2,698, $5,306 and $14,571
for the fiscal years ended 1996 and 1998 and for the three months ended
February 28, 1998 and 1999, respectively.
43
<PAGE>
SELECTED FINANCIAL DATA OF THE RPS DIVISION
(dollars in thousands)
The following table sets forth selected financial data of the RPS division.
The statement of income data, other data and balance sheet data as of and for
each fiscal year in the three year period ended December 31, 1997 were derived
from the audited combined financial statements of the RPS division. The
selected financial data as of and for the nine months ended September 30, 1997
and 1998 were derived from the unaudited combined financial statements of the
RPS division. The information contained in this table should be read in
conjunction with the combined financial statements of the RPS division,
including the notes to the financial statements, appearing elsewhere in this
prospectus.
As used in the table presented below, total debt includes bank overdrafts and
short-term loans plus the current portion of long-term debt.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales.................. $303,668 $333,915 $344,248 $231,978 $231,764
Restructuring charges...... -- 9,978 -- -- --
Operating loss............. (7,446) (17,197) (11,648) (10,210) (15,737)
Interest expense, net...... 1,257 1,652 1,418 945 1,586
Loss before income taxes... (10,008) (20,424) (13,499) (14,462) (20,593)
Net loss................... (7,721) (16,366) (6,720) (9,216) (15,730)
Other Data:
Capital expenditures....... $ 11,389 $ 14,736 $ 9,486 $ 6,810 $ 4,951
Depreciation and
amortization.............. 10,084 10,780 11,777 8,476 8,766
</TABLE>
<TABLE>
<CAPTION>
As of As of
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Balance Sheet Data:
Working capital.................................... $ 73,406 $101,282
Property, plant and equipment, net................. 32,183 31,735
Total assets....................................... 269,434 260,342
Total debt......................................... 12,614 2,289
Equity and retained earnings (deficit)............. 154,270 178,805
</TABLE>
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
On September 30, 1998, we completed the acquisition of the fuel dispenser
systems and service business of Schlumberger Limited, also known as the RPS
division, for a price equal to $330.0 million in cash, notes, and warrants. Of
the $330.0 million purchase price, $100.0 million was paid in cash borrowed
under the terms of our credit agreement including $22.5 million from our 12.5%
senior notes due 2005. The $210.0 million seller note portion of the purchase
price consisted of $40.0 million in ten year, 12.0% junior subordinated
payment-in-kind notes and $170.0 million in 12.0% senior subordinated notes due
January 29, 1999. $20.0 million of the purchase price was paid with warrants
exercisable for five years, beginning January 30, 1999, to purchase at a
nominal price, 2,526,923 shares of Tokheim's common stock.
The acquisition of the RPS division has been accounted for using the purchase
method of accounting. The RPS division's results of operations have been
included in the consolidated financial statements of Tokheim from the date of
acquisition. The purchase price has been preliminarily allocated to assets
acquired and liabilities assumed based on the RPS division's net book value of
assets at September 30, 1998, as adjusted, which is estimated to approximate
fair value. The purchase price allocated under this assumption exceeded the
estimated fair value of the tangible net assets acquired by approximately
$263.4 million. This amount is recognized as goodwill and is being amortized
over forty years. The current purchase price allocation is preliminary due to
the timing of the acquisition relative to Tokheim's year end. A more precise
allocation of purchase price is currently being performed at various RPS
division locations to more accurately identify and value the assets, including
intangibles, and liabilities assumed.
Tokheim is to reimburse Schlumberger for the net cash that remained in the
RPS division on the effective date of the acquisition, net of adjustments. This
amount is currently estimated to be up to approximately $6.5 million. It is
anticipated that this payment to Schlumberger will be made in the third or
fourth quarter of 1999 from funds available through the revolving working
capital facility under the credit agreement.
Simultaneously with the acquisition of the RPS division, Tokheim entered into
a note purchase agreement, pursuant to which Tokheim issued $22.5 million
aggregate principal amount of senior notes. Proceeds from the senior notes were
used in connection with the financing of the acquisition of the RPS division
and the refinancing of existing indebtedness.
On January 29, 1999, we redeemed the 12.0% senior subordinated notes and the
senior notes with the proceeds from the issuance of $123.0 million aggregate
principal amount of our 11.375% senior subordinated notes due 2008 and
(Euro)75.0 in million aggregate principal amount, or approximately $87.0
million, of our 11.375% senior subordinated notes due 2008 in a private
placement pursuant to Rule 144A and Regulation S. The 12.0% senior subordinated
notes were redeemed at an aggregate price of $176.7 million, representing
principal of $170.0 million and accrued and unpaid interest of $6.7 million.
The senior notes were redeemed at an aggregate price of $23.2 million,
representing principal of $22.5 million, accrued and unpaid interest of $0.2
million and an applicable call premium of $0.5 million.
Also simultaneously with the acquisition of the RPS division, we executed a
new credit agreement with a consortium of banks to pay a portion of the
purchase price and to refinance previously existing indebtedness. The credit
agreement currently provides for a six year, $110.0 million revolving working
capital facility and a six year $120.0 million term loan facility. An
additional agreement provides for the assignment of a three year $7.6 million
ESOP loan facility.
Also on September 30, 1998, we completed the repurchase of the final $55.0
million of our 11.5% senior subordinated notes due 2006 that were then
outstanding. These notes were redeemed at an aggregate premium
45
<PAGE>
and consent payment of $12.3 million along with accrued interest of $1.1
million. The premium and consent payment was aggregated with the write off of
the remaining deferred issuance costs related to the 11.5% senior subordinated
notes and the old credit agreement and reported as an extraordinary loss on
debt extinguishment of approximately $19.0 million in the fourth quarter of
1998.
In March 1998, Tokheim completed an offering of 4,370,000 shares of its
common stock. Net proceeds from the common stock offering totaled approximately
$67.7 million. We used $39.4 million of the proceeds to redeem $35.0 million in
aggregate principal amount of our 11.5% senior subordinated notes. These 11.5%
senior subordinated notes were redeemed at the call price of 109.857%,
expressed as a percentage of the original face value, resulting in premiums
paid of $3.5 million along with accrued interest of $0.9 million. Following the
redemption, $55.0 million in aggregate principal amount of the 11.5% senior
subordinated notes remained outstanding. We recorded an extraordinary loss on
the extinguishment of the 11.5% senior subordinated notes of approximately $5.0
million during the second quarter of 1998. This loss includes $3.5 million of
premiums paid to purchase the 11.5% senior subordinated notes and $1.5 million
representing the write-off of a proportionate share of the original unamortized
deferred issuance costs. The remaining $28.3 million was applied toward the old
credit agreement and general corporate purposes.
We acquired Sofitam in September 1996 for $107.4 million less adjustments.
Tokheim's 1996 financial statements include three months of Sofitam operations,
and the 1997 and 1998 financial statements include a full year of Sofitam
operations. A comparison of sales in 1997 versus 1996 of entities that were
part of Tokheim before the acquisition is not meaningful because some of the
sales made by these entities were conducted through Sofitam in 1996 and 1997.
International sales by foreign subsidiaries and exports from the U.S. totaled
approximately 60%, 64%, and 47% of consolidated net sales in 1998, 1997, and
1996, respectively. The acquisition of Sofitam has significantly extended our
international distribution network, reducing our reliance on U.S. domestic
sales. Furthermore the acquisition of the RPS division will significantly
increase the percentage of international sales in relation to future
consolidated sales.
In December 1997, we acquired Management Solutions, Inc., or MSI. MSI
develops and distributes retail automation systems, which includes point-of-
sale software, primarily for the convenience store, petroleum dispensing and
fast food service industries. We paid MSI's stockholders an initial amount of
$12.0 million. We are also obligated to make contingent payments of up to $13.2
million over fiscal years 1998, 1999 and 2000 based on MSI's performance. The
$13.2 million consists of $8.0 million of additional purchase price, $2.6
million related to a non-compete agreement, and $2.6 million of additional
employee compensation. We borrowed funds for the initial purchase price under
the old credit agreement.
Results of operations
Quarter ended February 28, 1999 compared to quarter ended February 28, 1998
Consolidated sales for the three month period ended February 28, 1999 were
$166.2 million compared to $90.9 million for the 1998 three month period. Sales
for North America, excluding export sales, have increased 38.0% for the three
month period from $36.1 million in 1998 to $49.9 million in 1999. International
sales, including domestic export sales, have increased 112.6% for the three
month period from $54.7 million in 1998 to $116.3 million in 1999. These
increases in sales from the prior year are primarily attributable to the
acquisition of the RPS division. Tokheim has observed a decline in purchasing
by major oil companies due to their merger activity. The low barrel price of
crude oil has also resulted in a delay of capital spending by major oil
companies. Those factors, however, were ameliorated by the purchasing momentum
of the jobber and mini-major market segments, the growing importance of the
hypermarket segments, demand in commercial and consumer products lines, and
increased service revenues.
Gross margins as a percent of sales, which is defined as net sales less cost
of sales divided by net sales, decreased from 26.3% in the three month period
ended February 28, 1998 to 19.8% in the 1999 three month
46
<PAGE>
period. This decline was primarily driven by historically lower margins
recognized in the RPS division. In addition, the first quarter sales mix is
composed of a larger portion of service contracts, which provide lower margins
than dispenser sales. Furthermore, the first three months of our business cycle
are generally lower sales volume months creating less opportunity to recover
manufacturing fixed cost to the extent of other quarters.
Selling, general, and administrative expenses as a percent of sales for the
three month period ended February 28, 1999 were 15.5% compared to 17.9% for the
1998 three month period. This decline as a percent of sales is primarily due to
the inclusion of the RPS division sales, elimination of redundant staffing
positions and the closure of the RPS division headquarters in Montrouge,
France. All remaining Montrouge personnel and job functions were consolidated
at our existing European headquarters in Trembley, France.
Net interest expense for the three month period ended February 28, 1999 was
$12.3 million compared to $4.0 million in the comparable 1998 period. This
increase is due to increased debt levels associated with the September 1998
acquisition and financing of the RPS division.
Depreciation and amortization expense for the three month period ended
February 28, 1999 was $6.9 million compared to $2.5 million in the comparable
1998 period. The majority of the increase between periods is associated with
the inclusion of the newly acquired RPS division which resulted in increased
amortization expense related to goodwill and depreciation of fixed assets
recorded in connection with the acquisition of the RPS division.
Merger and acquisition costs and other unusual items for the three month
period ended February 28, 1999 of $1.1 million, relates to closure expenses and
severance payments incurred in connection with the closing and consolidation of
certain pre-acquisition Tokheim facilities.
Foreign currency loss for the three month period ended February 28, 1999 was
$1.4 million compared to a loss of less than $0.1 million in the comparable
1998 period. The increase in the loss is primarily driven by short term
intercompany receivables and payables being revalued at the currency rate of
exchange in effect at February 28, 1999.
Other income, net for the first quarter of 1999 was $0.2 million compared to
net expense of $0.2 million for the comparable 1998 period. This difference is
attributable to various income and expense items, which are individually
insignificant.
Income taxes for the three month period ended February 28, 1999 were a
benefit of $0.4 million compared to an expense of $0.5 million in the
comparable 1998 period. This change is due to earnings in subsidiaries where
net operating loss carryforwards are available to offset book pretax earnings,
and tax benefits being recorded in subsidiaries with first quarter losses who
will recover these benefits in future 1999 quarters.
During the first quarter of 1999, we incurred an extraordinary loss on debt
extinguishment of approximately $6.2 million in connection with the refinancing
of the senior notes and the 12.0% senior subordinated notes. This amount
consists of $0.5 million of premiums paid on the redemption of the senior notes
and approximately $5.7 million of unamortized deferred issuance costs that were
written off.
As a result of the above mentioned items, loss before extraordinary item was
$14.2 million or $1.15 per diluted common share for the three months ended
February 28, 1999 compared to a loss of $5.6 million or $0.72 per diluted
common share for the same period in 1998. Loss from extraordinary loss on debt
extinguishment was $6.2 million or $0.49 per diluted common share for the three
months ended February 28, 1999. Net loss for the three months ended February
28, 1999 was $1.64 per diluted common share compared to a net loss of $0.72 per
diluted common share for the comparable 1998 period.
Fiscal years 1998, 1997 and 1996
Net sales for 1998 were $466.4 million. Net sales excluding the current year
acquisitions of MSI and the RPS division were $390.4 million as compared to
$385.5 million in 1997.
47
<PAGE>
After excluding the effects of the acquisitions of MSI and the RPS division,
net sales for 1998 increased by 1.3% from 1997 levels. Sales for North America,
excluding export sales, increased 18.4% from $139.9 million in 1997 to $165.6
million in 1998. This increase was driven by a stronger demand in our retail
distribution, commercial dispensers and service parts sales. This demand was
driven by new, more convenient products, such as credit/debit card readers, and
environmental regulations, such as those requiring vapor recovery systems.
During the current year the oil industry had various major oil companies merge
together. It is currently unknown what the effect, if any, of these mergers
will have on our future sales levels or operations. International sales,
including domestic export sales, were $224.8 million in 1998 compared to $245.5
million in 1997, representing a decrease of $20.7 million or 8.4%. This
decrease is due in part to the continued decline in foreign currency exchange
rates from prior year levels. International sales would have been $5.9 million
higher if average exchange rates of European and African currencies remained
consistent with 1997 rates. The other major contributing factor is a
significant decline in current year domestic export sales to the Asia Pacific
and Middle East regions compared to prior year levels. The depressed sales to
the Asia Pacific region compared to prior year levels have been caused by a
significant economic downturn in that region's economy. There can be no
assurance as to when Asian market conditions will improve or whether they may
worsen or spread to other regions.
Net sales for 1997 were $385.5 million, an increase of 37.8% from 1996 net
sales of $279.7 million. Substantially all of this increase was due to the
inclusion of a full year of Sofitam's results in 1997 compared to three months
of Sofitam's results in 1996. These increases were offset by the impact of a
decline in revenues due to a decline in foreign currency exchange rates. Sales
for 1997 would have been $20.9 million higher if average exchange rates of
European and African currencies had remained the same as in 1996.
Gross margin as a percent of sales, which is defined as net sales less cost
of sales, divided by net sales, was 26.0% in 1998 compared to 26.3% in 1997.
This decline is due to the historically lower gross margins in the RPS
division's business, offset partially by manufacturing improvements made in
some of our operations. During 1998 the Fort Wayne, Indiana manufacturing
facility implemented operational improvements. Our operational excellence
strategy provides an integrated process resulting in what we believe is a true
world-class manufacturing facility. This comprehensive approach utilizes the
following advanced operations to gain the maximum amount of operational
efficiencies:
. six sigma quality;
. high performance organizations;
. supplier partnerships; and
. advanced materials management and strategies.
Once fully implemented at the Fort Wayne, Indiana facility, these same
techniques will be implemented in all other manufacturing facilities.
Gross margin for 1997 was 26.3%, up from 24.8% in 1996. This increase is due
to:
. the inclusion of Sofitam's operations at higher margin levels for a full
year;
. personnel reductions and related cost savings;
. reduction of warranty expense in North America; and
. the results of concentrated efforts to improve manufacturing
efficiencies globally.
These cost reductions were offset somewhat by decreasing sales prices.
Selling, general and administrative expense as a percentage of net sales was
17.1% for 1998. After removing the effects of the acquisitions of MSI and the
RPS division, selling, general and administrative
48
<PAGE>
expense was 17.6% or $68.9 million in 1998 compared to 17.7% or $68.2 million
in 1997. The slight increase in dollars is primarily attributed to increased
costs associated with year 2000 corrective actions and increased incentive
compensation related to sales and earnings performance. Selling, general and
administrative expense was 17.7% or $68.2 million in 1997, compared to 18.5% or
$51.7 million in 1996. This increase over 1996 is largely attributable to a
full year of Sofitam expenses. These increases were offset by a program we
implemented in 1997 to improve efficiency and reduce personnel, which
translated into lower total compensation cost.
Depreciation and amortization expense for the twelve month period ended
November 30, 1998 was $13,136 or 2.8% of sales compared to $9,232 or 2.3% of
sales in 1997. This increase is attributable to increased amortization of
goodwill and depreciation of fixed assets acquired through the September 30,
1998 acquisition of the RPS division. Depreciation and amortization expense for
the twelve month period ended November 30, 1997 was $9,232 or 2.3% of sales
compared to $5,028 or 1.7% of sales in 1996. This increase is attributable to
recognition of a full fiscal year of amortization of goodwill and depreciation
of fixed assets acquired through the September 1996 acquisition of Sofitam.
Merger and acquisition costs and other unusual items for the twelve month
period ended November 30, 1998 were $13,685 or 2.9% of sales compared to $3,493
or 1.0% of sales in 1997. This increase is primarily attributable to the non-
recurring write-off of in process research and development costs incurred in
connection with the December 1997 acquisition of MSI and involuntary
termination and exit costs in connection with the integration and consolidation
plans. Merger and acquisition costs and other unusual items for the twelve
month period ended November 30, 1997 were $3,493 or 1.0% of sales compared to
$6,459 or 2.3% of sales in 1996. The 1997 and 1996 amounts include expenses
incurred through several corporate realignment initiatives related to the
Sofitam acquisition. Included in the 1996 amount are settled claims related to
ending an exclusive sales representative agreement with past distributors. Also
included in the 1996 amount are other charges relating to litigation and
customer satisfaction programs involving dispensers sold in prior years. See
Note 3 to Tokheim Corporation and Subsidiaries' Financial Statements included
elsewhere in this prospectus for additional information.
Net interest expense increased in 1998 to $19.2 million from $16.5 million in
1997. This increase is the direct result of higher levels of debt incurred to
effect the acquisition of the RPS division. Net interest expense increased in
1997 to $16.5 million from $7.2 million in 1996, reflecting a full year's
interest expense on Tokheim's 11.5% senior subordinated notes due 2006 issued
to finance the acquisition of Sofitam.
A net foreign currency exchange gain of $1.4 million was realized in 1998
compared to a net currency loss of less than $0.1 million in 1997 and a net
currency loss of $0.2 million in 1996. During the second quarter of 1998 we
realized a foreign currency gain of $0.8 million associated with the repayment
of various French franc denominated borrowings previously entered into under
our old credit agreement. Due to the decline in the value of the French franc,
we were able to repay these borrowings with less U.S. dollars than we had
received when the original contracts were entered into. During the fourth
quarter of 1998 we settled a foreign denominated obligation which resulted in a
foreign currency gain of $0.6 million. The 1997 currency loss was due
principally to the decline of the French franc against the U.S. dollar and was
partially offset by a foreign currency gain of $0.5 million on the sale of a
foreign currency option contract.
Other income, net was $0.7 million in 1998 compared to $1.4 million in 1997.
This decrease is principally due to lower gains realized on the sale of
property, plant and equipment. Other income, net was $1.4 million in 1997
compared to $0.2 million in 1996. This increase is partly due to gains on the
sale of property, plant and equipment that were $0.4 million greater in 1997
than 1996 and to the inclusion of Sofitam's other income for the full year. In
addition, other income in 1996 of $0.2 million includes $0.3 million of expense
for a litigation settlement of a non operating nature.
Income tax expense for 1998 was $1.0 million, which is comparable with the
prior year. As in prior years, the majority of this amount is comprised of
foreign taxes and U.S. state taxes. Our domestic and foreign
49
<PAGE>
operations benefit from the use of net operating loss carryforwards generated
in prior years. Income tax expense for 1997 was $1.2 million, an increase from
$0.8 million in 1996. The increase was due to higher income, offset partially
by utilization of net operating loss carryforwards and adjustments of prior
year's taxes and refunds. At the end of 1998, Tokheim recorded a net deferred
tax asset of $40.2 million, which was offset in full by a valuation allowance
due largely to uncertainties associated with our ability to fully use these tax
benefits. We are continuing to evaluate the likelihood that all or part of the
deferred tax asset will be realized through the generation of future taxable
earnings. If, in the future, Tokheim is able to generate sufficient levels of
taxable income, the valuation allowance will be adjusted accordingly. You
should read Note 15 of the Consolidated Financial Statements of Tokheim
Corporation and Subsidiaries for additional information concerning Tokheim's
income tax position at November 30, 1998.
Loss before extraordinary loss on debt extinguishment in 1998 was $3.7
million, or $0.46 loss per diluted common share, compared with 1997 earnings
before extraordinary loss on debt extinguishment of $4.0 million or $0.27
earnings per diluted common share and a loss of $2.0 million or $0.45 loss per
diluted common share in 1996. Net loss in 1998 included merger and acquisition
costs and other unusual items of $13.7 million, compared to $3.5 million in
1997 and $6.5 million in 1996. For further discussion see Note 3 to the
Consolidated Financial Statements of Tokheim Corporation and Subsidiaries.
In 1998, we incurred a $23.9 million extraordinary loss, or $2.10 loss per
diluted common share, as a result of redeeming all outstanding 11.5% senior
subordinated notes and refinancing borrowings under the old credit agreement.
This loss includes $15.7 million of premiums paid to purchase these notes and
$8.2 million of the remaining unamortized deferred issuance costs associated
with the 11.5% senior subordinated notes and the old credit agreement. In 1997,
we incurred a $1.9 million extraordinary loss, or $0.21 loss per diluted common
share, as a result of the open-market purchase and retirement of $10.0 million
in aggregate principal amount of the 11.5% senior subordinated notes. This loss
includes $1.4 million of premiums paid to purchase the 11.5% senior
subordinated notes and $0.5 million representing the write-off of a
proportionate share of the original unamortized deferred issuance costs. For
further information on the 11.5% senior subordinated notes you should read the
discussions under "--Liquidity and capital resources" and Note 7 to the
Consolidated Financial Statements of Tokheim Corporation and Subsidiaries,
"Senior Subordinated Notes."
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency, the euro. Tokheim conducts business in these
member countries. The transition period for the introduction of the euro is
from January 1, 1999 to June 30, 2002. We have been, and are continuing to,
address the issues involved with the introduction of the euro. The more
important issues facing Tokheim include:
. converting information technology systems;
. reassessing currency exchange rate risk;
. negotiating and amending licensing agreements and contracts;
. product pricing; and
. processing tax and accounting records.
Conversion to the euro may reduce our intra-European exposure to changes in
foreign currency exchange rates. As a result, our intra-European foreign
currency translation and transaction gains and losses could be reduced.
Based upon our plans and progress to date, we believe that use of the euro
will not have a significant impact on the manner in which we conduct our
business affairs and process our business and accounting records. However there
can be no certainty that such plans will be successfully implemented or that
external factors will not harm Tokheim's operations. Any costs of compliance
associated with the adoption of the euro will be expensed as incurred and we do
not expect these costs to be material to Tokheim's financial condition, results
of operations or cash flows.
50
<PAGE>
Inflation has not had a significant impact on Tokheim's results of
operations.
Tokheim is a party to various legal matters, and its operations are subject
to federal, state, and local environmental laws and regulations. We believe
that the outcome of such pending claims will not individually or in the
aggregate materially harm Tokheim's business, financial condition or results of
operations. For more information about legal matters and regulation, you should
read Note 20 to the Consolidated Financial Statements of Tokheim Corporation
and Subsidiaries, "Contingent Liabilities."
Liquidity and capital resources
Cash used in operations for the three month period ended February 28, 1999
was $1.3 million versus $5.3 million in the comparable period of 1998. During
the first quarter of 1999, Tokheim was able to collect receivables and reduce
inventory levels by a combined amount of $24.8 million. This cash inflow was
used to reduce the outstanding payables by approximately $17.9 million. These
working capital sources and uses are primarily related to the seasonality of
the business.
Cash used in investing activities for the three month period ended February
28, 1999 was $5.0 million compared to a cash usage of $12.5 million in the
comparable 1998 period. The cash usage in the 1998 period is attributable to
the acquisition of MSI.
Cash provided from financing activities for the three month period ended
February 28, 1999 was $13.3 million compared to cash provided in the comparable
1998 period of $19.8 million. The cash provided in 1998 is largely attributable
to an increase in notes payable to banks of $20.6 million used primarily to
finance the acquisition of MSI and for short term working capital needs. The
most significant item in the 1999 period was the issuance of the outstanding
dollar notes and the outstanding euro notes, the proceeds of which were used to
refinance the 12.0% senior subordinated notes and the senior notes which were
originally issued in connection with the acquisition of the RPS division, and
to refinance other debt of Tokheim at the date of the acquisition.
On January 29, 1999, Tokheim issued $123.0 million aggregate principal amount
of outstanding dollar notes and (Euro)75.0 million, which is equivalent to
$87.0 million, aggregate principal amount of outstanding euro notes. The
outstanding notes will mature on August 1, 2008, and interest is payable semi-
annually on February 1 and August 1 of each year, commencing August 1, 1999.
Net proceeds from the issuance of the outstanding notes were used to redeem
the 12.0% senior subordinated notes and the senior notes. The 12.0% senior
subordinated notes were redeemed at an aggregate price of $176.7 million,
representing principal of $170.0 million and accrued and unpaid interest on the
notes of $6.7 million. The senior notes were redeemed at an aggregate price of
$23.2 million, representing principal of $22.5 million, accrued and unpaid
interest on the notes of $0.2 million and an applicable call premium of $0.5
million. In addition, we used approximately $9.1 million of the net proceeds to
reduce borrowings under the revolving credit facility under the credit
agreement and to permanently reduce the bank working capital commitment from
$120.0 million to $110.0 million.
During the first quarter of 1999, we incurred an extraordinary loss on debt
extinguishment of approximately $6.2 million in connection with the refinancing
of the senior notes and the 12% senior subordinated notes with proceeds
received from the offering of the outstanding notes. This amount consists of
$0.5 million of premiums paid on the redemption of the senior notes and
approximately $5.7 million of unamortized deferred debt issuance costs that
were written off.
As part of the purchase price of the RPS division, we have provided $20.3
million for costs we expect to incur to close down redundant operations in
connection with the reorganization and rationalization of the RPS division's
operations. As of February 28, 1999 we have incurred and charged approximately
$2.2 million against this accrual for projects initiated since the acquisition
date, leaving a remaining balance of $18.1
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million. We expect to incur approximately $5.0 million of expenditures during
the second quarter of 1999 representing severance and closure costs related to
the Bonham, Texas, Tulla, Ireland and Belgium facilities. In addition, at
November 30, 1998 we set up a restructuring reserve related to the closure of
our Glenrothes, Scotland facility in the amount of $5.1 million. During the
first quarter of 1999 we charged approximately $3.0 million against the
reserve. These charges relate to severance costs, facility closure expenses and
the write down in value of impaired assets. We expect the closure of this
facility to be completed during the second quarter of 1999.
Tokheim has guaranteed loans to the ESOP in the amounts of $6.4 million and
$7.0 million at February 28, 1999 and November 30, 1998, respectively. The
trustee who holds the ESOP preferred stock may elect to convert each preferred
share to one common share in the event of a redemption by Tokheim,
consolidations or mergers of Tokheim, or a redemption by the trustee that is
necessary to provide for distributions under our retirement savings plan. A
participant may elect to receive a distribution from the plan in cash or common
stock. If redeemed by the trustee, we are responsible for purchasing the
preferred stock at the twenty-five dollar floor value. We may elect to pay the
redemption price in cash or an equivalent amount of common stock. Preferred
stock dividends paid were $0.4 million for the three month periods ended
February 28, 1999 and 1998, respectively.
In December 1997, we initiated our global Year 2000 plan, including the
organization and staffing of a full-time Year 2000 program office. We have
organized the process into the following sections:
.product certification, to ensure all of our products sold are Year 2000
ready;
. internal information systems, to ensure all internal hardware and
software is Year 2000 ready through upgrades or replacement;
. suppliers, distributors and external agents, to ensure all suppliers,
distributors and external agents that we use to purchase or sell goods
and services are Year 2000 ready; and
. manufacturing and infrastructure, to ensure manufacturing and
infrastructure systems are Year 2000 ready.
A more complete description of each of these sections follows.
Product certification consists of classifying, inventorying, assessing,
remediating and eventually certifying of all of Tokheim's products which have
embedded technologies within them. Examples of these types of products are fuel
dispensers, forecourt controllers, credit card readers, direct payment
terminals, outside payment terminals, and point-of-sale systems. Tokheim has a
total of 1,344 products on file. Of these products, 324 are not Year 2000
supported by Tokheim. The remaining 1,020 are active products which Tokheim has
an obligation to notify the customer as to its Year 2000 readiness. For those
customers with non-Year 2000 ready products, Tokheim has made available
upgrades or new systems to be purchased by the customer to correct any Year
2000 deficiencies. Tokheim is currently at a Year 2000 ready status of 93% for
these active products.
Internal information systems relates to the combination of computer hardware
and software that Tokheim uses internally for operations and financial
reporting. All of our computer hardware and the majority of our software
programs were purchased from outside firms. Some specialized programs were
internally developed. Tokheim has inventoried a total of 182 critical systems
and determined that 117 or 64% are Year 2000 ready. The remaining systems are
projected to be ready by October 1999.
Suppliers, distributors, and external agents involves the area of Tokheim's
Year 2000 program that assesses the Year 2000 readiness of its raw material and
component part vendors. Tokheim has currently identified 850 critical
suppliers, distributors and external agents. Survey responses indicate that 329
have identified themselves as ready, 127 have said they are on schedule to be
ready, and 153 have said that they are not yet ready. Tokheim has found the
remaining supply chain partners reluctant to admit verbally or in a written
statement what their Year 2000 readiness status is. The readiness of Tokheim's
external partners will more than likely improve; however, we do not know how
extensive any improvement will be.
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Manufacturing/infrastructure involves the area of Tokheim's Year 2000 program
that looks at its internal manufacturing equipment and the services needed to
keep operations running. Examples of items in this category include robotically
controlled manufacturing machines, CNC milling and punching equipment and
automated test equipment stations for testing calibration and flow rates of our
fuel dispensers. Infrastructure refers mainly to service-oriented items that
our plants cannot operate without, such as electricity, water,
telecommunications and transportation. Tokheim has inventoried 1,038 items in
this category and determined that 91% of the items are Year 2000 ready.
As of February 28, 1999 most of Tokheim's products worldwide have been tested
for Year 2000 readiness. A substantial majority of our total product lines are
Year 2000 ready, and we believe that the remaining products will be Year 2000
ready by December 1999. Our products presently being sold are Year 2000 ready.
We are currently assessing which products in the field are not Year 2000 ready
and our responsibility to customers, if any, to remedy non-compliant products.
This assessment is being done for all products sold by each entity with the
assessment efforts focused on the recently acquired RPS division locations.
There is a possibility that third-party networks over which the point-of-sale
systems must operate may not be Year 2000 ready, but our products will still
allow the pumping of petroleum products. We have surveyed our critical
suppliers, and about half of the respondents have indicated that they are Year
2000 ready. The other half of those responding have indicated that they are
still working to achieve Year 2000 readiness, but none has indicated that it
expects not to be ready. We believe that all of our information systems will be
Year 2000 ready no later than the third quarter of 1999. To date, we have not
uncovered any material Year 2000 problems. The total costs associated with
required modifications to become Year 2000 ready are not expected to be
material to Tokheim's financial position, results of operations or cash flows.
We estimate that we will spend a total of approximately $3.7 million by
December 31, 1999, of which approximately $1.3 million had been spent by
February 28, 1999, to become Year 2000 ready. We have enlisted the assistance
of a third-party consulting company to provide independent verification and
validation of our entire Year 2000 plan.
Failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, normal business activities or operations.
Such failures could materially harm Tokheim's results of operation and
financial condition and reduce its liquidity. We believe that the most likely
failure scenario is that our point-of-sale systems that have not been corrected
may fail, but our dispensers will still allow the pumping of petroleum
products. Under this scenario, purchasers of petroleum products would still be
able to use the dispensers but would be required to pay for their purchases at
the cashier rather than at the pump.
There is a possibility that our customers would seek legal recourse or take
other corrective action if a Year 2000 problem arises in our products that
disrupts our customers' businesses. At this time we cannot reasonably predict
the probability that our customers would pursue one of these courses of action,
the legal outcome of any action, or the financial impact on Tokheim of any of
these courses of action.
Due to the general uncertainty inherent in the Year 2000 problem, resulting
in part from the uncertainty of the Year 2000 readiness of third-party
suppliers, customers, and devices that interface with our products, we are
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on Tokheim's results of operations, liquidity, or
financial condition. The Year 2000 plan is expected to significantly reduce our
level of uncertainty about the Year 2000 problem and, in particular, about the
Year 2000 readiness of our material external agents. Tokheim believes that with
the implementation of new business systems and completion of the Year 2000 plan
as scheduled, the possibility of significant interruptions of normal operations
should be reduced. However, contingency planning for all sections discussed
above commenced in the fourth quarter of 1998, and we are currently focusing on
assessing the potential Year 2000 problems that may arise and the risks of not
becoming Year 2000 ready for each section mentioned. We expect to have a
contingency plan in place by the end of the second quarter of 1999.
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The future
Tokheim's principal sources of liquidity in the future are expected to be
cash flow from operations, including cash flow anticipated to be generated from
the RPS division, and available borrowings under the credit agreement. It is
expected that Tokheim's principal uses of liquidity will be to provide working
capital, finance capital expenditures, fund costs associated with Tokheim's
integration and rationalization plan and meet debt service requirements. As a
result of the acquisition of the RPS division, Tokheim has a significant level
of debt. Based upon current levels of operations and anticipated cost savings
and future growth, Tokheim believes that its expected cash flow from
operations, together with available borrowings under the credit agreement and
its other sources of liquidity, such as the sale of closed facilities and the
operating leases, will be adequate to meet its anticipated requirements for
working capital, capital expenditures, lease payments and scheduled principal
and interest payments. There can be no assurance, however, that Tokheim's
business will continue to generate cash flows at or above current levels, that
estimated cost savings or growth will be achieved or that Tokheim will be able
to refinance its existing indebtedness in whole or in part.
The indentures under which the outstanding notes were, and the exchange notes
will be, issued and the credit agreement contain a number of significant
covenants. The credit agreement requires Tokheim to maintain specified
financial ratios and satisfy financial tests. Tokheim's ability to meet such
financial ratios and tests may be affected by events beyond its control.
Several covenants in the credit agreement were amended in first quarter 1999.
There is a possibility that Tokheim will not be able to meet these amended
financial ratios and tests. The consequences of such a failure to meet these
tests are described more fully in the section "Risk Factors" under the heading
"We may not be able to comply with the financial ratios and financial tests . .
. under the credit agreement."
In addition, the indentures limit the ability of Tokheim and its subsidiaries
to, among other things:
. incur additional debt;
. pay dividends on capital stock or repurchase capital stock or make other
restricted payments;
. use the proceeds of asset sales;
. make investments;
. create liens on assets to secure debt;
. enter into transactions with affiliates;
. merge or consolidate with another company; and
. transfer and sell assets.
New accounting pronouncements
Tokheim has considered the impact that accounting pronouncements recently
issued by the Financial Accounting Standards Board and American Institute of
Certified Public Accountants will have on Tokheim's financial statements. None
of the pronouncements that have been issued but not yet adopted by Tokheim are
expected to have a material impact on Tokheim's financial position, results of
operations or cash flows. You should read the notes to the Consolidated
Condensed Financial Statements for additional information regarding recently
issued accounting pronouncements.
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BUSINESS
Tokheim
On September 30, 1998, we acquired the RPS division and became the world's
largest manufacturer and servicer of electronic and mechanical petroleum
dispensing systems. These systems include petroleum dispensers and pumps,
retail automation systems, including point-of-sale systems, dispenser payment
or "pay-at-the-pump" terminals, replacement parts and upgrade kits. Customer
service includes the installation, maintenance, certification and calibration
of, and technical support for petroleum dispensers, pumps, electronic hardware
and software systems. We provide products and services to customers in more
than 80 countries. We are the largest supplier of petroleum dispensing systems
in:
. Europe,
. Africa,
. Canada and
. Mexico,
and one of the largest in the United States. We also have established
operations in Asia and Latin America. We believe that our global capabilities
provide us with a competitive advantage to attract additional business and form
alliances with customers.
Petroleum dispensing systems are designed for and sold principally to owners
of retail service stations. These owners include:
. major oil companies,
. national oil companies,
. jobbers,
. independent oil companies,
. convenience store stations,
. hypermarkets and
. other retailers.
Petroleum dispensing systems are also sold to commercial customers. As a
result of industry consolidation, management estimates that the top three
manufacturers of petroleum dispensing equipment account for approximately 75%
of worldwide annual sales. Tokheim estimates that the combined annual sales of
the top five manufacturers in its industry is approximately $2 billion.
In 1998, approximately 88% of our net sales were to retail operators, such
as:
. Arco,
. BP Amoco,
. Elf Aquitaine,
. Esso,
. Fina,
. Marathon,
. Shell,
. SuperAmerica,
. Total
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and their affiliated jobbers, and approximately 12% of our net sales were to
commercial customers, such as:
. Federal Express,
. United Parcel Service,
. Penske Corporation and
. municipalities.
In the United States, Canada, and western Europe, demand for our products has
been driven by demand for new, more convenient systems, such as credit/debit
card readers, and by environmental regulations. These regulations include those
requiring vapor recovery systems and more secure underground storage tanks,
often with electronic leak detection technology. In emerging markets, economic
growth requires vehicle use and infrastructure development, which increase the
demand for fuel and fuel dispensers. Deregulation of local markets and
privatization of state-owned oil companies have also created additional growth
opportunities in emerging markets.
Tokheim believes that it offers superior customer service and support. In
western Europe and Africa we provide support through our extensive, company-
direct service organization. Throughout the rest of the world, service is
provided through authorized service representatives and distributors. Customer
service includes the installation, maintenance, certification and calibration
of, and technical support for, petroleum dispensers, pumps, electronic hardware
and software systems. We offer 24-hour, seven day-per-week support by telephone
and over the Internet via our FASRLINK help desk to authorized service
representatives, distributors and customers in major markets. We believe our
service and support capabilities are important factors in winning supply
contracts and gaining new customers. Additionally, major oil companies are more
frequently entering into geographically broader service contracts, which we
believe we are well-positioned to win.
Tokheim is the world's largest manufacturer and servicer of electronic and
mechanical petroleum dispensing systems. As of the date of this prospectus,
Tokheim's U.S. subsidiaries are:
. Envirotronic Systems, Inc.;
. Gasboy International, Inc.;
. Management Solutions, Inc.;
. Sunbelt Hose & Petroleum Equipment, Inc.;
. Tokheim Automation Corporation;
. Tokheim Equipment Corporation;
. Tokheim Investment Corp.;
. Tokheim RPS, LLC; and
. Tokheim Services LLC.
As a result of our acquisition of Sofitam in September 1996 and the RPS
division in September 1998, Tokheim has positioned itself as the largest global
competitor in the petroleum dispenser business, with an estimated 37% share of
the world market, and the ability to provide both products and services to
customers in over 80 countries. Tokheim was already one of the world's largest
manufacturers and servicers of electronic and mechanical petroleum dispensing
systems prior to its acquisition of the RPS division. Between 1994 and 1998,
Tokheim's revenues grew from approximately $202.1 million to $466.4 million, in
large part due to the Sofitam acquisition.
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Prior to the acquisition, the RPS division of Schlumberger Limited was
headquartered in France, and was a leading manufacturer and servicer of fuel
dispensing systems in western Europe. In 1992, it established a presence in
North America with the acquisition of Southwest Energy Control Systems and
continued to develop its North American position. The RPS division is also
present in eastern Europe and the former Soviet Union. The main manufacturing
sites for Europe and North America are located in Dundee, Scotland and in
Bonham, Texas, respectively. We recently announced that we will close the
Bonham facility.
History
Tokheim
Tokheim originated in 1898 in a hardware store in Thor, Iowa. Merchant John
J. Tokheim, while searching to improve on the "drum-and-spigot" method of
dispensing kerosene and gasoline, conceived of the idea of a pump dispenser.
His invention became known as the Tokheim Dome Oil Pump. The pump's popularity
led to the organization of the Tokheim Manufacturing Company in Cedar Rapids,
Iowa in 1901. In 1918, a group of businessmen from Fort Wayne, Indiana
purchased Tokheim. The company moved to Fort Wayne and was incorporated in
Indiana under the name Tokheim Oil Tank and Pump Company. The present name was
adopted in December 1953. Our common stock began trading on the New York Stock
Exchange on September 8, 1978. In 1986, Tokheim acquired the business now
operated as Gasboy International, Inc. Gasboy has been designing and
manufacturing products for fleet fuel dispensing for over 70 years and fluid
management products for over 30 years. Gasboy sells primarily to commercial and
governmental customers that maintain fleets.
In September 1996, Tokheim acquired Sofitam for $107.4 million less
adjustments. The acquisition included Sofitam's in-house service provider,
Sogen S.A., as well as the two distinct brand names--EIN and Satam. Sofitam had
and continues to have a leading market position in France and northern Africa,
as well as a strong market position in southern Europe. In December 1997,
Tokheim strengthened its offerings of retail automation systems, including
point-of-sale systems, with the acquisition of MSI.
The RPS division
Schlumberger built the RPS division mainly through acquisitions of other
petroleum dispensing equipment companies. The French RPS division was
established in 1920 under the name Aster-Boutillon and became part of
Schlumberger in 1972. In 1985, the RPS division acquired Koppens Automatic, a
manufacturer of fuel dispensers established in the Netherlands. In 1992, the
RPS division established a presence in North America with the acquisition of
Southwest Energy Control Systems. The RPS division developed a presence in
Germany through the acquisitions of Schwelm Tanksysteme GmbH and Paul Germann
GmbH, which became part of the RPS division in 1990 and 1996, respectively. The
RPS division expanded its European service business in 1996 by acquiring a
leading French service business named Gueant and three Italian companies, CME
Centro denominazione eletronica Srl, Borghetti snc and LA NUOVA RIMIC Srl. The
RPS division has approximately 125,000 fuel dispensers operating in the field,
over 50,000 operational retail automation systems, over 20,000 operational
payment terminals and over 20,000 service stations under a maintenance service
contract. The RPS division sells to major oil companies mainly located in
western Europe, including;
. Shell,
. BP,
. Fina,
. Elf,
. Total and
. Repsol,
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and to independent retailers, distributors and hypermarkets, such as:
. Palmetto (USA),
. Ten Hoeve Bros. (USA),
. Southwest Convenience (USA),
. Intermarche (France),
. Ocean (France) and
. Famila (Germany).
Competitive strengths
Tokheim believes that a number of factors make it a premier manufacturer and
servicer of petroleum dispensing systems. These factors include Tokheim's:
Global capabilities. Tokheim is the world's largest manufacturer and servicer
of petroleum dispenser systems, supplying products and services in more than 80
countries. As a result, we believe that we are able to satisfy the complete
petroleum dispensing equipment needs of customers throughout the world. Our
global capabilities provide a significant advantage when competing for sales to
major oil companies and national oil companies, including through tenders that
major oil companies and national oil companies are awarding more frequently to
meet their fuel dispensing equipment needs.
World's largest service network. Tokheim offers service to customers in over
80 countries through our 414 distributors, 319 authorized service
representatives and over 3,800 trained field representatives. We believe our
global distribution and service network also provides a significant advantage
when competing for tenders. We believe that the reach of our European and
African networks for distribution and service makes us a preferred partner for
major oil companies in these regions. We also recently launched an Internet-
based help desk known as FASRLINK, which provides authorized service
representatives worldwide with 24-hour access to installation drawings, product
updates and diagnostic procedures.
Our service network enables us to strengthen existing customer relationships,
attract new customers, increase its understanding of competitive products and
customer needs, and augment sales.
Strong customer relationships. Tokheim's strong relationships with major oil
companies, independent oil companies and hypermarkets are increasingly
valuable. As these customers expand across regions, they commonly rely on their
traditional suppliers to expand with them. We have established relationships
with many such customers, including:
. Arco,
. BP Amoco,
. Carrefour,
. Elf,
. Esso,
. Fina,
. Intermarche,
. Repsol,
. Shell,
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. Statoil and
. Total.
Furthermore, our ability to customize our equipment and software to meet
customer- and country-specific standards makes us attractive to major oil
companies and national oil companies as a single source of supply.
Broad, technologically advanced product line. Tokheim manufactures and sells
a wide variety of dispensers, pumps, meters, payment and retail automation
systems, including point-of-sale systems, both hardware and software, and fleet
fueling systems. Tokheim's acquisition of MSI in December 1997 provided
additional depth to its retail automation system product line. The RPS
division's unique microprocessor-driven dispenser electronics platform further
enhances our product portfolio. Our commitment to invest in technology allows
us to continue to satisfy diverse customer- and country-specific requirements.
We consider Tokheim to be an industry leader in the integration of electronics
and software into our products and believe there is a significant potential
demand for existing technologies. For example, in 1997, only 26% of all retail
petroleum dispensers in the United States were estimated to have dispenser
payment or "pay-at-the-pump" terminals.
Proven management team. Since Tokheim's current management team was assembled
in 1992, it has successfully implemented a strategic plan that has restored
financial viability, strengthened relationships with major oil companies,
broadened product lines and reduced costs. As part of this strategy, Tokheim
acquired Sofitam in 1996 and the RPS division in 1998. Management has been
successful to date in integrating Sofitam's operations into Tokheim and
consolidating our operations in Europe. In addition, management has already
initiated numerous cost-cutting programs in connection with the acquisition of
the RPS division. For more information on these programs, you should read below
under the heading "--Business strategy--Realize operating synergies and cost
savings."
Business strategy
Tokheim's business strategy has the following principal components:
Leverage global platform. Tokheim intends to use its broad product portfolio
and its understanding of the regulatory requirements of the countries where its
customers operate to compete aggressively for national, regional and global
tenders and new customers. We also believe we can obtain additional customers
and increase sales to existing customers by offering comprehensive sales and
service coverage worldwide through our extensive network.
Enhance largest service organization. Tokheim's service organization provides
it with information on customer needs and products, the opportunity to sell new
products to service customers and a stable source of recurring revenues from
product support. We intend to expand our service organization geographically.
Maintain technological leadership. In developed markets, such as the United
States, Canada and western Europe, Tokheim believes that improved technology
will be the primary driver of sales of petroleum dispensing products. As a
result, we have made a significant effort to maintain our competitive edge
technologically and consider ourself a leader in the integration of electronics
and software into petroleum dispensing products. For example, our new RFID
technology, which is currently being test marketed in the U.S. and is similar
to the drive-through payment systems used at toll booths, permits consumers to
pay for fuel purchases without using cash or credit cards. We also plan to
continue to invest in developing new technologies, such as human interface
displays, wireless forecourt systems, improved metering and robotic fueling.
Maintain top quality. Tokheim strives to produce the highest quality products
and is committed to continuously improving quality. An aggressive focus on
product quality has reduced Tokheim's defect rate, measured in parts per
million, by approximately 90% since 1995. Another indication of commitment to
quality is the award of ISO-9000 certification to most of our manufacturing
facilities. Moreover, our automated computerized dispenser testers
comprehensively test each dispenser's electrical and fluid systems before
shipment to the customer, further assuring the delivery of quality products.
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Realize operating synergies and cost savings. Tokheim believes that it will
be able to achieve an additional $43.7 million in annual cash cost savings by
the end of the third full year after the acquisition of the RPS division, of
which Tokheim believes $28.7 million can be obtained in the first full fiscal
year after the acquisition. The principal remaining components of our cost
savings program are:
. Combine manufacturing capabilities. We intend to consolidate
substantially all of our dispenser manufacturing into three modern
facilities. Management estimates that Tokheim can save $26.0 million on
an annual basis from such consolidation.
. Integrate service organizations. Tokheim is in the process of
streamlining its European service organization. We plan to further
reduce costs and improve service by integrating Tokheim's and the RPS
division's service organizations. Management estimates that Tokheim can
save $9.0 million on an annual basis from such integration.
. Eliminate general and administrative redundancies. Management expects to
achieve further savings by eliminating redundant administrative staff
and headquarter facilities. Management estimates that Tokheim can save
$5.0 million on an annual basis from such reductions.
. Reduce raw material costs. Management expects to save $5.5 million
annually due to increased purchasing leverage.
. Reduce foreign currency exposure. The RPS division incurred a $2.5
million loss from currency exchange connected with intercompany
purchases of inventory during fiscal 1997. Management expects to reduce
these losses by approximately $1.8 million annually by using hedging
techniques.
To realize the $47.3 million of cost savings, management expects that
approximately $32.2 million of expenditures will be required, most of which are
yet to be incurred. Management believes that further cost savings may be
achievable from:
. reduced manufacturing costs resulting from product standardization and
elimination of redundant products;
. productivity and efficiency improvements resulting from increased
capacity utilization levels;
. reduced administrative expense items such as insurance premiums and
supplies; and
. cost savings from bringing in-house various manufacturing operations,
such as fabrication, that the RPS division outsourced before the
acquisition.
The savings described above are based on estimates and assumptions of
Tokheim that are inherently uncertain, and are subject to significant
business, economic and competitive uncertainties and contingencies, all
of which are difficult to predict and many of which are beyond
Tokheim's control. We can give no assurance as to what extent or when
such savings will be achieved. You should read "Forward-Looking
Statements" for more information about these uncertainties.
Products
Tokheim's principal product offerings include:
. petroleum dispensers and pumps,
. retail automation systems,
. including point-of-sale systems,
. dispenser payment or "pay-at-the-pump" terminals,
. replacement parts and upgrade kits.
Petroleum dispensers and pumps transfer fuel from storage tanks to vehicles or
portable containers. Dispensers include meters, which measure the quantity of
fuel pumped and transfer the information to calculators which determine a sales
price. Retail automation systems control in-store and at-the-pump fuel sales,
pump activation
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and credit card transactions, monitor inventory, transmit data to a central
management system and perform other management functions. Pay-at-the-pump
terminals automate customer payment at the pump with cash or credit/debit
cards. Upgrade kits permit owners to upgrade a dispenser's capabilities and
functionality without incurring the cost of replacing the entire dispenser.
Tokheim also offers services for its products through authorized service
representatives and company-owned facilities.
In the United States, Tokheim's most popular petroleum dispensers are the
Premier(TM) series. Premier dispensers include a variety of sizes and models
that dispense multiple grades of fuel and that offer advanced pay-at-the-pump
terminals. Internationally, Tokheim offers a range of petroleum pumps,
including its Consommateur, Bernice, ADONIS, Partner 3 and Eurotron Spectra
models.
One of Tokheim's distinguishing characteristics is its commitment to adapting
products to local needs. For example, Tokheim produces a dispenser that permits
multiple hoses on the same side of the pump to operate simultaneously. This
model is targeted primarily at urban Asian markets with a high motorcycle
population. Tokheim has also adapted its products to accommodate differences
among markets which are driven more by custom than by need. For example,
European dispensers usually have retractable hoses and suction pumps within the
dispenser, while dispensers in the United States usually have high-hose units
and pumps located within the underground storage tank.
Tokheim provides both the software and hardware required for retail
automation systems. Tokheim's Columbus(TM) system was introduced on a
commercial basis in 1997. Columbus uses a touch-screen PC monitor and Windows
NT software in an open architecture system that allows full integration with
both existing and new equipment. The user-friendly, touch-screen cashier
interface reduces both employer training time and customer wait time. Other
point-of-sale solutions available from Tokheim include the Profit Point System,
the Ruby System and the Check Point System in the United States and the Prisma
and S-2000 systems in the international market.
MSI's principal product is the CVN(TM), or Convenience Management Solution, a
comprehensive retail automation system, including point-of-sale, backroom and
store management systems. The CVN integrates such features as advanced gas pump
controls, barcode scanning, credit authorization, commercial and charge
accounts, employee time clock, detailed inventory tracking and cash drawer
controls. Among its dispenser features, the CVN displays up to 32 separate
pumps at all times, with up to two customers per pump. Its "One Touch" controls
allow service station employees to easily authorize, pre-pay and monitor pumps
by pressing one button. The system can also automatically add merchandise
purchases to the customer's fuel bill.
The CVN has the capacity to work with a monitoring system to automatically
alert station owners of the status, fuel level, temperature, water content and
presence of leaks in underground storage tanks. The system interfaces with
almost every type of dispenser and control currently on the market, including
those not manufactured by Tokheim. The system permits station owners to take a
physical inventory or spot-check with a hand-held radio frequency scanner. It
also can track customers, even those who pay cash, and can help manage fleet,
commercial and in-house charge accounts.
Tokheim believes that its retail automation systems comprise one of the
broadest product ranges in the marketplace, from simple pump controllers to
sophisticated convenience store and fast-food functions. Tokheim believes that
by combining its retail automation resources under the leadership of MSI, it
will strengthen its market position and better utilize these resources.
Tokheim's newest dispenser payment terminal is INsight(TM), which can be used
with any of the Premier dispenser models now in the market. INsight provides a
flexible platform for merchandising at the dispenser, using a monitor that
prompts the consumer, making transactions easier to initiate and complete. This
product includes an animated graphic display for payment options, including
cash, credit card or debit card, and a larger display for text. Non-fuel items,
such as car washes or food, can also be purchased through INsight. Tokheim has
developed a graphic printer to provide such items as coupons, logos and
barcodes on the consumer's receipt.
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In 1997, Tokheim began market testing of its RFID technology. Similar to the
drive-through payment system at toll booths in major metropolitan areas, this
technology automatically charges a consumer's account, which is read from
either a microchip key ring tag or a microchip window tag. By eliminating the
need to pay for fuel with cash or credit cards, the system speeds gas
purchases, both increasing consumer convenience and enabling stations to fuel
more cars in less time. The technology also permits the gathering of
information about consumer buying habits to improve marketing techniques, such
as promotion of food and car washes on pump-mounted displays. Tokheim's RFID
system is compatible with all point-of-sale systems and with other
manufacturer's dispensers as an upgrade. Tokheim has entered into an agreement
with Micron Communications to further develop its RFID system, which is
currently being test marketed with consumers.
Also in 1997, Tokheim introduced its Fuel Link(TM) wireless communication
system. Fuel Link transmits information by radio frequency between the point of
sale and the dispenser hardware, eliminating the cost of installing underground
wiring to upgrade the functionality of the dispenser.
For the commercial market, Tokheim's new Gasboy products include Astra(TM)
and Fuel Point(TM). Astra is an electronic dispenser designed for the above-
ground tank market. The Fuel Point system automatically reads information from
the dispenser's nozzle, including vehicle identification, odometer data, fuel
consumption and service record, and other operating and maintenance data,
eliminating the risk of manually misentered data.
In the United States, the RPS division's most popular petroleum dispensers
are from the Centurion(TM) series. Centurion are the first local area network-
based dispensers with the electronics scheme called EZ BUS(TM) electronics. EZ
BUS's compact design reduces the number of electronic components and connection
points, making maintenance easier. In addition, customers can add options by
simply upgrading the dispenser software without changing electronic hardware.
The Highway is a highly sophisticated, open architecture, PC-based point-of-
sale system designed to interface with dispensers of other major manufacturers.
This product has the ability to drive multiple dispenser brands at a single
site.
In Europe, the RPS division's most popular petroleum dispensers are the
Eurotron Spectra, which are multiproduct dispensers designed to address the
spectrum of petroleum requirements across European markets. The Eurotron
Spectra dispensers are offered in a range of configurations, and the main
components have approvals for use in all European markets. The OMEGA 2010(TM)
forecourt equipment controller, which has also been designed for use throughout
Europe, can adjust to different national and international regulations
governing weights and measures and safety.
Service
Tokheim believes that one of its strongest competitive advantages is its
ability to offer comprehensive customer support and service. Service consists
of installation, maintenance, certification and calibration of petroleum
dispensers, pumps, electronic hardware and software systems. Tokheim offers
service to customers in over 80 countries through its 414 distributors, 319
authorized service representatives and over 3,800 trained field
representatives. Tokheim's customer service division, which maintains a help
desk in English, Spanish and other languages, is available 24 hours a day, 365
days a year, to respond immediately to service needs. Additionally, the
customer service division maintains a continuing program of service clinics for
customers and distributors, both in the field and at Tokheim's training
centers.
To improve efficiency, response time and customer convenience, Tokheim has
begun to implement a system to collect performance data and coordinate the
dispatch of service technicians. In addition, we recently launched an Internet-
based help desk known as FASRLINK, which provides authorized service
representatives worldwide immediate access to installation drawings, product
updates, service bulletins and diagnostic procedures 24 hours a day.
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Customers
Tokheim's products are sold primarily to retail service station operators and
commercial customers which fall into seven categories.
Major oil companies. Major oil companies are typically large multinational
companies that are vertically integrated with retail operations in developed
and emerging markets. They sell "branded" products and typically have standard
station formats, including dispenser design and proprietary credit card
networks. Tokheim's major oil company customers include:
. BP Amoco,
. Elf Aquitaine,
. Marathon Oil,
. Shell and
. Total, among others.
National oil companies. A national oil company is a non-U.S. oil company that
operates exclusively, or almost exclusively, in a single national market. Most
national oil companies are, or until recently were, state-owned. In recent
years, a number of national oil companies have been privatized or have
relinquished their monopolies over the local retail petroleum markets. For
example, in Mexico, the market was previously controlled by the government-
owned oil company, Petroleos Mexicanos. Initial deregulation occurred in 1995,
allowing major oil companies such as Amoco, Mobil and Conoco to enter that
market. Increased local competition as well as the need for newly-privatized
companies to earn profits has made once-insulated national oil companies more
sensitive to costs and customer service. These new sensitivities often
translate into demand for newer, more sophisticated dispenser equipment.
Additionally, a number of privatized nationals are now expanding across
borders. Tokheim's national oil company customers include:
. Petroleos Mexicanos in Mexico,
. Petroleo Brasileiro S.A. in Brazil,
. Paz Oil in Israel and
. Deltaven S.A. in Venezuela, among others.
Independent oil companies. Independent oil companies are usually U.S.
companies that sell "branded" products regionally rather than nationally. They
typically have station and dispenser designs which are standardized, similar to
major oil companies. Independent oil companies that are Tokheim customers
include:
. Merit Oil Corp.,
. Getty Petroleum Corp.,
. Amerada Hess Corp. and
. Phillips 66 Company, among others.
Jobbers. Jobbers are independent service station owners that operate under
the brand of a major oil company. A station owned by a jobber looks
substantially the same as one owned by a major oil company, selling major oil
company-branded products and using standard major oil company station layouts.
Most jobbers own multiple stations. Some jobbers work exclusively with one
major oil company, while others have multiple major oil company partners.
Usually, jobbers are not required to purchase their petroleum dispensing
equipment from the same manufacturers as their affiliated major oil company.
Convenience store stations. Convenience store stations are petroleum
retailers who source over 50% of their sales from merchandise rather than from
petroleum products. A significant number of convenience store stations are
owned by major oil companies. Tokheim's convenience store stations customers
also include national and regional operators, as well as small, local
businesses.
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Hypermarkets. Tokheim is the leading supplier to French hypermarkets. The
hypermarket is a retailing format pioneered in France, with a growing presence
in the rest of Europe. A hypermarket is similar to a strip mall in the United
States, with a supermarket as the anchor retailer. Hypermarkets typically offer
competitively-priced, private label petroleum products to attract customers. In
France, more than 50% of retail petroleum sales are through hypermarkets.
Tokheim's hypermarket customers include Intermarche, Leclerc, Systeme U,
Comptoirs Modernes, Promodes and Carrefour, among others.
Commercial customers. The commercial market is characterized by companies
whose fuel consumption needs justify maintaining internal fueling capabilities,
such as truck fleets and municipalities. Through its Gasboy subsidiary, Tokheim
is the leading supplier of fuel dispensing equipment to the U.S. commercial
market. Tokheim's commercial customers include:
. Federal Express,
. United Parcel Service,
. Penske Corp. and
. municipalities and state agencies.
Sales, marketing and distribution
United States
In the United States, Tokheim relies on two primary channels of distribution:
direct sales to national accounts such as major oil companies and independent
oil companies, and indirect sales through a large network of independent
distributors. Tokheim directly markets through national account managers who
call on the major oil companies, independent oil companies and large
convenience store chains. National account managers work closely with the major
oil companies to develop technology, pricing and account strategies. Tokheim
markets to jobbers and convenience stores through its 261 independent
distributors. To coordinate its distributor marketing, Tokheim has regional
district managers who are responsible for geographic coverage, training the
district sales force and assisting in the development of sales and marketing
strategies.
International markets
Historically, the petroleum dispenser market outside of the U.S. has been
served by local distributors. Tokheim has 153 international distributors
serving customers that cannot be served cost-effectively by its direct sales
force. Tokheim generally requires letters of credit from its international
distributors to limit any risk of non-payment by such distributor. However, as
major oil companies expand geographically and as national oil companies become
more commercially competitive, they increasingly are purchasing directly from
manufacturers, using national, regional and global tenders, alliances and
preferred supplier relationships. A tender is an award made by a major oil
company or a national oil company to a manufacturer to supply petroleum
dispensing equipment and related services in a specific country or region, or
even globally, for a specific period at specified prices and quantities.
Tenders allow major oil companies and national oil companies to reduce the
number of their suppliers while improving relationships with those remaining.
In response to the advent of tenders, manufacturers have expanded and adapted
their product lines and service capabilities to satisfy the specific
regulatory, marketing, and service demands of each country being supplied.
Tenders are often nonexclusive and cancellable by the customer at any time.
An alliance involves a closer relationship than a tender. Often, a major oil
company or national oil company will ask only its alliance partner to submit a
tender proposal. As part of an alliance, manufacturers can assist the major oil
company or national oil company by tracking purchases, warranty coverage,
service coverage and service response requirements on behalf of the major oil
company or national oil company. Tokheim has also been able to expand its
alliance with Amoco, for example, to obtain its Mexican business.
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Preferred supplier relationships are less committed arrangements than
alliances. These arrangements typically involve a one-way commitment by the
manufacturer on such matters as prices, service and available inventory.
Usually, the major oil company or national oil company does not make any
purchasing or other contractual commitments. Preferred supplier relationships
are usually non-exclusive and are typically cancellable by the customer at any
time. A major oil company or national oil company seeking to reduce the number
of suppliers with which it deals while increasing volume purchasing discounts
often will identify several manufacturers as preferred suppliers. Tokheim has
an expanded preferred supplier relationship with Total.
Manufacturing and quality
Tokheim's manufacturing process consists of sheet metal fabrication,
machining, assembly of electronic components and customer-specific painting.
Tokheim's manufacturing and production are generally to order. To improve
quality and productivity and to reduce costs, Tokheim employs a cellular
manufacturing format and just-in-time process engineering. The majority of our
manufacturing operations are concentrated in the following cities:
. Fort Wayne, Indiana;
. Washington, Indiana;
. Lansdale, Pennsylvania;
. Grentheville, France;
. Kya Sand, Randburg, South Africa;
. Dundee, Scotland;
. Bladel, the Netherlands; and
. Turnhout, Belgium.
The headquarters of the RPS division was, prior to the acquisition, located
in Montrouge, Paris, France. We recently closed manufacturing facilities in
Glenrothes, Scotland and Bonham, Texas. Management anticipates that Tokheim has
sufficient production capacity to meet demand over the next several years.
We strive to produce the highest quality products and are committed to
continuously improving the quality of our products and processes. An aggressive
focus on product quality has reduced Tokheim's defect rate, measured in parts
per million, by approximately 90% since 1995. One important element in reducing
the defect rate has been our effort to satisfy the standards for ISO-9000
certification at our manufacturing facilities. The International Organization
for Standardization awards ISO-9000 certification on a facility-by-facility
basis to manufacturers that adhere to strict quality standards. Companies must
maintain these standards and supply supporting documentation to retain their
ISO certification, and certified facilities are audited regularly. Independent
third party registrars must nominate candidates for certification. Most of
Tokheim's manufacturing facilities are ISO-9000 certified. We are actively
seeking certification for the uncertified manufacturing facilities.
Another important aspect of our efforts to improve quality is our automated
computerized dispenser tester. The computerized dispenser tester monitors all
fluid paths to detect leakage and, simulating real-world conditions, tests
displays, keypads, valves, pulsers, totalizers, card readers, cash acceptors,
printers, vapor recovery systems and other critical dispenser components. After
each testing cycle, technicians review the data for any potential corrective
actions. The computerized dispenser tester is networked to Tokheim's mainframe
computer, allowing instantaneous access from the order entry, engineering,
customer service and quality assurance departments, and permitting close
monitoring of the manufacturing process.
Tokheim has been recognized by third parties for its commitment to quality.
In September 1998, Tokheim received the Manufacturer of the Year Award from the
1,639 member Petroleum Equipment Institute. The
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Manufacturer of the Year Award is the top honor that the Institute presents
each year. This award recognizes Tokheim's commitment to marketing through
distributors, competitive pricing, honest business practices, good product
availability and responsive customer service. 1998 was the third consecutive
year Tokheim was recognized. In 1997 and 1996, Tokheim was one of five
recipients, out of 350 candidates, of the Institute's Circle of Excellence
Award. Tokheim's principal manufacturing facility in Fort Wayne, Indiana and
its electronic assembly plant in Washington, Indiana each received the 1996
State of Indiana Quality Improvement Award.
Supplies
The principal raw materials essential to Tokheim's business are flat sheet
steel, aluminum, copper tubing, iron castings and electronics, point-of-sale
systems, and computer components, all of which are generally available through
competitive sources of supply. At its U.S. facilities, Tokheim's purchasing
strategy, which includes a comprehensive supplier quality assurance component,
seeks to ensure that inventories are purchased at the lowest total cost-of-
quality. In making purchasing decisions, we consider the quality of performance
of the required items, as well as the supplier's delivery responsiveness and
prices. We have significantly reduced the number of suppliers we use to develop
more effective relationships with the remaining suppliers. We have also
implemented point-of-use programs so that supplies are delivered directly to
the proper usage points at the factory or to a storage facility.
Properties
The majority of Tokheim's manufacturing operations are concentrated in cities
marked with an asterisk ("*"). In addition, Tokheim conducts manufacturing
operations in Turnhout, Belgium. We recently closed manufacturing facilities in
Glenrothes, Scotland and Bonham, Texas. Tokheim conducts manufacturing
operations and owns an engineering and design center and a corporate office
building in Fort Wayne, Indiana. The facility in Greenwood Village, Colorado is
used for software development.
<TABLE>
<CAPTION>
Cities where Tokheim owns properties Cities where Tokheim leases properties
------------------------------------ --------------------------------------
<C> <S>
Fort Wayne, Indiana Greenwood Village, Colorado
Fremont, Indiana Tremblay, France
Washington, Indiana* Casablanca, Morocco
Lansdale, Pennsylvania* Solothurn, Switzerland
Brighton, Ontario, Canada West Sussex, United Kingdom
Kya Sand, Randburg, South Africa* Barcelona, Spain
Weilheim, Germany La Soukra, Tunisia
Grentheville, France* Dakar, Senegal
Scurzolengo, Italy Douala, Cameroon
Abidjan, Ivory Coast Leiderdorp, the Netherlands
Dundee, Scotland* Additional sites in France, Austria,
Denmark, Norway,
Bladel, the Netherlands* Great Britain, the Czech Republic,
Slovakia, Hungary,
Vilvoorde, Belgium Italy, Spain, Switzerland, Ireland, the
Netherlands, Germany, Poland and
the United States
</TABLE>
The properties that Tokheim owns or leases in the cities not marked with one
or more asterisks, other than Fort Wayne and Greenwood Village, are used
primarily for warehouse space or sales and service.
We believe that we have sufficient production capacity to meet demand over
the next several years. Tokheim is currently holding for sale facilities in:
. Falaise, France,
. Scurzolengo, Italy,
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. Vilvoorde, Belgium,
. Tulla, Ireland,
. Jasper, Tennessee,
. Bonhan, Texas and
. Atlanta, Georgia,
as well as a 109-acre track of unimproved land located in Fort Wayne, Indiana.
Tokheim has entered into a contract for the sale of 34 acres of the 109-acre
tract of unimproved land.
Employees
As of February 28, 1999, Tokheim employed approximately 4,700 persons. Most
employees are involved in manufacturing and production, with the balance
engaged in administration, sales and clerical work. In the United States,
approximately 500 of the employees are union members covered by collective
bargaining agreements. The collective bargaining agreement covering factory
employees expires in 2003, and the collective bargaining agreement covering
office employees expires in 2000. Tokheim believes its relationship with its
employees is good. It has not recently experienced any work stoppages at its
facilities, and has been able to extend or renegotiate its collective
bargaining agreement without disrupting production.
Research and development
We continually seek to enhance our existing product lines to offer increased
functionality in new or existing products. We have dedicated research and
engineering staffs. Tokheim, not including the RPS division for 1997 and 1996,
spent approximately $21.1 million, $18.3 million and $15.9 million in 1998,
1997 and 1996, respectively, to improve existing products and manufacturing
methods, develop new products and pursue other applied research and
development. The RPS division spent $16.6 million and $15.9 million in 1996 and
1997, respectively. Tokheim has also begun to form exclusive relationships with
the major oil companies to develop products that meet their specific needs and
with electronics companies to develop advanced technologies.
Tokheim revamped its product development process in 1996 to incorporate
formal product development procedures. Each project now includes a cross-
functional team of representatives from the engineering, manufacturing,
quality, marketing, customer service, finance and service parts departments.
The team reviews the project from a variety of aspects, including financial
impact, design and production implications, and required after-sale support.
Legal proceedings
Tokheim is defending various claims and legal actions, including claims
relating to environmental laws, product liability and various contract and
employee matters. We believe that the outcome of these pending claims will not,
individually or in the aggregate, materially harm our business, financial
condition or result of operations.
Regulation
Tokheim's operations are subject to national, regional and local laws and
regulations, including those concerning product safety, weights and measures,
and pollution and protection of the environment.
Product safety. In the United States, Tokheim's products are subject to
standards set by Underwriters' Laboratories, or UL. Standards for petroleum
product dispensers govern design features such as frame sturdiness, corrosion
resistance and hydrostatics of various parts. UL standards also apply to
electronic devices used in Tokheim's dispensers. Other countries often either
accept UL product standards or observe the standard of a comparable body
including the Canadian Standards Association and the British Approval Service
for
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Electrical Equipment and Flammable Atmosphere and Organization of International
Meteorology League, or OIML in Europe. Individual countries may vary the
standards created by these groups.
Weights and Measures. Meters and displays must meet accuracy standards. In
the United States, "Handbook 44" from the National Institute on Weights and
Measures, which all states have adopted, sets forth those standards. The
standards generally require that the meter accurately measure the amount of
fuel pumped to within 0.4%. Meters must be able to measure output at varying
flow rates, ranging from almost zero to fifteen gallons per minute. Also, pumps
must eliminate most of the vapor from the fuel to ensure that what is being
measured is fuel. Dispensers in the U.S. are typically inspected every year by
state inspectors. Outside the United States, similar standards govern meters
and displays. Standards set by OIML are generally accepted throughout Europe,
including in France.
Environment. Tokheim's operations and properties are subject to a variety of
complex and stringent federal, state, and local laws and regulations, including
those governing the use, storage, handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes,
the remediation of contaminated soil and groundwater, and the health and safety
of employees. Therefore, the nature of Tokheim's operations exposes it to the
risk of claims with respect to such matters. There can be no assurance that
material costs or liabilities will not be incurred in connection with these
claims. Based upon its experience to date, Tokheim believes that the future
cost of compliance with existing environmental laws and regulations, and
liability for known environmental claims pursuant to such laws and regulations,
will not materially harm its financial condition or results of operations.
However, future events, such as new information, changes in existing laws and
regulations or their interpretation, and more vigorous enforcement policies of
regulatory agencies, may give rise to additional expenditures or liabilities
that could be material. You should read Note 18 to the Consolidated Financial
Statements of Tokheim Corporation and Subsidiaries, "Contingent Liabilities"
for more information about environmental regulation.
CERCLA, also known as the "Superfund" law, imposes liability, without regard
to fault or the legality of the original conduct, on specified classes of
persons with respect to the release of a "hazardous substance" into the
environment. These persons include the owner or operator of the disposal site
or sites where the release occurred and companies that disposed of or arranged
for the disposal of the hazardous substances found at the site. Persons who are
or were responsible for releases of hazardous substances under CERCLA may be
subject to joint and several liability for the costs of cleaning up the
releases and for damages to natural resources. It is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury or property damages allegedly caused by the hazardous substances
released into the environment. Tokheim owns or leases, and has in the past
owned or leased, numerous properties that for many years have been used in
industrial and manufacturing operations. Although Tokheim has in the past
utilized operating and disposal practices that were standard for the industry
at the time, hazardous substances may have been disposed of or released on or
under the properties owned or leased by Tokheim, or on or under other locations
where such wastes have been taken for disposal. In addition, where Tokheim has
sold properties used in its prior manufacturing operations, it may have
contractual obligations to the new owner to remediate environmental
contamination on the site arising from prior operations.
Tokheim has reached a tentative settlement with respect to environmental
liabilities under an indemnity provision of a sale agreement concerning the
sale of the die casting facility of a former subsidiary to a third party.
Pursuant to the settlement agreement, Tokheim will repurchase the real property
and will enter into a leaseback agreement with the third party. The state
recently accepted the facility into its site remediation program. Based on
Tokheim's environmental consultant's report, we presently do not anticipate any
material costs at the facility.
Tokheim also generates or has in the past generated waste, including
hazardous waste, that is subject to the federal Reserve Conservation and
Recovery Act and comparable state statutes. The U.S. Environmental Protection
Agency and various state agencies have promulgated regulations that limit the
disposal options for hazardous and nonhazardous waste. These regulations may
also require corrective action with respect to contamination of facilities
caused by the past handling of industrial waste.
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Although no assurances can be given in this regard, we do not believe that
any environmental cleanup activities will materially harm our financial
condition or results of operations.
Environmental regulations also affect Tokheim's customers, their spending and
their demand for Tokheim's products. In the United States, a number of states
have adopted standards for the recovery of vapor coming from the nozzle as fuel
is pumped. The most rigorous standards are those set by the California Air
Resources Board, or CARB, which has become the de facto governing body of such
standards in the U.S. CARB's standards apply to vapor recovery systems on the
nozzle. In general, a product that meets CARB's standards will pass the tests
of other states. More recently, the U.S. federal government promulgated rules
that required many gas stations to upgrade their underground tanks and pipes to
use various corrosion preventing tanks, pipes, materials or devices, self-
containing mechanisms including an interior lining, and leak detection devices
or tests by the end of 1998. Since these gas stations temporarily closed to
comply with these regulations, we believe that many choose to replace their
aging gas pumps at the same time. The international operations of Tokheim and
its customers are also subject to various environmental statutes and
regulations of the countries in which they operate. In addition, many of the
countries in which Tokheim and its customers operate are members of the
European Union, which has promulgated and continues to promulgate environmental
directives and regulations. Generally, these requirements are no more
restrictive than those in effect in the United States. Although environmental
protection and safety laws in the countries in which Tokheim manufactures and
sells its products have an effect on product design, they apply equally to
Tokheim's competitors and have not, nor are they expected to, weaken Tokheim's
competitive position. Environmental laws and regulations also significantly
affect Tokheim's customers and their spending levels on its products.
Since 1989, the RPS division has conducted, with the assistance of an outside
environmental consulting firm, extensive investigations on the Bladel site
located in the Netherlands. These investigations have evidenced a significant
level of soil and groundwater contamination with mineral oil and aromatic and
chlorinated hydrocarbons. The RPS division prepared a remediation plan for
cleaning the premises in 1997. Before implementing the plan, the RPS division
has requested that local governmental authorities confirm that no further
liabilities for any existing soil contamination will arise for the RPS division
in the future. Discussions between the RPS division and the local governmental
authorities are currently in process. The total capital cost of remediation
measures is estimated to be $1.5 million, to be spent over three years.
Operation and related costs for a groundwater treatment system could extend
beyond eight years which is the period during which Schlumberger has agreed to
arrange for and bear the cost for remediation and monitoring for known soil and
groundwater contamination at Bladel.
In addition to Bladel, pursuant to the terms of the purchase agreement,
Schlumberger is required to arrange for and bear the cost of monitoring and
remediating the soil and ground water contamination that Schlumberger knows of
or discovers within a set period of time after the acquisition of the RPS
division, subject to a deductible limit of $700,000. Schlumberger is to take
actions required to address this contamination in accordance with applicable
environmental laws and under the oversight and with the approval of the
appropriate governmental authorities.
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MANAGEMENT
Directors
The following table sets forth background information and ages as of May 31,
1999 regarding each of Tokheim's directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Douglas K. Pinner....... 58 Chairman of the Board, President and
Chief Executive Officer
Gerald H. Frieling, 69 Vice Chairman of the Board
Jr.....................
John A. Negovetich...... 53 Executive Vice President, Finance and Administration,
and Chief Financial Officer
Norman L. Roelke........ 49 Vice President, Secretary and General Counsel
Jacques St. Denis....... 41 Executive Vice President, Operations
Scott A. Swogger........ 46 President, Tokheim U.S.
Walter S. Ainsworth..... 71 Director
Robert M. Akin, III..... 63 Director
James K. Baker.......... 67 Director
B. D. Cooper............ 57 Director
Richard W. Hansen....... 62 Director
Leo J. Hawk............. 66 Director
Dr. Winfred M. 58 Director
Phillips...............
Ian M. Rolland.......... 66 Director
</TABLE>
Douglas K. Pinner has been President and Chief Executive Officer since 1992,
a Director since 1993 and Chairman of the Board since 1996.
Gerald H. Frieling, Jr. has been Vice Chairman of the Board since 1996. From
1991 to 1996, he was Chairman of the Board. From 1991 to 1992, Mr. Frieling was
Chief Executive Officer. Previously, he was Chairman of the Board, President
and Chief Executive Officer of National-Standard, a diversified manufacturer of
specialty wire, metal products and machinery. He is also a director of CTS
Corporation.
John A. Negovetich has been Executive Vice President, Finance and
Administration and Chief Financial Officer since 1998. From 1996 to 1998, Mr.
Negovetich was President, Tokheim North America. From 1996 to 1997, Mr.
Negovetich was Chief Financial Officer, Tokheim North America. From 1993 to
1995, Mr. Negovetich was Vice President, Finance, Chief Financial Officer and a
member of the Board of Ardco, Inc.
Norman L. Roelke has been Vice President and General Counsel of Tokheim
since 1994 and Secretary since 1995. From 1987 to 1994, Mr. Roelke served as
Corporate Counsel and Assistant Secretary.
Jacques St. Denis has been Executive Vice President, Operations since 1998.
From 1996 to 1998, he served as President and Director General of Tokheim-
Sofitam S.A., the Tokheim subsidiary that was formerly Sofitam. During 1996, he
served as Vice President, Tokheim International. From 1995 to 1996, Mr. St.
Denis was Director of Export and International Operations for Tokheim. From
1994 to 1995, he was Tokheim's Director of Marketing, and from 1993 to 1994, he
was Director of Worldwide Services. Previously, Mr. St. Denis served as
Managing Director of European Operations, and National Sales and Marketing
Director, USA, for Babson Brothers Company.
Scott A. Swogger has been President, Tokheim U.S., since 1997. From 1995 to
1997, he served as Vice President, Quality Systems. From 1994 to 1995, he was
Tokheim's Director of Quality Assurance. Previously, he served as Tokheim's
Senior Manager of Quality Assurance.
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<PAGE>
Walter S. Ainsworth has been a Director since 1992. Before retiring in 1992,
he served as President and Chief Executive Officer of Phelps Dodge Magnet Wire
Company, an international producer of magnet wire, and as Senior Vice President
of Phelps Dodge Corp. He is also a director of Fort Wayne National Corporation.
Robert M. Akin, III has been a Director since 1993. Before his retirement in
1995, he served as President and Chief Executive Officer of Hudson Wire Company
d/b/a Hudson International Conductors, a manufacturer of speciality wire
products that became a subsidiary of Phelps Dodge Corp.
James K. Baker has been a Director since 1993. Before his retirement in 1998,
Mr. Baker served as Vice Chairman of the Board of Arvin Industries, Inc., a
global manufacturer of automotive products. Previously, he was Chairman and
Chief Executive Officer of Arvin Industries, Inc. Mr. Baker is also a director
of First Chicago NBD Corp., Amcast Industrial Corp., the GEON Company and
CINergy Corp.
B.D. Cooper has been a Director since 1993. Mr. Cooper is Chairman of the
Board of P.E.S. Inc., which sells and distributes petroleum equipment to the
petroleum industry. He is also a director of Delhi Bancshares and Chairman of
the Board of Heritage Banks.
Richard W. Hansen has been a Director since 1995. Before his retirement in
1996, Mr. Hansen served as Chairman, President and Chief Executive Officer of
Furnas Electric Company, a leading manufacturer of industrial electrical and
electronic motor control products.
Leo J. Hawk has been a Director since 1998. Since 1992, Mr. Hawk has been
Chairman of the Board of Superior Metal Products, Inc. which manufactures
functional and decorative hardware for major appliance, office furniture and
automotive industries.
Dr. Winfred M. Phillips has been a Director since 1986. Dr. Phillips is Dean
of the College of Engineering and Associate Vice President, Engineering and
Industrial Experiment Station of the University of Florida.
Ian M. Rolland has been a Director since 1981. Before his retirement in 1998,
Mr. Rolland served as Chairman and Chief Executive Officer of Lincoln National
Corporation, which provides life insurance and annuities, property-casualty
insurance and related services through its subsidiary companies. He is also a
director of NIPSCO Industries, Inc. and Norwest Corporation.
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<PAGE>
PRINCIPAL SHAREHOLDERS
Management ownership
The following table sets forth, as of May 31, 1999, the number of shares
beneficially owned, or deemed to be beneficially owned pursuant to the rules of
the SEC by each director of Tokheim, the executive officers, and the current
directors and executive officers of Tokheim as a group. All references are to
common stock unless otherwise noted:
Amount and Nature of Beneficial Ownership
<TABLE>
<CAPTION>
Common
Stock Preferred Exercisable Percent
Common in the Stock in Stock of
Name Stock RSP the RSP Options Class
---- ------- ------ --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Walter S. Ainsworth......... 6,414(1) -- -- -- *
Robert M. Akin, III......... 8,800 -- -- -- *
James K. Baker.............. 18,600 -- -- -- *
B. D. Cooper................ 3,800(2)(3) -- -- -- *
Gerald H. Frieling, Jr...... 8,400 -- -- -- *
Richard W. Hansen........... 27,400 -- -- -- *
Leo J. Hawk................. 8,000 -- -- -- *
John A. Negovetich.......... 10,500 379 600 22,500 *
Winfred M. Phillips......... 5,600 -- -- -- *
Douglas K. Pinner........... 84,034 4,305 1,940 26,250 *
Norman L. Roelke............ 5,464 728 2,780 22,000 *
Ian M. Rolland.............. 6,125 -- -- -- *
Jacques St-Denis............ 11,897 424 1,733 20,000 *
Scott A. Swogger............ -- 323 1,254 7,750 *
Executive officers and
directors as a group (14
persons)................... 205,034 6,159 8,307 98,500 2.3
</TABLE>
- --------
* Represents less than 1% of the Tokheim's outstanding common stock.
(1) In addition, Catherine Ainsworth, Mr. Ainsworth's wife, owns 478 shares,
with respect to which Mr. Ainsworth disclaims any beneficial interest.
(2) In addition, Barbara Cooper, Mr. Cooper's wife, owns 1,000 shares, with
respect to which Mr. Cooper disclaims any beneficial interest.
(3) In addition, P.E.S. Inc. Pension Plan owns 2,000 shares. Mr. Cooper is a
participant and trustee of the Plan.
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<PAGE>
Other beneficial owners
The following table sets forth the number of shares of common stock
beneficially owned by the only persons known to Tokheim to own more than 5% of
the outstanding shares of common stock and the holder of Tokheim's convertible
preferred stock:
<TABLE>
<CAPTION>
Amount and
Nature of
Name of Individual Beneficial Class of Percent of
or Identity of Group Ownership Shares Shares
- -------------------- ---------- --------------- ----------
<S> <C> <C> <C>
National City Bank...................... 771,479(1) convertible 100.0
fka Fort Wayne National Bank preferred stock
110 West Berry Street
Fort Wayne, Indiana 46802
Schlumberger Limited.................... 2,526,923(2) common stock 16.6
42 rue St Dominique
75007 Paris, France
David L. Babson and Company, Inc........ 1,481,100 common stock 11.9
One Memorial Drive, Suite 1100
Cambridge, Massachusetts 02142
Dresdner RCM Global Investors........... 1,251,868 common stock 9.9
Four Embarcadero Center
San Francisco, California 94111
Richard C. Blum & Associates, L.P....... 1,233,900 common stock 9.7
909 Montgomery Street, Suite 400
San Francisco, CA 94133
Dimensional Fund Advisors, Inc.......... 718,700 common stock 5.7
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
- --------
(1) Represents shares of Tokheim's preferred stock held by the trustee of the
retirement savings plan for employees of Tokheim Corporation and its
subsidiaries. Pursuant to this qualified plan, shares of preferred stock
are to be allocated from time to time to Tokheim's employees, including its
officers. It is not possible to predict the actual number of shares of
preferred stock which will be allocated to officers in the future.
Allocated shares are voted by the participants, including officers, to whom
they are allocated. Unallocated shares are voted by the trustee in
proportion to the vote by participants with respect to allocated shares.
(2) Represents shares for which warrants are exercisable.
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<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
The following are summaries of the material provisions of our credit
agreement and other debt documents, copies of which we have filed as exhibits
to the registration statement of which this prospectus forms a part. You should
read the section of this prospectus entitled "Where You Can Find Additional
Information" for more information on how to obtain copies of these documents.
The credit agreement
Tokheim and some of its subsidiaries, including several subsidiaries used to
acquire the RPS division, entered into a new credit agreement with The First
National Bank of Chicago, as administrative agent, Credit Lyonnais, as
collateral agent, and other institutions party thereto. The credit agreement
currently consists of a six year working capital/letter of credit facility in
favor of Tokheim and its borrowing subsidiaries in an aggregate principal
amount of $110.0 million and a six year term loan facility in favor of Tokheim,
in an aggregate principal amount of $120.0 million. Pursuant to the credit
agreement, $20.0 million of the availability under the working capital facility
may be utilized for issuance of standby letters of credit. $10.0 million of the
availability under the working capital facility may be utilized for swing line
facilities to be provided to Tokheim and its borrowing subsidiaries. The credit
agreement will permit borrowings in U.S. dollars. If additional conditions are
met, the credit agreement allows borrowings in French francs, British pounds,
Dutch gilders, German deutsche marks and euros, so long as such non-U.S.
currencies are freely traded, readily available and convertible into U.S.
dollars, and in other currencies as agreed by each lender. Each loan requested
to be made in a non-U.S. currency which is capable of being made in the euro
will be made in the euro unless the administrative agent otherwise consents.
An additional agreement provides for the assignment of a three year $7.6
million ESOP loan facility with NBD Bank, N.A, and other banks to the
administrative agent and the lenders.
Tokheim's indebtedness under the credit agreement is secured by:
. a first perfected security interest in and lien on certain of the real
and personal property assets of Tokheim, including claims against
subsidiaries to which Tokheim has made intercompany loans, and Tokheim's
direct and indirect material majority-owned U.S. subsidiaries,
. a pledge of 100% of the stock of Tokheim's direct and indirect material
majority-owned U.S. subsidiaries, and
. a pledge of 65% of the stock of Tokheim's first-tier material foreign
subsidiaries,
and is guaranteed by all of Tokheim's direct and indirect material majority-
owned U.S. subsidiaries. Some indebtedness of Tokheim's foreign subsidiaries
which are borrowers or become borrowers under the credit agreement will be
secured by personal property of the foreign subsidiaries.
Indebtedness under the credit agreement bears interest based upon, at
Tokheim's or the applicable borrowing subsidiary's option:
(1) the base rate in the case of U.S. dollar denominated loans, defined as
the higher of:
(a) the applicable prime rate, and
(b) the federal funds rate, as adjusted pursuant to the credit
agreement, plus 0.50% plus an applicable margin based upon
Tokheim's leverage ratio, with a range of 1.50% to 3.00% for
revolving loans and 3.00% for term loans, or
(2) the applicable eurocurrency rate, as defined in the credit agreement,
for a deposit in the currency of, and for a maturity corresponding to,
the applicable loan and interest period, plus an applicable margin
based upon Tokheim's leverage ratio, with a range of 2.50% to 4.00% for
revolving loans and 4.00% for term loans.
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<PAGE>
The credit agreement contains customary provisions relating to yield
protection, availability and capital adequacy.
Indebtedness under the credit agreement matures as follows: the $110.0
million in revolving loans matures on September 30, 2004, and the $120.0
million in term loans will amortize with payments due on a quarterly basis
commencing on February 28, 2000, with a final principal payment due on
September 30, 2004. Indebtedness under the ESOP loan facility will amortize
with a final principal payment on July 1, 2001. The unused portion of the
commitment under the credit agreement will be subject to a commitment fee in
the range of 0.375% to 0.50%, depending upon the leverage ratio of Tokheim.
The revolving loan commitment under the credit agreement may be voluntarily
permanently reduced by Tokheim in whole or in part on one day's notice without
premium or penalty. Tokheim and its borrowing subsidiaries may prepay the term
loans subject to a pre-payment penalty if Tokheim and its borrowing
subsidiaries prepay the entire amount of the term loans in the first 3 years
after September 30, 1998. Tokheim and its borrowing subsidiaries will be able
to prepay the loans in accordance with the terms of the credit agreement.
Subject to the provisions of the credit agreement, Tokheim and its borrowing
subsidiaries will be able to, from time to time, borrow, repay and reborrow
under the working capital facility.
The credit agreement requires an amount equal to all net proceeds from asset
sales by Tokheim or any of its subsidiaries, with specified exceptions, to be
applied to repay the loans under the credit agreement. Tokheim must prepay the
loans under the credit agreement in an amount equal to:
. all net proceeds from the sale or issuance of debt, with exceptions;
. all net proceeds from the sale or issuance of equity, with exceptions;
and
. a percentage of excess cash flow, as defined in the credit agreement,
for each fiscal year with a range of 50% to 85%, based upon Tokheim's
leverage ratio, commencing with Tokheim's fiscal year ending November
30, 1999.
The credit agreement requires Tokheim to meet consolidated financial tests,
including:
. minimum level of consolidated net worth,
. minimum level of EBITDA, as defined in the credit agreement,
. minimum level of consolidated interest coverage,
. maximum consolidated leverage ratio and senior leverage ratio, and
. minimum consolidated fixed charge coverage ratio.
The credit agreement also contains covenants which, among other things,
limit:
. the incurrence of additional indebtedness,
. dividends,
. transactions with affiliates,
. asset sales,
. acquisitions,
. investments,
. mergers and consolidations,
. prepayments of other indebtedness, including the exchange notes,
. amendments to other indebtedness, including the exchange notes,
. liens and encumbrances, and
. other matters customarily restricted in such agreements.
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<PAGE>
These covenants are more restrictive than those in favor of holders of the
exchange notes as described in this prospectus and as set forth in the
indentures.
The credit agreement contains events of default, including:
. payment defaults,
. breach of representations and warranties,
. covenant defaults,
. cross-default to other indebtedness,
. events of bankruptcy and insolvency,
. change in control,
. ERISA,
. judgment defaults, and
. failure of any guarantee or security agreement supporting the credit
agreement to be in full force and effect.
The junior subordinated notes
To pay part of the consideration for the acquisition of the RPS division,
Tokheim issued $40.0 million in ten year, 12.0% junior subordinated notes due
2008. Interest on the junior subordinated notes is payable quarterly and in-
kind. All existing U.S. subsidiaries have guaranteed, and all future U.S.
subsidiaries will guarantee, the junior subordinated notes on a junior
subordinated basis with unconditional guarantees that are or will be unsecured
and subordinated to senior debt of such subsidiaries.
The junior subordinated notes are unsecured junior subordinated obligations
of Tokheim and are junior to Tokheim's senior debt, including the exchange
notes. The junior subordinated notes were issued under an indenture that limits
the ability of Tokheim and its subsidiaries to, among other things:
. incur indebtedness;
. pay dividends and make other payments;
. make investments;
. sell assets;
. enter into transactions with affiliates;
. restrict distributions from subsidiaries;
. incur liens; and
. consolidate, merge or transfer all or substantially all of its or its
subsidiaries' assets.
Subject to the terms of the indenture under which they were issued, the
junior subordinated notes may be redeemed at any time, in whole or in part, at
the option of Tokheim at a redemption price equal to the unpaid principal
amount of the junior subordinated notes plus accrued interest thereon to the
redemption date. Upon a change of control, as defined in the junior
subordinated note indenture,any holder of junior subordinated notes will have
the right, subject to the conditions set forth in the indenture, to cause
Tokheim to repurchase all or any part of the junior subordinated notes of the
holder at a purchase price equal to 101% of the principal amount of the junior
subordinated notes to be repurchased plus accrued and unpaid interest on the
junior subordinated notes, if any, to the date of repurchase. The junior
subordinated notes are subject to a registration rights agreement which can be
exercised any time after 120 days after their date of issuance.
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<PAGE>
DESCRIPTION OF THE WARRANTS
The following is a summary of the material provisions of the warrants, a copy
of which we have filed as an exhibit to the registration statement of which
this prospectus forms a part. You should read the section of this prospectus
entitled "Where You Can Find Additional Information" for more information on
how to obtain a copy of this document.
As part of the consideration paid in the acquisition, Tokheim issued the
warrants to Schlumberger to purchase up to 19.9% of the outstanding shares of
Tokheim's common stock at an exercise price of $.01 per share. The actual
number of shares issuable upon exercise is 2,526,923. The warrants are
exercisable for five years beginning January 30, 1999.
The number of shares of Tokheim's common stock issuable upon exercise of the
warrants, along with the purchase price of the warrants, will be further
adjusted to reflect:
. any stock splits, stock subdivisions or combinations of Tokheim's common
stock,
. any reclassification of Tokheim's common stock,
. any capital reorganization, merger or consolidation of Tokheim,
. any issuance of common stock by Tokheim at less than fair market value,
or
. any issuance of any securities by Tokheim which are convertible into
other securities at less than fair market value.
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<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
General
The outstanding notes were, and the exchange notes will be, issued under
indentures, each dated as of January 29, 1999, among Tokheim, the subsidiary
guarantors and U.S. Bank Trust National Association, as trustee under each
indenture. Each indenture is governed by New York law. The terms of the
exchange notes are the same as the terms of the outstanding notes, except that
Tokheim registered the exchange notes under the Securities Act. As a result,
their transfer is not restricted like transfer of the outstanding notes. In
addition, holders of the exchange notes are not entitled to rights under the
registration rights agreements. For purposes of this summary, references to
"Tokheim" include only Tokheim Corporation and not its subsidiaries. In this
section entitled "Description of the Exchange Notes," the terms the "notes,"
the "dollar notes" and the "euro notes" refer to the exchange notes, the dollar
exchange notes, and the euro exchange notes, respectively. You can find the
definitions of capitalized terms used in this section below under the heading
entitled "--Certain definitions."
The following description is a summary of the material provisions of the
indentures. It does not restate the indentures in their entirety. We urge you
to read the indentures because they, and not this description, define your
rights as holders of the notes. Copies of the indentures and the registration
rights agreements can be obtained by following the instructions contained in
this prospectus in the sections "Where You Can Find More Information" and
"Information Incorporated by Reference." The terms of the notes include those
stated in the indentures and those made part of the indenture by reference to
the Trust Indenture Act of 1939.
Brief description of the notes
The notes:
.are unsecured obligations of Tokheim;
.rank subordinate to all Senior Debt of Tokheim, including the credit
agreement;
. rank senior to the junior subordinated notes and any Warrant Repurchase
Indebtedness;
. accrue interest from the most recent date to which interest has been
paid or, if no interest has been paid, from and including the date of
issuance of the outstanding notes;
.mature on August 1, 2008.
Tokheim has agreed to offer to repurchase the notes under the circumstances
described in the indentures upon:
.a Change of Control; or
.Asset Sales by Tokheim and its Subsidiaries.
The indentures also contain covenants concerning, among other things:
.limiting Indebtedness;
.limiting Restricted Payments;
.limiting Asset Sales;
.limiting dividend and other payment restrictions affecting Tokheim's
Subsidiaries;
.limiting issuance and sales of preferred stock of Subsidiaries;
.limiting Liens;
.prohibiting the incurrence of senior subordinated debt;
.the merger, consolidation or sale of assets of Tokheim;
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<PAGE>
.limiting transactions with Affiliates;
.providing reports to holders;
.limiting additional Subsidiary Guarantees; and
. limiting amendments to the junior subordinated notes issued to
Schlumberger and Warrant Repurchase Indebtedness.
The dollar notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples of $1,000. The euro
notes will be issued only in registered form, without coupons, in denominations
of (Euro)1,000 and integral multiples of (Euro)1,000. Initially, the trustee
will act as principal paying agent and registrar for the notes at its office in
New York, New York. The registrar, paying agent and transfer agent are
appointed in accordance with the indentures, and initially are as set forth on
the inside back cover page of this prospectus. Tokheim may change any paying
agent and registrar without notice to holders of the notes, provided that, for
so long as the notes are listed on the Luxembourg Stock Exchange and the rules
of such exchange so require, Tokheim will cause notice of the change in the
transfer agent in Luxembourg to be published in a daily newspaper with general
circulation in Luxembourg, which is expected to be the Luxemburger Wort. Any
outstanding notes that remain outstanding after the completion of the exchange
offer, together with the notes issued in connection with the exchange offer,
will be treated as a single class of securities under the applicable indenture.
Principal, maturity and interest
The dollar notes are limited in aggregate principal amount to $123.0 million
and will mature on August 1, 2008. The euro notes are limited in aggregate
principal amount to (Euro)75.0 million and will mature on August 1, 2008. The
notes will be payable in each case at maturity at par, plus accrued and unpaid
interest, if any. Interest on the dollar notes will accrue at the rate of
11.375%, and interest on the euro notes will accrue at the rate of 11.375%.
Interest on the notes will be payable semiannually in cash on each February 1
and August 1. Interest payments will be made to the persons who are registered
holders at the close of business on January 15 and July 15 immediately
preceding the applicable interest payment date. Interest on the notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance of the
outstanding notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Where not all of the notes represented by a certificated note are the subject
of a transfer, a new certificated note in respect of the principal amount of
the notes that have not been so transferred will be issued to the transferor.
The new note will be available at the office of the registrar in New York City
or at the office of the transfer agent in Luxembourg, if any, as applicable.
With respect to the dollar notes, payments of principal, premium, if any, and
interest will be made, on presentation of such notes if in certificated form,
at the corporate trust office of the paying agent in New York City. Payment
will be made by United States dollar check drawn on, or wire transfer to a
United States dollar account maintained by the holder with, a bank located in
New York City. Payments of any installment of interest on the dollar notes will
be made by a United States dollar check drawn on a bank in New York City mailed
to the holder at such holder's registered address or, if arrangements
satisfactory to Tokheim and the paying agents are made, by wire transfer to a
dollar account maintained by the holder with a bank in New York City.
With respect to the euro notes, payments of principal, premium, if any, and
interest will be made in the case of payments of principal, on presentation of
such notes if in certificated form at the office of the paying agent in London
by credit or transfer to a euro account maintained by the holder in the place
of payment specified by the holder. Holders of euro notes who wish to receive
payment in any currency other than euros must make arrangements at their own
expense.
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<PAGE>
For so long as the notes are listed on the Luxembourg Stock Exchange and the
rules of such stock exchange so require, Tokheim will maintain a paying agent
and transfer agent in Luxembourg. If a payment date is not a business day at a
place of payment, payment may be made at that place on the next succeeding
business day and no interest shall accrue for the intervening period.
The notes will not be entitled to the benefit of any mandatory sinking fund.
Redemption
Optional redemption of dollar notes. The dollar notes will be redeemable, at
Tokheim's option, in whole at any time or in part from time to time, on and
after February 1, 2004, upon not less than 30 nor more than 60 days' notice, at
the following redemption prices. The following prices are expressed as
percentages of the principal amount of the dollar notes, if they are redeemed
during the twelve-month period commencing on February 1 of the year set forth
below, plus, in each case, accrued and unpaid interest on the dollar notes, if
any, to the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004........................................................... 105.688%
2005........................................................... 103.792%
2006........................................................... 101.896%
2007 and thereafter............................................ 100.000%
</TABLE>
Optional redemption of euro notes. The euro notes will be redeemable, at
Tokheim's option, in whole at any time or in part from time to time, on and
after February 1, 2004, upon not less than 30 nor more than 60 days' notice, at
the following redemption prices. The following prices are expressed as
percentages of the principal amount of the euro notes, if they are redeemed
during the twelve-month period commencing on February 1 of the year set forth
below, plus, in each case, accrued and unpaid interest on the euro notes, if
any, to the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004........................................................... 105.688%
2005........................................................... 103.792%
2006........................................................... 101.896%
2007 and thereafter............................................ 100.000%
</TABLE>
For so long as the notes are listed on the Luxembourg Stock Exchange and the
rules of such exchange so require, Tokheim will cause a notice of redemption of
either the euro notes or the dollar notes to be published in a daily newspaper
with general circulation in Luxembourg, which is expected to be the Luxemburger
Wort.
Optional redemption upon public equity offerings. At any time, or from time
to time, on or prior to February 1, 2002, Tokheim may, at its option, use the
net cash proceeds of one or more public equity offerings to redeem up to 35% of
the original principal amount of the dollar notes issued in the exchange offer
and up to 35% of the original principal amount of the euro notes issued in the
exchange offer provided that at least 55% of the original principal amount of
the dollar notes issued in the exchange offer or the euro notes issued in the
exchange offer, as the case may be, remains outstanding immediately after any
redemption. Each redemption will be at a redemption price equal to 111.375% of
the principal amount of the redeemed notes plus accrued and unpaid interest on
the notes, if any, to the date of redemption. Tokheim shall make the redemption
not more than 120 days after the consummation of any public equity offering.
As used in the preceding paragraph, "public equity offering" means an
underwritten public offering of Qualified Capital Stock of Tokheim pursuant to
a registration statement filed with the SEC in accordance with the Securities
Act.
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<PAGE>
Selection and notice of redemption
In the event that less than all of the applicable notes are to be redeemed at
any time, the trustee will select the notes for redemption in compliance with
the requirements of the principal national securities exchange, if any, on
which the notes are listed. If the notes are not then listed on a national
securities exchange, then the trustee will select the notes for redemption on a
pro rata basis, by lot or by such method as the trustee shall deem fair and
appropriate; provided, however, that no notes of a principal amount of $1,000
or (Euro)1,000, as the case may be, or less shall be redeemed in part;
provided, further, that if a partial redemption is made with the proceeds of a
public equity offering, the trustee will select the notes or portions of the
notes for redemption only on a pro rata basis or on as nearly a pro rata basis
as is practicable, subject to DTC, Euroclear and Cedel Bank procedures, as
applicable, unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each holder of notes to be redeemed at its
registered address. If any note is to be redeemed in part only, the notice of
redemption that relates to that note shall state the portion of the principal
amount of the note to be redeemed. A new note in a principal amount equal to
the unredeemed portion of the notes will be issued in the name of the holder of
the notes upon delivery of the original note to the paying agent and
cancellation of the original note. On and after the redemption date, interest
will cease to accrue on notes or portions of the notes called for redemption as
long as Tokheim has deposited with the paying agents in New York, London and,
if the notes are listed on the Luxembourg Stock Exchange, Luxembourg, funds in
satisfaction of the applicable redemption price pursuant to the indentures.
Subordination
The payment of all Obligations on the notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt, whether outstanding on the issue date of
outstanding notes or incurred after that date. Upon any payment or distribution
of assets of Tokheim of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or marshalling of
assets of Tokheim or in a bankruptcy, reorganization, insolvency, receivership
or other similar proceeding relating to Tokheim or its property, whether
voluntary or involuntary, all Obligations due upon all Senior Debt shall first
be paid in full in cash or Cash Equivalents, or such payment duly provided for
to the satisfaction of the holders of Senior Debt, by Tokheim or any of its
Subsidiaries before any payment or distribution of any kind or character is
made on account of any Obligations on the notes, or for the acquisition by
Tokheim or any of its Subsidiaries of any of the notes for cash or property. If
any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal
of, interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Senior Debt, neither Tokheim nor
any of its Subsidiaries will make payment of any kind or character, other than
payments by a trust previously established pursuant to the provisions described
below under the heading "--Legal defeasance and covenant defeasance" with
respect to any Obligations on the notes or to acquire any of the notes for cash
or property.
In addition,
. if any other event of default occurs and is continuing with respect to
any Designated Senior Debt, as such event of default is defined in the
instruments creating or evidencing such Designated Senior Debt,
permitting the holders of such Designated Senior Debt then outstanding
to accelerate the maturity of the Designated Senior Debt, and
. the Representative for the respective issue of Designated Senior Debt
gives written notice of the event of default to the trustee,
then, unless and until all events of default have been cured or waived or have
ceased to exist or the trustee receives notice from the Representative for the
respective issue of Designated Senior Debt terminating the blockage, during the
180 day blockage period after the delivery of such written notice of an event
of default, neither Tokheim nor any of its Subsidiaries shall:
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. make any payment of any kind or character, other than payments by a
trust previously established pursuant to the provisions described
below under the heading "--Legal defeasance and covenant defeasance"
with respect to any Obligations on the notes, or
. acquire any of the notes for cash or property.
Notwithstanding anything in this paragraph to the contrary, in no event will a
blockage period extend beyond 180 days from the date of the commencement of the
blockage period. Only one such blockage period may be commenced within any 365
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any blockage period with respect to the Designated
Senior Debt shall be, or be made, the basis for commencement of a second
blockage period by the Representative of such Designated Senior Debt whether or
not within a period of 365 consecutive days, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
Notwithstanding the foregoing, any subsequent action, or any breach of any
financial covenants for a period commencing after the date of commencement of
such blockage period that, in either case, would give rise to an event of
default pursuant to any provisions under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose. The occurrence of a blockage period will not prevent the occurrence of
an Event of Default.
By reason of such subordination, in the event of the insolvency of Tokheim,
creditors of Tokheim who are not holders of Senior Debt, including the holders
of the notes, may recover less, ratably, than holders of Senior Debt.
The notes will be general unsecured obligations of Tokheim and will be
subordinated in right of payment to all existing and future Senior Debt of
Tokheim, including Tokheim's obligations under the credit agreement and to all
indebtedness and other obligations of Tokheim's Subsidiaries. As of February
28, 1999 Tokheim had approximately $212.4 million of Senior Debt, substantially
all of which was secured by the assets of Tokheim and several of its
Subsidiaries. The notes will rank senior in right of payment to the junior
subordinated notes and any Warrant Repurchase Indebtedness.
Subsidiary guarantees
Tokheim's payment obligations under the notes will be fully and
unconditionally, jointly and severally guaranteed on a senior subordinated
basis by the Guarantors. As of the date of issuance of the notes, the
Guarantors are:
. Envirotronic Systems, Inc.;
. Gasboy International, Inc.;
. Management Solutions, Inc.;
. Sunbelt Hose & Petroleum Equipment, Inc.;
. Tokheim Automation Corporation;
. Tokheim Equipment Corporation;
. Tokheim Investment Corp.;
. Tokheim RPS, LLC; and
. Tokheim Services LLC.
The Subsidiary Guarantee of each Guarantor with respect to the notes will be
subordinated to the prior payment in full in cash or Cash Equivalents of the
Guarantor Senior Debt to the same extent that the notes are subordinated to
Senior Debt of Tokheim. The obligations of each Guarantor under its Subsidiary
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law.
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Under the indentures, so long as no default or Event of Default has occurred
and is continuing, if the sale or disposal of all of a Guarantor's assets or
its capital stock in accordance with the terms of the indentures constitutes an
Asset Sale, then that Guarantor or the entity acquiring its property will be
released and relieved of any obligations under its Subsidiary Guarantee.
However, the Net Cash Proceeds of any such sale or other disposition must be
applied in accordance with the indentures. See information below under the
heading "--Certain covenants--Limitation on asset sales."
Change of control
The indentures provide that, upon the occurrence of a Change of Control, each
holder will have the right to require that Tokheim purchase all or a portion of
the holder's notes pursuant to the offer described below at a purchase price
equal to 101% of the principal amount of the notes plus accrued and unpaid
interest to the date of purchase.
The indentures provide that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, Tokheim
covenants to:
. repay in full all Indebtedness and terminate all commitments under the
credit agreement and all other Senior Debt whose terms require repayment
upon a Change of Control, or
. offer to repay in full and terminate all commitments under all
Indebtedness under the credit agreement and all other such Senior Debt
and to repay the Indebtedness owed to each lender which has accepted
such offer, or
. obtain the requisite consents under the credit agreement and all other
Senior Debt to permit the repurchase of the notes as provided below.
Within 30 days following the date upon which the Change of Control occurred,
Tokheim must send, by first class mail, a notice to each holder, with a copy to
the trustee. The notice shall govern the terms of the Change of Control offer.
The notice shall state, among other things, the Change of Control payment date,
which must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law. For so long as the
notes are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, Tokheim will
. cause a copy of such notice to be published in a daily newspaper with
general circulation in Luxembourg, which is expected to be the
Luxemburger Wort, and
. advise the Luxembourg Stock Exchange of the Change of Control offer.
Holders electing to have a note purchased pursuant to a Change of Control
offer will be required to surrender the note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the note completed, to the paying
agent, including, if applicable, the paying and transfer agent in Luxembourg,
at the address specified in the notice prior to the close of business on the
third business day prior to the Change of Control payment date.
If a Change of Control offer is made, there can be no assurance that Tokheim
will have available funds sufficient to pay the Change of Control purchase
price for all the notes that might be delivered by holders seeking to accept
the Change of Control offer. In the event Tokheim is required to purchase
outstanding notes pursuant to a Change of Control offer, Tokheim expects that
it would seek third party financing to the extent it does not have available
funds to meet its purchase obligations. However, there can be no assurance that
Tokheim would be able to obtain such financing. In addition, the credit
agreement will restrict the ability of Tokheim to make a Change of Control
offer. A Change of Control may result in an Event of Default under the credit
agreement.
Neither the board of directors of Tokheim nor the trustee may waive the
covenant relating to a holder's right to redemption upon a Change of Control.
Restrictions in the indentures described in this prospectus on the ability of
Tokheim and its Subsidiaries to
. incur additional Indebtedness,
. grant liens on its property,
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. make Restricted Payments
. make Asset Sales
may also make more difficult or discourage a takeover of Tokheim, whether
favored or opposed by the management of Tokheim. Consummation of any such
transaction may require redemption or repurchase of the notes, and there can be
no assurance that Tokheim or the acquiring party will have sufficient financial
resources to effect such redemption or repurchase. Such restrictions and the
restrictions on transactions with Affiliates may make more difficult or
discourage any leveraged buyout of Tokheim or any of its Subsidiaries by the
management of Tokheim. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the indentures may not afford the holders of notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
Tokheim will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations under the Exchange Act to the
extent such laws and regulations are applicable in
connection with the repurchase of notes pursuant to a Change of Control offer.
To the extent that the provisions of any securities laws or regulations
conflict with the Change of Control provisions of the indentures, Tokheim shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the "Change of Control"
provisions of the indentures by virtue of its compliance.
Certain covenants
The indentures contain, among others, the following covenants:
Limitation on incurrence of additional indebtedness. Tokheim will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee, acquire, become liable, contingently or otherwise,
with respect to, or otherwise become responsible for payment of (collectively,
"incur") any Indebtedness, other than Permitted Indebtedness; provided,
however, that if no default or Event of Default shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any such
Indebtedness, Tokheim may incur Indebtedness including, without limitation,
Acquired Indebtedness, and Subsidiaries of Tokheim may incur Acquired
Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of Tokheim is greater than 2.00 to 1.00 if incurred
on or prior to the second anniversary of the issue date of the outstanding
notes or greater than 2.25 to 1.00 if incurred thereafter.
Limitation on restricted payments. Tokheim will not, and will not cause or
permit any of its Subsidiaries to, directly or indirectly:
(A) declare or pay any dividend or make any distribution, other than
dividends or distributions payable in Qualified Capital Stock of
Tokheim, on or in respect of shares of Tokheim's Capital Stock,
(B) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of Tokheim or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock,
(C) make any Investment, other than Permitted Investments, or
(D) repurchase or redeem the junior subordinated notes, the warrants, any
Warrant Repurchase Indebtedness or Refinancing Indebtedness the
proceeds of which are used to repurchase or redeem the junior
subordinated notes, the warrants or any Warrant Repurchase
Indebtedness, or make any cash payments of interest thereon during:
. a Blockage Period in effect with respect to any such junior
Indebtedness or
. the time when Tokheim could, by the terms of such Indebtedness,
otherwise defer such interest or pay such interest in-kind
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(each of the foregoing actions set forth in clauses (A), (B), (C) and (D) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto:
. a default or an Event of Default shall have occurred and be continuing,
or
. Tokheim is not able to incur at least $1.00 of additional Indebtedness,
other than Permitted Indebtedness, in compliance with the "--Limitation
on incurrence of additional indebtedness" covenant, or
. the aggregate amount of Restricted Payments, including the proposed
Restricted Payment, made subsequent to the issue date of the outstanding
notes shall exceed the sum of:
(w) 50% of the cumulative Consolidated Net Earnings, or if cumulative
Consolidated Net Earnings shall be a loss, minus 100% of such loss,
of Tokheim earned subsequent to the issue date of the outstanding
notes and on or prior to the date the Restricted Payment occurs,
treating such period as a single accounting period; plus
(x) 100% of the aggregate net cash proceeds received by Tokheim from
any Person, other than a Subsidiary of Tokheim, from the issuance
and sale subsequent to the issue date of the outstanding notes and
on or prior to the date the Restricted Payment occurs of Qualified
Capital Stock of Tokheim; plus
(y) 100% of the net cash proceeds from the sale of Investments by
Tokheim, other than Permitted Investments, provided that such
Investment was made after the issue date of the outstanding notes;
plus
(z) without duplication of any amounts included in clause (x) above,
100% of the aggregate net cash proceeds of any equity contribution
received by Tokheim after the issue date of the outstanding notes
from a holder of Tokheim's Capital Stock
In the case of clauses (x) and (z), any net cash proceeds from a public
equity offering will be excluded to the extent used to redeem the
notes, and any net cash proceeds from a sale as described in clause
(2)(a) of the next succeeding paragraph will also be excluded. In
determining the amount of Restricted Payments pursuant to this third
bullet point, amounts not in cash will be the fair market value of such
property as determined reasonably and in good faith by the board of
directors of Tokheim.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of the dividend if the dividend would have been permitted
on the date of declaration; or
(2) the acquisition of any shares of Capital Stock of Tokheim or of any of
the Indebtedness described in clause (D) of the immediately preceding
paragraph, either
(a) solely in exchange for shares of Qualified Capital Stock of Tokheim
or
(b) through the application of the net cash proceeds of a substantially
concurrent sale for cash, other than to a Subsidiary of Tokheim, of
shares of Qualified Capital Stock of Tokheim (excluding, in the
case of this clause 2(b), any net cash proceeds from a public
equity offering to the extent used to redeem the notes); or
(3) dividends on, and redemptions of, the shares of Tokheim's preferred
stock held by the trust of Tokheim's retirement savings plan in
accordance with the terms on the plan on the date of the indentures;
(4) payments to redeem or repurchase stock or similar rights from
management of Tokheim in connection with the repurchase provisions
under employee stock option or stock purchase agreements or other
agreements to compensate management employees upon the termination of
employment, death or disability of any such person; provided that such
redemptions or repurchases shall not exceed $1.0 million; or
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(5) the purchase, redemption or acquisition of the warrants with proceeds
from the issuance of Warrant Repurchase Indebtedness; or
(6) the purchase, redemption, acquisition, or refinancing of the junior
subordinated notes with Refinancing Indebtedness.
In determining the aggregate amount of Restricted Payments made subsequent to
the issue date of the outstanding notes in accordance with the third bullet
point of the immediately preceding paragraph, amounts expended pursuant to
clauses (1), (4) and (5) shall be included in such calculation.
Not later than the date of making any Restricted Payment, Tokheim shall
deliver to the trustee an officers' certificate stating that such Restricted
Payment complies with the indentures and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations
may be based upon Tokheim's latest available internal quarterly financial
statements.
Limitation on Asset Sales. Tokheim will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless:
(1) Tokheim or the applicable Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of, as determined
in good faith by Tokheim's board of directors,
(2) with respect to Asset Sales by Tokheim or any Wholly Owned Subsidiary
of Tokheim, at least 80% of the consideration received by Tokheim or
such Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of
such disposition and
(3) upon the consummation of an Asset Sale, Tokheim shall apply, or cause
such Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 365 days of receipt thereof:
(A) to prepay any Senior Debt or Indebtedness of any Subsidiary of
Tokheim,
(B) to make an investment in properties and assets that replace the
properties and assets that were the subject of such Asset Sale or
in properties or assets that will be used in the business of
Tokheim and its Subsidiaries as existing on the issue date of the
outstanding notes or in businesses reasonably related thereto or
(C) a combination of prepayment and investment permitted by the
foregoing clauses (3)(A) and (3)(B).
On the 366th day after an Asset Sale or such earlier date, if any, as the board
of directors of Tokheim or of such Subsidiary determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(A),
(3)(B) and (3)(C) of the next preceding sentence (each, a "Net Proceeds Offer
Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Trigger Date as permitted in clauses
(3)(A), (3)(B) and (3)(C) of the next preceding sentence (each a "Net Proceeds
Offer Amount") shall be applied by Tokheim or such Subsidiary to make an offer
to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 45 days following the applicable
Net Proceeds Offer Trigger Date, from all holders on a pro rata basis, that
amount of notes equal to the Net Proceeds Offer Amount at a price equal to 100%
of the principal amount of the notes to be purchased, plus accrued and unpaid
interest on the notes, if any, to the date of purchase. Tokheim may defer the
Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales, at which time the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph.
Notwithstanding the immediately preceding paragraph, Tokheim and its
Subsidiaries will be permitted to consummate an Asset Sale without complying
with such paragraph to the extent:
(1) at least 80% of the consideration for such Asset Sale constitutes
replacement assets of the type referred to in clause 3(B) above and the
remainder in cash or Cash Equivalents and
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(2) such Asset Sale is for fair market value;
provided that any consideration not constituting Replacement Assets received by
Tokheim or any of its Subsidiaries in connection with any Asset Sale permitted
to be consummated under this paragraph shall constitute Net Cash Proceeds
subject to the provisions of the immediately preceding paragraph.
Each Net Proceeds Offer will be mailed to the record holders as shown on the
register of holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the trustee, and shall comply with the procedures set
forth in the indentures. For so long as the notes are listed on the Luxembourg
Stock Exchange and the rules of such exchange so require, Tokheim will cause a
copy of such notice to be published in a daily newspaper with general
circulation in Luxembourg, which is expected to be the Luxemburger Wort, and
the Luxembourg Stock Exchange will be advised of the Net Proceeds Offer. Upon
receiving notice of the Net Proceeds Offer, holders may elect to tender their
notes in whole or in part in integral multiples of $1,000 or (Euro)1,000, as
the case may be, in exchange for cash. To the extent holders properly tender
notes in an amount exceeding the Net Proceeds Offer Amount, notes of tendering
holders will be purchased on a pro rata basis, based on amounts tendered. A Net
Proceeds Offer shall remain open for a period of 20 business days or such
longer period as may be required by law.
Tokheim will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations under the Exchange Act to the
extent those laws and regulations are applicable in connection with the
repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the indentures, Tokheim shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the indentures by virtue
thereof.
Limitation on dividends and other payment restrictions affecting
subsidiaries.
Tokheim will not, and will not cause or permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or permit to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of
Tokheim to:
(a) pay dividends or make any other distributions on or in respect of its
Capital Stock;
(b) make loans or advances or pay or guarantee any Indebtedness or other
obligation owed to Tokheim or any other Subsidiary of Tokheim; or
(c) transfer any of its property or assets to Tokheim or any other
Subsidiary of Tokheim,
except for such encumbrances or restrictions existing under or by reason of:
(1) applicable law;
(2) the indentures;
(3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Subsidiary of Tokheim;
(4) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or assets
of the Person so acquired;
(5) agreements existing on the issue date of the outstanding notes to the
extent and in the manner the agreements are in effect on the issue date
of the outstanding notes;
(6) the credit agreement or the ESOP credit agreements; or
(7) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (2), (4), (5) or (6) above; provided, however
that the provisions relating to such encumbrance or restriction
contained in any such Refinancing Indebtedness are no less favorable to
Tokheim in any material respect as determined by the board of directors
of Tokheim in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (2), (4), (5) or (6).
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Limitation on preferred stock of subsidiaries. Tokheim will not permit any of
its Subsidiaries to issue any preferred stock, other than to Tokheim or to a
Wholly Owned Subsidiary of Tokheim, or permit any Person, other than Tokheim or
a Wholly Owned Subsidiary of Tokheim, to own any preferred stock of any
Subsidiary of Tokheim.
Limitation on Liens. Tokheim will not, and will not cause or permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets of
Tokheim or any of its Subsidiaries whether owned on the issue date of the
outstanding notes or acquired after the issue date of the outstanding notes, or
any proceeds from such property or assets, or assign or otherwise convey any
right to receive income or profits from such property, assets, or proceeds
unless:
. in the case of Liens securing Indebtedness that is expressly subordinate
or junior in right of payment to the notes, the notes are secured by a
Lien on such property, assets or proceeds that is senior in priority to
such Liens and
. in all other cases, the notes are equally and ratably secured,
except for:
(A) Liens existing as of the issue date of the outstanding notes to the
extent and in the manner such Liens are in effect on the issue date of
the outstanding notes;
(B) Liens securing Senior Debt and Liens securing Guarantor Senior Debt;
(C) Liens securing the notes and the Subsidiary Guarantees;
(D) Liens of Tokheim or a Wholly Owned Subsidiary of Tokheim on assets of
any Subsidiary of Tokheim;
(E) Liens securing Refinancing Indebtedness which is incurred to Refinance
any Indebtedness which has been secured by a Lien permitted under the
indentures and which has been incurred in accordance with the
provisions of the indentures; provided, however that such Liens
(x) are no less favorable to the holders and are not more favorable to
the lienholders with respect to such Liens that the Liens in
respect of the Indebtedness being Refinanced and
(y) do not extend to or cover any property or assets of Tokheim or any
of its Subsidiaries not securing the Indebtedness so Refinanced;
and
(F) Permitted Liens.
Prohibition on incurrence of senior subordinated debt. Tokheim will not incur
or suffer to exist Indebtedness that is senior in right of payment to the notes
and subordinate in right of payment to any Senior Debt of Tokheim. The
Guarantors will not incur or suffer to exist Indebtedness that is senior in
right of payment to any Subsidiary Guarantees and subordinate in right of
payment to any Guarantor Senior Debt.
Merger, consolidation or sale of assets of Tokheim. Tokheim will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of, or cause or permit any Subsidiary of Tokheim to sell, assign,
transfer, lease, convey or otherwise dispose of, all or substantially all of
Tokheim's assets, determined on a consolidated basis for Tokheim and its
Subsidiaries, whether as an entirety or substantially as an entirety to any
person unless:
(a) either
(1) Tokheim shall be the surviving or continuing corporation or
(2) the surviving entity, if other than Tokheim, formed by such
consolidation or into which Tokheim is merged or the surviving
entity which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of
Tokheim and of Tokheim's Subsidiaries substantially as an entirety
(x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District
of Columbia and
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(y) shall expressly assume, by supplemental indenture in form and
substance satisfactory to the trustee, executed and delivered to
the trustee, the due and punctual payment of the principal of,
and premium, if any, and interest on all of the notes and the
performance of every covenant contained in the notes, the
indentures and the registration rights agreements to be
performed or observed on the part of Tokheim;
(b) immediately after giving effect to such transaction and the assumption
contemplated by clause (a)(2)(y) above, including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction, Tokheim
or the Surviving Entity, as the case may be, shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of
Tokheim immediately prior to such transaction;
(c) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (a)(2)(y) above,
including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any
Lien granted in connection with or in respect of the transaction, no
default or Event of Default shall have occurred or be continuing; and
(d) Tokheim or the surviving entity, as the case may be, shall have
delivered to the trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, sale assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture complies with the applicable provisions of the
indentures and that all conditions precedent in the indentures relating
to such transaction have been satisfied.
The indentures provide that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of Tokheim in accordance
with the foregoing, in which Tokheim is not the continuing corporation, the
successor Person formed by such consolidation or into which Tokheim is merged
or to which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, Tokheim under the
indentures and the notes with the same effect as if such surviving entity had
been named as such.
Each Guarantor, other than any Guarantor whose Subsidiary Guarantee is to be
released in accordance with the terms of the Subsidiary Guarantee and the
indentures in connection with any transaction complying with the provisions of
"--Limitation on asset sales," will not, and Tokheim will not cause or permit
any Guarantor to, consolidate with or merge with or into any Person other than
Tokheim or any other Guarantor unless:
(1) the entity formed by or surviving any such consolidation or merger, if
other than the Guarantor, or to which such sale, lease, conveyance or
other disposition shall have been made is a corporation organized and
existing under the laws of the United States or any State thereof or
the District of Columbia;
(2) such entity assumes by supplemental indenture all of the obligations of
the Guarantor on the Subsidiary Guarantee;
(3) immediately before and after giving effect to such transaction, no
default or Event of Default shall have occurred and be continuing; and
(4) immediately after giving effect to such transaction and the use of any
net proceeds therefrom on a pro forma basis, Tokheim could satisfy the
provisions of clause (b) of the first paragraph of this covenant.
Any merger or consolidation of a Guarantor with and into Tokheim, with
Tokheim being the surviving entity, or another Guarantor of Tokheim need only
comply with clause (d) of the first paragraph of this covenant.
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Limitations on transactions with affiliates. (a) Tokheim will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into or
permit to exist any transaction or series of related transactions, including
the purchase, sale, lease or exchange of any property or the rendering of any
service, with, or for the benefit of, any of its Affiliates, other than:
(x) Affiliate transactions permitted under paragraph (b) below and
(y) Affiliate transactions on terms that are no less favorable to Tokheim
or such Subsidiary than those that could reasonably have been obtained
in a comparable transaction at such time on an arm's length basis from
a Person that is not an Affiliate of Tokheim or such Subsidiary.
All Affiliate transactions, and each series of related Affiliate transactions
which are similar or part of a common plan, involving aggregate payments or
other property with a fair market value in excess of $1.0 million shall be
approved by the board of directors of Tokheim or the Subsidiary, as the case
may be, such approval to be evidenced by a resolution of the board of directors
stating that the board of directors has determined that the transaction
complies with the foregoing provisions.
If Tokheim or any Subsidiary of Tokheim enters into an Affiliate transaction,
or a series of related Affiliate Transactions related to a common plan, that
involves aggregate payments or other property with a fair market value of more
than $5.0 million, Tokheim or the Subsidiary, as the case may be, shall, prior
to the consummation of the transaction, obtain a favorable opinion as to the
fairness of the transaction or series of related transactions to Tokheim or the
relevant Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the trustee.
(b) The restrictions set forth in clause (a) shall not apply to:
. reasonable fees and compensation paid to, and indemnity provided on
behalf of, officers, directors or employees of Tokheim or any Subsidiary
of the Tokheim as determined in good faith by Tokheim's board of
directors;
. transactions exclusively between or among Tokheim and any of its Wholly
Owned Subsidiaries; provided the transactions are not otherwise
prohibited by the indentures;
. transactions permitted by, and complying with, the provisions of the
covenant described under "Merger, consolidation and sale of assets of
Tokheim" above;
. transactions with distributors or other purchases or sales of goods or
services, in each case in the ordinary course of business and otherwise
in compliance with the terms of the indentures which are fair to
Tokheim, in the reasonable determination of the board of directors of
Tokheim or the senior management of Tokheim, or are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party;
. any management agreement as in effect as of the issue date of the
outstanding notes or any amendment to the management agreement or any
replacement agreement for the management agreement so long as any
amendment or replacement agreement is not more disadvantageous to the
holders in any material respect than the original agreement as in effect
on the issue date of the outstanding notes and any similar agreements
entered into after the issue date of the outstanding notes; and
. intercompany loans or capital contributions from Tokheim or any
Subsidiary to any of Tokheim's Subsidiaries; provided the loans are
otherwise in compliance with the terms of the indentures.
Reports to holders. The indentures provide that Tokheim will deliver to the
trustee within 15 days after the filing of the same with the SEC, copies of the
quarterly and annual reports and of the information, documents and other
reports, if any, which Tokheim is required to file with the SEC pursuant to
Sections 13 or
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15(d) of the Exchange Act. The indentures further provide that, notwithstanding
that Tokheim may not be subject to the reporting requirements of Sections 13 or
15(d) of the Exchange Act, Tokheim will file with the SEC, to the extent
permitted, and provide the trustee and holders with, such annual reports and
such information, documents and other reports specified in Sections 13 and
15(d) of the Exchange Act. Tokheim will also comply with the other provisions
of (S) 314(a) of the Trust Indenture Act. For so long as the notes are listed
on the Luxembourg Stock Exchange and the rules of that exchange so require,
copies of all reports and information described above will be available during
normal business hours at the office of the transfer agent in Luxembourg.
Additional subsidiary guarantees. The indentures provide that Tokheim will
cause any current and future Subsidiary of Tokheim that Guarantees any Senior
Debt of Tokheim or Indebtedness of Tokheim that is subordinated to the notes to
simultaneously execute and deliver supplemental indentures pursuant to which it
will become a Guarantor under the indentures.
Limitation on amendments to the junior subordinated notes and Warrant
Repurchase Indebtedness. The indentures provide that Tokheim shall not amend
the indentures or other agreements governing the terms of the junior
subordinated notes or Warrant Repurchase Indebtedness, or any Refinancing
Indebtedness thereof, in any way adverse to the holders of the notes.
Events of Default
The following events are defined in the indentures as "Events of Default":
(a) the failure to pay interest on, or liquidated damages owing pursuant
to the registration rights agreements, if any, with respect to, any notes
when the same become due and payable and the default continues for a period
of 30 days, whether or not such payment shall be prohibited by the
subordination provisions of the indentures;
(b) the failure to pay the principal on the notes when such principal
becomes due and payable, at maturity, upon redemption or otherwise,
including the failure to make a payment to purchase notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer, whether or not such
payment shall be prohibited by the subordination provisions of the
indentures;
(c) a default in the observance or performance of any other covenant or
agreement contained in the indentures which default continues for a period
of 30 days after Tokheim receives written notice specifying the default and
demanding that the default be remedied from the trustee or the holders of
at least 25% of the outstanding principal amount of the dollar notes or the
holders of at least 25% of the outstanding principal amount of the euro
notes, as the case may be, except in the case of a default with respect to
the "Merger, consolidation and sale of assets of Tokheim" covenant, which
will constitute an Event of Default with such notice requirement but
without such passage of time requirement;
(d) there shall be a default under any Indebtedness of Tokheim or any
Subsidiary, whether the Indebtedness now exists or shall hereinafter be
created, if both:
(1) the default either:
(A) results from the failure to pay any such Indebtedness at its
stated final maturity; or
(B) relates to an obligation other than the obligation to pay such
Indebtedness at its stated final maturity and results in the
holder or holders of such Indebtedness causing the Indebtedness
to become due prior to its stated final maturity and
(2) the amount of the Indebtedness, together with the principal amount
of any other such Indebtedness in default for failure to pay
principal at stated final maturity or the maturity of which has
been so accelerated, aggregates $10.0 million or more at any one
time outstanding;
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(e) one or more judgments in an aggregate amount in excess of $5.0
million which are not covered by third party insurance as to which the
insurer has not disclaimed coverage shall have been rendered against
Tokheim or any of its Subsidiaries, and the judgments remain undischarged,
unpaid or unstayed for a period of 60 days after the judgment or judgments
become final and non-appealable;
(f) except as permitted by the indentures, any Subsidiary Guarantee shall
be held in a judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Guarantee; or
(g) events of bankruptcy affecting Tokheim or any of its Significant
Subsidiaries.
If an Event of Default, other than an Event of Default specified in clause
(g) above with respect to Tokheim, shall occur and be continuing, the trustee
or the holders of at least 25% in principal amount of the then-outstanding
dollar notes or the holders of at least 25% in principal amount of the then-
outstanding euro notes, as the case may be, may declare the principal of and
accrued interest on all the dollar notes or the euro notes, as the case may be,
to be due and payable by notice in writing to Tokheim and the trustee
specifying the respective Event of Default and that it is a "notice of
acceleration," and the same:
. shall become immediately due and payable or
. if there are any amounts outstanding under the credit agreement or the
ESOP credit agreements, shall become immediately due and payable upon the
first to occur of an acceleration under the credit agreement or the ESOP
credit agreements or 5 business days after receipt by Tokheim and the
Representative under the credit agreement or the ESOP credit agreements
of such acceleration notice.
If an Event of Default specified in clause (g) above with respect to Tokheim
occurs and is continuing, then all unpaid principal of, premium, if any, and
accrued and unpaid interest on all of the outstanding notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the trustee or any holder.
The indentures provide that, at any time after a declaration of acceleration
with respect to the notes as described in the preceding paragraph, the holders
of a majority in principal amount of the then-outstanding dollar notes or euro
notes, as the case may be, may rescind and cancel such declaration and its
consequences if:
(1) the rescission would not conflict with any judgment or decree,
(2) all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because
of the acceleration,
(3) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been
paid,
(4) Tokheim has paid the trustee its reasonable compensation and reimbursed
the trustee for its expenses, disbursements and advances and
(5) in the event of the cure or waiver of an Event of Default of the type
described in clause (g) of the description of Events of Default above,
the trustee shall have received an officers' certificate and an opinion
of counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent default or impair any right
consequent thereto.
The holders of a majority in aggregate principal amount of the applicable
notes then outstanding may waive any existing default or Event of Default under
the applicable indenture, and its consequences, except a default in the payment
of the principal of or interest on any applicable notes.
Holders of the notes may not enforce the applicable indenture or the notes
except as provided in the applicable indenture and under the Trust Indenture
Act. Subject to the provisions of the applicable indenture relating to the
duties of the trustee, the trustee is under no obligation to exercise any of
its rights or powers under the applicable indenture at the request, order or
direction of any of the applicable holders, unless such holders have offered to
the trustee reasonable indemnity. Subject to all provisions of the applicable
indenture
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and applicable law, the holders of a majority in aggregate principal amount of
the then outstanding applicable notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on the trustee.
Under the indentures, Tokheim will be required to provide an officers'
certificate to the trustee promptly upon any officer obtaining knowledge of any
default or Event of Default that has occurred and, if applicable, describe such
default or Event of Default and the status thereof; provided that such officers
shall provide such certification at least annually whether or not they know of
any default or Event of Default.
Legal defeasance and covenant defeasance
Under each indenture Tokheim may, at its option and at any time, legally
defease its obligations, and the obligations of the Guarantors, with respect to
any outstanding notes under such indenture and the related Subsidiary
Guarantees. Such legal defeasance means that Tokheim and each Guarantor shall
be deemed to have paid and discharged the entire indebtedness represented by
the then-outstanding applicable notes and any Subsidiary Guarantees, except
for:
(1) the rights of holders of then-outstanding applicable notes to receive
payments in respect of the principal of, premium, if any, and interest
on such notes when such payments are due,
(2) Tokheim's obligations with respect to such notes and the maintenance of
an office or agency for payments,
(3) the rights, powers, trust, duties, and immunities of the trustee and
Tokheim's obligations in connection therewith and
(4) the "Legal Defeasance" provisions of the applicable indenture.
In addition, Tokheim may, at its option and at any time, defease specific
covenants of Tokheim and each Guarantor that are described in the indentures
and thereafter any omission to comply with such obligations shall not
constitute a default or Event of Default with respect to such notes. In the
event covenant defeasance occurs, specified events, not including non-payment,
bankruptcy, receivership, reorganization and insolvency events, described under
"Events of Default" will no longer constitute an Event of Default with respect
to such notes.
In order to exercise either legal defeasance or covenant defeasance under the
applicable indenture:
(1) Tokheim must irrevocably deposit with the trustee, in trust, for the
benefit of the applicable holders, cash in U.S. dollars, non-callable
U.S. government obligations, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if
any, and interest on the applicable notes on the stated date for
payment of such amounts or on the applicable redemption date, as the
case may be;
(2) in the case of legal defeasance, Tokheim shall have delivered to the
trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that
(A) Tokheim has received from, or there has been published by, the
Internal Revenue Service a ruling or
(B) since the date of the applicable indenture, there has been a change
in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders will not recognize income, gain
or loss for federal income tax purposes as a result of such legal
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such legal defeasance had not occurred;
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(3) in the case of covenant defeasance, Tokheim shall have delivered to the
trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that the applicable holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred;
(4) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or, insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(5) such legal defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under the applicable
indenture or any other material agreement or instrument to which
Tokheim or any of its Subsidiaries is a party or by which Tokheim or
any of its Subsidiaries is bound;
(6) Tokheim shall have delivered to the trustee an officers' certificate
stating that the deposit was not made by Tokheim with the intent of
preferring the holders over any other creditors of Tokheim or others;
and
(7) Tokheim shall have delivered to the trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided for or relating to the legal defeasance or the covenant
defeasance have been complied with, except that the opinion of counsel
shall speak only to clauses (2), (3) and (5) above.
Tokheim in its sole discretion can defease the dollar notes and/or the euro
notes.
Satisfaction and discharge
Each indenture will be discharged and will cease to be of further effect,
except as to surviving rights of registration of transfer or exchange of the
notes issued under such indentures, as expressly provided for in the
indentures, and Tokheim and the Guarantors will be discharged from their
obligations under the notes and the Subsidiary Guarantees when:
(1) either
(a) all the applicable notes theretofore authenticated and delivered
have been delivered to the trustee for cancellation, except for
mutilated, lost, stolen or destroyed notes which have been replaced
or paid and notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by Tokheim and
thereafter repaid to Tokheim or discharged from such trust, or
(b) all applicable notes not theretofore delivered to the trustee for
cancellation have become due and payable, and Tokheim has
irrevocably deposited or caused to be deposited with the trustee
funds in an amount sufficient to pay and discharge the entire
Indebtedness on such notes not theretofore delivered to the trustee
for cancellation, for principal of, premium, if any, and interest
on the applicable notes to date of such deposit, in the case of
notes that have become due and payable, or to the stated maturity
or redemption date, as the case may be;
(2) Tokheim has paid or caused to be paid all other sums payable under the
applicable indenture by Tokheim; and
(3) Tokheim has delivered to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent under
the applicable indenture relating to the satisfaction and discharge of
the applicable indenture have been complied with.
Modification of the indentures
From time to time, Tokheim, the Guarantors and the trustee, without the
consent of the applicable holders, may amend either indenture for specified
purposes, including, without limitation, curing ambiguities,
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defects or inconsistencies, so long as such change does not, in the opinion of
the trustee, diminishes the rights of any of the applicable holders in any
material respect. In formulating its opinion on such matters, the trustee will
be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion of counsel. Other modifications and
amendments of the indentures may be made with the consent of the applicable
holders of a majority in principal amount of the then-outstanding applicable
notes, except that,
(A) without the consent of each holder affected thereby, no amendment may:
(1) reduce the amount of applicable notes whose applicable holders must
consent to an amendment;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any
applicable notes;
(3) reduce the principal of or change or have the effect of changing
the fixed maturity of any applicable notes, or change the date on
which any applicable notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price for any
applicable notes;
(4) make any applicable notes payable in money other than that stated
in the applicable notes;
(5) make any change in provisions of the applicable indenture
protecting the right of each applicable holder to receive payment
of principal of, premium, if any, and interest on such holder's
notes on or after the due date of such payment or to bring suit to
enforce such payment;
(6) modify or change any provision of the applicable indenture or the
related definitions affecting the subordination or ranking of the
applicable notes in a manner which adversely affects the applicable
holders; provided, however, that it is understood that any
amendment, the purpose of which is to permit the incurrence of
additional Indebtedness under the applicable indenture shall not be
construed as adversely affecting the ranking of the applicable
notes, or
(7) make any change to the Subsidiary Guarantees in any manner that
diminishes the rights of the applicable holders, and
(B) without the consent of holders of not less than 66 2/3% in aggregate
principal amount of dollar notes then outstanding, in the case of the
dollar notes indenture, or holders of not less than 66 2/3% in
aggregate principal amount of euro notes then outstanding, in the case
of the euro notes indenture, no such amendment, supplement or waiver
may amend, change or modify in any material respect the obligation of
Tokheim to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate a Net Proceeds Offer with
respect to any Asset Sale or modify any of the provisions or
definitions with respect to such obligations.
Governing law
Each indenture provides that it and the applicable notes will be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
Under the Judiciary Law of the State of New York, a judgment or decree in an
action based upon an obligation denominated in a currency other than U.S.
dollars will be rendered in the foreign currency of the underlying obligation
and converted into U.S. dollars at a rate of exchange prevailing on the date of
entry of the judgment or decree.
The trustee
Each indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set
forth in the applicable indenture. During the existence of an Event of Default,
the trustee will exercise such rights and powers vested in it by the applicable
indenture, and use the same degree of care and skill in its exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
Each indenture and the provisions of the Trust Indenture Act contain
limitations on the rights of the trustee, should it become a creditor of
Tokheim, to obtain payments of claims or to realize on property received in
respect of any such claim as security or otherwise. Subject to the Trust
Indenture Act, the trustee will be permitted to engage in other transactions;
provided that if the trustee acquires any conflicting interest as described in
the Trust Indenture Act, it must eliminate such conflict or resign.
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Additional information
Anyone who receives this prospectus may obtain a copy of the indentures and
registration rights agreements without charge by writing to Tokheim
Corporation, 10501 Corporate Drive, Fort Wayne, Indiana, 46845 Attention:
Executive Vice President, Finance and Administration and Chief Financial
Officer. In addition, Tokheim filed the registration rights agreements as
exhibits to its Form 10-K filed with the SEC on March 1, 1999. Tokheim filed
the indentures in substantially final form as exhibits to its Form 10-K filed
with the SEC on March 1, 1999, and the indentures in final form as exhibits to
the first amendment to the registration statement of which this prospectus
forms a part. See the section in this prospectus entitled "Where You Can Find
More Information" for information regarding how to obtain documents from the
SEC.
Form of notes, clearance and settlement
The outstanding dollar notes are, and the dollar notes will be, represented
by one or more notes in registered, global form. The dollar global notes will
be deposited on the date of the closing date for exchange of the outstanding
dollar notes and the issuance of the dollar notes with the trustee as custodian
for DTC and registered in the name of Cede & Co. as nominee of DTC, in each
case for credit to the accounts of DTC participants and indirect participants
including, without limitation, Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear, and Cedel Bank. The outstanding euro
notes are, and the euro notes will be, represented by a note in registered,
global form. The euro global note will be deposited on the date of the
acceptance for exchange of the outstanding euro notes and the issuance of the
euro notes with the paying agent in London as common depositary for Euroclear
and Cedel Bank. The euro notes will not be eligible for clearance through DTC,
except indirectly through DTC's participation in Euroclear or Cedel.
Except in the limited circumstances set forth below, notes in certificated
form will not be issued.
Investors who purchased outstanding euro notes pursuant to Rule 144A and
investors who purchased outstanding euro notes pursuant to Regulation S who
exchange their outstanding euro notes for euro notes in the exchange offer will
each hold their interests through the euro global note.
Depositary procedures
DTC. DTC has advised Tokheim as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for persons who have accounts with it and to facilitate the
clearance and settlement of securities transactions between DTC participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. DTC participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
participant, either directly or indirectly.
Euroclear and Cedel Bank. Tokheim understands as follows with respect to
Euroclear and Cedel Bank: Euroclear and Cedel Bank each hold securities for
their account holders and facilitate the clearance and settlement of securities
transactions by electronic book-entry transfer between their respective account
holders, thereby eliminating the need for physical movements of certificates
and any risk from lack of simultaneous transfers of securities. Euroclear and
Cedel Bank each provide various services, including safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Each of Euroclear and Cedel Bank can
settle securities transactions in any of more than 30 currencies, including
euros. Euroclear and Cedel Bank each also deal with domestic securities markets
in several countries through established depository and custodial
relationships. The respective systems of
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Euroclear and Cedel Bank have established an electronic bridge between their
two systems across which their respective account holders may settle trades
with each other. Account holders in both Euroclear and Cedel Bank are world-
wide financial institutions including underwriters, securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect access to
both Euroclear and Cedel Bank is available to other institutions that clear
through or maintain a custodial relationship with an account holder of either
system. An account holder's overall contractual relations with either Euroclear
or Cedel Bank are governed by the respective rules and operating procedures of
Euroclear or Cedel Bank and any applicable laws. Both Euroclear and Cedel Bank
act under such rules and operating procedures only on behalf of their
respective account holders, and have no record of or relationship with any
persons who are not direct account holders.
Dollar notes. With respect to the dollar global notes, DTC has advised
Tokheim that pursuant to procedures established by it,
(1) upon initial deposit of a dollar global note, DTC will credit the
accounts of DTC participants, designated by the dollar exchange agent,
with portions of the principal amount of such dollar global note
deposited,
(2) for DTC participants, initial ownership of interests in such dollar
global notes will be shown on, and the transfer of ownership thereof
will be effected through, records maintained by DTC and
(3) for non-DTC participant owners, ownership interests in such dollar
global notes will only be shown on, and the transfer of ownership
thereof will only be effected through, the records of the DTC
participants, including Euroclear and Cedel Bank, or others through
which they hold their account.
All interests in a dollar global note deposited with DTC, including those held
through Euroclear or Cedel Bank, are subject to the procedures and requirements
of DTC. Those interests held through Euroclear or Cedel Bank are also subject
to the procedures and requirements of such system.
Euro notes. With respect to the euro global note, investors who hold accounts
with the Euroclear operator or Cedel Bank may acquire, hold and transfer
security entitlements with respect to the euro global note against the
Euroclear operator or Cedel Bank and their respective property by book-entry to
accounts with the Euroclear operator or Cedel Bank, each of which has an
account with the common depositary, and subject at all times to the procedures
and requirements of Euroclear or Cedel Bank, as the case may be. "Security
entitlement" means the rights and property interests of an accountholder
against its securities intermediary under applicable law in or with respect to
a security, including any ownership, co-ownership, contractual or other rights.
Investors who do not have accounts with the Euroclear operator or Cedel Bank
may acquire, hold and transfer security entitlements with respect to the euro
global note against the securities intermediary and its property with which
such investors hold accounts by book-entry to accounts with such securities
intermediary, which in turn may hold a security entitlement with respect to the
euro global note through the Euroclear operator or Cedel Bank. Investors
electing to acquire security entitlements with respect to the euro global note
through an account with the Euroclear operator or Cedel Bank or some other
securities intermediary must follow the settlement procedures of their
securities intermediary with respect to the settlement of new issues of
securities. Security entitlements with respect to the euro global note to be
acquired through an account with the Euroclear operator or Cedel Bank will be
credited to such account as of the settlement date against payment in euro for
value as of the settlement date. Investors electing to acquire, hold or
transfer security entitlements with respect to a euro global note through an
account with the Euroclear operator, Cedel Bank or some other securities
intermediary other than in connection with the initial distribution of the euro
notes must follow the settlement procedures of their securities intermediary
with respect to the settlement of secondary market transactions in securities.
Except as described below, owners of interests in the dollar global notes and
the euro global note will not have notes registered in their names, will not
receive physical delivery of notes in certificated form and will not be
considered the registered owners or holders of notes for any purpose. So long
as DTC or its nominee, or the common depositary, as the case may be, is the
registered owner or holder of a global note, such party will be
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considered the sole owner or holder of the notes represented by such global
note for all purposes under the indentures and the notes. Accordingly, each
person owning a beneficial interest in a global note must rely on the
procedures of DTC, Euroclear and Cedel Bank, as the case may be, and their
participants or account holders to exercise any rights and remedies of a holder
of notes under the indentures. Payments of principal and interest on the global
notes will be made to DTC or its nominee, or to the common depositary on behalf
of Euroclear and Cedel Bank, as the case may be, as the registered owners
thereof.
The laws of some countries and some states in the United States require that
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a global note to
such persons may be limited to that extent. Because DTC, Euroclear and Cedel
Bank can act only on behalf of their respective participants or account
holders, as the case may be, the ability of a person having beneficial
interests in a global note to pledge such interests to persons or entities that
do not participate in the relevant clearing system, or otherwise take actions
in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Payments on the global notes
Payments in respect of the principal of, premium, if any, and interest on a
global note will be made through a paying agent appointed pursuant to the
applicable indenture and will be payable to DTC or its nominee, or the common
depositary on behalf of Euroclear and Cedel Bank, as the case may be, each in
its capacity as the registered holder of such notes under such indentures.
Under the terms of the indentures, Tokheim and the trustee will treat the
persons in whose names the notes, including the global notes, are registered as
the owners of the notes for the purpose of receiving such payments and for any
and all other purposes whatsoever. Consequently, none of Tokheim, the trustee,
or any agent of Tokheim or the trustee has or will have any responsibility or
liability for
(1) any aspect or accuracy of the records of the relevant clearing system, the
participants therein or the account holders thereof, as the case may be,
relating to payments made on account of beneficial ownership interests in
the global notes, or for maintaining, supervising or reviewing any records
of such clearing system, participant or account holder relating to
beneficial ownership interests in the global notes, or
(2) any other matter relating to the actions and practices of the relevant
clearing system or the participants therein or the account holders thereof.
DTC, Euroclear or Cedel Bank, as the case may be, upon receipt of any such
payment, will immediately credit the accounts of their relevant participants or
account holders, as the case may be, with payments in amounts proportionate to
their respective holdings in principal amount of beneficial interests in the
relevant global note, as shown on the records of DTC, Euroclear or Cedel Bank,
as the case may be. Tokheim expects that payments by such participants or
account holders, as the case may be, to the beneficial owners of global notes
will be governed by standing instructions and customary practices and will be
the responsibility of such participants or account holders. Neither Tokheim nor
the trustee will have responsibility or liability for the payment of amounts
owing in respect of beneficial interests in the global notes held by DTC or by
the common depositary for Euroclear and Cedel Bank.
Transfers of global securities and interests therein
Unless definitive securities are issued,
(1) the dollar global notes may be transferred, in whole and not in part,
only to another nominee of DTC or to a successor of DTC or its nominee,
and
(2) the euro global note may be transferred, in whole and not in part, only
by Euroclear and Cedel Bank to the common depositary, as the case may
be, or by the common depositary to Euroclear and Cedel Bank,
respectively, or to another nominee or successor of such parties or a
nominee of such successor.
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Transfers of beneficial interests in the dollar global notes will be subject
to the applicable rules and procedures of DTC and its direct and indirect
participants including, if applicable, those of Euroclear and Cedel Bank, which
are subject to change from time to time. Transfers of beneficial interests in
the euro global note will be subject to the applicable rules and procedures of
Euroclear and Cedel Bank, as the case may be, and their respective account
holders and intermediaries. Any secondary market trading activity in beneficial
interests in the global notes is expected to occur through the participants or
account holders and intermediaries, as the case may be, of DTC, Euroclear and
Cedel Bank, and the securities custody accounts of investors will be credited
with their holdings against payment in same-day funds on the settlement date.
No service charge will be made for any registration of transfer or exchange
of notes, but the trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Although DTC, Euroclear and Cedel Bank have agreed to certain procedures to
facilitate transfers of interests in the global notes among participants in DTC
and account holders in Euroclear and Cedel Bank, they are under no obligation
to perform or to continue to perform such procedures. These procedures may be
discontinued at any time. None of Tokheim, the trustee, or any agent of Tokheim
or the trustee will have any responsibility for the nonperformance or
misperformance, as a result of insolvency, mistake, misconduct or otherwise, by
DTC, Euroclear or Cedel Bank or their respective participants, indirect
participants, account holders or intermediaries of their respective obligations
under the rules and procedures governing their operations.
Tokheim understands that under existing industry practices, if either Tokheim
or the trustee requests any action of holders of notes, or if an owner of a
beneficial interest in a global note desires to give instructions or take an
action that a holder is entitled to give or take under the indentures, DTC,
Euroclear or Cedel Bank, as the case may be, would authorize their respective
participants or account holders, as the case may be, owning the relevant
beneficial interest to give instructions or take the action. The participants
or account holders would authorize indirect participants or intermediaries to
give instructions or take such action, or would otherwise act upon the
instructions of such indirect participants or intermediaries.
Tokheim understands that under existing practices of DTC, Euroclear and Cedel
Bank, if less than all of the respective class of notes are to be redeemed at
any time, DTC, Euroclear or Cedel Bank, as the case may be, will credit their
participants' or account holders' accounts on a proportionate basis, with
adjustments to prevent fractions, or by lot or on such other basis as DTC,
Euroclear or Cedel Bank, as the case may be, deems fair and appropriate,
provided that no beneficial interests of less than $1,000 or (Euro)1,000, as
the case may be, may be redeemed in part.
Certificated notes
Beneficial interests in a global note are exchangeable for definitive notes
in registered certificated form only if:
(1) in the case of the dollar global notes, DTC
(x) notifies Tokheim that it is unwilling or unable to continue as
depositary for such dollar global notes or
(y) has ceased to be a "clearing agency" registered under the Exchange
Act
and, in each case, Tokheim thereupon fails to appoint a successor
depositary within 90 days;
(2) in the case of the euro global note, Euroclear and Cedel Bank are
unwilling or unable to continue as depositary for such euro global note
and Tokheim thereupon fails to appoint a successor depositary within 90
days; or
(3) there shall have occurred and be continuing a default or an Event of
Default with respect to the applicable notes.
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In all cases, certificated notes delivered in exchange for any global note or
beneficial interest in the global note will be registered in the names, and
issued in any approved denominations, requested by or on behalf of DTC,
Euroclear or Cedel Bank, as the case may be, in accordance with their customary
procedures. The notes may not be issued in bearer form.
In the case of the issuance of certificated notes in the limited
circumstances set forth above, the holder of any such certificated note may
transfer the note by surrendering it at the offices or agencies of Tokheim
maintained for such purpose within the city and state of New York, and at the
office of the transfer agent in London. Until otherwise designated by Tokheim,
Tokheim's office or agency in the city and state of New York and London,
England, respectively, will be the offices of the trustee maintained for that
purpose. In the event of a partial transfer of a holding of notes represented
by one certificate, or partial redemption of such a holding represented by one
certificate, a new certificate shall be issued to the transferee in respect of
the part transferred or redeemed and a further new certificate in respect of
the balance of the holding not transferred or redeemed shall be issued to the
transferor, provided that no certificate in denominations less than $1,000 or
(Euro)1,000 as the case may be, shall be issued. Each new certificate to be
issued shall be available for delivery within ten business days at the office
of the trustee or the transfer agent in London. The cost of preparing,
printing, packaging and delivering the certificated notes shall be borne by
Tokheim.
Tokheim shall not be required to register the transfer or exchange of
certificated notes for a period of 15 days preceding:
.the due date for any payment of principal of or interest on the notes or
.a selection of notes to be redeemed.
Also, Tokheim is not required to register the transfer or exchange of any
notes selected for redemption. In the event of the transfer of any certificated
note, the trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents, and Tokheim may require a
holder to pay any taxes and fees required by law and permitted by the
indentures and the notes.
If certificated notes are issued and a holder of a certificated note claims
that the note has been lost, destroyed or wrongfully taken or if the note is
mutilated and is surrendered to the trustee, Tokheim shall issue and the
trustee shall authenticate a replacement note if the trustee's and Tokheim's
requirements are met. If required by the trustee or Tokheim, an indemnity bond
sufficient in the judgment of both to protect Tokheim, the trustee or any
paying agent or authenticating agent appointed pursuant to the indentures from
any loss which any of them may suffer if a note is replaced must be posted.
Tokheim may charge for its expenses in replacing a note.
In case any such mutilated, destroyed, lost or stolen note has become or is
about to become due and payable, or is about to be redeemed or purchased by
Tokheim pursuant to the provisions of the indentures, Tokheim in its discretion
may, instead of issuing a new note, pay, redeem or purchase such note, as the
case may be.
Registration rights; liquidated damages
Tokheim, the Subsidiary Guarantors and the initial purchasers in the offering
of the outstanding notes, who were:
.BT Alex. Brown,
.Credit Lyonnais Securities,
.First Chicago Capital Markets, Inc.,
.Gleacher NatWest International,
.ABN AMRO Incorporated,
.PaineWebber Incorporated and
.Schroder & Co. Inc.
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entered into a dollar registration rights agreement and a euro registration
rights agreement, each dated as of January 29, 1999. Pursuant to the
registration rights agreements, Tokheim and the Subsidiary Guarantors agreed to
file with the SEC a registration statement with respect to the notes, of which
this prospectus forms a part. If applicable interpretations of the staff of the
SEC do not permit Tokheim to effect the exchange offer, or if for any other
reason the exchange offer is not consummated within 195 days after January 29,
1999, or, under specified circumstances, if the initial purchasers of the
outstanding notes so request, Tokheim will at its cost
(a) as promptly as practicable, file a shelf registration statement
covering resales of the outstanding notes,
(b) use its best efforts to cause such shelf registration to be declared
effective under the Securities Act and
(c) use its best efforts to keep effective such shelf registration
statement until the earlier of January 29, 2002 and such time as all of
the applicable outstanding notes have been sold thereunder.
Tokheim will, in the event of the filing of a shelf registration statement,
provide to each holder of the applicable outstanding notes copies of the
prospectus which is a part of such shelf registration statement, notify each
such holder when such shelf registration statement has become effective and
take other actions as are required to permit unrestricted resales of such
outstanding notes. A holder that sells its outstanding notes pursuant to a
shelf registration statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreements which are applicable to such
holder, including some of the indemnification obligations.
The registration rights agreements provide that Tokheim will, at its own cost,
(1) file an exchange offer registration statement with the SEC within 90
days after January 29, 1999,
(2) use its best efforts to cause the exchange offer registration statement
to be declared effective under the Securities Act within 150 days after
January 29, 1999 and
(3) use its best efforts to consummate the exchange offer within 195 days
after January 29, 1999.
If:
(a) Tokheim fails to file any of the registration statements required by
the registration rights agreements on or before the date specified in
the registration rights agreements for such filing,
(b) any of such registration statements is not declared effective on or
prior to the effectiveness target date specified in the registration
rights agreements for such effectiveness,
(c) Tokheim fails to exchange all applicable outstanding notes validly
tendered in accordance with the terms of the exchange offer on or
before the exchange target date specified in the registration rights
agreements for such exchange with respect to the exchange offer
registration statement, or
(d) the shelf registration statement or exchange offer registration
statement is declared effective but thereafter ceases to be effective
or usable for its intended purpose during the periods specified in the
registration rights agreements
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then Tokheim will pay liquidated damages in the form of additional
interest. In the case of a Registration Default, additional interest shall
accrue on the applicable outstanding notes over and above the stated interest
at a rate of 0.50% per annum for the first 90-day period immediately following
the occurrence of the Registration Default, such additional interest rate
increasing by an additional 0.50% per annum at the beginning of each subsequent
90-day period; provided, however, that the additional interest rate on the
applicable outstanding notes may not exceed in the aggregate 1.0% per annum;
provided further, that following the cure of all Registration Defaults,
additional interest on the applicable outstanding notes as a result of such
Registration Default shall cease to accrue.
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Any amounts of additional interest due in accordance with the immediately
preceding paragraph will be payable in cash, on the same original interest
payment dates as the applicable outstanding notes. The amount of additional
interest will be determined by multiplying
(x) the applicable additional interest rate by
(y) the principal amount of the applicable outstanding notes by
(z) a fraction, the numerator of which is the number of days such
additional interest was applicable during such period, determined on
the basis of a 360 day year comprised of twelve 30 day months, and the
denominator of which is 360.
Holders of outstanding notes will be required to make representations to
Tokheim which are described in the registration rights agreements, in order to
participate in the exchange offer and will be required to deliver information
to be used in connection with the shelf registration statement and to provide
comments on the shelf registration statement within the time periods set forth
in the registration rights agreements in order to have their outstanding notes
included in the shelf registration statement and benefit from the provisions
regarding liquidated damages set forth above. Holders of outstanding notes will
also be required to suspend their use of the prospectus included in the shelf
registration statement upon receipt of written notice to that effect from
Tokheim.
Certain definitions
Set forth below is a summary of some of the defined terms used in the
indentures. Reference is made to the indentures for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of Tokheim
or at the time it merges or consolidates with Tokheim or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of Tokheim
or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person who
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means:
(a) an Investment by Tokheim or any Subsidiary of Tokheim in any other
Person pursuant to which such Person shall become a Subsidiary of
Tokheim or any Subsidiary of Tokheim, or shall be merged with or into
Tokheim or any Subsidiary of Tokheim, or
(b) the acquisition by Tokheim or any Subsidiary of Tokheim of the assets
of any Person, other than a Subsidiary of Tokheim, which constitute all
or substantially all of the assets of such Person or comprise any
division or line of business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, not including operating leases entered into in the ordinary
course of business, assignment or other transfer for value by Tokheim or any of
its Subsidiaries, including any Sale and Leaseback Transaction, to any Person
other than Tokheim or a Wholly Owned Subsidiary of Tokheim of:
(a) any Capital Stock of any Subsidiary of Tokheim or
(b) any other property or assets of Tokheim or any Subsidiary of Tokheim
other than in the ordinary course of business;
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provided, however, that Asset Sales shall not include:
(1) a transaction or series of related transactions for which Tokheim or
its Subsidiaries receive aggregate consideration of less than $500,000;
(2) sales of accounts receivable that Tokheim has classified as
uncollectible;
(3) sales or other dispositions of Cash Equivalents;
(4) the sale of the stock of the Subsidiary of Tokheim Sofitam
Applications, S.A. to which Tokheim Sofitam Applications S.A. has
contributed its bulk meter business; and
(5) the sale, lease, conveyance, disposition or other transfer:
(w) of all or substantially all of the assets of Tokheim as permitted
under "Certain covenants--Merger, Consolidation or sale of Assets
by Tokheim,"
(x) pursuant to any foreclosure of assets or other remedy provided by
applicable law to a creditor of Tokheim or any Subsidiary of
Tokheim with a Lien on such assets, which Lien is permitted under
the indentures; provided that such foreclosure or other remedy is
conducted in a commercially reasonable manner or in accordance with
any bankruptcy law,
(y) involving only Cash Equivalents or inventory in the ordinary course
of business or obsolete equipment in the ordinary course of
business consistent with past practices of Tokheim or
(z) involving only the lease or sublease of any real or personal
property in the ordinary course of business.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means
(1) with respect to any Person that is a corporation, any and all shares,
interests, participations, or other equivalents, however designated and
whether or not voting, of corporate stock, including each class of
common stock and preferred stock of such Person and
(2) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Cash Equivalents" means
(a) marketable direct obligations issued by, or unconditionally guaranteed
by, the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(b) marketable direct obligations issued by any state of the United States
of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either S&P or Moody's;
(c) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(d) certificates of deposit, eurodollar time deposits or bankers'
acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250.0 million;
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(e) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above
entered into with any bank meeting the qualifications specified in
clause (d) above; and
(f) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (a) through (e)
above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) the approval by the holders of Capital Stock of Tokheim of any plan or
proposal for the liquidation or dissolution of Tokheim, whether or not
otherwise in compliance with the provisions of the indentures;
(2) any Person or group of related Persons for purposes of Section 13(d) of
the Exchange Act shall become the owner, directly or indirectly,
beneficially or of record, of shares representing either more than 40%
of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of Tokheim or more than 40% of the aggregate
issued and outstanding common stock of Tokheim; or
(3) the replacement of a majority of the board of directors of Tokheim over
a two-year period from the directors who constituted the board of
directors of Tokheim at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a
majority of the board of directors of Tokheim then still in office who
either were members of such board of directors at the beginning of such
period or whose election as a member of such board of directors was
previously so approved.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum, without duplication, of
(1) Consolidated Net Earnings and
(2) to the extent Consolidated Net Earnings has been reduced thereby,
. all income taxes of such Person and its Subsidiaries paid or accrued
in accordance with GAAP for such period, other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions outside the
ordinary course of business or other transactions the effect of
which has been excluded from Consolidated Net Earnings,
. Consolidated Interest Expense and
. Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Earnings for such period,
all as determined on a consolidated basis for such Person and its Subsidiaries
in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person,
the ratio of Consolidated EBITDA of such Person during the most recent four
full fiscal quarter period for which financial information is available ending
on or prior to the date of the transaction giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio to Consolidated Fixed Charges of
such Person for the four quarter period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to
(a) the incurrence or repayment of any Indebtedness of such Person or any
of its Subsidiaries, and the application of the proceeds from such
incurrence or repayment, giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness, and
the application of the proceeds thereof, other than the incurrence or
repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital or revolving
credit facilities, occurring during the four quarter period or at any
time subsequent to the last day of the four quarter period and on or
prior to the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio, as if such
incurrence or repayment, as the case may be, and the application of the
proceeds of such incurrence or repayment, occurred on the first day of
the four quarter period and
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(b) any Asset Sales or Asset Acquisitions, including any Asset Acquisition
giving rise to the need to make such calculation, as a result of such
Person or one of its Subsidiaries, including any Person who becomes a
Subsidiary as a result of the Asset Acquisition, incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA, but only to the extent includable pursuant to the
definition of "Consolidated Net Earnings," attributable to the assets
which are the subject of the Asset Acquisition or Asset Sale during the
four quarter period occurring during the four quarter period or at any
time subsequent to the last day of the four quarter period and on or
prior to the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio, as if such
Asset Sale or Asset Acquisition, including the incurrence, assumption
or liability for any such Acquired Indebtedness, occurred on the first
day of the four quarter period. If such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third
Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Subsidiary of
such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges"
for purposes of determining the denominator, but not the numerator, of
this "Consolidated Fixed Charge Coverage Ratio,"
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio and which
will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the date of the
transaction giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio;
(2) if interest on any Indebtedness actually incurred on the date of
the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio may optionally be
determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other
rates, then the interest rate in effect on the date of the
transaction giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio will be deemed to have been in effect
during the four quarter period; and
(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of
(1) Consolidated Interest Expense, plus
(2) the product of
. the amount of all dividend payments on any series of preferred stock
of such Person and its Subsidiaries, other than dividends paid in
Qualified Capital Stock of Tokheim or dividends to the extent
payable to Tokheim or its Subsidiaries, paid, accrued or scheduled
to be paid or accrued during such period, other than in the case of
preferred stock of such Person and its Subsidiaries for which the
dividends are tax deductible for federal income tax purposes, times
. a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated federal,
state and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its
Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation,
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(a) any amortization of debt discount, but excluding the amortization
of debt issuance costs,
(b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and
(d) the interest portion of any deferred payment obligation; and
(2) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its
Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Earnings" means, with respect to any Person, for any
period, the aggregate net earnings or loss of such Person and its Subsidiaries
for such period on a consolidated basis, before preferred stock dividend
requirements, determined in accordance with GAAP; provided that there shall be
excluded therefrom:
(a) after-tax gains or losses from Asset Sales or abandonments or reserves
relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains or
losses,
(c) the net earnings of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Subsidiary of the
referent Person or is merged or consolidated with the referent Person
or any Subsidiary of the referent Person,
(d) the net earnings, but not loss, of any Subsidiary of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by a
contract, operation of law or otherwise,
(e) the net earnings of any Person, other than a Subsidiary of the referent
Person, except to the extent of cash dividends or distributions paid to
the referent Person or to a Wholly Owned Subsidiary of the referent
Person by such Person,
(f) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net
Earnings accrued at any time following the issue date of the
outstanding notes,
(g) income or loss attributable to discontinued operations, including,
without limitation, operations disposed of during such period whether
or not such operations were classified as discontinued,
(h) in the case of a successor to the referent Person by consolidation or
merger or as a transferee of the referent Person's assets, any earnings
of the successor corporation prior to such consolidation, merger or
transfer of assets and
(i) all gains or losses from the cumulative effect of any change in
accounting principles.
"Consolidated Net Worth" of any Person means the consolidated shareholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less, without duplication, amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Net Earnings of such
Person and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, excluding any such charges constituting an
extraordinary item or loss or any such charge which requires an accrual of or a
reserve relating to possible cash charges or expenditures for any future or
past period.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Designated Senior Debt" means
(a) Indebtedness under or in respect of the credit agreement or the ESOP
credit agreements and
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(b) any other Indebtedness constituting Senior Debt which, at the time of
determination, has an aggregate principal amount of at least $25.0
million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by Tokheim.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms, or by the terms of any security into which it is convertible or
for which it is exchangeable, or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the notes.
"ESOP credit agreements" means those credit agreements among Tokheim, the
Tokheim Employee Stock Ownership Plan, NBD Bank, N.A., and other banks,
together with the related documents thereto, including any guarantee agreements
and security documents, in each case as such agreements may be amended,
including any amendment and restatement thereof, supplemented or otherwise
modified from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders and any
assignments thereof, including any agreement increasing the amount of available
borrowings under such agreements, provided that such increase in borrowings is
permitted by the "Limitation on incurrence of additional indebtedness" covenant
above.
"Fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the board of directors of Tokheim acting
reasonably and in good faith and shall be evidenced by a resolution of the
board of directors of Tokheim delivered to the trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the issue date of
the outstanding notes.
"Guarantor" means any Subsidiary of Tokheim which guarantees the notes
pursuant to the indentures.
"Guarantor Senior Debt" means with respect to any Guarantor, the principal
of, premium, if any, and interest on, including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law, any Indebtedness of a Guarantor, whether
outstanding on the issue date of the outstanding notes or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Subsidiary Guarantee of such Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Debt" shall also
include the principal of, premium, if any, interest on, including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law, and all other monetary
obligations of the Guarantors owing in respect of
(x) all monetary obligations of every nature of the Guarantor under the
credit agreement and the ESOP credit agreements, including obligations
to pay principal and interest, reimbursement obligations under letters
of credit, fees, expenses and indemnities,
(y) all Interest Swap Obligations and
(z) all obligations under Currency Agreements,
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in each case whether outstanding on the issue date of the outstanding notes or
thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt"
shall not include:
(1) any Indebtedness of a Guarantor or any Affiliate of the Guarantor to a
Subsidiary of the Guarantor or any of the Affiliate's Subsidiaries,
(2) Indebtedness to, or guaranteed on behalf of, any shareholder, director,
officer or employee of a Guarantor or any Subsidiary of the Guarantor,
including, without limitation, amounts owed for compensation,
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services,
(4) Indebtedness represented by Disqualified Capital Stock,
(5) any liability for federal, state, local or other taxes owed or owing by
a Guarantor,
(6) Indebtedness incurred in violation of the provisions set forth under
the "Limitation on incurrence of additional Indebtedness" covenant,
(7) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without
recourse to a Guarantor,
(8) any Indebtedness which is, by its express terms, subordinated in right
of payment to any other Indebtedness of a Guarantor and
(9) any guarantees of the junior subordinated notes or any Warrant
Repurchase Indebtedness, or guarantees of any Refinancing of the junior
subordinated notes or any Warrant Repurchase Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all indebtedness of the Person for borrowed money,
(b) all indebtedness of the Person evidenced by bonds, debentures, notes or
other similar instruments,
(c) all Capitalized Lease Obligations of the Person,
(d) all indebtedness or other obligations of the Person issued or assumed
as the deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention agreement,
but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90
days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted,
(e) all indebtedness for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction,
(f) guarantees and other contingent obligations in respect of Indebtedness
referred to in clauses (a) through (e) above and clause (h) below,
(g) all indebtedness of any other Person of the type referred to in clauses
(a) through (f) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount
of the Obligation so secured,
(h) all indebtedness under Currency Agreements and Interest Swap
Obligations of such Person and
(i) all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal
to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued
dividends, if any.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant
to the
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indentures, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the board of directors of the issuer
of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm:
. which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in
Tokheim and
. which, in the judgment of the board of directors of Tokheim, is
otherwise independent and qualified to perform the task for which it is
to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit, including a guarantee, or capital contribution by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others to, or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other Person.
"Investment" shall exclude extensions of trade credit by Tokheim and its
Subsidiaries on commercially reasonable terms in accordance with normal trade
practices of Tokheim or such Subsidiary, as the case may be. For the purposes
of the "Limitation on restricted payments" covenant, the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by Tokheim or any of its Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce
the amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Earnings.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind, including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents, but
not the portion of any such deferred payment constituting interest, received by
Tokheim or any of its Subsidiaries from the Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to the Asset Sale,
including, without limitation, legal, accounting, brokerage and
investment banking fees and sales commissions,
(b) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions
and any tax sharing arrangements,
(c) repayment of Indebtedness that is required to be repaid in connection
with such Asset Sale and
(d) appropriate amounts to be provided by Tokheim or any Subsidiary, as the
case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by Tokheim or
any Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale.
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"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness under the notes and the indentures;
(2) Indebtedness incurred pursuant to the credit agreement and the ESOP
credit agreements in an aggregate principal amount at any time outstanding
not to exceed
(A) $7.62 million with respect to the Indebtedness under the ESOP
credit agreements, less the amount of all mandatory principal payments,
if any, excluding any such payments to the extent refinanced at the
time of payment under a replaced ESOP credit agreement and
(B) $250.0 million in the aggregate with respect to Indebtedness under
the credit agreement, reduced by any required permanent repayments, if
any which are accompanied by a corresponding permanent commitment
reduction, thereunder;
(3) Other Indebtedness of Tokheim and its Subsidiaries outstanding on the
issue date of the outstanding notes;
(4) Interest Swap Obligations of Tokheim covering Indebtedness of Tokheim
or any of its Subsidiaries and Interest Swap Obligations of any Subsidiary
of Tokheim covering Indebtedness of such Subsidiary; provided, however that
(A) such Interest Swap Obligations are designed to protect Tokheim and
its Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with the indentures, and are
used for bona fide hedging, and not speculative, purposes, and the
notional principal amount of such Interest Swap Obligation does not
exceed the principal amount of the Indebtedness to which such
Interest Swap Obligation relates at the time entered into, or
(B) such Interest Swap Obligations are required under the terms of the
credit agreement;
(5) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
(A) are designed to protect against fluctuations in currency value, and
are used for bona fide hedging, and not speculative, purposes, and
do not increase the Indebtedness of Tokheim and its Subsidiaries
outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder, or
(B) are required under the terms of the credit agreement;
(6) Indebtedness of a Wholly Owned Subsidiary of Tokheim to Tokheim or to
a Wholly Owned Subsidiary of Tokheim for so long as such Indebtedness is
held by Tokheim or a Wholly Owned Subsidiary of Tokheim, in each case
subject to no Lien held by a Person other than Tokheim or a Wholly Owned
Subsidiary of Tokheim other than a Lien required under the Credit
Agreement; provided that if as of any date any Person other than Tokheim or
a Wholly Owned Subsidiary of Tokheim owns or holds any such Indebtedness or
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;
(7) Indebtedness of Tokheim to a Wholly Owned Subsidiary of Tokheim for
so long as such Indebtedness is held by a Wholly Owned Subsidiary of
Tokheim, in each case subject to no Lien other than a Lien required under
the credit agreement; provided that
(a) any Indebtedness of Tokheim to any Wholly Owned Subsidiary of
Tokheim is unsecured and subordinated, pursuant to a written agreement,
to Tokheim obligations under the Indentures and the Notes and
(b) if as of any date any Person other than a Wholly Owned Subsidiary
of Tokheim owns or holds any such Indebtedness or any Person holds a
Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by
Tokheim;
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(8) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn
against insufficient funds in the ordinary course of business, except in
the case of daylight overdrafts; provided, however, that such Indebtedness
is extinguished within ten business days of incurrence;
(9) Indebtedness of Tokheim or any of its Subsidiaries represented by
letters of credit for the account of Tokheim or such Subsidiary, as the
case may be, in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(10) Refinancing Indebtedness;
(11) Indebtedness incurred by Tokheim or any Subsidiary of Tokheim in
connection with the purchase or improvement of real or personal property or
equipment or other capital expenditures in the ordinary course of business
or consisting of Capitalized Lease Obligations, provided that
. at the time of the incurrence thereof, such Indebtedness, together
with any other Indebtedness incurred during the most recently completed
four fiscal quarter period in reliance upon this clause (11) does not
exceed, in the aggregate, 3% of the net sales of Tokheim and its
Subsidiaries during the most recently completed four fiscal quarter
period on a consolidated basis, calculated on a pro forma basis if the
date of incurrence is prior to the end of the fourth fiscal quarter
following the issue date of the outstanding notes, and
. such Indebtedness, together with all then outstanding Indebtedness
incurred in reliance upon this clause (11) does not exceed, in the
aggregate, 3% of the aggregate net sales of Tokheim and its
Subsidiaries during the most recently completed twelve fiscal quarter
period on a consolidated basis, calculated on a pro forma basis if the
date of incurrence is prior to the end of the twelfth fiscal quarter
following the issue date of the outstanding notes;
(12) Indebtedness arising from agreements of Tokheim or a Subsidiary of
Tokheim providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred in connection with the
disposition of any business, assets or Subsidiary, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such
acquisition; provided that the maximum aggregate liability in respect of
all such Indebtedness shall at no time exceed the gross proceeds actually
received by Tokheim and the Subsidiary in connection with such disposition;
(13) Obligations in respect of performance bonds and completion
guarantees provided by Tokheim or any Subsidiary of Tokheim in the ordinary
course of business;
(14) Guarantees by Tokheim or a Subsidiary of Tokheim of Indebtedness
incurred by Tokheim or a Subsidiary of Tokheim so long as the incurrence of
such Indebtedness by Tokheim or any such Subsidiary of Tokheim is otherwise
permitted by the terms of the indentures;
(15) the junior subordinated notes;
(16) Warrant Repurchase Indebtedness;
(17) Indebtedness incurred by Tokheim or any Subsidiary of Tokheim in
exchange for the use of Traits as collateral made in the ordinary course of
business to financial institutions which Indebtedness has a value of no
less than 90% of the face value of such Traits;
(18) Indebtedness of Tokheim or a Subsidiary of Tokheim to a Subsidiary
of Tokheim that is not a Wholly Owned Subsidiary in the aggregate principal
amount not to exceed at any one time $10.0 million; provided that if as of
any date any Person other than a Subsidiary of Tokheim that is not a Wholly
Owned Subsidiary owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(19) Indebtedness from bank overdraft facilities not to exceed $15.0
million at any time; and
(20) $10.0 million of other indebtedness of Tokheim or any of its
Subsidiaries, which amount may, but need not, be incurred in whole or in
part under the credit agreement.
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"Permitted Investments" means
(a) Investments by Tokheim or any Subsidiary of Tokheim in any Person that
is or will become immediately after such Investment a Wholly Owned
Subsidiary of Tokheim or that will merge or consolidate into Tokheim or
a Wholly Owned Subsidiary of Tokheim;
(b) Investments in Tokheim by any Subsidiary of Tokheim; provided that any
Indebtedness evidencing such Investment is unsecured and subordinated,
pursuant to a written agreement and to the same extent that the notes
are subordinated to Senior Debt, to Tokheim's obligations under the
notes and the indentures;
(c) Investments in cash and Cash Equivalents;
(d) loans and advances to employees and officers of Tokheim and its
Subsidiaries totaling up to $5.0 million in the aggregate
. in the ordinary course of business for bona fide business purposes
or
. to purchase Tokheim's Capital Stock;
(e) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of Tokheim's or its Subsidiaries' businesses and
otherwise in compliance with the indentures and in compliance with the
credit agreement;
(f) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(g) Investments made by Tokheim or its Subsidiaries as a result of
consideration received in connection with an Asset Sale made in
compliance with the "Limitation on asset sales" covenant;
(h) Investments existing on the issue date of the outstanding notes;
(i) Investments in an African Subsidiary in an aggregate amount not to
exceed $2.0 million for which Tokheim is committed on the issue date of
the outstanding notes; and
(j) additional Investments in an aggregate amount not exceeding $5.0
million.
"Permitted Liens" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims
either:
. not delinquent or
. being contested in good faith by appropriate proceedings and as to
which Tokheim or its Subsidiaries shall have set aside on its books
such reserves as may be required pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent for
a period of more than 60 days or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(3) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security;
(4) Liens securing letters of credit issued in the ordinary course of
business consistent with past practice in connection with the items
referred to in clause (3), or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations, exclusive of obligations for the payment of borrowed money;
(5) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
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(6) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of Tokheim or
any of its Subsidiaries;
(7) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(8) purchase money Liens to finance property or assets of Tokheim or any
Subsidiary of Tokheim acquired in the ordinary course of business;
provided, however, that
. the related purchase money Indebtedness shall not exceed the cost of
such property or assets and shall not be secured by any property or
assets of Tokheim or any Subsidiary of Tokheim other than the
property and assets so acquired and
.the Lien securing such Indebtedness shall be created within 90 days of
such acquisition;
(9) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(10) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(11) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of Tokheim or
any of its Subsidiaries, including rights of offset and set-off;
(12) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
indentures;
(13) Liens securing Indebtedness under Currency Agreements;
(14) Liens securing Acquired Indebtedness incurred in accordance with the
"Limitation on incurrence of additional indebtedness" covenant; provided
that
.such Liens secured such Acquired Indebtedness at the time of and prior
to the incurrence of such Acquired Indebtedness by Tokheim or a
Subsidiary of Tokheim and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by
Tokheim or a Subsidiary of Tokheim and
.such Liens do not extend to or cover any property or assets of Tokheim
or of any of its Subsidiaries other than the property or assets that
secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of Tokheim or a Subsidiary of Tokheim
and are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired
Indebtedness by Tokheim or a Subsidiary of Tokheim;
(15) Leases or subleases granted to others not interfering in any
material respect with the business of Tokheim or any of its Subsidiaries;
(16) Any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating, other than any
such interest or title resulting from or arising out of a default by
Tokheim or any of its Subsidiaries on its obligations under such lease;
(17) Liens arising from filing UCC financing statements for precautionary
purposes in connection with true leases of personal property that are
otherwise permitted under the indentures and under which Tokheim or any of
its Subsidiaries is lessee;
(18) Liens placed on Traits used as collateral in exchange for loans
provided to Tokheim or its Subsidiaries; and
(19) Liens in favor of the trustee and any substantially equivalent Lien
granted to any trustee or similar institution under any indenture governing
Indebtedness permitted to be incurred or outstanding under the Indentures.
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"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Qualified Capital Stock" means any Capital Stock of Tokheim that is not
Disqualified Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by Tokheim or any Subsidiary
of Tokheim of Indebtedness incurred in accordance with the "Limitation on
incurrence of additional indebtedness" covenant, other than pursuant to clause
(4), (5), (6), (7), (8), (9), (11) or (17) of the definition of Permitted
Indebtedness, in each case that does not
(1) result in an increase in the aggregate principal amount of Indebtedness
of such Person as of the date of such proposed Refinancing, plus the
amount of any premium or penalty required to be paid under the terms of
the instrument governing such Indebtedness and plus the amount of
reasonable fees and expenses incurred by Tokheim in connection with
such Refinancing or
(2) create Indebtedness with
(A) a Weighted Average Life to Maturity that is less that the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or
(B) a final maturity earlier than the final maturity of the
Indebtedness being refinanced;
provided that
(x) if such Indebtedness being Refinanced is Indebtedness of Tokheim, then
such Refinancing Indebtedness shall be Indebtedness solely of Tokheim
and
(y) if such Indebtedness being Refinanced is the junior subordinated notes,
Warrant Repurchase Indebtedness or any Refinancing thereof, then such
Refinancing Indebtedness shall
. be subordinate or junior to the notes at least to the same extent
and in the same manner as the junior subordinated notes as in effect
on the issue date of the outstanding notes,
. provide for no cash interest payments prior to October 2004,
. have covenants no more adverse to Tokheim than the junior
subordinated notes and
. have an effective interest rate not greater than 14%;
provided, however, that prior to the incurrence of such Indebtedness, Moody's
Investors Service, Inc. will have affirmed that its rating of the notes will
not decrease by one or more gradations below its rating in effect on the issue
date of the outstanding notes.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to Tokheim or a Subsidiary of Tokheim of any property, whether owned by
Tokheim or any Subsidiary of Tokheim at the issue date of the outstanding notes
or later
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acquired, which has been or is to be sold or transferred by Tokheim or such
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Senior Debt" means, the principal of, premium, if any, and interest on,
including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law, and all
other Obligations with respect to, any Indebtedness of Tokheim, whether
outstanding on the issue date of the outstanding notes or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes. Without limiting the generality of the
foregoing, "Senior Debt" shall also include the principal of, premium, if any,
interest on, including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law, and all other monetary obligations of Tokheim or any Subsidiary
of Tokheim owing in respect of,
(x) the credit agreement and the ESOP credit agreements, including
obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities,
(y) all Interest Swap Obligations and
(z) Obligations under Currency Agreements,
in each case whether outstanding on the issue date of the outstanding notes or
thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include:
(1) any Indebtedness of Tokheim to a Subsidiary of Tokheim,
(2) Indebtedness to, or guaranteed on behalf of, any shareholder, director,
officer or employee of Tokheim or any Subsidiary of Tokheim, including,
without limitation, amounts owed for compensation,
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services,
(4) Indebtedness represented by Disqualified Capital Stock,
(5) any liability for federal, state, local or other taxes owed or owing by
Tokheim,
(6) Indebtedness incurred in violation of the provisions set forth under
"Limitation on incurrence of additional indebtedness,"
(7) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without
recourse to Tokheim,
(8) any Indebtedness which is, by its express terms, subordinated in right
of payment to any other Indebtedness of Tokheim and
(9) The junior subordinated notes, any Warrant Repurchase Indebtedness or
any Refinancing of the junior subordinated notes or any Warrant
Repurchase Indebtedness.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(v) of
Regulation S-X under the Securities Act.
"Subsidiary," with respect to any Person, means
(a) any corporation of which the outstanding Capital Stock having at least
a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned,
directly or indirectly, by such Person or
(b) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
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"Subsidiary Guarantee" shall mean any guarantee of the Notes by any Guarantor
pursuant to the Indentures.
"Traits" means "traites" as defined under French law, accounts receivable or
invoices.
"Warrant Repurchase Indebtedness" means
(1) up to $20.0 million of Indebtedness incurred by Tokheim to repurchase
the warrants, or a pro rata portion of $20.0 million, if less than all
the warrants are repurchased, plus reasonable fees and expenses
incurred in connection therewith; provided, however that such
Indebtedness
(a) is subordinated to the notes at least to the same extent as the
junior subordinated notes,
(b) contains covenants no more adverse to Tokheim than the junior
subordinated notes,
(c) bears interest at an effective rate not to exceed 14% per annum,
which interest shall not be paid in cash prior to October 2004,
(d) contains no mandatory prepayment provisions and
(e) matures at least 6 months after the maturity of the notes, plus
(2) additional Indebtedness with the same terms incurred in payment of
interest thereon;
provided, however, that prior to the incurrence of such Indebtedness, Moody's
Investors Service, Inc. will have affirmed that its rating of the notes will
not decrease by one or more gradations below its rating in effect on the issue
date of the outstanding notes.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing
(a) the then outstanding aggregate principal amount of such Indebtedness
into
(b) the sum of the total or the products obtained by multiplying
. the amount of each then remaining installment, sinking fund, serial
maturity or other required payment of principal, including payment
at final maturity, in respect thereof, by
. the number of years, calculated to the nearest one-twelfth, which
will elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities, other than in the case of a
foreign Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law, are
owned by such Person or any Wholly Owned Subsidiary of such Person.
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IMPORTANT UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of important U.S. federal income tax
consequences of the purchase, ownership and disposition of the exchange notes
as of the date hereof. It deals only with exchange notes held as capital assets
by initial holders of the outstanding notes, and does not deal with special
situations, such as those of dealers in securities or currencies, financial
institutions, banks, tax-exempt organizations, insurance companies, holders
that are partnerships or other pass-through entities and holders whose
"functional currency" is not the U.S. dollar, or special rules with respect to
"straddle," "conversion," "hedging" or "constructive sales" transactions. The
discussion below is based upon the Internal Revenue Code of 1986 and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified, possibly with
retroactive effect, so as to result in federal income tax consequences
different from those discussed below. This discussion is not binding on the IRS
or the courts. No ruling has been sought or will be sought from the IRS with
respect to the positions and issues discussed herein, and there can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the exchange notes or
that any such position would not be sustained. PROSPECTIVE INVESTORS ARE URGED
TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES OF
PURCHASING, HOLDING AND DISPOSING OF EXCHANGE NOTES THAT MAY BE SPECIFIC TO
THEM, INCLUDING THE TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN
LAWS.
As used herein, the term "U.S. holder" means a beneficial owner of an
exchange note that is for United States federal income tax purposes
. a citizen or resident of the United States,
. a corporation created or organized under the laws of the United States
or any political subdivision thereof or therein,
. an estate the income of which is subject to U.S. federal income taxation
regardless of source, or
. a trust if both:
(a) A U.S. court is able to exercise primary supervision over the
administration of the trust, and
(b) one or more U.S. persons have the authority to control all
substantial decisions of the trust.
As used herein, the term "Non-U.S. holder" means a holder of an exchange note
that is not a U.S. holder.
U.S. holders
Interest
Interest on the exchange notes generally will be taxable to a U.S. holder as
ordinary interest income at the time accrued or received in accordance with the
U.S. holder's regular method of accounting for federal income tax purposes.
Under circumstances described above, Tokheim will be required to pay
additional interest on the outstanding notes if it fails to comply with its
obligations under the registration rights agreements. See "Description of the
Exchange Notes--Registration rights; liquidated damages." Although not certain,
such additional amount should be taxable to a U.S. holder as ordinary income at
the time it accrues or is received in accordance with such holder's regular
method of accounting for federal income tax purposes. It is possible, however,
that the IRS may take a different position, in which case the timing and the
amount of income on the notes may be different.
A U.S. holder who uses the cash method of accounting for federal income tax
purposes and who receives interest on a euro exchange note in euros will be
required to include in income the U.S. dollar value of such euros, determined
using the spot rate in effect on the date such payment is received, regardless
of whether the
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payment is in fact converted to U.S. dollars at that time. No exchange gain or
loss will be recognized by such holder if the euros are converted to U.S.
dollars on the date received. The U.S. federal income tax consequences of the
conversion of euros into U.S. dollars are described below. See "--Exchange of
foreign currencies."
A U.S. holder who uses the accrual method of accounting for federal income
tax purposes, or who is otherwise required to accrue interest prior to receipt,
will be required to include in income the U.S. dollar value
of the amount of interest income accrued, or otherwise required to be taken
into account, with respect to a euro note in a taxable year. The U.S. dollar
value of such accrued income will be determined by translating such income at
the average rate of exchange for the relevant interest accrual period, or with
respect to an accrual period that spans two taxable years, at the average rate
for the portion of such accrual period within the taxable year. The average
rate of exchange for an interest accrual period, or portion thereof, is the
simple average of the exchange rates for each business day of such period, or
such other average that is reasonably derived and consistently applied. An
accrual basis U.S. holder may elect, however, to translate such accrued
interest income using the spot rate of exchange in effect on the last day of
the accrual period or, with respect to an accrual period that spans two taxable
years, using the spot rate of exchange in effect on the last day of the taxable
year. If the last day of an accrual period is within five business days of the
receipt of the accrued interest, a U.S. holder may translate such interest
using the spot rate of exchange in effect on the date of receipt. The above
election must be made in a statement filed with the U.S. holder's U.S. tax
return and will apply to other debt obligations held by the U.S. holder at the
beginning of the first taxable year in which the election applies or acquired
thereafter and may not be changed without the consent of the IRS. Whether or
not such election is made, a U.S. holder may recognize exchange gain or loss,
which will be treated as ordinary income or loss, with respect to accrued
interest income on the date such interest income is received. The amount of
ordinary income or loss recognized will equal the difference, if any, between
the U.S. dollar value of the euros received in respect of such interest accrual
period, determined using the spot rate in effect on the date such payment is
received, and the U.S. dollar value of the interest income that has accrued
during such interest accrual period, as determined above. No additional
exchange gain or loss will be recognized by such holder if the euros are
converted to U.S. dollars on the date received. The U.S. federal income tax
consequences of the conversion of euros into U.S. dollars are described below.
See "--Exchange of foreign currencies."
Exchange offer
The exchange of the outstanding notes for the exchange notes will not be
treated as an "exchange" for U.S. federal income tax purposes. Accordingly, a
U.S. holder will not recognize any taxable gain or loss on the exchange of
outstanding notes for exchange notes pursuant to the exchange offer, and a U.S.
holder will have the same adjusted tax basis and holding period in the exchange
notes as the U.S. holder had in the outstanding notes exchanged therefor.
Dispositions
Upon the sale, exchange, retirement or other disposition of an exchange note,
a U.S. holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the disposition, not including any
amounts attributable to accrued but unpaid interest income, and such holder's
adjusted tax basis in the exchange note. Such gain or loss generally will be
capital gain or loss, except with respect to gains or losses attributable to
changes in currency exchange rates, as described below. To the extent that the
amount realized represents accrued but unpaid interest, however, such amounts
must be taken into account as interest income, with exchange gain or loss
computed as described above. If a U.S. holder receives foreign currency on such
a sale, exchange or retirement, the amount realized will be based on the U.S.
dollar value of the foreign currency on the date of disposition assuming the
exchange notes are not traded on an established securities market.
If the euro exchange notes are traded on an established securities market,
there is a special rule for purchases and sales of euro exchange notes by a
cash basis taxpayer under which units of foreign currency paid or received are
translated into U.S. dollars at the spot rate on the settlement date of the
purchase or sale. In that case, no exchange gain or loss will result from
currency fluctuations between the trade date and the settlement
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of such a purchase or sale. In such event, an accrual basis taxpayer may elect
the same treatment required of cash basis taxpayers with respect to purchases
and sales of euro exchange notes, provided the election is applied
consistently. Such election cannot be changed without the consent of the IRS.
Gain or loss realized by a U.S. holder upon the sale, exchange or retirement
of an exchange note that is attributable to fluctuations in the rate of
exchange between the U.S. dollar and the euro will be ordinary income or loss
and generally will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the foreign currency principal amount of the
exchange note, determined on the date such payment is received or the exchange
note is disposed of, and the U.S. dollar value of the foreign currency
principal amount of the exchange note, determined on the date the U.S. holder
acquired the exchange note. Such foreign currency gain or loss will be
recognized only to the extent of the total gain or loss realized by the U.S.
Holder on the sale, exchange or retirement of the exchange note.
For certain non-corporate U.S. holders, including individuals, the rate of
taxation of capital gains will depend upon
. the holder's holding period in the capital asset, with a preferential
rate generally available for capital assets held for more than one year,
and
. the holder's marginal tax rate for ordinary income.
Exchange of foreign currencies
A U.S. holder will have a tax basis in any euros received as interest or on
the sale, exchange, retirement or other disposition of an exchange note equal
to their U.S. dollar value at the time the interest is received or at the time
payment is received in consideration of the sale, exchange or retirement. Any
gain or loss realized by a U.S. holder on a sale or other disposition of euros
will be ordinary income or loss.
Non-U.S. holders
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of an exchange note that is a Non-U.S.
holder.
Interest
Payments of interest on an exchange note to any Non-U.S. holder will
generally not be subject to U.S. federal income or withholding tax, provided
that
(1) the holder is not
(a) a direct or indirect owner of 10% or more of the total voting
power of all voting stock of Tokheim, taking into account attribution
rules or
(b) a controlled foreign corporation related to Tokheim through stock
ownership,
(2) such interest payments are not effectively connected with the conduct
by the Non-U.S. holder of a trade or business within the United States and
(3) Tokheim or its paying agent receives
(a) from the Non-U.S. holder, a properly completed Form W-8, or
substitute Form W-8, under penalties of perjury which provides the Non-
U.S. holder's name and address and certifies that the Non-U.S. holder
of the exchange note is a Non-U.S. holder or
(b) from a security clearing organization, bank or other financial
institution that holds the exchange notes in the ordinary course of its
trade or business on behalf of the Non-U.S. holder, certification under
penalties of perjury that such a Form W-8, or substitute Form W-8, has
been received by it, or by another such financial institution, from the
Non-U.S. holder, and a copy of the Form W-8, or substitute Form W-8, is
furnished to the payor.
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A Non-U.S. holder that does not qualify for exemption from withholding under
the preceding paragraph generally will be subject to withholding of U.S.
federal income tax at the rate of 30%, or lower applicable treaty rate, on
payments of interest on the Exchange Notes.
If the payments of interest on an exchange note are effectively connected
with the conduct by a Non-U.S. holder of a trade or business in the United
States, such payments will be subject to U.S. federal income tax on a net basis
at the rates applicable to United States persons generally, and, with respect
to corporate holders, may also be subject to a 30% branch profits tax. If
payments are subject to U.S. federal income tax on a net basis in accordance
with the rules described in the preceding sentence, such payments will not be
subject to United States withholding tax so long as the holder provides Tokheim
or its paying agent with a properly executed Form 4224.
Non-U.S. holders should consult any applicable income tax treaties, which may
provide for a lower rate of withholding tax, exemption from or reduction of
branch profits tax, or other rules different from those described above.
Dispositions
Any gain realized by a Non-U.S. holder on the sale, exchange, retirement or
other disposition of an exchange note generally will not be subject to U.S.
federal income or withholding tax, unless
. such gain is effectively connected with the conduct by such Non-U.S.
holder of a trade or business within the United States,
. the Non-U.S. holder is an individual who is present in the United States
for 183 days or more in the taxable year of the disposition and other
conditions are satisfied, or
. the Non-U.S. holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain U.S. expatriates.
Federal estate tax
In general, exchange notes held, or treated as held, by an individual who is
a Non-U.S. holder at the time of his or her death will not be subject to U.S.
federal estate tax provided that
. the individual does not actually or constructively own 10% or more of
the total voting power of all voting stock of Tokheim and
. income on the exchange notes was not effectively connected with the
conduct by such Non-U.S. holder of a trade or business within the United
States.
Information reporting and backup withholding
Payments with respect to the exchange notes and the proceeds upon the sale or
other disposition of the exchange notes may be subject to information reporting
and possibly U.S. backup withholding at a 31% rate. Backup withholding will not
apply to a U.S. holder who furnishes its correct taxpayer identification number
and provides other certification. Backup withholding and information reporting
will not apply to payments made by Tokheim in respect to the exchange notes to
a Non-U.S. holder, if the holder certifies, under penalties of perjury, that it
is not a U.S. person and provides its name and address, provided that neither
Tokheim nor its paying agent has actual knowledge that the holder is a U.S.
person, or the Non-U.S. holder otherwise establishes an exemption. Copies of
information returns may be made available, under the provisions of a specific
treaty or agreement, to the tax authorities of the country in which the Non-
U.S. holder resides.
Payment of proceeds from the disposition of exchange notes to or through the
United States office of any broker, U.S. or foreign, will be subject to
information reporting and backup withholding unless the owner
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certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the proceeds from the
disposition of an exchange note to or through a non-U.S. office of a non-U.S.
broker that is not a U.S. related person generally will not be subject to
information reporting or backup withholding. For this purpose, a "U.S. related
person" is
. a "controlled foreign corporation" for U.S. federal income tax purposes
or
. a foreign person 50% or more of whose gross income from all sources for
the three year period ending with the close of its taxable year
preceding the payment, or for such part of the period that the broker
has been in existence, is derived from activities that are effectively
connected with the conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of exchange notes
to or through a non-U.S. office of a broker that is a U.S. person or a U.S.
related person, the regulations require information reporting, but not backup
withholding, on the payment unless the broker has documentary evidence in its
files that the owner is not a U.S. person and the broker has no knowledge to
the contrary.
Amounts withheld under the backup withholding rules do not constitute a
separate United States federal income tax. Rather, any amounts withheld under
the backup withholding rules will be allowed as a refund or a credit against a
holder's federal income tax liability, if any, provided that the requisite
procedures are followed.
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify standards governing the information upon which
a withholding agent may rely. The final regulations are generally effective for
payments made after December 31, 1999, subject to transition rules. Non-U.S.
holders should consult their own tax advisors with respect to the impact, if
any, of the final regulations.
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PLAN OF DISTRIBUTION
The exchange offer is not being made to, nor will Tokheim accept surrenders
of or exchange from, holders of outstanding notes in any jurisdiction in which
the exchange offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
Exchange notes may not be offered or sold directly or indirectly to the
public in the republic of France. Neither this document, which has not been
submitted for the approval of the COMMISSION DES OPERATIONS DE BOURSE, nor any
offering material relating to the exchange notes may be released or issued to
the public in connection with any such offer.
Exchange notes have not been and will not be qualified for sale under the
securities laws of Canada or any province or territory of Canada. Exchange
notes are not being offered and may not be offered or sold, directly or
indirectly, in Canada or to or for the account of any resident of Canada in
contravention of the securities laws of Canada or any province or territory
thereof. This prospectus is not, and under no circumstances is to be construed
as, an advertisement or a public offering in Canada of the securities described
in this prospectus. Canadian residents should consult their own attorney as to
restrictions on resales of exchange notes.
Exchange notes may not be offered in the Netherlands or elsewhere to the
account of any person or entity other than to persons who or entities which
trade or invest in securities in the conduct of a profession or business with
the meaning of the Securities Transactions Supervision Act of 1995 (WET
TOEZICHT EFFECTENVERKEER 1995) and its implementing regulations, which include
banks, investment banks, brokers, dealers, pension funds, insurance companies,
securities firms, investment institutions, other institutional investors, and
other parties including inter alia treasuries and finance companies of large
enterprises which regularly, as an ancillary activity, trade or invest in
securities.
Exchange notes will only be available for exchange in the United Kingdom
pursuant to the exchange offer by persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments, as principal
or agent, for the purposes of their businesses or otherwise in circumstances
that do not constitute an offer to the public in the United Kingdom for
purposes of the Public Offers of Securities Regulations 1995.
No document issued in connection with the exchange offer, including this
prospectus, may be passed on to any person in the United Kingdom unless that
person is as described in Article 11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended), or is a
person to whom the document may otherwise lawfully be issued or passed on.
Accordingly, by accepting delivery of this prospectus, the recipient warrants
and acknowledges that it is such a person.
In reliance on interpretations of the staff of the SEC set forth in no-action
letters issued to third parties in similar transactions, Tokheim believes that
the exchange notes issued in the exchange offer in exchange for the outstanding
notes may be offered for resale, resold and otherwise transferred by holders
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that the exchange notes are acquired in the
ordinary course of such holders' business and the holders are not engaged in,
and do not intend to engage in, and have no arrangement or understanding with
any person to participate in, a distribution of Exchange Notes. This position
does not apply to any holder that is
(1) an "affiliate" of Tokheim within the meaning of Rule 406 under the
Securities Act,
(2) a broker-dealer who acquired notes directly from Tokheim or
(3) broker-dealers who acquired notes as a result of market-making or other
trading activities.
Any participating broker-dealers receiving exchange notes in the exchange offer
are subject to a prospectus delivery requirement with respect to resales of the
exchange notes. To date, the SEC has taken the position that
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participating broker-dealers may fulfill their prospectus delivery requirements
with respect to transactions involving an exchange of securities such as the
exchange pursuant to the exchange offer, other than a resale of an unsold
allotment from the sale of the outstanding notes to the initial purchasers,
with this prospectus.
Each broker-dealer receiving exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in any resale
of the exchange notes. Participating broker-dealers may use this prospectus in
reselling exchange notes, if the outstanding notes were acquired for their own
accounts as a result of market-making activities or other trading activities.
Tokheim has agreed that a participating broker-dealer may use this prospectus
in reselling exchange notes for a period ending 180 days after the expiration
date of the exchange offer. A participating broker-dealer intending to use this
prospectus in the resale of exchange notes must notify Tokheim, on or before
the expiration date, that it is a participating broker-dealer. This notice may
be given in the space provided for in the letter of transmittal or may be
delivered to the appropriate exchange agent. Tokheim has agreed that, for a
period of 180 days after the expiration date, it will make this prospectus, and
any amendment or supplement to this prospectus, available to any broker-dealer
that requests these documents in the letter of transmittal.
Tokheim will not receive any cash proceeds from the exchange notes. Broker-
dealers acquiring exchange notes for their own accounts may sell the notes in
one or more transactions in the over-the-counter market, in negotiated
transactions, through writing options on the exchange notes or a combination of
such methods. Any resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any broker-dealer and/or the purchasers of exchange notes.
Any broker-dealer reselling exchange notes that it received in the exchange
offer and any broker or dealer that participates in a distribution of exchange
notes may be deemed to be an "underwriter" within the meaning of the Securities
Act. Any profit on any resale of exchange notes and any commissions or
concessions received by any persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver any by delivering a prospectus, a broker-
dealer will not admit that it is an "underwriter" within the meaning of the
Securities Act.
LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for
Tokheim by Norman L. Roelke, Esq., Vice President, Secretary and General
Counsel of Tokheim.
INDEPENDENT ACCOUNTANTS
The financial statements of Tokheim Corporation and Subsidiaries as of
November 30, 1998 and 1997 and for each of the three years in the period ended
November 30, 1998, included in this prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given the authority of said firm as experts in auditing and accounting.
The financial statements of Retail Petroleum Systems as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997,
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers, independent accountants, given the authority of said
firm as experts in auditing and accounting.
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GENERAL LISTING INFORMATION
Listing
The Certified Certificate of Incorporation of Tokheim and the legal notice
relating to the issue of the exchange notes will be deposited prior to any
listing on the Luxembourg Stock Exchange with the Registrar of the District
Court in Luxembourg (Greffier en Chef du Tribunal d'Arrondissement a
Luxembourg), where such documents are available for inspection and where copies
thereof can be obtained upon request. As long as the exchange notes are listed
on the Luxembourg Stock Exchange, an agent for making payments on, and
transfers of, exchange notes will be maintained in Luxembourg.
Independent accountants
The consolidated accounts of Tokheim Corporation and Subsidiaries for the
three years ended November 30, 1998 have been prepared in accordance with U.S.
GAAP and have been audited by PricewaterhouseCoopers LLP in accordance with
United States generally accepted auditing standards. The unaudited consolidated
interim accounts for the three months ended February 28, 1998 and 1999 were
prepared in accordance with U.S. GAAP. PricewaterhouseCoopers LLP has given and
not withdrawn their written consent to the issue of this prospectus with the
inclusion in it of their report in the form and context in which it is
included.
The consolidated accounts of Retail Petroleum Systems for the three years
ended December 31, 1997 have been prepared in accordance with United States
generally accepted accounting principles and have been audited by
PricewaterhouseCoopers in accordance with United States generally accepted
auditing standards. The unaudited consolidated interim accounts for the nine
months ended September 30, 1997 and 1998 were prepared in accordance with U.S.
GAAP. PricewaterhouseCoopers has given and not withdrawn their written consent
to the issue of this prospectus with the inclusion in it of their report in the
form and context in which it is included.
Documents for inspection
For so long as the exchange notes are listed on the Luxembourg Stock Exchange
and the rules of such exchange so require, copies of the following documents
may be inspected at the specified office of the paying agent and registrar in
Luxembourg.
. Certified Certificate of Incorporation of Tokheim; and
. the indentures relating to the exchange notes, which include the forms
of the exchange note certificates.
In addition, copies of the most recent consolidated financial statements of
Tokheim for the preceding financial year, and any interim quarterly financial
statements published by Tokheim, will be available at the specified office of
the paying agent in Luxembourg for so long as the notes are listed on the
Luxembourg Stock Exchange and the rules of such exchange so require. Tokheim
publishes only consolidated financial statements.
Notices
All notices shall be deemed to have been given upon
. the mailing by first class mail, postage prepaid, of such notices to
holders of the exchange notes at their registered addresses as recorded
in the register; and
. for so long as the exchange notes are listed on the Luxembourg Stock
Exchange and it is required by the rules of the Luxembourg Stock
Exchange, publication of such notice to the holders of the exchange
notes in English in a leading newspaper having general circulation in
Luxembourg, which is expected to be the Luxemburger Wort, or, if such
publication is not practicable, in one other leading English language
daily newspaper with general circulation in Europe, such newspaper being
published on each business day in morning editions, whether or not it
shall be published in Saturday, Sunday or holiday editions.
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WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-4
which, together with all amendments, supplements, schedules and exhibits to the
registration statement is referred to as the registration statement, which we
have filed with the Commission under the Securities Act, with respect to the
notes offered in this prospectus. This prospectus does not contain all the
information which is in the registration statement. Parts of the registration
statement are omitted as allowed by the rules and regulations of the
Commission. We refer you to the registration statement for further information
about our company and the securities offered in this prospectus. Statements
contained in this prospectus concerning the provisions of documents are not
necessarily summaries of all provisions of those documents. If we have filed
any other document as an exhibit to the registration statement, you should read
the exhibit for a more complete understanding of the document or matter.
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any documents we file at
the Commission's public reference rooms at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, New York, New York
10048. Please call the Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Commission filings are also available to the
public at the SEC's web site at http://www.sec.gov. In addition, reports, proxy
statements and other information about Tokheim, whose symbol is TOK, can be
reviewed and copied at the offices of the New York Stock Exchange, on which our
common stock is listed, at 20 Broad Street, New York, New York 10005. The
indentures require us to file reports and other information required to be
filed under the Exchange Act with the Commission and provide such information
to you, upon request, regardless of whether our company is subject to the
reporting requirements of the Exchange Act.
INFORMATION INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them, meaning that we can disclose important information by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information filed later with the Commission
will update and supersede the information then on file. We incorporate by
reference our Commission filings listed below (File No. 001-06018) and any
other documents we file with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until the exchange offer is completed.
1. Annual Report on Form 10-K for the fiscal year ended November 30, 1998
(filed March 1, 1999);
2. Current Report on Form 8-K/A filed December 14, 1998; and
3. Quarterly Report on Form 10-Q for the quarter ended February 28, 1999
(filed April 14, 1999).
On the request of any person to whom a copy of this prospectus is delivered,
we will provide, without charge, a copy of any or all of the documents
incorporated herein by reference, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference. Written requests for
such copies should be directed to Tokheim Corporation, 10501 Corporate Drive,
Fort Wayne, Indiana 46845, telephone number (219) 470-4600 Attention: Executive
Vice President, Finance and Administration and Chief Financial Officer. For so
long as the exchange notes are listed on the Luxembourg Stock Exchange and the
rules of such exchange so require, our quarterly and annual filings will be
available free of charge in Luxembourg.
You should rely only on the information incorporated by reference or provided
in this prospectus or any prospectus supplement. We have not authorized anyone
to provide you with different or additional information. We are not making an
offer to sell any notes in any state or country where the exchange offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of this document.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Financial Statements of Tokheim Corporation and Subsidiaries
Consolidated Condensed Statement of Earnings for the three months ended
February 28, 1999 and 1998 (unaudited)................................. F-2
Consolidated Condensed Balance Sheet as of February 28, 1999 (unaudited)
and November 30, 1998.................................................. F-3
Consolidated Condensed Statement of Cash Flows for the three months
ended February 28, 1999 and 1998 (unaudited)........................... F-4
Notes to the Consolidated Financial Statements.......................... F-5
Report of Independent Accountants....................................... F-14
Consolidated Statement of Earnings for the years ended November 30,
1998, 1997 and 1996.................................................... F-15
Consolidated Statement of Cash Flows for the years ended November 30,
1998, 1997 and 1996.................................................... F-16
Consolidated Balance Sheet as of November 30, 1998 and 1997............. F-17
Consolidated Statement of Shareholders' Equity for the years ended
November 30, 1998, 1997 and 1996....................................... F-19
Notes to Consolidated Financial Statements.............................. F-20
Combined Financial Statements of Retail Petroleum Systems
Combined Condensed Balance Sheets as of September 30, 1998 (unaudited)
and December 31, 1997.................................................. F-58
Unaudited Combined Condensed Statements of Income for the nine months
ended September 30, 1998 and 1997...................................... F-59
Unaudited Combined Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997............................................ F-60
Notes to the Combined Financial Statements (unaudited).................. F-61
Report of Independent Accountants....................................... F-63
Combined Statements of Income for the years ended December 31, 1997,
1996 and 1995.......................................................... F-64
Combined Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995.......................................................... F-65
Combined Balance Sheets as of December 31, 1997 and 1996................ F-66
Combined Statements of Equity for the years ended December 31, 1997,
1996 and 1995.......................................................... F-67
Notes to Financial Statements........................................... F-68
</TABLE>
F-1
<PAGE>
TOKHEIM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Amounts in thousands except amounts per share)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
February 28, February 28,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales................... $166,193 $90,852
Cost of sales, exclusive of
items listed below......... 133,297 67,074
Selling, general, and
administrative expenses.... 25,767 16,257
Depreciation and
amortization............... 6,892 2,500
Merger and acquisition costs
and other unusual items.... 1,123 5,987
-------- -------
Operating loss.............. (886) (966)
-------- -------
Interest expense, net....... 12,307 4,011
Foreign currency loss....... 1,438 35
Minority interest........... 94 73
Other (income), net......... (154) 221
-------- -------
Loss before income taxes.... (14,571) (5,306)
Income taxes................ (393) 300
-------- -------
Loss before extraordinary
item....................... (14,178) (5,606)
Extraordinary loss on debt
extinguishment............. (6,249) --
-------- -------
Net loss.................... $(20,427) $(5,606)
======== =======
Preferred stock dividends... (374) (374)
Loss applicable to common
stock.................... $(20,801) $(5,980)
Loss per common share:
Basic:
Before extraordinary
loss................... $ (1.15) $ (0.72)
Extraordinary loss on
debt extinguishment.... (0.49) --
-------- -------
Net loss................ $ (1.64) $ (0.72)
======== =======
Weighted average shares
outstanding............ 12,662 8,250
Diluted:
Before extraordinary
loss................... $ (1.15) $ (0.72)
Extraordinary loss on
debt extinguishment.... (0.49) --
-------- -------
Net loss................ $ (1.64) $ (0.72)
======== =======
Weighted average shares
outstanding............ 12,662 8,250
</TABLE>
F-2
<PAGE>
TOKHEIM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
February 28, November 30,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................... $ 34,720 $ 26,801
Accounts receivables, net.......................... 146,946 172,693
Inventories:
Raw materials and supplies....................... 67,062 70,545
Work in process.................................. 22,557 27,418
Finished goods................................... 22,816 25,070
-------- --------
112,435 123,033
Other current assets............................... 21,132 19,139
-------- --------
Total current assets........................... 315,233 341,666
Property, plant, and equipment, net.................. 75,874 77,905
Other tangible assets................................ 3,746 4,873
Goodwill, net........................................ 300,489 324,113
Other non-current assets and deferred charges, net... 29,564 28,085
-------- --------
Total assets................................... $724,906 $776,642
======== ========
Liabilities and Shareholders' Equity
Current maturities of long-term debt............... $ 1,911 $ 2,110
Notes payable to banks............................. 383 410
Cash overdrafts.................................... 15,012 15,064
Accounts payable................................... 74,908 95,322
Accrued expenses................................... 134,151 136,164
-------- --------
Total current liabilities...................... 226,365 249,070
Notes payable, bank credit agreement................. 185,146 182,145
Senior notes......................................... -- 22,500
Senior subordinated notes............................ 205,690 170,000
Junior subordinated payment in kind note............. 41,200 40,000
Other long-term debt, less current maturities........ 3,570 4,115
Guaranteed Employees' Stock Ownership Plan
obligation.......................................... 6,347 6,987
Post-retirement benefit liability.................... 14,799 14,418
Minimum pension liability............................ 3,135 3,135
Other long-term liabilities.......................... 7,141 7,511
-------- --------
693,393 699,881
-------- --------
Redeemable convertible preferred stock............... 24,000 24,000
Guaranteed Employees' Stock Ownership Plan
obligation.......................................... (6,347) (6,987)
Treasury stock, at cost.............................. (4,712) (4,883)
-------- --------
12,941 12,130
-------- --------
Common stock......................................... 90,354 90,354
Common stock warrants................................ 20,000 20,000
Minimum pension liability............................ (3,135) (3,135)
Foreign currency translation adjustments............. (47,855) (22,598)
Accumulated deficit.................................. (40,096) (19,295)
-------- --------
19,268 65,326
Less treasury stock, at cost......................... (695) (695)
-------- --------
18,572 64,631
-------- --------
Total liabilities and shareholders' equity..... $724,906 $776,642
======== ========
</TABLE>
F-3
<PAGE>
TOKHEIM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
February 28, February 28,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (20,427) $ (5,606)
Adjustments to reconcile net loss to cash used in
operations:
Write-off of in process research and development. -- 5,879
Payment in kind interest......................... 1,200 --
Extraordinary loss on debt extinguishment........ 6,249 --
Depreciation and amortization.................... 6,892 2,500
Gain on sale of equipment........................ (18) --
Deferred income taxes............................ (135) (183)
Changes in assets and liabilities:
Accounts receivables, net........................ 20,529 11,281
Inventories...................................... 4,247 (4,192)
Other current assets............................. (2,774) (451)
Accounts payable................................. (17,921) (6,707)
Accrued expenses................................. 1,222 (8,340)
Other............................................ (372) 478
--------- --------
Net cash used in operations.................... (1,308) (5,341)
--------- --------
Cash flows from investing activities:
Acquisition, net of cash acquired.................. -- (10,641)
Plant and equipment additions...................... (4,996) (1,885)
--------- --------
Net cash used in investing activities.......... (4,996) (12,526)
--------- --------
Cash flows from financing activities:
Redemption of senior notes......................... (22,500) --
Proceeds from senior subordinated notes............ 209,647 --
Redemption of senior subordinated notes............ (170,000) --
Decrease in other debt............................. (438) (122)
Increase in notes payable, banks................... 3,001 20,644
Increase (decrease) in cash overdraft.............. 463 (504)
Debt issuance costs................................ (6,084) --
Proceeds from issuance of common stock............. -- 158
Premiums paid on debt redemption................... (555) --
Treasury stock, net................................ 170 4
Preferred stock dividends.......................... (374) (374)
--------- --------
Net cash provided from financing activities.... 13,330 19,806
--------- --------
Effect of translation adjustments on cash............ 893 (250)
Cash and cash equivalents:
Increase in cash................................... 7,919 1,689
Beginning of year.................................. 26,801 6,438
--------- --------
End of period...................................... $ 34,720 $ 8,127
========= ========
</TABLE>
F-4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The interim financial statements are unaudited and reflect all adjustments
(consisting solely of normal recurring adjustments) that, in the opinion of
management, are necessary for a fair statement of the interim periods
presented. This report includes information in a condensed format and should be
read in conjunction with the audited consolidated financial statements included
in Tokheim Corporation's (the "Company") Annual Report to Shareholders for the
year ended November 30, 1998. The results of operations for the three months
ended February 28, 1999 are not necessarily indicative of the results to be
expected for the full year or any other interim period.
Amounts for interim periods are unaudited. Amounts for the year ended
November 30, 1998 were derived from audited consolidated financial statements
included in the 1998 Annual Report to Shareholders.
Certain prior period amounts in these financial statements have been
reclassified to conform with current year presentation.
New Accounting Pronouncements
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," and SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," are effective for the year ending November 30,
1999. In the opinion of management, these statements will not have a material
impact on the Company's financial position, results of operations, or cash
flows since they are "disclosure only" standards. The Company is currently
evaluating the impact that SFAS No. 131 will have on its current segment
groupings. SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June 1998 and is effective for the year ending
November 30, 2000. SFAS No. 133 establishes a new model for accounting for
derivatives in the balance sheet as either assets or liabilities and measures
them at fair value. Certain disclosures concerning the designation and
assessment of hedging relationships are also required. Management has not yet
determined the impact of this statement on the Company's consolidated financial
statements.
The Company will adopt SFAS No. 130, "Reporting Comprehensive Income," for
the year ending November 30, 1999 by including a separate statement of
comprehensive income as part of the consolidated financial statements. Total
comprehensive loss for the three months ended February 28, 1999 and 1998 was
$45.7 million and $7.9 million, respectively. The other components of
comprehensive loss in addition to net loss for these three month periods
consist of foreign currency translation adjustments and minimum pension
liability.
Senior Subordinated Notes
On January 29, 1999, the Company issued $123.0 million aggregate principal
amount of its 11.375% Senior Subordinated Notes due 2008 (the "Dollar Notes")
and Euro 75.0 million ($87.0 million equivalent) aggregate principal amount of
its 11.375% Senior Subordinated Notes due 2008 (the "Euro Notes," and together
with the Dollar Notes, the "Notes") in a private placement pursuant to Rule
144A and Regulation S (the "Offering"). The Notes will mature on August 1,
2008, and interest is payable semi-annually on February 1 and August 1 of each
year, commencing August 1, 1999. The Company used the net proceeds from the
Offering to redeem in whole, the $170.0 million in 12.0% senior subordinated
notes due January 29, 1999 (the "Senior Subordinated Seller Notes") and the
$22.5 million of senior notes due 2005 (the "Senior Notes"). In addition, the
Company used approximately $9.1 million of the net proceeds to reduce
borrowings under the revolving credit facility under the Company's new bank
credit agreement (the "New Credit Agreement") and to permanently reduce the
bank working capital commitment from $120.0 million to $110.0 million.
During the first quarter of 1999, the Company incurred an extraordinary loss
on debt extinguishment of approximately $6.2 million in connection with the
refinancing of the Senior Notes and the Senior Subordinated Seller Notes. This
amount consists of $0.5 million of premiums paid on the redemption of the
Senior Notes and approximately $5.7 million of unamortized deferred issuance
costs that were written off.
F-5
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Each of the Dollar Notes and the Euro Notes will be redeemable, at the
Company's option, in whole at any time, or in part from time to time, on and
after February 1, 2004, upon not less than 30 nor more than 60 days' notice, at
the following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing on
February 1 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004........................................................... 105.688%
2005........................................................... 103.792%
2006........................................................... 101.896%
2007 and thereafter............................................ 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings
At any time, or from time to time, on or prior to February 1, 2002, the
Company may, at its option, use the net cash proceeds of one or more public
equity offerings to redeem up to 35% of the original principal amount of the
Dollar Notes issued in the Offering and up to 35% of the original principal
amount of the Euro Notes issued in the Offering, each at a redemption price
equal to 111.375% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided that at least 55%
of the original principal amount of the Dollar Notes issued in the Offering or
the Euro Notes issued in the Offering, as the case may be, remains outstanding
immediately after any such redemption and the Company shall make such
redemption not more than 120 days after the consummation of any such public
equity offering.
The Notes are unsecured and subordinated to all of the Company's existing and
future senior debt, including its obligations under the New Credit Agreement.
All of the Company's current and future U.S. subsidiaries will guarantee the
Notes with guarantees that will be unsecured and subordinated to senior debt of
subsidiaries. The indentures under which the Notes were issued contain
covenants limiting the Company's ability to, among other things, incur
additional debt; pay dividends on capital stock, repurchase capital stock or
make certain other restricted payments; make certain investments; create liens
on its assets to secure debt; enter into transactions with affiliates; merge or
consolidate with another company; and transfer and sell assets.
The Company and the subsidiary guarantors have entered into a Registration
Rights Agreement pertaining to the Dollar Notes and another Registration Rights
Agreement pertaining to the Euro Notes (together, the "Registration Rights
Agreements"). Per the Registration Rights Agreements the Company will, at its
own cost, (i) within 90 days after the issue date of the Notes, file a
registration statement on the appropriate registration form (the "Exchange
Offer Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to an exchange offer (the "Exchange Offer") to
exchange the Euro Notes and Dollar Notes for new notes (the "Exchange Notes")
which will have terms substantially identical in all material respects to the
Dollar Notes or the Euro Notes, as the case may be, except that the Exchange
Notes will not contain terms with respect to transfer restrictions or
liquidated damages, (ii) use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act within
150 days after the issue date of the Notes and (iii) use its best efforts to
consummate the Exchange Offer within 195 days after the issue date of the
Notes. Upon the Exchange Offer Registration Statement being declared effective,
the Company will offer the Exchange Notes in exchange for surrender of the Euro
Notes and the Dollar Notes.
Although the Company intends to file the registration statement described
above, there can be no assurance that such registration statement will be
filed, or, if filed, that it will become effective. If the Company fails to
comply with the above provisions or if such registration statement fails to
become effective, then, as liquidated damages, additional interest (the
"Additional Interest") shall become payable with respect to the Euro Notes or
the Dollar Notes, as applicable, at an increasing rate of 0.5% for every ninety
days that the Company fails to register such notes.
F-6
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements
In connection with the Acquisition and as part of the subsequent financing,
the Company issued and sold $123,000 of 11.375% US dollar-denominated senior
subordinated notes and (Euro)75,000 of 11.375% Euro denominated senior
subordinated notes (together the "Outstanding Notes") in a private placement
pursuant to Rule 144A and Regulation S. The Outstanding Notes are, and the
Exchange Notes which will be issued in this Exchange Offer will be, general
unsecured obligations of the Company, subordinated in right of payment to all
existing and future senior indebtedness of the Company, and guaranteed on a
full, unconditional, joint and several basis by the Company's wholly-owned
domestic subsidiaries.
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of February 28, 1999
and November 30, 1998 and for the three months ended February 28, 1999 and
1998, of (a) Tokheim Corporation, the parent; (b) the guarantor
subsidiaries; (c) the nonguarantor subsidiaries; and (d) the Company on a
consolidated basis, and
(2) Elimination entries necessary to consolidate Tokheim Corporation, the
parent, with guarantor and nonguarantor subsidiaries.
Investments in subsidiaries are accounted for by the parent using the equity
method of accounting. The guarantor and nonguarantor subsidiaries are presented
on a combined basis. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
Separate financial statements for the guarantor subsidiaries and the
nonguarantor subsidiaries are not presented because management believes that
such financial statements would not be meaningful to investors.
F-7
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
For the three months ended February 28, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net sales............... $ 27,546 $ 31,235 $111,067 $(3,655) $166,193
Cost of sales, exclusive
of items listed below.. 22,335 23,741 90,876 (3,655) 133,297
Selling, general, and
administrative
expenses............... 6,018 6,106 13,643 -- 25,767
Depreciation and
amortization........... 1,268 1,097 4,527 -- 6,892
Merger and acquisition
costs and other unusual
items.................. -- 106 1,017 -- 1,123
-------- -------- -------- ------- --------
Operating profit (loss). (2,075) 185 1,004 -- (886)
Interest expense, net... 6,844 (4,553) 10,016 -- 12,307
Foreign currency loss... 194 620 624 -- 1,438
Equity in (earnings)
loss of consolidated
subsidiaries........... 6,126 -- -- (6,126) --
Minority interest....... -- -- 94 -- 94
Other (income) expense,
net ................... (1,079) (2,633) 3,558 -- (154)
-------- -------- -------- ------- --------
Earnings (loss) before
income taxes........... (14,160) 6,751 (13,288) 6,126 (14,571)
Income taxes............ 18 (363) (48) -- (393)
-------- -------- -------- ------- --------
Earnings (loss) before
extraordinary item..... (14,178) 7,114 (13,240) 6,126 (14,178)
Extraordinary loss on
debt extinguishment.... (6,249) -- -- -- (6,249)
-------- -------- -------- ------- --------
Net earnings (loss)..... $(20,427) $ 7,114 $(13,240) $ 6,126 $(20,427)
======== ======== ======== ======= ========
</TABLE>
F-8
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
For the three months ended February 28, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net sales............... $33,850 $16,312 $48,632 $ (7,942) $90,852
Cost of sales, exclusive
of items listed below.. 25,664 11,337 38,015 (7,942) 67,074
Selling, general, and
administrative
expenses............... 7,229 2,247 6,781 -- 16,257
Depreciation and
amortization........... 938 198 1,364 -- 2,500
Merger and acquisition
costs and other unusual
items.................. 5,879 -- 108 -- 5,987
------- ------- ------- -------- -------
Operating profit (loss). (5,860) 2,530 2,364 -- (966)
Interest expense, net... 1,335 6 2,670 -- 4,011
Foreign currency (gain)
loss................... -- (51) 86 -- 35
Equity in (earnings)
loss of consolidated
subsidiaries........... 663 -- -- (663) --
Minority interest....... -- -- 73 -- 73
Other (income) expense,
net ................... (2,281) 447 2,055 -- 221
------- ------- ------- -------- -------
Earnings (loss) before
income taxes........... (5,577) 2,128 (2,520) 663 (5,306)
Income taxes............ 29 101 170 -- 300
------- ------- ------- -------- -------
Earnings (loss) before
extraordinary item..... (5,606) 2,027 (2,690) 663 (5,606)
Extraordinary loss on
debt extinguishment.... -- -- -- -- --
------- ------- ------- -------- -------
Net earnings (loss)..... $(5,606) $ 2,027 $(2,690) $ 663 $(5,606)
======= ======= ======= ======== =======
</TABLE>
F-9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the three months ended February 28, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash provided from
(used in) operations. $ (7,330) $ 1,576 $(2,078) $6,524 $ (1,308)
Cash flows from
investing activities:
Plant and equipment
additions............ (2,521) (746) (1,729) -- (4,996)
Investments in and
advances to
subsidiaries, net.... (3,409) 4,418 5,515 (6,524) --
-------- ------- ------- ------ --------
Net cash provided
from (used in)
investing
activities......... (5,930) 3,672 3,786 (6,524) (4,996)
Cash flows from
financing activities:
Redemption of senior
notes................ (22,500) -- -- -- (22,500)
Proceeds from issuance
of senior
subordinated notes... 39,647 -- -- -- 39,647
Decrease in term debt. -- -- (438) -- (438)
Increase in notes
payable, banks....... 3,001 -- -- -- 3,001
Increase (decrease) in
cash overdraft....... (131) 229 365 -- 463
Debt issuance costs... (6,084) -- -- -- (6,084)
Premiums paid on debt
extinguishment....... (555) -- -- -- (555)
Treasury stock, net... 170 -- -- -- 170
Preferred stock
dividends............ (374) -- -- -- (374)
-------- ------- ------- ------ --------
Net cash provided
from (used in)
financing
activities......... 13,174 229 (73) -- 13,330
Effect of translation
adjustments on cash.... -- (7,955) 8,848 -- 893
-------- ------- ------- ------ --------
Cash and cash
equivalents:
Increase (decrease) in
cash................. (86) (2,478) 10,483 -- 7,919
Beginning of year..... 849 5,381 20,571 -- 26,801
-------- ------- ------- ------ --------
End of period......... $ 763 $ 2,903 $31,054 $ -- $ 34,720
======== ======= ======= ====== ========
</TABLE>
F-10
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the three months ended February 28, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(Amounts In thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash provided
from (used in)
operations.......... $ (8,027) $1,919 $1,291 $ (524) $ (5,341)
Cash flows from
investing activities:
Acquisition, net of
cash acquired....... (10,641) -- -- -- (10,641)
Plant and equipment
additions........... (819) (537) (529) -- (1,885)
Investments in and
advances to
subsidiaries, net... (772) -- 248 524 --
-------- ------ ------ ------ --------
Net cash provided
from (used in)
investing
activities........ (12,232) (537) (281) 524 (12,526)
Cash flows from
financing activities:
Decrease in term
debt................ (13) -- (109) -- (122)
Increase in notes
payable, banks...... 19,000 -- 1,644 -- 20,644
Increase (decrease)
in cash overdraft... 702 26 (1,232) -- (504)
Proceeds from
issuance of common
stock............... 158 -- -- -- 158
Treasury stock, net.. 4 -- -- -- 4
Preferred stock
dividends........... (374) -- -- -- (374)
-------- ------ ------ ------ --------
Net cash provided
from financing
activities........ 19,477 26 303 -- 19,806
Effect of translation
adjustments on cash... -- 320 (570) -- (250)
-------- ------ ------ ------ --------
Cash and cash
equivalents:
Increase (decrease)
in cash............. (782) 1,728 743 -- 1,689
Beginning of year.... 2,764 1,170 2,504 -- 6,438
-------- ------ ------ ------ --------
End of period........ $ 1,982 $2,898 $3,247 $ -- $ 8,127
======== ====== ====== ====== ========
</TABLE>
F-11
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
CONSOLIDATED CONDENSED BALANCE SHEET
As of February 28, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 763 $ 2,903 $ 31,054 $ -- $ 34,720
Accounts receivables,
net.................. 60,175 62,415 106,772 (82,416) 146,946
Inventories, net...... 16,452 15,382 80,717 (116) 112,435
Other current assets.. 1,562 1,478 18,092 -- 21,132
-------- -------- -------- ---------- --------
Total current assets.. 78,952 82,178 236,635 (82,532) 315,233
Investments in
subsidiaries......... 118,394 14,718 3,250 (136,362) --
Property, plant, and
equipment, net....... 23,734 11,035 41,105 -- 75,874
Goodwill, net......... 16,451 92,029 192,009 -- 300,489
Other non-current
assets and deferred
charges, net......... 108,024 241,854 5,628 (322,195) 33,311
-------- -------- -------- ---------- --------
Total assets........ $345,555 $441,814 $478,627 $ (541,089) $724,907
======== ======== ======== ========== ========
Liabilities and
Shareholders' Equity
Current maturities of
long-term debt......... $ -- $ -- $ 1,911 $ -- $ 1,911
Notes payable to banks.. -- -- 383 -- 383
Cash overdrafts......... -- 238 14,774 -- 15,012
Accounts payable........ 40,877 40,377 78,675 (85,021) 74,908
Accrued expenses........ 16,926 42,599 74,626 -- 134,151
-------- -------- -------- ---------- --------
Total current
liabilities............ 57,803 83,214 170,369 (85,021) 226,365
Notes payable, bank
credit agreement....... 3,000 182,146 -- -- 185,146
Senior subordinated
notes.................. 131,636 74,054 -- -- 205,690
Junior subordinated
payment in kind note... 41,200 -- -- -- 41,200
Other long-term debt,
less current
maturities............. 6,000 -- 316,644 (319,074) 3,570
Guaranteed Employees'
Stock Ownership Plan
obligation............. 6,347 -- -- -- 6,347
Post-retirement benefit
liability.............. 14,799 -- -- -- 14,799
Minimum pension
liability.............. 3,135 -- -- -- 3,135
Other long-term
liabilities............ 475 (241) 7,030 (123) 7,141
-------- -------- -------- ---------- --------
264,395 339,173 494,043 (404,218) 693,393
Redeemable convertible
preferred stock........ 24,000 -- -- -- 24,000
Guaranteed Employees'
Stock Ownership Plan
obligation............. (6,347) -- -- -- (6,347)
Treasury stock, at cost. (4,712) -- -- -- (4,712)
-------- -------- -------- ---------- --------
12,941 -- -- -- 12,941
Common stock............ 90,354 107,267 14,960 (122,227) 90,354
Common stock warrants... 20,000 -- -- -- 20,000
Minimum pension
liability.............. (3,135) -- -- -- (3,135)
Foreign currency
translation
adjustments............ (8,522) (34,650) (4,683) -- (47,855)
Retained earnings
(accumulated deficit).. (29,783) 30,024 (25,693) (14,644) (40,096)
-------- -------- -------- ---------- --------
68,914 102,641 (15,416) (136,871) 19,268
Less treasury stock, at
cost................... (695) -- -- -- (695)
-------- -------- -------- ---------- --------
68,219 102,641 (15,416) (136,871) 18,573
-------- -------- -------- ---------- --------
Total liabilities
and shareholders'
equity............. $345,555 $441,814 $478,627 $ (541,089) $724,907
======== ======== ======== ========== ========
</TABLE>
F-12
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
CONSOLIDATED CONDENSED BALANCE SHEET
As of November 30, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(Amounts In thousands)
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 849 $ 5,381 $ 20,571 $ -- $ 26,801
Accounts receivables,
net.................. 52,303 32,643 133,868 (46,121) 172,693
Inventories, net...... 16,720 18,255 88,369 (311) 123,033
Other current assets.. 1,921 759 16,459 -- 19,139
-------- -------- -------- --------- --------
Total current assets.. 71,793 57,038 259,267 (46,432) 341,666
Investments in
subsidiaries......... 112,268 13,869 3,197 (129,334) --
Property, plant, and
equipment, net....... 21,906 10,908 45,091 -- 77,905
Goodwill, net......... 15,765 89,590 218,758 -- 324,113
Other non-current
assets and deferred
charges, net......... 107,666 259,055 5,787 (339,550) 32,958
-------- -------- -------- --------- --------
Total assets........ $329,398 $430,460 $532,100 $(515,316) $776,642
======== ======== ======== ========= ========
Liabilities and
Shareholders' Equity
Current maturities of
long-term debt......... $ -- $ -- $ 2,110 $ -- $ 2,110
Notes payable to banks.. -- -- 410 -- 410
Cash overdrafts......... -- 21 15,043 -- 15,064
Accounts payable........ 32,782 24,750 84,107 (46,317) 95,322
Accrued expenses........ 16,458 42,193 77,513 -- 136,164
-------- -------- -------- --------- --------
Total current
liabilities............ 49,240 66,964 179,183 (46,317) 249,070
Notes payable, bank
credit agreement....... -- 182,145 -- -- 182,145
Senior notes............ 22,500 -- -- -- 22,500
Senior subordinated
notes.................. 95,946 74,054 -- -- 170,000
Junior subordinated
payment in kind note... 40,000 -- -- -- 40,000
Other long-term debt,
less current
maturities............. 9,409 -- 322,997 (328,291) 4,115
Guaranteed Employees'
Stock Ownership Plan
obligation............. 6,987 -- -- -- 6,987
Post-retirement benefit
liability.............. 14,418 -- -- -- 14,418
Minimum pension
liability.............. 3,135 -- -- -- 3,135
Other long-term
liabilities............ 475 (217) 7,366 (113) 7,511
-------- -------- -------- --------- --------
242,110 322,946 509,546 (374,721) 699,881
Redeemable convertible
preferred stock........ 24,000 -- -- -- 24,000
Guaranteed Employees'
Stock Ownership Plan
obligation............. (6,987) -- -- -- (6,987)
Treasury stock, at cost. (4,883) -- -- -- (4,883)
-------- -------- -------- --------- --------
12,130 -- -- -- 12,130
Common stock............ 90,354 107,243 14,960 (122,203) 90,354
Common stock warrants... 20,000 -- -- -- 20,000
Minimum pension
liability.............. (3,135) -- -- -- (3,135)
Foreign currency
translation
adjustments............ (12,547) (313) (9,738) -- (22,598)
Retained earnings
(accumulated deficit).. (18,819) 584 17,332 (18,392) (19,295)
-------- -------- -------- --------- --------
75,853 107,514 22,554 (140,595) 65,326
Less treasury stock, at
cost................... (695) -- -- -- (695)
-------- -------- -------- --------- --------
75,158 107,514 22,554 (140,595) 64,631
-------- -------- -------- --------- --------
Total liabilities
and shareholders'
equity............. $329,398 $430,460 $532,100 $(515,316) $776,642
======== ======== ======== ========= ========
</TABLE>
F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors, Tokheim Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, cash flows and shareholders' equity
present fairly, in all material respects, the financial position of Tokheim
Corporation and its subsidiaries at November 30, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended November 30, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
February 19, 1999
Fort Wayne, Indiana
F-14
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
for the years ended November 30, 1998, 1997, and 1996
(Amounts in thousands except dollars per share)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $466,440 $385,469 $279,733
Cost of sales, exclusive of items listed below... 345,031 283,932 210,223
Selling, general, and administrative expenses.... 79,819 68,167 51,667
Depreciation and amortization.................... 13,136 9,232 5,028
Merger and acquisition costs and other unusual
items........................................... 13,685 3,493 6,459
-------- -------- --------
Operating profit................................. 14,769 20,645 6,356
Interest expense (net of interest income of $822,
$837 and $602, respectively).................... 19,257 16,451 7,191
Foreign currency (gain) loss..................... (1,442) 48 159
Minority interest in subsidiaries................ 327 394 393
Other income, net................................ (675) (1,445) (158)
-------- -------- --------
Earnings (loss) before income taxes and
extraordinary loss.............................. (2,698) 5,197 (1,229)
Income taxes..................................... 1,046 1,217 780
-------- -------- --------
Earnings (loss) before extraordinary loss........ (3,744) 3,980 (2,009)
Extraordinary loss on debt extinguishment........ (23,924) (1,886) --
-------- -------- --------
Net earnings (loss).............................. (27,668) 2,094 (2,009)
Preferred stock dividends ($1.94 per share)...... (1,484) (1,512) (1,543)
-------- -------- --------
Earnings (loss) applicable to common stock....... $(29,152) $ 582 $ (3,552)
======== ======== ========
Earnings (loss) per common share:
Basic
Before extraordinary loss.................... $ (0.46) $ 0.31 $ (0.45)
Extraordinary loss on debt extinguishment.... (2.10) (0.23) --
-------- -------- --------
Net earnings (loss).......................... $ (2.56) $ 0.08 $ (0.45)
======== ======== ========
Weighted average shares outstanding.......... 11,371 8,042 7,940
======== ======== ========
Diluted
Before extraordinary loss.................... $ (0.46) $ 0.27 $ (0.45)
Extraordinary loss on debt extinguishment.... (2.10) (0.21) --
-------- -------- --------
Net earnings (loss).......................... $ (2.56) $ 0.06 $ (0.45)
======== ======== ========
Weighted average shares outstanding.......... 11,371 9,005 7,940
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended November 30, 1998, 1997, and 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss)............................ $(27,668) $ 2,094 $ (2,009)
Adjustments to reconcile net earnings (loss) to
net cash provided from operating activities:
Write-off of in-process research and
development................................. 5,879 -- --
Extraordinary loss on debt extinguishment.... 23,924 1,886 --
Depreciation and amortization................ 13,136 9,232 5,028
Gain on sale of property, plant, and
equipment................................... (36) (408) (59)
Deferred income taxes........................ (431) (139) (251)
Changes in assets and liabilities (net of
effects of the acquisitions in 1998 and
1996):
Receivables, net........................... (21,439) 4,254 2,363
Inventories................................ 4,327 5,975 (2,626)
Other current assets....................... 3,185 (2,001) 5,987
Accounts payable........................... 7,691 5,116 (1,425)
Accrued expenses........................... 6,370 (3,395) 4,249
Other...................................... (5,148) (1,412) (5,360)
-------- -------- --------
Net cash provided from operating
activities.............................. 9,790 21,202 5,897
-------- -------- --------
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired............. (110,641) -- (52,105)
Property, plant, and equipment additions....... (14,548) (11,154) (3,061)
Proceeds from sale of property, plant and
equipment..................................... 775 760 1,087
-------- -------- --------
Net cash used in investing activities.... (124,414) (10,394) (54,079)
-------- -------- --------
Cash Flows From Financing Activities:
Proceeds from senior notes..................... 22,500 -- --
Proceeds from senior subordinated notes........ -- -- 100,000
Redemption of senior subordinated notes........ (90,000) (10,000) --
Payments on term and other debt................ (4,267) (3,747) (31,800)
Net increase (decrease) in notes payable,
banks......................................... 158,769 1,770 (5,044)
Net increase in cash overdraft................. 3,571 1,874 7,237
Debt issuance costs............................ (16,157) -- (11,506)
Proceeds from issuance of common stock......... 74,057 1,706 42
Equity issuance costs.......................... (4,858) -- --
Treasury stock, net............................ (719) (496) (370)
Premiums paid on debt extinguishment........... (15,743) (1,390) --
Preferred stock dividends...................... (1,484) (1,512) (1,543)
-------- -------- --------
Net cash provided from (used in)
financing activities.................... 125,669 (11,795) 57,016
-------- -------- --------
Effect of translation adjustments on cash........ 9,318 (2,389) (4,482)
-------- -------- --------
Increase (decrease) in cash.................... 20,363 (3,376) 4,352
Cash and cash equivalents:
Beginning of year.............................. 6,438 9,814 5,462
-------- -------- --------
End of year.................................... $ 26,801 $ 6,438 $ 9,814
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
CONSOLIDATED BALANCE SHEET
as of November 30, 1998 and 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................. $ 26,801 $ 6,438
Accounts receivable, less allowance for doubtful accounts
of $2,115 and $1,392, respectively........................ 172,693 83,011
Inventories:
Raw materials and supplies............................... 70,545 29,427
Work in process.......................................... 27,418 27,514
Finished goods........................................... 25,070 7,406
-------- --------
123,033 64,347
Other current assets....................................... 19,139 6,705
-------- --------
Total current assets..................................... 341,666 160,501
Property, plant and equipment, at cost:
Land and land improvements................................. 5,644 4,679
Buildings and building improvements........................ 41,803 27,956
Machinery and equipment.................................... 97,138 70,068
Construction in progress................................... 6,041 4,514
-------- --------
150,626 107,217
Less accumulated depreciation............................ 72,721 64,682
-------- --------
77,905 42,535
Other tangible assets........................................ 4,873 3,615
Goodwill, net................................................ 324,113 67,695
Other non-current assets and deferred charges, net........... 28,085 16,273
-------- --------
Total assets............................................. $776,642 $290,619
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
CONSOLIDATED BALANCE SHEET
as of November 30, 1998, and 1997
(Amounts in thousands except dollars per share)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt.................... $ 2,110 $ 2,391
Notes payable to banks.................................. 410 98
Cash overdrafts......................................... 15,064 10,575
Accounts payable........................................ 95,322 54,597
Accrued expenses........................................ 136,164 51,190
-------- --------
Total current liabilities............................. 249,070 118,851
Notes payable, bank credit agreement...................... 182,145 24,090
Senior notes.............................................. 22,500 --
Senior subordinated notes................................. 170,000 90,000
Junior subordinated payment-in-kind notes................. 40,000 --
Other long-term debt, less current maturities............. 4,115 4,397
Guaranteed Employees' Stock Ownership Plan (ESOP)
obligation............................................... 6,987 9,429
Post-retirement benefit liability......................... 14,418 14,378
Minimum pension liability................................. 3,135 2,173
Other long-term liabilities............................... 7,511 6,830
-------- --------
699,881 270,148
-------- --------
Commitments and contingencies (Note 20)
Redeemable convertible preferred stock, at liquidation
value of $25 per share, 1,700 shares authorized, 960
shares issued............................................ 24,000 24,000
Guaranteed Employees' Stock Ownership Plan (ESOP)
obligation............................................... (6,987) (9,429)
Treasury stock, at cost, 195 and 189 shares,
respectively............................................. (4,883) (4,718)
-------- --------
12,130 9,853
-------- --------
Preferred stock, no par value; 3,300 shares authorized and
unissued................................................. -- --
Common stock, no par value; 30,000 shares authorized,
12,698 and 8,232 shares issued, respectively............. 90,354 21,158
Common stock warrants..................................... 20,000 --
Minimum pension liability................................. (3,135) (2,173)
Foreign currency translation adjustments.................. (22,598) (18,048)
Retained earnings (accumulated deficit)................... (19,295) 9,821
-------- --------
65,326 10,758
Treasury stock, at cost, 38 and 9 shares, respectively.... (695) (140)
-------- --------
64,631 10,618
-------- --------
Total liabilities and shareholders' equity............ $776,642 $290,619
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the years ended November 30, 1998, 1997 and 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Foreign Retained Total
-------------------- Guaranteed Minimum Currency Earnings Common
Outstanding Treasury ESOP Pension Translation (Accumulated Shareholders'
Amount Amount Warrants Obligation Obligation Adjustments Deficit) Equity
----------- -------- -------- ---------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at November 30,
1995................... $19,409 $(231) $ -- $(786) $(3,868) $ (3,542) $ 12,815 $23,797
Stock options
exercised............. 43 -- -- -- -- -- -- 43
Employee termination
benefits.............. -- 11 -- -- -- -- -- 11
Treasury stock
purchases............. -- 28 -- -- -- -- -- 28
Decrease in guaranteed
ESOP obligation....... -- -- -- 483 -- -- -- 483
Minimum pension
liability adjustment.. -- -- -- -- 620 -- -- 620
Foreign currency
translation
adjustments........... -- -- -- -- -- (3,729) -- (3,729)
Net loss............... -- -- -- -- -- -- (2,009) (2,009)
Treasury stock
transactions.......... -- -- -- -- -- -- (23) (23)
Preferred stock
dividends............. -- -- -- -- -- -- (1,543) (1,543)
------- ----- ------- ----- ------- -------- -------- -------
Balance at November 30,
1996................... $19,452 $(192) $ -- $(303) $(3,248) $ (7,271) $ 9,240 $17,678
Stock options
exercised............. 1,706 -- -- -- -- -- -- 1,706
Treasury stock
purchases............. -- 52 -- -- -- -- -- 52
Decrease in guaranteed
ESOP obligation....... -- -- -- 303 -- -- -- 303
Minimum pension
liability adjustment.. -- -- -- -- 1,075 -- -- 1,075
Foreign currency
translation
adjustments........... -- -- -- -- -- (10,777) -- (10,777)
Net earnings........... -- -- -- -- -- -- 2,094 2,094
Treasury stock
transactions.......... -- -- -- -- -- -- (1) (1)
Preferred stock
dividends............. -- -- -- -- -- -- (1,512) (1,512)
------- ----- ------- ----- ------- -------- -------- -------
Balance at November 30,
1997................... $21,158 $(140) $ -- -- $(2,173) $(18,048) $ 9,821 $10,618
Stock options
exercised............. 1,472 -- -- -- -- -- -- 1,472
Common stock offering.. 67,724 -- -- -- -- -- -- 67,724
Common stock warrants
issued................ -- -- 20,000 -- -- -- -- 20,000
Treasury stock
purchases............. -- (555) -- -- -- -- -- (555)
Minimum pension
liability adjustment.. -- -- -- -- (962) -- -- (962)
Foreign currency
translation
adjustments........... -- -- -- -- -- (4,550) -- (4,550)
Net (loss)............. -- -- -- -- -- -- (27,668) (27,668)
Minority interest
dividends............. -- -- -- -- -- -- 36 36
Preferred stock
dividends............. -- -- -- -- -- -- (1,484) (1,484)
------- ----- ------- ----- ------- -------- -------- -------
Balance at November 30,
1998................... $90,354 $(695) $20,000 $ -- $(3,135) $(22,598) $(19,295) $64,631
======= ===== ======= ===== ======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except dollars per share)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The Consolidated Financial Statements include
the accounts of Tokheim Corporation and its wholly- and majority-owned
subsidiaries (the "Company"). The Consolidated Financial Statements include
100% of the assets and liabilities of these subsidiaries, with the ownership
interest of minority participants recorded as minority interest. All
significant intercompany accounts and transactions have been eliminated in
consolidation. In September 1996, the Company acquired the petroleum dispenser
business ("Sofitam") of Sofitam, S.A., in December 1997, the Company acquired
Management Solutions Inc ("MSI"), and in September 1998, the Company acquired
the fuel dispenser systems and service business (the "RPS Division") of
Schlumberger Limited. The accounts of these three acquired companies are
included in the Consolidated Financial Statements since the respective dates
listed above. (See Note 2.)
Nature of Operations--The Company engages principally in the design,
manufacture and servicing of electronic and mechanical petroleum dispensing
marketing systems, including service station equipment, point-of-sale control
systems, and card- and cash-activated transaction systems for customers around
the world. The Company markets its products through subsidiaries located
throughout the world and has major facilities in the United States, France,
Canada, Germany, Italy, the Netherlands, Scotland, and South Africa.
Translation of Foreign Currency--The financial position, results of
operations and cash flows of the Company's foreign subsidiaries are measured
using local currency as the functional currency. Revenues and expenses of such
subsidiaries have been translated into U.S. dollars at average exchange rates
prevailing during the period. Assets and liabilities have been translated at
the rates of exchange at the balance sheet date. Translation gains and losses
are deferred as a separate component of shareholders' equity. Aggregate foreign
currency transaction gains and losses are included in determining net earnings.
Revenue Recognition--Revenue from sales of fuel dispensers and service parts
is recorded at the time the goods are shipped. On-call service revenue is
recognized when the service has been performed.
Revenue and costs associated with separately priced customer service
contracts are recognized such that (a) revenue is recognized ratably over the
contract period; (b) costs are expensed as incurred (incremental direct
acquisition costs are not material); and (c) losses are recognized on contracts
where the expected future costs exceed future revenue (no such contracts
existed at November 30, 1998). Customer service contracts include service and
maintenance agreements and extended warranty agreements for fuel dispensers and
point-of-sale system hardware and software.
Revenue from long-term construction contracts is recognized on the
percentage-of-completion method. Percentage-of-completion for the service
station construction business is measured principally by the percentage of
costs incurred for each contract to date relative to the estimated total costs
at completion. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Revenue from long-term
construction contracts is not material to the overall consolidated revenue.
Revenue from the sale of software and point-of-sale systems which is
dependent on software is recognized at the time of delivery as no significant
future Company obligations are required under the terms of the sales agreement
and the criteria of paragraph 8 of Statement of Position No. 97-2 "Software
Revenue Recognition" has been satisfied.
Risks and Uncertainties--The Company is not dependent on any single customer,
group of customers, market, geographic area or supplier of materials, labor or
services. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the Consolidated Financial
Statements and accompanying notes. The more significant areas requiring the use
of management's estimates include allowances for obsolete inventory and
uncollectible receivables, product warranty claims, environmental and product
liabilities, postretirement, pension, and other employee benefits, valuation
allowances for deferred tax assets, future
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
obligations associated with the Company's restructuring plans, future cash
flows associated with assets, and useful lives for depreciation and
amortization. Actual results could differ from these estimates, making it
reasonably possible that a change in certain of these estimates could occur in
the near term. Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and trade
receivables. The Company places its cash with high credit quality financial
institutions. At times, cash in United States banks may exceed FDIC insurance
limits. Concentration of credit risk with respect to trade receivables is
considered to be minimal due to the Company's large customer base and ongoing
control procedures, which monitor the credit worthiness of customers.
Fair Value of Financial Instruments--The fair value of cash and cash
equivalents, trade receivables, and accounts payable approximates the carrying
value because of the short-term maturities of these financial instruments.
The interest rate on the Company's bank credit agreement (the "New Credit
Agreement") fluctuates with current market rates. Consequently, the carrying
value of the New Credit Agreement approximates the market prices for the same
or similar issues in future periods. The estimated fair value of the Company's
12.0% senior subordinated notes (the "Senior Subordinated Seller Notes") and
the Company's 12.5% senior notes due 2005 (the "Senior Notes") approximated the
carrying value at November 30, 1998 since both notes were redeemed at face
value on January 29, 1999. The Company estimates that the fair value of the
$40,000 Junior Subordinated 12.0% Payment-in-Kind notes (the "Junior Notes")
approximated the carrying value at November 30, 1998 as there were no
significant changes in the market conditions or risks related to these notes
during the two month period between the time when the notes were issued on
September 30, 1998 and November 30, 1998.
The fair value of the Company's $20,000 common stock warrants (the
"Warrants") approximates $21,795 at November 30, 1998. This amount is computed
based on the Company's November 30, 1998 common stock price of $8.625 per share
less the nominal consideration to be received if exercised.
The fair value of the Company's convertible preferred stock, which is held in
the Trust of the Company's Retirement Savings Plan ("RSP"), approximates the
carrying value, as such stock is not traded in the open market, and the value
at conversion is equal to a fixed redemption value in cash or equivalent
amounts of common stock.
Inventory Valuation--Inventories are valued at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO) method.
Property and Depreciation--Depreciation of plant and equipment is generally
determined on a straight-line basis over the estimated useful lives of the
assets. Upon retirement or sale of assets, the cost of the disposed assets and
related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is credited or charged to income. These gains and losses
are accumulated and shown as a component of other income, net in the statement
of earnings. Buildings are generally depreciated over 40 years. Machinery and
equipment are depreciated over periods ranging from five to ten years.
Expenditures for normal repairs and maintenance are charged to expense as
incurred. Expenditures for improving or rebuilding existing assets which extend
the useful life of the assets are capitalized.
Software and Research and Development Costs--Costs incurred to address year
2000 issues are expensed when incurred. Unamortized software costs included in
other non-current assets were $8,711, and $1,089 at November 30, 1998 and 1997,
respectively. The amounts amortized and charged to expense in 1998, 1997 and
1996 were $2,025, $260 and $163, respectively. Included in unamortized software
costs at November 30, 1998
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
is approximately $4,850 related to software technology costs capitalized in
connection with the acquisition of MSI. Amortization of capitalized software
development costs offered for sale is provided over the estimated economic
useful life of the software product on a straight-line basis, generally three
to four years.
In 1998 Tokheim adopted Statement of Position (SOP) No. 98-1, "Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use." Costs
incurred related to software developed or obtained for internal use are
capitalized during the application development stage of the software
development and are amortized over three years. Prior to the adoption of SOP
No. 98-1 the Company capitalized the cost of purchased software and fees paid
to external software consultants that assist in the development and
installation of internally used software. Since the adoption of SOP 98-1, the
Company continues to capitalize these costs and additionally capitalizes
internal employee's wages and benefits associated with internally developed
software. During 1998 the Company capitalized approximately $1,200 in
connection with internally developed software under SOP 98-1.
All other product development expenditures are charged to research and
development expense in the period incurred. These expenses amounted to $21,080,
$18,284 and $15,909 in 1998, 1997 and 1996, respectively. In addition to these
expenses, the Company wrote off $5,879 of in-process research and development
expenses in connection with the acquisition of MSI and the related purchase
price allocation. See Note 2 for additional information.
Goodwill and Other Intangible Assets--Goodwill is amortized on a straight-
line basis over 40 years. The Company will continue to review facts and
circumstances to determine whether the remaining estimated useful life of
goodwill warrants revision or whether the carrying amount may not be
recoverable, using profitability projections to assess whether future operating
income on a non-discounted basis is likely to exceed the amortization over the
remaining life of the goodwill. The amounts amortized and charged to expense in
1998, 1997 and 1996 were approximately $2,709, $1,490 and $420, respectively.
Accumulated amortization of goodwill at November 30, 1998 and 1997 was $4,619
and $1,910, respectively. The Company is in the process of valuing certain
tangible and intangible assets acquired with the RPS Division and will finalize
the preliminary purchase price allocation upon completion of these valuations.
The goodwill recorded in connection with the RPS Division is currently being
amortized over 40 years. The Company will determine the appropriate amounts and
useful lives of the identified intangible assets upon completion of the
valuations. Finalization of the purchase price allocation is not expected to
have a material impact on the Company's financial position or results of
operations as of and for the year ended November 30, 1998. The Company
evaluates the recoverability of goodwill by comparing the estimated future
undiscounted cash flows associated with the recorded goodwill with its carrying
value. The amount of the goodwill impairment, if any, is determined by
calculating the difference in the recorded carrying value of the goodwill as
compared with the estimated undiscounted future cash flows that the goodwill is
expected to generate. If the carrying value of goodwill is greater than the
estimated undiscounted future cash flows, the goodwill value is written down to
the amount of the estimated undiscounted future cash flows and a charge to
earnings is recorded for the impairment amount calculated.
Other non-current assets and deferred charges consist primarily of debt
issuance costs. These costs are amortized over the terms of the related debt
agreements on a straight-line basis, which is not materially different from the
effective interest method, with periods ranging from six to eight years.
Amortization of these deferred charges included in interest expense at November
30, 1998, 1997 and 1996 was $1,658, $1,623, and $401, respectively. During
1998, the Company capitalized $16,160 of debt issuance costs incurred in
connection with the acquisition of the RPS Division and related financing and
charged $6,666 of deferred debt issuance costs to extraordinary loss on debt
extinguishment. During 1997, the Company charged $496 of deferred bond issuance
costs to extraordinary loss on debt extinguishment. This amount represents the
write-off of a proportionate share of the original unamortized deferred
issuance cost incurred in connection with the issuance of the senior
subordinated notes for the acquisition of Sofitam. During 1996, the Company
wrote-off approximately $233 of deferred debt issuance costs and capitalized
approximately $11,506 of costs incurred in
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
connection with the refinancing of the Company's preexisting debt and issuance
of senior subordinated notes. Accumulated amortization of other non-current
assets and deferred charges at November 30, 1998 and 1997 was $420 and $2,520,
respectively.
Advertising and Promotion--All costs associated with advertising and product
promotion are expensed in the period incurred. These expenses amounted to
$3,577, $2,687 and $2,268 in 1998, 1997 and 1996, respectively.
Income Taxes--The Company accounts for income taxes under the liability
method in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109 "Accounting for Income Taxes." The provision for income taxes includes
federal, foreign, state and local income taxes currently payable as well as
deferred taxes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in years in which those
temporary differences are expected to be recovered or settled. If it is more
likely than not that some portion or all of a deferred tax asset will not be
realized, a valuation allowance is recognized. No additional U.S. income taxes
or foreign withholding taxes have been provided on accumulated earnings of
foreign subsidiaries approximating $20,543 which are expected to be reinvested
indefinitely. (See Note 15).
Environmental Cleanup Matters--The Company adopted The American Institute of
Certified Public Accountants ("AICPA") Statement of Position ("SOP") No. 96-1,
"Environmental Remediation Liabilities" during 1998. This SOP did not have a
material impact on the Company's financial position, results of operations or
cash flows for 1998. The Company expenses environmental expenditures related to
existing conditions resulting from past or current operations and from which no
current or future benefit is discernible. Expenditures which extend the life of
the related property or mitigate or prevent future environmental contamination
are capitalized. The Company determines its liability on a site by site basis
and records a liability at the time when the associated expenses can be
reasonably estimated.
New Accounting Pronouncements
SFAS No. 129, "Disclosure of Information about Capital Structure," was
adopted during the first quarter of the fiscal year ended November 30, 1998.
This statement did not have a material impact on the Company's financial
position, results of operations or cash flows as disclosure requirements did
not change for the Company with this new statement. SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," and SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," are
effective for the year ending November 30, 1999. In the opinion of management,
these statements will not have a material impact on the Company's financial
position, results of operations, or cash flows since they are "disclosure only"
standards. The Company is currently evaluating the impact that SFAS No. 131
will have on its current segment groupings. SFAS No. 130, "Reporting
Comprehensive Income," is effective for the year ending November 30, 1999. Due
to the significance of the foreign currency translation adjustments recorded,
comprehensive income would have been less than reported net earnings or reduced
net loss had SFAS No. 130 been adopted. SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued in June 1998 and is
effective for the year ending November 30, 2000. SFAS No. 133 establishes a new
model for accounting for derivatives in the balance sheet as either assets or
liabilities and measures them at fair value. Certain disclosures concerning the
designation and assessment of hedging relationships are also required.
Management has not yet determined the impact of this statement on the Company's
consolidated financial statements.
SOP No. 97-2 "Software Revenue Recognition," is effective for the Company for
the year ended November 30, 1999. SOP No. 97-2 supersedes SOP No. 91-1 and
provides more specific guidance on revenue recognition related to software
products. The Company does not expect the adoption of SOP No. 97-2 to have a
material impact on the Company's financial position, results of operations or
cash flows.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
Product Warranty Costs--Anticipated costs related to product warranty are
expensed in the period of sale. Amounts accrued and charged to expense are
estimated based on historical warranty claim experience.
Cash Flows--For purposes of the Statement of Cash Flows, the Company
considers all highly liquid investments purchased with an initial maturity of
90 days or less to be cash equivalents.
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
Cash paid during the year for interest............ $ 15,930 $15,204 $ 4,918
Cash paid during the year for income taxes........ 1,194 921 1,013
Senior Subordinated Seller Notes issued in
connection with the RPS acquisition.............. 170,000 -- --
Junior Notes issued in connection with the RPS
acquisition...................................... 40,000 -- --
Liabilities assumed in the Acquisitions including
accrued merger and acquisition costs............. 101,830 -- 123,575
</TABLE>
Reclassifications--Certain prior year amounts in these financial statements
have been reclassified to conform with the current year presentation.
2. ACQUISITIONS
Acquisition of MSI--In December 1997, the Company acquired MSI. MSI develops
and distributes retail automation systems (including Point of Sale ("POS")
software), primarily for the convenience store, petroleum dispensing and fast
food service industries. The Company paid MSI's stockholders an initial amount
of $12,000. The Company is also obligated to make contingent payments of up to
$13,200 over the years 1998, 1999 and 2000 based upon MSI's performance. The
$13,200 consists of $8,000 of additional purchase price, $2,600 related to a
non-compete agreement, and $2,600 of additional employee compensation. The
Company borrowed funds for the initial purchase price under the Company's Old
Credit Agreement.
The MSI acquisition has been accounted for as a purchase, and accordingly,
the results of operations of MSI have been included in the Company's
Consolidated Financial Statements since the date of acquisition. Assets of
approximately $2,700 were acquired and liabilities of approximately $1,400 were
assumed and have been recorded at their determined fair values. An independent
valuation was performed for intangible assets acquired. As such, intangible
software technology was recorded which is being amortized over four years and
$5,879 was allocated to in-process research and development projects that have
not reached technological feasibility and have no alternative future use. This
amount was charged to operations at the date of acquisition and is included in
merger and acquisition costs and other unusual items in the consolidated
statement of earnings. The portion of the contingent payments that do not
relate to employee compensation will be allocated to various intangible assets
and goodwill and amortized over periods ranging from four to twelve years, if
payments are required. The Company was not required to make any contingent
purchase price payments for the year ended November 30, 1998.
As of the acquisition date, MSI was developing the CVN POS(TM) for Windows(R)
solution (CVN Windows) in order to provide a next-generation comprehensive
point of sale (POS) software application in the convenience store, petroleum
dispensing and fast food service industries. CVN Windows will incorporate a
graphical user interface with touch screen controls and allow the system to be
used with most POS systems. CVN Windows was under development for approximately
two years and was in the alpha testing stage at the time of the acquisition. At
the date of acquisition, approximately 85% of the research and development
costs related to CVN Windows had been incurred, based on remaining costs to
complete development, testing and quality assurance. The Company expects to
complete the development tasks for CVN Windows remaining at November 30, 1998
by the third quarter, with projected expenditures of approximately $1,000.
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
The CVN POSTM for Windows(R) project is not an adaptation, refinement,
enrichment, or improvement of existing capabilities. It is a new, next-
generation software application aimed for use in the petroleum and mini-mart
service station industry for controlling and monitoring petroleum and
Convenience store items, as well as tracking and controlling cashier functions
for correct operations and cash management. The CVN POSTM for Windows(R)
solution has required extensive programming of the disk operating system (DOS)-
based product in order to incorporate a new database design, product features,
graphical user interface, and enhanced system performance. These development
activities represent substantial engineering in order to implement a new
operating system platform. Moreover, these development efforts represent non-
routine programming, testing, and systems integration considering the
functionality improvements required with increased performance specification.
The remaining processes yet to be completed for the CVN POSTM for Windows
included the development of credit network modules for various customer
networks and the complete functional testing of the system. The operating
functionality of the CVN POSTM for Windows(R) is to provide Fuel Console
functions, electronic cash register functions, electronic payment processing
function and control of island or dispenser payment terminal control functions.
The CVN POSTM for Windows(R) is targeted at Convenience store and petroleum
refueling stations. This product is a new product offering to new customers and
as a migration product for our existing customers. This software provides for
the integration of gas pump controls, scanning and cash register functions into
a single terminal.
To determine the fair value of acquired IPR&D and other identifiable
intangible assets, the Company used an independent appraisal which utilized
standard appraisal methodologies. The appraisal procedures performed to
establish the fair value of IPR&D involved projected cash flows for CVN Windows
over the next five years, commensurate with its useful life, net of capital
charges for all employed intangible and tangible assets. We assessed the degree
of reliance on specific core technology based on the remaining use of the core
technology over the next five years. This has been reflected in the valuation
through a charge or economic rent against IPR&D profit over the next five
years, which was discounted to present value, using a discount rate that
reflected a 700 basis point risk premium reflective of the in process nature of
the remaining activities. This risk assessment reflects uncertainty related to
the Company's ability to successfully integrate remaining functionality and
performance features into the CVN Windows product, combined with the added
complexity of implementing legacy functionality onto a Windows platform. If the
Company is delayed in its market entry with the completed CVN Windows product,
it could adversely affect future operations.
RPS Division Acquisition--On September 30, 1998 the Company completed the
Acquisition of the RPS Division for a purchase price equal to $330,000, of
which $100,000 of which was paid in cash borrowed under the terms of the New
Credit Agreement as well as $22,500 of Senior Notes. The $210,000 seller note
portion of the purchase price consisted of $40,000 in Junior Notes, and
$170,000 in Senior Subordinated Seller Notes. $20,000 of the purchase price was
paid in the form of Warrants. See Note 7, 8 and 12 for additional information
on the debt and warrant instruments used to finance the Acquisition.
The RPS Division is a leading manufacturer and servicer of fuel dispensing
systems in Western Europe.
The Acquisition has been accounted for as a purchase and the RPS Division's
results of operations have been included in the Consolidated Financial
Statements of the Company from the date of acquisition. The purchase price has
been preliminarily allocated to assets acquired and liabilities assumed based
on the RPS Division's net book value of assets as of September 30, 1998, as
adjusted, which is estimated to approximate fair value. The purchase price
allocated under this assumption is preliminary and exceeded the estimated fair
value of tangible net assets acquired by $263,389, which has been recorded as
goodwill. The Company is in the process of valuing certain tangible and
intangible assets acquired with the RPS Division and will finalize the
preliminary purchase price allocation upon completion of these valuations. The
goodwill recorded in connection with the RPS Division is currently being
amortized over 40 years. The Company will determine the appropriate amounts and
useful lives of the identified intangible assets upon completion of the
valuations. Finalization of the purchase price allocation is not expected to
have a material impact on the Company's financial position or results of
operations as of and for the year ended November 30, 1998. The Company is to
reimburse Schlumberger Limited for cash (net of adjustments) that remained in
the RPS Division at the date of closing of
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
the Acquisition. This amount is currently estimated to be approximately $6,500.
It is anticipated that this payment will be made in the second quarter of 1999
using the revolving working capital facility under the New Credit Agreement.
Included in accrued liabilities are certain costs the Company will incur to
effect an integration and rationalization plan for the RPS Division's
operations. These costs represent involuntary termination costs and other
closure costs in connection with closing redundant manufacturing and service
operations. These accrued costs do not include costs associated with
consolidation of previously existing Tokheim subsidiaries, which will be
expensed as incurred or separately accrued once all criteria for accrual are
met, nor do these costs benefit future periods. The Company expects the
integration and rationalization plan to be completed by the end of the year
2000. The Company expects to reduce headcount by approximately 535 employees.
The employees being reduced form a cross section from manufacturing,
engineering, selling, general and administrative functions. The table below
summarizes the accrued liability by major category and when such costs are
expected to be incurred:
<TABLE>
<CAPTION>
Fiscal Fiscal Total
Year Year Expected
1999 2000 Costs
------- ------ --------
<S> <C> <C> <C>
Involuntary employee termination benefits for
approximately 535 employees............................ $11,398 $7,218 $18,616
Asset write-off and disposal costs...................... 483 -- 483
Leases and other contractual termination costs.......... 1,195 -- 1,195
------- ------ -------
Total accrued integration and rationalization costs. $13,076 $7,218 $20,294
======= ====== =======
</TABLE>
During 1998, approximately $371 was charged against the accrual, primarily
for employee termination costs.
The table below summarizes the acquisition liabilities as they relate to the
consolidation plan for Sofitam which was established in 1996. The amounts do
not include costs associated with consolidation of previously- existing Tokheim
subsidiaries, which were or will be expensed as incurred, nor do they reflect
costs expected to provide benefits in future periods. The Company expects the
consolidation plan to be completed by the end of 1999. (See Note 3 for
additional information regarding the Company's consolidation plan.)
<TABLE>
<CAPTION>
Charged to
November 30, 1997 Acquisition November 30, 1998
Item Balance Accrual Balance
---- ----------------- ----------- -----------------
<S> <C> <C> <C>
Involuntary employee
termination benefits (A)...... $4,124 $2,279 $1,845
Asset write-off and disposal
costs (B)..................... 2,232 154 2,078
Leases and other contract
terminations costs............ 941 863 78
------ ------ ------
$7,297 $3,296 $4,001
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
November 30, 1996 Adjustments
Original to Charged to
Acquisition Acquisition Acquisition November 30, 1997
Item Accrual Accrual Accrual Balance
---- ----------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
Involuntary employee
termination benefits
(A).................... $6,651 $(186) $2,341 $4,124
Asset write-off and
disposal costs (B)..... 2,108 183 59 2,232
Leases and other
contract terminations
costs.................. 1,040 700 799 941
------ ----- ------ ------
$9,799 $ 697 $3,199 $7,297
====== ===== ====== ======
</TABLE>
- --------
(A) Approximately 300 employees included in the original consolidation plan.
(B) For 9 locations under the original consolidation plan.
The asset write-off and disposal cost liability represents equipment and
inventory write-offs and write-downs for impaired assets. These assets are
located at the Company's France, Spain, Belgium, and German facilities
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
which were scheduled to be closed under the Sofitam consolidation and
integration plan during 1999. The assets consist primarily of production
tooling and inventory related to products that will be discontinued, and
furniture and fixtures which will not be moved to other facilities. Due to the
legal and social procedures that must be followed in these European countries,
the consolidation of these facilities and eventual closure needed to be
extended to ensure compliance with local laws pertaining to personnel
disclosures and notifications. The Company expects the consolidation and
closures to be completed by the end of 1999.
The following unaudited pro forma information summarizes consolidated results
of operations of Tokheim, the RPS Division and MSI as if the acquisitions had
occurred at the beginning of 1998 and 1997. These unaudited pro forma results
include certain adjustments, such as additional amortization expense as a
result of goodwill and other intangible assets and increased interest expense
on acquisition debt. They do not purport to be indicative of the results of
operations which actually would have resulted had the acquisition occurred on
December 1, 1997 or 1996, or future results of operations. The Company is in
the process of closing several redundant manufacturing, sales, service and
administrative operations as part of the integration and rationalization plans
discussed above. Anticipated synergies from the merger of Tokheim, the RPS
Division and MSI have been excluded from the amounts included in the pro forma
summary information presented below.
<TABLE>
<CAPTION>
Unaudited
Years Ended
November 30,
------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales................................................ $743,623 $737,520
Net loss................................................. (49,189) (37,966)
Net loss per common share (Basic and Diluted)............ (4.67) (3.48)
</TABLE>
3. MERGER AND ACQUISITION COSTS AND OTHER UNUSUAL ITEMS
For the years ended November 30, 1998, 1997 and 1996, the Company identified
certain expenses related primarily to the acquisition of the RPS Division in
1998 and the acquisition of Sofitam in 1996. These costs, although not uncommon
to the Company's industry, are considered by the Company to be attributable to
the purchase and integration of the acquired companies or otherwise significant
enough in size or unusual enough in nature to warrant separate disclosure.
These costs are shown in aggregate as a single operating line item, "Merger and
acquisition costs and other unusual items," on the Consolidated Statement of
Earnings.
Merger and acquisition costs/Restructuring--During 1998, as a result of the
acquisitions of the RPS Division and MSI, the Company initiated an integration
and rationalization plan that entails the closure and reorganization of certain
manufacturing, sales, service and administrative operations. Amounts charged to
operations for involuntary employee termination costs and other exit costs
incurred to execute certain projects of the integration and rationalization
plan were approximately $7,215 in 1998. Of this amount, approximately $3,235
relates to employee severance and related costs for approximately 136 employees
that served in various manufacturing, sales, service and administrative
capacities. In addition to the severance costs, approximately $3,220 relates to
costs to be incurred in connection with the closure of the Glenrothes, Scotland
manufacturing facility. The Company expects to incur $250 in grant repayment
costs, $420 for fixed asset and production tooling write-offs, $950 licensing
agreement write-off, $1,400 of inventory write-off and approximately $200 for
building clean up and maintenance prior to disposition. The impairment of the
inventory and licensing agreement was caused solely by management's decision to
close operations and discontinue the product lines produced at the Glenrothes
manufacturing facility. These products have been replaced by RPS division
products manufactured at the Dundee, Scotland facility. In addition, the
Company incurred approximately $760 of costs relating to the closure of certain
domestic operations. During 1997 and 1996, the Company implemented several
corporate realignment initiatives, including work force reductions and
reorganization of its
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
domestic and international operations, related to the consolidation of Sofitam.
Amounts charged to operations as incurred for the matters described above for
the years ended November 30, 1997 and 1996 approximated $1,736 and $2,035,
respectively.
Litigation/Other--In connection with the purchase of MSI in the first quarter
of fiscal 1998, the Company recorded a $5,879 charge relating to the write-off
of in-process research and development ("IPR&D"). This amount represents the
estimated fair value of acquired incomplete research and development projects
of MSI at the date of acquisition. See Note 2 for additional information on the
IPR&D. The Company's Spanish subsidiary, Sofitam Iberica, incurred an unusual
operating charge of approximately $485 to settle a customer dispute and the
write off of unusable customer specific inventory. During 1997, the Company
settled a claim against it directly associated with the purchase of Sofitam
related to a personnel matter that resulted in an outcome adverse to the
Company. The Company also favorably settled a claim that involved a former
supplier, which resulted in the reversal of an accrued liability which had been
charged to "Merger and acquisition costs and other unusual items" in 1996. In
addition, during 1997 the Company recorded a charge for an impaired asset
related to license technology. In 1996 the Company settled claims related to a
prior distributor and a foreign distributor to extinguish an exclusive sales
representative agreement. The Company also incurred a charge to operations for
the adverse outcome in a Pension Benefit Guarantee Corporation inquiry with
respect to a terminated benefit plan payout from 1991. In addition, the Company
incurred charges in 1996 related to customer satisfaction programs relating to
dispensers sold in prior years. Amounts charged to merger and acquisition costs
and other unusual items relating to litigation/other for 1998, 1997 and 1996
were $5,985, $1,757, and $4,424, respectively.
4. ACCRUED EXPENSES
Accrued expenses consisted of the following at November 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
RPS Division integration and rationalization plan.......... $ 20,294 $ --
Schlumberger Limited....................................... 6,507 --
Sofitam integration plan................................... 4,001 7,297
Compensated absences....................................... 14,644 7,087
Salaries, wages, and commissions........................... 14,871 6,076
Retirement benefits and profit sharing..................... 9,625 5,921
Interest................................................... 4,984 3,755
Warranty................................................... 10,627 3,742
Legal and professional..................................... 3,788 3,102
Employee payroll taxes..................................... 5,634 2,708
Deferred revenue........................................... 5,645 2,453
Taxes (sales, VAT, and other).............................. 11,072 2,434
Other...................................................... 24,472 6,615
-------- -------
$136,164 $51,190
======== =======
</TABLE>
5. NOTES PAYABLE, BANK CREDIT AGREEMENT
On September 30, 1998, Tokheim and certain of its subsidiaries, including
certain of the subsidiaries used to acquire the RPS Division (the "Borrowers")
entered into a credit agreement (the "New Credit Agreement") with certain
lenders. The New Credit Agreement replaced the existing ("old credit
agreement") and consists of
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
a six year working capital/letter of credit facility and a six year term loan
facility, each in an aggregate principal amount of $120,000. Pursuant to the
New Credit Agreement, $20,000 of the availability under the working capital
facility may be utilized for issuance of standby letters of credit, and $10,000
of the availability under the working capital facility may be utilized for
swing line facilities to be provided to Tokheim and certain of the other
Borrowers. The New Credit Agreement permits borrowings in U.S. dollars, and, if
certain additional conditions are met, in French francs, British pounds, Dutch
guilders, German marks and euros (so long as such non-U.S. currencies are
freely traded, readily available and convertible into U.S. dollars) and such
other currencies as agreed by each Bank.
An additional agreement provides for the assignment of a three year $7,600
ESOP loan facility with certain banks (the "ESOP Credit Agreement").
At November 30, 1998, the outstanding borrowings were $62,145 under the
revolving working capital facility, $120,000 under the term loan, and $6,987
under the ESOP facility. The term loan calls for equal quarterly principal
payments aggregating to $7,500 in year 2000; $10,000 in year 2001; $12,500 in
year 2002; $15,000 in year 2003; $37,500 in a single payment due first quarter
2004; and the remainder due at maturity. The revolving working capital facility
is due on September 30, 2004. Available borrowings under the revolving working
capital facility were $57,900 at November 30, 1998 subject to a borrowing base
limitation and certain other loan covenant restrictions.
Indebtedness of the Company under the New Credit Agreement (a) is secured by
(i) a first perfected security interest in and lien on certain of the real and
personal property assets of Tokheim (including claims against certain
subsidiaries to which Tokheim has made intercompany loans) and Tokheim's direct
and indirect material majority-owned U.S. subsidiaries, (ii) a pledge of 100%
of the stock of Tokheim's direct and indirect material majority-owned U.S.
subsidiaries, and (iii) a pledge of 65% of the stock of Tokheim's first-tier
material foreign subsidiaries and (b) is guaranteed by all of Tokheim's direct
and indirect material majority-owned U.S. subsidiaries. Certain indebtedness of
Tokheim's foreign subsidiaries which are Borrowers or become Borrowers under
the New Credit Agreement will be secured by certain of the personal property of
such foreign subsidiaries.
Indebtedness under the New Credit Agreement bears interest based upon (at the
applicable Borrower's option) (i) the Base Rate in the case of U.S. dollar
denominated loans (defined as the higher of (x) the applicable prime rate and
(y) the federal funds rate (as adjusted pursuant to the New Credit Agreement)
plus 0.50%) plus an applicable margin based upon the Company's leverage ratio
(with a range of 1.50% to 3.00% for revolving loans and 3.00% for term loans)
or (ii) the applicable Eurocurrency Rate (as defined in the New Credit
Agreement) for a deposit in the currency of, and for a maturity corresponding
to, the applicable loan and interest period, plus an applicable margin based
upon the Company's leverage ratio (with a range of 2.50% to 4.00% for revolving
loans and 4.00% for term loans). The unused portion of the commitment under the
New Credit Agreement will be subject to a commitment fee in the range of 0.375%
to 0.50% depending upon the leverage ratio of the Company.
Indebtedness under the ESOP Credit Agreement will amortize with a final
principal payment on July 1, 2001.
The revolving loan commitment under the New Credit Agreement may be
voluntarily permanently reduced by the Company in whole or in part on one day's
notice without premium or penalty. The Borrower may prepay the term loans
subject to a pre-payment penalty if the Borrowers prepay the entire amount of
the term loans in the first 3 years after September 30, 1998. The Borrowers
will be able to prepay the loans in accordance with the terms of the New Credit
Agreement. Subject to the provisions of the New Credit Agreement, the Borrowers
will be able to, from time to time, borrow, repay and reborrow under the
working capital facility.
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
The New Credit Agreement requires an amount equal to all net proceeds from
asset sales by the Company or any of its subsidiaries (with certain exceptions)
to be applied to repay the loans under the New Credit Agreement. The New Credit
Agreement also requires the Company to prepay the loans under the New Credit
Agreement in an amount equal to (i) all net proceeds from the sale or issuance
of debt (with certain exceptions), (ii) all net proceeds from the sale or
issuance of equity (with certain exceptions) and (iii) a percentage of Excess
Cash Flow (as defined in the New Credit Agreement) for each fiscal year with a
range of 50% to 85%, based upon the Company's leverage ratio, commencing with
the Company's fiscal year ending November 30, 1999.
The New Credit Agreement requires the Company to meet certain consolidated
financial tests, including minimum level of consolidated net worth, minimum
level of EBITDA (as defined in the New Credit Agreement), minimum level of
consolidated interest coverage, maximum consolidated leverage ratio and senior
leverage ratio and minimum consolidated fixed charge coverage ratio. The New
Credit Agreement also contains covenants which, among other things, limit the
incurrence of additional indebtedness, dividends, transactions with affiliates,
asset sales, acquisitions, investments, mergers and consolidations, prepayments
of certain other indebtedness, amendments to certain other indebtedness, liens
and encumbrances and other matters customarily restricted in such agreements.
At November 30, 1998 and 1997, the aggregate amounts outstanding under
working capital facilities were $62,145 and $24,090, respectively. These
amounts are classified as long-term debt because the Company had the ability
(under the terms of the facility) and the intent to finance these obligations
beyond one year. The total line of credit under the working capital facility
was approximately $120,000 and $67,768, of which $57,855 and $43,678 was unused
at November 30, 1998 and 1997, respectively. The weighted average annual
interest rates for these lines of credit were 7.1% and 7.6% for 1998 and 1997,
respectively. The range of rates at November 30, 1998 and 1997 was 5.1% to 7.5%
and 7.6% to 8.9%, respectively.
6. SENIOR NOTES
As part of the financing for the acquisition of the RPS Division, the Company
entered into a note purchase agreement, pursuant to which the Company issued
$22,500 million aggregate principal amount of Senior Notes bearing an interest
rate starting at 12.5% and increasing by 0.5% on December 1, 1998, and every
three months thereafter to a maximum of 14.5%. The Company has the option,
subject to bank approval, to redeem (in whole or in part) the Senior Notes. The
Note Purchase Agreement is subject to certain restrictions and covenants common
to such agreements. On January 29, 1999 the Senior Notes were repaid. See Note
21 for additional information.
7. SENIOR SUBORDINATED NOTES
As part of the financing for the Acquisition of the RPS Division, the Company
issued $170,000 in Senior Subordinated Seller Notes due one hundred twenty days
after the Acquisition closing date. The Company has the option, subject to bank
approval, to redeem (in whole or in part) the Senior Subordinated Seller Notes.
Under the terms of the Senior Subordinated Seller Notes, to the extent the
Company has not refinanced the Senior Subordinated Seller Notes within one
hundred twenty days of the Acquisition closing date, such notes convert into an
equal principal amount of eight year notes with an interest rate starting at
12.0% and increasing by 0.5% every three months to a maximum of 14.5%. Interest
exceeding 12.0% will be payable in kind. The Senior Subordinated Seller Notes
are subject to certain restrictions and covenants common to such agreements. On
January 29, 1999 the Senior Subordinated Seller Notes were repaid. See Note 21
for additional information.
In August 1996 the Company issued $100,000 aggregate principal amount of
11.5% Senior Subordinated Notes due 2006 (the "11.5% Notes") to finance the
acquisition of Sofitam. Interest on these notes accrues at
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
the rate of 11.5% per annum and is payable semi-annually in cash on each
February 1 and August 1 to the registered holders at the close of business on
January 15 and July 15 immediately preceding the applicable interest payment
date.
During the fourth quarter of 1997, the Company used proceeds from its Old
Credit Agreement to purchase $10,000 face value of the 11.5% Notes. The Company
purchased these 11.5% Notes on the open market at an aggregate price of $11,390
plus accrued interest and recorded an extraordinary loss of $1,886. This amount
includes $1,390 of premiums paid to repurchase the 11.5% Notes and $496
representing the write-off of a proportionate share of the original unamortized
deferred issuance costs.
The Company used proceeds from the March 1998 Common Stock Offering of
$39,356 to redeem $35,000 in aggregate principal amount of the 11.5% Notes.
These 11.5% Notes were redeemed at a call price of 109.857%, expressed as a
percentage of the original face value, resulting in premiums paid of $3,450
along with accrued interest of $906. Following the redemption, $55,000 in
aggregate principal amount of the 11.5% Notes remained outstanding. The Company
recorded an extraordinary loss on the extinguishment of the 11.5% Notes of
approximately $4,965 during the second quarter of 1998. This loss includes
$3,450 of premiums paid to purchase the 11.5% Notes and $1,515 representing the
write-off of a proportionate share of the original unamortized deferred
issuance costs.
On September 30, 1998, the Company completed the repurchase of the final
$55,000 of 11.5% Notes that were then outstanding. These 11.5% Notes were
redeemed at an aggregate premium and consent payment of $12,332 along with
accrued interest of $1,072. The company recorded an extraordinary loss on the
extinguishment of the 11.5% Notes of approximately $14,940 in the fourth
quarter of 1998. These notes were repurchased with proceeds from borrowings
under the New Credit Agreement. See also Note 21.
8. JUNIOR SUBORDINATED PIK NOTES
In connection with the acquisition of the RPS Division, the Company issued
$40,000 million in Junior Notes. Interest on the Junior Notes is payable
quarterly in cash or in-kind at the Company's option. All existing U.S.
subsidiaries have guaranteed, and all future U.S. subsidiaries will guarantee,
the Junior Notes on a junior subordinated basis with unconditional guarantees
that are or will be unsecured and subordinated to senior debt of such
subsidiaries.
The Junior Notes are unsecured junior subordinated obligations of the Company
and are junior to the Company's senior debt. The Junior Notes were issued under
an indenture (the "Junior Indenture") that limits the ability of the Company
and its subsidiaries to, among other things: incur indebtedness; pay dividends
and make certain other payments; make certain investments; sell certain assets;
enter into certain transactions with affiliates; restrict distributions from
subsidiaries; incur liens; and consolidate, merge or transfer all or
substantially all of its or its subsidiaries' assets.
Subject to the terms of the Junior Indenture, the Junior Notes may be
redeemed at any time, in whole or in part, at the option of the Company at a
redemption price equal to the unpaid principal amount thereof plus accrued
interest thereon to the redemption date. Upon a change of control (as defined
in the Junior Indenture, and subject to certain conditions set forth in the
Junior Indenture), any holder of Junior Notes will have the right to cause the
Company to repurchase all or any part of the Junior Notes of such Holder at a
purchase price equal to 101% of the principal amount of the Junior Notes to be
repurchased plus accrued and unpaid interest thereon, if any, to the date of
repurchase. The Junior Notes are subject to a registration rights agreement,
with registration rights that can be exercised any time after the date that is
120 days after the issue date of the Junior Notes.
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
9. OTHER LONG TERM DEBT AND GUARANTEED EMPLOYEES' STOCK OWNERSHIP PLAN (ESOP)
OBLIGATION
Term debt at November 30, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
0.0% Belgian government note due in 1999 (a)..................... $ 58 $ 93
3.5% German bonds, due in semiannual installments through 1998
(a)............................................................. -- 80
6.0% notes payable, due in semiannual installments through 2004
(a)............................................................. 679 --
8.1% note payable, due in semiannual installments through 2001
(a)............................................................. -- 160
11.5% note payable, due in quarterly installments through 1998
(a)............................................................. -- 405
15.0% note payable, due in quarterly installments through 2002
(a)............................................................. 315 372
14.3% note payable, due in monthly installments through 2000
(a)............................................................. -- 149
27.5% note payable, due in monthly installments through 2000
(a)............................................................. 303 343
5.0% to 16.50% capital lease obligations, due in quarterly
installments through 2002 (a)................................... 2,140 2,315
9.33% capital lease obligation, due in annual installments
through 2004 (a)................................................ 2,356 2,559
Other............................................................ -- 311
5.0% to 15.0% notes payable, due in annual installments through
2004 (a)........................................................ 374 --
------ ------
6,225 6,787
Less: Current maturities......................................... 2,110 2,390
------ ------
$4,115 $4,397
====== ======
Guaranteed Employees' Stock Ownership Plan (ESOP) obligation at
November 30, 1998 and 1997 consisted of the following:
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Guaranteed Employees' Stock Ownership Plan (ESOP) obligation,
variable rate, maturing $640 to $760 quarterly through 2001,
rate of 7.41% at November 30, 1998 (b).......................... $6,987 $9,429
</TABLE>
Aggregate scheduled maturities of the above term debt and Guaranteed Employees'
Stock Ownership Plan (ESOP) obligation during the upcoming five years
approximate $4,747; $4,418; $2,272; $637; and $482, respectively.
(a) Aggregate cost of plant and equipment pledged as collateral under revenue
bonds and lease obligations is $6,231.
(b) Per the New Credit Agreement as described in Note 5, the ESOP obligation
matures on September 3, 2002.
10. OPERATING LEASES
The Company leases certain manufacturing equipment, office equipment,
computers, vehicles, and office and warehousing space under operating leases.
These leases generally expire in periods ranging from one to five years.
Amounts charged to expenses under operating leases in 1998, 1997 and 1996
were $6,364, $4,104, and $2,835, respectively. Future minimum rental payments
under noncancelable operating leases during the upcoming five years approximate
$6,158, $5,020, $2,865, $2,371 and $2,260.
F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
11. STOCK OPTION PLANS
The Company has three separate Stock Option Plans, as outlined below:
1992 Stock Incentive Plan (SIP)
The Plan contains both incentive stock options (ISOs) and non-qualified stock
options (NSOs). The price of each share under this Plan for an ISO or NSO shall
not be less than the fair market value of Tokheim Corporation Common Stock on
the date the option is granted.
Options granted under the SIP become exercisable at the rate of 25% of the
total options granted per year, beginning one year after the grant date. All
options expire within ten years from the date on which they were granted.
In addition, the SIP provides for the granting of Stock Appreciation Rights
(SARs) and Restricted Stock Awards (RSAs). During 1998, there were no SARs or
RSAs granted.
1982 Incentive Stock Option Plan (ISOP) and 1982 Unqualified Stock Option Plan
(USOP)
Effective January 21, 1992, no additional shares could be granted under these
plans. All options expire within ten years from the date on which they were
granted.
The price of each share under the ISOP was not less than fair market value of
Tokheim Corporation Common Stock on the date the option was granted, and under
the USOP was not less than 85% of the fair market value of Tokheim Corporation
Common Stock on the date the option was granted.
Options granted under the respective plans during 1998, 1997, and 1996, are
as follows:
<TABLE>
<CAPTION>
1992 Stock
Incentive Plan
------------------
Year of Grant ISO NSO RSA
------------- ------- --- ------
<S> <C> <C> <C>
1998.................................................. 2,000 -- --
1997.................................................. 468,000 -- 42,500
1996.................................................. 45,000 -- --
</TABLE>
The following table sets forth the status of all outstanding options at
November 30, 1998:
<TABLE>
<CAPTION>
Exercisable In Total Options
Option Price Options The Next One Authorized and
Per Share Exercisable To Four Years Outstanding
------------ ----------- -------------- --------------
<S> <C> <C> <C>
$20.0000 15,300 -- 15,300
$18.6875 -- 2,000 2,000
$18.1250 4,375 13,125 17,500
$12.2500 500 -- 500
$11.9375 2,500 -- 2,500
$9.0000 -- 1,000 1,000
$8.8800 36,250 -- 36,250
$8.6880 81,250 285,000 366,250
$8.5000 11,250 3,750 15,000
$7.9380 2,000 21,000 23,000
$7.1250 19,000 21,500 40,500
------- ------- -------
172,425 347,375 519,800
======= ======= =======
</TABLE>
154,982 and 335,388 options were exercisable as of November 30, 1997 and 1996
respectively.
F-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
The weighted average exercise price was $9.25 and $9.10 and the weighted
average remaining contractual life was 6.83 and 7.15 years for all outstanding
options as of November 30, 1998, and 1997, respectively.
Transactions in stock options under these plans are summarized as follows:
<TABLE>
<CAPTION>
Shares
Under Option Price Range
------------ ------------
<S> <C> <C>
Outstanding, November 30, 1995..................... 482,341 $6.81-$20.00
Granted............................................ 45,000 $7.13-$9.00
Exercised.......................................... (5,000) $8.75
Canceled or expired................................ (70,087) $6.81-$20.00
--------
Outstanding, November 30, 1996..................... 452,254 $6.81-$20.00
Granted............................................ 468,000 $7.94-$18.13
Exercised.......................................... (235,547) $6.81-$9.38
Canceled or expired................................ (58,225) $6.81-$20.00
--------
Outstanding, November 30, 1997..................... 626,482 $6.81-$20.00
Granted............................................ 2,000 $18.69
Exercised.......................................... (94,907) $6.81-$11.94
Canceled or expired................................ (13,775) $7.94-$20.00
--------
Outstanding, November 30, 1998..................... 519,800
========
</TABLE>
Reserved for the granting of new options:
<TABLE>
<CAPTION>
Shares
-------
<S> <C>
November 30, 1996.................................................... 98,774
November 30, 1997.................................................... 133,274
November 30, 1998.................................................... 158,774
</TABLE>
F-34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
Effective December 1, 1996, the Company adopted the disclosure-only
provisions of SFAS No. 123. Accordingly, no compensation cost has been
recognized for the existing stock option plans under the provisions of this
statement. The Company continues to account for stock options at their
intrinsic value under the provisions of APBO No. 25, which is allowed under
SFAS No. 123. Under APBO No. 25, because the option terms are fixed and the
exercise price of employee stock options equals the market price on the date of
grant, no compensation expense is recorded. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the
grant date, consistent with the provisions of SFAS No. 123, the Company's net
earnings (loss) would have been impacted as indicated below:
<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
As Pro As Pro
Reported Forma Reported Forma
-------- -------- -------- -------
(in thousands except per share
data)
<S> <C> <C> <C> <C>
Earnings (loss) before extraordinary
loss.................................... $ (3,744) $ (3,744) $ 3,980 $ 3,980
Estimated fair value of the year's option
grants.................................. -- (4) -- (313)
-------- -------- ------- -------
Earnings (loss) before extraordinary
loss.................................... (3,744) (3,748) 3,980 3,667
Extraordinary loss on debt
extinguishment.......................... (23,924) (23,924) (1,886) (1,886)
-------- -------- ------- -------
Net earnings (loss)...................... $(27,668) $(27,672) $ 2,094 $ 1,781
======== ======== ======= =======
Preferred stock dividends ($1.94 per
share).................................. $ (1,484) $ (1,484) $(1,512) $(1,512)
Earnings (loss) applicable to common
stock................................... $(29,152) $(29,156) $ 582 $ 269
Earnings (loss) per common share:
Basic
Before extraordinary loss............ $ (0.46) $ (0.46) $ 0.31 $ 0.27
Extraordinary loss on debt
extinguishment...................... (2.10) (2.10) (0.23) (0.23)
-------- -------- ------- -------
Net earnings (loss).................. $ (2.56) $ (2.56) $ 0.08 $ 0.04
======== ======== ======= =======
Weighted average number of shares
outstanding......................... 11,371 11,371 8,042 8,042
======== ======== ======= =======
Diluted
Before extraordinary loss............ $ (0.46) $ (0.46) $ 0.27 $ 0.24
Extraordinary loss on debt
extinguishment...................... (2.10) (2.10) (0.21) (0.21)
-------- -------- ------- -------
Net earnings (loss).................. $ (2.56) $ (2.56) $ 0.06 $ 0.03
======== ======== ======= =======
Weighed average number of shares
outstanding......................... 11,371 11,371 9,005 9,005
======== ======== ======= =======
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options (stock-based compensation) is amortized to expense on a straight-line
basis over the options' vesting period. The pro forma information above only
includes the effects of 1998 and 1997 grants. As such, the impacts are not
necessarily indicative of the effects on reported net earnings (loss) of future
years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions for 1998 and 1997:
<TABLE>
<CAPTION>
Assumptions 1998 1997
----------- ------- -------
<S> <C> <C>
Dividend yield............................................... -- --
Risk free interest rate...................................... 5.88% 6.37%
Expected life of options..................................... 5 years 5 years
Expected volatility.......................................... 38.76% 38.76%
Estimated fair value of options granted per share............ $8.94 $9.01
</TABLE>
F-35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
12. COMMON AND PREFERRED STOCK
Changes in common stock and common treasury stock are shown below:
<TABLE>
<CAPTION>
Common
Common Stock Treasury Stock
------------------ ---------------
Shares Amount Shares Amount
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Balance, November 30, 1995............... 7,949,000 $19,409 13,000 $ 231
Stock options exercised.................. 5,000 43 -- --
Employee termination benefits............ -- -- (1,000) (11)
Other.................................... -- -- (1,000) (28)
---------- ------- ------- -----
Balance, November 30, 1996............... 7,954,000 19,452 11,000 192
Stock options exercised.................. 278,000 1,706 -- --
Shares purchased......................... -- -- 8,000 105
Other.................................... -- -- (10,000) (157)
---------- ------- ------- -----
Balance, November 30, 1997............... 8,232,000 $21,158 9,000 $ 140
Stock options exercised.................. 6,000 1,472 -- --
Shares purchased......................... -- -- 29,000 555
Equity Offering.......................... 4,370,000 67,724 -- --
---------- ------- ------- -----
Balance, November 30, 1998............... 12,698,000 $90,354 38,000 $ 695
========== ======= ======= =====
</TABLE>
Changes in redeemable convertible preferred stock and related treasury stock
are shown below:
<TABLE>
<CAPTION>
Preferred
Preferred Stock Treasury Stock
--------------- ---------------
Shares Amount Shares Amount
------- ------- ------- ------
<S> <C> <C> <C> <C>
Balance, November 30, 1995.................. 960,000 $24,000 151,000 $3,784
Shares redeemed............................. -- -- 31,000 771
RSP contributions........................... -- -- (15,000) (384)
------- ------- ------- ------
Balance, November 30, 1996.................. 960,000 $24,000 167,000 $4,171
Shares redeemed............................. -- -- 48,000 1,197
RSP contributions........................... -- -- (26,000) (650)
------- ------- ------- ------
Balance, November 30, 1997.................. 960,000 $24,000 189,000 $4,718
Shares redeemed............................. -- -- 43,000 1,079
RSP contributions........................... -- -- (37,000) (914)
------- ------- ------- ------
Balance, November 30, 1998.................. 960,000 $24,000 195,000 $4,883
======= ======= ======= ======
</TABLE>
On July 10, 1989, the Company sold 960,000 shares of redeemable convertible
preferred stock (the "Preferred Stock") to the Trust of the Company's RSP at
the liquidation value of $25 per share or $24,000. The Preferred Stock has a
dividend rate of 7.75%. The Trustees who hold the Preferred Stock may elect to
convert each preferred share to one common share in the event of redemption by
Tokheim, certain consolidations or mergers of Tokheim, or a redemption by the
Trustees which is necessary to provide for distributions under the RSP. A
participant may elect to receive a distribution from the RSP in cash or common
stock. If redeemed by the Trustees, the Company is responsible for purchasing
the Preferred Stock at the $25 floor value. The Company may elect to pay the
redemption price in cash or an equivalent amount of common stock. Due to the
redemption characteristics of the stock, the aggregate amount of future
redemptions for the next five years cannot be determined. See Note 18 for
further discussions on the Company's Preferred Stock.
F-36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
On March 1998, the Company completed a secondary public offering of 4,370,000
shares of Tokheim common stock at an initial offering price of $16.5625 per
share. The net proceeds of the offering totaled $67,724. The Company used the
proceeds to repurchase $35,000 in aggregate principal amount of outstanding
11.5% Notes, repayment of amounts outstanding under the Old Credit Agreement
and general corporate purposes.
As part of the consideration paid ($20,000) in the RPS Division Acquisition,
the Company issued the Warrants, exercisable for up to 19.9% of the outstanding
shares of the Company's common stock at an exercise price of $.01 per share.
The actual number of shares issuable upon exercise is 2,526,923. The Warrants
are exercisable for five years beginning January 30, 1999.
The number of shares of the Company's common stock issuable upon exercise of
the Warrants, along with the purchase price of the common stock Warrants, will
be further adjusted to reflect any stock splits, stock subdivisions or
combinations of the Company's common stock, any reclassification of the
Company's common stock, any capital reorganization, merger or consolidation of
the Company, any issuance of common stock by the Company, and any issuance of
convertible securities by the Company.
The Company may redeem the Warrants, in whole or in part, at any time on or
before January 29, 1999, by paying $20.0 million (or an appropriate percentage
thereof if the Warrants are redeemed in part).
13. EARNINGS PER SHARE
The Company adopted SFAS No. 128, Earnings Per Share, during the first
quarter of fiscal 1998. Under SFAS No. 128, the Company presents two earnings
per share ("EPS") amounts, Basic and Diluted. Basic EPS is calculated based on
earnings available to common shareholders and the weighted average number of
shares outstanding during the reported period. Diluted EPS includes additional
dilution from potential common stock, such as stock issuable pursuant to the
conversion of preferred stock or the exercise of stock options and warrants
outstanding. The incremental shares from conversions of preferred stock and the
exercise of stock options and rants were not included in computing diluted EPS
for the years ended November 30, 1998, and 1996, since the effect of such is
antidilutive during periods when a loss from continuing operations applicable
to common shareholders is reported. For the year ended November 30, 1998, the
weighted average of potentially issuable common shares included 764,664 shares
of convertible preferred stock outstanding, 210,488 shares for stock options
and 428,938 shares related to the Warrants. During the year ended November 30,
1996, the weighted average of potentially issuable common shares included
800,400 shares of convertible preferred stock outstanding and 67,504 shares for
stock options. EPS for the years ended November 30, 1997 and 1996 have been
restated to apply the provisions of SFAS No. 128. Earnings per common share
calculated for the years ended November 30, 1997 and 1996 on a primary and
fully diluted basis under the provisions of Accounting Principles Board Opinion
No. 15 differed by less than one cent per share from that calculated on a basic
and diluted basis under SFAS No. 128 as there is no difference in the earnings
amounts applicable to common stock and the difference between the weighted
average shares outstanding used in the two calculations is not material.
F-37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
The following table presents the share information necessary to calculate
earnings (loss) per share for fiscal years ended November 30, 1998, 1997, and
1996:
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Basic shares outstanding:
Weighted average outstanding............................ 11,371 8,042 7,940
====== ===== =====
Diluted shares outstanding:
Weighted average outstanding............................ 11,371 8,042 7,940
Share equivalents....................................... -- 177 --
Weighted conversion of preferred stock.................. -- 786 --
------ ----- -----
Adjusted outstanding.................................... 11,371 9,005 7,940
====== ===== =====
</TABLE>
The AICPA issued SOP No. 93-6, Employers' Accounting for Employee Stock
Ownership Plans, in November 1993. As allowed by that statement, the Company
has elected to continue its current accounting practices for the ESOP which are
based on SOP No. 76-3 and subject to consensuses of the Emerging Issues Task
Force of the Financial Accounting Standards Board. Dividends paid on Preferred
Stock are deducted from EPS computations and Preferred Stock outstanding is
converted at a ratio of one-for-one.
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998
---------------------------------------------------------
1st 2nd 3rd 4th Total
Quarter(A) Quarter Quarter Quarter(B) (A)(B)
---------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net sales............... $90,852 $99,652 $101,492 $174,443 $466,440
Cost of sales (C)....... 67,074 73,118 73,782 131,057 345,031
Earnings (loss) before
extraordinary loss..... (5,606) 2,427 2,929 (3,496) (3,744)
Extraordinary loss on
debt extinguishment.... -- (4,965) -- (18,959) (23,924)
Net earnings (loss)..... (5,606)(D) (2,538)(E) 2,929 (22,455)(F) (27,668)
Earnings (loss) per
common share:
Basic:
Before extraordinary
loss............... (0.72) 0.17 0.20 (0.31) (0.46)
Extraordinary loss
on debt
extinguishment..... -- (0.42) -- (1.50) (2.10)
Net earnings
(loss)............. (0.72) (0.25) 0.20 (1.81) (2.56)
Diluted:
Before extraordinary
loss............... (072) 0.16 0.19 (0.31) (0.46)
Extraordinary loss
on debt
extinguishment..... -- (0.39) -- (1.50) (2.10)
Net earnings
(loss)............. (0.72) (0.23) 0.19 (1.81) (2.56)
</TABLE>
- --------
(A) Includes MSI's results of operations since December 31, 1997, the date of
acquisition.
(B) Includes the RPS Division's results of operations since September 30, 1998,
the date of acquisition.
(C) Includes product development expenses and excludes depreciation and
amortization.
(D) Includes a $5,879 write-off of in-process research and development in
connection with the MSI acquisition
(E) Includes a $4,965 extraordinary loss on debt extinguishment on the
redemption of $35,000 of the 11.5% Notes, repurchased with proceeds from
the Company's Common Stock Offering. Includes a currency gain of $770
associated with the repayment of various French franc denominated
borrowings.
F-38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
(F) Includes an extraordinary loss on debt extinguishment on the redemption of
$55,000 of the 11.5% Notes and refinancing of the company's bank debt. In
addition, the Company recorded merger and acquisition costs and other
unusual items of $7,089 associated with various integration and
rationalization plans for the RPS Division and Sofitam.
<TABLE>
<CAPTION>
1997
--------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales........................ $92,024 $95,857 $91,781 $105,807 $385,469
Cost of products sold (A)........ 70,391 70,379 68,667 74,495 283,932
Earnings before extraordinary
item............................ 125 1,210 152 2,493 3,980
Extraordinary loss on debt
extinguishment.................. -- -- -- (1,886) (1,886)
Net earnings..................... 125 1,210 152 607 2,094
Earnings (loss) per common share:
Basic:
Before extraordinary item.... (0.03) 0.10 (0.03) 0.26 0.31
Extraordinary loss on debt
extinguishment.............. -- -- -- (0.23) (0.23)
Net earnings (loss).......... (0.03) 0.10 (0.03) 0.03 0.08
Diluted:
Before extraordinary item.... (0.03) 0.09 (0.03) 0.23 0.27
Extraordinary loss on debt
extinguishment.............. -- -- -- (0.20) (0.21)
Net earnings (loss).......... (0.03) 0.09 (0.03) 0.03 0.06
</TABLE>
- --------
(A) Includes product development expenses and excludes depreciation and
amortization.
15. INCOME TAXES
Earnings (loss) before income taxes and extraordinary loss consists of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Domestic............................................ $ 2,117 $4,209 $ (542)
Foreign............................................. (4,815) 988 (687)
------- ------ -------
$(2,698) $5,197 $(1,229)
======= ====== =======
Income tax provision (benefit) consists of the following:
<CAPTION>
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Current:
Federal........................................... $ (340) $ 240 $ (460)
State............................................. 747 311 277
Foreign........................................... 596 652 906
Deferred:
Foreign........................................... 43 14 57
------- ------ -------
Total tax provision............................. $ 1,046 $1,217 $ 780
======= ====== =======
</TABLE>
F-39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
A reconciliation of the reported tax expense (benefit) and the amount
computed by applying the statutory U.S. federal income tax rate of 35% to
earnings (loss) before income taxes and extraordinary loss is as stated below.
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)........... $ (944) $1,819 $ (430)
Increase (decrease) in taxes resulting from:
State income taxes net of federal tax benefit..... 487 202 180
Tax effect of dividends paid on stock held in
Retirement Savings Plans......................... (519) (529) (540)
Adjustments to prior year accruals and refunds.... -- (600) (111)
Foreign income (losses) not tax effected at
statutory rate................................... 2,030 917 1,248
Miscellaneous items, net.......................... (8) (592) 433
------ ------ ------
Reported tax expense................................ $1,046 $1,217 $ 780
====== ====== ======
</TABLE>
The components of the deferred tax assets and liabilities as of November 30,
1998 and 1997 are as stated below.
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Gross deferred tax assets:
Accounts receivable................................... $ 958 $ 346
Compensation and benefit accruals..................... 7,453 7,336
Accrued expenses...................................... 5,065 1,234
Net operating loss carryforwards...................... 33,145 12,822
Tax credit............................................ 383 378
Inventory............................................. 4,238 --
Intangible assets..................................... 4,944 --
Valuation allowance................................... (48,211) (19,095)
-------- --------
Total deferred tax asset............................ $ 7,975 $ 3,021
======== ========
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Gross deferred tax liabilities:
Property, plant and equipment......................... $ 1,494 $ 1,529
Pension assets........................................ 797 700
Inventory............................................. 1,819 476
Accrued expenses...................................... 3,865 --
Miscellaneous other, foreign.......................... -- 658
-------- --------
Total deferred tax liability........................ 7,975 3,363
-------- --------
Net deferred tax liability.............................. $ -- $ (342)
======== ========
</TABLE>
For domestic federal income tax purposes, the net operating loss ("NOL")
carryovers amount to $46,578 which will expire from 2006 to 2019.
At November 30, 1998, the Company recorded a net deferred tax asset of
approximately $40,240, which was offset in full by a valuation allowance due
largely to uncertainties associated with the Company's ability to fully use
these tax benefits. The Company is continuing to evaluate the likelihood that
all or part of the deferred tax asset will be realized through the generation
of future taxable earnings. If, in the future, the Company is able to generate
sufficient levels of taxable income, the valuation allowance will be adjusted
accordingly.
F-40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
16. GEOGRAPHICAL SEGMENTS
Domestic and foreign operations information for the years ended November 30,
1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales--unaffiliated customers:
North America................................ $186,835 $139,928 $147,763
Export....................................... 30,744 46,529 38,541
Europe....................................... 226,587 176,402 80,370
Africa....................................... 22,274 22,610 13,059
-------- -------- --------
$466,440 $385,469 $279,733
======== ======== ========
Inter-area sales eliminations:
North America................................ $ 7,162 $ 8,432 $ 9,471
======== ======== ========
Europe....................................... $ 3,470 $ 3,660 $ 1,100
======== ======== ========
Africa....................................... $ 3 $ 286 $ 510
======== ======== ========
Operating profit:
North America................................ $ 2,198 $ 5,557 $ 494
Europe....................................... 11,666 10,259 2,649
Africa....................................... 1,052 1,444 633
Adjustments and eliminations................. (147) 3,385 2,580
-------- -------- --------
$ 14,769 $ 20,645 $ 6,356
======== ======== ========
Identifiable assets:
North America................................ $595,291 $207,209 $216,989
Europe....................................... 509,684 169,110 186,372
Africa....................................... 15,798 14,448 14,955
Adjustments and eliminations................. (345,311) (100,148) (108,455)
-------- -------- --------
$775,642 $290,619 $309,861
======== ======== ========
</TABLE>
The Company's foreign operations are located in: Canada; South Africa;
Scotland; Germany; France; Italy; Ivory Coast; Morocco; Switzerland; Spain;
Tunisia; Senegal; Cameroon; the Netherlands; Belgium; Poland; Austria; Denmark;
Norway; Great Britain; Czech Republic; Slovakia; Hungary and Ireland. Transfers
between geographical areas are at cost plus an incremental amount intended to
provide a reasonable profit margin to the selling enterprise.
17. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Balance, beginning of year.......................... $1,392 $ 904 $1,150
Sofitam acquisition adjustments..................... -- 350 --
Charged to operations............................... 1,210 192 667
Uncollectible accounts written off, less
recoveries......................................... (507) (34) (900)
Foreign currency translation adjustments............ 20 (20) (13)
------ ------ ------
Balance, end of year.............................. $2,115 $1,392 $ 904
====== ====== ======
</TABLE>
F-41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
18. RETIREMENT PLAN COST
The Company has several retirement plans covering most employees, including
certain employees in foreign countries. Charges to operations for the cost of
the Company's retirement plans, including the RSP, were $2,470, $2,625 and
$3,052 in 1998, 1997 and 1996, respectively.
Defined Benefit Plans (U.S.)--The Company maintains two noncontributory
defined benefit pension plans which cover certain union employees. The Company
makes contributions to the plans equal to the minimum contribution required by
the Internal Revenue Code. The benefits are based upon a fixed benefit rate and
the employee's years of service. Future benefits under these plans were frozen
as of December 31, 1990, at which time the plans' participants became eligible
to participate in the RSP.
The following table sets forth the aggregate defined benefit plans' funded
status and the amounts reflected in the accompanying Consolidated Balance Sheet
as of November 30, 1998 and 1997:
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
-------------- -----------------
1998 1997 1998 1997
------ ------ -------- -------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated plan
benefits:
Vested.................................... $1,562 $1,470 $ 9,837 $ 9,624
Non-vested................................ 84 80 672 662
------ ------ -------- -------
Accumulated benefit obligations........... $1,646 $1,550 $ 10,509 $10,286
====== ====== ======== =======
Projected benefit obligations............... $1,646 $1,550 $ 10,509 $10,286
Plan assets at fair value, principally
common stocks, bonds, and guaranteed
investment contracts, including $1,160 and
$555 for 1998 and 1997, respectively, of
the Company's common stock................. 2,179 2,149 8,924 9,477
------ ------ -------- -------
Plan assets in excess of (less than)
projected benefit obligations.............. 533 599 (1,585) (809)
Unrecognized net loss....................... 366 238 3,202 2,262
Unrecognized net assets at December 1, 1991
and 1990 being recognized over 15 years.... (173) (202) (67) (89)
Adjustment required to recognize minimum
liability.................................. -- -- (3,135) (2,173)
------ ------ -------- -------
Prepaid pension cost (pension liability)
recognized in the Consolidated Balance
Sheet...................................... $ 726 $ 635 $ (1,585) $ (809)
====== ====== ======== =======
</TABLE>
The net periodic pension expense amounts were based on the following
actuarial assumptions:
<TABLE>
<CAPTION>
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets
----------- -----------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Discount rate on plan liabilities.................... 6.75% 7.25% 6.75% 7.25%
Rate of return on plan assets........................ 8.00% 8.00% 8.00% 8.00%
</TABLE>
The Company has recorded an additional minimum pension liability for the
underfunded plan of $3,135 and $2,173 at November 30, 1998 and 1997,
respectively, representing the excess of unfunded accumulated benefit
obligations over previously recorded pension cost liabilities.
F-42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
The net periodic pension cost of U.S. defined benefit plans for 1998, 1997,
and 1996 includes the following components:
<TABLE>
<CAPTION>
1998 1997 1996
----- ------- -------
<S> <C> <C> <C>
Interest cost on projected benefit obligations..... $ 818 $ 844 $ 842
Return on plan assets.............................. (335) (1,739) (1,204)
Net amortization and deferral...................... (526) 1,056 619
----- ------- -------
Net periodic pension expense....................... $ 43 $ 161 $ 257
===== ======= =======
</TABLE>
Defined Benefit Plans (Foreign)--Certain Sofitam subsidiaries in France offer
unfunded defined benefit plans that cover all employees and provide lump-sum
benefit payments upon retirement unless employment is terminated prior to
retirement age. The following table sets forth the actuarial valuation
information for 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C> <C>
Actuarial present value of accumulated plan
benefits
Vested......................................... -- --
Non-vested..................................... $ 2,549 $ 2,178
------- -------
Accumulated benefit obligations................ 2,549 2,178
Effect of future salary increases.............. 937 1,086
======= =======
Projected benefit obligation................... $ 3,486 $ 3,264
Plan assets at fair value........................ -- --
------- -------
Funded status.................................. (3,486) (3,264)
Amortization of unrecognized net transition
obligation.................................... 590 692
Unrecognized net (gain) loss................... 359 324
------- -------
Prepaid pension cost (pension liability)....... $(2,537) $(2,248)
======= =======
The net periodic pension expense amounts were
based on the following actuarial assumptions:
*Discount rate................................... 4.77% 6.00%
*Salary growth percentage........................ 2.50% 3.50%
The net periodic pension cost of the foreign
defined benefit plans includes the following
components:
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost................................... $ 208 $ 222 $ 207
Interest cost on projected benefit obligation.. 166 201 219
Amortization................................... 105 114 120
------- ------- -------
Net periodic pension cost.................... $ 493 $ 537 $ 546
======= ======= =======
</TABLE>
- --------
* In France
The information presented above was calculated based on actuarial valuations
of the plans as of August 31, 1998, 1997 and 1996, which approximates those as
of November 30, 1998, 1997 and 1996, respectively. The Company's other foreign
retirement plans represent an insignificant portion of the Company's total
retirement plans.
Defined Contribution Plan (U.S.)--The RSP covers substantially all U.S.
employees of Tokheim and includes a common and preferred stock ESOP, which
provide a retirement contribution of 2% (of salary) for
F-43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
factory and office employees, and 1.5% for all other participants in the plan
and a matching contribution of at least two-thirds of the first 6% of employee
contributions. The matching contribution can increase to 150% of the first 6%
of contributions, depending on the performance of the Company. See Note 11 for
a discussion of the Company's accounting for the ESOP pursuant to SOP 76-3.
The number of shares of preferred stock in the RSP at November 30, 1998 and
1997 was 764,664 and 793,160 respectively, at a cost of $25 per share. The
number of common shares in the RSP at November 30, 1998 and 1997 was 116,708
and 137,645, respectively, at an average cost of $17.17 and $18.22 per share,
respectively. The dividend yield on the preferred stock is 7.75%, and the
conversion rate is one share of preferred stock to one share of common stock.
Each year, approximately 8% of the preferred stock held by the plan is
allocated to participants' accounts. The Company has guaranteed the RSP loans
as described in Note 7. A like amount entitled "Guaranteed Employees' Stock
Ownership Plan (RSP) obligation" is recorded as a reduction of shareholders'
equity. As the Company makes contributions to the RSP, these contributions,
plus the dividends paid on the Company's preferred and common stock held by the
RSP, are used to repay the loans. As the principal amounts of the loans are
repaid, the RSP obligation in the equity and liability sections of the balance
sheet is reduced accordingly. Company contributions in excess of dividends are
allocated to interest and compensation expense on a basis proportional to the
required debt service on RSP loans. Amounts allocated to interest expense were
$565, $631, and $715 for 1998, 1997 and 1996 respectively.
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Interest expense incurred by the Plan Trust(s) on ESOP
debt.................................................. $ 511 $ 710 $1,075
Company contributions to the RSP....................... 2,513 2,464 2,541
Dividends on preferred stock used for debt service by
the RSP............................................... 1,484 1,512 1,543
</TABLE>
19. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides defined benefit postretirement health and life insurance
benefits to most of its U.S. employees. Covered employees become eligible for
these benefits at retirement, after meeting minimum age and service
requirements. The Company continues to fund benefits on a pay-as-you-go basis,
with some retirees paying a portion of the costs.
The accumulated postretirement benefit obligations as of November 30, 1998
and 1997, respectively, consisted of unfunded obligations as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Retirees and dependents..................................... $ 7,037 $ 6,890
Fully eligible active plan participants..................... 733 708
Other active plan participants.............................. 6,342 4,588
------- -------
Total accumulated postretirement benefit obligations...... 14,112 12,186
Unrecognized net gain....................................... 1,477 3,092
------- -------
Accrued postretirement benefit cost......................... 15,589 15,278
Less current portion........................................ (1,171) (900)
------- -------
$14,418 $14,378
======= =======
</TABLE>
Net postretirement benefit costs for 1998, 1997 and 1996 include the
following components:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Service costs.......................................... $ 380 $ 323 $ 603
Interest costs on accumulated postretirement benefit
obligation............................................ 901 860 1,108
------ ------ ------
Net postretirement benefit costs....................... $1,281 $1,183 $1,711
====== ====== ======
</TABLE>
F-44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
The assumptions used to develop the net postretirement benefit expense and
the present value of benefit obligations are as follows:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Discount rate.................................................... 6.75% 7.25%
Health care cost trend rate for the next year.................... 6.00% 6.50%
</TABLE>
The health care cost trend rate used to value the accumulated postretirement
benefit obligation is assumed to decrease gradually to an ultimate rate of 4.5%
in 2002. A 1% increase in this annual trend rate would increase the accumulated
postretirement benefit obligation as of November 30, 1998 by approximately
$1,600 and the combined service and interest components of the annual net post-
retirement health care cost by approximately $170.
20. CONTINGENT LIABILITIES
The Company is defending various claims and legal actions which are common to
its operations. These legal actions primarily involve claims for damages
arising out of the Company's manufacturing operations, including environmental
actions, patent infringement, product liability, and various contract and
employment matters.
Environmental Matters--The Company's operations and properties are subject to
a variety of complex and stringent federal, state, and local laws and
regulations, including those governing the use, storage, handling, generation,
treatment, emission, release, discharge and disposal of certain materials,
substances and wastes, the remediation of contaminated soil and groundwater,
and the health and safety of employees. As such, the nature of the Company's
operations exposes it to the risk of claims with respect to such matters. There
can be no assurance that material costs or liabilities will not be incurred in
connection with such claims. Based upon its experience to date, the Company
believes that the future costs of compliance with existing environmental laws
and regulations, and liabilities for known environmental claims pursuant to
such laws and regulations, will not have a material adverse effect on the
Company's business, financial condition, results of operations or cash flows.
However, future events, such as new information, changes in existing laws and
regulations or their interpretation, or more vigorous enforcement policies of
regulatory agencies may give rise to additional expenditures or liabilities
that could be material.
The U.S. Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without
regard to fault or the legality of the original conduct, on certain classes of
persons with respect to the release of a "hazardous substance" into the
environment. These persons include the owner or operator of the disposal site
or sites where the release occurred and companies that disposed of or arranged
for the disposal of the hazardous substances found at the site. Persons who are
or were responsible for releases of hazardous substances under CERCLA may be
subject to joint and several liability for the costs of cleaning up the
releases and for damages to natural resources. It is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury or property damages allegedly caused by the hazardous substances
released into the environment. In addition, where the Company has sold
properties used in its prior manufacturing operations, it may have contractual
obligations to the new owner to remediate environmental contamination on the
site arising from prior operations.
The Company also generates or has in the past generated waste, including
hazardous waste, that is subject to the federal Reserve Conservation and
Recovery Act and comparable state statutes. The U.S. Environmental Protection
Agency ("EPA") and various state agencies have promulgated regulations that
limit the disposal options for certain hazardous and non-hazardous waste. Such
regulations may also require corrective action with respect to contamination of
facilities caused by the past handling of industrial waste.
F-45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
The Company has been named as a potentially responsible party ("PRP") under
CERCLA or similar state Superfund laws at three sites: the Fort Wayne Reduction
Site in Fort Wayne, Indiana; the Moyer Landfill Site in Collegeville,
Pennsylvania; and the I. Jones Recycling Site in Fort Wayne, Indiana. The
Company believes that the clean-ups at these three sites are largely complete
and that it has paid, or has currently accrued sufficient funds to pay, any
liabilities it may have associated with the clean-up of these sites. The
Company also owns or leases, and has in the past owned or leased, numerous
properties that for many years have been used in industrial and manufacturing
operations. Although the Company has in the past utilized operating and
disposal practices that were standard for the industry at the time, hazardous
substances may have been disposed of or released on or under the properties
owned or leased by the Company, or on or under other locations where such
wastes have been taken for disposal. The Company currently owns a facility near
Atlanta, Georgia that was previously used to refurbish gasoline dispensers. As
part of this operation, chlorinated solvents were inadvertently released to the
soil and groundwater through the facility septic system. Migration of these
releases has caused solvent concentrations above background levels in the
groundwater under an adjacent residential property. The Company has completed
the cleanup of this release under the oversight of the Georgia Environmental
Protection Division of the Georgia Department of Natural Resources, and is
currently monitoring the property to ensure that additional cleanup work is not
necessary.
The Company is also involved in one lawsuit with respect to environmental
liabilities under an indemnity provision of a sale agreement concerning the
sale of the die casting facility of a former subsidiary to a third party. The
Company has reached a settlement in this matter. Pursuant to the settlement
agreement, the Company will repurchase the real property and then lease the
property to the third party. The Company has agreed to place the facility into
the state remediation program. The Company presently does not anticipate any
material costs as a result of submitting the facility to the state site
remediation program.
Total amounts included in accrued expenses related to environmental matters
were $717 and $990 at November 30, 1998 and 1997, respectively. During 1995,
the Company settled two actions with the EPA. In one matter, the Company
settled for $627 as part of a global settlement with other PRPs, and the
Company recorded the liability in full at November 30, 1994. The EPA approved
this settlement in late 1997, and the Company paid one-half of the settlement
amount in December 1997. The final payment was made in December 1998. The
Company is pursuing recovery of these amounts from its insurance carriers and
has received $150 to date. In the other matter, the Company settled as a
participating generator as part of a global settlement. The Company received a
favorable judgment with respect to the environmental oversight costs from the
U.S. Court of Appeals for the 7th Circuit; the only outstanding liability is
the potential natural resource damages. The Company's portion of these damages
is estimated to be immaterial.
Product Liability and Other Matters--The Company is subject to various other
legal actions arising out of the conduct of its business, including actions
relating to product liability, and claims for damages alleging violations of
federal, state, or local statutes or ordinances dealing with civil rights,
equal pay, and sex discrimination. Total amounts included in accrued expenses
related to these actions were $1,718 and $1,330 at November 30, 1998 and 1997,
respectively. The Company is also seeking to recover in excess of $1.0 million
from its former outside legal firm for malpractice in handling a litigation
matter for the Company. In addition the Company successfully appealed a jury
verdict of $350 with respect to an equal pay act and sexual discrimination
claim to the 7th U.S. Court of Appeals.
In the opinion of the Company, amounts accrued for awards or assessments in
connection with these matters at this time are adequate, and the ultimate
resolution of environmental, product liability, and other legal matters will
not have a material effect on the Company's consolidated financial position,
results of operations, or cash flows. The Company is not able to estimate
accurately the additional loss or range of loss that is reasonably possible, in
addition to the amounts accrued. The Company reassesses these matters as new
facts and cases are brought to management's attention.
F-46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
21. SUBSEQUENT EVENTS
On January 26, 1999, the Company issued $123,000 aggregate principal amount
of 11.375% Senior Subordinated Notes due 2008 (the "Dollar Notes") and
(Euro)75,000 ($87,000 equivalent) aggregate principal amount of 11.375% Senior
Subordinated Notes due 2008 (the "Euro Notes") in a private placement pursuant
to Rule 144A (the "Offering"). The Notes will mature on August 1, 2008, and
interest is payable semi-annually on February 1 and August 1 of each year,
commencing August 1, 1999. The Company used the net proceeds from the Offering
to redeem in whole, the $170,000 Senior Subordinated Seller Notes and the
$22,500 Senior Notes. In addition, the Company used approximately $9,100 of the
net proceeds to reduce borrowings under the revolving credit facility under the
New Credit Agreement and to permanently reduce the bank working capital
commitment from $120,000 to $110,000.
During the first quarter of 1999, the Company incurred an extraordinary loss
on debt extinguishment of approximately $6,500 in connection with the
refinancing of the Senior Notes and the Senior Subordinated Seller Notes with
proceeds received from the Offering. This amount consists of $500 of premiums
on the Senior Notes and approximately $6,000 of unamortized deferred issuance
costs.
Each of the Dollar Notes and the Euro Notes will be redeemable, at the
Company's option, in whole at any time, or in part from time to time, on and
after February 1, 2004, upon not less than 30 nor more than 60 days' notice, at
the following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing on
February 1 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004........................................................... 105.688%
2005........................................................... 103.792%
2006........................................................... 101.896%
2007 and thereafter............................................ 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to February 1, 2002, the Company may, at its option, use
the net cash proceeds of one or more public equity offerings to redeem up to
35% of the original principal amount of the Dollar Notes issued in the Offering
and up to 35% of the original principal amount of the Euro Notes issued in the
Offering, each at a redemption price equal to 111.375% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided that at least 55% of the original principal amount of the
Dollar Notes issued in the Offering or the Euro Notes issued in the Offering,
as the case may be, remains outstanding immediately after any such redemption
and the Company shall make such redemption not more than 120 days after the
consummation of any such public equity offering.
The Notes are unsecured and subordinated to all of the Company's existing and
future senior debt, including its obligations under the New Credit Agreement.
All of the Company's current and future U.S. subsidiaries will guarantee the
Notes with guarantees that will be unsecured and subordinated to senior debt of
subsidiaries. The indentures under which the Notes were issued contain
covenants limiting the Company's ability to incur additional debt; pay
dividends on capital stock, repurchase capital stock or make certain other
restricted payments; make certain investments; create liens on our assets to
secure debt; enter into transactions with affiliates; merge or consolidate with
another company; and transfer and sell assets.
The Company and the subsidiary guarantors have entered into a Registration
Rights Agreement pertaining to the Dollar Notes and another Registration Rights
Agreement pertaining to the Euro Notes (together, the "Registration Rights
Agreements"). Per the registration rights agreement the Company will, at its
own cost, (i)
F-47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
within 90 days after the Issue Date, file a registration statement on the
appropriate registration form (the "Exchange Offer Registration Statement")
with the Securities and Exchange Commission (the "Commission") with respect to
the Exchange Offer to exchange the Euro and Dollar for the Exchange Notes which
will have terms substantially identical in all material respects to the Dollar
Notes or the Euro Notes, as the case may be, (except that the Exchange Notes
will not contain terms with respect to transfer restrictions or liquidated
damages), (ii) use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 150 days
after the Issue Date and (iii) use its best efforts to consummate the Exchange
Offer within 195 days after the Issue Date. Upon the Exchange Offer
Registration Statement being declared effective, the Company will offer the
Exchange Notes in exchange for surrender of the Euro and Dollar Notes.
Although the Company intends to file the registration statement described
above, there can be no assurance that such registration statement will be
filed, or, if filed, that it will become effective. If the Company fails to
comply with the above provisions or if such registration statement fails to
become effective, then, as liquidated damages, additional interest (the
"Additional Interest") shall become payable with respect to the applicable Euro
and Dollar Notes at an increasing rate of 0.5% for every ninety days that the
Company fails to register such notes.
22. SHAREHOLDER RIGHTS PLAN
On January 22, 1997, the Board of Directors of the Company approved the
extension of the benefits afforded by the Company's then-existing rights plan
by adopting a new shareholder rights plan. Pursuant to the new Rights
Agreement, dated as of January 22, 1997, and as amended by Amendment No. 1,
dated as of September 30, 1998, by and between the Company and Harris Trust and
Savings Bank, as Rights Agent, one Right was issued for each outstanding share
of Common Stock upon the expiration of the Company's then-existing rights
(February 9, 1997). Each of the new Rights entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Preferred Stock at a price of $44.00 per one-thousandth of a share. The Rights
will not become exercisable, however, unless and until, among other things,
certain persons acquire 15% or more of the outstanding Common Stock of the
Company or the Board of Directors of the Company determines that a person is an
Adverse Person.
A person who beneficially owns 10% or more of the outstanding shares of
Common Stock of the Company will be declared an Adverse Person if the Board of
Directors determines (a) that such beneficial ownership is intended to cause
the Company to repurchase the Common Stock beneficially owned by such person or
to pressure the Company to take action or enter into transactions intended to
provide such person with short-term financial gain that are not in the best
long-term interests of the Company and its shareholders or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact on
the Company to the detriment of the Company's shareholders, employees,
suppliers, customers or community. If certain persons acquire 15% or more of
the outstanding Common Stock or is declared an Adverse Person (subject to
certain conditions and exceptions more fully described in the Rights
Agreement), each Right will entitle the holder (other than the person who
acquired 15% or more of the outstanding Common Stock or is declared an Adverse
Person) to purchase Common Stock of the Company having a market value equal to
twice the exercise price of a Right. The new Rights are redeemable under
certain circumstances at $0.01 per Right and will expire, unless earlier
redeemed, on February 9, 2007.
23. GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
In connection with the Acquisition and as part of the subsequent financing,
the Company issued and sold $123,000 of 11.375% US dollar-denominated senior
subordinated notes and (Euro)75,000 of 11.375% Euro denominated senior
subordinated notes (together the "Outstanding Notes") in a private placement
pursuant to
F-48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
Rule 144A and Regulation S. The Outstanding Notes are, and the Exchange Notes
which will be issued in this Exchange Offer will be, general unsecured
obligations of the Company, subordinated in right of payment to all existing
and future senior indebtedness of the Company, and guaranteed on a full,
unconditional, joint and several basis by the Company's wholly owned domestic
subsidiaries.
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of November 30, 1998
and 1997 and for the years ended November 30, 1998, 1997 and 1996, of (a)
Tokheim Corporation, the parent; (b) the guarantor subsidiaries; (c) the
nonguarantor subsidiaries; and (d) the Company on a consolidated basis, and
(2) Elimination entries necessary to consolidate Tokheim Corporation, the
parent, with guarantor and nonguarantor subsidiaries.
Investments in subsidiaries are accounted for by the parent using the equity
method of accounting. The guarantor and nonguarantor subsidiaries are presented
on a combined basis. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
Separate financial statements for the guarantor subsidiaries and the
nonguarantor subsidiaries are not presented because management believes that
such financial statements would not be meaningful to investors.
F-49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
For the year ended November 30, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $149,660 $83,788 $260,004 $(27,012) $466,440
Cost of sales, exclusive
of items listed below.. 112,809 58,527 200,707 (27,012) 345,031
Selling, general, and
administrative
expenses............... 32,606 14,189 33,024 -- 79,819
Depreciation and
amortization........... 4,419 1,302 7,415 -- 13,136
Merger and acquisition
costs and other unusual
items.................. 7,206 108 6,371 -- 13,685
-------- ------- -------- -------- --------
Operating profit (loss). (7,380) 9,662 12,487 -- 14,769
Interest expense, net... 4,650 1,283 13,324 -- 19,257
Foreign currency (gain)
loss................... (996) 3 (449) -- (1,442)
Equity in (earnings)
loss of consolidated
subsidiaries........... 2,032 -- -- (2,032) --
Minority interest....... -- -- 327 -- 327
Other (income) expense,
net.................... (9,444) 1,745 7,024 -- (675)
-------- ------- -------- -------- --------
Earnings (loss) before
income taxes........... (3,622) 6,631 (7,739) 2,032 (2,698)
Income taxes............ 122 287 637 -- 1,046
-------- ------- -------- -------- --------
Earnings (loss) before
extraordinary item..... (3,744) 6,344 (8,376) 2,032 (3,744)
Extraordinary loss on
debt extinguishment.... (23,924) -- -- -- (23,924)
-------- ------- -------- -------- --------
Net earnings (loss)..... $(27,668) $ 6,344 $ (8,376) $ 2,032 $(27,668)
======== ======= ======== ======== ========
</TABLE>
F-50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
For the year ended November 30, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $149,124 $55,784 $211,972 $(31,411) $385,469
Cost of sales, exclusive
of items listed below.. 113,234 39,879 162,230 (31,411) 283,932
Selling, general, and
administrative
expenses............... 31,606 7,259 29,302 -- 68,167
Depreciation and
amortization........... 2,930 736 5,566 -- 9,232
Merger and acquisition
costs and other unusual
items.................. 2,952 -- 541 -- 3,493
-------- ------- -------- -------- --------
Operating profit (loss). (1,598) 7,910 14,333 -- 20,645
Interest expense, net... 5,344 5 11,102 -- 16,451
Foreign currency (gain)
loss................... (808) -- 856 -- 48
Equity in (earnings)
loss of consolidated
subsidiaries........... (2,622) -- -- 2,622 --
Minority interest....... -- -- 394 -- 394
Other (income) expense,
net.................... (5,760) 1,536 2,779 -- (1,445)
-------- ------- -------- -------- --------
Earnings (loss) before
income taxes........... 2,248 6,369 (798) (2,622) 5,197
Income taxes............ (1,732) 2,085 864 -- 1,217
-------- ------- -------- -------- --------
Earnings (loss) before
extraordinary item..... 3,980 4,284 (1,662) (2,622) 3,980
Extraordinary loss on
debt extinguishment.... (1,886) -- -- -- (1,886)
-------- ------- -------- -------- --------
Net earnings (loss)..... $ 2,094 $ 4,284 $ (1,662) $ (2,622) $ 2,094
======== ======= ======== ======== ========
</TABLE>
F-51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
For the year ended November 30, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $153,016 $52,855 $107,863 $(34,001) $279,733
Cost of sales, exclusive
of items listed below.. 119,528 41,076 83,620 (34,001) 210,223
Selling, general, and
administrative
expenses............... 29,289 6,956 15,422 -- 51,667
Depreciation and
amortization........... 3,042 657 1,329 -- 5,028
Merger and acquisition
costs and other unusual
items.................. 5,230 -- 1,229 -- 6,459
-------- ------- -------- -------- --------
Operating profit (loss). (4,073) 4,166 6,263 -- 6,356
Interest expense, net... 3,162 2 4,027 -- 7,191
Foreign currency (gain)
loss................... 50 (1) 110 -- 159
Equity in (earnings)
loss of consolidated
subsidiaries........... (1,904) -- -- 1,904 --
Minority interest....... -- -- 393 -- 393
Other (income) expense,
net.................... (1,483) (276) 1,601 -- (158)
-------- ------- -------- -------- --------
Earnings (loss) before
income taxes........... (3,898) 4,441 132 (1,904) (1,229)
Income taxes............ (1,889) 1,831 838 -- 780
-------- ------- -------- -------- --------
Net earnings (loss)..... $ (2,009) $ 2,610 $ (706) $ (1,904) $ (2,009)
======== ======= ======== ======== ========
</TABLE>
F-52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the year ended November 30, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash provided from
(used in) operations. $ (1,001) $ 13,634 $ 18,394 $(21,237) $ 9,790
Cash flows from
investing activities:
Acquisition, net of
cash acquired........ (10,641) (100,000) -- -- (110,641)
Plant and equipment
additions............ (5,165) (2,743) (6,640) -- (14,548)
Investments in and
advances to
subsidiaries, net.... 71,402 (87,676) (4,963) 21,237 --
Proceeds from sale of
property and
equipment............ 23 163 589 -- 775
-------- --------- -------- -------- ---------
Net cash provided
from (used in)
investing
activities......... 55,619 (190,256) (11,014) 21,237 (124,414)
Cash flows from
financing activities:
Proceeds from issuance
of senior notes...... 22,500 -- -- -- 22,500
Redemption of senior
subordinated notes... (90,000) -- -- -- (90,000)
Decrease in term debt. (39) -- (4,228) -- (4,267)
Increase (decrease) in
notes payable, banks. (24,090) 182,146 713 -- 158,769
Increase in cash
overdraft............ -- 148 3,423 -- 3,571
Debt issuance costs... (16,157) -- -- -- (16,157)
Proceeds from issuance
of common stock...... 74,057 -- -- -- 74,057
Equity issuance costs. (4,858) -- -- -- (4,858)
Premiums paid on debt
extinguishment....... (15,743) -- -- -- (15,743)
Treasury stock, net... (719) -- -- -- (719)
Preferred stock
dividends............ (1,484) -- -- -- (1,484)
-------- --------- -------- -------- ---------
Net cash provided
from (used in)
financing
activities......... (56,533) 182,294 (92) -- 125,669
Effect of translation
adjustments on cash.... -- (1,461) 10,779 -- 9,318
Cash and cash
equivalents:
Increase (decrease) in
cash................. (1,915) 4,211 18,067 -- 20,363
Beginning of year..... 2,764 1,170 2,504 -- 6,438
-------- --------- -------- -------- ---------
End of period......... $ 849 $ 5,381 $ 20,571 $ -- $ 26,801
======== ========= ======== ======== =========
</TABLE>
F-53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the year ended November 30, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash provided
from operations..... $ 11,092 $ 2,109 $ 7,510 $491 $ 21,202
Cash flows from
investing activities:
Plant and equipment
additions........... (4,708) (846) (5,600) -- (11,154)
Investments in and
advances to
subsidiaries, net... (1,691) (319) 2,600 (590) --
Proceeds from sale of
property and
equipment........... 240 20 500 -- 760
-------- ------- ------- ---- --------
Net cash used in
investing
activities........ (6,159) (1,145) (2,500) (590) (10,394)
Cash flows from
financing activities:
Redemption of senior
subordinated notes.. (10,000) -- -- -- (10,000)
Increase (decrease)
in term debt........ (55) -- (3,692) -- (3,747)
Increase (decrease)
notes payable,
banks............... 7,946 -- (6,176) -- 1,770
Increase (decrease)
in cash overdraft... -- (355) 2,229 -- 1,874
Proceeds from
issuance of common
stock............... 1,706 -- -- -- 1,706
Premiums paid on debt
extinguishment...... (1,390) -- -- -- (1,390)
Treasury stock, net.. (496) -- (99) 99 (496)
Preferred stock
dividends........... (1,512) -- -- -- (1,512)
-------- ------- ------- ---- --------
Net cash provided
from (used in)
financing
activities........ (3,801) (355) (7,738) 99 (11,795)
Effect of translation
adjustments on cash... -- (6) (2,383) -- (2,389)
Cash and cash
equivalents:
Increase (decrease)
in cash............. 1,132 603 (5,111) -- (3,376)
Beginning of year.... 1,632 567 7,615 -- 9,814
-------- ------- ------- ---- --------
End of period........ $ 2,764 $ 1,170 $ 2,504 $-- $ 6,438
======== ======= ======= ==== ========
</TABLE>
F-54
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the year ended November 30, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net cash provided from
(used in) operations. $ 9,266 $ 3,034 $ (8,689) $2,286 $ 5,897
Cash flows from
investing activities:
Acquisition, net of
cash acquired........ (9,799) -- (42,306) -- (52,105)
Plant and equipment
additions............ (1,299) (654) (1,108) -- (3,061)
Investments in and
advances to
subsidiaries, net.... (80,741) (2,500) 85,527 (2,286) --
Proceeds from sale of
property and
equipment............ 150 5 932 -- 1,087
-------- ------- -------- ------ --------
Net cash provided
from (used in)
investing
activities......... (91,689) (3,149) 43,045 (2,286) (54,079)
Cash flows from
financing activities:
Proceeds from senior
subordinated notes... 100,000 -- -- -- 100,000
Decrease in term debt. (4,052) -- (27,748) -- (31,800)
Decrease notes
payable, banks....... (556) -- (4,488) -- (5,044)
Increase (decrease) in
cash overdraft....... -- -- 7,237 -- 7,237
Debt issuance costs .. (11,506) -- -- -- (11,506)
Proceeds from issuance
of common stock...... 42 -- -- -- 42
Treasury stock, net... (370) -- -- -- (370)
Preferred stock
dividends............ (1,543) -- -- -- (1,543)
-------- ------- -------- ------ --------
Net cash provided
from (used in)
financing
activities......... 82,015 -- (24,999) -- 57,016
Effect of translation
adjustments on cash.... -- -- (4,482) -- (4,482)
Cash and cash
equivalents:
Increase (decrease) in
cash................. (408) (115) 4,875 -- 4,352
Beginning of year..... 2,040 682 2,740 -- 5,462
-------- ------- -------- ------ --------
End of period......... $ 1,632 $ 567 $ 7,615 $ -- $ 9,814
======== ======= ======== ====== ========
</TABLE>
F-55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED BALANCE SHEET
As of November 30, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 849 $ 5,381 $ 20,571 $ -- $ 26,801
Accounts receivables,
net.................. 52,303 32,643 133,868 (46,121) 172,693
Inventories, net...... 16,720 18,255 88,369 (311) 123,033
Other current assets.. 1,921 759 16,459 -- 19,139
-------- -------- -------- --------- --------
Total current
assets............. 71,793 57,038 259,267 (46,432) 341,666
Investments in
subsidiaries........... 112,268 13,869 3,197 (129,334) --
Property, plant, and
equipment, net......... 21,906 10,908 45,091 -- 77,905
Goodwill, net........... 15,765 89,590 218,758 -- 324,113
Other non-current assets
and deferred charges,
net.................... 107,666 259,055 5,787 (339,550) 32,958
-------- -------- -------- --------- --------
Total assets........ $329,398 $430,460 $532,100 $(515,316) $776,642
======== ======== ======== ========= ========
Liabilities and
Shareholders' Equity
Current maturities of
long-term debt......... $ -- $ -- $ 2,110 $ -- $ 2,110
Notes payable to banks.. -- -- 410 -- 410
Cash overdrafts......... -- 21 15,043 -- 15,064
Accounts payable........ 32,782 24,750 84,107 (46,317) 95,322
Accrued expenses........ 16,458 42,193 77,513 -- 136,164
-------- -------- -------- --------- --------
Total current
liabilities........ 49,240 66,964 179,183 (46,317) 249,070
Notes payable, bank
credit agreement....... -- 182,145 -- -- 182,145
Senior notes............ 22,500 -- -- -- 22,500
Senior subordinated
notes.................. 95,946 74,054 -- -- 170,000
Junior subordinated
Payment In Kind note... 40,000 -- -- -- 40,000
Other long-term debt,
less current
maturities............. 9,409 -- 322,997 (328,291) 4,115
Guaranteed Employees'
Stock Ownership Plan
obligation............. 6,987 -- -- -- 6,987
Post-retirement benefit
liability.............. 14,418 -- -- -- 14,418
Minimum pension
liability.............. 3,135 -- -- -- 3,135
Other long-term
liabilities............ 475 (217) 7,366 (113) 7,511
-------- -------- -------- --------- --------
242,110 322,946 509,546 (374,721) 699,881
Redeemable convertible
preferred stock........ 24,000 -- -- -- 24,000
Guaranteed Employees'
Stock Ownership Plan
obligation............. (6,987) -- -- -- (6,987)
Treasury stock, at cost. (4,883) -- -- -- (4,883)
-------- -------- -------- --------- --------
12,130 -- -- -- 12,130
Common stock............ 90,354 107,243 14,960 (122,203) 90,354
Common stock warrants... 20,000 -- -- -- 20,000
Minimum pension
liability.............. (3,135) -- -- -- (3,135)
Foreign currency
translation
adjustments............ (12,547) (313) (9,738) -- (22,598)
Retained earnings
(accumulated deficit).. (18,819) 584 17,332 (18,392) (19,295)
-------- -------- -------- --------- --------
75,853 107,514 22,554 (140,595) 65,326
Less treasury stock, at
cost................... (695) -- -- -- (695)
-------- -------- -------- --------- --------
75,158 107,514 22,554 (140,595) 64,631
-------- -------- -------- --------- --------
Total liabilities
and shareholders'
equity............. $329,398 $430,460 $532,100 $(515,316) $776,642
======== ======== ======== ========= ========
</TABLE>
F-56
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED BALANCE SHEET
As of November 30, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 2,764 $ 1,170 $ 2,504 $ -- $ 6,438
Accounts receivables,
net.................. 27,755 10,005 56,867 (11,616) 83,011
Inventories, net...... 19,455 8,326 36,382 184 64,347
Other current assets.. 2,310 242 4,153 -- 6,705
-------- ------- -------- --------- --------
Total current
assets............. 52,284 19,743 99,906 (11,432) 160,501
Investments in
subsidiaries........... 32,488 7,089 3,440 (43,017) --
Property, plant, and
equipment, net......... 19,180 4,119 19,236 -- 42,535
Goodwill, net........... 3,581 -- 64,114 -- 67,695
Other non-current assets
and deferred charges,
net.................... 99,423 55 1,756 (81,346) 19,888
-------- ------- -------- --------- --------
Total assets........ $206,956 $31,006 $188,452 $(135,795) $290,619
======== ======= ======== ========= ========
Liabilities and
Shareholders' Equity
Current maturities of
long-term debt......... $ 39 $ -- $ 2,352 $ -- $ 2,391
Notes payable to banks.. -- -- 98 -- 98
Cash overdrafts......... -- -- 10,575 -- 10,575
Accounts payable........ 22,994 6,387 36,364 (11,148) 54,597
Accrued expenses........ 14,662 4,453 32,075 -- 51,190
-------- ------- -------- --------- --------
Total current
liabilities........ 37,695 10,840 81,464 (11,148) 118,851
Notes payable, bank
credit agreement....... 24,090 -- -- -- 24,090
Senior subordinated
notes.................. 90,000 -- -- -- 90,000
Other long-term debt,
less current
maturities............. -- -- 86,899 (82,502) 4,397
Guaranteed Employees'
Stock Ownership Plan
obligation............. 9,429 -- -- -- 9,429
Post-retirement benefit
liability.............. 14,378 -- -- -- 14,378
Minimum pension
liability.............. 2,173 -- -- -- 2,173
Other long-term
liabilities............ 597 (362) 6,698 (103) 6,830
-------- ------- -------- --------- --------
178,362 10,478 175,061 (93,753) 270,148
Redeemable convertible
preferred stock........ 24,000 -- -- -- 24,000
Guaranteed Employees'
Stock Ownership Plan
obligation............. (9,429) -- -- -- (9,429)
Treasury stock, at cost. (4,718) -- -- -- (4,718)
-------- ------- -------- --------- --------
9,853 -- -- -- 9,853
Common stock............ 21,158 27,147 5,032 (32,179) 21,158
Minimum pension
liability.............. (2,173) -- -- -- (2,173)
Foreign currency
translation
adjustments............ (11,735) 89 (6,402) -- (18,048)
Retained earnings
(accumulated deficit).. 11,631 (6,708) 14,761 (9,863) 9,821
-------- ------- -------- --------- --------
18,881 20,528 13,391 (42,042) 10,758
Less treasury stock, at
cost................... (140) -- -- -- (140)
-------- ------- -------- --------- --------
18,741 20,528 13,391 (42,042) 10,618
-------- ------- -------- --------- --------
Total liabilities
and shareholders'
equity............. $206,956 $31,006 $188,452 $(135,795) $290,619
======== ======= ======== ========= ========
</TABLE>
F-57
<PAGE>
RPS DIVISION
Combined Condensed Balance Sheets
(Amounts in thousands)
<TABLE>
<CAPTION>
As of
--------------------------
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents......................... $ 9,728 $ 7,321
Accounts receivables, net of allowance for
doubtful accounts of $4,111 and $3,313,
respectively..................................... 82,181 102,540
Inventory, net.................................... 69,317 58,859
Other current assets.............................. 13,669 11,872
-------- --------
Total current assets........................ 174,895 180,592
Property, plant & equipment, net.................... 31,735 32,183
Other tangible assets............................... 1,056 1,326
Goodwill............................................ 49,792 51,757
Other noncurrent assets and deferred charges
(principally taxes on income)...................... 2,864 3,576
-------- --------
Total assets................................ $260,342 $269,434
======== ========
Liabilities and Equity:
Liabilities:
Current liabilities:
Current portion long-term debt.................. $ -- $ 46
Cash overdraft.................................. 2,289 12,614
Accounts payable and accruals................... 71,324 94,526
-------- --------
Total current liabilities................... 73,613 107,186
Postretirement benefits......................... 4,571 4,188
Minority interest............................... 162 133
Other long-term liabilities..................... 3,191 3,657
-------- --------
Total liabilities........................... 81,537 115,164
Equity and retained earnings (deficit):
Equity........................................ 200,708 160,578
Retained earnings (deficit)................... (21,903) (6,308)
-------- --------
Total liabilities and stockholders' equity.. $260,342 $269,434
======== ========
</TABLE>
F-58
<PAGE>
RPS DIVISION
Combined Condensed Statements of Income
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
September 30, September 30,
1998 1997
------------- -------------
Unaudited Unaudited
------------- -------------
<S> <C> <C>
Net Sales........................................... $ 231,764 $ 231,978
Cost of sales....................................... 199,486 194,623
Selling, general, and administrative expenses....... 48,015 47,565
--------- ---------
Operating loss...................................... (15,737) (10,210)
Interest expense, net............................... 1,586 945
Other expense, net.................................. 3,270 3,307
--------- ---------
Loss before income taxes............................ (20,593) (14,462)
Income tax benefit.................................. (4,863) (5,246)
--------- ---------
Net loss............................................ $ (15,730) $ (9,216)
========= =========
</TABLE>
F-59
<PAGE>
RPS DIVISION
Combined Condensed Statements of Cash Flows
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
September 30, September 30,
1998 1997
------------- -------------
Unaudited Unaudited
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(15,730) $ (9,216)
Adjustment to reconcile net loss to net cash used
in operations:
Depreciation and amortization..................... 8,766 8,476
Minority Interest................................. 29 11
Deferred income taxes............................. 151 1,659
Changes in assets and liabilities, net of effect
of acquired businesses:
Receivables, net................................. 18,009 29,355
Related party receivables........................ 2,350 1,106
Inventories...................................... (10,458) 588
Accounts payable................................. (16,811) (32,412)
Related party payables........................... (6,254) (2,117)
U.S. and foreign income taxes.................... (1,396) (2,989)
Other............................................ (1,552) 2,298
-------- --------
Net cash used in operations................ (22,896) (3,241)
-------- --------
Cash flows from investing activities:
Property, plant and equipment additions.......... (4,951) (6,810)
Investments...................................... 48 3,483
Other, net....................................... 312 19,303
-------- --------
Net cash provided by (used in) investing
activities................................ (4,591) 15,976
-------- --------
Cash flows from financing activities:
Net decrease in long-term debt................... (46) (694)
Net decrease cash overdraft and short-term debt.. (10,325) (4,056)
Capital contributions and other changes in
equity, net..................................... 7,915 (20,286)
Related party advances........................... 32,350 14,640
Dividends declared............................... -- (5,705)
-------- --------
Net cash provided from (used in) financing
activities................................ 29,894 (16,101)
-------- --------
Cash and cash equivalents:
Increase (decrease) in cash and cash equivalents. 2,407 (3,366)
Cash and cash equivalents, beginning of year..... 7,321 5,445
-------- --------
Cash and cash equivalents, end of period......... $ 9,729 $ 2,079
======== ========
</TABLE>
F-60
<PAGE>
RETAIL PETROLEUM SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
Retail Petroleum Systems ("RPS" or the "Company") provides the worldwide
retail petroleum industry with integrated solutions for secured fuel dispenser
transactions. These solutions are based on a range of products and services,
including gasoline dispensers, payment terminals, service station management
systems, maintenance and installation of equipment, turn-key construction, and
renovation of service stations. RPS has 2,350 employees and its operations are
principally focused in Europe and the United States.
RPS is a wholly owned business of Schlumberger Limited (SL). The accompanying
interim financial statements have been prepared as if the Company had operated
as an independent stand-alone entity for the periods presented. These results
of operations, however, may not be indicative of the future results of
operations for RPS operating as a stand-alone entity.
On June 19, 1998, SL signed a contract with Tokheim Corporation for the sale
of the RPS operations. The accompanying interim financial statements do not
include any adjustments which may result from this change in ownership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Combined Interim Financial Statements of RPS have been prepared in
accordance with accounting principles generally accepted in the United States.
Principles of consolidation
The Combined Financial Statements include the accounts of all entities
controlled by RPS. All significant intercompany accounts and transactions are
eliminated. The equity method of accounting is used for investments in
affiliates in which RPS owns between 20% and 50%.
The combined balance sheet as of September 30, 1998, the combined statements
of income for the nine months ended September 30, 1998 and 1997, and the
combined statements of cash flows for the nine months ended September 30, 1998
and 1997 have been prepared by the Company, and are not audited. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position at September
30, 1998, and the results of operations and cash flows at September 30, 1998
and September 30, 1997 have been made. The combined balance sheet at December
31, 1997 has been derived from the audited financial statements at that date.
The results of operations for the nine months ended September 30, 1998 are
not necessarily indicative of the results to be expected for any subsequent
quarter or the entire year ending December 31, 1998.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
While actual results could differ from these estimates, management believes
that the estimates are reasonable.
F-61
<PAGE>
3. COMBINED STATEMENT OF EQUITY
<TABLE>
<CAPTION>
Retained Total
Equity Earnings Equity
-------- -------- --------
<S> <C> <C> <C>
Balance, December 31, 1996........................ $157,670 $ 6,396 $164,066
Net loss.......................................... -- (9,216) (9,216)
Dividend declared................................. -- (5,705) (5,705)
Capital contribution.............................. 3,628 -- 3,628
Related party advances............................ (6,298) -- 14,640
Other............................................. (3,359) -- (24,297)
Currency translation adjustment................... 385 -- 385
-------- -------- --------
Balance, September 30, 1997....................... 152,026 (8,525) 143,501
Balance, December 31, 1997........................ 160,578 (6,308) 154,270
Net loss.......................................... -- (15,730) (15,730)
Capital contribution.............................. 11,518 -- 11,518
Related party advances............................ 32,350 -- 32,350
Other............................................. (4,445) 135 (4,310)
Currency translation adjustment................... 707 -- 707
-------- -------- --------
Balance, September 30, 1998....................... $200,708 $(21,903) $178,805
======== ======== ========
</TABLE>
F-62
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Schlumberger Limited
In our opinion, the accompanying combined balance sheets and the related
combined statements of income and equity and of cash flows present fairly, in
all material respects, the financial position of Retail Petroleum Systems (a
wholly owned business of Schlumberger Limited) at December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers
July 6, 1998
Paris, France
F-63
<PAGE>
RETAIL PETROLEUM SYSTEMS
COMBINED STATEMENTS OF INCOME
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net revenue...................................... $344,248 $333,915 $303,668
-------- -------- --------
Expenses
Cost of goods sold and services................ 286,580 273,492 249,101
Research & engineering......................... 16,616 15,949 14,122
Marketing...................................... 25,520 24,111 21,364
General and administrative..................... 13,904 15,720 16,469
Goodwill amortization.......................... 3,902 3,255 2,594
Administrative fees allocated from parent...... 9,374 8,607 7,464
Restructuring charge........................... -- 9,978 --
-------- -------- --------
355,896 351,112 311,114
-------- -------- --------
Loss from operations............................. (11,648) (17,197) (7,446)
-------- -------- --------
Interest expense................................. (1,418) (1,652) (1,257)
Other expense.................................... (403) (1,557) (1,305)
-------- -------- --------
Loss before taxes and minority interest.......... (13,469) (20,406) (10,008)
Income tax benefit............................... 6,779 4,058 2,287
Minority interest................................ (30) (18) --
-------- -------- --------
Net loss......................................... $ (6,720) $(16,366) $ (7,721)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
RETAIL PETROLEUM SYSTEMS
COMBINED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(6,720) $(16,366) $(7,721)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization.................. 11,777 10,780 10,084
Other.......................................... 8,276 (1,920) (2,966)
Changes in operating assets and liabilities, net
of effect of acquired businesses:
Accounts receivable............................ (5,872) (22,210) (13,780)
Inventories.................................... 3,128 (9,064) (1,796)
Accounts payable and accrued liabilities....... (11,615) 38,668 10,012
Prepaid and refundable income taxes............ (3,558) 301 585
Other assets and liabilities, net.............. 17,741 10,243 (1,001)
------- -------- -------
Net cash provided by (used in) operating
activities.................................. 13,157 10,432 (6,583)
------- -------- -------
Cash flows from investing activities:
Capital expenditures............................. (9,486) (14,736) (11,389)
Acquisition of businesses........................ (1,933) (20,224) (314)
Other, net....................................... 1,151 (1,440) (294)
------- -------- -------
Net cash used in investing activities........ (10,268) (36,400) (11,997)
------- -------- -------
Cash flows from financing activities:
Advances from related parties.................... 2,083 25,402 18,442
Long-term debt................................... (740) 466 (248)
Capital contributions............................ 3,628 5,013 4,936
Dividends paid................................... (5,984) (5,702) (1,500)
------- -------- -------
Net cash provided by (used in) financing
activities.................................. (1,013) 25,179 21,630
------- -------- -------
Net change in cash and cash equivalents...... 1,876 (789) 3,050
Cash and cash equivalents, beginning of year. 5,445 6,234 3,184
------- -------- -------
Cash and cash equivalents, end of year....... $ 7,321 $ 5,445 $ 6,234
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE>
RETAIL PETROLEUM SYSTEMS
COMBINED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................. $ 7,321 $ 5,445
Short-term investments.................................... 1,001 3,431
Accounts receivable, net of allowance for doubtful
accounts of $3,313 and $3,397............................ 98,920 102,716
Receivables from related parties.......................... 3,620 2,076
Inventories............................................... 58,859 67,875
Deferred tax.............................................. 2,238 1,683
Prepaid and refundable income taxes....................... 4,631 1,420
Other current assets...................................... 4,002 2,964
-------- --------
Total current assets.................................... 180,592 187,610
-------- --------
Long-term investments and receivables....................... 988 2,383
Fixed assets, net of accumulated depreciation of $42,782 and
$45,651.................................................... 32,183 32,599
Goodwill.................................................... 51,757 57,391
Deferred tax................................................ 3,576 2,891
Other assets................................................ 338 19,796
-------- --------
Total assets............................................ $269,434 $302,670
======== ========
Liabilities and Equity
Current liabilities:
Bank overdrafts and short-term loans...................... $ 12,614 $ 11,433
Accounts payable and accrued liabilities.................. 87,608 110,516
Payables to related parties............................... 6,781 5,667
Dividends payable......................................... 137 --
Current portion of long-term debt......................... 46 203
-------- --------
Total current liabilities............................... 107,186 127,819
-------- --------
Long-term debt.............................................. -- 583
-------- --------
Other liabilities
Postretirement benefits................................... 4,188 3,827
Other long-term liabilities............................... 3,657 6,257
-------- --------
Total liabilities....................................... 115,031 138,486
-------- --------
Commitments and contingencies (Note 15)..................... -- --
Minority interest in subsidiaries........................... 133 118
Equity and retained earnings (deficit)
Equity.................................................... 160,578 157,670
Retained earnings (deficit)............................... (6,308) 6,396
-------- --------
154,270 164,066
-------- --------
Total liabilities and equity............................ $269,434 $302,670
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE>
RETAIL PETROLEUM SYSTEMS
COMBINED STATEMENTS OF EQUITY
(Amounts in thousands)
<TABLE>
<CAPTION>
Retained
Earnings Total
Equity (Deficit) Equity
-------- --------- --------
<S> <C> <C> <C>
Balance, January 1, 1995......................... $107,245 $ 37,685 $144,930
Net loss....................................... (7,721) (7,721)
Dividends paid................................. (1,500) (1,500)
Capital contribution........................... 4,936 4,936
Related party advances......................... 18,442 18,442
Other.......................................... (315) (315)
Currency translation adjustment................ 2,198 2,198
-------- -------- --------
132,506 28,464 160,970
-------- -------- --------
Balance, December 31, 1995....................... 132,506 28,464 160,970
Net loss....................................... (16,366) (16,366)
Dividends paid................................. (5,702) (5,702)
Capital contribution........................... 5,013 5,013
Related party advances......................... 25,402 25,402
Other.......................................... (3,462) (3,462)
Currency translation adjustment................ (1,789) (1,789)
-------- -------- --------
157,670 6,396 164,066
-------- -------- --------
Balance, December 31, 1996....................... 157,670 6,396 164,066
Net loss....................................... (6,720) (6,720)
Dividends paid................................. (5,984) (26,922)
Capital contribution........................... 3,628 3,628
Related party advances......................... 2,083 23,021
Other.......................................... (1,237) (1,237)
Currency translation adjustment................ (1,566) (1,566)
-------- -------- --------
Balance, December 31, 1997....................... $160,578 $ (6,308) $154,270
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-67
<PAGE>
RETAIL PETROLEUM SYSTEMS
Notes to Financial Statements
(Dollars in thousands, unless otherwise indicated)
1. ORGANIZATION
Retail Petroleum Systems ("RPS" or the "Company") provides the worldwide
retail petroleum industry with integrated solutions for secured fuel dispenser
transactions. These solutions are based on a range of products and services,
including gasoline dispensers, payment terminals, service station management
systems, maintenance and installation of equipment, turn-key construction, and
renovation of service stations. RPS has 2,350 employees and its operations are
principally focused in Europe and the United States. RPS's operations involve a
single industry segment for financial reporting purposes.
RPS is a wholly owned business of Schlumberger Limited (SL). The accompanying
financial statements have been prepared as if the Company had operated as an
independent stand-alone entity for the periods presented. These results of
operations, however, may not be indicative of the future results of operations
for RPS operating as a stand-alone entity.
On June 19, 1998, SL signed a contract with Tokheim Corporation for the sale
of the RPS operations. The accompanying financial statements do not include any
adjustments which may result from this change in ownership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Combined Financial Statements of RPS have been prepared in accordance
with accounting principles generally accepted in the United States.
Principles of Consolidation
The Combined Financial Statements include the accounts of all entities
controlled by RPS. All significant intercompany accounts and transactions are
eliminated. The equity method of accounting is used for investments in
affiliates in which RPS owns between 20% and 50%.
Revenue Recognition
Revenue from sales of fuel dispensers and service parts is recorded at the
time the goods are delivered. On-call service revenue is recognized when the
service has been performed. Revenue from the sale of fuel dispensers, service
parts and on-call revenue was approximately 53% of the total 1997 revenue.
Revenue and costs associated with separately priced customer service
contracts are recognized such that (a) revenue is recognized ratably over the
contract period; (b) costs are expensed as incurred; and (c) losses are
recognized on contracts where the expected future costs exceed future revenue.
Incremental direct acquisition costs are not material. Customer service
contracts include service and maintenance agreements and extended warranty
agreements for fuel dispensers and point-of-sale system hardware and software.
Revenue generated from separately priced customer service contracts was
approximately 14% of the total 1997 revenue.
Revenue from turn-key construction contracts is recognized on the percentage-
of-completion method. Percentage-of-completion for the service station
construction business is measured principally by the percentage of costs
incurred for each contract to date relative to the estimated total costs at
completion. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Revenue from turn-key
construction contracts was approximately 19% of the total 1997 revenue.
F-68
<PAGE>
Revenue from the sale of software and point-of-sale systems which is
dependent on software is recognized at the time of delivery as no significant
future Company obligations are required under the terms of the sales agreement
and the criteria of paragraph 8 of Statement of Position No. 97-2 "Software
Revenue Recognition" has been satisfied. Revenue from software and point-of-
sale systems was approximately 14% of the total 1997 revenue.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
While actual results could differ from these estimates, management believes
that the estimates are reasonable.
Translation of Non-U.S. Currencies
All assets and liabilities recorded in functional currencies other than US
dollars are translated at current exchange rates. The resulting adjustments are
charged or credited directly to the equity section of the balance sheet.
Revenue and expenses are translated at the weighted-average exchange rates for
the period. All realized and unrealized transaction gains and losses are
included in income in the period in which they occur. Transaction losses
included in results of operations were $3 million, $2 million, and $.1 million
in 1997, 1996 and 1995, respectively.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less at date of purchase.
Investments
Short-term investments held to maturity are stated at cost plus accrued
interest, which approximates market, and are comprised primarily of money
market funds.
For purposes of the Combined Statement of Cash Flows, the Company does not
consider short-term investments to be cash equivalents as they generally have
original maturities in excess of three months.
Financial Instruments
The fair value of cash, accounts receivable, trade accounts payable, short-
term borrowings, and accrued expenses are not materially different than their
carrying amounts as reported at December 31, 1997 and 1996.
Inventories
Inventories are stated at lower of average cost or market. Spares inventory
includes new and repaired parts primarily for maintenance of dispensers. Spares
are principally valued at average cost.
Fixed Assets and Depreciation
Fixed assets are stated at cost less accumulated depreciation, which is
provided for by charges to income over the estimated useful lives of the assets
by the straight-line method. Expenditures for renewals, replacements, and
betterments are generally capitalized. Maintenance and repairs are charged to
operating expense as incurred. Upon sale or other disposition, the applicable
amounts of asset cost and accumulated depreciation are removed from the
accounts and the net amount, less proceeds from disposal, is charged or
credited to income.
F-69
<PAGE>
Estimated useful lives of buildings and improvements range from ten to 30
years and machinery and equipment from three to ten years.
Goodwill
Goodwill represents cost in excess of net assets of purchased companies and
is amortized on a straight-line basis over periods ranging from five to 40
years. Accumulated amortization was $23 million and $19 million at December 31,
1997 and 1996, respectively. The Company evaluates the recoverability of
goodwill at each balance sheet date.
Research and Engineering
All research and engineering expenditures are expensed as incurred, including
costs relating to patents or rights that may result from such expenditures.
Taxes on Income
Taxes on income are computed in accordance with the tax rules and regulations
of the many taxing authorities where the income is earned. The income tax rates
imposed by these taxing authorities vary substantially. In most countries, RPS
is a division of the SL legal entity that is the ultimate tax payer in that
jurisdiction. Taxable income may differ from pre-tax income for financial
accounting purposes. To the extent that differences are due to revenue or
expense items reported in one period for tax purposes and in another period for
financial accounting purposes, an appropriate provision for deferred income
taxes is made.
Tax credits and other allowances are credited to current income tax expense
on the flow-through method of accounting.
3. INVENTORIES
Inventories at December 31, 1997 and 1996 consist of the following:
<TABLE>
<S> <C> <C>
Raw materials............................................. $18,071 $19,689
Work in progress.......................................... 6,038 9,793
Finished goods............................................ 9,321 13,246
Spares.................................................... 25,429 25,147
------- -------
$58,859 $67,875
======= =======
</TABLE>
4. FIXED ASSETS
Fixed assets at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land.................................................... $ 364 $ 392
Buildings and improvements.............................. 21,691 21,830
Machinery and equipment................................. 52,910 56,028
------- -------
74,965 78,250
Less: Accumulated depreciation.......................... (42,782) (45,651)
------- -------
Fixed assets............................................ $32,183 $32,599
======= =======
</TABLE>
Depreciation expense aggregated $7.9 million in 1997 and $7.5 million in both
1996 and 1995.
F-70
<PAGE>
5. ACQUISITIONS AND GOODWILL
In July 1996, RPS acquired for $7.0 million, GUEANT Pere & Fils and its
subsidiary ETPM, a gasoline dispenser service company providing maintenance of
service stations and project management of turn-key stations. In August 1996,
RPS acquired for $13.0 million, GERMANN and its Polish subsidiary, a turn-key
gasoline station provider located in Germany. Costs in excess of net assets
acquired were respectively $5.0 million and $12.0 million, respectively, which
are being amortized on a straight-line basis over ten and 20 years,
respectively.
In addition, between December 1995 and August 1996, RPS acquired three small
service companies in Italy, Borghetti, CME, and Nuova Rimic, for an aggregate
amount of $1.8 million. Costs in excess of net assets acquired were $1.0
million and are being amortized on straight-line basis over 10 years.
All acquisitions were accounted for as purchases.
6. DEBT
At December 31, 1996, the Company had $.5 million of long-term debt in French
francs at variable rates up to 7% and $46,000 in German marks at a rate of
5.75%. All long-term debt was repaid in 1997, except for the $46,000 in German
marks which is due on June 30, 1998. The carrying value of long-term debt at
December 31, 1997 approximates the aggregate fair value.
At December 31, 1997, the Company had available lines of credit of
approximately $13.4 million. The Company, at December 31, 1997, borrowed $12.6
million under these lines of credit at fixed and variable rates up to 8%.
7. TAXES ON INCOME
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. loss before taxes........................... $ 1,932 $ 4,698 $ 1,808
Foreign loss before taxes........................ 11,537 15,708 8,200
------- ------- -------
Total loss before taxes.......................... $13,469 $20,406 $10,008
======= ======= =======
</TABLE>
The following table shows the components of current and deferred income tax
benefits by taxing jurisdiction, both domestic and foreign:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current
Federal..................................... $ 134 $ (992) $ 681
State and local............................. 10 (104) 65
Foreign..................................... (5,745) (2,682) (1,561)
------- ------- -------
(5,601) (3,778) (815)
------- ------- -------
Deferred
Federal..................................... (645) (285) (968)
State and local............................. (111) (49) (166)
Foreign..................................... (422) 54 (338)
------- ------- -------
(1,178) (280) (1,472)
Total income tax benefits................. $(6,779) $(4,058) $(2,287)
======= ======= =======
</TABLE>
F-71
<PAGE>
At December 31, 1997 and 1996, gross deferred tax assets were $6,695 and
$5,202, respectively; gross deferred tax liabilities were $881 and $612,
respectively. The principal components of net deferred tax assets (liabilities)
were:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Employee and retiree benefits............................. $3,059 $2,736
Accounts receivable....................................... 517 516
Warranty.................................................. 1,721 1,167
Property, plant and equipment............................. 670 191
Others, net............................................... (153) (36)
------ ------
$5,814 $4,574
====== ======
</TABLE>
A reconciliation between the U.S. federal income tax rate and the effective
tax rate is:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996 1995
---- ----- -----
<S> <C> <C> <C>
Statutory tax rate...... 35.0% 35.0% 35.0%
Difference in effective
tax rate on foreign
earnings............... 12.7 (16.9) (15.6)
State and local taxes... 2.6 1.8 3.5
---- ----- -----
Effective tax rate...... 50.3% 19.9% 22.9%
==== ===== =====
</TABLE>
8. PENSION AND OTHER BENEFIT PLANS
SL sponsors several defined benefit pension plans that cover substantially
all U.S. employees. The benefits are based on years of service and compensation
on a career-average pay basis. These plans are substantially fully funded with
a trustee in respect to past and current service. Charges to expense are based
upon costs computed by independent actuaries. The funding policy is to
contribute annually amounts that are allowable for federal income tax purposes.
These contributions are intended to provide for benefits earned to date and
those expected to be earned in the future.
In the U.S., the RPS employees are included in the SL Plan, and accordingly,
$0.4 million was allocated to RPS for its share of pension expense for each of
the years ended December 31, 1997, 1996 and 1995. At December 31, 1997 and
December 31, 1996, accrued pension costs relating to the Company's
participation in this plan were $1.3 million.
Outside of the U.S., subsidiaries of SL sponsor several defined benefit and
defined contribution plans that cover substantially all employees who are not
covered by statutory plans. For defined benefit plans, charges to expense are
based upon costs computed by independent actuaries. These plans are
substantially fully funded with trustees in respect to past and current
service. For all non-US defined benefit plans, pension expense was $1.0
million, $1.8 million, and $1.1 million in 1997, 1996 and 1995, respectively.
For non-U.S. defined contribution plans, funding and costs are generally
based upon a predetermined percentage of employee compensation, Charges to
expense in 1997, 1996 and 1995, were $2.5 million, $2.4 million and $2.5
million, respectively.
In accordance with France labor agreements, RPS is required to pay certain
retirement benefits to employees who retire while working for the Company. The
benefit consists of a lump sum payment depending upon seniority, age and salary
level at retirement date. At both December 31, 1997 and 1996, accrued French
retirement costs were $1.3 million.
F-72
<PAGE>
Health Care Benefits
The Company provides health care benefits for certain active employees. The
cost of providing these benefits is recognized as expense when incurred and
aggregated $1 million, $1.1 million and $.9 million in 1997, 1996 and 1995,
respectively. Outside the US, such benefits are mostly provided through
government-sponsored programs.
Postretirement Benefits other than Pensions
The Company provides certain health care benefits to former employees who
have retired under the US pension plans.
The principal actuarial assumptions used to measure costs were a discount
rate of 8% in 1997 and 7.5% in 1996 and 1995. The overall medical cost trend
rate assumption beginning December 31, 1997, was 8% graded to 5% over the next
six years and 5% thereafter. Previously, the overall assumption had been 9%
graded to 6% over the next six years and thereafter.
Net periodic Postretirement benefit cost in the U.S. for 1997, 1996 and 1995,
included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period.......... $116 $181 $168
Interest cost on accumulated postretirement benefit
obligation.............................................. 56 80 64
Amortization of unrecognized net gain and other.......... (13) -- --
---- ---- ----
$159 $261 $232
==== ==== ====
</TABLE>
The funded status at December 31, 1997 and 1996, was as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $ 144 $ 105
Actives.................................................. 824 607
------ ------
968 712
Unrecognized net gain...................................... 380 476
Unrecognized prior service cost............................ 14 15
------ ------
Postretirement benefit liability....................... $1,362 $1,203
====== ======
</TABLE>
The assumed discount rate used to determine the accumulated Postretirement
benefit obligation was 7.5% for 1997 and 8% for 1996.
If the assumed medical cost trend rate was increased by one percentage point,
health care cost in 1997 would have been $.2 million, and the accumulated
postretirement benefit obligation would have been $1.2 million at December 31,
1997.
9. RESTRUCTURING CHARGE
In 1996, the Company announced a charge of $6.8 million after tax, which
included pre-tax charges of $9.6 million for severance and termination costs,
and other asset impairments/charges of $.4 million.
The severance and termination costs relate to less than 10% of the worldwide
workforce, primarily in Europe, and pertain to both manufacturing and operating
personnel in about five locations. At December 31, 1997, $8.1 million of the
severance and termination costs had been spent. The remainder should be spent
within the next nine months.
F-73
<PAGE>
10. LEASES AND LEASE COMMITMENTS
Minimum rental commitments under noncancellable operating leases, primarily
real estate and office facilities, in effect at December 31, 1997 are as
follows:
<TABLE>
<S> <C>
Year ended December 31,
1998............................ $4,629
1999............................ 3,833
2000............................ 2,282
2001............................ 1,318
2002 and beyond................. 593
</TABLE>
Operating lease rental expense aggregated $6.4 million, $5.1 million and $4.8
million for 1997, 1996 and 1995, respectively. These leases concern mostly
office building rentals and service van rentals.
11. GEOGRAPHIC INFORMATION
During the years ended December 31, 1997, 1996 and 1995, neither sales to any
government nor sales to any single customer exceeded 10% of operating revenue.
<TABLE>
<CAPTION>
United
States Europe Other Total
------- -------- ------ --------
<S> <C> <C> <C> <C>
Geographic Area 1997
Operating revenue........................ $72,064 $267,216 $4,968 $344,248
Operating loss........................... (1,312) (9,187) (1,149) (11,648)
Identifiable assets at December 31....... 47,233 222,201 -- 269,434
Geographic Area 1996
Operating revenue........................ 56,291 275,718 1,906 333,915
Operating loss........................... (5,619) (10,010) (1,568) (17,197)
Identifiable assets at December 31....... 42,331 260,339 -- 302,670
Geographic Area 1995
Operating revenue........................ 63,134 239,386 1,148 303,668
Operating loss........................... (1,479) (5,416) (551) (7,446)
Identifiable assets at December 31....... 41,229 186,532 -- 227,831
</TABLE>
12. STOCK OPTION PLANS
As of December 31, 1997, SL administered stock option plans, which are
described below. SL applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its stock option plans. Had compensation cost for the SL plans been
determined based on the fair value at the grant dates for awards under these
plans, consistent with the methodology of SFAS 123, RPS net loss would have
been the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Net loss
As reported................................. $(6,720) $(16,366) $(7,721)
Pro forma................................... (7,117) (16,619) (7,753)
</TABLE>
As required by SFAS No. 123, the above pro-forma data reflect the effect of
stock option grants during 1997, 1996, and 1995.
During 1997, 1996, 1995 and in prior years, key employees of RPS were granted
stock options under the SL stock option plans. The exercise price of each
option equals the market price of SL stock on the date of grant; and option's
maximum term is ten years, and options generally vest in 20% increments over
five years.
F-74
<PAGE>
As required by SFAS No. 123, the fair value of each grant is estimated on the
date of grant using the multiple option Black-Scholes option-pricing model with
the following weighted-average assumptions used for 1997, 1996 and 1995:
dividend of $0.75; expected volatility of 21% for 1997 grants and 20% for 1996
and 1995 grants; risk-free interest rates of 5.8%-6.77% for the 1997 grants;
5.09%-6.01% for the 1996 grants, and 5.70%-7.66% for the 1995 grants; and
expected option lives of 5.09 years for RPS employees for 1997 grants and 5.39
years for the 1996 and 1995 grants.
A summary of the status of the SL stock option plans for RPS as of December
31, 1997, 1996 and 1995, and changes during the years ending on those dates is
presented below.
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
1997 Exercise 1996 Exercise 1995 Exercise
Fixed Options Shares Price Shares Price Shares Price
------------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................. 179,600 $ 34.08 164,700 $ 30.04 148,000 $ 29.28
Granted................ 42,500 $ 81.03 62,000 $ 42.35 22,500 $ 32.07
Exercised.............. (32,750) $ 29.80 (47,100) $ 30.84 (5,800) $ 18.55
------- ------- -------
Outstanding at end of
year.................... 189,350 $ 45.36 179,600 $ 34.08 164,700 $ 30.04
======= ======= =======
Options exercisable at
year-end................ 60,550 56,600 79,400
Weighted-average fair
value of options granted
during the year......... $ 24.01 $ 11.25 $ 8.35
</TABLE>
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1997.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------- -----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding contractual Exercise Exercisable Exercise
Exercise Prices as of 12/31/97 Life Price as of 12/31/97 Price
- --------------- -------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$32.46-45.36....... $189,350 7.47 $45.36 60,550 $32.46
</TABLE>
13. RELATED PARTY TRANSACTIONS
In certain countries, RPS participates in SL's centralized treasury and cash
processes. In these countries, cash is managed either through zero balance
accounts or an interest-bearing offsetting mechanism. Cash disbursements for
operations, acquisitions, and other investments are funded as needed from
Schlumberger Limited.
SL and its affiliates provide a number of administrative functions to RPS
which resulted in charges of $9.4 million, $8.6 million, and $7.5 million being
recorded in the results of operations for 1997, 1996 and 1995, respectively.
These costs have been allocated to the RPS division using a standard percentage
of total revenue. Management believes that the method used to allocate such
costs is reasonable under the circumstances and the expense is reasonable and
adequate compared to the services provided.
There are no formal tax sharing arrangements between RPS and any entity of
SL. In most countries, RPS is a division of the SL legal entity that is the
ultimate tax payer in that jurisdiction. Thus the income tax benefit recorded
reflects the tax effect of the net operating losses incurred by RPS that are
available to offset the income of the SL legal entity that is the ultimate
taxpayer.
14. TRANSACTIONS WITH AFFILIATES
In July 1997, SI SPA, a non-RPS Schlumberger company purchased the shares of
Schlumberger Industries SPA, another Schlumberger company, from Koppens Holding
Nederland BV, a RPS company. As this was a
F-75
<PAGE>
transaction within a party under common control, this transaction was recorded
at net book value. The difference between net book value and sale proceeds was
credited to equity in 1997. The sales proceeds were transferred through a
dividend to Schlumberger Limited in 1997.
In December 1997, RPS via Koppens Iberica, acquired the shares of GNC, a
Portuguese subsidiary of SL for $5.8 million. This company was acquired to
implement and develop RPS business in Portugal. The difference between purchase
price and net book value was debited to equity in 1997.
15. CONTINGENCIES
The Company complies with government laws and regulations and responsible
management practices for the protection of the environment. The Combined
Balance Sheet includes accruals for the estimated future costs associated with
certain environmental remediation activities related to the past use or
disposal of hazardous materials. Due to a number of uncertainties, including
uncertainty of timing, the scope of remediation, future technology, regulatory
changes and other factors, it is possible that the ultimate remediation costs
may exceed the amounts estimated. However, in the opinion of management, such
additional costs are not expected to be material relative to consolidated
liquidity, financial position or future results of operations.
In addition, the Company is party to various other legal proceedings.
Although the ultimate disposition of these proceedings is not presently
determinable, in the opinion of the Company any liability that might ensue
would not be material in relation to the Combined Financial Statements.
16. SUPPLEMENTARY INFORMATION
Operating revenue and related cost of goods sold and services comprised the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Operating revenue
Sales........................................ $185,702 $186,764 $191,439
Services..................................... 158,546 147,151 112,229
-------- -------- --------
$344,248 $333,915 $303,668
-------- -------- --------
Direct operating costs
Goods sold................................... $148,257 $149,142 $156,374
Services..................................... 138,323 124,350 92,727
-------- -------- --------
$286,350 $273,492 $249,101
======== ======== ========
</TABLE>
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Interest............................................. $1,414 $1,897 $1,649
Income taxes......................................... $1,926 $ 248 $ 516
</TABLE>
Accounts payable and accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1996
------- --------
<S> <C> <C>
Payroll, vacation and employee benefits................. $12,056 $ 13,945
Trade................................................... 41,245 44,969
Taxes, other than on income............................. 8,988 10,398
Other................................................... 25,319 41,204
------- --------
$87,608 $110,516
======= ========
</TABLE>
F-76
<PAGE>
Principal Executive Office of Tokheim
Tokheim Corporation
10501 Corporate Drive
Fort Wayne, Indiana 46801
Independent Accountants
PricewaterhouseCoopers LLP
490 Lincoln Tower
Fort Wayne, Indiana 46802
Legal Advisors
To Tokheim
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Trustee, Registrar, Principal Paying and Transfer Agent
U.S. Bank Trust National Association
100 Wall Street
16th Floor
New York, New York 10005
Listing Agent, Paying and Transfer Agent
(if the Notes are listed on the Luxembourg Stock Exchange)
Bankers Trust Luxembourg S.A.
P.O. Box 807
14, Boulevard F.D. Roosevelt
L-2450 Luxembourg
Paying Agent and Common Depositary
Midland Bank plc
HSBC Issuer Services
Mariner House, Pepys Street
London, EC3N 4DA
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Until , all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 14
Risks associated with debt financing..................................... 14
Risks associated with the operation of the business...................... 16
Risks associated with government regulation.............................. 20
Risks associated with the exchange offer................................. 20
Forward-Looking Statements................................................ 21
Exchange Rates............................................................ 21
The Exchange Offer........................................................ 22
The Transactions.......................................................... 31
Sources and Uses of Funds................................................. 33
Capitalization............................................................ 34
Unaudited Pro Forma Consolidated Condensed Financial Statements........... 35
Selected Financial Data of Tokheim Corporation and Subsidiaries........... 42
Selected Financial Data of the RPS Division............................... 44
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 45
Business.................................................................. 55
Management................................................................ 70
Principal Shareholders.................................................... 72
Description of Other Indebtedness......................................... 74
Description of the Warrants............................................... 77
Description of the Exchange Notes......................................... 78
Important United States Federal Income Tax Considerations................. 117
Plan of Distribution...................................................... 122
Legal Matters............................................................. 123
Independent Accountants................................................... 123
General Listing Information............................................... 124
Where You Can Find More Information....................................... 125
Information Incorporated by Reference..................................... 125
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Tokheim Corporation
$123,000,000
11 3/8% senior subordinated notes
due 2008
(Euro)75,000,000
11 3/8% senior subordinated notes
due 2008
----------------
Prospectus
----------------
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The following summary is qualified in its entirety by reference to the
complete text of the statute, articles of incorporation and bylaws referred to
below.
Each of Tokheim Corporation and Envirotronic Systems, Inc. is empowered by
Chapter 37 of the Indiana Business Corporation Law (the "IBCL"), subject to the
procedures and limitations therein, to indemnify any person against expenses
(including attorneys' fees) and the obligation to pay a judgment, settlement,
penalty, fine or reasonable expenses incurred with respect to a threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal, in which such
person is made a party by reason of such person's being or having been a
director, officer, employee or agent of the corporation if his or her conduct
was in good faith and he or she reasonably believed that, if acting in the
individual's official capacity, the conduct was in the best interests of the
corporation and in all other cases, the conduct was not opposed to the
corporation's best interests. In the case of any criminal proceeding, the
corporation is empowered to indemnify a person if he or she had reasonable
cause to believe the conduct was lawful or had no reasonable cause to believe
the conduct was unlawful. In addition, unless limited by its articles of
incorporation, a corporation shall indemnify a person who was wholly successful
in the defense of any proceeding to which the person was a party because the
person is or was a director, officer, employee or agent against reasonable
expenses incurred by him or her in connection with the proceeding. A
corporation has the power to purchase and maintain insurance on behalf of any
of the persons described above against any liability asserted against such
person and incurred by such person in any of the capacities described above, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under the
IBCL.
Article VII, Section 7.8 of Tokheim Corporation's Restated Articles of
Incorporation, as amended, and Article VII, Section 7.8 of Envirotronic
Systems, Inc.'s Articles of Incorporation, as amended, obligate each
corporation to indemnify its past and present officers and directors in the
manner contemplated by the IBCL. Any such person who is wholly successful with
respect to any proceeding of the type described above is entitled to
indemnification as of right. In addition, each corporation's Board of Directors
is authorized to approve indemnification of any such person to the full extent
permitted by applicable law, or to any other person as it may determine.
Tokheim Corporation has directors' and officers' liability insurance which
protects each director and officer from certain claims and suits, including
shareholder derivative suits, even where the director may be determined to not
be entitled to indemnification under the IBCL, and claims and suits arising
under the Securities Act. The policy may also afford coverage under
circumstances where the facts do not justify a finding that the director or
officer acted in good faith and in a manner that was in or not opposed to the
best interests of Tokheim Corporation. Article VII, Section 7.8(h) of
Envirotronic Systems, Inc.'s Articles of Incorporation, as amended, permits its
Board of Directors to authorize the corporation to purchase and maintain
insurance on behalf of any eligible person against any liability asserted
against such person or any liability or expense incurred by such person in any
such capacity, or arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such person against such
liability or expense. Tokheim Corporation's and Envirotronic Systems, Inc.'s
bylaws contain no indemnification or insurance provisions.
The following summary is qualified in its entirety by reference to the
complete text of the statute, articles of organization and limited liability
company agreement referred to below.
Tokheim Services LLC is empowered by Chapter 2, Section 2(14) of the Indiana
Business Flexibility Act (the "IBFA") to indemnify and hold harmless any
member, manager, agent or employee from and against any and all claims and
demands, except in the case of action or failure to act by the member, agent,
or employee which constitutes willful misconduct or recklessness and subject to
any standards and restrictions set forth in a
II-1
<PAGE>
written operating agreement. Chapter 4, Section 4(2) of the IBFA provides that
a written operating agreement may provide for indemnification of a member or
manager for judgments, settlements, penalties, fines or expenses incurred in a
proceeding to which a person is a party because the person is or was a member
or manager. Tokheim Services LLC's articles of organization and limited
liability company agreement contain no indemnification or insurance provisions.
The following summary is qualified in its entirety by reference to the
complete text of the statute, certificate of incorporation and bylaws referred
to below.
Tokheim Equipment Corporation is empowered by Section 145 of the Delaware
General Corporation Law (the "DGCL"), subject to the procedures and limitations
therein, to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her if he or she acted
in good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interest of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of an action brought by or in the right of a
corporation, the corporation may indemnify a director, officer, employee or
agent of the corporation (or other entity if such person is serving in such
capacity at the corporation's request) against expenses (including attorneys'
fees) actually and reasonably incurred by him or her if he or she acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed
to, the best interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless a court determines
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses as the court shall deem proper. In addition,
unless limited by its articles of incorporation, a corporation shall indemnify
a person who was wholly successful in the defense of any proceeding to which
the person was a party because the person is or was a director, officer,
employee or agent against reasonable expenses incurred by him or her in
connection with the proceeding. A corporation has the power to purchase and
maintain insurance on behalf of any of the persons described above against any
liability asserted against such person and incurred by such person in any of
the capacities described above, or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify such person
against such liability under the DGCL.
Article VIII, Section 1 of Tokheim Equipment Corporation's bylaws obligates
it to indemnify its past and present officers and directors to the fullest
extent permitted by the DGCL. In addition, the corporation may indemnify any
other person whom it has the power or obligation to indemnify under the
provisions of the DGCL, and if authorized by the Board of Directors, may
indemnify employees and agents of the corporation on terms similar to those
applicable to its directors and officers. Article VIII, Section 8 of Tokheim
Equipment Corporation's bylaws authorizes it to purchase and maintain insurance
on behalf of its past and present officers and directors against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power or the obligation to indemnify such person against such
liability. Tokheim Equipment Corporation's certificate of incorporation
contains no indemnification or insurance provisions.
The following summary is qualified in its entirety by reference to the
complete text of the statute, certificate of formation and limited liability
company agreement referred to below.
Tokheim RPS, LLC is empowered by Section 18-108 of the Delaware Limited
Liability Company Act, subject to the procedures and limitations therein, to
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever, subject to such standards
and restrictions, if any, as are set forth in its limited liability company
agreement. Tokheim RPS, LLC's certificate of formation and its limited
liability company agreement contain no indemnification or insurance provisions.
II-2
<PAGE>
The following summary is qualified in its entirety by reference to the
complete text of the statute, articles of incorporation and bylaws referred to
below.
Management Solutions, Inc. is empowered by Section 7-109 of the Colorado
Business Corporations Act (the "CBCA"), subject to the procedures and
limitations therein, to indemnify any person against liability for reasonable
expenses incurred in connection with a proceeding in which such person is made
a party by reason of such person's being or having been a director, officer,
employee or agent if his or her conduct was in good faith and if he or she
reasonably believed that, if acting in the individual's official capacity, the
conduct was in the best interests of the corporation and in all other cases,
the conduct was not opposed to the corporation's best interests. In the case of
any criminal proceeding, the corporation is empowered to indemnify an
individual if he or she had no reasonable cause to believe the conduct was
unlawful. However, a corporation may not indemnify a director, officer,
employee or other agent (a) in connection with a proceeding by or in the right
of the corporation in which the person was adjudged liable to the corporation
or (b) in connection with any other proceeding charging that the person derived
an improper personal benefit, whether or not involving action in an official
capacity, in which proceeding the person was adjudged liable on the basis that
he or she derived an improper personal benefit. In addition, unless limited by
its articles of incorporation, a corporation shall indemnify a person who was
wholly successful in the defense of any proceeding to which the person was a
party because the person is or was a director, officer, employee or agent
against reasonable expenses incurred by him or her in connection with the
proceeding. A corporation is empowered to purchase and maintain insurance on
behalf of any of the persons described above against liability asserted against
or incurred by such person in the capacities described above or arising from
his or her status as such, whether or not the corporation would have power to
indemnify the person against the same liability under the CBCA.
Article XI of Management Solutions, Inc.'s Articles of Incorporation, as
amended, provides that Management Solutions, Inc. may indemnify any of its past
or present directors or officers or any person who may have served at its
request as a director or officer of another corporation in which it owns shares
of capital stock or of which it is a creditor, against expenses actually and
necessarily incurred by him or her in connection with the defense of any claim
or demand against him or her or any action, suit or proceeding in which he or
she is made a party by reason of having been or being such a director or
officer, and against any judgment for damages rendered therein, except in
relation to matters as to which he or she shall be adjudged in such action,
suit or proceeding to be liable for willful negligence or intentional
misconduct in the performance of duty. Management Solutions Inc.'s bylaws
contain no indemnification or insurance provisions.
The following summary is qualified in its entirety by reference to the
complete text of the statute, articles of incorporation and bylaws referred to
below.
Sunbelt Hose & Petroleum Equipment, Inc. is empowered by Section 14-2-851 of
the Georgia Business Corporation Code (the "GBCC"), subject to the procedures
and limitations therein, to indemnify an individual who is a party to a
proceeding because he or she is or was a director of the corporation or who,
while a director of the corporation, is or was serving at the corporation's
request as a director, officer, partner, trustee, employee or agent of another
corporation or entity, against liability incurred in the proceeding if (1) such
individual conducted himself or herself in good faith; and (2) such individual
reasonably believed (A) in the case of conduct in his or her official capacity,
that such conduct was in the best interests of the corporation; (B) in all
other cases, that such conduct was at least not opposed to the best interests
of the corporation; and (C) in the case of any criminal proceeding, that the
individual had no reasonable cause to believe such conduct was unlawful;
provided that a corporation may not indemnify a director (a) in connection with
a proceeding by or in the right of the corporation, except for reasonable
expenses incurred in connection with the proceeding if it is determined that
the director has met the relevant standard of conduct; or (b) in connection
with any proceeding with respect to conduct for which he or she was adjudged
liable on the basis that personal benefit was improperly received by him or
her, whether or not involving action in his or her official capacity. In
addition, a corporation is obligated to indemnify a director who was wholly
successful in such a proceeding. A corporation is empowered by the GBCC to
indemnify an officer of the corporation who is a party to a proceeding because
he or she is an officer of the corporation to the same extent as a director,
except for liability arising out of
II-3
<PAGE>
conduct that constitutes appropriation of any business opportunity of the
corporation, acts or omissions which involve intentional misconduct or a
knowing violation of law, liability for unlawful distributions or receipt of an
improper benefit. An officer is entitled to mandatory indemnification to the
same extent as a director. A corporation may also indemnify an employee or
agent who is not a director to the extent, consistent with public policy, that
may be provided by its articles of incorporation, bylaws, general or specific
action of its board of directors, or contract. The GBCC empowers a corporation
to purchase and maintain insurance on behalf of any person described above
against liability asserted against or incurred by such person in any capacity
described above or arising from his or her status as such, whether or not the
corporation would have power to indemnify him or her against the same liability
under the GBCC.
Article Eight, Section 8.6 of Sunbelt Hose & Petroleum Equipment, Inc.'s
bylaws obligates the corporation to indemnify any person who was or is a party
or is threatened to be made a party of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
entity against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such proceeding if such person acted in a manner he or she
reasonably believed to be in, or not opposed to, the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct unlawful. In the case of an
action or proceeding brought by or in the right of a corporation, the
corporation must indemnify a director, officer, employee or agent of the
corporation (or other entity if such person is serving in such capacity at the
corporation's request) against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection with the defense or
settlement of such proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests
of the corporation, except that no indemnification shall be made in respect of
any claim or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to
the corporation, unless the court in which such proceeding was brought
determines that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses as the court shall deem proper. In addition,
the corporation is obligated to indemnify any person described above that has
been successful on the merits or otherwise in defense of any such proceeding
against expenses (including attorneys' fees) actually and reasonably incurred
in connection therewith. Sunbelt Hose & Petroleum Equipment Inc.'s bylaws also
authorize it to purchase and maintain insurance on behalf of its past and
present officers, directors, employees or agents (or persons serving in such
capacity for another entity at the request of the corporation) against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such
liability. Sunbelt Hose & Petroleum Equipment, Inc.'s articles of
incorporation, as amended, contain no indemnification or insurance provisions.
The following summary is qualified in its entirety by reference to the
complete text of the statute, articles of incorporation and bylaws referred to
below.
Gasboy International, Inc. is empowered by Section 1741 of the Pennsylvania
Business Corporation Law (the "PBCL") to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he or she was a representative of the corporation, or
is or was serving at the request of the corporation as a representative of
another corporation or entity, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with the proceeding if he or she acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. In the case of an action brought by or in the right of a corporation,
the corporation may indemnify such persons against expenses (including
attorneys' fees) actually and reasonably incurred by him or
II-4
<PAGE>
her if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless a court determines that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses as the
court shall deem proper. In addition, a corporation shall indemnify a
representative of such corporation who was successful on the merits or
otherwise in the defense of any proceeding described above against reasonable
expenses incurred by him or her in connection therewith. No indemnification
under any bylaw, agreement or otherwise is permitted in any case where the act
or failure to act giving rise to the claim for indemnification is determined by
a court to have constituted willful misconduct or recklessness, and the
articles may not provide for indemnification in the case of willful misconduct
or recklessness. A corporation has the power to purchase and maintain insurance
on behalf of any of the persons described above against any liability asserted
against such person and incurred by such person in any of the capacities
described above, or arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such person against such
liability under the PBCL. Gasboy International, Inc.'s articles of
incorporation and bylaws contain no indemnification or insurance provisions.
The following summary is qualified in its entirety by reference to the
complete text of the statute, articles of incorporation and bylaws referred to
below.
Tokheim Investment Corp. and Tokheim Automation Corporation are empowered by
Section 2.02-1 of the Texas Business Corporation Act (the "TBCA") to indemnify
a person who was, is, or is threatened to be made a named defendant or
respondent in a proceeding because the person is or was a director of the
corporation or, while a director of the corporation, is or was serving at the
request of the corporation as a director, officer, partner, employee, agent or
other similar functionary of another corporation or entity against judgments,
penalties, fines, settlements and reasonable expenses (including attorneys'
fees) actually incurred by the person only if it is determined that the person
(1) conducted himself or herself in good faith; (2) reasonably believed (a) in
the case of conduct in his or her official capacity as a director of the
corporation, that such conduct was in the corporation's best interests and (b)
in all other cases, that his or her conduct was at least not opposed to the
corporation's best interests; and (3) in the case of any criminal proceeding,
had no reasonable cause to believe his or her conduct was unlawful. A director
may only be indemnified in respect of a proceeding in which the person is found
liable on the basis that personal benefit was improperly received by him or
her, whether or not the benefit resulted from an action taken in the person's
official capacity, or in which the person is found liable to the corporation,
for reasonable expenses actually incurred by the person in connection with the
proceeding; provided that no indemnification shall be made in respect of any
proceeding in which the person shall have been found liable for willful or
intentional misconduct in the performance of his or her duty to the
corporation. A corporation shall indemnify a director for the expenses
described above incurred in connection with a proceeding described above if the
person is wholly successful. Officers of a corporation are entitled to the same
mandatory indemnification as directors, and officers, employees and agents of a
corporation may be indemnified to the same extent as directors or to such
further extent, consistent with law, as may be provided in the corporation's
articles of incorporation, bylaws, general or specific action of its board of
directors or contract. A corporation is empowered to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation (or who was serving in a similar capacity at the
request of the corporation for another corporation or entity) against any
liability asserted against such person and incurred by such person in such
capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify him or her against that liability
under the TBCA.
Article 8 of Tokheim Investment Corp.'s articles of incorporation, as
amended, provide that it may indemnify any director or officer of the
corporation, and any person who may have served at the request of the
corporation as a director or officer of another corporation in which it owns
shares or of which it is a creditor, against any costs and expenses, including
counsel fees, actually and necessarily incurred (or reasonably expected to be
incurred) in connection with the defense of any civil, criminal,
administrative, investigative or
II-5
<PAGE>
other action, suit or proceeding (whether by or in the right of the corporation
or otherwise) in which he or she may become involved or with which he or she
may be threatened, by reason of such person being or having been such a
director or officer, and against any payments in settlement of any such action,
suit or proceeding or in satisfaction of any related judgment, fine or penalty.
Tokheim Investment Corp.'s bylaws, and Tokheim Automation Corporation's
articles of incorporation and bylaws, contain no indemnification or insurance
provisions.
Item21.Exhibits and Financial Statement Schedules
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
1.1 Purchase Agreement, dated as of January 26, 1999 among Tokheim
Corporation, BT Alex. Brown, Credit Lyonnais Securities, First
Chicago Capital Markets, Inc., Gleacher NatWest International, ABN
AMRO Incorporated, PaineWebber Incorporated, Schroder & Co. Inc.
and certain subsidiary guarantors of Tokheim Corporation
(incorporated herein by reference to the Registrant's Annual
Report on Form 10-K, for the year ended September 30, 1998, filed
March 1, 1999).
2.1 Stock Purchase Agreement, dated as of December 29, 1997 between
Tokheim Corporation and Arthur S. ("Rusty") Elston, Ronald H.
Elston, Eric E. Burwell and Curt E. Burwell (incorporated herein
by reference to the Registrant's Current Report on Form 8-K, dated
December 31, 1997).
2.2 Master Agreement for Purchase and Sale of Shares, Assets, and
Liabilities, dated as of June 19, 1998, between Tokheim
Corporation and Schlumberger Limited (incorporated herein by
reference to the Registrant's Current Report on Form 8-K/A dated
October 1, 1998).
2.3 Amendment No. 1 to the Master Agreement for Purchase and Sale of
Shares, Assets and Liabilities, dated as of September 30, 1998
between Tokheim Corporation and Schlumberger Limited (incorporated
herein by reference to the Registrant's Current Report on Form 8-
K/A dated October 1, 1998).
3.1 Restated Articles of Incorporation of Tokheim Corporation, as
amended, as filed with the Indiana Secretary of State on February
5, 1997 (incorporated herein by reference to the Registrant's
Annual Report on Form 10-K/A for the year ended November 30,
1996).
3.2 Bylaws of Tokheim Corporation, as restated on July 12, 1995 and
amended March 2, 1998 (incorporated herein by reference to the
Registrant's Quarterly Report on Form 10-Q for the period ended
May 31, 1998).
*3.3 Articles of Incorporation of Monitec Corporation (now known as
Envirotronic Systems, Inc.).
*3.4 Articles of Amendment of the Articles of Incorporation of Monitec
Corporation (changing name to Envirotronic Systems, Inc.).
*3.5 Bylaws of Envirotronic Systems, Inc.
*3.6 Amended and Restated Articles of Incorporation of William M.
Wilson's Sons, Inc. (now known as Gasboy International, Inc.).
*3.7 Amendment No. 1 to Amended and Restated Articles of Incorporation
of William M. Wilson's Sons, Inc.
*3.8 Amendment No. 2 to Amended and Restated Articles of Incorporation
of William M. Wilson's Sons, Inc.
*3.9 Amendment No. 2 to Amended and Restated Articles of Incorporation
of William M. Wilson's Sons, Inc. (changing name to Gasboy
International, Inc.).
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
*3.10 Restated Bylaws of Gasboy International, Inc.
*3.11 Articles of Incorporation of Management Solutions of Colorado,
Inc. (now known as Management Solutions, Inc.).
*3.12 Articles of Amendment to the Articles of Incorporation of
Management Solutions of Colorado, Inc. (changing name to
Management Solutions, Inc.).
*3.13 Bylaws of Management Solutions, Inc.
*3.14 Articles of Incorporation of ESCIA, Inc. (now known as Sunbelt
Hose & Petroleum Equipment, Inc.).
*3.15 Articles of Amendment of ESCIA, Inc. (changing name to Sunbelt
Hose & Petroleum Equipment, Inc.).
*3.16 Bylaws of Sunbelt Hose & Petroleum Equipment, Inc.
*3.17 Articles of Incorporation of Tokheim Base Systems, Inc. (now known
as Tokheim Automation Corporation).
*3.18 Articles of Amendment to the Articles of Incorporation of Tokheim
Base Systems, Inc. (changing name to Mini Base Systems, Inc.).
*3.19 Articles of Amendment to the Articles of Incorporation of Mini
Base Systems, Inc. (changing name to Tokheim Automation
Corporation).
*3.20 Bylaws of Tokheim Automation Corporation.
*3.21 Certificate of Incorporation of Tokheim Equipment Corporation.
*3.22 Bylaws of Tokheim Equipment Corporation.
*3.23 Articles of Incorporation of Tokheim Investment Corp.
*3.24 Bylaws of Tokheim Investment Corp.
*3.25 Certificate of Formation of Tokheim RPS, LLC.
*3.26 Limited Liability Company Agreement of Tokheim RPS, LLC.
*3.27 Articles of Organization of Tokheim Services LLC.
*3.28 Limited Liability Company Agreement of Tokheim Services LLC.
4.1 Rights Agreement, dated as of January 22, 1997, between Tokheim
Corporation and Harris Trust and Savings Bank, as Rights Agent
(incorporated herein by reference to the Registrant's Current
Report on Form 8-K, filed February 23, 1997).
4.2 Amendment No. 1 to Rights Agreement, dated as of September 30,
1998, between Tokheim Corporation and Harris Trust and Savings
Bank (incorporated herein by reference to the Registrant's Current
Report on Form 8-K/A dated October 1, 1998).
4.3 Indenture, dated as of August 23, 1996, between Tokheim
Corporation and Harris Trust and Savings Bank, as Trustee
(incorporated herein by reference to the Registrant's Current
Report on Form 8-K, filed September 23, 1996).
4.4 Credit Agreement, dated as of September 3, 1996, among Tokheim
Corporation, certain subsidiaries of Tokheim Corporation, certain
banks and NBD Bank, N.A. (incorporated herein by reference to the
Registrant's Current Report on Form 8-K, filed September 6, 1996).
4.5 Amendment No. 1 to Credit Agreement, dated as of May 15, 1997
(incorporated herein by reference to the Registrant's Annual
Report on Form 10-K, for the year ended November 30, 1997, filed
February 13, 1997).
4.6 Amendment No. 2 to Credit Agreement, dated as of June 30, 1997
(incorporated herein by reference to the Registrant's Annual
Report on Form 10-K, for the year ended November 30, 1997, filed
February 13, 1997).
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
4.7 Amendment No. 3 to Credit Agreement, dated as of September 25,
1997 (incorporated herein by reference to the Registrant's Annual
Report on Form 10-K, for the year ended November 30, 1997, filed
February 13, 1997).
4.8 Amendment No. 4 to Credit Agreement, dated as of December 29, 1997
(incorporated herein by reference to the Registrant's Annual
Report on Form 10-K, for the year ended November 30, 1997, filed
February 13, 1997).
4.9 Amendment No. 5 to Credit Agreement, dated as of March 20, 1998
(incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q for the period ended February 28, 1998).
4.10 Securities Purchase Agreement, dated September 30, 1998, between
Tokheim Corporation and Schlumberger Limited (incorporated herein
by reference to the Registrant's Current Report on Form 8-K/A
dated October 1, 1998).
4.11 12% Senior Subordinated Note due January 28, 1999 in the amount of
$170,000,000 (incorporated herein by reference to the Registrant's
Current Report on Form 8-K/A dated October 1, 1998).
4.12 Senior Subordinated Note Indenture, dated as of September 30,
1998, among Tokheim Corporation, Management Solutions, Inc.,
Tokheim Equipment Corporation, Tokheim RPS, LLC, Sunbelt Hose &
Petroleum Equipment, Inc., Envirotronic Systems, Inc., Gasboy
International, Inc., Tokheim Automation Corporation, Tokheim
Investment Corp., as guarantors, and Harris Trust and Savings
Bank, as trustee (incorporated herein by reference to the
Registrant's Current Report on Form 8-K/A dated October 1, 1998).
4.13 12% Junior Subordinated Note due 2008 in the amount of $40,000,000
(incorporated herein by reference to the Registrant's Current
Report on Form 8-K/A dated October 1, 1998).
4.14 Junior Subordinated Note Indenture, dated as of September 30,
1998, among Tokheim Corporation, Management Solutions, Inc.,
Tokheim Equipment Corporation, Tokheim RPS, LLC, Sunbelt Hose &
Petroleum Equipment, Inc., Envirotronic Systems, Inc., Gasboy
International, Inc., Tokheim Automation Corporation, Tokheim
Investment Corp., as guarantors, and Harris Trust and Savings
Bank, as trustee (incorporated herein by reference to the
Registrant's Current Report on Form 8-K/A dated October 1, 1998).
4.15 Amendment No. 1 to Junior Subordinated Note Indenture, dated as of
January 25, 1999 (incorporated herein by reference to the
Registrant's Annual Report on Form 10-K, for the year ended
September 30, 1998, filed March 1, 1999).
4.16 Warrant to Purchase up to 19.9% of the Shares of Common Stock of
Tokheim Corporation (incorporated herein by reference to the
Registrant's Current Report on Form 8-K/A dated October 1, 1998).
4.17 Form of Roll-Over Note (incorporated herein by reference to the
Registrant's Current Report on Form 8-K/A dated October 1, 1998).
4.18 Registration Rights Agreement, dated September 30, 1998, between
Tokheim Corporation and Schlumberger Limited (incorporated herein
by reference to the Registrant's Current Report on Form 8-K/A
dated October 1, 1998).
4.19 Note Purchase Agreement, dated as of September 30, 1998, among
Tokheim Corporation, the Subsidiaries and the Purchasers
(incorporated herein by reference to the Registrant's Current
Report on Form 8-K/A dated October 1, 1998).
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
4.20 Amended and Restated Credit Agreement, dated as of September 30,
1998, among Tokheim Corporation, the Borrowing Subsidiaries, the
Lenders and NBD Bank, N.A. as administrative agent and Credit
Lyonnais as documentation and collateral agent and Gleacher
NatWest Inc. and Bankers Trust Company as co-syndication agents
(incorporated herein by reference to the Registrant's Current
Report on Form 8-K/A dated October 1, 1998).
4.21 Second Amended and Restated Credit Agreement, dated as of December
14, 1998, among Tokheim Corporation, the Borrowing Subsidiaries,
the Lenders and NBD Bank, N.A. as administrative agent and Credit
Lyonnais as documentation and collateral agent and Gleacher
NatWest Inc. and Bankers Trust Company as co-syndication agents
(incorporated herein by reference to the Registrant's Annual
Report on Form 10-K, for the year ended September 30, 1998, filed
March 1, 1999).
4.22 Consent and Amendment No. 1 to Amended and Restated Credit
Agreement, dated as of January 11, 1999 (incorporated herein by
reference to the Registrant's Quarterly Report on Form 10-Q, for
the quarter ended February 28, 1999, filed April 14, 1999).
4.23 Amendment No. 2 to Amended and Restated Credit Agreement, dated as
of March 1, 1999 (incorporated herein by reference to the
Registrant's Quarterly Report on Form 10-Q, for the quarter ended
February 28, 1999, filed April 14, 1999).
4.24 Amendment No. 3 to Second Amended and Restated Credit Agreement,
dated as of February 27, 1999 (incorporated herein by reference to
the Registrant's Quarterly Report on Form 10-Q, for the quarter
ended February 28, 1999, filed April 14, 1999).
*4.25 Dollar Notes Indenture, dated as of January 29, 1999, among
Tokheim Corporation, BT Alex. Brown, Credit Lyonnais Securities,
First Chicago Capital Markets, Inc., Gleacher NatWest
International, ABN AMRO Incorporated, PaineWebber Incorporated,
Schroder & Co. Inc. and certain subsidiary guarantors of Tokheim
Corporation.
*4.26 Euro Notes Indenture, dated as of January 29, 1999, among Tokheim
Corporation, BT Alex. Brown, Credit Lyonnais Securities, First
Chicago Capital Markets, Inc., Gleacher NatWest International, ABN
AMRO Incorporated, PaineWebber Incorporated, Schroder & Co. Inc.
and certain subsidiary guarantors of Tokheim Corporation.
4.27 Dollar Registration Rights Agreement, dated as of January 29,
1999, among Tokheim Corporation, BT Alex. Brown, Credit Lyonnais
Securities, First Chicago Capital Markets, Inc., Gleacher NatWest
International, ABN AMRO Incorporated, PaineWebber Incorporated,
Schroder & Co. Inc. and certain subsidiary guarantors of Tokheim
Corporation (incorporated herein by reference to the Registrant's
Annual Report on Form 10-K, for the year ended September 30, 1998,
filed March 1, 1999).
4.28 Euro Registration Rights Agreement, dated as of January 29, 1999,
among Tokheim Corporation, BT Alex. Brown, Credit Lyonnais
Securities, First Chicago Capital Markets, Inc., Gleacher NatWest
International, ABN AMRO Incorporated, PaineWebber Incorporated,
Schroder & Co. Inc. and certain subsidiary guarantors of Tokheim
Corporation (incorporated herein by reference to the Registrant's
Annual Report on Form 10-K, for the year ended September 30, 1998,
filed March 1, 1999).
5.1 Opinion of Norman L. Roelke, Vice President, Secretary and General
Counsel of the Registrant.
10.1 Tokheim Corporation 1992 Stock Incentive Plan, established
December 15, 1992 (incorporated herein by reference to the
Registrant's Registration Statement on Form S-8, File No. 33-
52167, dated February 4, 1994).
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
10.2 Retirement Savings Plan for Employees of Tokheim Corporation and
Subsidiaries (incorporated herein by reference to Amendment No. 1
to the Registrant's Registration Statement on Form S-8, File No.
33-29710, dated August 1, 1989).
10.3 Tokheim Corporation 1996 Key Management Incentive Bonus Plan
(incorporated herein by reference to the Registrant's Report on
Form 10-Q/A, for the quarter ended February 29, 1996, filed
November 20, 1996).
10.4 Employment Agreement, dated December 10, 1997, between the
Registrant and Douglas K. Pinner (incorporated herein by reference
to the Registrant's Annual Report on Form 10-K for the year ended
November 30, 1997).
10.5 Employment Agreement, dated December 23, 1997, between the
Registrant and John A. Negovetich (incorporated herein by
reference to the Registrant's Annual Report on Form 10-K for the
year ended November 30, 1997).
10.6 Employment Agreement, dated December 23, 1997, between the
Registrant and Jacques St-Denis (incorporated herein by reference
to the Registrant's Annual Report on Form 10-K for the year ended
November 30, 1997).
10.7 Employment Agreement, dated December 23, 1997, between the
Registrant and Norman L. Roelke (incorporated herein by reference
to the Registrant's Annual Report on Form 10-K for the year ended
November 30, 1997).
10.8 Employment Agreement, dated December 23, 1997, between the
Registrant and Scott A. Swogger. (incorporated herein by reference
to the Registrant's Annual Report on Form 10-K for the year ended
November 30, 1997).
10.9 Technology License Agreement, effective as of December 1, 1997,
between Tokheim and Gilbarco, Inc. (incorporated herein by
reference to the Registrant's Annual Report on Form 10-K for the
year ended November 30, 1997).
10.10 Tokheim Corporation 1997 Incentive Plan (incorporated herein by
reference to the Registrant's Annual Report on Form 10-K for the
year ended November 39, 1997).
10.11 Employment Agreement, dated December 31, 1997, between Management
Solutions, Inc. and Arthur S. Elston (incorporated herein by
reference to the Registrant's Annual Report on Form 10-K for the
year ended November 30, 1997).
11.1 Statement re computation of per share earnings (incorporated
herein by reference to the Registrant's Quarterly Report on Form
10-Q, for the quarter ended February 28, 1999, filed April 14,
1999, and by reference to the Registrant's Annual Report on Form
10-K, for the year ended November 30, 1998).
*12.1 Statement re computation of ratios.
21.1 Subsidiaries of Tokheim Corporation (incorporated herein by
reference to the Registrant's Annual Report on Form 10-K, for the
year ended November 30, 1998, filed March 1, 1999).
23.1 Consent of PriceWaterhouseCoopers LLP.
23.2 Consent of PriceWaterhouseCoopers.
24.1 Powers of Attorney (included in Signature page to registration
statement).
*25.1 Statement of Eligibility of Trustee on Form T-1 under the Trust
Indenture Act of 1939 of U.S. Bank Trust National Association, as
Dollar Notes Trustee, under the Dollar Notes Indenture, relating
to the 11 3/8% Dollar Notes due 2008.
*25.2 Statement of Eligibility of Trustee on Form T-1 under the Trust
Indenture Act of 1939 of U.S. Bank Trust National Association, as
Euro Notes Trustee, under the Euro Notes Indenture, relating to
the 11 3/8% Euro Notes due 2008.
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
27.1 Financial Data Schedule (incorporated herein by reference to the
Registrant's Quarterly Report on Form 10-Q, for the quarter ended
February 28, 1999, filed April 14, 1999, and by reference to the
Registrant's Annual Report on Form 10-K, for the year ended
November 30, 1998).
*99.1 Form of Letter of Transmittal for the Dollar Notes.
*99.2 Form of Notice of Guaranteed Delivery for the Dollar Notes.
*99.3 Form of Tender Instruction for the Dollar Notes.
*99.4 Form of Letter of Transmittal for the Euro Notes.
*99.5 Form of Notice of Guaranteed Delivery for the Euro Notes.
*99.6 Form of Tender Instruction for the Euro Notes.
</TABLE>
- --------
*Previously filed.
Item22.Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in
II-11
<PAGE>
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
have duly caused this registration statement to be signed on their behalf by
the undersigned, thereunto duly authorized, in the City of Fort Wayne, State
of Indiana, as of June 28, 1999.
Tokheim Corporation
/s/ Douglas K. Pinner
By: _________________________________
Name: Douglas K. Pinner
Title:Chairman, President and Chief
Executive Officer
Envirotronic Systems, Inc.
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
Gasboy International, Inc.
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
Management Solutions, Inc.
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
Sunbelt Hose & Petroleum Equipment,
Inc.
/s/ Norman L. Roelke
By: ________________________________
Name: Norman L. Roelke
Title:Secretary
Tokheim Automation Corporation
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
Tokheim Equipment Corporation
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
II-13
<PAGE>
Tokheim Investment Corp.
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
Tokheim RPS, LLC
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
Tokheim Services LLC
/s/ Norman L. Roelke
By: _________________________________
Name: Norman L. Roelke
Title:Secretary
II-14
<PAGE>
We the undersigned directors and officers of the registrants do hereby
constitute and appoint Douglas K. Pinner and Norman L. Roelke, and each of
them, our true and lawful attorneys-in-fact and agents, to do any and all acts
and things in our names and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our name in the
capacities indicated below, which said attorneys and agents, or either of them,
may deem necessary or advisable to enable said corporations to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with this registration
statement, or any registration statement for this offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
including specifically, but without limitation, the power and authority to sign
for us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto; and we do hereby
ratify and confirm all that said attorneys and agents, or any of them, shall do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
below on April 26, 1999.
Tokheim Corporation
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Chairman of the Board, President and Chief
___________________________________________ Executive Officer and Director
Douglas K. Pinner
/s/ John A. Negovetich Executive Vice President, Finance and
___________________________________________ Administration and Chief Financial Officer
John A. Negovetich
/s/ Gerald H. Frieling, Jr. Vice Chairman of the Board and Director
___________________________________________
Gerald H. Frieling, Jr.
/s/ Walter S. Ainsworth Director
___________________________________________
Walter S. Ainsworth
/s/ Robert M. Akin, III Director
___________________________________________
Robert M. Akin, III
/s/ James K. Baker Director
___________________________________________
James K. Baker
/s/ B.D. Cooper Director
___________________________________________
B.D. Cooper
/s/ Richard W. Hansen Director
___________________________________________
Richard W. Hansen
/s/ Leo J. Hawk Director
___________________________________________
Leo J. Hawk
/s/ Dr. Winfred M. Phillips Director
___________________________________________
Dr. Winfred M. Phillips
/s/ Ian M. Rolland Director
___________________________________________
Ian M. Rolland
</TABLE>
II-15
<PAGE>
Envirotronic Systems, Inc.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Principal Executive Officer and Director
___________________________________________
Douglas K. Pinner
/s/ John A. Negovetich Principal Financial Officer and Director
___________________________________________
John A. Negovetich
/s/ Norman L. Roelke Director
___________________________________________
Norman L. Roelke
Gasboy International, Inc.
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ D. Michael Boone Principal Executive Officer and Director
___________________________________________
D. Michael Boone
/s/ John A. Negovetich Principal Financial Officer and Director
___________________________________________
John A. Negovetich
/s/ John Lotz Principal Accounting Officer
___________________________________________
John Lotz
/s/ Douglas K. Pinner Director
___________________________________________
Douglas K. Pinner
/s/ Norman L. Roelke Director
___________________________________________
Norman L. Roelke
/s/ Jacques St-Denis Director
___________________________________________
Jacques St-Denis
Management Solutions, Inc.
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Scott A. Swogger Principal Executive Officer
___________________________________________
Scott A. Swogger
/s/ Richard B. Kendall Principal Financial Officer
___________________________________________
Richard B. Kendall
/s/ John Lotz Principal Accounting Officer
___________________________________________
John Lotz
/s/ Douglas K. Pinner Director
___________________________________________
Douglas K. Pinner
</TABLE>
II-16
<PAGE>
<TABLE>
<S> <C>
/s/ John A. Negovetich Director
___________________________________________
John A. Negovetich
/s/ Norman L. Roelke Director
___________________________________________
Norman L. Roelke
Sunbelt Hose & Petroleum Equipment, Inc.
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Principal Executive Officer and Director
___________________________________________
Douglas K. Pinner
/s/ John A. Negovetich Principal Financial Officer and Director
___________________________________________
John A. Negovetich
/s/ Norman L. Roelke Director
___________________________________________
Norman L. Roelke
Tokheim Automation Corporation
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Principal Executive Officer and Director
___________________________________________
Douglas K. Pinner
/s/ John A. Negovetich Principal Financial Officer and Director
___________________________________________
John A. Negovetich
/s/ Norman L. Roelke Director
___________________________________________
Norman L. Roelke
Tokheim Equipment Corporation
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Principal Executive Officer and Director
___________________________________________
Douglas K. Pinner
/s/ John A. Negovetich Principal Financial Officer and Director
___________________________________________
John A. Negovetich
/s/ John Lotz Principal Accounting Officer
___________________________________________
John Lotz
/s/ Norman L. Roelke Director
___________________________________________
Norman L. Roelke
</TABLE>
II-17
<PAGE>
Tokheim Investment Corp.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Principal Executive Officer and Director
___________________________________________
Douglas K. Pinner
/s/ John A. Negovetich Principal Financial Officer, Principal
___________________________________________ Accounting Officer and Director
John A. Negovetich
/s/ Norman L. Roelke Director
___________________________________________
Norman L. Roelke
Tokheim RPS, LLC
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Principal Executive Officer and Manager
___________________________________________
Douglas K. Pinner
/s/ John A. Negovetich Principal Financial Officer, Principal
___________________________________________ Accounting Officer and Manager
John A. Negovetich
/s/ Norman L. Roelke Manager
___________________________________________
Norman L. Roelke
Tokheim Services LLC
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Douglas K. Pinner Principal Executive Officer and Manager
___________________________________________
Douglas K. Pinner
/s/ John A. Negovetich Principal Financial Officer, Principal
___________________________________________ Accounting Officer and Manager
John A. Negovetich
/s/ Norman L. Roelke Manager
___________________________________________
</TABLE> Norman L. Roelke
II-18
<PAGE>
Exhibit 5.1
-----------
April 28, 1999
Tokheim Corporation
10501 Corporate Drive
Fort Wayne, IN 46845
Re: Tokheim Corporation
Registration Statement on Form S-4
Ladies and Gentlemen:
I am Vice President, Secretary and General Counsel of Tokheim
Corporation, an Indiana corporation (the "Company"), and its direct and indirect
wholly-owned subsidiaries, Envirotronic Systems, Inc., an Indiana corporation,
Gasboy International, Inc., a Pennsylvania corporation, Management Solutions,
Inc., a Colorado corporation, Sunbelt Hose & Petroleum Equipment, Inc., a
Georgia corporation, Tokheim Services LLC, an Indiana limited liability company,
Tokheim Equipment Corporation, a Delaware corporation, Tokheim Automation
Corporation, a Texas corporation, Tokheim Investment Corp., a Texas corporation,
and Tokheim RPS, LLC, a Delaware limited liability company (collectively, the
"Subsidiary Guarantors"). In my capacity as General Counsel, I am authorized to
furnish opinions on behalf of the Company and the Subsidiary Guarantors that may
be required in connection with various matters, including the Company's offer to
exchange (the "Exchange Offer") up to $123,000,000 aggregate principal amount of
its outstanding Series A 11 3/8% Senior Subordinated Notes due 2008 (the
"Outstanding Dollar Notes") and related subsidiary guarantees, for its Series B
11 3/8% Senior Subordinated Exchange Notes due 2008 (the "Dollar Exchange
Notes") and related subsidiary guarantees (the "Dollar Subsidiary Guarantees"),
and up to Euro 75,000,000 aggregate principal amount of its outstanding Series A
11 3/8% Senior Subordinated Notes due 2008 (the "Outstanding Euro Notes," and,
together with the Outstanding Dollar Notes, the "Outstanding Notes") and related
subsidiary guarantees, for its Series B 11 3/8% Senior Subordinated Exchange
Notes due 2008 (the "Euro Exchange Notes," and, together with the Dollar
Exchange Notes, the "Exchange Notes") and related subsidiary guarantees (the
"Euro Subsidiary Guarantees" and, together with the Dollar Guarantees, the
"Subsidiary Guarantees"). The Dollar Exchange Notes and Dollar Subsidiary
Guarantees will be issued under a Dollar Note Indenture, dated as of January 29,
1999,
<PAGE>
Tokheim Corporation
April 28, 1999
Page 2
among the Company, the Subsidiary Guarantors and U.S. Bank Trust National
Association, as trustee. The Euro Exchange Notes and Euro Subsidiary Guarantees
will be issued under a Euro Note Indenture (together with the Dollar Note
Indenture, the "Indentures"), dated as of January 29, 1999, among the Company,
the Subsidiary Guarantors and U.S. Bank Trust National Association, as trustee.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Act").
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of the following
documents: (i) the Registration Statement on Form S-4 (File No. 333- ) as filed
with the Securities and Exchange Commission (the "Commission") on the date
hereof (the "Registration Statement"); (ii) copies of the Indentures; (iii) the
forms of the Exchange Notes and Subsidiary Guarantees and specimen certificates
thereof; and (iv) such other documents, certificates and records as I have
deemed necessary or appropriate as the basis for the opinions set forth herein.
I have also examined originals or copies, certified or otherwise identified to
my satisfaction, of such records of the Company and the Subsidiary Guarantors
and such agreements, certificates of public officials, certificates of officers
or other representatives of the Company, the Subsidiary Guarantors and others,
and such other documents, certificates and records, all as I have deemed
necessary or appropriate as a basis for the opinions set forth herein,
including, without limitation, (i) the charter and bylaws (or similar
organization documents), each as amended to date, of the Company and each
Subsidiary Guarantor and (ii) certain resolutions adopted by the Board of
Directors or Managers, as applicable, of the Company and the Subsidiary
Guarantors.
For purposes of my opinion, I have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to me as originals, the conformity to original documents of
all documents submitted to me as certified, facsimile, conformed or photostatic
copies and the authenticity of the originals of such copies. As to any facts
material to the opinions expressed herein which I did not
<PAGE>
Tokheim Corporation
April 28, 1999
Page 3
independently establish or verify, I have relied upon the statements and
representations of officers and other representatives of the Company and others.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the opinion
that:
1. When (i) the Registration Statement becomes effective and the
Indentures have been qualified under the Trust Indenture Act of 1939, as amended
(the "TIA"), and (ii) the Exchange Notes have been duly executed and
authenticated in accordance with the terms of the Indentures and delivered in
exchange for the Outstanding Notes in accordance with the Exchange Offer, the
Exchange Notes will constitute valid and binding obligations of the Company,
entitled to the benefits of the Indentures and enforceable against the Company
in accordance with their terms, except that (a) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law) or the discretion of the court before which any proceeding therefor may be
brought, and (b) the enforceability of the indemnification and contribution
provisions thereof may be limited by applicable law or public policy.
2. When (i) the Registration Statement becomes effective and the
Indentures have been qualified under the TIA and (ii) the Exchange Notes have
been duly executed and authenticated and the Subsidiary Guarantees endorsed
thereon have been executed by the Subsidiary Guarantors in accordance with the
terms of the Indentures and delivered in exchange for the Outstanding Notes in
accordance with the Exchange Offer, the Subsidiary Guarantees will be valid and
binding obligations of the Subsidiary Guarantors entitled to the benefits of the
Indentures and enforceable against the Subsidiary Guarantors in accordance with
their terms, except that (a) the enforcement thereof may be subject to (i)
<PAGE>
Tokheim Corporation
April 28, 1999
Page 4
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, (ii) general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law ) or the
discretion of the court before which any proceeding therefor may be brought, and
(b) the enforceability of the indemnification and contribution provisions
thereof may be limited by applicable law or public policy.
I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. I also consent to the reference to me
under the caption "Legal Matters" in the Registration Statement. In giving this
consent, I do not thereby admit that I am included in the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
Very truly yours,
/s/ Norman L. Roelke
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the use in this Registration Statement on Form S-4 of
Tokheim Corporation of our report dated February 19, 1999, relating to the
financial statements of Tokheim Corporation and Subsidiaries, which appear in
such Registration Statement. We also consent to the reference to us under the
heading "Independent Accountants" in such Registration Statement.
PricewaterhouseCoopers LLP
Fort Wayne, Indiana
June 28, 1999
<PAGE>
EXHIBIT 23.2
Consent of Independent Accountants
We hereby consent to the use in this Registration Statement on Form S-4 of
Tokheim Corporation of our report dated July 6, 1998 relating to the financial
statements of Retail Petroleum Systems, which appear in such Registration
Statement. We also consent to the reference to us under the heading "Independent
Accountants" in such Registration Statement.
PricewaterhouseCoopers
Paris, France
June 28, 1999
