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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended November 30, 1999
Commission file number 1-6018
TOKHEIM CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-0712500
(State of Incorporation) (I.R.S. Employer I.D. No.)
10501 Corporate Dr. 46845
Fort Wayne, Indiana (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code (219) 470-4600
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Stock, no par value.......................... New York Stock Exchange
Preferred Stock Purchase Rights..................... New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of February 25, 2000, 12,669,377 shares of voting common stock were
outstanding. The aggregate market value of shares held by non-affiliates was
$37,216,295 million (based on the closing price of these shares on the New
York Stock Exchange on such date).
Documents Incorporated by Reference
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Document Form 10-K
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Proxy Statement.................................... Part III, Items 10-13
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TOKHEIM CORPORATION
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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Page
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PART I
Item 1. Business....................................................... 1
Item 2. Properties..................................................... 6
Item 3. Legal Proceedings.............................................. 6
Item 4. Submission of Matters to a Vote of Security Holders............ 7
PART II
Item 5. Market For The Registrant's Common Equity and Related
Shareholder Matters............................................ 7
Item 6. Selected Financial Data........................................ 7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 9
Item 8. Financial Statements and Supplementary Data.................... 19
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 61
PART III
Item 10. Directors and Executive Officers of the Registrant............. 61
Item 11. Executive Compensation......................................... 61
Item 12. Security Ownership of Certain Beneficial Owners and
Management..................................................... 61
Item 13. Certain Relationships and Related Transactions................. 61
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K.............................................................. 62
</TABLE>
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PART I
Item 1. Business.
(a) General:
Tokheim Corporation is 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 ("POS") systems), dispenser payment or "pay-at-the-pump" terminals,
replacement parts and upgrade kits. The Company provides products and services
to customers in more than 80 countries. The Company is the largest supplier
and servicer of petroleum dispensing systems in Europe, Africa, Canada, the
Middle East, Eastern Europe and Mexico, and one of the largest in the United
States. The Company also has established operations in Asia and Latin America.
As used herein, "Tokheim" or "the Company" refers to Tokheim Corporation and
its subsidiaries after its acquisition of the RPS Division of Schlumberger
Limited unless otherwise indicated.
The Company was organized as the Tokheim Manufacturing Company in Cedar
Rapids, Iowa in 1901. In 1918, the Tokheim Manufacturing Company was purchased
by a group of businessmen and was moved to Fort Wayne, Indiana, where it was
incorporated in Indiana under the name Tokheim Oil Tank and Pump Company. The
present name was adopted in December 1953.
In September 1996, the Company acquired the petroleum dispenser business of
Sofitam S.A. ("Sofitam") for $107.4 million less certain 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 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, the Company acquired Management Solutions, Inc. ("MSI").
MSI develops and distributes retail automation systems (including POS
software), primarily for the convenience store, petroleum dispensing and fast
food service industries. The Company paid MSI's stockholders an initial amount
of $12.0 million. The Company is also obligated to make contingent payments of
up to $13.2 million through 2000 based upon MSI's performance. The Company was
not obligated to make any performance payments in 1999 or 1998 under the
purchase agreement. The Company is currently in arbitration with the former
shareholders of MSI. See the discussion under Item 3 "Legal Proceedings."
In March 1998, the Company completed the offering of 4,370,000 shares of its
common stock (the "Common Stock Offering"). Net proceeds from the Common Stock
Offering totaled approximately $67.7 million. The Company used approximately
$39.4 million of the proceeds to redeem $35.0 million in aggregate principal
amount of its 11.5% Senior Subordinated Notes due 2006 (the "11.5% Notes").
The remaining $28.3 million of proceeds was applied to reduce borrowings under
the then-existing credit agreement and for general corporate purposes.
In September, 1998, the Company acquired the RPS Division (the "RPS
Division") of Schlumberger Limited ("Schlumberger") for $330.0 million in
cash, notes, and warrants, subject to certain post-closing adjustments. Of the
$330.0 million purchase price, $100.0 million was paid in cash borrowed under
the terms of a new bank credit agreement with a consortium of banks (the "New
Credit Agreement") as well as $22.5 million of 12.5% senior notes due 2005
(the "Senior Notes"). The $210.0 million seller note portion of the purchase
price consisted of $170.0 million in 12.0% senior subordinated notes due
January 29, 1999 (the "Senior Subordinated Seller Notes"), and $40.0 million
in ten year, 12.0% junior subordinated payment-in-kind notes issued to
Schlumberger (the "Junior Notes"). The remaining $20.0 million of the purchase
price was paid with common stock warrants (the "Warrants") exercisable for
five years, beginning January 30, 1999, to purchase at a nominal price
2,526,923 shares of the Company's common stock. The Senior Subordinated Seller
Notes, along with the Senior Notes, were repaid on January 29, 1999 with the
proceeds from a private placement (the "Offering") of $123.0 million of
11.375% senior subordinated notes due 2008 (the "Dollar Notes") and (Euro)75.0
million (currently valued at $75.0 million) of 11.375% senior subordinated
notes due 2008 (the "Euro Notes").
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The information that follows should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes
included elsewhere in this Form 10-K. Unless otherwise noted, references to
years in this Report are to the Company's fiscal years ended November 30.
Certain statements contained in this Report, including, without limitation,
statements containing the words "believes," "anticipates," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the Company, or industry results, to differ materially from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following:
increases in interest rates or the Company's cost of borrowing or a default
under any material debt agreement; inability of the Company to successfully
make and integrate acquisitions; inability to achieve anticipated cost savings
or revenue growth; dependence on the retail petroleum industry; inability to
forecast or achieve future sales levels or other operating results;
fluctuations in exchange rates among various foreign currencies, principally
among dollars, the Euro, and the British pound; costs in adjusting to the
Euro; competition; inability to protect proprietary technology or to integrate
new technologies quickly into new products; changes in business strategy or
development plans; business disruptions; changes in general economic
conditions or in economic conditions of particular markets in which the
Company competes; unavailability of funds for capital expenditures or research
and development; changes in customer spending levels and demand for new
products; changes in governmental, environmental or other regulations,
especially as they may affect the capital expenditures of the Company's
customers; failure of the Company to comply with governmental regulations;
loss of key members of management; adverse publicity; contingent liabilities
and other claims asserted against the Company; loss of significant customers
or suppliers; "Year 2000" problems with computer systems, software, products
or suppliers of the Company or its customers, suppliers or resellers; and
other factors referenced in this Report. Certain of these factors are
discussed in more detail elsewhere in this Report, including, without
limitation, under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the Consolidated
Financial Statements and related notes. Given these uncertainties, investors
are cautioned not to place undue reliance on such forward-looking statements.
The Company disclaims any obligation to update any such factors or to announce
publicly the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(b) Financial Information About Industry Segments:
In 1999, 1998 and 1997, the Company had only one reportable industry
segment--the design, manufacture and servicing of petroleum dispensing
systems.
(c) Narrative Description of Business:
Principal Products and Services
The Company's principal product offerings include petroleum dispensers and
pumps, retail automation systems (including POS 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 the calculators which determine a sales
price based on the information received. Retail automation systems control in-
store and at-the-pump fuel sales, pump activation 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. The Company also offers
services for its products through authorized service representatives ("ASRs")
and Company-owned service facilities.
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In 1999, 1998 and 1997, the petroleum industry accounted for all of the
Company's sales. Approximately 92%, 88% and 89%, respectively, of the
Company's sales were derived from the sale of retail service station gasoline
dispensers, parts, accessories, and service contracts.
Markets
The Company's products are sold primarily to retail service station
operators and commercial customers characterized by the following categories.
Major Oil Companies ("MOCs")--MOCs 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.
National Oil Companies ("Nationals")--Nationals are non-U.S. oil companies
that operate exclusively (or almost exclusively) in a single national market.
Most nationals are, or until recently were, state-owned. In recent years, a
number of nationals have been privatized or have relinquished their monopolies
over the local retail petroleum markets.
Independent Oil Companies ("Independents")--Independents 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 MOCs.
Jobbers--Jobbers are independent service station owners that operate under
the brand of a MOC. A station owned by a jobber looks substantially the same
as one owned by a MOC, selling MOC-branded products and using standard MOC
station layouts. Most jobbers own multiple stations. Some jobbers work
exclusively with one MOC, while others have multiple MOC partners. Moreover,
jobbers can change their MOC affiliations within contractual limitations
between the jobber and the MOC. Usually, jobbers are not required to purchase
their petroleum dispensing equipment from the same manufacturers as their
affiliated MOC.
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 MOCs. The Company's convenience store station customers include
national and regional operators, as well as small, local businesses.
Hypermarkets--The Company 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.
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, the Company is the leading supplier of fuel dispensing equipment
to the U.S. commercial market.
Sales and Distribution
Products are distributed in the United States by a sales organization which
operates from national account offices, district sales offices, petroleum
equipment firms, industrial suppliers and distributors in major cities across
the United States. In areas outside the United States, product distribution is
accomplished by the international division through foreign subsidiaries,
distributors, and special sales representatives. In addition to its widespread
sales organization, there are more than 1,400 trained field service
representatives acting as independent contractors, many of whom maintain a
service parts inventory. The Company's customer service division maintains a
help desk which is available 24 hours a day, 365 days a year, for immediate
response to service needs in most markets. Additionally, the customer service
division maintains a continuing program of service clinics for customers, ASRs
and distributors, both in the field and at the Company's training centers.
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In recent years, MOCs and Nationals have been moving toward granting
national, regional and global contracts or "tenders" and creating alliances
with preferred suppliers. The Company believes that its acquisitions of
Sofitam and the RPS Division, which increased its global sales and services
capabilities, position it positively in response to this trend.
New Products; Research and Development
The Company continually seeks to enhance its existing product lines to offer
increased functionality in new or existing products and has dedicated research
and engineering staffs. The Company, not including the RPS Division for 1997,
spent approximately $27.8 million, $21.1 million and $18.3 million in 1999,
1998 and 1997, respectively, to improve existing products and manufacturing
methods, develop new products and pursue other applied research and
development. The RPS Division spent $15.9 million in 1997. The Company has
also formed exclusive relationships with MOCs to develop products that meet
their specific needs and with electronics companies to develop advanced
technologies.
During 1999, the Company introduced several new products to the market:
The Premier C model provides the Company with a unique advantage in the
industry, as it is the only off-the-assembly-line Americans with Disabilities
Act ("ADA") compliant dispenser in the industry. The Premier C model meets the
54 inch height requirement on a six inch island as recommended by the United
States Architectural and Transportation Barriers Board. In addition, new doors
on the electronic head have been added for easier access to card readers,
printers and electronic components.
The CVN 70 system offers complete integration of dedicated quick service
restaurant software with the existing convenience store ("C-Store") business
of selling fuel, car washes and convenience store items. Version 70 offers
over 250 enhancements from previous versions. The CVN system provides
comprehensive control over C-Store operations. Integrated bar code scanning
systems increase the speed and accuracy of each transaction. CVN also offers
cash and security controls, including such items as till timer with alarm,
reporting by cashier, cash drop tracking and detailed shift reporting.
The Harmony Retail System, designed specifically for the Asian market,
features real-time replication and redundancy of all transactional databases.
The modular design of Harmony offers the state-of-the-art in flexibility,
upgradeability and functionality.
The Company is currently test marketing its RFID system. 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 POS systems and with other manufacturer's
dispensers (as an upgrade).
Raw Materials
The principal raw materials essential to the Company's business are flat
sheet steel, aluminum, copper tubing, iron castings and electronics, POS
systems, and computer components, all of which are generally available through
competitive sources of supply. The Company has not experienced any difficulty
in obtaining these materials or products.
Patents and Licenses
The Company has filed patent applications on its technologies for RFID, a
new metering device and virtual classrooms, among others. The Company also
holds other patents, none of which are considered essential to its
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overall operations. The Company entered into a license agreement, effective
December 1, 1997, pursuant to which the Company will pay a $3.0 million fixed
royalty fee, payable in 12 quarterly installments, plus earned royalties for
the use of a patented vapor recovery system and certain vapor recovery
improvements, an electronic blender and a printed receipt severing device.
Seasonality
In recent years, the Company's sales have not been seasonal.
Working Capital Practices
There are no special inventory requirements or credit terms extended to
customers that would have a material adverse effect on the Company's working
capital.
Dependence on a Single Customer
No single customer accounted for 10% or more of the Company's consolidated
sales in 1999, 1998 or 1997.
Backlog
The Company's backlog of firm orders as of the end of 1999 was approximately
$85.6 million, compared to approximately $74.4 million at the end of 1998. The
RPS Division's revenues are made up of a large portion of current service
contract sales, which have been included as backlog due to the firmness of the
commitments. The Company expects that the entire backlog will be filled in
2000. The Company believes that its backlog is not necessarily an indicator of
sales during the forthcoming year because the average length of the backlog is
relatively short. Factors affecting backlog levels include the timing of
purchases by MOCs, announcements of price adjustments, sales promotions, and
production delays. The effect of these factors limits the usefulness of
comparing backlogs in different periods.
Competition
The Company competes principally against, among others, Gilbarco, Inc. (a
division of GEC, Plc), Wayne (a division of Halliburton Co.), Scheidt &
Bachmann GmbH and Tatsuno Corporation. Measured in industry sales, the Company
is the largest global manufacturer and servicer of petroleum dispensing
equipment.
The Company believes that the principal methods of competition include
price, product quality, service, technology and the ability to provide
products globally. The Company believes that a number of factors make it
unique. These factors include the Company's: (1) global capabilities, which
allow it to satisfy the complete petroleum dispensing equipment needs of
customers throughout the world; (2) world's largest service network; (3)
strong customer relationships; (4) broad, technologically advanced product
line; and (5) proven management team. Several of the Company's current and
potential future competitors are subsidiaries or divisions of much larger
corporations, however, and have significantly greater financial, technical and
marketing resources than the Company.
Environmental Regulations
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
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contaminated soil and groundwater, and the health and safety of employees. The
Company does not believe that compliance with any existing environmental
regulations will result in material capital expenditures or have a material
adverse effect on the Company's financial condition or results of operations.
Environmental regulations also tend to affect the Company's customers,
increasing their spending and their demand for the Company's products as they
attempt to remain in compliance. See Note 20 to the Consolidated Financial
Statements, "Contingent Liabilities."
Employees
As of January 31, 2000, the Company employed approximately 4,500 persons.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales:
Financial information about foreign and domestic operations and export sales
for 1999, 1998, and 1997 is set forth in Note 16 to the Consolidated Financial
Statements, captioned "Segment Reporting."
Item 2. Properties.
The Company owns properties in: Indiana and Pennsylvania in the United
States, Canada, South Africa, Scotland, Germany, France, Italy, Ivory Coast,
Africa, and Holland. The Company leases properties in: France, Morocco,
Switzerland, United Kingdom, Belgium, Spain, Tunisia, Senegal, Cameroon, the
Netherlands, Italy, Austria, Denmark, Norway, Czech Republic, Slovakia,
Hungary, Ireland, Germany, Poland and in Colorado and Virginia in the United
States. The majority of the Company's manufacturing operations are
concentrated in the following: Indiana and Pennsylvania in the U.S.A. France,
South Africa, Belgium, and Scotland. The Company recently closed manufacturing
facilities in Glenrothes, Scotland; Tulla, Ireland; Bladel, Holland; Schwelm,
Germany; Weilheim, Germany and Bonham, Texas. The Company believes that it has
sufficient production capacity to meet demand over the next several years. The
Company is currently holding for sale facilities in Falaise, France; Jasper,
Tennessee; Glenrothes, Scotland; Schwelm, Germany; Weilheim, Germany and
Atlanta, Georgia, as well as a 59-acre tract of unimproved land located in
Fort Wayne, Indiana. The Company has recently sold the Bonham, Texas facility
and 34 acres of unimproved land near its corporate headquarters.
Item 3. Legal Proceedings.
The four former shareholders of MSI filed a $30.0 million arbitration claim
against the Company with the American Arbitration Association on July 7, 1999
alleging fraud, breach of contract, tortious interference with contractual
relations and breach of implied covenant of good faith and fair dealing. The
claims relate to the Company's acquisition of MSI in 1997 and the termination
for cause of its president in February 1999. The Company believes that the
claims are without merit and will vigorously defend against the allegations.
The Company has filed counterclaims and is also seeking damages in excess of
$4.0 million for breaches of representations and warranties in the purchase
agreement. Management believes that the outcome of this arbitration will not
materially adversely affect the business, financial condition or results of
operations of the Company.
As more fully described in Note 20 to the Consolidated Financial Statements,
"Contingent Liabilities," the Company is defending various claims and legal
actions, including claims relating to the U.S. Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and other environmental
laws, product liability and various contract and employee matters. These legal
actions involve primarily claims for damages
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arising out of the Company's manufacturing operations, product liability and
various contractual and employment issues. Management believes that the
outcome of such pending claims will not, individually or in the aggregate,
have a material adverse effect on the Company's financial condition or results
of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market For The Registrant's Common Equity and Related Shareholder
Matters.
The Company's common stock, no par value (the "Common Stock"), is traded on
the New York Stock Exchange under the symbol "TOK." The high and low sales
prices for the Common Stock for 1999 and 1998 are set forth as follows:
QUARTERLY HIGH-LOW SHARE PRICES
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High Low
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Year Ended November 30, 1998
First Quarter................................................... 20 7/8 16 3/8
Second Quarter.................................................. 18 1/4 14 7/8
Third Quarter................................................... 22 15/16 7
Fourth Quarter.................................................. 10 1/8 5 3/8
Year Ended November 30, 1999
First Quarter................................................... 11 7 1/4
Second Quarter.................................................. 10 1/2 7 1/8
Third Quarter................................................... 12 3/8 9 3/4
Fourth Quarter.................................................. 11 2 3/4
</TABLE>
The Company has not declared or paid dividends on the Common Stock in recent
years. Currently, the Company does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future. The New Credit Agreement and the
indentures governing the Dollar Notes and the Euro Notes also restrict the
payment of dividends.
The number of Common Stock shareholders of record on February 22, 2000, was
approximately 2,229. On February 22, 2000, the closing price of the Common
Stock, as reported on the New York Stock Exchange, was $3.0625 per share.
Item 6. Selected Financial Data.
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 and the Consolidated Financial Statements and related
notes in Item 8.
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SELECTED FINANCIAL DATA
(Amounts in thousands except dollars per share)
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Year Ended November 30,
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1999 1998(A) 1997 1996(B) 1995
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Statement of Operations Data:
Net sales.................... $693,932 $466,440 $385,469 $279,733 $221,573
Operating profit (C)......... 15,730 14,769 20,645 6,356 5,811
Interest expense, net........ 51,450 19,257 16,451 7,191 3,319
Earnings (loss) before income
taxes(D).................... (36,641) (2,698) 5,197 (1,229) 3,270
Earnings (loss)(D)........... (36,537) (3,744) 3,980 (2,009) 3,231
Preferred stock dividends.... 1,515 1,484 1,512 1,543 1,580
Earnings (loss) applicable to
common stock(D)............. (38,052) (5,228) 2,468 (3,552) 1,651
Earnings (loss) per common
share(D):
Basic...................... $ (3.01) $ (0.46) $ 0.31 $ (0.45) $ 0.21
Weighted average shares
outstanding............... 12,668 11,371 8,042 7,940 7,911
Diluted.................... $ (3.01) $ (0.46) $ 0.27 $ (0.45) $ 0.17
Weighted average shares
outstanding............... 12,668 11,371 9,005 7,940 9,500
Balance Sheet Data (at year
end):
Working capital.............. $ 70,058 $ 96,473 $ 41,650 $ 54,356 $ 50,353
Property, plant and
equipment, net.............. 71,976 76,227 42,535 41,010 28,558
Total assets................. 690,802 771,816 290,619 309,861 124,332
Total debt(E)................ 478,556 443,331 140,980 155,745 38,612
ESOP preferred stock, net.... 15,439 12,130 9,853 8,137 6,426
Common shareholders' equity,
net(F)...................... (22,830) 64,631 10,618 17,678 23,797
Other Data:
Cash flows from operating
activities.................. (13,726) 9,790 21,202 5,897 3,347
Cash flows from investing
activities.................. (12,594) (124,414) (10,394) (54,079) (4,910)
Cash flows from financing
activities.................. 31,227 125,669 (11,795) 57,016 754
Capital expenditures......... 17,909 14,548 11,154 3,061 5,559
Depreciation and
amortization................ 25,869 13,136 9,232 5,028 4,857
Interest expense and
preferred stock dividends... 53,708 21,563 18,800 9,336 5,168
EBITDA (as defined)(G)....... 55,661 43,707 34,767 17,842 14,126
</TABLE>
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(A) Results for 1998 include eleven months of MSI operations and two months of
RPS operations.
(B) Results for 1996 include three months of Sofitam operations.
(C) Operating profit (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.
(D) The amounts for the years ended November 30, 1999, 1998 and 1997 exclude
$6,249, $23,924 and $1,886, respectively, for extraordinary loss on debt
extinguishment.
(E) Total debt includes all senior subordinated notes, junior subordinated
notes, senior notes, long-term borrowings under the credit agreements and
other credit agreements, the current portion of such borrowings, cash
overdraft facilities and the guaranteed ESOP Obligation.
(F) 1999 and 1998 common shareholders' equity includes net proceeds from the
Company's 1998 common stock offering of $67,724 and $20,000 of common
stock warrants issued in connection with the RPS Division acquisition.
(G) EBITDA represents earnings (loss) from continuing operations before income
taxes and extraordinary loss, net interest expense, depreciation and
amortization, merger and acquisition costs and other unusual items and
minority interest. Management uses EBITDA as a financial indicator of the
Company's ability to service debt, although the precise definition of
EBITDA is subject to variation among companies. EBITDA should not be
construed as an alternative to operating income or cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of the
Company's operating performance or as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" for additional information on the Company's results of
operations and liquidity and capital resources. For additional information
concerning the Company's historical cash flows, see the consolidated
statement of cash flows included elsewhere herein.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
On December 22, 1999, the Company amended its New Credit Agreement (defined
below). Among the items amended were the removal of the requirement to obtain
$50.0 million through the issuance of equity-type securities and the provision
for a mandatory reduction of the term loan by $50.0 million. As such, the
Company has reclassified the $50.0 million repayment from current to long term
liabilities for the year ended November 30, 1999. Other terms of the New
Credit Agreement that were amended include the addition of $5.7 million to the
borrowing availability under the working capital facility; changes to the
consolidated net worth covenant; changes to the leverage and senior leverage
ratio covenants; changes to the minimum EBITDA covenant; the addition of a
clean down or availability covenant on the working capital facility; and an
acceleration of the termination date of the New Credit Agreement from
September 30, 2004 to September 30, 2003.
In consideration for the amendment to the New Credit Agreement, the Company
paid certain fees and expenses to the bank group including warrants to
purchase 16.5% of the outstanding common stock of the Company at a purchase
price of $3.95 per share. The warrants are exercisable for an aggregate of
2,097,427 common shares. The Company has the right, subject to the terms and
conditions of the New Credit Agreement, to purchase 100% of the warrants upon
termination of the New Credit Agreement or 50% by meeting specified de-
leveraging conditions at various discount rates.
On September 30, 1998, the Company completed the acquisition ("RPS
Acquisition") of the fuel dispenser systems and service business (the "RPS
Division") of Schlumberger Limited ("Schlumberger") for a price equal to
$330.0 million in cash, notes, and warrants, subject to certain post-closing
adjustments. Of the $330.0 million purchase price, $100.0 million was paid in
cash borrowed under the terms of the Company's new bank credit agreement (the
"New Credit Agreement") as well as $22.5 million of senior notes due 2005 (the
"Senior Notes"). 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 (the "Junior Notes") and $170.0 million in 12.0% senior
subordinated notes due January 29, 1999 (the "Senior Subordinated Seller
Notes"). In addition, $20.0 million of the purchase price was paid with
warrants (the "Warrants") exercisable for five years, beginning January 30,
1999, to purchase at a nominal price 2,526,923 shares of the Company's common
stock.
The RPS Acquisition was 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 was
allocated to assets acquired and liabilities assumed based on their estimated
fair values. The purchase price exceeded the estimated fair value of tangible
and intangible net assets acquired by $263.4 million, which has been recorded
as goodwill.
Under the terms of the purchase agreement, the Company is to reimburse
Schlumberger for cash (net of adjustments) that remained in the RPS Division
on the effective date of the RPS Acquisition, which amounted to $6.5 million.
The Company has filed a claim against Schlumberger for breaches of certain
representations and warranties that were made in the purchase agreement
related to the RPS Acquisition. The amount of the claim exceeds the cash
amount due to Schlumberger.
On January 29, 1999, the Company redeemed the Senior Subordinated Seller
Notes and the Senior Notes with the proceeds from the issuance of $123.0
million aggregate principal amount of 11.375% Senior Subordinated Notes due
2008 (the "Dollar Notes") and (Euro)75.0 million aggregate principal amount
(approximately $75.0 million) of 11.375% Senior Subordinated Notes due 2008
(the "Euro Notes") in a private placement pursuant to Rule 144A and Regulation
S (the "Offering"). The Senior Subordinated Seller 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 thereon of $0.2 million and an
applicable call premium of $0.5 million.
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Simultaneously with the RPS Acquisition, the Company executed the New Credit
Agreement with a consortium of banks to pay a portion of the purchase price
and to refinance previously existing indebtedness. The New Credit Agreement
originally consisted of a six year, $120.0 million revolving working capital
facility and a six year, $120.0 million term loan facility due 2004. In
conjunction with the January 29, 1999 Offering, the Company used approximately
$9.1 million of the proceeds to reduce borrowings under the working capital
facility and to permanently reduce the bank working capital commitment from
$120.0 million to $110.0 million. In connection with the December 22, 1999
amendment to the New Credit Agreement, the maturity date was changed to
September 30, 2003. An additional agreement provides for the assignment of a
three year $7.6 million ESOP loan facility.
Also on September 30, 1998, the Company completed the repurchase of the
final $55.0 million of 11.5% Senior Subordinated Notes due 2006 (the "11.5%
Notes") that were then outstanding. These notes were
redeemed at an aggregate premium 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% 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, the Company completed an offering of 4,370,000 shares of its
common stock (the "Common Stock Offering"). Net proceeds from the Common Stock
Offering totaled approximately $67.7 million. The Company used $39.4 million
of the proceeds to redeem $35.0 million in aggregate principal amount of its
11.5% Notes. These 11.5% 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% Notes
remained outstanding. The Company recorded an extraordinary loss on the
extinguishment of the 11.5% 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% 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.
International sales by foreign subsidiaries and exports from the U.S.
totaled approximately 68%, 60%, and 64% of consolidated net sales in 1999,
1998, and 1997, respectively. The acquisition of the RPS Division in 1998 and
Sofitam in 1996 has increased the Company's international sales.
In December 1997, the Company acquired Management Solutions, Inc. ("MSI").
MSI develops and distributes retail automation systems (including POS
software), primarily for the convenience store, petroleum dispensing and fast
food service industries. The Company paid MSI's stockholders an initial amount
of $12.0 million. The Company borrowed funds for the initial purchase price
under the Old Credit Agreement. The Company is also obligated to make
contingent payments of up to $13.2 million through 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. In 1999 and 1998, the Company was not
required to and did not make any performance payments. The former stockholders
of MSI have commenced arbitration proceedings against the Company. See Item 3
"Legal Proceedings."
Results of Operations
Net sales increased 48.8% in 1999 to $693.9 million compared to $466.4
million in 1998. Sales for North America, excluding domestic export sales,
were $219.4 million in 1999 compared to $187.2 million in 1998. International
sales, including domestic export sales, were $474.6 million in 1999 compared
to $279.2 million in 1998. The increase in net sales in 1999 versus 1998 was
primarily attributable to the full year inclusion of the acquired RPS
Division's sales in the Company's 1999 results compared to the inclusion of
RPS Division sales for two months in 1998. During 1999, the oil industry
experienced continued consolidation among major oil companies which had the
effect of reducing their purchases from the Company. It is currently unknown
what effect, if any, these mergers will have on the Company's future sales
levels or operations.
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Net sales for 1998 were $466.4 million. Net sales excluding the 1998 fiscal
year acquisitions of MSI and the RPS Division (the "Acquisitions") were $390.4
million as compared to $385.5 million in 1997. After excluding the effects of
the Acquisitions, 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 the Company's retail distribution, commercial dispensers and service
parts sales. This demand was driven by new, more convenient products, such as
credit/debit card readers, environmental regulations, and products requiring
vapor recovery systems.
After excluding the effects of the Acquisitions, 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 was 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 was 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 was caused by a
significant economic downturn in that region's economy.
Gross margin as a percent of sales (defined as net sales less cost of sales,
divided by net sales) was 23.3% in 1999 compared to 26.0% in 1998. The
decrease in gross margin for 1999 was attributable to the increase in service
revenue in the Company's product mix which provides a lower margin than
equipment sales and the inclusion of a full year of RPS Division operations
which have had lower gross margins. During 1999, the Fort Wayne, Indiana
manufacturing facility continued its program of operational improvements. The
Company's operational excellence strategy provides an integrated process
resulting in what the Company believes is a true world-class manufacturing
facility. This comprehensive approach utilizes advanced operating techniques
encompassing lean manufacturing, six sigma quality, high performance
organizations, supplier partnerships, advanced materials management and
strategies to gain the maximum amount of operational efficiencies. Once fully
implemented at the Fort Wayne, Indiana facility, these same techniques will be
implemented in all manufacturing facilities worldwide.
Gross margin as a percent of sales was 26.0% in 1998 compared to 26.3% in
1997. This decline was due to the historically lower gross margins in the RPS
Division's business, offset partially by manufacturing improvements made in
certain of the Company's operations.
Selling, general and administrative expense ("SG&A") as a percentage of net
sales was 15.1% in 1999 compared to 17.1% in 1998. This improvement in SG&A is
driven by cost savings from the continuing integration and rationalization of
the RPS Acquisition and increased levels of sales.
In 1998, SG&A as a percentage of net sales was 17.1% for 1998. After
removing the effects of the Acquisitions, SG&A 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.
Depreciation and amortization expense increased in 1999 to $25.9 million
from $13.1 million in 1998. This increase is the direct result of higher
levels of assets due to the inclusion of the RPS Division for a full year and
amortization of the goodwill associated with the RPS Acquisition. Depreciation
and amortization expense increased in 1998 to $13.1 million from $9.2 million
in 1997, primarily due to two months of depreciation on RPS Division assets.
Net interest expense for 1999 increased to $51.5 million from $19.2 million
in 1998. The increase was the result of increased levels of debt in 1999
including borrowings under the New Credit Agreement. The increased levels of
debt were related to the acquisition of the RPS Division.
Net interest expense increased in 1998 to $19.2 million from $16.5 million
in 1997. This increase was the direct result of higher levels of debt incurred
to effect the acquisition of the RPS Division.
The Company incurred a net foreign currency exchange loss of $2.1 million in
1999 compared to a net foreign currency exchange gain of $1.4 million in 1998.
The primary reason for this loss was the continued decline in the value of the
Euro and other European currencies against the U.S. dollar during 1999.
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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. During the
second quarter of 1998, the Company realized a foreign currency gain of $0.8
million associated with the repayment of various French franc denominated
borrowings previously entered into under the Company's Old Credit Agreement.
During the fourth quarter of 1998, the Company 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 $1.3 million in 1999 compared to $0.7 million in 1998.
This increase was primarily attributable to the gain on the sale of 34 acres
of unimproved land near the Company's corporate headquarters in Fort Wayne,
Indiana.
Other income, net was $0.7 million in 1998 compared to $1.4 million in 1997.
This decrease was principally due to lower gains realized on the sale of
property, plant and equipment.
Income tax benefit for 1999 was $0.1 million compared to income tax expense
of $1.0 million in 1998. The majority of this income tax benefit realized in
1999 is comprised of foreign tax benefits derived from the formation of fiscal
unities in key European countries.
Income tax expense for 1998 was $1.0 million, a decrease from $1.2 million
in 1997. The decrease was due to utilization of net operating loss
carryforwards and adjustments of prior years' taxes and refunds. Income tax
expense for 1997 was $1.2 million due to higher income, offset partially by
utilization of net operating loss carry forwards and adjustments of prior
year's taxes and refunds.
For the year ended November 30, 1999, the Company recorded a net deferred
tax asset of $65.3 million, 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. When, in the future, the Company is
able to generate sufficient levels of taxable income, the valuation allowance
will be adjusted accordingly. See Note 15 to the Consolidated Financial
Statements for additional information concerning the Company's income tax
position at November 30, 1999.
Loss before extraordinary loss on debt extinguishment for 1999 was $36.5
million, or $3.01 loss per common share, compared to a loss before
extraordinary loss on debt extinguishment in 1998 of $3.7 million, or $0.46
loss per common share. The net loss in 1999 included $14.9 million of merger
and acquisition costs and other unusual items and $51.4 million of interest
expense related to the acquired RPS Division. The 1998 loss included $13.7
million of merger and acquisition costs and other unusual items and $19.3
million of interest expense. For further discussion see Note 2 "Acquisitions."
Loss before extraordinary loss on debt extinguishment in 1998 was $3.7
million, or $0.46 loss per common share, compared with 1997 earnings before
extraordinary loss on debt extinguishment of $4.0 million or $0.27 earnings
per diluted common share. The net loss in 1998 included merger and acquisition
costs and other unusual items of $13.7 million, compared to $3.5 million in
1997.
In 1999, the Company incurred a $6.2 million, or $0.49 per common share,
extraordinary loss on debt extinguishment. This extraordinary loss was related
to the redemption of the $170.0 million Senior Subordinated Seller Notes and
the $22.5 million Senior Notes. The $6.2 million of extraordinary loss was
comprised of the write off of $5.7 million of unamortized deferred issuance
costs and $0.5 million of premiums paid to redeem the Senior Notes. See
further discussions under "Liquidity and Capital Resources" and Note 7 to the
Consolidated Financial Statements, "Senior Subordinated Notes."
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In 1998, the Company incurred a $23.9 million extraordinary loss, or $2.10
loss per diluted common share, as a result of redeeming all outstanding 11.5%
Notes and refinancing borrowings under the Old Credit Agreement. This loss
included $15.7 million of premiums paid to purchase the 11.5% Notes and $8.2
million of the remaining unamortized deferred issuance costs associated with
the 11.5% Notes and the Old Credit Agreement. In 1997, the Company 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% Notes. This loss included $1.4 million
of premiums paid to purchase the 11.5% Notes and $0.5 million representing the
write-off of a proportionate share of the original unamortized deferred
issuance costs. See further discussions under "Liquidity and Capital
Resources" and Note 7 to the Consolidated Financial Statements, "Senior
Subordinated Notes."
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency, the Euro. The Company conducts business in
member countries. The transition period for the introduction of the Euro is
from January 1, 1999 to June 30, 2002. The Company has been, and is continuing
to, address the issues involved with the introduction of the Euro. The more
important issues facing the Company 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 the Company's intra-
European exposure to changes in foreign currency exchange rates.
Based upon the Company's plans and progress to date, the Company believes
that use of the Euro will not have a significant impact on the manner in which
it conducts its business affairs and processes its business and accounting
records. However, there can be no certainty that such plans will be
successfully implemented nor that external factors will not have an adverse
effect on the Company's operations. Any costs of compliance associated with
the adoption of the Euro will be expensed as incurred and the Company does not
expect these costs to be material to its financial condition, results of
operations or cash flows.
Inflation has not had a significant impact on the Company's results of
operations.
The Company is a party to various legal matters, and its operations are
subject to federal, state, and local environmental laws and regulations. For
further details, see Note 20 to the Consolidated Financial Statements,
"Contingent Liabilities."
Liquidity and Capital Resources
Cash used in operations for 1999 was $13.7 million compared to cash provided
from operations of $9.8 million in 1998. The primary uses of cash in 1999 were
the payment of $14.4 million for accrued expenses, primarily to fund the
Company's cost savings initiatives and interest payments and to fund the net
loss of $42.8 million. The majority of the cash payments of accrued expenses
were related to cash restructuring and acquisition expenses incurred as part
of the continuing integration and rationalization of the RPS Division.
Cash provided from operations was $9.8 million in 1998 compared to $21.2
million in 1997. The decrease from 1997 to 1998 was primarily due to increased
receivables, principally at the RPS Division locations since the date of the
RPS Acquisition. The increase in receivables was caused by the increased year-
end RPS Division sales. The increase in 1997 cash provided from operations was
achieved primarily through improved earnings, reductions in receivables and
inventory, and an increase in accounts payable.
The Company's capital expenditures amounted to $17.9 million in 1999, $14.5
million in 1998 and $11.2 million in 1997. The increases year over year relate
primarily to capital requirements for implementing the consolidation plan for
the RPS Division and Sofitam, improvements at the Company's Fort Wayne,
Indiana manufacturing facility, and capitalized costs associated with the
implementation of new finance and accounting software packages at the Fort
Wayne, Indiana, Lansdale, Pennsylvania and Tremblay, France locations. At
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November 30, 1999, no significant contractual commitments existed for future
capital expenditures. The Company expects to commit approximately $9.0 million
for capital expenditures during 2000.
On September 30, 1998, the Company completed the acquisition of the RPS
Division for a price equal to $330.0 million in cash, notes, and warrants,
subject to certain post-closing adjustments. Of the $330.0 million purchase
price, $100.0 million was paid in cash borrowed under the terms of the
Company's New Credit Agreement as well as $22.5 million of Senior Notes. The
$210.0 million seller note portion of the purchase price consisted of $40.0
million Junior Notes and $170.0 million Senior Subordinated Seller Notes. The
remaining $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 the Company's common stock.
Simultaneously with the RPS Acquisition, the Company executed the New Credit
Agreement with a consortium of banks to pay a portion of the purchase price
and to refinance previously existing indebtedness. The New Credit Agreement
originally consisted of a six year, $120.0 million revolving working capital
facility and a six year $120.0 million term loan facility. In conjunction with
the January 29, 1999 Offering, the Company used approximately $9.1 million of
the proceeds to reduce borrowings under the working capital facility and to
permanently reduce the bank working capital commitment from $120.0 million to
$110.0 million. In connection with the December 22, 1999 amendment to the New
Credit Agreement, the maturity date was changed to September 30, 2003. An
additional agreement provides for the assignment of a three year $7.6 million
ESOP loan facility.
On December 22, 1999, the Company amended its New Credit Agreement. Among
the items amended were the removal of the requirement to obtain $50.0 million
through the issuance of equity-type securities and the provision for a
mandatory reduction of the term loan by $50.0 million. As such, the Company
has reclassified the $50.0 million repayment from current to long term
liabilities for the year ended November 30, 1999. Other terms of the New
Credit Agreement that were amended include the addition of $5.7 million to the
borrowing availability under the working capital facility; changes to the
consolidated net worth covenant; changes to the leverage and senior leverage
ratio covenants; changes to the minimum EBITDA covenant; the addition of a
clean down or availability covenant on the working capital facility; and an
acceleration of the termination date of the New Credit Agreement from
September 30, 2004 to September 30, 2003.
In consideration for the amendment to the New Credit Agreement, the Company
paid certain fees and expenses to the bank group including warrants to
purchase 16.5% of the outstanding common stock of the Company at a purchase
price of $3.95 per share. The warrants are exercisable for an aggregate of
2,097,427 shares. The Company has the right, subject to the terms and
conditions of the New Credit Agreement, to purchase 100% of the warrants upon
termination of the New Credit Agreement or 50% by meeting specified de-
leveraging conditions at various discount rates.
At November 30, 1999, the outstanding borrowings were $94.3 million under
the revolving working capital facility, $117.5 million under the term loan,
and $4.4 million under the ESOP facility. Available borrowings under the
revolving working capital facility were $15.7 million at November 30, 1999,
subject to the Company's borrowing base calculation and certain other loan
covenants.
On September 30, 1998, the Company completed the repurchase of the final
$55.0 million of its 11.5% Notes that were then outstanding. These notes were
redeemed at an aggregate premium 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% 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.
On January 29, 1999, the Company redeemed the Senior Subordinated Seller
Notes and the Senior Notes with the proceeds from the issuance of $123.0
million of Dollar Notes and (Euro)75.0 million of Euro Notes (currently valued
at $75.0 million) in a private placement pursuant to Rule 144A and Regulation
S. The Senior
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Subordinated Seller Notes were redeemed at an aggregate price of $176.7
million, representing principal of $170.0 million and accrued and unpaid
interest thereon 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 thereon of $0.2 million and an applicable call
premium of $0.5 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 on the Senior Notes and
approximately $5.7 million of unamortized deferred issuance costs.
Under the terms of the RPS Division purchase agreement, the Company is to
reimburse Schlumberger for cash (net of adjustments) that remained in the RPS
Division at the acquisition date, which amounts to $6.5 million. The Company
has filed a claim against Schlumberger for breaches of certain representations
and warranties that were made in the purchase agreement related to the RPS
Acquisition. The amount of the claim exceeds the cash due to Schlumberger.
In March 1998, the Company completed the Common Stock Offering. Net proceeds
from the Common Stock Offering totaled approximately $67.7 million. The
Company used $39.4 million of the proceeds to redeem $35.0 million in
aggregate principal amount of its 11.5% Notes. The 11.5% 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% Notes remained outstanding. The Company recorded
an extraordinary loss on the extinguishment of the 11.5% 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% 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.
As part of the purchase price of the RPS Division, the Company has provided
for certain costs it expects to incur to close down redundant operations in
connection with the reorganization and rationalization of the RPS Division's
operations. The Company has incurred $13.2 million of expenditures in 1999 and
expects to incur an additional $8.6 million which consists of $8.0 million of
involuntary termination costs to reduce redundant staffing levels,
approximately $0.2 million of facility closure and other exit costs, and
approximately $0.4 million associated with lease breakage fees. These costs
have been aggregated and included in accrued liabilities. These amounts do not
include costs associated with the consolidation of previously existing Tokheim
subsidiaries, which will be expensed as incurred, nor do these costs benefit
future periods. The Company estimates the cash expenditures necessary to close
or consolidate certain of the existing Tokheim subsidiaries to approximate
$3.0 million in addition to the $1.8 million spent in 1999. These costs will
be funded with cash generated from operations, working capital improvements
and, if needed, borrowings from the working capital facility. For additional
information see Item 2 "Acquisitions."
As part of the MSI acquisition, the Company is obligated to make contingent
payments of up to $13.2 million through 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. In 1999 and 1998 the Company was not required to and
did not make any performance payments under the purchase agreement. The former
stockholders of MSI have commenced arbitration proceedings against the
Company. For further discussion of the matter, see Item 3 "Legal Proceedings".
The Company has guaranteed loans to the Employees' Stock Ownership Plan
("ESOP") in the amounts of $4.4 million and $7.0 million at November 30, 1999
and 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 the Company, certain consolidations or mergers of the Company,
or a redemption by the Trustee that is necessary to provide for distributions
under the Company's Retirement Savings Plan. A participant may elect to
receive a distribution from the plan in cash or common stock. If redeemed by
the Trustee, the Company is responsible for
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purchasing the preferred stock at the twenty-five dollar floor value. The
Company may elect to pay the redemption price in cash or an equivalent amount
of common stock. Preferred stock dividends paid were approximately $1.5
million in 1999 and 1998, respectively.
Beginning in 1996, the Company began to address any possible Year 2000
("Y2K") issues related to the Company's software and hardware systems as well
as its product line. The Company prepared an inventory of all systems and
equipment, analyzing risks, determining compliance levels and addressing
remediation tactics. In 1997, a formal Y2K program office was established with
a full time staff to address all aspects on a worldwide basis. The program
office was sponsored by and reported to the executive steering committee of
the Company which is comprised of the Company's senior management.
The program office established regional Y2K offices throughout the world in
early 1998. The Y2K project office identified five major sub projects related
to the Y2K issue: products utilizing embedded technologies; information
systems and technology; external agents consisting primarily of supplier,
distributors and third party service providers; manufacturing equipment; and
infrastructure. The Y2K program office published a Y2K implementation manual
which was distributed throughout the Company. The Company enlisted the
assistance of a third party consulting firm to verify and validate its Y2K
plan.
The program office established a deadline of August 31, 1999 for contingency
planning to be completed. Contingency planning was defined as planning to
ensure the continued availability of essential services, programs, and
operations including all the resources necessary to operate the enterprise at
a level acceptable to senior management. Operations' stability and reliability
was to be maintained to ensure the survival of the enterprise and to represent
the primary objectives of contingency planning. The goals of the contingency
planning are outlined below. They include:
. Ensuring that threats to the safety of the Company's employees and visitors
were minimized or eliminated
. To provide a sense of security through continued operations
. To minimize damage to, or loss of, enterprise assets
. To minimize the establishment of alternative locations for essential
business functions
. Minimize the need for subjective decision-making during a systems failure
. To provide a standard for testing and updating the contingency plan
. To ensure the availability of necessary resources to avoid any interruption
of operations during a systems failure
Through the planning and corrective actions identified by the Y2K program
office, the Company did not experience any system critical failures. The
Company incurred costs of approximately $4.0 million related to the Y2K
program office. The Y2K program office was officially closed on January 31,
2000.
The Future
The Company's principal sources of liquidity in the future are expected to
be cash flow from operations and available borrowings under the New Credit
Agreement. It is expected that the Company's principal uses of liquidity will
be to provide working capital, finance capital expenditures, fund costs
associated with the Company's integration and rationalization plan and meet
debt service requirements. As a result of the acquisition of the RPS Division,
the Company has a significant level of debt. Based upon current levels of
operations and anticipated cost savings and future growth, the Company
believes that its expected cash flow from operations, together with available
borrowings under the New Credit Agreement and its other sources of liquidity,
including 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 the Company's
business will continue to generate cash flow at or above current levels, that
estimated cost savings or growth will be achieved or that financial ratios and
financial tests under the New Credit Agreement will be met or that the Company
will be able to refinance its existing indebtedness in whole or in part.
16
<PAGE>
The indentures under which the Dollar Notes and the Euro Notes were issued
(the "Indentures") and the New Credit Agreement contain a number of
significant covenants. The New Credit Agreement requires the Company to
maintain specified financial ratios and satisfy certain financial tests.
During the year ended November 30, 1999 and in December 1999 the Company was
required to enter into three amendments to the New Credit Agreement to avoid
the occurrence of events of default relating to certain financial ratios and
financial tests. The Company's ability to meet such amended financial ratios
and tests in the future may be affected by events beyond its control. While
the Company currently expects to be in compliance with the covenants and
satisfy the financial ratios and tests in the future, there can be no
assurance that the Company will meet such financial ratios and tests or that
it will be able to obtain future amendments to the New Credit Agreement, if so
needed, to avoid a default. In the event of a default, the lenders could elect
to declare all amounts borrowed under the New Credit Agreement to be due and
payable. In addition, the Indentures limit the ability of the Company and its
subsidiaries to, among other things: incur additional debt; pay dividends on
capital stock or repurchase capital stock or make certain other restricted
payments; use the proceeds of certain asset sales; make certain 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
The Company 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 the Consolidated
Financial Statements as of November 30, 1999. None of the pronouncements that
have been issued but not yet adopted by the Company are expected to have a
material impact on the Company's financial position, results of operations or
cash flows. See Note 1 to the Consolidated Financial Statements for additional
information regarding recently issued accounting pronouncements.
17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE>
Item 8. Financial Statements and Supplementary Data.
CONSOLIDATED STATEMENT OF EARNINGS
for the years ended November 30, 1999, 1998, and 1997
(Amounts in thousands except dollars per share)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $693,932 $466,440 $385,469
Cost of sales, exclusive of items listed below... 532,089 345,031 283,932
Selling, general, and administrative expenses.... 105,349 79,819 68,167
Depreciation and amortization.................... 25,869 13,136 9,232
Merger and acquisition costs and other unusual
items........................................... 14,895 13,685 3,493
-------- -------- --------
Operating profit................................. 15,730 14,769 20,645
Interest expense (net of interest income of $743,
$822, and $837 respectively).................... 51,450 19,257 16,451
Foreign currency (gain) loss..................... 2,148 (1,442) 48
Minority interest in subsidiaries................ 88 327 394
Other income, net................................ (1,315) (675) (1,445)
-------- -------- --------
Earnings (loss) before income taxes and
extraordinary loss.............................. (36,641) (2,698) 5,197
Income taxes..................................... (104) 1,046 1,217
-------- -------- --------
Earnings (loss) before extraordinary loss........ (36,537) (3,744) 3,980
Extraordinary loss on debt extinguishment........ (6,249) (23,924) (1,886)
-------- -------- --------
Net earnings (loss).............................. (42,786) (27,668) 2,094
Preferred stock dividends ($1.94 per share)...... (1,515) (1,484) (1,512)
-------- -------- --------
Earnings (loss) applicable to common stock....... $(44,301) $(29,152) $ 582
======== ======== ========
Earnings (loss) per common share:
Basic
Before extraordinary loss.................... $ (3.01) $ (0.46) $ 0.31
Extraordinary loss on debt extinguishment.... (0.49) (2.10) (0.23)
-------- -------- --------
Net earnings (loss).......................... $ (3.50) $ (2.56) $ 0.08
======== ======== ========
Weighted average shares outstanding.......... 12,668 11,371 8,042
======== ======== ========
Diluted
Before extraordinary loss.................... $ (3.01) $ (0.46) $ 0.27
Extraordinary loss on debt extinguishment.... (0.49) (2.10) (0.21)
-------- -------- --------
Net earnings (loss).......................... $ (3.50) $ (2.56) $ 0.06
======== ======== ========
Weighted average shares outstanding.......... 12,668 11,371 9,005
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
CONSOLIDATED BALANCE SHEET
as of November 30, 1999 and 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................. $ 14,437 $ 26,801
Accounts receivable, less allowance for doubtful accounts
of $6,786 and $2,115, respectively........................ 168,565 172,693
Inventories:
Raw materials, service parts and supplies................ 68,122 67,397
Work in process.......................................... 16,389 27,418
Finished goods........................................... 9,017 25,070
-------- --------
93,528 119,885
Other current assets....................................... 12,598 19,139
-------- --------
Total current assets..................................... 289,128 338,518
Property, plant and equipment, at cost:
Land and land improvements................................. 5,683 5,644
Buildings and building improvements........................ 43,403 41,803
Machinery and equipment.................................... 104,377 95,460
Construction in progress................................... 2,143 6,041
-------- --------
155,606 148,948
Less accumulated depreciation............................ 83,630 72,721
-------- --------
71,976 76,227
Other tangible assets........................................ 2,328 4,873
Intangible assets, net....................................... 308,552 332,733
Other non-current assets, net................................ 18,818 19,465
-------- --------
Total assets............................................. $690,802 $771,816
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
CONSOLIDATED BALANCE SHEET
as of November 30, 1999, and 1998
(Amounts in thousands except dollars per share)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Current maturities of long-term debt.................... $ 10,731 $ 2,520
Cash overdrafts......................................... 12,321 15,064
Accounts payable........................................ 84,511 95,322
Accrued expenses........................................ 111,507 129,139
-------- --------
Total current liabilities............................. 219,070 242,045
Notes payable, bank credit agreement...................... 204,284 182,145
Senior notes.............................................. -- 22,500
Senior subordinated notes................................. 198,681 170,000
Junior subordinated payment-in-kind notes................. 45,020 40,000
Other long-term debt, less current maturities............. 3,168 4,115
Guaranteed Employees' Stock Ownership Plan obligation..... 4,351 6,987
Post-retirement benefit liability......................... 18,693 16,617
Minimum pension liability................................. -- 3,135
Other long-term liabilities............................... 4,926 7,511
-------- --------
698,193 695,055
-------- --------
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 obligation..... (4,351) (6,987)
Treasury stock, at cost, 168 and 195 shares,
respectively............................................. (4,210) (4,883)
-------- --------
15,439 12,130
-------- --------
Preferred stock, no par value; 3,300 shares authorized and
unissued................................................. -- --
Common stock, no par value; 30,000 shares authorized,
12,701 and 12,698 shares
issued .................................................. 90,375 90,354
Common stock warrants..................................... 20,000 20,000
Accumulated other comprehensive loss...................... (69,077) (25,733)
Retained earnings (accumulated deficit)................... (63,597) (19,295)
-------- --------
(22,299) 65,326
Treasury stock, at cost, 29 and 38 shares, respectively... (531) (695)
-------- --------
(22,830) 64,631
-------- --------
Total liabilities and shareholders' equity (deficit).. $690,802 $771,816
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended November 30, 1999, 1998, and 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss)........................... $(42,786) $ (27,668) $ 2,094
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... 6,249 23,924 1,886
Depreciation and amortization............... 28,739 14,794 11,176
Payment in kind interest.................... 5,020 -- --
Gain on sale of property, plant, and
equipment.................................. (1,253) (36) (408)
Deferred income taxes....................... (28) (431) (139)
Changes in assets and liabilities (net of
effects of the acquisitions in 1998):
Receivables, net.......................... (11,935) (21,439) 4,254
Inventories............................... 21,473 4,327 5,975
Other current assets...................... 4,922 3,185 (2,001)
Accounts payable.......................... (3,570) 7,691 5,116
Accrued expenses.......................... (14,404) 6,370 (3,395)
Other non-current assets.................. (4,348) (1,658) (1,944)
Other..................................... (1,805) (5,148) (1,412)
-------- --------- --------
Net cash provided from (used in)
operating activities................... (13,726) 9,790 21,202
-------- --------- --------
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired............ -- (110,641) --
Property, plant, and equipment additions...... (17,909) (14,548) (11,154)
Proceeds from sale of property, plant and
equipment.................................... 5,315 775 760
-------- --------- --------
Net cash used in investing activities... (12,594) (124,414) (10,394)
-------- --------- --------
Cash Flows From Financing Activities:
Proceeds from senior notes.................... -- 22,500 --
Redemption of senior notes.................... (22,500) -- --
Proceeds from 11.375% senior subordinated
notes........................................ 209,647 -- --
Redemption of seller senior subordinated
notes........................................ (170,000) (90,000) (10,000)
Increase (decrease) in other debt............. 8,060 (4,267) (3,747)
Net increase in notes payable, banks.......... 22,139 158,769 1,770
Net increase (decrease) in cash overdraft..... (1,132) 3,571 1,874
Debt issuance costs........................... (13,102) (16,157) --
Proceeds from issuance of common stock........ 22 74,057 1,706
Equity issuance costs......................... -- (4,858) --
Treasury stock, net........................... 163 (719) (496)
Premiums paid on debt extinguishment.......... (555) (15,743) (1,390)
Preferred stock dividends..................... (1,515) (1,484) (1,512)
-------- --------- --------
Net cash provided from (used in)
financing activities................... 31,227 125,669 (11,795)
-------- --------- --------
Effect of translation adjustments on cash....... (17,271) 9,318 (2,389)
-------- --------- --------
Increase (decrease) in cash................... (12,364) 20,363 (3,376)
Cash and cash equivalents:
Beginning of year............................. 26,801 6,438 9,814
-------- --------- --------
End of year................................... $ 14,437 $ 26,801 $ 6,438
======== ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the years ended November 30, 1999, 1998 and 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Retained Accumulated Total
Common Stock Guaranteed Earnings Other Common
------------------------ ESOP (Accumulated Comprehensive Shareholders'
Issued Treasury Warrants Obligation Deficit) Loss Equity
------ -------- -------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 30,
1996................... 19,452 (192) $(303) $ 9,240 $(10,519) $ 17,678
Net earnings........... 2,094 2,094
Changes in other
comprehensive income
(loss)................
Minimum pension
obligation
adjustments........... 1,075 1,075
Foreign currency
translation
adjustments........... (10,777) (10,777)
Adjustment to
guaranteed ESOP
obligation............ 303 303
Stock options
exercised............. 1,706 1,706
Treasury stock
transactions.......... 52 (1) 51
Preferred stock
dividends............. (1,512) (1,512)
------ ---- ------ ----- -------- -------- --------
Balance at November 30,
1997................... 21,158 (140) -- $ -- $ 9,821 $(20,221) $ 10,618
Net loss............... (27,668) (27,668)
Changes in other
comprehensive income
(loss)................
Minimum pension
obligation
adjustments........... (962) (962)
Foreign currency
translation
adjustments........... (4,550) (4,550)
Stock options
exercised............. 1,472 1,472
Common stock offering.. 67,724 67,724
Common stock warrants.. 20,000 20,000
Treasury stock
transactions.......... (555) (555)
Preferred stock
dividends............. (1,484) (1,484)
Minority interest
dividends............. 36 36
------ ---- ------ ----- -------- -------- --------
Balance at November 30,
1998................... 90,354 (695) 20,000 $ -- $(19,295) $(25,733) $ 64,631
Net loss............... (42,786) (42,786)
Changes in other
comprehensive income
(loss)................
Minimum pension
obligation
adjustments........... 3,135 3,135
Foreign currency
translation
adjustments........... (46,479) (46,479)
Stock options
exercised............. 21 21
Treasury stock
transactions.......... 164 164
Preferred stock
dividends............. (1,516) (1,516)
------ ---- ------ ----- -------- -------- --------
Balance at November 30,
1999................... 90,375 (531) 20,000 $ -- $(63,597) $(69,077) $(22,830)
====== ==== ====== ===== ======== ======== ========
</TABLE>
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" effective
November 30, 1999. SFAS No. 130 requires that a separate presentation for
accumulated other comprehensive income (loss) be presented. The components of
other comprehensive income (loss) consist of foreign currency translation
adjustments and minimum pension obligation adjustments.
Comprehensive income for the years ended November 30, 1999, 1998 and 1997
consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net earnings (loss).............................. $(42,786) $(27,668) $ 2,094
Other comprehensive income (loss):
Foreign currency translation adjustments....... (46,479) (4,550) (10,777)
Minimum pension obligation adjustments......... 3,135 (962) 1,075
-------- -------- --------
Comprehensive (loss)............................. $(86,130) $(33,180) $ (7,608)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar 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 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 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 (U.S.),
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 (deficit).
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 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. 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 Company's consolidated revenue.
The Company adopted SOP 97-2, "Software Revenue Recognition" at the
beginning of 1999. SOP 97-2 supersedes SOP 91-1 and provides more specific
guidance on revenue recognition related to software products. The adoption of
SOP 97-2 did not have a material impact on the Company's Consolidated
Financial Statements. Revenue from the sale of software and point-of-sale
systems which are dependent on software is recognized at the time of delivery
as no significant future Company obligations are required under the terms of
the sales agreements and the criteria of paragraph 8 of SOP 97-2 have 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
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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 other potential litigation claims and settlements, assets
and liabilities related to employee benefits, valuation allowances for
deferred tax assets, future obligations associated with the Company's
restructuring plans, the carrying value of long lived 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 U.S. 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 and collectibility of accounts receivable.
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. The fair value of the Company's Senior Subordinated Notes
at November 30, 1999 was $109,275. The fair value was determined using
available market information. The Company estimates that the fair value of the
Junior Subordinated Payment-in-Kind notes (the "Junior Notes") approximated
$22,510 at November 30, 1999.
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 forty 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. Costs incurred to
address year 2000 issues have been expensed when incurred. 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 3 years.
Research and Development--Product development expenditures are charged to
research and development expense in the period incurred. These expenses
amounted to $27,782, $21,080, and $18,284 in 1999, 1998 and 1997,
respectively.
Goodwill and Other Intangible Assets--Goodwill is amortized on a straight-
line basis over forty years. The Company continually reviews facts and
circumstances to determine whether the remaining estimated useful life of
goodwill and intangible assets warrants revision or whether the carrying
amount may not be recoverable.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
The Company evaluates the recoverability of goodwill by comparing the
estimated future undiscounted cash flows associated with the recorded goodwill
and 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 future cash flows and a charge
to earnings is recorded for the impairment amount calculated. Know how and
service relationships acquired as part of the acquisition of the RPS Division
are amortized over periods ranging from ten to twenty years on a straight-line
basis. Debt issuance 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 five to nine years.
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.
Intangible assets at November 30 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Goodwill................................................... $292,973 $325,501
Know how and service relationships......................... 9,500 9,500
Debt issuance costs........................................ 20,632 10,353
Capitalized software....................................... 6,405 3,235
-------- --------
Total intangible assets................................ $329,510 $348,589
Accumulated amortization................................... $(20,958) $(15,856)
-------- --------
Total intangible assets, net......................... $308,552 $332,733
======== ========
</TABLE>
The accumulated amortization of capitalized software was $2,058 and $787 at
November 30, 1999 and 1998, respectively. $1,271, $260 and $2,025 was charged
to amortization expense for 1999, 1998, and 1997, respectively.
Advertising and Promotion--Costs associated with advertising and product
promotion are expensed in the period incurred. These expenses amounted to
$3,258, $3,577, and $2,687 in 1999, 1998 and 1997, 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.
Product Warranty Costs--Anticipated costs related to product warranty are
expensed in the period of sale.
New Accounting Pronouncements--SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," was issued in June 1998 and is effective
for the year ending November 30, 2001. 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 does not believe this statement will have a significant impact on
the Company's Consolidated Financial Statements.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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>
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
Cash paid during the year for interest.......... $37,574 $ 15,930 $15,204
Cash paid during the year for income taxes...... 418 1,194 921
Senior Subordinated Seller Notes issued in
connection with the RPS acquisition............ -- 170,000 --
Junior Notes issued in connection with the RPS
acquisition.................................... 5,020(1) 40,000 --
Liabilities assumed in the acquisitions
including accrued merger and acquisition
costs.......................................... -- 101,830 --
</TABLE>
- --------
(1) Represents non-cash interest added to principal during 1999.
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 borrowed funds for the initial purchase price under
the Company's Old Credit Agreement. The Company is also obligated to make
contingent payments of up to $13,200 through 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 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 obligated to make any performance
payments in 1999 or 1998. See Note 20 "Contingent Liabilities."
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.
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 completed the development tasks for CVN Windows during the third
quarter of 1999.
To determine the fair value of acquired IPR&D and other identifiable
intangible assets, the Company used appraisal procedures which utilized
standard appraisal methodologies. The appraisal procedures performed
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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, and
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
porting legacy DOS functionality onto a Windows platform.
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 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 Notes 7, 8 and 12 for additional information on the
debt and warrant instruments used to finance the RPS Acquisition.
The RPS Division is a leading manufacturer and servicer of fuel dispensing
systems in Western Europe. The RPS Acquisition was 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 was allocated to assets acquired and liabilities assumed
based on their estimated fair values. The purchase price exceeded the
estimated fair value of tangible and intangible net assets acquired by
$263,400, which has been recorded as goodwill. The Company is to reimburse
Schlumberger Limited for cash (net of adjustments) that remained in the RPS
Division at the date of the RPS Acquisition which amounted to $6,500. The
Company has filed a claim against Schlumberger for breaches of certain
representations and warranties that were made in the purchase agreement
related to the RPS Acquisition. The amount of the claim exceeds the cash
amount due to Schlumberger.
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 table below summarizes the accrued liability activity by major
category and initiatives:
<TABLE>
<CAPTION>
November 30, Adjustments Charges November 30,
1998 to Accrual to Accrual 1999
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
Involuntary employee
termination benefits...... $18,617 $(3,036) $ (7,575) $8,006
Facility closure and other
closure costs............. 482 204 (475) 211
Lease and contract
termination fees.......... 1,195 4,305 (5,119) 381
------- ------- -------- ------
Total accrued integration
and rationalization
costs................... $20,294 $ 1,473 $(13,169) $8,598
======= ======= ======== ======
</TABLE>
The original accrual established at November 30, 1998 included an estimate
for 644 employee terminations at various locations. During 1999, approximately
620 employees were terminated. The revised estimate for total employees to be
terminated by the completion of the plan is 754. The adjustments to the
accrual resulted from the refinement of the integration and rationalization
plan during 1999.
During 1998, approximately $400 was charged against the accrual, primarily
for employee termination costs.
The table below summarizes the acquisition liabilities related to the
consolidation plan for Sofitam which was established in 1996 and completed in
1999. Approximately $319 of the original liability was unused at November 30,
1999 and recorded as a reduction of goodwill.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
<TABLE>
<CAPTION>
Lease and
Involuntary other
employee contract
termination termination
benefits costs Total
----------- ----------- -------
<S> <C> <C> <C>
Balance at November 30, 1996 (original
accrual)..................................... $ 6,651 $1,040 $ 7,691
Charges to accrual.......................... (2,341) (799) (3,140)
Adjustments to accrual...................... (186) 700 514
------- ------ -------
Balance at November 30, 1997.................. 4,124 941 5,065
Charges to accrual.......................... (2,279) (863) (3,142)
------- ------ -------
Balance at November 30, 1998.................. 1,845 78 1,923
Charges to accrual.......................... (1,598) (6) (1,604)
Adjustments to goodwill..................... (247) (72) (319)
------- ------ -------
Balance at November 30, 1999.................. $ -- $ -- $ --
======= ====== =======
</TABLE>
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 has closed and 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
Included in merger and acquisition costs and other unusual items are certain
costs that have been accrued as a restructuring liability at November 30, 1999
and 1998 and charged to operations. The activity in the restructuring accrual
during 1999 was as follows:
<TABLE>
<CAPTION>
Restructuring
Accrual
-------------
<S> <C>
Balance at November 30, 1997...................................... $ 0
Charges to the restructuring accrual............................ 2,300
-------
Balance at November 30, 1998...................................... 2,300
Charges to the restructuring accrual............................ (1,762)
Adjustments to the restructuring accrual........................ (198)
Additions to the restructuring accrual during 1999.............. 2,700
-------
Balance at November 30, 1999...................................... $ 3,040
=======
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
The costs accrued at November 30, 1998 consisted of approximately $1,650 for
involuntary employee termination and related costs, $340 for a pension
liability related primarily to terminated employees and $310 of facility
closure expenses in connection with the exit from the Company's Glenrothes,
Scotland manufacturing facility. The Company completed the closure of this
facility during the fourth quarter of 1999 and reversed approximately $200 of
the accrual to earnings with the remaining $340 accrued for the pension
liability at November 30, 1999.
During 1999, as a result of the continuing integration and rationalization
of the RPS Division with other business units, the Company accrued
approximately $2,700 as a charge to operations which consisted of
approximately $1,680 for involuntary termination and related costs for
approximately 69 employees that served in primarily service and administrative
roles at various service facilities in France. $1,020 was also accrued for
lease termination and other exit costs. No amounts were charged to this
reserve as of November 30, 1999.
In addition to the restructuring costs that were accrued as a liability and
charged to merger and acquisition costs and other unusual items, the following
table illustrates the other costs related to the Company's restructuring plan
and costs the Company considers to be unusual that were charged directly to
expense as the costs were incurred as follows:
<TABLE>
<S> <C>
1999
Involuntary employee termination and related costs...................... $ 5,479
Lease cancellation and other facility expenses.......................... 1,045
Increased warranty and other product related costs...................... 1,717
Other exit costs........................................................ 3,954
-------
Total................................................................. $12,195
=======
1998
Write-off of in process research and development related to MSI......... $ 5,879
Involuntary employee termination and related costs...................... 1,165
Write-off of fixed assets, inventory and licensing agreement assets..... 2,770
Other exit costs........................................................ 1,571
-------
Total................................................................. $11,385
=======
1997
Involuntary employee termination and related costs...................... $ 1,736
Settlement of certain litigation matters................................ 1,757
-------
Total................................................................. $ 3,493
=======
</TABLE>
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
4. ACCRUED EXPENSES
Accrued expenses consisted of the following at November 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
RPS Division integration and rationalization plan......... $ 8,598 $ 20,294
Schlumberger Limited...................................... 6,507 6,507
Sofitam integration plan.................................. -- 1,923
Restructuring plan........................................ 3,040 2,300
Compensated absences...................................... 11,480 14,644
Salaries, wages, and commissions.......................... 10,522 14,871
Retirement benefits and profit sharing.................... 5,755 7,426
Interest.................................................. 11,612 4,984
Warranty.................................................. 8,442 10,627
Legal and professional.................................... 5,092 3,788
Employee payroll taxes.................................... 3,730 5,634
Deferred revenue.......................................... 7,478 5,645
Taxes (sales, VAT, and other)............................. 16,288 11,072
Other..................................................... 12,963 19,424
-------- --------
$111,507 $129,139
======== ========
</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") that amended and
restated the existing agreement ("Old Credit Agreement"). The New Credit
Agreement originally consisted of 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 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 Euro (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. In conjunction with the January 29, 1999 Senior
Subordinated Note offering, the Company used approximately $9,100 of the
proceeds of such offering to reduce borrowings under the working capital
facility and to permanently reduce the bank working capital commitment from
$120,000 to $110,000.
An additional agreement provides for the assignment of a three year $7,600
ESOP loan facility with certain banks (the "ESOP Credit Agreement").
Indebtedness under the ESOP Credit Agreement will amortize with a final
principal payment payable on May 31, 2001.
During the quarter ended August 31, 1999, the Company failed to satisfy
certain financial covenants contained in its New Credit Agreement. The Company
received waivers relating to the financial covenant defaults for the fiscal
quarter ended August 31, 1999 and also amended its New Credit Agreement to,
among other things, amend the related financial covenants that covered the
Company's fourth fiscal quarter of 1999 and periods thereafter. In connection
with amending the New Credit Agreement, the Company agreed to obtain $50,000
by issuing new equity-type securities and pay down the term loan balance on or
before January 25, 2000 with such proceeds.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
On December 22, 1999, the Company amended its New Credit Agreement. Among
the items amended were the removal of the requirement to obtain $50,000
through the issuance of equity-type securities and the provision for a
mandatory reduction of the term loan by $50,000. Other terms of the New Credit
Agreement that were amended include the addition of $5,750 to the borrowing
availability under the working capital facility; changes to the interest
expense coverage ratio; changes to the fixed charge coverage ratio; changes to
the consolidated net worth covenant; changes to the leverage and senior
leverage ratio covenants; changes to the minimum EBITDA covenant; the addition
of a clean down or availability covenant on the working capital facility; an
increase of up to .50% to the applicable margin charged on borrowings based
upon the Company's leverage ratio; and an acceleration of the termination date
of the New Credit Agreement from September 30, 2004 to September 30, 2003.
In consideration for the amendment to the New Credit Agreement, the Company
paid certain fees and expenses to the bank group including warrants to
purchase 16.5% of the outstanding common stock of the Company at a purchase
price of $3.95 per share. The warrants are exercisable for an aggregate of
2,097,427 shares. The Company has the right, subject to the terms and
conditions of the New Credit Agreement, to purchase 100% of the warrants upon
termination of the New Credit Agreement or 50% by meeting specified de-
leveraging conditions at various discount rates.
The term loan under the amended New Credit Agreement calls for equal
quarterly principal payments aggregating $7,300 in 2000; $9,800 in 2001; and
$12,200 in 2002. The principal payments in 2003 include equal quarterly
payments in the first three quarters of $3,700 each with the remainder due at
maturity on September 30, 2003.
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. The New Credit Agreement requires
the Company to maintain specified financial ratios and satisfy certain
financial tests. During the year ended November 30, 1999 and in December 1999,
the Company was required to enter into three amendments to the New Credit
Agreement to avoid the occurrence of events of default relating to certain
financial ratios and tests. The Company's ability to meet such amended
financial ratios and tests in the future may be affected by events beyond its
control. While the Company currently expects to be in compliance with the
covenants and satisfy the financial ratios and tests in the future, there can
be no assurance that the Company will meet such financial ratios and tests or
that it will be able to obtain future amendments to the New Credit Agreement,
if so needed, to avoid a default. In the event of a default, the lenders could
elect to declare all amounts borrowed under the New Credit Agreement to be due
and payable.
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 the Company (including claims against certain
subsidiaries to which the Company has made intercompany loans) and the
Company's direct and indirect material majority-owned U.S. subsidiaries, (ii)
a pledge of 100% of the stock of the Company's direct and indirect material
majority-owned U.S. subsidiaries, and (iii) a pledge of 65% of the stock of
the Company's first-tier material foreign subsidiaries and (b) is guaranteed
by all of the Company's direct and indirect material majority-owned U.S.
subsidiaries. Certain indebtedness of the Company'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.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
Indebtedness (other than with respect to the additional availability under
the working capital facility) 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 3.50% for revolving loans
and 3.50% 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 4.50% for revolving loans and 4.50% for term loans). In addition, the
$5,750 of additional availability under the working capital facility bears an
applicable margin on Base Rate loans of 5.00% and Eurocurrency Rate loans of
6.00%.
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 prepayment penalty if the Borrowers prepay the entire
amount of the term loans in the first 3 years after September 30, 1998.
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.
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.
At November 30, 1999 and 1998, the aggregate amounts outstanding under
working capital facilities were $94,300 and $62,100, 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 $110,000 and $120,000, of which $15,700 and $57,900 was unused at November
30, 1999 and 1998, respectively. The range of rates at November 30, 1999 and
1998 was 7.2% to 10.06% and 5.1% to 7.5%, 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 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%.
On January 29, 1999, the Company redeemed the Senior Notes at an aggregate
price of $23,200, representing principal of $22,500, accrued and unpaid
interest of $200 and an applicable call premium of $500. The Company also
incurred an extraordinary loss on debt extinguishment related to the
refinancing of the Senior Notes of $4,600 representing unamortized issuance
costs which were written off in conjunction with the redemption. The
redemption was effected through the issuance of $123,000 aggregate principal
amount of 11.375% Senior Subordinated Notes due 2008 (the "Dollar Notes") and
(Euro)75,000 (currently valued at $75,000) aggregate principal amount of
11.375% Senior Subordinated Notes due 2008 (the "Euro Notes").
7. SENIOR SUBORDINATED NOTES
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 accrued at the rate of 11.5%
per annum and was payable semi-annually in cash on each February 1 and August
1 to the registered holders at the close of business on the January 15 and
July 15 immediately preceding the applicable interest payment date.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
During the fourth quarter of 1997, the Company used proceeds from its Old
Credit Agreement to redeem $10,000 face value of the 11.5% Notes. The Company
redeemed these 11.5% Notes at an aggregate price of $11,400 plus accrued
interest and recorded an extraordinary loss of $1,900. This amount includes
$1,400 of premiums paid to redeem the 11.5% Notes and $500 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 to
redeem $35,000 face value of the 11.5% Notes. The Company redeemed the 11.5%
Notes at an aggregate price of $38,500 plus accrued interest and recorded an
extraordinary loss on debt extinguishment of $5,000. This amount includes
$3,500 of premiums paid to redeem the 11.5% Notes and $1,500 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 face value of the 11.5% Notes outstanding. The Company redeemed the
11.5% Notes at an aggregate price of $67,300 plus accrued interest and
recorded an extraordinary loss on debt extinguishment of approximately
$14,900. This amount includes $12,300 of premiums paid to redeem the 11.5%
Notes and $2,600 representing the write-off of a proportionate share of the
original unamortized deferred issuance costs. These 11.5% Notes were
repurchased with proceeds from borrowings under the New Credit Agreement.
As part of the financing for the September 1998 acquisition of the RPS
Division, the Company issued $170,000 Senior Subordinated Seller Notes due 120
days after the RPS Acquisition closing date. The Company had 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 had not refinanced the Senior Subordinated
Seller Notes within 120 days of the RPS Acquisition closing date, such notes
would have converted 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% would have been payable in
kind. The Senior Subordinated Seller Notes were subject to certain
restrictions and covenants common to such agreements.
On January 26, 1999, the Company issued $123,000 aggregate principal amount
of the Dollar Notes and (Euro)75,000 (currently valued at $75,000) aggregate
principal amount of the Euro Notes in a private placement pursuant to Rule
144A (the "Offering"). The Dollar Notes and the Euro Notes (together, 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. The
Company incurred an extraordinary loss on debt extinguishment of approximately
$6,200 in connection with the refinancing of the Senior Notes and the Senior
Subordinated Seller Notes. This amount consists of $500 of premiums on the
Senior Notes and approximately $5,700 of unamortized deferred issuance costs
that were written off. In addition, the Company used approximately $9,100 of
the net proceeds to permanently reduce the bank working capital commitment
from $120,000 to $110,000.
The Company has designated the Euro Notes as a hedge instrument against its
foreign denominated intercompany long term notes receivable held by domestic
subsidiaries. As such, any gains or losses on translation of these notes to
U.S. dollars are recorded in the Shareholders' Equity section of the balance
sheet.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
The 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>
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
guaranteed the Notes with guarantees that are 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.
8. JUNIOR SUBORDINATED PIK NOTES
In connection with the acquisition of the RPS Division, the Company issued
$40,000 in Junior Notes. Interest on the Junior Notes is payable quarterly in
cash or in-kind at the Company's option. The Company elected not to pay the
interest in cash and the interest has been added to the principal. 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,
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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. Interest of $5.0 million was added to the balance of the Junior Notes
in 1999.
9. OTHER LONG TERM DEBT AND GUARANTEED EMPLOYEES' STOCK OWNERSHIP PLAN (ESOP)
OBLIGATION
Other long term debt at November 30, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Capital lease obligations, due through 2004 (a).................. $4,847 $4,496
Various notes, due through 2004 at interval rates ranging from
3.0% to 15.5%................................................... 1,552 1,729
------ ------
6,399 6,225
Less: current maturities......................................... 3,231 2,110
------ ------
$3,168 $4,115
====== ======
</TABLE>
Aggregate scheduled maturities of the above other long term debt obligations
exclusive of current maturities under the term loan as described in Note 5,
"Notes Payable, Bank Credit Agreement," during the upcoming five years
approximate $3,231, $1,032, $969, $644 and $497, respectively.
<TABLE>
<S> <C> <C>
ESOP obligation at November 30, 1999 and 1998 consisted of the
following:
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
ESOP obligation, variable rate, maturing $691 to $760 quarterly
through May 2001, rate of 8.52% at November 30, 1999 (b)........ $4,351 $6,987
</TABLE>
(a) Consists of various monthly, quarterly and annual lease obligations for
buildings, vehicles and computer equipment.
(b) Per the New Credit Agreement as described in Note 5, the ESOP obligation
matures on May 31, 2001.
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 expense under operating leases in 1999, 1998, and 1997
were $11,322, $6,364, and $4,104, respectively. Future minimum payments under
non-cancelable operating leases during the next five years approximate $8,753,
$6,382, $4,499, $3,793, and $2,237, and $1,385 thereafter.
11. STOCK OPTION PLANS
The Company has three separate Stock Option Plans, as outlined below:
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.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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).
Options granted under the plan during 1999, 1998, and 1997, are as follows:
<TABLE>
<CAPTION>
Year of Grant ISO SAR RSA
------------- ------- ------- ------
<S> <C> <C> <C>
1999............................................... 179,000 152,000 --
1998............................................... 2,000 -- --
1997............................................... 468,000 -- 42,500
</TABLE>
During 1999, the Company elected to grant SARs, as included in the table
above, in conjunction with previously granted ISOs, pursuant to the 1992 SIP
plan. SARs are exercisable for the same period as the companion stock options.
Exercise of either cancels the other.
The following table sets forth the status of all outstanding options at
November 30, 1999:
<TABLE>
<CAPTION>
Total
Option Exercisable Options
Price In The Next Authorized
Per Currently One To Four and
Share Exercisable Years Outstanding
------ ----------- ----------- -----------
<S> <C> <C> <C>
$20.0000 14,850 -- 14,850
18.6875 500 1,500 2,000
18.1250 6,250 6,250 12,500
12.2500 500 -- 500
8.8800 36,250 -- 36,250
8.6880 141,875 144,375 286,250
8.6875 -- 169,000 169,000
8.5625 -- 10,000 10,000
8.5000 15,000 -- 15,000
7.9380 9,000 14,000 23,000
7.1250 28,125 9,375 37,500
------- ------- -------
252,350 354,500 606,850
======= ======= =======
</TABLE>
There were 252,350 and 172,425 options exercisable as of November 30, 1999
and 1998, respectively.
The weighted average exercise price was $9.07 and $9.25 and the weighted
average remaining contractual life was 7.32 and 6.83 years for all outstanding
options as of November 30, 1999, and 1998, respectively.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
Transactions in stock options under these plans are summarized as follows:
<TABLE>
<CAPTION>
Shares
Under Option Price Range
------------ -----------
<S> <C> <C>
Outstanding, November 30, 1996.................. 452,254 $6.81-20.00
Granted......................................... 468,000 $7.94-18.13
Exercised....................................... (235,547) $6.81- 9.38
Forfeited 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
Forfeited or expired............................ (13,775) $7.94-20.00
--------
Outstanding, November 30, 1998.................. 519,800 $7.13-20.00
Granted......................................... 179,000 $8.56- 8.69
Exercised....................................... (2,500) $8.69
Forfeited or expired............................ (89,450) $7.13-20.00
--------
Outstanding, November 30, 1999.................. 606,850 $7.13-20.00
========
</TABLE>
Reserved for the granting of new options:
<TABLE>
<CAPTION>
Shares
-------
<S> <C>
November 30, 1999................................................. 61,274
November 30, 1998................................................. 158,774
</TABLE>
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 incentive 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.
In accordance with APBO No. 25, the Company measures compensation cost
attributable to SARs as the amount by which the quoted market value of the
shares of the Company's stock covered by the grant exceeds the option price.
As the option price per share exceeded market for all outstanding SARs, no
current year compensation expense attributable to the SARs has been
recognized.
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>
1999 1998 1997
-------- -------- ----------
<S> <C> <C> <C>
As reported:
Earnings (loss) applicable to common
stock.................................. $(44,301) $(29,152) $582
Basic earnings (loss) per share......... (3.50) (2.56) .08
Diluted earnings (loss) per share....... (3.50) (2.56) .06
Pro forma:
Earnings (loss), net of compensation
cost................................... (44,835) (29,559) 331
Basic earnings (loss) per share......... (3.54) (2.60) .04
Diluted earnings (loss) per share....... (3.54) (2.60) .04
</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 grants fiscal 1996 and forward. As such, the impacts
are not necessarily indicative of the effects on reported net earnings (loss)
of future years.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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 1999 and 1998:
<TABLE>
<CAPTION>
Assumptions 1999 1998
----------- ------- -------
<S> <C> <C>
Risk free interest rate................................. 5.15% 5.88%
Expected life of options................................ 5 years 5 years
Expected volatility..................................... 62.14% 38.76%
Estimated fair value of options granted per share....... $8.68 $8.94
</TABLE>
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, 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.................. 95,000 1,472 -- --
Shares purchased......................... -- -- 29,000 555
Equity Offering.......................... 4,370,000 67,724 -- --
---------- ------- ------- -----
Balance, November 30, 1998............... 12,697,000 $90,354 38,000 $ 695
Stock options exercised.................. 2,500 21 -- --
Other.................................... 1,000 -- (9,000) (164)
---------- ------- ------- -----
Balance, November 30, 1999............... 12,700,500 $90,375 29,000 $ 531
========== ======= ======= =====
</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, 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
Shares redeemed............................ -- -- 34,500 864
RSP contributions.......................... -- -- (61,500) (1,537)
------- ------- ------- -------
Balance, November 30, 1999................. 960,000 $24,000 168,000 $ 4,210
======= ======= ======= =======
</TABLE>
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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.
On March 1998, the Company completed an 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 $67,700. 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 in the RPS Acquisition, the Company issued
warrants to finance $20,000 of the purchase price, 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.
On December 22, 1999, the Company amended its New Credit Agreement. In
consideration for the amendment, the Company has paid certain fees and
expenses to the bank group including warrants to purchase 16.5% of the
outstanding common stock of the Company at a purchase price of $3.95 per
share. The warrants are exercisable for an aggregate of 2,097,427 shares. The
Company has the right, subject to the terms and conditions of the New Credit
Agreement, to repurchase 100% of the warrants upon termination of the New
Credit Agreement or 50% by meeting specified de-leveraging conditions of
various discount rates.
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.
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
common 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 warrants were not included in
computing diluted EPS for the years ended November 30, 1999 and 1998, since
the effect of such is antidilutive during periods when a loss from continuing
operations is reported. For the year ended November 30, 1999, the weighted
average of potentially issuable common shares included 791,568 shares of
convertible preferred stock outstanding, 8,801 shares for stock options and
2,523,999 shares related to warrants issued to Schlumberger. For the year
ended November 30, 1998, the weighted average of potentially issuable common
shares included 764,664 shares of convertible preferred stock outstanding and
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
210,488 shares for stock options. EPS for the year ended November 30, 1997 has
been restated to apply the provisions of SFAS No. 128.
The following table presents the share information necessary to calculate
earnings (loss) per share for fiscal years ended November 30, 1999, 1998, and
1997:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Basic shares outstanding:
Weighted average common shares outstanding............. 12,668 11,371 8,042
====== ====== =====
Diluted shares outstanding:
Weighted average common shares outstanding............. 12,668 11,371 8,042
Share equivalents...................................... 177
Weighted conversion of preferred stock................. 786
------ ------ -----
Diluted shares outstanding............................. 12,668 11,371 9,005
====== ====== =====
</TABLE>
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999
------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales.................... $166,193 $177,010 $169,170 $181,559 $693,932
Cost of sales (A)............ 133,297 131,775 128,927 138,090 532,089
Loss before extraordinary
loss........................ (14,178) (4,998) (5,448) (11,913) (36,537)
Extraordinary loss on debt
extinguishment.............. (6,249) -- -- -- (6,249)
Net loss..................... (20,427) (4,998) (5,448) (11,913) (42,786)
Loss per common share:
Basic:
Before extraordinary
loss.................... $ (1.15) $ (0.35) $ (0.46) $ (.94) $ (3.01)
Extraordinary loss on
debt extinguishment..... (0.49) -- -- -- (.49)
-------- -------- -------- -------- --------
Net loss................. $ (1.64) $ (0.35) $ (0.46) $ (.94) $ (3.50)
======== ======== ======== ======== ========
Diluted:
Before extraordinary
loss.................... $ (1.15) $ (0.35) $ (0.46) $ (.94) $ (3.01)
Extraordinary loss on
debt extinguishment..... (0.49) -- -- -- (.49)
-------- -------- -------- -------- --------
Net loss................. $ (1.64) $ (0.35) $ (0.46) $ (.94) $ (3.50)
======== ======== ======== ======== ========
</TABLE>
- --------
(A) Includes product development expenses and excludes depreciation and
amortization.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
<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 $174,444 $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 (3,494) (3,744)
Extraordinary loss on
debt extinguishment.... -- (4,965) -- (18,959) (23,924)
Net earnings (loss)..... (5,606)(D) (2,538)(E) 2,929 (22,453)(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............... $ (0.72) $ 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 currency gain of $770 associated with the repayment of various
French franc denominated borrowings.
(F) 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.
15. INCOME TAXES
Earnings (loss) before income taxes and extraordinary loss consists of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- ------
<S> <C> <C> <C>
Domestic.......................................... $ 3,547 $ 2,117 $4,209
Foreign........................................... (40,188) (4,815) 988
-------- ------- ------
$(36,641) $(2,698) $5,197
======== ======= ======
Income tax provision (benefit) consists of the following:
<CAPTION>
1999 1998 1997
-------- ------- ------
<S> <C> <C> <C>
Current:
Federal......................................... $ -- $ (340) $ 240
State........................................... 263 747 311
Foreign......................................... (88) 596 652
Deferred:
Federal......................................... 340 -- --
Foreign......................................... (619) 43 14
-------- ------- ------
Total tax provision (benefit)................. $ (104) $ 1,046 $1,217
======== ======= ======
</TABLE>
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar 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 stated below.
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------ ------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)......... $(12,825) $ (944) $1,819
Increase (decrease) in taxes resulting from:
State income taxes net of federal tax benefit... 171 487 202
Tax effect of dividends paid on stock held in
Retirement Savings Plans....................... (530) (519) (529)
Adjustments to prior year accruals and refunds.. -- -- (600)
Foreign losses not tax effected at statutory
rate........................................... 12,735 2,030 917
Miscellaneous items, net........................ 345 (8) (592)
-------- ------ ------
Reported tax expense (benefit).................... $ (104) $1,046 $1,217
======== ====== ======
</TABLE>
The components of the deferred tax assets and liabilities as of November 30,
1999 and 1998 are as stated below.
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Gross deferred tax assets:
Accounts receivable.................................... $ 392 $ 958
Compensation and benefit accruals...................... 7,841 7,453
Accrued expenses....................................... 7,334 5,065
Net operating loss carryforwards....................... 48,718 33,145
Tax credits............................................ 312 383
Inventory.............................................. 5,654 4,238
Intangible assets...................................... 6,537 4,944
Valuation allowance.................................... (65,257) (48,211)
-------- --------
Total deferred tax asset............................. $ 11,531 $ 7,975
======== ========
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Gross deferred tax liabilities:
Property, plant and equipment.......................... $ 2,120 $ 1,494
Pension assets......................................... 772 797
Inventory.............................................. 1,215 1,819
Accrued expenses....................................... 7,424 3,865
-------- --------
Total deferred tax liability......................... 11,531 7,975
-------- --------
Net deferred tax liability............................... $ -- $ --
======== ========
</TABLE>
For domestic federal income tax purposes, the net operating loss ("NOL")
carryovers amount to $50,078 which will expire from 2006 to 2020.
At November 30, 1999, the Company's net deferred tax assets are 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.
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
16. SEGMENT REPORTING
Effective November 30, 1999, the Company adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information." This statement
establishes standards for the reporting of information about operating
segments in financial statements and requires restatement of prior years
segment information.
In 1999, 1998 and 1997, the Company had only one reportable industry
segment--the design, manufacture and servicing of petroleum dispensing
systems. The Company has three reportable operating segments: North America;
Europe; and Africa. The accounting policies of the segments are the same as
described in the summary of significant accounting policies. The Company
evaluates the performance of each operating segment based upon income from
operations before merger and acquisition costs and other unusual items. The
Company's selling, general, and administrative expenses are charged to each
segment based upon the operating segment where the costs were incurred.
Segment results for 1999, 1998 and 1997 are summarized in the table below.
<TABLE>
<CAPTION>
North
1999 America(1) Europe Africa Eliminations Consolidated
---- ---------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Customer sales.......... $244,965 $428,402 $20,565 $ $693,932
Intercompany sales...... 3,327 4,339 118 (7,784)
Depreciation and
amortization........... 9,694 15,887 288 25,869
Operating profit, before
merger and acquisition
costs and other unusual
items.................. (374) 31,049 43 (93) 30,625
Total assets............ $ 570,168 $417,125 $14,104 $(310,595) $690,802
<CAPTION>
North
1998 America(1) Europe Africa Eliminations Consolidated
---- ---------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Customer sales.......... $217,579 $226,587 $22,274 $ $466,440
Intercompany sales...... 7,162 3,470 3 (10,635)
Depreciation and
amortization........... 5,781 7,035 320 13,136
Operating profit, before
merger and acquisition
costs and other unusual
items.................. 9,512 17,930 1,158 (146) 28,454
Total assets............ $ 595,291 $504,858 $15,798 $(344,131) $771,816
<CAPTION>
North
1997 America(1) Europe Africa Eliminations Consolidated
---- ---------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Customer sales.......... $186,457 $176,402 $22,610 $ $385,469
Intercompany sales...... 8,432 3,660 286 (12,378)
Depreciation and
amortization........... 3,738 5,232 262 9,232
Operating profit, before
merger and acquisition
costs and other unusual
items.................. 8,509 13,577 2,023 29 24,138
Total assets............ $ 206,888 $167,396 $14,319 $ (97,984) $290,619
</TABLE>
- --------
(1) Includes corporate expenses
Reconciliation from segment information to consolidated statement of
earnings:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Segment operating profit....................... $ 30,625 $ 28,454 $24,138
Merger and acquisition costs and other unusual
items......................................... (14,895) (13,685) (3,493)
-------- -------- -------
Consolidated operating profit.................. $ 15,730 $ 14,769 $20,645
======== ======== =======
</TABLE>
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
17. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Balance, beginning of year.................................... $2,115 $1,392
Charged to operations......................................... 3,187 1,210
Uncollectible accounts written off, less recoveries........... -- (507)
Foreign currency translation and other adjustments............ 1,484 20
------ ------
Balance, end of year.......................................... $6,786 $2,115
====== ======
</TABLE>
18. RETIREMENT PLAN COST
During 1999 the Company adopted SFAS No. 132, "Disclosure requirements for
pensions and other postretirement benefits." 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 $3,715, $2,949 and $3,065 in 1999,
1998 and 1997, 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' net
periodic benefit cost, funded status and the amounts reflected in the
accompanying consolidated balance sheet as of November 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Components of Net Periodic Benefit Cost
Interest cost.................................. $ 797 $ 818 $ 844
Expected return on market related plan assets.. (871) (905) (1,739)
Amortization of transition (asset) obligation.. (51) (51)
Amortization of recognized actuarial (gain)
loss.......................................... 195 94 1,056
------- ------- -------
Net periodic benefit cost........................ $ 70 $ (44) $ 161
======= ======= =======
Reconciliation of Projected Benefit Obligation
Projected benefit obligation--beginning
balance....................................... $12,155 $11,836
Interest cost.................................. 797 818
Benefits paid.................................. (1,194) (1,092)
Actuarial (gain) loss.......................... (1,614) 593
------- -------
Projected benefit obligation--ending balance..... $10,144 $12,155
Reconciliation of Fair Value of Plan Assets
Plan assets at fair market value--beginning
balance......................................... $11,103 $11,626
Actuarial return on plan assets................ 1,760 350
Employer contributions......................... 0 234
Benefits paid.................................. (1,194) (1,092)
Expenses....................................... (11) (15)
------- -------
Plan assets at fair market value--ending balance. $11,658 $11,103
======= =======
</TABLE>
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Reconciliation of funded status
Funded status........................................... $1,513 $(1,052)
Unrecognized transition (asset) obligation.............. (189) (240)
Unrecognized actuarial (gain) loss...................... 882 3,569
------ -------
Net amount recognized................................... 2,206 2,277
Minimum liability adjustment............................ -- (3,135)
------ -------
Accrued benefit liability............................... $2,206 $ (858)
Amounts recognized in the consolidated balance sheet
Prepaid benefit cost.................................... $2,206 $ 726
Accrued benefit liability............................... -- (1,585)
Accumulated other comprehensive income.................. -- 3,135
------ -------
Net amount recognized................................... $2,206 $ 2,276
====== =======
Weighted average assumptions
Discount rate........................................... 8.00% 6.75%
Expected return on plan assets.......................... 8.00% 8.00%
</TABLE>
The Company recorded an additional minimum pension liability for the
underfunded plan of $3,135 at November 30, 1998, representing the excess of
unfunded accumulated benefit obligations over previously recorded pension cost
liabilities.
Defined Benefit Plans (Foreign)--Certain foreign subsidiaries of the Company
offer unfunded defined benefit plans, as required by the local governing
authority, that cover all employees and provide lump-sum benefit payments upon
retirement unless employment is terminated prior to retirement age.
Net periodic charges to expense were $502, $479, and $440 during the years
ended November 30, 1999, 1998 and 1997, respectively. The unfunded accrued
benefit liability was $3,852 and $3,453 at November 30, 1999 and 1998
respectively.
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 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.
The number of shares of preferred stock in the RSP at November 30, 1999 and
1998 was 791,568 and 764,664 respectively, at a cost of $25 per share. The
number of common shares in the RSP at November 30, 1999 and 1998 was 112,589
and 116,708, respectively, at an average cost of $17.33 and $17.17 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 $431, $565, and $631 for 1999, 1998 and 1997,
respectively.
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
Components of Net Periodic Benefit Cost
Service cost..................................... $ 425 $ 362 $ 323
Interest cost.................................... 930 905 860
Recognized actuarial gain........................ (7) (124)
-------- -------- ------
Net periodic benefit cost........................ 1,348 1,143 1,183
Curtailment gain................................. (134)
-------- -------- ------
Net periodic benefit cost........................ $ 1,348 $ 1,009 $1,183
======== ======== ======
The accumulated postretirement benefit obligations as of November 30, 1999
and 1998, respectively, consisted of unfunded obligations as follows:
<CAPTION>
1999 1998
-------- --------
<S> <C> <C> <C>
Reconciliation of accumulated postretirement
benefit obligation
Accumulated postretirement benefit obligation--
beginning balance............................... $ 13,977 $ 12,186
Service cost..................................... 425 362
Interest cost.................................... 930 905
Participant contributions........................ 24 16
Curtailments..................................... -- (134)
Benefits paid.................................... (1,029) (888)
Actuarial loss................................... 2,155 1,530
-------- --------
Accumulated postretirement benefit obligation--
ending balance.................................. $ 16,482 $ 13,977
Reconciliation of fair value of plan assets
Employer contributions........................... $ 1,005 $ 872
Participant contributions........................ 24 16
Benefits paid.................................... (1,029) (888)
-------- --------
Plan assets at fair market value--ending balance. $ -- $ --
Reconciliation of funded status
Funded status.................................... $(16,482) $(13,977)
Unrecognized actuarial (gain) loss............... 723 (1,439)
-------- --------
Net amount recognized in the consolidated balance
sheet........................................... $(15,759) $(15,416)
======== ========
Weighted average assumptions
Discount rate.................................... 8.00% 6.75%
Valuation year health care cost trend rate....... 10.00% 6.00%
Ultimate health care cost trend rate............. 5.00% 4.50%
First year of ultimate health care cost trend
rate............................................ 2007 2001
</TABLE>
The health care cost trend rate used to value the accumulated post-
retirement benefit obligation is assumed to decrease gradually to an ultimate
rate of 5% in 2007. A 1% increase in this annual trend rate would increase the
accumulated post-retirement benefit obligation as of November 30, 1999 by
approximately $1,680 and the combined service and interest components of the
annual net post-retirement health care cost by approximately $160. A 1%
decrease in this annual trend rate would decrease the accumulated post-
retirement benefit obligation as of November 30, 1999 by approximately $2,046
and the combined service and interest components of the annual net post-
retirement health care cost by approximately $190.
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
20. CONTINGENT LIABILITIES
The Company is defending various claims and legal actions that are common to
its operations. These legal actions primarily involve claims for damages
arising from 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. Management 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.
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 Moyer Landfill Site has been resolved and the Fort Wayne
Reduction Site is near final resolution. The Company believes that the clean-
up at the two remaining 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
48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
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 also owns property near Jasper,
Tennessee where chlorinated solvents have been detected in the groundwater.
The Company has engaged a firm to assess the situation and is seeking a no
further action letter from the State of Tennessee. Additionally, the Company
owns a site in the State of Illinois which was formerly a die cast operation.
The Company has submitted the site to the State of Illinois site remediation
program. The Company presently does not anticipate any material costs as a
result of this action.
Total amounts included in accrued expenses related to environmental matters
were $901 and $717 at November 30, 1999 and 1998, respectively.
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 $3,191 and $1,718 at November 30, 1999 and 1998,
respectively. The Company is also seeking to recover in excess of $1,000 from
its former outside legal firm for malpractice in handling a litigation matter
for the Company.
In December 1997, the Company acquired Management Solutions, Inc. ("MSI").
MSI develops and distributes retail automation systems (includes 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 through 2000 based upon MSI's performance. The Company was not
obligated to make any performance payments in 1999 or 1998 under the purchase
agreement. The four former shareholders of MSI filed a $30,000 arbitration
claim against the Company with the American Arbitration Association on July 7,
1999 alleging fraud, breach of contract, tortious interference with
contractual relations and breach of implied covenant of good faith and fair
dealing. The claims relate to the Company's acquisition of MSI in 1997 and the
termination for cause of its president and chief executive officer in February
1999. The Company believes that the claims are without merit and will
vigorously defend against the allegations. The Company has filed counterclaims
and is also seeking damages in excess of $4,000 for breaches of
representations and warranties in the purchase agreement. Management believes
that the outcome of this arbitration will not materially adversely affect the
business, financial condition or results of operations of the Company.
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.
21. SUBSEQUENT EVENTS
On December 22, 1999, the Company amended its New Credit Agreement. Among
the items amended were the removal of the requirement to obtain $50,000
through the issuance of equity type securities and the provision for a
mandatory reduction of the term loan by $50,000. Other terms of the New Credit
Agreement that were amended include the addition of $5,750 to the borrowing
availability under the working capital facility; changes to the consolidated
net worth covenant; changes to the leverage and senior leverage ratio
covenants; changes to the minimum EBITDA covenant; the addition of a clean
down or availability covenant on the working capital facility; and an
acceleration of the termination date of the New Credit Agreement from
September 30, 2004 to September 30, 2003.
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
In consideration for the amendment to the New Credit Agreement, the Company
paid certain fees and expenses to the bank group including warrants to
purchase 16.5% of the outstanding common stock of the Company at a purchase
price of $3.95 per share. The warrants are exercisable for an aggregate of
2,097,427 shares. The Company has the right, subject to the terms and
conditions of the New Credit Agreement, to purchase 100% of the warrants upon
termination of the New Credit Agreement or 50% by meeting specified de-
leveraging conditions at various discount rates.
On February 18, 2000, the Company announced that it currently fails to meet
the newly effective New York Stock Exchange ("NYSE") continued listing
standards requiring total market capitalization and total stockholders equity
of not less than $50,000 each. The Company has submitted a plan to the
Listings and Compliance Committee of the NYSE demonstrating how the Company
plans to comply with the newly effective standard. Based upon management
estimates, the Company believes it will satisfy the new standards of the NYSE,
however, there can be no assurance that such standards will be met.
After reviewing the plan, the Committee will either accept the plan
(following which the Company will be subject to quarterly monitoring for
compliance with the plan) or reject the plan (in which the event the Company
will be subject to NYSE trading suspension and delisting). Should the
Company's shares cease trading on the NYSE, the Company believes that an
adequate alternative trading venue will be available.
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 RPS 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
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands except dollars per share)
Rule 144A and Regulation S. The Outstanding Notes were, and the exchange notes
which were issued in the exchange offer for the Outstanding Notes are, 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, 1999
and 1998 and for the years ended November 30, 1999, 1998 and 1997, 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.
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
For the year ended November 30, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $167,091 $88,572 $459,684 $(21,415) $693,932
Cost of sales, exclusive
of items listed below.. 128,297 64,597 360,610 (21,415) 532,089
Selling, general, and
administrative
expenses............... 28,138 24,954 52,257 -- 105,349
Depreciation and
amortization........... 6,065 3,580 16,224 -- 25,869
Merger and acquisition
costs and other unusual
items.................. 1,786 1,000 12,109 -- 14,895
-------- ------- -------- -------- --------
Operating profit (loss). 2,805 (5,559) 18,484 -- 15,730
Interest (income)
expense, net........... 11,371 3,405 36,674 -- 51,450
Foreign currency loss... 288 826 1,034 -- 2,148
Equity in (earnings)
loss of consolidated
subsidiaries........... 21,790 -- -- (21,790) --
Minority interest....... -- -- 88 -- 88
Other (income) expense,
net.................... 5,600 (27,816) 20,901 -- (1,315)
-------- ------- -------- -------- --------
Earnings (loss) before
income taxes........... (36,244) 18,026 (40,213) 21,790 (36,641)
Income taxes............ 293 5 (402) -- (104)
Earnings (loss) before
extraordinary item..... (36,537) 18,021 (39,811) 21,790 (36,537)
Extraordinary loss on
debt extinguishment.... (6,249) -- -- -- (6,249)
-------- ------- -------- -------- --------
Net earnings (loss)..... $(42,786) $18,021 $(39,811) $ 21,790 $(42,786)
======== ======= ======== ======== ========
</TABLE>
52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar 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>
53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar 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>
54
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED BALANCE SHEET
As of November 30, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 1,657 $ 2,705 $ 10,075 $ -- $ 14,437
Accounts receivable,
net.................. 56,905 83,987 132,423 (104,750) 168,565
Inventories, net...... 27,438 10,087 56,068 (65) 93,528
Other current assets.. 1,941 1,066 9,591 -- 12,598
-------- -------- -------- --------- --------
Total current
assets............. 87,941 97,845 208,157 (104,815) 289,128
Investments in
subsidiaries........... 66,312 250,201 6,527 (323,040) --
Property, plant, and
equipment, net......... 24,665 11,244 36,067 -- 71,976
Goodwill, net........... 97,673 10,175 181,390 -- 289,238
Other non-current assets
and deferred charges,
net.................... 216,588 75,200 5,549 (256,877) 40,460
-------- -------- -------- --------- --------
Total assets........ $493,179 $444,665 $437,690 $(684,732) $690,802
======== ======== ======== ========= ========
Liabilities and
Shareholders' Equity
Current maturities of
long-term debt......... $ -- $ 7,500 $ 2,944 $ -- $ 10,444
Notes payable to banks.. -- -- 287 -- 287
Cash overdrafts......... -- 514 11,807 -- 12,321
Accounts payable........ 79,968 25,303 83,989 (104,749) 84,511
Accrued expenses........ 45,619 14,943 50,945 -- 111,507
-------- -------- -------- --------- --------
Total current
liabilities........ 125,587 48,260 149,972 (104,749) 219,070
Notes payable, bank
credit agreement....... 19,599 184,685 -- -- 204,284
Senior subordinated
notes.................. 198,681 -- -- -- 198,681
Junior subordinated
payment in-kind notes.. -- 45,020 -- -- 45,020
Other long-term debt,
less current
maturities............. 6,000 -- 254,895 (257,727) 3,168
Guaranteed Employees'
Stock Ownership Plan
obligation............. 4,351 -- -- -- 4,351
Post-retirement benefit
liability.............. 14,842 -- 3,851 -- 18,693
Minimum pension
liability.............. -- -- -- -- --
Other long-term
liabilities............ 476 (216) 4,764 (98) 4,926
-------- -------- -------- --------- --------
369,536 277,749 413,482 (362,574) 698,193
Redeemable convertible
preferred stock........ 24,000 -- -- -- 24,000
Guaranteed Employees'
Stock Ownership Plan
obligation............. (4,351) -- -- -- (4,351)
Treasury stock, at cost. (4,210) -- -- -- (4,210)
-------- -------- -------- --------- --------
15,439 -- -- -- 15,439
Common stock............ 90,375 234,966 65,046 (300,012) 90,375
Common stock warrants... 20,000 -- -- -- 20,000
Accumulated other
comprehensive loss..... (8,023) (35,360) (17,013) (8,681) (69,077)
Retained earnings
(accumulated deficit).. 6,383 (32,690) (23,825) (13,465) (63,597)
-------- -------- -------- --------- --------
108,735 166,916 24,208 (322,158) (22,299)
Less treasury stock, at
cost................... (531) -- -- -- (531)
-------- -------- -------- --------- --------
108,204 166,916 24,208 (322,158) (22,830)
-------- -------- -------- --------- --------
Total liabilities
and shareholders'
equity (deficit)... $493,179 $444,665 $437,690 $(684,732) $690,802
======== ======== ======== ========= ========
</TABLE>
55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar 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 receivable,
net.................. 52,303 32,643 133,868 (46,121) 172,693
Inventories, net...... 16,720 18,255 85,221 (311) 119,885
Other current assets.. 1,921 759 16,459 -- 19,139
-------- -------- -------- --------- --------
Total current
assets............. 71,793 57,038 256,119 (46,432) 338,518
Investments in
subsidiaries........... 112,268 13,869 3,197 (129,334) --
Property, plant, and
equipment, net......... 21,906 10,908 43,413 -- 76,227
Goodwill, net........... 15,765 89,590 220,146 -- 325,501
Other non-current assets
and deferred charges,
net.................... 107,666 259,055 4,399 (339,550) 31,570
-------- -------- -------- --------- --------
Total assets........ $329,398 $430,460 $527,274 $(515,316) $771,816
======== ======== ======== ========= ========
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 70,488 -- 129,139
-------- -------- -------- --------- --------
Total current
liabilities........ 49,240 66,964 172,158 (46,317) 242,045
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 -- 2,199 -- 16,617
Minimum pension
liability.............. 3,135 -- -- -- 3,135
Other long-term
liabilities............ 475 (217) 7,366 (113) 7,511
-------- -------- -------- --------- --------
242,110 322,946 504,720 (374,721) 695,055
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
Accumulated other
comprehensive loss..... (15,682) (313) (9,738) -- (25,733)
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 (deficit)... $329,398 $430,460 $527,274 $(515,316) $771,816
======== ======== ======== ========= ========
</TABLE>
56
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar amounts in thousands except dollars per share)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the year ended November 30, 1999
<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. $ (6,519) $ (6,530) $ (22,467) $ 21,790 $ (13,726)
Cash flows from
investing activities:
Plant and equipment
additions/transfers.. (13,840) 2,455 (6,524) -- (17,909)
Proceeds from
sale/transfers of
property and
equipment............ 9,148 (4,418) 585 -- 5,315
Investments in and
advances to
subsidiaries, net.... 22,387 (1,154) 557 (21,790) --
--------- -------- --------- -------- ---------
Net cash provided
from (used in)
investing
activities......... 17,695 (3,117) (5,382) (21,790) (12,594)
Cash flows from
financing activities:
Redemption of senior
notes................ (22,500) -- -- -- (22,500)
Proceeds from issuance
of senior
subordinated notes... 209,647 -- -- -- 209,647
Redemption of issuance
of senior
subordinated notes... (95,946) (74,054) -- -- (170,000)
Increase (decrease) in
term debt............ -- 7,500 560 -- 8,060
Increase (decrease)
notes payable, banks. 19,600 2,539 -- -- 22,139
Increase (decrease) in
cash overdraft....... -- 495 (1,627) -- (1,132)
Debt issuance costs... (13,102) -- -- -- (13,102)
Premiums paid on debt
extinguishment....... (555) -- -- -- (555)
Other................. 163 -- -- -- 163
Proceeds from issuance
of common stock...... 22 -- -- -- 22
Preferred stock
dividends............ (1,515) -- -- -- (1,515)
--------- -------- --------- -------- ---------
Net cash provided
from (used in)
financing
activities......... 95,814 (63,520) (1,067) -- 31,227
Effect of translation
adjustments on cash.... (106,182) 70,491 18,420 -- (17,271)
Cash and cash
equivalents:
Increase (decrease) in
cash................. 808 (2,676) (10,496) -- (12,364)
Beginning of year..... 849 5,381 20,571 -- 26,801
--------- -------- --------- -------- ---------
End of period......... $ 1,657 $ 2,705 $ 10,075 $ -- $ 14,437
========= ======== ========= ======== =========
</TABLE>
57
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar 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>
58
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Guarantor and Nonguarantor Financial Statements--(Continued)
(Dollar 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>
59
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors, Tokheim Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) present fairly, in all material respects, the
financial position of Tokheim Corporation and its subsidiaries at November 30,
1999 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended November 30, 1999, in conformity
with accounting principles generally accepted in the United States. 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, 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 22, 2000
Fort Wayne, Indiana
60
<PAGE>
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the caption
"Election of Directors" in the Company's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year. The information
concerning delinquent filers pursuant to Item 405 of Regulation S-K is
incorporated herein by reference from the material contained under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" under the caption
"Stock Ownership" in the Company's definitive proxy statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Executive Officers
The information concerning executive officers required under this item is
incorporated herein by reference from the material under the caption
"Executive Officers" in the Company's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the close of the fiscal year.
Item 11. Executive Compensation.
The information required under this item is incorporated herein by reference
from the material contained under the caption "Executive Compensation" in the
Company's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required under this item is incorporated herein by reference
from the material contained under the caption "Stock Ownership" in the
Company's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions.
The information required under this item is incorporated herein by reference
from the material contained under the caption "Relationship with Affiliates"
in the Company's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120 days
after the close of the fiscal year.
61
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements
Included as outlined in Item 8 of Part II of this Report:
<TABLE>
<S> <C>
Consolidated Statement of Earnings for each of the three years in the
period ended November 30, 1999........................................ Page 19
Consolidated Balance Sheet as of November 30, 1999, and 1998........... Page 20
Consolidated Statement of Cash Flows for each of the three years in the
period ended November 30, 1999........................................ Page 22
Consolidated Statement of Shareholders' Equity for each of the three
years in the period ended November 30, 1999........................... Page 23
Notes to Consolidated Financial Statements............................. Page 24
Report of Independent Accountants...................................... Page 60
</TABLE>
(a) 2. Supplemental Data and Financial Statement Schedules:
Included as outlined in Item 8 of Part II of this Report:
<TABLE>
<S> <C>
Quarterly Financial Information (unaudited) in Note 14 to the
Consolidated Financial Statements..................................... Page 41
</TABLE>
3(a). Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
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 Company'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
Company'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 Company'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 Company'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
Company's Quarterly Report on Form 10-Q for the period ended May 31,
1998).
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 Company'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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.3 Securities Purchase Agreement, dated September 30, 1998, between
Tokheim Corporation and Schlumberger Limited (incorporated herein by
reference to the Company's Current Report on Form 8-K/A dated
October 1, 1998).
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
4.4 12% Senior Subordinated Note due January 28, 1999 in the amount of
$170,000,000 (incorporated herein by reference to the Company's
Current Report on Form 8-K/A dated October 1, 1998).
4.5 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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.6 12% Junior Subordinated Note due 2008 in the amount of $40,000,000
(incorporated herein by reference to the Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.7 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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.8 Amendment No. 1 to Junior Subordinated Note Indenture, dated as of
January 25, 1999 (incorporated herein by reference to the Company's
Annual Report on Form 10-K, for the year ended November 30, 1998).
4.9 Warrant to Purchase up to 19.9% of the Shares of Common Stock of
Tokheim Corporation (incorporated herein by reference to the
Company's Current Report on Form 8-K/A dated October 1, 1998).
4.10 Registration Rights Agreement, dated September 30, 1998, between
Tokheim Corporation and Schlumberger Limited (incorporated herein by
reference to the Company's Current Report on Form
8-K/A dated October 1, 1998).
4.11 Note Purchase Agreement, dated as of September 30, 1998, among
Tokheim Corporation, the Subsidiaries and the Purchasers
(incorporated herein by reference to the Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.12 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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.13 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 Company's Annual Report on
Form 10-K, for the year ended September 30, 1998).
4.14 Consent and Amendment No. 1 to Amended and Restated Credit
Agreement, dated as of January 11, 1999 (incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q, for the
quarter ended February 28, 1999).
4.15 Amendment No. 2 to Amended and Restated Credit Agreement, dated as
of March 1, 1999 (incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q, for the quarter ended February 28,
1999).
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
4.16 Amendment No. 3 to Second Amended and Restated Credit Agreement,
dated as of February 27, 1999 (incorporated herein by reference to
the Company's Quarterly Report on Form 10-Q, for the quarter ended
February 28, 1999).
4.17 Amendment No. 4 and Waiver to Second Amended and Restated Credit
Agreement, dated as of October 14, 1999 (incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q, for the
quarter ended August 31, 1999).
4.18 Amendment No. 5 to Second Amended and Restated Credit Agreement,
dated as of December 22, 1999.
4.19 Warrant and Registration Rights Agreement, dated as of December 22,
1999, among Tokheim Corporation, Bank One, Indiana, National
Association, Credit Lyonnais, Chicago Branch, Bankers Trust Company,
ABN Amro Bank, N.V., Credit Agricole Indosuez, Harris Trust and
Savings Bank, Compagnie Financiere de Cic et de L'Union Europeene,
Mercantile Bank N.A., The Provident Bank, Finova Capital
Corporation, Imperial Bank, Natexis Banque BFCE, Bank Polska Kasa
Opieke S.A.--Pekao S.A. Group, New York Branch, Senior Debt
Portfolio, Eaton Vance Senior Income Trust, Oxford Strategic Income
Fund, Octagon Loan Trust, Octagon Investment Partners II, LLC,
Indosuez Capital Funding IIA, Limited, Indosuez Capital Funding IV,
L.P., Alliance Investment Opportunities Fund, L.L.C., Amsouth Bank
and ARES Leveraged Investment Fund II, L.P.
4.20 Form of Warrant Certificate, dated as of December 22, 1999.
4.21 Dollar Notes Indenture, dated as of January 29, 1999, among Tokheim
Corporation, certain subsidiary guarantors of Tokheim Corporation,
and U.S. Bank Trust National Association, as trustee (incorporated
herein by reference to Amendment No. 140 to the Company's
Registration Statement on Form S-4, dated June 15, 1999, as
amended).
4.22 Euro Notes Indenture, dated as of January 29, 1999, among Tokheim
Corporation, certain subsidiary guarantors of Tokheim Corporation,
and U.S. Bank Trust National Association, as trustee (incorporated
herein by reference to Amendment No. 140 to the Company's
Registration Statement on Form S-4, dated June 15, 1999, as
amended).
4.23 Dollar Registration Rights Agreement, dated as of January 29, 1999,
among Tokheim Corporation, BT Alex. Brown Incorporated, Credit
Lyonnais Securities (USA) Inc., 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
Company's Annual Report on Form 10-K, for the year ended November
30, 1998).
4.24 Euro Registration Rights Agreement, dated as of January 29, 1999,
among Tokheim Corporation, BT Alex. Brown Incorporated, Credit
Lyonnais Securities (USA) Inc., 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
Company's Annual Report on Form 10-K, for the year ended November
30, 1998).
10.1 Tokheim Corporation 1992 Stock Incentive Plan, established December
15, 1992 (incorporated herein by reference to the Company's
Registration Statement on Form S-8, File No. 33-52167, dated
February 4, 1994).
10.2 Retirement Savings Plan for Employees of Tokheim Corporation and
Subsidiaries (incorporated herein by reference to Amendment No. 1 to
the Company's Registration Statement on Form S-8, File No. 33-29710,
dated August 1, 1989).
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
10.3 Tokheim Corporation 1996 Key Management Incentive Bonus Plan
(incorporated herein by reference to the Company's Report on Form
10-Q/A, for the quarter ended February 29, 1996).
10.4 Tokheim Corporation Deferred Compensation Plan (incorporated herein
by reference to the Company's Report on Form 10-Q, for the quarter
ended August 31, 1999).
10.5 Tokheim Corporation Supplemental Executive Retirement Plan
(incorporated herein by reference to the Company's Report on Form
10-Q, for the quarter ended August 31, 1999).
10.6 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Douglas K. Pinner (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.7 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and John A. Negovetich (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.8 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Jacques St-Denis (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.9 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Norman L. Roelke (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.10 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Scott A. Swogger (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.11 Technology License Agreement, effective as of December 1, 1997,
between Tokheim Corporation and Gilbarco, Inc. (incorporated herein
by reference to the Company's Annual Report on Form 10-K, for the
year ended November 30, 1997).
10.12 Tokheim Corporation 1997 Incentive Plan (incorporated herein by
reference to the Company's Annual Report on Form 10-K, for the year
ended November 30, 1997).
10.13 Employment Agreement, dated December 31, 1997, between Management
Solutions, Inc. and Arthur S. Elston (incorporated herein by
reference to the Company's Annual Report on Form 10-K, for the year
ended November 30, 1997).
11.1 Statement re computation of per share earnings.
21.1 Subsidiaries of Tokheim Corporation.
23.1 Consents.
27.1 Financial Data Schedule.
</TABLE>
b. Reports on Form 8-K
None.
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Tokheim Corporation
/s/ Douglas K. Pinner
By: __________________________________
Douglas K. Pinner Chairman of the
Board, President,Chief Executive
Officer
February 25, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf
of the Registrant and in the capacities indicated on this 25th day of February,
2000.
Signature Title
/s/ Douglas K. Pinner Chairman of the Board,
- ------------------------------------- President and Chief
Douglas K. Pinner Executive Officer
and Director
/s/ John A. Negovetich Executive Vice
- ------------------------------------- President, Finance and
John A. Negovetich Administration and
Chief Financial
Officer
/s/ Gerald H. Frieling, Jr. Vice Chairman of
- ------------------------------------- the Board and
Gerald H. Frieling, Jr. Director
/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
66
<PAGE>
Signature Title
/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
67
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
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 Company'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
Company'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 Company'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 Company'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
Company's Quarterly Report on Form 10-Q for the period ended May 31,
1998).
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 Company'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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.3 Securities Purchase Agreement, dated September 30, 1998, between
Tokheim Corporation and Schlumberger Limited (incorporated herein by
reference to the Company's Current Report on Form 8-K/A dated
October 1, 1998).
4.4 12% Senior Subordinated Note due January 28, 1999 in the amount of
$170,000,000 (incorporated herein by reference to the Company's
Current Report on Form 8-K/A dated October 1, 1998).
4.5 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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.6 12% Junior Subordinated Note due 2008 in the amount of $40,000,000
(incorporated herein by reference to the Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.7 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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.8 Amendment No. 1 to Junior Subordinated Note Indenture, dated as of
January 25, 1999 (incorporated herein by reference to the Company's
Annual Report on Form 10-K, for the year ended November 30, 1998).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
4.9 Warrant to Purchase up to 19.9% of the Shares of Common Stock of
Tokheim Corporation (incorporated herein by reference to the
Company's Current Report on Form 8-K/A dated October 1, 1998).
4.10 Registration Rights Agreement, dated September 30, 1998, between
Tokheim Corporation and Schlumberger Limited (incorporated herein by
reference to the Company's Current Report on Form 8-K/A dated
October 1, 1998).
4.11 Note Purchase Agreement, dated as of September 30, 1998, among
Tokheim Corporation, the Subsidiaries and the Purchasers
(incorporated herein by reference to the Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.12 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 Company's Current Report on
Form 8-K/A dated October 1, 1998).
4.13 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 Company's Annual Report on
Form 10-K, for the year ended September 30, 1998).
4.14 Consent and Amendment No. 1 to Amended and Restated Credit
Agreement, dated as of January 11, 1999 (incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q, for the
quarter ended February 28, 1999).
4.15 Amendment No. 2 to Amended and Restated Credit Agreement, dated as
of March 1, 1999 (incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q, for the quarter ended February 28,
1999).
4.16 Amendment No. 3 to Second Amended and Restated Credit Agreement,
dated as of February 27, 1999 (incorporated herein by reference to
the Company's Quarterly Report on Form 10-Q, for the quarter ended
February 28, 1999).
4.17 Amendment No. 4 and Waiver to Second Amended and Restated Credit
Agreement, dated as of October 14, 1999 (incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q, for the
quarter ended August 31, 1999).
4.18 Amendment No. 5 to Second Amended and Restated Credit Agreement,
dated as of December 22, 1999.
4.19 Warrant and Registration Rights Agreement, dated as of December 22,
1999, among Tokheim Corporation, Bank One, Indiana, National
Association, Credit Lyonnais, Chicago Branch, Bankers Trust Company,
ABN Amro Bank, N.V., Credit Agricole Indosuez, Harris Trust and
Savings Bank, Compagnie Financiere de Cic et de L'Union Europeene,
Mercantile Bank N.A., The Provident Bank, Finova Capital
Corporation, Imperial Bank, Natexis Banque BFCE, Bank Polska Kasa
Opieke S.A.--Pekao S.A. Group, New York Branch, Senior Debt
Portfolio, Eaton Vance Senior Income Trust, Oxford Strategic Income
Fund, Octagon Loan Trust, Octagon Investment Partners II, LLC,
Indosuez Capital Funding IIA, Limited, Indosuez Capital Funding IV,
L.P., Alliance Investment Opportunities Fund, L.L.C., Amsouth Bank
and ARES Leveraged Investment Fund II, L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
4.20 Form of Warrant Certificate, dated as of December 22, 1999.
4.21 Dollar Notes Indenture, dated as of January 29, 1999, among Tokheim
Corporation, certain subsidiary guarantors of Tokheim Corporation,
and U.S. Bank Trust National Association, as trustee (incorporated
herein by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4, dated June 15, 1999, as amended).
4.22 Euro Notes Indenture, dated as of January 29, 1999, among Tokheim
Corporation, certain subsidiary guarantors of Tokheim Corporation,
and U.S. Bank Trust National Association, as trustee (incorporated
herein by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4, dated June 15, 1999, as amended).
4.23 Dollar Registration Rights Agreement, dated as of January 29, 1999,
among Tokheim Corporation, BT Alex. Brown Incorporated, Credit
Lyonnais Securities (USA), Inc., 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 Company's Annual Report on Form 10-K, for the year ended
November 30, 1998).
4.24 Euro Registration Rights Agreement, dated as of January 29, 1999,
among Tokheim Corporation, BT Alex. Brown Incorporated, Credit
Lyonnais Securities (USA), Inc., 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 Company's Annual Report on Form 10-K, for the year ended
November 30, 1998).
10.1 Tokheim Corporation 1992 Stock Incentive Plan, established December
15, 1992 (incorporated herein by reference to the Company's
Registration Statement on Form S-8, File No. 33-52167, dated
February 4, 1994).
10.2 Retirement Savings Plan for Employees of Tokheim Corporation and
Subsidiaries (incorporated herein by reference to Amendment No. 1 to
the Company'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 Company's Report on Form
10-Q/A, for the quarter ended February 29, 1996).
10.4 Tokheim Corporation Deferred Compensation Plan (incorporated herein
by reference to the Company's Report on Form 10-Q, for the quarter
ended August 31, 1999).
10.5 Tokheim Corporation Supplemental Executive Retirement Plan
(incorporated herein by reference to the Company's Report on Form
10-Q, for the quarter ended August 31, 1999).
10.6 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Douglas K. Pinner (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.7 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and John A. Negovetich (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.8 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Jacques St-Denis (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Document
------- --------
<C> <S>
10.9 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Norman L. Roelke (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.10 Employment Agreement, dated July 15, 1999, between Tokheim
Corporation and Scott A. Swogger (incorporated herein by reference
to the Company's Report on Form 10-Q, for the quarter ended
August 31, 1999).
10.11 Technology License Agreement, effective as of December 1, 1997,
between Tokheim Corporation and Gilbarco, Inc. (incorporated herein
by reference to the Company's Annual Report on Form 10-K, for the
year ended November 30, 1997).
10.12 Tokheim Corporation 1997 Incentive Plan (incorporated herein by
reference to the Company's Annual Report on Form 10-K, for the year
ended November 30, 1997).
10.13 Employment Agreement, dated December 31, 1997, between Management
Solutions, Inc. and Arthur S. Elston (incorporated herein by
reference to the Company's Annual Report on Form 10-K, for the year
ended November 30, 1997).
11.1 Statement re computation of per share earnings.
21.1 Subsidiaries of Tokheim Corporation.
23.1 Consents.
27.1 Financial Data Schedule.
</TABLE>
<PAGE>
Exhibit 4.18
AMENDMENT NO. 5
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NO. 5 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of December 22, 1999 by and among TOKHEIM
---------
CORPORATION, an Indiana corporation (the "Company"), GASBOY INTERNATIONAL, INC.,
-------
a Pennsylvania corporation ("Gasboy"), TOKHEIM-SOFITAM S.A., a societe anonyme
------
organized under the laws of France ("Tokheim-Sofitam"), TOKHEIM SOFITAM
---------------
APPLICATIONS S.A., a societe anonyme organized under the laws of France
("Sofitam Applications"), the financial institutions party hereto, BANK ONE,
- ----------------------
INDIANA, NATIONAL ASSOCIATION, formerly known as NBD BANK, N.A., in its
individual capacity as a Lender and as contractual representative on behalf of
the Lenders (the "Existing Administrative Agent"), ABN AMRO BANK N.V., in its
-----------------------------
individual capacity as a Lender and as successor administrative agent on behalf
of the Lenders (the "New Administrative Agent"), CREDIT LYONNAIS, as
------------------------
Documentation and Collateral Agent, and BANKERS TRUST COMPANY, as Co-Syndication
Agent under that certain Second Amended and Restated Credit Agreement dated as
of December 14, 1998 by and among the Company, Gasboy, Tokheim-Sofitam, Sofitam
Applications, the financial institutions party thereto (the "Lenders"), the
-------
Existing Administrative Agent, the Documentation and Collateral Agent, and the
Co-Syndication Agent, as amended by an Amendment No. 1, an Amendment No. 2, an
Amendment No. 3 and an Amendment No. 4, dated as of January 11, 1999, March 1,
1999, February 27, 1999 and October 14, 1999, respectively (as amended and as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"). Capitalized terms used herein and not
----------------
otherwise defined herein shall have the respective meanings given to them in the
Credit Agreement.
WITNESSETH
WHEREAS, the Company, Gasboy, Tokheim-Sofitam, Sofitam Applications,
the Lenders, the Existing Administrative Agent, the New Administrative Agent,
the Documentation and Collateral Agent, and the Co-Syndication Agent are parties
to the Credit Agreement;
WHEREAS, the Borrowers have requested that the Required Lenders amend
the Credit Agreement in certain respects, and the Required Lenders are willing
to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company,
Gasboy,
<PAGE>
Tokheim-Sofitam, Sofitam Applications and the Required Lenders have agreed as
follows:
1. Amendments to Credit Agreement. Effective as of the date hereof and
------------------------------
subject to the satisfaction of the conditions precedent set forth in Section 3
---------
below, the Credit Agreement is hereby amended as follows:
1.1 Section 1.1 of the Credit Agreement is hereby amended (i) to delete
-----------
the following at the end of the first sentence of the definition of "Fixed
-----
Charge Coverage Ratio":
- ---------------------
", minus (f) for the four-quarter period ending on November 30, 1999, the
-----
current portion of the Term Loans in an amount not to exceed $50,000,000"
(ii) to add the following definitions, each in its appropriate alphabetical
position:
"Additional Revolving Lender" means any Lender which holds an
Additional Revolving Loan Commitment or, after termination of the
Commitments, any Additional Revolving Loan.
"Additional Revolving Loan" is defined in Section 2.1.5.
-------------
"Additional Revolving Loan Commitment" means, for each Additional
Revolving Lender, the obligation of such Additional Revolving Lender to
make Additional Revolving Loans to the Company not exceeding the amount set
forth opposite the signature of such Lender under the heading "Additional
Revolving Loan Commitment" on the signature pages to Amendment No. 5 to
this Agreement dated as of December 22, 1999 or as set forth in an
applicable Assignment Agreement in the form of Exhibit B hereto received by
---------
the Agent under the terms of Section 13.3, as such amount may be modified
------------
from time to time pursuant to the terms of this Agreement or to give effect
to any applicable assignment and acceptance.
"Additional Revolving Loan Percentage" means, with respect to any
Additional Revolving Lender, the percentage obtained by dividing (A) the
then aggregate amount of such Lender's Additional Revolving Loan Commitment
(as adjusted from time to time in accordance with the provisions of this
Agreement) by (B) the Aggregate Additional Revolving Loan Commitment at
such time; provided, however, if all of the Commitments are terminated
-------- -------
pursuant to the terms of this Agreement, then "Additional Revolving Loan
Percentage" means the percentage obtained by dividing (i) the Dollar Amount
of such Lender's Additional Revolving Loans by (ii) (a) the aggregate
Dollar Amount of all Additional Revolving Loans.
<PAGE>
"Additional Revolving Loan Termination Date" means December 22, 2001.
"Additional Revolving Notes" means the Additional Revolving Notes
executed by the Company in favor of the Additional Revolving Lenders
evidencing the Additional Revolving Loans and the Aggregate Additional
Revolving Loan Commitment, including any amendment, restatement,
modification, renewal or replacement of such Additional Revolving Note.
"Aggregate Additional Revolving Loan Commitment" means the aggregate
of the Additional Revolving Loan Commitments of all the Additional
Revolving Lenders, as may be reduced from time to time pursuant to the
terms hereof. As of the date when Amendment No. 5 to this Agreement dated
as of December 22, 1999 became effective, the Aggregate Additional
Revolving Loan Commitment was $2,500,000 (it being understood that the
-------------------
Aggregate Additional Revolving Loan Commitment may be increased upon the
request of the Company after the date such amendment became effective by
having additional financial institutions execute a counterpart of such
amendment following such effectiveness and thereby committing to provide an
Additional Revolving Loan Commitment, provided that the Aggregate
--------
Additional Revolving Loan Commitment shall not exceed $10,000,000).
and (iii) the definitions of "Aggregate Revolving Loan Commitment," "Applicable
Percentage," "Borrowing Base," "Commitment," ""Interest Period," "Loan,"
"Revolving Loan," "Revolving Loan Commitment," "Revolving Loan Termination Date"
and "Term Loan Termination Date" are each amended and restated to read in their
entireties as follows:
"Aggregate Revolving Loan Commitment" means (x) in the case of any
determination of Percentage (but not Revolving Loan Percentage), the
aggregate of the Revolving Loan Commitments and Additional Revolving Loan
Commitments of all the Lenders, as may be reduced from time to time
pursuant to the terms hereof and (y) in all other cases, the aggregate of
the Revolving Loan Commitments of all the Lenders, as may be reduced from
time to time pursuant to the terms hereof.
"Applicable Percentage" means, for any Lender, such Lender's
Additional Revolving Loan Percentage, Revolving Loan Percentage or Term
Loan Percentage, as applicable.
"Borrowing Base" means, as of any date of calculation, an amount, as
set forth on the most current Borrowing Base Certificate delivered to the
Agent, for the Company and its Consolidated Subsidiaries equal to: (i)
seventy-five percent (75%) of the Gross Amount of Receivables; plus (ii)
----
fifty percent (50%) of the Gross Amount of Inventory owned by the Company
and its Consolidated
<PAGE>
Subsidiaries; minus (iii) the aggregate amount of trade payables owed to
-----
creditors of the Subsidiaries of the Company that have not granted Liens on
such Subsidiaries' Receivables in favor of the Agent for the benefit of the
holders of secured Obligations (provided that, until March 1, 2000, the
--------
trade payables of Tokheim Services France and Tokheim, Ltd. shall not be
subtracted pursuant to this clause (iii)).
------------
"Commitment" means, for each Lender, collectively, such Lender's
Additional Revolving Commitment, Revolving Loan Commitment and/or Term Loan
Commitment.
"Interest Period" means, (i) any Alternate Currency Interest Period or
(ii) with respect to a Eurocurrency Advance or a Eurocurrency Loan, a
period of one, two, three or six months (or, with respect to Additional
Revolving Loans, such shorter periods to which all Additional Revolving
Lenders shall agree (a "Shorter Period") commencing on a Business Day
selected by the applicable Borrower pursuant to this Agreement. Other than
with respect to Shorter Periods and other than as may be required by an
Alternate Currency Interest Period, such Interest Period shall end on (but
exclude) the day which corresponds numerically to such date of commencement
one, two, three or six months thereafter, provided, however, that if there
is no such numerically corresponding day in such next, second, third or
sixth succeeding month, such Interest Period shall end on the last Business
Day of such next, second, third or sixth succeeding month. If an Interest
Period would otherwise end on a day which is not a Business Day, such
Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new month,
such Interest Period shall end on the immediately preceding Business Day.
"Loan" means, (i) with respect to a Lender, such Lender's portion, if
any, of any Advance, (ii) with respect to a Swing Loan Lender, such Swing
Loan Lender's Swing Loans, (iii) with respect to any Alternate Currency
Bank, such Alternate Currency Bank's Alternate Currency Loan, and (iv)
collectively, with respect to all Lenders, all Term Loans, Additional
Revolving Loans, Revolving Loans, Swing Loans and Alternate Currency Loans.
"Note" means any Additional Revolving Note, Revolving Note, Swing Loan
Note, Term Note or any Note issued to evidence the Alternate Currency
Loans.
"Payment Date" means the last Business Day of each month.
"Revolving Loan" is defined in Section 2.1.1; provided that, solely
------------- --------
for purposes of the proviso to the definition of "Percentage," "Revolving
-------
Loan" shall mean Revolving Loans and Additional Revolving Loans.
<PAGE>
"Revolving Loan Commitment" means, for each Lender, the obligation of
the Lender to make Revolving Loans to the Borrowers, to purchase
participations in Letters of Credit and to participate in Swing Loans and
Alternate Currency Loans pursuant to Section 2.1.4 not exceeding the amount
-------------
set forth opposite the name of such Lender under the heading "Revolving
Loan Commitment" on Schedule I hereof or as set forth in an applicable
----------
Assignment Agreement in the form of Exhibit B hereto received by the Agent
---------
under the terms of Section 13.3, as such amount may be modified from time
------------
to time pursuant to the terms of this Agreement or to give effect to any
applicable assignment and acceptance; provided that, solely for purposes of
the definition of "Percentage," "Revolving Loan Commitment" shall include
the obligation of each Lender to make Additional Revolving Loans.
"Revolving Loan Termination Date" means September 30, 2003.
"Term Loan Termination Date" means September 30, 2003.
1.2. Section 2.1.3(iv) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"(iv) Repayment of the Term Loans. The Term Loans shall be repaid in
---------------------------
sixteen (16) installments, payable in an initial installment on January 21,
2000 and thereafter in installments on the last Business Day of each fiscal
quarter of the Company thereafter (excluding the fiscal quarter ending on
February 28, 2000) as prescribed below until the Term Loan Termination
Date, and the Term Loans shall be permanently reduced by the amount of each
installment on the date payment thereof is made hereunder. The principal
amount of the installments may be paid by either Tokheim or Gasboy at their
discretion provided that each of the installments shall be in the aggregate
amounts set forth below:
Term Loan
Installment Date Installment Amount
---------------- ------------------
January 21, 2000 $1,875,000
May 31, 2000 $1,875,000
August 31, 2000 $1,875,000
November 30, 2000 $1,875,000
February 28, 2001 $2,500,000
May 31, 2001 $2,500,000
August 31, 2001 $2,500,000
November 30, 2001 $2,500,000
February 28, 2002 $3,125,000
May 31, 2002 $3,125,000
<PAGE>
August 31, 2002 $3,125,000
November 30, 2002 $3,125,000
February 28, 2003 $3,750,000
May 31, 2003 $3,750,000
August 31, 2003 $3,750,000
Term Loan
Termination Date $8,750,000
Notwithstanding the foregoing, the final installment shall be in the amount
of the then outstanding principal balance of the Term Loans. In addition,
the then outstanding principal balance of the Term Loans, if any, shall be
due and payable on the Term Loan Termination Date. No installment of any
Term Loan shall be reborrowed once repaid."
1.3. The following Section 2.1.5 is hereby added to the Credit Agreement:
"2.1.5. Additional Revolving Loans. (i) Upon the satisfaction of the
--------------------------
applicable conditions precedent set forth in Sections 4.1, 4.2 and 4.3,
------------ --- ---
from and including the date of this Agreement and prior to the Additional
Revolving Loan Termination Date, each Additional Revolving Lender severally
and not jointly agrees, on the terms and conditions set forth in this
Agreement (including, without limitation, the terms and conditions of
Section 2.5.11 and Section 8.1 relating to the reduction, suspension or
-------------- -----------
termination of the Aggregate Additional Revolving Loan Commitment), to make
revolving loans (each individually, an "Additional Revolving Loan" and,
collectively, the "Additional Revolving Loans") in Dollars to the Company
from time to time in a Dollar Amount not to exceed such Lender's Additional
Revolving Loan Percentage of the lesser of (x) Aggregate Additional
Revolving Loan Commitment at such time and (y) the Borrowing Base minus the
Revolving Credit Obligations at such time; provided that no Additional
--------
Revolving Lender shall be required to make any Additional Revolving Loan
unless, at the time of such proposed Additional Revolving Loan, the
Revolving Credit Availability shall be zero. Subject to the terms of this
Agreement (including, without limitation, the terms and conditions of
Section 2.5.11 and 8.1 relating to the reduction, suspension or termination
-------------- ---
of the Aggregate Additional Revolving Loan Commitment), the Company may
borrow, repay and reborrow Additional Revolving Loans at any time prior to
the Additional Revolving Loan Termination Date. Unless earlier terminated
in accordance with the terms and conditions of this Agreement, the
Additional Revolving Loan Commitments of the Additional Revolving Lenders
to lend hereunder shall expire on the Additional Revolving Loan Termination
Date. The proceeds of all Additional Revolving Loans made under this
Section 2.1.1 shall be used in accordance with the terms of Section 6.2.
------------- -----------
All outstanding Additional Revolving Loans shall be paid in full by the
Company on the Additional Revolving Loan Termination Date.
<PAGE>
(ii) Borrowing Notice. When the Company desires to borrow under
----------------
this Section 2.1.5, a Financial Officer shall deliver to the Agent a
-------------
Borrowing Notice, signed by it, specifying that the Company is requesting
an Additional Revolving Loan pursuant to this Section 2.1.5. Any Borrowing
-------------
Notice given pursuant to this Section 2.1.5 shall be irrevocable.
-------------
(iii) Maximum Amount of Additional Revolving Loans. At no time shall
--------------------------------------------
the aggregate amount of all Additional Revolving Loans exceed the lesser of
the (x) the Aggregate Additional Revolving Loan Commitment at such time and
(y) the Borrowing Base minus the Revolving Credit Obligations at such time.
(iv) Making of Additional Revolving Loans. Promptly after receipt
------------------------------------
of the Borrowing Notice under Section 2.1.5(ii) in respect of Additional
-----------------
Revolving Loans, the Agent shall notify each Additional Revolving Lender by
telex or telecopy, or other similar form of transmission, of the proposed
Advance. Each Additional Revolving Lender shall make available its
Additional Revolving Loan in accordance with the terms of Section 2.5.1.
-------------
The Agent will make the funds so received from the Lenders available to the
Company in accordance with the terms of Section 2.5.1 and shall disburse
-------------
such proceeds in accordance with the Company's disbursement instructions
set forth in such Borrowing Notice. The failure of any Additional Revolving
Lender to deposit the amount described above with the Agent on the
applicable Borrowing Date shall not relieve any other Additional Revolving
Lender of its obligations hereunder to make its Additional Revolving Loan
on such Borrowing Date."
1.4. Section 2.2.1 of the Credit Agreement is hereby amended by adding the
phrase ", Additional Revolving Loans" after the words "Revolving Loans" in the
first sentence thereof.
1.5. Section 2.2.2 of the Credit Agreement is hereby amended by (i)
inserting the following after the words "twelve (12) Interest Periods" where
they appear in such Section "(or, so long as the Aggregate Additional Revolving
Commitment is greater than zero, fifteen (15) Interest Periods)", (ii) inserting
the phrase ", Additional Revolving Loans" after the words "Term Loans" in clause
(iii) thereof and (iii) inserting the phrase "Additional Revolving Loan," after
the words "Term Loan" in clause (iv) thereof.
1.6. Section 2.3 of the Credit Agreement is hereby amended by (i) replacing
the table in such Section with the following:
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
Eurocurrency Alternate Base
Margins Rate Margins
Commitment \
Leverage Ratio Fee Percentage
------------------------------------------------------------------------------
Additional Additional
Revolving Revolving Term Revolving Revolving Term
Loans Loans Loans Loans Loans Loans
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Level I Status 4.50% 6.00% 4.50% 3.50% 5.00% 3.50% 0.75%
----------------------------------------------------------------------------------------------------------------------
Level II Status 4.00% 6.00% 4.50% 3.00% 5.00% 3.50% 0.75%
----------------------------------------------------------------------------------------------------------------------
Level III Status 3.50% 6.00% 4.50% 2.50% 5.00% 3.50% 0.50%
----------------------------------------------------------------------------------------------------------------------
Level IV Status 3.25% 6.00% 4.50% 2.25% 5.00% 3.50% 0.50%
----------------------------------------------------------------------------------------------------------------------
Level V Status 3.00% 6.00% 4.50% 2.00% 5.00% 3.50% 0.50%
======================================================================================================================
Level VI Status 2.50% 6.00% 4.50% 1.50% 5.00% 3.50% 0.375%
======================================================================================================================
</TABLE>
and (ii) adding the following as the last paragraph thereof
"Notwithstanding the foregoing, on June 1, 2000 and on the last day of each
fiscal quarter of the Company thereafter, each of the above margins
applicable to Loans shall be increased by 0.25% unless, on the last day of
any fiscal quarter prior to any such scheduled date of increase, (x) the
Senior Leverage Ratio is less than 2.5:1.00 and (y) the principal amount of
all Obligations is less than or equal to $180,000,000 and the aggregate
commitments of the Lenders to extend credit hereunder have been permanently
reduced to $180,000,000 or less; provided that if the conditions set forth
--------
in clauses (x) and (y) are met, any increase to the margins set forth above
----------- ---
pursuant to this sentence shall thenceforth be ineffective and the margins
set forth in the table above shall apply."
1.7. Section 2.4.1 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"2.4.1. Commitment Fee. (a) The Company and the Borrowing
--------------
Subsidiaries hereby jointly and severally agree to pay to the Agent for the
ratable account of each Lender, for the period from the date hereof to and
including the Termination Date, a commitment fee at a rate per annum equal
to the annual percentage rate indicated as the Applicable Margin for the
commitment fee on the average daily amount by which such Lender's Revolving
Loan Commitment exceeds the sum of the outstanding principal balance of
such Lender's Revolving Loans plus Swing Loans plus such Lender's
Percentage of the L/C Obligations and Alternate Currency Loans, the accrued
but unpaid portion of which shall be payable on each Payment Date hereafter
and on the Termination Date. All such
<PAGE>
accrued commitment fees shall be payable on the effective date of any
termination of the obligations of the Lenders to make Revolving Loans and
issue or participate in Letters of Credit hereunder, and commitment fees
shall cease to accrue thereafter. For purposes of calculating such
commitment fee hereunder, the principal amount of each Advance or Swing
Loan made in a currency other than Dollars shall be the Dollar Amount of
such Advance as determined under clause (ii) of the definition herein of
-----------
"Dollar Amount".
(b) The Company hereby agrees to pay to the Agent for the ratable
account of each Additional Revolving Lender, for the period from the date
hereof to and including the Additional Revolving Loan Termination Date, a
commitment fee at a rate per annum equal to the annual percentage rate
indicated as the Applicable Margin for the commitment fee on the average
daily amount by which such Lender's Additional Revolving Loan Commitment
exceeds the sum of the outstanding principal balance of such Lender's
Additional Revolving Loans, the accrued but unpaid portion of which shall
be payable on each Payment Date hereafter and on the Additional Revolving
Loan Termination Date. All such accrued commitment fees shall be payable on
the effective date of any termination of the obligations of the Lenders to
make Additional Revolving Loans, and commitment fees shall cease to accrue
thereafter."
1.8. Section 2.4.2 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"2.4.2. Agent Fees. The Company agrees to pay certain fees to the
----------
Agent, for its sole account, on the dates and in the amounts set forth in
the mandate and fee letter between Company and ABN Amro Bank N.V., dated
November 19, 1999, as amended from time to time (the "Fee Letter")."
1.9. Section 2.5.1(i) of the Credit Agreement is hereby amended by adding
the phrase "Additional Revolving Loan," immediately prior to the words
"Revolving Loan" in the second sentence thereof.
1.10. Section 2.5.2 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"2.5.2. Minimum Amount of Each Advance. Each Advance shall be in
------------------------------
the minimum amount of $1,000,000 and in integral multiples of $500,000 if
in excess thereof (or the Approximate Equivalent Amount if denominated in
an Agreed Currency other than Dollars or an Alternate Currency (or such
other amounts as may be specified in the applicable Alternate Currency
Addendum)); provided, however, that (x) any Alternate Base Rate Advance of
Revolving Loans may be in the amount of (i) the aggregate applicable unused
Aggregate Revolving Loan Commitment and (ii) any Alternate Base Rate
Advance required to be made in connection with the required repayment of a
Swing Loan under Section
-------
<PAGE>
2.1.2(iv) and (y) any Alternate Base Rate Advance of Additional Revolving
---------
Loans may be in the amount of the aggregate unused Aggregate Additional
Revolving Loan Commitment."
1.11. Section 2.5.3(B)(i)(d) of the Credit Agreement is hereby deleted in
its entirety and the following is substituted therefor:
"(d) [Intentionally Omitted]."
1.12. Section 2.5.3(B)(i)(f)(II) of the Credit Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"(II) following the payment in full of the Term Loans, the amount of
each Designated Prepayment shall be applied to repay Additional Revolving
Loans (and shall concurrently reduce Additional Revolving Loan Commitments
pursuant to Section 2.5.11(c)) and following the payment in full of the
-----------------
Additional Revolving Loans, the amount of each Designated Prepayment shall
be applied first to Revolving Loans (but shall not reduce Revolving Loan
Commitments), then to interest on the Reimbursement Obligations, then to
principal on the Reimbursement Obligations, then to fees on account of
Letters of Credit and then, to the extent any L/C Obligations are
contingent, deposited with the Agent as cash collateral in respect of such
L/C Obligations."
1.13. Section 2.5.3(B)(ii)(x) of the Credit Agreement is hereby deleted in
its entirety and the following is substituted therefor:
"(x) In addition to repayments under Section 2.5.3(B)(ii)(z), (1) if
-----------------------
at any time and for any reason the amount of Additional Revolving Loans is
greater than the lesser of (aa) the Aggregate Additional Revolving Loan
Commitment or (bb) the Borrowing Base less the Revolving Credit
Obligations, the Company shall immediately make a mandatory prepayment of
the Additional Revolving Loans in an amount equal to such excess and (2) if
at any time and for any reason other than the fluctuation in currency
exchange rates the Dollar Amount of the Revolving Credit Obligations are
greater than the Maximum Revolving Credit Amount, the Company shall
immediately make a mandatory prepayment of the Obligations in an amount
equal to such excess. If after giving effect to such payment the Dollar
Amount of L/C Obligations outstanding at any time is greater than the
Maximum Revolving Credit Amount at such time, the Company shall deposit
cash collateral with the Agent in an amount in Dollars equal to such
excess."
1.14. Section 2.5.3(B) of the Credit Agreement is amended by adding the
following clause (iii) at the end thereof:
<PAGE>
"(iii) Mandatory Prepayments of Additional Revolving Loans. If at
---------------------------------------------------
any time when any Additional Revolving Loans are outstanding there is any
unused Revolving Credit Availability, the Company shall immediately borrow
Revolving Loans to the extent of such unused Revolving Credit Availability
and use the proceeds of such Revolving Loans to make a mandatory prepayment
of Additional Revolving Loans."
1.15. Section 2.5.6 of the Credit Agreement is hereby amended by deleting
the third sentence of such Section in its entirety and substituting the
following therefor:
"Interest accrued on each Eurocurrency Advance having an Interest Period
longer than one month shall also be paid on the last day of each one-month
interval during such Interest Period."
1.16. Section 2.5.9 is hereby amended by adding the phrase "Aggregate
Additional Revolving Loan Commitment reduction notice," immediately prior to the
words "Aggregate Revolving Loan Commitment reduction notice" where they appear
in such Section.
1.17. Section 2.5.11 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"2.5.11. Termination or Reduction of the Revolving Loan Commitments.
----------------------------------------------------------
(a) The Company may at any time after the date hereof permanently
reduce the Aggregate Revolving Loan Commitment or the Alternate Currency
Commitments, in whole, or in a minimum aggregate amount of $1,000,000 and
in integral multiples of $1,000,000 if in excess thereof (or in such
amounts as may be set forth on the applicable Alternate Currency Addendum),
ratably among the Lenders upon at least one Business Day's prior written
notice to the Agent, which notice shall specify the amount of such
reduction; provided, however, no such notice of reduction shall be
-------- -------
effective to the extent that it would reduce the Aggregate Revolving Loan
Commitment to an amount which would be less than the outstanding Dollar
Amount of the Revolving Credit Obligations outstanding at the time such
reduction is to take effect; provided, further, that no such notice of
-------- -------
reduction shall be effective to the extent that it would reduce the
aggregate Alternate Currency Commitments in any Alternate Currency to an
amount which would be less than the outstanding amount of the Alternate
Currency Loans in such currency at the time such reduction is to take
effect. The Aggregate Revolving Loan Commitment once reduced as provided
in this Section 2.5.11 may not be reinstated.
--------------
(b) The Company may at any time after the date hereof permanently
reduce the Aggregate Additional Revolving Loan Commitment, in whole, or in
a minimum aggregate amount of $1,000,000 and in integral multiples of
$1,000,000
<PAGE>
if in excess thereof, ratably among the Additional Revolving Lenders upon
at least one Business Day's prior written notice to the Agent, which notice
shall specify the amount of such reduction; provided, however, no such
-------- -------
notice of reduction shall be effective to the extent that it would reduce
the Aggregate Additional Revolving Loan Commitment to an amount which would
be less than the outstanding Dollar Amount of the Additional Revolving
Loans outstanding at the time such reduction is to take effect.
(c) Upon any Designated Prepayment of Additional Revolving Loans,
the Aggregate Additional Revolving Loan Commitment shall be automatically
and permanently reduced by the amount of such prepayment.
(d) The Aggregate Additional Revolving Loan Commitment, once
reduced as provided in this Section 2.5.11, may not be reinstated.
--------------
(e) If (y) any Lender notifies the Company in accordance with
Section 2.5.15 or (z) a Borrower reasonably determines that it is or will
--------------
be required to make any additional payment to any Lender under Section 3.1,
-----------
3.2 or 3.3 the Company may, at any time thereafter (provided that no
--- ---
Default or Unmatured Default then exists and no satisfactory solution has
been reached pursuant to Section 3.6) and by not less than five Business
-----------
Days' prior written notice to the Agent, cancel such Lender's Commitment,
whereupon such Lender shall cease to be obliged to make further Loans
hereunder and its Commitment shall be reduced to zero. Upon termination of
such Lender's Commitment, each applicable Borrower shall, subject to the
last sentence of this Section 2.5.11, pay all outstanding Obligations owing
--------------
to such Lender. Any notice of cancellation given pursuant to this Section
-------
2.5.11 shall be irrevocable and shall specify the date upon which such
------
cancellation is to take effect. Notwithstanding any such cancellation, the
obligations of the Company and the Borrowing Subsidiaries under Sections
--------
3.1, 3.2, 3.3 and 10.6 shall survive any such cancellation and be
--- --- --- ----
enforceable by such Lender. In any case described in clauses (y) or (z)
---------- ---
above in which the Company has the right to cancel a Lender's Commitment,
the Company may, in connection with such cancellation arrange for a sale
(at par) of such Commitment and all outstanding Loans held by such Lender
pursuant to the terms of Section 13.3 and such Lender will promptly enter
------------
into any such sale arranged by the Company."
1.18. Section 3.2 of the Credit Agreement is hereby amended by adding the
words "or its Additional Revolving Loan Commitment" in the last sentence thereof
immediately after the words "Revolving Loan Commitment."
1.19. Section 6.2 of the Credit Agreement is hereby amended by adding the
words "and the Additional Revolving Loans" in the second sentence thereof
immediately after the words "the Revolving Loans."
<PAGE>
1.20. Section 6.9 of the Credit Agreement is hereby amended by (i)
deleting clause (iv) in its entirety and substituting the following therefor:
"(iv) Sales or other transfers of assets (A) from a Borrower or Guarantor
Subsidiary to another Borrower or Guarantor Subsidiary and (B) from
Tokheim Sofitam to Tokheim Services France SA with respect to the
service business of Tokheim Sofitam."
and (ii) deleting clause (ix) in its entirety and substituting the following
therefor:
"(ix) Sales, assignments or discounting of "traites" (within the meaning
of French law) or similar post-dated checks or trade receivables or
invoices without recourse in the ordinary course of business in an
aggregate amount not to exceed $12,000,000 outstanding at any one
time."
1.21. Section 6.12 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"6.12. Consolidated Net Worth. The Company shall maintain, as
----------------------
of the end of each fiscal year, Consolidated Net Worth of not less than:
(A) for the fiscal year ending on or about November 30, 1999, the
sum of (i) $46,000,000 plus (ii) 100% of Net Cash Proceeds
----
received after the Effective Date through November 30, 1999
from the issuance of Capital Stock of the Company or any of its
Subsidiaries to any Person other than the Company or its
Subsidiaries; and
(B) for each fiscal year thereafter, the sum of (i) $46,000,000
plus (ii) sixty percent (60%) of Consolidated Net Income (if
----
positive) for each fiscal year of the Company commencing with
the fiscal year ending on or about November 30, 2000 and
concluding with the fiscal year ending most recently prior to
the date of determination but without deduction for any fiscal
year in which there is a loss plus (iii) an amount equal to (x)
----
100% of Net Cash Proceeds received after the Effective Date
from the issuance of Capital Stock of the Company or any of its
Subsidiaries to any Person other than the Company or its
Subsidiaries."
1.22. Section 6.13 of the Credit Agreement is hereby amended by adding the
following clause (d) at the end thereof:
"and (d) if the Company can demonstrate to the satisfaction of the New
Administrative Agent that it will be in compliance on a pro forma basis
with the covenants in Sections 6.12, 6.23, 6.24, 6.25, 6.33 and 6.34 after
------------- ---- ---- ---- ---- ----
giving effect to such redemption or repurchase (assuming that the aggregate
repurchase or
<PAGE>
redemption price therefor was deducted from EBITDA in the cases of Sections
--------
6.23, 6.24, 6.25 and 6.33), the Company may repurchase or redeem the
---- ---- ---- ----
warrants issued to the Lenders and their Affiliates issued in connection
with Amendment No. 5 to this Agreement dated as of December 22, 1999."
1.23. Section 6.23 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"6.23 Leverage Ratio and Senior Leverage Ratio. (a) At any and all
----------------------------------------
times, the Company shall not permit the Leverage Ratio to exceed the
amounts set forth below for the fiscal periods set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending On or About
the Dates Set Forth Below: Maximum Ratio
------------------------- -------------
<S> <C>
November 30, 1999 9.00 to 1.00
February 29, 2000 8.50 to 1.00
May 31, 2000 8.00 to 1.00
August 31, 2000 7.50 to 1.00
November 30, 2000 6.00 to 1.00
February 28, 2001 5.50 to 1.00
May 31, 2001 5.50 to 1.00
August 31, 2001 5.50 to 1.00
November 30, 2001 5.50 to 1.00
February 28, 2002 3.50 to 1.00
May 31, 2002 3.50 to 1.00
August 31, 2002 3.50 to 1.00
And at all times during each 3.00 to 1.00
fiscal quarter thereafter
</TABLE>
(b) At any and all times, the Company shall not permit the Senior Leverage
Ratio to exceed the amounts set forth below for the fiscal periods set forth
below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending On or About
the Dates Set Forth Below: Maximum Ratio
- ------------------------- -------------
<S> <C>
November 30, 1999 5.00 to 1.00
February 29, 2000 4.50 to 1.00
May 31, 2000 4.00 to 1.00
August 31, 2000 4.00 to 1.00
</TABLE>
<PAGE>
<TABLE>
<S> <C>
November 30, 2000 3.50 to 1.00
February 28, 2001 3.00 to 1.00
May 31, 2001 2.75 to 1.00
August 31, 2001 2.75 to 1.00
November 30, 2001 2.75 to 1.00
And at all times during each
fiscal quarter thereafter 2.00 to 1.00
</TABLE>
The Leverage Ratio and Senior Leverage Ratio shall be calculated, in each
case, as of the last day of each fiscal quarter based upon (A) for
Indebtedness, Indebtedness as of the last day of each such fiscal quarter;
and (B) for EBITDA, the actual amount for the four-quarter period ending on
such day."
1.24. Section 6.24 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"6.24 Interest Expense Coverage Ratio. The Company shall not permit
-------------------------------
the Interest Expense Coverage Ratio to be less than the amounts set forth
below for the fiscal periods set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending On or About
the Dates Set Forth Below: Minimum Ratio
------------------------- -------------
<S> <C>
November 30, 1999 1.05 to 1.00
February 29, 2000 1.10 to 1.00
May 31, 2000 1.20 to 1.00
August 31, 2000 1.20 to 1.00
November 30, 2000 1.50 to 1.00
February 28, 2001 1.50 to 1.00
May 31, 2001
through November 30, 2001 1.60 to 1.00
And for each fiscal quarter
ending thereafter 2.50 to 1.00"
</TABLE>
1.25. Section 6.25 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
<PAGE>
"6.25 Fixed Charge Coverage Ratio. The Company shall not permit the
---------------------------
Fixed Charge Coverage Ratio to be less than the amounts set forth below for
the fiscal periods set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending On or About
the Dates Set Forth Below: Minimum Ratio
-------------------------- -------------
<S> <C>
November 30, 1999 0.50 to 1.00
February 29, 2000 0.60 to 1.00
May 31, 2000 0.70 to 1.00
August 31, 2000 0.75 to 1.00
November 30, 2000 0.95 to 1.00
February 28, 2001 through
November 30, 2001 1.00 to 1.00
And for each fiscal quarter
ending thereafter 1.25 to 1.00"
</TABLE>
1.26. Section 6.33 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"6.33. Minimum EBITDA. The Company shall not permit EBITDA to be
--------------
less than the amounts set forth below for the fiscal periods ending on the
dates set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending on or About
the Dates Set Forth Below: Minimum EBITDA
-------------------------- --------------
<S> <C>
November 30, 1999 $ 45,000,000
February 29, 2000 $ 50,000,000
May 31, 2000 $ 55,000,000
August 31, 2000 $ 55,000,000
November 30, 2000 $ 70,000,000
February 28, 2001 $ 70,000,000
May 31, 2001 $ 75,000,000
August 31, 2001 $ 75,000,000
November 30, 2001 $ 75,000,000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
February 28, 2002 and each
fiscal quarter thereafter $100,000,000
</TABLE>
In each case, EBITDA shall be determined as of the last day of each fiscal
quarter then ended for the four fiscal quarter period ending on such date."
1.27. The following Section 6.34 is hereby added to the Credit Agreement:
"6.34 Clean-Down of Revolving Loans. The Company shall, on the 25th
-----------------------------
day of each month set forth below cause (a) the sum of (x) the Revolving
Credit Availability on such day plus (y) the Aggregate Additional Revolving
Loan Commitment on such day minus the aggregate amount of all outstanding
Additional Revolving Loans on such day to be at least equal to (b) the
amount set forth below for such month (with each such amount to be reduced
pro tanto in the event that the Aggregate Additional Revolving Loan
---------
Commitment, at the time such aggregate commitment is initially committed
to, is less than $10,000,000):
<TABLE>
<CAPTION>
Month Amount
---------------------------------
<S> <C>
January 2000 $ 18,000,000
February 2000 $ 15,000,000
March 2000 $ 10,000,000
April 2000 $ 10,000,000
May 2000 $ 10,000,000
June 2000 $ 15,000,000
July 2000 $ 20,000,000
August 2000 $ 15,000,000
September 2000 $ 10,000,000
October 2000 $ 10,000,000
November 2000 $ 10,000,000
December 2000 $ 10,000,000
January 2001 $ 20,000,000
February 2001 $ 20,000,000
March 2001 $ 20,000,000
April 2001 $ 20,000,000
May 2001 $ 20,000,000
June 2001 $ 20,000,000
July 2001 $ 20,000,000
August 2001 $ 20,000,000
September 2001 $ 20,000,000
October 2001 $ 20,000,000
November 2001 $ 20,000,000;
</TABLE>
<PAGE>
provided that: (i) the Company may defer complying with this Section on
--------
the 25th day of a month so long as it is in compliance on one day within a
five-day period following the 25th of such month (provided that this
--------
deferral option may not be exercised more than three times in any 12 months
and in any event such option may not be exercised with respect to
compliance on the 25th of January or July in any year); and (ii) for
purposes of this Section 6.34 only, to the extent that the Company deposits
------------
(or causes to be deposited) immediately available cash of the Company or
any Subsidiary into a blocked account maintained with the Administrative
Agent in which the Administrative Agent has a first priority security
interest or sole dominion and control and as to which neither the Company
nor any Subsidiary has the power to withdraw such cash, such deposit shall
be deemed to reduce the outstanding Revolving Loans and Additional
Revolving Loans to the same extent as if such Loans had been paid
(provided, that so long as no Default or Unmatured Default exists, the
--------
Administrative Agent shall release all such funds from such accounts one
Business Day following such deposit)."
1.28. Section 7.3 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
7.3. The breach by the Company of any of the terms or provisions of
Section 6.2, 6.9, 6.10, 6.12, 6.13, 6.15, 6.16, 6.18, 6.23, 6.24, 6.25,
-----------------------------------------------------------------------
6.27, 6.28, 6.33 or 6.34.
----------- ---- ----
1.29. Section 8.2 of the Credit Agreement is hereby amended by (i) adding
the phrase "the Additional Revolving Loan Termination Date," immediately after
the phrase "the Termination Date," in clause (i) of the proviso to such Section,
(ii) adding the phrase "`Additional Revolving Loan Percentage'," immediately
after the phrase "`Revolving Loan Percentage'," in clause (iii) of the proviso
to such Section, (iii) adding the phrase "or the Additional Revolving Loan
Commitment" immediately after the phrase "Revolving Loan Commitment" in clause
(iv) of the proviso to such Section and (iv) adding the phrase "Additional
Revolving Loan Percentage," immediately after the phrase "Revolving Loan
Percentage," in clause (iv) of the proviso to such Section.
1.30. Section 11.9 of the Credit Agreement is hereby amended by adding the
phrase "its Additional Revolving Loan Commitment," immediately after the phrase
"its Revolving Loan Commitment," in the first sentence of such Section.
1.31. Section 12.3 of the Credit Agreement is hereby amended by deleting
the phrase "first, to the outstanding Revolving Loans, and second, to the
----- ------
outstanding Term Loans" from the second sentence of such Section and
substituting the following therefor "first, to the outstanding Additional
-----
Revolving Loans, second to the outstanding Revolving Loans, and third, to the
------ -----
outstanding Term Loans".
<PAGE>
1.32. Sections 13.2.1 and 13.2.2 are hereby amended by adding the phrase
"or Additional Revolving Loan Commitment" immediately following the words
"Revolving Loan Commitment" each place where they appear in such Sections.
1.33. Sections 13.3.1 and 13.3.2 are hereby amended by (i) adding the
phrase "or Additional Revolving Loan Commitments" immediately following the
words "Revolving Loan Commitments" each place where they appear in such Sections
and (ii) adding the phrase "or Additional Revolving Loan Commitment" immediately
following the words "Revolving Loan Commitment" where they appear in the
penultimate sentence of Section 13.3.2.
1.34. Upon the effectiveness hereof, the Required Lenders hereby agree
that the letter agreement dated October 14, 1999 between the Company and the
Existing Administrative Agent is terminated and that the Company is released
from any obligation thereunder.
2. Replacement of Administrative Agent. Pursuant to Section 11.11 of the
-----------------------------------
Credit Agreement, effective as of January 30, 2000 (the "Removal Effective
-----------------
Date"), the Required Lenders hereby remove the Existing Administrative Agent as
- ----
Administrative Agent and appoint the New Administrative Agent as Administrative
Agent. The New Administrative Agent hereby accepts such appointment. The
Required Lenders hereby direct the Existing Administrative Agent to, forthwith
following the date hereof and in any event on or prior to the Removal Effective
Date, transfer, assign and convey to the New Administrative Agent, any and all
Collateral held by it pursuant to the Loan Documents in its capacity as
Administrative Agent, execute any and all instruments, agreements and other
documents, including assignments of financing statements, reasonably requested
by the New Administrative Agent to properly transfer, assign or convey such
Collateral, and deliver such information relating to the administration of the
Loans to the New Administrative Agent as the New Administrative Agent may
reasonably request.
3. Conditions of Effectiveness. This Amendment shall become effective
---------------------------
and be deemed effective as of the date hereof upon (a) the delivery of (i) duly
executed originals of this Amendment from the Required Lenders, each Lender that
has agreed to provide an "Additional Revolving Loan Commitment" as provided
above on the effectiveness of this Agreement (each such Lender, an "Increasing
----------
Lender"), Gasboy, Tokheim-Sofitam, Sofitam Applications and the Company and (ii)
- ------
duly executed originals of a Reaffirmation in the form of Exhibit A attached
---------
hereto from Tokheim Automation Corporation, Envirotronic Systems, Inc., Tokheim
Investment Corp., Sunbelt Hose & Petroleum Equipment, Inc., Gasboy, Tokheim-
Sofitam, Sofitam Applications, Management Solutions, Inc., Tokheim Equipment
Corporation, and Tokheim RPS, LLC, (b) the payment of all the fees described in
Section 4 below and any other fees payable by the Company in connection herewith
- ---------
and (c) in the event that this Amendment is executed and delivered by the
Required Lenders on or prior to 5:00 p.m. (Chicago time) on December 22, 1999,
the delivery of each of the following documents (i) (subject to the
<PAGE>
parenthetical in clause (c)(ii) below) a Warrant Certificate, substantially in
--------------
the form of Exhibit B hereto ("Warrant Certificate"), for each Lender
--------- -------------------
representing the right to purchase a number of shares of common stock, par value
$1.00 per share, of the Company ("Common Stock"), determined as follows: (A) as
------------
to each Lender, its Percentage (prior to giving effect hereto) of 1,516,212.01
shares of Common Stock plus (B) if such Lender is an Increasing Lender, its
proportionate share (based upon the amount of its "Additional Revolving Loan
Commitment" as set forth opposite its signature hereto as an "Increasing Lender"
divided by $10,000,000) of 1,010,808 shares of Common Stock, (ii) a Warrant and
Registration Rights Agreement, substantially in the form of Exhibit C hereto,
---------
duly executed by the Company (it being understood that no Lender shall be
------------------------
entitled to receive any Warrant Certificate unless and until it shall have
executed and delivered to the New Administrative Agent a counterpart of such
Agreement) and (iii) opinions of (x) Skadden, Arps, Slate, Meagher & Flom
(Illinois), (y) Ice Miller, special Indiana counsel to the Company and (z)
Norman L. Roelke, general counsel to the Company, in each case in form and
substance reasonably satisfactory to the New Administrative Agent and, as to
legal matters, its counsel.
4. Fees. In the event the Required Lenders execute and deliver (by
----
facsimile of duly executed signature pages to Tom Kramer (fax: 312-904-1028) at
the New Administrative Agent) this Amendment on or prior to 5:00 p.m. (Chicago
time) on December 22, 1999 each Lender shall be entitled to a fee of 0.50% of
such Lender's Commitment (as defined in the Credit Agreement) prior to giving
effect to this Amendment. The Company shall pay to each Increasing Lender a fee
of 0.50% of such Increasing Lender's "Additional Revolving Loan Commitment" as
set forth opposite its signature hereto as an "Increasing Lender". Each of the
fees described above shall be due and payable on the date the Company executes
this Amendment.
5. Representations and Warranties of the Company. The Company, Gasboy,
---------------------------------------------
Tokheim-Sofitam and Sofitam Applications (each a "Credit Party") hereby
------------
represent and warrant as follows:
(a) This Amendment and the Credit Agreement as previously executed
and amended and as amended hereby, constitute legal, valid and binding
obligations of such Credit Party and are enforceable against such Credit
Party in accordance with their terms.
(b) Upon the effectiveness of this Amendment, each Credit Party
hereby reaffirms all covenants, representations and warranties made in the
Credit Agreement, to the extent the same are not amended hereby, and agree
that all such covenants, representations and warranties shall be deemed to
have been remade as of the effective date of this Amendment (unless
expressly made as of a different date).
<PAGE>
6. Reference to and Effect on the Credit Agreement.
-----------------------------------------------
6.1. Upon the effectiveness of Section 1 hereof, on and after the
---------
date hereof, each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Second Amended and Restated Credit Agreement dated as of
December 14, 1998, as amended previously and as amended hereby.
6.2. Except as specifically amended above, the Credit Agreement and
all other documents, instruments and agreements executed and/or delivered
in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
6.3. The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the
Administrative Agent or any of the Lenders, nor constitute a waiver of any
provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
7. Costs and Expenses. The Company agrees to pay all reasonable costs,
------------------
fees and out-of-pocket expenses (including reasonable attorneys' fees and
expenses charged to the New Administrative Agent and the reasonable fees and
charges of Policano & Manzo, L.L.C.) incurred by the New Administrative Agent in
connection with the preparation, execution and enforcement of this Amendment.
8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING WITHOUT LIMITATION, 735 ILCS 105/5-
1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS) OF
THE STATE OF ILLINOIS.
9. Headings. Section headings in this Amendment are included herein for
--------
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
10. Counterparts. This Amendment may be executed by one or more of the
------------
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
11. Schlumberger Consent. The Company will use commercially reasonable
--------------------
efforts to obtain a waiver and amendment, duly executed by Schlumberger Limited,
in form and substance satisfactory to the New Administrative Agent, (x) waiving
any antidilution adjustment under its Warrant, dated September 30, 1999, to
purchase
<PAGE>
common stock of the Company caused by the issuance of the Warrant Certificates
set forth above and any antidilution adjustment pursuant to the terms of such
Warrant Certificates and (y) amending its registration rights agreement with the
Company such that the priorities on registration set forth in the Warrant and
Registration Rights Agreement set forth above do not conflict therewith.
12. Due Diligence. Without limiting Section 6.8 of the Credit Agreement,
------------- -----------
the Company will, and will cause each Subsidiary to, permit the Lenders, by
their respective representatives and agents (including without limitation
Policano & Manzo, L.L.C.), to perform due diligence, inspect any of the
Properties, corporate books and financial records of the Company and each such
Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Company and each such Subsidiary, and to discuss the
affairs, finances and accounts of the Company and each such Subsidiary with, and
to be advised as to the same by, their respective officers at such reasonable
times and intervals as the Lenders may designate upon reasonable notice. The
reasonable out-of-pocket expenses incurred by the Lenders in connection with
retaining consultants in respect of analyzing the Company's financial results
and forecasts and providing other workout-related consulting shall be reimbursed
by the Company promptly following the Agent's demand; provided that the Company
--------
shall only have to pay the expenses of a single consultant with respect to such
analysis and consulting after January 30, 2000 (this limitation not to be
applicable to legal counsel, the expenses of which are governed by Section 10.6
------------
of the Credit Agreement).
13. Consent to Increase. For purposes of greater clarity, the Required
-------------------
Lenders hereby consent to any increase in the "Aggregate Additional Revolving
Loan Commitment" after the date hereof as permitted by the parenthetical phrase
in the second sentence of the definition of "Aggregate Additional Revolving Loan
Commitment" as set forth in the Credit Agreement as amended hereby.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.
TOKHEIM CORPORATION, as a Borrower
By:__________________________________
Name:
Title:
GASBOY INTERNATIONAL, INC., as a
Borrower
By:__________________________________
Name:
Title:
TOKHEIM-SOFITAM S.A., as a Borrower
By:__________________________________
Name:
Title:
TOKHEIM SOFITAM APPLICATIONS
S.A., as a Borrower
By:__________________________________
Name:
Title:
<PAGE>
BANK ONE, INDIANA, NATIONAL ASSOCIATION,
formerly known as NBD BANK, N.A., as
Existing Administrative Agent, as a
Lender, as Issuing Lender, and a Swing
Loan Lender
By:__________________________________
Name:
Title:
CREDIT LYONNAIS, CHICAGO BRANCH, as
Documentation and Collateral Agent and
as a Lender
By:__________________________________
Name:
Title:
BANKERS TRUST COMPANY, as Co-Syndication
Agent and as a Lender
By:__________________________________
Name:
Title:
ABN AMRO BANK N.V., as New
Administrative Agent and as a Lender
By:__________________________________
Name:
Title:
<PAGE>
By:__________________________________
Name:
Title:
<PAGE>
CREDIT AGRICOLE INDOSUEZ, as a Lender
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as a
Lender
By:__________________________________
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE, as a Lender
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
MERCANTILE BANK N.A., as a Lender
<PAGE>
By:__________________________________
Name:
Title:
THE PROVIDENT BANK, as a Lender
By:__________________________________
Name:
Title:
FINOVA CAPITAL CORPORATION, as a Lender
By:__________________________________
Name:
Title:
IMPERIAL BANK, as a Lender
By:__________________________________
Name:
Title:
NATEXIS BANQUE BFCE, as a Lender
By:__________________________________
Name:
Title:
<PAGE>
By:__________________________________
Name:
Title:
BANK POLSKA KASA OPIEKI S.A. - PEKAO S.A
GROUP, NEW YORK BRANCH, as a Lender
By:__________________________________
Name:
Title:
SENIOR DEBT PORTFOLIO, as a Lender
By: Boston Management and Research, as
Investment Advisor
By:__________________________________
Name:
Title:
EATON VANCE SENIOR INCOME TRUST, as a
Lender
By: Eaton Vance Management, as
Investment Advisor
By:__________________________________
Name:
Title:
OXFORD STRATEGIC INCOME FUND, as a
Lender
<PAGE>
By: Eaton Vance Management, as
Investment Advisor
By:__________________________________
Name:
Title:
OCTAGON LOAN TRUST, as a Lender
By: Octagon Credit Investors, as
Manager
By:__________________________________
Name:
Title:
OCTAGON INVESTMENT PARTNERS II, LLC, as
a Lender
By:__________________________________
Name:
Title:
INDOSUEZ CAPITAL FUNDING IIA, LIMITED,
as a Lender
By: Indosuez Capital as Portfolio
Advisor
By:__________________________________
Name:
Title:
INDOSUEZ CAPITAL FUNDING IV, L.P.
<PAGE>
By: Indosuez Capital as Portfolio
Advisor
By:__________________________________
Name:
Title:
ALLIANCE INVESTMENT OPPORTUNITIES FUND,
L.L.C., as a Lender
By: ALLIANCE INVESTMENT OPPORTUNITIES
MANAGEMENT, L.L.C., as Managing
Member
By: ALLIANCE CAPITAL MANAGEMENT L.P.,
as Managing Member
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, as General Partner
By:__________________________________
Name:
Title:
AMSOUTH BANK, as a Lender
By:__________________________________
Name:
Title:
<PAGE>
ARES LEVERAGED INVESTMENT FUND II, L.P.,
as a Lender
By: ARES Management II, L.P., its
General Partner
By:__________________________________
Name:
Title:
<PAGE>
INCREASING LENDERS:
Additional Revolving Loan
Commitment: ABN AMRO BANK N.V.
$2,500,000
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT A
REAFFIRMATION
Each of the undersigned hereby acknowledges receipt of a copy of the
foregoing Amendment No. 5 to the Second Amended and Restated Credit Agreement
dated as of December 14, 1998 by and among TOKHEIM CORPORATION, an Indiana
corporation (the "Company"), GASBOY INTERNATIONAL, INC., a Pennsylvania
-------
corporation ("Gasboy"), TOKHEIM-SOFITAM S.A., a societe anonyme organized under
------
the laws of France ("Tokheim-Sofitam"), TOKHEIM SOFITAM APPLICATIONS S.A., a
---------------
societe anonyme organized under the laws of France ("Sofitam Applications", and,
--------------------
together with the Company, Gasboy and Tokheim-Sofitam, the "Borrowers") and the
---------
financial institutions from time to time party thereto (the "Lenders"), as
-------
amended by an Amendment No. 1, an Amendment No. 2, an Amendment No. 3 and an
Amendment No. 4, dated as of January 11, 1999, March 1, 1999, February 27, 1999
and October 14, 1999, respectively (as amended and as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), which Amendment No. 5 is dated as of December 22, 1999 (the
- ---------
"Amendment"). Capitalized terms used in this Reaffirmation and not defined
---------
herein shall have the meanings given to them in the Credit Agreement. Without
in any way establishing a course of dealing by any Agent or any Lender, each of
the undersigned reaffirms the terms and conditions of the Guaranty, Pledge
Agreement, Security Agreement and any other Loan Document executed by it and
acknowledges and agrees that such agreement and each and every such Loan
Document executed by the undersigned in connection with the Credit Agreement
remains in full force and effect and is hereby reaffirmed, ratified and
confirmed. All references to the Credit Agreement contained in the above-
referenced documents shall be a reference to the Credit Agreement as so modified
by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4 and the
Amendment and as the same may from time to time hereafter be amended, modified
or restated.
<PAGE>
Dated as of December 22, 1999
TOKHEIM AUTOMATION CORPORATION
ENVIROTRONIC SYSTEMS, INC.
TOKHEIM INVESTMENT CORP.
SUNBELT HOSE & PETROLEUM EQUIPMENT, INC.
GASBOY INTERNATIONAL, INC.
MANAGEMENT SOLUTIONS, INC.
TOKHEIM EQUIPMENT CORPORATION
TOKHEIM RPS, LLC
By: Gasboy International, Inc.
TOKHEIM-SOFITAM S.A.
TOKHEIM SOFITAM APPLICATIONS S.A.
By ____________________________________
Name:
Title:
<PAGE>
EX 4.19
WARRANT AND REGISTRATION RIGHTS AGREEMENT
WARRANT AND REGISTRATION RIGHTS AGREEMENT, dated as of December 22, 1999
(this "Agreement"), is by and among TOKHEIM CORPORATION, an Indiana corporation
(the "Company"), and certain holders of Warrant Certificates referred to below
(the "Investors").
WHEREAS, in connection with Amendment No. 5 (the "Amendment") to the Second
Amended and Restated Credit Agreement, dated as of December 14, 1998 (as the
same may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), by and among the Company, certain lenders (the "Lenders")
and ABN Amro Bank, N.V., as administrative agent, the Company has agreed to
issue certain Warrants (the "Warrants") evidenced by Warrant Certificates in the
form of Exhibit B to the Amendment (together with any certificates issued in
replacement or substitution therefor, the "Warrant Certificates") to purchase
shares of the Company's Common Stock, par value $1.00 per share (the "Common
Stock"), pursuant to the terms of such Warrants;
WHEREAS, in connection with the Amendment, the Company has agreed to
register for sale by the Investors the shares of Common Stock received by the
Investors upon exercise of the Warrants; and
WHEREAS, the Company and the Investors desire to set forth certain
agreements relating to the repurchase of the Warrants and the Common Stock
issuable upon exercise thereof.
NOW, THEREFORE, in consideration of the foregoing and the covenants of the
parties set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, subject to the terms
and conditions set forth herein, the parties hereby agree as follows:
Section 1. Certain Definitions. In this Agreement the following terms
shall have the following meanings:
"Accredited Investor" shall have the meaning set forth in Rule 501 of the
General Rules and Regulations promulgated under the Securities Act.
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Applicable Law" means (a) all applicable common law and principles of
equity and (b) all applicable provisions of all (i) constitutions, statutes,
rules, regulations, ordinances and orders of governmental bodies, (ii)
authorizations, consents, approvals, licenses or exemptions of,
<PAGE>
registrations or filings with, or reports or notices to, governmental bodies and
(iii) orders, decisions, judgments and decrees of all courts, administrative
agencies and arbitrators.
"Call Percentage" means (x) in the case of a repurchase pursuant to the
Loan Repayment Date having occurred, 100% and (y) in the case of a repurchase
occurring by virtue of the Deleveraging Condition having been met, 50%.
"Call Repurchase Price" in effect as of any date shall mean a per share
value equal to
(1) in the case of a repurchase pursuant to the Loan Repayment Date having
occurred, the higher of:
(a) the Market Price per share on such date and
(b) the Minimum Price per share; and
(2) in the case of any repurchase occurring by virtue of the Deleveraging
Condition having been met, the higher of
(a) (x) the Market Price per share on such date times (y) (i) if such
repurchase occurs prior to the first anniversary hereof, .80, (ii) if such
repurchase occurs on or after the first anniversary hereof but prior to the
second anniversary hereof, .90 or (iii) if such repurchase occurs on or
after the second anniversary hereof, 1 and
(b) the Minimum Price per share;
provided that in the case of the repurchase of unexercised Warrants, the above
per share prices shall be reduced by the Exercise Price (as defined in the
Warrant Certificates) per share.
"Change of Control" has the meaning assigned thereto in the Credit
Agreement.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Deleveraging Condition" means that (a) the Company's Senior Leverage Ratio
(as defined in the Credit Agreement) is less than 2.0 to 1.0, (b) the Company's
Leverage Ratio (as defined in the Credit Agreement) is less than 4.0 to 1.0 and
(c) the principal amount of all Obligations under the Credit Agreement does not
exceed $200,000,000 and the Lenders do not have an obligation to extend credit
to the Company under the Credit Agreement in an amount in excess of
$200,000,000.
"Designated Affiliate" means, as to any Lender, an Affiliate of such Lender
designated by such Lender to hold some or all of the Warrants issuable
hereunder.
<PAGE>
"Effective Date" means the date the Amendment becomes effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
"Holders" shall mean (i) the Investors and (ii) each Person holding
Registrable Shares as a result of a transfer or assignment to that Person of
Registrable Shares other than pursuant to an effective registration statement or
Rule 144 (or any successor provision) under the Securities Act.
"Indemnified Party" shall have the meaning ascribed to it in Section 7(c)
of this Agreement.
"Indemnifying Party" shall have the meaning ascribed to it in Section 7(c)
of this Agreement.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset.
"Loan Repayment Date" means the date upon which: (i) all Obligations under
and as defined in the Credit Agreement shall have been irrevocably paid in full
in cash; (ii) no further obligations, contingent or otherwise) to the Agents or
any of the Lenders shall remain outstanding under the Credit Agreement or any of
the other Credit Documents (as defined in the Credit Agreement), other than any
contingent obligation of the Company to indemnify the Agents and the Lenders and
any other obligation which under the term of the Credit Documents survives the
repayment of the Obligations; and (iii) the Lenders' commitments to make Loans
and to issue Letters of Credit under the Credit Agreement shall have been
irrevocably terminated.
"Market Price" has the meaning assigned thereto in the Warrant
Certificates.
"Minimum Price" in effect as of any date shall mean $7 per share; provided
that upon any adjustment pursuant to Section 7(d) of the Warrant Certificates of
the Exercise Price (as defined in the Warrant Certificates) or the number of
Warrant Shares issuable upon the exercise of the Warrants (an "Adjustment"), the
Minimum Price will be adjusted upward or downward so that the result obtained by
multiplying (i) such Minimum Price prior to such Adjustment, by (ii) the number
of shares of Warrant Shares issuable pursuant to the Warrants immediately prior
to such Adjustment is equal to the result obtained by multiplying (iii) such
Minimum Price after such Adjustment, by (iv) the number of Warrant Shares
issuable pursuant to the Warrants immediately after such Adjustment.
"Person" shall mean an individual, corporation, partnership, limited
liability company, estate, trust, association, private foundation, joint stock
company or other entity.
<PAGE>
"Put Repurchase Price" in effect as of any date shall mean the Market Price
on such date; provided that in the case of the repurchase of unexercised
Warrants, the above per share price shall be reduced by the Exercise Price (as
defined in the Warrant Certificates) per share.
The terms "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act providing for the sale by the Holders of
Registrable Shares in accordance with the method or methods of distribution
designated by the Holders, and the declaration or ordering of the effectiveness
of such registration statement by the Commission.
"Registrable Shares" shall mean the Warrant Shares issued upon exercise of
the Warrants; provided, however, that any such shares of Common Stock shall
cease to be Registrable Shares when (A) a registration statement with respect to
the sale of such shares shall have become effective under the Securities Act and
such shares shall have been disposed of in accordance with such registration
statement; (B) such shares shall have been sold in accordance with Rule 144; or
(C) such shares shall have been otherwise transferred and new certificates not
subject to transfer restrictions under the Securities Act and not bearing any
legend restricting further transfer shall have been delivered by the Company,
and no other applicable and legally binding restriction on transfer under the
federal securities laws shall exist.
"Registration Expenses" shall mean all out-of-pocket expenses (excluding
Selling Expenses) incurred by the Company in complying with Section 5 hereof,
including, without limitation, the following:
(a.) all registration and filing fees; fees and expenses of compliance with
federal and state securities laws (including, without limitation,
reasonable fees and disbursements of counsel in connection with state
securities qualifications of the Registrable Shares under the laws of
such jurisdictions as the Holders may reasonably designate); printing
(including, without limitation, expenses of printing or engraving
certificates representing the Registrable Shares in a form eligible
for deposit with The Depository Trust Company and otherwise meeting
the requirements of any securities exchange on which they are listed
and of printing registration statements and prospectuses), messenger,
telephone, shipping and delivery expenses; fees and disbursements of
counsel for the Company; fees and disbursements of all independent
public accountants of the Company (including without limitation the
expenses of any annual or special audit and "cold comfort" letters
reasonably required by the managing underwriter); Securities Act
liability insurance if the Company so desires; fees and expenses of
other Persons reasonably necessary in connection with the
registration, including any experts, retained by the Company; fees and
expenses incurred in connection with the listing of the Registrable
Shares on each securities exchange on which securities of the same
class are then listed; and fees and expenses associated with any
filing with
<PAGE>
the National Association of Securities Dealers, Inc. required to be
made in connection with the registration statement.
"Rule 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act, or any successor thereto, as the same shall be in effect at the
relevant time.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the relevant time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to any sale of Registrable
Shares.
"Subsidiary" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Warrant Shares" has the meaning assigned thereto in the Warrant
Certificates.
Section 2. Issuance of Warrants. On the Effective Date, in consideration
for the Lenders entering into the Loan Agreement, the Company shall issue to
each Lender (or its Designated Affiliate) a Warrant Certificate representing
Warrants to purchase the number of shares of Common Stock to which such Lender
is entitled pursuant to Section 3(c) of the Amendment.
Section 3. Representations and Warranties of the Company. The Company
represents and warrants to the Lenders and their Designated Affiliates that:
(a.) Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Indiana, and is duly qualified as a foreign corporation
and authorized to do business in all jurisdictions wherein the
character of the properties owned or held under lease by it or the
nature of the business transacted by it makes such qualification
necessary, except for those jurisdictions in which the failure so to
qualify or be authorized, singly or in the aggregate, have not had and
will not have a materially adverse effect upon the business, financial
position or results of operations of the Company and its Subsidiaries
taken as a whole, and each of the Company and each of its Subsidiaries
has all corporate powers, and all material governmental licenses,
authorizations, consents and approvals, required to carry on its
respective businesses as presently conducted.
(b.) Corporate and Governmental Authorization; No Contravention. The
execution, delivery and performance by the Company of this Agreement
and each Warrant
<PAGE>
Certificate are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or
in respect of, or filing or recording with, any governmental body,
agency or official and do not (i) contravene, or constitute a default
under, any provision of Applicable Law or of the certificate of
incorporation or by-laws of the Company or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the
Company, or (ii) result in the creation or imposition of any Lien on
any asset of the Company or any of its Subsidiaries.
(c.) Binding Effect. Each of this Agreement and each Warrant Certificate is
a valid and binding obligation of the Company.
(d.) Capitalization of the Company; Reservation of Shares; Other Matters
Relating to Capital Stock.
(i.) As of the Effective Date, the authorized capital stock of the
Company consists solely of 30,000,000 shares of Common Stock
and 5,000,000 shares of special stock ("Special Stock")], of
which (assuming no Lender or Designated Affiliate exercises
any Warrant) 12,698,593 shares of Common Stock and 817,412
shares of Special Stock are issued and outstanding. All of
such outstanding capital stock is validly issued, fully paid
and nonassessable and has been issued in compliance with all
applicable securities laws. As of the Effective Date, except
as set forth on Schedule 3(d) and except for the Warrants,
there are no existing options, convertible securities,
warrants, calls, pledges, transfer restrictions (except
restrictions imposed by federal and state securities laws),
liens, rights of first offer, rights of first refusal,
antidilution provisions or commitments of any character
relating to any issued or unissued shares of capital stock of
the Company. Except for the Warrants or as set forth on
Schedule 3(d), there are no preemptive or other preferential
rights applicable to the issuance and sale of equity
securities (or securities convertible or exercisable into or
exchangeable for equity securities) of the Company.
(ii.) As of the Effective Date, sufficient shares of authorized but
unissued shares of Common Stock have been reserved by
appropriate corporate action in connection with the
prospective exercise of the Warrants. The issuance of the
Warrants will not (x) require any further corporate action by
the stockholders or directors of the Company, (y) be subject
to any statutory or contractual preemptive rights of any
present or future stockholders of the Company or (z) conflict
with any provision of any agreement to which the Company is a
party or by which the Company is bound. All shares of Common
Stock issuable upon exercise of the
<PAGE>
Warrants in accordance with their terms will be validly
authorized, fully paid and nonassessable.
(iii.) Neither the Company nor any of its Subsidiaries has violated
any applicable federal or state securities laws in connection
with the offer, sale and issuance of any of its capital stock
or securities. The offer, sale and issuance of the Warrants
and the shares of Common Stock issuable upon exercise thereof
do not require registration under the Securities Act or any
applicable federal or state securities laws.
Section 4. Compliance with Securities Laws; Legends.
----------------------------------------
(a.) Investment Intent. Each Lender represents and warrants to the Company
that it is acquiring the Warrants for its own account, with no present
intention of selling or otherwise distributing the same to the public.
(b.) Status of Securities. Each Lender has been informed by the Company
that the Warrants and Warrant Shares have not been and, except as
contemplated by this Agreement, will not be registered under the
Securities Act or under any state securities laws and are being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering.
(c.) Status of Lenders. Each Lender represents and warrants to the Company
that it is an Accredited Investor.
(d.) Transfer of Warrants and Warrant Shares.
---------------------------------------
(i.) Without limiting any other permitted transfers contemplated by
this Agreement, the Warrants and Warrant Shares may be
transferred pursuant to (1) public offerings registered under
the Securities Act, (2) Rule 144 or 144A promulgated under the
Securities Act (or any similar rule then in force) or (3)
subject to the conditions set forth in Section 4(d)(ii), any
other legally available means of transfer.
(ii.) In connection with any transfer of any Warrants or Warrant
Shares described in Section 4(d)(i)(3), a Holder desiring to
transfer Warrants or Warrant Shares shall deliver written
notice to the Company describing in reasonable detail the
proposed transfer, together with an opinion of counsel (which,
to the Company's reasonable satisfaction, is knowledgeable in
securities law matters) to the effect that such transfer may
be effected without registration of such shares under the
Securities Act; provided that no such opinion shall be
required if there shall have been delivered to the Company an
opinion of counsel that no subsequent transfer of such
<PAGE>
Warrants or Warrant Shares shall require registration under
the Securities Act. Promptly upon receipt of any opinion
described in the proviso to the preceding sentence, the
Company shall prepare and deliver in connection with the
consummation of the proposed transfer, new certificates for
the Warrants or Warrant Shares being transferred that do not
bear the legend set forth in Section 4(d)(iii).
(iii.) Except as provided in Sections 5(j) and 4(d)(ii), each
certificate for any Warrants or Warrant Shares shall be
imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
(e.) In addition to the legend required by Section 4(d)(iii), each
certificate for any Warrants or Warrant Shares shall be imprinted with
a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND PROVISIONS OF A CERTAIN WARRANT AND REGISTRATION RIGHTS
AGREEMENT DATED AS OF DECEMBER 22, 1999, ENTERED INTO AMONG THE
COMPANY AND CERTAIN HOLDERS OF SECURITIES OF THE COMPANY, A COPY OF
WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL OFFICES. UPON WRITTEN
REQUEST TO THE COMPANY'S SECRETARY, A COPY OF SUCH AGREEMENT WILL BE
PROVIDED WITHOUT CHARGE TO APPROPRIATELY INTERESTED PERSONS.
Any legend endorsed on a certificate pursuant to this Section 4(e) shall be
removed if the securities represented thereby shall have been effectively
registered under the Securities Act and sold pursuant to an effective
registration statement or have been sold in compliance with Rule 144.
Section 5. Registration.
-------------
(a.) Company Registration.
---------------------
(i.) If, after the earlier of (x) December 22, 2000 and (y) the
Loan Repayment Date, the Company shall determine to Register
any of its equity securities either for its own account or for
the account of any other Person, other than a Registration
relating solely to benefit plans, or
<PAGE>
a Registration relating solely to a Commission Rule 145
transaction, or a Registration on any registration form which
does not permit secondary sales or does not include
substantially the same information as would be required to be
included in a registration statement covering the sale of
Registrable Shares, the Company will:
(A) promptly give to each of the Holders a written notice
thereof (which shall include a list of the jurisdictions,
if any, in which the Company intends to attempt to
qualify such securities under applicable state securities
laws); and
(B) include in such Registration (and any related
qualification under state securities laws or other
compliance), and in any underwriting involved therein,
all the Registrable Shares specified in a written request
or requests, made by the Holders within ten (10) business
days after the giving of the written notice from the
Company described in clause (i) above, except as set
forth in Section 5(a)(ii) below. Such written request
shall specify the amount of Registrable Shares intended
to be disposed of by a Holder and may specify all or a
part of the Holder's Registrable Shares.
Notwithstanding the foregoing, if, at any time after giving such written notice
of its intention to effect such Registration and prior to the effective date of
the registration statement filed in connection with such Registration, the
Company shall determine for any reason not to Register such equity securities
the Company may, at its election, give written notice of such determination to
the Holders and thereupon the Company shall be relieved of its obligation to
Register such Registrable Shares in connection with the Registration of such
equity securities (but not from its obligation to pay Registration Expenses to
the extent incurred in connection therewith as provided herein).
(ii) Underwriting. If the Registration of which the Company gives
notice is for a Registered public offering involving an
underwriting, the Company shall so advise each of the Holders
as a part of the written notice given pursuant to Section
5(a)(i)(A). In such event, the right of each of the Holders to
Registration pursuant to this Section 5(a) shall be
conditioned upon such Holders' participation in such
underwriting and the inclusion of such Holders' Registrable
Shares in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such Registration
shall (together with the Company and any other Person
distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for
the underwriting by the Company or such other Persons, as the
case may be. Such underwriting agreement will contain such
representations and warranties by the Company and such other
terms and provisions as are customarily contained in
underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in
Section 7 hereof. Notwithstanding any other provision of this
Section 5(a), if the representative determines that marketing
factors require a limitation on
<PAGE>
the number of shares to be underwritten, the Company shall so
advise all holders of securities requesting Registration, and
the number of shares of securities that are entitled to be
included in the Registration and underwriting shall be
allocated in the following manner: the number of shares that
may be included in the Registration and underwriting by each
of the Holders and by each stockholder of the Company (other
than the Holders) that on the date hereof has rights to
piggyback registration upon a Company Registration shall be
reduced, on a pro rata basis (based on the number of shares
held by such Holder or stockholder), by such minimum number of
shares as is necessary to comply with such limitation. If any
of the Holders or any officer, director or stockholder of the
Company other than a Holder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any
Registrable Shares or other securities excluded or withdrawn
from such underwriting shall be withdrawn from such
Registration.
(b) Shelf Registration. (i) On or before the earlier of (x) December 22,
2000 and (y) the Loan Repayment Date, the Company shall file a "shelf"
registration statement pursuant to Rule 415 under the Securities Act
(the "Shelf Registration") permitting a continuous or delayed offering
of the Registrable Shares. The Company shall (A) use its best efforts
to have the Shelf Registration declared effective on or before two
weeks have elapsed since the date of filing thereof or as soon as
practicable thereafter and (B) subject to the Company's Suspension
Right (defined below), use its best efforts to keep the Shelf
Registration continuously effective from the date such Shelf
Registration is declared effective until the date when all shares of
Common Stock issued or issuable upon exercise of the Warrants cease to
be Registrable Shares in accordance with the definition thereof in
order to permit the prospectus forming a part thereof to be usable by
Holders during such period.
(ii) Subject to the Company's Suspension Right, the Company shall
supplement or amend the Shelf Registration (A) as required by the
registration form utilized by the Company or by the instructions
applicable to such registration form or by the Securities Act or
the rules and regulations promulgated thereunder and (B) to
permit the disposition of Registrable Shares in the manner
requested by any Holder. The Company shall furnish to the Holders
of the Registrable Shares to which the Shelf Registration relates
copies of any such supplement or amendment sufficiently in
advance (but in no event less than three business days in
advance) of its use and/or filing with the Commission to allow
the Holders a meaningful opportunity to comment thereon.
(c) Suspension Right. Notwithstanding the provisions of Sections 5(a) and
(b), if the Board of Directors of the Company determines in good faith
that the filing of a registration statement or any supplement or
amendment thereto would interfere with the negotiation or completion
of a material transaction or event being contemplated by the Company,
the Company shall have the right to (the "Suspension Right"), by
notice to the Holders in accordance with Section 11(d), defer the
filing of a registration statement to effect the Shelf Registration or
suspend the rights of the Holders to make sales pursuant to the Shelf
Registration
<PAGE>
for such a period of time as the Board of Directors may determine;
provided that no such period of deferral or suspension may exceed 45
consecutive days and that all such periods of deferral or suspension
may not exceed 90 days in the aggregate during any period of 12
consecutive months.
(d) Notices. The Company shall promptly notify the Holders of Registrable
Shares covered by the Shelf Registration of the occurrence of the
following events:
(i) when the Shelf Registration or post-effective amendment
thereto filed with the Commission has become effective;
(ii) the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration;
(iii) the suspension of sales under the Shelf Registration by the
Company in accordance with Section 5(c) above;
(iv) the Company's receipt of any notification of the suspension of
the qualification of any Registrable Shares covered by the
Shelf Registration for sale in any jurisdiction; and
(v) the existence of any event, fact or circumstance that results
in the registration statement evidencing the Shelf
Registration or prospectus relating to Registrable Shares or
any document incorporated therein by reference containing an
untrue statement of material fact or omitting to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading during the
distribution of securities.
The Company agrees to use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of any such registration statement or any state
qualification at the earliest possible moment.
(e) Registration Statement; Amendments and Supplements. The Company shall
provide to the Holders of Registrable Shares covered by the Shelf
Registration, at no cost to such Holders, a copy of the related
registration statement and any amendment thereto used to effect the
Registration of the Registrable Shares, each prospectus contained in
such registration statement or post-effective amendment and any
amendment or supplement thereto and such other documents as the
requesting Holders may reasonably request in order to facilitate the
disposition of the Registrable Shares covered by such registration
statement. The Company consents to the use of each such prospectus and
any supplement thereto by the Holders in connection with the offering
and sale of the Registrable Shares covered by such registration
statement or any amendment thereto. The Company shall also file a
sufficient number of copies of the prospectus and any post-effective
amendment or supplement thereto with The New York Stock Exchange, Inc.
(or, if the Common Stock is no longer listed thereon, with such other
securities exchange or market on which the Common Stock is then
listed) so as to enable the Holders to have the benefits of the
prospectus delivery provisions of Rule 153 under the Securities Act.
<PAGE>
(f) State Securities Laws. The Company agrees to use commercially
reasonable efforts to cause the Registrable Shares covered by a
registration statement to be registered with or approved by such state
securities authorities as may be necessary to enable the Holders to
consummate the disposition of such shares pursuant to the plan of
distribution set forth in the registration statement; provided,
however, that the Company shall not be obligated to take any action to
effect any such Registration, qualification or compliance pursuant to
this Section 5 in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such Registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction.
(g) Remediation of Misstatements or Omissions. Subject to the Company's
Suspension Right, if any event, fact or circumstance requiring an
amendment to a registration statement relating to the Registrable
Shares or supplement to a prospectus relating to the Registrable
Shares shall exist, immediately upon becoming aware thereof the
Company agrees to notify the Holders and prepare and furnish to the
Holders a post-effective amendment to the registration statement or
supplement to the prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Shares, the prospectus
will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(h) Listing on Exchange. The Company agrees to use its best efforts
(including the payment of any listing fees) to obtain the listing of
all Registrable Shares covered by the registration statement on each
securities exchange on which securities of the same class are then
listed.
(i) Compliance with Securities Laws. The Company agrees to use its best
efforts to comply with the Securities Act and the Exchange Act in
connection with the offer and sale of Registrable Shares pursuant to a
registration statement, and, as soon as reasonably practicable
following the end of any fiscal year during which a registration
statement effecting a Registration of the Registrable Shares shall
have been effective, to make available to its security holders an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
(j) Share Certificates. The Company agrees to: (x) cooperate with the
selling Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Shares to be sold pursuant to a
Registration and not bearing any Securities Act legend; and (y) enable
certificates for such Registrable Shares to be issued for such numbers
of shares and registered in such names as the Holders may reasonably
request at least two business days prior to any sale of Registrable
Shares. Each Holder requesting delivery of certificates not bearing
any Securities Act legend shall provide appropriate representations to
the Company of such Holder's intent to comply with all conditions
necessary for sale pursuant to a Registration, including prospectus
delivery requirements.
Section 6. Expenses of Registration. The Company shall pay all
Registration Expenses incurred in connection with the registration,
qualification or compliance pursuant to
<PAGE>
Section 5 hereof. All Selling Expenses incurred in connection with the offer and
sale of Registrable Shares by any of the Holders shall be borne by the Holder
offering or selling such Registrable Shares. The Company shall pay the fees and
expenses (not to exceed $25,000) of one counsel to the Holders in connection
with the preparation of the Shelf Registration.
Section 7. Indemnification.
(a) The Company will indemnify each Holder, each Holder's officers and
directors, each person controlling such Holder within the meaning of
Section 15 of the Securities Act and each underwriter, if any, of the
Company's securities covered by any Registration hereunder against all
expenses, claims, losses, damages and liabilities (including
reasonable legal fees and expenses), arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement or prospectus relating to the
Registrable Shares, or any amendment or supplement thereto, or based
on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided, however, that the Company will not
be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with information furnished in writing
to the Company by such Holder or underwriter for inclusion therein.
(b) Each Holder will indemnify the Company, each of its directors and each
of its officers who signs the registration statement and each person
who controls the Company within the meaning of Section 15 of the
Securities Act against all claims, losses, damages and liabilities
(including reasonable legal fees and expenses) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement or prospectus, or
any amendment or supplement thereto, or based on any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement or prospectus
in reliance upon and in conformity with information furnished in
writing to the Company by such Holder for inclusion therein.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, but the omission to so notify the
Indemnifying Party shall not relieve it from any liability which it
may have to the Indemnified Party pursuant to the provisions of this
Section 7 except to the extent of the actual damages suffered by such
delay in notification. The Indemnifying Party shall assume the defense
of such action, including the employment of counsel to be chosen by
the Indemnifying Party, which counsel must be reasonably satisfactory
to the Indemnified Party, and payment of expenses. The Indemnified
Party shall have the right to employ its own counsel in any such case,
but the legal fees and expenses of such counsel shall be at the
expense of the Indemnified Party, unless the employment of such
counsel shall have been authorized in writing by the Indemnifying
Party in connection with
<PAGE>
the defense of such action, or the Indemnifying Party shall not have
employed counsel to take charge of the defense of such action, or the
Indemnified Party shall have reasonably concluded that there may be
defenses available to it or them which are different from or
additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense
of such action on behalf of the Indemnified Party), in any of which
events such fees and expenses shall be borne by the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 7 is unavailable
to a party that would have been an Indemnified Party under this
Section 7 in respect of any expenses, claims, losses, damages and
liabilities referred to herein, then each party that would have been
an Indemnifying Party hereunder shall, in lieu of indemnifying such
Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such expenses, claims, losses,
damages and liabilities in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand
and such Indemnified Party on the other in connection with the
statement or omission which resulted in such expenses, claims, losses,
damages and liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying
Party or such Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each holder of Registrable
Shares agrees that it would not be just and equitable if contribution
pursuant to this Section were determined by pro rata allocation or by
any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(d).
(e) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) In no event shall any Holder be liable for any expenses, claims,
losses, damages or liabilities pursuant to this Section 7 in excess of
the net proceeds to such Holder of any Registrable Shares sold by such
Holder.
Section 8. Information to be Furnished by Holders. Each Holder shall
furnish to the Company such information as the Company may reasonably request
and as shall be required in connection with the Registration and related
proceedings referred to in Section 5 hereof. If any Holder fails to provide the
Company with such information within three weeks of the Company's request, the
Company's obligations under Section 5 hereof with respect to such Holder or the
Registrable Shares owned by such Holder shall be suspended until such Holder
provides such information.
<PAGE>
Section 9. Rule 144 Sales.
--------------
(a) The Company covenants that it will file any and all reports required
to be filed by the Company under the Exchange Act so as to enable any
Holder to sell Registrable Shares pursuant to Rule 144 under the
Securities Act.
(b) In connection with any sale, transfer or other disposition by any
Holder of any Registrable Shares pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates
representing Registrable Shares to be sold and not bearing any
Securities Act legend, if deemed appropriate, and enable certificates
for such Registrable Shares to be for such number of shares and
registered in such names as the selling Holder may reasonably request,
provided that such request is made at least two business days prior to
any sale of Registrable Shares.
Section 10. Repurchases. Reference in this Section 10 to issued Warrant
Shares shall mean Warrant Shares theretofore issued upon the exercise of any
Warrants, together with any Warrant Shares or other securities issued with
respect to such shares pursuant to any Organic Change (as defined in the Warrant
Certificates).
(a) Obligation of Company. During the period of 60 days following the
occurrence of a Change of Control, from time to time the Company
will, on the date (not less than 10 or more than 20 days from the
date of such notice) designated in a notice (a "Put Notice") from
any Holder to the Company, repurchase from such Holder all or the
portion of the Warrants and/or the number of issued Warrant
Shares held by such Holder designated in such notice for: (i) in
the case of all or a portion of the Warrants, an amount equal to
the product of (x) the Put Repurchase Price in effect on the date
of such notice and (y) the number of Warrant Shares represented
by the Warrants on the date of such notice or the portion of the
Warrants to be repurchased; and (ii) in the case of issued
Warrant Shares, an amount equal to the product of (x) the Put
Repurchase Price in effect on the date of such notice and (y) the
number of Warrant Shares to be repurchased.
Upon receipt by the Company of any notice pursuant to this Section 10(a),
the Company shall, within five days thereof, send a copy of such notice to each
Holder of Warrants and issued Warrant Shares held by such Holders. Thereafter,
each other Holder of a Warrant and/or such Warrant Shares shall be entitled to
exercise its rights pursuant to the preceding paragraph by giving not less than
10 days' notice of such request to repurchase. The date designated for such
repurchase shall be the same day designated by the Holder initially requesting
such repurchase.
On each date designated for the repurchase of Warrants and/or Warrant
Shares pursuant to this Section 10(a), each appropriate Holder shall assign to
the Company the Warrant or portion thereof and/or Warrant Shares being
repurchased, without any representation or warranty (other than that such Holder
has good and valid title thereto free and clear of Liens, claims and
restrictions of any kind), against payment therefor by wire transfer to an
account in a Lender located in the United States designated by such Holder for
such purpose.
The Company shall not be obligated under this Section 10(a) to repurchase
any Warrant or portion thereof and/or Warrant Shares to the extent such a
repurchase would violate or cause
<PAGE>
a default under the corporate laws of the Company's state of incorporation or
any agreement, instrument or indenture in existence on the date hereof to which
the Company is a party, as determined by an opinion of Independent Counsel;
provided, however, that the Put Repurchase Price shall become immediately due
and payable from time to time to the extent such payment does not result in such
a violation of, or default with respect to, such law or any such agreement,
instrument or indenture; provided, further, that the Company shall use its
reasonable best efforts to have any such restriction removed, including, without
limitation, recapitalizing the Company. The Company shall repurchase any Warrant
or portion thereof and/or Warrant Shares requested to be, but not (due to
operation of this paragraph), repurchased pursuant to this Section 10(a) before
repurchasing any other Warrant or portion thereof and/or Warrant Shares pursuant
to this Section 10(a).
If more than one Holder has exercised its rights pursuant to this Section
10(a) and part but not all of the Put Repurchase Price then due and owing are
paid to such Holders pursuant to the preceding paragraph, then any Holder may
rescind its repurchase election under this Section 10(a) and, except as
otherwise provided in the last sentence of the preceding paragraph, payment of
the Put Repurchase Price to any such Holders that do not rescind shall be made
pro rata based on the number of Warrant Shares with respect to which such rights
have been exercised and not rescinded (either directly or as to shares
represented by Warrants), notwithstanding the order in which the Company
received the Put Notices from such Holders and the dates designated in such Put
Notices for the payment of the Put Repurchase Price; provided, however, that
such pro rata payments by the Company shall not relieve the Company of its
obligation to pay all of the Put Repurchase Price as provided in the preceding
paragraph. Any obligation to repurchase securities of the Company issued after
the date of this Warrant shall be subordinated to any obligation under this
Section 10(a).
(b) Option of Company. The Company shall have the right, but subject to
the terms and conditions of the Credit Agreement, upon the giving of
written notice during the period of 30 days following (x) the Loan
Repayment Date or (y) the Company having achieved the Deleveraging
Condition, to repurchase from each Holder the Call Percentage of such
Holder's Warrants and the Call Percentage of the issued Warrant Shares
held by such Holder for: (i) in the case of Warrants, an amount equal
to the product of (x) the Call Repurchase Price in effect on the date
of such notice and (y) the number of Warrant Shares represented by the
Warrants on the date of such notice; and (ii) in the case of issued
Warrant Shares, an amount equal to the product of (x) the Call
Repurchase Price in effect on the date of such notice and (y) the
number of issued Warrant Shares; provided, however, that any
additional payment that may be required by the terms of Section 10(c)
shall be made. In effecting all such repurchases, the Company shall
repurchase Warrants and Warrant Shares and pay the aggregate Call
Repurchase Price to be paid by it ratably such that each Holder sells
a ratable portion of Warrants and Warrant Shares and receives a
ratable portion of such aggregate Call Repurchase Price based upon the
aggregate number of Warrants and Warrant Shares of all Holders (other
than Warrant Shares no longer subject to this Section by virtue of
Section 10(d)).
Such notice of repurchase shall (i) designate the date of repurchase, which
date shall be not less than 60 or more than 120 days from the date of such
notice, (ii) state the Call Repurchase Price and number of Warrant Shares
subject to the Warrants and/or the number of issued Warrant Shares and (iii)
indicate the method by which calculations were made. On the date so designated,
each Holder shall assign to the Company the Warrants and/or the number of
<PAGE>
Warrant Shares being repurchased, without any representation or warranty (other
than that such Holder has good and valid title thereto free and clear of Liens,
claims and restrictions of any kind), against payment therefor by wire transfer
to an account in a Lender located in the United States designated by such Holder
for such purpose.
(c) Adjustment to Repurchase Payment. If (i) more than twenty-five percent
(25%) of the Common Stock Deemed Outstanding (as defined in the
Warrant Certificates) is sold in any transaction or series of related
transactions and/or (ii) any Organic Change (as defined in the Warrant
Certificates) shall occur and/or (iii) a Change of Control shall occur
and/or (iv) the Company shall sell Common Shares or other securities
of the Company in an offering required to be registered under the
Securities Act, in any case within 270 days after the date of a
repurchase pursuant to Section 10(b), for a consideration per share
(determined by reference to all the consideration received in such
transaction by the stockholders of the Company or which would be
received if all consideration received by the Company in such
transaction were distributed to the stockholders (in each case net of
all reasonable transaction fees and expenses)), as determined by an
independent firm of investment bankers, reduced, where and to the
extent a Holder has not exercised its Warrants, by the Exercise Price
(the "Stockholder's Consideration Per Share"), greater than the
consideration per share which was paid to the Holders on the date of
such repurchase, then immediately upon such event the Company shall
pay to such Holders an amount equal to the product of (x) the number
of Warrant Shares repurchased and/or represented by that portion of
the Warrant repurchased, and (y) the difference between the
Stockholder's Consideration Per Share and the consideration per share
received by the Holders in such repurchase. The calculation of the
amount to be paid a Holder pursuant to this Section 10(c) shall be
made after taking into account any adjustment to Exercise Price (as
defined in the Warrant Certificates) pursuant to any stock split,
stock dividend, share combination or other similar transaction
occurring subsequent to the repurchase but prior to any subsequent
event pursuant to clauses (i)-(iv) above. The obligation of the
Company under this Section 10(c) shall survive any repurchase of the
Warrant or the Warrant Shares issued upon the exercise thereof.
(d) Termination of Repurchase Options. Notwithstanding anything to the
contrary herein, no Holder of Warrant Shares that have been sold
pursuant to an effective registration statement or sold to the public
pursuant to Rule 144 may submit a Put Notice under Section 10(a) as to
any such Warrant Shares and the Company may not exercise its
repurchase option under Section 10(b) as to any such Warrant Shares.
Section 11. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed in all respects by the
internal laws of the State of Illinois.
(b) Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the
subject matter hereof.
(c) Amendment. No supplement, modification, waiver or termination of this
Agreement (including without limitation any amendment or modification
of any
<PAGE>
defined term used herein which is defined in any other agreement or
instrument referred to herein) shall be binding against any Person
unless executed in writing by such Person or a predecessor-in-interest
of such Person.
(d) Notices, etc. Each notice, demand, request, request for approval,
consent, approval, disapproval, designation or other communication
(each of the foregoing being referred to herein as a notice) required
or desired to be given or made under this Agreement shall be in
writing (except as otherwise provided in this Agreement), and shall be
effective and deemed to have been received when delivered in person,
when sent by fax with receipt acknowledged, five (5) days after having
been mailed by certified or registered United States mail, postage
prepaid, return receipt requested, or the next business day after
having been sent by a nationally recognized overnight mail or courier
service, receipt requested. Notices shall be addressed as follows: (x)
if to any Holder, at such address or fax number as such Holder shall
have furnished the Company in writing (or, if such Holder is a Lender,
at such Holder's address set forth in the Loan Agreement), or (y) if
to the Company, at the address or fax number of its principal
executive offices set forth below its signature hereon or at such
other address or fax number as the Company shall have furnished to the
Investors. Any notice or other communication required to be given
hereunder to a Holder in connection with a registration may instead be
given to the designated representative of such Holder.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of the
parties hereto, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument.
(f) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full
force and effect without said provision.
(g) Captions. Captions are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the
text.
(h) Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns. Whether or
not any express assignment has been made in this Agreement, the
provisions of this Agreement that are for the Lenders as holders of
Registrable Shares are also for the benefit of, and shall be
enforceable by, all subsequent holders of Registrable Shares.
(i) Remedies. The Company and the Investors acknowledge that there would
be no adequate remedy at law if any Person fails to perform any of its
obligations hereunder, and accordingly agree that the Company and each
Holder, in addition to any other remedy to which it may be entitled at
law or in equity, shall be entitled to compel specific performance of
the obligations of another party under this Agreement in accordance
with the terms and conditions of this Agreement in any court of the
United States or any State thereof having jurisdiction.
(j) Attorneys' Fees. If the Company or any Holder brings an action to
enforce its rights under this Agreement, the prevailing party in the
action shall be entitled to recover its costs and expenses, including,
without limitation, reasonable attorneys' fees and expenses, incurred
in connection with such action, including any appeal of such action.
<PAGE>
(k) No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent
with the rights granted to the Holders of Registrable Shares in this
Agreement.
(l) Survival of Representations and Warranties. All representations and
warranties contained herein shall survive the execution and delivery
of this Agreement and any transfer of any Warrant or Common Stock
issued upon exercise thereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
TOKHEIM CORPORATION
By:
-------------------------------------
Name:
Title:
1600 Wabash Avenue
Fort Wayne, Indiana 46801-0630
Attention: Chief Financial Officer
Facsimile: (219) 484-1110
<PAGE>
BANK ONE, INDIANA, NATIONAL ASSOCIATION
By:__________________________________
Name:
Title:
CREDIT LYONNAIS, CHICAGO BRANCH
By:__________________________________
Name:
Title:
BANKERS TRUST COMPANY
By:__________________________________
Name:
Title:
ABN AMRO BANK N.V.
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By:__________________________________
Name:
Title:
<PAGE>
By:__________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
By:__________________________________
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
MERCANTILE BANK N.A.
By:__________________________________
Name:
Title:
THE PROVIDENT BANK
By:__________________________________
Name:
Title:
<PAGE>
By: Eaton Vance Management, as Investment
Advisor
By:
------------------------------------------
Name:
Title:
OXFORD STRATEGIC INCOME FUND
By: Eaton Vance Management, as Investment
Advisor
By:
------------------------------------------
Name:
Title:
OCTAGON LOAN TRUST
By: Octagon Credit Investors, as Manager
By:
------------------------------------------
Name:
Title:
OCTAGON INVESTMENT PARTNERS II, LLC
By:
------------------------------------------
Name:
Title:
<PAGE>
FINOVA CAPITAL CORPORATION
By:
------------------------------------------
Name:
Title:
IMPERIAL BANK
By:
------------------------------------------
Name:
Title:
NATEXIS BANQUE BFCE
By:
------------------------------------------
Name:
Title:
By:
------------------------------------------
Name:
Title:
BANK POLSKA KASA OPIEKI S.A. - PEKAO
S.A GROUP, NEW YORK BRANCH
By:
------------------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By:
------------------------------------------
Name:
Title:
EATON VANCE SENIOR INCOME TRUST
<PAGE>
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
By:Indosuez Capital, as Portfolio Advisor
By:__________________________________
Name:
Title:
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: Indosuez Capital, as Portfolio Advisor
By:__________________________________
Name:
Title:
ALLIANCE INVESTMENT OPPORTUNITIES
FUND, L.L.C.
By: ALLIANCE INVESTMENT
OPPORTUNITIES MANAGEMENT, L.L.C.,
as Managing Member
By: ALLIANCE CAPITAL MANAGEMENT
L.P., as Managing Member
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, as General Partner
By:__________________________________
Name:
Title:
AMSOUTH BANK
By:__________________________________
Name:
Title:
ARES LEVERAGED INVESTMENT FUND II,
L.P.
By: ARES Management II, L.P. its General
Partner
By:__________________________________
Name:
Title:
<PAGE>
Schedule 3(d)
[to be completed by the Company]
<PAGE>
EX 4.20
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES
ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
PROVISIONS OF A CERTAIN WARRANT AND REGISTRATION RIGHTS AGREEMENT DATED AS OF
DECEMBER 22, 1999, ENTERED INTO AMONG THE COMPANY AND CERTAIN HOLDERS OF
SECURITIES OF THE COMPANY, A COPY OF WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL
OFFICES. UPON WRITTEN REQUEST TO THE COMPANY'S SECRETARY, A COPY OF SUCH
AGREEMENT WILL BE PROVIDED WITHOUT CHARGE TO APPROPRIATELY INTERESTED PERSONS.
TOKHEIM CORPORATION
WARRANT CERTIFICATE
Dated as of December 22, 1999
Warrants to Purchase Common Stock
---------------------------------
TOKHEIM CORPORATION, an Indiana corporation (the "Company"), hereby
certifies that, for value received, _____________, or registered assigns (the
"Holder"), is the registered owner of ____________ Warrants (as adjusted from
time to time as provided herein, the "Warrants"), each of which will entitle the
registered owner thereof to purchase one share, as adjusted from time to time as
provided herein (each such share being a "Warrant Share" and all such shares
being the "Warrant Shares"), of the common stock, par value $1.00 per share, of
the Company (the "Common Stock") at the exercise price of $3.95 per share (as
adjusted from time to time as provided herein, the "Exercise Price") during the
period (the "Exercise Period") from and after the Original Issuance Date until
all Warrants evidenced hereby have been exercised, all subject to the following
terms and conditions. Certain capitalized terms are defined in Section 11
hereof. The Company and the Holder agree that
<PAGE>
the value of this Warrant on the date hereof is [$1.00 per share of Common Stock
represented hereby on the date of issuance].
SECTION 1. Registration. The Company shall register each Warrant upon
records to be maintained by the Company for that purpose in the name of the
record holder of such Warrant from time to time. The Company may deem and treat
the registered holder of each Warrant as the absolute owner thereof for the
purpose of any exercise thereof, any distribution to the holder thereof and for
all other purposes.
SECTION 2. Transfers and Exchanges of Warrants and Warrant Shares.
(a) Registration of Transfers and Exchanges. The Company shall register
the transfer of any Warrants upon records to be maintained by the Company for
that purpose upon surrender of this Warrant Certificate, with the Form of
Assignment attached hereto appropriately completed and duly signed, to the
Company at the office specified in or pursuant to Section 3(c). Upon any such
registration of transfer, a new Warrant Certificate, in substantially the form
of this Warrant Certificate, evidencing the Warrants so transferred shall be
issued to the transferee and a new Warrant Certificate, in similar form,
evidencing the remaining Warrants not so transferred, if any, shall be issued to
the then registered holder thereof.
(b) Warrants Exchangeable for Different Denominations. This Warrant
Certificate is exchangeable, upon the surrender hereof by the holder hereof at
the office of the Company specified in or pursuant to Section 3(c), for new
Warrant Certificates, in substantially the form of this Warrant Certificate,
evidencing in the aggregate the right to purchase the number of Warrant Shares
which may then be purchased hereunder, each of such new Warrant Certificates to
be dated the date of such exchange and to represent the right to purchase such
number of Warrant Shares as shall be designated by said holder hereof at the
time of such surrender.
SECTION 3. Duration and Exercise of Warrants.
(a) Warrants shall be exercisable by the registered holder thereof on any
business day during the Exercise Period.
(b) Subject to the provisions of this Warrant Certificate, including
adjustments to the number of Warrant Shares issuable on the exercise of each
Warrant and to the Exercise Price pursuant to Section 7, the holder of each
Warrant during the Exercise Period shall have the right to purchase from the
Company (and the Company shall be obligated to issue and sell to such holder of
a Warrant) at the Exercise Price one fully paid Warrant Share which is non-
assessable.
(c) Subject to Sections 4, 8 and 10, upon surrender of this Warrant
Certificate, with the Form of Election to Purchase attached hereto duly filled
in and signed, to the Company at its office at
-2-
<PAGE>
1600 Wabash Avenue, Fort Wayne, Indiana 46801-0360, Attention: Chief Financial
Officer, or at such other address as the Company may specify in writing to the
then registered holder of the Warrants, and upon either (i) payment of the
Exercise Price multiplied by the number of Warrant Shares then issuable upon
exercise of the Warrants being exercised in lawful money of the United States of
America or (ii) notice by the registered Holder of this Warrant Certificate of
its election to exercise the Warrants evidenced by this Warrant Certificate on a
cashless basis in the manner described in subsection (d) of this Section 3, all
as specified by the Holder of this Warrant Certificate in the Form of Election
to Purchase, the Company shall promptly issue and cause to be delivered to or
upon the written order of the registered Holder of such Warrants, and in such
name or names as such registered Holder may designate, one or more certificates
for the Warrant Shares issued upon such exercise of such Warrants. Any Person so
designated to be named therein shall be deemed to have become Holder of record
of such Warrant Shares as of the Date of Exercise of such Warrants.
The "Date of Exercise" of any Warrant means the date on which the Company
shall have received (i) this Warrant Certificate, with the Form of Election to
Purchase attached hereto appropriately completed and duly signed, and (ii)
unless the Holder of this Warrant Certificate makes the election described in
subsection (d) of this Section 3, payment of the Exercise Price for such
Warrant.
(d) In lieu of paying the Exercise Price upon exercise of the Warrants,
the Holder of this Warrant Certificate may elect to receive a number of Warrant
Shares whose aggregate Market Price as of the Date of Exercise is equal to the
fair value of this Warrant Certificate (or the portion hereof evidencing the
number of Warrants then being exercised) on such date, in which event the
Company shall issue to the Holder of this Warrant Certificate, upon receipt of
notice of such election, a number of Warrant Shares equal to (i) the number of
Warrant Shares that would otherwise be issuable upon payment of the Exercise
Price of the Warrants then being exercised minus (ii) the number of shares of
Common Stock having an aggregate Market Price equal to the product obtained by
multiplying the Exercise Price by the number of Warrant Shares otherwise
issuable upon payment of the Exercise Price of the Warrants then being
exercised.
(e) The Warrants evidenced by this Warrant Certificate shall be
exercisable, either as an entirety or, from time to time, for part only of the
number of Warrants evidenced by this Warrant Certificate. If less than all of
the Warrants evidenced by this Warrant Certificate are exercised at any time,
the Company shall issue, at its expense, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, for the remaining number of
Warrants evidenced by this Warrant Certificate.
-3-
<PAGE>
SECTION 4. Payment of Taxes. The Company will pay all transfer and stock
issuance taxes attributable to the issuance of the Warrants and the Warrant
Shares; provided, however, that the Company shall not be required to pay any tax
in respect of the transfer of Warrants, or the issuance or delivery of
certificates for Warrant Shares or other securities in respect of the Warrant
Shares upon the exercise of Warrants, to a Person other than a then existing
registered Holder of Warrants or an Affiliate of such registered Holder.
SECTION 5. Mutilated or Missing Warrant Certificate. If this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company will,
upon request by the registered Holder of this Warrant Certificate, issue, in
exchange for and upon cancellation of the mutilated Warrant Certificate, or in
substitution for the lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate, in substantially the form of this Warrant Certificate, of
like tenor and representing the equivalent number of Warrants, but, in the case
of loss, theft or destruction, only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of this Warrant Certificate and, if
requested by the Company, a written agreement of indemnity from the Holder
satisfactory to the Company.
SECTION 6. Reservation, Listing and Issuance of Warrant Shares.
(a) The Company will at all times have authorized, and reserve and keep
available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of the
Warrants, the number of shares of Warrant Shares issuable upon exercise of the
Warrants.
(b) Before taking any action which could cause an adjustment pursuant to
Section 7 reducing the Exercise Price below the then par value (if any) of the
Warrant Shares, the Company will take any corporate action which may be
necessary in order that the Company may validly and legally issue at the
Exercise Price as so adjusted Warrant Shares that are fully paid and non-
assessable.
(c) The Company covenants that all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant Certificate, be (i) duly authorized,
fully paid and non-assessable, and (ii) free from all taxes with respect to the
issuance thereof and from all adverse claims, liens, charges and security
interests created by the Company.
SECTION 7. Adjustments of Price and Number of Warrant Shares.
-4-
<PAGE>
(a) Adjustment of Number of Warrant Shares Issuable. Upon each adjustment
of the Exercise Price pursuant to this Section 7, the Holder of a Warrant shall
be entitled to purchase, at the Exercise Price in effect after such adjustment,
a number of Warrant Shares equal to the amount obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of such Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(b) Adjustment of Price upon Issuance of Common Stock. If and whenever
after the date hereof, the Company shall issue or sell any shares of Common
Stock for a consideration per share less than 100% of the Market Price (as
hereinafter defined) at the time of such issue or sale, then forthwith upon such
issue or sale, the Exercise Price shall be reduced to the lesser of the prices
determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the number of
shares of Common Stock Deemed Outstanding immediately prior to such issue
or sale multiplied by the then existing Exercise Price, and (2) the
consideration, if any, received by the Company upon such issue or sale, by
(B) the total number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale; and
(ii) by multiplying the Exercise Price in effect immediately prior to
the time of such issue or sale by a fraction, the numerator of which shall
be the sum of (A) the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale multiplied by the Market Price
immediately prior to such issue or sale plus (B) the consideration received
by the Company upon such issue or sale, and the denominator of which shall
be the product of (C) the total number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale, multiplied by (D) the
Market Price immediately prior to such issue or sale.
(c) Additional Adjustments. For the purposes of subsection (b) of this
Section, the following clauses shall also be applicable:
(i) Issuance of Rights or Options. If at any time the Company shall
grant (whether directly or by assumption in a merger in which the Company
is the surviving Company or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") whether or not such
-5-
<PAGE>
rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such rights or options or
upon conversion or exchange of such Convertible Securities (determined as
provided below) shall be less than the Market Price in effect immediately
prior to the time of the granting of such rights or options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such
rights or options shall (as of the date of granting of such rights or
options) be deemed to have been issued for such price per share, and the
Exercise Price shall be adjusted in accordance with Section 7(b). Except as
provided in clause (iii) of this subsection, no further adjustments of any
Exercise Price shall be made upon the actual issue of such Common Stock or
of such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities. For the purposes of this clause (i), the price
per share for which Common Stock is issuable upon the exercise of any such
rights or options or upon conversion or exchange of any such Convertible
Securities shall be determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the granting of
such rights or options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such rights
or options, plus, in the case of such rights or options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options.
(ii) Issuance of Convertible Securities. If the Company shall issue
(whether directly or by assumption in a merger in which the Company is the
surviving corporation or otherwise) or sell any Convertible Security,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable
upon conversion or exchange of such Convertible Securities (determined as
provided below) shall be less than the Market Price in effect immediately
prior to the time of such issue or sale, then the total maximum number of
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to have been issued for such
-6-
<PAGE>
price per share, and the Exercise Price shall be adjusted in accordance
with Section 7(b), provided that (A) except as provided in clause (iii) of
this subsection, no further adjustments of any Exercise Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities, and (B) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights to subscribe for
or to purchase or any option to purchase any such Convertible Securities
for which adjustments of any Exercise Price have been or are to be made
pursuant to other provisions of this subsection (c), no further adjustment
of any Exercise Price shall be made by reason of such issue or sale. For
the purposes of this clause (ii), the price per share for which Common
Stock is issuable upon conversion or exchange of Convertible Securities
shall be determined by dividing (C) the total amount, if any, received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (D) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities.
(iii) Readjustments. If the purchase price provided for in any rights
or options referred to in clause (i) above, or the additional
consideration, if any, payable upon the conversion or exchange of
Convertible Securities referred to in clause (i) or (ii) above, or the rate
at which any Convertible Securities referred to in clause (i) or (ii) above
are convertible into or exchangeable for Common Stock, shall be reduced,
then the Exercise Price in effect at the time of such event shall forthwith
be readjusted to the Exercise Price which would have been in effect at such
time had such rights, options or Convertible Securities then outstanding
provided for such reduced purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued
or sold. On the expiration of any such option or right or the termination
of any such right to convert or exchange such Convertible Securities, the
Exercise Price and number of Warrant Shares issuable pursuant hereto then
in effect shall be readjusted to the Exercise Price and number of Warrant
Shares which would have been in effect at the time of such expiration or
termination had such warrant, right, option or Convertible Security never
been issued, and the shares of Common Stock issuable thereunder shall no
longer be Common Stock Deemed Outstanding.
(iv) Consideration for Stock. If any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall
-7-
<PAGE>
be issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith. If the
Company shall declare or pay a dividend or make any other distribution upon
any stock of the Company payable in Common Stock, Convertible Securities or
options, warrants or rights to purchase Common Stock or Convertible
Securities, the securities issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration. If any shares of Common Stock or Convertible Securities or
any rights or options to purchase any such Common Stock or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall
be deemed to be the fair value of such consideration as determined
reasonably and in good faith by the board of directors of the Company,
without deduction of any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Company in connection therewith. If
any shares of Common Stock or Convertible Securities or any rights or
options to purchase such shares of Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which the
Company is the surviving corporation (other than any consolidation or
merger in which the previously outstanding shares of Common Stock of the
Company shall be changed into or exchanged for the stock or other
securities of another corporation), the amount of consideration therefor
shall be deemed to be the fair value as determined reasonably and in good
faith by the board of directors of the Company or such portion of the
assets and business of the non-surviving corporation as such board may
reasonably and in good faith determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or options, as the case may
be. In the event of any consolidation or merger of the Company in which the
Company is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Company shall be changed into or
exchanged for the stock or other securities of another entity or in the
event of any sale of all or substantially all of the assets of the Company
for stock or other securities of any entity, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or securities
or other property of such entity computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of all such stock or securities or other property of such
entity, and if any such calculation results in adjustment of the Exercise
Price in accordance with Section 7(b), the determination of the
-8-
<PAGE>
number of shares of Common Stock issuable upon exercise of the Warrants
immediately prior to such merger, consolidation or sale, for purposes of
Section 7(f), shall be made after giving effect to such adjustment of the
Exercise Price.
(v) Record Date. If the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities or (B) to rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right, as the case may be.
(vi) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purposes of
this Section 7.
(d) Subdivision or Combination of Stock. If the Company shall at any time
subdivide (whether by stock split, stock dividend, recapitalization or
otherwise) the outstanding shares of Common Stock into a greater number of
shares or pay a dividend or make a distribution to holders of Common Stock in
the form of Common Stock, the Exercise Price in effect immediately prior to such
subdivision, payment or distribution shall be proportionately reduced;
conversely, if the outstanding shares of Common Stock shall be combined into a
smaller number of shares (whether by reverse stock split or otherwise), the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased.
(e) Payment in the Event of Dividends. If the Company shall pay a dividend
or distribution (including, without limitation, a distribution in the form of
securities of the Company) upon the Common Stock, the Company shall pay to the
holder of this Warrant Certificate, in respect of each Warrant Share issuable
upon exercise of the Warrants evidenced hereby, an amount equal, in the case of
a dividend in cash, to the amount per share of the Common Stock so payable or,
in the case of any other dividend, to the fair value per share of the Common
Stock of the property so payable, as determined, reasonably and in good faith,
by the board of directors of the Company.
(f) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization,
etc. If the Company (i) consolidates with or merges into any other entity and is
not the continuing or surviving
-9-
<PAGE>
corporation of such consolidation or merger, or (ii) permits any other entity to
consolidate with or merge into the Company and the Company is the continuing or
surviving corporation but, in connection with such consolidation or merger, the
Common Stock is changed into or exchanged for stock or other securities of any
other corporation or cash or any other assets, or (iii) transfers all or
substantially all of its properties and assets to any other entity, or (iv)
effects a recapitalization, capital reorganization or reclassification of the
capital stock of the Company in such a way that holders of Common Stock shall be
entitled to receive stock, securities, cash or assets with respect to or in
exchange for Common Stock (each of the transactions referred to in the foregoing
clauses (i) through (iv) being an "Organic Change"), then, and in each such
case, proper provision shall be made in form and substance satisfactory to the
Holders so that, upon the basis and upon the terms and in the manner provided in
this subsection (f), the holder of this Warrant Certificate, upon the exercise
of each Warrant at any time after the consummation of such Organic Change, shall
be entitled to receive (at the aggregate Exercise Price in effect for all
Warrant Shares issuable upon such exercise immediately prior to such
consummation as adjusted to the time of such transaction), in lieu of shares of
Common Stock issuable upon such exercise prior to such consummation, the stock
and other securities, cash and assets to which such holder would have been
entitled upon such consummation if such holder had so exercised such Warrant
immediately prior thereto (subject to adjustments subsequent to such corporate
action as nearly equivalent as possible to the adjustments provided for in this
Section 7).
(g) Notice of Adjustment. Upon any adjustment of any Exercise Price, then
and in each such case the Company shall promptly deliver a notice to the
registered holder of the Warrants, which notice shall state the Market Price, if
any adjustment depends upon a determination of Market Price, and the Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares purchasable at such price upon the exercise of each
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(h) Other Notices. In case at any time:
(i) the Company shall declare any cash dividend on its Common Stock;
(ii) the Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends)
to the holders of its Common Stock;
(iii) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares
-10-
<PAGE>
of stock of any class or other rights;
(iv) the Company shall authorize the distribution to all holders of
its Common Stock of evidence of its indebtedness or assets (other than cash
dividends or cash distributions payable out of earnings or earned surplus
or dividends payable in Common Stock);
(v) there shall be any Organic Change;
(vi) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or
winding up of the Company; or
(vii) the Company proposes to take any other action or an event occurs
which would require an adjustment of the Exercise Price pursuant to
subsection (i) of this Section 7;
then, in any one or more of said cases, the Company shall give written notice,
addressed to the holder of this Warrant Certificate at the address of such
holder as shown on the books of the Company, of (1) the date on which the books
of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (2) the date (or, if not then known, a
reasonable approximation thereof by the Company) on which such Organic Change or
other action or event, as the case may be, shall take place (or, in the case of
clause (vi) above, the date on which the relevant action or event took place).
Such notice shall also specify (or, if not then known, reasonably approximate)
the date as of which the holders of Common Stock of record shall participate in
such dividends, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such Organic Change, dissolution, liquidation, bankruptcy, assignment for the
benefit of creditors, winding up, or other action or event, as the case may be.
Such written notice shall be given at least twenty days prior to the action in
question and not less than twenty days prior to the record date or the date on
which the Company's transfer books are closed in respect thereto; provided, that
no advance notice need be given of any event or action specified in clause (vi)
above, but the Company shall give notice of such event as promptly thereafter as
practicable.
(i) Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company
shall appoint a firm of independent certified public accountants (which may be
the regular auditors of the Company) of recognized national standing, which
shall give their opinion upon the adjustment, if
-11-
<PAGE>
any, on a basis consistent with the basic intent and principles established in
the other provisions of this Section 7, necessary to preserve, without dilution,
the exercise rights of the registered holder of this Warrant Certificate. Upon
receipt of such opinion, the Company shall forthwith make the adjustments
described therein.
(j) Certain Exceptions to Antidilution Protection. Notwithstanding
anything to the contrary in this Section 7, there shall be no adjustment to the
Exercise Price or to the number of Warrant Shares issuable upon exercise hereof:
(i) in connection with the sale or issuance of the Warrant Certificates for an
initial aggregate of 2,527,020.01 shares of Common Stock issued to the Lenders
(or their Affiliates) under the Credit Agreement on the Original Issuance Date
and all warrants issued upon the partial exercise, transfer or division of, or
in substitution for, any such warrants, or any adjustment to the number of
shares issuable pursuant thereto in accordance with the terms of any thereof;
(ii) from and after the date on which all holders of the Schlumberger Warrant
have issued the waiver and amendment referred to the Section 11 of Amendment No.
5 to the Credit Agreement, any adjustment to the number of shares issuable under
the Schlumberger Warrant pursuant to the terms thereof as in effect on the
Original Issuance Date; (iii) upon exercise of any Convertible Security
outstanding on the Original Issuance Date provided that the price per share for
which Common Stock is issuable upon exercise of such Convertible Security was
not less than the Market Price upon the date of grant or issuance of such
Convertible Security; or (iv) upon any exercise of the Schlumberger Warrant in
accordance with the terms thereof in effect on the Original Issuance Date.
(k) Other Securities. If at any time, as a result of an adjustment made
pursuant to this Section 7, any holder of Warrants shall become entitled to
purchase any securities of the Company other than shares of Common Stock, the
number or amount of such other securities so purchasable and the consideration
for such securities shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions contained in
this Section 7 hereof.
SECTION 8. No Stock Rights. No holder of this Warrant Certificate, as
such, shall be entitled to vote or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained herein be construed to confer upon
the Holder of this Warrant Certificate, as such, the rights of a stockholder of
the Company or the right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or give or withhold
consent to any corporate action or to receive notice of meetings or other
actions affecting stockholders (except as provided herein), or to receive
dividends (except as provided
-12-
<PAGE>
herein) or subscription rights or otherwise, until the Date of Exercise of the
Warrants shall have occurred.
SECTION 9. Fractional Shares. The Company shall not be required to issue
fractions of Warrant Shares upon exercise of the Warrants or to distribute
certificates which evidence fractional Warrant Shares. As to any fractional
share of Common Stock which the Holder would otherwise be entitled to subscribe
for from the Company upon such exercise, the Company shall purchase from the
Holder such unissued fractional share at a price equal to an amount calculated
by multiplying such fractional share (calculated to the nearest 1/100th of a
share) by the then-Market Price determined in accordance with the terms of this
Warrant. Payment of such amount shall be made in cash or by check payable to the
order of the Holder at the time of delivery of any certificate or certificates
arising upon such exercise.
SECTION 10. No Registration under Securities Act. Neither the Warrants nor
the Warrant Shares have been registered under the Securities Act. The Holder of
this Warrant Certificate, by acceptance hereof, represents that it is acquiring
the Warrants to be issued to it for its own account and not with a view to the
distribution thereof, and agrees not to sell, transfer, pledge or hypothecate
any Warrants or any Warrant Shares unless a registration statement is effective
for such Warrants or Warrant Shares under the Securities Act or in the opinion
of such holder's counsel (a copy of which opinion shall be delivered to the
Company) such transaction is exempt from the registration requirements of the
Securities Act; provided that Warrants and Warrant Shares issued to such Holder
may be transferred to any Affiliate of such Holder, without any such
registration (to the extent permitted by law) or opinion, subject to the
foregoing restriction on any further sale, transfer, pledge or hypothecation by
such Affiliate.
SECTION 11. Certain Definitions. The following terms have the meanings set
forth below:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under direct or indirect common control with such
Person.
"Common Stock" is defined in the first paragraph hereof.
"Common Stock Deemed Outstanding" means, at any given time, (x) the number
of shares of Common Stock actually outstanding at such time, plus (y) the number
of shares of Common Stock issuable pursuant to any outstanding Convertible
Securities, or rights or options to purchase Common Stock or Convertible
Securities but only to the extent such Convertible Securities, rights or options
are In the Money at such time.
"Company" is defined in the first paragraph hereof.
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<PAGE>
"Convertible Securities" is defined in Section 7(c)(i).
"Credit Agreement" means the Second Amended and Restated Credit Agreement
dated as of December 14, 1998 among the Company, certain subsidiaries of the
Company, certain lenders and ABN Amro Bank N.V., as administrative agent, as
amended, supplemented or otherwise modified from time to time.
"Date of Exercise" is defined in Section 3(c).
"Exercise Period" is defined in the first paragraph hereof.
"Exercise Price" is defined in the first paragraph hereof.
"Holder" is defined in the first paragraph hereof.
"In the Money" means, as to any Convertible Securities or rights or options
to purchase Common Stock or Convertible Securities at any time, that such
Convertible Securities, rights or options have a conversion price, exercise
price or similar price per share of Common Stock that is less than the Market
Price as of the date of determination.
"Market Price" shall mean the average of the daily closing prices per share
of the Common Stock for the ten consecutive trading days immediately preceding
the day as of which "Market Price" is being determined (exclusive of "ex-
dividend" and similar dates) provided, however, that (i) Market Price shall be
the closing price per share of the Common Stock of the Company on the date of
issuance with respect to the issuance of options to purchase Common Stock of the
Company issued to directors, officers or employees of the Company and (ii)
Market Price shall be the closing price per share of the Common Stock of the
Company on the date the underwriting agreement is executed with respect to any
bona fide underwritten public offering of the Common Stock of the Company
involving net cash proceeds to the Company of at least $1,000,000. The closing
price for each day shall be the last sale price regular way or, in case no such
sale takes place on such day, the average of the closing bid and asked prices
regular way, in either case on the principal national securities exchange on
which the shares are listed or admitted to trading, or if the shares are not so
listed or admitted to trading, on the National Market System of NASDAQ or, if
prices for the shares are not quoted on such National Market System, the average
of the highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. through NASDAQ or through a
similar organization if NASDAQ is no longer reporting such information. If
shares of the Common Stock are not listed or admitted to trading on any exchange
or quoted through NASDAQ or any similar organization, the "Market Price" shall
be deemed to be the
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<PAGE>
higher of (x) the book value of a share of the Common Stock as determined by any
firm of independent certified public accountants of recognized national
standing, selected by the board of directors of the Company, as at the last day
of any month ending within sixty days preceding the date as of which the
determination is to be made and (y) the fair value thereof determined in good
faith by a nationally recognized independent investment banking firm selected by
the Company and acceptable to the holders of a majority of the Warrants as of a
date which is within 30 days of the date as of which the determination is to be
made (the fees and expenses of such independent certified public accountants and
independent investment banking firm to be paid by the Company); provided,
however, that in the case of any determination of Market Price pursuant to this
sentence, the Market Price shall not be less than the amount of the
consideration per share received by the Company in respect of the most recent
sale, transfer or other issuance of Common Stock by the Company (other than as a
result of the exercise of any option or warrant or the conversion of any
Convertible Security) in an arms' length transaction to an unaffiliated third
party within the 90-day period immediately preceding the date as to which the
determination is to be made.
Anything herein to the contrary notwithstanding, if the Company shall issue
any shares of Common Stock or Convertible Securities or rights or options to
purchase Common Stock or Convertible Securities in connection with the
acquisition by the Company of the stock or assets of any other corporation or
the merger of any other corporation into the Company, the Market Price shall be
determined in the manner described in this definition as of the date the number
of shares of Common Stock, Convertible Securities (or in the case of Convertible
Securities other than stock, the aggregate principal amount of Convertible
Securities), rights or options was determined (as set forth in a written
agreement between the Company and the other party to the transaction) rather
than on the date of issuance of such shares of Common Stock, Convertible
Securities, rights or options.
"Organic Change" is defined in Section 7(f).
"Original Issuance Date" means December 22, 1999.
"Person" means an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Schlumberger Warrant" means the Warrant to Purchase up to 19.9% of the
Shares of Tokheim Corporation dated September 30, 1998 issued by the Company to
Schlumberger Limited.
"Securities Act" means the Securities Act of 1933, as amended.
-15-
<PAGE>
"Warrant" is defined in the first paragraph hereof.
"Warrant and Registration Rights Agreement" means the Warrant and
Registration Rights Agreement dated as of December 22, 1999 among the Company
and certain holders of its securities, as amended, supplemented or otherwise
modified from time to time.
"Warrant Share" is defined in the first paragraph hereof.
SECTION 12. Notices. All notices, requests, demands and other
communications relating to this Warrant Certificate shall be in writing,
including by facsimile, addressed (a) if to the registered owner hereof, to it
at the address furnished by the registered owner to the Company, and (b) if to
the Company, to it at 1600 Wabash Avenue, Fort Wayne, Indiana 46801-0630,
facsimile no.: (219) 484-1110, Attention: Chief Financial Officer, or to such
other address as any party shall notify the other party in writing, and shall be
effective, in the case of written notice by mail, three days after placement
into the mails (first class, postage prepaid), and in the case of notice by
facsimile, on the same day as receipt is confirmed.
SECTION 13. Binding Effect. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its successors and
assigns, the registered Holder or Holders from time to time of the Warrants and
the Warrant Shares.
SECTION 14. Governing Law. This Warrant Certificate shall be construed in
accordance with and governed by the internal laws of the State of Illinois.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed by its officer thereunto duly authorized as of the date hereof.
TOKHEIM CORPORATION
By
Title:
-17-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the holder of Warrants if such holder desires to exercise
Warrants evidenced by the foregoing Warrant Certificate)
To Tokheim Corporation:
The undersigned hereby irrevocably elects to exercise _______________
Warrants evidenced by the foregoing Warrant Certificate for, and to [purchase
thereunder, _______________ shares of Common Stock issuable upon exercise of
said Warrants and delivery of $___________ (in cash as provided for in the
foregoing Warrant Certificate) and any applicable taxes payable by the
undersigned pursuant to such Warrant Certificate.][receive, in accordance with
Section 3(d) of the Warrant Certificate, ______ shares of Common Stock issuable
upon exercise of said Warrants and delivery of any applicable taxes payable by
the undersigned pursuant to such Warrant Certificate].
The undersigned requests that certificates for such shares be issued in the
name of
PLEASE INSERT SOCIAL
SECURITY OR TAX
IDENTIFICATION NUMBER
- -------------------------------
(Please print name and address)
If said number of Warrants shall not be all the Warrants evidenced by the
foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to
(Please print name and address)
Dated: ______________, _____ Name of
holder of Warrant (Print):
(By:)
(Title:)
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _______________________________________ hereby sells,
assigns and transfers to each assignee set forth below all of the rights of the
undersigned in and to the number of Warrants (as defined in and evidenced by the
foregoing Warrant Certificate) set opposite the name of such assignee below and
in and to the foregoing Warrant Certificate with respect to said Warrants and
the shares of Common Stock issuable upon exercise of said Warrants:
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
If the total of said Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so assigned be issued in the name of and
delivered to the undersigned.
Name of
holder of Warrant (Print:)
<PAGE>
EXHIBIT 11.1
Tokheim Corporation
Exhibit (11.1) - Earnings Per Share
For the twelve month periods ended November 30, 1999, 1998, and 1997.
Basic earnings per share is based on the weighted average number of common
shares outstanding during each year presented. Dilutive earnings per share is
based on the weighted average number of common shares outstanding and the
assumed exercise of dilutive common stock equivelants from the exercise of
certain options and warrants less the number of shares ssumed to be repurchased
using the average market price of the Company's common stock during the period
using the treasury stock method.
The following table presents information necessary to calculate earnings per
share for the twelve month periods ended November 30, 1999, 1998, and 1997.
<TABLE>
<CAPTION>
Basic
--------------------------------------------
Twelve Months Ended
--------------------------------------------
November 30, November 30, November 30,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding.......................... 12,668 11,371 8,042
============ ============ ============
Net earnings (loss):
Before extraordinary loss............................. $ (36,537) $ (3,744) $ 3,980
Extraordinary loss on debt extinguishment............. (6,249) (23,924) (1,886)
------------ ------------ ------------
Net earnings (loss)................................... (42,786) (27,668) 2,094
Preferred stock dividends............................. (1,515) (1,484) (1,512)
------------ ------------ ------------
Earnings (loss) applicable to common stock............ $ (44,301) $ (29,152) $ 582
============ ============ ============
Net earnings (loss) per common share:
Before extraordinary loss............................. $ (3.01) $ (0.46) $ 0.31
Extraordinary loss on debt extinguishment............. (0.49) (2.10) (0.23)
------------ ------------ ------------
Net earnings (loss)................................... $ (3.50) $ (2.56) $ 0.08
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Diluted
--------------------------------------------
Twelve Months Ended
--------------------------------------------
November 30, November 30, November 30,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding.......................... 12,668 11,371 8,042
Share equivalents..................................... 2,533 639 177
Weighted conversion of preferred stock................ 792 765 786
------------ ------------ ------------
Adjusted outstanding.................................. 15,993 12,775 9,005
============ ============ ============
Net earnings (loss):
Before extraordinary loss............................. $ (36,537) $ (3,744) $ 3,980
Extraordinary loss on debt extinguishment............. (6,249) (23,924) (1,886)
------------ ------------ ------------
Net earnings (loss)................................... (42,786) (27,668) 2,094
Incremental RSP expense............................... (1,515) (1,484) (1,512)
------------ ------------ ------------
Earnings (loss) applicable to common stock............ $ (44,301) $ (29,152) $ 582
============ ============ ============
Net earnings (loss) per common share:
Before extraordinary loss............................. $ (2.38) $ (0.41) $ 0.27
Extraordinary loss on debt extinguishment............. (0.39) (1.87) (0.21)
------------ ------------ ------------
Net earnings (loss)................................... $ (2.77) $ (2.28) $ 0.06
============ ============ ============
</TABLE>
For financial reporting purposes, the loss per share, assuming dilution, is
considered to be the same as basic since the effect of the common stock
equivalents would be antidilutive.
<PAGE>
Exhibit 21.1
Subsidiaries*
<TABLE>
<CAPTION>
F/S
Tokheim % Jurisdiction of Information
Subsidiary Name Ownership(P) Incorporation Included By
--------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Tokheim Automation Corporation** (A) 100.00% USE - Texas Consolidated
Management Solutions, Inc. (A) 100.00% USA - Colorado Consolidated
Tokheim Equipment Corporation** (A) 100.00% USA - Delaware Consolidated
Tokheim RPS, LLC (K) 100.00% USA - Delaware Consolidated
Sunbelt Hose & Petroleum Equipment, Inc. (B) 100.00% USA - Georgia Consolidated
Gasboy International, Inc. (B) 100.00% USA - Pennsylvania Consolidated
Tokheim Services, LLC (O) 100.00% USA - Indiana Consolidated
Tokheim Investment Corp. (A) 100.00% USA - Texas Consolidated
Tokheim Austria GesmbH (G) 100.00% Austria Consolidated
Tokheim Belgium N.V. (N) 100.00% Belgium Consolidated
Socatam S.A. (F) 99.9% Cameroon Consolidated
Tokheim & Gasboy of Canada, Ltd. (C) 100.00% Canada - Ontario Consolidated
Tokheim Czech Republic s.r.o. (F) 100.00% Czech Republic Consolidated
Tokheim Scandinavia A/S (J) 100.00% Denmark Consolidated
Tokheim Sofitam S.A. (B) 100.00% France Consolidated
Tokheim Sofitam Applications S.A. (E) 100.00% France Consolidated
Tokheim Services France S.A. (F) 100.00% France Consolidated
Tokheim Holding GmbH (A) 100.00% Germany Consolidated
Tokheim GmbH (G) 100.00% Germany Consolidated
Deutsche Tokheim GmbH (G) 100.00% Germany Consolidated
Tokheim Germann GmbH (G) 100.00% Germany Consolidated
Tokheim Tanksysteme GmbH (G) 100.00% Germany Consolidated
Tokheim Hungary k.f.t. (B) 100.00% Hungary Consolidated
Tulla Electronics Limited (B) 100.00% Ireland Consolidated
Tokheim Ireland Limited (B) 100.00% Ireland Consolidated
Tokheim-Italia SRL (F) 99.00% Italy Consolidated
Cocitam S.A. (F) 98.60% Ivory Coast Consolidated
Matam S.A. (F) 99.9% Morocco Consolidated
Tokheim Poland (M) 100.00% Poland Consolidated
Rossgermann (M) 100.00% Russia Equity Method
Cosetam S.A. (H) 98.93% Senegal Consolidated
Tokheim Slovakia s.r.o. (F) 100.00% Slovak Republic Consolidated
Tokheim Properties (Proprietary), Ltd. (D) 100.00% South Africa Consolidated
Tokheim South Africa (Proprietary), Ltd. (D) 100.00% South Africa Consolidated
Tokheim Koppens Iberica S.A. (F) 99.81% Spain Consolidated
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Tokheim Switzerland AG (B) 100.00% Switzerland Consolidated
Tokheim Holding Netherlands B.V. (B) 100.00% The Netherlands Consolidated
Koppens Automatic Fabrieken B.V. (I) 100.00% The Netherlands Consolidated
Tokheim Netherlands B.V. (I) 100.00% The Netherlands Consolidated
Koppens Holding Nederland B.V. (I) 100.00% The Netherlands Consolidated
Tokheim Europe B.V. (I) 100.00% The Netherlands Consolidated
HMA Rotterdam B.V. (J) 100.00% The Netherlands Consolidated
Cottam Sarl (F) 99.88% Tunisia Consolidated
Tokheim UK Limited (B) 100.00% United Kingdom Consolidated
Sofitam Pump Services Ltd. (F) 100.00% United Kingdom Consolidated
Tokheim de Mexico (B) 100.00% Mexico Consolidated
Tokheim Portugal (L) 100.00% Portugal Consolidated
</TABLE>
* Subsidiaries as of 11/30/99. Does not include entities in which Tokheim
Corporation or subsidiaries hold less than 50%. Does not take into account
subsequent liquidations, mergers, or other transactions.
**Will be merged into Tokheim Corporation.
A) Directly owned by Tokheim Corporation.
B) Directly owned by Tokheim Corporation's subsidiary, Tokheim Investment
Corp., or directors' qualifying shares.
C) Directly owned 65% by Tokheim Corporation's subsidiary, Tokheim Investment
Corp., and 35% by Tokheim Corporation's indirect subsidiary, Gasboy
International, Inc.
D) Directly owned by Tokheim Corporation's indirect subsidiary, Tokheim &
Gasboy of Canada, Ltd.
<PAGE>
E) Directly owned by Tokheim Corporation's indirect subsidiary, Tokheim
Sofitam S.A.
F) Directly owned by Tokheim Corporation's indirect subsidiary, Tokheim
Sofitam Applications S.A.
G) Directly owned by Tokheim Corporation's indirect subsidiary, Tokheim
Holding GmbH.
H) Directly owned 65.6% by Tokheim Corporation's indirect subsidiary, Tokheim
Sofitam Application S.A., and 33.33% by Tokheim Corporation's indirect
subsidiary, Cocitam S.A.
I) Directly owned by Tokheim Corporation's indirect subsidiary, Tokheim
Holding Netherlands B.V.
J) Directly owned by Tokheim Corporation's indirect subsidiary, Koppens
Holding Nederland B.V.
K) Directly owned by Tokheim Corporation's indirect subsidiary, Gasboy
International, Inc.
L) Directly owned by Tokheim Corporation's indirect subsidiary, Tokheim
Koppens Iberica S.A.
M) Directly owned by Tokheim Corporation's indirect subsidiary, Tokheim
Germann GmbH.
N) Directly owned 98.92% by Tokheim Corporation's indirect subsidiary, Koppens
Holding Nederland B.V., 1.04% by Tokheim Corporation's indirect subsidiary,
Tokheim Sofitam Applications S.A., and 0.04% by Tokheim Corporation's
indirect subsidiary, Koppens Automatic Fabrieken B.V.
O) Directly owned 99% by Tokheim Corporation and 1% by Tokheim Corporation's
subsidiary, Tokheim Investment Corp.
P) All subsidiaries are consolidated, except for Rossgermann, which is
accounted for using the equity method.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Tokheim Corporation on Form S-8 (file No. 1-6018) of our report dated
February 22, 2000, on our audits of the consolidated financial statements of
Tokheim Corporation and subsidiaries as of November 30, 1999 and 1998, and for
the years ended November 30, 1999, 1998, and 1997, which report is included in
this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Fort Wayne, Indiana
February 28, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Tokheim Corporation's November 30, 1999, annual financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000098559
<NAME> TOKHEIM CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 14,437
<SECURITIES> 0
<RECEIVABLES> 175,351
<ALLOWANCES> 6,786
<INVENTORY> 93,528<F1>
<CURRENT-ASSETS> 289,128
<PP&E> 155,606<F2>
<DEPRECIATION> 83,630
<TOTAL-ASSETS> 690,802
<CURRENT-LIABILITIES> 219,070
<BONDS> 243,701
15,439<F3>
0
<COMMON> 89,844<F4>
<OTHER-SE> (112,674)<F5>
<TOTAL-LIABILITY-AND-EQUITY> 690,802
<SALES> 693,932
<TOTAL-REVENUES> 693,932
<CGS> 532,089<F6>
<TOTAL-COSTS> 532,089<F6>
<OTHER-EXPENSES> 14,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,450
<INCOME-PRETAX> (36,641)
<INCOME-TAX> (104)
<INCOME-CONTINUING> (36,537)
<DISCONTINUED> 0
<EXTRAORDINARY> (6,249)
<CHANGES> 0
<NET-INCOME> (42,786)
<EPS-BASIC> (3.50)
<EPS-DILUTED> (3.50)
<FN>
<F1> Represents gross inventory net of loss reserves.
<F2> Represents gross PP&E.
<F3> Represents redeemable preferred stock of $24,000 less Guaranteed ESOP of
$4,351 and treasury stock of $4,210.
<F4> Represents common stock of $90,375 less treasury stock of $531.
<F5> Represents accumulated deficit of $63,597, foreign currency translation
adjustments of $69,077 and $20,000 warrants.
<F6> Includes product development expenses and excludes depreciation and
amortization.
</FN>
</TABLE>
