-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qow5XlDIDssDYkDkxB/7D17lHUDhvbDxuQ8Xi2+K0TlnG2WEEHoNg/Kh4YPpsdgz pp8V1c7l4UroHGg2xNJCOw== 0000950131-00-001469.txt : 20000229 0000950131-00-001469.hdr.sgml : 20000229 ACCESSION NUMBER: 0000950131-00-001469 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOKHEIM CORP CENTRAL INDEX KEY: 0000098559 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 350712500 STATE OF INCORPORATION: IN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06018 FILM NUMBER: 555066 BUSINESS ADDRESS: STREET 1: 10501 CORPORATE DRIVE CITY: FORT WAYNE STATE: IN ZIP: 46845 BUSINESS PHONE: 2194704600 MAIL ADDRESS: STREET 1: 10501 CORPORATE DRIVE CITY: FORT WAYNE STATE: IN ZIP: 46845 10-K 1 FORM-10K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- 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:
Name of each exchange Title of each class on which registered ------------------- ----------------------- Common Stock, no par value.......................... New York Stock Exchange Preferred Stock Purchase Rights..................... New York Stock Exchange
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
Document Form 10-K -------- --------------------- Proxy Statement.................................... Part III, Items 10-13
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TOKHEIM CORPORATION 1999 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS
Page ---- 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
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"). 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. 2 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. 3 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 4 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 5 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 6 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
High Low -------- ------ 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
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. 7 SELECTED FINANCIAL DATA (Amounts in thousands except dollars per share)
Year Ended November 30, ------------------------------------------------ 1999 1998(A) 1997 1996(B) 1995 -------- -------- -------- -------- -------- 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
- -------- (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. 8 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. 9 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. 10 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. 11 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." 12 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 13 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 14 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 15 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 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 [THIS PAGE INTENTIONALLY LEFT BLANK] 18 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)
1999 1998 1997 -------- -------- -------- 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 ======== ======== ========
The accompanying notes are an integral part of the financial statements. 19 CONSOLIDATED BALANCE SHEET as of November 30, 1999 and 1998 (Amounts in thousands)
1999 1998 -------- -------- 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 ======== ========
The accompanying notes are an integral part of the financial statements. 20 CONSOLIDATED BALANCE SHEET as of November 30, 1999, and 1998 (Amounts in thousands except dollars per share)
1999 1998 -------- -------- 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 ======== ========
The accompanying notes are an integral part of the financial statements. 21 CONSOLIDATED STATEMENT OF CASH FLOWS for the years ended November 30, 1999, 1998, and 1997 (Amounts in thousands)
1999 1998 1997 -------- --------- -------- 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 ======== ========= ========
The accompanying notes are an integral part of the financial statements. 22 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY For the years ended November 30, 1999, 1998 and 1997 (Amounts in thousands)
Retained Accumulated Total Common Stock Guaranteed Earnings Other Common ------------------------ ESOP (Accumulated Comprehensive Shareholders' Issued Treasury Warrants Obligation Deficit) Loss Equity ------ -------- -------- ---------- ------------ ------------- ------------- 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) ====== ==== ====== ===== ======== ======== ========
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:
1999 1998 1997 -------- -------- -------- 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) ======== ======== ========
The accompanying notes are an integral part of the financial statements. 23 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 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 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:
1999 1998 -------- -------- 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 ======== ========
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 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:
1999 1998 1997 ------- -------- ------- 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 --
- -------- (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 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:
November 30, Adjustments Charges November 30, 1998 to Accrual to Accrual 1999 ------------ ----------- ---------- ------------ 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 ======= ======= ======== ======
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 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollar amounts in thousands except dollars per share)
Lease and Involuntary other employee contract termination termination benefits costs Total ----------- ----------- ------- 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.................. $ -- $ -- $ -- ======= ====== =======
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.
Unaudited Years Ended November 30, ------------------ 1998 1997 -------- -------- Net sales................................................ $743,623 $737,520 Net loss................................................. (49,189) (37,966) Net loss per common share (basic and diluted)............ (4.67) (3.48)
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:
Restructuring Accrual ------------- 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 =======
29 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: 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 =======
30 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:
1999 1998 -------- -------- 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 ======== ========
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 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 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 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 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:
Year Percentage ---- ---------- 2004.......................... 105.688% 2005.......................... 103.792% 2006.......................... 101.896% 2007 and thereafter........... 100.000%
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 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:
1999 1998 ------ ------ 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 ====== ======
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. ESOP obligation at November 30, 1999 and 1998 consisted of the following:
1999 1998 ------ ------ 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
(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 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:
Year of Grant ISO SAR RSA ------------- ------- ------- ------ 1999............................................... 179,000 152,000 -- 1998............................................... 2,000 -- -- 1997............................................... 468,000 -- 42,500
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:
Total Option Exercisable Options Price In The Next Authorized Per Currently One To Four and Share Exercisable Years Outstanding ------ ----------- ----------- ----------- $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 ======= ======= =======
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 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:
Shares Under Option Price Range ------------ ----------- 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 ========
Reserved for the granting of new options:
Shares ------- November 30, 1999................................................. 61,274 November 30, 1998................................................. 158,774
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:
1999 1998 1997 -------- -------- ---------- 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
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 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:
Assumptions 1999 1998 ----------- ------- ------- 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
12. COMMON AND PREFERRED STOCK Changes in common stock and common treasury stock are shown below:
Common Common Stock Treasury Stock ------------------ --------------- Shares Amount Shares Amount ---------- ------- ------- ------ 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 ========== ======= ======= =====
Changes in redeemable convertible preferred stock and related treasury stock are shown below:
Preferred Preferred Stock Treasury Stock --------------- ---------------- Shares Amount Shares Amount ------- ------- ------- ------- 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 ======= ======= ======= =======
39 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 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:
1999 1998 1997 ------ ------ ----- 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 ====== ====== =====
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for 1999 and 1998 is as follows:
1999 ------------------------------------------------ 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total -------- -------- -------- -------- -------- 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) ======== ======== ======== ======== ========
- -------- (A) Includes product development expenses and excludes depreciation and amortization. 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollar amounts in thousands except dollars per share)
1998 --------------------------------------------------------- 1st 2nd 3rd 4th Total Quarter(A) Quarter Quarter Quarter(B) (A)(B) ---------- ------- -------- ---------- -------- 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) ======= ======= ======== ======== ========
- -------- (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:
1999 1998 1997 -------- ------- ------ 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: 1999 1998 1997 -------- ------- ------ 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 ======== ======= ======
42 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.
1999 1998 1997 -------- ------ ------ 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 ======== ====== ======
The components of the deferred tax assets and liabilities as of November 30, 1999 and 1998 are as stated below.
1999 1998 -------- -------- 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 ======== ======== 1999 1998 -------- -------- 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............................... $ -- $ -- ======== ========
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 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.
North 1999 America(1) Europe Africa Eliminations Consolidated ---- ---------- -------- ------- ------------ ------------ 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 North 1998 America(1) Europe Africa Eliminations Consolidated ---- ---------- -------- ------- ------------ ------------ 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 North 1997 America(1) Europe Africa Eliminations Consolidated ---- ---------- -------- ------- ------------ ------------ 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
- -------- (1) Includes corporate expenses Reconciliation from segment information to consolidated statement of earnings:
1999 1998 1997 -------- -------- ------- 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 ======== ======== =======
44 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:
1999 1998 ------ ------ 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 ====== ======
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:
1999 1998 1997 ------- ------- ------- 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 ======= =======
45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (Dollar amounts in thousands except dollars per share)
1999 1998 ------ ------- 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%
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 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.
1999 1998 1997 -------- -------- ------ 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: 1999 1998 -------- -------- 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
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 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 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 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 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 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------ 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) ======== ======= ======== ======== ========
52 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------ 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) ======== ======= ======== ======== ========
53 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------ 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 ======== ======= ======== ======== ========
54 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------ 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 ======== ======== ======== ========= ========
55 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------ 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 ======== ======== ======== ========= ========
56 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total --------- ------------ ------------ ------------ ------------ 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 ========= ======== ========= ======== =========
57 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------ 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 ======== ========= ======== ======== =========
58 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
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------ 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 ======== ======= ======= ==== ========
59 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 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 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: 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
(a) 2. Supplemental Data and Financial Statement Schedules: Included as outlined in Item 8 of Part II of this Report: Quarterly Financial Information (unaudited) in Note 14 to the Consolidated Financial Statements..................................... Page 41
3(a). Exhibits
Exhibit No. Document ------- -------- 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).
62
Exhibit No. Document ------- -------- 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).
63
Exhibit No. Document ------- -------- 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).
64
Exhibit No. Document ------- -------- 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.
b. Reports on Form 8-K None. 65 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 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 EXHIBIT INDEX
Exhibit No. Document ------- -------- 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).
Exhibit No. Document ------- -------- 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.
Exhibit No. Document ------- -------- 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).
Exhibit No. Document ------- -------- 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.
EX-4.18 2 AMENDMENT TO RESTATED CREDIT AGREEMENT 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, 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. "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 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. "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 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. (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:
====================================================================================================================== 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 ====================================================================================================================== 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% ======================================================================================================================
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 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 ------- 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: "(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 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." 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 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:
Fiscal Quarter Ending On or About the Dates Set Forth Below: Maximum Ratio ------------------------- ------------- 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
(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:
Fiscal Quarter Ending On or About the Dates Set Forth Below: Maximum Ratio - ------------------------- ------------- 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
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
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:
Fiscal Quarter Ending On or About the Dates Set Forth Below: Minimum Ratio ------------------------- ------------- 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"
1.25. Section 6.25 of the Credit Agreement is hereby deleted in its entirety, and the following is substituted therefor: "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:
Fiscal Quarter Ending On or About the Dates Set Forth Below: Minimum Ratio -------------------------- ------------- 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"
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:
Fiscal Quarter Ending on or About the Dates Set Forth Below: Minimum EBITDA -------------------------- -------------- 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
February 28, 2002 and each fiscal quarter thereafter $100,000,000
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):
Month Amount --------------------------------- 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;
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". 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 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). 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 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. 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: 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: By:__________________________________ Name: Title: 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 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: 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 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. 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: ARES LEVERAGED INVESTMENT FUND II, L.P., as a Lender By: ARES Management II, L.P., its General Partner By:__________________________________ Name: Title: INCREASING LENDERS: Additional Revolving Loan Commitment: ABN AMRO BANK N.V. $2,500,000 By:__________________________________ Name: Title: By:__________________________________ Name: Title: 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. 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: EX-4.19 3 WARRANT & REGISTRATION RIGHTS AGREEMENT 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, 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. "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. "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 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 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 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 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 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 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 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. (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 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 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. 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 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 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 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. (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. 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 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: 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: 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: 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 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: Schedule 3(d) [to be completed by the Company] EX-4.20 4 FORM OF WARRENT CERTIFICATE 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 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- 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- 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- (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- 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- 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- 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- 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- 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- 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- 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- 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. -13- "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 -14- 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- "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. -16- 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- 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:) 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:) EX-11.1 5 STATEMENT OF PER SHARE EARNINGS 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.
Basic -------------------------------------------- Twelve Months Ended -------------------------------------------- November 30, November 30, November 30, 1999 1998 1997 ------------ ------------ ------------ 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 ============ ============ ============
Diluted -------------------------------------------- Twelve Months Ended -------------------------------------------- November 30, November 30, November 30, 1999 1998 1997 ------------ ------------ ------------ 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 ============ ============ ============
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. EX-21.1 6 SUBSIDIARIES OF TOKHEIM CORPORATION Exhibit 21.1 Subsidiaries*
F/S Tokheim % Jurisdiction of Information Subsidiary Name Ownership(P) Incorporation Included By --------------- ------------ --------------- ----------- 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
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
* 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. 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. EX-23.1 7 CONSENT OF INDEPENDENT ACCOUNTANTS 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 EX-27.1 8 FINANCIAL DATA SCHEDULE
5 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. 0000098559 TOKHEIM CORPORATION 1,000 12-MOS NOV-30-1999 NOV-30-1999 14,437 0 175,351 6,786 93,528 289,128 155,606 83,630 690,802 219,070 243,701 15,439 0 89,844 (112,674) 690,802 693,932 693,932 532,089 532,089 14,895 0 51,450 (36,641) (104) (36,537) 0 (6,249) 0 (42,786) (3.50) (3.50) Represents gross inventory net of loss reserves. Represents gross PP&E. Represents redeemable preferred stock of $24,000 less Guaranteed ESOP of $4,351 and treasury stock of $4,210. Represents common stock of $90,375 less treasury stock of $531. Represents accumulated deficit of $63,597, foreign currency translation adjustments of $69,077 and $20,000 warrants. Includes product development expenses and excludes depreciation and amortization.
-----END PRIVACY-ENHANCED MESSAGE-----