-----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, PN51Vq1i8gOm175UlXUvwymSF4CpJTAupjRR+h3Mte9yhCph2rk+ju7vpAJp3Sqt SZcHPLLGfDDL1Jla1+bXGw== 0000950131-96-005977.txt : 19961121 0000950131-96-005977.hdr.sgml : 19961121 ACCESSION NUMBER: 0000950131-96-005977 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19961120 SROS: NYSE 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06018 FILM NUMBER: 96669739 BUSINESS ADDRESS: STREET 1: P O BOX 360 CITY: FORT WAYNE STATE: IN ZIP: 46801-0360 BUSINESS PHONE: 2194232552 10-K/A 1 FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For fiscal year ended NOVEMBER 30, 1995 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., P.O. BOX 360, FORT WAYNE, INDIANA 46801 - ---------------------------------------------------------- -------------- (Address of principal executive offices) (Zip Code) 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 Securities registered pursuant to Section l2(g) of the Act: NONE -------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of February 2, 1996, 7,937,988 shares of voting common stock were outstanding. The aggregate market value of shares held by non-affiliates was $61.1 million (based on the closing price of these shares on the New York Stock Exchange). In addition, 808,620 shares of convertible preferred stock were held by the Trustee of the Retirement Savings Plan for Employees of Tokheim Corporation and Subsidiaries. The liquidation value is $25 per share with an aggregate liquidation value of $20.2 million. For a complete discussion regarding the attributes of this preferred stock see Item 5 on page 7. Documents Incorporated by Reference ----------------------------------- Document Form 10-K --------------- ------------------------ Proxy Statement Part III, Item(s) 10-13 The Table of Contents is located on the following page. The Exhibit Index is located on Page 39. TOKHEIM CORPORATION 1995 FORM 10-K/A ANNUAL REPORT TABLE OF CONTENTS PART I Item 1. Business ........................................................ 3 Item 2. Properties ...................................................... 6 Item 3. Legal Proceedings ............................................... 6 Item 4. Submission of Matters to a Vote of Security Holders ............. 6 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters ............................................. 7 Item 6. Selected Financial Data ......................................... 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................................... 11 Item 8. Financial Statements and Supplementary Data ..................... 14 Item 9. Disagreements on Accounting and Financial Disclosure ............ 36 PART III Item 10. Directors and Executive Officers of the Registrant .............. 36 Item 11. Executive Compensation .......................................... 38 Item 12. Security Ownership of Certain Beneficial Owners and Management .. 38 Item 13. Certain Relationships and Related Transactions .................. 38 PART IV Item l4. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ........................................................ 39 PART I ITEM 1. BUSINESS. (a) General: Tokheim Corporation and its subsidiaries (the "Company") are engaged in the design and manufacture of electronic and mechanical petroleum dispensing marketing systems, including service station equipment, point-of-sale (POS) control systems, and card- and cash-activated transaction systems for customers around the world. Sales of the Company's products can be affected by a variety of factors, such as environmental regulations, retail petroleum construction, the price of oil, interest rates, weather conditions, political stability in foreign markets, and general economic conditions. RECENT DEVELOPMENTS 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 thereto included elsewhere in this Form 10-K. The continuing improvement during 1995 in industry demand for petroleum marketing equipment was driven by the development of emerging markets, compliance with U.S. Federal Clean Air Act amendments requiring Stage II vapor recovery, and the desire for increased automation equipment, including dispenser payment terminals and point-of-sale systems. In addition, Tokheim's operating performance continued to benefit from new product introductions, strengthened distribution channels, increased international market penetration, and cost- reduction programs which more than offset price deterioration. The Board of Directors recently approved capital expenditures of approximately $12.8 million for important improvements in plant productivity and capacity, product design, and quality of both products and processes which should enhance future operating results. During the year, the Fort Wayne facility achieved a quality milestone--ISO 9000 certification. This was an important accomplishment for the Fort Wayne plant, which now joins the plants in the U.K. and South Africa which are also ISO certified. ISO 9000 will help the Company to continue its expansion into markets recognizing this certification, especially European markets. The International Standards Organization (ISO), in Geneva, Switzerland, was founded in 1946 to develop a common set of standards in manufacturing, trade and communications. It is composed of the national standards institutes and organizations of 97 countries worldwide. First published in 1987, the standards have been rapidly adopted by organizations in Europe, Asia and North America. In addition, there is a movement by several industries in the European Union where ISO certification is now a prerequisite to product certification. The standards have been endorsed by the American Society of Quality Control, the European Standards Institutes, and by the Japanese Industrial Standards Committee. The standards are designed to: establish consistent language and terminology; provide baseline quality practices that are accepted internationally; and reduce the need for costly on-site supplier assessments. The standards require: a standard language for documenting quality practices; a system to track and manage evidence that these practices are instituted throughout the organization; and a third-party auditing model to review, certify and maintain certification of organizations. In 1995 the Company introduced a number of new products, including the Windows(R) PC-based Columbus point-of-sale (POS) system. In addition, the existing POS system was expanded to include 15 major oil company networks, with plans to expand to 20 networks, covering virtually the entire industry, by the end of 1996. Another significant product introduction in 1995 was the new line of retrofit dispenser heads which enable installed Tokheim equipment to have the same electronics and functionality as our newest designs. (b) Financial Information About Business and Geographical Segments: Financial information about business and geographical segments for the years ended November 30, 1995, 1994, and 1993, is set forth in Item 8 of this Report in Note 12 to the Consolidated Financial Statements captioned "Business and Geographical Segments." 3 (c) Narrative Description of Business: PETROLEUM DISPENSING EQUIPMENT AND SYSTEMS This market is served by: (a) Tokheim Corporation, United States; Tokheim Europe B.V.,The Netherlands; Tokheim and Gasboy of Canada Limited, Canada; Tokheim GmbH, Germany; Tokheim Limited, The United Kingdom; and Tokheim South Africa (Proprietary) Limited, South Africa, which are involved in the design, manufacture, and marketing of petroleum dispensing equipment and services, point-of-sale systems, card- and cash-activated transaction systems, and commercial dispensers, and (b) Gasboy International, Inc., United States, which designs, manufactures, and distributes petroleum dispensing equipment for the consumer, fleet, and commercial markets. Gasboy also designs and manufactures vehicle fleet management and control systems and point-of-sale terminals for dual purpose, retail, and fleet applications. In 1995, 1994, and 1993, the petroleum industry accounted for all of the Company's sales. Approximately 85%, 83%, and 81%, respectively, of the Company's sales were derived from the sale of service station gasoline dispensers, parts, accessories, and service contracts, which are sold to major oil companies for their own gasoline stations and to independent retail station owners through the Company's distributor and manufacturers' representative organization. International sales by foreign subsidiaries and exports from the U.S. approximated 43%, 41%, and 42% of consolidated net sales in 1995, 1994, and 1993, respectively. While risks attendant to operations in foreign countries vary widely from country to country, the Company is of the opinion that, considered in the aggregate, the risks attendant to its operations in foreign countries are not significantly greater than the risks attendant to operations in the United States. 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 service parts inventory. The Company's Customer Service Division maintains a Help Desk which is open 24 hours a day, 365 days a year for immediate responsiveness to service needs. Additionally, the Customer Service Division maintains a continuing program of service clinics for personnel of customers and distributors, both in the field and at the Company's training centers. The business is somewhat seasonal, primarily relating to the construction season and increased purchase activity by major oil companies toward the end of the calendar year. The market for these products is highly competitive. The Company and its subsidiaries all compete with a number of companies, some of which have greater sales and assets than the Company. The Company competes domestically against four manufacturers of service station dispensers. Environmental regulations and service station automation are expected to continue to favorably impact the future growth of the Company's business both domestically and internationally. The Company's belief that environmental regulations will have a favorable impact is based upon experience, analysis, and a study of the proposed Vapor Recovery Market published by an independent consultant to the Company. That study concludes that a significant number of retail service stations across the United States will be impacted by Stage II Vapor Recovery Control regulations effective in stages through 1996. The study further indicates that while the majority of service stations will retrofit existing dispensers, requiring purchase of a retrofit kit from a dispenser manufacturer, a large number of older dispensers will be replaced. 4 With respect to service station automation, a separate independent study has estimated that approximately 30,000 stations will install point-of-sale systems between 1993 and 1999. It is therefore expected that overall market demand may be on the rise throughout this period. The Company's conclusions regarding international markets arise from its sales experience suggesting that international markets tend to follow the lead of the United States in addressing environmental issues and automation opportunities. Strong demand from emerging markets during the past year is expected to continue into and favorably impact 1996. The dollar amount of backlog considered to be firm as of the end of fiscal year 1995 was approximately $21.0 million, compared to approximately $16.6 million and $23.0 million at the end of fiscal years 1994 and 1993, respectively. The Company expects that the entire backlog will be filled in fiscal year 1996. Backlog amounts at any fiscal year-end are not an indicator of sales during the forthcoming year. Factors impacting backlog levels at any point in time include such events as the timing of purchases by the major oil companies, announcements of price adjustments, sales promotions, and production delays, which mitigate against comparisons of one period to another. In fiscal 1995, no one customer accounted for as much as ten percent of the Company's consolidated sales. The principal raw materials essential to the Company's business are flat sheet steel, aluminum, copper tubing, iron castings, and electronic components, all of which are available through several competitive sources of supply. The Company holds a number of patents, no one of which is considered essential to its overall operations. The Company relies primarily on its engineering, production, marketing, and service capabilities to maintain its established position within the industry it now serves. At November 30, 1995, the Company employed approximately 1,700 persons at its various locations. NEW PRODUCTS The Company spent approximately $12.7 million in 1995; $10.2 million in 1994; and $8.6 million in 1993 on activities related to the support and improvement of existing products, manufacturing methods, the development of new products, and other applied research and development. Last year, a major investment was made to upgrade our engineering facility with an advanced CAD/CAM system. Not only was the Company successful in implementing the system, but also in applying it to new product introductions. Research and development projects are evaluated on the basis of cash payback and return on investment. A number of new products were introduced by the Company during 1995. Major enhancements were made to the POS systems product line including introduction of the Windows(R) PC-based Columbus system, an island payment terminal, a card reader upgrade for the Multi-Modular Dispenser, a retrofit head for Tokheim Convenience Systems, and installation of the Tokheim POS system in 15 major oil company networks by the end of 1995. Products introduced in the commercial and fleet market segments include ASTRA, a unique electronic commercial dispenser with a remote display designed specifically for the above-ground market; Fuel Point, a fully automated fuel management system which captures vehicle identification and odometer information at the dispenser nozzle; and Oilex, a fully automated oil change device capable of changing the oil in a commercial truck in less than ten minutes through a single connection. (d) Financial Information About Foreign and Domestic Operations and Export Sales: Financial information about foreign and domestic operations and export sales for the years ended November 30, 1995, 1994, and 1993 is set forth in Item 8 of this Report in Note 12 to the Consolidated Financial Statements captioned "Business and Geographical Segments." 5 ITEM 2. PROPERTIES. The Company owns properties located in: Fort Wayne, Indiana; Fremont, Indiana; Washington, Indiana; Lansdale, Pennsylvania; Brighton, Ontario, Canada; Leiderdorp, The Netherlands; Kya Sand, Randburg, South Africa; Glenrothes, Scotland; Weilheim, Germany; Jasper, Tennessee; and Atlanta, Georgia. Due to plant consolidations and the sale of the Controls segment, the following properties were sold in 1993: Newbern, Tennessee; Dallas, Texas; and London, Ontario, Canada. The Jasper, Tennessee and Atlanta, Georgia facilities are currently being held for sale. The above properties are all manufacturing oriented except as noted below: The Company owns an engineering and design center and corporate office building and an adjacent 116-acre tract of unimproved land located north of Fort Wayne, Indiana. The building in Leiderdorp, The Netherlands, which previously housed a distribution facility, was sold subsequent to November 30, 1995. The Company now leases space in Leiderdorp, The Netherlands for a sales and technical support facility. ITEM 3. LEGAL PROCEEDINGS. As more fully described in Item 8 of this report in Note 16 to the Consolidated Financial Statements captioned "Contingent Liabilities", the Company is defending various claims and legal actions, including environmental and product liability actions, which are common to its operations. These legal actions primarily involve claims for damages arising out of the Company's manufacturing operations, the use of the Company's products, and allegations of patent infringement. In the opinion of the Company's management, amounts accrued for awards or assessments in connection with environmental, product liability and other legal matters are adequate, and ultimate resolution of these matters will not have a material effect on the Company's consolidated financial position, results of operations or cash flow. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock is traded on the New York Stock Exchange under the symbol "TOK". The approximate number of stockholders of the Company's common stock as of November 30, 1995, was 7,000. No dividends were paid on common stock in 1995, 1994, and 1993 in accordance with restrictive covenants under the Company's loan agreement. The high-low sales prices for the Company's common stock are set forth as follows: QUARTERLY HIGH-LOW SHARE PRICES 1995 1994 -------------- ---------------- Share Price Share Price Quarter High-Low High-Low ------- -------------- ---------------- 1 9 5/8 -- 7 1/4 15 1/8 -- 11 2 9 1/4 -- 7 1/2 14 -- 11 3 9 -- 6 1/2 12 1/8 -- 8 5/8 4 7 3/4 -- 6 3/8 9 5/8 -- 8 1/4 In September 1993, the Company issued an additional 1,283,000 shares of common stock through a private placement offering, resulting in net proceeds of approximately $11.5 million. On July 10, 1989, the Company sold 960,000 shares of convertible cumulative preferred stock to the Trust of the Company's Retirement Savings Plan (RSP) at the liquidation value of $25 per share, or $24 million. The preferred shares have a dividend rate of 7.75%. The Trustee, who holds the preferred shares, 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 Trustee 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 Trustee, the Company is responsible for purchasing the preferred shares 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. ITEM 6. SELECTED FINANCIAL DATA. The following selected financial data is not covered by the Auditor's Report, but should be read in conjunction with the Consolidated Financial Statements and related Notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 7 SELECTED FINANCIAL DATA TOKHEIM CORPORATION AND SUBSIDIARIES (Amounts in thousands except amounts per share)
1995 1994 1993 -------- -------- -------- OPERATING RESULTS: Net sales ............................................. $221,573 $202,134 $172,306 Cost of products sold (2) ............................. 167,329 154,652 133,326 Equity in net loss of unconsolidated affiliate ........ -- -- -- Earnings (loss) before income taxes, cumulative effect of accounting change, and discontinued operations ... 2,915 2,119 (5,745) Earnings (loss) before income taxes, cumulative effect of accounting change, and discontinued operations percent of sales .................................... 1.3% 1.0% (3.3)% Income taxes........................................... 39 257 122 Earnings (loss) before cumulative effect of accounting change and discontinued operations .................. 2,876 1,862 (5,867) Cumulative effect of accounting change ................ -- (13,416) -- Earnings (loss) from continuing operations ............ 2,876 (11,554) (5,867) Total earnings from discontinued operations ........... -- -- -- Net earnings (loss) ................................... 2,876 (11,554) (5,867) Net earnings (loss) percent of sales .................. 1.3% (5.7)% (3.4)% Dividends paid common ................................. -- -- -- Dividends paid preferred .............................. 1,580 1,617 1,663 PRIMARY PER SHARE: Earnings (loss) from continuing operations before cumulative effect of accounting change .............. .16 .03 (1.09) Cumulative effect of accounting change ............... -- (1.72) -- Discontinued operations ............................... -- -- -- Net earnings (loss) ................................... .16 (1.69) (1.09) FULLY DILUTED PER SHARE: Earnings (loss) from continuing operations before cumulative effect of accounting change .............. .13 .03 (1.09) Cumulative effect of accounting change ................ -- (1.72) -- Discontinued operations ............................... -- -- -- Net earnings (loss) ................................... .13 (1.69) (1.09) Dividends paid per common share ....................... -- -- -- FINANCIAL POSITION: Current assets ........................................ 86,798 80,408 83,139 Current liabilities ................................... 39,545 36,114 53,725 Current ratio ......................................... 2.2 to 1 2.2 to 1 1.5 to 1 Working capital ....................................... 47,253 44,294 29,414 Term debt ............................................. 21,321(5) 18,941(5) 5,374 Guaranteed Employees' Stock Ownership Plan (RSP) obligation .......................................... 14,576 16,975 19,206 Property, plant, and equipment, net ................... 28,558 27,425 29,004 Total assets .......................................... 121,232 113,505 117,065 Stockholders' equity .................................. 27,123 25,116 33,640 Return on average equity .............................. 10.4% (41.8)% (21.3)% Term debt percent of equity ........................... 78.6% 75.4% 16.0% Term debt percent of equity with Guaranteed Employees' Stock Ownership Plan (RSP) obligation .... 132.3% 143.0% 73.1% Primary average number of common shares ............... 7,911 7,801 6,940 Fully diluted average number of common shares ......... 9,820 9,223 8,236 CAPITAL EXPENDITURES AND DEPRECIATION: Capital expenditures .................................. 5,559 2,757 2,503 Depreciation .......................................... 4,216 4,405 4,813
See footnote explanations on page 10. 8 SELECTED FINANCIAL DATA TOKHEIM CORPORATION AND SUBSIDIARIES (AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
1992 (1) 1991 (1) -------- -------- OPERATING RESULTS: Net sales ............................................. $162,089 $167,522 Cost of products sold (2) ............................. 128,690 131,903 Equity in net loss of unconsolidated affiliate ........ -- 754 Earnings (loss) before income taxes, cumulative effect of accounting change, and discontinued operations ... (33,801) (21,954) Earnings (loss) before income taxes, cumulative effect of accounting change, and discontinued operations percent of sales ......................... (20.8)% (13.1)% Income taxes .......................................... 1,383 1,194 Earnings (loss) before cumulative effect of accounting change and discontinued operations .................. (35,184) (23,148) Cumulative effect of accounting change ................ -- -- Earnings (loss) from continuing operations ............ (35,184) (23,148) Total earnings from discontinued operations ........... 10,278 1,402 Net earnings (loss) ................................... (24,906) (21,746) Net earnings (loss) percent of sales .................. (15.4)% (13.0)% Dividends paid common ................................. -- 2,649 Dividends paid preferred .............................. 1,790 1,831 PRIMARY PER SHARE: Earnings (loss) from continuing operations before cumulative effect of accounting change .............. (5.86) (3.96) Cumulative effect of accounting change ................ -- -- Discontinued operations ............................... 1.63 .22 Net earnings (loss) ................................... (4.23) (3.74) FULLY DILUTED PER SHARE: Earnings (loss) from continuing operations before cumulative effect of accounting change .............. (5.86) (3.96) Cumulative effect of accounting change ............... -- -- Discontinued operations ............................... 1.63 .22 Net earnings (loss) ................................... (4.23) (3.74) Dividends paid per common share ....................... -- .42 FINANCIAL POSITION: Current assets ........................................ 83,306 117,586 Current liabilities ................................... 57,752 99,803 Current ratio ......................................... 1.4 to 1 1.2 to 1 Working capital ....................................... 25,554 17,783 Term debt ............................................. 7,674 11,087 Guaranteed Employees' Stock Ownership Plan (RSP) obligation .......................................... 21,280 --(3) Property, plant, and equipment, net ................... 32,851 47,490 Total assets .......................................... 121,588 178,525 Stockholders' equity .................................. 28,621 60,554 Return on average equity .............................. (50.0)% (27.7)% Term debt percent of equity ........................... 26.8% 20.1%(4) Term debt percent of equity with Guaranteed Employees' Stock Ownership Plan (RSP) obligation ............... 101.2% 58.4%(4) Primary average number of common shares ............... 6,307 6,307 Fully diluted average number of common shares ......... 7,236 7,255 CAPITAL EXPENDITURES AND DEPRECIATION: Capital expenditures .................................. 2,045 6,910 Depreciation .......................................... 6,089 6,854
See footnote explanations on page 10. 9 (1) Represents fiscal years' financial information reclassified for discontinued operations (2) Includes product development expenses and excludes depreciation and amortization (3) A component of long-term obligations in technical default in the amount of $23,209 classified as current in 1991 (4) Term debt percent of equity and term debt percent of equity with Guaranteed Employees' Stock Ownership Plan (RSP) includes $1,200 and $24,409 of term obligations in technical default classified as current in 1991 (5) Includes $16,700 in 1995 and $14,700 in 1994 of domestic notes payable classified as long-term 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The continuing improvement during fiscal 1995 in industry demand for petroleum marketing equipment was driven by the development of emerging markets, compliance with U.S. Federal Clean Air Act amendments requiring Stage II vapor recovery, and the desire for increased automation equipment including dispenser payment terminals and point-of-sale systems. In addition, Tokheim's operating performance continued to benefit from new product introductions, strengthened distribution channels, increased international market penetration, and cost- reduction programs which more than offset price deterioration. Net earnings in 1995 were $2.9 million, or $0.13 per fully diluted share, versus $1.9 million, or $0.03 per share, in 1994 before the cumulative effect of a change in accounting, or a 1994 net loss of $11.6 million, or $1.69 net loss per share. In 1993, the net loss amounted to $5.9 million, or $1.09 net loss per share. Fiscal 1995 operating earnings were favorably impacted principally by a $19.4 million increase in sales and improved gross margin on product sales resulting from cost control measures, new product introductions, and product mix improvements. Fiscal 1994 operating earnings were favorably impacted principally by a $29.8 million increase in sales and improved gross margin on product sales. Fiscal 1993 operating earnings were principally impacted by a $10.2 million increase in sales; an improved gross margin on product sales; and lower selling, general, and administrative expenses. Consolidated sales were $221.6 million, an increase of 10% from $202.1 million in 1994 and an increase of 29% from 1993 sales of $172.3 million. Both domestic and international sales contributed to this gain. Domestic sales of petroleum dispensing equipment and systems increased 6% from $119.8 million in fiscal 1994 to $126.7 million in fiscal 1995. International sales were $94.8 million in fiscal 1995, up 15% from fiscal 1994 sales of $82.4 million. The gross margin on product sales for 1995 was 24.5% which was up from the prior year's 23.5% due primarily to higher sales volume and actions taken to improve the Company's cost structure offset, in part, by lower price realization. The gross margin on product sales for 1994 had increased from the 1993 level of 22.6% due primarily to higher sales volume and the impact of cost reduction programs. Selling, general, and administrative expenses as a percentage of net sales in each of the past three years were 19.7% in 1995, compared to 18.9% in 1994 and 20.9% in 1993. The increase in 1995 was attributable to sales promotion efforts to penetrate new markets, costs incurred in connection with reorganization of the European operations, and improvements in information systems. The decrease in 1994 was due to cost reduction efforts and higher sales levels. The combined domestic and international operations incurred operating income of $5.8 million in 1995 compared to $4.6 million in 1994 and an operating loss of $2.3 million in 1993. Net interest expense of $3.3 million increased over 1994 interest of $2.8 million reflecting increased borrowings throughout the year to support higher levels of sales, as well as slightly higher rates. Interest expense in 1994 was $0.6 million less than 1993 reflecting the Company's debt reduction program. Amortization of debt restructuring changes included in interest expense was $0.5 million in 1995 and 1994 and $0.6 million in 1993. A net foreign currency exchange gain of $0.1 million earned in fiscal 1995 was about the same as fiscal 1994. A net foreign currency exchange loss of $0.5 million was incurred in fiscal 1993. The foreign currency gains and losses during these years were primarily a result of fluctuations in the exchange rates on intercompany balances between the Tokheim Corporation parent company and its foreign subsidiaries. The Company's long-term investment in foreign subsidiaries, when translated at fiscal 1995 conversion rates, resulted in a translation adjustment reflected as a $3.5 million charge to stockholders' equity in both 1995 and 1994 versus the comparable 1993 amount of $4.0 million. 11 In fiscal 1995, the Company sold a noncore product line and related assets. Net proceeds were $0.5 million, and a net gain of $0.5 million was realized. The gain has been included in other expense, net in the statement of earnings and retained earnings. Fully diluted net earnings were $0.13 per share in 1995 versus 1994 earnings per share before accounting change of $0.03 and a 1994 net loss of $1.69 per share after accounting change, and a net loss of $1.09 per share incurred in fiscal 1993. The weighted average shares outstanding used in computing fully diluted earnings per share were 9,820,000 in 1995; 7,801,000 in 1994; and 6,940,000 in 1993. No dividends were paid on common stock during fiscal years 1993 through 1995 in accordance with restrictive covenants under the Company's loan agreement. The number of stockholders as of November 30, 1995 was approximately 7,000. Inflation has not had a significant impact on the Company's results of operations. LITIGATION AND ENVIRONMENTAL MATTERS Claims have been brought against the Company and its subsidiaries for various legal matters. In addition, the Company's operations are subject to federal, state, and local environmental laws and regulations. For further details, see Notes to Consolidated Financial Statements No. 16, "Contingent Liabilities." OTHER In the first quarter of 1994, the Company adopted a mandatory noncash accounting change pursuant to Statement of Financial Accounting Standards (SFAS) No. 106 which governs accounting for nonpension retiree benefit costs. SFAS No. 106 requires companies to project the future cost of providing retiree medical, dental, and life insurance benefits and recognize that cost as benefits are earned during the employee's career. Tokheim's actuarially determined liability was $13.4 million which the Company elected to record as a one-time noncash accounting adjustment versus the alternative of amortizing the amount over a period not to exceed 20 years. At November 30, 1995, the Company's accrual was $14.8 million. Adoption of the new accounting standard had no cash flow effect nor did it represent a change with respect to previous fiscal years in the benefit levels provided to employees. The Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," in the first quarter of 1995. This statement requires an accrual method of accounting for the expected cost of benefits to be paid to former or inactive employees and their covered dependents after employment but prior to retirement. Adoption of the new accounting standard did not have a material impact on the Company's financial position, cash flows, or results of operations, nor did it represent a change in the benefit levels provided to employees. SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," is effective for the year ending November 30, 1997. In the opinion of management, this statement is not expected to impact the Company's financial position or results of operations. SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for the year ending November 30, 1997. The Company has not decided how it intends to apply the accounting and disclosure provisions of this statement. LIQUIDITY AND CAPITAL RESOURCES The Company has available to it a variety of sources of liquidity and capital resources, both internal and external. These resources provide funds required for current operations, debt retirement, capital expenditures, and other requirements. On April 22, 1994, the Company completed a refinancing of its loan agreement which was to have matured on December 1, 1994. The three-year domestic revolving credit agreement which matures on April 21, 1997 is collateralized by substantially all of the unencumbered domestic assets of the Company and its subsidiaries. In addition, the Company in 1994 completed a refinancing of the previous loan agreement for its German subsidiary. 12 Availability of revolving credit under these agreements is subject to borrowing base requirements and compliance with covenants as described below. The Company was in full compliance with all covenants as of November 30, 1995. Restrictions and financial covenants of the agreements include those related to indebtedness, net worth, cash flow coverage, and the ratio of current assets to current liabilities. The domestic credit facility prohibited the payment of cash dividends on common stock through fiscal year 1994. Beyond fiscal 1994, dividends on common stock are limited by a cash flow coverage test and a net income test. In 1995, dividends on common stock were prohibited by these tests. Cash provided from operations was $3.2 million in 1995 compared to $2.4 million in 1994 and a deficit of $5.0 million in 1993. The increases in 1995 and 1994, relative to the previous year, reflect the increase in operating earnings and continued improvement in working capital management. The Company's investing activities are generally for capital expenditures which amounted to $5.6 million in 1995, $2.8 million in 1994, and $2.5 million in 1993. In 1995, the Company received proceeds from sales of property, plant, and equipment of $0.6 million versus $0.2 million and $2.4 million in 1994 and 1993, respectively. At November 30, 1995, no significant contractual commitments existed for future capital expenditures. Prior to fiscal 1995 year-end, the Board of Directors approved capital expenditures of approximately $12.8 million for improvements in plant productivity and capacity, product design, and quality of both products and processes. The Company is evaluating various sources to fund these expenditures and does not foresee any difficulty obtaining adequate funding. Financing activities in 1995 were limited to normal business transactions. Financing activities in 1994 primarily resulted in a $5.7 million reduction in debt which aggregated $38.8 million at November 30, 1994 versus $44.5 million at November 30, 1993. Financing activities in 1993 included the issuance of 1,283,000 shares of common stock in a private placement with institutional investors, raising a net of $11.5 million of new equity capital. The Company reduced its debt during 1993 by $13.4 million from November 30, 1992. Peak short-term borrowings were $19.9 million in 1995, $18.4 million in 1994, and $25.0 million in 1993. The weighted average interest rate for these borrowings was approximately 8.6% in 1995, 8.1% in 1994, and 8.9% in 1993. Preferred stock dividends paid were $1.6 million, $1.6 million, and $1.7 million in fiscal years 1995, 1994, and 1993, respectively. Cash and cash equivalents at November 30, 1995 aggregated $3.0 million versus $3.9 million at November 30, 1994. Working capital at November 30, 1995 increased $3.0 million over the prior year as a result of higher accounts receivable, partially offset by an increase in current liabilities and a decrease in cash and cash equivalents. The Company's current ratio at November 30, 1995 and 1994 was 2.2. The Company has guaranteed loans to its Retirement Savings Plan in the amounts of $14.6 million and $17.0 million at November 30, 1995 and 1994, respectively. The Company has guaranteed a $25 per share value for its convertible preferred stock. If redeemed by the Trustee, the Company is responsible for purchasing the preferred shares at the $25 floor value. The Company may elect to pay the redemption price in cash or an equivalent amount of Common Stock. Total interest-bearing debt as a percent of equity for 1995 was 142% compared to 155% for 1994. The decrease in 1995 is primarily due to a reduction in Guaranteed Employees' Stock Ownership Plan Obligation, reduction in common treasury stock, and increased retained earnings. In summary, the Company believes that it has adequate financial resources, both from internal and external sources, to meet its liquidity needs over the next 12 months and on a long-term basis. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS TOKHEIM CORPORATION AND SUBSIDIARIES FOR THE YEARS ENDED NOVEMBER 30, 1995, 1994, AND 1993 (Amounts in thousands except amounts per share)
1995 1994 1993 -------- -------- -------- Net sales................................................... $221,573 $202,134 $172,306 Cost of sales, exclusive of items listed below.............. 167,329 154,652 133,326 Selling, general, and administrative expenses............... 43,631 38,193 36,071 Depreciation and amortization............................... 4,857 4,672 5,233 Interest expense (net of interest income of $269, $252, and $369, respectively)....................... 3,319 2,806 3,443 Foreign currency (gains) losses............................ (143) (172) 453 Other income, net........................................... (335) (136) (475) -------- -------- -------- Earnings (loss) before income taxes and cumulative effect of change in accounting.......................... 2,915 2,119 (5,745) Income taxes................................................ 39 257 122 -------- -------- -------- Earnings (loss) before cumulative effect of change in accounting............................................ 2,876 1,862 (5,867) Cumulative effect of change in method of accounting for postretirement benefits other than pensions.............. -- (13,416) -- -------- -------- -------- Net earnings (loss)......................................... 2,876 (11,554) (5,867) Preferred stock dividends ($1.94 per share)................. (1,580) (1,617) (1,663) -------- -------- -------- Earnings (loss) applicable to common stock.................. 1,296 (13,171) (7,530) Retained earnings, beginning of year........................ 9,279 22,829 31,733 Treasury stock transactions................................. (860) (379) (1,374) -------- -------- -------- Retained earnings, end of year.............................. $ 9,715 $ 9,279 $ 22,829 ======== ======== ======== Earnings (loss) per common share: Primary: Before cumulative effect of change in method of accounting..................................... $ .16 $ .03 $ (1.09) Cumulative effect of change in method of accounting for postretirement benefits other than pensions...... -- (1.72) -- -------- -------- -------- Net earnings (loss).................................. $ .16 $ (1.69) $ (1.09) ======== ======== ======== Weighted average shares outstanding.................. 7,911 7,801 6,940 ======== ======== ======== Fully Diluted: Before cumulative effect of change in method of accounting..................................... $ .13 $ .03 $ (1.09) Cumulative effect of change in method of accounting for postretirement benefits other than pensions...... -- (1.72) -- -------- -------- -------- Net earnings (loss).................................. $ .13 $ (1.69) $ (1.09) ======== ======== ======== Weighted average shares outstanding.................. 9,820 7,801 6,940 ======== ======== ========
The accompanying notes are an integral part of the financial statements. 14 CONSOLIDATED STATEMENT OF CASH FLOWS TOKHEIM CORPORATION AND SUBSIDIARIES FOR THE YEARS ENDED NOVEMBER 30, 1995, 1994, AND 1993 (Amounts in thousands)
1995 1994 1993 ------- -------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)........................................ $ 2,876 $(11,554) $(5,867) Adjustments to reconcile net earnings (loss) to net cash provided from (used in) operations: Cumulative effect of change in method of accounting for postretirement benefits other than pensions........................................ -- 13,416 -- Depreciation and amortization............................. 4,857 4,672 5,233 (Gain) loss on sale of property, plant, and equipment..... (436) (23) 446 Deferred income taxes..................................... (33) (903) (830) Changes in assets and liabilities: Receivables, net...................................... (6,140) (1,260) (7,999) Inventories........................................... 444 (300) (590) Prepaid expenses...................................... (877) 229 (202) Accounts payable...................................... 1,648 (3,694) 7,277 Accrued expenses...................................... 2,132 2,486 (4,223) U.S. and foreign income taxes......................... (349) 55 759 Other................................................. (900) (716) 957 ------- -------- ------- Net cash provided from (used in) operations................ 3,222 2,408 (5,039) ------- -------- ------- CASH FLOWS FROM INVESTING AND OTHER ACTIVITIES: Property, plant, and equipment additions................... (5,559) (2,757) (2,503) Proceeds from sale of property, plant, and equipment....... 649 195 2,427 ------- -------- ------- Net cash used in investing and other activities............ (4,910) (2,562) (76) ------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from term debt.................................... 2,122 485 -- Payments on term debt...................................... (819) (3,889) (2,176) Net increase (decrease) notes payable, banks............... 559 (522) (9,166) Proceeds from issuance of common stock..................... -- 49 11,485 Treasury stock, net........................................ 273 431 427 Preferred stock dividends.................................. (1,580) (1,617) (1,663) ------- -------- ------- Net cash provided from (used in) financing activities..... 555 (5,063) (1,093) ------- -------- ------- EFFECT OF TRANSLATION ADJUSTMENT ON CASH.................... 166 53 (212) ------- -------- ------- CASH AND CASH EQUIVALENTS: Decrease in cash........................................... (967) (5,164) (6,420) Beginning of year.......................................... 3,933 9,097 15,517 ------- -------- ------- End of year................................................ $ 2,966 $ 3,933 $ 9,097 ======= ======== =======
The accompanying notes are an integral part of the financial statements. 15 CONSOLIDATED BALANCE SHEET TOKHEIM CORPORATION AND SUBSIDIARIES AS OF NOVEMBER 30, 1995 AND 1994 (Amounts in thousands)
ASSETS 1995 1994 ------- -------- Current assets: Cash and cash equivalents.................................. $ 2,966 $ 3,933 Accounts receivable, less allowance for doubtful accounts of $1,150 and $1,295, respectively....................... 45,649 38,812 Inventories: Raw materials and supplies................................ 7,649 7,697 Work in process........................................... 25,535 25,675 Finished goods............................................ 4,911 4,729 -------- ------- 38,095 38,101 Less amounts necessary to reduce certain inventories to LIFO method........................................... 3,100 2,746 -------- ------- 34,995 35,355 Prepaid expenses........................................... 3,188 2,308 -------- ------- Total current assets...................................... 86,798 80,408 Property, plant, and equipment, at cost: Land and land improvements................................ 3,311 3,232 Buildings and building improvements....................... 22,716 22,150 Machinery and equipment................................... 57,138 55,268 Construction in progress.................................. 2,867 1,166 -------- ------- 86,032 81,816 Less accumulated depreciation............................. 57,474 54,391 -------- ------- 28,558 27,425 Other noncurrent assets and deferred charges............... 5,876 5,672 -------- -------- $121,232 $113,505 ======== ========
The accompanying notes are an integral part of the financial statements. 16 CONSOLIDATED BALANCE SHEET (CONTINUED) TOKHEIM CORPORATION AND SUBSIDIARIES AS OF NOVEMBER 30, 1995 AND 1994 (Amounts in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994 -------- -------- Current liabilities: Current maturities of long-term debt.......................... $ 351 $ 1,248 Notes payable to banks........................................ 2,364 1,661 Accounts payable.............................................. 18,689 16,215 Accrued expenses.............................................. 18,141 16,990 -------- -------- Total current liabilities................................... 39,545 36,114 Long-term debt, less current maturities........................ 21,321 18,941 Guaranteed Employees' Stock Ownership Plan (RSP) obligation.................................................... 14,576 16,975 Postretirement benefit liability............................... 13,882 13,512 Minimum pension liability...................................... 3,868 1,906 Other long-term liabilities.................................... 110 150 Deferred income taxes.......................................... 807 791 -------- -------- 94,109 88,389 -------- -------- 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 (RSP) obligation.................................................... (13,790) (15,733) Treasury stock, at cost, 151 and 130 shares, respectively...... (3,784) (3,262) -------- -------- 6,426 5,005 -------- -------- Preferred stock, no par value; 3,300 shares authorized and unissued...................................................... -- -- Common stock, no par value; 30,000 shares authorized, 7,949 shares issued........................................... 19,409 19,410 Guaranteed Employees' Stock Ownership Plan (RSP) obligation.................................................... (786) (1,242) Minimum pension liability...................................... (3,868) (1,906) Foreign currency translation adjustments....................... (3,542) (3,543) Retained earnings.............................................. 9,715 9,279 -------- -------- 20,928 21,998 Treasury stock, at cost, 13 and 106 shares, respectively....... (231) (1,887) -------- -------- 20,697 20,111 -------- -------- $121,232 $113,505 ======== ========
The accompanying notes are an integral part of the financial statements. 17 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 subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. TRANSLATION OF FOREIGN CURRENCY -- The financial position and results of operations of the Company's foreign subsidiaries are measured using local currency as the functional currency. Revenues and expenses of such subsidiaries have been translated at average exchange rates. Assets and liabilities have been translated at year-end rates of exchange. Translation gains and losses are being deferred as a separate component of stockholders' equity, unless there is a sale or liquidation of the underlying foreign investments. The Company has no present plans for the sale or liquidation of significant investments to which these deferrals relate. Aggregate foreign currency transaction gains and losses are included in determining net earnings. INVENTORY VALUATION -- Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for the major portion of United States inventories and the first-in, first-out (FIFO) method for most other inventories. Inventories valued using the LIFO method amounted to approximately $28,590 and $27,988 on a FIFO basis and $25,490 and $25,242 on a LIFO basis at November 30, 1995 and 1994, respectively. PROPERTY AND DEPRECIATION -- Depreciation of plant and equipment is determined generally 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 the 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 expense, net in the statement of earnings and retained earnings. SOFTWARE DEVELOPMENT COSTS -- Amortization of capitalized software costs is provided over the estimated economic useful life of the software product on a straight-line basis, generally three years. Unamortized software costs included in other noncurrent assets were $543 and $76 at November 30, 1995 and 1994, respectively. The amounts amortized and charged to expense in 1995, 1994, and 1993 were $109, $220, and $382, respectively. All other product development expenditures are charged to research and development expense in the period incurred. These expenses amounted to $12,746; $10,239; and $8,625 in 1995, 1994, and 1993, respectively. INCOME TAXES -- The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," effective December 1, 1993. In 1993, the Company accounted for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes." The provision for income taxes includes federal, foreign, state, and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. No additional U.S. income taxes or foreign withholding taxes have been provided on earnings of foreign subsidiaries which are expected to be reinvested indefinitely. A determination of the tax liability associated with repatriation of these earnings has not been made as it is not practical. Additional income and withholding taxes are provided, however, on planned repatriations of foreign earnings. 18 POSTEMPLOYMENT BENEFITS -- The Company adopted Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," in the first quarter of 1995. This statement requires an accrual method of accounting for the expected cost of benefits to be paid to former or inactive employees and their covered dependents after employment but prior to retirement. The adoption of this statement did not have a material impact on the Company's financial position, cash flows, or results of operations. PRODUCT WARRANTY COSTS -- Anticipated costs related to product warranty are expensed in the period of sales. CASH FLOWS -- For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of 90 days or less to be cash equivalents. Supplemental disclosures of cash flow information:
1995 1994 1993 ------ ------ ------ Cash paid during the year for: Interest.................................................. $3,060 $2,441 $3,273 Income taxes.............................................. 926 894 1,352 Noncash transactions primarily related to the issuance of treasury stock in settlement of Retirement Savings Plan distributions..................................... 976 612 1,374 Noncash adjustments to certain assets and liabilities in connection with the settlement of the corporate reorganization......................................... 383 224 1,400
ACCOUNTING PRONOUNCEMENTS SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," is effective for the year ending November 30, 1997. In the opinion of management, this statement is not expected to impact the Company's financial position or results of operations. SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for the year ending November 30, 1997. The Company has not decided how it intends to apply the accounting and disclosure provisions of this statement. RECLASSIFICATION -- Certain prior year amounts in these financial statements have been reclassified to conform with current year presentation. 2. ACCRUED EXPENSES Accrued expenses consisted of the following at November 30, 1995 and 1994:
1995 1994 ------- ------- Salaries, wages, and commissions.......................... $ 4,308 $ 3,930 Compensated absences...................................... 3,480 3,391 Retirement plan contributions............................. 516 915 Postretirement benefits................................... 887 697 Warranty.................................................. 2,821 2,506 Legal and professional.................................... 1,525 1,274 Taxes, other than United States and foreign income taxes.. 1,304 1,487 Insurance................................................. 440 651 Other..................................................... 2,860 2,139 ------- ------- $18,141 $16,990 ======= =======
19 3. NOTES PAYABLE TO BANKS Notes payable to banks represent short-term borrowings under domestic and foreign credit lines. In 1995, aggregate amounts outstanding under these lines were $19,064 of which $16,700 has been classified as long-term debt since the Company has the ability, under the terms of the agreement, and the intent to finance these obligations beyond one year. Domestic and foreign credit lines totaled approximately $30,458 of which $11,394 was unused at November 30, 1995. Availability of revolving credit under these agreements is subject to borrowing base requirements and compliance with covenants. The weighted average annual interest rate was 8.6% and 8.1% for 1995 and 1994, respectively. The range of domestic and foreign rates at November 30, 1995 and 1994 was 7.1% to 9.8% and 7.3% to 11.8%, respectively. On April 22, 1994, the Company completed a refinancing of its domestic loan agreement which was to have matured on December 1, 1994. The three-year domestic revolving credit agreement which matures on April 21, 1997 is collateralized by substantially all of the unencumbered domestic assets of the Company and its subsidiaries. In July 1994, the Company completed a refinancing of the previous loan agreement for its German subsidiary. The credit agreement which matures on March 31, 1996 is collateralized by substantially all of the assets of the subsidiary. Each of the debt agreements contains various restrictions relating to, among other things, net worth, leverage, cash flow coverage, incurrance of additional debt, and transactions in the Company's own stock. In addition, the domestic credit facility prohibited the payment of cash dividends on common stock through 1994. Beyond 1994, dividends on common stock are limited by a cash flow coverage test and a net income test. In 1995, dividends on common stock were prohibited by these tests. 20 4. TERM DEBT AND GUARANTEED EMPLOYEES' STOCK OWNERSHIP PLAN (RSP) OBLIGATION Term debt at November 30, 1995 and 1994 consisted of the following:
1995 1994 ------- ------- Industrial Revenue Bonds, variable rate, maturing in 2006, rate of 4.1% at November 30, 1995 (a)(b).............................. $ 4,000 $ 4,500 3.5% German Bonds, due in $49 semiannual installments through 1998 (a)......................................... 292 359 Note payable, variable rate, due in monthly installments ranging from $4 to $8 through 1999, rate of 18.5% at November 30, 1995(a).......... 253 313 Capital lease obligations, variable rate, due in $1 monthly installments through 1998, rate of 18.5% at November 30, 1995(a)...... 168 -- 9.2% Capital lease obligation, due in $4 monthly installments through 1997 (a)......................................... 70 114 10.9% Capital lease obligation, due in $2 monthly installments though 1997(a)........................................... 44 -- Revolving credit facility, variable rate, maturing April 21, 1997, rates ranging from 8.8% to 9.8% at November 30, 1995(b)............... 16,700 14,700 Other, 3% to 14% (a)................................................... 145 203 ------- ------- 21,672 20,189 Less: Current maturities.............................................. 351 1,248 ------- ------- $21,321 $18,941 ======= =======
Guaranteed Employees' Stock Ownership Plan (RSP) obligation at November 30, 1995 and 1994 consisted of the following:
1995 1994 ------- ------- Guaranteed Employees' Stock Ownership Plan (RSP) obligation, variable rate, annual maturities of $1,506 to $2,845, due in quarterly installments through 2001, rate of 7.5% at November 30, 1995(b)........ $13,790 $15,733 Guaranteed Employees' Stock Ownership Plan (RSP) obligation, variable rate, annual maturities of $484 to $303, through 1997, rate of 8.5% at November 30, 1995(b).................................................... 786 1,242 ------- ------- $14,576 $16,975 ======= =======
(a) Aggregate cost of plant and equipment pledged as collateral under revenue bonds and lease obligations is $10,558. (b) Per the domestic revolving credit agreement as described in Note 3, the term obligation matures on April 21, 1997. Any extension of the facility beyond April 21, 1997 is at the discretion of the lenders. Aggregate scheduled maturities of the above term debt and Guaranteed Employees' Stock Ownership Plan (RSP) obligation during the ensuing four years approximate $2,932; $29,128; $140; and $48, respectively. 21 5. OPERATING LEASES The Company leases certain manufacturing equipment, office equipment, vehicles, and office and warehousing space under operating leases. These leases generally expire in periods ranging from one to five years. In 1995 the Company leased a CAD/CAM system. The lease is effective for a term of three years with an interest rate of 12% and monthly rentals ranging from $55 to $68. The lease contains a fair market value purchase option at the end of the lease term. Amounts charged to expenses under operating leases in 1995, 1994, and 1993 were $1,986; $1,077; and $1,144, respectively. Minimum rental payments under noncancelable operating leases during the ensuing five years approximate $1,448; $1,211; $307; $145; and $190, respectively. 6. STOCK OPTION PLANS The Company has three separate Stock Option Plans, as outlined below: 1992 Stock Incentive Plan (SIP) - ------------------------------- The Plan contains both incentive stock options (ISOs) and nonqualified 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 Common Stock on the date the option is granted. Options granted under this Plan become exercisable at the rate of approximately 25% of the total options granted per year beginning one year after the grant date. No option expires later than 10 years from the date on which it was granted. In addition, the Plan provides for the granting of Stock Appreciation Rights (SARs) and Restricted Stock Awards (RSAs). At November 30, 1995, no SARs or RSAs had been granted. 1982 Incentive Stock Option Plan (ISOP) and 1982 Unqualified Stock Option Plan (USOP) - ----------------------------------------- Effective January 21, 1992, no additional shares could be granted under these plans. No option expires later than 10 years from the date on which it was granted. The price of each share under the ISOP was not less than the fair market value of Tokheim 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 Common Stock on the date the option was granted. Options granted under the SIP during 1995, 1994, and 1993 are as follows:
1992 Stock Incentive Plan Year of ------------------------- Grant ISO NSO - ----------- --- --- 1995 35,000 -- 1994 19,000 -- 1993 275,162 41,288
Subsequent to November 30, 1995, an additional 43,000 ISO shares were granted under the SIP at an option price of $7.125 per share. These shares become exercisable starting in 1997. 22 The following table sets forth the status of all outstanding options at November 30, 1995:
Option Exercisable Total Price Per Options In The Next One Options Share Exercisable To Four Years Outstanding ------------ ------------ --------------- ----------- $20.0000 28,225 -- 28,225 $12.3750 3,000 -- 3,000 $12.2500 1,000 -- 1,000 $11.9375 2,875 8,625 11,500 $ 9.3750 12,500 12,500 25,000 $ 8.8800 107,470 -- 107,470 $ 8.5000 -- 35,000 35,000 $ 7.8750 15,000 -- 15,000 $ 7.7500 30,000 -- 30,000 $ 6.8750 15,000 -- 15,000 $ 6.8125 95,070 116,076 211,146 ------- ------- ------- 310,140 172,201 482,341 ======= ======= ======= Transactions in stock options under these plans are summarized as follows: Shares Under Option Price Range ------- --------------- Outstanding, November 30, 1992...... 344,750 $ 6.88 - $20.00 Granted............................. 316,450 $ 6.81 - $ 9.38 Exercised........................... (14,797) $ 8.88 - $ 8.88 Canceled or expired................. (80,675) $ 7.75 - $20.00 ------- Outstanding, November 30, 1993...... 565,728 $ 6.81 - $20.00 Granted............................. 19,000 $10.75 - $11.94 Exercised........................... (29,950) $ 6.81 - $ 8.88 Canceled or expired................. (12,250) $ 8.88 - $20.00 ------- Outstanding, November 30, 1994...... 542,528 $ 6.81 - $20.00 Granted............................. 35,000 $ 8.50 Exercised........................... -- Canceled or expired................. (95,187) $ 6.81 - $20.00 ------- Outstanding, November 30, 1995...... 482,341 $ 6.81 - $20.00 ======= Reserved for options: Shares - -------------------------- ------- November 30, 1993........ 112,550 November 30, 1994........ 98,550 November 30, 1995........ 95,462
23 7. COMMON AND PREFERRED STOCK Changes in common stock and common treasury stock are shown below:
Common Stock Common Treasury Stock -------------------------------- --------------------------- Shares Amount Shares Amount -------------- ---------------- ------------ ----------- Balance, November 30, 1992..................................... 6,659,000 $ 8,258 352,000 $ 6,335 Shares issued in private placement............................. 1,283,000 11,485 -- -- Shares purchased............................................... -- -- 7,000 81 Stock options exercised........................................ -- (149) (15,000) (265) Redemption of preferred stock.................................. -- -- (132,000) (2,368) Employee termination benefits.................................. -- -- (21,000) (380) --------- ------- -------- ------- Balance, November 30, 1993..................................... 7,942,000 19,594 191,000 3,403 Shares purchased............................................... -- -- -- 3 Stock options exercised........................................ 7,000 (184) (22,000) (405) Redemption of preferred stock.................................. -- -- (48,000) (852) Employee termination benefits.................................. -- -- (13,000) (230) Other.......................................................... -- -- (2,000) (32) --------- ------- -------- ------- Balance, November 30, 1994..................................... 7,949,000 19,410 106,000 1,887 Redemption of preferred stock.................................. -- -- (67,000) (1,196) Employee termination benefits.................................. -- -- (24,000) (427) Other.......................................................... -- (1) (2,000) (33) --------- ------- -------- ------- Balance, November 30, 1995..................................... 7,949,000 $19,409 13,000 $ 231 ========= ======= ======== =======
Changes in preferred stock and preferred treasury stock are shown below:
Preferred Preferred Stock Treasury Stock ------------------------- ---------------------- Shares Amount Shares Amount -------------- ---------- --------- -------- Balance, November 30, 1992..................................... 960,000 $24,000 66,000 $ 1,658 Shares redeemed................................................ -- -- 46,000 1,131 --------- ------- ------- ------- Balance, November 30, 1993..................................... 960,000 24,000 112,000 2,789 Shares redeemed................................................ -- -- 22,000 562 RSP contributions............................................. -- -- (4,000) (89) --------- ------- -------- ------- Balance, November 30, 1994..................................... 960,000 24,000 130,000 3,262 Shares redeemed................................................ -- -- 29,000 720 RSP contributions.............................................. -- -- (8,000) (197) --------- ------- ------- ------ Balance, November 30, 1995..................................... 960,000 $24,000 151,000 $3,785 ========= ======= ======= ======
24 In September 1993, the Company issued an additional 1,283,000 shares of common stock through a private placement offering, resulting in net proceeds of approximately $11,485. On July 10, 1989, the Company sold 960,000 shares of convertible cumulative preferred stock to the Trust of the Company's Retirement Savings Plan (RSP) at the liquidation value of $25 per share or $24,000. The preferred shares have a dividend rate of 7.75%. The Trustee, who holds the preferred shares, 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 Trustee 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 Trustee, the Company is responsible for purchasing the preferred shares 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 footnote 14 for further discussion on the preferred stock. 8. EARNINGS PER SHARE Primary earnings per share are based on the weighted average number of shares outstanding during each year and the assumed exercise of dilutive employees' stock options less the number of treasury shares assumed to be purchased from the proceeds using the average market price of the Company's common stock. The following table presents information necessary to calculate earnings (loss) per share for fiscal years ended November 30, 1995, 1994, and 1993:
Primary ----------------------------- 1995 1994 1993 -------- --------- -------- Shares outstanding (in thousands): Weighted average outstanding......................... 7,893 7,801 6,891 Share equivalents.................................... 18 -- 49 ------- -------- ------- Adjusted outstanding................................. 7,911 7,801 6,940 ======= ======== ======= Net earnings (loss): Before cumulative effect of change in method of accounting.................................... $ 2,876 $ 1,862 $(5,867) Cumulative effect of change in method of accounting for postretirement benefits other than pensions.. -- (13,416) -- ------- -------- ------- Net earnings (loss).................................. 2,876 (11,554) (5,867) Preferred stock dividends............................ (1,580) (1,617) (1,663) ------- -------- ------- Earnings (loss) applicable to common stock........... $ 1,296 $(13,171) $(7,530) ======= ======== ======= Net earnings (loss) per common share: Before cumulative effect of change in method of accounting....................................... $ .16 $ .03 $ (1.09) Cumulative effect of change in method of accounting for postretirement benefits other than pensions.. -- (1.72) -- ------- -------- ------- Net earnings (loss).................................. $ .16 $ (1.69) $ (1.09) ======= ======== =======
25 For 1994 and 1993, fully diluted earnings per share is considered to be the same as primary earnings per share, since the effect of certain potentially dilutive securities would be antidilutive.
Fully Diluted -------------------------------- 1995 1994 1993 ------- -------- ------- Shares outstanding (in thousands): Weighted average outstanding......................................... 7,893 7,801 6,891 Share equivalents.................................................... 18 -- 49 Weighted conversion of preferred stock............................... 1,909 -- -- ------- -------- ------- Adjusted outstanding................................................. 9,820 7,801 6,940 ======= ======== ======= Net earnings (loss): Before cumulative effect of change in method of accounting.......................................................... $ 2,876 $ 1,862 $(5,867) Cumulative effect of change in method of accounting for postretirement benefits other than pensions.................... -- (13,416) -- ------- -------- ------- Net earnings (loss).................................................. 2,876 (11,554) (5,867) Incremental RSP expense.............................................. (1,580) (1,617) (1,663) ------- -------- ------- Earnings (loss) applicable to common stock.......................... $ 1,296 $(13,171) $(7,530) ======= ======== ======= Net earnings (loss) per common share: Before cumulative effect of change in method of accounting.......................................................... $ .13 $ 0.03 $ (1.09) Cumulative effect of change in method of accounting for postretirement benefits other than pensions..................... -- (1.72) -- ------- -------- ------- Net earnings (loss).................................................. $ .13 $ (1.69) $ (1.09) ======= ======== ======= 9. FOREIGN CURRENCY TRANSLATION ADJUSTMENTS Consolidated foreign currency translation adjustments are as follows: 1995 1994 ------- -------- Foreign currency translation adjustments, beginning of year............ $(3,543) $ (4,037) Current year adjustments............................................... 1 494 ------- -------- Foreign currency translation adjustments, end of year.................. $(3,542) $ (3,543) ======= ========
The adjustments represent principally the effect of changes in the current rate of exchange from the beginning of the year to the end of the year in translating the net assets, including certain intercompany amounts of foreign subsidiaries. 26 10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for 1995 and 1994 is as follows:
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total -------- ------- ------- ------- -------- 1995 - ---- Net sales.................................. $ 45,845 $54,127 $52,935 $68,666 (D) $221,573 Cost of products sold(A)................... 36,413 40,554 40,577 49,785 167,329 Net earnings (loss)........................ (1,363) 526 (941) (B) 4,654 (C) 2,876 Earnings (loss) per share: Primary: Net earnings (loss)................... (.22) .02 (.17) .54 .16 Fully diluted: Net earnings (loss)................... (.22) .01 (.17) .42 .13 1994 - ------ Net sales.................................. $ 45,236 $49,908 $47,931 $59,059 (D) $202,134 Cost of products sold(A)................... 34,511 37,246 37,610 45,285 154,652 Earnings (loss) before cumulative effect of change in accounting................. 155 1,151 (1,473) 2,029 1,862 Cumulative effect of change in method of accounting for postretirement benefits other than pensions..................... (13,416) -- -- -- (13,416) Net earnings (loss)........................ (13,261) 1,151 (1,473) 2,029 (11,554) Earnings (loss) per share: Primary: Before cumulative effect of change in accounting....................... (.03) .10 (.24) .21 .03 Cumulative effect of change in method of accounting for postretirement benefits other than pensions........ (1.73) -- -- -- (1.72) Net earnings (loss).................... (1.76) .10 (.24) .21 (1.69) Fully diluted: Before cumulative effect of change in accounting....................... (.03) .08 (.24) .17 .03 Cumulative effect of change in method of accounting for postretirement benefits other than pensions........ (1.73) -- -- -- (1.72) Net earnings (loss).................... (1.76) .08 (.24) .17 (1.69)
(A) Includes product development expenses and excludes depreciation and amortization. (B) Includes $0.5 million nonrecurring operating expense in connection with developing and implementing an earnings improvement plan for the Company's international operations. (C) Includes a net gain of $0.5 million on the sale of a noncore product line and related assets. (D) Sales of petroleum dispenser equipment have historically been seasonal. Approximately 30% of Tokheim's annual net sales volume is recorded in the fourth quarter of its fiscal year, with no significant variation among the other three quarters. 27 11. INCOME TAXES Effective December 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the Company's financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Financial statements for the prior years have not been restated as the cumulative effect of the accounting change was not material to net earnings. Earnings (loss) before income taxes consist of the following:
1995 1994 1993 ------- ------- ------- Domestic................................................... $ 8,591 $ 6,456 $(5,842) Foreign.................................................... (5,676) (4,337) 97 ------- ------- ------- $ 2,915 $ 2,119 $(5,745) ======= ======= ======= Income tax provision (benefit) consists of the following: 1995 1994 1993 ------- ------- ------- Current: Federal................................................... $ (272) $ -- $ -- State..................................................... 249 673 723 Foreign................................................... 132 409 49 Deferred: Foreign................................................... (70) (825) (650) ------- ------- ------- $ 39 $ 257 $ 122 ======= ======= =======
A reconciliation of the reported tax expense and the amount computed by applying the statutory United States federal income tax rate of 35% for November 30, 1995 and 34% for November 30, 1994 and 1993 to earnings before income taxes is as follows:
1995 1994 1993 -------- -------- --------- Computed "expected" tax expense (benefit).......... $ 1,020 $ 721 $(1,953) Increase (decrease) in taxes resulting from: State income taxes net of federal tax benefit... 162 444 477 Tax effect of dividends paid on stock held in Retirement Savings Plan (RSP)................ (553) (550) (565) Settlement of prior income tax returns and adjustments to prior year accruals........... (599) 237 -- Difference in foreign and U.S. tax rates........ (6) (104) (37) Decrease in valuation allowance................. (2,099) (1,492) -- Earnings with no current tax benefit(expense): Domestic..................................... -- -- 1,339 Foreign...................................... 1,985 1,089 (219) Repatriation of foreign earnings................ 41 (162) 677 Miscellaneous items, net........................ 88 74 403 ------- ------- ------- $ 39 $ 257 $ 122 ======= ======= =======
28 Prior to the change in accounting method, the nature of temporary differences giving rise to deferred income taxes (benefit) and the tax effect of each during 1993 was as follows:
1993 -------- Federal: Depreciation............................................ $ 149 Warranty costs.......................................... (14) Provision for doubtful accounts......................... 38 Pension costs........................................... (37) Inventory reserves...................................... (717) Insurance reserves...................................... (54) Restructuring charge.................................... 1,060 Software development costs.............................. (112) Other................................................... (313) -------- Deferred federal income taxes (benefit) from continuing operations.............................. $ -- ======== Foreign: Repatriation of foreign earnings........................ $ (500) Other................................................... (150) -------- $ (650) ========
The components of the deferred tax asset and liability as of November 30, 1995 and 1994 were as follows:
1995 1994 -------- -------- Gross deferred tax assets: Accounts receivable..................................... $ 187 $ 322 Employee compensation and benefit accruals.............. 6,198 5,949 Workers' compensation and other claims.................. 153 215 Other................................................... 58 184 Warranty accrual........................................ 946 818 EPA accrual............................................. 315 308 Net operating loss carryforwards........................ 9,430 12,171 General business credit................................. 295 5 Valuation allowance..................................... (15,654) (17,753) -------- -------- Total deferred tax asset.............................. $ 1,928 $ 2,219 -------- -------- Gross deferred tax liabilities: Property, plant, and equipment.......................... $ 1,424 $ 1,479 Pension assets.......................................... 253 151 Inventory............................................... (217) 201 Investment in property.................................. 214 208 Foreign earnings not permanently invested............... 202 161 Foreign exchange........................................ 236 236 Export sales provision.................................. 623 574 -------- -------- Total deferred tax liability.......................... 2,735 3,010 -------- -------- Net deferred tax liability................................ $ (807) $ (791) ======== ========
For domestic federal income tax purposes, the Net Operating Loss (NOL) carryover amounts to $26,942 and will expire from 2006 to 2008. For purposes of the Alternative Minimum Tax (AMT), the NOL carryover is $13,626 and the credit carryforwards total $295. 29 12. GEOGRAPHICAL SEGMENTS Domestic and foreign operations information for 1995, 1994, and 1993 is as follows:
1995 1994 1993 ---------- ---------- ---------- Net sales--unaffiliated customers: Domestic............................. $126,738 $119,774 $ 99,317 Export............................... 36,238 28,848 25,036 Foreign: Europe...................... 35,829 34,534 22,858 Other....................... 22,768 18,978 25,095 -------- -------- -------- $221,573 $202,134 $172,306 ======== ======== ======== Inter-area sales eliminations: Domestic............................. $ 17,732 $ 16,904 $ 11,098 ======== ======== ======== Foreign, principally Europe.......... $ 47 $ 207 $ 120 ======== ======== ======== Operating income (loss): Domestic............................. $ 8,945 $ 7,156 $ (4,295) Foreign: Europe..................... (4,232) (2,971) (1,025) Other...................... (399) (882) 1,393 Adjustments and eliminations......... 1,442 1,314 1,603 -------- -------- -------- $ 5,756 $ 4,617 $ (2,324) ======== ======== ======== Identifiable assets: Domestic............................. $107,445 $ 94,466 $102,743 Foreign: Europe..................... 22,914 25,189 21,090 Other...................... 14,071 13,102 12,776 Adjustments and eliminations......... (23,198) (19,252) (19,544) -------- -------- -------- $121,232 $113,505 $117,065 ======== ======== ========
The Company's foreign operations are located in Canada, Germany, The Netherlands, Scotland, and South Africa. A substantial amount of European sales to unaffiliated customers are made to geographical areas outside of Europe. Transfers between geographical areas are at cost plus an incremental amount intended to provide a reasonable profit margin to the selling enterprises. Amounts relating to foreign operations included in the consolidated financial statements are as follows:
1995 1994 1993 --------- --------- --------- Working capital................................................. $ 14,717 $14,828 $15,982 Property, plant, and equipment (net) and other.................. 5,997 5,717 5,187 Noncurrent liabilities.......................................... (12,666) (6,683) (3,128) -------- ------- ------- Net foreign assets.............................................. $ 8,048 $13,862 $18,041 ======== ======= ======= Net earnings (loss) of foreign operations....................... $ (5,620) $(4,438) $ 161 ======== ======= ======= 13. ALLOWANCE FOR DOUBTFUL ACCOUNTS Changes in the allowance for doubtful accounts are as follows: 1995 1994 1993 -------- -------- ------- Balance, beginning of year...................................... $ 1,295 $ 1,267 $ 1,795 Charged to operations........................................... 367 291 381 Uncollectible accounts written off, less recoveries............. (519) (278) (879) Foreign currency translation adjustments........................ 7 15 (30) -------- ------- ------- Balance, end of year............................................ $ 1,150 $ 1,295 $ 1,267 ======== ======= =======
30 14. RETIREMENT PLANS The Company and its subsidiaries have several retirement plans covering most of their employees, including certain employees in foreign countries. Charges to operations for the cost of the Company's retirement plans including the Retirement Savings Plan (RSP) were $3,054 in 1995; $2,421 in 1994; and $2,675 in 1993. Defined Benefit Plans (U.S.) -- The Company maintains two noncontributory defined benefit pension plans which cover certain union employees. The Company's funding to the plans is equal to the minimum contribution required by the Internal Revenue Code. The benefits are based upon a fixed benefit rate and years of service. Future benefits under these plans were frozen as of December 31, 1990. The participants under these plans became eligible to participate in the Retirement Savings Plan (RSP) beginning January 1, 1991. The following table sets forth the aggregate defined benefit plans' funded status and amounts reflected in the accompanying consolidated balance sheets as of November 30, 1995 and 1994:
Assets Exceed Accumulated Accumulated Benefits Benefits Exceed Assets ------------- --------------- 1995 1994 1995 1994 ------ ------ ------- ------- Actuarial present value of accumulated plan benefits: Vested.............................. $1,599 $1,196 $10,226 $ 8,720 Nonvested........................... 57 -- 769 -- ------ ------ ------- ------- Accumulated benefit obligations..... $1,656 $1,196 $10,995 $ 8,720 ====== ====== ======= ======= Projected benefit obligations........ $1,656 $1,196 $10,995 $ 8,720 Plan assets at fair value, principally common stocks, bonds, and GIC funds, including $409 in 1995 and $437 in 1994 of the Company's common stock.............. 1,924 1,765 7,325 6,790 ------ ----- ------- ------- Plan assets in excess of (less than) projected benefit obligations....... 268 569 (3,670) (1,930) Unrecognized net loss................ 516 189 4,002 2,063 Unrecognized net assets at December 1, 1991 and 1990 being recognized over 15 years....................... (260) (288) (134) (157) Adjustment required to recognize minimum liability........ -- -- (3,868) (1,906) ------ ------ ------- ------- Prepaid pension cost (pension liability) recognized in the consolidated balance sheet.......... $ 524 $ 470 $(3,670)$(1,930) ====== ====== ======= ======= The net periodic pension expense amounts were based on actuarial assumptions as follows: 1995 1994 1995 1994 ----- ----- ----- ----- Discount rate on plan liabilities.... 7.00% 8.50% 7.00% 8.50% Rate of return on plan assets........ 8.00% 8.00% 8.00% 8.00%
31 In accordance with Statement of Financial Accounting Standards (SFAS) No. 87, "Employers' Accounting for Pensions," the Company has recorded an additional minimum pension liability for the underfunded plan of $3,868 and $1,906 at November 30, 1995 and 1994, respectively, representing the excess of unfunded accumulated benefit obligations over previously recorded pension cost liabilities. The net periodic pension cost of U.S. defined benefit plans for 1995, 1994, and 1993 includes the following components:
1995 1994 1993 -------- ------ ------ Interest cost on projected benefit obligations.. $ 857 $ 849 $ 851 Return on plan assets........................... (1,138) 82 (896) Net amortization and deferral................... 558 (625) 335 ------- ----- ----- Net periodic pension expense.................... $ 277 $ 306 $ 290 ======= ===== =====
The Company's foreign retirement plans are an insignificant portion of the Company's total retirement plans and are not required to report to certain governmental agencies pursuant to ERISA. These plans do not otherwise determine actuarial value of accumulated benefits or net assets available for benefits and are omitted from the above table. Defined Contribution Plan (U.S.) -- The RSP covers substantially all employees of Tokheim and its U.S. subsidiary. Through the RSP, employee ownership of the Company is increased approximately 11%. The RSP includes a common stock ESOP and a preferred stock ESOP which provide a retirement contribution of 1.5% of salary to all employees 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 Accounting Standards Division of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 93-6, Employers' Accounting for Employee Stock Ownership Plans, in November, 1993. As allowed by that statement, the Company has elected to continue its current practices which are based on SOP 76-3 and subsequent consensuses of the Emerging Issues Task Force of the Financial Accounting Standards Board. Dividends paid on ESOP shares are reflected as a reduction of retained earnings. All ESOP shares are considered outstanding for earnings per share computations. Preferred ESOP shares which have not been allocated to participants' accounts are assumed to be outstanding based on the stated conversion ratio of one-for-one. Preferred ESOP shares which have been allocated to participants' accounts are included in the computation of earnings per share based on the weighted average market value of the Company's common stock relative to the $25 liquidation value of the preferred stock. The number of allocated preferred ESOP and common ESOP shares at November 30, 1995 was 365,843 and 118,366, respectively. 442,777 preferred shares and 27,179 common shares were held in suspense by the ESOPs at November 30, 1995. At November 30, 1995, the value of the shares allocated to participants was $9,988,550. The number of preferred shares in the RSP at November 30, 1995 and 1994 was 808,620 and 829,534, respectively, at a cost of $25 per share. The number of common shares in the RSP at November 30, 1995 and 1994 was 145,545 and 153,478, respectively, at an average cost of $21.09 and $21.05 per share. 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 released from suspense, based on the ratio of the current year's debt service (principal and interest) to the sum of current year and remaining debt service, and allocated to participants' accounts. The Company has guaranteed the RSP loans as described in Note 4. A like amount entitled "Guaranteed Employees' Stock Ownership Plan (RSP) obligation" is recorded as a reduction of stockholders' 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 "Guaranteed Employees' Stock Ownership Plan (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. Compensation expense is calculated as the debt service on the RSP debt, less dividends paid to the ESOP, plus additional amounts required to meet the obligations under the RSP, net of the amounts allocated to interest. 32 The table below sets forth the interest expense, the amounts contributed to the RSP (excluding preferred stock dividends), and the amount of dividends on preferred stock used for debt service by the RSP:
1995 1994 1993 ------ ------ ------ Interest expense incurred by the Plan Trust(s) on RSP debt........... $1,265 $1,367 $1,595 Company contributions to the RSP..................................... 2,300 1,719 2,030 Dividends on preferred stock used for service by the RSP............. 1,580 1,617 1,663 Compensation Expense................................................. 1,531 977 1,157 Interest Expense..................................................... 832 746 887
15. 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. Effective December 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This statement requires that the costs of future benefits be accrued during an employee's active working career. The cost of providing these benefits was previously recognized as claims were incurred. The Company continues to fund benefits on a pay-as-you-go basis, with some retirees paying a portion of the costs. The Company recorded the discounted value of expected future benefits earned as of December 1, 1993 as a cumulative effect of accounting change. This one-time, noncash accounting change resulted in a charge to earnings of $13,416, or $1.72 per share. Due to the Company's net operating loss carryforward position (see Note 11), the Company established a valuation allowance to offset the deferred tax asset created by this charge to operations. The accumulated postretirement benefit obligation as of November 30, 1995 and 1994 consisted of unfunded obligations related to the following:
1995 1994 ------- ------- Retirees and dependents............................... $ 8,333 $ 4,903 Fully eligible active plan participants............... 1,114 1,274 Other active plan participants........................ 5,631 6,935 ------- ------- Total accumulated postretirement benefit obligation.................................. 15,078 13,112 Unrecognized net gain (loss).......................... (309) 1,101 ------- ------- Accrued postretirement benefit cost................... 14,769 14,213 Less current portion.................................. (887) (701) ------- ------- $13,882 $13,512 ======= =======
Postretirement benefit cost for 1995 and 1994 includes the following components:
1995 1994 ------- ------- Service cost.......................................... $ 422 $ 582 Interest cost on accumulated postretirement benefit obligation................................... 1,034 916 Amortization (gain) loss.............................. (25) -- ------- ------- Net postretirement benefit cost.................... $ 1,431 $ 1,498 ======= =======
The assumptions used to develop the net postretirement benefit expense and the present value of benefit obligations are as follows:
1995 1994 ------- ------- Discount rate......................................... 7.00% 8.50% Health care cost trend rate for the next year........ 10.00% 11.00%
The health care cost trend rate used to value the accumulated postretirement benefit obligation is assumed to decrease gradually to an ultimate rate of 5% in 2005. A 1% increase in this annual trend rate would increase the accumulated postretirement benefit obligation as of November 30, 1995 by approximately $2,063 and the combined service and interest components of the annual net postretirement health care cost by approximately $263. 33 16. CONTINGENT LIABILITIES The Company is defending various claims and legal actions, including environmental actions, which are common to its operations. These legal actions primarily involve claims for damages arising out of the Company's manufacturing operations, the use of the Company's products, and allegations of patent infringement. Environmental Matters -- Total amounts included in accrued expenses related to environmental matters were $872 and $847 at November 30, 1995 and 1994, respectively. The Company has been designated as a "potentially responsible party" (PRP), in conjunction with other parties, in five governmental actions associated with hazardous waste sites falling under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). Such actions seek recovery of certain cleanup costs. Dates upon which the Company received notice as a PRP range from January 1988 to January 1992. The Company has attempted, where possible, to develop a reasonable estimate of the cost or range of costs which may accrue from these actions. Likewise, the Company has attempted, where possible, to assess the likelihood of an unfavorable outcome to the Company as a result of these actions. Legal counsel has been retained to assist the Company in making these determinations, and cleanup costs are accrued when an unfavorable outcome is determined to be probable and a reasonable estimate can be made. The Company is a "de minimis" party in two of these sites. One matter was settled for $14. The second matter will cost the Company approximately $6 for its share of the pro rated clean up costs. During 1995, the Company settled two additional actions with the Environmental Protection Agency (EPA). One matter the Company settled in the amount of $627 as part of a global settlement with other PRPs and has recorded the liability in full at November 30, 1995. The accrued amount will be paid over a two year period. In the other settlement, the Company has settled as a participating generator as part of a global settlement. The Company paid $192 as part of its past costs and operating maintenance of the site. The Company provided a letter of credit in the amount of $148 to cover its projected future costs. With respect to the fifth site, involving potential groundwater contamination, the Company and other PRPs are negotiating with the EPA as to the testing to be performed on the property to determine if contamination has occurred; and, if so, the specific tracts of property affected. The Company cannot determine the extent of its liability in the event its property is deemed to be contaminated; and the method of allocation of liability, if any, among the PRPs who may ultimately be found liable remains uncertain. The Company is also involved in one lawsuit with respect to environmental liabilities under an indemnity provision of a sale agreement concerning the sale of a subsidiary die casting facility to a third party. The Company believes it has fulfilled its obligations under the sale agreement and it cannot at this time quantify the liabilities that are alleged in the litigation. Product Liability and Other Matters -- The Company is subject to various other legal actions arising out of the conduct of its business, including those relating to product liability, patent infringement, and claims for damages alleging violations of federal, state, or local statutes or ordinances dealing with civil rights. Total amounts included in accrued expenses related to these actions were $156 and $265 at November 30, 1995 and 1994, respectively. In the opinion of the Company's Management, amounts accrued for awards or assessments in connection with these matters are adequate and 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 flow. 34 INDEPENDENT ACCOUNTANTS' REPORT To the Stockholders and Directors, Tokheim Corporation: We have audited the accompanying consolidated balance sheets of Tokheim Corporation and Subsidiaries as of November 30, 1995 and 1994, and the related consolidated statements of earnings and retained earnings, and cash flows for each of the three years in the period ended November 30, 1995. These statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tokheim Corporation and Subsidiaries as of November 30, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended November 30, 1995, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Fort Wayne, Indiana January 24, 1996 35 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS OF THE REGISTRANT The information required by this Item is set forth on page 1 through 4 in the registrant's Proxy Statement for the 1995 Annual Meeting of Stockholders, which information is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to item 401 of Regulation S-K, the following information is presented herein in lieu of presenting such information in a definitive Proxy Statement to be filed as described under Part III. The names, ages, and positions of all of the executive officers of the Company are listed below along with their business experience during the past five years. Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Stockholders. There are no family relationships among any of the officers of the Company, nor any arrangement or understanding between any such officer and any other person pursuant to which he was elected as an officer. NAME, AGE, AND POSITION BUSINESS EXPERIENCE DURING PAST 5 YEARS - ---------------------------- -------------------------------------------- GERALD H. FRIELING, JR., 65 Elected Chairman of the Board in 1991; Chairman of the Board during the last 5 years, also served as Chief Executive Officer of the Company. DOUGLAS K. PINNER, 55 Joined Tokheim as President and Chief President and Chief Executive Officer in 1992; during the last Executive Officer 5 years, also served as President of Slater Steels Fort Wayne Specialty Alloys. WILLIAM M. ANDERSON, 49 Elected Vice President, Planning and Vice President, Planning Human Resources in 1995; during the and Human Resources last 5 years, also served as Vice President, Human Resources, of the Company and as Senior Vice President of NordicTrack, Inc. and as Director, Total Quality Management/Human Resources of FMC Corporation. CONDELL B. ELLIS, 63 Elected Vice President, Domestic Sales in Vice President, 1995; during the last 5 years, also served Domestic Sales as Vice President, as Vice President, Sales of CANMAX; served in various executive sales officer positions of Tokheim Corporation; and as Vice President, Sales, Wayne Division of Dresser Industries, Inc. 36 NAME, AGE, AND POSITION BUSINESS EXPERIENCE DURING PAST 5 YEARS - ----------------------------- -------------------------------------------- TERRY M. FULMER, 52 Elected Vice President, Global Vice President, Manufacturing in 1995; during the last 5 Global Manufacturing years, also served as Vice President, Corporate Operations and Planning; Vice President, Corporate Planning; General Manager, Small Pumps Division; and Manager of Manufacturing, Newbern Plant of the Company. JOHN A. NEGOVETICH, 50 Joined Tokheim as Vice President and Chief Vice President and Financial Officer in 1995; during the last 5 Chief Financial Officer years, also served as Vice President, Finance, Chief Financial Officer and Director of Ardco, Inc. and as Vice President, Finance, Hawker Siddeley, Inc. ARTHUR C. PREWITT, 54 Elected Vice President, Technology and Vice President, Technology Venture Development in 1995; during the last and Venture Development five years, also served as Vice President, Technology; Vice President, Corporate Engineering and Marketing; and Vice President, Product Engineering, of the Company; and as Manager, Technical Products of Gilbarco, Inc. NORMAN L. ROELKE, 46 Elected Vice President, Secretary and Vice President, Secretary General Counsel in 1995; during the last 5 and General Counsel years, also served as Vice President and General Counsel and as Corporate Counsel of the Company. SCOTT A. SWOGGER, 43 Elected Vice President, Quality Systems in Vice President, 1995; during the last 5 years, also served Quality Systems as Director, Quality Assurance, of the Company; Corporate Quality Engineer and Senior Quality Engineer of DePuy, Inc.; and as Senior Manager, Quality Assurance of Tokheim Corporation. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, executive (and certain other) officers, and persons who own more than 10% of the Company's common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Directors, officers, and greater-than-10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of copies of such forms furnished to the Company, or written representations that no Forms 5 were required, the Company believes that during fiscal year 1995 all Section 16(a) filing requirements applicable to its directors, officers and greater-than-10% stockholders were held in compliance. 37 ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is set forth on page 4 through 6 in the registrant's Proxy Statement for the 1995 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is set forth on page 9 through 11 in the registrant's Proxy Statement for the 1995 Annual Meeting of Stockholders, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is set forth on page 9 through 11 in the registrant's Proxy Statement for the 1995 Annual Meeting of Stockholders, which information is incorporated herein by reference. 38 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 and Retained Earnings for each of the three years in the period ended November 30, 1995...... Page 14 Consolidated Statement of Cash Flows for each of the three years in the period ended November 30, 1995.............................. Page 15 Consolidated Balance Sheet as of November 30, 1995 and 1994........ Page 16 Notes to Consolidated Financial Statements......................... Page 18 Report of Independent Accountants.................................. Page 35 (a) 2. SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES: Included as outlined in Item 8 of Part II of this report: Quarterly Financial Information (Unaudited) in Note 10 to the Consolidated Financial Statements.................................. Page 27
There are no schedules included in Part IV of this report as they are not required, are not applicable, or the information is shown in the Notes to the Consolidated Financial Statements. (a) 3. EXHIBITS: Exhibit Number Description ------- ----------- 3.1 Restated Articles of Incorporation of the Registrant, as filed with the Indiana Secretary of State on August 17, 1990. 3.2 Bylaws of the Registrant, as restated on July 12, 1995. 4 Rights Agreement, dated as of January 28, 1987, between the Registrant and Harris Trust and Savings Bank,, as Rights Agent (incorporated by reference to the Registrant's Registration Statement on Form 8-A, File No. 1-6018, dated February 10, 1987). 10.1 Tokheim Corporation 1992 Stock Incentive Plan, established December 15, 1992 (incorporated by reference to the Registrant'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 by reference to Amendment No. 1 to the Registrant's Registration Statement on Form S-8, File No. 33-29710, dated August 1, 1989). 10.3 Employment Agreement, dated September 22, 1995, between the Registrant and Douglas K. Pinner. 10.4 Employment Agreement dated September 22, 1995, between the Registrant and Terry M. Fulmer. 11 Statement re: Computation of Per Share Earnings. 21 List of the Subsidiaries of the Registrant. 23 Consent of Coopers & Lybrand L.L.P. 27 Financial Data Schedule (b) REPORTS ON FORM 8-K: None.
39 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. November 20, 1996 TOKHEIM CORPORATION ---------------------------------------------- (Registrant) By: Douglas K. Pinner ---------------------------------------------- Chairman of the Board, President and Chief Executive Officer and Director By: John A. Negovetich ---------------------------------------------- President, Tokheim, North America and Acting Chief Financial Officer 40
EXHIBIT INDEX Exhibit Number Description ------- ----------- 3.1 Restated Articles of Incorporation of the Registrant, as filed with the Indiana Secretary of State on August 17, 1990. 3.2 Bylaws of the Registrant, as restated on July 12, 1995. 4 Rights Agreement, dated as of January 28, 1987, between the Registrant and Harris Trust and Savings Bank,, as Rights Agent (incorporated by reference to the Registrant's Registration Statement on Form 8-A, File No. 1-6018, dated February 10, 1987). 10.1 Tokheim Corporation 1992 Stock Incentive Plan, established December 15, 1992 (incorporated by reference to the Registrant'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 by reference to Amendment No. 1 to the Registrant's Registration Statement on Form S-8, File No. 33-29710, dated August 1, 1989). 10.3 Employment Agreement, dated September 22, 1995, between the Registrant and Douglas K. Pinner. 10.4 Employment Agreement dated September 22, 1995, between the Registrant and Terry M. Fulmer. 11 Statement re: Computation of Per Share Earnings. 21 List of the Subsidiaries of the Registrant. 23 Consent of Coopers & Lybrand L.L.P. 27 Financial Data Schedule
EX-3.1 2 RESTATED ARTICLES OF INCROPORATION OF REGISTRANT Exhibit 3.1 RESTATED ARTICLES OF INCORPORATION OF TOKHEIM CORPORATION ------------------------ Tokheim Corporation (hereinafter referred to as the "Corporation"), having duly elected to be governed by IC 23-1-18 through IC 23-1-54 (except for IC 23-1-18-3, IC 23-1-21 and IC 23-1-53-3) effective April 10, 1986, and desiring to amend and restate its Articles of Incorporation effective the date of filing hereof with the office of the Indiana Secretary of State, pursuant to the provisions of the Indiana Business Corporation Law (hereinafter referred to as the "Corporation Law"), submits the following Restated Articles of Incorporation: ARTICLE I Name The name of the Corporation is Tokheim Corporation. ARTICLE II Purposes and Powers Section 2.1. Purposes of the Corporation. The purposes for which the Corporation is formed are (a) to engage in the general business of manufacturing and selling any and all devices, appliances and/or articles of every kind and description, for whatever purpose or use and of whatever material or substance made, and to carry on such activities of every kind or nature as may be allied or incidental to such general business and (b) to engage in the transaction of any or all lawful business for which corporations may now or hereafter be incorporated under the Corporation Law. Section 2.2. Powers of the Corporation. The Corporation shall have (a) all powers now or hereafter authorized by or vested in corporations pursuant to the provisions of the Corporation Law, (b) all powers now or hereafter vested in corporations by common law or any other statute or act and (c) all powers authorized by or vested in the Corporation by the provisions of these Restated Articles of Incorporation or by the provisions of its Bylaws as from time to time in effect. ARTICLE III Term of Existence The period during which the Corporation shall continue is perpetual. 1 ARTICLE IV Registered Office and Agent The street address of the Corporation's registered office at the time of adoption of these Restated Articles of Incorporation is 1602 Wabash Avenue, Fort Wayne, Indiana 46803 and the name of its Resident Agent at such office at the time of adoption of these Restated Articles of Incorporation is Randolph J. Straka. ARTICLE V Shares Section 5.1. Authorized Classes and Number of Shares. The total number of shares which the Corporation has authority to issue shall be 35,000,000 shares, consisting of 30,000,000 common shares (the "Common Shares") and 5,000,000 special shares (the "Special Shares"). The Corporation's shares do not have any par or stated value, except that, solely for the purpose of any statute or regulation imposing any tax or fee based upon the capitalization of the Corporation, each of the Corporation's shares shall be deemed to have a par value of $1.00 per share. Section 5.2. General Terms of All Shares. The Corporation shall have the power to acquire (by purchase, redemption or otherwise), hold, own, pledge, sell, transfer, assign, reissue, cancel or otherwise dispose of the shares of the Corporation in the manner and to the extent now or hereafter permitted by the laws of the State of Indiana (but such power shall not imply an obligation on the part of the owner or holder of any share to sell or otherwise transfer such share to the Corporation), including the power to purchase, redeem or otherwise acquire the Corporation's own shares, directly or indirectly, and without pro rata treatment of the owners or holders of any class or series of shares, unless, after giving effect thereto, the Corporation would not be able to pay its debts as they become due in the usual course of business or the Corporation's total assets would be less than its total liabilities (and without regard to any amounts that would be needed, if the Corporation were to be dissolved at the time of the purchase, redemption or other acquisition, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those of the holders of the shares of the Corporation being purchased, redeemed or otherwise acquired, unless otherwise expressly provided with respect to a series of Special Shares in the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 5.5 hereof describing the terms of such series). Shares of the Corporation purchased, redeemed or otherwise acquired by it shall constitute authorized but unissued shares, unless prior to any such purchase, redemption or other acquisition, or within thirty (30) days thereafter, the Board of Directors adopts a resolution providing that such shares constitute authorized and issued but not outstanding shares. 2 The Board of Directors of the Corporation may dispose of, issue and sell shares in accordance with, and in such amounts as may be permitted by, the laws of the State of Indiana and the provisions of these Restated Articles of Incorporation and for such consideration, at such price or prices, at such time or times and upon such terms and conditions (including the privilege of selectively repurchasing the same) as the Board of Directors of the Corporation shall determine, without the authorization or approval by any shareholders of the Corporation. Shares may be disposed of, issued and sold to such persons, firms or corporations as the Board of Directors may determine, without any preemptive or other right on the part of the owners or holders of other shares of the Corporation of any class or kind to acquire such shares by reason of their ownership of such other shares. When the Corporation receives the consideration specified in a subscription agreement entered into before incorporation, or for which the Board of Directors authorized the issuance of shares, as the case may be, the shares issued therefor shall be fully paid and nonassessable. The Corporation shall have the power to declare and pay dividends or other distributions upon the issued and outstanding shares of the Corporation, subject to the limitation that a dividend or other distribution may not be made if, after giving it effect, the Corporation would not be able to pay its debts as they become due in the usual course of business or the Corporation's total assets would be less than its total liabilities (and without regard to any amounts that would be needed, if the Corporation were to be dissolved at the time of the dividend or other distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those of the holders of shares receiving the dividend or other distribution, unless otherwise expressly provided with respect to a series of Special Shares in the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 5.5 hereof describing the terms of such series). The Corporation shall have the power to issue shares of one class or series as a share dividend or other distribution in respect of that class or series or one or more other classes or series. Section 5.3 Voting Rights of Shares. (a) Common Shares. Except as otherwise provided by the Corporation Law and subject to such shareholder disclosure and recognition procedures (which may include voting prohibition sanctions) as the Corporation may by action of its Board of Directors establish, the Common Shares have unlimited voting rights and each outstanding Common Share shall, when validly issued by the Corporation, entitle the record holder thereof to one vote at all shareholders' meetings on all matters submitted to a vote of the shareholders of the Corporation. (b) Special Shares. Except as required by the Corporation Law or by the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 5.5 hereof describing the terms of Special Shares or a series thereof, the holders of Special Shares shall have no voting rights or powers. Special Shares shall, when validly issued by the Corporation, entitle the record holder thereof to vote as and on such matters, but only as 3 and on such matters, as the holders thereof are entitled to vote under the Corporation Law or under the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 5.5 hereof describing the terms of Special Shares or a series thereof (which provisions may provide for special, conditional, limited or unlimited voting rights, including multiple or fractional votes per share, or for no right to vote, except to the extent required by the Corporation Law) and subject to such shareholder disclosure and recognition procedures (which may include voting prohibition sanctions) as the Corporation may by action of the Board of Directors establish. Section 5.4. Other Terms of Common Shares. The Common Shares shall be equal in every respect insofar as their relationship to the Corporation is concerned, but such equality of rights shall not imply equality of treatment as to redemption or other acquisition of shares by the Corporation. Subject to the rights of the holders of any outstanding Special Shares issued under Section 5.5 hereof, the holders of Common Shares shall be entitled to share ratably in such dividends or other distributions (other than purchases, redemptions or other acquisitions of shares by the Corporation), if any, as are declared and paid from time to time on the Common Shares at the discretion of the Board of Directors. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, after payment shall have been made to the holders of the Special Shares of the full amount to which they shall be entitled under this Article V, the holders of Common Shares shall be entitled, to the exclusion of the holders of the Special Shares of any and all series, to share, ratably according to the number of shares of Common Shares held by them, in all remaining assets of the Corporation available for distribution to its shareholders. Section 5.5. Other Terms of Special Shares. (a) Special Shares may be issued from to time in one or more series, each such series to have such distinctive designation and such preferences, limitations and relative voting and other rights as shall be set forth in these Restated Articles of Incorporation. Subject to the requirements of the Corporation Law and subject to all other provisions of these Restated Articles of Incorporation, the Board of Directors of the Corporation may create one or more series of Special Shares and may determine the preferences, limitations and relative voting and other rights of one or more series of Special Shares before the issuance of any shares of that series by the adoption of an amendment to the Restated Articles of Incorporation that specifies the terms of the series of Special Shares. All shares of a series of Special Shares must have preferences, limitations and relative voting and other rights identical with those of other shares of the same series and, if the description of the series set forth in these Restated Articles of Incorporation so provides, no series of Special Shares need have preferences, limitations or relative voting or other rights identical with those of any other series of Special Shares. 4 Before issuing any shares of a series of Special Shares, the Board of Directors shall adopt an amendment to these Restated Articles of Incorporation, which shall be effective without any shareholder approval or other action that sets forth the preferences, limitations and relative voting and other rights of the series, and authority is hereby expressly vested in the Board of Directors, by such amendment: (i) To fix the distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (ii) To fix the voting rights of such series, which may consist of special, conditional, limited or unlimited voting rights, including multiple or fractional votes per share, or no right to vote (except to the extent required by the Corporation Law); (iii) To fix the dividend or distribution rights of such series and the manner of calculating the amount and time for payment of dividends or distributions, including, but not limited to: (A) the dividend rate, if any, of such series; (B) any limitations, restrictions or conditions on the payment of dividends or other distributions, including whether dividends or other distributions shall be noncumulative or cumulative or partially cumulative and, if so, from which date or dates; (C) the relative rights of priority, if any, of payment of dividends or other distributions on shares of that series in relation to Common Shares and shares of any other series of Special Shares; and (D) the form of dividends or other distributions, which may be payable at the option of the Corporation, the shareholder or another person (and in such case to prescribe the terms and conditions of exercising such option), or upon the occurrence of a designated event in cash, indebtedness, stock or other securities or other property, or in any combination thereof, and to make provisions, in the case of dividends or other distributions payable in stock or other securities, for adjustment of the dividend or distribution rate in such events as the Board of Directors shall determine; (iv) To fix the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed or converted, which may be: (A) at the option of the Corporation, the shareholder or another person or upon the occurrence of a designated event; (B) for cash, indebtedness, securities, or other property or any combination thereof; and 5 (C) in a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events; (v) To fix the amount or amounts payable upon the shares of such series in the event of any liquidation, dissolution or winding up of the Corporation and the relative rights of priority, if any, of payment upon shares of such series in relation to Common Shares and shares of any other series of Special Shares; and to determine whether or not any such preferential rights upon dissolution need be considered in determining whether or not the Corporation may make dividends, repurchases or other distributions; (vi) To determine whether or not the shares of such series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of such series and, if so entitled, the amount of such fund and the manner of its application; (vii) To determine whether or not the issue of any additional shares of such series or of any other series in addition to such series shall be subject to restrictions in addition to restrictions, if any, on the issue of additional shares imposed in the provisions of these Restated Articles of Incorporation fixing the terms of any outstanding series of Special Shares theretofore issued pursuant to this Section 5.5 and, if subject to additional restrictions, the extent of such additional restrictions; and (viii) Generally to fix the other preferences or rights, and any qualifications, limitations or restrictions of such preferences or rights, of such series to the full extent permitted by the Corporation Law; provided, however, that no such preferences, rights, qualifications, limitations or restrictions shall be in conflict with these Restated Articles of Incorporation or any amendment hereof. (b) Special Shares of any series that have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible, have been converted into shares of the Corporation of any other class or series, may be reissued as a part of such series or of any other series of Special Shares, subject to such limitations (if any) as may be fixed by the Board of Directors with respect to such series of Special Shares in accordance with subsection (a) of this Section 5.5. ARTICLE VI Directors Section 6.1. Number. The Board of Directors at the time of adoption of these Restated Articles of Incorporation is composed of nine (9) members, and the number of Directors shall be fixed by the By-Laws and may be changed from time to time by amendment to the By-Laws, provided, however, that the number of Directors fixed in the By-Laws shall not be less than nine (9) nor more than thirteen (13). If the By-Laws do not specify the number of Directors, the Board of Directors shall be composed of nine (9) members. The Board of Directors shall be divided into two (2) or three (3) groups (with each group containing one-half (1/2) or one-third 6 (1/3) of the total, as near as may be) whose terms of office expire at different times, as provided in the By-Laws. Notwithstanding the first sentence of this Section 6.1, any amendment to the By-Laws that would affect any increase in the number of Directors over such number as then in effect or any elimination or modification of the groups or terms of office of the Directors as the By-Laws then in effect may provide, shall also be approved by the affirmative vote of a majority of the entire number of Directors of the Corporation who then qualify as Continuing Directors with respect to all Related Persons (as such terms are defined for purposes of Article VIII hereof). Section 6.2. Qualifications. Directors need not be shareholders of the Corporation or residents of this or any other state in the United States. Section 6.3. Vacancies. Vacancies occurring in the Board of Directors shall be filled in the manner provided in the By-Laws or, if the By-Laws do not provide for the filling of vacancies, in the manner provided by the Corporation Law. The By-Laws may also provide that in certain circumstances specified therein, vacancies occurring in the Board of Directors may be filled by vote of the shareholders at a special meeting called for that purpose or at the next annual meeting of shareholders. Section 6.4. Liability of Directors. A Director's responsibility to the Corporation shall be limited to discharging his duties as a Director, including his duties as a member of any Committee of the Board of Directors upon which he may serve, in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the Director reasonably believes to be in the best interests of the Corporation, all based on the facts then known to the Director. In discharging his duties, a Director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: (a) One (1) or more officers or employees of the Corporation whom the Director reasonably believes to be reliable and competent in the matters presented; (b) Legal counsel, public accountants or other persons as to matters the Director reasonably believes are within such person's professional or expert competence; or (c) A Committee of the Board of which the Director is not a member if the Director reasonably believes the Committee merits confidence; but a Director is not acting in good faith if the Director has knowledge concerning the matter in question that makes reliance otherwise permitted by this Section 6.4 unwarranted. A Director may, in considering the best interests of the Corporation, consider the effects of any action on shareholders, employees, suppliers and customers of the Corporation, and communities in which offices or other facilities of the Corporation are located, and any other factors the Director considers pertinent. 7 A Director shall not be liable for any action taken as a Director, or any failure to take any action, unless (a) the Director has breached or failed to perform the duties of the Director's office in compliance with this Section 6.4, and (b) the breach or failure to perform constitutes willful misconduct or recklessness. Section 6.5. Removal of Directors. Any or all of the members of the Board of Directors may be removed, with or without cause, only at a meeting of the shareholders called for that purpose, by the affirmative vote of the holders of outstanding shares representing at least seventy-five percent (75%) of all the votes then entitled to be cast at an election of Directors. Section 6.6. Election of Directors by Holders of Special Shares. The holders of one (1) or more series of Special Shares may be entitled to elect all or a specified number of Directors, but only to the extent and subject to limitations as may be set forth in the provisions of these Restated Articles of Incorporation adopted by the Board of Directors pursuant to Section 5.5 hereof describing the terms of the series of Special Shares. ARTICLE VII Provisions for Regulation of Business and Conduct of Affairs of Corporation Section 7.1. Meetings of Shareholders. Meetings of the shareholders of the Corporation shall be held at such time and at such place, either within or without the State of Indiana, as may be stated in or fixed in accordance with the By-Laws of the Corporation and specified in the respective notices or waivers of notice of any such meetings. Section 7.2. Special Meetings of Shareholders. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by the Corporation Law, may be called at any time by the Board of Directors or the person or persons authorized to do so by the By-Laws and shall be called by the Board of Directors if the Secretary of the Corporation receives one (1) or more written, dated and signed demands for a special meeting, describing in reasonable detail the purpose or purposes for which it is to be held, from the holders of shares representing at least twenty-five percent (25%) of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting. If the Secretary receives one (1) or more proper written demands for a special meeting of shareholders, the Board of Directors may set a record date for determining shareholders entitled to make such demand. Section 7.3. Meetings of Directors. Meetings of the Board of Directors of the Corporation shall be held at such place, either within or without the State of Indiana, as may be authorized by the By-Laws and specified in the respective notices or waivers of notice of any such meetings or otherwise specified by the Board of Directors. Unless the By-Laws provide otherwise (a) regular meetings of the Board of Directors may be held without notice of the date, 8 time, place or purpose of the meeting and (b) the notice for a special meeting need not describe the purpose or purposes of the special meeting. Section 7.4. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or shareholders, or of any committee of such Board, may be taken without a meeting, if the action is taken by all members of the Board or all shareholders entitled to vote on the action, or by all members of such committee, as the case may be. The action must be evidenced by one (1) or more written consents describing the action taken, signed by each Director, or all the shareholders entitled to vote on the action, or by each member of such committee, as the case may be, and, in the case of action by the Board of Directors or a committee thereof, included in the minutes or filed with the corporate records reflecting the action taken or, in the case of action by the shareholders, delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Action taken under this Section 7.4 is effective when the last director, shareholder or committee member, as the case may be, signs the consent, unless the consent specifies a different prior or subsequent effective date, in which case the action is effective on or as of the specified date. Such consent shall have the same effect as a unanimous vote of all members of the Board, or all shareholders, or all members of the committee, as the case may be, and may be described as such in any document. Section 7.5. Bylaws. The Board of Directors shall have the exclusive power to make, alter, amend or repeal, or to waive provisions of, the Bylaws of the Corporation by the affirmative vote of a majority of the entire number of Directors at the time, except as expressly provided in Section 6.1 hereof and as provided by the Corporation Law. All provisions for the regulation of the business and management of the affairs of the Corporation not stated in these Restated Articles of Incorporation shall be stated in the Bylaws. The Board of Directors may adopt Emergency Bylaws of the Corporation and shall have the exclusive power (except as may otherwise be provided therein) to make, alter, amend or repeal, or to waive provisions of, the Emergency Bylaws by the affirmative vote of both (a) a majority of the entire number of Directors at the time and (b) a majority of the entire number of Directors who then qualify as Continuing Directors with respect to all Related Persons (as such terms are defined for purposes of Article VIII hereof). Section 7.6. Interest of Directors. (a) A conflict of interest transaction is a transaction with the Corporation in which a Director of the Corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the Corporation solely because of the Director's interest in the transaction if any one (1) of the following is true: (i) The material facts of the transaction and the Director's interest were disclosed or known to the Board of Directors or a Committee of the Board of Directors and the Board of Directors or Committee authorized, approved, or ratified the transaction. 9 (ii) The material facts of the transaction and the Director's interest were disclosed or known to the shareholders entitled to vote and they authorized, approved, or ratified the transaction. (iii) The transaction was fair to the Corporation. (b) For purposes of this Section 7.6, a Director of the Corporation has an indirect interest in a transaction if: (i) Another entity in which the Director has material financial interest or in which the Director is a general partner is party to the transaction; or (ii) Another entity of which the Director is a director, officer, or trustee in a party to the transaction and the transaction is, or is required to be, considered by the Board of Directors of the Corporation. (c) For purposes of Section 7.6(a)(i), a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the Directors on the Board of Directors (or on the Committee) who have no direct or indirect interest in the transaction vote to authorize, approve or ratify the transaction, a quorum shall be deemed present for the purpose of taking action under this Section 7.6. The presence of, or a vote cast by, a Director with a direct or indirect interest in the transaction does not affect the validity of any action taken under Section 7.6(a)(i), if the transaction is otherwise authorized, approved or ratified as provided in such subsection. (d) Shares owned by or voted under the control of a Director who has a direct or indirect interest in the transaction, and shares owned by or voted under the control of an entity described in Section 7.6(b), may be counted in a vote of shareholders to determine whether to authorize, approve or ratify a conflict of interest transaction under Section 7.6(a)(ii). Section 7.7. Nonliability of Shareholders. Shareholders of the Corporation are not personally liable for the acts or debts of the Corporation, nor is private property of shareholders subject to the payment of corporate debts. Section 7.8. Indemnification of Officers, Directors and Other Eligible Persons. (a) Every Eligible Person, as a matter of right, shall be indemnified by the Corporation against all Liability and reasonable Expense that may be incurred by such Eligible Person in connection with or resulting from any Claim, (i) if such Eligible Person is Wholly Successful with respect to the Claim, or (ii) if not Wholly Successful, then if such Eligible Person is determined, as provided in either Section 7.8(f) or 7.8(g), with respect to the Claim, or any count, issue or matter of the Claim, to have acted in good faith; and he reasonably believed: (A) in the case of conduct in his official capacity with the Corporation, that his conduct was in its best interests, and (B) in all other cases, that his conduct was at least not opposed to 10 its best interests; and, in the case of any Claim of a criminal nature, he either (A) had reasonable cause to believe his conduct was lawful, or (B) had no reasonable cause to believe his conduct was unlawful. The termination of any Claim, by judgment, order, settlement (whether with or without court approval), or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not be determinative nor create a presumption that an Eligible Person did not meet the standards of conduct set forth in clause (ii) of this subsection (a). The actions of an Eligible Person with respect to an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 shall be deemed to have been taken in what the Eligible Person reasonably believed to be the best interests of the Corporation or at least not opposed to its best interests if the Eligible Person reasonably believed he was acting in conformity with the requirements of such Act or he reasonably believed his actions to be in the interests of the participants in or beneficiaries of the plan. (b) The term "Claim" as used in this Section 7.8 shall include every pending, threatened or completed claim, action, suit or proceeding and all appeals thereof (whether brought by or in the right of this Corporation, any other corporation, partnership, joint venture, trust, enterprise, organization, association, governmental agency, person or otherwise), civil, criminal, administrative or investigative, formal or informal, in which an Eligible Person may become or is threatened to become involved, as a party or otherwise: (i) by reason of his being or having been an Eligible Person or (ii) by reason of any action taken or not taken by him in his capacity as an Eligible Person, whether or not he continued in such capacity at the time such Liability or Expense shall have been incurred, and further whether or not the action taken or not taken antedated the adoption of this Section 7.8. (c) The term "Eligible Person" as used in this Section 7.8 shall mean every person (and the estate, heirs, executors, administrators, and personal representatives of such person) who is or was a Director or officer of the Corporation or a Director or officer of the Corporation who is or was serving at the request of the Corporation as a director, officer, employee, agent or fiduciary of another foreign or domestic corporation, partnership, joint venture, trust employee benefit plan or other organization or entity, whether for profit or not. An Eligible Person shall also be considered to have been serving an employee benefit plan at the request of the Corporation if his duties to the Corporation also imposed duties on, or otherwise involved services by, him to the plan or to participants in or beneficiaries of the plan. (d) The terms "Liability" and "Expense" as used in this Section 7.8 shall include, but shall not be limited to, amounts of judgments, fines or penalties against (including excise taxes assessed with respect to an employee benefit plan), and amounts paid in settlement by or on behalf of, an Eligible Person, attorney fees, accountant fees, investment banker fees, and any other professional fees, disbursements, travel, expert witness fees, and any other expense reasonably incurred in defense of any Claim. 11 (e) The term "Wholly Successful" as used in this Section 7.8 shall mean: (i) Termination of any claim against the Eligible Person in question without a finding of liability against him, or guilt in a criminal Claim against him; (ii) Approval by a court of a settlement of any Claim, with a concurrent approval by the court of indemnification pursuant to this Section 7.8; or (iii) The expiration of the applicable statute of limitations regarding the Claim. (f) Every Eligible Person claiming indemnification hereunder (other than one who has been Wholly Successful with respect to any Claim) shall be entitled to indemnification if a disinterested person or persons selected by the Board of Directors (the "Referee") shall determine that such Eligible Person has met the standards of conduct set forth in Section 7.8(a)(ii). In the event an Eligible Person is found to be entitled to indemnification pursuant to the preceding sentence, the Referee shall also determine the reasonableness of the Eligible Person's Expenses. The Eligible Person claiming indemnification shall, if requested, appear before the Referee, answer questions that the Referee deems relevant and shall be given ample opportunity to present to the Referee evidence upon which he relies for indemnification. The Corporation shall, at the request of the Referee, make available facts, opinions or other evidence in any way relevant to the Referee's determination that are within the possession or control of the Corporation. The Referee shall not incur any liability as a result of his decision. (g) If an Eligible Person claiming indemnification pursuant to Section 7.8(f) is found not to be entitled thereto, or if the Board of Directors fails to select a Referee under Section 7.8(f) within a reasonable amount of time following a written request of an Eligible Person for the selection of a Referee, or if the Referee fails to make a determination under Section 7.8(f) within a reasonable amount of time following the selection of the Referee, the Eligible Person may apply for indemnification with respect to a Claim or any count, issue or matter of a Claim to any court of competent jurisdiction, including a court in which the Claim is pending against the Eligible Person. On receipt of an application, the court, after giving notice to the Corporation, may order indemnification if it determines either that: (i) The Eligible Person is entitled to indemnification with respect to the Claim because such Eligible Person met the standards of conduct set forth in Section 7.8(a)(ii); or (ii) The Eligible Person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the Eligible Person has met the standard of conduct set forth in Section 7.8(a)(ii). If the court determines that the Eligible Person is entitled to indemnification, the court shall also determine the reasonableness of the Eligible Person's Expenses. (h) The rights of indemnification provided in this Section 7.8 shall not be exclusive and shall be in addition to any rights to which any Eligible Person may otherwise be entitled 12 under any statute, agreement, resolution of the Board of Directors of the Corporation or otherwise. Irrespective of the provisions of this Section 7.8, the Board of Directors may, at any time and from time to time: (i) Approve indemnification of any Eligible Person to the full extent permitted by the provisions of applicable law at the time in effect, whether on account of past or future transactions; and (ii) Authorize the Corporation to purchase and maintain insurance on behalf of any Eligible Person against any Liability asserted against him or Liability or Expense incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such Liability or Expense. (i) Expenses incurred by an Eligible Person with respect to any Claim may be advanced by the Corporation (by action of the Board of Directors, whether or not a disinterested quorum exists) prior to the final disposition thereof upon receipt of any undertaking by or on behalf of the recipient to repay such amount unless he is determined to be entitled to indemnification. (j) In the event the Claim is the result of any action taken, any action not taken or any alleged breach of duty or obligation by the Board of Directors related to a proposed or actual tender offer for shares of the Corporation; change in control of the Corporation; merger, business combination or consolidation in which the Corporation is a party; or the election of Directors of the Corporation, the Expense incurred by an Eligible Person with respect to such Claim shall as a matter of right be advanced to the Eligible Person by the Corporation prior to final disposition of such Claim if: (i) The Eligible Person furnishes the Corporation a written affirmation of the Eligible Person's good faith belief that he has met the standard of conduct described in clause (ii) of Section 7.8(a); and (ii) The Eligible Person furnishes the Corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that the Eligible Person did not meet such standard of conduct. (k) The indemnification provisions of this Section 7.8 shall be deemed to be a contract between the Corporation and each Eligible Person. (l) The provisions of this Section 7.8 shall be applicable to all acts or failures to act occurring prior to the adoption of this Section 7.8 or during the term of this Section 7.8 irrespective of when the Claim relating to the occurrence is made or commenced. (m) The Board of Directors shall have power on behalf of the Corporation to grant indemnification in a manner consistent with this Section 7.8 to any person other than an Eligible Person to such extent as the Board of Directors may from time to time and at any time determine. 13 (n) If any provision of this Section 7.8 is adjudged to be beyond the powers of the Corporation under the Indiana Business Corporation Law, as amended, or any other applicable law, then such identification shall nevertheless remain available, but shall be limited, amended or construed only to the extent necessary to be within the powers of the Corporation under the Indiana Business Corporation Law, as amended, or any other applicable law, and such indemnification so limited, amended or construed shall be available and provided pursuant to this Section 7.8. ARTICLE VIII Approval of Business Combinations Section 8.1. Supermajority Vote. Except as provided in Section 8.2 hereof, neither the Corporation nor its Subsidiaries, if any, shall become a party to any Business Combination with a Related Person without the prior affirmative vote at a meeting of the Corporation's shareholders: (a) Of not less than seventy-five percent (75%) of all the votes entitled to be cast by the holders of the outstanding shares of all classes of Voting Stock of the Corporation considered for purposes of this Article VIII as a single class, and (b) Of an Independent Majority of Shareholders. Such favorable votes shall be in addition to any shareholder vote which would be required without reference to this Section 8.1 and shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified by law or elsewhere in these Restated Articles of Incorporation or the By-Laws of the Corporation or otherwise. Section 8.2. Exceptions. The provisions of Section 8.1 hereof shall not apply to a Business Combination if: (a) The Continuing Directors of the Corporation by not less than a seventy-five percent (75%) vote: (i) Have expressly approved a memorandum of understanding with the Related Person with respect to the Business Combination prior to the time that the Related Person became a Related Person and the Business Combination is effected on substantially the same terms and conditions as are provided by the memorandum of understanding; or (ii) Have otherwise approved the Business Combination (this provision is incapable of satisfaction unless there is at least one Continuing Director); or (b) The Business Combination is solely between the Corporation and another corporation, one hundred percent (100%) of the Voting Stock of which is owned directly or indirectly by the Corporation. Section 8.3. Definitions. For purposes of this Article VIII: (a) A "Business Combination" means: 14 (i) The sale, exchange, lease, transfer or other disposition to or with a Related Person or any Affiliate or Associate of such Related Person by the Corporation or any Subsidiaries (in a single transaction or a Series of Related Transactions) of all or substantially all, or any Substantial Part, of its or their assets or business (including, without limitation, securities issued by a Subsidiary, if any); (ii) The purchase, exchange, lease or other acquisition by the Corporation or any Subsidiaries (in a single transaction or a Series of Related Transactions) of all or substantially all, or any Substantial Part, of the assets or business of a Related Person or any Affiliate or Associate of such Related Person; (iii) Any merger or consolidated of the Corporation or any Subsidiary thereof into or with a Related Person or any Affiliate or Associate of such Related Person or into or with another Person which, after such merger or consolidation, would be an Affiliate or an Associate of a Related Person, in each case irrespective of which Person is the surviving entity in such merger or consolidation; (iv) Any reclassification of securities, recapitalization or other transaction (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of shares of Voting Stock of the Corporation or any Subsidiary thereof which are Beneficially Owned by a Related Person, or any partial or complete liquidation, spin-off or split- up of the Corporation or any Subsidiary thereof; provided, however, that this Section 8.3(a)(iv) shall not relate to any transaction that has been approved by a majority of the Continuing Directors; or (v) The acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of shares of Voting Stock or securities convertible into shares of Voting Stock or any voting securities or securities convertible into voting securities of any Subsidiary of the Corporation, or the acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of any rights, warrants or options to acquire any of the foregoing or any combination of the foregoing shares of Voting Stock or voting securities of a Subsidiary, if any. (b) A "Series of Related Transactions" shall be deemed to include not only a series of transactions with the same Related Person but also a series of separate transactions with a Related Person or any Affiliate or Associate of such Related Person. (c) A "Person" shall mean any individual, firm, corporation or other entity and any partnership, syndicate or other group. (d) "Related Person" shall mean any Person (other than the Corporation or any Subsidiary of the Corporation or the Continuing Directors, singly or as a group) who or that at any time described in the last sentence of this first paragraph of this subsection (d): 15 (i) Is the Beneficial Owner, directly or indirectly, of more than ten percent (10%) of the voting power of the outstanding shares of Voting Stock and who has not been the Beneficial Owner, directly or indirectly, of more than ten percent (10%) of the voting power of the outstanding shares of Voting Stock for a continuous period of two years prior to the date in question; or (ii) Is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question (but not continuously during such two-year period) was the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding shares of Voting Stock; or (iii) Is an assignee of or has otherwise succeeded to any shares of the Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Related Person, if such assignment or succession shall have occurred within the meaning of the Securities Act of 1933, as amended. A Related Person shall be deemed to have acquired a share of the Corporation at the time when such Related Person became the Beneficial Owner thereof. For the purposes of determining whether a Person is the Beneficial Owner of ten percent (10%) or more of the voting power of the then outstanding Voting Stock, the outstanding Voting Stock shall be deemed to include any Voting Stock that may be issuable to such Person pursuant to a right to acquire such Voting Stock and that is therefore deemed to be Beneficially Owned by such Person pursuant to Section 8.3(e)(ii)(A). A person who is a Related Person at: (i) The time any definitive agreement relating to a Business Combination is entered into; (ii) The record date for the determination of shareholders entitled to notice of and to vote on a Business Combination; or (iii) The time immediately prior to the consummation of a Business Combination shall be deemed a Related Person. A Related Person shall not include the Board of Directors of the Corporation acting as a group. In addition, a Related Person shall not include any Person who possesses more than ten percent (10%) of the voting power of the outstanding shares of Voting Stock of the Corporation at the time of filing these Restated Articles of Incorporation. (e) A Person shall be a "Beneficial Owner" of any shares of Voting Stock: (i) Which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (ii) Which such Person or any of its Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of 16 conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) Which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (f) An "Affiliate" of, or a person Affiliated with, a specific Person, means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. (g) The term "Associate" used to indicate a relationship with any Person, means: (i) Any corporation or organization (other than this Corporation or a majority-owned Subsidiary or this Corporation) of which such Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of five percent (5%) or more of any class of equity securities; (ii) Any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; (iii) Any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person; or (iv) Any investment company registered under the Investment Company Act of 1940, as amended, for which such Person or any Affiliate of such Person serves as investment advisor. (h) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Related Person set forth in Section 8.3(d) hereof, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (i) "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board") who is not associated with the Related Person and was a member of the Board prior to the time that the Related Person became a Related Person, and any successor of a Continuing Director who is not associated with the Related Person and is recommended to succeed a Continuing Director by not less than two-thirds of the Continuing Directors then on the Board. (j) "Independent Majority of Shareholders" shall mean the holders of the outstanding shares of Voting Stock representing a majority of all the votes entitled to be cast by all shares of Voting Stock other than shares Beneficially Owned or controlled, directly or indirectly, by a Related Person. (k) "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation or another corporation entitled to vote generally on the election of Directors, and each 17 reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares. (l) "Substantial Part" means properties and assets involved in any single transaction or a Series of Related Transactions having an aggregate fair market value of more than ten percent (10%) of the total consolidated assets of the Person in question as determined immediately prior to such transaction or Series of Related Transactions. Section 8.4. Director Determinations. A majority of the Continuing Directors shall have the power to determine for the purposes of this Article VIII, on the basis of information known to them: (a) The number of shares of Voting Stock of which any Person is the Beneficial Owner; (b) Whether a Person is an Affiliate or Associate of another; (c) Whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of "Beneficial Owner"; (d) Whether the assets subject to any Business Combination constitute a Substantial Part; (e) Whether two or more transactions constitute a Series of Related Transactions; and (f) Such other matters with respect to which a determination is required under this Article VIII. Section 8.5. Nonmonetary Factors in Acquisition Proposals. In connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its shareholders when evaluating a proposal by another person or persons to acquire some material part or all of the business or properties of the Corporation (whether by merger, consolidation, purchase of assets, stock reclassification or recapitalization, spin-off, liquidation or otherwise) or to acquire some material part or all of the stock of the Corporation (whether by a tender or exchange offer or some other means), the Board of Directors of the Corporation shall, in addition to considering the adequacy of the consideration to be paid in connection with any such transaction, consider all of the following factors and any other factors that it deems relevant: (a) The social and economic effects of the transaction on the Corporation and its subsidiaries and their employees, customers, creditors and communities in which the Corporation and its subsidiaries operate or are located; (b) The business and financial condition and earnings prospects of the acquiring person or persons, including, but not limited to, debt service and other existing or likely financial obligations of the acquiring person or persons and their affiliates and associates, and the possible effect of such conditions upon the Corporation and its subsidiaries and the communities in which the Corporation and its subsidiaries operate or are located; and (c) The competence, experience, and integrity of the acquiring person or persons and its or their management and affiliates and associates. 18 Section 8.6. Amendment of Article VIII or Certain Other Provisions. Any amendment, change or repeal of this Article VIII, or of Sections 6.1, 6.5, 7.2, 7.5, 9.2 or 9.3, or any other amendment of these Restated Articles of Incorporation which would have the effect of modifying or permitting circumvention of this Article VIII or such other provisions of these Restated Articles of Incorporation, shall require the affirmative vote, at a meeting of shareholders of the Corporation: (a) Of at least seventy-five percent (75%) of the votes entitled to be cast by the holders of the outstanding shares of all classes of Voting Stock of the Corporation considered for purposes of this Article VIII as a single class; and (b) Of an Independent Majority of Shareholders; provided, however, that this Section 8.6 shall not apply to, and such vote shall not be required for, any such amendment, change or repeal recommended to shareholders by the favorable vote of not less than seventy-five percent (75%) of the Directors who then qualify as Continuing Directors with respect to all Related Persons and any such amendment, change or repeal so recommended shall require only the vote, if any, required under the applicable provisions of the Corporation Law. Section 8.7. Fiduciary Obligations Unaffected. Nothing in this Article VIII shall be construed to relieve any Related Person from any fiduciary duty imposed by law. Section 8.8. Article VIII Nonexclusive. The provisions of this Article VIII are nonexclusive and are in addition to any other provisions of law or these Restated Articles of Incorporation or the By-Laws of the Corporation relating to Business Combinations, Related Persons or similar matters. ARTICLE IX Miscellaneous Provisions Section 9.1. Amendment or Repeal. Except as otherwise expressly provided for in these Restated Articles of Incorporation, the Corporation shall be deemed, for all purposes, to have reserved the right to amend, alter, change or repeal any provision contained in these Restated Articles of Incorporation to the extent and in the manner now or hereafter permitted or prescribed by statute, and all rights herein conferred upon shareholders are granted subject to such reservation. Section 9.2. Redemption of Shares Acquired in Control Share Acquisitions. If and whenever the provisions of IC 23-1-42 apply to the Corporation, it is authorized to redeem its securities pursuant to IC 23-1-42-10. Section 9.3. Election to be Subject to Five-Year Freeze Statute. Unless the Corporation's By-Laws provide that it elects not be governed by IC 23-1-43, the Corporation elects to have the provisions of IC 23-1-43 apply to it regardless of whether or not it has a class of 19 voting securities registered with the Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934. Section 9.4. Captions. The captions of the Articles and Sections of these Restated Articles of Incorporation have been inserted for convenience of reference only and do not in any way define, limit, construe or describe the scope or intent of any Article or Section hereof. ARTICLE X Terms of ESOP Convertible Voting Preferred Stock The designation, preferences, limitations and relative voting and other rights of the first series of the authorized Special Shares of the Corporation in addition to those set forth elsewhere in these Restated Articles of Incorporation which are applicable to all series of Special Shares are hereby fixed as follows: Section 10.1. Designation and Amount; Special Purpose Restricted Transfer Issue. (a) The shares of such series shall be designated as "ESOP Convertible Voting Preferred Stock" ("ESOP Preferred Stock") and the number of shares constituting such series shall be 1,700,000. (b) Shares of ESOP Preferred Stock shall be issued only to Fort Wayne National Bank, Lincoln National Bank and Trust Company of Fort Wayne, and Summit Bank, as trustees (the "Trustee") of the Retirement Savings Plan for Employees of Tokheim Corporation and Subsidiaries (the "Plan"). All references to the holder of shares of ESOP Preferred Stock shall mean the Trustee or any successor trustee under the Plan. In the event of any transfer of record ownership of shares of ESOP Preferred Stock to any person other than any successor trustee under the Plan, the shares of ESOP Preferred Stock so transferred, upon such transfer and without any further action by the Corporation or the holder thereof, shall be automatically converted into shares of Common Shares on the terms otherwise provided for the conversion of shares of ESOP Preferred Stock into shares of Common Shares pursuant to Section 10.5 hereof and no such transferee shall have any of the preferences, limitations and relative voting and other rights, ascribed to shares of ESOP Preferred Stock hereunder but, rather, only the powers and rights pertaining to the Common Shares into which such shares of ESOP Preferred Stock shall be so converted. In the event of such a conversion, the transferee of the shares of ESOP Preferred Stock shall be treated for all purposes as the record holder of the shares of Common Shares into which such shares of ESOP Preferred Stock have been automatically converted as of the date of such transfer. Certificates representing shares of ESOP Preferred Stock shall bear a legend to reflect the foregoing provisions. Notwithstanding the foregoing provisions of this paragraph (b) of Section 10.1, shares of ESOP Preferred Stock: (i) May be converted into shares of Common Shares as provided by Section 10.5 hereof and the shares of Common Shares issued upon such conversion may be transferred by the holder thereof as permitted by law; and 20 (ii) Shall be redeemable by the Corporation upon the terms and conditions provided by Sections 10.6, 10.7 and 10.8 hereof. Section 10.2. Dividends and Distributions. (a) Subject to the provisions for adjustment hereinafter set forth, the holders of shares of ESOP Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, cash dividends ("Preferred Dividends") in an amount per share equal to $1.9375 per share per annum, and no more, payable quarterly in arrears, one-fourth on the first day of March, June, September, and December of each year (each a "Dividend Payment Date") commencing on September 1, 1989, to holders of record at the start of business on such Dividend Payment Date. In the event that any Dividend Payment shall fall on any day other than a "Business Day" (as hereinafter defined), the dividend payment due on such Dividend Payment Date shall be paid on the Business Day immediately preceding such Dividend Payment Date. Preferred Dividends shall begin to accrue on outstanding shares of ESOP Preferred Stock from the date of issuance of such shares of ESOP Preferred Stock. Preferred Dividends shall accrue on a daily basis whether or not the Corporation shall have earnings or surplus at the time, but Preferred Dividends accrued after issuance on the shares of ESOP Preferred Stock for any period less than a full quarterly period between Dividend Payment Dates shall be computed on the basis of a 360-day year of 12 30-day months. Accrued but unpaid Preferred Dividends shall cumulate as of the Dividend Payment Date on which they first become payable, but not interest shall accrue on accumulated but unpaid Preferred Dividends. (b) So long as any shares of ESOP Preferred Stock shall be outstanding, no dividend shall be declared or paid or set apart for payment on any other series of stock ranking on a parity with the ESOP Preferred Stock as to dividends, unless there shall also be or have been declared and paid or set apart for payment on the ESOP Preferred Stock, dividends for all dividend payment periods of the ESOP Preferred Stock ending on or before the Dividend Payment Date of such parity stock, ratably in proportion to the respective amounts of dividends accumulated and unpaid through such dividend period on the ESOP Preferred Stock and accumulated and unpaid on such parity stock through the dividend payment period on such parity stock next preceding such Dividend Payment Date. In the event that full cumulative dividends on the ESOP Preferred Stock have been declared and paid or set apart for payment when due, the Corporation shall not declare or pay or set apart for payment any dividends or make any other distributions on, or make any payment on account of the purchase, redemption or other retirement of any other class of stock or series thereof of the Corporation ranking, as to dividends or as to distributions in the event of a liquidation, dissolution or windup of the Corporation, junior to the ESOP Preferred Stock until full cumulative dividends on the ESOP Preferred Stock shall have been paid or declared and set apart for payment; provided, however, that the foregoing shall not apply to (i) any dividend payable solely in any shares of any stock ranking, as to dividends and as to distributions in the event of a liquidation, dissolution or windup of the Corporation, junior to 21 the ESOP Preferred Stock or (ii) the acquisition of shares of any stock ranking, as to dividends or as to distributions in the event of a liquidation, dissolution or windup of the Corporation, junior to the ESOP Preferred Stock in exchange solely for shares of any other stock ranking, as to dividends and as to distributions in the event of a liquidation, dissolution or windup of the Corporation, junior to the ESOP Preferred Stock. Section 10.3. Voting Rights. The holders of shares of ESOP Preferred Stock shall have the following voting rights: (a) The holders of ESOP Preferred Stock shall be entitled to vote on all matters submitted to a vote of the shareholders of the Corporation, voting together with the holders of Common Shares as one class. The holder of each share of ESOP Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Shares into which such share of ESOP Preferred Stock could be converted on the record date for determining the shareholders entitled to vote, rounded to the nearest one-tenth of a vote; it being understood that whenever the "Conversion Price" (as defined in Section 10.5 hereof) is adjusted as provided in Section 10.9 hereof, the voting rights of the ESOP Preferred Stock shall also be similarly adjusted. (b) Except as otherwise required by law or set forth herein, holders of ESOP Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for the taking of any corporate action; provided, however, that the vote of at least 66-2/3% of the outstanding shares of ESOP Preferred Stock, voting separately as a series, shall be necessary to adopt any alteration, amendment or repeal of any provision of these Restated Articles of Incorporation of the Corporation, as amended (including any such alteration, amendment or repeal effected by any merger or consolidation in which the Corporation is the surviving or resulting corporation), if such amendment, alteration or repeal would alter or change the preferences, limitations, or relative voting or other rights of the shares of ESOP Preferred Stock so as to affect them adversely. Section 10.4. Liquidation, Dissolution or Windup. (a) Upon any voluntary or involuntary liquidation, dissolution or windup of the Corporation, the holders of ESOP Preferred Stock shall be entitled to receive out of assets of the Corporation which remain after satisfaction in full of all valid claims of creditors of the Corporation and which are available for payment to shareholders, and subject to the rights of the holders of any stock of the Corporation ranking senior to or on a parity with the ESOP Preferred Stock in respect of distributions upon liquidation, dissolution or windup of the Corporation, before any amount shall be paid or distributed among the holders of Common Shares or any other shares ranking junior to the ESOP Preferred Stock in respect of distributions upon liquidation, dissolution or windup of the Corporation, liquidating distributions in the amount of $25.00 per share, plus an amount equal to all accrued and unpaid dividends thereon to the date fixed for distribution, and no more. If upon any liquidation, dissolution or windup of the 22 Corporation, the amounts payable with respect to the ESOP Preferred Stock and any other stock ranking as to any such distribution on a parity with the ESOP Preferred Stock are not paid in full, the holders of the ESOP Preferred Stock and such other stock shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled. After payment of the full amount to which they are entitled as provided by the foregoing provisions of this paragraph 10.4(a), the holders of shares of ESOP Preferred Stock shall not be entitled to any further right or claim to any of the remaining assets of the Corporation. (b) Neither the merger or consolidation of the Corporation with or into any other corporation, nor the merger or consolidation of any other corporation with or into the Corporation, nor the sale, lease, exchange or other transfer of all or any portion of the assets of the Corporation, shall be deemed to be a dissolution, liquidation or windup of the affairs of the Corporation for purposes of this Section 10.4, but the holders of the ESOP Preferred Stock shall nevertheless be entitled in the event of any such merger or consolidation to the rights provided by Section 10.8 hereof. (c) Written notice of any voluntary or involuntary liquidation, dissolution or windup of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable to holders of ESOP Preferred Stock in such circumstances shall be payable, shall be given by first-class mail, postage prepaid, mailed not less than twenty (20) days prior to any payment date stated therein, to the holders of ESOP Preferred Stock, at the address shown on the books of the Corporation or any transfer agent for the ESOP Preferred Stock. Section 10.5. Conversion into Common Shares. (a) A holder of shares of ESOP Preferred Stock shall be entitled, at any time prior to the close of business on the date fixed for redemption of such shares pursuant to Sections 10.6, 10.7 and 10.8 hereof, to cause any or all of such shares to be converted into shares of Common Shares, initially at a conversion rate equal to the ratio of $25.00 to the amount which initially shall be $25.00 and which shall be adjusted as hereinafter provided (and, as so adjusted, is hereinafter sometimes referred to as the "Conversion Price") (that is, a conversion rate initially equivalent to one share of Common Shares for each share of ESOP Preferred Stock so converted, which is subject to adjustment as the Conversion Price is adjusted as hereinafter provided). (b) Any holder of shares of ESOP Preferred Stock desiring to convert such shares into shares of Common Shares shall surrender the certificate or certificates representing the shares of ESOP Preferred Stock being converted, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating thereto), at the principal executive office of the Corporation or the offices of the transfer agent for the ESOP Preferred Stock or such office or offices in the continental United States of an agent for conversion as may from time to time be designated by notice to the holders of the ESOP Preferred Stock by the Corpora- 23 tion or the transfer agent for the ESOP Preferred Stock, accompanied by written notice of conversion. Such notice of conversion shall specify (i) the number of shares of ESOP Preferred Stock to be converted and the name or names in which such holder wishes the certificate or certificates for Common Shares and for any shares of ESOP Preferred Stock not to be so converted to be issued and (ii) the address to which such holder wishes delivery to be made of such new certificates to be issued upon such conversion. (c) Upon surrender of a certificate representing a share or shares of ESOP Preferred Stock for conversion, the Corporation shall issue and send by hand delivery (with receipt to be acknowledged) or by first class mail, postage prepaid, to the holder thereof or to such holder's designee, at the address designated by such holder, a certificate or certificates for the number of shares of Common Shares to which such holder shall be entitled upon conversion. In the event that there shall have been surrendered a certificate or certificates representing shares of ESOP Preferred Stock, only part of which are to be converted, the Corporation shall issue and deliver to such holder or such holder's designee a new certificate or certificates representing the number of shares of ESOP Preferred Stock which shall not have been converted. (d) The issuance by the Corporation of shares of Common Shares upon a conversion of shares of ESOP Preferred Stock into shares of Common Shares made at the option of the holder thereof shall be effective as of the earlier of (i) the delivery to such holder or such holder's designee of the certificates representing the shares of Common Shares issued upon conversion thereof or (ii) the commencement of business on the second business day after the surrender of the certificate or certificates for the shares of ESOP Preferred Stock to be converted, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating thereto) as provided herein. On and after the effective day of conversion, the person or persons entitled to receive the Common Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Shares, but no allowance or adjustment shall be made in respect of dividends payable to holders of Common Shares in respect of any period prior to such effective date. The Corporation shall not be obligated to pay any dividends which shall have been declared and shall be payable to holders of shares of ESOP Preferred Stock on a Dividend Payment Date if such Dividend Payment Date for such dividend is subsequent to the effective date of conversion of such shares. (e) The Corporation shall not be obligated to deliver to holders of ESOP Preferred Stock any fractional share or shares of Common Shares issuable upon any conversion of such shares of ESOP Preferred Stock, but in lieu thereof may make a cash payment in respect thereof in any manner permitted by law. (f) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Shares, solely for issuance upon the conversion of shares of ESOP Preferred Stock as herein provided, free from any preemptive rights, such number of shares of Common Shares as shall from time to time be issuable upon the conversion of all the shares of ESOP 24 Preferred Stock then outstanding. Nothing contained herein shall preclude the Corporation from issuing shares of Common Shares held in its treasury upon the conversion of shares of ESOP Preferred Stock into Common Shares pursuant to the terms hereof. The Corporation shall prepare and shall use its best efforts to obtain and keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all requirements as to registration or qualification of the Common Shares, in order to enable the Corporation lawfully to issue and deliver to each holder of records of ESOP Preferred Stock such number of shares of its Common Shares as shall from time to time be sufficient to effect the conversion of all shares of ESOP Preferred Stock then outstanding and convertible into shares of Common Shares. SECTION 10.6. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) The ESOP Preferred Stock shall be redeemable, in whole or in part, at the option of the Corporation at any time after December 1, 1989, or at any time after the date of issuance, if permitted by paragraph (d) of this Section 10.6, at the following redemption prices per share:
During the Twelve-Month Period Price Per Beginning December 1 Share -------------------- ----- 1989 $26.94 1990 26.75 1991 26.55 1992 26.36 1993 26.17 1994 25.97 1995 25.78 1996 25.59 1997 25.39 1998 25.20
and thereafter at $25.00 per share, plus, in each case, an amount equal to all accrued and unpaid dividends thereon to the date fixed for redemption. Payment of the redemption price shall be made by the Corporation in cash or shares of Common Shares, or a combination thereof, as permitted by paragraph (f) of this Section 10.6. From and after the date fixed for redemption, dividends on shares of ESOP Preferred Stock called for redemption will cease to accrue, such shares will no longer be deemed to be outstanding and all rights in respect of such shares of the Corporation shall cease, except the right to receive the redemption price. If less than all of the outstanding shares of ESOP Preferred Stock are to be redeemed, the Corporation shall either redeem a portion of the shares of each holder determined pro rata based on the number of shares held by each holder or shall select the shares to be redeemed by lot, as may be determined by the Board of Directors of the Corporation. (b) Unless otherwise required by law, notice of redemption will be sent to the holders of ESOP Preferred Stock at the address shown on the books of the Corporation or any transfer agent for the ESOP Preferred Stock by first class mail, postage prepaid, mailed not less than 25 twenty (20) days nor more than sixty (60) days prior to the redemption date. Each such notice shall state: (i) the redemption date; (ii) the total number of shares of the ESOP Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the conversion rights of the shares to be redeemed, the period within which conversion rights may be exercised, and the Conversion Price and number of shares of Common Shares issuable upon conversion of a share of ESOP Preferred Stock at the time. Upon surrender of the certificate for any shares so called for redemption and not previously converted (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the date fixed for redemption and at the redemption price set forth in this Section 10.6. (c) In the event of a change in the federal tax law of the United States of America which has the effect of precluding the Corporation from claiming any of the tax deductions for dividends paid on the ESOP Preferred Stock when such dividends are used as provided under Section 404(k)(2) of the Internal Revenue Code of 1986, as amended and in effect on the date shares of ESOP Preferred Stock are initially issued, the Corporation may, in its sole discretion and notwithstanding anything to the contrary in paragraph (a) of this Section 10.6, elect to redeem any or all of such shares for the amount payable in respect of the shares upon liquidation of the Corporation pursuant to Section 10.4 hereof. (d) Notwithstanding anything to the contrary in paragraph (a) of this Section 10.6, the Corporation may elect to redeem any or all of the shares of ESOP Preferred Stock at any time on or prior to December 1, 1989, on the terms and conditions set forth in paragraphs (a) and (b) of this Section 10.6, if the last reported sales price, regular way, of a share of Common Shares, as reported on the New York Stock Exchange Composite-Tape, or, if the Common Shares is not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which such stock is listed or admitted to trading or, if the Common Shares is not listed or admitted to trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or, if Common Shares is not quoted on such National Market System, the average of the closing bid and asked prices in the over-the-counter market as reported by NASDAQ, for at least twenty (20) trading days within a period of thirty (30) consecutive trading days ending within five (5) days of the notice of redemption, equals or exceeds one hundred fifty percent (150%) of the Conversion Price (giving effect in making such calculation to any adjustments required by Section 10.9 hereof). (e) In the event that the Plan is terminated in accordance with its terms, and notwithstanding anything to the contrary in paragraph (a) of this Section 10.6, the Corporation 26 shall, as soon thereafter as practicable, call for redemption all then outstanding shares of ESOP Preferred Stock for the amount payable in respect of the shares upon liquidation of the Corporation pursuant to Section 10.4 hereof. (f) The Corporation, at its option, may make payment of the redemption price required upon redemption of shares of ESOP Preferred Stock in cash or in shares of Common Shares, or in a combination of such shares and cash, any such shares of Common Shares to be valued for such purposes at their Fair Market Value (as defined in paragraph (f) of Section 10.9 hereof). Section 10.7. Other Redemption Rights. Shares of ESOP Preferred Stock shall be redeemed by the Corporation except to the extent prohibited by law for shares of Common Shares, or if the Corporation so elects, in cash, or a combination of such shares and cash, any such shares of Common Shares to be valued for such purpose as provided by paragraph (f) of Section 10.6, at a redemption price of $25.00 per share plus accrued and unpaid dividends thereon to the date fixed for redemption, at the option of the holder, at any time and from time to time upon notice to the Corporation given not less than five (5) business days prior to the date fixed by the holder in such notice for such redemption, upon certification by such holder to the Corporation that redemption is necessary for such holder to provide for distributions required to be made to participants under, or to satisfy an investment election provided to participants in accordance with, the Plan, or any successor plan. Section 10.8. Consolidation, Merger, etc. (a) In the event that the Corporation shall consummate any consolidation or merger or similar business combination, pursuant to which the outstanding shares of Common Shares are by operation of law exchanged solely for or changed, reclassified or converted solely into stock of any successor or resulting corporation (including the Corporation) that constitutes "qualifying employer securities" with respect to a holder of ESOP Preferred Stock within the meaning of Section 4975(e)(8) of the Internal Revenue Code of 1986, as amended, and Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as amended, or any successor provisions of law, and, if applicable, for a cash payment in lieu of fractional shares, if any, the shares of ESOP Preferred Stock of such holder shall, in connection with such consolidation, merger or similar business combination, be assumed by and shall become preferred stock of such successor or resulting corporation, having in respect of such corporation, insofar as possible, the same powers, preferences and relative, participating, optional or other special rights (including the redemption rights provided by Sections 10.6, 10.7 and 10.8 hereof), and the qualifications, limitations or restrictions thereon, that the ESOP Preferred Stock had immediately prior to such transaction, except that after such transaction each share of the ESOP Preferred Stock shall be convertible, otherwise on the terms and conditions provided by Section 10.5 hereof, into the number and kind of qualifying employer securities so receivable by a holder of the number of shares of Common Shares into which such shares of ESOP Preferred Stock could have been converted immediately prior to such transaction; provided, however, that if by virtue of the structure of 27 such transaction, a holder of Common Shares is required to make an election with respect to the nature and kind of consideration to be received in such transaction, which election cannot practicably be made by the holders of the ESOP Preferred Stock, then the shares of ESOP Preferred Stock shall, by virtue of such transaction and on the same terms as apply to the holders of Common Shares, be converted into or exchanged for the aggregate amount of stock, securities, cash or other property (payable in kind) receivable by a holder of the number of shares of Common Shares into which such shares of ESOP Preferred Stock could have converted immediately prior to such transaction if such holder of Common Shares failed to exercise any rights of election to receive any kind or amount of stock, securities, cash or other property (other than such qualifying employer securities and a cash payment, if applicable, in lieu of fractional shares) receivable upon such transaction (provided that, if the kind or amount of qualifying employer securities receivable upon such transaction is not the same for each nonelecting share, then the kind and amount so receivable upon such transaction for each nonelecting share shall be the kind and amount so receivable per share by the plurality of the nonelecting shares). The rights of the ESOP Preferred Stock as preferred stock of such successor or resulting corporation shall successively be subject to adjustment pursuant to Section 10.9 hereof after any such transaction as nearly equivalent as practicable to the adjustment provided for by such Section prior to such transaction. The Corporation shall not consummate any such merger, consolidation or similar transaction unless all then outstanding shares of ESOP Preferred Stock be assumed and authorized by the successor or resulting corporation as aforesaid. (b) In the event that the Corporation shall consummate any consolidation or merger or similar business combination, pursuant to which the outstanding shares of Common Shares are by operation of law exchanged for or changed, reclassified or converted into other stock or securities or cash or any other property, or any combination thereof, other than any such consideration which is constituted solely of qualifying employer securities (as referred to in paragraph (a) of this Section 10.8) and cash payments, if applicable, in lieu of fractional shares, outstanding shares of ESOP Preferred Stock shall, without any action on the part of the Corporation or any holder thereof (but subject to paragraph (c) of this Section 10.8), be automatically converted by virtue of such merger, consolidation or similar transaction immediately prior to such consummation into the number of shares of Common Shares into which such shares of ESOP Preferred Stock could have been converted at such time so that each share of ESOP Preferred Stock shall, by virtue of such transaction and on the same terms as apply to the holders of Common Shares, be converted into or exchanged for the aggregate amount of stock, securities, cash or other property (payable in like kind) receivable by a holder of the number of shares of Common Shares into which such shares of ESOP Preferred Stock could have been converted immediately prior to such transaction; provided, however, that if by virtue of the structure of such transaction, a holder of Common Shares is required to make an election with respect to the nature and kind of consideration to be received in such transaction, which election cannot practi- 28 cably be made by the holders of the ESOP Preferred Stock, then the shares of ESOP Preferred Stock, by virtue of such transaction and on the same terms as apply to the holders of Common Shares, be converted into or exchanged for the aggregate amount of stock, securities, cash or other property (payable in kind) receivable by a holder of the number of shares of Common Shares into which such shares of ESOP Preferred Stock could have been converted immediately prior to such transaction if such holder of Common Shares failed to exercise any rights of election as to the kind or amount of stock, securities, cash or other property receivable upon such transaction (provided that, if the kind or amount of stock, securities, cash or other property receivable upon such transaction is not the same for each nonelection share, then the kind and amount of stock, securities, cash or other property receivable upon such transaction for each nonelecting share shall be the kind and amount so receivable per share by a plurality of the nonelecting shares). (c) In the event the Corporation shall enter into any agreement providing for any consolidation or merger or similar business combination described in paragraph (b) of this Section 10.8, then the Corporation shall as soon as practicable thereafter (and in any event at least ten (10) Business Days before consummation of such transaction) give notice of such agreement and the material terms thereof to each holder of ESOP Preferred Stock and each such holder shall have the right to elect, by written notice to the Corporation, to receive, upon consummation of such transaction (if and when such transaction is consummated), from the Corporation or the successor of the Corporation, in redemption and retirement of such ESOP Preferred Stock, a cash payment equal to the amount payable in respect of shares of ESOP Preferred Stock upon liquidation of the Corporation pursuant to Section 10.4 hereof. No such notice of redemption shall be effective unless given to the Corporation prior to the close of business on the fifth business day prior to consummation of such transaction, unless the Corporation or the successor of the Corporation shall waive such prior notice, but any notice of redemption so given prior to such time may be withdrawn by notice of withdrawal given to the Corporation prior to the close of business on the fifth Business Day prior to consummation of such transaction. Section 10.9 Anti-dilution Adjustments. (a) In the event the Corporation shall, at any time or from time to time while any of the shares of the ESOP Preferred Stock are outstanding, (i) pay a dividend or make a distribution in respect of the Common Shares in shares of Common Shares, (ii) subdivide the outstanding shares of Common Shares, or (iii) combine the outstanding shares of Common Shares into a smaller number of shares, in each case whether by reclassification of shares, recapitalization of the Corporation (including a recapitalization effected by a merger or consolidation to which Section 10.8 hereof does not apply) or otherwise, the Conversion Price in effect immediately prior to such action shall be adjusted by multiplying such Conversion Price by a fraction, the numerator of which is the number of shares of Common Shares outstanding immediately before such event, and the denominator of which is the number of shares of Common Shares outstanding immediately after 29 such event. An adjustment made pursuant to this paragraph 10.9(a) shall be given effect, upon payment of such a dividend or distribution, as of the record date for the determination of stockholders entitled to receive such dividend or distribution (on a retroactive basis and in the case of a subdivision or combination shall become effective immediately as of the effective date thereof. (b) In the event the Corporation shall, at any time or from time to time while any of the shares of ESOP Preferred Stock are outstanding, issue to holders of shares of Common Shares as a dividend or distribution, including by way of a reclassification of shares on a recapitalization of the Corporation, any right or warrant to purchase shares of Common Shares (but not including as such a right or warrant any security convertible into or exchangeable for shares of Common Shares) at a purchase price per share less than the Fair Market Value (as hereinafter defined) of a share of Common Shares on the date of issuance of such right or warrant, then, subject to the provisions of paragraphs (d) and (e) of this Section 10.9, the Conversion Price shall be adjusted by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Shares outstanding immediately before such issuance of rights or warrants plus the number of shares of Common Shares which could be purchased at the Fair Market Value of a share of Common Shares at the time of such issuance for the maximum aggregate consideration payable upon exercise in full of all such rights or warrants, and the denominator of which shall be the number of shares of Common Shares outstanding immediately before such issuance of rights or warrants plus the maximum number of shares of Common Shares that could be acquired upon exercise in full of all such rights and warrants. (c) In the event the Corporation shall, at any time or from time to time while any of the shares of ESOP Preferred Stock are outstanding, make an Extraordinary Distribution (as hereinafter defined) in respect of the Common Shares, whether by dividend, distribution, reclassification of shares or recapitalization of the Corporation (including a recapitalization or reclassification effected by a merger or consolidation to which Section 10.8 hereof does not apply) or effect a Pro Rata Repurchase (as hereinafter defined) of Common Shares, the Conversion Price in effect immediately prior to such Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs (d) and (e) of this Section 10.9, be adjusted by multiplying such Conversion Price by the fraction the numerator of which is (i) the product of (x) the number of shares of Common Shares outstanding immediately before such Extraordinary Distribution or Pro Rata Repurchase multiplied by (y) the Fair Market Value of a share of Common Shares on the day before the ex-dividend date with respect to an Extraordinary Distribution which is paid in cash and on the distribution date with respect to an Extraordinary Distribution which is paid other than in cash, or on the applicable expiration date (including all extensions thereof) of any tender offer which is a Pro Rata Repurchase, or on the date of purchase with respect to any Pro Rata Repurchase which is not a tender offer, as the case may be, minus (ii) the Fair Market Value of the Extraordinary Distribution or the aggregate purchase price of the Pro Rata Repur- 30 chase, as the case may be, and the denominator of which shall be the product of (a) the number of shares of Common Shares outstanding immediately before such Extraordinary Dividend or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase, the number of shares of Common Shares repurchased by the Corporation multiplied by (b) the Fair Market Value of a share of Common Shares on the day before the ex-dividend date with respect to an Extraordinary Distribution which is paid in cash and on the distribution date with respect to an Extraordinary Distribution which is paid other than in cash, or on the applicable expiration date (including all extensions thereof) of any tender offer which is a Pro Rata Repurchase or on the date of purchase with respect to any Pro Rata Repurchase which is not a tender offer, as the case may be. The Corporation shall send each holder of ESOP Preferred Stock (i) notice of its intent to make any dividend or distribution and (ii) notice of any offer by the Corporation to make a Pro Rata Repurchase, in each case at the same time as, or as soon as practicable after, such offer is first communicated (including by announcement of a record date in accordance with the rules of any stock exchange on which the Common Shares is listed or admitted to trading) to holders of Common Shares. Such notice shall indicate the intended record date and the amount and nature of such dividend or distribution, or the number of shares subject to such offer for a Pro Rata Repurchase and the purchase price payable by the Corporation pursuant to such offer, as well as the Conversion Price and the number of shares of Common Shares into which a share of ESOP Preferred Stock may be converted at such time. (d) Notwithstanding any other provisions of this Section 10.9, the Corporation shall not be required to make any adjustment to the Conversion Price unless such adjustment would require an increase or decrease of at least one percent (1%) in the Conversion Price. Any lesser adjustment shall be carried forward and shall be made no later than the time of, and together with, the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least one percent (1%) in the Conversion Price. (e) If the Corporation shall make any dividend or distribution on the Common Shares or issue any Common Shares, other capital stock or other security of the Corporation or any rights or warrants to purchase or acquire any such security, which transaction does not result in an adjustment to the Conversion Price pursuant to the foregoing provisions of this Section 10.9, the Board of Directors of the Corporation shall consider whether such action is of such a nature that an adjustment to the Conversion Price should equitably be made in respect of such transaction. If in such case the Board of Directors of the Corporation determines that an adjustment to the Conversion Price should be made, an adjustment shall be made effective as of such date, as determined by the Board of Directors of the Corporation. The determination of the Board of Directors of the Corporation as to whether an adjustment to the Conversion Price should be made pursuant to the foregoing provisions of this paragraph 10.9(e) and, if so, as to what adjustment should be made and when, shall be final and binding on the Corporation and all share- 31 holders of the Corporation. The Corporation shall be entitled to make such additional adjustments in the Conversion Price, in addition to those required by the foregoing provisions of this Section 10.9, as shall be necessary in order that any dividend or distribution in shares of capital stock of the Corporation, subdivision, reclassification or combination of shares of stock of the Corporation or any recapitalization of the Corporation shall not be taxable to the holders of the Common Shares. (f) As used herein, the following definitions shall apply: "Business Day" shall mean each day that is not a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open. "Current Market Price" of publicly traded shares of Common Shares or any other class of Capital Stock or other security of the Corporation or any other issuer for any day shall mean the last reported sales price, regular way, or, in the event that no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in either case as reported on the New York Stock Exchange Composite Tape or, if such security is not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which such security is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the NASDAQ National Market System or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on each such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for such security on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in such security selected for such purpose by the Board of Directors of the Corporation or a committee thereof, in each case, on each trading day during the Adjustment Period. "Adjustment Period" shall mean the period of five (5) consecutive trading days preceding, and including, the date as of which the Fair Market Value of a security is to be determined. The "Fair Market Value" of any security which is not publicly traded or of any other property shall mean the fair value thereof as determined by an independent investment banking or appraisal firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors of the Corporation or a committee thereof, or, if no such investment banking or appraisal firm is in good faith judgment of the Board of Directors or such committee available to make such determination, as determined in good faith by the Board of Directors of the Corporation or such committee. "Extraordinary Distribution" shall mean any dividend or other distribution to holders of Common Shares (effected while any of the shares of ESOP Preferred Stock are outstanding) (i) of cash, where the aggregate amount of such cash dividend or distribution, together with the amount of all cash dividends and distributions made during the preceding period of 12 months, when combined with the aggregate amount of all Pro Rata Repurchases (for this purpose, including 32 only that portion of the aggregate purchase price of such Pro Rata Repurchase which is in excess of the Fair Market Value of the Common Shares repurchased as determined on the applicable expiration date (including all extensions thereof) of any tender offer or exchange offer which is a Pro Rata Repurchase, or the date of purchase with respect to any other Pro Rata Repurchase which is not a tender offer or exchange offer made during such period), exceeds fifteen percent (15%) of the aggregate Fair Market Value of all shares of Common Shares outstanding on the day before the ex- dividend date with respect to such Extraordinary Distribution which is paid in cash and on the distribution date with respect to an Extraordinary Distribution which is paid other than in cash, and/or (ii) of any shares of capital stock of the Corporation (other than shares of Common Shares), other securities of the Corporation (other than securities of the type referred to in paragraph (b) or (c) of this Section 10.9), evidences of indebtedness of the Corporation or any other person or any other property (including shares of any subsidiary of the Corporation) or any combination thereof. The Fair Market Value of an Extraordinary Distribution for purposes of paragraph (d) of this Section 10.9 shall be equal to the sum of the Fair Market Value of such Extraordinary Distribution plus the amount of any cash dividends which are not Extraordinary Distributions made during such 12-month period and not previously included in the calculation of an adjustment pursuant to paragraph (d) of this Section 10.9. "Fair Market Value" shall mean, as to shares of Common Shares or any other class of capital stock or securities of the Corporation or any other issuer which are publicly traded, the average of the Current Market Prices of such shares or securities for each day of the Adjustment Period. "Non-Dilutive Amount" in respect of an issuance, sale or exchange by the Corporation of any right or warrant to purchase or acquire shares of Common Shares (including any security convertible into or exchangeable for shares of Common Shares) shall mean the remainder of: (i) The product of the Fair Market Value of a share of Common Shares on the day preceding the first public announcement of such issuance, sale or exchange multiplied by the maximum number of shares of Common Shares which could be acquired on such date upon the exercise in full of such rights and warrants (including upon the conversion or exchange of all such convertible or exchangeable securities), whether or not exercisable (or convertible or exchangeable) at such date, minus (ii) The aggregate amount payable pursuant to such right or warrant to purchase or acquire such maximum number of shares of Common Shares; provided, however, that in no event shall the Non-Dilutive Amount be less than zero. For purposes of the foregoing sentence, in the case of a security convertible into or exchangeable for shares of Common Shares, the amount payable pursuant to a right or warrant to purchase or acquire shares of Common Shares shall be the Fair Market Value of such security on the date of the issuance, sale or exchange of such security by the Corporation. 33 "Pro Rata Repurchase" shall mean any purchase of shares of Common Shares by the Corporation or any subsidiary thereof, whether for cash, shares of capital stock of the Corporation, other securities of the Corporation, evidences of indebtedness of the Corporation or any other person or any other property (including shares of a subsidiary of the Corporation), or any combination thereof, effected while any of the shares of ESOP Preferred Stock are outstanding, pursuant to any tender offer or exchange offer subject to Section 13(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor provision of law, or pursuant to any other offer available to substantially all holders of Common Shares; provided, however, that no purchase of shares by the Corporation, or any subsidiary thereof made in open market transactions shall be deemed a Pro Rata Repurchase. For purposes of this paragraph 10.9(f), shares shall be deemed to have been purchased by the Corporation or any subsidiary thereof "in open market transactions" if they have been purchased substantially in accordance with the requirements of Rule 10b-18 as in effect under the Exchange Act, on the date shares of ESOP Preferred Stock are initially issued by the Corporation or on such other terms and conditions as the Board of Directors of the Corporation or a committee thereof shall have determined are reasonably designed to prevent such purchases from having a material effect on the trading market for the Common Shares. (g) Whenever an adjustment to the Conversion Price and the related voting rights of the ESOP Preferred Stock is required hereunder, the Corporation shall forthwith place on file with the transfer agent for the Common Shares and the ESOP Preferred Stock, and with the Secretary of the Corporation, a statement signed by two officers of the Corporation stating the adjusted Conversion Price determined as provided herein and the resulting conversion ratio, and the voting rights (as appropriately adjusted), of the ESOP Preferred Stock. Such statement shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment, including any determination of Fair Market Value involved in such computation. Promptly after each adjustment to the Conversion Price and the related voting rights of the ESOP Preferred Stock, the Corporation shall mail a notice thereof and of the then prevailing conversion ratio to each holder of shares of the ESOP Preferred Stock. Section 10.10 Ranking; Retirement of Shares. (a) The ESOP Preferred Stock shall rank senior to the Common Shares as to the payment of dividends and the distribution of assets on liquidation, dissolution and windup of the Corporation, and, unless otherwise provided in these Restated Articles of Incorporation of the Corporation, as the same may be amended, relating to a subsequent series of Preferred Stock of the Corporation, the ESOP Preferred Stock shall rank junior to all subsequent series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets on liquidation, dissolution or windup. (b) Any shares of ESOP Preferred Stock acquired by the Corporation by reason of the conversion or redemption of such shares as provided herein, or otherwise so acquired, shall be 34 retired as shares of ESOP Preferred Stock and restored to the status of authorized but unissued shares of Special Shares of the Corporation, undesignated as to series, and may thereafter be reissued as part of a new series of such Special Shares as permitted by law. Section 10.11. Miscellaneous. (a) All notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three (3) business days after the mailing thereof if sent by registered mail (unless first-class mail shall be specifically herein permitted for such notice) with postage prepaid, addressed: (i) if to the Corporation, to its office at 10501 Corporate Drive, Fort Wayne, Indiana 46845 (Attention: Secretary), or to the transfer agent for the ESOP Preferred Stock, or other agent of the Corporation designated as permitted herein or (ii) if to any holder of the ESOP Preferred Stock or Common Shares, as the case may be, to such holder at the address of such holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the ESOP Preferred Stock or Common Shares, as the case may be) or (iii) to such other address as the Corporation or any such holder, as the case may be, shall have designated by notice similarly given. (b) The term "Common Shares" as used in this Resolution means the Corporation's Common Shares, as the same exists at the date of filing the Amendment to these Restated Articles of Incorporation relating to the ESOP Preferred Stock. In the event that, at any time as a result of an adjustment made pursuant to Section 10.9, the holder of any shares of the ESOP Preferred Stock upon thereafter surrendering such shares for conversion, shall become entitled to receive any shares or other securities of the Corporation other than shares of Common Shares, the Conversion Price in respect of such other shares or securities so receivable upon conversion of shares of ESOP Preferred Stock shall thereafter be adjusted, and shall be subject to further adjustment from time to time, in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Shares contained in Section 10.9 hereof, and the provisions of Sections 10.1 through 10.8, 10.10 and 10.11 hereof with respect to the Common Shares shall apply on like or similar terms to any such other shares or securities. (c) The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of ESOP Preferred Stock or shares of Common Shares or other securities issued on account of ESOP Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of shares of ESOP Preferred Stock or Common Shares or other securities in a name other than that in which the shares of ESOP Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person with respect to any such shares or securities other than a payment, to the registered holder thereof, and shall not be required to make any such issuance, delivery or 35 payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable. (d) In the event that a holder of shares of ESOP Preferred Stock shall not by written notice designate the name in which shares of Common Shares to be issued upon conversion of such shares should be registered or to whom payment upon redemption of shares of ESOP Preferred Stock should be made or the address to which the certificate or certificates representing such shares, or such payment, should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the name of the holder of such ESOP Preferred Stock as shown on the records of the Corporation and to send the certificate or certificates representing such shares, or such payment, to the address of such holder shown on the records of the Corporation. (e) Unless otherwise provided in these Restated Articles of Incorporation, as the same may be amended, of the Corporation, all payments in the form of dividends, distributions on voluntary or involuntary dissolution, liquidation or windup or otherwise made upon the shares of ESOP Preferred Stock and any other stock ranking on a parity with the ESOP Preferred Stock with respect to such dividend or distribution shall be pro rata, so that amounts paid per share on the ESOP Preferred Stock and such other stock shall in all cases bear to each other the same ratio that the required dividends, distributions or payments, as the case may be, then payable per share on the shares of the ESOP Preferred Stock and such other stock bear to each other. (f) The Corporation may appoint, and from time to time discharge and change, a transfer agent for the ESOP Preferred Stock. Upon any such appointment or discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of ESOP Preferred Stock. 36 EX-3.2 3 BYLAWS OF THE REGISTRANT Exhibit 3.2 BYLAWS OF TOKHEIM CORPORATION (Restated July 12, 1995) ARTICLE I --------- Meetings of Shareholders ------------------------ Section 1.1. Annual Meetings. Annual meetings of the shareholders of the Corporation shall be held in March of each year, on such date and at such hour and place within or without the State of Indiana as shall be designated by the Board of Directors. The Board of Directors may, by resolution, change the date, time or place of such annual meeting. If the day fixed for any annual meeting of shareholders shall fall on a legal holiday, then such annual meeting shall be held on the first following day that is not a legal holiday. Section 1.2. Special Meetings. Special meetings of the shareholders of the Corporation may be called at any time by a majority of the Board of Directors, the Chairman of the Board or the President and shall be called by the Board of Directors if the Secretary receives written, dated and signed demands for a special meeting, describing in reasonable detail the purpose or purposes for which it is to be held, from the holders of shares representing at least twenty-five percent (25%) of all votes entitled to be cast on any issue proposed to be considered at the proposed special meeting. If the Secretary receives one (1) or more proper written demands for a special meeting of shareholders, the Board of Directors may set a record date for determining shareholders entitled to make such demand. The Board of Directors or the Chairman of the Board, as the case may be, calling a special meeting of shareholders shall set the date, time and place of such meeting, which may be held within or without the State of Indiana. Section 1.3. Notices. A written notice, stating the date, time and place of any meeting of the shareholders, and in the case of a special meeting the purpose or purposes for which such meeting is called, shall be delivered or mailed by the Secretary of the Corporation, to each shareholder of record of the Corporation entitled to notice of or to vote at such meeting no fewer than ten (10) nor more than sixty (60) days before the date of the meeting. In the event of a special meeting of shareholders required to be called as the result of a demand therefor made by shareholders, such notice shall be given no later than the sixtieth (60th) day after the Corporation's receipt of the demand requiring the meeting to be called. Notice of shareholders' meetings, if mailed, shall be mailed, postage prepaid, to each shareholder at his address shown in the Corporation's current record of shareholders. Notice of a meeting of shareholders shall be given to shareholders not entitled to vote, but only if a purpose for the meeting is to vote on any amendment to the Corporation's Restated Articles of Incorporation, merger or share exchange to which the Corporation would be a party, sale of the Corporation's assets, dissolution of the Corporation, or consideration of voting rights to be accorded to 1 shares acquired or to be acquired in a "control share acquisition" (as such term is defined in the Indiana Business Corporation Law). Except as required by the foregoing sentence or as otherwise required by the Indiana Business Corporation Law or the Corporation's Restated Articles of Incorporation, notice of a meeting of shareholders is required to be given only to shareholders entitled to vote at the meeting. A shareholder or his proxy may at any time waive notice of a meeting if the waiver is in writing and is delivered to the Corporation for inclusion in the minutes or filing with the Corporation's records. A shareholder's attendance at a meeting, whether in person or by proxy, (a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder or his proxy at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder or his proxy objects to considering the matter when it is presented. Each shareholder who has in the manner above provided waived notice or objection to notice of a shareholders' meeting shall be conclusively presumed to have been given due notice of such meeting, including the purpose or purposes thereof. If an annual or special shareholders' meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment, unless a new record date is or must be established for the adjourned meeting. Section 1.4. Voting. Except as otherwise provided by the Indiana Business Corporation Law or the Corporation's Restated Articles of Incorporation, each share of the capital stock of any class of the Corporation that is outstanding at the record date established for any annual or special meeting of shareholders and is outstanding at the time of and represented in person or by proxy at the annual or special meeting, shall entitle the record holder thereof, or his proxy, to one (1) vote on each matter voted on at the meeting. Section 1.5. Quorum. Unless the Corporation's Restated Articles of Incorporation or the Indiana Business Corporation Law provide otherwise, at all meetings of the shareholders a majority of the votes entitled to be cast on a matter, represented in person or by proxy, constitutes a quorum for action on the matter. Action may be taken at a shareholders' meeting only on matters with respect to which a quorum exists; provided, however, that any meeting of shareholders, including annual and special meetings and any adjournments thereof, may be adjourned to a later date although less than a quorum is present. Once a share is represented for any purpose at a meeting it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjournment meeting. Section 1.6. Vote Required to Take Action. If a quorum exists as to a matter to be considered at a meeting of shareholders, action on such matter (other than the election of Directors) is approved if the votes properly cast favoring the action exceed the votes properly cast opposing the action, except as the Corporation's Restated Articles of Incorporation or the Indiana Business Corporation Law require a greater number of affirmative votes. Directors shall be elected by a plurality of the votes properly cast. Section 1.7. Record Date. Only those persons shall be entitled to notice of or to vote, in person or by proxy, at any shareholders' meeting who shall appear as shareholders upon the books of the Corporation as of the record date for such meeting set by the Board of Directors, which date may not 2 be earlier than the date seventy (70) days immediately preceding the meeting. In the absence of such determination, the record date shall be the fiftieth (50th) day immediately preceding the date of such meeting. Unless otherwise provided by the Board of Directors, shareholders shall be determined as of the close of business on the record date. Section 1.8. Proxies. A shareholder may vote his shares either in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder (including authorizing the proxy to receive, or to waive, notice of any shareholders' meetings within the effective period of such proxy) by signing an appointment form either personally or by the shareholder's attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent authorized to tabulate votes and is effective for eleven (11) months unless a shorter or longer period is expressly provided in the appointment form. The proxy's authority may be limited to a particular meeting or may be general and authorize the proxy to represent the shareholder at any meeting of shareholders held within the time provided in the appointment form. Subject to the Indiana Business Corporation Law and to any express limitation on the proxy's authority appearing on the face of the appointment form, the Corporation is entitled to accept the proxy's vote or other action as that of the shareholder making the appointment. Section 1.9. Removal of Directors. Any or all of the members of the Board of Directors may be removed, with or without cause, only at a meeting of the shareholders called expressly for that purpose, by a vote of the holders of shares representing seventy-five percent (75%) of the votes then entitled to be cast at an election of Directors. Section 1.10. Participation by Conference Telephone. The Chairman of the Board or the Board of Directors may permit any or all shareholders to participate in an annual or special meeting of shareholders by, or through the use of, any means of communication, such as conference telephone, by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder participating in a meeting by such means shall be deemed to be present in person at the meeting. Section 1.11. Notice of Shareholder Business. (a) At any meeting of the shareholders, only such business may be conducted as shall have been properly brought before the meeting, and as shall have been determined to be lawful and appropriate for consideration by shareholders at the meeting. To be properly brought before a meeting, business must be: (1) specified in the notice of meeting given in accordance with Section 1.3 of this Article I, (2) otherwise properly brought before the meeting by or at the direction of the Board of Directors or the Chief Executive Officer, or (3) otherwise properly brought before the meeting by a shareholder. (b) For business to be properly brought before a meeting by a shareholder pursuant to clause (c) above, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal office of the Corporation, not less than 50 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 60 days' notice of the date of the meeting is given to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was given. A 3 shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting: (1) a brief description of the business desired to be brought before the meeting, (2) the name and address, as they appear on the Corporation's stock records, of the shareholder proposing such business, (3) the class and number of shares of the Corporation which are beneficially owned by the shareholder, and (4) any interest of the shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 1.11. The person presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the Bylaws, or that business was not lawful or appropriate for consideration by shareholders at the meeting, and if he should so determine, he shall so declare to the meeting and any such business shall not be transacted. Section 1.12. Notice of Shareholder Nominees. Nominations of persons for election to the Board of Directors of the Corporation may be made at any meeting of shareholders by or at the direction of the Board of Directors or by any shareholder of the Corporation entitled to vote for the election of directors at the meeting. Shareholder nominations shall be made pursuant to timely notice given in writing to the Secretary of the Corporation in accordance with Section 1.11 of this Article I. Such shareholder's notice shall set forth, in addition to the information required by Section 1.11, as to each person whom the shareholder proposes to nominate for election or reelection as a Director: (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of the Corporation which are beneficially owned by such person, (d) any other information relating to such person that is required to be disclosed in solicitation of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected), and (e) the qualifications of the nominee to serve as a Director of the Corporation. No shareholder nomination shall be effective unless made in accordance with the procedures set forth in this Section 1.12. The person presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that a shareholder nomination was not made in accordance with the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. 4 ARTICLE II ---------- Directors --------- Section 2.1. Number and Terms. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors consisting of nine (9) Directors. The Directors shall be divided into three (3) groups consisting of three (3) Directors in each group, with the term of office of the first group to expire at the 1988 annual meeting of shareholders, the term of office of the second group to expire at the 1989 annual meeting of shareholders, and the term of office of the third group to expire at the 1990 annual meeting of shareholders; and at each annual meeting of shareholders, the Directors chosen to succeed those whose terms then expire shall be identified as being of the same group as the Directors they succeed and shall be elected for a term expiring at the third succeeding annual meeting of shareholders. Despite the expiration of a Director's term, the Director shall continue to serve until his successor is elected and qualified, or until the earlier of his death, resignation, disqualification or removal, or until there is a decrease in the number of Directors. Any vacancy occurring in the Board of Directors, from whatever cause arising, shall be filled by selection of a successor by a majority vote of the remaining members of the Board of Directors (although less than a quorum); provided, however, that if such vacancy or vacancies leave the Board of Directors with no members or if the remaining members of the Board are unable to agree upon a successor or determine not to select a successor, such vacancy may be filled by a vote of the shareholders at a special meeting called for that purpose or at the next annual meeting of shareholders. The term of a Director elected or selected to fill a vacancy shall expire at the end of the term for which such Director's predecessor was elected. In the event the Board of Directors shall increase the total number of its members within the limits provided in the Articles of Incorporation, the Board of Directors shall be authorized to assign such additional member or members to such class of Directors as it deems appropriate and to fill such vacancy for the term of that class to which such additional member or members are assigned. The Directors and each of them shall have no authority to bind the Corporation except when acting as a Board. Section 2.2. Quorum and Vote Required to Take Action. A majority of the whole Board of Directors shall be necessary to constitute a quorum for the transaction of any business, except the filling of vacancies. If a quorum is present when a vote is taken, the affirmative vote of a majority of the Directors present shall be the act of the Board of Directors, unless the act of a greater number is required by the Indiana Business Corporation Law, the Corporation's Restated Articles of Incorporation or these Bylaws. Section 2.3. Annual and Regular Meetings. The Board of Directors shall meet annually, without notice, immediately following the annual meeting of the shareholders, for the purpose of transacting such business as properly may come before the meeting. Other regular meetings of the Board of Directors, in addition to said annual meeting, shall be held on such dates, at such times and at such places as shall be fixed by resolution adopted by the Board of Directors and specified in a notice of each such regular meeting, or otherwise communicated to the Directors. The Board of Directors may at any time alter the date for the next regular meeting of the Board of Directors. 5 Section 2.4. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the members of the Board of Directors upon not less than twenty-four (24) hours' notice given to each Director of the date, time and place of the meeting, which notice need not specify the purpose or purposes of the special meeting. Such notice may be communicated in person (either in writing or orally), by telephone, telegraph, teletype or other form of wire or wireless communication, or by mail, and shall be effective at the earlier of the time of its receipt or, if mailed, five (5) days after its mailing. Notice of any meeting of the Board may be waived in writing at any time if the waiver is signed by the Director entitled to the notice and is filed with the minutes or corporate records. A Director's attendance at or participation in a meeting waives any required notice to the Director of the meeting, unless the Director at the beginning of the meeting (or promptly upon the Director's arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Section 2.5. Written Consents. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one (1) or more written consents describing the action taken, signed by each Director, and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this Section 2.5 is effective when the last Director signs the consent, unless the consent specifies a different prior or subsequent effective date, in which case the action is effective on or as of the specified date. A consent signed under this Section 2.5 shall have the same effect as a unanimous vote of all members of the Board and may be described as such in any document. Section 2.6. Participation by Conference Telephone. The Board of Directors may permit any or all Directors to participate in a regular or special meeting by, or through the use of, any means of communication, such as conference telephone, by which all Directors participating may simultaneously hear each other during the meeting. A Director participating in a meeting by such means shall be deemed to be present in person at the meeting. Section 2.7. Committees. (a) The Board of Directors shall appoint an Audit Committee comprised only of nonofficer members of the Board of Directors, which shall arrange the details of the annual audit of the Corporation and shall recommend to the Board of Directors independent auditors to be presented for consideration by the shareholders. The Board of Directors shall also appoint a Compensation Committee, comprised only of nonofficer members of the Board of Directors, which shall make recommendations to the Board of Directors concerning officers' salaries and other compensation. (b) The Board of Directors may create one (1) or more other committees and appoint members of the Board of Directors to serve on them, by resolution of the Board of Directors adopted by a majority of all the Directors in office when the resolution is adopted. Each committee may have one (1) or more members, and all the members of a committee shall serve at the pleasure of the Board of Directors. (c) To the extent specified by the Board of Directors in the resolution creating a committee, each committee may exercise all of the authority of the Board of Directors; provided, however, that a committee may not: 6 (1) authorize dividends or other distributions, except a committee (or a senior executive officer of the Corporation) may authorize or approve a reacquisition of shares or other distribution if done according to a formula or method or within a range prescribed by the Board of Directors; (2) approve or propose to shareholders action that is required to be approved by shareholders; (3) fill vacancies on the Board of Directors or on any of its committees; (4) amend the Corporation's Restated Articles of Incorporation under IC 23-1-38-2; (5) adopt, amend, repeal, or waive provisions of these Bylaws; (6) approve a plan of merger not requiring shareholder approval; or (7) authorize or approve the issuance or sale or a contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize a committee (or a senior executive officer of the Corporation) to do so within limits prescribed by the Board of Directors. (d) Except to the extent inconsistent with the resolutions creating a committee, Sections 2.1 through 2.6 of these Bylaws, which govern meetings, action without meetings, notice and waiver of notice, quorum and voting requirements and telephone participation in meetings of the Board of Directors, apply to each committee and its members as well. Section 2.8. Compensation. The Board of Directors may fix fees and expenses paid to Directors for attending meetings, and any other compensation paid to Directors by resolution. ARTICLE III ----------- Officers -------- Section 3.1. Designation, Selections and Terms. The officers of the Corporation shall consist of a Chief Executive Officer (CEO) and/or President, one or more Vice Presidents, Chief Financial Officer or Treasurer, and Secretary. The Board of Directors may also elect such other officers or assistant officers as it may from time to time determine by resolution creating the office and defining the duties thereof. In addition, the CEO or the President may, by a certificate of appointment creating the office and defining the duties thereof delivered to the Secretary for inclusion with the corporate records, from time to time create and appoint such assistant officers as they deem desirable. The officers of the Corporation shall be elected by the Board of Directors (or appointed by the CEO or the President as provided above) and need not be selected from among the members of the Board of Directors, except for the Chairman of the Board, the CEO and/or President, who shall be members of the Board of Directors. Any two (2) or more offices may be held by the same person. All officers shall serve at the pleasure of the Board of Directors and, with respect to officers appointed by the CEO or the President, also at the pleasure of such officers. The election or appointment of an officer does not itself create contract rights. Section 3.2. Removal. The Board of Directors may remove any officer at any time with or without cause. An officer appointed by the Chairman of the Board or the President may also be removed at any time, with or without cause, by either of such officers. Vacancies in such offices, however 7 occurring, may be filled by the Board of Directors at any meeting of the Board of Directors (or by appointment by the Chairman of the Board or the President to the extent provided in Section 3.1 of these Bylaws). Section 3.3. Chairman of the Board. The Chairman of the Board shall be the chief executive and principal policy-making officer of the Corporation. Subject to the authority of the Board of Directors, he shall formulate the major policies to be pursued in the administration of the Corporation's affairs. He shall study and make reports and recommendations to the Board of Directors with respect to major problems and activities of the Corporation and shall see that the established policies are placed into effect and carried out under the direction of the President. The Chairman of the Board shall, if present, preside at all meetings of the shareholders and of the Board of Directors. Section 3.4. President. Subject to the provisions of Section 3.3, the President shall be the chief operating officer of the Corporation, shall exercise the powers and perform the duties which ordinarily appertain to that office and shall manage and operate the business and affairs of the Corporation in conformity with the policies established by the Board of Directors and by the Chairman of the Board, or as may be provided for in these Bylaws. In connection with the performance of his duties, he shall keep the Chairman of the Board fully informed as to all phases of the Corporation's activities. In the absence of the Chairman of the Board, the President shall preside at meetings of the shareholders and of the Board of Directors. Section 3.5. Executive Vice President. The Executive Vice President shall perform such duties as are assigned by the Board of Directors or the President, shall perform the duties of the President in case of the absence of the President and Chairman of the Board, and shall report to the President regarding his official activities. Section 3.6. Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board of Directors may, from time to time, prescribe and as the President may, from time to time, delegate to him, and shall report to the President regarding his official activities. The Board of Directors shall also be empowered to specifically designate said Vice President as "Group Vice President," "Senior Vice President," or with any other title descriptive of the Vice President's position. Section 3.7. Chief Financial Officer. The Chief Financial Officer shall have charge of the Corporation's fiscal affairs and keep and hold all moneys, bonds and securities belonging to the Corporation as ordered by the Board of Directors. He shall keep or cause to be kept a correct account and record of the financial affairs of the Corporation in proper books. He shall report to the President regarding his official activities. He shall also be responsible for causing the Corporation to furnish financial statements to its shareholders pursuant to IC 23-1-53-1. Section 3.7.1. Treasurer. If the Board of Directors shall not elect a Chief Financial Officer, then it shall elect a Treasurer in lieu of a Chief Financial Officer. Section 3.8. Secretary. The Secretary shall be the custodian of the books, papers and records of the Corporation and of its corporate seal, if any, and shall be responsible for seeing that the Corporation maintains the records required by IC 23-1-52-1 (other than accounting records) and that the Corporation files with the Indiana Secretary of State the annual report required by IC 23-1-53-3. The Secretary shall be responsible for preparing minutes of the meetings of the shareholders of the Board 8 of Directors and the authenticating records of the Corporation, and he shall perform all of the other duties usual in the office of Secretary of a corporation. The Secretary shall report to the President regarding his official activities. Section 3.9. Assistant Officers. An assistant officer shall have and perform the duties and powers of his principal in cash of the principal's absence or inability to act, and his duties shall be such as to properly supplement the duties, powers, and functions of the principal officer and as directed by such principal officer and the Board of Directors; and such assistant officer shall report to his superior officer and to the President as to his official activities. Section 3.10. Salary. The Board of Directors may, at its discretion, from time to time, fix the salary of any officer by resolution included in the minute book of the Corporation. ARTICLE IV ---------- Checks ------ All checks, drafts or other orders for payment of money shall be signed in the name of the Corporation by such officers or persons as shall be designated from time to time by resolution adopted by the Board of Directors and included in the minute book of the Corporation; and in the absence of such designation, such checks, drafts or other orders for payment shall be signed by either the President or the Chief Financial Officer. If no Chief Financial Officer position exists, then said responsibilities shall be performed by the Treasurer. ARTICLE V --------- Loans ----- Any two of the Chairman of the Board, Chief Executive Officer and/or President, Executive Vice President, or any Vice President, Secretary, and/or Chief Financial Officer or Treasurer, are authorized and empowered to negotiate and make any loan for money from any bank or banking institution or other corporation or person, and to make, deliver and fully execute any promissory note, or other evidence of indebtedness for or on account of said borrowed money, and to accept the proceeds of said loan. ARTICLE VI ---------- Execution of Documents ---------------------- The Chairman of the Board or the President may, in the Corporation's name, sign all deeds, leases, contracts or similar documents that may be authorized by the Board of Directors unless otherwise directed by the Board of Directors or otherwise provided herein or in the Corporation's Restated Articles of Incorporation, or as otherwise required by law. 9 ARTICLE VII ----------- Stock ----- Section 7.1. Execution. Certificates for shares of the capital stock of the Corporation shall be signed by the Chairman of the Board, President, Executive Vice President or a Vice President, and by the Secretary or an Assistant Secretary and the seal of the Corporation (or a facsimile thereof), if any, may be thereto affixed. Where any such certificate is also signed by a transfer agent or a registrar, or both, the signatures of the officers of the Corporation may be facsimiles. The Corporation may issue and deliver any such certificate notwithstanding that any such officer who shall have signed, or whose facsimile signature shall have been imprinted on, such certificate shall have ceased to be such officer. Section 7.2. Contents. Each certificate shall state on its face the name of the Corporation and that it is organized under the laws of the State of Indiana, the name of the person to whom it is issued, and the number and class of shares and the designation of the series, if any, the certificate represents, and shall state conspicuously on its front or back that the Corporation will furnish the shareholder, upon his written request and without charge, a summary of the designations, relative rights, preferences and limitations applicable to each class and the variations in rights, preferences and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series). Section 7.3. Transfers. Except as otherwise provided by law or by resolution of the Board of Directors, transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by the holder thereof in person or by duly authorized attorney, on payment of all taxes thereon and surrender for cancellation of the certificate or certificates for such shares (except as hereinafter provided in the case of loss, destruction or mutilation of certificates) properly endorsed by the holder thereof or accompanied by the proper evidence of succession, assignment or authority to transfer, and delivered to the Secretary or an Assistant Secretary. Section 7.4. Stock Transfer Records. There shall be entered upon the stock records of the Corporation the number of each certificate issued, the name and address of the registered holder of such certificate, the number, kind and class of shares represented by such certificate, the date of issue, whether the shares are originally issued or transferred, the registered holder from whom transferred and such other information as is commonly required to be shown by such records. The stock records of the Corporation shall be kept at its principal office, unless the Corporation appoints a transfer agent or registrar, in which case the Corporation shall keep at its principal office a complete and accurate shareholders' list giving the names and addresses of all shareholders and the number and class of shares held by each. If a transfer agent is appointed by the Corporation, shareholders shall give written notice of any changes in their addresses from time to time to the transfer agent. Section 7.5. Transfer Agents and Registrars. The Board of Directors may appoint one or more transfer agents and one or more registrars and may require each stock certificate to bear the signature of either or both. Section 7.6. Loss, Destruction or Mutilation of Certificates. the holder of any of the capital stock of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board of Directors may, in its discretion, cause to be issued to him a new certificate or certificates of stock, upon the surrender of the mutilated certificate, or, in the 10 case of loss or destruction, upon satisfactory proof of such loss or destruction. The Board of Directors may, in its discretion, require the holder of the lost or destroyed certificate or his legal representative to give the Corporation a bond in such sum and in such form, and with such surety or sureties as it may direct, to indemnify the Corporation, its transfer agents and registrars, if any, against any claim that may be made against them or any of them with respect to the capital stock represented by the certificate or certificates alleged to have been lost or destroyed, but the Board of Directors may, in its discretion, refuse to issue a new certificate or certificates, save upon the order of a court having jurisdiction in such matters. Section 7.7. Form of Certificates. The form of the certificates for shares of the capital stock of the Corporation shall conform to the requirements of Section 7.2 of these Bylaws and be in such printed form as shall from time to time be approved by resolution of the Board of Directors. ARTICLE VIII Seal The corporate seal of the Corporation shall, if the Corporation elects to have one, be circular in form, with the words "Tokheim Corporation, Fort Wayne, Indiana" on the periphery thereof and the word "SEAL" in the center. ARTICLE IX Miscellaneous Section 9.1. Indiana Business Corporation Law. The provisions of the Indiana Business Corporation Law, as amended, applicable to all matters relevant to, but not specifically covered by, these Bylaws are hereby, by reference, incorporated in and made a part of these Bylaws. Section 9.2. Fiscal Year. The fiscal year of the Corporation shall end on the 30th day of November of each year. Section 9.3. Redemption of Shares Acquired in Control Share Acquisitions. If and whenever the provisions of IC 23-1-42 apply to the Corporation, any or all control shares acquired in a control share acquisition shall be subject to redemption by the Corporation, if either: (a) no acquiring person statement has been filed with the Corporation with respect to such control share acquisition in accordance with IC 23-1-42-6, or (b) the control shares are not accorded full voting rights by the Corporation's shareholders as provided in IC 23-1-42-9. A redemption pursuant to Section 9.3(a) may be made at any time during the period ending sixty (60) days after the lost acquisition of control shares by the acquiring person. A redemption pursuant to Section 9.3(b) may be made at any time during the period ending two (2) years after the shareholder vote with respect to the granting of voting rights to such control shares. Any redemption pursuant to this Section 9.3 shall 11 be made at the fair value of the control shares and pursuant to such procedures for such redemption as may be set forth in these Bylaws or adopted by resolution of the Board of Directors. As used in this Section 9.3, the terms "control shares," "control share acquisition," "acquiring person statement" and "acquiring person" shall have the meanings ascribed to such terms in IC 23-1-42. Section 9.4. Amendments. These Bylaws may be rescinded, changed or amended, and provisions hereof may be waived, at any meeting of the Board of Directors by the affirmative vote of a majority of the entire number of Directors at the time, provided such proposed amendment is described in the notice of such meeting and except as otherwise required by the Corporation's Restated Articles of Incorporation or by the Indiana Business Corporation Law. Section 9.5. Selection of Auditors. Independent auditors shall be elected each year at the annual meeting of shareholders, for the purpose of auditing the accounts and records of this Corporation, to report on the financial position of this Corporation, and to perform such other appropriate accounting services as may be required by the Board of Directors. Section 9.6. Definition of Articles of Incorporation. The term "Articles of Incorporation" as used in these Bylaws means the Amended or Restated Articles of Incorporation of the Corporation as from time to time in effect. 12 EX-10.3 4 EMPLOYMENT AGREEMENT-REGISTRANT & DOUGLAS K. PINNER Exhibit 10.3 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT (hereinafter "Agreement"), dated this 22nd day of September, 1995, by and between TOKHEIM CORPORATION, an Indiana corporation (hereinafter "the Company"), and Douglas K. Pinner (hereinafter "the Employee"), which Agreement shall be deemed to replace any and all previously existing Employment Agreements between the parties. WHEREAS, the Company desires to employ the Employee in an executive capacity and the Employee desires to be so employed, all upon the following terms and conditions. NOW, THEREFORE, in consideration of the premises hereinafter set forth, it is mutually agreed as follows: 1. The Company agrees to employ the Employee, and the Employee agrees to serve the Company, on a full-time basis in the capacity hereinafter designated and upon the terms hereinafter specified. Said employment shall continue from this date forward for an indefinite period and until such time as it may be terminated by one or more of the parties, it being expressly recognized that either party may terminate this Agreement, with cause, upon the giving of thirty (30) days' written notice to the other, and in such event, the parties shall each be entitled only to such continuing rights as may be provided in this Agreement or as may otherwise be available to them in law or equity. In the event Employee is terminated without cause, Employee shall be entitled to severance pay equal to twelve (12) months of the Employee's base monthly salary. 2. The Employee shall serve in the capacity of President & CEO. 1 The Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsibilities as the Company, through the Board of Directors, the duly appointed Committees of the Board, the Chief Executive Officer of the Company or such other Executive Officers as may be designated by the Board, shall, from time to time, direct, and said parties shall be free to alter or amend the position, responsibilities, duties or services to be performed by the Employee in such manner as to them shall be deemed to be in the best interests of the Company. During the term of employment, the Employee shall devote his best efforts and skills to the business interests of the Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with the Company's business, or which may in any way interfere with his employment, without the consent of the Company. 3. The Employee hereby recognizes the Company's proprietary rights in the tangible and intangible property of the Company and acknowledges that notwithstanding the relationship of employment, the Employee will not obtain or acquire through such employment any personal property rights in any of the property of the Company, including, but not limited to, any writings, communications, manuals, documents, instruments, contracts, agreements, files, literature, data, technical information, know-how secrets, formulas, products, methods, procedures, processes, devices, apparatuses, trademarks, tradenames, trade styles, service marks, logos, copyrights, patents or other matters which are properly the property of the Company. 4. The Employee shall, during the term of employment, use his best efforts and exercise his utmost diligence to protect and safeguard the confidential information of the Company, including, but not limited to, trade secrets, know-how, product formulas, recipes, 2 methods, procedures, processes, devices, apparatuses, materials or other matters which are confidential to the Company. The Employee further agrees that he shall not, during the term of employment or thereafter, personally use or disclose to others information which shall be confidential to the Company, except as such use or disclosure may be required during the course of employment with the Company or as may be consented to by the Company. 5. The Employee agrees that during the term of his employment, any and all inventions and discoveries, whether or not patentable, which the Employee may conceive or make, either alone or in conjunction with others and related or in any way connected with the business of the Company, shall be the sole and exclusive property of the Company. The Employee shall, without further compensation or consideration, but at the expense of the Company, and as and when requested to do so by the Company, promptly execute and assign any and all applications, assignments and other instruments which the Company shall deem necessary in order to apply for and obtain letters patent of the United States and of foreign countries for said inventions and discoveries, and in order to assign and convey to the Company, or to the Company's nominee the sole and exclusive right, title and interest in and to said inventions, discoveries or any applications or patents thereon. As promptly as known or possessed by the Employee, the Employee shall disclose to the Company all information with respect to said inventions and discoveries. The Employee further agrees that during the term of employment, trademarks, tradenames, service marks, trade styles, logos, emblems, labels, slogans and writings, whether or not copyrighted, originated by the Employee, alone or in conjunction with others, and related or in any way connected with the business of the Company, shall be the sole and exclusive property of the Company. 3 6. The Employee shall be entitled to compensation as follows: A. The Employee shall be entitled to a monthly base salary of Twenty Two Thousand Nine Hundred Seventeen Dollars ($22,917.00). The Base Pay will be reviewed annually. Such Base Pay will be payable in such semi-monthly or monthly installments as is consistent with the policy of the Company in such matters. The Employee shall also be eligible for the officer's bonus program, a copy of which has been supplied to the Employee. B. The Employee shall be granted participation in all employee benefit plans applicable to executive officers of the Company, including, but not limited to, medical plans, disability plans, life insurance plans, savings plans, stock option plans and such other plans as may from time to time be made available and applicable to the Employee, consistent with the policies of the Company and the terms and conditions of such plans. Nothing herein shall be deemed to alter the terms and conditions of such plans or the policy of the Company with respect thereto, and nothing herein shall be deemed to entitle the Employee to any rights therein which would not otherwise be made available to the Employee pursuant to the implementations of such plans in accordance with the terms, conditions and provisions set forth therein. It shall be further understood that nothing herein shall prevent the Company, through its Board of Directors, the duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending any of the aforesaid plans or eliminating or adding to them as they shall from time to time deem appropriate and in the interests of the Company. C. Except as may otherwise be expressly provided herein, the Employee shall be granted, upon his termination from the Company, such rights as may be available to him 4 pursuant to any plan or plans hereinabove referred to, and, in addition thereto, any termination benefits accorded terminated executives, consistent with any existing policy or practice of the Company with respect to such termination. In the event there shall be no such policy or practice with respect to termination, then such termination benefits, if any, as may be deemed appropriate to the Board of Directors, its duly appointed Committees or such other Executive Officers as may be directed by the Board to act in such matters. 7. In the event there shall occur (i) a merger, consolidation or other combination of the Company with or into any other corporation, (ii) the acquisition, subsequent to the date of this Agreement, directly or indirectly, by any person, entity or group of persons of ownership of the power to vote in excess of twenty percent (20%) of the voting securities of the Company followed by the election by said party of one or more representatives to the Board of Directors, (iii) the acquisition, subsequent to the date of this Agreement, directly or indirectly, by any person, entity or group of persons of ownership of the power to vote in excess of fifty percent (50%) of the voting securities of the Company, whether or not followed by the election by said party or parties of one or more representatives to the Board of Directors or (iv) any other event, including, but not limited to, the matters set forth in (i) through (iii) above which shall have the effect of vesting effective control of the business and affairs of the Company in a person, entity or group of persons other or different than the present stockholders of the Company, or which shall have the effect of causing a change in management of the Company, then and in that event, the right of the Company and the Employee to unilaterally terminate this employment upon thirty (30) days' written notice as provided in Paragraph 1 above shall continue, but shall be subject to the following express provision: If such termination shall occur as a result of notice 5 given by either party within thirty-six (36) months of any of the events described in (i), (ii), (iii) or (iv) of this Paragraph above, then upon the effective date of termination, the Employee shall be entitled to the termination benefits set forth in this Paragraph 7 in addition to any other termination rights which may have accrued to him during his employment; provided, however, that the following provisions with respect to direct severance pay (i.e., salary and bonus payments) shall be exclusive and shall replace any other rights of the Employee to direct severance payments: A. The Employee shall be entitled to receive the greater of 299.99% of the base salary or twice the Employee's total compensation at the same rate at which it existed at the date of the event referenced in (i) through (iv) of this Paragraph 7 above. The Employee shall further be entitled to receive as direct severance pay, bonuses during the subsequent twenty-four (24) months on the same dates that he would otherwise have been entitled to them had his employment continued; provided, however, that the amount of such bonuses shall not be contingent upon any matters arising after the date of termination, but shall on an annual basis be equal to the average annual sum paid in bonuses to the Employee during the last three (3) bonus periods preceding his termination, or the average annual bonuses of such lesser bonus periods if his employment was for less than three (3) bonus periods prior to termination. In the event that during any part of such twenty-four (24) month period, the executive officer's activities involved returning the corporation to profitability which limited bonus potential, the bonus shall be paid for such twenty-four month period as if the company had been profitable. To the extent the twenty-four (24) months shall expire in the middle of a bonus period, then for such partial year the Employee shall be entitled to that percentage of the average annual bonus that the partial year bears to a total year, and he 6 shall be paid any remaining and unpaid bonus amounts due him at the expiration of said twenty-four (24) month period. In the event the Employee is terminated within said 36 month period, severance shall be payable. In the event the Employee shall die during any period in which payments shall be due hereunder, the balance of any salary and bonus payments shall be paid to the Employee's estate within six (6) months of the date of his death. B. The Employee shall immediately be paid a lump sum amount equal to the value of any outstanding stock options which by their terms cannot be exercised the day following the Employee's termination of employment (the value of each option shall be equal to the average of the high and low price of a share of stock, as quoted on the composite transactions table covering transactions on the New York Stock Exchange on the first date that the stock was traded on that Exchange which next precedes the date the Employee's employment terminated minus the stock option's exercise price). The Executive shall immediately be paid a lump sum amount equal to the value of any unvested shares of restricted stock as if all restrictions had been removed the day preceding the Change of Control; C. In addition to the continuation of his base salary and bonus as provided above, the Employee shall further be entitled for twenty-four (24) months following termination to receive medical insurance, life insurance and disability insurance benefits from the Company on terms comparable to the benefits provided by the Company to the Employee in such matters as of the date of the event referenced in (i) through (iv) of this Paragraph 7 above; provided, that any severance payments provided for hereinabove shall be reduced by the amount of any disability benefits paid pursuant to this Paragraph 7B for the period that such disability payments shall continue; and, provided further, that notwithstanding anything hereinabove set forth, any medical, 7 life and disability benefits shall terminate automatically at any time that the Employee shall secure and begin alternate employment. The employee may elect in writing at the time of severance to receive the cash value of any or all of these benefits in lieu of coverage. D. If the Employee shall be fifty (50) years of age or older at the time of any termination governed by the terms of this Paragraph 7, and if the twenty- four (24) months of continued salary and bonus shall expire prior to the Employee's sixtieth (60th) birthday, then the Employee shall additionally be entitled to receive his base salary and bonus from the date of expiration of the twenty-four (24) months until the date of his sixtieth (60th) birthday at one- half (1/2) the rate of salary and bonus payable to him during the first twenty- four (24) months following his termination. E. If the Employee shall be sixty-three (63) years of age or older at the time of any termination governed by the terms of this Paragraph 7, then all benefits provided for above shall run not for a period of twenty-four (24) months as hereinabove set forth, but rather for that number of months occurring between the date of termination and the date of the Employee's sixty-fifth (65th) birthday and all benefits otherwise running for twenty-four (24) months shall run for that period of time. F. It is expressly understood and agreed that if the receipt or the right to receive all or any part of the payments contemplated by this Paragraph 7, either alone or with other payments, which the Employee has received or has the right to receive from the Company and which are "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, as amended, would result in some or all of the payments contemplated by this Paragraph 7 or the parachute payments being "excess parachute payments," as defined in Section 280G of 8 the Internal Revenue Code, and/or if such payments would result in the Employee suffering an excise tax or other extraordinary tax upon the receipt thereof, the Company shall make such additional payments to the Employee as shall be necessary to cause the net after-tax benefit to the Employee to be the same as would have been the case had there been no excise or extraordinary tax applied to such payments. G. In the event the Employee shall be required to employ counsel or bring suit to enforce any of the terms or conditions of this Paragraph 7 and shall be successful in securing enforcement of any of such terms and conditions, the Employee shall be entitled to all reasonable expenses, including, but not limited to, attorneys' fees incurred in such enforcement efforts. 8. Nothing contained herein shall be construed as conferring upon the Employee the right to continue in the employ of the Company as an executive or in any other capacity. 9. All payments provided under this Agreement shall be paid in cash from the general funds of the Company and no special or separate fund shall be established and no other segregation of assets shall be made to assure payment. The Employee shall have no right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligations hereunder. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship, between the Company and the Employee or any other person. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. 9 10. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 11. Neither this Agreement nor any right or interest hereunder shall be assignable by the Employee, his beneficiaries or legal representatives, without the Company's prior written consent; provided however, that nothing in this Paragraph shall preclude the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or the executors, administrators or other legal representatives of the Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. 12. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, communication, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 13. This Agreement shall be binding upon and inure to the benefit of the Employee and the Company and their respective permitted successors and assigns. In the event the Company merges or consolidates with or into any other corporation or corporations or sells or otherwise transfers substantially all its assets to another corporation, the provisions of this Agreement shall be binding upon and inure to the benefit of the corporation surviving or resulting from the merger or consolidation or to which such assets are sold or transferred. All references herein to the Company refer with equal force and effect to any corporate or other successor of the 10 Company which acquires, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company. 14. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provisions of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 15. If, for any reason, any provisions of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 16. This Agreement has been executed and delivered in the State of Indiana, and its validity, interpretation, performance and enforcement shall be governed by the laws of said State. 11 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its seal to be affixed hereunto by its officers thereunto duly authorized, and the Employee has signed this Agreement, all as of the day and year first above written. TOKHEIM CORPORATION By /s/ Walter S. Ainsworth ________________________________ Walter S. Ainsworth Chairman, Compensation Committee ATTEST: "the Company" _____________________________ Its _________________________ /s/ Douglas K. Pinner ________________________________ Douglas K. Pinner President & CEO "the Employee" 12 EX-10.4 5 EMPLOYMENT AGREEMENT - REGISTRANT & TERRY M FULMER Exhibit 10.4 EMPLOYMENT AGREEMENT FOR VICE PRESIDENTS THIS EMPLOYMENT AGREEMENT (hereinafter "Agreement"), dated this 22nd day of September, 1995, by and between TOKHEIM CORPORATION, an Indiana corporation (hereinafter "the Company"), and Terry M. Fulmer (hereinafter "the Employee"), which Agreement shall be deemed to replace any and all previously existing Employment Agreements between the parties. WHEREAS, the Company desires to employ the Employee in an executive capacity and the Employee desires to be so employed, all upon the following terms and conditions. NOW, THEREFORE, in consideration of the premises hereinafter set forth, it is mutually agreed as follows: 1. The Company agrees to employ the Employee, and the Employee agrees to serve the Company, on a full-time basis in the capacity hereinafter designated and upon the terms hereinafter specified. Said employment shall continue from this date forward for an indefinite period and until such time as it may be terminated by one or more of the parties, it being expressly recognized that either party may terminate this Agreement, with cause, upon the giving of thirty (30) days' written notice to the other, and in such event, the parties shall each be entitled only to such continuing rights as may be provided in this Agreement or as may otherwise be available to them in law or equity. In the event Employee is terminated without cause, Employee shall be entitled to severance pay equal to twelve (12) months of the Employee's base monthly salary. 1 2. The Employee shall serve in the capacity of VP, Corporate Operations & Planning. The Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsibilities as the Company, through the Board of Directors, the duly appointed Committees of the Board, the Chief Executive Officer of the Company or such other Executive Officers as may be designated by the Board, shall, from time to time, direct, and said parties shall be free to alter or amend the position, responsibilities, duties or services to be performed by the Employee in such manner as to them shall be deemed to be in the best interests of the Company. During the term of employment, the Employee shall devote his best efforts and skills to the business interests of the Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with the Company's business, or which may in any way interfere with his employment, without the consent of the Company. 3. The Employee hereby recognizes the Company's proprietary rights in the tangible and intangible property of the Company and acknowledges that notwithstanding the relationship of employment, the Employee will not obtain or acquire through such employment any personal property rights in any of the property of the Company, including, but not limited to, any writings, communications, manuals, documents, instruments, contracts, agreements, files, literature, data technical information, know-how secrets, formulas, products, methods, procedures, processes, devices, apparatuses, trademarks, tradenames, trade styles, service marks, logos, copyrights, patents or other matters which are properly the property of the Company. 2 4. The Employee shall, during the term of employment, use his best efforts and exercise his utmost diligence to protect and safeguard the confidential information of the Company, including, but not limited to, trade secrets, know- how, product formulas, recipes, methods, procedures, processes, devices, apparatuses, materials or other matters which are confidential to the Company. The Employee further agrees that he shall not, during the term of employment or thereafter, personally use or disclose to others information which shall be confidential to the Company, except as such use or disclosure may be required during the course of employment with the Company or as may be consented to by the Company. 5. The Employee agrees that during the term of his employment, any and all inventions and discoveries, whether or not patentable, which the Employee may conceive or make, either alone or in conjunction with others and related or in any way connected with the business of the Company, shall be the sole and exclusive property of the Company. The Employee shall, without further compensation or consideration, but at the expense of the Company, and as and when requested to do so by the Company, promptly execute and assign any and all applications, assignments and other instruments which the Company shall deem necessary in order to apply for and obtain letters patent of the United States and of foreign countries for said inventions and discoveries, and in order to assign and convey to the Company, or to the Company's nominee the sole and exclusive right, title and interest in and to said inventions, discoveries or any applications or patents thereon. As promptly as known or possessed by the Employee, the Employee shall disclose to the Company all information with respect to said inventions and discoveries. The Employee further agrees that during the term of employment, trademarks, tradenames, service marks, trade styles, logos, emblems, labels, slogans and writings, whether or not copyrighted, 3 originated by the Employee, alone or in conjunction with others, and related or in any way connected with the business of the Company, shall be the sole and exclusive property of the Company. 6. The Employee shall be entitled to compensation as follows: A. The Employee shall be entitled to a monthly base salary of Fourteen Thousand One Hundred Sixty Seven Dollars ($14,167.00). The Base Pay will be reviewed annually. Such Base Pay will be payable in such semi monthly or monthly installments as is consistent with the policy of the Company in such matters. The Employee shall also be eligible for the officer's bonus program, a copy of which has been supplied to the Employee. B. The Employee shall be granted participation in all employee benefit plans applicable to executive officers of the Company, including but not limited to, medical plans, disability plans, life insurance plans, savings plans, stock option plans and such other plans as may from time to time be made available and applicable to the Employee, consistent with the policies of the Company and the terms and conditions of such plans. Nothing herein shall be deemed to alter the terms and conditions of such plans or the policy of the Company with respect thereto, and nothing herein shall be deemed to entitle the Employee to any rights therein which would not otherwise be made available to the Employee pursuant to the implementations of such plans in accordance with the terms, conditions and provisions set forth therein. It shall be further understood that nothing herein shall prevent the Company, through its Board of Directors, the duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending any of the aforesaid plans or eliminating or 4 adding to them as they shall from time to time deem appropriate and in the interests of the Company. C. Except as may otherwise be expressly provided herein, the Employee shall be granted, upon his termination from the Company, such rights as may be available to him pursuant to any plan or plans hereinabove referred to, and, in addition thereto, any termination benefits accorded terminated executives, consistent with any existing policy or practice of the Company with respect to such termination. In the event there shall be no such policy or practice with respect to termination, then such termination benefits, if any, as may be deemed appropriate to the Board of Directors, its duly appointed Committees or such other Executive Officers as may be directed by the Board to act in such matters. 7. In the event there shall occur (i) a merger, consolidation or other combination of the Company with or into any other corporation, (ii) the acquisition, subsequent to the date of this Agreement, directly or indirectly, by any person, entity or group of persons of ownership of the power to vote in excess of twenty percent (20%) of the voting securities of the Company followed by the election by said party of one or more representatives to the Board of Directors, (iii) the acquisition, subsequent to the date of this Agreement, directly or indirectly, by any person, entity or group of persons of ownership of the power to vote in excess of fifty percent (50%) of the voting securities of the Company, whether or not followed by the election by said party or parties of one or more representatives to the Board of Directors or (iv) any other event, including, but not limited to, the matters set forth in (i) through (iii) above which shall have the effect of vesting effective control of the business and affairs of the Company in a person, entity or group of persons other or different than the present stockholders of the Company, or 5 which shall have the effect of causing a change in management of the Company, then and in that event, the right of the Company and the Employee to unilaterally terminate this employment upon thirty (30) days' written notice as provided in Paragraph 1 above shall continue, but shall be subject to the following express provision: If such termination shall be initiated by the Company within thirty-six (36) months of any of the events described in (i), (ii), (iii) or (iv) of this Paragraph; or if such termination shall be initiated by the employee within thirty six (36) months of any of the events described in (i), (ii), (iii), (iv) of this Paragraph, and any one of the following also occurs; (a) a change of the Chief Executive Officer, (b) change of job, (c) change of salary, or (d) move of job responsibilities to a distance greater than fifty (50) miles from the current office location, then upon the effective date of termination, the Employee shall be entitled to the termination benefits set forth in this Paragraph 7 in addition to any other termination rights which may have accrued to him during his employment; provided, however, that the following provisions with respect to direct severance pay (i.e., salary and bonus payments) shall be exclusive and shall replace any other rights of the Employee to direct severance payments: A. The Employee shall be entitled to receive the greater of 299.99% of the base salary or twice the employees total compensation at the same rate at which it existed at the date of the event referenced in (i) through (iv) of this Paragraph 7 above. The Employee shall further be entitled to receive as direct severance pay, bonuses during the subsequent twenty-four (24) months on the same dates that he would otherwise have been entitled to them had his employment continued; provided, however, that the amount of such bonuses shall not be contingent upon any matters arising after the date of termination, but shall on an annual basis be equal to the average annual sum paid in bonuses to the Employee during the last three (3) bonus periods preceding his 6 termination, or the average annual bonuses of such lesser bonus periods if his employment was for less than three (3) bonus periods prior to termination. In the event that during any part of such twenty-four (24) month period, the executive officer's activities involved returning the corporation to profitability which limited bonus potential, the bonus shall be paid for such twenty-four month period as if the company had been profitable. To the extent the twenty-four (24) months shall expire in the middle of a bonus period, then for such partial year, the Employer shall be entitled to that percentage of the average annual bonus that the partial year bears to a total year, and he shall be paid any remaining and unpaid bonus amounts due him at the expiration of said twenty-four (24) month period. In the event the Employee is terminated within said 36 month period, severance shall be payable in a single lump sum. In the event the Employee shall die during any period in which payments shall be due hereunder, the balance of any salary and bonus payments shall be paid to the Employee's estate within six (6) months of the date of his death. B. The Employee shall immediately be paid a lump sum amount equal to the value of any outstanding stock options which by their terms cannot be exercised the day following the Employee's termination of employment (the value of each option shall be equal to the average of the high and low price of a share of stock, as quoted on the composite transactions table covering transactions on the New York Stock Exchange on the first date that the stock was traded on that Exchange which next precedes the date the Employee's employment terminated minus the stock option's exercise price). The Executive shall immediately be paid a lump sum amount equal to the value of any unvested shares of restricted stock as if all restrictions had been removed the day preceding the Change of Control; 7 C. In addition to the continuation of his base salary and bonus as provided above, the Employee shall further be entitled for twenty-four (24) months following termination to receive medical insurance, life insurance and disability insurance benefits from the Company on terms comparable to the benefits provided by the Company to the Employee in such matters as of the date of the event referenced in (i) through (iv) of this Paragraph 7 above; provided, that any severance payments provided for hereinabove shall be reduced by the amount of any disability benefits paid pursuant to this Paragraph 7B for the period that such disability payments shall continue: and provided further, that notwithstanding anything hereinabove set forth, any medical, life and disability benefits shall terminate automatically at any time that the Employee shall secure and begin alternate employment. The employee may elect in writing at the time of severance to receive the cash value of any or all of these benefits in lieu of coverage. D. If the Employee shall be fifty (50) years of age or older at the time of any termination governed by the terms of this Paragraph 7, and if the twenty-four (24) months of continued salary and bonus shall expire prior to the Employee's sixtieth (60th) birthday, then the Employee shall additionally be entitled to receive his base salary and bonus from the date of expiration of the twenty-four (24) months until the date of his sixtieth (60th) birthday at one-half (1/2) the rate of salary and bonus payable to him during the first twenty-four (24) months following his termination. E. If the Employee shall be sixty-three (63) years of age or older at the time of any termination governed by the terms of this Paragraph 7, then all benefits provided for above shall run not for a period of twenty-four (24) months as hereinabove set forth, but rather for that number of months occurring between the date of termination and the date of the Employee's sixty- 8 fifth (65th) birthday and all benefits otherwise running for twenty-four (24) months shall run for that period of time. F. It is expressly understood and agreed that if the receipt or the right to receive all or any part of the payments contemplated by this Paragraph 7, either alone or with other payments, which the Employee has received or has the right to receive from the Company and which are "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, as amended, would result in some or all of the payments contemplated by this Paragraph 7 or the parachute payments being "excess parachute payments", as defined in Section 280G of the Internal Revenue Code, and/or if such payments would result in the Employee suffering an excise tax or other extraordinary tax upon the receipt thereof, the Company shall make such additional payments to the Employee as shall be necessary to cause the net after-tax benefit to the Employee to be the same as would have been the case had there been no excise or extraordinary tax applied to such payments. G. In the event the Employee shall be required to employ counsel or bring suit to enforce any of the terms or conditions of this Paragraph 7 and shall be successful in securing enforcement of any of such terms and conditions, the Employee shall be entitled to all reasonable expenses, including, but not limited to, attorneys' fees incurred in such enforcement efforts. 8. Nothing contained herein shall be construed as conferring upon the Employee the right to continue in the employ of the Company as an executive or in any other capacity. 9. All payments provided under this Agreement shall be paid in cash from the general funds of the Company and no special or separate fund shall be established and no other 9 segregation of assets shall be made to assure payment. The Employee shall have no right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligations hereunder. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship, between the Company and the Employee or any other person. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. 10. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 11. Neither this Agreement or any right or interest hereunder shall be assignable by the Employee, his beneficiaries or legal representatives, without the Company's prior written consent; provided however, that nothing in this Paragraph shall preclude the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or the executors, administrators or other legal representatives of the Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. 12. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, communication, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 10 13. This Agreement shall be binding upon and inure to the benefit of the Employee and the Company and their respective permitted successors and assigns. In the event the Company merges or consolidates with or into any other corporation or corporations or sells or otherwise transfers substantially all its assets to another corporation, the provisions of this Agreement shall be binding upon and inure to the benefit of the corporation surviving or resulting from the merger or consolidation or to which such assets are sold or transferred. All references herein to the Company refer with equal force and effect to any corporate or other successor of the Company which acquires, directly or indirectly, by merger, consolidation, purchase of otherwise, all or substantially all of the assets or stock of the Company. 14. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provisions of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 15. If, for any reason, any provisions of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other 11 provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 16. This Agreement has been executed and delivered in the State of Indiana, and its validity, interpretation, performance and enforcement shall be governed by the laws of said State. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its seal to be affixed hereunto by its officers thereunto duly authorized, and the Employee has signed this Agreement, all as of the day and year first above written. TOKHEIM CORPORATION By /s/ Douglas K. Pinner ----------------------------------- Douglas K. Pinner, President and Chief Executive Officer ATTEST: /s/ - ----------------------------- Its ------------------------- "the Company" /s/ Terry M. Fulmer ----------------------------------- Terry M. Fulmer VP, Corporate Operations & Planning "the Employee" 12 EX-11 6 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11 TOKHEIM CORPORATION AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE FOR THE YEARS ENDED NOVEMBER 30, 1995, 1994, AND 1993 (AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE) Primary earnings per share are based on the weighted average number of shares outstanding during each year and the assumed exercise of dilutive stock options less the number of treasury shares assumed to be purchased from the proceeds using the average market price of the Company's common stock. The following table presents information necessary to calculate earnings per share for fiscal years ended November 30, 1995, 1994, and 1993:
Primary ----------------------------- 1995 1994 1993 ------ -------- ------- Shares outstanding: Weighted average outstanding......................... 7,893 7,801 6,891 Share equivalents.................................... 18 -- 49 ------ -------- ------- Adjusted outstanding................................. 7,911 7,801 6,940 ====== ======== ======= Earnings (loss): Continuing operations before cumulative effect of change in accounting............................. $2,876 $ 1,862 $(5,867) Cumulative effect of change in method of accounting for postretirement benefits other than pensions..... -- (13,416) -- ------ -------- ------- Net earnings (loss).................................. 2,876 (11,554) (5,867) Preferred stock dividends............................ (1,580) (1,617) (1,663) ------ -------- ------- Earnings (loss) applicable to common stock........... $1,296 $(13,171) $(7,530) ====== ======== ======= Earnings (loss) per common share: Continuing operations before cumulative effect of change in accounting................................ $ .16 $ .03 $ (1.09) Cumulative effect of change in method of accounting for postretirement benefits other than pensions..... -- (1.72) -- ------ -------- ------- Net earnings (loss) per common share................. $ 0.16 $ (1.69) $ (1.09) ====== ======== =======
TOKHEIM CORPORATION AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE FOR THE YEARS ENDED NOVEMBER 30, 1995, 1994, AND 1993 (CONTINUED) (AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE) For 1995, 1994, and 1993, fully diluted earnings per share is considered to be the same as primary earnings per share, since the effect of certain potentially dilutive securities would be antidilutive.
Fully Diluted ----------------------------- 1995 1994 1993 ------ -------- ------- Shares outstanding: Weighted average outstanding.......................... 7,893 7,801 6,891 Share equivalents..................................... 18 60 49 Weighted conversion of preferred stock................ 1,909 1,362 1,296 ------ -------- ------- Adjusted outstanding.................................. 9,820 9,223 8,236 ====== ======== ======= Earnings (loss): Continuing operations before cumulative effect of change in accounting.............................. $2,876 $ 1,862 $(5,867) Cumulative effect of change in method of accounting for postretirement benefits other than pensions... -- (13,416) -- ------ -------- ------- Net earnings (loss)................................... 2,876 (11,554) (5,867) Incremental RSP expense............................... (1,580) (1,617) (1,663) ------ -------- ------- Earnings (loss) applicable to common stock............ $1,296 $(13,171) $(7,530) ====== ======== ======= Earnings (loss) per common share: Continuing operations before cumulative effect of change in accounting.............................. $ 0.13 $ 0.03 $ (0.91) Cumulative effect of change in method of accounting for postretirement benefits other than pensions... -- (1.45) -- ------ -------- ------- Net earnings (loss) per common share.................. $ 0.13 $ (1.42) $ (0.91) ====== ======== =======
EX-21 7 LIST OF THE SUBSIDIARIES Exhibit 21 TOKHEIM CORPORATION AND SUBSIDIARIES LIST OF SUBSIDIARIES OF THE REGISTRANT NOVEMBER 30, 1995 The Company has no corporate parent. Tokheim Corporation, an Indiana corporation, owns all of the issued and outstanding stock of each of the following corporations: State or Country Subsidiary of Incorporation ------------------- --------------------- Tokheim GmbH Germany Tokheim Investment Corporation Texas In addition, Tokheim Investment Corporation owns all of the issued and outstanding stock (other than directors' qualifying shares, if any, with respect to certain foreign subsidiaries) of each of the following corporations, except as noted: State or Country Subsidiary of Incorporation ------------------- --------------------- Sunbelt Hose & Petroleum Equipment, Inc. (A) Georgia Tokheim and Gasboy of Canada Limited (B) Canada Tokheim Europe B.V. The Netherlands Tokheim Limited Scotland Tokheim South Africa (Proprietary) Limited (C) South Africa Tokheim Properties (Proprietary) Limited (C) South Africa Gasboy International, Inc. Pennsylvania (A) In February 1990, the Company sold substantially all of the assets of this subsidiary. (B) Owned 35% by Gasboy International, Inc. and 65% by Tokheim Investment Corporation. (C) Owned 100% by Tokheim and Gasboy of Canada Limited. EX-23 8 CONSENT OF COOPERS & LYBRAND L.L.P. Exhibit 23 TOKHEIM CORPORATION AND SUBSIDIARIES CONSENT OF COOPERS & LYBRAND L.L.P. NOVEMBER 30, 1995 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 January 24, 1996, on our audits of the consolidated financial statements of Tokheim Corporation and Subsidiaries as of November 30, 1995 and 1994, and for the years ended November 30, 1995, 1994, and 1993, which report is included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Fort Wayne, Indiana February 23, 1996 EX-27 9 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Tokheim Corporation's November 30, 1995, annual financial statements and is qualified in its entirety by reference to such financial statements. 0000098559 TOKHEIM CORPORATION 1,000 12-MOS NOV-30-1995 NOV-30-1995 2966 0 46799 1150 34995 86798 86032 57474 121232 39545 0 18392 6426 0 2305 121232 221573 221573 167329 167329 0 0 3319 2915 39 2876 0 0 0 2876 0.16 0.13 Represents gross inventory net of LIFO and loss reserves. Represents gross PP&E. Represents redeemable preferred stock of $24,000 less Guaranteed ESOP of $13,790 and treasury stock of $3,784. Represents common stock of $19,409 less Guaranteed ESOP of $786 and treasury stock of $231. Represents retained earnings of $9,715 less minimum pension liability of $3,868 and foreign currency translation adjustments of $3,542. Includes product development expenses and excludes depreciation and amortization.
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