-----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, NvZiiLekRgZ37mmQrt3Xcd2ZoU5GmGoC1Bwn4oLRQGKo4x97bsKKwez57AlV+XUS aT6HX+z9hdsj/jIjnFv7BQ== 0000950131-98-001062.txt : 19980218 0000950131-98-001062.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950131-98-001062 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980213 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 SEC ACT: SEC FILE NUMBER: 001-06018 FILM NUMBER: 98540069 BUSINESS ADDRESS: STREET 1: 10501 CORPORATE DRIVE STREET 2: P O BOX 360 CITY: FORT WAYNE STATE: IN ZIP: 46845 BUSINESS PHONE: 2194704600 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED NOVEMBER 30, 1997 COMMISSION FILE NUMBER 1-6018 TOKHEIM CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 35-0712500 INDIANA (I.R.S. EMPLOYER I.D. NO.) (STATE OF INCORPORATION) 46801 10501 CORPORATE DR., P.O. BOX 360 (ZIP CODE) FORT WAYNE, INDIANA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (219) 470-4600 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ----------------------- Common Stock, no par value........................ New York Stock Exchange Preferred Stock Purchase Rights................... New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by references in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of February 4, 1998, 8,295,523 shares of voting common stock were outstanding. The aggregate market value of shares held by non-affiliates was $153.9 million (based on the closing price of these shares on the New York Stock Exchange on such date). DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT FORM 10-K -------- --------------------- Proxy Statement.................................... Part III, Items 10-13
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TOKHEIM CORPORATION 1997 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.......................................................... 3 Item 2. Properties........................................................ 7 Item 3. Legal Proceedings................................................. 7 Item 4. Submission of Matters to a Vote of Security Holders............... 7 PART II Item 5. Market For The Registrant's Common Equity and Related Shareholder Matters.................................................................. 8 Item 6. Selected Financial Data........................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 10 Item 8. Financial Statements and Supplementary Data....................... 16 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure..................................................... 48 PART III Item 10. Directors and Executive Officers of the Registrant............... 48 Item 11. Executive Compensation........................................... 48 Item 12. Security Ownership of Certain Beneficial Owners and Management... 48 Item 13. Certain Relationships and Related Transactions................... 48 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 49
2 PART I ITEM 1. BUSINESS. (a) General: Tokheim Corporation and its subsidiaries ("Tokheim" or the "Company") is one of the world's largest manufacturers and servicers of electronic and mechanical petroleum dispensing systems. These systems include petroleum dispensers and pumps, retail automation systems including point-of-sale ("POS") systems, dispenser payment or "pay-at-the-pump" terminals, replacement parts and upgrade kits. As a result of its acquisition (the "Sofitam Acquisition") of the petroleum dispenser business ("Sofitam") of Sofitam S.A. in September 1996, Tokheim has positioned itself as a global competitor in the petroleum dispenser business, with the ability to provide both products and services to customers in over 80 countries. Tokheim is a leading supplier of petroleum dispensing systems in the United States, France, Canada, Mexico and Africa, and has strong market positions in Italy, the United Kingdom, Germany and Spain. The Company also has operations established in Asia, eastern Europe and Latin America. The Company was organized as the Tokheim Manufacturing Company in Cedar Rapids, Iowa in 1901. In 1918, Tokheim was purchased by a group of businessmen and was moved to Fort Wayne, Indiana where it was incorporated in Indiana under the name Tokheim Oil Tank and Pump Company. The present name was adopted in December 1953. The information that follows should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes included elsewhere in this Form 10-K. Unless otherwise noted, references to years in this Report are to the Company's fiscal years ended November 30th. In December 1997, the Company acquired Management Solutions, Inc. ("MSI"). MSI develops and distributes retail automation systems (including POS software), primarily for the convenience store, petroleum dispensing and fast food service industries. The Company paid MSI's stockholders an initial amount of $12.0 million. The Company is also obligated to make contingent payments of up to $13.2 million over the next three years based upon MSI's performance. The $13.2 million consists of $8.0 million of additional purchase price, $2.6 million related to a non-compete agreement, and $2.6 million of additional employee compensation. The Company borrowed funds for the initial purchase price under the Company's bank credit facility (the "Bank Credit Facility"). As part of the transaction, the Company entered into an employment relationship with Arthur S. Elston, the president of MSI, pursuant to which he will oversee Tokheim's retail automation systems business. Certain statements contained in this Report, including, without limitation, statements containing the words "believes," "anticipates," "expects" and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements, expressed or implied, by such forward-looking statements. Such factors include, among others, the following: loss of key members of management; increases in interest rates or the Company's cost of borrowing or a default under any material debt agreement; inability to achieve future sales levels or other operating results; fluctuation in foreign currency valuation; unavailability of funds for capital expenditures or research and development; changes in customer spending levels and demand for new products; changes in governmental, environmental or other regulations, especially as they may affect the capital expenditures of the Company's customers; failure of the Company to comply with governmental regulations; inability of the Company to successfully make and integrate acquisitions; adverse publicity; contingent liabilities and other claims asserted against the Company; competition; loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; 3 business disruptions; inability to protect technology or to integrate new technologies quickly into new products; claims relating to intellectual property infringement; changes in general economic conditions; and other factors referenced in this Report. Certain of these factors are discussed in more detail elsewhere in this Report, including, without limitation, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the Consolidated Financial Statements and related notes. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. (b) Financial Information About Industry Segments: In 1997, 1996 and 1995, the Company had only one reportable industry segment--the design, manufacture and servicing of petroleum dispensing systems. (c) Narrative Description of Business: PRINCIPAL PRODUCTS AND SERVICES The Company's principal product offerings include petroleum dispensers and pumps, retail automation systems including POS systems, dispenser payment or "pay-at-the-pump" terminals, replacement parts and upgrade kits. Petroleum dispensers and pumps transfer fuel from storage tanks to vehicles or portable containers. Dispensers include meters, which measure the quantity of fuel pumped and transfer the information to calculators which determine a sales price. Retail automation systems control in-store and at-the-pump fuel sales, pump activation and credit card transactions, monitor inventory, transmit data to a central management system and perform other management functions. Pay-at- the-pump terminals automate customer payment at the pump with cash and credit/debit cards. Upgrade kits permit owners to upgrade a dispenser's capabilities and functionality without incurring the cost of replacing the entire dispenser. The Company also offers services for its products through authorized service representatives and Company-owned facilities. In 1997, 1996 and 1995, the petroleum industry accounted for all of the Company's sales. Approximately 89%, 86% and 85%, respectively, of the Company's sales were derived from the sale of retail service station gasoline dispensers, parts, accessories, and service contracts. Markets The Company's products are sold primarily to retail service station operators and commercial customers which fall into seven categories. Major Oil Companies ("MOCs")--MOCs are typically large multinational companies that are vertically integrated with retail operations in developed and emerging markets. They sell "branded" products and typically have standard station formats, including dispenser design and proprietary credit card networks. National Oil Companies ("nationals")--A national is an oil company that operates exclusively (or almost exclusively) in a single national market (other than the United States). Most nationals are, or until recently were, state-owned. In recent years, a number of nationals have been privatized or have relinquished their monopolies over the local retail petroleum markets. Independent Oil Companies ("independents")--Independents are usually U.S. companies that sell "branded" products regionally rather than nationally. They typically have station and dispenser designs which are standardized, similar to MOCs. Jobbers--Jobbers are independent service station owners that operate under the brand of a MOC. A station owned by a jobber looks substantially the same as one owned by a MOC, selling MOC-branded products and using standard MOC station layouts. Most jobbers own multiple stations. Some jobbers work exclusively with one MOC, while others have multiple partners. Moreover, jobbers can change their MOC 4 affiliation within the contractual limitations between the jobber and the MOC. Usually, jobbers are not required to purchase their petroleum dispensing equipment from the same manufacturers as their affiliated MOC. Convenience Store Stations--Convenience store stations are petroleum retailers which receive over 50% of their revenues from merchandise rather than from petroleum products. A significant number of convenience store stations are owned by MOCs. The Company's convenience store customers also include national or regional operators as well as small, local businesses. Hypermarkets--The Company is the leading supplier to French hypermarkets. The hypermarket is a retailing format pioneered in France, with a growing presence in the rest of Europe. A hypermarket is similar to a strip mall in the United States, with a supermarket as the anchor retailer. Hypermarkets typically offer competitively-priced, private label petroleum products to attract customers. In France, more than 50% of retail petroleum sales are through hypermarkets. Commercial Customers--The commercial market is characterized by companies whose fuel consumption needs justify maintaining internal fueling capabilities, such as truck fleets and municipalities. Through its Gasboy subsidiary, Tokheim is the leading supplier of fuel dispensing equipment to the U.S. commercial market. Sales and Distribution Products are distributed in the United States by a sales organization which operates from national account offices, district sales offices, petroleum equipment firms, industrial suppliers and distributors in major cities across the United States. In areas outside the United States, product distribution is accomplished by the international division through foreign subsidiaries, distributors, and special sales representatives. In addition to its widespread sales organization, there are more than 1,400 trained field service representatives acting as independent contractors, many of whom maintain a service parts inventory. The Company's customer service division maintains a help desk which is available 24 hours a day, 365 days a year, for immediate response to service needs in most markets. Additionally, the customer service division maintains a continuing program of service clinics for customers, authorized service representatives and distributors, both in the field and at the Company's training centers. In recent years, MOCs and nationals have been moving toward granting national, regional and global contracts or "tenders" and toward creating alliances and preferred supplier relationships with suppliers. The Company believes that its acquisition of Sofitam, which increased its global sales and services capabilities, positions it positively in response to this trend. NEW PRODUCTS; RESEARCH AND DEVELOPMENT The Company continually seeks to enhance its existing product lines to offer increased functionality in new or existing products and has dedicated research and engineering staffs. Tokheim spent approximately $18.3 million, $15.9 million and $12.7 million in 1997, 1996, and 1995, respectively, to improve existing products and manufacturing methods, develop new products, and pursue other applied research and development. The Company has also begun to form partnerships with the MOCs to develop products that meet their specific needs and with electronics and software development companies to develop advanced technologies. In 1997, Tokheim began market testing of Radio Frequency Identification ("RFID") technology. Similar to the drive-through payment system at toll booths in major metropolitan areas, this technology automatically charges a consumer's account, which a sensor on the dispenser reads from either a microchip key ring tag or a microchip window decal. By eliminating the need to pay for fuel with cash or credit cards, the system speeds gas purchases, both increasing consumer convenience and enabling stations to fuel more cars in less time. The technology also permits service station owners to gather information about consumer buying habits to improve marketing techniques, such as promotion of food, car washes and other items on pump-mounted displays. 5 Tokheim's RFID system is compatible with all POS systems and with other manufacturer's dispensers (as an upgrade). Tokheim has entered into an agreement with Micron Communications to further develop its RFID systems. RAW MATERIALS The principal raw materials essential to the Company's business are flat sheet steel, aluminum, copper tubing, iron castings, and electronic, POS and computer components, all of which are available through several competitive sources of supply. The Company has not experienced any difficulty in obtaining these materials or products. PATENTS, LICENSES AND TRADEMARKS The Company has filed patent applications on its technologies for RFID, a new metering device and virtual classrooms. The Company also holds other patents, none of which is considered essential to its overall operations. The Company entered into a license agreement, effective as of December 1, 1997, pursuant to which, the Company will pay a $3 million fixed royalty fee, payable in 12 quarterly installments, plus earned royalties for the use of a patented vapor recovery system and certain vapor recovery improvements, an electronic blender and a printed receipt severing device. See Item 3, "Legal Proceedings" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." SEASONALITY Sales of petroleum dispenser equipment have historically been seasonal, primarily due to the construction season and seasonal MOC purchasing which typically is highest at the end of the calendar year. Historically, approximately 30% of Tokheim's annual net sales volume has been recorded in the fourth quarter of its fiscal year, with no significant variation among the other three quarters. The acquisition of Sofitam has diminished such seasonality, with the 1997 fourth quarter representing 27% of consolidated annual sales. See Note 12 to the Consolidated Financial Statements, "Quarterly Financial Information (unaudited)." WORKING CAPITAL PRACTICES There are no special inventory requirements or credit terms extended to customers that would have a material adverse affect on the Company's working capital. DEPENDENCY ON A SINGLE CUSTOMER No single customer accounted for 10% or more of the Company's consolidated sales in 1997, 1996 or 1995. BACKLOG The Company's backlog of firm orders as of the end of 1997 was approximately $26.2 million, compared to approximately $28.1 million at the end of 1996. The Company expects that the entire backlog will be filled in 1998. The Company believes that its backlog is not necessarily an indicator of sales during the forthcoming year because the average length of the backlog is not very long (four to six weeks of shipments). Factors affecting backlog levels include the timing of purchases by MOCs, announcements of price adjustments, sales promotions, and production delays. The effect of these factors limits the usefulness of comparing backlogs in different periods. COMPETITION The market for petroleum dispensing equipment is competitive and sensitive to new product introductions and pricing pressure. Intense competition has significantly reduced the average price on the Company's products over the past few years. The Company competes principally against Gilbarco, Inc. (a division of GEC, Plc), 6 Wayne (a division of Dresser Industries, Inc.), Schlumberger Limited, Tankanlagen Salzkotten GmbH, Scheidt & Bachmann GmbH and Tatsuno Corporation. Measured in industry sales, the Company believes that it is one of the largest global manufacturers of petroleum dispensing equipment. The Company believes that the principal methods of competition include price, product quality, service, technology and the ability to provide products globally. The Company believes that its strengths include: (1) its global presence, which allows it to satisfy the demands of companies seeking regional or global suppliers; (2) its production of high quality, customized products; (3) its strong service-provider network; (4) its application of new technologies into products; and (5) its focus on its core business. Several of the Company's competitors are subsidiaries or divisions of much larger corporations, however, and may have significantly greater financial, technical and marketing resources than the Company. ENVIRONMENTAL REGULATIONS The Company's operations and properties are subject to a variety of complex and stringent federal, state and local laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain materials, substances and wastes, the remediation of contaminated soil and groundwater, and the health and safety of employees. The Company does not believe that compliance with any existing environmental regulations will result in material capital expenditures or have a material adverse effect on the Company's financial condition or results of operations. Environmental regulations also tend to affect the Company's customers, increasing their spending and their demand for the Company's products as they attempt to remain in compliance. See Note 18 to the Consolidated Financial Statements, "Contingent Liabilities." EMPLOYEES As of November 30, 1997, the Company employed approximately 2,903 people worldwide. (d) Financial Information About Foreign and Domestic Operations and Export Sales: Financial information about foreign and domestic operations and export sales for 1997, 1996, and 1995 is set forth in Note 14 to the Consolidated Financial Statements, captioned "Geographical Segments." ITEM 2. PROPERTIES. The Company owns properties in: Fort Wayne, Indiana; Fremont, Indiana; Washington, Indiana; Lansdale, Pennsylvania; Brighton, Ontario, Canada; Kya Sand, Randburg, South Africa; Glenrothes, Scotland; Weilheim, Germany; Grentheville, France; Fribourg, Switzerland; Scurzolengo, Italy; Abidjan, Ivory Coast; and Halstenbek, Germany. The Company leases properties in: Greenwood Village, Colorado; Mexico City, Mexico; Tremblay, France; Casablanca, Morocco; Solothurn, Switzerland; West Sussex, United Kingdom; Vilvoorde, Belgium; Barcelona, Spain; La Soukra, Tunisia; Dakar, Senegal; Douala, Cameroon; Leiderdorp, the Netherlands, and Hamburg, Germany. The majority of the Company's manufacturing operations are concentrated in six cities: Fort Wayne, Indiana; Washington, Indiana; Lansdale, Pennsylvania; Grentheville, France; Kya Sand, Randburg, South Africa; and Glenrothes, Scotland. The Company believes that it has sufficient production capacity to meet demand over the next several years. The Company also owns an engineering and design center and a corporate office building in Fort Wayne, Indiana. Other than the Colorado facility, which is for software development, the remaining properties owned or leased by the Company are primarily for warehouse space or sales and service. The Company is currently holding for sale facilities in Falaise, France, Jasper, Tennessee and Atlanta, Georgia, as well as a 109-acre tract of unimproved land located in Fort Wayne, Indiana. ITEM 3. LEGAL PROCEEDINGS. As more fully described in Note 18 to the Consolidated Financial Statements, "Contingent Liabilities," the Company is defending various claims and legal actions, including claims under the U.S. Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") and other environmental actions. These legal actions involve primarily claims for damages arising out of the Company's manufacturing operations, 7 product liability and various contractual and employment issues. Management believes that the outcome of such pending claims will not, individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations. For further details, see Note 18 to the Consolidated Financial Statements, "Contingent Liabilities." The Company was a defendant in litigation filed by Gilbarco, Inc. ("Gilbarco"), which alleged infringement of patents on its vapor recovery system and certain vapor recovery improvements, blender, printed receipt severing and filter housing. Gilbarco also alleged violation of the North Carolina Fair Practice Claims Act. Gilbarco is seeking injunctions and treble unspecified damages. The Company, in addition to asserting other defenses, has counterclaimed with an antitrust claim. The lawsuit was filed on August 3, 1995 and took place in federal court in the Middle District of North Carolina. The parties have signed a settlement agreement which includes a nonexclusive, worldwide license to use the disputed technology. The agreement settles all outstanding issues related to the litigation. See Item 1 under the caption "Patents, Licenses and Trademarks." On February 13, 1998, the court entered a consent judgment approving the settlement. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. The Company's common stock, no par value (the "Common Stock"), is traded on the New York Stock Exchange under the symbol "TOK." The high and low sales prices for the Common Stock for 1996 and 1997 are set forth as follows: QUARTERLY HIGH-LOW SHARE PRICES
HIGH LOW --------- ------- YEAR ENDED NOVEMBER 30, 1996 First Quarter........................................... $ 9 1/2 $ 6 1/8 Second Quarter.......................................... 10 3/4 8 3/4 Third Quarter........................................... 10 7 1/2 Fourth Quarter.......................................... 10 8 1/2 YEAR ENDED NOVEMBER 30, 1997 First Quarter........................................... $ 9 7/8 $ 7 1/4 Second Quarter.......................................... 10 1/8 8 Third Quarter........................................... 14 3/8 9 3/4 Fourth Quarter.......................................... 18 13/16 13 3/8
The Company has not declared or paid dividends on the Common Stock in recent years. Currently, the Company does not anticipate paying any cash dividends on the Common Stock in the foreseeable future. The Bank Credit Facility and the indenture governing the 11 1/2% Senior Subordinated Notes also restrict the payment of dividends. The number of Common Stock shareholders of record on February 4, 1998, was approximately 7,200. On February 12, 1998, the closing price of the Common Stock, as reported on the New York Stock Exchange, was $17.25 per share. 8 ITEM 6. SELECTED FINANCIAL DATA. The following selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and the Consolidated Financial Statements and related notes in Item 8. SELECTED FINANCIAL DATA (AMOUNTS IN THOUSANDS EXCEPT DOLLARS PER SHARE)
YEAR ENDED NOVEMBER 30, ------------------------------------------------ 1997 1996(A) 1995 1994 1993 -------- -------- -------- -------- -------- STATEMENT OF OPERATIONS DATA: Net sales.................. $385,469 $279,733 $221,573 $202,134 $172,306 Operating profit (loss)(B). 20,645 6,356 5,811 3,780 (2,324) Interest expense, net...... 16,451 7,191 3,319 2,806 3,443 Earnings (loss) before income taxes(C)........... 5,197 (1,229) 3,270 1,932 (5,745) Earnings (loss)(C)......... 3,980 (2,009) 3,231 1,675 (5,867) Preferred stock dividends.. 1,512 1,543 1,580 1,617 1,663 Earnings (loss) applicable to common stock(C)........ 2,468 (3,552) 1,651 58 (7,530) Earnings (loss) per common share(C): Primary.................... 0.31 (0.45) 0.21 0.01 (1.09) Weighted average number of shares outstanding........ 8,083 7,981 7,911 7,801 6,940 Fully diluted.............. 0.27 (0.45) 0.17 0.01 (1.09) Weighted average number of shares outstanding........ 9,067 7,981 9,500 7,801 6,940 BALANCE SHEET DATA (AT PERIOD END): Working capital............ $ 41,650 $ 54,356 $ 50,353 $ 47,040 $ 32,346 Property, plant and equipment................. 41,966 41,010 28,558 27,425 29,004 Total assets............... 290,619 309,861 124,332 116,251 119,997 Total debt(D).............. 130,405 146,012 38,612 38,825 44,501 ESOP preferred stock, net.. 9,853 8,137 6,426 5,005 3,678 Common shareholders' equity, net............... 10,618 17,678 23,797 22,857 32,894 OTHER DATA: Cash flows from operating activities................ 21,202 5,897 3,347 2,069 (5,039) Cash flows for investing activities................ (10,394) (54,079) (4,910) (2,562) (76) Cash flows from financing activities................ (11,795) 57,016 754 (5,063) (1,093) Capital expenditures....... 11,154 3,061 5,559 2,757 2,503 Depreciation and amortization.............. 9,232 5,028 4,857 4,672 5,233 Interest expense and preferred stock dividends. 18,800 9,336 5,168 4,675 5,475 EBITDA (as defined)(E)..... 34,767 17,842 14,126 10,230 2,931
- -------- (A) 1996 includes the balance sheet of Sofitam and three months of operating activity since the date of acquisition. In addition, the financial statements presented have been restated for an accounting change in the method of valuing inventory, as more fully described in Note 1 to the Consolidated Financial Statements, "Summary of Significant Accounting Policies." (B) Operating profit equals net sales less cost of sales, selling, general and administrative expenses, merger and acquisition costs and other unusual items, and depreciation and amortization. (C) Amounts for 1997 exclude $1,886 of extraordinary loss from debt extinguishment. Amounts for 1994 exclude the cumulative effect of change in method of accounting for postretirement benefits other than pensions of $13,416. (D) Total debt includes senior subordinated notes, long-term debt, current maturities of long-term debt, notes payable bank, capitalized lease obligations and the guarantee of certain debt incurred by the Company's Employee Stock Ownership Plan (the "ESOP") to purchase Tokheim preferred stock, the dividends of which are used by the ESOP to service such debt (the "Guaranteed ESOP Obligation"). 9 (E) EBITDA as used in this Report represents earnings (loss) from continuing operations before income taxes, extraordinary loss or debt extinguishment and cumulative effect of change in method of accounting, net interest expense, depreciation and amortization, merger and acquisition costs and other unusual items and minority interest. Management uses EBITDA as a financial indicator of the Company's ability to service debt, although the precise definition of EBITDA is subject to variation among companies. EBITDA should not be construed as an alternative to operating income or cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of the Company's operating performance or as a measure of liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 for a discussion of liquidity. For additional information concerning the Company's historical cash flows, see the Consolidated Statement of Cash Flows included elsewhere herein under Item 8. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL The Company's petroleum dispensing systems are designed for and sold principally to owners of retail service stations, which include major oil companies ("MOCs"), national oil companies ("nationals"), independent owners operating under a MOC brand ("jobbers"), independent oil companies ("independents"), convenience store stations, hypermarkets and other retailers, and to commercial customers. In 1997, approximately 89% of Tokheim's net sales were to retail operators, and approximately 11% of net sales were to commercial customers, such as municipalities and truck fleets. Unless otherwise noted, references herein to years are to the Company's fiscal years ended November 30th. In the United States, Canada and western Europe, demand is driven by new, more convenient products, such as credit/debit card readers, and by environmental regulations, such as those requiring vapor recovery systems and more secure underground storage tanks. In emerging markets, such as eastern Europe, Africa and southeast Asia, economic growth is promoting vehicle use and infrastructure development, which increase the demand for fuel and fuel dispensers. Deregulation of local markets and privatization of state-owned oil companies have created additional growth opportunities in Central and South America. The market for petroleum dispensing equipment is competitive and sensitive to new product introductions and pricing pressure. Intense competition has significantly reduced the average price on the Company's products over the past few years. Beginning in 1992, the Company initiated an aggressive program to consolidate manufacturing operations, enhance manufacturing efficiency, redesign existing products and divest non-core businesses. In addition, since the Sofitam acquisition, the Company has begun to implement a plan to combine manufacturing facilities, integrate product lines, re-engineer the manufacturing process and eliminate general and administrative redundancies. The Company is continually looking for opportunities to redesign its products and manufacturing processes to increase efficiency. The Company has entered into a licensing agreement, effective as of December 1, 1997 (the "Licensing Agreement"). Under the terms of the Licensing Agreement, the Company will pay a $3.0 million fixed royalty fee, payable in 12 quarterly installments, plus earned royalties on patented devices used in Company products until the patents expire. The Company expects that these earned royalties will total approximately $1.1 million in 1998, based on projected sales. These licensing expenses may offset in part savings from the Company's restructuring efforts. The Company acquired Sofitam in September 1996 for $107.4 million less certain adjustments. The Company's 1996 financial statements include three months of Sofitam operations, and the 1997 financial statements include a full year of Sofitam operations. A comparison of sales in 1997 versus 1996 of entities that have been part of Tokheim since before the acquisition are not meaningful because certain sales made by these entities were conducted through Sofitam in 1996 and 1997. 10 International sales by foreign subsidiaries and exports from the U.S. totaled approximately 64%, 47%, and 38% of consolidated net sales in 1997, 1996, and 1995, respectively. The acquisition of Sofitam has significantly extended the Company's international distribution network, reducing its reliance on U.S. domestic sales. Sales of petroleum dispenser equipment have historically been seasonal, primarily due to the construction season and MOC purchasing which typically is highest at the end of the calendar year. Historically, approximately 30% of Tokheim's annual net sales volume has been recorded in the fourth quarter of its fiscal year, with no significant variation among the other three quarters. The acquisition of Sofitam has diminished such seasonality, with the 1997 fourth quarter representing 27% of consolidated annual sales. Because of the Company's relatively low profit margins, the relatively higher sales in the fourth quarter have translated into a disproportionately high contribution to the Company's annual earnings. See Note 12 to the Consolidated Financial Statements. In December 1997, the Company acquired Management Solutions, Inc. ("MSI"). MSI develops and distributes retail automation systems (including POS systems), primarily for the convenience store, petroleum dispensing and fast food service industries. The Company paid MSI's stockholders an initial amount of $12.0 million. The Company is also obligated to make contingent payments of up to $13.2 million over the next three years based upon MSI's performance. The $13.2 million consists of $8.0 million of additional purchase price, $2.6 million related to a non-compete agreement, and $2.6 million of additional employee compensation. The Company borrowed funds for the initial purchase price under the Bank Credit Facility. RESULTS OF OPERATIONS Consolidated sales for 1997 were $385.5 million, an increase of 37.8% from 1996 sales of $279.7 million. Substantially all of this increase was due to the inclusion of a full year of Sofitam's results in 1997 compared to three months of Sofitam's results in 1996. These increases were offset by the impact of a decline in revenues due to a decline in foreign currency exchange rates. Sales for 1997 would have been $20.9 million higher if average exchange rates of European and African currencies had remained the same as in 1996. Consolidated sales of $279.7 million in 1996 represented an increase of 26.3% from $221.6 million in 1995. The increase was due principally to the inclusion of three months of Sofitam's operations as well as unit volume increases. Both domestic and international sales contributed to this gain in sales. The gross margin (defined as net sales less cost of sales divided by net sales) for 1997 was 26.3%, up from 24.8% in 1996 and 24.6% in 1995. The increase from 1996 to 1997 is due to (i) the inclusion of Sofitam at higher margin levels for a full year, (ii) personnel reductions and related cost savings, (iii) reduction of warranty expense in North America, and (iv) the results of concentrated efforts to improve manufacturing efficiencies globally. Cost reductions were offset somewhat by decreasing sales prices. The 1996 increase over 1995 was achieved by higher sales volume and improvements in the Company's cost structure, offset, in part, by lower sales prices. Selling, general and administrative expenses as a percentage of net sales were 17.7% in 1997, compared to 18.5% in 1996 and 18.6% in 1995. Such expenses increased to $68.2 million in 1997 compared to $51.7 million in 1996 and $41.3 million in 1995. The 1997 expense increase over 1996 is largely attributable to a full year of Sofitam expenses. These increases were offset by a program implemented by the Company in 1997 to improve efficiency and reduce personnel, which translated into lower total compensation cost. Net interest expense increased in 1997 to $16.5 million from $7.2 million in 1996, reflecting a full year's interest expense on the Company's 11 1/2% Senior Subordinated Notes due 2006 (the "Notes") issued to finance the acquisition of Sofitam. Interest expense for 1997 is net of interest income of $0.8 million, which includes $0.5 million of interest on tax refunds. The increase in interest expense of $3.3 million in 1996 compared to 1995 reflects approximately three months of interest on the Notes. 11 A net foreign currency exchange loss of less than $0.1 million was incurred in 1997 versus a loss of $0.2 million incurred in 1996 and a gain of $0.1 million in 1995. The 1997 loss was due principally to the decline of the French franc against the U.S. dollar and was partially offset by a foreign currency gain of $0.5 million on the sale of a foreign currency option contract. Other income, net was $1.4 million in 1997 compared to $0.2 million in 1996. This increase is partly due to gains on the sale of property, plant and equipment that were $0.4 million greater in 1997 than 1996 and to the inclusion of Sofitam's other income for the full year. In addition, other income in 1996 of $0.2 million includes $0.3 million of expense for a litigation settlement of a nonoperating nature. In 1995, the Company sold a non-core product line and related assets that resulted in a net gain of $0.5 million. Income tax expense for 1997 was $1.2 million, an increase from $0.8 million in 1996. The increase was due to higher income, offset by utilization of net operating loss carryforwards and adjustments of prior year's taxes and refunds. At the end of 1997, the Company recorded a net deferred tax asset of $14.9 million, which was offset in full by a valuation allowance due largely to uncertainties associated with the Company's ability to fully use these tax benefits. The Company is continuing to evaluate the likelihood that all or part of the deferred tax asset will be realized through the generation of future taxable earnings. If, in the future, the Company is able to generate sufficient levels of taxable income, the valuation allowance will be adjusted accordingly. See Note 13 of the Consolidated Financial Statements for additional information concerning the Company's income tax position at November 30, 1997. Earnings before extraordinary loss on debt extinguishment in 1997 were $4.0 million, or $0.27 per fully diluted common share, compared with a loss of $2.0 million or $0.45 loss per fully diluted common share in 1996. Earnings in 1995 were $3.2 million, or $0.17 per fully diluted common share. Earnings in 1997 included merger and acquisition costs and other unusual items of $3.5 million, compared to $6.5 million in 1996 and $2.7 million in 1995. In 1997, the Company incurred a $1.9 million extraordinary loss, or $0.21 loss per fully diluted common share, as a result of the open-market purchase and retirement of $10.0 million in aggregate principal amount of the Notes. This loss includes $1.4 million of premiums paid to purchase the Notes and $0.5 million representing the write-off of a proportionate share of the original unamortized deferred issuance costs. See further discussions under "--Liquidity and Capital Resources" and Note 6 to the Consolidated Financial Statements, "Senior Subordinated Notes." Inflation has not had a significant impact on the Company's results of operations. The Company is a party to various legal matters, and its operations are subject to federal, state, and local environmental laws and regulations. For further details, see Note 18 to the Consolidated Financial Statements, "Contingent Liabilities." During 1996, the Company changed its method of valuing domestic inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. The change did not have a material impact on earnings from operations. LIQUIDITY AND CAPITAL RESOURCES The Company has available to it various internal and external sources of liquidity and capital resources. These resources provide funds required for current operations, interest payments, debt retirement, capital expenditures and other requirements. Working capital at November 30, 1997 was $41.7 million compared to $54.4 million on November 30, 1996. The Company's current ratio was 1.4 at November 30, 1997 and 1996. In September 1996, Tokheim entered into the Bank Credit Facility, an $80 million revolving credit facility with five domestic and international banks for a six-year term. This facility allows the Company to borrow in several currencies. The Company has pledged as collateral substantially all of its assets, including intercompany 12 notes and receivables and intangibles. The facility includes numerous covenants, including minimum levels of earnings and interest coverage and restrictions on capital expenditures, rentals and dividend payments. The Company must be in compliance with the terms and conditions of the facility before making interest and principal payments on the Notes. The Company had $33.1 million available under the Bank Credit Facility as of November 30, 1997. Subsequent to November 30, 1997, the Company borrowed an additional $12.0 million to fund the MSI acquisition. Availability of revolving credit under this facility is subject to borrowing base requirements and compliance with covenants as described in Note 5 to the Consolidated Financial Statements, "Notes Payable to Banks." The Company was in full compliance with all covenants as of November 30, 1997. In August 1996, the Company sold $100 million in aggregate principal amount of the Notes in a private placement pursuant to Rule 144A. The offering of the Notes was made in connection with the Company's acquisition of Sofitam. In January 1997, the Company completed an offer to exchange the original Notes for registered notes. The terms of the registered Notes are similar in all material respects to those of the original Notes, except that the registered Notes are registered under the Securities Act of 1933, as amended, and thus do not bear legends restricting transfer. All of the original Notes were exchanged before the expiration of the exchange offer. During the fourth quarter of 1997, the Company used proceeds from the Bank Credit Facility to purchase $10.0 million in aggregate principal amount of the Notes on the open- market at an aggregate price of $11.4 million, plus accrued interest. Cash provided from operations was $21.2 million in 1997 compared to $5.9 million in 1996 and $3.3 million in 1995. The increase in 1997 was achieved primarily through improved earnings, reductions in receivables and inventory, and an increase in accounts payable. The improved cash flow is the result of continued efforts to increase the efficiency of the two consolidated businesses (Sofitam and Tokheim) and improved working capital management. Cash flow from operations in 1996 was enhanced by improved receivables collection and increased accrued expenses. The Company's French subsidiaries participate, as needed, in a customary practice of selling traits (selling accounts receivable without recourse) to financial institutions. Under this arrangement, the subsidiaries present traits to financial institutions and receive 95% of the face value in the form of short-term loans. These loans bear interest at a variable rate, which was 3.8% at November 30, 1997. When the subsidiaries receive payment from the customers, they remit 95% of the amount received back to the financial institutions plus the accrued interest. The amount outstanding at November 30, 1997 was approximately $3.6 million. The Company did not sell traits prior to 1997. The Company's capital expenditures amounted to $11.2 million in 1997, $3.1 million in 1996 and $5.6 million in 1995. The increase in 1997 relates primarily to capital requirements for implementing both the consolidation plan for Sofitam and improvements at the Company's Fort Wayne, Indiana manufacturing facility. At November 30, 1997, no significant contractual commitments existed for future capital expenditures. The Company expects to commit approximately $8.0 million for capital expenditures during 1998. In connection with the continued implementation of the Sofitam consolidation plan, the Company expects to incur a number of charges. During 1997, the Company charged $3.2 million against the acquisition accrual recorded for estimated costs necessary to realign the Sofitam operations in Europe and to close redundant operations. This realignment also resulted in $1.7 million of charges against operating income in 1997. With respect to the consolidation, the Company anticipates charging $7.3 million against the remaining acquisition accrual during the next eighteen to twenty-four months. The Company also expects to charge $0.1 million and $1.6 million in 1998 and 1999, respectively, against operating income for the realignment. See Notes 2 and 3 to the Consolidated Financial Statements for additional information concerning the Company's consolidation plan. As part of the MSI acquisition, the Company is obligated to make contingent payments of up to $13.2 million over the next 3 years based on MSI's performance. The $13.2 million consists of $8.0 million of additional purchase price, $2.6 million related to a non-compete agreement, and $2.6 million of additional employee compensation. See Note 19 to the Consolidated Financial Statements, "Subsequent Events." 13 The Company has guaranteed loans to the ESOP in the amounts of $9.4 million and $11.7 million at November 30, 1997 and 1996, respectively. The Trustee, who holds the ESOP Preferred Stock, may elect to convert each preferred share to one common share in the event of redemption by Tokheim, certain consolidations or mergers of Tokheim, or a redemption by the Trustee that is necessary to provide for distributions under the Company's Retirement Savings Plan. A participant may elect to receive a distribution from the Plan in cash or common stock. If redeemed by the Trustee, the Company is responsible for purchasing the preferred stock at the $25 floor value. The Company may elect to pay the redemption price in cash or an equivalent amount of common stock. Preferred stock dividends paid were $1.5 million, $1.5 million, and $1.6 million in 1997, 1996, and 1995, respectively. See Note 16 to the Consolidated Financial Statements, "Retirement Plan Cost." The Company also satisfies various capital needs through operating leases for machinery and equipment, computer systems, vehicles and other items. Expenses related to such leases aggregated approximately $4.9 million in 1997. See Note 8 to the Consolidated Financial Statements for further additional information concerning commitments related to leases. The Company is completing the initial phase of assessment and is developing a project plan of tasks, resources, time schedules and estimated costs to replace or upgrade those computer programs which are not year 2000 compliant. This initiative includes activities to test and certify all Company-wide business systems, infrastructure, and internal and external products and services. Based on preliminary estimates, the Company expects to spend a total of approximately $1.7 million in 1998 and 1999 to modify its computer information systems enabling proper processing of transactions relating to the year 2000 and beyond. The Company continues to evaluate appropriate courses of corrective action, including replacement of certain systems whose associated cost would be recorded under capital or operating leases. The Company's long-term investments and long term loans to foreign subsidiaries, when translated at 1997 conversion rates, resulted in a translation adjustment that is reflected as a reduction to shareholders' equity of $18.0 million in 1997 and $7.3 million in 1996. The adjustments represent the effect of changes in the current rate of exchange from the beginning to the end of the year used in translating the net assets of foreign subsidiaries, including certain long-term intercompany loans of foreign subsidiaries, into U.S. dollar amounts. The majority of the 1997 and 1996 adjustments are the result of translating long-term loans to foreign affiliates which were established to complete the acquisition of Sofitam. 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. The Company may consider other methods of raising capital, such as the issuance of debt or equity securities in a public offering as its needs require. NEW ACCOUNTING PRONOUNCEMENTS The Company has considered the impact that accounting pronouncements recently issued by the Financial Accounting Standards Board and American Institute of Certified Public Accountants will have on the Consolidated Financial Statements as of November 30, 1997. None of the pronouncements that have been issued but not yet adopted by the Company is expected to have a material impact on the Company's financial position, results of operations or cash flows. See Note 1 to the Consolidated Financial Statements for additional information regarding recently issued accounting pronouncements. 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEARS ENDED NOVEMBER 30, 1997, 1996, AND 1995 (AMOUNTS IN THOUSANDS EXCEPT DOLLARS PER SHARE)
1997 1996 1995 -------- -------- -------- Net sales........................................ $385,469 $279,733 $221,573 Cost of sales, exclusive of items listed below... 283,932 210,223 166,974 Selling, general, and administrative expenses.... 68,167 51,667 41,251 Depreciation and amortization.................... 9,232 5,028 4,857 Merger and acquisition costs and other unusual items........................................... 3,493 6,459 2,680 -------- -------- -------- Operating profit................................. 20,645 6,356 5,811 Interest expense (net of interest income of $837, $602 and $269, respectively).................... 16,451 7,191 3,319 Foreign currency (gain) loss..................... 48 159 (143) Minority interest in subsidiaries................ 394 393 -- Other income, net................................ (1,445) (158) (635) -------- -------- -------- Earnings (loss) before income taxes and extraordinary loss.............................. 5,197 (1,229) 3,270 Income taxes..................................... 1,217 780 39 -------- -------- -------- Earnings (loss) before extraordinary loss........ 3,980 (2,009) 3,231 Extraordinary loss on debt extinguishment........ (1,886) -- -- -------- -------- -------- Net earnings (loss).............................. 2,094 (2,009) 3,231 Preferred stock dividends ($1.94 per share)...... (1,512) (1,543) (1,580) -------- -------- -------- Earnings (loss) applicable to common stock....... $ 582 $ (3,552) $ 1,651 ======== ======== ======== Earnings (loss) per common share: Primary Before extraordinary loss...................... $ 0.31 $ (0.45) $ 0.21 Extraordinary loss on debt extinguishment...... (0.23) -- -- -------- -------- -------- Net earnings (loss)............................ $ 0.07 $ (0.45) $ 0.21 ======== ======== ======== Weighted average number of shares outstanding.. 8,083 7,981 7,911 ======== ======== ======== Fully diluted Before extraordinary loss...................... $ 0.27 $ (0.45) $ 0.17 Extraordinary loss on debt extinguishment...... (0.21) -- -- -------- -------- -------- Net earnings (loss)............................ $ 0.06 $ (0.45) $ 0.17 ======== ======== ======== Weighted average number of shares outstanding.. 9,067 7,981 9,500 ======== ======== ========
The accompanying notes are an integral part of the financial statements. 15 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED NOVEMBER 30, 1997, 1996, AND 1995 (AMOUNTS IN THOUSANDS)
1997 1996 1995 -------- -------- ------- Cash Flows From Operating Activities: Net earnings (loss).............................. $ 2,094 $ (2,009) $ 3,231 Adjustments to reconcile net earnings (loss) to net cash provided from operating activities: Extraordinary loss on debt extinguishment....... 1,886 -- -- Depreciation and amortization................... 9,232 5,028 4,857 Gain on sale of property, plant, and equipment.. (408) (59) (436) Deferred income taxes........................... (139) (251) (33) Changes in assets and liabilities (net of effects of the acquisition in 1996): Receivables, net............................... 4,254 2,363 (6,140) Inventories.................................... 5,975 (2,626) 89 Prepaid expenses............................... (2,001) 5,987 (877) Accounts payable............................... 5,116 (1,425) 1,648 Accrued expenses............................... (3,395) 4,249 2,132 U.S. and foreign income taxes.................. 12 (912) (349) Other.......................................... (1,424) (4,448) (775) -------- -------- ------- Net cash provided from operating activities...... 21,202 5,897 3,347 -------- -------- ------- Cash Flows From Investing Activities: Acquisition of Sofitam, net of cash acquired..... -- (52,105) -- Property, plant, and equipment additions......... (11,154) (3,061) (5,559) Proceeds from sale of property, plant and equipment....................................... 760 1,087 649 -------- -------- ------- Net cash used in investing activities............ (10,394) (54,079) (4,910) -------- -------- ------- Cash Flows From Financing Activities: Proceeds from senior subordinated notes.......... -- 100,000 -- Redemption of senior subordinated notes.......... (10,000) -- -- Proceeds from term debt.......................... -- 490 2,122 Payments on term debt and other.................. (3,747) (32,290) (819) Net increase (decrease) notes payable, banks..... 1,770 (5,044) 559 Net increase in cash overdraft................... 1,874 7,237 199 Debt issuance costs.............................. -- (11,506) -- Proceeds from issuance of common stock........... 1,706 42 -- Treasury stock, net.............................. (496) (370) 273 Premiums paid on debt extinguishment............. (1,390) -- -- Preferred stock dividends........................ (1,512) (1,543) (1,580) -------- -------- ------- Net cash provided from (used in) financing activities...................................... (11,795) 57,016 754 -------- -------- ------- Effect of Translation Adjustments on Cash......... (2,389) (4,482) 41 -------- -------- ------- Increase (decrease) in cash...................... (3,376) 4,352 (768) Cash and Cash Equivalents: Beginning of year................................ 9,814 5,462 6,230 -------- -------- ------- End of year...................................... $ 6,438 $ 9,814 $ 5,462 ======== ======== =======
The accompanying notes are an integral part of the financial statements. 16 CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1997 AND 1996 (AMOUNTS IN THOUSANDS)
1997 1996 -------- -------- ASSETS Current assets: Cash and cash equivalents.................................. $ 6,438 $ 9,814 Accounts receivable, less allowance for doubtful accounts of $1,392 and $904, respectively.......................... 83,011 94,402 Inventories: Raw materials and supplies............................... 29,427 30,689 Work in process.......................................... 27,514 33,080 Finished goods........................................... 7,406 11,145 -------- -------- 64,347 74,914 Prepaid expenses........................................... 6,705 5,056 -------- -------- Total current assets..................................... 160,501 184,186 Property, plant and equipment, at cost: Land and land improvements................................. 4,669 4,982 Buildings and building improvements........................ 26,924 29,867 Machinery and equipment.................................... 70,068 64,473 Construction in progress................................... 4,514 1,285 -------- -------- 106,175 100,607 Less accumulated depreciation............................ 64,209 59,597 -------- -------- 41,966 41,010 Assets held for sale......................................... 7,825 -- Other tangible assets........................................ 1,359 3,836 Goodwill, net................................................ 62,695 62,692 Other non-current assets and deferred charges, net........... 16,273 18,137 -------- -------- Total assets............................................. $290,619 $309,861 ======== ========
The accompanying notes are an integral part of the financial statements. 17 CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1997 AND 1996 (AMOUNTS IN THOUSANDS EXCEPT DOLLARS PER SHARE)
1997 1996 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt..................... $ 2,391 $ 4,447 Notes payable to banks................................... 98 7,168 Cash overdrafts.......................................... 10,575 9,733 Accounts payable......................................... 54,597 53,593 Accrued expenses......................................... 51,190 54,889 -------- -------- Total current liabilities.............................. 118,851 129,830 Senior subordinated notes.................................. 90,000 100,000 Long-term debt, less current maturities.................... 28,487 22,402 Guaranteed Employees' Stock Ownership Plan (RSP) obligation................................................ 9,429 11,995 Post-retirement benefit liability.......................... 14,378 14,780 Minimum pension liability.................................. 2,173 3,248 Other long-term liabilities................................ 5,169 342 Deferred income taxes...................................... 342 524 Minority Interest.......................................... 1,319 925 -------- -------- 270,148 284,046 -------- -------- Commitments and contingencies (Note 19) 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................................................ (9,429) (11,692) Treasury stock, at cost, 189 and 167 shares, respectively.. (4,718) (4,171) -------- -------- 9,853 8,137 -------- -------- Preferred stock, no par value; 3,300 shares authorized and unissued.................................................. -- -- Common stock, no par value; 30,000 shares authorized, 8,232 and 7,954 shares issued, respectively..................... 21,158 19,452 Guaranteed Employers' Stock Ownership Plan (RSP) obligation................................................ -- (303) Minimum pension liability.................................. (2,173) (3,248) Foreign currency translation adjustments................... (18,048) (7,271) Retained earnings.......................................... 9,821 9,240 -------- -------- 10,758 17,870 Treasury stock, at cost, 9 and 11 shares, respectively..... (140) (192) -------- -------- 10,618 17,678 -------- -------- Total liabilities and shareholders' equity............. $290,619 $309,861 ======== ========
The accompanying notes are an integral part of the financial statements. 18 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995 (AMOUNTS IN THOUSANDS)
COMMON STOCK FOREIGN -------------------- GUARANTEED MINIMUM CURRENCY TOTAL COMMON OUTSTANDING TREASURY ESOP PENSION TRANSLATION RETAINED SHAREHOLDERS' AMOUNT AMOUNT OBLIGATION OBLIGATION ADJUSTMENTS EARNINGS EQUITY ----------- -------- ---------- ---------- ----------- -------- ------------- BALANCE AT NOVEMBER 30, 1994 $ 19,410 $(1,887) $(1,242) $ (1,906) $ (3,543) $12,024 $ 22,856 Other.................. (1) 33 -- -- -- -- 32 Redemption of preferred stock................. -- 1,057 -- -- -- -- 1,057 Employee termination benefits.............. -- 427 -- -- -- -- 427 RSP diversification.... -- 139 -- -- -- -- 139 Decrease in guaranteed ESOP obligation....... -- -- 456 -- -- -- 456 Minimum pension liability adjustment.. -- -- -- (1,962) -- -- (1,962) Foreign currency translation adjustments........... -- -- -- -- 1 -- 1 Net earnings........... -- -- -- -- -- 3,231 3,231 Treasury stock transactions.......... -- -- -- -- -- (860) (860) Preferred stock dividends............. -- -- -- -- -- (1,580) (1,580) -------- ------- ------- -------- --------- ------- -------- BALANCE AT NOVEMBER 30, 1995 $$19,409 $ (231) $ (786) $ (3,868) $ (3,542) $12,815 $ 23,797 Stock options exercised............. 43 -- -- -- -- -- 43 Employee termination benefits.............. -- 11 -- -- -- -- 11 Other.................. -- 28 -- -- -- -- 28 Decrease in guaranteed ESOP obligation....... -- -- 483 -- -- -- 483 Minimum pension liability adjustment.. -- -- -- 620 -- -- 620 Foreign currency translation adjustments........... -- -- -- -- (3,729) -- (3,729) Net loss............... -- -- -- -- -- (2,009) (2,009) Treasury stock transactions.......... -- -- -- -- -- (23) (23) Preferred stock dividends............. -- -- -- -- -- (1,543) (1,543) -------- ------- ------- -------- --------- ------- -------- BALANCE AT NOVEMBER 30, 1996 $ 19,452 $ (192) $ (303) $ (3,248) $ (7,271) $ 9,240 $ 17,678 Stock options exercised............. 1,706 -- -- -- -- -- 1,706 Other.................. -- 52 -- -- -- -- 52 Decrease in guaranteed ESOP obligation....... -- -- 303 -- -- -- 303 Minimum pension liability adjustment.. -- -- -- 1,075 -- -- 1,075 Foreign currency translation adjustments........... -- -- -- -- (10,777) -- (10,777) Net earnings........... -- -- -- -- -- 2,094 2,094 Treasury stock transactions.......... -- -- -- -- -- (1) (1) Preferred stock dividends............. -- -- -- -- -- (1,512) (1,512) -------- ------- ------- -------- --------- ------- -------- BALANCE AT NOVEMBER 30, 1997 $ 21,158 $ (140) $ (2,173) $ (18,048) $ 9,821 $ 10,618 ======== ======= ======= ======== ========= ======= ========
The accompanying notes are an integral part of the financial statements 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS EXCEPT DOLLARS PER SHARE) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation--The Consolidated Financial Statements include the accounts of Tokheim Corporation and its wholly- and majority-owned subsidiaries (the "Company"). The Consolidated Financial Statements include 100% of the assets and liabilities of these subsidiaries, with the ownership interest of minority participants recorded as "Minority interest" in the Consolidated Balance Sheet. All significant intercompany accounts and transactions have been eliminated in consolidation. In September 1996, the Company acquired the petroleum dispenser business ("Sofitam") of Sofitam, S.A., which is included in the Consolidated Financial Statements since that date. (See Note 2). Nature of Operations--The Company engages principally in the design, manufacture and servicing of electronic and mechanical petroleum dispensing marketing systems, including service station equipment, point-of-sale control systems, and card- and cash-activated transaction systems for customers around the world. The Company markets its products through subsidiaries located throughout the world and has major facilities in the United States, France, Canada, Germany, Scotland, and South Africa. 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 into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange at the balance sheet date. Translation gains and losses are deferred as a separate component of shareholders' equity, unless there is a sale or complete liquidation of the underlying foreign investments. Aggregate foreign currency transaction gains and losses are included in determining net earnings. Risks and Uncertainties--The Company is not dependent on any single customer, group of customers, market, geographic area or supplier of materials, labor or services. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. The more significant areas requiring the use of management's estimates relate to allowances for obsolete inventory and uncollectible receivables, warranty claims, environmental and product liabilities, postretirement, pension, and other employee benefits, valuation allowances for deferred tax assets, future obligations associated with the Company's restructuring, future cash flows associated with assets, and useful lives for depreciation and amortization. Actual results could differ from these estimates, making it reasonably possible that a change in certain of these estimates could occur in the near term. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade receivables. The Company places its cash with high credit quality financial institutions. At times, cash in United States banks may exceed FDIC insurance limits. Concentration of credit risk with respect to trade receivables is minimal due to the Company's large customer base and ongoing control procedures, which monitor the credit worthiness of customers. Fair Value of Financial Instruments--The fair value of cash and cash equivalents, trade receivables, and accounts payable approximates the carrying value because of the short-term maturities of these financial instruments. The interest rate on the Company's bank debt and short-term notes payable fluctuates with current market rates. Consequently, the carrying value of the bank debt and short-term notes payable approximates the market prices for the same or similar issues in future periods. The estimated fair value of the Company's senior subordinated notes was $98,316 at November 30, 1997, based on a quoted market price of 109.24%. 20 The fair value of the Company's convertible preferred stock, which is held in the Trust of the Company's Retirement Savings Plan ("RSP"), approximates the carrying value, as such stock is not traded in the open market, and the value at conversion is equal to a fixed redemption value in cash or equivalent amounts of common stock. In 1997, the Company entered into a foreign currency option contract covering six bi-annual interest payments. During 1997, after selling one contract, the Company sold the benefit side of the remaining five payments and recognized a gain of $0.5, but retained the downside exposure. The floor is set at 5.30 French francs to a U.S. dollar. As of November 30, 1997, the French franc was 5.91 to a U.S. dollar. Inventory Valuation--Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Accounting Change--During 1996, the Company changed its method of valuing domestic inventories from the last-in, first-out (LIFO) method to the first- in, first-out (FIFO) method. 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 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. Buildings are generally depreciated over 40 years. Machinery and equipment are depreciated over periods ranging from five to ten years. Expenditures for normal repairs and maintenance are charged to expense as incurred. Expenditures for improving or rebuilding existing assets which extend the useful life of the assets are capitalized. Costs incurred to address the year 2000 are expensed when incurred except for expenditures for hardware, software and other system-related equipment. The Company is currently holding for sale facilities in Falaise, France, Jasper, Tennessee and Atlanta, Georgia, as well as a 109-acre tract of unimproved land located in Fort Wayne, Indiana. Such assets are recorded at the lower of cost or net realizable value. Software, and Research and Development Costs--Amortization of capitalized software development 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 non-current assets were $1,089 and $479 at November 30, 1997 and 1996, respectively. The amounts amortized and charged to expense in 1997, 1996 and 1995 were $260, $163 and $109, respectively. All other product development expenditures are charged to research and development expense in the period incurred. These expenses amounted to $18,284, $15,909 and $12,746 in 1997, 1996 and 1995, respectively. Goodwill and Other Intangible Assets--Goodwill is amortized on a straight- line basis over 40 years. The Company will continue to review facts and circumstances to determine whether the remaining estimated useful life of goodwill warrants revision or whether the carrying amount may not be recoverable, using profitability projections to assess whether future operating income on a non-discounted basis is likely to exceed the amortization over the remaining life of the goodwill. The amounts amortized and charged to expense in 1997 and 1996 were approximately $1,490 and $420, respectively. Accumulated amortization of goodwill at November 30, 1997 and 1996 was $1,910 and $420, respectively. Other non-current assets and deferred charges consist primarily of debt issuance costs. These costs are amortized over the terms of the related debt agreements on a straight-line basis with periods ranging from six to ten years. Amortization of these deferred charges included in interest expense at November 30, 1997, 1996 and 1995 was $1,623, $401, and $504, respectively. During 1997, the Company charged $496 of deferred bond issuance costs to extraordinary loss on debt extinguishment. This amount represents the write- off of a proportionate share of the original unamortized deferred issuance cost in connection with the issuance of the senior subordinated notes for the acquisition of Sofitam. During 1996, the Company wrote-off approximately 21 $233 of deferred debt issuance costs and capitalized approximately $11,506 of costs incurred in connection with the refinancing of the Company's preexisting debt and issuance of senior subordinated notes. Accumulated amortization of other non-current assets and deferred charges at November 30, 1997 and 1996 was $2,520 and $401, respectively. Advertising and Promotion--All costs associated with advertising and product promotion are expensed in the period incurred. These expenses amounted to $2,687, $2,268 and $1,579 in 1997, 1996 and 1995, respectively. Income Taxes--The Company accounts for income taxes under the liability method in accordance with Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes." The provision for income taxes includes federal, foreign, state and local income taxes currently payable as well as deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. No additional U.S. income taxes or foreign withholding taxes have been provided on accumulated earnings of foreign subsidiaries approximating $21,700 which are expected to be reinvested indefinitely. Additional income and withholding taxes are provided, however, on planned repatriations of foreign earnings. (See Note 13). New Accounting Pronouncements--SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was adopted in 1997. This statement requires that long-lived assets and certain identifiable intangible assets that are to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. This statement did not have an impact on the Company's consolidated financial statements as it did not reflect a change in the Company's practices with respect to reviewing assets for impairment and accounting for assets to be disposed of. The Company adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," in 1997. This statement encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments based on a fair value method of accounting. The Company has elected not to adopt the new expense recognition provisions of SFAS No. 123 and will continue to apply the existing accounting provisions of Accounting Principles Board Opinion (APBO) No. 25. APBO No. 25 does not require recognition of compensation expense for the stock-based compensation arrangements provided by the Company where the exercise price is equal to the market price at the date of grant. The Company has provided the required pro forma disclosure of the compensation expense determined under the fair value provisions of SFAS No. 123 in Note 9, "Stock Option Plans." SFAS No. 128, "Earnings per Share," is effective for the first quarter of 1998. This statement establishes standards for computing and presenting earnings per share ("EPS"). SFAS No. 128 simplifies the standards for computing EPS previously codified in APBO No. 15, "Earnings per Share," and makes them comparable to international EPS standards. This statement requires the replacement of primary EPS with basic EPS and a dual presentation of basic and diluted EPS on the face of the statement of earnings for all entities with a complex capital structure. Restatement of prior-period EPS data presented is required. The Company does not expect basic or diluted EPS as calculated under SFAS No. 128 to differ significantly from primary or fully diluted EPS as calculated pursuant to APBO No. 15. See Note 11 for additional information on EPS, including a pro forma calculation of weighted average shares outstanding and EPS calculated under SFAS No. 128 for the year ended November 30, 1997. SFAS No. 129, "Disclosure of Information about Capital Structure," is effective for the year ending November 30, 1998. SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information," are effective for the year ending November 30, 1999. In the opinion of management, these statements will not have a material impact on the Company's financial position, results of operations or cash flows. SFAS No. 130 "Reporting Comprehensive Income," is effective for the year ending November 30, 1999. Due to the significance of the foreign currency translation adjustments recorded in 1997 and 1996, comprehensive income would have been significantly lower than net income and resulted in a loss for both years. 22 American Institute of Certified Public Accountants (AICPA) Statements of Position (SOP) No. 96-1 "Environmental Remediation Liabilities," and No. 97-2 "Software Revenue Recognition," are effective for the year ending November 30, 1998. SOP No. 96-1 provides guidance for recognizing, measuring and disclosing environmental remediation liabilities. SOP 97-2 supersedes SOP 91-1 and provides more specific guidance on revenue recognition related to software products. In the opinion of the Company, the adoption of these statements will not have a material impact on the Company's financial position, results of operations or cash flows. 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 an initial maturity of 90 days or less to be cash equivalents. Supplemental disclosures of cash flow information:
1997 1996 1995 ------- -------- ------ Cash paid during the year for interest............... $15,204 $ 4,918 $3,060 Cash paid during the year for income taxes........... 921 1,013 976 Noncash transactions primarily related to the issuance of treasury stock in settlement of RSP distributions....................................... 1 23 976 Noncash adjustments to certain assets and liabilities in connection with the settlement of the corporate reorganization...................................... -- -- 383 Liabilities assumed in the acquisition............... -- 113,776 -- Accrued merger and acquisition costs................. 9,799
Reclassifications--Certain prior year amounts in these financial statements have been reclassified to conform with the current year presentation. 2. ACQUISITION In September 1996, the Company acquired Sofitam for $107.4 million less certain adjustments. Sofitam is the leading designer, manufacturer and servicer of petroleum dispensers in France and northern Africa, and has a strong market position in southern Europe. The transaction was financed by the sale of $100 million in aggregate principal amount of 11 1/2% senior subordinated notes due 2006 (the "Notes") and by the Company's bank credit facility (the "Bank Credit Facility"). During 1997, the Company adjusted goodwill and related acquisition accrued liabilities originally recorded in connection with the acquisition of Sofitam. These adjustments were recorded in connection with a more precise allocation of the Sofitam purchase price performed during 1997. The table below summarizes the acquisition liabilities as they relate to the consolidation plan for Sofitam. The amounts do not include costs associated with consolidation of previously-existing Tokheim subsidiaries, which will be expensed as incurred, nor do they reflect costs expected to provide benefits in future periods. The Company expects the consolidation plan to be completed by 1999. (See Note 3 for additional information regarding the Company's consolidation plan.)
NOVEMBER 30, 1996 ADJUSTMENTS ORIGINAL TO CHARGED TO ACQUISITION ACQUISITION ACQUISITION NOVEMBER 30, 1997 ITEM ACCRUAL ACCRUAL ACCRUAL REMAINING BALANCE - ---- ----------------- ----------- ----------- ----------------- Employee termination benefits (A)........... $6,651 $(186) $2,341 $4,124 Asset write-off and disposal cost (B)...... 2,108 183 59 2,232 Other plant closing cost (C).................... 1,040 700 799 941 ------ ----- ------ ------ $9,799 $ 697 $3,199 $7,297 ====== ===== ====== ======
- -------- (A) Approximately 300 employees (B) Up to 10 locations (C) Leases and other contract terminations 23 In 1997 and 1996, the Company charged operations $1,736 and $1,043, respectively, for restructuring expenses associated with the Company's plan for merging the operations of Tokheim and Sofitam. These costs were included in "Merger and acquisition costs and other unusual items" in the Consolidated Statement of Earnings. The Company estimates future non-accruable restructuring charges related to the consolidation plan to be approximately $125 in 1998 and $1,515 in 1999. In addition, normal operating charges associated with the plan will be expensed as incurred. The following unaudited pro forma information summarizes consolidated results of operations of Tokheim and Sofitam as if the acquisition had occurred at the beginning of 1996 and 1995. These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense as a result of goodwill and other intangible assets, and increased interest expense on acquisition debt. They do not purport to be indicative of the results of operation which actually would have resulted had the combination been in effect on December 1, 1994 or 1995, or the future results of operations of the consolidated entities. The Company is in the process of closing several manufacturing, sales, service and administrative operations in Europe, consolidating these operations into its administrative center in Tremblay, France and into its manufacturing facility in Grentheville, France. Anticipated efficiencies from the merger of Tokheim and Sofitam are not fully determinable and therefore have been excluded from the amounts included in the pro forma summary presented below.
UNAUDITED YEARS ENDED NOVEMBER 30, ------------------ 1996 1995 -------- -------- Revenues.................................................... $406,173 $399,023 Merger and acquisition costs and other unusual items........ 6,459 4,294 Net loss.................................................... (5,242) (5,208) Net loss per common share................................... (0.85) (0.86)
3. MERGER AND ACQUISITION COSTS AND OTHER UNUSUAL ITEMS For the years ended November 30, 1997, 1996 and 1995, the Company identified expenses brought about by the acquisition of Sofitam, costs associated with the restructuring of the Company, pending and settled litigation, and warranty policy adjustments above and beyond normal recurring amounts. These costs are shown in aggregate as a single operating line item, "Merger and acquisition costs and other unusual items," on the Consolidated Statement of Earnings. Merger and acquisition costs/Restructuring--During 1997 and 1996 the Company implemented several corporate realignment initiatives, including work force reductions and reorganization of its domestic and international operations, related to the consolidation of Sofitam. In addition, during 1995, the Company reorganized its European operations to improve manufacturing and service efficiencies and to reduce cost. Amounts charged to operations for the matters described above for the years ended November 30, 1997, 1996 and 1995 approximated $1,736, $2,035 and $842, respectively. Litigation/Other--During 1997, the Company settled a claim brought against it directly associated with the purchase of Sofitam related to a personnel matter that resulted in an adverse outcome against the Company. The Company also favorably settled a claim that involved a former supplier, which resulted in the reversal of an accrued liability which had been charged to "Merger and acquisition costs and other unusual items" in 1996. In addition, during 1997 the Company recorded a charge for an impaired asset related to license technology (see also Note 18). In 1996 the Company settled claims related to a prior distributor, and a foreign distributor to extinguish an exclusive sales representative agreement. The Company also accrued and charged to operations for the potential adverse outcome in a Pension Benefit Guarantee Corporation inquiry with respect to a terminated benefit plan payout dated back to 1991. In 1995 the Company settled an environmental related matter in the amount of $300. In addition, the Company incurred charges in 1996 and 1995 related to customer satisfaction 24 programs relating to dispensers sold in prior years. Amounts charged to operations relating to litigation/other for 1997, 1996, and 1995, were $1,757, $4,424, and $1,838, respectively. The above costs, although not uncommon to the Company's industry, are considered by the Company to be attributable to the purchase and consolidation of Sofitam or otherwise significant enough in size and nature to warrant separate disclosure. 4. ACCRUED EXPENSES Accrued expenses consisted of the following at November 30, 1997 and 1996:
1997 1996 ------- ------- Sofitam integration............................................ $ 7,297 $ 9,799 Compensated absences........................................... 7,087 6,833 Salaries, wages, and commissions............................... 6,076 9,240 Retirement benefits and profit sharing......................... 5,921 5,930 Interest....................................................... 3,755 3,294 Warranty....................................................... 3,742 5,193 Legal and professional......................................... 3,102 2,393 Employee payroll taxes......................................... 2,708 3,091 Deferred revenue............................................... 2,453 1,989 Taxes (sales, VAT, and other).................................. 2,434 2,924 Other.......................................................... 6,615 4,203 ------- ------- $51,190 $54,889 ======= =======
5. NOTES PAYABLE TO BANKS On September 3, 1996 the parent Company (the "Parent") and certain of its French subsidiaries (the "French Borrowing Subsidiaries") entered into the six-year $80,000 Bank Credit Facility. The facility consists of a working capital/letter of credit facility in the amount of $67,768 (the "Credit Agreement") and an Employee Stock Ownership Plan assignment facility in the amount of $12,232 (the "ESOP Credit Agreement"). Notes payable to banks represent short-term borrowings under domestic and foreign lines of credit. At November 30, 1997, the aggregate amount outstanding under these lines was $24,188, of this amount, $24,090 has been classified as long-term debt because the Company has the ability (under the terms of the facility) and the intent to finance these obligations beyond one year. Domestic and foreign lines of credit totaled approximately $85,371, of which $61,182 was unused at November 30, 1997. The weighted average annual interest rate for these lines of credit was 7.6% for 1997. The range of domestic and foreign rates at November 30, 1997 was 6.9% to 9.0% and 4.8% to 7.5%, respectively. At November 30, 1996, the aggregate amount outstanding under these lines of credit was $23,300, of which $16,144 has been classified as long-term debt (for reasons described above). Domestic and foreign credit lines totaled approximately $75,311, of which $52,011 was unused at November 30, 1996. The weighted average annual interest rate for these lines of credit was 8.8% for 1996. The range of domestic and foreign rates at November 30, 1996 was 8.2% to 10.0% and 4.4% to 6.7%, respectively. At November 30, 1995, the aggregate amount outstanding under revolving credit agreements was $19,064, of which $16,700 was classified as long-term debt (for reasons described above). The weighted average annual interest rate was 8.6% for fiscal 1995. The range of domestic and foreign rates at November 30, 1995 was 7.1% to 9.8%. The Credit Agreement can be drawn down by the Parent and/or the French Borrowing Subsidiaries if they are in compliance with a borrowing base limitation. The borrowing base is calculated on specified percentages 25 of eligible receivables and inventories and is determined independently for the Parent and the French Borrowing Subsidiaries. The unused portion of this commitment is subject to a commitment fee ranging from 0.375% to 0.5%, depending on the aggregate leverage ratio of the Parent and the French Borrowing Subsidiaries. The Credit Agreement permits borrowings in U.S. dollars, French francs, British pounds sterling, German deutsche marks and other currencies which are freely available and convertible into U.S. dollars. The Credit Agreement expires on September 3, 2002. The ESOP Credit Agreement was used to assign existing indebtedness of the Parent and the Tokheim Employee Stock Ownership Plan (the "ESOP"). The unused portion of the ESOP Credit Agreement cannot be reclaimed as part of the Credit Agreement, nor can any amounts be re-borrowed by the Parent or the French Borrowing Subsidiaries. Principal amounts outstanding at November 30, 1997 and 1996 were $9,429 and $11,692, respectively, and are amortized over the remaining life of the pre-existing agreement. See Note 7, captioned "Term Debt and Guaranteed Employees' Stock Ownership Plan (RSP) Obligation". Indebtedness of the Parent and domestic borrowing subsidiaries under the Bank Credit Facility is collateralized by (i) a first perfected security interest in and lien on certain of the real and personal assets of the Parent (including claims against Subsidiaries to which the Parent has made an intercompany loan) and each of the Parent's direct and indirect wholly-owned United States Subsidiaries and, (ii) a pledge of 100% of the stock of the Parent's direct and indirect wholly-owned United States Subsidiaries and, (iii) a pledge of 65% of the stock of the French holding Company and (iv) a guarantee by all of the Parent's direct and indirect wholly-owned United States Subsidiaries. Indebtedness of the French Borrowing Subsidiaries under the Bank Credit Facility is collateralized by (i) a first perfected security interest in certain of the real and personal assets of the French Borrowing Subsidiaries, the Parent and all of the Parent's direct and indirect wholly- owned United States Subsidiaries and, (ii) a pledge of 100% of the stock of the French Borrowing Subsidiaries, and (iii) a guarantee by the Parent, the French holding Company and all of the Parent's direct and indirect wholly- owned United States Subsidiaries. Any lien on the real property in France will be limited to the fair market value of such property. Indebtedness under the Bank Credit Facility will bear interest based (at the applicable borrower's option) upon (i) the Base Rate in the case of U.S. dollar denominated loans (defined as the higher of the applicable prime rate and the federal funds rate plus 0.5%) plus an applicable margin based upon the Company's leverage ratio (with a range of 0.5% to 1.75%) or (ii) the applicable Eurocurrency rate for one, two, three, or six months, plus an applicable margin based upon the Company's leverage ratio (with a range of 1.50% to 2.75%). The Bank Credit Facility contains customary provisions relating to yield protection, availability and capital adequacy. In the event of an occurrence and the continuation of a default, the Agent or the Bank, may increase the interest rate payable to the otherwise applicable rate plus 2%. The Bank Credit Facility requires the Company to meet certain consolidated financial tests, including minimum leverage of consolidated net worth, minimum level of consolidated EBITDA as defined, minimum consolidated interest coverage, maximum consolidated leverage ratio and minimum consolidated fixed charge coverage ratio. The Bank Credit Facility also contains certain covenants common to such agreements, which among other things, prohibit the payments of dividends, limits the incurrence of additional indebtedness and guarantees, transactions with affiliates, significant asset sales, investments and acquisitions, mergers and consolidations, prepayments and amendments to other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. The Bank Credit Facility contains events of default, including payment defaults, breach of representation and warranties, covenant defaults, cross default to certain other indebtedness, certain events of bankruptcy and insolvency, ERISA defaults, a change in control default, judgment defaults and failure of any guaranty or security agreement supporting the Bank Credit Facility to be in full force and effect. 26 Based on the Company's monthly borrowing base calculations, it had $33.1 million available under the Bank Credit Facility as of November 30, 1997. An additional $9.0 million is available to the Company under the facility if it meets the borrowing base requirements. Subsequent to year end the Company borrowed an additional $12.0 million to fund the acquisition of Management Solutions Inc. The Company's French subsidiaries participate, as needed, in a customary practice of selling traits (selling accounts receivable without recourse) to financial institutions. Under this arrangement, the subsidiaries present traits to financial institutions and receive 95% of the face value in the form of short-term loans. These loans bear interest at a variable rate, which was 3.8% at November 30, 1997. When the subsidiaries receive payment from the customers, they remit 95% of the amount received back to the financial institutions plus the accrued interest. The amount outstanding at November 30, 1997 was approximately $3.6 million. The Company did not sell traits prior to 1997. 6. SENIOR SUBORDINATED NOTES In August 1996 the Company issued Notes with an aggregate principal amount of $100,000, maturing on August 1, 2006, to finance the acquisition of Sofitam. Interest on the Notes accrues at the rate of 11 1/2% per annum and is payable semi-annually in cash on each February 1 and August 1 to the registered holders at the close of business on January 15 and July 15 immediately preceding the applicable interest payment date. During the fourth quarter of 1997, the Company used proceeds from its Bank Credit Facility to purchase $10,000 face value of Notes. The Company purchased these Notes on the open market at an aggregate price of $11,390 plus accrued interest and recorded an extraordinary loss of $1,886. This amount includes $1,390 of premiums paid to repurchase the Notes and $496 representing the write-off of a proportionate share of the original unamortized deferred issuance costs. The Notes are general unsecured obligations of the Company, subordinate in right of payment to all existing and future senior debt of the Company, including the Company's obligations under the Bank Credit Facility, and to all indebtedness and other obligations of the Company's subsidiaries. Evidence of default under the Bank Credit Agreement could prevent payment of principal and interest on the Notes. The Notes are redeemable, at the Company's option, in whole at any time or in part from time to time, on and after August 1, 2001, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof), if redeemed during the twelve-month period commencing on August 1 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption.
YEAR PERCENTAGE ---- ---------- 2001........................................................... 105.750% 2002........................................................... 103.833% 2003........................................................... 101.917% 2004 and thereafter............................................ 100.000%
On or prior to August 1, 1999, the Company may, at its option, use the net cash proceeds of one or more public equity offerings to redeem up to an aggregate of 35% of the principal amount of the Notes originally issued at the following redemption prices (expressed as percentages of the principal amount thereof), if redeemed during the twelve-month period ending on August 1 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:
YEAR PERCENTAGE ---- ---------- 1997........................................................... 111.500% 1998........................................................... 109.857% 1999........................................................... 108.214%
To effect the foregoing redemption with the proceeds of any public equity offering, the Company must make such redemption not more than 120 days after the consummation of any such public equity offering. The indenture under which the Notes are issued provides that, upon the occurrence of a "Change of Control," each Note holder will have the right to require that the Company purchase all or a portion of the 27 holder's Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. The indenture also contains restrictions common to such agreements, including among others: limitation on incurrence of additional indebtedness; limitation on restricted payments; limitation on asset sales; limitation on dividend and other payment restrictions affecting subsidiaries; limitation on preferred stock of subsidiaries; limitation on liens, merger, consolidation and sale of assets; and limitations on transactions with affiliates. 7. TERM DEBT AND GUARANTEED EMPLOYEES' STOCK OWNERSHIP PLAN (RSP) OBLIGATION Term debt at November 30, 1997 and 1996 consisted of the following:
1997 1996 ------- ------- 0.0% Belgian government note, maturing $16, due in quarterly installments switching to $19, due in annual installments through 1999 (a).............................................. $ 93 $ 129 3.5% German bonds, maturing $40, due in semiannual installments through 1998 (a).............................................. 80 184 8.1% notes payable, maturing $8 to $18, due in semiannual installments through 2001 (a)...................................................... 160 85 11.5% notes payable, maturing $41 to $73, due in quarterly installments through 1998 (a)...................................................... 405 346 15.0% notes payable, maturing $15 to $19, due in quarterly installments through 2002 (a)................................. 372 879 14.3% notes payable, maturing $4 to $7, due in monthly installments through 2000 (a)...................................................... 149 223 20.25% note payable, maturing $4 to $6, due in monthly installments through 1999 (a)................................. 94 153 6.0% to 20.25% capital lease obligations, maturing $7 to $84, in annual installments through 2000 (a)....................... 2,564 3,300 9.15% capital lease obligation, maturing $271 to $475, in annual installments through 2004 (a).......................... 2,559 3,230 Credit Agreement, variable rate, due 2002, rates ranging from 5.0% to 7.2% at November 30, 1997 (b)......................... 24,090 16,144 Other.......................................................... 312 296 5.0% to 9.6% notes payable, maturing $561 to $992, due in annual installments through 1997 (a).......................... -- 1,553 11.0% notes payable, maturing $1 to $27, due in quarterly installments through 2006 (a)...................................................... -- 327 ------- ------- 30,878 26,849 Less: Current maturities....................................... 2,391 4,447 ------- ------- $28,487 $22,402 ======= =======
Guaranteed Employees' Stock Ownership Plan (RSP) obligation at November 30, 1997 and 1996 consisted of the following:
1997 1996 ------ ------- Guaranteed Employees' Stock Ownership Plan (RSP) obligation, variable rate, maturing $593 to $760 quarterly through 2001, rate of 6.27% at November 30, 1997 (b)....................... $9,429 $11,692 Guaranteed Employees' Stock Ownership Plan (RSP) obligation, variable rate maturing $303 annually through 1997, rate of 8.075% at November 30, 1996 (b).............................. -- 303 ------ ------- $9,429 $11,995 ====== =======
- -------- (a) Aggregate cost of plant and equipment pledged as collateral under revenue bonds and lease obligations is $11,133. (b) Per the Bank Credit Facility as described in Note 5, the term obligation matures on September 3, 2002. 28 Aggregate scheduled maturities of the above term debt, excluding Guaranteed ESOP Obligation which is funded through preferred stock dividends, during the ensuing five years approximate $2,391, $1,663, $742, $535, and $543 respectively. 8. OPERATING LEASES The Company leases certain manufacturing and office equipment, vehicles, and office and warehousing space under operating leases. These leases generally expire in periods ranging from one to eight years. During 1997, the Company entered into a thirty-six month operating lease agreement for computer hardware and software to replace existing financial and manufacturing applications for one of its domestic subsidiaries. The lease has current monthly lease payments of $27 that are expected to increase to $61 per month at completion of the project. In 1996 the Company executed various operating leases for manufacturing equipment effective for a term of eight years and monthly rentals ranging from $3 to $72. Amounts charged to expense for operating leases in 1997, 1996 and 1995 were $4,853, $2,835, and $1,986, respectively. Future minimum rental payments under noncancelable operating leases during the ensuing five years aggregate $3,352, $3,208, $2,906, $1,551, $1,408 and $22 thereafter. 9. STOCK OPTION PLANS The Company has three separate Stock Option Plans, as outlined below: 1992 Stock Incentive Plan (SIP) The Plan contains both incentive stock options (ISOs) and non-qualified stock options (NSOs). The price of each share under this Plan for an ISO or NSO shall not be less than the fair market value of Tokheim Corporation Common Stock on the date the option is granted. Options granted under the SIP become exercisable at the rate of approximately 25% of the total options granted per year, beginning one year after the grant date. All options expire within ten years from the date on which they were granted. In addition, the SIP provides for the granting of Stock Appreciation Rights (SARs) and Restricted Stock Awards (RSAs). At November 30, 1997, there were no SARs and 42,500 RSAs granted. 1982 Incentive Stock Option Plan (ISOP) and 1982 Unqualified Stock Option Plan (USOP) Effective January 21, 1992, no additional shares could be granted under these plans. All options expire within ten years from the date on which they were granted. The price of each share under the ISOP was not less than fair market value of Tokheim Corporation Common Stock on the date the option was granted, and under the USOP was not less than 85% of the fair market value of the stock on the date the option was granted. Options granted under the respective plans during 1997, 1996, and 1995, are as follows:
1992 STOCK INCENTIVE PLAN --------------------------- YEAR OF GRANT ISO NSO RSA ------------- ---------- ---------------- 1997........................................ 468,000 -- 42,500 1996........................................ 45,000 -- -- 1995........................................ 35,000 -- --
29 The following table sets forth the status of all outstanding options at November 30, 1997:
EXERCISABLE IN TOTAL OPTIONS OPTION PRICE OPTIONS THE NEXT ONE AUTHORIZED AND PER SHARE EXERCISABLE TO FOUR YEARS OUTSTANDING ------------ ----------- -------------- -------------- $20.0000....................... 16,575 -- 16,575 $18.1250....................... -- 20,000 20,000 $12.2500....................... 500 -- 500 $11.9375....................... 6,750 2,250 9,000 $ 9.3750....................... 6,500 -- 6,500 $ 9.0000....................... 500 1,500 2,000 $ 8.8800....................... 57,820 -- 57,820 $ 8.6880....................... -- 380,000 380,000 $ 8.5000....................... 7,500 7,500 15,000 $ 7.9380....................... -- 28,000 28,000 $ 7.8750....................... 15,000 -- 15,000 $ 7.1250....................... 8,250 32,250 40,500 $ 6.8750....................... 15,000 -- 15,000 $ 6.8125....................... 20,587 20,587 ------- ------- ------- 154,982 471,500 626,482 ======= ======= =======
335,388 and 310,140 options were exercisable as of November 30, 1996 and 1995 respectively. The weighted average exercise price was $9.10 and the weighted average remaining contractual life was 7.15 years for all outstanding options as of November 30, 1997. Transactions in stock options under these plans are summarized as follows:
SHARES UNDER OPTION PRICE RANGE -------- ------------- 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 Granted.......................................... 45,000 $7.13- $ 9.00 Exercised........................................ (5,000) $8.75 Canceled or expired.............................. (70,087) $6.81- $20.00 -------- Outstanding, November 30, 1996................... 452,254 $6.81- $20.00 Granted.......................................... 468,000 $7.94- $ 8.69 Exercised........................................ (235,547) $6.81- $ 9.38 Canceled or expired.............................. (58,225) $6.81- $20.00 -------- Outstanding, November 30, 1997................... 626,482 $6.81- $20.00 ======== SHARES -------- Reserved for the granting of new options: November 30, 1995................................ 95,462 November 30, 1996................................ 98,774 November 30, 1997................................ 133,274
30 Effective December 1, 1996, the Company adopted the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation cost has been recognized for the existing stock option plans under the provisions of this statement. The Company continues to account for stock options at their intrinsic value under the provisions of APBO No. 25, which is allowed under SFAS No. 123. Under APBO No. 25, because the option terms are fixed and the exercise price of employee stock options equals the market price on the date of grant, no compensation expense is recorded. Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant date, consistent with the provisions of SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts indicated below:
(IN THOUSANDS EXCEPT PER SHARE DATA) 1997 1996 ----------------- ----------------- AS PRO AS PRO REPORTED FORMA REPORTED FORMA -------- ------- -------- ------- Earnings (loss) before extraordinary loss and estimated fair value of the year's option grants................... $ 3,980 $ 3,980 $(2,009) $(2,009) Estimated fair value of the year's option grants.......................... -- (308) -- (30) ------- ------- ------- ------- Earnings (loss) before extraordinary loss................................... 3,980 3,672 (2,009) (2,039) Extraordinary loss on debt extinguishment......................... (1,886) (1,886) -- -- ------- ------- ------- ------- Net earnings (loss)..................... $ 2,094 $ 1,786 $(2,009) $(2,039) ======= ======= ======= ======= Preferred stock dividends ($1.94 per share)................................. $(1,512) $(1,512) $(1,543) $(1,543) Earnings (loss) applicable to common stock.................................. $ 582 $ 274 $(3,552) $(3,582) Earnings (loss) per common share: Primary Before extraordinary loss........... $ 0.31 $ 0.26 $ (0.45) $ (0.45) Extraordinary loss on debt extinguishment..................... (0.23) (0.23) -- -- ------- ------- ------- ------- Net earnings (loss)................. $ 0.07 $ 0.03 $ (0.45) $ (0.45) ======= ======= ======= ======= Weighted average number of shares outstanding........................ 8,083 8,083 7,981 7,981 ======= ======= ======= ======= Fully diluted Before extraordinary loss........... $ 0.27 $ 0.24 $ (0.45) $ (0.45) Extraordinary loss on debt extinguishment..................... (0.21) (0.21) -- -- ------- ------- ------- ------- Net earnings (loss)................. $ 0.06 $ 0.03 $ (0.45) $ (0.45) ======= ======= ======= ======= Weighed average number of shares outstanding........................ 9,067 9,067 7,981 7,981 ======= ======= ======= =======
For purposes of pro forma disclosures, the estimated fair value of the options (stock-based compensation) is amortized to expense on a straight-line basis over the options' vesting period. The pro forma information above only includes the effects of 1997 and 1996 grants. As such, the impacts are not necessarily indicative of the effects on reported net income of future years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 1997 and 1996:
ASSUMPTIONS 1997 1996 ----------- ------- ------- Dividend yield.......................................... -- -- Risk free interest rate................................. 6.38% 5.29% Expected life of options................................ 5 years 5 years Expected volatility..................................... 38.76% 39.91% Estimated fair value of options granted per share....... $8.61 $7.21
31 10. COMMON AND PREFERRED STOCK Changes in common stock and common treasury stock are shown below:
COMMON COMMON STOCK TREASURY STOCK ----------------- --------------- SHARES AMOUNT SHARES AMOUNT --------- ------- ------- ------ Balance, November 30, 1994............... 7,949,000 $19,410 106,000 $1,887 Redemption of preferred stock............ -- -- (59,000) (1,057) Employee termination benefits............ -- -- (24,000) (427) RSP Diversification...................... -- -- (8,000) (139) Other.................................... -- (1) (2,000) (33) --------- ------- ------- ------ Balance, November 30, 1995............... 7,949,000 19,409 13,000 231 Stock options exercised.................. 5,000 43 -- -- Employee termination benefits............ -- -- (1,000) (11) Other.................................... -- -- (1,000) (28) --------- ------- ------- ------ Balance, November 30, 1996............... 7,954,000 19,452 11,000 192 Stock options exercised.................. 278,000 1,706 -- -- Shares purchased......................... -- -- 8,000 105 Other.................................... -- -- (10,000) (157) --------- ------- ------- ------ Balance, November 30, 1997............... 8,232,000 $21,158 9,000 $ 140 ========= ======= ======= ======
Changes in redeemable convertible preferred stock and related treasury stock are shown below:
PREFERRED PREFERRED STOCK TREASURY STOCK --------------- --------------- SHARES AMOUNT SHARES AMOUNT ------- ------- ------- ------ Balance, November 30, 1994.................. 960,000 $24,000 130,000 $3,262 Shares redeemed............................. -- -- 29,000 720 RSP Contributions........................... -- -- (8,000) (198) ------- ------- ------- ------ Balance, November 30, 1995.................. 960,000 24,000 151,000 3,784 Shares redeemed............................. -- -- 31,000 771 RSP Contributions........................... -- -- (15,000) (384) ------- ------- ------- ------ Balance, November 30, 1996.................. 960,000 24,000 167,000 4,171 Shares redeemed............................. -- -- 48,000 1,197 RSP Contributions........................... -- -- (26,000) (650) ------- ------- ------- ------ Balance, November 30, 1997.................. 960,000 $24,000 189,000 $4,718 ======= ======= ======= ======
On July 10, 1989, the Company sold 960,000 shares of redeemable convertible preferred stock (the "Preferred Stock") to the Trust of the Company's RSP at the liquidation value of $25 per share or $24,000. The Preferred Stock has a dividend rate of 7.75%. The Trustees who hold the Preferred Stock may elect to convert each preferred share to one common share in the event of redemption by Tokheim, certain consolidations or mergers of Tokheim, or a redemption by the Trustees which is necessary to provide for distributions under the RSP. A participant may elect to receive a distribution from the RSP in cash or common stock. If redeemed by the Trustees, the Company is responsible for purchasing the Preferred Stock at the $25 floor value. The Company may elect to pay the redemption price in cash or an equivalent amount of common stock. Due to the redemption characteristics of the stock, the aggregate amount of future redemptions for the next five years cannot be determined. See Note 16 for further discussions on the Company's Preferred Stock. 11. EARNINGS PER SHARE Primary earnings (loss) per share is 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. 32 In addition to the primary earnings per share computation, the fully diluted earnings per share computation assumes conversion of the Company's Preferred Stock into common stock and further adjusts net earnings for the additional ESOP compensation expense resulting from the absence of the Preferred Stock dividends available to fund the ESOP. The following table presents the share information necessary to calculate earnings (loss) per share for fiscal years ended November 30, 1997, 1996, and 1995:
PRIMARY ----------------- 1997 1996 1995 ----- ----- ----- Shares outstanding: Weighted average outstanding................................ 8,044 7,939 7,893 Share equivalents........................................... 39 42 18 ----- ----- ----- Adjusted outstanding........................................ 8,083 7,981 7,911 ===== ===== ===== FULLY DILUTED ----------------- 1997 1996 1995 ----- ----- ----- Shares outstanding: Weighted average outstanding................................ 8,044 7,939 7,893 Share equivalents........................................... 77 42 18 Weighted conversion of preferred stock...................... 946 -- 1,589 ----- ----- ----- Adjusted outstanding........................................ 9,067 7,981 9,500 ===== ===== =====
The AICPA issued 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 accounting practices for the ESOP which are based on SOP 76-3 and subject to consensuses of the Emerging Issues Task Force of the Financial Accounting Standards Board. Dividends paid on Preferred Stock are deducted for EPS computations and Preferred Stock that has not been allocated to participants' accounts is assumed to be outstanding based on the stated conversion ratio of one-for-one. Preferred Stock that has been allocated to participants' accounts is included in the computation of EPS based on the period-end closing price or the weighted average market value of the Company's common stock relative to the $25 liquidation value of the Preferred Stock. The number of unallocated shares of Preferred Stock at November 30, 1997 and 1995 were 295,750 and 454,601, respectively. The number of allocated shares of Preferred Stock at November 30, 1997 and 1995 were 488,947 and 365,843, respectively. The allocated shares of Preferred Stock were converted using $18.813 at November 30, 1997 and $8.047 at November 30, 1995. For 1996, fully diluted earnings per share is considered to be the same as primary earnings per share, since the effect of common stock equivalents and certain potentially dilutive securities would be antidilutive. As stated in Note 1, the Company will be required to retroactively adopt the provisions of SFAS No. 128 when it reports its operating results for the quarter ended February 28, 1998. In addition, during 1998, the Company will convert its preferred shares at a one-to-one ratio instead of the pro rated approach described above. This change is due to the Company having the ability and intent to make ESOP distributions in cash instead of in the Company's common stock which has been the historical practice as described above. The weighted average number of common shares outstanding for 1997 calculated under the provisions of SFAS No. 128 are 8,042 for basic and 9,005 for diluted. EPS for 1997 calculated pursuant to SFAS No. 128 is $0.07 for basic and $0.06 for diluted. 33 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for 1997 and 1996 is as follows:
1997 ------------------------------------------------------- 1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- -------- -------- Net sales............... $92,024 $95,857 $91,781 $105,807 $385,469 Cost of products sold (A).................... 70,391 70,379 68,667 74,495 283,932 Earnings before extraordinary item..... 126 1,210 152 2,493 3,980 Extraordinary loss on debt extinguishment.... -- -- -- (1,886) (1,886) Net earnings............ 126(B) 1,210(C) 152 (D) 607 (E) 2,094 Earnings (loss) per share: Primary: Before extraordinary item................. (0.03) 0.10 (0.03) 0.26 0.31 Extraordinary loss on debt extinguishment.. -- -- -- (0.23) (0.23) Net earnings (loss)... (0.03) 0.10 (0.03) 0.03 0.07 Fully dilutive: Before extraordinary item................. (0.03) 0.08 (0.03) 0.23 0.27 Extraordinary loss on debt extinguishment.. -- -- -- (0.20) (0.21) Net earnings (loss)... (0.03) 0.08 (0.03) 0.03 0.06
- -------- (A) Includes product development expenses and excludes depreciation and amortization. (B) Includes $500 of interest income recorded on specified loss liability tax claims. (C) Increase attributable to (i) high sales levels and reduced manufacturing costs due to the consolidation of manufacturing facilities in France and (ii) a reduction of Company personnel in the U.S., which translated into a reduction of the postretirement benefit liability. (D) Includes a $530 gain on the sale of foreign currency option agreements. (E) Includes an income adjustment in the amount of $955, increasing goodwill for a materials supply contract between Sofitam and a previously affiliated company. This amount was offset by a $894 charge recorded for licensed technology that was determined to have minimal value.
1996 --------------------------------------------------- 1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER(A) TOTAL ------- ------- ------- ---------- -------- Net sales................. $49,548 $57,620 $59,044 $113,521 $279,733 Cost of products sold (B). 37,805 43,546 45,222 83,650 210,223 Net earnings (loss)....... (613) 486 (37)(C) (1,845)(D) (2,009) Earnings (loss) per share: Primary: Net earnings (loss)..... (0.13) 0.01 (0.05) (0.28) (0.45) Fully dilutive: Net earnings (loss)..... (0.13) 0.01 (0.05) (0.28) (0.45)
- -------- (A) Includes the results of operations, for the three-month period ended November 30, 1996, of Sofitam. (B) Includes product development expenses and excludes depreciation and amortization. (C) Includes approximately $254 charged to operations for employee termination benefits related to corporate restructuring resulting from the acquisition of Sofitam and $669 related to a litigation settlement. (D) Includes approximately $387 charged to operations for employee termination benefits related to corporate restructuring resulting from the acquisition of Sofitam, $455 for various other acquisition charges, $780 for product/service exit costs and $866 for a legal settlement and a possible adverse outcome related to Pension Benefit Guaranty Corporation inquiries. 34 13. INCOME TAXES Earnings (loss) before income taxes and extraordinary loss consists of the following:
1997 1996 1995 ------ ------- ------- Domestic......................................... $4,209 $ (542) $ 8,946 Foreign.......................................... 988 (687) (5,676) ------ ------- ------- $5,197 $(1,229) $ 3,270 ====== ======= =======
Income tax provision (benefit) consists of the following:
1997 1996 1995 ------ ----- ----- Current: Federal............................................ $ 240 $(460) $(272) State.............................................. 311 277 249 Foreign............................................ 652 906 132 Deferred: Foreign............................................ 14 57 (70) ------ ----- ----- Total tax provision.............................. $1,217 $ 780 $ 39 ====== ===== =====
A reconciliation of the reported tax expense (benefit) and the amount computed by applying the statutory U.S. federal income tax rate of 35% to earnings (loss) before income taxes and extraordinary loss is as stated below.
1997 1996 1995 ------ ------ ------- Computed "expected" tax expense (benefit)....... $1,819 $ (430) $ 1,144 Increase (decrease) in taxes resulting from: State income taxes net of federal tax benefit. 202 180 162 Tax effect of dividends paid on stock held in the RSP...................................... (529) (540) (553) Adjustments to prior year accruals and refunds...................................... (600) (111) (572) Difference in foreign and U.S. tax rates...... (99) (78) (6) Increase (decrease) in valuation allowance before effect of stock options and Extraordinary loss........................... (525) 316 (2,250) Foreign losses with no current tax benefit: 1,016 1,201 1,985 Repatriation of foreign earnings.............. -- 125 41 Miscellaneous items, net...................... (67) 117 88 ------ ------ ------- Provision at effective tax rate................. $1,217 $ 780 $ 39 ====== ====== =======
The components of the deferred tax assets and liabilities as of November 30, 1997 and 1996 are as stated below. The tax benefit of $660 related to the extraordinary loss on the debt extinguishment has been fully offset by an increase in the valuation allowance.
1997 1996 -------- -------- Gross deferred tax assets: Accounts receivable.................................... $ 346 $ 215 Employee compensation and benefit accruals............. 6,733 7,107 Workers' compensation and other claims................. 603 242 Other.................................................. 24 14 Warranty accrual....................................... 978 1,032 Environmental liability................................ 232 322 Net operating loss carryforwards....................... 8,634 7,137 Alternative minimum tax credit......................... 378 331 Valuation allowance.................................... (14,907) (14,885) -------- -------- Total deferred tax asset............................. $ 3,021 $ 1,515 ======== ========
35
1997 1996 -------- -------- Gross deferred tax liabilities: Property, plant and equipment......................... $ 1,322 $ 1,158 Pension assets........................................ 700 524 Inventory............................................. 476 (707) Investment in property................................ 207 214 Foreign earnings not permanently invested............. 327 327 Foreign exchange...................................... 28 235 Export sales provision................................ 303 288 -------- -------- Total deferred tax liability........................ 3,363 2,039 -------- -------- Net deferred tax liability.............................. $ (342) $ (524) ======== ========
For U.S. federal income tax purposes, the net operating loss ("NOL") carryover amounts to $24,669 which will expire from 2006 to 2008. For purposes of the Alternative Minimum Tax ("AMT"), the NOL carryover is $10,561 and the credit carryforwards total $378. During 1997, $1,500 of the NOL was used. At November 30, 1997, the Company recorded a net deferred tax asset of $14.9 million, which was offset in full by a valuation allowance due largely to uncertainties associated with the Company's ability to fully use these tax benefits. The Company is continuing to evaluate the likelihood that all or part of the deferred tax asset will be realized through the generation of future taxable earnings. If, in the future, the Company is able to generate sufficient levels of taxable income, the valuation allowance will be adjusted accordingly. 36 14. GEOGRAPHICAL SEGMENTS Domestic and foreign operations information for 1997, 1996, and 1995 is as follows:
1997 1996 1995 --------- --------- -------- Net sales--unaffiliated customers: North America........................... $ 139,928 $ 147,763 $137,470 Export.................................. 46,529 38,541 36,238 Europe.................................. 176,402 80,370 37,068 Africa.................................. 22,610 13,059 10,797 --------- --------- -------- $ 385,469 $ 279,733 $221,573 ========= ========= ======== Inter-area sales eliminations: North America........................... $ 8,432 $ 9,471 $ 10,778 ========= ========= ======== Europe.................................. $ 3,660 $ 1,100 $ 47 ========= ========= ======== Africa.................................. $ 286 $ 510 -- ========= ========= ======== Operating income (loss): North America........................... $ 5,557 $ 494 $ 8,812 Europe.................................. 10,259 2,649 (4,232) Africa.................................. 1,444 633 165 Adjustments and eliminations............ 3,385 2,580 1,066 --------- --------- -------- $ 20,645 $ 6,356 $ 5,811 ========= ========= ======== Identifiable assets: North America........................... $ 207,209 $ 216,989 $121,044 Europe.................................. 169,110 186,372 22,914 Africa.................................. 14,448 14,955 7,025 Adjustments and eliminations............ (100,148) (108,455) (26,651) --------- --------- -------- $ 290,619 $ 309,861 $124,332 ========= ========= ========
The Company's foreign operations are located in: Canada; Belgium; France; Germany; Italy; Spain; Switzerland; the Netherlands; United Kingdom; Cameroon; Ivory Coast; Morocco; Senegal; South Africa; and Tunisia. Transfers between geographical areas are at cost plus an incremental amount intended to provide a reasonable profit margin to the selling enterprises. 37 15. ALLOWANCE FOR DOUBTFUL ACCOUNTS Changes in the allowance for doubtful accounts are as follows:
1997 1996 1995 ------ ------ ------ Balance, beginning of year....................... $ 904 $1,150 $1,295 Sofitam acquisition adjustments.................. 350 -- -- Charged to operations............................ 192 667 367 Uncollectible accounts written off, less recoveries...................................... (34) (900) (519) Foreign currency translation adjustments......... (20) (13) 7 ------ ------ ------ Balance, end of year........................... $1,392 $ 904 $1,150 ====== ====== ======
16. RETIREMENT PLAN COST The Company has several retirement plans covering most employees, including certain employees in foreign countries. Charges to operations for the cost of the Company's retirement plans, including the RSP, were $2,625, $3,052 and $3,054 in 1997, 1996 and 1995, respectively. 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, at which time the plans' participants became eligible to participate in the RSP. The following table sets forth the aggregate defined benefit plans' funded status and amounts reflected in the accompanying consolidated balance sheets as of November 30, 1997 and 1996:
ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS -------------- ---------------- 1997 1996 1997 1996 ------ ------ ------- ------- Actuarial present value of accumulated plan benefits: Vested................................. $1,470 $1,592 $ 9,624 $10,046 Non-vested............................. 80 89 662 703 ------ ------ ------- ------- Accumulated benefit obligations........ $1,550 $1,681 $10,286 $10,749 ====== ====== ======= ======= Projected benefit obligations............ $1,550 $1,681 $10,286 $10,749 Plan assets at fair value, principally common stocks, bonds, and guaranteed investment contracts, including $1,160 and $555 for 1997 and 1996, respectively, of the Company's common stock................................... 2,149 1,968 9,477 8,424 ------ ------ ------- ------- Plan assets in excess of (less than) projected benefit obligations........... 599 287 (809) (2,325) Unrecognized net loss.................... 238 520 2,262 3,360 Unrecognized net assets at December 1, 1991 and 1990 being recognized over 15 years................................... (202) (231) (89) (112) Adjustment required to recognize minimum liability............................... -- -- (2,173) (3,248) ------ ------ ------- ------- Prepaid pension cost (pension liability) recognized in the consolidated balance sheet................................... $ 635 $ 576 $ (809) $(2,325) ====== ====== ======= =======
38 The net periodic pension expense amounts were based on the following actuarial assumptions:
ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS ------------- ------------- 1997 1996 1997 1996 ------ ------ ------ ------ Discount rate on plan liabilities................ 7.25% 7.00% 7.25% 7.00% Rate of return on plan assets.................... 8.00% 8.00% 8.00% 8.00%
The Company has recorded an additional minimum pension liability for the underfunded plan of $2,173 and $3,248 at November 30, 1997 and 1996, 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 1997, 1996, and 1995 includes the following components:
1997 1996 1995 ------- ------- ------- Interest cost on projected benefit obligations... $ 844 $ 842 $ 857 Return on plan assets............................ (1,739) (1,204) (1,138) Net amortization and deferral.................... 1,056 619 558 ------- ------- ------- Net periodic pension expense..................... $ 161 $ 257 $ 277 ======= ======= =======
Defined Benefit Plans (Foreign)--Certain French Sofitam subsidiaries offer unfunded defined benefit plans that cover all employees and provide lump-sum benefit payments upon retirement unless employment is terminated prior to retirement age. The following table sets forth the actuarial valuation information required to be presented under U.S. GAAP for 1997 and 1996:
1997 1996 ------- ------- Actuarial present value of accumulated plan benefits Vested................................................. -- -- Non-vested............................................. $ 2,178 $ 2,115 ------- ------- Accumulated benefit obligations........................ 2,178 2,115 Effect of future salary increases...................... 1,086 1,187 ======= ======= Projected benefit obligation........................... $ 3,264 $ 3,302 Plan assets at fair value -- -- ------- ------- Funded status.......................................... (3,264) (3,302) Amortization of unrecognized net transition obligation. 692 909 Unrecognized net (gain) loss........................... 324 136 ------- ------- Prepaid pension cost (pension liability)............... $(2,248) $(2,257) ======= ======= The net periodic pension expense amounts were based on the following actuarial assumptions: *Discount rate........................................... 6.00% 6.58% *Salary growth percentage................................ 3.50% 4.00% The net periodic pension cost of the foreign defined benefit plans includes the following components: Service cost............................................. $ 222 $ 207 Interest cost on projected benefit obligation............ 201 219 Amortization............................................. 114 120 ------- ------- Net periodic pension cost.............................. $ 537 $ 546 ======= ======= Pension liability recognized in the balance sheet: Accrued pension........................................ $(2,257) Allowances paid during the year........................ 285 1997 net periodic pension cost......................... (537) ------- Accrued pension........................................ $(2,509) =======
- -------- * In France 39 The information presented above was calculated based on actuarial valuations of the plans as of August 31, 1997 and 1996, which approximates that as of November 30, 1997 and 1996, respectively. The Company's other foreign retirement plans represent an insignificant portion of the Company's total retirement plans. Defined Contribution Plan (U.S.)--The RSP covers substantially all U.S. employees of Tokheim and includes a common and preferred stock ESOP, which provide a retirement contribution of 2% (of salary) for factory and office employees, and 1.5% for all other participants in the plan and a matching contribution of at least two-thirds of the first 6% of employee contributions. The matching contribution can increase to 150% of the first 6% of contributions, depending on the performance of the Company. See Note 11 for a discussion of the Company's accounting for the ESOP pursuant to SOP 76-3. The number of shares of Preferred Stock in the RSP at November 30, 1997 and 1996 was 793,160 and 771,263 respectively, at a cost of $25 per share. The number of common shares in the RSP at November 30, 1997 and 1996 was 137,645 and 25,305, respectively, at an average cost of $18.22 and $17.14 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 allocated to participants' accounts. The Company has guaranteed the RSP loans as described in Note 7. A like amount entitled "Guaranteed Employees' Stock Ownership Plan (RSP) obligation" is recorded as a reduction of shareholders' equity. As the Company makes contributions to the RSP, these contributions, plus the dividends paid on the Company's preferred and common stock held by the RSP, are used to repay the loans. As the principal amounts of the loans are repaid, the "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. Amounts allocated to interest expense were $631, $715, and $832 for 1997, 1996 and 1995 respectively.
1997 1996 1995 ------ ------ ------ Interest expense incurred by the Plan Trust(s) on RSP debt........................................... $ 710 $1,075 $1,265 Company contributions to the RSP.................... 2,464 2,541 2,300 Dividends on preferred stock used for debt service by the RSP......................................... 1,512 1,543 1,580
17. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides defined benefit postretirement health and life insurance benefits to most of its U.S. employees. Covered employees become eligible for these benefits at retirement, after meeting minimum age and service requirements. The Company continues to fund benefits on a pay-as-you- go basis, with some retirees paying a portion of the costs. The accumulated postretirement benefit obligation as of November 30, 1997 and 1996 consisted of unfunded obligations as follows:
1997 1996 ------- ------- Retirees and dependents.................................. $ 6,890 $ 8,220 Fully eligible active plan participants.................. 708 1,088 Other active plan participants........................... 4,588 7,742 ------- ------- Total accumulated postretirement benefit obligation.... 12,186 17,050 Unrecognized net gain (loss)............................. 3,092 (1,531) ------- ------- Accrued postretirement benefit cost...................... 15,278 15,519 Less current portion..................................... (900) (739) ------- ------- $14,378 $14,780 ======= =======
40 Net postretirement benefit cost for 1997, 1996 and 1995 includes the following components:
1997 1996 1995 ------ ------ ------ Service cost........................................ $ 323 $ 603 $ 422 Interest cost on accumulated postretirement benefit obligation......................................... 860 1,108 1,034 Amortization (gain) loss............................ -- -- 25 ------ ------ ------ Net postretirement benefit cost..................... $1,183 $1,711 $1,431 ====== ====== ======
The assumptions used to develop the net postretirement benefit expense and the present value of benefit obligations are as follows:
1997 1996 ----- ----- Discount rate................................................. 7.25% 7.00% Health care cost trend rate for the next year................. 6.50% 9.00%
The health care cost trend rate used to value the accumulated postretirement benefit obligation is assumed to decrease gradually to an ultimate rate of 4.5% in 2005. A 1% increase in this annual trend rate would increase the accumulated postretirement benefit obligation as of November 30, 1997 by approximately $1,500 and the combined service and interest components of the annual net post-retirement health care cost by approximately $180. 18. CONTINGENT LIABILITIES The Company is defending various claims and legal actions which are common to its operations. These legal actions primarily involve claims for damages arising out of the Company's manufacturing operations, including environmental actions, patent infringement, product liability matters and various contract and employment matters. Environmental Matters--The Company's operations and properties are subject to a variety of complex and stringent federal, state, and local laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain materials, substances and wastes, the remediation of contaminated soil and groundwater, and the health and safety of employees. As such, the nature of the Company's operations exposes it to the risk of claims with respect to such matters. There can be no assurance that material costs or liabilities will not be incurred in connection with such claims. Based upon its experience to date, the Company believes that the future cost of compliance with existing environmental laws and regulations, and liability for known environmental claims pursuant to such laws and regulations, will not have a material adverse effect on the Company's business, financial condition or results of operations. However, future events, such as new information, changes in existing laws and regulations or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. The U.S. Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to the release of a "hazardous substance" into the environment. These persons include the owner or operator of the disposal site or sites where the release occurred and companies that disposed of or arranged for the disposal of the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the releases and for damages to natural resources. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury or property damages allegedly caused by the hazardous substances released into the environment. In addition, where the Company has sold properties used in its prior manufacturing operations, it may have contractual obligations to the new owner to remediate environmental contamination on the site arising from prior operations. 41 The Company also generates or has in the past generated waste, including hazardous waste, that is subject to the federal Reserve Conservation and Recovery Act ("RCRA") and comparable state statutes. The U.S. Environmental Protection Agency ("EPA") and various state agencies have promulgated regulations that limit the disposal options for certain hazardous and nonhazardous waste. Such regulations may also require corrective action with respect to contamination of facilities caused by the past handling of industrial waste. The Company has been named as a potentially responsible party ("PRP") under CERCLA or similar state Superfund laws at three sites: the Fort Wayne Reduction Site in Fort Wayne, Indiana; the Moyer Landfill Site in Collegeville, Pennsylvania; and the I. Jones Recycling Site in Fort Wayne, Indiana. The Company believes that the clean ups at these three sites are largely complete and that the Company has paid, or has currently accrued on its balance sheet sufficient funds to pay, any liabilities it may have associated with the clean up of these sites. The Company also owns or leases, and has in the past owned or leased, numerous properties that for many years have been used in industrial and manufacturing operations. Although the Company has in the past utilized operating and disposal practices that were standard for the industry at the time, hazardous substances may have been disposed of or released on or under the properties owned or leased by the Company, or on or under other locations where such wastes have been taken for disposal. The Company currently owns a facility near Atlanta, Georgia that was previously used to refurbish gasoline dispensers. As part of this operation, chlorinated solvents were inadvertently released to the soil and groundwater through the facility septic system. Migration of these releases has caused solvent concentrations above background levels in the groundwater under an adjacent residential property. The Company has completed the cleanup of this release under the oversight of the Georgia Environmental Protection Division of the Georgia Department of Natural Resources, and is currently monitoring the property to ensure that additional cleanup work is not necessary. The Company is also involved in one lawsuit with respect to environmental liabilities under an indemnity provision of a sale agreement concerning the sale of the die casting facility of a former subsidiary to a third party. Negotiations with the other party to settle this matter to avoid litigation expenses ceased when the other party could not show its expenses were a direct result of environmental matters related to the indemnity agreement. Discovery is now being conducted in this matter. Total amounts included in accrued expenses related to environmental matters were $990 and $878 at November 30, 1997 and 1996, respectively. During 1995, the Company settled two actions with the Environmental Protection Agency ("EPA"). One matter the Company settled for $627 as part of a global settlement with other PRPs, and the Company recorded the liability in full at November 30, 1994. The government approved this settlement in late 1997, and the Company paid one-half of the settlement amount in December 1997. The remaining half is due in 12 months. The Company is pursuing recovery of these amounts from its insurance carriers. In the other action, the Company settled as a participating generator as part of a global settlement. The Company provided a letter of credit in the amount of $148 to cover its projected future costs. In 1996, this letter of credit was reduced to $43. This action is still pending with respect to EPA oversight costs and potential natural resource damages owed to the state of Indiana. Settlement negotiations are ongoing with respect to the natural resource damages. The matter regarding EPA oversight costs is on appeal to the U.S. Court of Appeals for the 7th Circuit. Management believes that the letter of credit of $43 is adequate to cover any future cost to the Company relating to this matter. Product Liability and Other Matters--The Company is subject to various other legal actions arising out of the conduct of its business, including actions relating to product liability, and claims for damages alleging violations of federal, state, or local statutes or ordinances dealing with civil rights, equal pay, and sex discrimination. Total amounts included in accrued expenses related to these actions were $1,330 and $382 at November 30, 1997 and 1996, respectively. The Company is also seeking to recover in excess of $1.0 million from its former outside legal firm for malpractice in handling a litigation matter for the Company. In addition the Company appealed a jury verdict of $350 with respect to an equal pay act and sexual discrimination claim to the 7th U.S. Court of Appeals. The Company is awaiting a decision in this matter. In addition, during 1997, the 42 Company settled various product liabilities, patent infringement and other matters with aggregate settlement charges of approximately $150. The Company was a defendant in litigation filed by Gilbarco, Inc. ("Gilbarco"), which alleged infringement of patents on its vapor recovery system and certain vapor recovery improvements, blender, printed receipt severing and filter housing. Gilbarco also alleged violation of the North Carolina Fair Practice Claims Act. Gilbarco sought injunctions and treble unspecified damages. The Company, in addition to asserting other defenses, counterclaimed with an antitrust claim. The lawsuit was filed on August 3, 1995 and took place in federal court in the Middle District of North Carolina. The parties have signed a settlement agreement to license the disputed technology (the "Licensing Agreement"), effective as of December 1, 1997. The Licensing Agreement settles all outstanding issues related to the litigation, and on February 13, 1998, the court entered a consent judgment regarding the settlement. Under the License Agreement, the Company will pay a $3 million fixed royalty fee, payable in 12 quarterly installments, plus earned royalties for the use of the licensed technology. These royalties are estimated to total approximately $1.1 million annually. In the opinion of the Company, amounts accrued for awards or assessments in connection with these matters at this time are adequate, and the ultimate resolution of environmental, product liability, and other legal matters will not have a material effect on the Company's consolidated financial position, results of operations, or cash flows. The Company is not able to estimate accurately the additional loss or range of loss that is reasonably possible, in addition to the amounts accrued. The Company reassesses these matters as new facts and cases are brought to management's attention. 19. SUBSEQUENT EVENTS In December 1997, the Company acquired MSI, a Colorado corporation. MSI develops and distributes retail automation systems (including POS software), primarily for the convenience store stations, petroleum dispensing and fast food service industries. The Company paid the MSI shareholders an initial amount of $12.0 million. The Company is also obligated to make contingent payments of up to $13.2 million over the next 3 years based upon MSI's performance. The $13.2 million consists of $8.0 million of additional purchase price, $2.6 million related to a non-compete agreement, and $2.6 million of additional employee compensation. The $12.0 million amount was funded through the Company's existing Bank Credit Facility. The Company is in the process of valuing MSI's assets, which consist principally of in-process research and development, software and other intangibles. The Company estimates that it will incur a charge of approximately $5.9 million in the first quarter of 1998 for the write off of in-process research and development costs. 20. SHAREHOLDER RIGHTS PLAN On January 22, 1997, the Board of Directors of the Company approved the extension of the benefits afforded by the Company's then-existing rights plan by adopting a new shareholder rights plan. Pursuant to the new Rights Agreement, dated as of January 22, 1997, by and between the Company and Harris Bank and Trust Company, as Rights Agent, one Right was issued for each outstanding share of Common Stock upon the expiration of the Company's then- existing rights (February 9, 1997). Each of the new Rights entitle the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Preferred Stock at a price of $44.00 per one-thousandth of a share. The Rights will not become exercisable, however, unless and until, among other things, any person acquires 15% or more of the outstanding Common Stock or the Board of Directors of the Company determines that a person is an Adverse Person. A person who beneficially owns 10% or more of the outstanding Common Stock will be declared an Adverse Person if the Board of Directors determines (a) that such beneficial ownership is intended to cause the Company to repurchase the Common Stock beneficially owned by such person or to pressure the Company to take action or enter into transactions intended to provide such person with short-term financial gain that are not in the best long-term interests of the Company and its shareholders or (b) such beneficial ownership is causing or reasonably likely to cause a material adverse impact on the Company to the detriment of the Company's shareholders, employees, suppliers, customers or community. If a person acquires 15% or more of the outstanding Common Stock or is declared an Adverse Person (subject to certain conditions and exceptions more fully described in the Rights Agreement), each Right will entitle the holder (other than the person who acquired 15% or more of the outstanding Common Stock or is declared an Adverse Person) to purchase Common Stock having a market value equal to twice the exercise price of a Right. The new Rights are redeemable under certain circumstances at $0.01 per Right and will expire, unless earlier redeemed, on February 9, 2007. 43 INDEPENDENT ACCOUNTANTS' REPORT To the Shareholders and Directors, Tokheim Corporation: We have audited the accompanying consolidated balance sheet of Tokheim Corporation and Subsidiaries as of November 30, 1997 and 1996, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended November 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended November 30, 1997, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Fort Wayne, Indiana January 23, 1998 44 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS The information concerning directors required under this item is incorporated herein by reference from the material contained under the caption "Election of Directors" in the Company's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. The information concerning delinquent filers pursuant to Item 405 of Regulation S-K is incorporated herein by reference from the material contained under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" under the caption "Stock Ownership" in the Company's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. EXECUTIVE OFFICERS The following table sets forth certain information and ages as of February 12, 1998 regarding each of Tokheim's executive officers:
NAME AGE POSITION - ---- --- -------- Douglas K. Pinner..... 57 Chairman of the Board, President and Chief Executive Officer John A. Negovetich.... 52 Executive Vice President, Finance and Administration Norman L. Roelke...... 48 Vice President, Secretary and General Counsel Jacques St. Denis..... 40 Executive Vice President, Operations Scott A. Swogger...... 45 President, Tokheim U.S.
Douglas K. Pinner has been President and Chief Executive Officer of Tokheim since 1992, a Director since 1993 and Chairman of the Board since 1996. Previously, he was President of Slater Steels Fort Wayne Specialty Alloys, a wholly-owned subsidiary of Slater Industrial of Toronto, which manufactures stainless steel bar. John A. Negovetich has been Executive Vice President, Finance and Administration since 1998 and Chief Financial Officer since 1995. From 1996 to 1998, Mr. Negovetich was President, Tokheim North America. From 1993 to 1995, Mr. Negovetich was Vice President, Finance, Chief Financial Officer and a member of the Board of Ardco, Inc. From 1987 to 1992, he served as Vice President and Chief Financial Officer of Hawker-Siddeley Investments, Inc. Norman L. Roelke has been Vice President and General Counsel of Tokheim since 1994 and Secretary since 1995. From 1987 to 1994, Mr. Roelke served as the Company's Corporate Counsel. Jacques St. Denis has been Executive Vice President, Operations since 1998. From 1996 to 1998, he served as President and Director General of Tokheim- Sofitam S.A. (the Company subsidiary that was formerly Sofitam). During 1996, he served as Vice President, Tokheim International. From 1995 to 1996, Mr. St. Denis was Director of Export and International Operations for the Company. From 1994 to 1995, he was Tokheim's Director of Marketing, and from 1993 to 1994, he was Director of Worldwide Services. Previously, Mr. St. Denis served as Managing Director of European Operations, and National Sales and Marketing Director, USA, for Babson Brothers Company. 45 Scott A. Swogger has been President, Tokheim U.S., since 1997. From 1995 to 1997, he served as Vice President, Quality Systems. From 1994 to 1995, he was Tokheim's Director of Quality Assurance. Previously, he served as the Company's Senior Manager of Quality Assurance. ITEM 11. EXECUTIVE COMPENSATION. The information required under this item is incorporated herein by reference from the material contained under the caption "Executive Compensation" in the Company's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required under this item is incorporated herein by reference from the material contained under the caption "Stock Ownership" in the Company's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required under this item is incorporated herein by reference from the material contained under the caption "Relationship with Affiliates" in the Company's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. 46 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. 1. FINANCIAL STATEMENTS Included as outlined in Item 8 of Part II of this Report: Consolidated Statement of Earnings for each of the three years in the period ended November 30, 1997................................. Page 15 Consolidated Statement of Cash Flows for each of the three years in the period ended November 30, 1997................................. Page 16 Consolidated Balance Sheet as of November 30, 1997, and 1996....... Page 17 Consolidated Statement of Shareholders' Equity..................... Page 19 Notes to Consolidated Financial Statements......................... Page 20 Independent Accountants' Report.................................... Page 44 2. SUPPLEMENTAL DATA AND FINANCIAL STATEMENT SCHEDULES: Included as outlined in Item 8 of Part II of this Report: Quarterly Financial Information (unaudited) in Note 12 to the Consolidated Financial Statements................................. Page 34
47 3(a). EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2 Stock Purchase Agreement, dated as of December 29, 1997 between the Registrant and Arthur S. ("Rusty") Elston, Ronald H. Elston, Eric E. Burwell and Curt E. Burwell (in- corporated by reference to the Registrant's Current Report on Form 8-K, dated December 31, 1997). 3.1 Restated Articles of Incorporation of the Registrant, as amended, as filed with the Indiana Secretary of State on February 5, 1997 (incorporated by reference to the Regis- trant's Annual Report on Form 10-K/A for the year ended November 30, 1996). 3.2 Bylaws of the Registrant, as restated on July 12, 1995 (incorporated by reference to the Registrant's Annual Re- port on Form 10-K/A, for the year ended November 30, 1995, filed November 20, 1996). 4.1 Rights Agreement, dated as of January 22, 1997, between the Registrant and Harris Trust and Savings Bank, as Rights Agent (incorporated by reference to the Regis- trant's Current Report on Form 8-K, filed February 23, 1997). 4.2 Indenture, dated as of August 23, 1996, between the Regis- trant and Harris Trust and Savings Bank, as Trustee (in- corporated by reference to the Registrant's Current Report on Form 8-K, filed September 23, 1996). 4.3 Credit Agreement, dated as of September 3, 1996, among the Registrant, certain subsidiaries of the Registrant (the "Borrowing Subsidiaries"), certain banks (the "Lenders") and NBD Bank, N.A. ("Agent") (the "Credit Agreement") (in- corporated by reference to the Registrant's Current Report on Form 8-K, filed September 6, 1996). 4.4 Amendment No. 1 to Credit Agreement, dated as of May 15, 1997. 4.5 Amendment No. 2 to Credit Agreement, dated as of June 30, 1997. 4.6 Amendment No. 3 to Credit Agreement, dated as of September 25, 1997. 4.7 Amendment No. 4 to Credit Agreement, dated as of December 29, 1997. 10.1 Tokheim Corporation 1992 Stock Incentive Plan, established December 15, 1992 (incorporated by reference to the Regis- trant's Registration Statement on Form S-8, File No. 33- 52167, dated February 4, 1994). 10.2 Retirement Savings Plan for Employees of Tokheim Corpora- tion and Subsidiaries (incorporated by reference to Amend- ment No. 1 to the Registrant's Registration Statement on Form S-8, File No. 33-29710, dated August 1, 1989). 10.3 Tokheim Corporation 1996 Key Management Incentive Bonus Plan (incorporated by reference to the Registrant's Report on Form 10-Q/A, for the quarter ended February 29, 1996, filed November 20, 1996). 10.4 Employment Agreement, dated December 10, 1997, between the Registrant and Douglas K. Pinner. 10.5 Employment Agreement, dated December 23, 1997, between the Registrant and John A. Negovetich. 10.6 Employment Agreement, dated December 23, 1997, between the Registrant and Jacques St- Denis. 10.7 Employment Agreement, dated December 23, 1997, between the Registrant and Norman L. Roelke. 10.8 Employment Agreement, dated December 23, 1997, between the Registrant and Scott A. Swogger.
48
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.9 Technology License Agreement, effective as of December 1, 1997, between Registrant and Gibarco, Inc. 10.10 Tokheim Corporation 1997 Incentive Plan. 10.11 Employment Agreement, dated December 31, 1997, between Management Solutions, Inc. and Arthur S. Elston. 11 Statement Regarding 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 On January 15, 1998, the Company filed a Current Report on Form 8-K to report the Company's acquisition of MSI. The required financial statements and interim pro form information, which were unavailable at that time, were filed on February 13, 1998 on a Form 8-K/A. 49 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. Tokheim Corporation /s/ Douglas K. Pinner By: _________________________________ Douglas K. Pinner Chairman of the Board, President, Chief Executive Officer and Director February 9, 1998 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Douglas K. Pinner Chairman of the Board, February 9, 1998 ____________________________________ President and Chief Douglas K. Pinner Executive Officer and Director /s/ John A. Negovetich Executive Vice President, February 9, 1998 ____________________________________ Finance and Administration John A. Negovetich /s/ Gerald H. Frieling, Jr. Vice Chairman of the Board February 9, 1998 ____________________________________ and Director Gerald H. Frieling, Jr. /s/ Walter S. Ainsworth Director February 9, 1998 ____________________________________ Walter S. Ainsworth /s/ Robert M. Akin, III Director February 9, 1998 ____________________________________ Robert M. Akin, III /s/ James K. Baker Director February 9, 1998 ____________________________________ James K. Baker /s/ B. D. Cooper Director February 9, 1998 ____________________________________ B. D. Cooper /s/ Richard W. Hansen Director February 9, 1998 ____________________________________ Richard W. Hansen /s/ Dr. Winfred M. Phillips Director February 9, 1998 ____________________________________ Dr. Winfred M. Phillips /s/ Iam M. Rolland Director February 9, 1998 ____________________________________ Ian M. Rolland
50 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2 Stock Purchase Agreement, dated as of December 29, 1997 between the Registrant and Arthur S. ("Rusty") Elston, Ronald H. Elston, Eric E. Burwell and Curt E. Burwell (in- corporated by reference to the Registrant's Current Report on Form 8-K, dated December 31, 1997). 3.1 Restated Articles of Incorporation of the Registrant, as amended, as filed with the Indiana Secretary of State on February 5, 1997 (incorporated by reference to the Regis- trant's Annual Report on Form 10-K/A for the year ended November 30, 1996). 3.2 Bylaws of the Registrant, as restated on July 12, 1995 (incorporated by reference to the Registrant's Annual Re- port on Form 10-K/A, for the year ended November 30, 1995, filed November 20, 1996). 4.1 Rights Agreement, dated as of January 22, 1997, between the Registrant and Harris Trust and Savings Bank, as Rights Agent (incorporated by reference to the Regis- trant's Current Report on Form 8-K, filed February 23, 1997). 4.2 Indenture, dated as of August 23, 1996, between the Regis- trant and Harris Trust and Savings Bank, as Trustee (in- corporated by reference to the Registrant's Current Report on Form 8-K, filed September 23, 1996). 4.3 Credit Agreement, dated as of September 3, 1996, among the Registrant, certain subsidiaries of the Registrant (the "Borrowing Subsidiaries"), certain banks (the "Lenders") and NBD Bank, N.A. ("Agent") (the "Credit Agreement") (in- corporated by reference to the Registrant's Current Report on Form 8-K, filed September 6, 1996). 4.4 Amendment No. 1 to Credit Agreement, dated as of May 15, 1997. 4.5 Amendment No. 2 to Credit Agreement, dated as of June 30, 1997. 4.6 Amendment No. 3 to Credit Agreement, dated as of September 25, 1997. 4.7 Amendment No. 4 to Credit Agreement, dated as of December 29, 1997. 10.1 Tokheim Corporation 1992 Stock Incentive Plan, established December 15, 1992 (incorporated by reference to the Regis- trant's Registration Statement on Form S-8, File No. 33- 52167, dated February 4, 1994). 10.2 Retirement Savings Plan for Employees of Tokheim Corpora- tion and Subsidiaries (incorporated by reference to Amend- ment No. 1 to the Registrant's Registration Statement on Form S-8, File No. 33-29710, dated August 1, 1989). 10.3 Tokheim Corporation 1996 Key Management Incentive Bonus Plan (incorporated by reference to the Registrant's Report on Form 10-Q/A, for the quarter ended February 29, 1996, filed November 20, 1996). 10.4 Employment Agreement, dated December 10, 1997, between the Registrant and Douglas K. Pinner. 10.5 Employment Agreement, dated December 23, 1997, between the Registrant and John A. Negovetich. 10.6 Employment Agreement, dated December 23, 1997, between the Registrant and Jacques St- Denis. 10.7 Employment Agreement, dated December 23, 1997, between the Registrant and Norman L. Roelke. 10.8 Employment Agreement, dated December 23, 1997, between the Registrant and Scott A. Swogger.
EXHIBIT NUMBER DESCRIPTION ------- ----------- --- 10.9 Technology License Agreement, effective as of December 1, 1997, between Registrant and Gilbarco, Inc. 10.10 Tokheim Corporation 1997 Incentive Plan. 10.11 Employment Agreement, dated December 31, 1997, between Management Solutions, Inc. and Arthur S. Elston. 11 Statement Regarding 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-4.4 2 AMEND. NO. 1 TO CREDIT AGMT. EXHIBIT 4.4 AMENDMENT NO. 1 TO CREDIT AGREEMENT Dated as of May 15, 1997 THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT ("Amendment") is made as of May 15, 1997 by and among TOKHEIM CORPORATION, an Indiana corporation (the "Company"), certain of the Company's Subsidiaries listed on the signature pages hereof (the "Other Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD BANK, N.A., in its individual capacity as a Bank and as agent (the "Agent") on behalf of the Lenders under that certain Credit Agreement dated as of September 3, 1996 by and among the Company, the Other Borrowers, the Lenders and the Agent (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement. WITNESSETH WHEREAS, the Company, the Other Borrower, the Lenders and the Agent are parties to the Credit Agreement; WHEREAS, the Company has requested that the Lenders amend the Credit Agreement in certain respects; and WHEREAS, the Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Other Borrowers, the Lenders and the Agent have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of May 15, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 Article of the Credit Agreement is hereby amended by amending the definition of "EBITDA" to delete the reference to "the first two fiscal quarters" in clause (x) and substitute therefor "the first five fiscal quarters". 1.2 Section 6.9 of the Credit Agreement is hereby amended by adding the following language at the end thereof. "(ix) Sales or discounting of "traits" (within the meaning of French law) or similar post-dated checks without recourse in the ordinary course of business." 2. Conditions of Effectiveness. This Amendment shall become effective and be deemed effective as of May 15, 1997, if, and only if, the Agent shall have received each of the following: (a) duly executed originals of this Amendment from the Company, the Other Borrowers and the Required Lenders; and (b) such other documents, instruments and agreements as the Agent may reasonably request. 3. Representations and Warranties of the Company. The Company and the Other Borrowers hereby represent and warrant as follows: (a) This amendment and the Credit Agreements as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Company and the Other Borrower and are enforceable against the Company and the Other Borrowers in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Company and the Other Borrowers hereby reaffirm all covenants, representations and warranties made in the Credit Agreement, to the extent the same are not amended hereby, and agree that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. 4. Reference to the Effect on the Credit Agreement (a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," or words of like import shall mean and be a reference to the Credit Agreement "herein" dated as of September 3, 1996, as amended previously and as amended hereby. (b) Except as specifically amended above, the Credit Agreement dated as of September 3, 1996 and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agent or any of the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Costs and Expenses. The Company agrees to pay all reasonable costs, fees and out-of-pocket expenses (including attorneys' fees and expenses charged to the Agent) incurred by the Agent in connection with the preparation, execution and enforcement of this Amendment. 6. Governing Law. This amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of law provisions) of the State of Illinois. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 2 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. TOKHEIM CORPORATION By: /s/ John Tomlinson -------------------------------- Title: CFO ----------------------------- SOGEN S.A., as a Borrower By: /s/ John A. Negovitch -------------------------------- Title: Director ----------------------------- SOFITAM INTERNATIONAL S.A., as a Borrower By: /s/ John A. Negovitch -------------------------------- Title: Director ----------------------------- SOFITAM EQUIPEMENT S.A., as a Borrower By: /s/ John A. Negovitch -------------------------------- Title: Director ----------------------------- NBD BANK, N.A., as a Lender, an Issuing Lender, a Swing Line Lender and as Agent By: /s/ Robert Minardo -------------------------------- Title: Vice President ----------------------------- THE FIRST NATIONAL BANK OF CHICAGO, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: /s/ A. A. Stevenson -------------------------------- Title: Vice President ----------------------------- 3 CREDIT LYONNAIS, CHICAGO BRANCH, as a Lender By: /s/ Matthew Kirat -------------------------------- Title: Vice President ----------------------------- HARRIS TRUST AND SAVINGS BANK, as a Lender By: /s/ Peter J. Dancy -------------------------------- Title: Vice President ----------------------------- BANK OF MONTREAL, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: /s/ Colin Ferguson -------------------------------- Title: Director ----------------------------- BANK OF AMERICA NT & SA (formerly Bank of America Illinois), as a Lender By: /s/ June Courtney -------------------------------- Title: Vice President ----------------------------- BANK OF AMERICA NT & SA, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: /s/ Jean-Paul Monier -------------------------------- Title: Vice President ----------------------------- SOCIETE GENERALE, as a Lender By: /s/ C. Steven Coffman -------------------------------- Title: Assistant Treasurer ----------------------------- 4 EX-4.5 3 AMEND. NO. 2 TO CREDIT AGMT. Exhibit 4.5 AMENDMENT NO. 2 TO CREDIT AGREEMENT Dated as of June 30, 1997 THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT ("Amendment") is made as of June 30, 1997 by and among TOKHEIM CORPORATION, an Indiana corporation (the "Company"), certain of the Company's Subsidiaries listed on the signature pages hereof (the "Other Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD BANK, N.A., in its individual capacity as a Bank and as agent (the "Agent") on behalf of the Lenders under that certain Credit Agreement dated as of September 3, 1996 by and among the Company, the Other Borrowers, the Lenders and the Agent (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement. WITNESSETH WHEREAS, the Company, the Other Borrower, the Lenders and the Agent are parties to the Credit Agreement; WHEREAS, the Company has requested that the Lenders amend the Credit Agreement in certain respects; and WHEREAS, the Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Other Borrowers, the Lenders and the Agent have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of June 30, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1. Article I of the Credit Agreement is hereby amended by amending the definition of "Eligible Inventory" to insert "or Tokheim and Gasboy of Canada Limited or Tokheim Limited" immediately after "the Borrowers or Domestic Guarantors" in each of the three places in which it appears. 1.2 Article I of the Credit Agreement is hereby amended by amending the definition of "Eligible Receivables" to insert "or Tokheim and Gasboy of Canada Limited or Tokheim Limited" immediately after "Domestic Guarantors" in each of the three places in which it appears and immediately after the phrase "Domestic Guarantor" in the one place it appears in such definition. 1.3 Article I of the Credit Agreement is hereby amended by amending the definition of "French Borrowing Base" to delete subsection (ii) now contained therein and to substitute therefor the following: "(ii) eighty-five percent (85%) of the Gross Amount of Eligible Receivables owed to Tokheim and Gasboy of Canada Limited or Tokheim Limited and subject to security documents acceptable to the Agent plus (iii) the lesser of (A) $6,000,000 and (B) fifty percent (50%) of the Gross Amount of Eligible Inventory owned by either Tokheim and Gasboy of Canada Limited or Tokheim Limited and subject to security documents acceptable to the Agent." 1.4 Article I of the Credit Agreement is hereby amended by amending the definition of "Gross Amount of Eligible Inventory" to delete the term "French Borrowing Subsidiaries" now contained therein and to substitute therefor the following: "Tokheim and Gasboy of Canada Limited and Tokheim Limited". 1.5 Article I of the Credit Agreement is hereby amended by amending the definition of "Gross Amount of Eligible Receivables" to insert "or Tokheim and Gasboy of Canada Limited or Tokheim Limited" immediately after "French Borrowing Subsidiaries" in subsection (b) thereof. 1.6 Section 6.30 of the Credit Agreement is hereby amended by adding the following at the end thereof: "except that the Company may purchase Senior Subordinated Notes in the original principal amount of up to $15,000,000 provided the aggregate amount paid for such Senior Subordinated Notes does not exceed $18,000,000." 2. Conditions of Effectiveness. This Amendment shall become effective and be deemed effective as of June 30, 1997, if, and only if, the Agent shall have received each of the following: (a) duly executed originals of this Amendment from the Company, the Other Borrowers and the Required Lenders; and (b) such other documents, instruments and agreements as the Agent may reasonably request. 3. Representations and Warranties of the Company. The Company and the Other Borrowers hereby represent and warrant as follows: (a) This Amendment and the Credit Agreement as previously executed and amended and as amended hereby, constitute legal, valid and binding obligations of the Company and the Other Borrowers and are enforceable against the Company and the Other Borrowers in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Company and the Other Borrowers hereby reaffirm all covenants, representations and warranties made in the Credit Agreement, to the extent the same are not amended hereby, and agree that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. 4. Reference to the Effect on the Credit Agreement. 2 (a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Credit Agreement dated as of September 3, 1996, as amended previously and as amended hereby. (b) Except as specifically amended above, the Credit Agreement dated as of September 3, 1996 and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agent or any of the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Costs and Expenses. The Company agrees to pay all reasonable costs, fees and out-of-pocket expenses (including attorneys' fees and expenses charged to the Agent) incurred by the Agent in connection with the preparation, execution and enforcement of this Amendment. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of law provisions) of the State of Illinois. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 3 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. TOKHEIM CORPORATION By: /s/ John Tomlinson ------------------------------ Title: Chief Financial Officer --------------------------- SOGEN S.A., as a Borrower By: /s/ John A. Negovitch ------------------------------ Title: Director --------------------------- SOFITAM INTERNATIONAL S.A., as a Borrower By: /s/ John A. Negovitch ------------------------------ Title: Director --------------------------- SOFITAM EQUIPEMENT S.A., as a Borrower By: /s/ John A. Negovitch ------------------------------ Title: Director --------------------------- NBD BANK, N.A., as a Lender, an Issuing Lender, a Swing Line Lender and as Agent By: /s/ Robert Minardo ------------------------------ Title: Vice President --------------------------- THE FIRST NATIONAL BANK OF CHICAGO, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: /s/ A. A. Stevenson ------------------------------ Title: Vice President --------------------------- 4 CREDIT LYONNAIS, CHICAGO BRANCH, as a Lender By: /s/ Mathew Kirat ------------------------------ Title: Vice President --------------------------- HARRIS TRUST AND SAVINGS BANK, as a Lender By: /s/ Jeffrey C. Nicholson ------------------------------ Title: Vice President --------------------------- BANK OF MONTREAL, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: ------------------------------ Title: --------------------------- BANK OF AMERICA ILLINOIS, as a Lender By: /s/ June Courtney ------------------------------ Title: Vice President --------------------------- BANK OF AMERICA NT & SA, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: /s/ Jean-Paul Monier ------------------------------ Title: Vice President --------------------------- SOCIETE GENERALE, as a LenderBy: By: /s/ C. Steve Coffman ------------------------------ Title: Assistant Treasurer --------------------------- 5 EX-4.6 4 AMEND. NO. 3 TO CREDIT AGMT. Exhibit 4.6 AMENDMENT NO. 3 TO CREDIT AGREEMENT Dated as of September 25, 1997 THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT ("Amendment") is made as of September 25, 1997 by and among TOKHEIM CORPORATION, an Indiana corporation (the "Company"), certain of the Company's Subsidiaries listed on the signature pages hereof (the "Other Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD BANK, N.A., in its individual capacity as a Bank and as agent (the "Agent") on behalf of the Lenders under that certain Credit Agreement dated as of September 3, 1996 by and among the Company, the Other Borrowers, the Lenders and the Agent (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement. WITNESSETH WHEREAS, the Company, the Other Borrowers, the Lenders and the Agent are parties to the Credit Agreement; WHEREAS, the Company has requested that the Lenders amend the Credit Agreement in certain respects; and WHEREAS, the Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Other Borrowers, the Lenders and the Agent have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of September 25, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1. Section 6.9 of the Credit Agreement is hereby amended by adding the following new subsection (ix) at the end thereof: "(ix) the sale of the stock of the Subsidiary of Sofitam Equipement to which Sofitam Equipement contributed its Bulk Meter business." 1.2 Section 6.17 of the Credit Agreement is hereby amended by adding the following new subsection (vii) at the end thereof: "(vii) acquisitions which satisfy all of the following conditions: (a) all acquisitions permitted by this subsection 6.17 (vii) shall require the Company or any of its Subsidiary to pay (or assume Indebtedness) an aggregate amount for all such acquisitions not in excess of $5,000,000 or the Equivalent Amount thereof; (b) no Default or Unmatured Default shall have occurred and be continuing at the time of the closing of any such acquisition or would result therefrom; (c) the business being acquired is substantially similar, related or incidental to the business of the Company and its Subsidiaries; (d) the acquisition is consummated pursuant to a negotiated acquisition agreement on a non-hostile basis; (e) any additional Collateral Documents considered appropriate by the Agent are executed by the applicable Person and, if appropriate, filed; (f) prior to any such acquisition, the Company shall deliver to the Agent (i) a certificate demonstrating to the satisfaction of the Agent that after giving effect to the acquisition on a pro forma basis, the Company and its Subsidiaries will be in compliance with the financial covenants in the Credit Agreement and (ii) such other information as the Agent shall reasonably request." 2. Conditions of Effectiveness. This Amendment shall become effective and be deemed effective as of September 25, 1997, if, and only if, the Agent shall have received each of the following: (a) duly executed originals of this Amendment from the Company, the Other Borrowers and the Required Lenders; (b) payment of an amendment fee of $5,000 to each of the Lenders (other than The First National Bank of Chicago, London Branch, Bank of Montreal, London Branch and Bank of America NT & SA, London Branch) that executes this amendment and delivers its signature page to the Agent on or before September 25, 1997; and (c) such other documents, instruments and agreements as the Agent may reasonably request. 3. Representations and Warranties of the Company. The Company and the Other Borrowers hereby represent and warrant as follows: (a) This Amendment and the Credit Agreement as previously executed and amended and as amended hereby, constitute legal, valid and binding obligations of the Company and the Other Borrowers and are enforceable against the Company and the Other Borrowers in accordance with their terms. 2 (b) Upon the effectiveness of this Amendment, the Company and the Other Borrowers hereby reaffirm all covenants, representations and warranties made in the Credit Agreement, to the extent the same are not amended hereby, and agree that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. 4. Reference to the Effect on the Credit Agreement. (a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Credit Agreement dated as of September 3, 1996, as amended previously and as amended hereby. (b) Except as specifically amended above, the Credit Agreement dated as of September 3, 1996 and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agent or any of the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Costs and Expenses. The Company agrees to pay all reasonable costs, fees and out-of-pocket expenses (including attorneys' fees and expenses charged to the Agent) incurred by the Agent in connection with the preparation, execution and enforcement of this Amendment. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of law provisions) of the State of Illinois. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 3 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. TOKHEIM CORPORATION By: /s/ John A. Negovetich -------------------------------- Title: President & CFO ----------------------------- SOGEN S.A., as a Borrower By: /s/ John A. Negovetich -------------------------------- Title: Director ----------------------------- SOFITAM INTERNATIONAL S.A., as a Borrower By: /s/ John A. Negovetich -------------------------------- Title: Director ----------------------------- SOFITAM EQUIPEMENT S.A., as a Borrower By: /s/ John A. Negovetich -------------------------------- Title: Director ----------------------------- 4 CREDIT LYONNAIS, CHICAGO BRANCH, as a Lender By: /s/ Sandra E. Horwitz -------------------------------- Title: Senior Vice President ----------------------------- HARRIS TRUST AND SAVINGS BANK, as a Lender By: /s/ Peter Krawchuk -------------------------------- Title: Vice President ------------------------------ BANK OF MONTREAL, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: /s/ Colin Ferguson -------------------------------- Title: Director ----------------------------- BANK OF AMERICA NT & SA (formerly Bank of America Illinois), as a Lender By: /s/ Jean-Paul Monier -------------------------------- Title: Vice President ----------------------------- 5 EX-4.7 5 AMEND. NO. 4 TO CREDIT AGMT. Exhibit 4.7 AMENDMENT NO. 4 TO CREDIT AGREEMENT Dated as of December 29, 1997 THIS AMENDMENT NO. 4 TO CREDIT AGREEMENT ("Amendment") is made as of December 29, 1997 by and among TOKHEIM CORPORATION, an Indiana corporation (the "Company"), certain of the Company's Subsidiaries listed on the signature pages hereof (the "Other Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD BANK, N.A., in its individual capacity as a Bank and as agent (the "Agent") on behalf of the Lenders under that certain Credit Agreement dated as of September 3, 1996 by and among the Company, the Other Borrowers, the Lenders and the Agent (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement. WITNESSETH WHEREAS, the Company, the Other Borrowers, the Lenders and the Agent are parties to the Credit Agreement; WHEREAS, the Company has requested that the Lenders amend the Credit Agreement in certain respects; and WHEREAS, the Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Other Borrowers, the Lenders and the Agent have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of December 29, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 Section 2.1.1(iii) of the Credit Agreement is hereby amended by adding the following language at the end of the first sentence thereof: "plus at any time between December 29, 1997 and June 30, 1998 $12,000,000 to the extent that the French Borrowing Base exceeds the aggregate amount of all outstanding Loans and Swing Loans made to the French Borrowing Subsidiaries together with all outstanding L/C Obligations to the French Borrowing Subsidiaries (calculated without duplication) by not less than $12,000,000 or the Dollar Amount thereof." 1.2 Section 6.14 of the Credit Agreement is hereby amended by adding the following at the end thereof: "Promptly after the Company's acquisition thereof, Management Solutions, Inc. will guaranty the Obligations pursuant to a guaranty substantially identical to those previously executed by the Guarantor Subsidiaries." 1.3 Section 6.17 of the Credit Agreement is hereby amended by adding the following new subsection (viii) at the end thereof: "(viii) the acquisition of Management Solutions, Inc." 2. Conditions of Effectiveness. This Amendment shall become effective and be deemed effective as of December 29, 1997, if, and only if, the Agent shall have received each of the following: (a) duly executed originals of this Amendment from the Company, the Other Borrowers and the Required Lenders; (b) payment of the fee as provided in the Agent's letter to the Lenders dated December 19, 1997; and (c) such other documents, instruments and agreements as the Agent may reasonably request. 3. Representations and Warranties of the Company. The Company and the Other Borrowers hereby represent and warrant as follows: (a) This Amendment and the Credit Agreement as previously executed and amended and as amended hereby, constitute legal, valid and binding obligations of the Company and the Other Borrowers and are enforceable against the Company and the Other Borrowers in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Company and the Other Borrowers hereby reaffirm all covenants, representations and warranties made in the Credit Agreement, to the extent the same are not amended hereby, and agree that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. 4. Reference to the Effect on the Credit Agreement. (a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Credit Agreement dated as of September 3, 1996, as amended previously and as amended hereby. (b) Except as specifically amended above, the Credit Agreement dated as of September 3, 1996 and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agent or any of 2 the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Costs and Expenses. The Company agrees to pay all reasonable costs, fees and out-of-pocket expenses (including attorneys' fees and expenses charged to the Agent) incurred by the Agent in connection with the preparation, execution and enforcement of this Amendment. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of law provisions) of the State of Illinois. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. TOKHEIM CORPORATION By: /s/ William D. Shank ----------------------------------- Title: Vice President -------------------------------- SOGEN S.A., as a Borrower By: /s/ John A. Negovitch ----------------------------------- Title: Director -------------------------------- SOFITAM INTERNATIONAL S.A., as a Borrower By: /s/ John A. Negovitch ----------------------------------- Title: Director -------------------------------- SOFITAM EQUIPEMENT S.A., as a Borrower By: /s/ John A. Negovitch ----------------------------------- Title: Director -------------------------------- 3 NBD BANK, N.A., as a Lender, an Issuing Lender, a Swing Line Lender and as Agent By: /s/ John Otteson ----------------------------------- Title: Vice President -------------------------------- THE FIRST NATIONAL BANK OF CHICAGO, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: ----------------------------------- Title: -------------------------------- CREDIT LYONNAIS, CHICAGO BRANCH, as a Lender By: /s/ Sandra E. Horwitz ----------------------------------- Title: Senior Vice President -------------------------------- HARRIS TRUST AND SAVINGS BANK, as a Lender By: /s/ Peter Krawchuk ----------------------------------- Title: Vice President -------------------------------- BANK OF MONTREAL, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: ----------------------------------- Title: -------------------------------- BANK OF AMERICA NT & SA (formerly Bank of America Illinois) as a Lender By: /s/ Paul A. O'Mara ----------------------------------- Title: Senior Vice President -------------------------------- BANK OF AMERICA NT & SA, LONDON BRANCH, as a Lender with respect to the French Borrowing Subsidiaries By: /s/ P. Marechal ----------------------------------- Title: Vice President -------------------------------- SOCIETE GENERALE, as a Lender By: /s/ ----------------------------------- Title: Vice President -------------------------------- 4 EX-10.4 6 EMPLOYMENT AGREEMENT, DOUGLAS K. PINNER [LOGO] EXHIBIT 10.4 EMPLOYMENT AGREEMENT for CORPORATE OFFICERS THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of this 10TH day of DECEMBER, 1997, by and between Tokheim Corporation, an Indiana Corporation ("Company") and DOUGLAS K. PINNER ("Employee"). RECITALS A. Company acknowledges and recognizes the value of Employee's services and deems it necessary and desirable to retain Employee's full-time services. B. Employee and Company desire to embody the terms and conditions of Employee's employment in a written agreement which will supersede all prior employment agreements, whether written or oral. AGREEMENT NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: EMPLOYMENT. Company agrees to employ Employee, and the Employee agrees to serve Company, on a full time basis in the capacity of CHAIRMAN, PRESIDENT & CEO, subject to the terms and conditions of this Agreement. 1. TERM. Employee's employment shall commence on the effective date of this Agreement and continue for an indefinite period and until such time as it may be terminated by one or both of the parties as provided below. 2. DUTIES. 2.1 During the term of this Agreement, Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsibilities as Company, through its Board of Directors ("Board"), any duly appointed Committee of the Board, the Chief Executive Officer of the Company (the "Chief Executive Officer"), or such other Executive Officers as may be designated by the Board, shall, from time to time, direct. Company specifically retains the right to alter or amend the position, responsibilities, duties or services to be performed by Employee in such manner as to it shall be deemed in the best interests of Company. During the term of employment, Employee shall devote his best efforts and skills to the business interests of Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with Company's business, or which may in any way interfere with his employment, without the consent of Company. 2.2 Employee agrees that, during the term of his employment, any and all inventions and discoveries, whether or not patentable, which Employee may conceive or make (collectively, "Inventions"), either alone or in conjunction with others and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, promptly execute and assign any and all applications, assignments and other instruments which Company shall deem necessary in order to apply for and obtain letters patent of the United States and foreign countries for any Inventions, and in order to assign and convey to Company, or to Company's nominee the sole and exclusive right, title and interest in and to any Inventions or any applications or patents thereon. As promptly as known or possessed by Employee, Employee shall disclose to Company all information with respect to any Invention. Employee further agrees that, during the term of employment, any trademarks, tradenames, service marks, trade styles, logos, emblems, labels, slogans and writings, whether or not copyrighted (collectively, "Marks"), originated by Employee, alone or in conjunction with others, and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, take all action necessary to register or otherwise perfect Company's interest in and to any Marks. 3. COMPENSATION. During the term of this Agreement, Company shall compensate Employee for his services as follows: 3.1 Employee shall be entitled to a monthly base salary of $33,583.34 (the "Base Salary"). Base Salary will be reviewed periodically. Base Salary shall be payable in semi-monthly or monthly installments, in accordance with the policy of Company at the time of such payments. 3.2 Employee shall be eligible for such officer's bonus program as may from time to time be made available and applicable to Employee. Provided, however, that nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the officers bonus program, or from eliminating or adding any other bonus programs as it shall from time to time deem appropriate and in the interests of Company. 3.3 Employee shall be granted participation in all employee benefit plans applicable to Employee's position with Company, including, but not limited to, medical plans, disability plans, life insurance plans, savings plans, stock option 2 plans and such other plans as may from time to time be made available and applicable to Employee (collectively, "Plans"), consistent with the policies of Company and the terms and conditions of the Plans. Nothing in this Agreement shall be deemed to alter the terms and conditions of any Plans or the policy of Company with respect to any Plans, and nothing in this Agreement shall be deemed to entitle Employee to any rights in any Plan which would not otherwise be made available to Employee pursuant to the terms, conditions and provisions of the Plans. Further, nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the Plan, or from eliminating or adding any other Plan as it shall from time to time deem appropriate and in the interests of Company. 3.3.1 Except as may otherwise be expressly provided, Employee shall be granted, upon termination of this Agreement, such rights as may be available to him pursuant to any Plan or Plans then in effect. 4. TERMINATION. Either Company or Employee may terminate this Agreement upon providing written notice to the other. 4.1 By the Company. In the event this Agreement is terminated with cause (as defined below), Employee shall be entitled to no severance pay and 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. 4.1.1 With Cause. For purposes of this Agreement, the termination of this Agreement shall be deemed to have been made with cause only upon the occurrence of one or more of the following circumstances: 4.1.1.1 Employee engages in any breach of fiduciary duty, act of dishonesty, or theft involving Company; 4.1.1.2 Employee is convicted of a felony; 4.1.1.3 Employee discloses Confidential Information in violation of section 7, below, or competes with Company in violation of section 8, below; 4.1.1.4 Employee refuses or fails to carry out the duties which may have been assigned to him; or 4.1.1.5 Employee continues to violate any written Company policy after written notice by Company of the violation. 3 4.1.2 Without Cause. In the event Company terminates this Agreement without cause, Employee shall be entitled to severance pay equal to 36 months of Employee's Base Salary in effect at the time of the termination, payable at the same interval as his salary at the time of the termination. 4.1.2.1 Employee shall have no obligation to mitigate damages by seeking other employment. 4.1.2.2 The right to severance pay under this section shall vest upon notice of termination and shall not be affected by Employee's subsequent death or disability. 4.2 By Employee. In the event Employee terminates this Agreement, Employee shall be entitled to no severance pay and shall be entitled only to such other rights as may be provided in this Agreement or as may otherwise be available to him in law or equity. 4.3 Death or disability. In the event Employee dies or becomes permanently disabled during the term of this Agreement or any extension of it, this Agreement shall terminate upon the date of such death or permanent disability. In the event this Agreement terminates by Employee's death or disability, Company shall pay Employee's pro-rata Base Salary through the termination date, and Employee shall be entitled to no severance pay. Notwithstanding anything to the contrary, in the event this Agreement terminates as a result of Employee's death or disability, Employee shall be entitled to such continuing benefits as may be provided in any Plan or by law. 5. RETURN OF COMPANY PROPERTY. Upon termination of this Agreement for any reason, Employee shall immediately surrender to Company, in the same condition as existed prior to termination of this Agreement, all property of Company in his possession or control, including Confidential Information (as defined below), computers, files, and any other property owned by Company. Employee and Company acknowledge and agree that the damages suffered as a result of the breach of this section would be difficult to ascertain. Accordingly, the parties agree that Company shall be entitled to liquidated damages in the amount of $5,000 in the event of a breach by Employee of this section. 6. CHANGE IN CONTROL. 6.1 Benefits payable. Notwithstanding anything in this Agreement to the contrary, Employee shall be entitled to the termination benefits set forth below if this Agreement is terminated by a "Triggering Event." The benefits set forth below shall be in addition to any other benefits which may have accrued to Employee during the term of employment; provided, however, that the provisions regarding direct severance pay shall be exclusive and shall replace any other rights of Employee to direct severance payments as set forth in section 5. 6.1.1 Triggering Event. For purposes of this Agreement, a Triggering Event shall be deemed to have occurred if: 4 6.1.1.1 there is a Change in Control (as defined below); and 6.1.1.2 within 36 months after the Change in Control: (a) Company terminates this Agreement without cause, or (b) (1) Employee terminates this Agreement, and (2) in combination with the Change in Control there has been one or more of the following: (i) a material change of Employee's job responsibilities, (ii) a greater than 20% reduction of Employee's Base Salary or benefits, or (iii) the relocation of Employee's primary office location to a distance greater than 50 miles from the current office location. 6.1.2 Change in Control. As used in this Agreement, a "Change in Control" shall be deemed to have occurred if there has been one or more of the following: 6.1.2.1 any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended [the "Exchange Act"]), other than a trustee or fiduciary holding securities under an employee benefit plan of Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing twenty percent (20%) or more of the combined voting power of Company's then outstanding voting securities; 6.1.2.2 there is a merger or consolidation of Company in which Company is not the surviving corporation; or 6.1.2.3 the business or businesses of Company for which Employee's services are principally performed is disposed of by Company pursuant to a partial or complete liquidation of Company, a sale of assets (including stock of a subsidiary) of Company, or otherwise. 6.2 Benefits. In the event this Agreement is terminated by a Triggering Event, Employee shall be entitled to the following: 5 6.2.1 Severance pay in an amount equal to 299% of Employee's "annualized includible compensation for the base period," within the meaning of section 280(G), of the Internal Revenue Code, as amended. Notwithstanding anything herein to the contrary, any amounts payable pursuant to this subparagraph shall be reduced by the amount of any disability benefits paid to Employee. 6.2.1.1 Payments under this section shall be made over 36 months in the same interval as Employee's salary as the time of termination of this Agreement. 6.2.1.2 Employee shall have no obligation to mitigate damages by seeking other employment. 6.2.2 Medical insurance, life insurance and disability insurance benefits from Company on terms comparable to the benefits provided by Company to Employee as of the date of the termination of this Agreement for 36 months or until Employee shall begin alternative employment. 6.2.3 Deferred Compensation. Employee, as a participant in the Company's Deferred Compensation Plan, shall receive a payment equal to, but not less than, the Company match said Employee received in the year prior to the takeover, or a full year prior to Employee's termination, whichever is later. 6.3 Notwithstanding anything herein to the contrary, in the event Company reasonably determines that any payment or benefit provided under this section is an "excess parachute payment" within the meaning of section 280(G) of the Internal Revenue Code, as amended, Company shall be entitled to limit the total of all payments or compensation to Employee to the maximum amount payable by Company that would not constitute such "excess parachute payment." 7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. For purposes of this Agreement, Confidential Information is defined as trade secrets (as defined in Indiana Code 24-2-3-2, as amended), software programs, customer reports, customer lists, vendor reports, vendor lists, and other information regarding customers and vendors utilized by Company in the course of its business, and any information regarding Company's present or future business plans. 7.1 Employee acknowledges his position with Company will expose Employee to certain Confidential Information of Company; and that Confidential Information constitutes a valuable, special and unique asset of Company's business. Employee will not, during or at any time after the term of his employment, disclose any Confidential Information acquired by Employee during his employment, to any person, firm, corporation, association, or other entity for any purpose, or use Confidential Information for any purpose, other than for the performance of services for Company. 6 7.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section, Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach or threatened breach, including the recovery of damages, costs and attorney's fees from Employee. 7.3 Employee acknowledges that all Confidential Information is the sole and exclusive property of Company. Employee shall surrender possession of all Confidential Information, including documents, computers, software, disks, tape or video recording, or any other written, recorded, or graphic matter, however produced or reproduced, containing Confidential Information to Company upon any suspension or termination of Employee's employment. If, after the suspension or termination of Employee's employment, Employee becomes aware of any Confidential Information in his possession, Employee shall immediately surrender possession of the Confidential Information to Company. 8. RESTRICTIVE COVENANT. For purposes of this Agreement, "Competing Business" is defined as Gilbarco, Wayne, Schlumberge, Bennett, and Tatsuno, and their respective affiliates and subsidiaries, both domestic and international, and any other company engaged in the petroleum dispensing manufacturing business or point of sale equipment business related to petroleum dispensing. 8.1 Employee hereby covenants and agrees that, for the greater of 36 months after termination of this Agreement, or such time as Employee is receiving any severance pay from Company (the "Restricted Period") Employee will not, directly or indirectly own, manage, operate, control, be controlled by, participate in, be employed by, or be connected in any manner with the ownership, management, operation or control of any Competing Business. Employee further covenants and agrees that he will not during the Restricted Period contact or attempt to contact, either directly or indirectly, any customers of Company as they may exist at the time of termination of Employee's employment for the purpose of soliciting such customer's business for or on behalf of any Competing Business. Employee specifically acknowledges and agrees that Company's business is international in scope and that the restriction as contained in this section is intended to cover activity by Employee both domestically and internationally. Employee further stipulates, covenants and agrees that a reasonable geographic restriction, as that term is used and defined by Indiana law, on Employee's activity's under this section is the entire world. 8.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section , Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other 7 available remedies available for such breach, including the recovery of damages, costs and attorney's fees from Employee. 8.3 If a court of competent jurisdiction or any arbitrator determines that any provision or restriction in this section is unreasonable or unenforceable, the court or arbitrator shall modify such restriction or provision so that the agreement then becomes an enforceable restriction of the activities of Employee. 9. FORFEITURE OF BENEFITS. In the event Employee is breaching his obligations under either section 7 or section 8 of this Agreement, Employee shall forfeit all future payments or compensation payable or provided by Company. 10. NO CONTINUING OBLIGATION. Employee acknowledges and agrees that this Agreement does not grant Employee the right to continue as an Employee of Company as an executive or in any other capacity. 11. NO TRUST ESTABLISHED. All payments provided under this Agreement shall be paid in cash from the general funds of Company and no separate or special fund has been or shall be established and no segregation of assets has been or shall be made to assure payment. Employee shall have no right, title or interest in or to any investments or other assets which Company may acquire or obtain to assist in meeting its obligations under this Agreement. 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 Company and Employee or any other person. The right of any person to receive payments from Company under this Agreement shall be no greater than the rights of a general unsecured creditor of Company. 12. TAXES, ETC. Company may withhold from any payments or benefits provided under this Agreement: 12.1 all federal, state, city or other taxes as required pursuant to any law or governmental regulation or ruling; and 12.2 any amounts owed by Employee to Company for any reason at the time of the termination of this Agreement. 13. NO ASSIGNMENT OR ALIENATION. This Agreement shall not be assignable by Employee without Company's prior written consent; provided, however, that nothing in this paragraph shall preclude Employee from designating a beneficiary to receive any benefit payable upon his death, or preclude Employee's executors, administrators or other legal representatives of his estate from assigning any rights hereunder to the person or persons entitled thereto. Further, 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. 8 14. ARBITRATION. Employee and Company recognize and agree that the arbitration of disputes provides mutual advantages in terms of facilitating the fair and expeditious resolution of disputes. In consideration of these mutual advantages, the parties agree as follows: 14.1 Scope of Arbitration. The parties will submit to arbitration, in accordance with these provisions, any and all disputes either party may have arising from or related to this Agreement, and any other disputes between the parties arising from or related to their employment relationship, including but not limited to, any disputes regarding alleged common law tort violations or violations of state or federal statutory rights. The parties further agree that the arbitration process set forth below shall be the exclusive means for resolving all disputes made subject to arbitration but that no arbitrator shall have authority to determine whether disputes fall within the scope of these arbitration provisions. 14.2 Governing Law. Employee and Company agree that the interpretation and enforcement of the arbitration provisions of this Agreement, including any right to appeal, shall be governed by the Indiana Uniform Arbitration Act, I.C. 34-4-2-1, et seq. 14.3 Time Limits on Submitting Disputes. Employee and Company acknowledge and agree that one of the objectives of this arbitration provision is to resolve disputes expeditiously, as well as fairly, and that it is the obligation of both parties, to those ends, to raise any disputes subject to arbitration under this Agreement in an expeditious manner. Accordingly, the parties agree to waive all statutes of limitations that might otherwise be applicable, and agree further that, as to any dispute subject to arbitration pursuant to this Agreement, notice of a demand for arbitration must be provided to the other party: 14.3.1 In the event of a dispute arising out of a termination of this Agreement, within 6 months of the date of termination; 14.3.2 In the event of a breach of section or section of this Agreement, within 4 months after the Chief Executive Officer has actual knowledge of the breach; or 14.3.3 In the event of any other dispute, within 3 months after the dispute arises. Failure to demand arbitration on claims within these time limits is intended to, and shall to the furthest extent permitted by law, be a waiver and release with respect to such claims, and, in the absence of a timely submitted written demand for arbitration, an arbitrator has no authority to resolve the disputes or render an award. 14.4 Availability of Provisional Relief. Notwithstanding anything herein to the contrary, nothing in this section shall prevent Company or Employee from obtaining injunctive 9 relief from a court of competent jurisdiction to enforce the obligations of sections and for which either party may require provisional relief pending a decision on the merits by the arbitrator. 14.5 American Arbitration Association Rules Apply as Modified Herein. Any arbitration of disputes shall be conducted under the Model Employment Procedures of the American Arbitration Association (AAA), as modified in this Agreement. 14.6 Invoking Arbitration. Either party may invoke the arbitration procedures described in this Agreement by written notice of a demand for arbitration (an "Arbitration Notice"). An Arbitration Notice shall contain a statement of the matter to be arbitrated in sufficient detail to establish the timeliness of the demand. The parties shall then have 10 business days within which they may identify a mutually agreeable arbitrator. After the 10-day period has expired, the parties shall prepare and submit to the AAA a joint submission, with each party to contribute half of the appropriate administrative fee. In their submission to the AAA, the parties shall either designate a mutually acceptable arbitrator or request a panel of arbitrators from the AAA according to the procedure described in section , below. 14.7 Arbitrator Selection. In the event the parties cannot agree upon an arbitrator within 10 business days after the Arbitration Notice is received, their joint submission to the AAA shall request a panel of seven arbitrators from the joint Labor and Commercial Arbitration Panels who are practicing attorneys with professional experience in the field of labor and/or employment law and the parties shall attempt to select an arbitrator from the panel according to AAA procedures. If the parties remain unable to select an arbitrator, they shall request from AAA a panel of three comparably qualified arbitrators from which the AAA shall reject the least preferred candidate of each party and select the candidate with the highest joint ranking of the parties. In the event of the death or disability of an arbitrator, the parties shall select a new arbitrator as provided above. The substitute arbitrator shall have the power to determine the extent to which he or she shall act on the record already made in arbitration. 14.8 Prehearing Procedures. Upon accepting assignment as arbitrator, the arbitrator shall promptly conduct a preliminary hearing at which each party shall be entitled to submit a brief statement of their respective positions, and at which the arbitrator shall establish a timetable for prehearing activities and the conduct of the hearing, and may address initial requests from the parties for prehearing disclosure of information. At the preliminary hearing and/or thereafter, the arbitrator shall have the discretion and authority to order, upon request or otherwise, the prehearing disclosure of information to the parties. Such disclosure may include, without limitation, production of requested documents, exchange of witness lists and summaries of the testimony of proposed witnesses, and examination by deposition of potential witnesses, to the end that information disclosure shall be conducted in the most expeditious and cost-effective manner possible, and shall be limited to that which is relevant and for which each party has a substantial, demonstrable need. The arbitrator shall further have the authority, upon request or otherwise, to conference with the parties or their designated representatives concerning any matter, and to set or modify timetables for all aspects of the arbitration proceeding. 10 The arbitrator may award either party its reasonable attorney's fees and costs, including reasonable expenses associated with production of witnesses or proof, upon a finding that the other party (a) engaged in unreasonable delay, (b) failed to comply with the Arbitrator's discovery order, or (c) failed to comply with requirements of confidentiality hereunder. The arbitrator shall also have the authority, upon request or otherwise, to entertain and decide motions for prehearing judgment. 14.9 Stenographic Record. There shall be a stenographic record of the arbitration hearing, unless the parties agree to record the proceedings by other reliable means. The costs of recording the proceedings shall be borne equally by the parties. 14.10 Location. Unless otherwise agreed by the parties, arbitration hearings shall take place in Fort Wayne, Allen County, Indiana at a mutually agreeable place or, if no agreement can be reached, at a place designated by the AAA. 14.11 The Hearing. At any hearing, the party bearing the burden of proof according to the governing substantive law shall present its evidence first. 14.12 Posthearing Briefs. After the close of the arbitration hearing, and on any issue concerning prehearing procedures, the arbitrator shall allow the parties to submit written briefs. 14.13 Confidentiality. All arbitration proceedings hereunder shall be confidential. Neither party shall disclose any information about the evidence produced by the other in the arbitration proceeding or about documents produced by the other in connection with the proceeding, except in the course of a judicial, regulatory or arbitration proceeding, or as may be requested by governmental authority. Before making any disclosure permitted by the preceding sentence, the party shall give the other party reasonable written notice of the intended disclosure and an opportunity to protect its interests. Expert witnesses and stenographic reporters shall sign appropriate nondisclosure agreements. 14.14 Costs. As to any disputes arising from the termination of the Agreement, each party shall be responsible for its costs, including attorney's fees, incurred in any arbitration, and the arbitrator shall not have authority to include all or any portion of said costs and fees in his or her award. The costs and fees of the arbitrator and of the AAA shall be borne equally by the parties. 14.14.1 Notwithstanding anything herein to the contrary, Company shall be entitled to recover its costs and attorney's fees incurred in enforcing the provisions of section 7 and section 8. 14.15 Remedies. Subject to the provisions of section , the arbitrator shall have authority to award any remedy or relief that a federal or state court situated in the State of Indiana could grant in conformity to applicable law. 14.16 Law Governing the Arbitrator's Award. In rendering an award, the arbitrator shall determine the rights and obligations of the parties, including employment 11 discrimination issues, according to federal law and the substantive law of the State of Indiana (excluding conflicts of laws principles) as though the matter were before a court of law. 14.17 Written Awards and Enforcement. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The parties agree that a competent court shall enter judgment upon the award of the arbitrator, provided it is in conformity with the terms of this Agreement. 14.18 Conflict in Procedure. If any part of this arbitration procedure is in conflict with any mandatory requirement of applicable law, the mandatory requirement shall govern, and the procedure set forth above shall be reformed and construed to the maximum extent possible in conformance with the applicable law. The procedure shall remain otherwise unaffected and enforceable. 15. MISCELLANEOUS. 15.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties and all prior negotiations and agreements, whether written or oral, are merged into this Agreement. 15.2 Severability. If any provision of this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or part of a provision of this Agreement; but this Agreement shall be reformed and construed as if such provision had never been contained in it, and any such provision shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted. 15.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counterparts collectively shall constitute one document representing the agreement among the parties. 15.4 Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 15.5 Amendment. This Agreement may not be amended, discharged, terminated, or changed orally; and any such proposed amendment, discharge, termination, or change shall be in writing and signed by the party against whom such amendment, change, discharge, or termination is sought. 15.6 Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach; and no waiver shall be valid unless it is in writing and is signed by the party against whom such waiver is sought. 12 15.7 Extension of Noncompete Period. The periods of time during which Employee is prohibited from engaging in such business practices pursuant to this Agreement shall be extended by any length of time during which Employee is in breach of any of such covenants. 15.8 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana. 15.9 Survival. The provisions and restrictions contained in sections and shall survive the termination of this Agreement and Employee's employment with Company. 15.10 Attorney Fees and Expenses. Except as expressly provided in this Agreement or by statute and ordered by an arbitrator or court in accordance with the provisions of this Agreement, no party shall be entitled to recover from the other party the reasonable attorney's fees, costs and expenses incurred as a result of any action to enforce any of the rights under this Agreement. 15.11 Full Disclosure. Employee acknowledges that Employee's employment with Company is conditioned upon the execution of this Agreement. Employee represents and acknowledges that Employee has carefully reviewed all of the terms and conditions in this Agreement, and has been advised of Employee's right to seek independent legal counsel prior to execution of this Agreement. 15.12 Notices. Any notice, request, or other communication required or permitted under this Agreement shall be in writing. Notice shall be deemed to have been given only if personally delivered or sent by registered or certified mail, return receipt requested. Any notice so mailed shall be deemed given on the postmark date. Failure or refusal to accept or receive any notice or communication shall not affect the validity of the notice. All such notices shall be given to the respective parties at the addresses designated below, or to such other address as a party may designate in a like manner. If to Company: TOKHEIM CORPORATION c/o TIMOTHY EASTOM, VP HUMAN RESOURCES P.O. BOX 360 FORT WAYNE, IN 46801 If to Employee: DOUGLAS K. PINNER 13701 SQUAWCREEK FORT WAYNE, IN 46804 13 IN WITNESS WHEREOF, the parties have entered into this Agreement the date first written above. COMPANY EMPLOYEE TOKHEIM CORPORATION /s/ WALTER S. AINSWORTH /s/ DOUGLAS K. PINNER - -------------------------------- ----------------------------------- WALTER S. AINSWORTH, CHAIRMAN DOUGLAS K. PINNER COMPENSATION COMMITTEE /s/ NORMAN L. ROELKE - --------------------------------- Attest: NORMAN L. ROELKE Its: VICE PRESIDENT, SECRETARY & GENERAL COUNSEL 14 EX-10.5 7 EMPLOYMENT AGREEMENT, JOHN A. NEGOVETICH [TOKHEIM LOGO] Exhibit 10.5 EMPLOYMENT AGREEMENT for CORPORATE OFFICERS THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of this 23rd day of DECEMBER, 1997, by and between Tokheim Corporation, an Indiana Corporation ("Company") and JOHN A. NEGOVETICH ("Employee"). RECITALS A. Company acknowledges and recognizes the value of Employee's services and deems it necessary and desirable to retain Employee's full-time services. B. Employee and Company desire to embody the terms and conditions of Employee's employment in a written agreement which will supersede all prior employment agreements, whether written or oral. AGREEMENT NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: EMPLOYMENT. Company agrees to employ Employee, and the Employee agrees to serve Company, on a full time basis in the capacity of PRESIDENT, TOKHEIM, NORTH AMERICA, subject to the terms and conditions of this Agreement. 1. TERM. Employee's employment shall commence on the effective date of this Agreement and continue for an indefinite period and until such time as it may be terminated by one or both of the parties as provided below. 2. DUTIES. 2.1 During the term of this Agreement, Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsibilities as Company, through its Board of Directors ("Board"), any duly appointed Committee of the Board, the Chief Executive Officer of the Company (the "Chief Executive Officer"), or such other Executive Officers as may be designated by the Board, shall, from time to time, direct. Company specifically retains the right to alter or amend the position, responsibilities, duties or services to be performed by Employee in such manner as to it shall be deemed in the best interests of Company. During the term of employment, Employee shall devote his best efforts and skills to the business interests of Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with Company's business, or which may in any way interfere with his employment, without the consent of Company. 2.2 Employee agrees that, during the term of his employment, any and all inventions and discoveries, whether or not patentable, which Employee may conceive or make (collectively, "Inventions"), either alone or in conjunction with others and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, promptly execute and assign any and all applications, assignments and other instruments which Company shall deem necessary in order to apply for and obtain letters patent of the United States and foreign countries for any Inventions, and in order to assign and convey to Company, or to Company's nominee the sole and exclusive right, title and interest in and to any Inventions or any applications or patents thereon. As promptly as known or possessed by Employee, Employee shall disclose to Company all information with respect to any Invention. Employee further agrees that, during the term of employment, any trademarks, tradenames, service marks, trade styles, logos, emblems, labels, slogans and writings, whether or not copyrighted (collectively, "Marks"), originated by Employee, alone or in conjunction with others, and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, take all action necessary to register or otherwise perfect Company's interest in and to any Marks. 3. COMPENSATION. During the term of this Agreement, Company shall compensate Employee for his services as follows: 3.1 Employee shall be entitled to a monthly base salary of $20,066.67 (the "Base Salary"). Base Salary will be reviewed periodically. Base Salary shall be payable in semi-monthly or monthly installments, in accordance with the policy of Company at the time of such payments. 3.2 Employee shall be eligible for such officer's bonus program as may from time to time be made available and applicable to Employee. Provided, however, that nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the officers bonus program, or from eliminating or adding any other bonus programs as it shall from time to time deem appropriate and in the interests of Company. 3.3 Employee shall be granted participation in all employee benefit plans applicable to Employee's position with Company, including, but not limited 2 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 Employee (collectively, "Plans"), consistent with the policies of Company and the terms and conditions of the Plans. Nothing in this Agreement shall be deemed to alter the terms and conditions of any Plans or the policy of Company with respect to any Plans, and nothing in this Agreement shall be deemed to entitle Employee to any rights in any Plan which would not otherwise be made available to Employee pursuant to the terms, conditions and provisions of the Plans. Further, nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the Plan, or from eliminating or adding any other Plan as it shall from time to time deem appropriate and in the interests of Company. 3.3.1 Except as may otherwise be expressly provided, Employee shall be granted, upon termination of this Agreement, such rights as may be available to him pursuant to any Plan or Plans then in effect. 4. TERMINATION. Either Company or Employee may terminate this Agreement upon providing written notice to the other. 4.1 By the Company. In the event this Agreement is terminated with cause (as defined below), Employee shall be entitled to no severance pay and 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. 4.1.1 With Cause. For purposes of this Agreement, the termination of this Agreement shall be deemed to have been made with cause only upon the occurrence of one or more of the following circumstances: 4.1.1.1 Employee engages in any breach of fiduciary duty, act of dishonesty, or theft involving Company; 4.1.1.2 Employee is convicted of a felony; 4.1.1.3 Employee discloses Confidential Information in violation of section 7 , below, or competes with Company in violation of section 8, below; 4.1.1.4 Employee refuses or fails to carry out the duties which may have been assigned to him; or 4.1.1.5 Employee continues to violate any written Company policy after written notice by Company of the violation. 3 4.1.2 Without Cause. In the event Company terminates this Agreement without cause, Employee shall be entitled to severance pay equal to 18 months of Employee's Base Salary in effect at the time of the termination, payable at the same interval as his salary at the time of the termination. 4.1.2.1 Employee shall have no obligation to mitigate damages by seeking other employment. 4.1.2.2 The right to severance pay under this section shall vest upon notice of termination and shall not be affected by Employee's subsequent death or disability. 4.2 By Employee. In the event Employee terminates this Agreement, Employee shall be entitled to no severance pay and shall be entitled only to such other rights as may be provided in this Agreement or as may otherwise be available to him in law or equity. 4.3 Death or disability. In the event Employee dies or becomes permanently disabled during the term of this Agreement or any extension of it, this Agreement shall terminate upon the date of such death or permanent disability. In the event this Agreement terminates by Employee's death or disability, Company shall pay Employee's pro-rata Base Salary through the termination date, and Employee shall be entitled to no severance pay. Notwithstanding anything to the contrary, in the event this Agreement terminates as a result of Employee's death or disability, Employee shall be entitled to such continuing benefits as may be provided in any Plan or by law. 5. RETURN OF COMPANY PROPERTY. Upon termination of this Agreement for any reason, Employee shall immediately surrender to Company, in the same condition as existed prior to termination of this Agreement, all property of Company in his possession or control, including Confidential Information (as defined below), computers, files, and any other property owned by Company. Employee and Company acknowledge and agree that the damages suffered as a result of the breach of this section would be difficult to ascertain. Accordingly, the parties agree that Company shall be entitled to liquidated damages in the amount of $5,000 in the event of a breach by Employee of this section. 6. CHANGE IN CONTROL. 6.1 Benefits payable. Notwithstanding anything in this Agreement to the contrary, Employee shall be entitled to the termination benefits set forth below if this Agreement is terminated by a "Triggering Event." The benefits set forth below shall be in addition to any other benefits which may have accrued to Employee during the term of employment; provided, however, that the provisions regarding direct severance pay shall be exclusive and shall replace any other rights of Employee to direct severance payments as set forth in section 5. 6.1.1 Triggering Event. For purposes of this Agreement, a Triggering Event shall be deemed to have occurred if: 4 6.1.1.1 there is a Change in Control (as defined below); and 6.1.1.2 within 12 months after the Change in Control: (a) Company terminates this Agreement without cause, or (b) (1) Employee terminates this Agreement, and (2) in combination with the Change in Control there has been one or more of the following: (i) a change of the Chief Executive Officer, (ii) a material change of Employee's job responsibilities, (iii) a greater than 20% reduction of Employee's Base Salary or benefits, or (iv) the relocation of Employee's primary office location to a distance greater than 50 miles from the current office location. 6.1.2 Change in Control. As used in this Agreement, a "Change in Control" shall be deemed to have occurred if there has been one or more of the following: 6.1.2.1 any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended [the "Exchange Act"]), other than a trustee or fiduciary holding securities under an employee benefit plan of Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing twenty percent (20%) or more of the combined voting power of Company's then outstanding voting securities; 6.1.2.2 there is a merger or consolidation of Company in which Company is not the surviving corporation; or 6.1.2.3 the business or businesses of Company for which Employee's services are principally performed is disposed of by Company pursuant to a partial or complete liquidation of Company, a sale of assets (including stock of a subsidiary) of Company, or otherwise. 5 6.2 Benefits. In the event this Agreement is terminated by a Triggering Event, Employee shall be entitled to the following: 6.2.1 Severance pay in an amount equal to 299% of Employee's "annualized includible compensation for the base period," within the meaning of section 280(G), of the Internal Revenue Code, as amended. Notwithstanding anything herein to the contrary, any amounts payable pursuant to this subparagraph shall be reduced by the amount of any disability benefits paid to Employee. 6.2.1.1 Payments under this section shall be made over 12 months in the same interval as Employee's salary as the time of termination of this Agreement. 6.2.1.2 Employee shall have no obligation to mitigate damages by seeking other employment. 6.2.2 Medical insurance, life insurance and disability insurance benefits from Company on terms comparable to the benefits provided by Company to Employee as of the date of the termination of this Agreement for 12 months or until Employee shall begin alternative employment. 6.2.3 Deferred Compensation. Employee, as a participant in the Company's Deferred Compensation Plan, shall receive a payment equal to, but not less than, the Company match said Employee received in the year prior to the takeover, or a full year prior to Employee's termination, whichever is later. 6.3 Notwithstanding anything herein to the contrary, in the event Company reasonably determines that any payment or benefit provided under this section is an "excess parachute payment" within the meaning of section 280(G) of the Internal Revenue Code, as amended, Company shall be entitled to limit the total of all payments or compensation to Employee to the maximum amount payable by Company that would not constitute such "excess parachute payment." 7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. For purposes of this Agreement, Confidential Information is defined as trade secrets (as defined in Indiana Code 24-2-3-2, as amended), software programs, customer reports, customer lists, vendor reports, vendor lists, and other information regarding customers and vendors utilized by Company in the course of its business, and any information regarding Company's present or future business plans. 7.1 Employee acknowledges his position with Company will expose Employee to certain Confidential Information of Company; and that Confidential Information constitutes a valuable, special and unique asset of Company's business. Employee will not, during or at any time after the term of his employment, disclose any Confidential Information acquired by Employee during his employment, to any person, firm, corporation, association, or other entity for any purpose, or use Confidential Information for any purpose, other than for the performance of services for Company. 6 7.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section , Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach or threatened breach, including the recovery of damages, costs and attorney's fees from Employee. 7.3 Employee acknowledges that all Confidential Information is the sole and exclusive property of Company. Employee shall surrender possession of all Confidential Information, including documents, computers, software, disks, tape or video recording, or any other written, recorded, or graphic matter, however produced or reproduced, containing Confidential Information to Company upon any suspension or termination of Employee's employment. If, after the suspension or termination of Employee's employment, Employee becomes aware of any Confidential Information in his possession, Employee shall immediately surrender possession of the Confidential Information to Company. 8. RESTRICTIVE COVENANT. For purposes of this Agreement, "Competing Business" is defined as Gilbarco, Wayne, Schlumberger, Bennett, and Tatsuno, and their respective affiliates and subsidiaries, both domestic and international, and any other company engaged in the petroleum dispensing manufacturing business or point of sale equipment business related to petroleum dispensing. 8.1 Employee hereby covenants and agrees that, for the greater of 12 months after termination of this Agreement, or such time as Employee is receiving any severance pay from Company (the "Restricted Period") Employee will not, directly or indirectly own, manage, operate, control, be controlled by, participate in, be employed by, or be connected in any manner with the ownership, management, operation or control of any Competing Business. Employee further covenants and agrees that he will not during the Restricted Period contact or attempt to contact, either directly or indirectly, any customers of Company as they may exist at the time of termination of Employee's employment for the purpose of soliciting such customer's business for or on behalf of any Competing Business. Employee specifically acknowledges and agrees that Company's business is international in scope and that the restriction as contained in this section is intended to cover activity by Employee both domestically and internationally. Employee further stipulates, covenants and agrees that a reasonable geographic restriction, as that term is used and defined by Indiana law, on Employee's activity's under this section is the entire world. 8.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section , Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, 7 including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach, including the recovery of damages, costs and attorney's fees from Employee. 8.3 If a court of competent jurisdiction or any arbitrator determines that any provision or restriction in this section is unreasonable or unenforceable, the court or arbitrator shall modify such restriction or provision so that the agreement then becomes an enforceable restriction of the activities of Employee. 9. FORFEITURE OF BENEFITS. In the event Employee is breaching his obligations under either section 7 or section 8 of this Agreement, Employee shall forfeit all future payments or compensation payable or provided by Company. 10. NO CONTINUING OBLIGATION. Employee acknowledges and agrees that this Agreement does not grant Employee the right to continue as an Employee of Company as an executive or in any other capacity. 11. NO TRUST ESTABLISHED. All payments provided under this Agreement shall be paid in cash from the general funds of Company and no separate or special fund has been or shall be established and no segregation of assets has been or shall be made to assure payment. Employee shall have no right, title or interest in or to any investments or other assets which Company may acquire or obtain to assist in meeting its obligations under this Agreement. 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 Company and Employee or any other person. The right of any person to receive payments from Company under this Agreement shall be no greater than the rights of a general unsecured creditor of Company. 12. TAXES, ETC. Company may withhold from any payments or benefits provided under this Agreement: 12.1 all federal, state, city or other taxes as required pursuant to any law or governmental regulation or ruling; and 12.2 any amounts owed by Employee to Company for any reason at the time of the termination of this Agreement. 13. NO ASSIGNMENT OR ALIENATION. This Agreement shall not be assignable by Employee without Company's prior written consent; provided, however, that nothing in this paragraph shall preclude Employee from designating a beneficiary to receive any benefit payable upon his death, or preclude Employee's executors, administrators or other legal representatives of his estate from assigning any rights hereunder to the person or persons entitled thereto. Further, 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. 8 14. ARBITRATION. Employee and Company recognize and agree that the arbitration of disputes provides mutual advantages in terms of facilitating the fair and expeditious resolution of disputes. In consideration of these mutual advantages, the parties agree as follows: 14.1 Scope of Arbitration. The parties will submit to arbitration, in accordance with these provisions, any and all disputes either party may have arising from or related to this Agreement, and any other disputes between the parties arising from or related to their employment relationship, including but not limited to, any disputes regarding alleged common law tort violations or violations of state or federal statutory rights. The parties further agree that the arbitration process set forth below shall be the exclusive means for resolving all disputes made subject to arbitration but that no arbitrator shall have authority to determine whether disputes fall within the scope of these arbitration provisions. 14.2 Governing Law. Employee and Company agree that the interpretation and enforcement of the arbitration provisions of this Agreement, including any right to appeal, shall be governed by the Indiana Uniform Arbitration Act, I.C. 34-4-2-1, et seq. 14.3 Time Limits on Submitting Disputes. Employee and Company acknowledge and agree that one of the objectives of this arbitration provision is to resolve disputes expeditiously, as well as fairly, and that it is the obligation of both parties, to those ends, to raise any disputes subject to arbitration under this Agreement in an expeditious manner. Accordingly, the parties agree to waive all statutes of limitations that might otherwise be applicable, and agree further that, as to any dispute subject to arbitration pursuant to this Agreement, notice of a demand for arbitration must be provided to the other party: 14.3.1 In the event of a dispute arising out of a termination of this Agreement, within 6 months of the date of termination; 14.3.2 In the event of a breach of section or section of this Agreement, within 4 months after the Chief Executive Officer has actual knowledge of the breach; or 14.3.3 In the event of any other dispute, within 3 months after the dispute arises. Failure to demand arbitration on claims within these time limits is intended to, and shall to the furthest extent permitted by law, be a waiver and release with respect to such claims, and, in the absence of a timely submitted written demand for arbitration, an arbitrator has no authority to resolve the disputes or render an award. 9 14.4 Availability of Provisional Relief. Notwithstanding anything herein to the contrary, nothing in this section shall prevent Company or Employee from obtaining injunctive relief from a court of competent jurisdiction to enforce the obligations of sections and for which either party may require provisional relief pending a decision on the merits by the arbitrator. 14.5 American Arbitration Association Rules Apply as Modified Herein. Any arbitration of disputes shall be conducted under the Model Employment Procedures of the American Arbitration Association (AAA), as modified in this Agreement. 14.6 Invoking Arbitration. Either party may invoke the arbitration procedures described in this Agreement by written notice of a demand for arbitration (an "Arbitration Notice"). An Arbitration Notice shall contain a statement of the matter to be arbitrated in sufficient detail to establish the timeliness of the demand. The parties shall then have 10 business days within which they may identify a mutually agreeable arbitrator. After the 10-day period has expired, the parties shall prepare and submit to the AAA a joint submission, with each party to contribute half of the appropriate administrative fee. In their submission to the AAA, the parties shall either designate a mutually acceptable arbitrator or request a panel of arbitrators from the AAA according to the procedure described in section 14.7, below. 14.7 Arbitrator Selection. In the event the parties cannot agree upon an arbitrator within 10 business days after the Arbitration Notice is received, their joint submission to the AAA shall request a panel of seven arbitrators from the joint Labor and Commercial Arbitration Panels who are practicing attorneys with professional experience in the field of labor and/or employment law and the parties shall attempt to select an arbitrator from the panel according to AAA procedures. If the parties remain unable to select an arbitrator, they shall request from AAA a panel of three comparably qualified arbitrators from which the AAA shall reject the least preferred candidate of each party and select the candidate with the highest joint ranking of the parties. In the event of the death or disability of an arbitrator, the parties shall select a new arbitrator as provided above. The substitute arbitrator shall have the power to determine the extent to which he or she shall act on the record already made in arbitration. 14.8 Prehearing Procedures. Upon accepting assignment as arbitrator, the arbitrator shall promptly conduct a preliminary hearing at which each party shall be entitled to submit a brief statement of their respective positions, and at which the arbitrator shall establish a timetable for prehearing activities and the conduct of the hearing, and may address initial requests from the parties for prehearing disclosure of information. At the preliminary hearing and/or thereafter, the arbitrator shall have the discretion and authority to order, upon request or otherwise, the prehearing disclosure of information to the parties. Such disclosure may include, without limitation, production of requested documents, exchange of witness lists and summaries of the testimony of proposed witnesses, and examination by deposition of potential witnesses, to the end that information disclosure shall be conducted in the most expeditious and cost-effective manner possible, and shall be limited to that which is relevant and for which each party has a substantial, demonstrable need. The arbitrator shall further have the authority, upon request or otherwise, to conference with the parties or their designated representatives concerning any matter, and to set or modify timetables for all aspects of the arbitration proceeding. 10 The arbitrator may award either party its reasonable attorney's fees and costs, including reasonable expenses associated with production of witnesses or proof, upon a finding that the other party (a) engaged in unreasonable delay, (b) failed to comply with the Arbitrator's discovery order, or (c) failed to comply with requirements of confidentiality hereunder. The arbitrator shall also have the authority, upon request or otherwise, to entertain and decide motions for prehearing judgment. 14.9 Stenographic Record. There shall be a stenographic record of the arbitration hearing, unless the parties agree to record the proceedings by other reliable means. The costs of recording the proceedings shall be borne equally by the parties. 14.10 Location. Unless otherwise agreed by the parties, arbitration hearings shall take place in Fort Wayne, Allen County, Indiana at a mutually agreeable place or, if no agreement can be reached, at a place designated by the AAA. 14.11 The Hearing. At any hearing, the party bearing the burden of proof according to the governing substantive law shall present its evidence first. 14.12 Posthearing Briefs. After the close of the arbitration hearing, and on any issue concerning prehearing procedures, the arbitrator shall allow the parties to submit written briefs. 14.13 Confidentiality. All arbitration proceedings hereunder shall be confidential. Neither party shall disclose any information about the evidence produced by the other in the arbitration proceeding or about documents produced by the other in connection with the proceeding, except in the course of a judicial, regulatory or arbitration proceeding, or as may be requested by governmental authority. Before making any disclosure permitted by the preceding sentence, the party shall give the other party reasonable written notice of the intended disclosure and an opportunity to protect its interests. Expert witnesses and stenographic reporters shall sign appropriate nondisclosure agreements. 14.14 Costs. As to any disputes arising from the termination of the Agreement, each party shall be responsible for its costs, including attorney's fees, incurred in any arbitration, and the arbitrator shall not have authority to include all or any portion of said costs and fees in his or her award. The costs and fees of the arbitrator and of the AAA shall be borne equally by the parties. 14.14.1 Notwithstanding anything herein to the contrary, Company shall be entitled to recover its costs and attorney's fees incurred in enforcing the provisions of section 7 and section 8. 14.15 Remedies. Subject to the provisions of section, the arbitrator shall have authority to award any remedy or relief that a federal or state court situated in the State of Indiana could grant in conformity to applicable law. 11 14.16 Law Governing the Arbitrator's Award. In rendering an award, the arbitrator shall determine the rights and obligations of the parties, including employment discrimination issues, according to federal law and the substantive law of the State of Indiana (excluding conflicts of laws principles) as though the matter were before a court of law. 14.17 Written Awards and Enforcement. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The parties agree that a competent court shall enter judgment upon the award of the arbitrator, provided it is in conformity with the terms of this Agreement. 14.18 Conflict in Procedure. If any part of this arbitration procedure is in conflict with any mandatory requirement of applicable law, the mandatory requirement shall govern, and the procedure set forth above shall be reformed and construed to the maximum extent possible in conformance with the applicable law. The procedure shall remain otherwise unaffected and enforceable. 15. MISCELLANEOUS. 15.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties and all prior negotiations and agreements, whether written or oral, are merged into this Agreement. 15.2 Severability. If any provision of this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or part of a provision of this Agreement; but this Agreement shall be reformed and construed as if such provision had never been contained in it, and any such provision shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted. 15.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counterparts collectively shall constitute one document representing the agreement among the parties. 15.4 Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 15.5 Amendment. This Agreement may not be amended, discharged, terminated, or changed orally; and any such proposed amendment, discharge, termination, or change shall be in writing and signed by the party against whom such amendment, change, discharge, or termination is sought. 12 15.6 Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach; and no waiver shall be valid unless it is in writing and is signed by the party against whom such waiver is sought. 15.7 Extension of Noncompete Period. The periods of time during which Employee is prohibited from engaging in such business practices pursuant to this Agreement shall be extended by any length of time during which Employee is in breach of any of such covenants. 15.8 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana. 15.9 Survival. The provisions and restrictions contained in sections and shall survive the termination of this Agreement and Employee's employment with Company. 15.10 Attorney Fees and Expenses. Except as expressly provided in this Agreement or by statute and ordered by an arbitrator or court in accordance with the provisions of this Agreement, no party shall be entitled to recover from the other party the reasonable attorney's fees, costs and expenses incurred as a result of any action to enforce any of the rights under this Agreement. 15.11 Full Disclosure. Employee acknowledges that Employee's employment with Company is conditioned upon the execution of this Agreement. Employee represents and acknowledges that Employee has carefully reviewed all of the terms and conditions in this Agreement, and has been advised of Employee's right to seek independent legal counsel prior to execution of this Agreement. 15.12 Notices. Any notice, request, or other communication required or permitted under this Agreement shall be in writing. Notice shall be deemed to have been given only if personally delivered or sent by registered or certified mail, return receipt requested. Any notice so mailed shall be deemed given on the postmark date. Failure or refusal to accept or receive any notice or communication shall not affect the validity of the notice. All such notices shall be given to the respective parties at the addresses designated below, or to such other address as a party may designate in a like manner. If to Company: TOKHEIM CORPROATION c/o TIMOTHY EASTOM, VICE PRESIDENT, HUMAN RESOURCES P.O. BOX 360 FORT WAYNE, IN 46801 If to Employee: JOHN A. NEGOVETICH 5519-7 OLD DOVER BLVD FORT WAYNE, IN 46835 13 IN WITNESS WHEREOF, the parties have entered into this Agreement the date first written above. COMPANY EMPLOYEE TOKHEIM CORPORATION /s/ DOUGLAS K. PINNER /s/ JOHN A. NEGOVETICH - ---------------------------------------- ------------------------------- DOUGLAS K. PINNER JOHN A. NEGOVETICH CHAIRMAN, PRESIDENT & CEO /s/ NORMAN L. ROELKE - ---------------------------------------- Attest: NORMAN L. ROELKE Its: VICE PRESIDENT, SECRETARY & GENERAL COUNSEL 14 EX-10.6 8 EMPLOYMENT AGREEMENT, JACQUES ST. DENIS Exhibit 10.6 [TOKHEIM LOGO] EMPLOYMENT AGREEMENT for CORPORATE OFFICERS THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of this 23rd day of DECEMBER, 1997, by and between Tokheim Corporation, an Indiana Corporation ("Company") and JACQUES ST-DENIS ("Employee"). RECITALS A. Company acknowledges and recognizes the value of Employee's services and deems it necessary and desirable to retain Employee's full-time services. B. Employee and Company desire to embody the terms and conditions of Employee's employment in a written agreement which will supersede all prior employment agreements, whether written or oral. AGREEMENT NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: EMPLOYMENT. Company agrees to employ employee, and the employee agrees to serve company, on a full time basis in the capacity of PRESIDENT, SOFITAM, subject to the terms and conditions of this agreement. 1. TERM. Employee's employment shall commence on the effective date of this Agreement and continue for an indefinite period and until such time as it may be terminated by one or both of the parties as provided below. 2. DUTIES. 2.1 During the term of this Agreement, Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsibilities as Company, through its Board of Directors ("Board"), any duly appointed Committee of the Board, the Chief Executive Officer of the Company (the "Chief Executive Officer"), or such other Executive Officers as may be designated by the Board, shall, from time to time, direct. Company specifically retains the right to alter or amend the position, responsibilities, duties or services to be performed by Employee in such manner as to it shall be deemed in the best interests of Company. During the term of employment, Employee shall devote his best efforts and skills to the business interests of Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with Company's business, or which may in any way interfere with his employment, without the consent of Company. 2.2 Employee agrees that, during the term of his employment, any and all inventions and discoveries, whether or not patentable, which Employee may conceive or make (collectively, "Inventions"), either alone or in conjunction with others and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, promptly execute and assign any and all applications, assignments and other instruments which Company shall deem necessary in order to apply for and obtain letters patent of the United States and foreign countries for any Inventions, and in order to assign and convey to Company, or to Company's nominee the sole and exclusive right, title and interest in and to any Inventions or any applications or patents thereon. As promptly as known or possessed by Employee, Employee shall disclose to Company all information with respect to any Invention. Employee further agrees that, during the term of employment, any trademarks, tradenames, service marks, trade styles, logos, emblems, labels, slogans and writings, whether or not copyrighted (collectively, "Marks"), originated by Employee, alone or in conjunction with others, and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, take all action necessary to register or otherwise perfect Company's interest in and to any Marks. 3. COMPENSATION. During the term of this Agreement, Company shall compensate Employee for his services as follows: 3.1 Employee shall be entitled to a monthly base salary of $20,066.67 (the "Base Salary"). Base Salary will be reviewed periodically. Base Salary shall be payable in semi-monthly or monthly installments, in accordance with the policy of Company at the time of such payments. 3.2 Employee shall be eligible for such officer's bonus program as may from time to time be made available and applicable to Employee. Provided, however, that nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the officers bonus program, or from eliminating or adding any other bonus programs as it shall from time to time deem appropriate and in the interests of Company. 3.3 Employee shall be granted participation in all employee benefit plans applicable to Employee's position with Company, including, but not limited to, medical plans, disability plans, life insurance plans, savings plans, stock option 2 plans and such other plans as may from time to time be made available and applicable to Employee (collectively, "Plans"), consistent with the policies of Company and the terms and conditions of the Plans. Nothing in this Agreement shall be deemed to alter the terms and conditions of any Plans or the policy of Company with respect to any Plans, and nothing in this Agreement shall be deemed to entitle Employee to any rights in any Plan which would not otherwise be made available to Employee pursuant to the terms, conditions and provisions of the Plans. Further, nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the Plan, or from eliminating or adding any other Plan as it shall from time to time deem appropriate and in the interests of Company. 3.3.1 Except as may otherwise be expressly provided, Employee shall be granted, upon termination of this Agreement, such rights as may be available to him pursuant to any Plan or Plans then in effect. 4. TERMINATION. Either Company or Employee may terminate this Agreement upon providing written notice to the other. 4.1 By the Company. In the event this Agreement is terminated with cause (as defined below), Employee shall be entitled to no severance pay and 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. 4.1.1 With Cause. For purposes of this Agreement, the termination of this Agreement shall be deemed to have been made with cause only upon the occurrence of one or more of the following circumstances: 4.1.1.1 Employee engages in any breach of fiduciary duty, act of dishonesty, or theft involving Company; 4.1.1.2 Employee is convicted of a felony; 4.1.1.3 Employee discloses Confidential Information in violation of section 7 , below, or competes with Company in violation of section 8, below; 4.1.1.4 Employee refuses or fails to carry out the duties which may have been assigned to him; or 4.1.1.5 Employee continues to violate any written Company policy after written notice by Company of the violation. 3 4.1.2 Without Cause. In the event Company terminates this Agreement without cause, Employee shall be entitled to severance pay equal to 18 months of Employee's Base Salary in effect at the time of the termination, payable at the same interval as his salary at the time of the termination. 4.1.2.1 Employee shall have no obligation to mitigate damages by seeking other employment. 4.1.2.2 The right to severance pay under this section shall vest upon notice of termination and shall not be affected by Employee's subsequent death or disability. 4.2 By Employee. In the event Employee terminates this Agreement, Employee shall be entitled to no severance pay and shall be entitled only to such other rights as may be provided in this Agreement or as may otherwise be available to him in law or equity. 4.3 Death or disability. In the event Employee dies or becomes permanently disabled during the term of this Agreement or any extension of it, this Agreement shall terminate upon the date of such death or permanent disability. In the event this Agreement terminates by Employee's death or disability, Company shall pay Employee's pro-rata Base Salary through the termination date, and Employee shall be entitled to no severance pay. Notwithstanding anything to the contrary, in the event this Agreement terminates as a result of Employee's death or disability, Employee shall be entitled to such continuing benefits as may be provided in any Plan or by law. 5. RETURN OF COMPANY PROPERTY. Upon termination of this Agreement for any reason, Employee shall immediately surrender to Company, in the same condition as existed prior to termination of this Agreement, all property of Company in his possession or control, including Confidential Information (as defined below), computers, files, and any other property owned by Company. Employee and Company acknowledge and agree that the damages suffered as a result of the breach of this section would be difficult to ascertain. Accordingly, the parties agree that Company shall be entitled to liquidated damages in the amount of $5,000 in the event of a breach by Employee of this section. 6. CHANGE IN CONTROL. 6.1 Benefits payable. Notwithstanding anything in this Agreement to the contrary, Employee shall be entitled to the termination benefits set forth below if this Agreement is terminated by a "Triggering Event." The benefits set forth below shall be in addition to any other benefits which may have accrued to Employee during the term of employment; provided, however, that the provisions regarding direct severance pay shall be exclusive and shall replace any other rights of Employee to direct severance payments as set forth in section 5. 6.1.1 Triggering Event. For purposes of this Agreement, a Triggering Event shall be deemed to have occurred if: 4 6.1.1.1 there is a Change in Control (as defined below); and 6.1.1.2 within 12 months after the Change in Control: (a) Company terminates this Agreement without cause, or (b) (1) Employee terminates this Agreement, and (2) in combination with the Change in Control there has been one or more of the following: (i) a change of the Chief Executive Officer, (ii) a material change of Employee's job responsibilities, (iii) a greater than 20% reduction of Employee's Base Salary or benefits, or (iv) the relocation of Employee's primary office location to a distance greater than 50 miles from the current office location. 6.1.2 Change in Control. As used in this Agreement, a "Change in Control" shall be deemed to have occurred if there has been one or more of the following: 6.1.2.1 any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended [the "Exchange Act"]), other than a trustee or fiduciary holding securities under an employee benefit plan of Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing twenty percent (20%) or more of the combined voting power of Company's then outstanding voting securities; 6.1.2.2 there is a merger or consolidation of Company in which Company is not the surviving corporation; or 6.1.2.3 the business or businesses of Company for which Employee's services are principally performed is disposed of by Company pursuant to a partial or complete liquidation of Company, a sale of assets (including stock of a subsidiary) of Company, or otherwise. 5 6.2 Benefits. In the event this Agreement is terminated by a Triggering Event, Employee shall be entitled to the following: 6.2.1 Severance pay in an amount equal to 299% of Employee's "annualized includible compensation for the base period," within the meaning of section 280(G), of the Internal Revenue Code, as amended. Notwithstanding anything herein to the contrary, any amounts payable pursuant to this subparagraph shall be reduced by the amount of any disability benefits paid to Employee. 6.2.1.1 Payments under this section shall be made over 12 months in the same interval as Employee's salary as the time of termination of this Agreement. 6.2.1.2 Employee shall have no obligation to mitigate damages by seeking other employment. 6.2.2 Medical insurance, life insurance and disability insurance benefits from Company on terms comparable to the benefits provided by Company to Employee as of the date of the termination of this Agreement for 12 months or until Employee shall begin alternative employment. 6.2.3 Deferred Compensation. Employee, as a participant in the Company's Deferred Compensation Plan, shall receive a payment equal to, but not less than, the Company match said Employee received in the year prior to the takeover, or a full year prior to Employee's termination, whichever is later. 6.3 Notwithstanding anything herein to the contrary, in the event Company reasonably determines that any payment or benefit provided under this section is an "excess parachute payment" within the meaning of section 280(G) of the Internal Revenue Code, as amended, Company shall be entitled to limit the total of all payments or compensation to Employee to the maximum amount payable by Company that would not constitute such "excess parachute payment." 7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. For purposes of this Agreement, Confidential Information is defined as trade secrets (as defined in Indiana Code 24-2-3-2, as amended), software programs, customer reports, customer lists, vendor reports, vendor lists, and other information regarding customers and vendors utilized by Company in the course of its business, and any information regarding Company's present or future business plans. 7.1 Employee acknowledges his position with Company will expose Employee to certain Confidential Information of Company; and that Confidential Information constitutes a valuable, special and unique asset of Company's business. Employee will not, during or at any time after the term of his employment, disclose any Confidential Information acquired by Employee during his employment, to any person, firm, 6 corporation, association, or other entity for any purpose, or use Confidential Information for any purpose, other than for the performance of services for Company. 7.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section, Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach or threatened breach, including the recovery of damages, costs and attorney's fees from Employee. 7.3 Employee acknowledges that all Confidential Information is the sole and exclusive property of Company. Employee shall surrender possession of all Confidential Information, including documents, computers, software, disks, tape or video recording, or any other written, recorded, or graphic matter, however produced or reproduced, containing Confidential Information to Company upon any suspension or termination of Employee's employment. If, after the suspension or termination of Employee's employment, Employee becomes aware of any Confidential Information in his possession, Employee shall immediately surrender possession of the Confidential Information to Company. 8. RESTRICTIVE COVENANT. For purposes of this Agreement, "Competing Business" is defined as Gilbarco, Wayne, Schlumberger, Bennett, and Tatsuno, and their respective affiliates and subsidiaries, both domestic and international, and any other company engaged in the petroleum dispensing manufacturing business or point of sale equipment business related to petroleum dispensing. 8.1 Employee hereby covenants and agrees that, for the greater of 12 months after termination of this Agreement, or such time as Employee is receiving any severance pay from Company (the "Restricted Period") Employee will not, directly or indirectly own, manage, operate, control, be controlled by, participate in, be employed by, or be connected in any manner with the ownership, management, operation or control of any Competing Business. Employee further covenants and agrees that he will not during the Restricted Period contact or attempt to contact, either directly or indirectly, any customers of Company as they may exist at the time of termination of Employee's employment for the purpose of soliciting such customer's business for or on behalf of any Competing Business. Employee specifically acknowledges and agrees that Company's business is international in scope and that the restriction as contained in this section is intended to cover activity by Employee both domestically and internationally. Employee further stipulates, covenants and agrees that a reasonable geographic restriction, as that term is used and defined by Indiana law, on Employee's activity's under this section is the entire world. 8.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section , Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the 7 event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach, including the recovery of damages, costs and attorney's fees from Employee. 8.3 If a court of competent jurisdiction or any arbitrator determines that any provision or restriction in this section is unreasonable or unenforceable, the court or arbitrator shall modify such restriction or provision so that the agreement then becomes an enforceable restriction of the activities of Employee. 9. FORFEITURE OF BENEFITS. In the event Employee is breaching his obligations under either section 7 or section 8 of this Agreement, Employee shall forfeit all future payments or compensation payable or provided by Company. 10. NO CONTINUING OBLIGATION. Employee acknowledges and agrees that this Agreement does not grant Employee the right to continue as an Employee of Company as an executive or in any other capacity. 11. NO TRUST ESTABLISHED. All payments provided under this Agreement shall be paid in cash from the general funds of Company and no separate or special fund has been or shall be established and no segregation of assets has been or shall be made to assure payment. Employee shall have no right, title or interest in or to any investments or other assets which Company may acquire or obtain to assist in meeting its obligations under this Agreement. 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 Company and Employee or any other person. The right of any person to receive payments from Company under this Agreement shall be no greater than the rights of a general unsecured creditor of Company. 12. TAXES, ETC. Company may withhold from any payments or benefits provided under this Agreement: 12.1 all federal, state, city or other taxes as required pursuant to any law or governmental regulation or ruling; and 12.2 any amounts owed by Employee to Company for any reason at the time of the termination of this Agreement. 13. NO ASSIGNMENT OR ALIENATION. This Agreement shall not be assignable by Employee without Company's prior written consent; provided, however, that nothing in this paragraph shall preclude Employee from designating a beneficiary to receive any benefit payable upon his death, or preclude Employee's executors, administrators or other legal representatives of his estate from assigning any rights hereunder to the person or persons entitled thereto. Further, 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 8 by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 14. ARBITRATION. Employee and Company recognize and agree that the arbitration of disputes provides mutual advantages in terms of facilitating the fair and expeditious resolution of disputes. In consideration of these mutual advantages, the parties agree as follows: 14.1 Scope of Arbitration. The parties will submit to arbitration, in accordance with these provisions, any and all disputes either party may have arising from or related to this Agreement, and any other disputes between the parties arising from or related to their employment relationship, including but not limited to, any disputes regarding alleged common law tort violations or violations of state or federal statutory rights. The parties further agree that the arbitration process set forth below shall be the exclusive means for resolving all disputes made subject to arbitration but that no arbitrator shall have authority to determine whether disputes fall within the scope of these arbitration provisions. 14.2 Governing Law. Employee and Company agree that the interpretation and enforcement of the arbitration provisions of this Agreement, including any right to appeal, shall be governed by the Indiana Uniform Arbitration Act, I.C. 34-4-2-1, et seq. 14.3 Time Limits on Submitting Disputes. Employee and Company acknowledge and agree that one of the objectives of this arbitration provision is to resolve disputes expeditiously, as well as fairly, and that it is the obligation of both parties, to those ends, to raise any disputes subject to arbitration under this Agreement in an expeditious manner. Accordingly, the parties agree to waive all statutes of limitations that might otherwise be applicable, and agree further that, as to any dispute subject to arbitration pursuant to this Agreement, notice of a demand for arbitration must be provided to the other party: 14.3.1 In the event of a dispute arising out of a termination of this Agreement, within 6 months of the date of termination; 14.3.2 In the event of a breach of section or section of this Agreement, within 4 months after the Chief Executive Officer has actual knowledge of the breach; or 14.3.3 In the event of any other dispute, within 3 months after the dispute arises. Failure to demand arbitration on claims within these time limits is intended to, and shall to the furthest extent permitted by law, be a waiver and release with respect to such claims, and, in the absence of a timely submitted written demand for arbitration, an arbitrator has no authority to resolve the disputes or render an award. 9 14.4 Availability of Provisional Relief. Notwithstanding anything herein to the contrary, nothing in this section shall prevent Company or Employee from obtaining injunctive relief from a court of competent jurisdiction to enforce the obligations of sections and for which either party may require provisional relief pending a decision on the merits by the arbitrator. 14.5 American Arbitration Association Rules Apply as Modified Herein. Any arbitration of disputes shall be conducted under the Model Employment Procedures of the American Arbitration Association (AAA), as modified in this Agreement. 14.6 Invoking Arbitration. Either party may invoke the arbitration procedures described in this Agreement by written notice of a demand for arbitration (an "Arbitration Notice"). An Arbitration Notice shall contain a statement of the matter to be arbitrated in sufficient detail to establish the timeliness of the demand. The parties shall then have 10 business days within which they may identify a mutually agreeable arbitrator. After the 10-day period has expired, the parties shall prepare and submit to the AAA a joint submission, with each party to contribute half of the appropriate administrative fee. In their submission to the AAA, the parties shall either designate a mutually acceptable arbitrator or request a panel of arbitrators from the AAA according to the procedure described in section, below. 14.7 Arbitrator Selection. In the event the parties cannot agree upon an arbitrator within 10 business days after the Arbitration Notice is received, their joint submission to the AAA shall request a panel of seven arbitrators from the joint Labor and Commercial Arbitration Panels who are practicing attorneys with professional experience in the field of labor and/or employment law and the parties shall attempt to select an arbitrator from the panel according to AAA procedures. If the parties remain unable to select an arbitrator, they shall request from AAA a panel of three comparably qualified arbitrators from which the AAA shall reject the least preferred candidate of each party and select the candidate with the highest joint ranking of the parties. In the event of the death or disability of an arbitrator, the parties shall select a new arbitrator as provided above. The substitute arbitrator shall have the power to determine the extent to which he or she shall act on the record already made in arbitration. 14.8 Prehearing Procedures. Upon accepting assignment as arbitrator, the arbitrator shall promptly conduct a preliminary hearing at which each party shall be entitled to submit a brief statement of their respective positions, and at which the arbitrator shall establish a timetable for prehearing activities and the conduct of the hearing, and may address initial requests from the parties for prehearing disclosure of information. At the preliminary hearing and/or thereafter, the arbitrator shall have the discretion and authority to order, upon request or otherwise, the prehearing disclosure of information to the parties. Such disclosure may include, without limitation, production of requested documents, exchange of witness lists and summaries of the testimony of proposed witnesses, and examination by deposition of potential witnesses, to the end that information disclosure shall be conducted in the most expeditious and cost-effective manner possible, and shall be limited to that which is relevant and for which each party has a substantial, demonstrable need. The arbitrator shall further have the authority, upon request or otherwise, to 10 conference with the parties or their designated representatives concerning any matter, and to set or modify timetables for all aspects of the arbitration proceeding. The arbitrator may award either party its reasonable attorney's fees and costs, including reasonable expenses associated with production of witnesses or proof, upon a finding that the other party (a) engaged in unreasonable delay, (b) failed to comply with the Arbitrator's discovery order, or (c) failed to comply with requirements of confidentiality hereunder. The arbitrator shall also have the authority, upon request or otherwise, to entertain and decide motions for prehearing judgment. 14.9 Stenographic Record. There shall be a stenographic record of the arbitration hearing, unless the parties agree to record the proceedings by other reliable means. The costs of recording the proceedings shall be borne equally by the parties. 14.10 Location. Unless otherwise agreed by the parties, arbitration hearings shall take place in Fort Wayne, Allen County, Indiana at a mutually agreeable place or, if no agreement can be reached, at a place designated by the AAA. 14.11 The Hearing. At any hearing, the party bearing the burden of proof according to the governing substantive law shall present its evidence first. 14.12 Posthearing Briefs. After the close of the arbitration hearing, and on any issue concerning prehearing procedures, the arbitrator shall allow the parties to submit written briefs. 14.13 Confidentiality. All arbitration proceedings hereunder shall be confidential. Neither party shall disclose any information about the evidence produced by the other in the arbitration proceeding or about documents produced by the other in connection with the proceeding, except in the course of a judicial, regulatory or arbitration proceeding, or as may be requested by governmental authority. Before making any disclosure permitted by the preceding sentence, the party shall give the other party reasonable written notice of the intended disclosure and an opportunity to protect its interests. Expert witnesses and stenographic reporters shall sign appropriate nondisclosure agreements. 14.14 Costs. As to any disputes arising from the termination of the Agreement, each party shall be responsible for its costs, including attorney's fees, incurred in any arbitration, and the arbitrator shall not have authority to include all or any portion of said costs and fees in his or her award. The costs and fees of the arbitrator and of the AAA shall be borne equally by the parties. 14.14.1 Notwithstanding anything herein to the contrary, Company shall be entitled to recover its costs and attorney's fees incurred in enforcing the provisions of section 7 and section 8. 14.15 Remedies. Subject to the provisions of section , the arbitrator shall have authority to award any remedy or relief that a federal or state court situated in the State of Indiana could grant in conformity to applicable law. 11 14.16 Law Governing the Arbitrator's Award. In rendering an award, the arbitrator shall determine the rights and obligations of the parties, including employment discrimination issues, according to federal law and the substantive law of the State of Indiana (excluding conflicts of laws principles) as though the matter were before a court of law. 14.17 Written Awards and Enforcement. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The parties agree that a competent court shall enter judgment upon the award of the arbitrator, provided it is in conformity with the terms of this Agreement. 14.18 Conflict in Procedure. If any part of this arbitration procedure is in conflict with any mandatory requirement of applicable law, the mandatory requirement shall govern, and the procedure set forth above shall be reformed and construed to the maximum extent possible in conformance with the applicable law. The procedure shall remain otherwise unaffected and enforceable. 15. MISCELLANEOUS. 15.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties and all prior negotiations and agreements, whether written or oral, are merged into this Agreement. 15.2 Severability. If any provision of this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or part of a provision of this Agreement; but this Agreement shall be reformed and construed as if such provision had never been contained in it, and any such provision shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted. 15.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counterparts collectively shall constitute one document representing the agreement among the parties. 15.4 Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 15.5 Amendment. This Agreement may not be amended, discharged, terminated, or changed orally; and any such proposed amendment, discharge, termination, or change shall be in writing and signed by the party against whom such amendment, change, discharge, or termination is sought. 12 15.6 Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach; and no waiver shall be valid unless it is in writing and is signed by the party against whom such waiver is sought. 15.7 Extension of Noncompete Period. The periods of time during which Employee is prohibited from engaging in such business practices pursuant to this Agreement shall be extended by any length of time during which Employee is in breach of any of such covenants. 15.8 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana. 15.9 Survival. The provisions and restrictions contained in sections and shall survive the termination of this Agreement and Employee's employment with Company. 15.10 Attorney Fees and Expenses. Except as expressly provided in this Agreement or by statute and ordered by an arbitrator or court in accordance with the provisions of this Agreement, no party shall be entitled to recover from the other party the reasonable attorney's fees, costs and expenses incurred as a result of any action to enforce any of the rights under this Agreement. 15.11 Full Disclosure. Employee acknowledges that Employee's employment with Company is conditioned upon the execution of this Agreement. Employee represents and acknowledges that Employee has carefully reviewed all of the terms and conditions in this Agreement, and has been advised of Employee's right to seek independent legal counsel prior to execution of this Agreement. 15.12 Notices. Any notice, request, or other communication required or permitted under this Agreement shall be in writing. Notice shall be deemed to have been given only if personally delivered or sent by registered or certified mail, return receipt requested. Any notice so mailed shall be deemed given on the postmark date. Failure or refusal to accept or receive any notice or communication shall not affect the validity of the notice. All such notices shall be given to the respective parties at the addresses designated below, or to such other address as a party may designate in a like manner. If to Company: TOKHEIM CORPORATION c/o TIMOTHY EASTOM, VICE PRESIDENT, HUMAN RESOURCES P.O. BOX 360 FORT WAYNE, IN 46801 If to Employee: JACQUES ST-DENIS 2714 CROSSBRANCH COURT FORT WAYNE, IN 46825 13 IN WITNESS WHEREOF, the parties have entered into this Agreement the date first written above. COMPANY EMPLOYEE TOKHEIM CORPORATION /s/ DOUGLAS K. PINNER /s/ JACQUES ST-DENIS - ------------------------------- ------------------------------------ DOUGLAS K. PINNER JACQUES ST-DENIS CHAIRMAN, PRESIDENT & CEO /s/ NORMAN L. ROELKE - ------------------------------- Attest: NORMAN L. ROELKE Its: VICE PRESIDENT, SECRETARY & GENERAL COUNSEL 14 EX-10.7 9 EMPLOYMENT AGREEMENT, NORMAN L. ROELKE Exhibit 10.7 [TOKHEIM LOGO] EMPLOYMENT AGREEMENT for CORPORATE OFFICERS THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of this 23rd day of DECEMBER, 1997, by and between Tokheim Corporation, an Indiana Corporation ("Company") and NORMAN L. ROELKE ("Employee"). RECITALS A. Company acknowledges and recognizes the value of Employee's services and deems it necessary and desirable to retain Employee's full-time services. B. Employee and Company desire to embody the terms and conditions of Employee's employment in a written agreement which will supersede all prior employment agreements, whether written or oral. AGREEMENT NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: EMPLOYMENT. Company agrees to employ employee, and the employee agrees to serve company, on a full time basis in the capacity of VICE PRESIDENT, SECRETARY & GENERAL COUNSEL, subject to the terms and conditions of this agreement. 1. TERM. Employee's employment shall commence on the effective date of this Agreement and continue for an indefinite period and until such time as it may be terminated by one or both of the parties as provided below. 2. DUTIES. 2.1 During the term of this Agreement, Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsibilities as Company, through its Board of Directors ("Board"), any duly appointed Committee of the Board, the Chief Executive Officer of the Company (the "Chief Executive Officer"), or such other Executive Officers as may be designated by the Board, shall, from time to time, direct. Company specifically retains the right to alter or amend the position, responsibilities, duties or services to be performed by Employee in such manner as to it shall be deemed in the best interests of Company. During the term of employment, Employee shall devote his best efforts and skills to the business interests of Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with Company's business, or which may in any way interfere with his employment, without the consent of Company. 2.2 Employee agrees that, during the term of his employment, any and all inventions and discoveries, whether or not patentable, which Employee may conceive or make (collectively, "Inventions"), either alone or in conjunction with others and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, promptly execute and assign any and all applications, assignments and other instruments which Company shall deem necessary in order to apply for and obtain letters patent of the United States and foreign countries for any Inventions, and in order to assign and convey to Company, or to Company's nominee the sole and exclusive right, title and interest in and to any Inventions or any applications or patents thereon. As promptly as known or possessed by Employee, Employee shall disclose to Company all information with respect to any Invention. Employee further agrees that, during the term of employment, any trademarks, tradenames, service marks, trade styles, logos, emblems, labels, slogans and writings, whether or not copyrighted (collectively, "Marks"), originated by Employee, alone or in conjunction with others, and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, take all action necessary to register or otherwise perfect Company's interest in and to any Marks. 3. COMPENSATION. During the term of this Agreement, Company shall compensate Employee for his services as follows: 3.1 Employee shall be entitled to a monthly base salary of $12,916.67 (the "Base Salary"). Base Salary will be reviewed periodically. Base Salary shall be payable in semi-monthly or monthly installments, in accordance with the policy of Company at the time of such payments. 3.2 Employee shall be eligible for such officer's bonus program as may from time to time be made available and applicable to Employee. Provided, however, that nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the officers bonus program, or from eliminating or adding any other bonus programs as it shall from time to time deem appropriate and in the interests of Company. 3.3 Employee shall be granted participation in all employee benefit plans applicable to Employee's position with Company, including, but not limited 2 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 Employee (collectively, "Plans"), consistent with the policies of Company and the terms and conditions of the Plans. Nothing in this Agreement shall be deemed to alter the terms and conditions of any Plans or the policy of Company with respect to any Plans, and nothing in this Agreement shall be deemed to entitle Employee to any rights in any Plan which would not otherwise be made available to Employee pursuant to the terms, conditions and provisions of the Plans. Further, nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the Plan, or from eliminating or adding any other Plan as it shall from time to time deem appropriate and in the interests of Company. 3.3.1 Except as may otherwise be expressly provided, Employee shall be granted, upon termination of this Agreement, such rights as may be available to him pursuant to any Plan or Plans then in effect. 4. TERMINATION. Either Company or Employee may terminate this Agreement upon providing written notice to the other. 4.1 By the Company. In the event this Agreement is terminated with cause (as defined below), Employee shall be entitled to no severance pay and 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. 4.1.1 With Cause. For purposes of this Agreement, the termination of this Agreement shall be deemed to have been made with cause only upon the occurrence of one or more of the following circumstances: 4.1.1.1 Employee engages in any breach of fiduciary duty, act of dishonesty, or theft involving Company; 4.1.1.2 Employee is convicted of a felony; 4.1.1.3 Employee discloses Confidential Information in violation of section 7 , below, or competes with Company in violation of section 8, below; 4.1.1.4 Employee refuses or fails to carry out the duties which may have been assigned to him; or 4.1.1.5 Employee continues to violate any written Company policy after written notice by Company of the violation. 3 4.1.2 Without Cause. In the event Company terminates this Agreement without cause, Employee shall be entitled to severance pay equal to 18 months of Employee's Base Salary in effect at the time of the termination, payable at the same interval as his salary at the time of the termination. 4.1.2.1 Employee shall have no obligation to mitigate damages by seeking other employment. 4.1.2.2 The right to severance pay under this section shall vest upon notice of termination and shall not be affected by Employee's subsequent death or disability. 4.2 By Employee. In the event Employee terminates this Agreement, Employee shall be entitled to no severance pay and shall be entitled only to such other rights as may be provided in this Agreement or as may otherwise be available to him in law or equity. 4.3 Death or disability. In the event Employee dies or becomes permanently disabled during the term of this Agreement or any extension of it, this Agreement shall terminate upon the date of such death or permanent disability. In the event this Agreement terminates by Employee's death or disability, Company shall pay Employee's pro-rata Base Salary through the termination date, and Employee shall be entitled to no severance pay. Notwithstanding anything to the contrary, in the event this Agreement terminates as a result of Employee's death or disability, Employee shall be entitled to such continuing benefits as may be provided in any Plan or by law. 5. RETURN OF COMPANY PROPERTY. Upon termination of this Agreement for any reason, Employee shall immediately surrender to Company, in the same condition as existed prior to termination of this Agreement, all property of Company in his possession or control, including Confidential Information (as defined below), computers, files, and any other property owned by Company. Employee and Company acknowledge and agree that the damages suffered as a result of the breach of this section would be difficult to ascertain. Accordingly, the parties agree that Company shall be entitled to liquidated damages in the amount of $5,000 in the event of a breach by Employee of this section. 6. CHANGE IN CONTROL. 6.1 Benefits payable. Notwithstanding anything in this Agreement to the contrary, Employee shall be entitled to the termination benefits set forth below if this Agreement is terminated by a "Triggering Event." The benefits set forth below shall be in addition to any other benefits which may have accrued to Employee during the term of employment; provided, however, that the provisions regarding direct severance pay shall be exclusive and shall replace any other rights of Employee to direct severance payments as set forth in section 5. 6.1.1 Triggering Event. For purposes of this Agreement, a Triggering Event shall be deemed to have occurred if: 4 6.1.1.1 there is a Change in Control (as defined below); and 6.1.1.2 within 12 months after the Change in Control: (a) Company terminates this Agreement without cause, or (b) (1) Employee terminates this Agreement, and (2) in combination with the Change in Control there has been one or more of the following: (i) a change of the Chief Executive Officer, (ii) a material change of Employee's job responsibilities, (iii) a greater than 20% reduction of Employee's Base Salary or benefits, or (iv) the relocation of Employee's primary office location to a distance greater than 50 miles from the current office location. 6.1.2 Change in Control. As used in this Agreement, a "Change in Control" shall be deemed to have occurred if there has been one or more of the following: 6.1.2.1 any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended [the "Exchange Act"]), other than a trustee or fiduciary holding securities under an employee benefit plan of Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing twenty percent (20%) or more of the combined voting power of Company's then outstanding voting securities; 6.1.2.2 there is a merger or consolidation of Company in which Company is not the surviving corporation; or 6.1.2.3 the business or businesses of Company for which Employee's services are principally performed is disposed of by Company pursuant to a partial or complete liquidation of Company, a sale of assets (including stock of a subsidiary) of Company, or otherwise. 5 6.2 Benefits. In the event this Agreement is terminated by a Triggering Event, Employee shall be entitled to the following: 6.2.1 Severance pay in an amount equal to 299% of Employee's "annualized includible compensation for the base period," within the meaning of section 280(G), of the Internal Revenue Code, as amended. Notwithstanding anything herein to the contrary, any amounts payable pursuant to this subparagraph shall be reduced by the amount of any disability benefits paid to Employee. 6.2.1.1 Payments under this section shall be made over 12 months in the same interval as Employee's salary as the time of termination of this Agreement. 6.2.1.2 Employee shall have no obligation to mitigate damages by seeking other employment. 6.2.2 Medical insurance, life insurance and disability insurance benefits from Company on terms comparable to the benefits provided by Company to Employee as of the date of the termination of this Agreement for 12 months or until Employee shall begin alternative employment. 6.2.3 Deferred Compensation. Employee, as a participant in the Company's Deferred Compensation Plan, shall receive a payment equal to, but not less than, the Company match said Employee received in the year prior to the takeover, or a full year prior to Employee's termination, whichever is later. 6.3 Notwithstanding anything herein to the contrary, in the event Company reasonably determines that any payment or benefit provided under this section is an "excess parachute payment" within the meaning of section 280(G) of the Internal Revenue Code, as amended, Company shall be entitled to limit the total of all payments or compensation to Employee to the maximum amount payable by Company that would not constitute such "excess parachute payment." 7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. For purposes of this Agreement, Confidential Information is defined as trade secrets (as defined in Indiana Code 24-2-3-2, as amended), software programs, customer reports, customer lists, vendor reports, vendor lists, and other information regarding customers and vendors utilized by Company in the course of its business, and any information regarding Company's present or future business plans. 7.1 Employee acknowledges his position with Company will expose Employee to certain Confidential Information of Company; and that Confidential Information constitutes a valuable, special and unique asset of Company's business. Employee will not, during or at any time after the term of his employment, disclose any Confidential Information acquired by Employee during his employment, to any person, firm, corporation, association, or other entity for any purpose, or use Confidential Information for any purpose, other than for the performance of services for Company. 6 7.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section , Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach or threatened breach, including the recovery of damages, costs and attorney's fees from Employee. 7.3 Employee acknowledges that all Confidential Information is the sole and exclusive property of Company. Employee shall surrender possession of all Confidential Information, including documents, computers, software, disks, tape or video recording, or any other written, recorded, or graphic matter, however produced or reproduced, containing Confidential Information to Company upon any suspension or termination of Employee's employment. If, after the suspension or termination of Employee's employment, Employee becomes aware of any Confidential Information in his possession, Employee shall immediately surrender possession of the Confidential Information to Company. 8. RESTRICTIVE COVENANT. For purposes of this Agreement, "Competing Business" is defined as Gilbarco, Wayne, Schlumberger, Bennett, and Tatsuno, and their respective affiliates and subsidiaries, both domestic and international, and any other company engaged in the petroleum dispensing manufacturing business or point of sale equipment business related to petroleum dispensing. 8.1 Employee hereby covenants and agrees that, for the greater of 12 months after termination of this Agreement, or such time as Employee is receiving any severance pay from Company (the "Restricted Period") Employee will not, directly or indirectly own, manage, operate, control, be controlled by, participate in, be employed by, or be connected in any manner with the ownership, management, operation or control of any Competing Business. Employee further covenants and agrees that he will not during the Restricted Period contact or attempt to contact, either directly or indirectly, any customers of Company as they may exist at the time of termination of Employee's employment for the purpose of soliciting such customer's business for or on behalf of any Competing Business. Employee specifically acknowledges and agrees that Company's business is international in scope and that the restriction as contained in this section is intended to cover activity by Employee both domestically and internationally. Employee further stipulates, covenants and agrees that a reasonable geographic restriction, as that term is used and defined by Indiana law, on Employee's activity's under this section is the entire world. 8.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section , Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, 7 including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach, including the recovery of damages, costs and attorney's fees from Employee. 8.3 If a court of competent jurisdiction or any arbitrator determines that any provision or restriction in this section is unreasonable or unenforceable, the court or arbitrator shall modify such restriction or provision so that the agreement then becomes an enforceable restriction of the activities of Employee. 9. FORFEITURE OF BENEFITS. In the event Employee is breaching his obligations under either section 7 or section 8 of this Agreement, Employee shall forfeit all future payments or compensation payable or provided by Company. 10. NO CONTINUING OBLIGATION. Employee acknowledges and agrees that this Agreement does not grant Employee the right to continue as an Employee of Company as an executive or in any other capacity. 11. NO TRUST ESTABLISHED. All payments provided under this Agreement shall be paid in cash from the general funds of Company and no separate or special fund has been or shall be established and no segregation of assets has been or shall be made to assure payment. Employee shall have no right, title or interest in or to any investments or other assets which Company may acquire or obtain to assist in meeting its obligations under this Agreement. 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 Company and Employee or any other person. The right of any person to receive payments from Company under this Agreement shall be no greater than the rights of a general unsecured creditor of Company. 12. TAXES, ETC. Company may withhold from any payments or benefits provided under this Agreement: 12.1 all federal, state, city or other taxes as required pursuant to any law or governmental regulation or ruling; and 12.2 any amounts owed by Employee to Company for any reason at the time of the termination of this Agreement. 13. NO ASSIGNMENT OR ALIENATION. This Agreement shall not be assignable by Employee without Company's prior written consent; provided, however, that nothing in this paragraph shall preclude Employee from designating a beneficiary to receive any benefit payable upon his death, or preclude Employee's executors, administrators or other legal representatives of his estate from assigning any rights hereunder to the person or persons entitled thereto. Further, 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. 8 14. ARBITRATION. Employee and Company recognize and agree that the arbitration of disputes provides mutual advantages in terms of facilitating the fair and expeditious resolution of disputes. In consideration of these mutual advantages, the parties agree as follows: 14.1 Scope of Arbitration. The parties will submit to arbitration, in accordance with these provisions, any and all disputes either party may have arising from or related to this Agreement, and any other disputes between the parties arising from or related to their employment relationship, including but not limited to, any disputes regarding alleged common law tort violations or violations of state or federal statutory rights. The parties further agree that the arbitration process set forth below shall be the exclusive means for resolving all disputes made subject to arbitration but that no arbitrator shall have authority to determine whether disputes fall within the scope of these arbitration provisions. 14.2 Governing Law. Employee and Company agree that the interpretation and enforcement of the arbitration provisions of this Agreement, including any right to appeal, shall be governed by the Indiana Uniform Arbitration Act, I.C. 34-4-2-1, et seq. 14.3 Time Limits on Submitting Disputes. Employee and Company acknowledge and agree that one of the objectives of this arbitration provision is to resolve disputes expeditiously, as well as fairly, and that it is the obligation of both parties, to those ends, to raise any disputes subject to arbitration under this Agreement in an expeditious manner. Accordingly, the parties agree to waive all statutes of limitations that might otherwise be applicable, and agree further that, as to any dispute subject to arbitration pursuant to this Agreement, notice of a demand for arbitration must be provided to the other party: 14.3.1 In the event of a dispute arising out of a termination of this Agreement, within 6 months of the date of termination; 14.3.2 In the event of a breach of section or section of this Agreement, within 4 months after the Chief Executive Officer has actual knowledge of the breach; or 14.3.3 In the event of any other dispute, within 3 months after the dispute arises. Failure to demand arbitration on claims within these time limits is intended to, and shall to the furthest extent permitted by law, be a waiver and release with respect to such claims, and, in the absence of a timely submitted written demand for arbitration, an arbitrator has no authority to resolve the disputes or render an award. 9 14.4 Availability of Provisional Relief. Notwithstanding anything herein to the contrary, nothing in this section shall prevent Company or Employee from obtaining injunctive relief from a court of competent jurisdiction to enforce the obligations of sections and for which either party may require provisional relief pending a decision on the merits by the arbitrator. 14.5 American Arbitration Association Rules Apply as Modified Herein. Any arbitration of disputes shall be conducted under the Model Employment Procedures of the American Arbitration Association (AAA), as modified in this Agreement. 14.6 Invoking Arbitration. Either party may invoke the arbitration procedures described in this Agreement by written notice of a demand for arbitration (an "Arbitration Notice"). An Arbitration Notice shall contain a statement of the matter to be arbitrated in sufficient detail to establish the timeliness of the demand. The parties shall then have 10 business days within which they may identify a mutually agreeable arbitrator. After the 10-day period has expired, the parties shall prepare and submit to the AAA a joint submission, with each party to contribute half of the appropriate administrative fee. In their submission to the AAA, the parties shall either designate a mutually acceptable arbitrator or request a panel of arbitrators from the AAA according to the procedure described in section , below. 14.7 Arbitrator Selection. In the event the parties cannot agree upon an arbitrator within 10 business days after the Arbitration Notice is received, their joint submission to the AAA shall request a panel of seven arbitrators from the joint Labor and Commercial Arbitration Panels who are practicing attorneys with professional experience in the field of labor and/or employment law and the parties shall attempt to select an arbitrator from the panel according to AAA procedures. If the parties remain unable to select an arbitrator, they shall request from AAA a panel of three comparably qualified arbitrators from which the AAA shall reject the least preferred candidate of each party and select the candidate with the highest joint ranking of the parties. In the event of the death or disability of an arbitrator, the parties shall select a new arbitrator as provided above. The substitute arbitrator shall have the power to determine the extent to which he or she shall act on the record already made in arbitration. 14.8 Prehearing Procedures. Upon accepting assignment as arbitrator, the arbitrator shall promptly conduct a preliminary hearing at which each party shall be entitled to submit a brief statement of their respective positions, and at which the arbitrator shall establish a timetable for prehearing activities and the conduct of the hearing, and may address initial requests from the parties for prehearing disclosure of information. At the preliminary hearing and/or thereafter, the arbitrator shall have the discretion and authority to order, upon request or otherwise, the prehearing disclosure of information to the parties. Such disclosure may include, without limitation, production of requested documents, exchange of witness lists and summaries of the testimony of proposed witnesses, and examination by deposition of potential witnesses, to the end that information disclosure shall be conducted in the most expeditious and cost-effective manner possible, and shall be limited to that which is relevant and for which each party has a substantial, demonstrable need. The arbitrator shall further have the authority, upon request or otherwise, to conference with the parties or their designated representatives concerning any matter, and to set or modify timetables for all aspects of the arbitration proceeding. 10 The arbitrator may award either party its reasonable attorney's fees and costs, including reasonable expenses associated with production of witnesses or proof, upon a finding that the other party (a) engaged in unreasonable delay, (b) failed to comply with the Arbitrator's discovery order, or (c) failed to comply with requirements of confidentiality hereunder. The arbitrator shall also have the authority, upon request or otherwise, to entertain and decide motions for prehearing judgment. 14.9 Stenographic Record. There shall be a stenographic record of the arbitration hearing, unless the parties agree to record the proceedings by other reliable means. The costs of recording the proceedings shall be borne equally by the parties. 14.10 Location. Unless otherwise agreed by the parties, arbitration hearings shall take place in Fort Wayne, Allen County, Indiana at a mutually agreeable place or, if no agreement can be reached, at a place designated by the AAA. 14.11 The Hearing. At any hearing, the party bearing the burden of proof according to the governing substantive law shall present its evidence first. 14.12 Posthearing Briefs. After the close of the arbitration hearing, and on any issue concerning prehearing procedures, the arbitrator shall allow the parties to submit written briefs. 14.13 Confidentiality. All arbitration proceedings hereunder shall be confidential. Neither party shall disclose any information about the evidence produced by the other in the arbitration proceeding or about documents produced by the other in connection with the proceeding, except in the course of a judicial, regulatory or arbitration proceeding, or as may be requested by governmental authority. Before making any disclosure permitted by the preceding sentence, the party shall give the other party reasonable written notice of the intended disclosure and an opportunity to protect its interests. Expert witnesses and stenographic reporters shall sign appropriate nondisclosure agreements. 14.14 Costs. As to any disputes arising from the termination of the Agreement, each party shall be responsible for its costs, including attorney's fees, incurred in any arbitration, and the arbitrator shall not have authority to include all or any portion of said costs and fees in his or her award. The costs and fees of the arbitrator and of the AAA shall be borne equally by the parties. 14.14.1 Notwithstanding anything herein to the contrary, Company shall be entitled to recover its costs and attorney's fees incurred in enforcing the provisions of section 7 and section 8. 14.15 Remedies. Subject to the provisions of section, the arbitrator shall have authority to award any remedy or relief that a federal or state court situated in the State of Indiana could grant in conformity to applicable law. 11 14.16 Law Governing the Arbitrator's Award. In rendering an award, the arbitrator shall determine the rights and obligations of the parties, including employment discrimination issues, according to federal law and the substantive law of the State of Indiana (excluding conflicts of laws principles) as though the matter were before a court of law. 14.17 Written Awards and Enforcement. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The parties agree that a competent court shall enter judgment upon the award of the arbitrator, provided it is in conformity with the terms of this Agreement. 14.18 Conflict in Procedure. If any part of this arbitration procedure is in conflict with any mandatory requirement of applicable law, the mandatory requirement shall govern, and the procedure set forth above shall be reformed and construed to the maximum extent possible in conformance with the applicable law. The procedure shall remain otherwise unaffected and enforceable. 15. MISCELLANEOUS. 15.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties and all prior negotiations and agreements, whether written or oral, are merged in to this Agreement. 15.2 Severability. If any provision of this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or part of a provision of this Agreement; but this Agreement shall be reformed and construed as if such provision had never been contained in it, and any such provision shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted. 15.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counterparts collectively shall constitute one document representing the agreement among the parties. 15.4 Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 15.5 Amendment. This Agreement may not be amended, discharged, terminated, or changed orally; and any such proposed amendment, discharge, termination, or change shall be in writing and signed by the party against whom such amendment, change, discharge, or termination is sought. 12 15.6 Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach; and no waiver shall be valid unless it is in writing and is signed by the party against whom such waiver is sought. 15.7 Extension of Noncompete Period. The periods of time during which Employee is prohibited from engaging in such business practices pursuant to this Agreement shall be extended by any length of time during which Employee is in breach of any of such covenants. 15.8 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana. 15.9 Survival. The provisions and restrictions contained in sections and shall survive the termination of this Agreement and Employee's employment with Company. 15.10 Attorney Fees and Expenses. Except as expressly provided in this Agreement or by statute and ordered by an arbitrator or court in accordance with the provisions of this Agreement, no party shall be entitled to recover from the other party the reasonable attorney's fees, costs and expenses incurred as a result of any action to enforce any of the rights under this Agreement. 15.11 Full Disclosure. Employee acknowledges that Employee's employment with Company is conditioned upon the execution of this Agreement. Employee represents and acknowledges that Employee has carefully reviewed all of the terms and conditions in this Agreement, and has been advised of Employee's right to seek independent legal counsel prior to execution of this Agreement. 15.12 Notices. Any notice, request, or other communication required or permitted under this Agreement shall be in writing. Notice shall be deemed to have been given only if personally delivered or sent by registered or certified mail, return receipt requested. Any notice so mailed shall be deemed given on the postmark date. Failure or refusal to accept or receive any notice or communication shall not affect the validity of the notice. All such notices shall be given to the respective parties at the addresses designated below, or to such other address as a party may designate in a like manner. If to Company: TOKHEIM CORPORATION c/o TIMOTHY EASTOM, VICE PRESIDENT, HUMAN RESOURCES P.O. BOX 360 FORT WAYNE, IN 46801 If to Employee: NORMAN L. ROELKE 9225 COVINGTON WOODS FORT WAYNE, IN 46804 13 IN WITNESS WHEREOF, the parties have entered into this Agreement the date first written above. COMPANY EMPLOYEE TOKHEIM CORPORATION /s/ DOUGLAS K. PINNER /s/ NORMAN L. ROELKE ________________________________________ _______________________________ DOUGLAS K. PINNER NORMAN L. ROELKE CHAIRMAN, PRESIDENT & CEO /s/ TIMOTHY EASTOM ________________________________________ Attest: Timothy Eastom Its: Vice President, Human Resources _________________________________ 14 EX-10.8 10 EMPLOYMENT AGREEMENT, SCOTT A. SWOGGER Exhibit 10.8 [LOGO] EMPLOYMENT AGREEMENT for EXECUTIVE OFFICERS THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of this 23rd day of DECEMBER, 1997, by and between Tokheim Corporation, an Indiana Corporation ("Company") and SCOTT A. SWOGGER ("Employee"). RECITALS A. Company acknowledges and recognizes the value of Employee's services and deems it necessary and desirable to retain Employee's full-time services. B. Employee and Company desire to embody the terms and conditions of Employee's employment in a written agreement which will supersede all prior employment agreements, whether written or oral. AGREEMENT NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: EMPLOYMENT. Company agrees to employ Employee, and the Employee agrees to serve Company, on a full time basis in the capacity of PRESIDENT, TOKHEIM US, subject to the terms and conditions of this Agreement. 1. TERM. Employee's employment shall commence on the effective date of this Agreement and continue for an indefinite period and until such time as it may be terminated by one or both of the parties as provided below. 2. DUTIES. 2.1 During the term of this Agreement, Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsibilities as Company, through its Board of Directors ("Board"), any duly appointed Committee of the Board, the Chief Executive Officer of the Company (the "Chief Executive Officer"), or such other Executive Officers as may be designated by the Board, shall, from time to time, direct. Company specifically retains the right to alter or amend the position, responsibilities, duties or services to be performed by Employee in such manner as to it shall be deemed in the best interests of Company. During the term of employment, Employee shall devote his best efforts and skills to the business interests of Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with Company's business, or which may in any way interfere with his employment, without the consent of Company. 2.2 Employee agrees that, during the term of his employment, any and all inventions and discoveries, whether or not patentable, which Employee may conceive or make (collectively, "Inventions"), either alone or in conjunction with others and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, promptly execute and assign any and all applications, assignments and other instruments which Company shall deem necessary in order to apply for and obtain letters patent of the United States and foreign countries for any Inventions, and in order to assign and convey to Company, or to Company's nominee the sole and exclusive right, title and interest in and to any Inventions or any applications or patents thereon. As promptly as known or possessed by Employee, Employee shall disclose to Company all information with respect to any Invention. Employee further agrees that, during the term of employment, any trademarks, tradenames, service marks, trade styles, logos, emblems, labels, slogans and writings, whether or not copyrighted (collectively, "Marks"), originated by Employee, alone or in conjunction with others, and related or in any way connected with the business of Company, shall be the sole and exclusive property of Company. Employee shall, without further compensation or consideration, but at the expense of Company, and as and when requested to do so by Company, take all action necessary to register or otherwise perfect Company's interest in and to any Marks. 3. COMPENSATION. During the term of this Agreement, Company shall compensate Employee for his services as follows: 3.1 Employee shall be entitled to a monthly base salary of $12,500.00 (the "Base Salary"). Base Salary will be reviewed periodically. Base Salary shall be payable in semi-monthly or monthly installments, in accordance with the policy of Company at the time of such payments. 3.2 Employee shall be eligible for such officer's bonus program as may from time to time be made available and applicable to Employee. Provided, however, that nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the officers bonus program, or from eliminating or adding any other bonus programs as it shall from time to time deem appropriate and in the interests of Company. 3.3 Employee shall be granted participation in all employee benefit plans applicable to Employee's position with 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 Employee (collectively, "Plans"), 2 consistent with the policies of Company and the terms and conditions of the Plans. Nothing in this Agreement shall be deemed to alter the terms and conditions of any Plans or the policy of Company with respect to any Plans, and nothing in this Agreement shall be deemed to entitle Employee to any rights in any Plan which would not otherwise be made available to Employee pursuant to the terms, conditions and provisions of the Plans. Further, nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or such other Executive Officers of the Company as the Board may designate, from altering or amending the terms, eligibility, or other provisions of the Plan, or from eliminating or adding any other Plan as it shall from time to time deem appropriate and in the interests of Company. 3.3.1 Except as may otherwise be expressly provided, Employee shall be granted, upon termination of this Agreement, such rights as may be available to him pursuant to any Plan or Plans then in effect. 4. TERMINATION. Either Company or Employee may terminate this Agreement upon providing written notice to the other. 4.1 By the Company. In the event this Agreement is terminated with cause (as defined below), Employee shall be entitled to no severance pay and 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. 4.1.1 With Cause. For purposes of this Agreement, the termination of this Agreement shall be deemed to have been made with cause only upon the occurrence of one or more of the following circumstances: 4.1.1.1 Employee engages in any breach of fiduciary duty, act of dishonesty, or theft involving Company; 4.1.1.2 Employee is convicted of a felony; 4.1.1.2 Employee is convicted of a felony; 4.1.1.3 Employee discloses Confidential Information in violation of section 7, below, or competes with Company in violation of section 8, below; 4.1.1.4 Employee refuses or fails to carry out the duties which may have been assigned to him; or 4.1.1.5 Employee continues to violate any written Company policy after written notice by Company of the violation. 4.1.2 Without Cause. In the event Company terminates this Agreement without cause, Employee shall be entitled to severance pay equal to 12 months of Employee's Base Salary in effect at the time of the termination, payable at the same interval as his salary at the time of the termination. 4.1.2.1 Employee shall have no obligation to mitigate damages by seeking other employment. 4.1.2.2 Subject to any right of offset for Earned Income, the right to severance pay under this section shall vest upon notice of termination and shall not be affected by Employee's subsequent death or disability. 4.2 By Employee. In the event Employee terminates this Agreement, Employee shall be entitled to no severance pay and shall be entitled only to such other rights as may be provided in this Agreement or as may otherwise be available to him in law or equity. 4.3 Death or disability. In the event Employee dies or becomes permanently disabled during the term of this Agreement or any extension of it, this Agreement shall terminate upon the date of such death or permanent disability. In the event this Agreement terminates by Employee's death or disability, Company shall pay Employee's pro-rata Base Salary through the termination date, and Employee shall be entitled to no severance pay. Notwithstanding anything to the contrary, in the event this Agreement terminates as a result of Employee's death or disability, Employee shall be entitled to such continuing benefits as may be provided in any Plan or by law. 5. RETURN OF COMPANY PROPERTY. Upon termination of this Agreement for any reason, Employee shall immediately surrender to Company, in the same condition as existed prior to termination of this Agreement, all property of Company in his possession or control, including Confidential Information (as defined below), computers, files, and any other property owned by Company. Employee and Company acknowledge and agree that the damages suffered as a result of the breach of this section would be difficult to ascertain. Accordingly, the parties agree that Company shall be entitled to liquidated damages in the amount of $5,000 in the event of a breach by Employee of this section. 6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. For purposes of this Agreement, Confidential Information is defined as trade secrets (as defined in Indiana Code 24-2-3-2, as amended), software programs, customer reports, customer lists, vendor reports, vendor lists, and other information regarding customers and vendors utilized by Company in the course of its business, and any information regarding Company's present or future business plans. 6.1 Employee acknowledges his position with Company will expose Employee to certain Confidential Information of Company; and that Confidential Information constitutes a valuable, special and unique asset of Company's business. Employee will not, during or at any time after the term of his employment, disclose any 4 Confidential Information acquired by Employee during his employment, to any person, firm, corporation, association, or other entity for any purpose, or use Confidential Information for any purpose, other than for the performance of services for Company. 6.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section 14, Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach or threatened breach, including the recovery of damages, costs and attorney's fees from Employee. 6.3 Employee acknowledges that all Confidential Information is the sole and exclusive property of Company. Employee shall surrender possession of all Confidential Information, including documents, computers, software, disks, tape or video recording, or any other written, recorded, or graphic matter, however produced or reproduced, containing Confidential Information to Company upon any suspension or termination of Employee's employment. If, after the suspension or termination of Employee's employment, Employee becomes aware of any Confidential Information in his possession, Employee shall immediately surrender possession of the Confidential Information to Company. 7. RESTRICTIVE COVENANT. For purposes of this Agreement, "Competing Business" is defined as Gilbarco, Wayne, Schlumberger, Bennett, and Tatsuno, and their respective affiliates and subsidiaries, both domestic and international, and any other company engaged in the petroleum dispensing manufacturing business or point of sale equipment business related to petroleum dispensing. 7.1 Employee hereby covenants and agrees that, for the greater of 12 months after termination of this Agreement, or such time as Employee is receiving any severance pay from Company (the "Restricted Period") Employee will not, directly or indirectly own, manage, operate, control, be controlled by, participate in, be employed by, or be connected in any manner with the ownership, management, operation or control of any Competing Business. Employee further covenants and agrees that he will not during the Restricted Period contact or attempt to contact, either directly or indirectly, any customers of Company as they may exist at the time of termination of Employee's employment for the purpose of soliciting such customer's business for or on behalf of any Competing Business. Employee specifically acknowledges and agrees that Company's business is international in scope and that the restriction as contained in this section is intended to cover activity by Employee both domestically and internationally. Employee further stipulates, covenants and agrees that a reasonable geographic restriction, as that term is used and defined by Indiana law, on Employee's activity's under this section is the entire world. 5 7.2 In the event of Employee's actual or threatened breach of the provisions of this section, subject to the provisions of section 14, Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. In the event Company obtains an injunction enjoining Employee from violating this provision, Company shall be entitled to recover all costs incurred in connection with the injunction, including reasonable attorney's fees. Company shall also be permitted to pursue any other available remedies available for such breach, including the recovery of damages, costs and attorney's fees from Employee. 7.3 If a court of competent jurisdiction or any arbitrator determines that any provision or restriction in this section is unreasonable or unenforceable, the court or arbitrator shall modify such restriction or provision so that the agreement then becomes an enforceable restriction of the activities of Employee. 8. FORFEITURE OF BENEFITS. In the event Employee is breaching his obligations under either section 7 or section 8 of this Agreement, Employee shall forfeit all future payments or compensation payable or provided by Company. 9. NO CONTINUING OBLIGATION. Employee acknowledges and agrees that this Agreement does not grant Employee the right to continue as an Employee of Company as an executive or in any other capacity. 10. NO TRUST ESTABLISHED. All payments provided under this Agreement shall be paid in cash from the general funds of Company and no separate or special fund has been or shall be established and no segregation of assets has been or shall be made to assure payment. Employee shall have no right, title or interest in or to any investments or other assets which Company may acquire or obtain to assist in meeting its obligations under this Agreement. 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 Company and Employee or any other person. The right of any person to receive payments from Company under this Agreement shall be no greater than the rights of a general unsecured creditor of Company. 11. TAXES, ETC. Company may withhold from any payments or benefits provided under this Agreement: 11.1 all federal, state, city or other taxes as required pursuant to any law or governmental regulation or ruling; and 11.2 any amounts owed by Employee to Company for any reason at the time of the termination of this Agreement. 6 12. NO ASSIGNMENT OR ALIENATION. This Agreement shall not be assignable by Employee without Company's prior written consent; provided, however, that nothing in this paragraph shall preclude Employee from designating a beneficiary to receive any benefit payable upon his death, or preclude Employee's executors, administrators or other legal representatives of his estate from assigning any rights hereunder to the person or persons entitled thereto. Further, 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. ARBITRATION. Employee and Company recognize and agree that the arbitration of disputes provides mutual advantages in terms of facilitating the fair and expeditious resolution of disputes. In consideration of these mutual advantages, the parties agree as follows: 13.1 Scope of Arbitration. The parties will submit to arbitration, in accordance with these provisions, any and all disputes either party may have arising from or related to this Agreement, and any other disputes between the parties arising from or related to their employment relationship, including but not limited to, any disputes regarding alleged common law tort violations or violations of state or federal statutory rights. The parties further agree that the arbitration process set forth below shall be the exclusive means for resolving all disputes made subject to arbitration but that no arbitrator shall have authority to determine whether disputes fall within the scope of these arbitration provisions. 13.2 Governing Law. Employee and Company agree that the interpretation and enforcement of the arbitration provisions of this Agreement, including any right to appeal, shall be governed by the Indiana Uniform Arbitration Act, I.C. 34-4-2-1, et seq. 13.3 Time Limits on Submitting Disputes. Employee and Company acknowledge and agree that one of the objectives of this arbitration provision is to resolve disputes expeditiously, as well as fairly, and that it is the obligation of both parties, to those ends, to raise any disputes subject to arbitration under this Agreement in an expeditious manner. Accordingly, the parties agree to waive all statutes of limitations that might otherwise be applicable, and agree further that, as to any dispute subject to arbitration pursuant to this Agreement, notice of a demand for arbitration must be provided to the other party: 13.3.1 In the event of a dispute arising out of a termination of this Agreement, within 6 months of the date of termination; 7 13.3.2 In the event of a breach of section 7 or section 8 of this Agreement, within 4 months after the Chief Executive Officer has actual knowledge of the breach; or 13.3.3 In the event of any other dispute, within 3 months after the dispute arises. Failure to demand arbitration on claims within these time limits is intended to, and shall to the furthest extent permitted by law, be a waiver and release with respect to such claims, and, in the absence of a timely submitted written demand for arbitration, an arbitrator has no authority to resolve the disputes or render an award. 13.4 Availability of Provisional Relief. Notwithstanding anything herein to the contrary, nothing in this section shall prevent Company or Employee from obtaining injunctive relief from a court of competent jurisdiction to enforce the obligations of sections 7 and 8 for which either party may require provisional relief pending a decision on the merits by the arbitrator. 13.5 American Arbitration Association Rules Apply as Modified Herein. Any arbitration of disputes shall be conducted under the Model Employment Procedures of the American Arbitration Association (AAA), as modified in this Agreement. 13.6 Invoking Arbitration. Either party may invoke the arbitration procedures described in this Agreement by written notice of a demand for arbitration (an "Arbitration Notice"). An Arbitration Notice shall contain a statement of the matter to be arbitrated in sufficient detail to establish the timeliness of the demand. The parties shall then have 10 business days within which they may identify a mutually agreeable arbitrator. After the 10-day period has expired, the parties shall prepare and submit to the AAA a joint submission, with each party to contribute half of the appropriate administrative fee. In their submission to the AAA, the parties shall either designate a mutually acceptable arbitrator or request a panel of arbitrators from the AAA according to the procedure described in section 14.7, below. 13.7 Arbitrator Selection. In the event the parties cannot agree upon an arbitrator within 10 business days after the Arbitration Notice is received, their joint submission to the AAA shall request a panel of seven arbitrators from the joint Labor and Commercial Arbitration Panels who are practicing attorneys with professional experience in the field of labor and/or employment law and the parties shall attempt to select an arbitrator from the panel according to AAA procedures. If the parties remain unable to select an arbitrator, they shall request from AAA a panel of three comparably qualified arbitrators from which the AAA shall reject the least preferred candidate of each party and select the candidate with the highest joint ranking of the parties. 8 In the event of the death or disability of an arbitrator, the parties shall select a new arbitrator as provided above. The substitute arbitrator shall have the power to determine the extent to which he or she shall act on the record already made in arbitration. 13.8 Prehearing Procedures. Upon accepting assignment as arbitrator, the arbitrator shall promptly conduct a preliminary hearing at which each party shall be entitled to submit a brief statement of their respective positions, and at which the arbitrator shall establish a timetable for prehearing activities and the conduct of the hearing, and may address initial requests from the parties for prehearing disclosure of information. At the preliminary hearing and/or thereafter, the arbitrator shall have the discretion and authority to order, upon request or otherwise, the prehearing disclosure of information to the parties. Such disclosure may include, without limitation, production of requested documents, exchange of witness lists and summaries of the testimony of proposed witnesses, and examination by deposition of potential witnesses, to the end that information disclosure shall be conducted in the most expeditious and cost-effective manner possible, and shall be limited to that which is relevant and for which each party has a substantial, demonstrable need. The arbitrator shall further have the authority, upon request or otherwise, to conference with the parties or their designated representatives concerning any matter, and to set or modify timetables for all aspects of the arbitration proceeding. The arbitrator may award either party its reasonable attorney's fees and costs, including reasonable expenses associated with production of witnesses or proof, upon a finding that the other party (a) engaged in unreasonable delay, (b) failed to comply with the Arbitrator's discovery order, or (c) failed to comply with requirements of confidentiality hereunder. The arbitrator shall also have the authority, upon request or otherwise, to entertain and decide motions for prehearing judgment. 13.9 Stenographic Record. There shall be a stenographic record of the arbitration hearing, unless the parties agree to record the proceedings by other reliable means. The costs of recording the proceedings shall be borne equally by the parties. 13.10 Location. Unless otherwise agreed by the parties, arbitration hearings shall take place in Fort Wayne, Allen County, Indiana at a mutually agreeable place or, if no agreement can be reached, at a place designated by the AAA. 13.11 The Hearing. At any hearing, the party bearing the burden of proof according to the governing substantive law shall present its evidence first. 13.12 Posthearing Briefs. After the close of the arbitration hearing, and on any issue concerning prehearing procedures, the arbitrator shall allow the parties to submit written briefs. 9 13.13 Confidentiality. All arbitration proceedings hereunder shall be confidential. Neither party shall disclose any information about the evidence produced by the other in the arbitration proceeding or about documents produced by the other in connection with the proceeding, except in the course of a judicial, regulatory or arbitration proceeding, or as may be requested by governmental authority. Before making any disclosure permitted by the preceding sentence, the party shall give the other party reasonable written notice of the intended disclosure and an opportunity to protect its interests. Expert witnesses and stenographic reporters shall sign appropriate nondisclosure agreements. 13.14 Costs. As to any disputes arising from the termination of the Agreement, each party shall be responsible for its costs, including attorney's fees, incurred in any arbitration, and the arbitrator shall not have authority to include all or any portion of said costs and fees in his or her award. The costs and fees of the arbitrator and of the AAA shall be borne equally by the parties. 13.14.1 Notwithstanding anything herein to the contrary, Company shall be entitled to recover its costs and attorney's fees incurred in enforcing the provisions of section 7 and section 8. 13.15 Remedies. Subject to the provisions of section 14.14, the arbitrator shall have authority to award any remedy or relief that a federal or state court situated in the State of Indiana could grant in conformity to applicable law. 13.16 Law Governing the Arbitrator's Award. In rendering an award, the arbitrator shall determine the rights and obligations of the parties, including employment discrimination issues, according to federal law and the substantive law of the State of Indiana (excluding conflicts of laws principles) as though the matter were before a court of law. 13.17 Written Awards and Enforcement. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The parties agree that a competent court shall enter judgment upon the award of the arbitrator, provided it is in conformity with the terms of this Agreement. 13.18 Conflict in Procedure. If any part of this arbitration procedure is in conflict with any mandatory requirement of applicable law, the mandatory requirement shall govern, and the procedure set forth above shall be reformed and construed to the maximum extent possible in conformance with the applicable law. The procedure shall remain otherwise unaffected and enforceable. 10 14. MISCELLANEOUS. 14.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties and all prior negotiations and agreements, whether written or oral, are merged into this Agreement. 14.2 Severability. If any provision of this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or part of a provision of this Agreement; but this Agreement shall be reformed and construed as if such provision had never been contained in it, and any such provision shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted. 14.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counterparts collectively shall constitute one document representing the agreement among the parties. 14.4 Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 14.5 Amendment. This Agreement may not be amended, discharged, terminated, or changed orally; and any such proposed amendment, discharge, termination, or change shall be in writing and signed by the party against whom such amendment, change, discharge, or termination is sought. 14.6 Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach; and no waiver shall be valid unless it is in writing and is signed by the party against whom such waiver is sought. 14.7 Extension of Noncompete Period. The periods of time during which Employee is prohibited from engaging in such business practices pursuant to this Agreement shall be extended by any length of time during which Employee is in breach of any of such covenants. 14.8 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana. 14.9 Survival. The provisions and restrictions contained in sections 7 and 8 shall survive the termination of this Agreement and Employee's employment with Company. 11 14.10 Attorney Fees and Expenses. Except as expressly provided in this Agreement or by statute and ordered by an arbitrator or court in accordance with the provisions of this Agreement, no party shall be entitled to recover from the other party the reasonable attorney's fees, costs and expenses incurred as a result of any action to enforce any of the rights under this Agreement. 14.11 Full Disclosure. Employee acknowledges that Employee's employment with Company is conditioned upon the execution of this Agreement. Employee represents and acknowledges that Employee has carefully reviewed all of the terms and conditions in this Agreement, and has been advised of Employee's right to seek independent legal counsel prior to execution of this Agreement. 14.12 Notices. Any notice, request, or other communication required or permitted under this Agreement shall be in writing. Notice shall be deemed to have been given only if personally delivered or sent by registered or certified mail, return receipt requested. Any notice so mailed shall be deemed given on the postmark date. Failure or refusal to accept or receive any notice or communication shall not affect the validity of the notice. All such notices shall be given to the respective parties at the addresses designated below, or to such other address as a party may designate in a like manner. If to Company: TOKHEIM CORPORATION c/o TIMOTHY R. EASTOM, VP, HUMAN RESOURCES P.O. BOX 360 FORT WAYNE, IN 46801 If to Employee: SCOTT A. SWOGGER 10063 E 415 N KENDALLVILLE, IN 46755 12 IN WITNESS WHEREOF, the parties have entered into this Agreement the date first written above. COMPANY EMPLOYEE TOKHEIM CORPORATION /s/ John A. Negovetich /s/ Scott A. Swogger - --------------------------- ------------------------- JOHN A. NEGOVETICH Scott A. Swogger PRESIDENT, TOKHEIM NORTH AMERICA /s/ Norman L. Roelke - --------------------------- Attest: NORMAN L. ROELKE Its: VICE PRESIDENT, SECRETARY & GENERAL COUNSEL 13 EX-10.9 11 TECHNOLOGY LICENSE AGREEMENT, GILBARCO, INC. EXHIBIT 10.9 TECHNOLOGY LICENSE AGREEMENT - -------------------------------------------------------------------------------- THIS AGREEMENT, effective as of December 1, 1997 (referred to in this Agreement as the "Effective Date"), is made between GILBARCO INC., a corporation of Delaware having a place of business at 7300 West Friendly Avenue, Greensboro, North Carolina 27410 (referred to in this Agreement as "GILBARCO," and TOKHEIM CORPORATION, a corporation of Indiana having a place of business at 10501 Corporate Drive, Fort Wayne, Indiana 46845 (referred to in this Agreement as "TOKHEIM"). WHEREAS, GILBARCO is the owner, by assignment, of U.S. Patent Nos. Re. 35,238 granted May 14, 1996 as a reissue of U.S. Patent No, 5,040,577 granted August 20, 1991 entitled "Vapor Recovery System for Fuel Dispenser," and U.S. Patent No. 5,355,915 granted October 18, 1994 entitled "Vapor Recovery Improvements," and U.S. Patent No. 4,876,653 granted October 24, 1989 entitled "Programmable Multiple Blender," and U.S. Patent No. 5,407,115 granted April 18, 1995 entitled "Printed Receipt Severing," and also is the owner of certain inventions in vapor recovery and gasoline dispensing systems which are described and claimed in those patents; WHEREAS, TOKHEIM is a manufacturer of gasoline dispensing systems and desires to obtain a license under GILBARCO's patents and to use its vapor recovery and gasoline dispensing system technology; WHEREAS, GILBARCO and TOKHEIM are currently parties to Civil Action No. 2:95CV00581 now pending in the United States District Court for the Middle District of North Carolina ("Lawsuit"), in which GILBARCO charges TOKHEIM with committing infringement of GILBARCO's Patent Rights and acts of unfair competition in violation of N.C.G.S. 75-1.1; WHEREAS, GILBARCO and TOKHEIM desire to compromise and settle said litigation pursuant to the terms of this Agreement, including the entry by the Court of the Consent Judgment appended hereto as Exhibit A; and WHEREAS, TOKHEIM desires to exploit products incorporating GILBARCO's patented inventions and its technology. NOW, THEREFORE, in consideration of the mutual covenants hereinafter recited and other good and valuable consideration, the parties hereto agree as follows. ARTICLE I - DEFINITIONS For the purpose of this Agreement, the following terms shall have the following meanings: 1.1 "GILBARCO's Patent Rights" shall mean United States Patent No. Re. 35,238 granted May 14, 1996 as a reissue of United States Patent No. 5,040,577 granted August 20, 1991, United States Patent No. 5,355,915 granted October 18, 1994, United States Patent No. 4,876,653 granted October 24, 1989, and United States Patent No. 5,407,115 granted April 18, 1995, and all foreign counterpart patents thereof, and all reissues, reexaminations, divisions, continuations, or continuations-in-part of said patents. 1.2 "Vapor Recovery Licensed Product" shall mean a TOKHEIM vacuum-assist vapor recovery system if the completed combination or any portion thereof is claimed in 2 GILBARCO's Patent Rights, including TOKHEIM's MaxVac(R) vapor recovery products. Vapor Recovery Licensed Products may have any number of hoses, up to eight (8), either active or inactive, per dispenser, and up to two (2) sides per dispenser. 1.3 "Electronic Blending Licensed Product" shall mean a TOKHEIM electronic fuel blending system if the completed combination or any portion thereof is claimed in GILBARCO's Patent Rights, including TOKHEIM's Model -REB, -B3 and -B5 electronic blender products. Electronic Blending Licensed Products may have any number of hoses, up to eight (8), either active or inactive, per dispenser, and up to two (2) sides per dispenser. 1.4 "Receipt Severing Licensed Product" shall mean a TOKHEIM printed receipt severing device utilizing a blade, if the completed combination or any portion thereof is claimed in GILBARCO's Patent Rights, including TOKHEIM's present models of print severing receipt devices utilizing a peaked stationary blade. Receipt Severing Licensed Products may have any number of hoses up to eight (8) and up to two (2) sides per dispenser. 1.5 "Licensed Products" shall mean Vapor Recovery Licensed Products, Electronic Blending Licensed Products, Receipt Severing Licensed Products, and TOKHEIM gasoline pumps or dispensers incorporating Vapor Recovery Licensed Products, Electronic Blending Licensed Products, and Receipt Severing Licensed Products, and Related Technology, if the completed combination or any portion thereof is claimed in GILBARCO's Patent Rights. 1.6 "Related Technology" shall mean the inventions in vapor recovery and gasoline dispensing systems which are described in GILBARCO's Patent Rights. 1.7 "Subsidiary" shall mean a firm, company, or corporation in which a party owns or controls, directly or indirectly, at least a majority of the voting stock or control. 3 1.8 "Parent" shall mean a firm, company, or corporation which owns or controls, directly or indirectly, at least a majority of the voting stock or control of a party. For the purpose of this definition, the stock owned or controlled by a particular firm, company or corporation shall be deemed to include all stock owned or controlled, directly or indirectly, by any other firm, company or corporation of which the particular firm, company or corporation owns or controls, directly or indirectly, at least a majority of the stock having the right to vote for directors thereof. 1.9 "Affiliate" shall mean a firm, company, or corporation as to which a majority of the voting stock or control is owned or controlled, directly or indirectly, by a Parent of the party. ARTICLE II - GRANTS 2.1 Subject to the terms and conditions of this Agreement, and the entry by the Court of the Consent Judgment appended as Exhibit A, GILBARCO hereby grants to TOKHEIM for the term of this Agreement a nonexclusive, nontransferable (except as provided herein) worldwide license under GILBARCO's Patent Rights to make, have made, use, offer to sell and sell Licensed Products throughout the world, together with the right to convey to direct and indirect purchasers of such Licensed Products a nonexclusive license under GILBARCO's Patent Rights to use such Licensed Products so purchased, and the right to grant sublicenses with such grant to Subsidiaries. Affiliates and Parents of TOKHEIM, but no other sublicensing right is granted. ARTICLE III - ROYALTIES 3.1 As license fees for the transfer and license of GILBARCO's Patent Rights and Related Technology, and for technical assistance and consulting services provided by 4 GILBARCO by mutual consent of both parties, until the expiration of the last of GILBARCO's Patent Rights as set forth in Article V, paragraph 5.2 of this Agreement, TOKHEIM shall make the following payments: A. Three Million Dollars ($3,000,000) as a fixed royalty, payable in equal quarterly installments over three (3) years (or twelve (12) quarterly installments of $250,000 each), plus interest at a rate per annum equal to the "prime rate" published by "The Wall Street Journal" at the time such payment is due. Such interest shall accrue from the Effective Date of this Agreement. The first of said installments shall be due and payable with the first quarterly royalty report, and payment, if any, which is due after the Effective Date of this Agreement, and each installment thereafter shall be due and payable with each quarterly royalty report and payment, if any, due, pursuant to Article IV, paragraph 4.2 of this Agreement (i.e., such installment payments shall be due for the first such year on April 30, July 30 and October 30, 1998, and on January 30, 1999; for the second such year on April 30, July 30 and October 30, 1999, and on January 30, 2000; and for the third such year on April 30, July 30 and October 30, 2000, and on January 30, 2001). B. TOKHEIM acknowledges and agrees that the fixed royalty and installment payments due under Article III, paragraph 3.1.A of this Agreement are nonrefundable and shall be paid in full, regardless of any disputes or disagreements which may arise at any time under this Agreement, including, but not limited to, termination under Article V. 3.2 In addition to the fixed royalty payable to GILBARCO pursuant to Article III, paragraph 3.1 above, TOKHEIM shall also pay GILBARCO the following earned royalties, for each Licensed Product manufactured, used or sold by TOKHEIM subsequent to the Effective 5 Date of this Agreement: A. (*1) per dispenser side for each dispenser side incorporating or retrofitting a Vapor Recovery Licensed Product, or (*2) for each two sided dispenser incorporating or retrofitting Vapor Recovery Licensed Products on both sides. - --------------- (*1) Confidential information has been omitted and filed separately with the Securities and Exchange Commission. (*2) Confidential information has been omitted and filed separately with the Securities and Exchange Commission. B. (*3) per dispenser side for each dispenser side incorporating or retrofitting an Electronic Blending Licensed Product, or (*4) for each two sided dispenser incorporating or retrofitting Electronic Blending Licensed Products on both sides. - --------------- (*3) Confidential information has been omitted and filed separately with the Securities and Exchange Commission. (*4) Confidential information has been omitted and filed separately with the Securities and Exchange Commission. C. (*5) per dispenser side for each dispenser side incorporating or retrofitting a Receipt Severing Licensed Product, or (*6) for each two-sided dispenser incorporating or retrofitting Receipt Severing Licensed Products on both sides. - --------------- (*5) Confidential information has been omitted and filed separately with the Securities and Exchange Commission. (*6) Confidential information has been omitted and filed separately with the Securities and Exchange Commission. 3.3 Royalties and payments provided for in this Agreement in Article III, paragraphs 3.1 and 3.2, when overdue, shall bear interest at a rate per annum equal to two percent (2%) in excess of the "prime rate" published by "The Wall Street Journal" at the time such payment is due, and for the time period until payment is received by GILBARCO. 3.4 The earned royalties accrued or paid by TOKHEIM under the terms of Article III, paragraph 3.2 of this Agreement shall also be nonrefundable. 6 ARTICLE IV - ACCOUNTING PROVISIONS 4.1 Records TOKHEIM shall keep or cause to be kept, in accordance with generally accepted accounting principles, books, records and accounts covering its operations applicable to this Agreement and containing all information necessary for the accurate determination of amounts payable hereunder. TOKHEIM also agrees to permit a mutually agreed to, certified public accountant, which agreement shall not be unreasonably withheld by TOKHEIM, to inspect, at GILBARCO's expense, at reasonable intervals and during regular business hours, such books, records and accounts as may be necessary to determine the completeness and accuracy of reports required to be made hereunder. Such certified public accountant shall agree to keep all TOKHEIM information confidential. In the event such inspection reveals that the reports provided by TOKHEIM pursuant to Article 4.2 below understate the number of Licensed Products sold by an amount which is five percent (5%) or more, then TOKHEIM shall bear the cost of such inspection. 4.2 Reports and Payment A. As promptly as practicable and within thirty (30) days after the end of each calendar quarter, any part of which is within the term of this Agreement, TOKHEIM shall deliver to GILBARCO a report in writing, certified by an officer of TOKHEIM, setting forth the number and type of Licensed Products sold during such calendar quarter by TOKHEIM. Such report shall be made whether or not TOKHEIM has made any sales during such quarter. TOKHEIM agrees to accompany each such report with payment of the royalties, if any, due to GILBARCO for TOKHEIM's sales during the period for which such report is made. 7 B. TOKHEIM shall also provide GILBARCO an annual summary within sixty (60) days after the completion of each of TOKHEIM's fiscal years, prepared by an independent accounting firm which at the time shall be used by TOKHEIM as its auditors attesting to the number of Licensed Products sold by TOKHEIM in that fiscal year. The examination of books and records and preparation of this annual report shall be at the expense of TOKHEIM. ARTICLE V - TERM AND TERMINATION 5.1 Term The term of this Agreement shall be from the Effective Date until the expiration or lapsing of the last of GILBARCO's Patent Rights as set forth below in this Article V, paragraph 5.2 of this Agreement. 5.2 Royalty Payments and Termination of Patents A. Royalty Payments and Expiration or Lapse of Patents TOKHEIM's obligation to GILBARCO for earned royalty payments for Vapor Recovery Licensed Products in this Agreement under Article III, paragraph 3.1 shall cease with the last to lapse or expire of GILBARCO's U.S. Patent Nos. Re. 35,238 and 5,355,915, i.e., October 18, 2011; TOKHEIM's obligation to GILBARCO for earned royalty payments for Electronic Blending Licensed Products in this Agreement under Article III, paragraph 3.1 shall cease with the lapse or expiration of GILBARCO's U.S. Patent No. 4,876,653, i.e., October 24, 2006; TOKHEIM's obligation to GILBARCO for earned royalty payments for Receipt Severing Licensed Products in this Agreement under Article III, paragraph 3.1 shall cease with the lapse or expiration of GILBARCO's U.S. Patent No. 5,407,115, i.e., April 18, 2012. 8 B. Royalty Payments and Invalidity or Unenforceability of Patents In the event any of the foregoing patents are found to be invalid, void or unenforceable by a final decision of a court from which no appeal may be taken, TOKHEIM's obligations to pay earned royalties for that patent under the appropriate Paragraph of Article III, paragraph 3.2 shall cease. In no event shall this Paragraph affect TOKHEIM's obligation to pay the fixed royalty, or any of the installment payments due, under Article III., paragraph 3.1 of this Agreement. 5.3 Termination A. GILBARCO, at its option, may terminate the License granted by it under this Agreement if TOKHEIM fails to make any of the payments due under this Agreement, or defaults in the performance of any material obligation and if the default has not been remedied within ninety (90) days after written notice by GILBARCO to TOKHEIM describing the default, except that in the case of a default GILBARCO may not terminate if the matter is being arbitrated pursuant to Article XI. B. TOKHEIM shall inform GILBARCO of any filing of a voluntary petition of bankruptcy, or another party's filing of an involuntary petition of bankruptcy, in writing within thirty (30) days of the filing of such a petition. Such filing shall be a material breach of this Agreement and shall entitle GILBARCO, at its sole discretion, to immediately terminate this Agreement as of the effective date of the filing of such petition. ARTICLE VI - GOVERNING LAW This Agreement shall be governed and interpreted in accordance with the laws of the State of North Carolina, except to the extent that North Carolina's conflict of law rules would 9 indicate the application of the law of another state or country. TOKHEIM further consents to the jurisdiction over it of the State and federal courts of North Carolina for the purpose of resolving any disputes, claims or controversies arising out of this Agreement, other than any disputes, claims or controversies which are subject to adjudication by the arbitration provisions of Article XI of this Agreement. ARTICLE VII-ENFORCEMENT OF GILBARCO'S PATENT RIGHTS 7.1 TOKHEIM shall promptly notify GILBARCO and provide evidence and documentation of any infringement by another of GILBARCO's Patent Rights in the United States, insofar as such rights relate to Licensed Products hereunder. If such evidence and documentation establishes that a third party is actually infringing any of GILBARCO's Patent Rights in the United States to the substantial detriment of TOKHEIM, while TOKHEIM is paying earned royalties to GILBARCO pursuant to the provisions of this Agreement and is not in material breach of any term or condition hereof, and if GILBARCO within a period of six (6) months after receiving such written notice of infringement and such evidence and documentation of actual infringement from TOKHEIM fails to institute legal action against such unlicensed third party to enjoin such unlicensed activities, or fails to reasonably satisfy TOKHEIM that such unlicensed activities will cease, TOKHEIM shall have the right, at its expense, to institute legal action against such unlicensed third party and to retain any royalties or other damages collected as a result of such legal action, provided that TOKHEIM shall keep GILBARCO fully and promptly advised with respect to such legal action and, in particular, all challenges to the validity and enforceability of GILBARCO's Patent Rights, and shall permit GILBARCO to join such 10 action, at GILBARCO's expense, if GILBARCO so desires. If GILBARCO is required to join such legal action under the rules of the jurisdiction, GILBARCO will do so at TOKHEIM's expense. 7.2 The existence of any known or suspected infringement by another of GILBARCO's Patent Rights shall not entitle TOKHEIM to cease the payment of earned royalties pursuant to the terms of ARTICLE III. ARTICLE VIII - GENERAL TERMS AND CONDITIONS 8.1 Relationship of the Parties This Agreement does not constitute a partnership agreement, nor does it create a joint venture or agency relationship between the Parties. Neither Party shall hold itself out contrary to the terms of this Paragraph. Neither Party shall be liable to any third party for the representations, acts or omissions of the other party. 8.2 Notices Unless otherwise expressly provided for, all notices required under this Agreement must be in writing and must be delivered personally or sent by certified mail (postage prepaid and return receipt requested) to the other Party at the address set forth below (or to any other address given by either Party to the other Party in writing): For GILBARCO: GILBARCO INC. P.O. Box 22087 7300 West Friendly Avenue Greensboro, NC 27420 11 Attn: Office of the General Counsel For TOKHEIM: TOKHEIM CORPORATION 10501 Corporate Drive Fort Wayne, Indiana 46945 Attn: Office of the General Counsel In the case of mailing, the effective date of delivery of any notice shall be considered to be ten (10) days after proper mailing. 8.3 Waiver and Amendment No waiver, amendment or modification of this Agreement shall be effective unless in writing and signed by the party against whom the waiver, amendment or modification is sought to be enforced. No failure or delay by either Party in exercising any right power or remedy under this Agreement shall operate as a waiver of the right, power or remedy. No waiver of any term, condition or default of this Agreement shall be construed as a waiver of any other term, condition or default. 8.4 Assignment TOKHEIM may not assign any rights or obligations under this Agreement without GILBARCO's prior written consent except that the respective rights and obligations of TOKHEIM under this Agreement shall be assignable without the consent of GILBARCO, but subject to prior notice, to any person or entity who acquires all of that portion of TOKHEIM's business to which this Agreement relates, in which event the assignee shall enjoy the benefits of, and be bound by the respective rights and obligations of TOKHEIM hereunder. Any other 12 assignment of this Agreement or the rights hereunder by TOKHEIM shall be void and of no effect unless consented to in writing by GILBARCO. GILBARCO has the right to assign this Agreement and to assign its rights under this Agreement, in whole or in part, at any time and without TOKHEIM's consent. 8.5 Entire Agreement This Agreement constitutes the complete and final agreement between the parties, and supersedes all prior negotiations and agreements between the parties concerning its subject matter. The interpretation of this Agreement may not be explained or supplemented by any course of dealing or performance, or by usage of trade. 8.6 Patent Marking TOKHEIM agrees to mark every device manufactured by or sold by it under this Agreement in accordance with the statutes of the United States relating to marking of patented articles. 8.7 Heading The section and paragraph headings of this Agreement are intended as a convenience only, and shall not affect the interpretation of its provisions. 8.8 Singular and Plural Terms Where the context of this Agreement requires, singular terms shall be considered plural, and plural terms shall be considered singular. 8.9 Severability If any provision of this Agreement is finally held by a court of competent jurisdiction to be unlawful, the remaining provisions of this Agreement shall remain in full force and effect, unless as a result of such unlawful provision there is a material failure of consideration as to a 13 party and such party is unwilling to waive such failure. ARTICLE IX -- WARRANTIES 9.1 GILBARCO represents and warrants that it owns GILBARCO's Patent Rights and that such rights are not the subject of any encumbrance, lien or claim of ownership by any third party. 9.2 TOKHEIM understands, acknowledges and agrees that, except as specifically provided herein, GILBARCO DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, A WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), IN RESPECT OF THE GILBARCO'S PATENT RIGHTS AND RELATED TECHNOLOGY, FOR ANY PRODUCTS PRODUCED BY OR FOR TOKHEIM, OR ANY OTHER SUBJECT MATTER HEREOF. ARTICLE X -- CONFIDENTIALITY OF AGREEMENT The terms and conditions of this Agreement shall be kept confidential by both parties hereto and shall not be disclosed by either party without the prior written consent of the other, except as may be required by law or by order of a court, or as required by the provisions of any license agreement to which GILBARCO is a party, provided, however, TOKHEIM may disclose the terms and conditions of this Agreement to Nuovo Pignone's counsel, pursuant to the Protective Order in this case as "Confidential Counsel Only" without prior written consent of GILBARCO. Nothing in this Paragraph, however, shall preclude either party from announcing 14 that an agreement has been reached between the parties settling the disputes between them and that GILBARCO has granted and TOKHEIM has received a license under GILBARCO's Patent Rights and to use its Related Technology. ARTICLE XI -- ARBITRATION 11.1 Provision for Arbitration Any controversy or claim arising out of or relating to this Agreement, or breach thereof, if not otherwise settled by the parties, shall be settled by expedited binding arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof, provided, however, that the arbitrators shall not have the power to either amend this Agreement in any respect, or to arbitrate any issue of the validity, enforceability or infringement of GILBARCO's Patent Rights. The arbitration award shall then have the same force and effect as if the award and decision were made and entered by a court. The arbitration proceedings shall be conducted in Greensboro, North Carolina, and shall be conducted by an arbitrator who shall be experienced in the field to which the issues relate and approved by both Parties and who shall have no financial interest or relation to the subject matter or the Parties hereto. 11.2 Commencement GILBARCO or TOKHEIM may commence an arbitration proceeding under this Section by giving written notice to the other party, which notice shall set forth the matters to be arbitrated. The other party shall respond within thirty (30) days upon receipt of such notice. Thereafter the arbitrator shall be selected in accordance with the Rules of the American 15 Arbitration Association and the provisions of Article XI, paragraph 11.1 above. 11.3 Expenses and Costs Until a determination hereunder, the parties shall share equally in the payment of the expenses of the arbitrator. As part of any award, the arbitrator may award the payment of arbitration expenses to the prevailing party. 11.4 Rules of Procedure In the event that the Rules of the American Arbitration Association do not cover a question arising during arbitration, then the laws of the United States of America and the State of North Carolina pertaining to arbitration shall apply. The arbitrators shall provide for discovery, pursuant to the Federal Rules of Civil Procedure and the Federal Rules of Evidence, for a reasonable period following the selection of the arbitrator, with questions relating to such discovery determined by the arbitrator. ARTICLE XII - FORCE MAJEURE 12.1 Neither Party shall be responsible to the other for failure to perform any of the obligations (other than the obligation to pay money) imposed by this Agreement, provided such failure shall be caused directly by fire, explosion, lightening, windstorm, earthquake, subsidence of soil, failure or destruction, in whole or in part, of machinery or equipment or failure of supply of materials, discontinuity in the supply of power, governmental interference, civil commotion, riot, war, strikes, labor disturbance, transportation difficulties, labor shortage or by any cause beyond the reasonable control of the Party in question. 16 ARTICLE XIII - RELEASE AND SETTLEMENT 13.1 In consideration of the promises and covenants contained herein, the parties hereto agree as follows: A. Release by GILBARCO. Subject to the provisions of this Agreement -------------------- and the entry of the Consent Judgment appended as Exhibit A, GILBARCO hereby releases and forever discharges TOKHEIM, together with its directors, officers, agents, stockholders, as well as its/their heirs, assigns, suppliers and successors, from any and all claims, demands, liabilities, actions or causes of action of whatsoever kind or nature which GILBARCO has or may have as a result of or arising out of the subject matter of GILBARCO's Patent Rights and/or the Lawsuit. Subject to the provisions of this Agreement and the entry of the Consent Judgment appended as Exhibit A, it is the intent of the parties that GILBARCO hereby releases any and all claim which it believes it has or may have against TOKHEIM and/or its officers, directors, shareholders, agents, heirs or its successors in interest at any time prior to and including the date of the execution of this Agreement that it has or may have as a result of or arising out of the subject matter of the GILBARCO Patent Rights and/or the Lawsuit. B. Release by TOKHEIM. Subject to the provisions of this Agreement ------------------- and the entry of the Consent Judgment appended as Exhibit A, Tokheim hereby releases and forever discharges GILBARCO and its agents, as well as its heirs and assigns, from any and all claims, demands, liabilities, actions or causes of action of whatsoever kind or nature which they may have arising out of the subject matter of the Lawsuit and/or GILBARCO'S Patent Rights. Subject to the provisions of that Agreement and the entry of the Consent Judgment appended as Exhibit A, it is the intent of the parties that TOKHEIM releases GILBARCO and its agents, heirs 17 and assigns from any and all claims which it has or may have at any time prior to and including the date of the execution of this Agreement that it has or may have as a result of or arising out of the subject matter of the GILBARCO Patent Rights and/or the Lawsuit. GILBARCO INC. By: /s/ David L. Kaehler --------------------------- Title: President, Gilbarco N.A. ------------------------ DATED: 2/11/98 ------------------------ TOKHEIM CORPORATION By: /s/ John A. Negovetich --------------------------- Title: Executive Vice President, Finance and Administration ---------------------------------------------------- DATED: 2/4/98 ------------------------ 18 EX-10.10 12 TOKHEIM INCENTIVE PLAN Exhibit 10.10 [LOGO OF TOKHEIM] TOKHEIM CORPORATION 1997 INCENTIVE PLAN SECTION 1. OBJECTIVE: - -------------------- Tokheim's Salary Administration Program, Stock Option/Grant Programs, and the 1997 Key Management Incentive Bonus Plan's objectives are to increase executives' and managerial focus toward optimizing Corporate financial performance for shareholders and return on their investment while also providing the financial resources to support the Corporation's objectives for growth, service and quality commitments, and employee and organizational development. SECTION 2. PHILOSOPHY: - --------------------- The compensation of certain key executives and managers should be based, in part, on preestablished financial objectives of the Corporation and individual, specific, measurable objectives. This incentive plan is intended to focus the effort of the plan participants on achieving the goals approved by the Board of Directors to insure the profitability and long-term growth of Tokheim. In addition, corporate officers are expected to share with the company in the responsibility to accumulate Tokheim stock. Corporate officer stock ownership should be significant; as such, the C.E.O. should own three (3) times base salary and each Vice President should own two (2) times their respective base salary in Tokheim stock. This goal should be reached progressively over the next continuing five (5) year period. Stock grants and/or options and performance incentives should be the largest component of total compensation. SECTION 3. ADMINISTRATION: - ------------------------- The Board of Directors will consider and, if appropriate, approve a plan annually. The Plan will be administered by the Compensation Committee whose actions are subject to the Board of Directors approval. The decision of the Board of Directors will be final as to the interpretation of the Plan or any rule, procedure or action of the Compensation Committee. The award or sale of shares under this plan may be restricted for up to five years and will be accompanied by cash awards equal to the fair market value of the shares on the date of lapsed restriction, if awarded, or equal to the excess of the fair market value on the date of the lapse over the original purchase price, if purchased. Annual share grants/options will not exceed 1% of total outstanding shares per year. Shares authorized for plan use will not exceed 10% of outstanding 1 shares at any point in time. An addendum will be added to the plan each year reflecting current market payouts. The Compensation Committee will make the final determination of stock option levels and/or restrictions for the C.E.O. and will review the C.E.O.'s recommendation for all other corporate participants. SECTION 4. ELIGIBILITY: - ---------------------- Categories of eligible Plan participants are: CATEGORY 1: CEO; CATEGORY 2: Division President(s); and Corporate Vice Presidents; CATEGORY 3: Other Corporate staff and key functional managers as may be designated by the CEO of Tokheim. Participants are measured on the results of the operating unit or units in which their principal duties are performed, that is Corporate, Group or individual operating unit. The award for those individuals who serve as Divisional Presidents will depend on the attainment of the Business Performance Factors of both the Corporation in total (50%) and the Group they administer (50%). A participant who transfers from one eligibility class to another will share pro- rata in each class based on the percentage eligibility in each class and the portion of the fiscal year spent in each class. To receive a bonus under this Plan, a participant must be an active, full-time employee on the last business day of the Company's fiscal year. Those who join during the year will be awarded a pro-rata bonus based upon days in the plan. If a participant dies, and such death occurs during the last two fiscal quarters of the year, a bonus, prorated in accordance with the number of days in the year in which he participated before his death, will be paid to his or her beneficiary at the same time and in the same manner as bonuses for the year are paid to Plan participants. The beneficiary will be the beneficiary designated for the employee's group life insurance plan. If no such beneficiary has been designated, the bonus will be paid to the employee's estate. If a participant retires prior to the last day of any Plan year, a bonus, prorated in accordance with the number of days in the year in which he or she participated before retirement, will be paid to such participant at the same time and in the same manner as bonuses for the year are paid to other participants. SECTION 5. BONUS PERCENTAGES AND COMPONENTS: - ------------------------------------------- Total incentives will be determined by the attainment of Business Performance Factors (BPF) and Strategic Performance Factors (SPF). Attainment of minimum acceptable corporate 2 performance will yield a payout of 50% of the target opportunity. The target bonus payable to a participant will be the following. CATEGORY 1: C.E.O. - 50% of base salary. CATEGORY 2: V.P. and Subsidiary Officers - 40% of base salary CATEGORY 3: Key Managers - Up to 25% of base salary as determined for each participant by the CEO. In each class, participants earn the bonus at the specific percentage defined for achievement of financial objectives and the specific percentage defined for achievement of non-financial objectives each year. Salary, as used to determine an employee's bonus, will mean the employee's total base salary earned in the bonus year, before deductions for salary reduction benefit plans, but excluding any and all items or forms of special compensation, bonuses, commissions or reimbursed expenses. The above provisions notwithstanding: A. Should any event result in a loss for the bonus year, the Chief Executive Officer and all Corporate Officers will not be eligible for a formula bonus. B. Participants whose potential bonus is measured solely on corporate performance, are eligible for the applicable bonus only when no loss is experienced for the bonus year. C. Participants whose bonus is measured by both divisional, subsidiary or corporate performance, are eligible for the applicable bonus based on each unit measured that experiences no loss for the bonus year. D. The C.E.O. or the Committee may recommend discretionary bonuses based on individual performance. SECTION 6. BUSINESS PERFORMANCE FACTORS: - ---------------------------------------- The financial objectives will be proposed to the Compensation Committee by the CEO. The Committee will make its recommendation to the Board after evaluating Management's Business Performance Factors (BPF) targets for the Corporation as a whole and its individual operating units. The BPF targets will be determined by the CEO and will not be less than the operating plan BPF targets. 3 When determining formula bonuses, operating profit and pretax profit will exclude any unusual gains or losses (such as a benefit from FAS87, a Board approved sale of business, etc.). Participants will not benefit from "Windfall" or unusual types of gains or losses, but will be given appropriate consideration based on their role in the transaction. The BPF target as a percentage of the Total Bonus will be determined annually. The financial component of the bonus award is a function of achieving the BPF targets and may range from 0% to 200%. The method of calculating the financial objective of the bonus follows: A. Minimum Bonus Level: 50% - A bonus will not be paid if the minimum BPF target is not achieved. B. Target Bonus Level; 100% - Paid when the BPF target is achieved. C. Maximum Bonus Level; 200% - The maximum bonus is based on 125% achievement of the BPF target as determined by the CEO and will be prorated. SECTION 7. STRATEGIC PERFORMANCE FACTORS: - ---------------------------------------- This portion of a participant's bonus is based on individual performance evaluation of preestablished non-financial personal, unit and corporate objectives. The performance of the CEO will be evaluated by the Board of Directors. The performance of other officers will be evaluated by the CEO. The performance of Key Managers and Category 2 and 3 participants will be made by appropriate supervisors and the Vice President of Human Resources, subject to review by the CEO. The SPF as a percentage of the Total Bonus will be determined annually. SECTION 8. CALCULATION, APPROVAL AND PAYMENT: - -------------------------------------------- Upon completion of the annual audit and certification of results by the Company's independent auditors, the CEO will recommend bonuses for plan participants to the Compensation Committee. Other provisions notwithstanding, the CEO may recommend increases or decreases in individual bonuses or the addition or deletion of a participant to or from the Plan in view of extraordinary or unusual events or circumstances. Any payment to a participant under any Tokheim Deferred Compensation Plan for the bonus plan year will be deducted from the bonus award, if any. The Committee will review the CEO's recommendations and make such adjustments as it deems appropriate. 4 Bonus components may consist of cash, stock grants/options or company stock at the discretion of the CEO. Payment of bonuses under this Plan, as reviewed by the Committee and approved by the Board of Directors will be made promptly after such approval, or to such deferred plan as the Corporation may establish for such purposes. SECTION 9. NO CONTRACT: - ---------------------- This Plan is not and will not be construed as an employment contract or as a promise or contract to pay bonuses to participants or their beneficiaries. The Plan will be reviewed at least annually by the Board of Directors, and the Plan may be amended from time to time by the Board of Directors without notice. No participant or beneficiary may sell, assign, transfer, discount or pledge as collateral for a loan, or otherwise anticipate any right to a payment or a bonus under this Plan. 5 EX-10.11 13 FORM OF EMPLOYMENT AGREEMENT EXHIBIT 10.11 FORM OF EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of the 1/st/ day of January, 1998 (the "Effective Date"), by and between Management Solutions, Inc. ("Company"), a Colorado corporation, a wholly-owned subsidiary of Tokheim Corporation ("Tokheim"), an Indiana corporation, and Arthur S. ("Rusty") Elston ("Employee"). RECITALS A. Company acknowledges and recognizes the value of Employee's services and deems it necessary and desirable to retain Employee's full-time services. B. Employee and Company desire to embody the terms and conditions of Employee's employment in a written agreement which will supersede all prior employment agreements, whether written or oral. AGREEMENT NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. EMPLOYMENT. Company agrees to employ Employee, and Employee agrees to serve Company, on a full-time basis in the capacity of President, subject to the terms and conditions of this Agreement, provided, that the Company shall not relocate either its main office or Employee from the southeast Denver, Colorado metropolitan area. 2. TERM. Employee's employment shall commence on the Effective Date and continue for three (3) years thereafter unless earlier terminated by one or both of the parties as provided below (the "Term"). 3. DUTIES. During the Term, Employee shall have such duties and responsibilities and shall supply such services in the carrying out of such duties and responsi- bilities as the Chief Executive Officer of Tokheim (the "Chief Executive Officer") or the President of Tokheim-North America (or the person in any successor position thereto) shall, from time to time, direct. Employee shall have the primary day-to-day responsibility for the management of the Company consistent with the customary duties and responsibilities of the president of a wholly-owned subsidiary of a public company and Section 1.6 of the Stock Purchase Agreement (as hereinafter defined). During the term of employment, Employee shall devote his best efforts and skills to the business interests of Company and shall not engage in any commercial enterprise or activity, either directly or indirectly, in conflict with Company's business, or which may in any way interfere with his employment, without the consent of Company. 4. COMPENSATION. During the term of this Agreement, Company shall compensate Employee for his services as follows: 4.1 Employee shall be entitled to a base salary of $250,000 (the "Base Salary") per year. Base Salary will be reviewed periodically; provided that the Base Salary may not be decreased during the Term. Base Salary shall be payable in semimonthly or monthly installments, in accordance with the policy of Company at the time of such payments. When referred to as a monthly payment or amount, Base Salary shall mean $20,833.33 per month. 4.2 Employee shall be eligible for such officer's bonus program as may from time to time be made available and applicable to Employee's position with Company, and shall be consistent with employees in similar positions with Tokheim; provided, however, that nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or the Chief Executive Officer, from altering or amending the terms, eligibility, or other provisions of the officers' bonus program, or from eliminating or adding any other bonus programs as it shall from time to time deem appropriate and in the interests of Company; provided further that Employee shall have the right to refuse any bonus to the extent that such bonus would decrease the "Adjusted EBIT" of the Company (as such term is defined in the Stock Purchase Agreement, dated December 29, 1997, between Tokheim, Employee and others (the "Stock Purchase Agreement")). 4.3 Employee shall be granted participation in all employee benefit plans applicable to Employee's position with 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 2 applicable to Employee (collectively, "Plans"), consistent with the policies of Company and the terms and conditions of the Plans. Nothing in this Agreement shall be deemed to alter the terms and conditions of any Plans or the policy of Company with respect to any Plans, and nothing in this Agreement shall be deemed to entitle Employee to any rights in any Plan which would not otherwise be made available to Employee pursuant to the terms, conditions and provisions of the Plans. Further, nothing in this Agreement shall prevent Company, through its Board, any duly appointed Committees of the Board or the Chief Executive Officer, from altering or amending the terms, eligibility, or other provisions of the Plan, or from eliminating or adding any other Plan as it shall from time to time deem appropriate and in the interests of Company. 4.3.1 Except as may otherwise be expressly provided herein, Employee shall be granted, upon termination of this Agreement, such rights as may be available to him pursuant to any Plan or Plans then in effect. 4.4 Employee shall be entitled to receive incentive bonuses (collectively, the "Incentive Bonus") up to an aggregate maximum of $5,180,000 payable as follows: 4.4.1 Company shall pay Employee an amount equal to (*) (the "Payment Multiple") times the amount by which the Adjusted EBIT (as defined and determined pursuant to the Stock Purchase Agreement) for fiscal year 1998 exceeds (*) (the "Estimated 1997 Adjusted EBIT") but only if and only to the extent that Sellers have been paid an aggregate of (*) pursuant to Section 1.2(c)(i), Section 1.2(c)(ii) and Section 1.2(c)(iii) of the Stock Purchase Agreement. (*) Confidential information has been omitted and filed separately with the Securities and Exchange Commission.) 4.4.2 Company shall pay Employee an amount equal to the Payment Multiple times the amount by which the Adjusted EBIT for fiscal year 1999 exceeds the higher of the Estimated 1997 Adjusted EBIT and the actual Adjusted EBIT for fiscal year 1998 but only if and only to the extent that Sellers (as defined in the Stock Purchase Agreement) have been paid an aggregate of (*) pursuant to Section 1.2 (c)(i) and Section 1.2(c)(ii) of the Stock Purchase Agreement; and (*) Confidential information has been omitted and filed separately with the Securities and Exchange Commission.) 4.4.3 Company shall pay Employee an amount equal to the Payment Multiple times the amount by which the Adjusted EBIT for fiscal year 2000 exceeds the highest of the Estimated 1997 Adjusted EBIT, the actual Adjusted EBIT for fiscal year 1998 and the actual Adjusted EBIT for fiscal year 1999 but only if and only to the extent that Sellers have been paid an aggregate of (*) pursuant to (*) Confidential information has been omitted and filed separately with the Securities and Exchange Commission.) 3 Section 1.2(c)(i), Section 1.2(c)(ii) and Section 1.2(c)(iii) of the Stock Purchase Agreement. The Incentive Bonus will be payable on or within 30 days after completion of a final determination of the Adjusted EBIT consistent with Section 1.4 of the Stock Purchase Agreement for each of the three successive periods described above (each a "Period"). The parties hereto agree that fiscal year 1998 consists of the 12-month period from December 1, 1997 to November 30, 1998. In each Period, the fiscal year will be deemed to begin on December 1/st/ of the prior calendar year and end on the following November 30/th/. In no event shall the aggregate Incentive Bonus be more than $5,180,000. Upon termination of the Employee during the Periods by the Company with cause as provided in Section 5.1 or by the Employee for reason other than a material breach of this Agreement by the Company, the Incentive Bonus shall remain payable to Employee but calculated using a Payment Multiple of [*]. Upon termination of the Employee during the Periods by the Company without cause or by the Employee due to a material beach by the Company as finally and judicially determined, the maximum Incentive Bonus (less any portion previously paid) shall be paid to the Employee on the next regular date on which an Incentive Bonus payment is due. Notwithstanding anything in this Agreement to the contrary, if within the Periods (i) Tokheim sells all or any portion of the capital stock of the Company such that the Company is no longer eligible to be a member of Tokheim's consolidated group as defined for federal income tax purposes, or (ii) the Company sells all or substantially all of its assets to any person or entity other than a member of Tokheim's consolidated group, then the maximum Incentive Bonus (less any portion previously paid) shall be paid to the Employee on the next regular date on which an Incentive Bonus payment is due. 5. TERMINATION. Either Company or Employee may terminate this Agreement as provided in this Section 5 upon providing written notice to the other. 5.1 By Company. In the event this Agreement is terminated with cause (as defined below), Employee shall be entitled to no severance pay, and 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. 5.1.1 With Cause. For purposes of this Agreement, the termination of this Agreement shall be deemed to have been made with cause only upon the occurrence of one or more of the following circumstances: 4 5.1.1.1 Employee engages in any material breach of fiduciary duty, act of dishonesty, fraud, or theft involving Company; 5.1.1.2 Employee is convicted of a felony (excluding traffic- related incidents), including the entry of a guilty or nolo contendere plea; 5.1.1.3 Employee discloses Confidential Information in violation of section 7, below, or competes with Company in violation of section 8, below; or 5.1.1.4 Employee violates any written Company policy or refuses or fails to substantially carry out the duties which have been assigned to him after the Company has given written notice to Employee detailing such violation, refusal or failure and Employee shall not have cured such violation, refusal or failure within twenty (20) days of receipt of such written notice. 5.1.2 Without Cause. In the event Company terminates this Agreement without cause, Employee shall be entitled, in addition to the amounts provided in Section 4.4, to severance pay equal to the greater of (i) the number of months remaining in the Term at the Employee's Base Salary per month in effect at the time of termination or (ii) 12 months of Employee's Base Salary per month in effect at the time of the termination, payable at the same interval as his salary at the time of the termination. Employee shall have no obligation to mitigate damages by seeking other employment and Employee's severance pay shall not be subject to reduction for any reason, including Employee obtaining other employment. The right to severance pay under this section shall vest upon notice of termination and shall not be affected by Employee's subsequent death or disability. 5.2 By Employee. In the event Employee terminates this Agreement, Employee shall be entitled to no severance pay and shall be entitled only to such other rights as may be provided in this Agreement or as may otherwise be available to him in law or equity, provided, however, that if Employee terminates this Agreement because of Company's failure to comply with any material provision of this Agreement that has not been cured within twenty (20) days after Employee has given written notice detailing such noncompliance to the Company, Employee shall be entitled, in addition to the amounts provided in Section 4.4, to severance pay equal to the greater of (i) the number of months remaining in the Term at the Employee's Base Salary per month in effect at the time of termination or (ii) 12 5 months of Employee's Base Salary per month in effect at the time of the termination, payable at the same interval as his salary at the time of the termination. 5.3 Death or disability. In the event employee dies or becomes permanently disabled during the Term, this Agreement shall terminate upon the date of such death or the date specified in a written notice of termination as provided below. In the event this Agreement terminates for such reason, Company shall pay Employee's pro-rata Base Salary through the termination date, and Employee shall be entitled to no severance pay. Notwithstanding anything to the contrary, in the event this Agreement terminates as a result of Employee's death or disability, Employee shall be entitled to such continuing benefits as may be provided in any Plans or by law. As used in this Section 5.3, "disability" shall mean Employee's inability, due to physical or mental illness or accident, accident or injury, to perform his duties for 40 or more business days within three consecutive months. If Company elects to terminate this Agreement for disability, it shall give written notice thereof to Employee specifying the date of termination. 6. BUSINESS PLAN. Before November 30, 1998 and 1999, Employee will, or will cause the Company's employees to, prepare a business plan (each a "Business Plan"), setting forth a detailed estimate of revenues and expenditures for the forthcoming fiscal year of Company's point of sale software unit (the "Unit") and any other business of Company for which Employee is primarily responsible, together with a description of the objectives and marketing strategies that management of Company proposes to use during such fiscal year. The Business Plan will take into account revenue opportunities reasonably available and reasonable estimates of expenditures, with the goal of maximizing the value of the Unit. Each Business Plan will be submitted to the Chief Executive Officer on or before November 30/th/ of each fiscal year for discussion and approval. 7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. For purposes of this Agreement, Confidential Information is defined as trade secrets (as defined by Colorado Revised Statute 7-74-102, as amended), software programs, customer reports, customer lists, vendor reports, vendor lists, and other information regarding customers and vendors utilized by Company in the course of its business, marketing and/or sales plans or proposals, business plans, costs and/or pricing information, intellectual property or any information regarding Tokheim or Company, and any information regarding Tokheim's or Company's present or future business plans, whether any of the foregoing is embodied in hardcopy, software, computer readable form or otherwise. 6 7.1 Employee acknowledges his position with Company will expose Employee to certain Confidential Information of Company; and that Confidential Information constitutes a valuable, unique asset of Company's business. Employee will not, and will not assist any third party to, during or at any time after the Term, disclose, copy or publish any Confidential Information acquired by Employee during his employment, to any person, firm, corporation, association, or other entity for any purpose, or use Confidential Information for any purpose, other than for the performance of services for Company or pursuant to a court order or other process of law; provided, however, that if the Confidential Information is or becomes generally available to the public through no fault of Employee, then such information shall not be covered by the scope or intent of this Agreement. 7.2 In the event of Employee's actual or threatened breach of the provisions of this section, Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. Company shall also be permitted to pursue any other available remedies available for such breach or threatened breach. 8. RESTRICTIVE COVENANT. For purposes of this Agreement, "Competing Business" is defined as Gilbarco, Inc., Wayne (a division of Dresser Industries, Inc.), Schlumberger Limited, Tankanlagen Salzkotten GmbH, Scheidt & Bachmann GmbH, Tatsuno Corporation and Bennett Pump Company, and their respective affiliates, subsidiaries and successors, both domestic and international, and any other company engaged in the petroleum dispenser manufacturing business or the point- of-sale software or equipment business. 8.1 Employee hereby covenants and agrees that, from the date of this Agreement until the later of (x) a period of 48 months thereafter, and (y) 12 months after termination of employment with the Company (the "Restricted Period"), Employee will not, directly or indirectly, own, manage, operate, control, be controlled by, participate in, be employed by, or be connected in any manner with the ownership, management, operation or control of any Competing Business. Employee further covenants and agrees that he will not during the Restricted Period solicit, induce, conspire with or attempt to solicit, induce or conspire with either (a) any of the officers or employees of the Company or any of its affiliates to terminate their employment relationship with or to compete against the Company or any of its affiliates or (b) any customer or supplier of the Company or any of its affiliates with whom Employee has dealt or otherwise has or had dealings during the 24 months 7 prior to such attempted solicitation or inducement, to terminate their business relationship with the Company or any of its affiliates. Employee specifically acknowledges and agrees that Company's business is international in scope and that the restriction as contained in this section is a reasonable geographic restriction, as that term is used and defined by Colorado law, on Employee's activities. 8.2 In the event of Employee's actual or threatened breach of the provisions of this section, Company shall be entitled to obtain an injunction enjoining Employee from committing such actual or threatened breach. Company shall also be permitted to pursue any other available remedies available for breach or threatened such breach. 8.3 If a court of competent jurisdiction or any arbitrator deter mines that any provision or restriction in this section is unreasonable or unenforceable, the court or arbitrator shall modify such restriction or provision to the minimum extent necessary so that the agreement then becomes an enforceable restriction of the activities of Employee. 9. OWNERSHIP AND ASSIGNMENT OF CERTAIN WORKS. 9.1 Works for Hire. Employee expressly acknowledges that all copyrightable aspects of the Inventions (as defined herein) are to be considered "works made for hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"), and that Company is to be the "author" within the meaning of such Act for all purposes. All such copyrightable works, as well as all copies of such works in whatever medium fixed or embodied, shall be owned exclusively by Company as its creation, and Employee hereby expressly disclaims any and all interest in any of such copyrightable works and waives any moral rights or similar rights. 9.2 Assignment. Employee acknowledges and agrees that all Inventions constitute trade secrets of Company and shall be the sole property of Company or any other entity designated by Company. If title to any or all of the Inventions or any part or element thereof, may not, by operation of law, vest in Company or such Inventions may be found as a matter of law not to be "works made for hire" within the meaning of the Act, Employee hereby conveys and irrevocably assigns to Company, without further consideration, all his right, title and interest, in all Inventions and all copies of them, in whatever medium fixed or embodied, and in all written records, graphics, diagrams, notes, or reports relating thereto in Employee's possession or under its control, including, with respect to any of the foregoing, 8 all rights of copyright, patent, trademark, trade secret, and any and all other proprietary rights therein, the right to modify and create derivative works, the right to invoke the benefit of any priority under any international convention, and all rights to register and renew same. 9.3 Further Assurances. Employee agrees to assist Company, or any party designated by Company, promptly on Company's request, whether before or after the termination of employment however such termination may occur, in perfecting, registering, maintaining, and enforcing, in any jurisdiction, Company's rights in the Inventions by performing all acts and executing all documents and instruments deemed necessary or convenient by Company, including, by way of illustration and not limitation: 9.3.1 Executing assignments, applications, and other documents and instruments in connection with (A) obtaining patents, copyrights, trade marks, or other proprietary protections for the Inventions and (B) confirming the assignment to Company of all right, title, and interest in the Inventions or otherwise establishing Company's exclusive ownership rights therein. 9.3.2 Cooperating in the prosecution of patent, copyright and trademark applications, as well as rendering reasonable assistance in the enforcement of Company's rights in the Inventions, including, but not limited to, testifying in court on other administrative body, or before any patent, copyright or trademark registry office. Employee will be reimbursed for all out-of-pocket costs incurred in connection with the foregoing, if requested by Company after the termination of employment. In addition, to the extent that, after the termination of employment for whatever reason, Employee's cooperation or assistance shall be required in connection with the fulfillment of the obligations set forth in Section 9.3.2, Company will compensate Employee at a reasonable rate for the time actually spent by Employee at Company's request rendering such assistance. 9.4 Power of Attorney. Except with respect to any Invention which is the subject of a dispute between Employee and Company, Employee hereby irrevocably appoints Company to be his Attorney-In-Fact in his name and on his behalf to execute any document and to take any action and to generally use his name for the purpose of giving to Company the full benefit of the assignment provisions set forth above. 9 9.5 Definition of Inventions. For the purpose of this Agreement, the term "Inventions" shall mean all inventions, discoveries, improvements, trade secrets, formulas, techniques, data, programs, systems, specifications, documentation, algorithms, flow charts, logic diagrams, source codes, processes, and other information, including works-in-progress, whether or not subject to patent, trademark, copy-right or trade secret protection, and whether or not reduced to practice, which are made, created, authored, conceived, or reduced to practice by Employee, either alone or jointly with others, during the period of employment with Company which (A) relate to the actual or anticipated business, activities, research, or investigations of Company or (B) result from or is suggested by work performed by Employee for Company (whether or not made or conceived during normal working hours or on the premises of Company), or (C) which result, to any extent, from use of Company's premises or property. 9.6 Representations. Employee represents, warrants, and covenants that he: (A) is not a party to any conflicting agreements with third parties which will prevent him from fulfilling the terms of employment and the obligations of this Agreement; and (B) does not have in his possession any confidential or proprietary information or documents belonging to others. Employee has supplied or shall promptly supply to Company a copy of each written agreement to which Employee is subject which includes any obligation of confidentiality, assignment of Inventions, or non-competition. Employee agrees to indemnify and save harmless Company from any loss, claim, damage, costs or expenses of any kind (including without limitation, reasonable attorney fees) to which Company may be subjected by virtue of a breach by Employee of the foregoing representations, warranties, and covenants. 9.7 Obligations upon Termination. In the event of any termination of his employment, for whatever reason, Employee will promptly (A) deliver to Company, all physical property, discs, documents, notes, print-outs, and all copies thereof and other materials in Employee's possession or under Employee's control pertaining to the business of Company, including, but not limited to, those embodying or relating to the Inventions and the Confidential Information, (B) deliver to 10 Company all notebooks and other data relating to research or experiments or other work conducted by Employee in the scope of Employment or any Inventions made, created, authored, conceived, or reduced to practice by Employee, either alone or jointly with others and (C) make full disclosure regarding any Inventions. Upon termination of employment with Company, Employee shall, if requested by Company, reaffirm Employee's recognition of the importance of maintaining the confidentiality of Company's Confidential Information. 10. FORFEITURE OF BENEFITS. In the event Employee has breached his obligations under Section 7 or Section 8 of this Agreement, Employee shall forfeit all future payments or compensation payable by Company pursuant to the terms of this Agreement, specifically not including, however, the Contingent Purchase Price payable under the Stock Purchase Agreement or the Incentive Bonus under Section 4.4 hereof. 11. NO TRUST ESTABLISHED. All payments provided under this Agreement shall be paid in cash from the general funds of Company, and no separate or special fund has been or shall be established and no segregation of assets has been or shall be made to assure payment. Employee shall have no right, title or interest in or to any investments or other assets which Company may acquire or obtain to assist in meeting its obligations under this Agreement. 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 Company and Employee or any other person. The right of any person to receive payments from Company under this Agreement shall be no greater than the rights of a general unsecured creditor of Company. 12. TAXES, ETC., Company may withhold from any payments or benefits provided under this Agreement: 12.1 all federal, state, city or other taxes as required pursuant to any law or governmental regulation or ruling; and 12.2 any amounts owed by Employee to Company for any reason at the time of the termination of this Agreement. 13. NO ASSIGNMENT OR ALIENATION. This Agreement shall not be assignable by either party; provided, however, that nothing in this paragraph shall preclude Employee from designating a beneficiary to receive any benefit payable 11 upon his death, or preclude Employee's executors, administrators or other legal representatives of his estate from assigning any rights hereunder to the person or persons entitled thereto. 14. ARBITRATION. Employee and Company recognize and agree that the arbitration of disputes provides mutual advantages in terms of facilitating the fair and expeditious resolution of disputes. In consideration of these mutual advantages, the parties agree as follows: 14.1 Scope of Arbitration. The parties will submit to arbitration, in accordance with these provisions, any and all disputes either party may have arising from or related to this Agreement, and any other disputes between the parties arising from or related to their employment relationship, including, but not limited to, any disputes regarding alleged common-law tort violations or violations of state or federal statutory rights; provided, however, that all disputes with respect to the determination of Adjusted EBIT shall be governed by the terms of the Stock Purchase Agreement. The parties further agree that the arbitration process set forth below shall be the exclusive means for resolving all disputes hereunder, except as otherwise provided, but that no arbitrator shall have authority to determine whether disputes fall within the scope of these arbitration provisions. 14.2 Governing Law. Employee and Company agree that the interpretation and enforcement of the arbitration provisions of this Agreement, including any right to appeal, shall be governed by Colorado law. 14.3 Time Limits on Submitting Disputes. Employee and Company acknowledge and agree that one of the objectives of this arbitration provision is to resolve disputes expeditiously, as well as fairly, and that it is the obligation of both parties, to those ends, to raise any disputes subject to arbitration under this Agreement in an expeditious manner. Accordingly, the parties agree to waive all statutes of limitations that might otherwise be applicable, and agree further that, as to any dispute subject to arbitration pursuant to this Agreement, notice of a demand for arbitration must be provided to the other party: 14.3.1 in the event of a dispute arising out of a termination of this Agreement within 6 months of the date of termination; 14.3.2 in the event of a breach of Section 7 or Section 8 of this Agreement, within 4 months after the Chief Executive Officer has actual knowledge of the breach; or 12 14.3.3 in the event of any other dispute, within 3 months after the party has actual knowledge of the dispute. Failure to demand arbitration on claims within these time limits is intended to, and shall to the furthest extent permitted by law, be a waiver and release with respect to such claims, and, in the absence of a timely submitted written demand for arbitration, an arbitrator has no authority to resolve the disputes or render an award. 14.4 Availability of Provisional Relief. Notwithstanding anything herein to the contrary, nothing in this Section shall prevent Company or Employee from obtaining injunctive relief from a court of competent jurisdiction to enforce the obligations of Sections 7 and 8 for which either party may require provisional relief pending a decision on the merits by the arbitrator. 14.5 American Arbitration Association Rules Apply as Modified Herein. Any arbitration of disputes shall be conducted under the Model Employment Procedures of the American Arbitration Association ("AAA"), as modified in this Agreement. 14.6 Invoking Arbitration. Either party may invoke the arbitration procedures described in this Agreement by written notice of a demand for arbitration (an "Arbitration Notice"). An Arbitration Notice shall contain a statement of the matter to be arbitrated in sufficient detail to establish the timeliness of the demand. The parties shall then have 20 business days within which they may identify a mutually agreeable arbitrator. After the 20-day period has expired, the parties shall prepare and submit within 30 days thereafter to the AAA a joint submission, with each party to contribute half of the appropriate administrative fee. In their submission to the AAA, the parties shall either designate a mutually acceptable arbitrator or request a panel of arbitrators from the AAA according to the procedure described in Section 14.7, below. 14.7 Arbitrator Selection. Each of Employee on the one hand, and Company on the other hand, shall select an arbitrator and a third arbitrator shall be selected jointly by the arbitrators selected by the parties within fifteen (15) days after demand for arbitration is made by a party. If the arbitrators are unable to agree on a third arbitrator within that period, then any party may request that the AAA select the third arbitrator. The arbitrators shall possess substantive legal experience in the principal issues in dispute and shall be independent of the parties hereto. 13 In the event of the death or disability of an arbitrator, the parties shall select a new arbitrator as provided above. The substitute arbitrator shall have the power to determine the extent to which he or she shall act on the record already made in arbitration. 14.8 Prehearing Procedures. Upon accepting assignment as arbitrator, the arbitrator shall promptly conduct a preliminary hearing at which each party shall be entitled to submit a brief statement of their respective positions, and at which the arbitrator shall establish a timetable for prehearing activities and the conduct of the hearing, and may address initial requests from the parties for prehearing disclosure of information. At the preliminary hearing and/or thereafter, the arbitrator shall have the discretion and authority to order, upon request or otherwise, the prehearing disclosure of information to the parties. Such disclosure may include, without limitation, production of requested documents, exchange of witness lists and summaries of the testimony of proposed witnesses, and examination by deposition of potential witnesses, to the end that information disclosure shall be conducted in the most expeditious and cost-effective manner possible, and shall be limited to that which is relevant and for which each party has a substantial, demonstrable need. The arbitrator shall further have the authority, upon request or otherwise, to conference with the parties or their designated representatives concerning any matter, and to set or modify timetables for all aspects of the arbitration proceeding. 14.9 Location. Unless otherwise agreed by the parties, arbitration hearings shall take place in Arapahoe County, Colorado. 14.10 Confidentiality. All arbitration proceedings hereunder shall be confidential. Neither party shall disclose any information about the evidence produced by the other in the arbitration proceeding or about documents produced by the other in connection with the proceeding, except in the course of a judicial, regulatory or arbitration proceeding, or as may be requested by governmental authority. Before making any disclosure permitted by the preceding sentence, the party shall give the other party reasonable written notice of the intended disclosure and an opportunity to protect its interests. Expert witnesses and stenographic reporters shall sign appropriate nondisclosure agreements. 14.11 Costs. The non-prevailing party shall be responsible for the reasonable attorney's fees and costs of the prevailing party incurred in any arbitration, and shall reimburse the prevailing party for any such fees and costs paid 14 thereby. The costs and fees of the arbitrator and of the AAA shall be borne equally by the parties. 14.12 Remedies. Subject to the provisions of Section 14.14, the arbitrator shall have authority to award any remedy or relief that a federal or state court situated in the State of Colorado could grant in conformity to applicable law. 14.13 Law Governing the Arbitrator's Award. In rendering an award, the arbitrator shall determine the rights and obligations of the parties, including employment discrimination issues, according to federal law and the substantive law of the State of Colorado (excluding conflicts-of-laws principles) as though the matter were before a court of law. 14.14 Written Awards and Enforcement. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The parties agree that a competent court shall enter judgment upon the award of the arbitrator, provided it is in conformity with the terms of this Agreement. 14.15 Conflict in Procedure. If any part of this arbitration procedure is in conflict with any mandatory requirement of applicable law, the mandatory requirement shall govern, and the procedure set forth above shall be reformed and construed to the maximum extent possible in conformance with the applicable law. The procedure shall remain otherwise unaffected and enforceable. 15. MISCELLANEOUS. 15.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto, and supercedes all prior agreements, written or oral. 15.2 Severability. If any provision of this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision or part of a provision of this Agreement, and any such provision shall be reformed so that it would be valid, legal, and enforceable to the maximum extent permitted. 15.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counter- 15 parts collectively shall constitute one document representing the agreement among the parties. 15.4 Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective successors and assigns. 15.5 Amendment. Any such proposed amendment, discharge, termination, or change to this Agreement shall be in writing and signed by the parties. 15.6 Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. No waiver shall be valid unless it is in writing and is signed by the party against whom such waiver is sought. 15.7 Extension of Noncompete Period. The periods of time during which Employee is prohibited from engaging in such business practices pursuant to this Agreement shall be extended by any length of time during which Employee is in breach of any of such covenants. 15.8 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado. 15.9 Survival. The provisions and restrictions contained in Sections 7 and 8 shall survive the termination of this Agreement and Employee's employment with Company. 15.10 Attorney Fees and Expenses. Except as expressly provided in this Agreement or by statute and ordered by an arbitrator or court in accordance with the provisions of this Agreement, no party shall be entitled to recover from the other party the reasonable attorney's fees, costs, and expenses incurred as a result of any action to enforce any of the rights under this Agreement. 15.11 Full Disclosure. Employee acknowledges that Employee's employment with Company is conditioned upon the execution of this Agreement. Employee represents and acknowledges that Employee has carefully reviewed all of the terms and conditions in this Agreement, and has been advised of Employee's right to seek independent legal counsel prior to execution of this Agreement. 16 15.12 Notices. Any notice, request, or other communication required or permitted under this Agreement shall be in writing. Notice shall be deemed to have been given only if personally delivered or sent by registered or certified mail, return receipt requested. Any notice so mailed shall be deemed given on the postmark date. Failure or refusal to accept or receive any notice or communication shall not affect the validity of the notice. All such notices shall be given to the respective parties at the addresses designated below, or to such other address as a party may designate in a like manner. If to Company: Management Solutions, Inc. Denver Technological Center 5351 S. Roslyn Street, Suite 200 Greenwood Village, CO 80111 with copy to: General Counsel Tokheim Corporation 10501 Corporate Drive Fort Wayne, IN 46845 If to Employee: Arthur S. ("Rusty") Elston 11925 E. Ida Circle Englewood, CO 80111 17 In WITNESS WHEREOF, the parties have entered into this Agreement the date first written above. COMPANY /s/ William D. Shank ------------------------------ Management Solutions, Inc. By: William D. Shank Title: EMPLOYEE /s/ Arthur S. ("Rusty") Elston ------------------------------ Arthur S. ("Rusty") Elston 18 EX-11 14 EARNINGS PER SHARE EXHIBIT 11 TOKHEIM CORPORATION AND SUBSIDIARIES EXHIBIT (11)--EARNINGS PER SHARE FOR THE YEARS ENDED NOVEMBER 30, 1997, 1996, AND 1995. 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 option, 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 the fiscal years ended November 30, 1997, 1996, and 1995.
PRIMARY ------------------------- 1997 1996 1995 ------- ------- ------- Shares outstanding (in thousands): Weighted average outstanding...................... 8,044 7,939 7,893 Share equivalents................................. 39 42 18 ------- ------- ------- Adjusted outstanding.............................. 8,083 7,981 7,911 ======= ======= ======= Net earnings (loss): Before extraordinary loss on debt extinguishment.. $ 3,980 $(2,009) $ 3,231 Extraordinary loss on debt extinguishment......... (1,886) -- -- ------- ------- ------- Net earnings (loss)............................... 2,094 (2,009) 3,231 Less preferred stock dividend..................... (1,512) (1,543) (1,580) ------- ------- ------- Earnings (loss) applicable to common stock........ $ 582 $(3,552) $ 1,651 ======= ======= ======= Net loss per common share: Before cumulative effect of change in method of accounting....................................... $ 0.31 $ (0.45) $ 0.21 Cumulative effect of change in method of accounting....................................... (0.23) -- -- ------- ------- ------- Net earnings (loss) per common share.............. $ 0.07 $ (0.45) $ 0.21 ======= ======= =======
For 1996, 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 ------------------------- 1997 1996 1995 ------- ------- ------- Shares outstanding (in thousands): Weighted average outstanding...................... 8,044 7,939 7,893 Share equivalents................................. 77 44 18 Weighted conversion of preferred stock............ 946 1,863 1,909 ------- ------- ------- Adjusted outstanding.............................. 9,067 9,846 9,820 ======= ======= ======= Net earnings (loss): Before extraordinary loss on debt extinguishment.. $ 3,980 $(2,009) $ 3,231 Extraordinary loss on debt extinguishment......... (1,886) -- -- ------- ------- ------- Net earnings (loss)............................... 2,094 (2,009) 3,231 Incremental compensation expense.................. (1,512) (1,543) (1,580) ------- ------- ------- Earnings (loss) applicable to common stock........ $ 582 $(3,552) $ 1,651 ======= ======= ======= Net loss per common share: Before cumulative effect of change in method of accounting....................................... $ 0.31 $ (0.36) $ 0.17 Cumulative effect of change in method of accounting....................................... (0.23) -- -- ------- ------- ------- Net earnings (loss) per common share.............. $ (0.07) $ (0.36) $ 0.17 ======= ======= =======
Fully Diluted ---------------------------------- 1997 1996 1995 --------- -------- ------- Shares outstanding (in thousands): Weighted average outstanding......................... 7,939 7,893 Share equivalents.................................... 44 18 Weighted conversion of preferred stock............... 1,863 1,909 ------- ------- Adjusted outstanding................................. 9,846 9,820 ======= ======= Net earnings (loss): Before cumulative effect of change in method of accounting......................................... $(2,009) $ 3,231 Cumulative effect of change in method of accounting.. -- -- ------- ------- Net earnings (loss).................................. (2,009) 3,231 Incremental compensation expense..................... (1,543) (1,580) ------- ------- Earnings (loss) applicable to common stock........... $(3,552) $ 1,651 ======= ======= Net loss per common share: Before cumulative effect of change in method of accounting......................................... $ (0.36) $ 0.17 Cumulative effect of change in method of accounting.. -- -- ------- ------- Net earnings (loss) per common share................. $ (0.36) $ 0.17 ======= =======
EX-21 15 LIST OF THE SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 Subsidiaries
Subsidiary Tokheim % Jurisdiction of F/S Information Name Ownership Incorporation Included By ------------------------------------------ --------- ------------------ --------------- Tokheim Sales B.V. (B) 100.00% The Netherlands Consolidated Tokheim Investment Corporation (A) 100.00% Texas - USA Consolidated Sunbelt Hose and Petroleum Equipment, Inc. (B) 100.00% Georgia - USA Consolidated Tokheim Automation Corporation (A) 100.00% Texas - USA Consolidated Envirotronic Systems, Inc. (A) 100.00% Indiana - USA Consolidated Gasboy International, Inc. (B) 100.00% Pennsylvania - USA Consolidated Tokheim and Gasboy of Canada Limited (C) 100.00% Ontario - Canada Consolidated Tokheim Europe B.V. (B) 100.00% The Netherlands Consolidated Tokheim GmbH (A) 100.00% Germany Consolidated Tokheim South Africa (Proprietary) Limited (D) 100.00% South Africa Consolidated Tokheim Properties (Proprietary) Limited (D) 100.00% South Africa Consolidated Tokheim Sofitam Limited (B) 100.00% United Kingdom Consolidated Sofitam - Tokheim S.A. (B) 100.00% France Consolidated Sofitam Equipment S.A. (E) 100.00% France Consolidated Sogen S.A. (F) 100.00% France Consolidated Sofitam International S.A. (F) 100.00% France Consolidated Sofitam N.V. (H) 100.00% Belgium Consolidated Sofitam Iberica (G) 99.81% Spain Consolidated Tokheim Sofitam Italia (G) 60.00% Italy Consolidated Cocitam S.A. (G) 98.75% Ivory Coast Consolidated Bennett Sauser S.A. (I) 47.14% Switzerland Consolidated Sofitam Pump Services (G) 51.34% United Kingdom Consolidated Matam S.A. (G) 100.00% Morocco Consolidated Cottam Sarl (G) 100.00% Tunisia Consolidated Socatam S.A. (G) 99.91% Cameroon Consolidated Cosetam S.A. (G) 98.93% Senegal Consolidated Excelsior S.A. (F) 20.00% France Equity Method Serip S.A. (F) 10.00% France Equity Method Outelec (F) less than 1.00% France Equity Method
A) Directly owned by Tokheim Corporation. B) Directly owned by Tokheim Corporation subsidiary Tokheim Investment Corporation, or directors' qualifying shares. C) Directly owned 65% by Tokheim Corporation subsidiary Tokheim Investment Corporation and 35% by Tokheim Corporation subsidiary Gasboy International, Inc. D) Directly owned by Tokheim Corporation's indirect subsidiary Tokheim and Gasboy of Canada Limited. E) Directly owned by Tokheim Corporation's indirect subsidiary Sofitam -Tokheim S.A. F) Directly owned by Tokheim Corporation's indirect subsidiary Sofitam Equipment S.A. G) Directly owned by Tokheim Corporation's indirect subsidiary Sofitam International S.A. H) Directly owned 66.67% by Tokheim Corporation's indirect subsidiary Sofitam International S.A. and 33.33% by Tokheim Corporation's indirect subsidiary Parke Penrhyn. I) Directly owned 44.76% by Tokheim Corporation's indirect subsidiary Parke Penrhyn and 2.38% by Tokheim Corporation's indirect subsidiary Sofitam International S.A. EX-23 16 CONSENT OF COOPERS & LYBRAND L.L.P. EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Tokheim Corporation on Form S-8 (file No. 1-6018) of our report dated January 23, 1998, on our audits of the consolidated financial statements of Tokheim Corporation and subsidiaries as of November 30, 1997 and 1996, and for the years ended November 30, 1997, 1996, and 1995, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. Fort Wayne, Indiana February 13, 1998 EX-27 17 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Tokheim Corporation's November 30, 1997, annual financial statements and is qualified in its entirety by reference to such financial statements. 0000098559 TOKHEIM CORPORATION 1,000 12-MOS NOV-30-1997 NOV-30-1997 6,438 0 86,923 3,912 64,347 160,501 106,175 64,209 209,619 118,851 90,000 21,018 9,853 0 (10,400) 290,619 385,469 385,469 283,932 283,932 3,493 0 16,451 5,197 1,217 3,980 0 (1,886) 0 2,094 0.08 0.06 Represents gross inventory net of loss reserves. Represents gross PP&E. Represents common stock of $21,158 less treasury stock of $140. Represents redeemable preferred stock of $24,000 less Guaranteed ESOP of $9,429 and treasury stock of $4,718. Represents retained earnings of $9,821 less minimum pension liability of $2,173 and foreign currency translation adjustments of $18,048. Includes product development expenses and excludes depreciation and amortization.
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