<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1999.
REGISTRATION NO. 333-75151
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMDOCS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
ISLAND OF GUERNSEY 7371 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
TOWER HILL HOUSE LE BORDAGE
ST. PETER PORT, ISLAND OF GUERNSEY, GY1 3QT CHANNEL ISLANDS
011-44-1481-727272
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
AMDOCS, INC.
1610 DES PERES ROAD, ST. LOUIS, MISSOURI 63131
ATTENTION: THOMAS G. O'BRIEN, TREASURER
314-821-3242
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
ROBERT A. SCHWED, ESQ. PHYLLIS G. KORFF, ESQ.
REBOUL, MACMURRAY, HEWITT, MAYNARD & KRISTOL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
45 ROCKEFELLER PLAZA 919 THIRD AVENUE
NEW YORK, NEW YORK 10111 NEW YORK, NEW YORK 10022
(212) 841-5700 (212) 735-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
- ---------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
The inside front cover pages contain the following:
* Amdocs Logo with text and pictures of telecommunications users superimposed
upon a globe of the Earth. Text: Business Support Systems Solutions for the
Telecommunications Industry.
* Amdocs Logo with text and a graphical representation of the different
components that comprise Amdocs' customer care and billing platform. Text:
Customer Care and Billing Platform. Comprehensive Customer Care and Billing
Platform supporting wireline, wireless and multi-service convergence
telecom carriers.
<PAGE> 3
EXPLANATORY NOTE
This Registration Statement relates to an offering of up to 20,000,000 of
our ordinary shares (or 23,000,000 shares if the underwriters' over-allotment
option is exercised in full) for sale directly to the public, of which 2,000,000
ordinary shares will be offered by us and 18,000,000 will be offered by the
selling shareholders identified in this prospectus, and up to 10,000,000 of our
ordinary shares (or 11,500,000 shares if the underwriters' over-allotment option
is exercised in full) that may be delivered by the Amdocs Automatic Common
Exchange Security Trust, a non-diversified closed-end management investment
company, to holders of its Automatic Common Exchange Securities upon exchange of
those securities. The Automatic Common Exchange Securities are being offered
pursuant to a separate prospectus of the Amdocs Automatic Common Exchange
Security Trust included in a registration statement on Form N-2 (Registration
Nos. 333-73265 and 811-09245).
This Registration Statement contains two forms of prospectus: one to be
used in connection with our ordinary share offering and one to be attached to
the Amdocs Automatic Common Exchange Security Trust prospectus. The prospectus
to be attached to the Amdocs Automatic Common Exchange Security Trust prospectus
will be identical to the one used for the ordinary share offering except for the
front and back cover pages and except that the Trust prospectus contains
additional sections entitled "Plan of Distribution" and "Trust Prospectus" and
does not contain a section entitled "Underwriting".
<PAGE> 4
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated June 7, 1999.
20,000,000 Shares
AMDOCS LIMITED
Ordinary Shares
LOGO
----------------------
Amdocs is offering 2,000,000 ordinary shares to be sold in the offering.
The selling shareholders identified in this prospectus are offering an
additional 18,000,000 ordinary shares.
In addition to the offering described in this prospectus, the Amdocs
Automatic Common Exchange Security Trust (the "TRACES Trust") shareholder named
in this prospectus is offering up to 10,000,000 ordinary shares (or up to
11,500,000 ordinary shares if the underwriters' over-allotment option is
exercised in full) that may be delivered by the TRACES Trust to holders of
Automatic Common Exchange Securities of the TRACES Trust upon exchange of such
securities on the Exchange Date as defined in the prospectus attached to the
TRACES Trust prospectus (the "Trust Prospectus"). The Automatic Common Exchange
Securities are being sold by the TRACES Trust in an offering described in the
Trust Prospectus. The respective closings of the offerings of the ordinary
shares and the Automatic Common Exchange Securities are not dependent upon one
another.
Amdocs will not receive any proceeds from the sale of the ordinary shares
by the selling shareholders or the sale of the Automatic Common Exchange
Securities by the TRACES Trust.
The ordinary shares are listed on the New York Stock Exchange under the
symbol "DOX." The last reported sale price of our ordinary shares on June 3,
1999 was $22.88 per share.
See "Risk Factors" on page 9 to read about factors you should consider
before buying our ordinary shares.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial price to public..................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Amdocs........................ $ $
Proceeds, before expenses, to the selling shareholders...... $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 3,000,000 shares from Amdocs and the selling shareholders at the
initial price to public less the underwriting discount.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
BANCBOSTON ROBERTSON STEPHENS
DEUTSCHE BANC ALEX. BROWN
LEHMAN BROTHERS
SG COWEN
----------------------
Prospectus dated , 1999.
<PAGE> 5
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated under the laws of the Island of Guernsey ("Guernsey").
Several of our directors and officers named herein are not residents of the
United States, and a significant portion of our assets and the assets of those
persons are located outside the United States. As a result, it may not be
possible for investors to effect service of process within the United States
upon those persons or to enforce against them in U.S. courts judgments
predicated upon the civil liability provisions of the laws of the United States,
including the federal securities laws. We have irrevocably appointed Amdocs,
Inc., one of our U.S. subsidiaries, as our agent to receive service of process
in any action against us in any Federal court or court of the State of New York
arising out of the offering and sale of securities in connection with this
prospectus.
We have been advised by Carey Langlois, our Guernsey counsel, that there is
doubt as to the enforceability against our directors and officers in Guernsey,
whether in original actions in a Guernsey court or in actions in a Guernsey
court for the enforcement of judgments of a U.S. court, of civil liabilities
predicated solely upon the laws of the United States, including the federal
securities laws. However, subject to certain time limitations, Guernsey courts
may base original actions in Guernsey on foreign final executory judgments,
including those of the United States, for liquidated amounts in civil matters,
obtained after completion of due process before a court of competent
jurisdiction (according to the rules of private international law currently
prevailing in Guernsey) which recognizes and enforces similar Guernsey
judgments, provided that:
- adequate service of process has been effected and the defendant has had a
reasonable opportunity to be heard;
- such judgments or the enforcement thereof are not contrary to the law,
public policy, security or sovereignty of Guernsey;
- such judgments were not obtained by fraudulent means and do not conflict
with any other valid judgment in the same matter between the same
parties; and
- an action between the same parties in the same matter is not pending in
any Guernsey court at the time the lawsuit is instituted in the foreign
court.
3
<PAGE> 6
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the ordinary shares being sold in this
offering and our financial statements and notes to those financial statements
appearing elsewhere in this prospectus. Unless otherwise indicated, all
information in this prospectus assumes the underwriters' option to purchase
additional shares in the offering will not be exercised. See "Description of
Share Capital" and "Underwriting". References in this prospectus to "Amdocs,"
"we," "our," "us" and the "Company" refer to Amdocs Limited and its consolidated
subsidiaries and their respective predecessors. References to "dollars" or $ are
to United States dollars.
Unless otherwise stated, all references in this prospectus to ordinary
shares are to both voting and nonvoting ordinary shares, all references to
percentage ownership of our ordinary shares exclude the effect of the ordinary
shares being offered by this prospectus and all references to ordinary voting
and nonvoting share ownership, as expressed in percentages, are as of April 30,
1999.
AMDOCS
We are a leading provider of product-driven information system solutions to
major telecommunications companies in North America, Europe and around the
world. Our Business Support Systems consist of families of products designed to
meet the mission-critical needs of specific market sectors. We provide
integrated, comprehensive customer care and billing systems for wireline and
wireless network operators and service providers. We also provide customer care
and billing systems to companies that offer multiple service packages, commonly
referred to as convergent services, such as local, long distance, international,
data, Internet, Voice Over Internet Protocol, cellular, personal communications
services and paging. In addition, we provide a full-range of directory sales and
publishing systems to publishers of both traditional printed yellow page and
white page directories and Internet directories.
Since the inception of our business in 1982, we have concentrated on
providing software products and services to major telecommunications companies.
By focusing on this market, we believe that we have been able to develop the
innovative products and the industry expertise, project management skills and
technological competencies required for the advanced, large-scale,
specifications-intensive system projects typical of the telecommunications
industry. Our customer base includes the largest local exchange service
providers in the United States, major foreign network operators and service
providers such as Deutsche Telekom (Germany) and Telstra Corporation Ltd.
(Australia) and emerging market leaders.
We believe that our total solutions orientation, product functionality and
quality personnel permit us to offer effective solutions to our customers that
are both highly innovative and reliable. Our software products are based on an
advanced three-tier client-server architecture that provides the flexibility and
scalability needed by major companies in the highly competitive, rapidly
changing telecommunications industry. We have developed an extensive library of
Business Support System software products, providing comprehensive support for
the various types of telecommunications operations. Core elements include
customer care, order management, call rating, invoice calculation, bill
formatting, collections, fraud management and directory publishing. Our products
have also been configured to support the growing trend for communications
companies to provide convergent wireline and wireless services. We also offer
our customers a range of support services to provide a complete systems
solution. These services include software customization to address each
customer's specific requirements, as well as implementation support, system
integration, maintenance, ongoing support and outsourcing services.
4
<PAGE> 7
The telecommunications industry is undergoing rapid and fundamental changes
due to the increased demand for telecommunications services, deregulation,
privatization and technological advancements. These changes are creating
opportunities for new entrants to provide both traditional and new types of
services, including Internet, Voice over Internet Protocol telephony, Internet
directories, data and convergent services. In this environment,
telecommunications service providers increasingly need to compete for customers
by providing service and product offerings that are differentiated by factors
such as service quality, advanced features, rapid implementation of new
services, technological innovation and price.
As a result of these developments, many telecommunications companies are
seeking a new generation of information systems to support their operations and
to be more competitive. In addition, many new and existing service providers do
not have the financial or human resources or technological capability to
internally develop efficient, flexible, cost-effective information systems on a
timely basis. Moreover, as many telecommunications companies strive to become
more consumer oriented, they are concentrating their efforts and resources on
marketing to consumers and expanding their service offerings and many are
turning to third party vendors for their information systems. All of these
factors create significant opportunities for us to provide information system
solutions.
We derive our revenue principally from
- the sale of our Business Support System products and related services,
including license fees and customization and implementation services, and
- recurring revenue from ongoing maintenance, support, outsourcing and
related services provided to our customers and to a lesser degree, from
incremental license fees resulting from increases in a customer's subscribers.
Customer care and billing systems and related services accounted for $199.6
million or 71.5% of our revenue for the six months ended March 31, 1999 and
$251.8 million or 62.4% of our revenue for the year ended September 30, 1998.
Directory sales and publishing systems and related services and other activities
accounted for $79.7 million or 28.5% of our revenue for the six months ended
March 31, 1999 and $151.9 million or 37.6% of our revenue for the year ended
September 30, 1998.
As of March 31, 1999, we had approximately 4,150 full-time equivalent
employees, of which approximately 3,600 were software and information technology
specialists engaged in research, development, maintenance and support
activities. Our Israeli subsidiary employs over 2,600 software and information
technology specialists and operates our largest development facility. In the
United States, our main sales and development center is located in St. Louis,
Missouri. The executive offices of our principal subsidiary in the United States
are located at 1610 Des Peres Road, St. Louis, Missouri 63131, and the telephone
number at that location is (314) 821-3242.
5
<PAGE> 8
THE OFFERING
<TABLE>
<S> <C>
Shares offered by Amdocs............................. 2,000,000 shares
Shares offered by the selling shareholders........... 18,000,000 shares
Shares to be outstanding after the offering.......... 198,800,024(1)
Use of proceeds...................................... To repay a portion of our outstanding
revolving bank debt and for general corporate
purposes, principally working capital and
capital expenditures. See "Use of Proceeds".
NYSE symbol.......................................... DOX
</TABLE>
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(1) Based on ordinary shares outstanding as of June 7, 1999. Does not include
(i) approximately 4,231,000 ordinary shares reserved for issuance upon the
exercise of stock options that have been granted through March 31, 1999
under our stock option plan and (ii) approximately 2,369,000 ordinary shares
to be reserved for future issuance of stock options under our stock option
plan.
In addition to the offering described in this prospectus, the TRACES Trust
shareholder named in this prospectus is offering up to 10,000,000 ordinary
shares (or up to 11,500,000 ordinary shares if the underwriters' over-allotment
option is exercised in full) that may in certain circumstances be delivered by
the TRACES Trust to holders of its Automatic Common Exchange Securities upon
exchange of those securities on the Exchange Date.
6
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Our consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States ("U.S. GAAP") and
presented in dollars. The summary consolidated financial information set forth
below has been derived from the combined or consolidated financial statements of
Amdocs and its subsidiaries for the fiscal periods presented. During the year
ended September 30, 1994, Amdocs' operating subsidiaries were operated as a
group of companies owned by common shareholders, and financial statements for
such periods were prepared on a combined basis and were not audited. Information
as of and for the four years ended September 30, 1998 is derived from our
consolidated financial statements which have been audited by Ernst & Young LLP,
our independent auditors. The summary consolidated financial information as of
and for the six months ended March 31, 1999 and 1998 is derived from our
unaudited consolidated financial statements. The unaudited financial information
reflects all adjustments (consisting only of normal recurring adjustments) that
we consider necessary for a fair statement of our consolidated financial
position and the results of operations for such periods. The results of
operations for the six months ended March 31, 1999 are not necessarily
indicative of results to be expected for any future period.
The information presented below is qualified by the more detailed
consolidated financial statements included elsewhere in this prospectus and
should be read in conjunction with those consolidated financial statements and
the discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
------------------- -------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................... $279,255 $180,566 $403,767 $290,102 $211,720 $167,312 $121,310
Operating income...................... 65,786 35,970 84,895 26,969 35,490 15,377 22,047
Net income(1)......................... 43,283 12,066 30,107 5,876 24,508 11,224 16,068
Basic earnings per share.............. 0.22 0.09 0.19 0.05 0.23 0.11 0.17
Diluted earnings per share............ 0.22 0.09 0.19 0.05 0.22 0.11 0.17
Dividends declared per share(2)....... -- 3.76 3.76 0.18 0.35 0.17 0.15
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
-------------------------------------- -------------------------------------------------------
1999 1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
(AS ADJUSTED)(4) (ACTUAL) (UNAUDITED)
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets(4)........ $313,594 $301,550 $223,882 $239,966 $220,582 $104,531 $101,483 $ 77,106
Long-term obligations
(net of current
portion)............. 12,675 12,675 339,615 9,215 7,370 1,663 -- --
Shareholders' equity
(deficit)(2)(3)(4)... 67,815 25,771 (273,917) (21,889) 94,253 15,988 29,429 21,872
</TABLE>
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(1) In the fourth quarter of fiscal 1997, we recorded nonrecurring charges of
$27,563. Of such amount, $25,763 is attributable to the funding of a
contribution to a trust and the balance, $1,800, is due to the write-off of
in-process technology related to certain software rights acquired from
several operating subsidiaries of SBC Communications Inc.
(2) In January 1998, we paid dividends totaling $478,684.
(3) In June 1998, we completed our initial public offering of 18,000 ordinary
shares. The net proceeds from the offering to us were $234,190.
7
<PAGE> 10
(4) Adjusted to give effect to the sale of the 2,000 ordinary shares by us in
the offering, at an assumed public offering price of $22.88 per share, after
deducting the underwriting discount and estimated offering expenses.
Adjustments assume that $30.0 million of the proceeds we receive in the
offering are used to repay outstanding revolving loans under our bank credit
facility, which we classify as short-term obligations. See "Use of
Proceeds".
8
<PAGE> 11
RISK FACTORS
Investing in our ordinary shares involves significant risks. You should
carefully consider the following risks before deciding to invest in our ordinary
shares. In preparing this document, we have made certain assumptions and
projections. We generally use words like "expect," "believe" and "intend" to
indicate these assumptions and projections. Our assumptions and projections
could be wrong for many reasons, including the reasons discussed in this
section. We do not promise to notify you if we learn that our assumptions or
projections in this prospectus are wrong. See "Forward-Looking Statements" for
more information.
RISKS APPLICABLE TO OUR BUSINESS
FUNDAMENTAL CHANGES IN THE TELECOMMUNICATIONS MARKET COULD REDUCE DEMAND FOR OUR
SYSTEMS
Future developments in the telecommunications industry, such as continued
industry consolidation, the formation of alliances among network operators and
service providers and changes in the regulatory environment, could adversely
affect our existing or potential customers. This could reduce the demand for our
products and services. As a result, we may be unable to effectively market and
sell our information systems to potential customers in the telecommunications
industry.
We derive a significant portion of our revenue from products and services
provided to directory publishers. We believe that the demand for such products
and services will be affected by the extent of increased competition between
directory publishers and other media channels, as well as a broader introduction
of electronic directories. Our new products for these markets may not be
successful or we may be unable to maintain our current level of revenue from
directory systems.
IF WE CANNOT COMPETE SUCCESSFULLY WITH EXISTING OR NEW COMPETITORS OUR BUSINESS
COULD BE MATERIALLY ADVERSELY AFFECTED
We may be unable to compete successfully with existing or new competitors
and our failure to adapt to changing market conditions and to compete
successfully with established or new competitors could have a material adverse
effect on our results of operations and financial condition.
The market for telecommunications information systems is highly competitive
and fragmented, and we expect this competition to increase. We compete with
independent providers of information systems and services and with in-house
software departments of telecommunications companies. Our competitors include
firms that provide comprehensive information systems, software vendors that sell
products for particular aspects of a total information system, systems
integrators, service bureaus and companies that offer software systems in
combination with the sale of network equipment. We anticipate continued growth
and competition in the telecommunications industry and, consequently, the
emergence of new software providers in the industry that will compete with us.
We also believe that our ability to compete depends in part on a number of
competitive factors, including:
- the development by others of software that is competitive with our
products and services;
- the price at which others offer competitive software and services;
- the responsiveness of our competitors to customer needs; and
- the ability of our competitors to hire, retain and motivate key
personnel.
We compete with a number of companies that have longer operating histories,
larger customer bases, substantially greater financial, technical, sales,
marketing and other resources,
9
<PAGE> 12
and greater name recognition than do we. Current and potential competitors have
established, and may establish in the future, cooperative relationships among
themselves or with third parties to increase their ability to address the needs
of our prospective customers. Accordingly, new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. As a
result, our competitors may be able to adapt more quickly than us to new or
emerging technologies and changes in customer requirements, and may be able to
devote greater resources to the promotion and sale of their products.
WE MUST CONTINUALLY ENHANCE OUR PRODUCTS TO REMAIN COMPETITIVE
We believe that our future success will depend, to a significant extent,
upon our ability to enhance our existing products and to introduce new products
and features to meet the requirements of our customers in a rapidly developing
and evolving market. We are currently devoting significant resources to refining
and expanding our base software modules and to developing Business Support
System products that operate on state-of-the-art operating systems. Our present
or future products may not satisfy the evolving needs of the telecommunications
market. If we are unable to anticipate or respond adequately to such demands,
due to resource, technological or other constraints, our business and results of
operations could be materially adversely affected.
WE DEPEND ON SBC COMMUNICATIONS INC. FOR A SIGNIFICANT PORTION OF OUR REVENUES
Our single largest group of customers are SBC Communications Inc., or SBC,
and its operating subsidiaries. SBC International Inc., or SBCI, a wholly owned
subsidiary of SBC, is also one of our significant shareholders. It currently
holds approximately 22.0% of our outstanding ordinary shares. A significant
decrease in the sale of products and services to SBC or its subsidiaries may
materially adversely affect our results of operations and financial condition.
Substantially all our work for SBC is conducted directly with SBC's
operating subsidiaries, such as Southwestern Bell Mobile Systems, Southwestern
Bell Yellow Pages, Southwestern Bell Communications Services (SBC's long
distance provider) and Southwestern Bell Telephone Company. These SBC
relationships accounted for in the aggregate 16.6% of our total revenue in the
first six months of fiscal 1999 and 20.8%, 34.5% and 38.0% of revenue in fiscal
1998, 1997 and 1996, respectively. The absolute amount of revenue attributable
to SBC and such subsidiaries amounted to $46.2 million in the first six months
of fiscal 1999 and $84.4 million, $99.9 million and $80.5 million in fiscal
1998, 1997 and 1996, respectively.
OUR BUSINESS IS HIGHLY DEPENDENT ON A LIMITED NUMBER OF SIGNIFICANT CUSTOMERS
Our business is highly dependent on a limited number of significant
customers. The loss of any significant customer or a significant decrease in
business from any of those customers could have a material adverse effect on our
results of operations and financial condition. We have approximately 70
customers, and revenue derived from our five largest customers, excluding SBC
and its operating subsidiaries, accounted for approximately 23.5% of revenue in
the first six months of fiscal 1999 and 27.1%, 33.2% and 42.7% of revenue in
fiscal 1998, 1997 and 1996, respectively.
Although we have received a substantial portion of our revenue from repeat
business with established customers, most of our major customers do not have any
obligation to purchase additional products or services and generally have
already acquired fully paid licenses to their installed systems. Therefore, our
customers may not continue to purchase new systems, system enhancements and
services in amounts similar to previous years.
10
<PAGE> 13
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP LONG-TERM RELATIONSHIPS
WITH NEW CUSTOMERS
We believe that our future success depends to a significant extent on our
ability to develop new long-term relationships with successful network operators
and service providers. Many new entrants into the telecommunications market lack
significant financial and other resources. We may be unable to develop new
customer relationships and our new customers may be unsuccessful. Our failure to
attract new customer relationships or the failure of new customers to be
successful could have a material adverse effect on our business, results of
operations and financial condition.
THE SKILLED EMPLOYEES THAT WE NEED MAY BE DIFFICULT TO HIRE AND RETAIN
Our success depends in large part on our ability to attract, train,
motivate and retain highly skilled information technology professionals,
software programmers and telecommunications engineers. These types of qualified
personnel are in great demand and are likely to remain a limited resource for
the foreseeable future. We currently employ 3,600 software and information
technology specialists, of which over 2,600 are located in Israel. We
intensively recruit technical personnel for our principal development centers in
Israel, the United States and Cyprus. Our ability to expand our business is
highly dependent upon our success in recruiting such personnel and our ability
to manage and coordinate our worldwide development efforts. We may be unable to
continue to attract and retain the skilled employees we require and any
inability to do so could adversely impact our ability to manage and complete our
existing projects and to compete for new customer contracts. In addition, the
resources required to attract and retain such personnel may adversely affect our
operating margins. The failure to attract and retain qualified personnel may
have a material adverse effect on our business, results of operations and
financial condition. Our success also depends, to a certain extent, upon the
continued active participation of a relatively small group of senior management
personnel who have been with us for many years. The loss of the services of all
or some of these employees could have a material adverse effect on our business.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE
We have experienced fluctuations in our quarterly operating results and
anticipate that such fluctuations may continue and could intensify. Our
quarterly operating results may fluctuate as a result of many factors,
including:
- the size and timing of significant customer projects and license fees;
- increased competition;
- cancellations of significant projects by customers;
- changes in operating expenses;
- changes in our strategy;
- personnel changes;
- foreign currency exchange rates; and
- general economic and political factors.
Generally, our license fee revenue and our service fee revenue relating to
customization and implementation are recognized as work is performed, using
percentage of completion accounting. Given our reliance on a limited number of
significant customers, our quarterly results may be significantly affected by
the size and timing of customer projects and our progress in completing such
projects.
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<PAGE> 14
We believe that the placement of customer orders may be concentrated in
specific quarterly periods due to the time requirements and budgetary
constraints of our customers. Although we recognize revenue as projects
progress, which progress may vary significantly from project to project, we
believe that variations in quarterly revenue are sometimes attributable to the
timing of initial order placements. Due to the relatively fixed nature of
certain of our costs, a decline of revenue in any quarter would result in lower
profitability for that quarter and, in such event, the price of our ordinary
shares could be materially adversely affected.
As a result of these factors and the factors that follow, we believe that
period-to-period comparisons of our revenues and operating results are not
necessarily meaningful.
OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO ANTICIPATE THE TIMING OF SALES
The sales cycle associated with the purchase of our information systems is
lengthy, with the time between the making of an initial proposal to a
prospective customer and the signing of a sales contract typically being between
six and twelve months. Information systems for telecommunications companies are
relatively complex and their purchase generally involves a significant
commitment of capital, with attendant delays frequently associated with large
capital expenditures and implementation procedures within an organization.
Moreover, the purchase of such products typically requires coordination and
agreement across a potential customer's entire organization. Delays associated
with such timing factors may reduce our revenue in a particular period without a
corresponding reduction in our costs, which could have a material adverse effect
on our results of operations and financial condition.
OUR INTERNATIONAL PRESENCE CREATES SPECIAL RISKS
We are subject to certain risks inherent in doing business in international
markets, including:
- lack of acceptance of non-localized products,
- legal and cultural differences in the conduct of business,
- difficulties in staffing and managing foreign operations,
- longer payment cycles,
- difficulties in collecting accounts receivable and withholding taxes that
limit the repatriation of earnings,
- trade barriers,
- immigration regulations that limit our ability to deploy our employees,
- political instability, and
- variations in effective income tax rates among countries where we conduct
business.
One or more of these factors could have a material adverse effect on our
international operations.
We maintain three development facilities located in Israel, the United
States and Cyprus, operate a support center located in Brazil and have
operations in Europe, North America, Latin America and the Asia-Pacific region.
Although a majority of our revenue in fiscal 1998 was derived from customers in
North America, we obtain significant revenue from customers in Europe,
Australia, and Latin America. Our strategy is to continue to broaden our North
American and European customer base and to expand into new international
markets, the most significant of which are located in Latin America and the
Asia-Pacific region.
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<PAGE> 15
FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES COULD ADVERSELY AFFECT OUR
BUSINESS
A significant portion of our operating costs are incurred outside the
United States, and therefore fluctuations in exchange rates between the
currencies in which such costs are incurred and the dollar may have a material
adverse effect on our results of operations and financial condition. The cost of
our operations in Israel, as expressed in dollars, could be adversely affected
by the extent to which any increase in the rate of inflation in Israel is not
offset (or is offset on a lagging basis) by a devaluation of the Israeli
currency in relation to the dollar. As a result of this differential, from time
to time we experience increases in the costs of our operations in Israel, as
expressed in dollars, which could in the future have a material adverse effect
on our results of operations and financial condition.
Generally, the effects of fluctuations in foreign currency exchange rates
are mitigated by the fact that a significant portion of our revenue is in
dollars and we generally hedge our currency exposure on both a short-term and
long-term basis with respect to the balance of our revenue.
The imposition of exchange or price controls or other restrictions on the
conversion of foreign currencies could also have a material adverse effect on
our business, results of operations and financial condition.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY
Any misappropriation of our technology or the development of competitive
technology could seriously harm our business. We regard a substantial portion of
our software products and systems as proprietary and rely on a combination of
statutory and common law copyright, trademark and trade secret laws, customer
licensing agreements, employee and third party non-disclosure agreements and
other methods to protect our proprietary rights. We do not include in our
software any mechanisms to prevent or inhibit unauthorized use, but we generally
enter into confidentiality agreements with our employees, consultants, customers
and potential customers and limit access to and distribution of proprietary
information.
The steps we have taken to protect our proprietary rights may be
inadequate. If so, we might not be able to prevent others from using what we
regard as our technology to compete with us. Existing trade secret, copyright
and trademark laws offer only limited protection. In addition, the laws of some
foreign countries do not protect our proprietary technology to the same extent
as the laws of the United States. Other companies could independently develop
similar or superior technology without violating our proprietary rights.
If we have to resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive and could
involve a high degree of risk.
CLAIMS BY OTHERS THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD HARM OUR
BUSINESS
Although we have not received any notices from third parties alleging
infringement claims, third parties could claim that our current or future
products or technology infringe their proprietary rights. We expect that
software developers will increasingly be subject to infringement claims as the
number of products and competitors providing software and services to the
telecommunications industry increase and overlaps occur. Any claim of
infringement by a third party could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business. Furthermore, a party making such a claim could
secure a judgment that requires us to pay substantial damages. A judgment could
also include an injunction or other court order that could prevent us from
selling our products. Any of these events could seriously harm our business.
If anyone asserts a claim against us relating to proprietary technology or
information, we might seek to license their intellectual property or to develop
non-infringing technology. We might not be able to obtain a license on
commercially reasonable terms or on any terms. Alternatively,
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<PAGE> 16
our efforts to develop non-infringing technology could be unsuccessful. Our
failure to obtain the necessary licenses or other rights or to develop
non-infringing technology could prevent us from selling our products and could
therefore seriously harm our business.
THE TERMINATION OR REDUCTION OF CERTAIN GOVERNMENT PROGRAMS AND TAX BENEFITS
COULD ADVERSELY AFFECT OUR OVERALL EFFECTIVE TAX RATE
We benefit from certain government programs and tax benefits, including
programs and benefits in Israel and Cyprus. To be eligible for these programs
and tax benefits, we must meet certain conditions. If we fail to meet these
conditions we could be required to refund tax benefits already received.
Additionally, some of these programs and the related tax benefits are available
to us for a limited number of years, and these benefits expire from time to
time.
Any of the following could have a material affect on our overall effective
tax rate:
- some programs may be discontinued,
- we may be unable to meet the requirements for continuing to qualify for
some programs,
- these programs and tax benefits may be unavailable at their current
levels, or
- upon expiration of a particular benefit, we may not be eligible to
participate in a new program or qualify for a new tax benefit that would
offset the loss of the expiring tax benefit or we may be required to
refund previously accredited tax benefits if we are found to be in
violation of the stipulated conditions.
PRODUCT DEFECTS OR SOFTWARE ERRORS COULD ADVERSELY AFFECT OUR BUSINESS
Design defects or software errors may cause delays in product introductions
or damage customer satisfaction and may have a material adverse effect on our
business, results of operations and financial condition. Our software products
are highly complex and may, from time to time, contain design defects or
software errors that may be difficult to detect and correct.
Since our products are generally used by our customers to perform
mission-critical functions, design defects, software errors, misuse of our
products, incorrect data from external sources or other potential problems
within or out of our control may arise from the use of our products, and may
result in financial or other damages to our customers. Completion of the
development and implementation phases of a project requires between six and
twelve months of work. During this period, a customer's budgeting constraints
and internal reviews, over which we have little or no control, can impact
operating results. Our failure or inability to meet a customer's expectations in
providing products or performing services may result in the termination of our
relationship with that customer or could give rise to claims against us.
Although we have license agreements with our customers that contain provisions
designed to limit our exposure to potential claims and liabilities arising from
customer problems, these provisions may not effectively protect us against such
claims in all cases. Claims and liabilities arising from customer problems could
damage our reputation, adversely affecting our business, results of operations
and financial condition.
"YEAR 2000 ISSUES" MAY DISRUPT OUR OPERATIONS
The term "year 2000 issues" is a general term used to describe the various
problems that may result from the improper processing of dates and faulty date
calculations by computers and other machinery in the upcoming millennium. These
problems generally arise from the fact that most of the world's legacy computer
hardware and software have historically used only two digits to identify the
year in a date, often meaning that the computer will fail to distinguish dates
in the "2000s" from dates in the "1900s". These problems may also arise from
other sources such as the use of special codes and conventions in software that
make use of the date field.
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<PAGE> 17
This could result in a system failure or miscalculation causing disruptions of
operations, including, among other things, total failure of mass systems that
depend on computers such as electricity, telephone networks and banking systems.
We believe that a small number of computer products marketed by us or
currently used by our customers might not be year 2000 compliant. In addition,
some products and services provided to our customers by other software vendors
may not be year 2000 compliant, thereby disrupting the ability of our customers
to use our software. We have accrued $2.0 million at March 31, 1999,
representing the estimated costs to modify our software products to address year
2000 issues under existing agreements for previously sold products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Year 2000 Issues". Our ultimate costs to address the year 2000
issues may significantly exceed our estimates, in which case those costs could
have a material adverse effect on our results of operations and business and
financial condition. Moreover, due to our dependence on a limited number of
significant customers, any material adverse impact on such customers due to year
2000 issues could also have a material adverse effect on our results of
operations, business and financial conditions.
OUR SOFTWARE PRODUCTS MAY NOT SUCCESSFULLY ACCEPT THE NEW EUROPEAN MONETARY
UNION CURRENCY, OR EURO, OR CONVERT FROM LOCAL CURRENCIES TO THE EURO
The euro is being phased in over a three-year period which commenced
January 1, 1999 when participating European countries began using the euro
currency for non-cash transactions. Computer systems and software products will
need to be designed or modified to accept the euro currency and, during a
transitional phase, will need to accept both the euro and local currencies. The
conversion to the euro currency will require restructuring of databases and
internal accounting systems and may require the conversion of historical data.
We intend to offer software products that are capable of accepting the euro
currency and converting from local currencies to the euro and vice versa. Our
software or software provided to our customers by other vendors may not ensure
an errorless transition to the euro currency. We have accrued $1.9 million at
March 31, 1999, representing the estimated costs to modify our software products
to accept the euro currency under existing agreements for previously sold
products. Our ultimate costs may significantly exceed our estimates, in which
case those costs could have a material adverse effect on our results of
operations, business and financial condition.
OUR DEVELOPMENT FACILITIES IN ISRAEL AND CYPRUS MAY BE ADVERSELY AFFECTED BY
POLITICAL AND ECONOMIC CONDITIONS IN THOSE COUNTRIES
Our largest development center is located in the State of Israel. Although
a substantial majority of our sales are made to customers outside Israel and we
maintain significant service teams on site with our customers, we are
nonetheless directly influenced by the political, economic and military
conditions affecting Israel. Any major hostilities involving Israel or the
interruption or curtailment of trade between Israel and its current trading
partners could have a material adverse effect on our business. We have developed
certain contingency plans to move certain development operations to various
sites both within and outside of Israel in the event political or military
conditions disrupt our normal operations.
Israel has entered into peace agreements with both Egypt and Jordan and is
in the process of conducting peace negotiations with the Palestinian Community.
Moreover, several other countries have announced their intentions to establish
trade and other relations with Israel. Israel, however, has not entered into any
peace arrangement with Syria or Lebanon. In addition, in recent months there has
been a deterioration in Israel's relationship with the Palestinian Community.
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<PAGE> 18
Consequently, we cannot predict how the peace process will develop or what
effect it may have on us or our business.
In addition, our development facility in Cyprus may be adversely affected
by political conditions in that country. As a result of intercommunal strife
between the Greek and Turkish communities, Turkish troops invaded Cyprus in 1974
and continue to occupy approximately 40% of the island. Efforts to resolve the
problem have not yet resulted in an agreeable solution. Recently, tensions
between the parties involved have increased significantly over certain military
defense issues. Any major hostilities between Cyprus and Turkey may have a
material adverse effect on our development facility in Cyprus.
RISKS APPLICABLE TO OUR CAPITAL STRUCTURE
A FEW OF OUR SHAREHOLDERS MAY BE ABLE TO EXERCISE CONTROL OVER ALL MATTERS
REQUIRING SHAREHOLDER APPROVAL
As a result of the concentration of ownership of our ordinary voting
shares, some shareholders may be able to exercise control over matters requiring
shareholder approval, including the election of directors and approval of
significant corporate transactions. This control may have the effect of delaying
or preventing a change in control of Amdocs.
Our ordinary voting shares are currently owned as follows:
- 34.2% by Welsh, Carson, Anderson & Stowe, or WCAS, a private investment
firm, and its affiliates,
- 8.6% by SBCI, and
- 27.4% by Amdocs International Limited, or AIL, a private company
beneficially owned by Morris S. Kahn.
SBCI also owns ordinary nonvoting shares, which together with its ordinary
voting shares represent 22.0% of the ordinary shares outstanding. In addition,
WCAS and certain entities in which members of our management have a beneficial
interest have granted irrevocable proxies with respect to a portion of the
ordinary shares held by them to a company beneficially owned by Morris S. Kahn.
Giving effect to such proxies, the company beneficially owned by Morris S. Kahn
and AIL together have the right to vote 45.2% of our ordinary voting shares,
WCAS and its affiliates have the right to vote 20.1% of our ordinary voting
shares and SBCI has the right to vote 8.6% of our ordinary voting shares.
Affiliates of WCAS and certain other investors, or the WCAS Investors, have
granted a call option on some of the ordinary shares that they hold to SBCI, AIL
and others who were shareholders of Amdocs prior to our initial public offering
in June 1998. The call option may be exercised if we achieve specified revenue
and cash flow targets in fiscal 1998 and 1999, which targets were achieved for
fiscal 1998. If exercised, the option would increase the relative ownership of
SBCI, AIL and those other shareholders and decrease the relative ownership of
WCAS. If the targets are met in full, the WCAS Investors will hold 28.1% of our
ordinary voting shares and AIL will hold 31.0% of our ordinary voting shares.
THE MARKET PRICE OF OUR ORDINARY SHARES HAS AND MAY CONTINUE TO FLUCTUATE WIDELY
The market price of our ordinary shares has fluctuated widely and may
continue to do so. For example, since our initial public offering in June 1998
through May 5, 1999 the closing price of our ordinary shares ranged from a high
of $28.88 per share to a low of $8.38 per share. Many
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<PAGE> 19
factors could cause the market price of our ordinary shares to rise and fall.
Some of these factors are:
- variations in our quarterly operating results;
- announcements of technological innovations;
- introduction of new products or new pricing policies by us or our
competitors;
- trends in the telecommunications industry;
- acquisitions or strategic alliances by us or others in our industry;
- changes in estimates of our performance or recommendations by financial
analysts; and
- market conditions in the industry and the economy as a whole.
In addition, the stock market experiences significant price and volume
fluctuations. These fluctuations particularly affect the market prices of the
securities of many high technology companies. These broad market fluctuations
could adversely affect the market price of our ordinary shares. When the market
price of a stock has been volatile, holders of that stock have often instituted
securities class action litigation against the company that issued the stock. If
any of our stockholders brought a securities class action lawsuit against us, we
could incur substantial costs defending the lawsuit. The lawsuit could also
divert the time and attention of our management. Any of these events could
seriously harm our business.
FUTURE SALES BY EXISTING SHAREHOLDERS COULD DEPRESS THE MARKET PRICE OF OUR
ORDINARY SHARES
Sales of substantial amounts of ordinary shares in the public market, or
the perception that such sales could occur, could adversely affect prevailing
market prices for the ordinary shares. We currently have 196,800,024 ordinary
shares issued and outstanding, all of which are either freely tradeable on the
NYSE or currently eligible for sale pursuant to Rule 144, under the Securities
Act of 1933, or the Securities Act (subject to compliance with the volume and
manner of sale limitation of Rule 144), or pursuant to another exemption from
the registration requirements of the Securities Act.
Our principal shareholders have the right, in certain circumstances, to
require us to register their shares under the Securities Act for resale to the
public. In addition, we expect to register under the Securities Act up to a
total of 6,600,000 ordinary shares reserved for issuance upon the exercise of
options that have been or may be granted under our stock option plans. The right
to exercise options outstanding under these plans is subject to certain vesting
requirements.
WE DO NOT ANTICIPATE PAYING DIVIDENDS ON OUR ORDINARY SHARES IN THE FORESEEABLE
FUTURE
We do not anticipate paying dividends on our ordinary shares in the
foreseeable future. In addition, the terms of bank debt incurred by our
subsidiaries effectively prevent us from paying cash dividends.
THE RIGHTS OF SHAREHOLDERS OF GUERNSEY CORPORATIONS DIFFER IN SOME RESPECTS FROM
THOSE OF SHAREHOLDERS OF UNITED STATES CORPORATIONS
We are incorporated under the laws of Guernsey. The rights of holders of
ordinary shares are governed by Guernsey law, including the Companies Act of
Guernsey, and by our Articles of Association. These rights differ in some
respects from the rights of shareholders in corporations incorporated in the
United States. See "Description of Share Capital" and "Comparison of United
States and Guernsey Corporate Law" for a discussion of the material differences.
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USE OF PROCEEDS
The net proceeds to us from our sale of the 2,000,000 ordinary shares in
the offering are estimated to be approximately $42.0 million, after deducting
the underwriting discount and the estimated offering expenses payable by us.
We intend to use a portion of the proceeds received by us to repay up to
$30.0 million principal amount of outstanding loans under our revolving credit
facility. The debt to be repaid matures in June 1999 and bears interest at a
rate of approximately 5.5% per annum. We expect that any proceeds not used to
repay this debt will be used for general corporate purposes, including working
capital and capital expenditures. We may also use a portion of the net proceeds,
currently intended for general corporate purposes, to acquire or invest in
businesses, technologies, products or services that are complementary to our
business. We do not currently have any commitments or agreements with respect to
any such acquisitions or investments. Pending any of these uses, we intend to
invest the net proceeds from this offering in short-term, interest-bearing,
investment grade securities.
We will not receive any of the proceeds from the sale of the ordinary
shares by the selling shareholders or the sale of the Automatic Common Exchange
Securities by the TRACES Trust.
MARKET PRICES AND DIVIDEND POLICY
Our ordinary shares have been quoted on the NYSE since June 19, 1998 under
the symbol "DOX". Through June 3, 1999, the high and low reported closing prices
for the ordinary shares were as follows:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
Fiscal Year 1998:
Third Quarter 1998 (since June 19, 1998).................. $16.50 $14.00 --
Fourth Quarter 1998....................................... $15.50 $ 8.38 --
Fiscal Year 1999:
First Quarter 1999........................................ $17.25 $ 8.88 --
Second Quarter 1999....................................... $25.81 $15.06 --
Third Quarter 1999 (through June 3, 1999)................. $28.88 $21.00
</TABLE>
As of June 3, 1999, the last reported closing price of the ordinary shares
on the New York Stock Exchange was $22.88 and ordinary shares were held by
approximately 139 recordholders. Based on a review of the addresses of such
holders, 90 recordholders, holding approximately 62.6% of the outstanding
ordinary shares, were residents of the United States.
Shareholders are advised to obtain a current market quotation for our
ordinary shares.
Although in the past we have paid substantial cash dividends, we do not
anticipate paying cash dividends on our ordinary shares in the foreseeable
future. We declared dividends to our shareholders during fiscal 1998, 1997 and
1996 of $478.7 million, $19.3 million and $37.9 million, respectively. See
"Certain Transactions". We currently intend to retain our earnings to finance
the development of our business.
Any future dividend policy will be determined by our board of directors
based upon conditions then existing, including our earnings, financial condition
and capital requirements, as well as such economic and other conditions as the
board of directors may deem relevant. The terms of the revolving credit
agreement under which several of our subsidiaries are borrowers effectively
prevent us from paying cash dividends. In addition, future agreements under
which we or any of our subsidiaries may incur indebtedness may contain
limitations on our ability to pay cash dividends.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
Our consolidated financial statements are prepared in accordance with U.S.
GAAP and presented in dollars. The selected consolidated financial information
set forth below has been derived from the combined or consolidated financial
statements of Amdocs and its subsidiaries for the fiscal periods presented.
During the year ended September 30, 1994, Amdocs' operating subsidiaries were
operated as a group of companies owned by common shareholders and financial
statements for such periods were prepared on a combined basis and were not
audited. Information as of and for the four years ended September 30, 1998 is
derived from our consolidated financial statements which have been audited by
Ernst & Young LLP, our independent auditors. The selected consolidated financial
information as of and for the six months ended March 31, 1999 and 1998 is
derived from our unaudited consolidated financial statements. The unaudited
financial information reflects all adjustments (consisting only of normal
recurring adjustments) that we consider necessary for a fair statement of our
consolidated financial position and the results of operations for such periods.
The results of operations for the six months ended March 31, 1999 are not
necessarily indicative of results to be expected for any future period.
The information presented below is qualified by the more detailed
consolidated financial statements included elsewhere in this prospectus and
should be read in conjunction with those consolidated financial statements and
the discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
------------------- -------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................... $279,255 $180,566 $403,767 $290,102 $211,720 $167,312 $121,310
Operating income...................... 65,786 35,970 84,895 26,969 35,490 15,377 22,047
Net income(1)......................... 43,283 12,066 30,107 5,876 24,508 11,224 16,068
Basic earnings per share.............. 0.22 0.09 0.19 0.05 0.23 0.11 0.17
Diluted earnings per share............ 0.22 0.09 0.19 0.05 0.22 0.11 0.17
Dividends declared per share(2)....... -- 3.76 3.76 0.18 0.35 0.17 0.15
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
-------------------------------------- -------------------------------------------------------
1999 1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
(AS ADJUSTED)(4) (ACTUAL) (UNAUDITED)
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets(4)............ $313,594 $301,550 $223,882 $239,966 $220,582 $104,531 $101,483 $ 77,106
Long-term obligations (net
of current portion)...... 12,675 12,675 339,615 9,215 7,370 1,663 -- --
Shareholders' equity
(deficit)(2)(3)(4)....... 67,815 25,771 (273,917) (21,889) 94,253 15,988 29,429 21,872
</TABLE>
- ---------------
(1) In the fourth quarter of fiscal 1997, we recorded nonrecurring charges of
$27,563. Of such amount, $25,763 is attributable to the funding of a
contribution to a trust and the balance, $1,800, is due to the write-off of
in-process technology related to certain software rights acquired from
several operating subsidiaries of SBC Communications Inc.
(2) In January 1998, we paid dividends totaling $478,684.
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(3) In June 1998, we completed our initial public offering of 18,000 ordinary
shares. The net proceeds from the offering to us were $234,190.
(4) Adjusted to give effect to the sale of the 2,000 ordinary shares by us in
the offering, at an assumed public offering price of $22.88 per share, after
deducting the underwriting discount and estimated offering expenses.
Adjustments assume that $30.0 million of the proceeds we receive in the
offering are used to repay outstanding revolving loans under our bank credit
facility, which we classify as short-term obligations. See "Use of
Proceeds".
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
In Management's Discussion and Analysis we explain the general financial
condition and the results of operations for Amdocs and its subsidiaries
including:
- what factors affect our business,
- what our revenue and costs were in the first six months of fiscal 1999
and 1998 and fiscal 1998, 1997 and 1996,
- why those revenue and costs were different from period to period,
- the sources of our revenue,
- how all of this affects our overall financial condition,
- what our expenditures were in the first six months of fiscal 1999 and
1998 and fiscal 1998, 1997 and 1996, and
- the sources of our cash to pay for future capital expenditures.
As you read Management's Discussion and Analysis, it may be helpful to
refer to Amdocs' financial statements. In Management's Discussion and Analysis,
we analyze and explain the six month to six month and annual changes in the
specific line items in the consolidated statements of operations. Our analysis
may be important to you in making decisions about your investment in Amdocs. Our
analysis contains certain forward looking statements that involve risk and
uncertainties. Our actual results could differ materially from the results
reflected in these forward looking statements as they are subject to a variety
of risk factors. See "Risk Factors" for more information. We disclaim any
obligation to update our forward looking statements.
OVERVIEW
We are a leading provider of customized software products and services to
the telecommunications industry, primarily customer care and billing systems, or
CC&B Systems, for wireline, wireless and multiple-service or convergent network
operators and service providers. We also supply directory sales and publishing
systems, or Directory Systems, to publishers of both traditional printed yellow
page and white page directories and Internet directories. Our products are
mission-critical for a customer's operations. Due to the complexity of the
process and the expertise required for system support, we also provide extensive
customization, implementation, integration, ongoing support, system enhancement,
maintenance and outsourcing services.
We derive our revenue principally from:
- the initial sale of our products and related services, including license
fees and customization, implementation and integration services; and
- recurring revenue from ongoing maintenance, support, outsourcing and
related services provided to our customers and, to a lesser degree, from
incremental license fees resulting from increases in a customer's
subscribers.
License revenue is recognized concurrently as work is performed, using
percentage of completion accounting. Service revenue that involves significant
ongoing obligations, including fees for customization, implementation and
support services, is also recognized as work is performed, under the percentage
of completion method. Revenue from ongoing support and outsourcing services is
recognized as work is performed. Revenue from third party hardware and software
sales is recognized upon delivery. Maintenance revenue is recognized ratably
over the
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<PAGE> 24
term of the maintenance agreement. As a result of our percentage of completion
accounting policies, our annual and quarterly operating results may be
significantly affected by the size and timing of customer projects and our
progress in completing such projects.
Since 1992, we have invested substantial resources to develop our
information technology and to expand our range of products. As a result of
significant information technology expenditures, we were able to offer a full
range of integrated applications for our CC&B Systems; at the same time factors
such as increased demand for services, deregulation, privatization and
technological advancements began to transform the telecommunications industry.
- License and service fees from the sale of CC&B Systems amounted to $199.6
million for the six months ended March 31, 1999, representing 71.5% of
our revenue for such period.
We believe that the demand for CC&B Systems will continue to increase as
the size and complexity of the telecommunications industry increases and that
CC&B Systems will account for a larger share of our total revenue over time.
Although the business of publishing traditional yellow page and white page
directories is a mature business in the United States, it continues to be a
significant source of revenue for us worldwide. We believe that we are a leading
provider of Directory Systems in most of the markets we serve.
- License and service fee revenue from the sale of Directory Systems
totaled $79.7 million for the six months ended March 31, 1999 accounting
for 28.5% of our revenue for such period.
We believe that the demand for Directory Systems will be favorably impacted
by a broader introduction of electronic directories. However, we anticipate that
the relative contribution of license and service fees for Directory Systems to
total revenue will decrease over time. We have also recently introduced a number
of new products for Internet and electronic commerce applications. We anticipate
that over the next several years products developed or to be developed for such
applications will make a modest but increasing contribution to revenue.
Our research and development activities involve the development of new
software modules and product offerings in response to an identified market
demand, usually in conjunction with a customer project. We also expend
additional amounts on applied research and software development activities to
keep abreast of new technologies in the telecommunications market. In the next
several years, we intend to continue to make significant investments in our
research and development activities both for CC&B Systems and Directory Systems.
22
<PAGE> 25
RESULTS OF OPERATIONS
The following table sets forth, for the six months ended March 31, 1999 and
1998 and for the years ended September 30, 1998, 1997 and 1996, certain items in
our consolidated statements of operations reflected as a percentage of total
revenue:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
-------------- -----------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue:
License....................................... 11.6% 10.2% 10.6% 9.0% 7.7%
Service....................................... 88.4 89.8 89.4 91.0 92.3
----- ----- ----- ----- -----
100.0 100.0 100.0 100.0 100.0
Operating expenses:
Cost of license............................... 1.0 3.2 2.7 1.3 1.9
Cost of service............................... 57.4 58.0 57.3 59.9 61.0
Research and development...................... 6.3 6.1 6.3 6.0 6.9
Selling, general and administrative........... 11.8 12.8 12.7 14.0 13.4
Nonrecurring charges.......................... -- -- -- 9.5 --
----- ----- ----- ----- -----
76.5 80.1 79.0 90.7 83.2
----- ----- ----- ----- -----
Operating income................................ 23.5 19.9 21.0 9.3 16.8
Other expense, net.............................. 1.4 6.5 6.0 1.1 0.2
----- ----- ----- ----- -----
Income before income taxes...................... 22.1 13.4 15.0 8.2 16.6
Income taxes.................................... 6.6 6.7 7.5 6.2 5.0
----- ----- ----- ----- -----
Cumulative effect of a change in accounting
principle, net................................ -- -- * -- --
Net income...................................... 15.5% 6.7% 7.5% 2.0% 11.6%
===== ===== ===== ===== =====
</TABLE>
- ---------------
* Less than 0.1%
SIX MONTHS ENDED MARCH 31, 1999 AND 1998
REVENUE. Revenue for the six months ended March 31, 1999 was $279.3
million, an increase of $98.7 million, or 54.7%, compared to the six months
ended March 31, 1998, primarily due to additional CC&B Systems sales to European
customers. License revenue increased from $18.4 million in the first six months
of fiscal 1998 to $32.3 million in the first six months of fiscal 1999, an
increase of 75.5%, and service revenue increased 52.3% by $84.8 million in the
first six months of fiscal 1999, from $162.1 million in the first six months of
fiscal 1998 to $246.9 million in the first six months of fiscal 1999. Total CC&B
Systems revenue for the six months ended March 31, 1999 was $199.6 million, an
increase of $98.6 million, or 97.6%, compared to the prior year's first six
months. Revenue attributable to Directory Systems was $79.7 million for the six
months ended March 31, 1999, an increase of $0.1 million, or 0.1%, from the
first six months of fiscal 1998.
In the six months ended March 31, 1999, revenue from customers in North
America, Europe and the rest of the world accounted for 44%, 36% and 20%,
respectively, compared to 58%, 20%, and 22% respectively, in the six months
ended March 31, 1998.
COST OF LICENSE. Cost of license for the six months ended March 31, 1999
was $2.7 million, a decrease of $3.2 million, or 54.1%, from cost of license for
the six months ended March 31, 1998. Cost of license includes amortization of
purchased computer software and intellectual property rights.
23
<PAGE> 26
COST OF SERVICE. Cost of service for the first six months of fiscal 1999
was $160.2 million, an increase of $55.4 million, or 52.9%, compared to the cost
of service of $104.8 million for the first six months of fiscal 1998. As a
percentage of revenue, cost of service decreased to 57.4% in the six months
ended March 31, 1999 from 58.0% in the first six months of fiscal 1998. The
absolute increase in cost of service is consistent with the increase in revenue
for the first six months of fiscal 1999, as these costs are predominately
compensation related and reflect increased employment levels required to support
the growth in revenue.
RESEARCH AND DEVELOPMENT. Research and development expense is primarily
comprised of compensation expense attributed to research and development
activities, usually in conjunction with customer contracts. In the six months
ended March 31, 1999, research and development expense was $17.5 million, or
6.3% of revenue, compared with $11.0 million, or 6.1% of revenue, in the six
months ended March 31, 1998. The increase in research and development expense
represents ongoing expenditures for both CC&B Systems and Directory Systems.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense is primarily comprised of compensation expense and increased by 43.6% to
$33.1 million, or 11.8% of revenue, in the six months ended March 31, 1999 from
$23.0 million, or 12.8% of revenue, in the corresponding period of fiscal 1998.
OPERATING INCOME. Operating income in the six months ended March 31, 1999
was $65.8 million, as compared with $36.0 million in the first six months of
fiscal 1998, an increase of 82.9%. As a percentage of revenue, operating income
was 23.5% in the first six months of fiscal 1999 as compared to 19.9% in the
first six months of fiscal 1998, primarily due to an increase in license revenue
and a decrease in cost of license. In addition, selling, general and
administrative expense increased at a lesser rate than revenue.
OTHER EXPENSE, NET. Other expense, net is primarily interest expense
incurred by us related to senior bank debt and subordinated debt, which was
substantially repaid from the proceeds of our initial public offering. In the
first six months of fiscal 1999, other expense, net was $4.0 million, a decrease
of $7.8 million from the first six months of fiscal 1998.
INCOME TAXES. Income taxes in the six months ended March 31, 1999 were
$18.6 million on income before taxes of $61.8 million. In the prior year's first
half, income taxes were $12.1 million on income before taxes of $24.1 million.
See discussion below "-- Effective Tax Rate".
NET INCOME. Net income was $43.3 million in the first six months of fiscal
1999 compared to $12.1 for the first six months of fiscal 1998. The increase was
primarily the result of an increase in operating income and a decrease in
interest expense, which also resulted in an increase in earnings per share from
$.09 in the first six months of fiscal 1998 to $0.22 in the first six months of
fiscal 1999.
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUE. Revenue for the year ended September 30, 1998 was $403.8 million,
an increase of $113.7 million, or 39.2%, compared to the prior year. License
revenue increased from $26.0 million in fiscal 1997 to $42.9 million in fiscal
1998, an increase of 65.0%, and service revenue increased 36.6%, or $96.8
million, in fiscal 1998. Total CC&B Systems revenue for the year ended September
30, 1998 was $251.8 million, an increase of $85.5 million, or 51.4%, compared to
the prior fiscal year. Revenue attributable to Directory Systems was $151.9
million for the year ended September 30, 1998, an increase of $28.2 million, or
22.8%, from fiscal 1997. The growth in revenue is attributable to sales to new
customers as well as sales of additional products and services to existing
customers.
In fiscal 1998, revenue from customers in North America, Europe and the
rest of the world accounted for 52.2%, 27.2% and 20.6%, respectively, compared
to 63.8%, 11.3% and 24.9%, respectively, in fiscal 1997.
24
<PAGE> 27
COST OF LICENSE. Cost of license for fiscal 1998 was $10.7 million, an
increase of $7.0 million, or 189.2%, from cost of license for fiscal 1997. Cost
of license in fiscal 1998 includes amortization of purchased computer software
and intellectual property rights, and in fiscal 1997 included royalty expense
paid to some subsidiaries of SBC in connection with the grant to us of licenses
to use certain software jointly developed with those subsidiaries.
COST OF SERVICE. Cost of service for fiscal 1998 was $231.4 million, an
increase of $57.7 million, or 33.2%, from cost of service of $173.7 million for
fiscal 1997. As a percentage of revenue, cost of service decreased to 57.3% in
fiscal 1998 from 59.9% in fiscal 1997. The absolute increase in cost of service
is consistent with the increase in revenue for the period, as these costs are
predominately for compensation and reflect increased employment levels needed to
support the growth in revenue.
RESEARCH AND DEVELOPMENT. Research and development expense is primarily
comprised of compensation expense for employees engaged in research and
development activities, usually in conjunction with customer contracts. In
fiscal 1998, research and development expense was $25.6 million, or 6.3% of
revenue, compared with $17.4 million, or 6.0% of revenue, in fiscal 1997. The
increase in research and development expense in fiscal 1998 represents ongoing
expenditures for both CC&B Systems and Directory Systems.
SELLING, GENERAL AND ADMINISTRATIVE. Compensation is the largest component
of selling, general and administrative expense. Selling, general and
administrative expense increased by 25.5% to $51.2 million, in fiscal 1998 from
$40.8 million in the prior fiscal year. However, selling, general and
administrative expense as a percentage of revenue decreased from 14.0% of
revenue in fiscal 1997 to 12.7% of revenue in fiscal 1998.
OPERATING INCOME. Operating income in fiscal 1998 was $84.9 million, as
compared with $54.5 million in fiscal 1997, excluding the effect of the
nonrecurring charges in that fiscal year, an increase of 55.8%. As a percentage
of revenue, operating income was 21.0% in fiscal 1998 compared to 18.8% in
fiscal 1997, excluding the effect of the nonrecurring charges in fiscal 1997.
OTHER EXPENSE, NET. Other expense, net is primarily interest expense
incurred by us related to senior bank debt and subordinated debt, which debt was
substantially repaid from the proceeds of our initial public offering. In fiscal
1998, such interest expense was $24.1 million, an increase of $20.8 million from
fiscal 1997.
INCOME TAXES. Income taxes in fiscal 1998 were $30.4 million on income
before taxes of $60.8 million. In the prior year, income taxes were $17.8
million on income before taxes of $23.7 million. Our consolidated effective tax
rate for fiscal 1998 was 50%, due to significant interest expense in a tax
jurisdiction in which we are tax exempt, which resulted in no tax benefit to
offset the tax expense incurred in other jurisdictions. In fiscal 1997, we
sustained a loss in a tax jurisdiction in which we are tax exempt, which
resulted in no tax benefit to offset tax expense incurred in other
jurisdictions.
NET INCOME. Our net income was $30.1 million in fiscal 1998 compared with
net income of $5.9 million in fiscal 1997. The increase was primarily the result
of an increase in operating income. In addition, in fiscal 1998 we incurred
$24.1 million in interest expense related to outstanding debt; while in fiscal
1997 we had a nonrecurring charge of $27.6 million.
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
REVENUE. Revenue for fiscal 1997 was $290.1 million, an increase of $78.4
million, or 37.0%, from fiscal 1996. License revenue increased from $16.3
million in fiscal 1996 to $26.0 million in fiscal 1997, an increase of 59.5%,
and service revenue increased 35.1% or $68.7 million in fiscal 1997. The
majority of the increase in total revenue was due to the expansion of the CC&B
Systems business. Total CC&B Systems revenue for fiscal 1997 was $166.3 million,
an increase
25
<PAGE> 28
of $63.9 million, or 62.3%, from the prior year. Revenue attributable to
Directory Systems was $123.8 million for fiscal 1997, an increase of $14.5
million, or 13.3%, from fiscal 1996.
In fiscal 1997, revenue from customers in North America, Europe and the
rest of the world accounted for 63.8%, 11.3% and 24.9% respectively, compared to
67.5%, 14.5% and 18.0%, respectively, in fiscal 1996.
COST OF LICENSE. Cost of license for fiscal 1997 was $3.7 million, a
decrease of $0.3 million, or 7.5%, from fiscal 1996 cost of license of $4.0
million. The decrease was due to the acquisition of certain software rights from
several operating subsidiaries of SBC, which eliminated the requirement to pay
royalties.
COST OF SERVICE. Cost of service for fiscal 1997 was $173.7 million, an
increase of $44.5 million, or 34.4%, from fiscal 1996 cost of service of $129.2
million. As a percentage of revenue, cost of service decreased to 59.9% in
fiscal 1997 from 61.0% in fiscal 1996. The absolute increase in cost of service
was consistent with the increase in revenue for the period, and reflected
increased compensation attributable to higher employment levels needed to
support the growth in revenue.
RESEARCH AND DEVELOPMENT. In fiscal 1997, research and development expense
was $17.4 million, or 6.0% of revenue, compared with $14.7 million, or 6.9% of
revenue, in fiscal 1996. The absolute increase in research and development
expense in fiscal 1997 represented ongoing expenditures for both CC&B Systems
and Directory Systems, while the decrease as a percentage of revenue was
attributable to the overall increase in revenue for the period.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense increased to $40.8 million, or 14.0% of revenue, in fiscal 1997 from
$28.3 million, or 13.4% of revenue, in the prior year, an increase of 43.8%. The
increase was primarily attributable to increased marketing efforts for our CC&B
Systems.
NONRECURRING CHARGES. In the fourth quarter of fiscal 1997, we recorded
nonrecurring charges of $27.6 million. Of such amount, $1.8 million was due to
the write-off of in-process research and development for technology related to
certain software rights (which rights include the termination of related future
royalty payment obligations) acquired from several operating subsidiaries of SBC
and the balance, $25.8 million, was attributable to the funding of a
contribution to a trust for the benefit of certain officers and employees. See
"Management -- Employee Trust Agreement".
OPERATING INCOME. As a result of the $27.6 million of nonrecurring charges
recognized in fiscal 1997, operating income in fiscal 1997 was $27.0 million, as
compared with $35.5 million in fiscal 1996. As a percentage of revenue,
operating income was 9.3% in fiscal 1997 as compared to 16.8% in fiscal 1996.
Excluding the effect of the nonrecurring charges, operating income would have
been $54.5 million in fiscal 1997, or 18.8% of revenue, an increase of $19.0
million, or 53.4%, between fiscal 1997 and 1996. The increase in operating
income as a percentage of revenue (excluding the effect of the nonrecurring
charges) was primarily attributable to increased license revenue.
OTHER EXPENSE, NET. Other expense, net was an expense of $0.5 million in
fiscal 1996 and an expense of $3.3 million in fiscal 1997. The increase in
fiscal 1997 was attributable to the settlement of the claims of various taxing
authorities for additional taxes for years prior to such fiscal year.
Approximately $3.0 million of expense was included in fiscal 1997 for interest
on the tax assessments.
INCOME TAXES. Income taxes in fiscal 1997 were $17.8 million on income
before taxes of $23.7 million. In fiscal 1996, income taxes were $10.5 million
on income before taxes of $35.0 million. In fiscal 1997, we paid income taxes
for the operations of our subsidiaries, principally in
26
<PAGE> 29
the United States, the United Kingdom and Israel, and recorded a loss in
Guernsey, a jurisdiction in which we are tax-exempt.
NET INCOME. We had net income of $5.9 million in fiscal 1997 compared with
net income of $24.5 million in fiscal 1996, primarily as a result of the $27.6
million for the nonrecurring charges incurred in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
FINANCING TRANSACTIONS
We have primarily financed our operations through cash generated from
operations and borrowings from banks and other lenders. Cash and cash
equivalents totaled $26.9 million at March 31, 1999 compared to $25.4 million at
September 30, 1998. Net cash provided by operating activities amounted to $38.3
million and $11.8 million for the first half of fiscal 1999 and 1998,
respectively.
We currently intend to retain our earnings to repay our outstanding loans
and to finance the development of our business. The terms of our bank agreement
effectively restrict our ability to pay cash dividends.
At March 31, 1999, we had short term lines of credit totaling $152.0
million from various banks or bank groups, of which $75.9 million was
outstanding. As of that date, we had also utilized approximately $8.2 million of
our revolving credit facility to support outstanding letters of credit. We
intend to use a portion of the net proceeds from our sale of ordinary shares in
the offering to repay a portion of amounts outstanding under our revolving
credit facility. See "Use of Proceeds".
At March 31, 1999, we had negative working capital of $48.3 million as
compared to negative working capital of $84.3 million at September 30, 1998. We
do not believe this will have a negative impact on our liquidity as this
temporary situation is primarily a result of a three-year revolving credit
facility which we intend to repay with part of the proceeds we receive in the
offering and with cash flows from operations. We believe that cash generated
from operations and our current lines of credit will provide sufficient
resources to meet our needs in the near future.
At March 31, 1999, we had long-term obligations outstanding of $16.9
million in connection with vehicle leasing arrangements.
Currently, our capital expenditures are funded primarily by operating cash
flows and capital leasing arrangements. We do not anticipate any change to this
policy in the foreseeable future.
NET DEFERRED TAX ASSETS
Based on our assessment, it is more likely than not that all the net
deferred tax assets at March 31, 1999 will be realized through future taxable
earnings. No significant increase in future taxable earnings would be required
to fully realize the net deferred tax assets.
YEAR 2000 ISSUES
OUR STATE OF READINESS. We have identified the information technology, or
IT, and non-IT systems, software and products which could be affected by year
2000 issues, and have assessed the efforts required to remediate or replace
them. We have also identified versions of our products that will not be made
compliant and are assisting customers in upgrading or migrating to year 2000
compliant versions. By the end of 1999, it is our intention that all of the
major or key systems, software and products will be remediated or replaced.
27
<PAGE> 30
We began evaluating year 2000 compliance issues in mid-1996. Since then the
following functions have been performed:
- a thorough examination and study of year 2000 compliance status;
- adoption of a work plan;
- analysis of solution alternatives; and
- determination of our technical and business year 2000 policies.
In recent years, new systems have been developed as year 2000 compliant;
older generations of applications are being made year 2000 compliant in
cooperation with our customers (using Amdocs year 2000 methodology and tool
kit). None of these systems need mass data conversion, which is usually the most
sensitive portion of the year 2000 migration. Recognizing the importance of year
2000 support in the IT industry and to provide an additional level of assurance
to our customers, we have decided to conduct a thorough and systematic
verification process. This effort is based on the application of industry-wide
standards for year 2000 compliance. This verification process utilizes a
specialized tool kit developed by us including a powerful search utility. For
many customers we offer to conduct the verification process, since the ultimate
verification for year 2000 compliance should be executed in their own working
environment.
We anticipate completing the majority of the testing, implementation of
changes and necessary refinements by mid-1999 but to continue extensive testing
through calendar 1999. We expect that systems, software and products for which
we have responsibility currently are year 2000 compliant or will be compliant on
a timely basis. We are not aware of any year 2000 issues with our customers that
cannot be remedied.
We have contacted all of our customers, and several of our vendors and
other third parties with whom we deal to identify potential year 2000 issues.
These communications are also used to clarify which year 2000 issues are our
responsibility and which are the responsibility of the third party. We do not
anticipate that our third party year 2000 issues will be different than those
encountered by other providers of information services, including our
competitors. At this time, we are not aware of any year 2000 issues or problems
relating to third parties with which we have a material relationship.
With respect to our internal IT systems (including IT-based office
facilities such as data and voice communications, building management and
security systems, human resources and recruitment systems, purchasing,
invoicing, finance and budget systems, general ledger and other administrative
systems), both third party software and in-house developments, we have adopted
standard industry practices, as published by the British Standards Institute,
and methodologies suggested by the Gartner Group (INSPCT), in preparing for the
year 2000 date change. Our year 2000 internal readiness program primarily
covers:
- taking inventory of hardware, software and embedded systems;
- assessing business risks associated with such systems;
- creating action plans to address known risks;
- executing and monitoring action plans; and
- contingency planning.
Although we do not believe that we will incur any material cost or
experience material disruptions in our business associated with preparing our
internal systems for the year 2000, there can be no assurance that we will not
experience serious unanticipated negative consequences and/or material costs
caused by undetected errors or defects in the technology used in our internal
systems, which are composed of third party software, third party hardware
28
<PAGE> 31
that contains embedded software and our own software products. We are in the
process of implementing action plans for the remediation of high risk areas and
we are scheduled to implement remediation plans for medium to low risk areas
during the remainder of fiscal 1999. We expect our contingency plans to include,
among other things, manual "work-arounds" for software and hardware failure, as
well as substitution of systems, if necessary.
COSTS TO ADDRESS OUR YEAR 2000 ISSUES. A significant portion of our year
2000 compliance efforts have occurred or are occurring in connection with system
upgrades or replacements that were otherwise planned (but perhaps accelerated
due to the year 2000 issue) or which have significant improvements and benefits
unrelated to year 2000 issues. The remainder of the costs that are incremental
and directly related to year 2000 issues are not expected to be material to our
financial position or results of operations.
At March 31, 1999, we have accrued approximately $2.0 million representing
the estimated remaining costs to modify previously sold customized software
products. We do not anticipate capitalizing any of these costs as they relate to
warranties related to products developed for customers.
OUR CONTINGENCY PLANS. Detailed contingency plans are being prepared and
will be refined as appropriate. Those plans will focus on matters which appear
to be our most likely year 2000 risks, such as possible additional customer
support efforts by us that would be necessary if customers or vendors are not
year 2000 compliant, or if a year 2000 issue should not be timely detected in
our own compliance efforts. See "Risk Factors" for more information.
EUROPEAN MONETARY UNION CURRENCY
The European Monetary Union currency, or the euro, will be phased in over
the three-year period commencing January 1, 1999, when participating European
countries began using the euro currency for non-cash transactions. We intend to
offer software products that are capable of handling the euro currency and
converting from local currencies to the euro. There can be no assurance that our
software or software provided to our customers by other vendors will ensure an
errorless transition to the euro currency. At March 31, 1999, we have accrued
approximately $1.9 million representing estimated remaining costs to modify our
software products to accept the euro currency under existing agreements with
customers relating to previously sold products. We do not currently anticipate
recovering these expenditures from our customers, as they relate to warranty
agreements. There can be no assurance that such costs will not significantly
exceed such estimate, in which case such costs could have a material adverse
effect on our results of operations and financial condition.
EFFECTIVE TAX RATE
Our overall effective tax rate has historically been approximately 30% due
to the various corporate income tax rates in the countries in which we operate
and the relative magnitude of our business in those countries. Our consolidated
effective tax rate for the first half of the fiscal 1999 was 30% compared to 50%
in the prior period. The consolidated effective tax rate of 50% for 1998 was due
to significant interest expense in a tax jurisdiction in which we are tax
exempt, which resulted in no tax benefit to offset the tax expense incurred in
other jurisdictions.
CURRENCY FLUCTUATIONS
Approximately 80% of our revenue are in dollars or linked to the dollar and
therefore the dollar is our functional currency. Approximately 60% of our
operating expenses are paid in dollars or are linked to dollars. Other
significant currencies in which we receive revenue or pay expenses are
Australian dollars, the euro, British pounds, Canadian dollars and Israeli
shekels. Historically, the effect of fluctuations in currency exchange rates has
had a minimal impact on our operations. As we expand our operations outside of
the United States, our exposure to
29
<PAGE> 32
fluctuations in currency exchange rates could increase. In managing our foreign
exchange risk, we enter from time to time into various foreign exchange
contracts. As of March 31, 1999, we had hedged most of our significant exposures
in currencies other than the dollar.
FOREIGN CURRENCY RISK
We enter into foreign exchange forward contracts to hedge some of our
foreign currency exposure. We use such contracts to hedge exposure to changes in
foreign currency exchange rates associated with revenue denominated in a foreign
currency and anticipated costs to be incurred in a foreign currency. We seek to
minimize the risk that the fair value of sales of our products and services and
cash flow required for our expenses denominated in a currency other than our
functional currency, the dollar, will be affected by changes in exchange rates.
See Note 18 to our consolidated financial statements.
The following table summarizes our foreign currency forward exchange
agreements as of September 30, 1998. The table presents the notional amounts
(dollars in millions), weighted average exchange rates by expected (contractual)
maturity dates, and fair value of the total derivative instruments. Notional
values and average contract rates are calculated based on forward rates at
September 30, 1998 dollar translated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
---------------------------------------- FV
1999 2000 2001 2002 AFTER OF FORWARDS
---- ---- ---- ---- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Forward contracts to sell foreign
currencies for dollars:
British Pounds
Notional value................. $ 31.00 $ 1.70 -- -- -- $(1.60)
Average contract rate.......... 1.67 1.66 -- -- --
Austrian Schillings
Notional value................. $ 14.80 $ 0.90 -- -- -- $(0.50)
Average contract rate.......... 11.64 11.52 -- -- --
Canadian Dollars
Notional value................. $ 10.00 -- -- -- -- *
Average contract rate.......... 1.50 -- -- -- --
Japanese Yen
Notional value................. $ 3.20 -- -- -- -- *
Average contract rate.......... 133.80 -- -- -- --
Forward contracts to buy foreign
currencies for dollars:
Australian Dollars
Notional value................. $ 15.60 $ 9.10 $4.90 $5.50 $4.30 $(3.10)
Average contract rate.......... 0.60 0.60 0.59 0.59 0.59
Israeli Shekels
Notional value................. $ 80.40 -- -- -- -- $ 0.50
Average contract rate.......... 3.94 -- -- -- --
</TABLE>
- ---------------
* Less than $100,000.
INTEREST RATE RISK
Our interest expenses are most sensitive to changes in the London InterBank
Offered Rate, or LIBOR, as all of our short-term borrowings bear a LIBOR-based
interest rate. Excess liquidity invested in short-term investments bears minimal
interest rate risk.
At September 30, 1998, we had approximately $91.6 million outstanding on
our revolving line of credit and short-term credit agreements and $12.2 million
recorded as long-term lease obligations. The potential loss to us over one year
that would result from a hypothetical,
30
<PAGE> 33
instantaneous, and unfavorable change of 100 basis points in the interest rates
of all applicable financial assets and liabilities on September 30, 1998 would
be approximately $1.0 million. The above sensitivity analysis is based on the
assumption of an unfavorable 100 basis point movement of the interest rates
applicable to each homogenous category of financial assets and liabilities and
sustained over a period of one year. A homogenous category is defined according
to the currency in which financial assets and liabilities are denominated and
assumes the same interest rate movement within each homogenous category. As a
result, our interest rate risk sensitivity model may overstate the impact of
interest rate fluctuations for such financial instruments, as consistently
unfavorable movements of all interest rates are unlikely. See Note 8 to our
consolidated financial statements.
ARCHITEL TRANSACTION
On March 2, 1999, we entered into a combination agreement with Architel
Systems Corporation, a Canadian corporation, by which we would acquire Architel
in a stock transaction valued at approximately $400 million at the time of the
agreement. On April 8, 1999, Architel announced that it had restructured its
relationship with its largest customer, and expected revenue and earnings for
future periods to be substantially less than originally anticipated. As a result
of these developments, on April 22, 1999, we terminated the combination
agreement.
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<PAGE> 34
BUSINESS
INTRODUCTION
We are a leading provider of product-driven information system solutions to
major telecommunications companies in North America, Europe and around the
world.
Our Business Support Systems, or BSS, consist of families of customized
software products and services designed to meet the mission-critical needs of
specific telecommunications market sectors. We provide primarily CC&B Systems
for wireline (local, long distance, international, data, Internet and Voice Over
Internet Protocol, or VOIP) and wireless (cellular, personal communications
services, or PCS, and paging) network operators and service providers, as well
as for companies that offer multiple service packages, commonly referred to as
convergent services (combinations of local, long distance, international,
mobile, cable television, data and Internet services). In addition, we provide a
full range of Directory Systems to publishers of both traditional printed yellow
page and white page directories and electronic Internet directories. Due to the
complexity of the process and the expertise required for system support, we also
provide extensive customization, implementation, system integration, ongoing
support, system enhancement, maintenance and outsourcing services.
Since the inception of our business in 1982, we have concentrated on
providing software products and services to major telecommunications companies.
By focusing on this market, we believe that we have been able to develop the
innovative products and the industry expertise, project management skills and
technological competencies required for the advanced, large-scale,
specifications-intensive system projects typical of the telecommunications
industry. Our customer base includes the largest local exchange service
providers in the United States (including all the regional Bell operating
companies), major foreign network operators and service providers (including
Deutsche Telekom (Germany) and Telstra Corporation Ltd. (Australia)) and
emerging market leaders.
Our BSS products and related services are designed to manage and improve
key aspects of the business operations of telecommunications companies, such as
customer care, order management, call rating, invoice calculation, bill
formatting, collections, fraud management and directory publishing services. The
BSS products are tailored to address the unique needs of each telecommunications
provider.
Our products are designed to support a variety of service offerings,
including wireline, wireless, data and convergent multi-service environments, in
a network-independent manner.
INDUSTRY BACKGROUND
TELECOMMUNICATIONS INDUSTRY
The global telecommunications industry is becoming increasingly more
competitive due to deregulation and the development of new service technologies.
Competition in the U.S. market began to increase in 1984 when AT&T was required
to divest its local telephone operations and many new operators began to enter
the long distance market. The Telecommunications Act of 1996 has increased
competition in the United States even further by allowing new and existing local
(e.g., competitive local exchange carriers), long distance and cable companies
to offer competing services. Many companies are beginning to compete by
providing multiple or convergent services, offering combinations of local
exchange, long distance, wireless and data communications services to customers
in single geographic markets. Deregulation is also creating opportunities for
new ways of doing business, such as wholesaling and reselling telecommunications
services. Internationally, privatization and deregulation are resulting in
increased international competition and the emergence of newly authorized
telecommunications network operators and service providers, especially in
Europe, Latin America and the Asia-Pacific
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region. As markets are opened to competition, new competitors within these
markets typically compete for market share with more established carriers,
initially by providing access to service and then by providing competitive
prices, by introducing new features and services and by being more responsive to
customer needs. In addition, global expansion by multinational companies and
concurrent technological advances are opening markets in less developed
countries to enhanced telecommunications services and competition.
In recent years, there has also been an explosion of new communications
technologies, including the Internet, PCS, Direct Broadcast Satellites and
Enhanced Specialized Mobile Radio, and improvements to existing services such as
call-forwarding, caller ID and voice mail, as well as the introduction of
advanced intelligent networks that offer new services such as voice activated
dialing. Additionally, companies in the directory publishing industry, which is
currently dominated by telecommunications companies that are owned by or
affiliated with the public telecommunications carriers, generally employ a local
sales force numbering thousands of representatives, serve an advertiser customer
base of hundreds of thousands of businesses and publish hundreds of different
directories each year. With the introduction of new technologies and
distribution platforms, including Internet directories, the directory publishing
industry is also experiencing significant changes.
INFORMATION SYSTEMS
As a result of these developments, many telecommunications companies are
seeking a new generation of information systems to support their operations and
to be more competitive. Many are looking to offer single-contact, single-invoice
solutions with integrated pricing plans for all services ("one-stop shopping").
Traditional telecommunications information systems are generally not able to
support multiple services or convergent systems efficiently. In addition, these
legacy information systems generally utilize antiquated technology, are costly
to maintain, are oriented to supporting a single-service approach and require
significant time and effort to accommodate new products or features, such as
pricing changes. In this dynamic environment, integrated, flexible and scalable
information systems are increasingly a means of differentiating competitors.
Many new and existing telecommunications companies do not have the
financial or human resources or technological capability to internally develop
efficient, flexible, cost-effective information systems on a timely basis.
Moreover, as many telecommunications companies strive to become more
consumer-oriented, they are concentrating their efforts and resources on
marketing to consumers and expanding their service offerings, and many are
turning to third-party vendors for their information systems which creates
significant opportunities for us. Unlike us, however, many third-party vendors
generally provide only generic software packages and maintenance services, while
customization, implementation and other related and ongoing tasks are performed
by a separate systems integration company.
THE AMDOCS SOLUTION
We believe that our total solutions orientation, product-driven approach
and commitment to and support of quality personnel permit us to offer effective
solutions to our customers that are both highly innovative and reliable. We
believe that our success derives from a combination of the following factors
that differentiate us from most of our competitors.
TOTAL SOLUTIONS ORIENTATION. We offer our customers total solutions that
include BSS product-driven software tailored to the customer's specific
requirements, implementation services, systems integration, maintenance and
ongoing support. By providing services directly to the customer, rather than
through intermediaries and system integrators, we are able to utilize
effectively our intensive technical knowledge of our BSS products in the overall
execution of the project, significantly reducing project risk. Our
product-driven software solutions approach is
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distinctly different from the project-based strategy that has traditionally
characterized many of the telecommunications information systems providers over
the past twenty years. Our product-driven software solutions uses our BSS
products as the starting point for each project. This approach enhances our
ability to provide our customers with timely, cost-effective, low-risk solutions
at a consistent level of quality.
FUNCTIONAL AND FLEXIBLE BSS PRODUCTS. Our BSS products are based on an
open, three-tier, client-server, rule-based architecture that provides the
functionality, scalability, modularity and adaptability required in today's
deregulated, highly competitive telecommunications industry. Through the
flexibility of our BSS products, our customers have achieved significant
time-to-market advantages and reduced their dependence on technical and other
staff.
HIGHLY SKILLED PERSONNEL. We are able to offer our customers superior
products and services on a worldwide basis in large part due to our highly
qualified and trained technical, sales, marketing and managerial personnel. We
invest significantly in the ongoing training of our personnel in key areas such
as industry knowledge, software technologies and management capabilities.
Primarily based on the skills and knowledge of our employees, we believe that we
have developed a reputation for the reliable delivery of quality solutions
within agreed time frames and budgets. We have global recruitment capabilities
and have development centers in Israel, the United States and Cyprus.
BUSINESS STRATEGY
Our goal is to provide advanced information technology software products
and related customer service and support to the world's leading
telecommunications companies. We seek to accomplish our goal by pursuing the
strategies described below.
- CONTINUED FOCUS ON THE TELECOMMUNICATIONS INDUSTRY. We intend to continue
to concentrate our resources and efforts on providing strategic
information systems to the growing number of telecommunications industry
participants. This strategy has enabled us to develop the specialized
industry know-how and capability necessary to deliver the technologically
advanced, large-scale, specifications-intensive information systems
solutions required by the leading telecommunications companies in the
wireless, wireline and convergent service sectors.
- TARGET INDUSTRY LEADERS AND PROMISING NEW ENTRANTS. We intend to continue
to direct our marketing efforts principally towards the major
telecommunications companies and new entrants that are believed to have
the potential to be market leaders. Our customer base includes the
largest local exchange service providers in the United States (including
all the regional Bell operating companies), major foreign network
operators and service providers (including Deutsche Telekom (Germany),
Vodafone Group (United Kingdom) and Telstra Corporation Ltd. (Australia))
and emerging market leaders. We believe that the development of this
premier customer base has helped position us as a market leader, while
contributing to the stability of our business. By targeting industry
leaders and promising new entrants that require the most sophisticated
information systems solutions, we believe that we are best able to ensure
that we remain at the forefront of developments in the industry.
- DELIVER AND SUPPORT TOTAL SOLUTIONS. Our strategy is to use our BSS
products as the basis for providing customers with total systems
solutions. Using this product-driven solutions strategy, we strive to
tailor our core software modules to the specific, individualized
requirements of our customers. Working directly with the customer,
development personnel prepare the detailed functional specifications of
the system required by the customer. In accordance with such
specifications, system modules are then adapted or customized to meet the
customer's specific business requirements. We believe that this approach
minimizes risks and increases efficiencies by drawing on field-proven BSS
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products and techniques, and also helps to create for our customers
significant time-to-market and other competitive advantages. By leveraging
our specialized product knowledge, we believe that we can provide more
effective system integration and implementation support services to our
customers.
- MAINTAIN AND DEVELOP LONG-TERM CUSTOMER RELATIONSHIPS. We seek to
maintain and develop long-term, mutually beneficial relationships with
our customers. As a result of this strategy, we have been able to
establish long-term working relationships with many of our customers. Of
our current base of over 70 customers, 18 have been customers for five
years or more. These relationships have generally involved additional
product sales, as well as ongoing support, system enhancement and
maintenance services. We believe that such relationships are facilitated
in many cases by the mission-critical strategic nature of the systems
provided by us and by the customer's reliance on our specialized skills
and knowledge. In addition, our strategy is to solidify our existing
customer relationships by means of long-term support and maintenance
contracts.
- FURTHER ENHANCE GLOBAL CAPABILITIES. We intend to continue to develop and
enhance our global business strategy by targeting advanced
telecommunications markets around the world. The worldwide demand for
telecommunications services is increasing rapidly, due, in part, to the
needs of many underserved national markets and, in part, to increased
competition among established and new network operators and service
providers in more mature markets. We believe we have developed the human
and other resources required to conduct business on a global basis and we
are well positioned to respond to the demands of a worldwide industry,
including the increasing trend for the major telecommunications companies
to invest in new national markets, often in partnership with local
companies. We have also developed the capability for the rapid global
deployment of appropriately skilled personnel, when and where required,
to support customer projects.
TECHNOLOGY
We have developed core competencies in various advanced technologies that
are used in our BSS products. By utilizing technologies such as rule-based
techniques, intelligent agents over the Internet, object-oriented design and
programming and data mining, we are able to provide telecommunications companies
with the flexibility required in a highly competitive, dynamic environment. For
example, the use of rule and table-based technologies allows telecommunications
companies to implement changes to the key elements of their marketing and
customer service activities simply and rapidly, such as the introduction of new
services, price plans, discount schemes and bill formats, eliminating the need
to modify system code. Similarly, by drawing on Web-enabled and Internet
technologies, we have been able to improve access to information for remote
users, both internally within a telecommunications company's organization and
between the organization and its subscribers.
These technologies are integrated in an open, multi-tier, client-server,
service-oriented architecture. In order to support the ability of our customers
to operate all of their distributed and mainframe applications, our BSS products
are designed to work in a number of network and operating system environments,
including UNIX, MVS and Windows NT.
The architecture of the BSS products includes the following key
characteristics:
- SCALABILITY. The BSS products are designed to take full advantage of the
proven scalability of the UNIX platform, allowing progressive system
expansion, proportional with the customer's growth in business volumes.
Using the same software, our BSS products can support operations for
small as well as very large service providers.
- MODULARITY. The BSS products are comprised of sets of functional modules.
Each module can be installed on an individual stand alone basis,
interfacing with the customer's existing
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systems, or as part of an integrated BSS environment. This modularity
provides our customers with a highly flexible and cost-effective solution
that is able to incrementally expand with the customers' growing needs and
capabilities. The modular approach also preserves the customer's initial
investment in BSS products, while minimizing future disruptions and the
overall cost of system implementation.
- PORTABILITY. The architecture of the BSS products, by utilizing a UNIX
platform, ensures that our customers are able to choose from a variety of
hardware vendors, including Compaq, Hewlett Packard, IBM and Sun
Microsystems. In implementing solutions for wireline companies, we are
also able to employ MVS and hybrid UNIX/MVS platforms. The BSS products
utilize, where applicable, Java-based design and programming to augment
cross-platform portability.
- OPEN SYSTEMS. The BSS products accommodate well-defined application
program interfaces with legacy systems and with other third-party modules
or packages. The systems are not dependent on any single hardware vendor
or specific relational database management system, enabling our customers
to select among multiple hardware platforms and a variety of network and
operating system environments. Similarly, BSS products utilize standard
programming languages, such as C++, to ensure compatibility with the
operating environments employed in most telecommunications companies. It
is also our general policy to deliver to our customers complete copies of
all source code, system documentation and other product information,
which permits the customer to maintain and further customize the BSS
products.
PRODUCTS
We have developed an extensive library of BSS software products, providing
comprehensive information systems functionality for wireless (cellular, PCS and
paging), wireline (local, long distance, international, data, Internet and VOIP)
and directory publishing operations. Core elements include customer care, order
management, call rating, invoice calculation, bill formatting, collections,
fraud management and directory publishing services.
Specialized modules are provided to support specific functionalities
required in the different network environments (roaming functionality for
wireless carriers, SIM card functionality for GSM networks, value added services
introduced by Advanced Intelligent Network (AIN) and preferred interexchange
carrier functionality for long distance carriers). In addition, we have
developed systems to support resellers and wholesalers of telecommunication
services. Our systems also support telecommunications providers that offer
multiple service packages, commonly referred to as convergent services
(combinations of local, long distance, international, mobile, cable television,
data and Internet services).
We configure individual BSS modules into families of products, which serve
as marketing packages oriented to the needs of specific customer segments. We
offer Ensemble, our Customer Care and Billing System, in a number of versions to
serve the different needs of telecommunications operators in the various network
and business segments, such as wholesale and retail operations, and local,
cellular, long distance, international, data, Internet, VOIP and convergent
operations. We also offer our new generation, or NG, line of "ADS (NG)/Family of
Products" which provides comprehensive support for directory publishing
operations. Each individual module from the product families can be installed as
an independent stand-alone application, interfacing with the customer's legacy
and third-party systems, or as part of an integrated Amdocs Solution. We have
also recently introduced a number of new products for Internet and electronic
commerce applications, such as Internet-based bill viewing. We anticipate that
over the next several years products developed or to be developed for such
applications will make a modest but increasing contribution to revenue.
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CUSTOMER CARE AND BILLING
The Ensemble suite of products we offer encompasses the following key
application areas:
- Customer Care -- provides customer account information management and
service support, including account initiation, on-line assistance in
choosing a price plan, installation scheduling and complaint handling.
- Order Management -- supports the ordering of products and services for
all lines of business. This module assists customer service
representatives in capturing the customer's order, negotiating with the
customer and monitoring service delivery.
- Message Processing -- calculates charges for usage (i.e., call rating) of
telecommunications services, such as telephone calls and data transfer.
Usage of the telecommunications network creates "messages" or call data
records, which contain information such as the origin and destination of
the call and its duration. In addition, this module provides for
acquisition and formatting of the raw message data received from a
switch, as well as calculates the charges for each call based on the
service packages and price plans applicable to each individual user.
- Invoicing -- provides comprehensive functionality for bill preparation
(totaling of usage and other charges, application of discounts, taxes and
credits) and bill production, as well as the ability to offer so-called
"hot billing" (or real-time billing).
- Flexible Bill Formatter -- enables the flexible definition and
modification of bill formats, according to user requests (e.g., to
combine charges from multiple services onto a single bill or to permit
certain types of charges to be highlighted).
- Revenue Management -- provides comprehensive functionality for accounts
receivable and collections, including invoice receipt, payment receipt,
payment posting, financial reporting and automated handling of customers
with outstanding debts.
- Network Resource Mediation -- manages the carrier's inventory of
telephone numbers and SIM cards. This module also manages the interface
between a wireless carrier's customer care and billing system and the
network, transferring instructions regarding the provision or
discontinuation of network services to specified users.
- Sales Channels -- manages the financial relationship between a wireless
carrier and its authorized dealers, including commission calculation,
chargebacks and residual compensation.
- Fraud Management -- employs sophisticated data analysis tools and makes
use of the integrated user database to detect the fraudulent use of
wireless phones and phone numbers.
- Internet-based Bill Viewing -- enables user interaction and bill view
capabilities over the Internet through www.self.service.
- Churn Management -- uses data mining techniques to identify customers
with a high probability of switching to another carrier or of
disconnecting service.
DIRECTORY PUBLISHING
The "ADS(NG)/Family of Products," our main products in the Directory
Systems area, provides comprehensive support for yellow page and white page
directory sales and publishing operations, as well as for Internet directories
and catalogs, including fully integrated electronic commerce capabilities. The
directory line of products comprises a series of modules, including:
- Sales -- addresses all aspects of managing sales to advertisers,
including preparation and management of the overall sales campaign, which
encompasses selecting the advertisers
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to be targeted, allocating the advertisers to various sales channels (such
as field sales or telemarketing sales), assigning the advertisers to sales
representatives, tracking advertising sales results and calculating sales
commissions. These modules also provide automated support for the
advertising sales representative, including laptop-based applications for
use by members of the sales force in the field.
- Publishing -- supports the process of entering, proofing and extracting
the telephone listing and advertising information that is to be published
in a directory. These modules encompass contract processing, service
order processing, listing information management and directory extract in
preparation for the actual production of the directory.
- Marketing and Information Analysis -- includes corporate data warehousing
techniques, online analytical processing and data mining capabilities,
oriented to the specific marketing needs of the directory publisher. For
example, these modules can be used to identify changed patterns of
advertisement buying behavior in certain groups of customers, or to
perform "what if" analyses on marketing policy parameters. These modules
are also used by management to analyze the directory market and customer
behavior, assisting in the planning of corporate strategy and marketing
tactics.
- Prepress -- manages the production of advertisements that are to be
published in a directory and also supports the fully automated pagination
of yellow page and white page directories, including the generation of
the final typesetting file so that printed copies of the documents can be
produced.
- Customer Service -- permits online support for handling customer
inquiries and resolving customer complaints, including online correction
of advertising data and billing adjustments.
- Financial Management -- specifically designed for the directory
publisher's billing, accounts receivable and collections functions.
SERVICES
We believe that the methodology we employ to deliver BSS products is one of
the key factors that enables us to achieve the time-frame, budget and quality
objectives of our customers' projects. Our methodology emphasizes rigorous
project management, software development, solutions implementation and
integration planning, as well as active customer participation at all stages to
help prioritize and implement time-critical information system solutions that
address the customer's individual needs.
This process of customizing a system involves creating a tailored BSS
product to address a customer's specific technical and business requirements.
Following detailed functional design sessions with the customer, we modify our
BSS software modules to provide the complete functionality needed by the
customer. The process permits both Amdocs and the customer to identify and
jointly plan for ongoing resource requirements, as well as jointly to create
specific guidelines for the types of organizational and other changes that may
be required for implementation and integration.
System implementation and integration activities are conducted by joint
teams from Amdocs and the customer in parallel with the customization effort.
Implementation and integration activities include, for example, project
management, development of training, methods and procedures, design of work
flows, hardware planning and installation, network and system design and
installation, system conversion and documentation. In most cases, the role of
Amdocs personnel is to provide support services to the customer's own
implementation and integration team which has primary responsibility for the
task. Customers sometimes require turn-key solutions, in which case we are able
to provide full system implementation and integration services.
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Once the system becomes operational, we are generally retained by the
customer to provide ongoing services such as maintenance, enhancement design and
development, and operational support. For substantially all of our customers,
the implementation and integration of an initial BSS product has been followed
by the sale of additional systems and modules. In recent years, we have
established long-term maintenance and support contracts with a number of our
customers. These contracts have generally involved an expansion in the scope of
support provided, while also ensuring a recurring source of revenue to us.
Our business is conducted on a global basis. We maintain three development
facilities located in Israel, the United States and Cyprus, operate a support
center located in Brazil and have operations in Europe, North America, Latin
America and the Asia-Pacific region. Support for implementation and integration
activities is performed typically at the customer site. Once the system is
operational or in production, ongoing support and maintenance are provided by a
combination of remote support from the development centers with local support at
the customer site.
As part of our effort to provide comprehensive solutions to our customers,
we also offer outsourcing services to support the operation of the customer's
BSS products. These functions would include full responsibility for the ongoing
development and enhancement of our BSS products, the purchase and management of
all related hardware assets and overall management of the customer's associated
data centers. We concluded our first major multi-year services agreement in May
1998, entering into a six-year agreement with an affiliate of Telstra
Corporation Ltd. of Australia. Under the agreement, we are responsible for
software development, maintenance, support and facility management for Telstra's
directory publishing activities.
SALES AND MARKETING
Our sales and marketing activities are primarily directed at major
telecommunications companies and at emerging network operators or services
providers that are potential market leaders. As a result of the strategic
importance of our information systems to the operations of such companies, a
number of constituencies within a customer's organization are typically involved
in purchase decisions, including senior management, information systems
personnel and user groups such as the finance and marketing departments. Due to
the comprehensiveness and large scale of our systems, the time between the
making of an initial proposal to a prospective customer and the signing of a
sales contract is typically between six and twelve months.
We employ a relatively small dedicated sales force and maintain sales
offices in the United States, the United Kingdom, and several other countries.
Our sales activities are supported by a marketing group, which is responsible
for advertising, preparation of sales proposals and market research and analysis
of industry trends and developments. Our sales efforts are dependent upon close
cooperation between our sales representatives and development personnel.
Development personnel are intensively involved from the early stages of the
sales cycle. This approach enables us to demonstrate our technical and
professional skills to potential customers, while creating the opportunity to
discuss with the customer its system needs. To ensure that we have a clear
understanding of customer needs and expectations, it is our policy to have
development personnel involved in a particular sales proposal continue to work
with the customer. This approach creates continuity from the initial sales
proposal through project development and beyond, into the ongoing production
phase.
The management of our operating subsidiaries is closely involved in
establishing sales policies and overseeing sales activities. Management's role
includes the setting of priorities among the multiple sales opportunities
available at any point in time. Management is also responsible for allocating
sufficient resources to each project to meet our quality standards while also
adhering to the project's cost and schedule parameters.
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We also interact with various third parties in our sales activities,
including independent sales agents, information systems consultants engaged by
our customers or prospective customers and systems integrators that provide
complementary products and services to such customers. We also have value-added
reseller agreements with certain hardware and database vendors.
CUSTOMERS
Our target market is comprised of telecommunications companies that require
information systems with advanced functionality and technology. The companies in
this market segment are typically industry leaders or innovative, well-backed
new entrants. By working with such companies, we help ensure that we remain at
the forefront of developments in the telecommunications industry and that our
product offerings continue to address the market's most sophisticated needs. We
have an international orientation, focusing on potential customers in the
developed, industrialized countries in North America, Europe, Latin America and
the Asia-Pacific region.
We have a world-class customer base comprising over 70 telecommunications
companies. Our customers include global telecommunications leaders, as well as
other leading network operators and service providers and directory publishers
in the United States and around the world. Our customers include SBC and a
number of its operating subsidiaries, such as Southwestern Bell Mobile Systems,
Southwestern Bell Yellow Pages, Southwestern Bell Communications Services (SBC's
long distance provider) and Southwestern Bell Telephone Company. Additional
customers include:
Bell Atlantic
BellSouth
U.S. West
GTE
Sprint
Deutsche Telekom (Germany)
Mannesmann (Germany)
SEAT (Italy)
Telstra Corporation Ltd. (Australia)
Telus (Canada)
Telecom Eireann (Ireland)
Korean Telecom (South Korea)
Vodafone Group (United Kingdom)
Bezeq (Israel)
BCP (Brazil)
Telecom New Zealand (New Zealand)
We have been able to establish long-term working relationships with many of
our customers. Of our total customer base, 18 have been customers for five or
more years. These long-term relationships are due, in part, to our broad-based
expertise and our ability to address the evolving needs of a dynamic
telecommunications industry.
Our single largest group of customers is SBC and its operating
subsidiaries, which accounted for in the aggregate 16.6% of our revenue in the
first six months of fiscal 1999 and for 20.8%, 34.5% and 38.0% of our revenue in
fiscal 1998, 1997 and 1996, respectively. Our next largest customer is
BellSouth, which accounted for 9.6% of our revenue in the first six months of
fiscal 1999 and for 15.8%, 4.5% and 1.5% of our revenue in fiscal 1998, 1997 and
1996, respectively. Our third largest customer is Telstra, which accounted for
7.0% of our revenue in the first half of fiscal 1999 and for 8.2%, 13.0% and
16.0% of our revenue in fiscal 1998, 1997 and 1996, respectively.
Revenue derived from our five largest customers, excluding SBC and its
operating subsidiaries, accounted for approximately 23.5% of total revenue for
the first six months of fiscal 1999 and 27.1%, 33.2% and 42.7% of revenue in
fiscal 1998, 1997 and 1996, respectively.
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The following is a summary of revenue by geographic area. Revenue is
attributed to geographic region based on the location of the customers:
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS SEPTEMBER 30,
ENDED --------------------
MARCH 31, 1999 1998 1997 1996
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
North America......................................... 44.0% 52.2% 63.8% 67.5%
Europe................................................ 36.4% 27.2% 11.3% 14.5%
Rest of the World..................................... 19.6% 20.6% 24.9% 18.0%
</TABLE>
COMPETITION
The market for telecommunications information systems is highly competitive
and fragmented, and we expect competition to increase. We compete with many
independent providers of information systems and services, including Alltel
Corporation, American Management Systems, IBM, Kenan Systems (a subsidiary of
Lucent Technologies), LHS Group Inc., Saville Systems and SEMA Group, with
system integrators, such as Andersen Consulting and EDS, and internal
information systems departments of larger telecommunications carriers. We expect
continued growth and competition in the telecommunications industry and the
entrance of new competitors into the software information systems market in the
future.
We believe that we are able to differentiate ourselves from the competition
by, among other things,
- offering customers a total information system from a single vendor,
- providing high quality reliable, scalable products,
- managing effectively the timely implementation of products,
- responding to customer service and support needs through a skilled
professional organization, and
- providing BSS solutions independent of any specific vendor of network
equipment, hardware or software.
We compete with a number of companies that have longer operating histories,
larger customer bases, substantially greater financial, technical, sales,
marketing and other resources, and greater name recognition than us. Current and
potential competitors have established, and may establish in the future,
cooperative relationships among themselves or with third parties to increase
their ability to address the needs of our prospective customers. Accordingly,
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share. As a result, our competitors may be able to adapt more
quickly than we would to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the promotion and sale of their
products. There can be no assurance that we will be able to compete successfully
with existing or new competitors. Failure by us to adapt to changing market
conditions and to compete successfully with established or new competitors may
have a material adverse effect on our results of operations and financial
condition.
PROPRIETARY RIGHTS
We regard significant portions of our software products and systems as
proprietary and rely on a combination of statutory and common law copyright,
trademark and trade secret laws, customer licensing agreements, employee and
third-party nondisclosure agreements and other methods to protect our
proprietary rights. We generally enter into confidentiality agreements with our
employees, consultants, customers and potential customers and limit access to,
and distribution of, our proprietary information. We believe that the
sophistication and complexity of
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our systems make it very difficult to copy such information or to subject such
information to unauthorized use.
We have developed a unique methodology for product development. Initially,
we develop a core idea and the initial modules in-house. Thereafter, we approach
a customer and introduce the initial developments to a customer and further
develop the product in conjunction with a project conducted for such a customer,
thus allowing us to resolve and develop specific, novel information technology
solutions addressing actual needs of the market. We maintain sole ownership of
our products.
As a result of strategic development projects conducted with SBC and some
of its subsidiaries, some of our products were jointly developed and owned in
the past by us and SBC subsidiaries. In September 1997, we entered into a series
of agreements with such SBC subsidiaries pursuant to which we purchased certain
rights from these SBC subsidiaries and terminated related future royalty payment
obligations for a total consideration of $40.0 million.
EMPLOYEES
As of March 31, 1999, we employed on a full-time basis approximately 3,600
software and information technology specialists, engaged in research,
development, maintenance and support activities, and approximately 550 managers
and administrative professionals. We employ over 2,600 software and information
technology specialists in Israel, with the remaining 1,000 located in North
America, Europe and the Asia-Pacific region. We often maintain teams of
employees at a customer's premises to work on specific projects.
We invest significant resources in recruitment, training and retention of
quality personnel. Training programs cover areas such as technology,
applications, development methodology, project methodology, programming
standards, industry background and management development. Our management
development scheme is reinforced by a divisional structure, which provides
opportunities for talented managers to gain experience in general management
roles at the division level. We also invest considerable resources in personnel
motivation, including providing various incentive plans for senior employees.
Our future success depends in large part upon our continuing ability to attract
and retain highly qualified managerial, technical, sales and marketing
personnel.
We have to comply with various labor and immigration laws throughout the
world, including laws and regulations in Australia, Brazil, Europe, Israel,
Japan and the United States. To date, compliance with such laws has not been a
material burden for us. As the number of our employees increases over time, our
compliance with such regulations could become more burdensome.
Our operating subsidiaries are not party to any collective bargaining
agreements. However, our Israeli subsidiary is subject to certain labor-related
statutes and to certain provisions of collective bargaining agreements between
the Histadrut (General Federation of Labor in Israel) and the Coordinating
Bureau of Economic Organizations (including the Industrialists' Association),
which are applicable to our Israeli employees by virtue of expansion orders of
the Israeli Ministry of Labor and Welfare. A significant provision applicable to
all employees in Israel under collective bargaining agreements and expansion
orders is the automatic adjustment of wages in relation to increases in the CPI.
The amount and frequency of these adjustments are modified from time to time. We
consider our relationship with our employees to be good and have never
experienced a labor dispute, strike or work stoppage.
RESEARCH AND DEVELOPMENT
The goals of our research and development staff are to be responsive to
customer needs, to keep abreast of industry developments, to apply technology
selectively to our systems, to build
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<PAGE> 45
transition plans for adopting new technologies and to build a system
architecture that is capable of absorbing such technologies. We have
historically developed new modules and product offerings in response to an
identified market demand. Our product development strategy is to fund the
research and development of an advanced prototype, typically based on our
existing products or modules. Products are usually developed in conjunction with
a customer project. By adopting this strategy, we seek to remain at the
forefront of technological development by working on technologically advanced
solutions with our customers. Close cooperation with customers helps to ensure
the relevance and timeliness of the products developed.
We believe that our ability to identify innovative applications for
emerging technologies has yielded us considerable competitive advantages.
Examples of such innovations include the application of rule and table-based
techniques to network mediation systems, intelligent agent systems in directory
pagination, Web-enabled technology for Internet-based customer care and data
mining technology for fraud management and churn control.
We spent $17.5 million, $25.6 million, $17.4 million and $14.7 million on
research and development activities in the first six months of fiscal 1999 and
in fiscal 1998, 1997 and 1996, respectively, or 6.3%, 6.3%, 6.0% and 6.9%,
respectively, of total revenue in those periods. For fiscal 1999, we expect to
spend approximately $40.0 million on research and development activities.
FACILITIES
We lease space in numerous facilities in Israel, aggregating approximately
565,000 square feet, pursuant to leases expiring on various dates between
December 1999 and December 2008, and have various options to extend the terms of
such leases. Approximately 69,000 square feet of such facilities are owned by
related companies which lease such facilities to us. In Israel, we currently pay
total yearly rental fees of approximately $10.5 million which are linked, in
most cases, to the U.S. dollar.
In June 1998, our Israeli subsidiary entered into a ten-year lease for
297,000 square feet in Ra'anana, Israel. In June 1998, the Israeli subsidiary
relocated its main offices and most of its operations to this location. The
annual rent for the Ra'anana facility is approximately $5.4 million. Subject to
the modification of certain tax rules, the Israeli subsidiary will also have the
option to extend the lease term for an additional eight years. In addition, the
Israeli subsidiary holds, subject to certain terms and conditions, an option to
acquire certain parts of the Ra'anana facility. In November 1998, the Israeli
subsidiary rented an additional 25,000 square feet in Ra'anana. In December
1998, the Israeli subsidiary entered into a ten-year lease for an additional
55,000 square feet commencing in July 2000. The annual rent will be
approximately $1.0 million.
In August 1998, we entered into a seven-year lease (commencing December
1998) for 90,600 square feet in Chesterfield, Missouri. We intend to relocate
our development center and all of our administrative personnel, now principally
centered around St. Louis, Missouri, to Chesterfield. The annual rent for the
facility will be approximately $2.4 million. In July 1999, we intend to
terminate part of our St. Louis lease under which we pay approximately $130,000
annually in rent. We also hold a number of other leases in the United States,
with an aggregate annual rent of approximately $75,000.
We also lease 37,670 square feet for our development facility in Cyprus at
an annual rent of approximately $500,000.
We lease additional office space in the United Kingdom, Australia, Germany,
Japan, Korea and Brazil.
LEGAL PROCEEDINGS
We are not involved in any material legal proceedings.
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<PAGE> 46
MANAGEMENT
GENERAL
Amdocs Limited is organized under the laws of Guernsey and, as set forth in
its Articles of Association, is a holding company for the various subsidiaries
that conduct our business on a worldwide basis. Our principal operating
subsidiaries are Amdocs (Israel) Limited (Israel), Amdocs, Inc. (the United
States) and Amdocs (UK) Limited (the United Kingdom). We rely on the executive
officers of our operating subsidiaries to manage our business. In addition,
Amdocs Management Limited, our management subsidiary, performs certain executive
coordination functions for all our operating subsidiaries.
EXECUTIVE OFFICERS AND DIRECTORS AND OTHER KEY EMPLOYEES
The board of directors and the executive officers of Amdocs and our
subsidiaries and their ages as of April 30, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Bruce K. Anderson(2)(3)................... 59 Chairman of the Board and Chief Executive Officer,
Amdocs Limited
Robert A. Minicucci(2)(3)................. 46 Director and Chief Financial Officer, Amdocs
Limited
Avinoam Naor.............................. 50 Director of Amdocs Limited and Chief Executive
Officer of Amdocs Management Limited
Dov Baharav............................... 48 Senior Vice President and Chief Financial Officer,
Amdocs Management Limited
Thomas G. O'Brien......................... 38 Treasurer and Secretary, Amdocs Limited
Nehemia Lemelbaum......................... 56 Senior Vice President, Amdocs Management Limited
Mario Segal............................... 51 Senior Vice President, Amdocs Management Limited
Joshua Ehrlich............................ 49 Senior Vice President, Amdocs Management Limited
Simon Cassif.............................. 56 Senior Vice President, Amdocs (UK) Limited
James W. Andrews.......................... 34 General Manager, Amdocs (UK) Limited
Adrian Gardner(1)(2)(3)................... 36 Director
Stephen Hermer............................ 37 Director
James Kahan............................... 51 Director
Paz Littman(2)(3)......................... 42 Director
Revital Naveh(1).......................... 31 Director
Lawrence Perlman(1)....................... 61 Director
Michael J. Price.......................... 41 Director
Urs Suter................................. 40 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Executive Committee
Bruce K. Anderson has been Chief Executive Officer and Chairman of the
Board of Amdocs since September 1997. Since August 1978, he has been a general
partner of WCAS, an investment firm which specializes in the acquisition of
companies in the information services, communications and health care
industries. Investment partnerships affiliated with WCAS are collectively our
largest stockholder. Mr. Anderson served for nine years with Automated Data
Processing, Inc., or ADP, until his resignation as Executive Vice President and
a director of ADP, and President of ADP International, effective August 1978.
Mr. Anderson serves on the board of directors of Medquist, Inc. and several
private companies.
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<PAGE> 47
Robert A. Minicucci has been Chief Financial Officer and a director of
Amdocs since September 1997. He has been a general partner of WCAS since 1993.
From 1992 to 1993, Mr. Minicucci served as Senior Vice President and Chief
Financial Officer of First Data Corporation, a provider of information
processing and related services for credit card and other payment transactions.
From 1991 to 1992, he served as Senior Vice President and Treasurer of the
American Express Company. Mr. Minicucci served for twelve years with Lehman
Brothers (and its predecessors) until his resignation as a Managing Director in
1991. He is also a director of several private companies.
Avinoam Naor has been a director of Amdocs Limited since January 1999 and
is Chief Executive Officer of Amdocs Management Limited having overall
coordination responsibility for the operations and activities of our operating
subsidiaries. Mr. Naor joined Amdocs in 1982 and initially served as a Senior
Vice President. He has been involved with software development for 28 years,
working on projects for the development of infrastructure software for
communications systems and developing and marketing directory assistance
systems. Mr. Naor was a member of the team that established the computerized
system for Golden Pages, the Israel Yellow Pages company.
Dov Baharav is a Senior Vice President and the Chief Financial Officer of
Amdocs Management Limited, and has overall coordination responsibility for the
financial reporting of our operating subsidiaries. Mr. Baharav joined Amdocs in
1991 in St. Louis, Missouri and until 1995 served as Vice President and
President of Amdocs, Inc., our principal U.S. subsidiary. Prior to joining
Amdocs, Mr. Baharav served as Chief Operating Officer of Oprotech Ltd., a
publicly held company that develops, manufactures and markets electro-optical
devices.
Thomas G. O'Brien is Treasurer and Secretary of Amdocs Limited and since
July 1995 has held other financial management positions within Amdocs. From July
1993 to July 1995, Mr. O'Brien was Controller of Big River Minerals Corporation,
a diversified natural resources company. From 1989 to 1993, Mr. O'Brien was the
Assistant Controller for Big River Minerals Corporation. From 1983 to 1989, Mr.
O'Brien was a certified public accountant with Arthur Young and Company (now
Ernst & Young LLP). Mr. O'Brien is a member of the American Institute of
Certified Public Accountants and the Missouri Society of Certified Public
Accountants.
Nehemia Lemelbaum is Senior Vice President, Strategy and Corporate
Development, of Amdocs Management Limited. He joined Amdocs in 1985, with
initial responsibility for our U.S. operations. Mr. Lemelbaum led our
development of graphic products for the Yellow Pages industry and directed our
development of CC&B Systems. He served for nine years with Contahal Ltd., a
leading Israeli software house, first as a senior consultant, and later as
Managing Director. From 1967 to 1976, Mr. Lemelbaum was employed by the Ministry
of Communications of Israel (in effect the organization that is currently Bezeq,
the Israel Telecommunication Corp. Ltd.), with responsibility for computer
technology in the area of business data processing.
Mario Segal is a Senior Vice President and the Chief Operating Officer of
Amdocs Management Limited. He joined Amdocs in 1984 as Senior Vice President and
was a leading member of the team that developed the "ADS(NG)/Family of Products"
directory automation systems and the "Customer Care and Billing Platform." Mr.
Segal was also an account manager for a major North American Yellow Pages
publisher and prior thereto managed the computer department of a major Israeli
insurance company, leading large-scale software development projects and
strategic planning of automation systems.
Joshua Ehrlich is Senior Vice President, Business Development, of Amdocs
Management Limited. Mr. Ehrlich has overall responsibility for coordinating new
business development. He joined Amdocs in 1985. Mr. Ehrlich served as the
account manager for one of our major North American installations, and
subsequently had responsibility for major product development efforts. Following
that, he assumed the responsibility for coordinating our sales support
activities. Prior to joining Amdocs, Mr. Ehrlich managed the industrial
application division of a leading Israeli
45
<PAGE> 48
software company, with responsibility for business development, overall project
control and coordination of sales support.
Simon Cassif is a Senior Vice President of Amdocs (UK) Limited. He has
principal responsibility for developing our relationships with strategic
customers in Europe. Mr. Cassif joined Amdocs in January 1994 and has since been
devoting most of his efforts to business development in the area of customer
care and billing. Prior to joining Amdocs, Mr. Cassif was Chief Information
Officer and Vice President, Systems and Computers at Bezeq, the Israel
Telecommunication Corp. Ltd. Mr. Cassif held this position for twelve years,
with full responsibility for Bezeq Information Technology strategy, systems
development, maintenance and operations.
James W. Andrews is General Manager of Amdocs (UK) Limited, with
responsibility for supervising financial reporting and control, insurance,
administration and human resources. Mr. Andrews joined Amdocs in 1991 and has
served in a number of financial management positions, including Financial
Controller. Prior to joining Amdocs, Mr. Andrews was the Accounting Supervisor
at Arch Mineral Corporation. He also served at Arthur Andersen & Co. as a
certified public accountant. Mr. Andrews is a member of the American Institute
of Certified Public Accountants and the Missouri Society of Certified Public
Accountants.
Adrian Gardner has been a director of Amdocs since April 1998. Mr. Gardner
is an Executive Director of Lazard Brothers & Co., Limited, based in London and
working with technology and telecommunications-related companies. Prior to
joining Lazard Brothers in 1989, Mr. Gardner qualified as a chartered accountant
with Price Waterhouse. Mr. Gardner is a member of the Institute of Chartered
Accountants in England and Wales and a member of The Securities Institute.
Stephen Hermer has been a director of Amdocs since April 1998. In 1998, Mr.
Hermer joined the law firm of Olswang, based in London, where he practices
corporate and securities law. Prior to that, he was a partner with the London
law firm of Frere Cholmeley Bischoff.
James S. Kahan has been a director of Amdocs since April 1998. Mr. Kahan
has worked at SBC since 1983, and currently serves as its Senior Vice
President-Corporate Development, a position he has held since 1992. Prior to
joining SBC Mr. Kahan held various positions at several telecommunications
companies, including Western Electric, Bell Laboratories, South Central Bell and
AT&T.
Paz Littman has been a director of Amdocs since September 1997. Since
October 1996, he has served as President of Aurum Management and Consulting
Ltd., a privately held company, which makes and manages investments for
shareholders of the Aurec Group. From 1991 to 1996, Mr. Littman was an active
partner with the law firm of Meitar, Littman & Co.
Revital Naveh has been a director of Amdocs since April 1998. In July 1997,
Ms. Naveh joined Aurum Management and Consulting Ltd., a privately held company,
which makes and manages investments for shareholders of the Aurec Group. Prior
to that, Ms. Naveh was an associate at the New York law firm of Skadden, Arps,
Slate, Meagher & Flom LLP.
Lawrence Perlman has been a director of Amdocs since April 1998. He has
been Chairman of Ceridian Corporation since 1992, and its Chief Executive
Officer since 1990. Ceridian Corporation is a provider of information services
to employers to administer various human resource functions, as well as
information services for the transportation and electronic media markets. Mr.
Perlman is a director and Chairman of Seagate Technology, Inc., and a director
of The Valspar Corporation and Computer Network Technology Corporation. Mr.
Perlman has been a director of Ceridian since 1985.
Michael J. Price has been a director of Amdocs since January 1998. He is
co-Chief Executive Officer of FirstMark Communications LLC, a broadband wireless
telecommunications company.
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<PAGE> 49
Prior to that, he worked at Lazard Freres & Co. L.L.C., starting in 1987,
serving first as a Vice President and then as a Managing Director, where he led
its technology and telecommunications group. He is also a director of
SpectraSite, a leading tower management company.
Urs Suter has been a director of Amdocs since May 1999. Mr. Suter has been
the managing partner of the law firm Suter attorneys at law, in Zurich,
Switzerland, since 1995. Prior to that, he was a law partner with Price
Waterhouse. He is also a director of several private companies.
DIRECTORS
All directors hold office until the next annual meeting of our shareholders
or until their respective successors are duly elected and qualified or their
positions are earlier vacated by resignation or otherwise.
EXECUTIVE OFFICERS
Executive officers of Amdocs are elected by the board of directors on an
annual basis and serve until the next annual meeting of the board of directors
or until their respective successors have been duly elected or qualified or
their positions are earlier vacated by resignation or otherwise. The executive
officers of each of the Amdocs subsidiaries are elected by the board of
directors of such subsidiary on an annual basis and serve until the next annual
meeting of such board of directors or until their respective successors have
been duly elected or qualified or their positions are earlier vacated by
resignation or otherwise.
BOARD COMMITTEES
The Audit Committee of the board of directors reviews, acts on and reports
to the board of directors with respect to various auditing and accounting
matters, including the selection of our auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of our independent
auditors and our accounting practices.
The Compensation Committee of the board of directors determines the
salaries and incentive compensation of the officers of Amdocs and our
subsidiaries and provides recommendations for the salaries and incentive
compensation of other employees and the consultants. The Compensation Committee
also administers various compensation, stock and benefit plans of Amdocs.
We have also established an Executive Committee which may act from time to
time instead of the full board of directors and has such responsibilities as may
be delegated to it by the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation Committee consists of Messrs. Anderson, Minicucci, Gardner
and Littman. None of the members of the Committee was an employee of ours at any
time during fiscal 1998 or the first six months of fiscal 1999.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
We pay our non-employee directors who are not associated with any of our
principal shareholders (1) $10,000 per annum and (2) $1,500 per meeting of the
board of directors and $500 per meeting of a committee of the Board. We
reimburse all of our directors for their reasonable travel expenses incurred in
connection with attending meetings of the board of directors or committees
thereof. Under certain circumstances, directors are also eligible to receive
stock options. During fiscal year 1998, we granted options to two non-employee
directors to purchase a total of 21,000 ordinary shares at a price of $14 per
share, vesting over three years.
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<PAGE> 50
A total of nine persons who served either as an executive officer or
director of Amdocs during fiscal year 1998 received remuneration from Amdocs.
The aggregate remuneration paid by us to such persons was approximately $4
million, which includes amounts set aside or accrued to provide pension,
retirement or similar benefits, but does not include amounts expended by us for
automobiles made available to our officers, expenses (including business travel,
professional and business association dues) or other fringe benefits.
During fiscal 1998, we granted options to six executive officers and
directors to purchase a total of 448,000 ordinary shares at an average exercise
price of $8.20 per share, with vesting over three to eight-year terms.
EMPLOYEE STOCK OPTIONS
From January, 1998 through March 31, 1999 we granted options to purchase
approximately 4,190,000 ordinary shares to our officers and employees, and
options to purchase 41,000 ordinary shares to our non-employee directors and
consultants, pursuant to a stock option and incentive plan adopted in January
1998, or the Amdocs Plan. The weighted average exercise price of those options
is $6.03. The options vest over a period of three to eight years commencing from
the date of grant. There are currently 6,600,000 ordinary shares reserved for
issuance under the Amdocs Plan. The purpose of the Amdocs Plan is to enable us
to attract and retain qualified personnel and to motivate such persons by
providing them with an equity participation in Amdocs. The Amdocs Plan is
administered by a committee appointed by the Board and expires ten years after
the date of its adoption.
The ordinary shares acquired upon exercise of an option and the restricted
shares that may be granted under the Amdocs Plan will be subject to certain
restrictions on transfer, sale or hypothecation. Options will be exercisable and
restrictions on disposition of shares will lapse pursuant to the terms of the
individual agreements under which such options were granted or shares issued.
EMPLOYEE TRUST AGREEMENT
In September 1997, we contributed $25.8 million to an irrevocable secular
trust, or the Trust, the beneficiaries of which are primarily software and
information technology specialists who have played an important role in our
success. The Trust will distribute on specified dates within the next five years
cash amounts to those beneficiaries employed by us on those dates. The amounts
to be distributed to the beneficiaries employed by us on the relevant dates will
include any appreciation in the value of the Trust's assets and are dependent
upon certain conditions, such as the amount of cash available and the Trust's
ability to realize the value of the assets it holds. Termination of a
beneficiary's employment with Amdocs will not affect entitlement to a
beneficiary's minimum interest in the Trust which was fixed at the time of our
contribution to the Trust, and any terminated employee will receive such
interest in September 2007. In September 1997, the Trust used the contribution
from Amdocs and other resources to purchase 5,720,000 ordinary shares from us
for an aggregate consideration of approximately $31.6 million. The Trust is
required to liquidate any investments held in respect of any beneficiary and
distribute only a cash payment. The Trust is one of the selling shareholders in
the offering. See "Principal and Selling Shareholders".
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<PAGE> 51
CERTAIN TRANSACTIONS
INVESTMENT AGREEMENTS. In September 1997, Amdocs and the WCAS Investors
entered into a Share Subscription Agreement under which the WCAS Investors
acquired from us on September 22, 1997, $3.27 million principal amount of our
junior promissory notes and shares representing 8.7% of our then outstanding
equity for $61.2 million. On that date, Amdocs and the WCAS Investors also
entered into a Conditional Investment Agreement, under which the WCAS Investors
agreed, subject to the satisfaction of specific revenue and cash flow targets
through November 30, 1997, to acquire additional shares of Amdocs which, when
added to the shares acquired under the Share Subscription Agreement, would
constitute 35.0% of our outstanding equity as of September 22, 1997.
Concurrently with the signing of the Conditional Investment Agreement, a
subsidiary of Amdocs, ESM, entered into a Note Purchase Agreement with WCAS
Capital Partners III, L.P., an investment partnership affiliated with WCAS, and
several other investors, providing for the issuance of up to $125.0 million
principal amount of 10% subordinated notes of ESM, subject to the satisfaction
of the same financial targets set forth in the Conditional Investment Agreement.
In January 1998, with the financial targets having been met, ESM sold $123.5
million principal amount of subordinated notes under the Note Purchase Agreement
for a purchase price equal to their principal amount. On March 30, 1998, we
completed the transactions contemplated by the Conditional Investment Agreement
by issuing and selling to the WCAS Investors 51,507,716 ordinary shares for
$95.83 million in cash and the surrender of the $3.27 million principal amount
of junior promissory notes issued by us in September 1997.
Some entities in which several of our directors and executive officers and
our subsidiaries have a beneficial interest participated in the investments made
pursuant to the Share Subscription Agreement and the Conditional Investment
Agreement and acquired beneficial ownership of 2,078,336 ordinary shares for a
total investment of $4.0 million.
The proceeds of the equity and subordinated debt investments made under the
Share Subscription Agreement, the Conditional Investment Agreement and the Note
Purchase Agreement were used, together with the proceeds of a senior bank debt
financing and internally generated funds, (1) to acquire for $40.0 million
certain intellectual property rights from operating subsidiaries of SBC and (2)
to fund an internal corporate reorganization. Following the reorganization,
$478.7 million in dividends were paid to our shareholders, including a total of
$39.9 million to the WCAS Investors.
In September 1997, the WCAS Investors (investment partnerships affiliated
with WCAS and some other investors, including certain entities in which some
directors and executive officers of our subsidiaries have a beneficial interest)
also granted a call option on some of the ordinary shares acquired under the
Share Subscription Agreement and the Conditional Investment Agreement to our
then existing shareholders, AIL, SBCI, several entities in some of which some of
our executive officers have a beneficial interest and the Trust. The call option
may be exercised, without the payment of any consideration to the WCAS
Investors, if specific revenue and cash flow targets are met in fiscal 1998 and
fiscal 1999. The targets in fiscal 1998 were satisfied in full. If fully
exercised, the call option would decrease the ownership of the WCAS Investors
from 62,340,224 to 47,142,184 and increase the relative ownership of AIL, SBCI
and the other investors with no change in the aggregate number of ordinary
shares outstanding. If the conditions of the call option agreement are satisfied
in full, AIL and SBCI each have the right to acquire 6,154,138 ordinary shares
and the other investors have the right to acquire 2,889,764 ordinary shares.
SHAREHOLDERS AGREEMENT. In connection with the Share Subscription Agreement
and Conditional Investment Agreement, SBCI, WCAS (on behalf of the WCAS
Investors), AIL and Amdocs, entered into a shareholders agreement, under which
these shareholders have certain rights to have their shares registered for sale
to the public under the Securities Act of 1933.
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<PAGE> 52
RELATIONSHIP WITH SBC. Until September 1997, SBC and some of its operating
subsidiaries had specified ownership and marketing rights with respect to some
of our software products that were developed and owned jointly by us and such
SBC subsidiaries. In September 1997, we entered into a series of agreements with
these SBC subsidiaries pursuant to which we purchased certain rights from them
and terminated related future royalty payment obligations for a total
consideration of $40.0 million.
In March 1999, we entered into an agreement with a subsidiary of SBC, under
which SBC has agreed that the level of support and development services that we
will provide to SBC and its subsidiaries over the next three years will be at
least equal to a substantial portion of the services we currently provide to
SBC.
SBC and some of its operating subsidiaries are also significant customers
of ours. During the first six months of fiscal 1999 and fiscal 1998, 1997 and
1996, SBC and those subsidiaries accounted for approximately 16.6%, 20.8%, 34.5%
and 38.0%, respectively, of our revenue.
THE 1995 REORGANIZATION. Prior to 1995, Amdocs and our operating
subsidiaries were operated as a group of companies owned by common shareholders.
In 1995, the companies underwent a reorganization, or the 1995 Reorganization,
as a result of which Amdocs Limited became the holding company for all the
affiliated companies. Subsequent to the reorganization, we issued shares for a
total of $16.6 million to several entities in some of which some of our
officers, including one of our directors, have a beneficial interest. In
connection with the 1995 Reorganization, these entities entered into
shareholders agreements with SBCI and AIL, or the 1995 Shareholders Agreements,
in March and September of 1995. Pursuant to the 1995 Shareholders Agreements,
the parties thereto have, subject to the occurrence of specified events, call
and put rights with respect to the shares issued in connection with the 1995
Reorganization, which may be exercised at a price less than the original
purchase price. These rights expire ratably over time and fully expire in 1999,
in the case of one such entity, and 2002, in all other cases. The exercise of
such rights will not affect the number of outstanding ordinary shares.
OTHER RELATIONSHIPS. Since fiscal 1997, we have provided a CC&B System and
related customization and implementation services to GoldenLines Limited, a
provider of international telephone service for calls to and from Israel. SBC
and Morris S. Kahn have a significant beneficial interest in GoldenLines.
SBC and Mr. Kahn also are the beneficial owners of a company that leases
office facilities and provide certain miscellaneous support services to us in
Israel.
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<PAGE> 53
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth specified information with respect to the
beneficial ownership (before and after giving effect to the issuance and sale of
ordinary shares pursuant to this prospectus) as of June 7, 1999 of (i) any
person known by us to be the beneficial owner of more than 10% of the
outstanding ordinary shares, (ii) all of our directors and executive officers as
a group and (iii) the selling shareholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARED BENEFICIALLY OWNED
PRIOR TO THE OFFERING SHARES AFTER THE OFFERING
-------------------------- BEING --------------------------
NAME AND ADDRESS NUMBER(1) PERCENT(2) OFFERED NUMBER(1) PERCENT(3)
- ---------------- ------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Welsh, Carson, Anderson &
Stowe(4)(6)....................... 57,372,796 29.2% 2,856,000 54,516,796 27.4%
320 Park Avenue, Suite 2500
New York, New York 10022
SBC International, Inc.(5).......... 43,285,450 22.0% 4,347,750 38,937,700 19.6%
175 E. Houston Street
San Antonio, Texas 78205-2233
SBC Foundation(5)................... 1,449,250 * 1,449,250 0 --
175 E. Houston Street
San Antonio, Texas 78205-2233
Amdocs International
Limited(6)(7)(8)(9)(10)........... 45,963,500 23.4% 8,347,000 37,616,500 18.9%
Suite 5, Tower Hill House
Le Bordage, St. Peter Port
Guernsey GY1 3QT
The Channel Islands
Toes Corporation Limited(11)........ 5,720,000 2.9% 1,000,000 4,720,000 2.4%
Lord Coutanche House
66-68 Esplanade, St. Helier
Jersey JE4 5PS
The Channel Islands
All directors and executive officers
as a group (18
persons)(4)(5)(12)................ 163,375,858 83.0% 15,550,750 147,825,108 74.4%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the entities and individuals identified in this
table have sole voting and investment power with respect to all ordinary
shares and sole investment power with respect to all ordinary nonvoting
shares shown as beneficially owned by them, subject to community property
laws, where applicable.
(2) The percentages shown are based on 168,014,574 ordinary voting shares and
28,785,450 ordinary nonvoting shares outstanding on June 7, 1999.
(3) The percentages shown are based on 174,362,324 ordinary voting shares and
24,437,700 ordinary nonvoting shares to be outstanding after the offering,
including the 2,000,000 ordinary shares offered by us hereunder.
(4) Includes 36,761,712 ordinary voting shares held by Welsh, Carson, Anderson
& Stowe VII, L.P., 10,542,844 ordinary voting shares held by Welsh, Carson,
Anderson & Stowe VI, L.P., 7,354,932 ordinary voting shares held by WCAS
Capital Partners III, L.P., 226,512 ordinary voting shares held by WCAS
Information Partners, L.P. and 2,486,796 ordinary voting shares held by
partners and others affiliated with WCAS. Those partners are also partners
of the sole general partner of each of the foregoing limited partnerships.
The partners of WCAS who are also directors of Amdocs are Bruce K. Anderson
(Chairman of the Board and Chief Executive Officer of Amdocs) and Robert A.
Minicucci (Chief Financial Officer of
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Amdocs), and each may be deemed to be a beneficial owner of the ordinary
voting shares held by WCAS.
(5) SBCI is a wholly-owned subsidiary of SBC, a company whose shares are
publicly traded on the NYSE. The number of shares shown as beneficially
owned by SBCI is comprised of 14,500,000 ordinary voting shares and
28,785,450 ordinary nonvoting shares before the offering and 14,500,000
ordinary voting shares and 24,437,700 ordinary nonvoting shares after the
offering. SBCI is the only shareholder of Amdocs that holds ordinary
nonvoting shares. The 4,347,750 ordinary nonvoting shares being sold by
SBCI in the offering will automatically convert into ordinary shares. SBC
Foundation is a private, not-for-profit corporation funded by SBC and its
affiliates.
(6) In connection with our recapitalization effected as of May 20, 1998, in
advance of our initial public offering in June 1998, investment
partnerships affiliated with WCAS and several entities in which some
members of management have a beneficial interest granted irrevocable
proxies with respect to a total of 23,521,899 and 6,459,024 ordinary voting
shares, respectively, to a company which is the principal shareholder of
AIL and which is beneficially owned by Morris S. Kahn. The proxies granted
by the WCAS partnerships expire in ten years, or sooner if at any time the
WCAS entities collectively own less than 10.0% of our outstanding capital
shares. The proxies granted by several entities in which some members of
management have a beneficial interest expire ratably over the next one or
two years. After giving effect to those proxies and the issuance and sale
of ordinary shares in this offering, AIL and its principal shareholder will
together have the right to vote 38.8% of our ordinary voting shares (or
33.0%, assuming the delivery of the 10,000,000 ordinary shares which may be
required to be delivered to the TRACES Trust upon the exchange of Automatic
Common Exchange Securities on the Exchange Date), and WCAS will have the
right to vote 17.8% of such shares. The Exchange Date will occur no earlier
than June , 2002.
(7) The number of shares shown as beneficially owned by AIL includes 10,000,000
ordinary shares that may be required to be delivered to the TRACES Trust
upon the exchange of Automatic Common Exchange Securities, See "TRACES
Shareholders".
(8) An aggregate 18.7% non-voting interest in AIL is held by an entity whose
beneficial interests are held by some of our key executive officers
(including a former executive officer).
(9) Some of our key executive officers are expected to receive approximately
14.5% of the proceeds of the sales by AIL (including proceeds in respect of
the ordinary shares deliverable to the TRACES Trust pursuant to the
Purchase Contract, see "TRACES Shareholders"). Those executive officers
will indirectly sell through AIL (including ordinary shares deliverable to
the TRACES Trust pursuant to the Purchase Contract) approximately 14.5% of
their indirect economic interest in Amdocs.
(10) After giving effect to the offering, all of our executive officers will
continue to hold, directly and indirectly, economic interests in
approximately 35.7% of our outstanding ordinary shares (of which
approximately 27.4% are held beneficially by WCAS).
(11) Toes Corporation Limited is owned by an irrevocable secular trust
established in September 1997 for the benefit of a group of our employees,
primarily software and information technology specialists. Walbrook
Trustees (Jersey) Limited is the trustee for the Trust and has sole voting
and dispositive power with respect to the ordinary shares of Amdocs owned
by Toes Corporation Limited. Walbrook Trustees (Jersey) Limited disclaims
beneficial ownership of these shares. The beneficiaries include three
executive officers of our operating subsidiaries. See
"Management -- Employee Trust Agreement".
(12) Affiliates of WCAS, SBCI and AIL serve on our board of directors and,
accordingly, those affiliates may be deemed to be the beneficial owners of
the shares held by such entities.
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TRACES SHAREHOLDERS
Pursuant to a forward purchase contract, or the Purchase Contract, between
the TRACES Trust and the shareholder listed below, or the TRACES Shareholder, a
specified number of ordinary shares may be required to be delivered to the
TRACES Trust by the TRACES Shareholder upon the exchange of Automatic Common
Exchange Securities. The following table sets forth certain information for the
TRACES Shareholder with respect to (1) the TRACES Shareholder's beneficial
ownership of ordinary shares as of June 7, 1999 and the percentage of total
voting power represented thereby and (2) the maximum number of ordinary shares
of the TRACES Shareholder that may be delivered to the TRACES Trust pursuant to
the Purchase Contract (without taking into account the underwriters'
over-allotment option in respect of the Automatic Common Exchange Securities).
The TRACES Shareholder's beneficial ownership of ordinary shares will not change
as a result of the offering of the Automatic Common Exchange Securities unless,
until and to the extent that the TRACES Shareholder delivers ordinary shares to
the TRACES Trust pursuant to the Purchase Contract.
<TABLE>
<CAPTION>
MAXIMUM NUMBER
OF ORDINARY SHARES
SHARES PERCENTAGE DELIVERABLE TO TRACES
BENEFICIALLY OWNED OF TOTAL TRUST PURSUANT
DELIVERING SHAREHOLDER AFTER THE OFFERING VOTING POWER TO PURCHASE CONTRACT
- ---------------------- ------------------ ------------ ---------------------
<S> <C> <C> <C>
Amdocs International Limited(1)(2)(3)(4)(5)... 37,616,500 21.6% 10,000,000
</TABLE>
- ---------------
(1) AIL may be required to deliver an additional 1,500,000 ordinary shares if
the underwriters' over-allotment option is exercised in respect of the
Automatic Common Exchange Securities. Pursuant to the Purchase Contract, the
ordinary shares deliverable thereunder will be delivered to the TRACES Trust
on the Exchange Date under the Purchase Contract. The Exchange Date will
occur no earlier than June , 2002. Under the Purchase Contract, the
ordinary shares owned by AIL are not mandatorily deliverable to the TRACES
Trust. After delivery of the ordinary shares to the TRACES Trust (assuming
the delivery of the maximum number of shares that may be delivered by AIL
under the Purchase Contract and without taking into account the
underwriters' over-allotment option in respect of the Automatic Common
Exchange Securities and the sale of the ordinary shares by AIL in the
offering), AIL will beneficially own 27,616,500 ordinary shares representing
15.8% of the outstanding voting power of the ordinary shares.
(2) In connection with our recapitalization effected as of May 20, 1998, in
advance of our initial public offering in June 1998, investment partnerships
affiliated with WCAS and several entities in which some members of
management have a beneficial interest granted irrevocable proxies with
respect to a total of 23,521,899 and 6,459,024 ordinary voting shares,
respectively, to a company which is the principal shareholder of AIL and
which is beneficially owned by Morris S. Kahn. The proxies granted by the
WCAS partnerships expire in ten years, or sooner if at any time the WCAS
entities collectively own less than 10.0% of our outstanding capital shares.
The proxies granted by several entities in which some members of management
have a beneficial interest expire ratably over the next one or two years.
After giving effect to those proxies and the issuance and sale of ordinary
shares in the offering, AIL and its principal shareholder will together have
the right to vote 38.8% of our ordinary voting shares (or 33.0%, assuming
the delivery of the 10,000,000 ordinary shares that may be required to be
delivered to the TRACES Trust upon the exchange of Automatic Common Exchange
Securities on the Exchange Date) and WCAS will have the right to vote 17.8%
of those shares.
(3) An aggregate 18.7% non-voting interest in AIL is held by an entity whose
beneficial interests are held by some of our key executive officers
(including a former executive officer).
(4) Some of our key executive officers are expected to receive approximately
14.5% of the proceeds of the sales by AIL (including proceeds from the
ordinary shares to be sold in the offering). Those executive officers will
indirectly sell through AIL (including the shares to be sold in the
offering) approximately 14.5% of their indirect economic interest in Amdocs.
(5) After giving effect to the offering and the delivery of 10,000,000 ordinary
shares deliverable to the TRACES Trust pursuant to the Purchase Contract,
all of our executive officers will continue to hold, directly and
indirectly, economic interests in approximately 35.0% of our outstanding
ordinary shares (of which approximately 27.4% are held beneficially by
WCAS).
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DESCRIPTION OF SHARE CAPITAL
Our authorized capital stock consists of 500,000,000 ordinary shares,
50,000,000 ordinary nonvoting shares and 25,000,000 preferred shares, in each
case, par value L 0.01.
OUR ORDINARY SHARES
All of our issued and outstanding ordinary shares and ordinary nonvoting
shares are, and the ordinary shares being offered by us hereunder when issued
and paid for will be, validly issued, fully paid and non-assessable. Neither the
ordinary shares nor the ordinary nonvoting shares have pre-emptive, subscription
or redemption rights. Neither our Memorandum of Association or Articles of
Association nor the laws of Guernsey restrict in any way the ownership or voting
of ordinary shares held by non-residents of Guernsey.
Except as to voting rights, the rights of the holders of ordinary shares
and ordinary nonvoting shares are identical and such securities rank on a
parity.
Dividend and Liquidation Rights. Holders of ordinary shares and ordinary
nonvoting shares are entitled to receive equally, share for share, any dividends
that may be declared by the board of directors out of funds legally available
therefor. If, in the future, we declare cash dividends, such dividends will be
payable in U.S. dollars. In the event of our liquidation, after satisfaction of
liabilities to creditors, holders of ordinary shares and ordinary nonvoting
shares are entitled to share pro rata in the net assets of Amdocs. Such rights
may be affected by the grant of preferential dividend or distribution rights to
the holders of a class or series of preferred shares that may be authorized in
the future. Declaration of a final dividend (not exceeding the amounts proposed
by our board of directors) requires shareholder approval by adoption of an
ordinary resolution. Failure to obtain such shareholder approval does not affect
previously paid interim dividends.
Voting, Shareholder Meetings and Resolutions. Holders of ordinary shares
have one vote for each ordinary share held on all matters submitted to a vote of
shareholders. These voting rights may be affected by the grant of any special
voting rights to the holders of a class or series of preferred shares that may
be authorized in the future. An annual general meeting shall be held once every
calendar year at the time (within a period of not more than 15 months after the
last preceding annual general meeting) and at the place as may be determined by
the board of directors. The quorum required for an ordinary meeting of
shareholders consists of shareholders present in person or by attorney who hold
or represent between them a majority of the outstanding ordinary shares.
An ordinary resolution (such as a resolution for the approval of the
financial reports or the declaration of dividends) requires approval by the
holders of a majority of the voting rights represented at a meeting, in person
or by proxy, and voting thereon. A special or extraordinary resolution (such as,
for example, a resolution amending our Memorandum of Association or Articles of
Association or approving any change in capitalization, or a liquidation or
winding-up) requires approval of the holders of 75% of the voting rights
represented at the meeting, in person or by proxy, and voting thereon. A special
or extraordinary resolution can only be considered if shareholders receive at
least fourteen days' prior notice of the meeting at which such resolution will
be considered.
Except as described below, the ordinary nonvoting shares do not have any
voting rights. Each nonvoting ordinary share will be converted automatically
into one ordinary share at any time that it is transferred by SBCI, the sole
holder of the ordinary nonvoting shares. Accordingly, the ordinary nonvoting
shares being sold by SBCI in this offering will automatically convert into
ordinary shares.
Transfer of Shares and Notices. Fully paid ordinary shares and ordinary
nonvoting shares are issued in registered form and may be freely transferred
pursuant to the Articles of Association
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unless the transfer is restricted or prohibited by another instrument. Each
shareholder of record is entitled to receive at least fourteen days' prior
notice of an ordinary shareholders' meeting and at least twenty-one days' prior
notice of any shareholders' meeting at which a special resolution is to be
adopted. For the purposes of determining the shareholders entitled to notice and
to vote at the meeting, the board of directors may fix a record date not more
than 60 or less than ten days prior to the date of the meeting.
Modification of Class Rights. The rights attached to any class (unless
otherwise provided by the terms of issue of that class), such as voting,
dividends and the like, may be varied with the consent in writing of the holders
of 75% of the outstanding shares of such class, or with the adoption of an
extraordinary resolution passed at a separate general meeting of the holders of
the shares of that class.
Election of Directors. The ordinary shares do not have cumulative voting
rights in the election of directors. As a result, the holders of ordinary shares
that represent more than 50% of the voting power have the power to elect all of
Amdocs' directors. See "Principal and Selling Shareholders."
OUR PREFERRED SHARES
Amdocs has 25,000,000 authorized preferred shares. The board of directors
has the authority to issue the preferred shares in one or more series and to fix
the rights, preferences, privileges and restrictions of such shares, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of shares
constituting any series, without further vote or action by the shareholders. We
currently do not have any plans to issue any preferred shares other than the
voting share described below.
The purpose of authorizing the board of directors to issue preferred shares
and to determine their rights and preferences is to eliminate delays associated
with a shareholder vote on specific issuances. The issuance of preferred shares,
while providing desirable flexibility in connection with possible equity
financings, acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of our outstanding voting shares.
REGISTRATION RIGHTS
AIL, SBCI and WCAS have demand and piggyback registration rights with
respect to their ordinary shares under the Securities Act. The ordinary shares
being offered in the offering have been registered upon the exercise of one of
these demand registration rights. Following the offering described in this
prospectus, these holders will have the right, on one more occasion, to require
us to register the shares held by them for sale to the public in an underwritten
public offering. In addition, if we propose to register any of our ordinary
shares under the Securities Act, these holders may require us to include all or
a portion of their shares in the registration, although the managing underwriter
of any offering has certain rights to limit the number of shares in that
registration. All expenses incurred in connection with these registrations
(other than underwriters' discounts and commissions and fees of counsel retained
by any selling shareholder) will be borne by us. These shareholders have agreed
that they will not exercise any right with respect to any of these registrations
for a period ending 180 days after the effective date of the registration
statement for the offering, without the prior written consent of the
underwriters.
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COMPARISON OF UNITED STATES AND GUERNSEY CORPORATE LAW
The following discussion is a summary of the material differences between
United States and Guernsey corporate law relevant to an investment in the
ordinary shares and is based on the advice of Reboul, MacMurray, Hewitt, Maynard
& Kristol, with respect to the corporate law of the United States, and Carey
Langlois, with respect to the corporate law of Guernsey. The following
discussion is based upon laws and relevant interpretations thereof in effect as
of the date of this prospectus, all of which are subject to change.
Under the laws of many jurisdictions in the United States, controlling
shareholders generally have certain "fiduciary" responsibilities to minority
shareholders. Shareholder action by controlling shareholders must be taken in
good faith and actions by such shareholders that are obviously unreasonable may
be declared null and void. Guernsey law protecting the interests of minority
shareholders may not be as protective in all circumstances as the law protecting
minority shareholders in United States jurisdictions.
Under Guernsey law, an individual shareholder cannot, without the authority
of the majority of the shareholders of the corporation, initiate litigation in
the corporation's name, but an individual shareholder may seek to enforce the
corporation's rights by suing in representative form on behalf of himself and
all of the other shareholders of the corporation (except the wrongdoers where
the complaint is against other shareholders) against the wrongdoers, who may
include directors. In these circumstances, the corporation itself may be joined
as a nominal defendant in order that it can be bound by the judgment and, if an
action results in any property or damages recovered, such recovery goes not to
the plaintiff, but to the corporation. Alternatively, Guernsey law makes
specific provision to enable a shareholder to apply to the court for relief on
the ground that the affairs of the corporation are being or have been conducted
in a manner that is unfairly prejudicial to the interests of certain
shareholders (including at least himself) or any actual or proposed act or
omission of the corporation is or would be so prejudicial. In such
circumstances, the court has wide discretion to make orders to regulate the
conduct of the corporation's affairs in the future, to require the corporation
to refrain from doing or continuing to do an act that the applicant has
complained it has omitted to do, to authorize civil proceedings to be brought in
the name and on behalf of the corporation and to provide for the purchase of
shares of any shareholder of the corporation by other members or by the
corporation itself.
As in most United States jurisdictions, unless approved by a special
resolution of our shareholders, our directors do not have the power to take
certain actions, including an amendment of our Memorandum of Association or
Articles of Association or an increase or reduction in our authorized capital.
Directors of a Guernsey corporation, without shareholder approval, in certain
instances may, among other things, implement a reorganization and effect certain
mergers or consolidations, certain sales, transfers, exchanges or dispositions
of assets, property, parts of the business or securities of the corporation; or
any combination thereof, if they determine any such action is in the best
interests of the corporation, its creditors or its shareholders.
As in most United States jurisdictions, the board of directors of a
Guernsey corporation is charged with the management of the affairs of the
corporation. In most United States jurisdictions, directors owe a fiduciary duty
to the corporation and its shareholders, including a duty of care, pursuant to
which directors must properly apprise themselves of all reasonably available
information, and a duty of loyalty, pursuant to which they must protect the
interests of the corporation and refrain from conduct that injures the
corporation or its shareholders or that deprives the corporation or its
shareholders of any profit or advantage. Many United States jurisdictions have
enacted various statutory provisions that permit the monetary liability of
directors to be eliminated or limited. Guernsey law protecting the interests of
shareholders may not be as protective in all circumstances as the law protecting
shareholders in United States
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jurisdictions. Under our Articles of Association, we are obligated to indemnify
any person who is made or threatened to be made a party to a legal or
administrative proceeding by virtue of being a director, officer or agent of
Amdocs, provided that we have no obligation to indemnify any such persons for
any claims they incur or sustain by or through their own willful act of default.
See "Risk Factors -- The rights of shareholders of Guernsey corporations differ
in some respects from those of shareholders of United States corporations".
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have 174,362,324 ordinary shares
and 24,437,700 non-voting ordinary shares issued and outstanding. Of these
shares, the 20,000,000 ordinary shares sold in the offering plus any shares
issued upon exercise of the underwriters' overallotment options will be freely
tradeable without restriction. We, substantially all of our principal
shareholders and our officers and directors have agreed not to offer, sell,
contract to sell or otherwise dispose of any ordinary shares or non-voting
ordinary shares without the consent of the representatives of the underwriters
for a period of 90 days after the date of this prospectus, except for the
ordinary shares offered hereby and ordinary shares issuable upon the exercise of
options granted or to be granted under the Amdocs Plan. These shareholders will,
upon the consummation of the offering, own an aggregate 155,655,332 shares or
78.3% of the then outstanding ordinary shares and non-voting ordinary shares.
After this 90-day period, all our ordinary shares will be eligible for sale in
the public market pursuant to Rule 144, subject to compliance with the volume
and manner of sale limitations of Rule 144, or under another exemption from the
registration requirements of the Securities Act. Our principal shareholders also
have the right in certain circumstances to require us to register their shares
under the Securities Act for resale to the public. See "Description of Share
Capital -- Registration Rights".
In general, under Rule 144, as currently in effect, if one year has elapsed
since the date of acquisition of shares that are "restricted securities" (as
defined in Rule 144) from us or any "affiliate" (as defined below) of ours, the
acquiror or subsequent holder of the shares (including an affiliate) is entitled
to sell, within any three-month period, that number of shares that does not
exceed the greater of 1% of our then outstanding ordinary shares and the average
weekly trading volume of the ordinary shares on all exchanges and/or reported
through the automated quotation system of a registered securities association
during the four calendar weeks preceding the date on which notice of the sale is
filed with the Securities and Exchange Commission. Sales under Rule 144 are also
subject to restrictions relating to manner of sale, notice requirements and the
availability of current public information about us. If two years have elapsed
since the later of the date of acquisition of restricted shares from us or from
any affiliate of ours, and the acquiror or subsequent holder thereof is deemed
not to have been an affiliate of ours at any time during the 90 days preceding a
sale, that person would be entitled to sell those shares in the public market
under Rule 144(k) without regard to volume limitations, manner of sale
provisions, public information requirements or notice requirements. As defined
in Rule 144, an "affiliate" of an issuer is a person that directly, or
indirectly through the use of one or more intermediaries, controls, or is
controlled by, or is under common control with, that issuer.
We intend to register the 6,600,000 ordinary shares reserved for issuance
pursuant to the Amdocs Plan following the date of this prospectus, on a Form S-8
registration statement under the Securities Act. This registration statement
would become effective immediately upon filing. Shares issued upon the exercise
of stock options after the effective date of the Form S-8 registration statement
would be eligible for resale in the public market without restriction, subject
to Rule 144 limitations applicable to affiliates. The right to exercise options
outstanding under the Amdocs Plan is subject to vesting requirements. See
"Management -- Employee Stock Options".
One of the selling shareholders has also entered into the Purchase Contract
with the TRACES Trust under which it may deliver up to 11,500,000 ordinary
shares on or before the Exchange Date. The TRACES Trust will deliver these
ordinary shares to the holders of its Automatic Common Exchange Securities.
These ordinary shares will be freely tradeable upon their delivery to the TRACES
Trust's security holders. The Exchange Date will occur no earlier than June ,
2002.
We can make no prediction as to the effect, if any, that future sales of
shares or the availability of shares for sale will have on the market price of
the ordinary shares prevailing, from time to time. Nevertheless, sales of
substantial amounts of the ordinary shares in the public market could adversely
affect the prevailing market price of the ordinary shares and could impair our
ability to raise capital through the sale of equity securities.
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TAXATION OF THE COMPANY
The following is a summary of certain material tax considerations relating
to us and our subsidiaries. To the extent that the discussion is based on tax
legislation that has not been subject to judicial or administrative
interpretation, there can be no assurance that the views expressed in the
discussion will be accepted by the tax authorities in question. The discussion
is not intended, and should not be construed, as legal or professional tax
advice and is not exhaustive of all possible tax considerations.
GENERAL
Our overall effective tax rate has historically been approximately 30% due
to the various corporate income tax rates of the countries in which we operate
and the magnitude of our activities in those countries. Our effective tax rate
for fiscal 1998 was 50% due to the incurrence of significant interest expense in
tax-exempt or low tax jurisdictions. There can be no assurance that our
effective tax rate will not change over time as a result of a change in
corporate income tax rates or other changes in the tax laws of the various
countries in which we operate. Moreover, our effective tax rate in future years
may be adversely affected in the event that a tax authority challenged the
manner in which items of income and expense are allocated among us and our
subsidiaries. In addition, we and certain of our subsidiaries have been granted
certain special tax benefits, discussed below, in Cyprus and Israel. The loss of
any such tax benefits could have an adverse effect on our effective tax rate.
CERTAIN GUERNSEY TAX CONSIDERATIONS
We qualify as an exempt company (i.e. our shareholders are not Guernsey
residents and we do not carry on business in Guernsey) so we generally are not
subject to taxation in Guernsey. We will retain such exempt status following the
offering.
CERTAIN CYPRUS TAX CONSIDERATIONS
Our Cyprus subsidiary, Amdocs Development Ltd., operates a development
center. Corporations resident in Cyprus currently are subject to a maximum 25%
income tax rate. The Government of Cyprus has issued a permit to our Cyprus
subsidiary pursuant to which the activities to be conducted by it will be deemed
to be offshore activities for the purpose of Cyprus taxation. As a result, our
Cyprus subsidiary is subject to an effective tax rate in Cyprus of 4.25%. In
order for our subsidiary to remain entitled to this reduced rate of taxation
pursuant to the permit, it must continue to satisfy certain requirements
concerning its operations in Cyprus and it must undertake certain information
reporting obligations to the Government of Cyprus.
CERTAIN UNITED KINGDOM TAX CONSIDERATIONS
Our United Kingdom subsidiary, Amdocs (UK) Limited, performs global
development, contracting and marketing functions for our business, and acts as a
holding company for certain of our subsidiaries, including our principal United
States operating subsidiary.
GENERAL CORPORATE TAXATION IN THE UNITED KINGDOM
Until March 31, 1999, the statutory United Kingdom corporation tax rate was
31%. Commencing on April 1, 1999, the statutory corporate tax rate decreased to
30%. Our United Kingdom subsidiary pays UK corporation tax on its worldwide
income, with a credit in certain
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cases for non-UK income taxes paid. Our United Kingdom subsidiary pays tax on
dividends received from its subsidiaries, with a credit for underlying non-UK
taxes paid by such subsidiaries and withholding taxes paid on such dividends.
CERTAIN ISRAELI TAX CONSIDERATIONS
Our Israeli subsidiary, Amdocs (Israel) Limited, operates our largest
development center. Discussed below are certain Israeli tax considerations
relating to our Israeli subsidiary:
GENERAL CORPORATE TAXATION IN ISRAEL
Effective January 1, 1996, and thereafter, in general, Israeli companies
are subject to "Company Tax" at the rate of 36% of taxable income. However, the
effective tax rate payable by an Israeli company that derives income from an
Approved Enterprise (as further discussed below) may be considerably less.
LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959
GENERAL. Certain production and development facilities of our Israeli
subsidiary have been granted "Approved Enterprise" status pursuant to the Law
for the Encouragement of Capital Investments, 1959, or the Investment Law, which
provides certain tax and financial benefits to investment programs that have
been granted such status.
The Investment Law provides that capital investments in production
facilities (or other eligible assets) may, upon application to the Israeli
Investment Center, be designated as an Approved Enterprise. Each instrument of
approval for an Approved Enterprise relates to a specific investment program
delineated both by the financial scope of the investment, including source of
funds, and by the physical characteristics of the facility or other assets. The
tax benefits available under any instrument of approval relate only to taxable
profits attributable to the specific investment program and are contingent upon
compliance with the conditions set out in the instrument of approval.
TAX BENEFITS. Taxable income derived from an Approved Enterprise is
subject to a reduced corporate tax rate of 25% until the earlier of
- seven consecutive years (or ten in the case of an FIC (as defined below))
commencing in the year in which the Approved Enterprise first generates
taxable income,
- twelve years from the year of commencement of production or
- fourteen years from the year of the approval of the Approved Enterprise
status.
Such income is eligible for further reductions in tax rates if the company
qualifies as a Foreign Investors' Company, or FIC, depending on the percentage
of the foreign ownership. Subject to certain conditions, an FIC is a company
more than 25% of whose share capital (in terms of shares, rights of profits,
voting and appointment of directors) and more than 25% of whose combined share
and loan capital is owned by non-Israeli residents. The tax rate is 20% if the
foreign investment is 49% or more but less than 74%; 15% if the foreign
investment is 74% or more but less than 90%; and 10% if the foreign investment
is 90% or more. The determination of foreign ownership is made on the basis of
the lowest level of foreign ownership during the tax year. A company that owns
an Approved Enterprise, approved after April 1, 1986 may elect to forego the
entitlement to grants and apply for an alternative package of tax benefits. In
addition, a company (like our Israeli subsidiary) with an enterprise outside the
National Priority Regions (which is not entitled to grants) may also apply for
the alternative benefits. Under the alternative benefits, undistributed income
from the Approved Enterprise operations is fully tax exempt (a tax holiday) for
a defined period. The tax holiday ranges between two to ten years from the first
year of taxable income subject to the limitations as described above, depending
principally upon
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the geographic location within Israel. On expiration of the tax holiday, the
Approved Enterprise is eligible for a beneficial tax rate (25% or lower in the
case of an FIC, as described above) for the remainder of the otherwise
applicable period of benefits.
Our Israeli subsidiary has elected the alternative benefits with respect to
its current Approved Enterprise and its enlargements, pursuant to which the
Israeli subsidiary enjoys, in relation to its Approved Enterprise operations,
certain tax holidays for a period of two years (and in some cases for a period
of four years) and reduced tax rates for an additional period of up to eight
years. In case our Israeli subsidiary pays a dividend, at any time, out of
income earned during the tax holiday period in respect of its Approved
Enterprise, it will be subject, assuming that the current level of foreign
investment in Amdocs is not reduced, to corporate tax at the otherwise
applicable rate of 10% of the income from which such dividend has been paid and
up to 25% if such foreign investments are reduced (as detailed above). This tax
is in addition to the withholding tax on dividends as described below. Under a
new instrument of approval issued recently and relating to the current
investment program of our Israeli subsidiary and to the income derived
therefrom, our Israeli subsidiary is entitled to a reduced tax rate period of
thirteen years (instead of the eight year period referred to above.) The tax
benefits, available with respect to an Approved Enterprise only to taxable
income attributable to that specific enterprise, are given according to an
allocation formula provided for in the Investment Law or in the instrument of
approval, and are contingent upon the fulfillment of the conditions stipulated
by the Investment Law, the regulations published thereunder and the instruments
of approval for the specific investments in the Approved Enterprises. In the
event our Israeli subsidiary fails to comply with these conditions, the tax and
other benefits could be canceled, in whole or in part, and the subsidiary might
be required to refund the amount of the canceled benefits, with the addition of
CPI linkage differences and interest. We believe that the Approved Enterprise of
our Israeli subsidiary substantially complies with all such conditions
currently, but there can be no assurance that it will continue to do so.
From time to time, the Government of Israel has discussed reducing the
benefits available to companies under the Investment Law. The termination or
substantial reduction of any of the benefits available under the Investment Law
could have a material adverse effect on future investments by us in Israel
(although such termination or reduction would not affect our Israeli
subsidiary's existing Approved Enterprise or the related benefits).
Dividends
Dividends paid out of income derived by an Approved Enterprise during the
benefit periods (or out of dividends received from a company whose income is
derived by an Approved Enterprise) are subject to withholding tax at a reduced
rate of 15% (deductible at source). In the case of companies that do not qualify
as a FIC, the reduced rate of 15% is limited to dividends paid at any time up to
twelve years thereafter.
TAXATION OF HOLDERS OF ORDINARY SHARES
The following discussion is a summary of certain United States federal
income tax considerations and Guernsey tax considerations relating to an
investment in the ordinary shares.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material United States federal
income tax consequences to a holder of ordinary shares that is
(i) a citizen or resident of the United States,
(ii) a corporation created or organized in, or under the laws of, the United
States or of any state thereof,
61
<PAGE> 64
(iii) an estate, the income of which is includable in gross income for United
States federal income tax purposes regardless of its source, or
(iv) a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons has the authority to control all substantial decisions of the
trust.
This summary generally considers only U.S. holders that will own ordinary
shares as capital assets. This summary does not discuss the United States
federal income tax consequences to a holder of ordinary shares that is not a
U.S. holder.
This discussion is based on current provisions of the Internal Revenue Code
of 1986, as amended, or the Code, current and proposed Treasury regulations
promulgated thereunder, and administrative and judicial decisions as of the date
hereof, all of which are subject to change, possibly on a retroactive basis.
This discussion does not address all aspects of United States federal income
taxation that may be relevant to a holder of ordinary shares based on such
holder's particular circumstances (including potential application of the
alternative minimum tax), United States federal income tax consequences to
certain holders that are subject to special treatment (such as taxpayers who are
broker-dealers, insurance companies, tax-exempt organizations, financial
institutions, holders of securities held as part of a "straddle", "hedge" or
"conversion transaction" with other investments, or holders owning directly,
indirectly or by attribution at least 10% of the ordinary shares), or any aspect
of state, local or non-United States tax laws. Additionally, the discussion does
not consider the tax treatment of persons who hold ordinary shares through a
partnership or other pass-through entity or the possible application of United
States federal gift or estate taxes.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT
TO THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES TO SUCH PERSON OF PURCHASING, HOLDING OR DISPOSING OF THE ORDINARY
SHARES.
DIVIDENDS
In general, a U.S. holder receiving a distribution with respect to the
ordinary shares will be required to include such distribution (including the
amount of foreign taxes, if any, withheld therefrom) in gross income as a
taxable dividend to the extent such distribution is paid from our current or
accumulated earnings and profits as determined under United States federal
income tax principles. Any distributions in excess of such earnings and profits
will first be treated, for United States federal income tax purposes, as a
nontaxable return of capital to the extent of the U.S. holder's tax basis in the
ordinary shares, and then, to the extent in excess of such tax basis, as gain
from the sale or exchange of a capital asset. See "Disposition of Ordinary
Shares" below. United States corporate shareholders will not be entitled to any
deduction for distributions received as dividends on the ordinary shares.
The amount of foreign income taxes that may be claimed as a credit against
United States federal income tax in any year is subject to certain complex
limitations and restrictions, which must be determined on an individual basis by
each U.S. holder. The limitations set out in the Code include, among others,
rules that may limit foreign tax credits allowable with respect to specific
classes of income to the United States federal income taxes otherwise payable
with respect to each such class of income. Dividends paid by us generally will
be foreign source "passive income" for United States foreign tax credit
purposes.
DISPOSITION OF ORDINARY SHARES
Upon the sale, exchange or other disposition of ordinary shares, a U.S.
holder generally will recognize capital gain or loss in an amount equal to the
difference between the amount realized on the disposition by such U.S. holder
and its tax basis in the ordinary shares. Such capital gain
62
<PAGE> 65
or loss will be long-term capital gain or loss if the U.S. holder has held the
ordinary shares for more than one year at the time of the disposition. In the
case of a U.S. holder that is an individual, trust or estate, long-term capital
gains realized upon a disposition of the ordinary shares generally will be
subject to a maximum tax rate of 20%. Gains realized by a U.S. holder on a sale,
exchange or other disposition of ordinary shares generally will be treated as
United States source income for United States foreign tax credit purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Dividend payments with respect to the ordinary shares and proceeds from the
sale, exchange or redemption of ordinary shares may be subject to information
reporting to the Internal Revenue Service and possible U.S. backup withholding
at a 31% rate. Backup withholding will not apply, however, to a U.S. holder who
furnishes a correct taxpayer identification number and makes any other required
certification or who is otherwise exempt from backup withholding. Generally a
U.S. holder will provide such certification on IRS Form W-9 (Request for
Taxpayer Identification Number and Certification).
Amounts withheld under the backup withholding rules may be credited against
a U.S. holder's tax liability, and a U.S. holder may obtain a refund of any
excess amounts withheld under the backup withholding rules by filing the
appropriate claim for a refund with the Internal Revenue Service.
CERTAIN GUERNSEY TAX CONSIDERATIONS
Under the laws of Guernsey as currently in effect, a holder of ordinary
shares who is not a resident of Guernsey and who does not carry on business in
Guernsey through a permanent establishment situated there is (1) exempt from
Guernsey income tax on dividends paid with respect to the ordinary shares and
(2) not liable for Guernsey income tax on gains realized on sale or disposition
of such ordinary shares. In addition, Guernsey does not impose a withholding tax
on dividends paid by us to holders of ordinary shares.
There are no capital gains, gift or inheritance taxes levied by Guernsey,
and the ordinary shares generally are not subject to any transfer taxes, stamp
duties or similar charges on issuance or transfer.
THE FOREGOING DISCUSSION DOES NOT ATTEMPT TO ADDRESS ALL OF THE POTENTIAL
TAX CONSEQUENCES RELATING TO THE ORDINARY SHARES. EACH PROSPECTIVE INVESTOR
SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES OF PURCHASING, HOLDING OR DISPOSING OF THE ORDINARY SHARES UNDER
THE LAWS OF ITS COUNTRY OF CITIZENSHIP, DOMICILE OR RESIDENCE.
63
<PAGE> 66
LEGAL MATTERS
The validity of the ordinary shares offered hereby will be passed upon for
us by Carey Langlois, Guernsey. Certain legal matters in connection with the
offering will be passed upon for us by Reboul, MacMurray, Hewitt, Maynard &
Kristol and for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
The financial statements of Amdocs Limited as of September 30, 1998 and
1997 and for the three year period ended September 30, 1998 audited by Ernst &
Young LLP have been included in reliance on their report given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual reports, quarterly reports and current reports and other
information with the Securities and Exchange Commission. You may read and copy
any of our SEC filings at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further
information about the Public Reference Room. Our SEC filings are also available
to the public on the SEC's website at http://www.sec.gov.
You may request copies of the filings, at no cost, by writing to or
telephoning us as follows:
Amdocs, Inc.
1610 Des Peres Road
St. Louis, Missouri 63131
Telephone: (314) 821-3242
This prospectus is part of a registration statement on Form F-1 that we
filed with the SEC under the Securities Act. This prospectus does not contain
all the information contained in the registration statement. For further
information about us and our ordinary shares, you should read the registration
statement and the exhibits filed with the registration statement.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "expect," "anticipate,"
"plan," "believe," "seek," "estimate" and similar words. Statements that we make
in this prospectus that are not statements of historical fact may also be
forward-looking statements. In particular, statements that we make in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" may be forward-looking statements. Forward-looking statements are
not guarantees of our future performance, and involve risks, uncertainties and
assumptions that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. There may be events
in the future that we are not accurately able to predict, or over which we have
no control. You should not place undue reliance on forward-looking statements.
We do not promise to notify you if we learn that our assumptions or projections
are wrong for any reason. Before you invest in our ordinary shares, you should
be aware that the factors we discuss in "Risk Factors" and elsewhere in this
prospectus could cause our actual results to differ from any forward-looking
statements.
64
<PAGE> 67
<TABLE>
<S> <C>
AMDOCS LIMITED
INDEX TO FINANCIAL STATEMENTS
(in U.S. dollars, unless otherwise stated)
Audited Consolidated Financial Statements
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of September 30, 1998 and
1997...................................................... F-3
Consolidated Statements of Operations for the years ended
September 30, 1998, 1997, and 1996........................ F-4
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) for the years ended September 30, 1998, 1997,
and 1996.................................................. F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1998, 1997, and 1996........................ F-6
Notes to Consolidated Financial Statements.................. F-8
Unaudited Consolidated Financial Statements
Consolidated Balance Sheet as of March 31, 1999............. F-24
Consolidated Statements of Operations for the six months
ended March 31, 1999 and 1998............................. F-25
Consolidated Statement of Changes in Shareholder's Equity
(Deficit) for the six months ended March 31, 1999......... F-26
Consolidated Statements of Cash Flows for the six months
ended March 31, 1999 and 1998............................. F-27
Notes to Unaudited Consolidated Financial Statements........ F-28
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
AMDOCS LIMITED
We have audited the accompanying consolidated balance sheets of Amdocs
Limited as of September 30, 1998 and 1997, and the related statements of
operations, changes in shareholders' equity (deficit) and cash flows for each of
the three years in the period ended September 30, 1998. 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 auditing standards generally
accepted in the United States. 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 Amdocs Limited
at September 30, 1998 and 1997, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended September 30,
1998, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
St. Louis, Missouri
November 8, 1998
F-2
<PAGE> 69
AMDOCS LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
--------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 25,389 $ 53,732
Accounts receivable, including unbilled of $10,331 in 1998
and $2,031 in 1997..................................... 79,723 48,565
Accounts receivable from related parties, including
unbilled of $537 in 1998 and $0 in 1997................ 10,235 15,393
Deferred income taxes..................................... 14,534 12,532
Prepaid expenses and other current assets................. 11,991 6,161
-------- --------
Total current assets.............................. 141,872 136,383
Equipment, vehicles and leasehold improvements, net......... 46,404 28,287
Deferred income taxes....................................... 7,773 4,587
Intellectual property rights................................ 23,362 25,982
Other noncurrent assets..................................... 20,555 25,343
-------- --------
$239,966 $220,582
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses..................... $ 47,599 $ 30,543
Accrued personnel costs................................... 29,948 23,098
Short-term financing arrangements......................... 91,565 1,998
Unearned revenue.......................................... 29,241 17,440
Notes payable to related parties.......................... -- 3,268
Short-term portion of capital lease obligations........... 2,952 1,954
Forward exchange contracts................................ 2,926 --
Income taxes payable and deferred income taxes............ 21,919 20,151
-------- --------
Total current liabilities......................... 226,150 98,452
Long-term forward exchange contracts........................ 2,222 --
Long-term portion of capital lease obligations.............. 9,215 7,370
Other noncurrent liabilities................................ 24,268 20,507
Shareholders' equity (deficit):
Preferred Shares -- Authorized 25,000 shares; pound
sterling 0.01 par value; 0 shares issued and
outstanding............................................ -- --
Ordinary Shares -- Authorized 550,000 shares; pound sterling
0.01 par value; 196,800 and 124,708 outstanding,
respectively (1998 -- 30,235 Non Voting Ordinary Shares
and 166,565 Voting Ordinary Shares)....................... 3,149 1,996
Additional paid-in capital.................................. 447,503 105,779
Unrealized loss on derivative instruments................... (1,495) --
Unearned compensation....................................... (8,947) --
Accumulated deficit......................................... (462,099) (13,522)
-------- --------
Total shareholders' equity (deficit).............. (21,889) 94,253
-------- --------
$239,966 $220,582
======== ========
</TABLE>
See accompanying notes
F-3
<PAGE> 70
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenue:
License(*)............................................ $ 42,891 $ 25,995 $ 16,298
Service(*)............................................ 360,876 264,107 195,422
-------- -------- --------
403,767 290,102 211,720
-------- -------- --------
Operating expenses:
Cost of license(*).................................... 10,732 3,711 4,011
Cost of service(*).................................... 231,360 173,704 129,177
Research and development.............................. 25,612 17,386 14,695
Selling, general and administrative(*)................ 51,168 40,769 28,347
Nonrecurring charges (*).............................. -- 27,563 --
-------- -------- --------
318,872 263,133 176,230
-------- -------- --------
Operating income........................................ 84,895 26,969 35,490
Other expense, net(*)................................... 24,126 3,266 476
-------- -------- --------
Income before income taxes and cumulative effect........ 60,769 23,703 35,014
Income taxes............................................ 30,385 17,827 10,506
-------- -------- --------
Income before cumulative effect......................... 30,384 5,876 24,508
Cumulative effect of change in accounting principle, net
of $277 tax........................................... 277 -- --
-------- -------- --------
Net income.............................................. $ 30,107 $ 5,876 $ 24,508
======== ======== ========
Basic earnings per share
Income before cumulative effect....................... $ 0.19 $ 0.05 $ 0.23
Cumulative effect of a change in accounting principle
(less than $0.01).................................. -- -- --
-------- -------- --------
Net income............................................ $ 0.19 $ 0.05 $ 0.23
======== ======== ========
Diluted earnings per share Income before
cumulative effect..................................... $ 0.19 $ 0.05 $ 0.22
Cumulative effect of a change in accounting principle
(less than $0.01).................................. -- -- --
-------- -------- --------
Net income............................................ $ 0.19 $ 0.05 $ 0.22
======== ======== ========
</TABLE>
- ---------------
(*) Includes the following income (expense) resulting from transactions with
related parties for the year ended September 30, 1998, 1997 and 1996,
respectively: License revenue -- $2,300, $0, and $2,000; service
revenue -- $82,100, $100,500 and $76,500; cost of license -- $0, $(3,382)
and $(4,011); cost of service -- $(2,325), $(2,523) and $(1,966); selling,
general and administrative -- $(510), $(377) and $(294); other expense,
net -- $(6,268), $0 and $0 (Note 3); nonrecurring charges -- $0, $(1,800)
and $0 (Note 3).
See accompanying notes
F-4
<PAGE> 71
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED RETAINED TOTAL
ORDINARY SHARES ADDITIONAL LOSS ON EARNINGS SHAREHOLDERS'
---------------- PAID-IN DERIVATIVE UNEARNED (ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL INSTRUMENTS COMPENSATION DEFICIT) (DEFICIT)
------ ------ ---------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995......... 107,934 $1,727 $ 14,348 $ -- $ -- $ 13,354 $ 29,429
Conversion to Voting Shares........... (18) -- -- -- -- -- --
Net income -- -- -- -- -- 24,508 24,508
Dividends declared, $0.35 per share... -- -- -- -- -- (37,949) (37,949)
------- ------ -------- ------- -------- --------- ---------
Balance at September 30, 1996......... 107,916 1,727 14,348 -- -- (87) 15,988
Net income............................ -- -- -- -- -- 5,876 5,876
Dividends declared, $0.18 per share... -- -- -- -- -- (19,311) (19,311)
Issuance of Ordinary Shares, net...... 16,792 269 91,431 -- -- -- 91,700
------- ------ -------- ------- -------- --------- ---------
Balance at September 30, 1997......... 124,708 1,996 105,779 -- -- (13,522) 94,253
Net income............................ -- -- -- -- -- 30,107 30,107
Unrealized loss on derivative
instruments, net of $640 tax........ -- -- -- (1,495) -- -- (1,495)
Dividends declared, $3.76 per share... -- -- -- -- -- (478,684) (478,684)
Issuance of Ordinary Shares, net...... 54,092 865 97,583 -- -- -- 98,448
Initial public offering of Ordinary
Shares, net......................... 18,000 288 233,902 -- -- -- 234,190
Stock options granted to employees,
net of forfeitures.................. -- -- 10,239 -- (10,239) -- --
Amortization of unearned
compensation........................ -- -- -- -- 1,292 -- 1,292
------- ------ -------- ------- -------- --------- ---------
Balance at September 30, 1998......... 196,800 $3,149 $447,503 $(1,495) $ (8,947) $(462,099) $ (21,889)
======= ====== ======== ======= ======== ========= =========
</TABLE>
See accompanying notes
F-5
<PAGE> 72
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income........................................... $ 30,107 $ 5,876 $ 24,508
Reconciliation of net income to net cash provided by
operating activities:
Depreciation.................................... 12,611 8,066 5,223
Amortization.................................... 16,485 328 --
Loss on sale of equipment....................... 149 137 11
Deferred income taxes........................... (1,991) (11,868) 4,861
Write-off of purchased computer software........ -- 1,800 --
Net changes in operating assets and liabilities:
Accounts receivable............................. (26,000) (19,357) (8,211)
Prepaid expenses and other current assets....... (5,244) 1,258 (681)
Other noncurrent assets......................... (3,324) (3,958) (3,181)
Accounts payable and accrued expenses........... 23,906 20,971 (1,896)
Forward exchange contracts...................... 5,148 -- --
Unearned revenue................................ 11,800 6,730 5,697
Income taxes payable............................ (1,429) 11,225 3,979
Other noncurrent liabilities.................... 5,760 4,843 3,598
Unrealized loss on derivative instruments....... (1,495) -- --
--------- --------- ---------
9,122 21,712 (695)
--------- --------- ---------
Net cash provided by operating activities............ 66,483 26,051 33,908
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment, vehicles and
leasehold improvements............................. 889 959 253
Payments for purchase of equipment, vehicles and
leasehold improvements............................. (26,566) (10,213) (5,526)
Purchase of computer software and intellectual
property rights.................................... -- (40,000) --
--------- --------- ---------
Net cash used in investing activities................ (25,677) (49,254) (5,273)
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid....................................... (478,684) (18,000) (40,013)
Net proceeds from issuance of Ordinary Shares........ 330,638 91,700 --
Payments under short-term finance arrangements....... (269,946) (155,190) (130,358)
Borrowings under short-term finance arrangements..... 358,862 140,360 137,872
Net proceeds from issuance of long term debt......... 364,127 -- --
Principal payments on long term debt................. (368,521) -- --
Principal payments on capital lease obligations...... (2,357) (1,286) (267)
Proceeds from (payments on) issuance of notes
payable............................................ (3,268) 3,268 --
--------- --------- ---------
Net cash provided by (used in) financing
activities......................................... (69,149) 60,852 (32,766)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents........................................ (28,343) 37,649 (4,131)
Cash and cash equivalents at beginning of year....... 53,732 16,083 20,214
--------- --------- ---------
Cash and cash equivalents at end of year............. $ 25,389 $ 53,732 $ 16,083
========= ========= =========
</TABLE>
See accompanying notes
F-6
<PAGE> 73
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Supplementary Cash Flow Information
Interest and Income Taxes Paid
Cash paid for:
Income taxes, net of refunds.............................. $32,472 $18,352 $1,475
Interest.................................................. 25,150 1,036 1,199
</TABLE>
NON CASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations of $5,200, $8,516 and $2,361 were incurred during
the years ended September 30, 1998, 1997 and 1996 respectively, when the Company
entered into lease agreements for vehicles.
The Company declared a dividend to its shareholders as of June 30, 1997 of
certain assets, consisting principally of the net assets and liabilities of a
dormant entity, totaling approximately $1,311. The estimated value of the net
assets distributed, based on internally prepared estimates, approximates the net
book value at the date of distribution. The dividend is aggregated in the
Statement of Changes in Shareholders' Equity (Deficit) with cash dividends paid
of $18,000.
See accompanying notes
F-7
<PAGE> 74
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 1998
NOTE 1 NATURE OF ENTITY
Amdocs Limited (the "Company") is a leading provider of product-driven
information system solutions to the telecommunications industry. The Company and
its subsidiaries operate in one business segment, providing computer systems
integration and related services for the telecommunications industry. The
Company designs, develops, markets, and supports computer software products and
related services to telecommunications companies throughout the world.
The Company is a Guernsey corporation, which holds directly or indirectly
several wholly owned subsidiaries in the United States, Europe, Canada, Israel,
Japan, Cyprus and Australia. The Company's customers are mainly in the North
America, Europe, South America, Australia, and the Asia-Pacific region. The
Company derives approximately 55 percent of its revenue from outside the United
States. The majority of the Company's production facilities are located in the
State of Israel. Additional development and support centers are located in the
U.S., Brazil and Cyprus.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the U.S.
CONSOLIDATION
The financial statements include the accounts of the Company and all its
subsidiaries, which are wholly owned. All significant intercompany transactions
and balances have been eliminated in consolidation.
FUNCTIONAL CURRENCY
The U.S. dollar is the functional currency for the Company and its
subsidiaries, as the U.S. dollar is the predominant currency of the Company's
revenue.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and short-term investments with
insignificant interest rate risk and original maturities of 90 days or less.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computers, office furniture and equipment, vehicles and leasehold
improvements are stated at cost. Assets under capital leases are recorded at the
present value of the future minimum lease payments at the date of acquisition.
Depreciation is computed using the straight-line method over the estimated
useful life of the asset, which ranges from two to twelve years and includes the
amortization of assets under capitalized leases. Leasehold improvements are
amortized over the shorter of the estimated useful lives or the term of the
lease. Management reviews property and equipment and other long-lived assets on
a periodic basis to determine whether the events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
F-8
<PAGE> 75
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RESEARCH AND DEVELOPMENT AND COMPUTER SOFTWARE
Research and development expenditures consist of costs incurred during the
development of new software modules and product offerings, usually in
conjunction with a customer project. Such costs are charged to operations as
incurred. Certain computer software costs are capitalized in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," which
requires capitalization of software development costs subsequent to the
establishment of technological feasibility.
Based on the Company's product development process, technological
feasibility is established upon completion of a detailed program design or, in
the absence thereof, completion of a working model. Costs incurred by the
Company after achieving technological feasibility and before the product is
ready for customer release have been insignificant.
Purchased computer software, which is reported at the lower of amortized
cost or net realizable value, is amortized over its estimated useful life of
three years based on the ratio of the current gross revenue for each product to
the total current and anticipated future gross revenue for each product. This
accounting policy results in amortization of purchased computer software on a
basis faster than the straight-line method.
Periodically, the Company considers whether there are indicators of
impairment that would require the evaluation of the net realizable value of the
capitalized computer software in comparison to its carrying value.
In September 1997 the Company acquired certain intellectual properties
rights. These rights are amortized over their estimated useful life of 10 years,
on a straight line basis.
Accumulated amortization of intellectual properties rights and computer
software is $11,060 and $328 at September 30, 1998 and 1997.
STOCK SPLIT
In September 1997 and May 1998, the Board of Directors of the Company
authorized stock splits effected as dividends of Ordinary Shares. All references
in the consolidated financial statements referring to shares, per share amounts,
and contingently issuable shares have been adjusted retroactively for the stock
splits.
INCOME TAXES
The Company records deferred income taxes to reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and for tax purposes. Deferred taxes are computed
based on tax rates anticipated to be in effect (under applicable law at the time
the financial statements are prepared) when the deferred taxes are expected to
be paid or realized.
Deferred tax liabilities and assets are classified as current or noncurrent
based on the classification of the related asset or liability for financial
reporting, or according to the expected reversal dates of the specific temporary
differences, if not related to an asset or liability for financial reporting,
and also include anticipated withholding taxes due on subsidiaries' earnings
when paid as dividends to their parents.
F-9
<PAGE> 76
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
The Company's software products require significant customization and
therefore the development projects are recognized as long term contracts in
conformity with Accounting Research Bulletin (ARB) No. 45 "Long Term
Construction Type Contracts" and Statement of Position (SOP) 81-1 "Accounting
for Performance of Construction Type and Certain Production Type Contracts" and
SOP 97-2 "Software Revenue Recognition". License revenue is recognized as work
is performed, using percentage of completion accounting. Service revenue that
involves significant ongoing obligations, including fees for customization,
implementation and support services, is recognized as work is performed, under
the percentage of completion method. Revenue related to ongoing support is
recognized as work is performed. Revenue from third party hardware and software
sales is recognized when products are delivered. Maintenance revenue is
recognized ratably over the term of the maintenance agreement, which in most
cases is one year or less. As a result of its percentage of completion
accounting policies, the Company's annual and quarterly operating results may be
significantly affected by the size and timing of customer projects and the
Company's progress in completing such projects.
Losses are recognized on contracts in the period in which the liability is
identified. Unearned revenue represents advance billings to customers for
services and third-party products and generally is recognized within one year of
receipt.
Included in service revenue are sales of third-party products totaling
$27,016 in 1996. Revenue from sales of such products in 1998 and 1997 are less
than 10 percent of total revenue and are expected to continue to be below 10
percent in the future. Such products include third-party computer hardware and
computer software products.
COST OF LICENSE AND COST OF SERVICE
Cost of license and service consists of all costs associated with providing
services to customers, including warranty expense. Estimated costs related to
warranty obligations are initially provided at the time the product is delivered
and are revised to reflect subsequent changes in circumstances and estimates.
Cost of license includes amortization of purchased computer software and
intellectual property rights and, in 1997 and 1996 royalty expense.
Included in cost of service are costs of third-party products associated
with reselling third-party computer hardware and computer software products to
customers. In 1996, such costs totaled $22,124. Customers purchasing third-party
products from the Company generally do so in conjunction with the purchase of
services.
NONRECURRING CHARGES
Amounts reflected as nonrecurring charges in the consolidated statements of
operations of the year ended September 30, 1997 represent two items: (a) the
payment of a one-time special bonus of $25,763 paid to a trust for the benefit
of certain officers and employees related to past services and (b) a write-off
of $1,800 in connection with the acquisition of certain software rights related
to in-process research and development.
MODIFICATION OF ACCOUNTING FOR INTELLECTUAL PROPERTY RIGHTS
In 1998, the Company revised its accounting for certain intellectual
property rights acquired in 1997. The cost of such rights, $26,200, was
previously reported as a nonrecurring charge in 1997. Effective September 30,
1997, the rights were capitalized and are amortized over their estimated useful
life of 10 years.
F-10
<PAGE> 77
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Pursuant to this accounting standard, the Company records deferred
compensation for share options granted to employees at the date of grant based
on the difference between the exercise price of the options and the market value
of the underlying shares at that date. Deferred compensation is amortized to
compensation expense over the vesting period of the underlying options. See Note
14 for pro forma disclosures required in accordance with Statement No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") of the Financial
Accounting Standards Board.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The financial instruments of the Company consist mainly of cash and cash
equivalents, accounts receivable, short-term financing arrangements, forward
exchange contracts, and lease obligations. In view of their nature, the fair
value of the financial instruments included in the accounts of the Company does
not significantly vary from their carrying amount.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of trade receivables. The Company invests its
excess cash primarily in highly liquid U.S. dollar-denominated deposits with
major U.S. and U.K. banks. The Company does not expect any credit losses in
respect of these items. The Company's revenue is generated primarily in North
America, Europe, Australia, Brazil and the Asia-Pacific region, and most of its
customers are among the largest telecommunications and directory publishing
companies in the world (or owned by them). The Company performs ongoing analysis
of its customer base and generally does not require collateral.
RECLASSIFICATIONS
Certain amounts in the 1997 and 1996 financial information have been
reclassified to conform to the current year presentation.
ADOPTION OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings per Share" which was adopted on December 31, 1997. SFAS
No. 128 replaced previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share exclude the dilutive effects of options,
warrants and convertible securities. Diluted earnings per share are very similar
to previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary restated to
conform to the SFAS No. 128 requirements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" which was adopted on October 1, 1997. This new Statement establishes
standards for reporting and displaying comprehensive income exclusive of net
income and its components in a company's financial statements. At the present
time, the only component of comprehensive income which must be included in the
Company's financial statements is unrealized gains and losses on derivative
instruments designated as cash flow hedges.
F-11
<PAGE> 78
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which was adopted on December 31, 1997.
SFAS No. 131 requires companies to provide financial and descriptive information
about their operating segments. All operating segment information for all
periods has been presented.
In October 1997, the AICPA issued SOP 97-2, "Software Revenue Recognition,"
which updates the requirements of revenue recognition effective for transactions
that the Company has entered into beginning January 1, 1998. The adoption of SOP
97-2 did not have a material impact on the Company's financial position or
results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 1999. The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Company adopted the new
Statement effective July 1, 1998. The Statement requires the Company to
recognize all derivatives on the balance sheet at fair value. If the derivative
meets the definition of a hedge and is so designated, depending on the nature of
the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
In March 1998, the AICPA issued SOP 98-1, "Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use". The provisions of
the SOP must be applied in financial statements for fiscal years beginning after
December 15, 1998. The SOP will require the capitalization of certain costs
incurred after the date of adoption in connection with developing or obtaining
software for internal-use. The company currently expenses such costs as
incurred. The Company has not yet assessed what the impact of the SOP will be on
the Company's future earnings or financial position.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. The Company's most significant estimates are related to contract
accounting estimates used to recognize revenue under percentage of completion
contracts. Actual results could differ from those estimates.
NOTE 3 RELATED-PARTY TRANSACTIONS
The Company licenses software and provides computer systems integration and
related services to several affiliates of a significant shareholder of the
Company (the "affiliates"). Revenue from the affiliates totaled approximately
$84,400, $100,500 and $78,500 in 1998, 1997 and 1996, respectively. Through
September 1997 the Company also paid royalties to the affiliates for the
licensing of computer software. Royalty expense totaled approximately $3,400 and
$4,000 in 1997 and 1996, respectively. Amounts due to the affiliates related to
these royalties were $0 and $436 at September 30, 1998 and 1997, respectively,
and were included in accounts payable and accrued expenses.
On September 22, 1997, the Company purchased certain computer software and
intellectual property rights from the affiliates for an aggregate amount of
$40,000. As a result, the Company
F-12
<PAGE> 79
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
no longer pays royalties to the affiliates related to the purchased computer
software. In process research and development, related to this transaction
resulted in a nonrecurring charge of $1,800. The remainder has been capitalized
as computer software and intellectual property rights.
On September 22, 1997, the Company issued junior subordinated notes payable
in the aggregate amount of $3,268 to certain persons affiliated with the
investors party to the Share Subscription Agreement referred to in Note 13. The
notes bore an interest rate of 5.75 percent per annum and were originally due
September 22, 1998. The notes were paid in March 1998.
In January 1998, the Company issued $123,500 in principal amount of 10
percent subordinated notes to affiliates of certain shareholders which were
party to the Conditional Investment Agreement referred to in Note 13. This
amount was paid as described in Note 8.
The Company leases office space in Israel on a month-to-month basis and
purchases other miscellaneous support services from affiliates of certain
shareholders. Amounts paid for rent and related maintenance and other
miscellaneous support services were approximately $2,835, $2,900 and $2,260 for
1998, 1997 and 1996, respectively.
NOTE 4 COMPENSATING BALANCES
The Company was required to maintain compensating cash balances of $574 at
September 30, 1998 and 1997, relating to foreign currency contracts.
NOTE 5 EQUIPMENT, VEHICLES AND LEASEHOLD IMPROVEMENTS
Components of equipment, vehicles and leasehold improvements, net are as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Furniture and fixtures......................... $ 6,852 $ 2,900
Computer equipment............................. 37,534 24,688
Vehicles furnished to employees................ 20,500 16,708
Leasehold improvements......................... 12,353 3,481
------- -------
77,239 47,777
Less accumulated depreciation.................. 30,835 19,490
------- -------
$46,404 $28,287
======= =======
</TABLE>
A subsidiary of the Company has entered into various leasing arrangements
with a commercial bank of vehicles for periods of five years, carrying interest
rates of LIBOR plus a varying interest rate of 0.7 percent to 1 percent (6.5
percent at September 30, 1998). The Company has accounted for these as capital
leases. Capital lease payments, excluding interest, due over the next five years
are as follows: $2,952 in 1999, $3,148 in 2000, $3,005 in 2001, $2,200 in 2002
and $862 in 2003.
F-13
<PAGE> 80
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 OTHER NONCURRENT ASSETS
Other noncurrent assets consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Funded personnel benefit costs................. $13,622 $10,660
Computer software, net of amortization of
$8,222 in 1998, and $110 in 1997............. 3,778 11,890
Other.......................................... 3,155 2,793
------- -------
$20,555 $25,343
======= =======
</TABLE>
NOTE 7 INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current.................... $32,376 $ 29,695 $ 5,645
Deferred................... (1,991) (11,868) 4,861
------- -------- -------
$30,385 $ 17,827 $10,506
======= ======== =======
</TABLE>
All income taxes are from continuing operations reported by the Company in
the applicable taxing jurisdiction. Income taxes also include anticipated
withholding taxes due on subsidiaries' earnings when paid as dividends to their
parent company.
Deferred income taxes are comprised of the following components:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
DEFERRED ASSETS:
Unearned revenue....................................... $ 5,849 $ 5,900
Accrued personnel costs................................ 7,027 6,621
Computer software and intellectual property............ 1,735 3,339
Warranty and maintenance accruals...................... 2,184 --
Other.................................................. 5,512 1,259
------- -------
Total deferred assets.................................. 22,307 17,119
------- -------
DEFERRED LIABILITIES:
Anticipated withholdings on subsidiaries' earnings..... (7,945) (4,748)
------- -------
Total deferred liabilities............................. (7,945) (4,748)
------- -------
Net deferred assets.................................... $14,362 $12,371
======= =======
</TABLE>
F-14
<PAGE> 81
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effective income tax rate varied from the statutory Guernsey tax rate
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory Guernsey tax rate............ 20% 20% 20%
Guernsey tax-exempt status............. (20) (20) (20)
Foreign taxes.......................... 50* 75* 30
--- --- ---
Effective income tax rate.............. 50% 75% 30%
=== === ===
</TABLE>
- ---------------
* In 1998 and 1997 the Company incurred tax expense on the income of its
operations in various countries and sustained a loss in a tax jurisdiction in
which the Company is tax exempt, which resulted in no tax benefit to offset
the expense incurred. As a result, the Company's effective income tax rate is
significantly greater than the 1996 effective rate.
The Company's Israeli subsidiary, which accounts for approximately 31 percent
of the Company's income before income taxes, enjoys tax benefits from Approved
Enterprise status, as established under Israeli law. The benefits from this
status begin phasing out in 1999.
During 1997, the Company settled claims from various taxing authorities
resulting in an increase in taxes paid and deferred tax assets. Included in
other income (expense), net for the year ended September 30, 1997 is
approximately $3,000, representing interest on tax assessments relating to
years prior to fiscal 1997.
The Company's assumption is that it is more likely than not that all the
net deferred tax assets will be realized through future taxable earnings.
NOTE 8 SHORT-TERM FINANCING ARRANGEMENTS
Pursuant to a July 1998 agreement (which is an amendment to the December
1997 agreement discussed below) with a syndicate of banks, the Company may
borrow up to $100,000 under a revolving line of credit. This agreement expires
in June 2001. The Company borrowed $66,000 under the line of credit to refinance
a facility from a commercial bank, and to repay $46,000 of the subordinated debt
to affiliates of the shareholders as described below. The revolving line of
credit bears a variable interest rate (6.5 percent at September 30, 1998). The
credit agreement has various covenants which limit the Company's ability to make
investments, incur debt, pay dividends and dispose of property. The Company is
also required to maintain certain financial ratios as defined in the agreement.
Except for vehicles, substantially all of the Company's assets have been pledged
as security under the terms of the agreement. At September 30, 1998, the
outstanding balance under this credit facility was $59,000.
Under a credit agreement with the First International Bank of Israel, the
Company's subsidiary in the State of Israel may borrow up to $40,000 under a
short term credit line. At September 30, 1998, the outstanding balance was
$32,565. The short term credit line bears a variable interest rate (6.7 percent
at September 30, 1998).
In addition, the Company has short term revolving credit line totaling
$7,000 from the FIBI BANK (UK) plc. As of September 30, 1998, the Company used
approximately $4,500 of this revolving credit facility to support outstanding
letters of credit.
The Company's financing transactions for the year are described below:
On September 22, 1997, the Company issued junior subordinated notes payable
in the aggregate amount of $3,268 to certain entities affiliated with the
investors party to the Share
F-15
<PAGE> 82
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subscription Agreement referred to in Note 13. The notes bore an interest rate
of 5.75 percent per annum, and were due September 22, 1998. The notes were paid
in March 1998.
In December 1997, certain direct and indirect subsidiaries entered into a
credit agreement (the 1997 Credit Agreement) with several commercial banks,
which provided for three separate term loans and a revolving credit facility.
Term loans of $125,000 and $100,000 with variable interest rates and quarterly
principal payments due through December 2002 and June 2004, respectively, and a
$90,000 term loan with a variable interest rate and principal due in May 1998.
In December 1997, the Company borrowed $315,000 under the term loans and placed
such proceeds in a cash collateral account maintained by one of the commercial
banks subject to the 1997 Credit Agreement. The release of the cash held in the
cash collateral account was subject to the occurrence of certain events, as
defined. The events were met in January 1998, and the cash held in the cash
collateral account was released to the Company.
In March 1998, the Company received the proceeds of the additional equity
investment discussed in Note 13 totaling approximately $99,000 and used the
proceeds to repay the term loan maturing in May 1998 and the short-term notes
payable to related parties.
In January 1998, the Company borrowed $20,000 under the revolving credit
portion of the 1997 Credit Agreement and used the proceeds to prepay certain of
the term loans. Amounts borrowed under the revolving credit facility bore a
variable interest rate and were due December 5, 2002. This amount was repaid in
July 1998 with the proceeds of the Company's $100,000 revolving credit facility.
The occurrence of certain qualifying events, as defined in the Conditional
Investment Agreement as discussed in Note 13, also resulted in the issuance of
unsecured long-term notes to affiliates of certain shareholders of the Company
totaling $123,500, and a requirement for affiliates of certain shareholders to
make an equity investment in the Company of approximately $99,000, subject to
possible adjustment, as provided in the Conditional Investment Agreement. The
long-term subordinated notes to affiliates carried an interest rate of 10
percent, payable quarterly with principal due September 2004. The proceeds of
the long-term subordinated notes to affiliates were received in January 1998.
On June 24, 1998 the Company used the proceeds from the initial public
offering that was conducted on June 19, 1998 to repay $183,750 in outstanding
term loans made in December 1997 and $49,000 out of the $123,500, 10 percent
subordinated debt issued in January 1998.
Subordinated debt to affiliates of the shareholders in the amount of
$46,000 was repaid in July 1998 from the proceeds of the Company's revolving
credit facility.
Effective July 31, 1998, the Company extinguished the subordinated debt
with cash flows from operations.
NOTE 9 OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Accrued personnel costs................ $24,268 $18,507
Ordinary Shares subscription deposit... -- 2,000
------- -------
$24,268 $20,507
======= =======
</TABLE>
F-16
<PAGE> 83
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 OTHER EXPENSE, NET
Other expense, net consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Interest income.................... $ 3,445 $ 873 $ 964
Interest expense................... (24,947) (981) (1,291)
Interest expense related to
settlement of tax claims......... -- (3,000) --
Other, net......................... (2,624) (158) (149)
-------- ------- -------
$(24,126) $(3,266) $ (476)
======== ======= =======
</TABLE>
NOTE 11 COMMITMENTS
The Company leases office space in various countries in which it does
business under non-cancelable operating leases. Future minimum lease payments
required for the five-year period beginning October 1, 1998 are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------
<S> <C>
1999.............................................. $ 9,700
2000.............................................. 10,600
2001.............................................. 10,300
2002.............................................. 8,400
2003.............................................. 7,400
-------
$46,400
=======
</TABLE>
Rent expense was approximately $8,000, $5,400 and $4,900 for 1998, 1997 and
1996, respectively. The lease agreement related to the Company's principal
facilities in Israel, for which the Company has provided a $2,000 guarantee,
includes a purchase option.
NOTE 12 EMPLOYEE BENEFITS
The Company accrues severance pay for the employees of its Israeli
operations in accordance with Israeli law and certain employment procedures on
the basis of the latest monthly salary paid to these employees and the length of
time that they have worked for the Israeli subsidiary. The severance pay
liability, which is included in other noncurrent liabilities, is partially
funded by amounts on deposit with insurance companies, which are included in
other noncurrent assets. Most of the deposits were funded by the Israeli
subsidiary. Severance pay expenses were approximately $7,100, $5,500 and $4,200
for 1998, 1997 and 1996, respectively.
The Company sponsors a defined contribution benefit plan covering
substantially all employees in the U.S., U.K., and Canada. The plan provides for
Company matching contributions based upon a percentage of the employees'
voluntary contributions. The Company's 1998, 1997 and 1996 plan contributions
were not significant.
NOTE 13 CAPITAL TRANSACTIONS
On June 19, 1998, the Company commenced an initial public offering of
18,000 Ordinary Shares at an offering price of $14 per share. Total net
proceeds, after deduction of offering expenses and underwriting commissions,
amounted to $234,190. The Company used these funds
F-17
<PAGE> 84
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to repay interest and principal relating to $183,750 outstanding term loans made
in December 1997 and $49,000 out of the $123,500 10 percent subordinated debt
issued in January 1998.
On July 17, 1998, pursuant to an over-allotment option granted by an
existing shareholder of the Company to the underwriters involved with the
Company's initial public offering, the underwriters elected to exercise their
over-allotment option with respect to 1,344 nonvoting Ordinary Shares held by
this shareholder. In accordance with the Company's Articles of Association, such
nonvoting Ordinary Shares converted automatically into voting Ordinary Shares,
upon their transfer.
In May 1998, in contemplation of the Company's initial public offering, the
Board of Directors took the following actions: (i) redeemed the outstanding
Voting Shares at the par value thereof, (ii) amended the terms of the Ordinary
Shares to create two classes: voting and non-voting; (iii) authorized 25,000
Preferred Shares, 500,000 Ordinary Shares and 50,000 non-voting Ordinary Shares;
and (iv) declared a stock split of 52-for-1 for each Ordinary Share outstanding.
The rights of the two classes of Ordinary Shares are identical except as to
voting rights and all of the outstanding non-voting Ordinary Shares are held by
a principal shareholder of the Company. All references to the number of shares
and earnings per share have been restated to reflect the stock split and the
redemption of Voting Shares has been given retroactive effect.
In March 1998, the Company issued 51,508 Ordinary Shares according to the
September 1997 Conditional Investment Agreement discussed below. Total proceeds
(net of $2,600 fees) amounted to approximately $96,448.
In January 1998, the Company's Board of Directors declared dividends of
$478,684 which were paid at that time. The dividends were financed by the
proceeds of the long term loans, long term notes of affiliates of certain
shareholders, and surplus working capital.
In January 1998, the Company issued 36 additional Voting Shares at par
value which were redeemed in May 1998 as discussed above and issued the
contingently issuable 2,584 Ordinary Shares which were paid in advance in the
amount of $2,000 in the 1995 Stock Subscription Agreements.
On September 22, 1997, the Company entered into a Share Subscription
Agreement, under which 11,072 Ordinary Shares and 990 Voting Shares and $3,268
principal amount of junior promissory notes were issued to certain investors.
Also, on September 22, 1997, the Company entered into a Conditional Investment
Agreement whereby such investors were obligated to purchase 51,508 Ordinary
Shares of the Company in the second quarter 1998 for approximately $99,000, if
the Company achieved certain financial performance targets. In addition, the
Company entered into a note purchase agreement with certain affiliates of the
investors to issue, at its election, up to $125,000 of long-term notes, with
interest at 10 percent and payable in 2004 subject to the same financial targets
in the Conditional Investment Agreement. In addition, the ownership percentages
between shareholders will change if the Company attains certain financial
performance targets through September 30, 1999.
NOTE 14 STOCK OPTION AND INCENTIVE PLAN
In January 1998, the Company adopted the Amdocs Limited 1998 Stock Option
and Incentive Plan ("the Plan"). Under the provisions of the Plan, 4,100
Ordinary Shares are available to be granted to officers, directors, employees
and consultants. Subsequent to year end, the Company increased the number of
Ordinary Shares available to be granted to 6,600 Ordinary Shares. Under the
Plan, in January 1998, 1,651 options were granted to purchase Ordinary Shares at
an
F-18
<PAGE> 85
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exercise price of $1.92 per share, with vesting over four years and a term of 10
years. No compensation expense is recorded for these stock options as they were
granted at an exercise price equal to the fair market value of the Ordinary
Shares at the time of the grant.
On June 19, 1998, under the plan, the Company granted an additional 855.4
options with the same exercise price, expiration date and vesting dates as the
options granted in January 1998. The Company recorded unearned compensation
expense totaling $10,333 as a separate component of shareholders' equity for the
difference between the fair market value per share at the date of grant and the
exercise price of $1.92. Additional Paid in Capital was increased by the same
amount. The unearned compensation expense will be amortized ratably over the
vesting period of 3.5 years.
On June 19, 1998, options for 21 shares were granted to two non-employee
directors at an exercise price equal to the market price of the Ordinary Shares
on the grant date, with vesting over three years and a term of 10 years.
On September 14, 1998, options for 1,000 shares were granted to employees
at an exercise price of $8.75 which was equal to the market price of the
Ordinary Shares on the grant date, with vesting over four and eight years and a
term of 10 years.
A summary of the Plan as of September 30, 1998, as well as changes during
the year then ended, is presented below:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARE EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Outstanding as of beginning of year........... -- $ --
Granted....................................... 3,527.4 3.93
Exercised..................................... -- --
Forfeited..................................... (7.8) 1.92
------- -----
Outstanding as of end of year................. 3,519.6 $3.93
======= =====
</TABLE>
The following table summarizes information about share options outstanding
as of September 30, 1998:
<TABLE>
<CAPTION>
EXERCISABLE AS OF
OUTSTANDING AS OF SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
- ---------------------------------------------- -------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.92 2,498.6 9.25 $ 1.92 -- $ --
14.00 21.0 9.75 14.00 5.3 14.00
8.75 1,000.0 10 8.75 -- --
</TABLE>
F-19
<PAGE> 86
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average grant-date fair value of the 3,527.4 options granted
during the year amounted to $6.12 per option. The Company utilized the
Black-Scholes option pricing model to estimate fair value, utilizing the
following assumptions for the year (all in weighted averages):
<TABLE>
<S> <C>
Risk-free interest rate..................................... 5.24%
Expected life of options (in years)......................... 7.1
Expected annual volatility.................................. 0.945
Expected dividend yield..................................... None
</TABLE>
Had compensation cost for the Company's share option plans been determined
based on fair value at the grant dates for awards made in 1998 under such plans
in accordance with SFAS No. 123, the Company's pro forma net income and earnings
per share for the year ended September 30, 1998 would have been as follows:
<TABLE>
<S> <C>
Pro forma net income...................................... $29,455
Pro forma basic earnings per share........................ 0.19
Pro forma diluted earnings per share...................... 0.18
</TABLE>
All of the Company's stock options were granted during the year ended
September 30, 1998. Accordingly, the impact of the stock options on pro forma
net income and earnings per share does not reflect the annualized impact of such
option grants.
NOTE 15 EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Numerator:
Income before cumulative effect............................ $30,384 $ 5,876 $24,508
======= ======== =======
Denominator:
Denominator for basic earnings per share weighted average
number of shares outstanding.......................... 158,528 108,330 107,920
Effect of dilutive contingently issuable shares.......... -- 2,585 2,585
Effect of dilutive stock options granted................. 914 -- --
------- -------- -------
Denominator for dilutive earnings per share -- adjusted
weighted average shares and assumed conversions.......... 159,442 110,915 110,505
======= ======== =======
Basic earnings per share................................... $ 0.19 $ 0.05 $ 0.23
======= ======== =======
Diluted earnings per share................................. $ 0.19 $ 0.05 $ 0.22
======= ======== =======
</TABLE>
NOTE 16 SEGMENT INFORMATION AND SALES TO SIGNIFICANT CUSTOMERS
GEOGRAPHIC INFORMATION
The following is a summary of revenue and long-lived assets by geographic
area. Revenue is attributed to geographic region based on the location of the
customers.
F-20
<PAGE> 87
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUE
North America........................................... $210,867 $185,119 $142,921
Australia............................................... 33,215 37,362 36,553
Europe.................................................. 109,752 32,642 30,763
Other................................................... 49,933 34,979 1,483
-------- -------- --------
Total................................................... $403,767 $290,102 $211,720
======== ======== ========
LONG-LIVED ASSETS
Israel*................................................. $ 38,917 $ 26,779 $ 18,346
North America**......................................... 30,441 39,771 ***
Other................................................... 7,378 2,402 1,794
-------- -------- --------
$ 76,736 $ 68,952 $ 20,140
======== ======== ========
</TABLE>
- ---------------
* Primarily computers and vehicles.
** Primarily computer software and intellectual property rights.
*** Less than 10 percent of total long-lived assets.
REVENUE AND CUSTOMER INFORMATION
Customer care and billing systems (CC&B) include systems for wireless,
wireline and multiple-service or convergent network operators and service
providers. Directory includes directory sales and publishing systems for
publishers of both traditional printed yellow pages and white pages directories
and electronic directories, such as Internet, kiosk and CD-ROM directories.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CC&B............................ $251,829 $166,335 $102,481
Directory....................... 151,938 123,767 109,239
-------- -------- --------
Total........................... $403,767 $290,102 $211,720
======== ======== ========
</TABLE>
F-21
<PAGE> 88
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SALES TO SIGNIFICANT CUSTOMERS
The following table summarizes the percentage of sales to significant
customers (when they exceed 10 percent of total revenue for the year).
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
--------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Southwestern Bell Communications Services Inc. and
affiliates........................................... 21% 35% 38%
BellSouth Telecommunications, Inc., and affiliates..... 16 * *
Telstra Corporation Ltd................................ * 13 16
</TABLE>
- ---------------
* less than 10 percent of total revenue
NOTE 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------
SEPT 30, JUNE 30, MARCH 31, DEC 31,
-------- -------- --------- -------
<S> <C> <C> <C> <C>
1998
Revenue............................... $116,704 $106,497 $94,008 $86,558
Operating income...................... 26,104 22,821 19,125 16,845
Net income............................ 11,598 6,443 4,105 7,961
Basic earnings per share.............. 0.06 0.04 0.03 0.06
Diluted earnings per share............ 0.06 0.04 0.03 0.06
1997
Revenue............................... $ 87,987 $ 77,089 $62,489 $62,537
Operating income (loss)............... (10,586) 13,363 12,179 12,013
Net income (loss)..................... (18,307) 7,378 8,236 8,569
Basic earnings (loss) per share....... (0.17) 0.07 0.08 0.08
Diluted earnings (loss) per share..... (0.17) 0.07 0.07 0.08
</TABLE>
The fiscal quarter ended September 30, 1997 includes nonrecurring charges
of $27,563.
NOTE 18 FINANCIAL INSTRUMENTS
Most of the Company's revenue and expenses are denominated in U.S. dollars.
However, as the Company does business world-wide, the Company enters into
various foreign exchange contracts in managing its foreign exchange risks. The
derivative financial instruments are afforded hedge accounting treatment because
they are effective in managing foreign exchange risks and are appropriately
designated to the underlying exposures. The Company does not enter into
derivative contracts for speculative purposes, nor is it a party to any
leveraged derivative instrument. Through its foreign currency hedging
activities, the Company seeks to minimize the risk that fair value of the sales
of products and services and cash flow required for the Company's expenses
denominated in a currency different from the functional currency will be
affected by changes in exchange rates. Cash flow hedges protect the Company from
fluctuations in expenses expected to be incurred in subsidiaries that operate in
non U.S. dollar-based environments. Fair value hedges protect cash flows
generated by firm commitments from customers who purchase services in non U.S.
dollar-based currencies.
F-22
<PAGE> 89
AMDOCS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For its qualifying fair value hedges, the fair value of the derivative
instrument and firm commitment are recorded as assets and liabilities on the
balance sheet. The change in the fair value of the forward contract related to
the ineffective portion of the hedging contracts is recorded in Other expense,
net. For the year ended September 30, 1998, this amounted to an expense of $98.
For its qualifying cash flow hedges, the fair value of the derivative
instrument is recorded as an asset or liability on the balance sheet. The change
in fair value of the derivative instrument related to the ineffective portion of
the hedging contracts is recorded in Other expense, net. For the year ended
September 30, 1998, this amounted to income of $300. The remaining change in
fair value is reported in Other comprehensive income and will be recorded into
earnings, as a component of the line item which contains the hedged item in the
same period the forecasted transactions affect earnings. It is expected that
$634 of net unrealized losses included in Other comprehensive income at
September 30, 1998 will be recognized during the period ended September 30,
1999. At September 30, 1998 the maximum length of time over which the Company is
hedging its exposure to the variability of future cash flows is 4 years.
At September 30, 1998, the Company had forward exchange contracts to
exchange various foreign currencies for U.S. dollars. The value of New Israeli
shekels and Australian dollars to be purchased was $121,868 and the value of
Great Britain pounds, Austrian shillings, Japanese yen, and Canadian dollars to
be sold is $60,599. The fair value of forward derivatives as of September 30,
1998 is $(4,671).
F-23
<PAGE> 90
AMDOCS LIMITED
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 26,894
Accounts receivable, including unbilled of $7,124......... 121,283
Accounts receivable from related parties.................. 10,144
Deferred income taxes..................................... 12,050
Prepaid expenses and other current assets................. 16,085
---------
Total current assets.............................. 186,456
Equipment, vehicles and leasehold improvements, net......... 63,533
Deferred income taxes....................................... 7,348
Intellectual property rights................................ 22,052
Other noncurrent assets..................................... 22,161
---------
$ 301,550
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 47,449
Accrued personnel costs................................... 26,861
Short-term financing arrangements......................... 75,908
Deferred revenue.......................................... 61,070
Short-term portion of capital lease obligations........... 4,184
Forward exchange contracts................................ 1,275
Income taxes payable and deferred income taxes............ 18,039
---------
Total current liabilities......................... 234,786
Long-term forward exchange contracts........................ 513
Long-term portion of capital lease obligations.............. 12,675
Other noncurrent liabilities................................ 27,805
Shareholders' equity:
Preferred Shares -- Authorized 25,000 shares; L0.01 par
value; 0 shares issued and outstanding................. --
Ordinary Shares -- Authorized 550,000 shares; L0.01 par
value; 196,800 shares outstanding...................... 3,149
Additional paid-in capital................................ 447,772
Unrealized income on derivative instruments............... 225
Unearned compensation..................................... (6,559)
Accumulated deficit....................................... (418,816)
---------
Total shareholders' equity........................ 25,771
---------
$ 301,550
=========
</TABLE>
See accompanying notes
F-24
<PAGE> 91
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Revenue:
License (*)............................................... $ 32,348 $ 18,419
Service (*)............................................... 246,907 162,147
-------- --------
279,255 180,566
Operating expenses:
Cost of license........................................... 2,693 5,867
Cost of service (*)....................................... 160,195 104,750
Research and development.................................. 17,519 10,955
Selling, general and administrative (*)................... 33,062 23,024
-------- --------
213,469 144,596
-------- --------
Operating income............................................ 65,786 35,970
Other expense, net.......................................... 3,953 11,837
-------- --------
Income before income taxes.................................. 61,833 24,133
Income taxes................................................ 18,550 12,067
-------- --------
Net income.................................................. $ 43,283 $ 12,066
======== ========
Basic earnings per share.................................... $ 0.22 $ 0.09
======== ========
Diluted earnings per share.................................. $ 0.22 $ 0.09
======== ========
</TABLE>
- ---------------
(*) Includes the following income (expense) resulting from transactions with
related parties for the six months ended March 31, 1999 and 1998,
respectively: license revenue -- $278 and $210; service revenue -- $45,949
and $42,832; cost of service -- $(1,057) and $(1,265); selling, general and
administrative -- $(232) and $(189); interest expense -- $(0) and $(3,048).
See accompanying notes.
F-25
<PAGE> 92
AMDOCS LIMITED
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
INCOME TOTAL
ORDINARY SHARES ADDITIONAL (LOSS) ON SHAREHOLDERS'
---------------- PAID-IN DERIVATIVE UNEARNED ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL INSTRUMENTS COMPENSATION DEFICIT (DEFICIT)
------ ------ ---------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1998..................... 196,800 $3,149 $447,503 $(1,495) $(8,947) $(462,099) $(21,889)
Net income................. -- -- -- -- -- 43,283 43,283
Unrealized income on
derivative instruments,
net of $737 tax.......... -- -- -- 1,720 -- -- 1,720
Stock options granted, net
of forfeitures........... -- -- 269 -- (241) -- 28
Amortization of unearned
compensation............. -- -- -- -- 2,629 -- 2,629
------- ------ -------- ------- ------- --------- --------
Balance at March 31, 1999.. 196,800 $3,149 $447,772 $ 225 $(6,559) $(418,816) $ 25,771
======= ====== ======== ======= ======= ========= ========
</TABLE>
See accompanying notes
F-26
<PAGE> 93
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income.................................................. $ 43,283 $ 12,066
Reconciliation of net income to net cash provided by
operating activities:
Depreciation.............................................. 8,343 5,646
Amortization.............................................. 5,425 8,585
Loss on sale of equipment................................. 394 80
Deferred income taxes..................................... 4,799 (2,790)
Net changes in operating assets and liabilities:
Accounts receivable....................................... (41,469) (40,478)
Prepaid expenses and other current assets................. (4,220) (534)
Other noncurrent assets................................... (2,938) (2,841)
Accounts payable and accrued expenses..................... (3,237) 5,877
Forward exchange contracts................................ (3,360) --
Deferred revenue.......................................... 31,830 17,524
Income taxes payable...................................... (6,508) 5,996
Other noncurrent liabilities.............................. 3,537 2,636
Unrealized loss on derivative instruments................. 2,457 --
--------- ---------
(23,908) (11,820)
--------- ---------
Net cash provided by operating activities................... 38,336 11,767
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of equipment, vehicles and leasehold
improvements.............................................. 1,006 544
Payments for purchase of equipment, vehicles and leasehold
improvements.............................................. (20,401) (9,581)
--------- ---------
Net cash used in investing activities....................... (19,395) (9,037)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from issuance of Ordinary Shares............... -- 96,448
Dividends paid.............................................. -- (478,684)
Payments under short-term finance arrangements.............. (179,274) (163,249)
Borrowings under short-term finance arrangements............ 163,617 171,081
Net proceeds from issuance of long-term debt................ -- 364,127
Principal payments under capital lease obligations.......... (1,779) (1,195)
Payments under long-term financing arrangements............. -- (30,000)
Payments on notes payable to related parties................ -- (3,268)
--------- ---------
Net cash used in financing activities....................... (17,436) (44,740)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 1,505 (42,010)
Cash and cash equivalents at beginning of period............ 25,389 53,732
--------- ---------
Cash and cash equivalents at end of period.................. $ 26,894 $ 11,722
========= =========
SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for:
Income taxes, net of refunds.............................. $ 20,953 $ 10,496
Interest.................................................. 3,012 3,972
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations of $6,472 and $1,133 were incurred during the six
months ended March 31, 1999 and 1998, respectively, when the Company entered
into lease agreements for vehicles.
See accompanying notes.
F-27
<PAGE> 94
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 1999
1. BASIS OF PRESENTATION
AMDOCS Limited (the "Company") is a leading provider of product-driven
information system solutions to the telecommunications industry. The Company and
its subsidiaries operate in one business segment, providing computer systems
integration and related services for the telecommunications industry. The
Company designs, develops, markets and supports computer software products and
related services to telecommunications companies throughout the world.
The unaudited consolidated financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the
United States. In the opinion of management, all adjustments considered
necessary for a fair presentation of the unaudited interim consolidated
financial statements have been included therein and are of a normal recurring
nature. The results of operations for the interim periods presented herein are
not necessarily indicative of the results to be expected for the full year.
These statements, however, do not include all information and footnotes
necessary for a complete presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. These statements should be read in conjunction with the Company's
consolidated financial statements for the year ended September 30, 1998 set
forth in the Company's Annual Report on Form 20-F filed with the Securities and
Exchange Commission.
2. ADOPTION OF NEW ACCOUNTING STANDARDS
Effective October 1, 1998, the Company adopted the provisions of Statement
of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed
for or Obtained for Internal-Use". The SOP requires the capitalization of
certain costs incurred after the date of adoption in connection with developing
or obtaining software for internal use. In accordance with the SOP, the Company
capitalized approximately $1,200 of internally developed software costs in the
six-month period ended March 31, 1999.
3. COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(Statement 130), which established standards for the reporting and display of
comprehensive income and its components. Comprehensive income represents the
change in shareholders' equity during a period from transactions and other
events and circumstances from nonowner sources. It includes all changes in
equity except those resulting from investments by owners and distributions to
owners.
The following table sets forth the reconciliation from net income to
comprehensive income for the six month periods ended March 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net income.................................................. $43,283 $12,066
Change in unrealized income on derivative instruments, net
of tax.................................................... 1,720 --
------- -------
Comprehensive income........................................ $45,003 $12,066
======= =======
</TABLE>
F-28
<PAGE> 95
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
The provision for income taxes for the six month periods ended March 31
consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current..................................................... $13,751 $14,857
Deferred.................................................... 4,799 (2,790)
------- -------
$18,550 $12,067
======= =======
</TABLE>
The effective income tax rate varied from the statutory Guernsey tax rate
as follows for the six month periods ended March 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Statutory Guernsey tax rate................................. 20% 20%
Guernsey tax-exempt status.................................. (20) (20)
Foreign taxes............................................... 30 50*
--- ---
Effective income tax rate................................... 30% 50%
=== ===
</TABLE>
- ---------------
* In fiscal 1998, the Company incurred tax expense on the income of its
operations in various countries and sustained a loss in a tax jurisdiction in
which the Company is tax-exempt, which resulted in no tax benefit to offset
the expense incurred. As a result, the Company's effective income tax rate in
fiscal 1998 was significantly greater than the estimated fiscal 1999 effective
tax rate.
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the six month periods ended March 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net income................................................ $ 43,283 $ 12,066
======== ========
Denominator:
Denominator for basic earnings per share -- weighted average
shares.................................................... 196,800 127,858
Effect of dilutive stock options granted.................... 2,463 475
-------- --------
Denominator for dilutive earnings per share -- adjusted
average shares and assumed conversions.................... 199,263 128,333
======== ========
Basic earnings per share.................................... $ 0.22 $ 0.09
======== ========
Diluted earnings per share.................................. $ 0.22 $ 0.09
======== ========
</TABLE>
6. ARCHITEL TRANSACTION
On March 2, 1999, the Company entered into a combination agreement with
Architel Systems Corporation, a Canadian corporation, by which the Company would
acquire Architel in a stock transaction valued at approximately $400,000 at the
time of the agreement. On April 8, 1999, Architel announced that it had
restructured its relationship with its largest customer, and expected revenue
and earnings for the future periods to be substantially less than originally
anticipated. As a result of these developments, on April 22, 1999, the Company
terminated the combination agreement.
F-29
<PAGE> 96
UNDERWRITING
The Company, the selling shareholders and the underwriters for the
offering, or the Underwriters, named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each Underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Banc of America
Securities LLC, BancBoston Robertson Stephens Inc., BT Alex. Brown Incorporated,
Lehman Brothers Inc. and SG Cowen Securities Corporation are the representatives
of the Underwriters.
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ----------
<S> <C>
Goldman, Sachs & Co. .......................................
Banc of America Securities LLC..............................
BancBoston Robertson Stephens Inc. .........................
BT Alex. Brown Incorporated.................................
Lehman Brothers Inc. .......................................
SG Cowen Securities Corporation.............................
----------
Total............................................. 20,000,000
==========
</TABLE>
------------------------
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional
3,000,000 shares from Amdocs and the selling shareholders to cover such sales.
They may exercise that option for 30 days. If any shares are purchased pursuant
to this option, the Underwriters will severally purchase shares in approximately
the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the Underwriters by Amdocs and the selling
shareholders, respectively. Such amounts are shown assuming both no exercise and
full exercise of the Underwriters' option to purchase additional shares.
<TABLE>
<CAPTION>
Paid by Amdocs
----------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.................................................. $ $
Total...................................................... $ $
Paid by the Selling
Shareholders
----------------------------
No Exercise Full Exercise
----------- -------------
Per Share.................................................. $ $
Total...................................................... $ $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus and will
be eligible for trading on the New York Stock Exchange. Any shares sold by the
Underwriters to securities dealers may be sold at a discount of up to
$ per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the Underwriters to certain other
brokers or dealers at a discount of up to $ per share from the initial
price to public. If all the shares are not sold at the initial price to public
the representatives may change the offering price and the other selling terms.
The Company and the selling shareholders have agreed with the Underwriters
not to dispose of or hedge any of their ordinary shares or securities
convertible into or exchangeable for ordinary shares during the period from the
date of this prospectus continuing through the date
U-1
<PAGE> 97
days after the date of this prospectus, except with the prior written consent of
the representatives. This agreement does not apply to any existing employee
benefit plans. See "Shares Eligible for Future Sale" for a discussion of certain
transfer restrictions.
In connection with the offering, the Underwriters may purchase and sell
ordinary shares in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater number of
shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the ordinary shares
while the offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the ordinary shares. As a result, the price of the
ordinary shares may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the New York
Stock Exchange or otherwise.
The Company will pay the expenses of the offering on behalf of the selling
shareholders, excluding underwriting discounts and commissions. The expenses of
the offering are estimated to be approximately $2.0 million.
The Company and the selling shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
Up to 10,000,000 additional ordinary shares (or up to 11,500,000 shares if
the applicable over-allotment option is exercised in full) may be delivered by
the TRACES Trust to holders of the Automatic Common Exchange Securities upon
exchange of the Automatic Common Exchange Securities on the Exchange Date (as
defined in the Trust Prospectus). In lieu of delivery of such shares, the TRACES
Trust shareholder may elect to pay cash or deliver other securities on the
Exchange Date for each ordinary share then deliverable in the amounts and under
the procedures described in the Trust Prospectus. The Automatic Common Exchange
Securities are being offered through an underwriter or underwriters in the
manner described in the Trust Prospectus. The respective closings of the
offerings of the ordinary shares and the Automatic Common Exchange Securities
are not dependent upon one another.
U-2
<PAGE> 98
The inside back cover page contains the following:
* Amdocs Logo with text and a graphical representation of the components of
Amdocs' "ADS(NG)/Family of Products". Text: ADS(NG)/Family of Products.
End-to-end family of products for publishers of Yellow Pages, White Pages and
Internet directories.
<PAGE> 99
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Enforcement of Civil Liabilities..... 3
Prospectus Summary................... 4
Risk Factors......................... 9
Use of Proceeds...................... 18
Market Prices and Dividend Policy.... 18
Selected Consolidated Financial
Information........................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 21
Business............................. 32
Management........................... 44
Certain Transactions................. 49
Principal and Selling Shareholders... 51
TRACES Shareholders.................. 53
Description of Share Capital......... 54
Comparison of United States and
Guernsey Corporate Law............. 56
Shares Eligible for Future Sale...... 58
Taxation of the Company.............. 59
Taxation of Holders of Ordinary
Shares............................. 61
Legal Matters........................ 64
Experts.............................. 64
Where You Can Find
More Information................... 64
Forward-Looking Statements........... 64
Index to Financial Statements........ F-1
Underwriting......................... U-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
20,000,000 Shares
AMDOCS LIMITED
Ordinary Shares
------------------------
LOGO
------------------------
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
BANCBOSTON ROBERTSON
STEPHENS
DEUTSCHE BANC ALEX. BROWN
LEHMAN BROTHERS
SG COWEN
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 100
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
[ALTERNATE PAGE FOR TRUST PROSPECTUS]
Subject to Completion. Dated June 7, 1999.
10,000,000 Shares
AMDOCS LIMITED
Ordinary Shares
LOGO
----------------------
This prospectus relates to up to 10,000,000 ordinary shares (or up to
11,500,000 ordinary shares if the underwriters' over-allotment option is
exercised in full) beneficially owned by the Amdocs Automatic Common Exchange
Security Trust (the "TRACES Trust") shareholder named in this prospectus that
may be delivered by the TRACES Trust to holders of Automatic Common Exchange
Securities of the TRACES Trust upon exchange of such securities on the Exchange
Date as defined in the attached prospectus of the TRACES Trust (the "Trust
Prospectus"). The Automatic Common Exchange Securities are being sold by the
TRACES Trust in an offering described in the attached Trust Prospectus. See
"Trust Prospectus".
In addition, Amdocs and several of our shareholders are offering for sale
up to an aggregate 20,000,000 ordinary shares (or up to 23,000,000 ordinary
shares if the underwriters' over-allotment option is exercised in full) directly
to the public pursuant to a separate prospectus. Of the 20,000,000 ordinary
shares being offered in that offering, 2,000,000 shares are being offered by
Amdocs and 18,000,000 shares are being offered by the selling shareholders. The
respective closings of the offerings of the Automatic Common Exchange Securities
and the ordinary shares are not dependent upon one another.
Amdocs will not receive any proceeds from the sale of the Automatic Common
Exchange Securities by the TRACES Trust or the sale of the ordinary shares by
our selling shareholders.
The ordinary shares are listed on the New York Stock Exchange under the
symbol "DOX." The last reported sale price of our ordinary shares on June 3,
1999 was $22.88 per share.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
GOLDMAN, SACHS & CO.
DEUTSCHE BANC ALEX. BROWN
LEHMAN BROTHERS
----------------------
Prospectus dated , 1999.
<PAGE> 101
[ALTERNATE PAGE FOR TRUST PROSPECTUS]
PLAN OF DISTRIBUTION
The Automatic Common Exchange Securities will be distributed as described
in the Trust Prospectus under the caption "Underwriting". Some of the
underwriters and their affiliates have provided, are currently providing, and
expect to provide in the future, commercial and investment banking services to
us for which they have received and will receive fees and commissions.
TRUST PROSPECTUS
The Automatic Common Exchange Securities are being offered pursuant to the
Trust Prospectus. This prospectus relates only to the ordinary shares that may
be delivered upon exchange of the Automatic Common Exchange Securities. We take
no responsibility for any information included in or omitted from the Trust
Prospectus. The Trust Prospectus does not constitute a part of this prospectus
nor is it incorporated by reference herein.
A-65
<PAGE> 102
[ALTERNATE COVER FOR TRUST PROSPECTUS]
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Enforcement of Civil Liabilities.... 3
Prospectus Summary.................. 4
Risk Factors........................ 9
Use of Proceeds..................... 18
Market Prices and Dividend Policy... 18
Selected Consolidated Financial
Information....................... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 21
Business............................ 32
Management.......................... 44
Certain Transactions................ 49
Principal and Selling
Shareholders...................... 51
TRACES Shareholders................. 53
Description of Share Capital........ 54
Comparison of United States and
Guernsey Corporate Law............ 56
Shares Eligible for Future Sale..... 58
Taxation of the Company............. 59
Taxation of Holders of Ordinary
Shares............................ 61
Legal Matters....................... 64
Experts............................. 64
Where You Can Find More
Information....................... 64
Forward-Looking Statements.......... 64
Plan of Distribution................ 65
Trust Prospectus.................... 65
Index to Financial Statements....... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
10,000,000 Shares
AMDOCS LIMITED
Ordinary Shares
------------------------
LOGO
------------------------
GOLDMAN, SACHS & CO.
DEUTSCHE BANC ALEX. BROWN
LEHMAN BROTHERS
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be paid by Amdocs in
connection with the issuance and distribution of the securities being
registered. All amounts shown are estimates except for amounts of filing and
listing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 226,914
New York Stock Exchange listing fee......................... 36,900
National Association of Securities Dealers fee.............. 30,500
Legal fees and expenses..................................... 640,000
Registrar and Transfer Agent fees and expenses.............. 3,500
Accounting fees and expenses................................ 290,000
Printing, EDGAR formatting and mailing expenses............. 420,000
Miscellaneous............................................... 352,186
----------
Total............................................. $2,000,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under our Articles of Association, we are obligated to indemnify any person
who is made or threatened to be made a party to a legal or administrative
proceeding by virtue of being a director, officer or agent of Amdocs, provided
that we have no such obligation to indemnify any such persons for any claims
they incur or sustain by or through their own willful act or default.
We have entered into an indemnity agreement with our directors and some of
our officers, under which we have agreed to pay the indemnified party the amount
of Loss (as defined therein) suffered by that party due to claims made against
that party for a Wrongful Act (as defined therein).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in reverse chronological order below is certain information
regarding the number of ordinary shares or other securities issued, or options
granted, by the Registrant, since May 6, 1996 that have not been registered
under the Securities Act.
(a) Issuances of Share Capital
On March 30, 1998, Welsh, Carson, Anderson & Stowe VII, L.P., Welsh,
Carson, Anderson & Stowe VI. L.P., WCAS Information Partners, L.P. and certain
other investors purchased a total of 51,507,716 ordinary shares for an aggregate
purchase price of $99.1 million. Such number of ordinary shares and all other
share figures set forth in this Item give effect to a recapitalization of
Amdocs' share capital which was effected prior to the June 19, 1998 public
offering.
On September 28, 1997, a trust for the benefit of certain employees of
Amdocs purchased 5,720,000 ordinary shares for an aggregate purchase price of
$31.6 million.
On September 22, 1997, Welsh, Carson, Anderson & Stowe VII, L.P., Welsh,
Carson, Anderson & Stowe VI. L.P., and certain other investors purchased
11,072,308 ordinary shares for an aggregate purchase price of $61.2 million and
$3.27 million in principal amount of Amdocs' junior promissory notes.
(b) Option Grants
II-1
<PAGE> 104
From January 1998 through March 31, 1999, Amdocs granted options to
directors, employees and consultants to purchase an aggregate of 4,231,214
ordinary shares at a weighted average exercise price of $6.03 per share. The
options vest ratably over a period of three to eight years commencing from the
date of grant. As of March 31, 1999 none of those options were exercisable.
No underwriters were engaged in connection with any of the foregoing sales
of securities. The securities issued in the above transactions were offered and
sold in reliance upon the exemption from registration under Section 4(2) of the
Securities Act or Regulation D or Regulation S promulgated under the Securities
Act, relative to sales by an issuer not involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
**1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Association of Amdocs
Limited (Exhibit 3.1 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration No. 333-8826)
3.2 Memorandum of Association of Amdocs Limited (Exhibit 3.2 to
Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826)
4.1 Specimen certificate for the ordinary shares of the
Registrant (Exhibit 4.1 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration Number 333-8826)
4.2 Stock Option and Incentive Plan, as amended, of Amdocs
(Exhibit 4.2 to Amdocs' Registration Statement on Form F-1
dated June 19, 1998; Registration No. 333-8826)
4.3 Note Purchase Agreement, dated as of September 22, 1997,
among European Software Marketing Ltd., WCAS Capital
Partners III, L.P., as Agent, and the several Purchasers
named in Schedule 1 thereto (Exhibit 4.3 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826)
*4.4 Amended and Restated Credit Agreement, dated as of June
29,1998, among European Software Marketing Limited, the
other subsidiaries of Amdocs named therein, the Initial
Lenders, Initial Issuing Bank and Swing Line Bank named
therein, and NationsBank, N.A., as Administrative Agent and
the Bank of Nova Scotia, as Syndication Agent
4.5 Share Subscription Agreement, dated as of September 22,
1997, among the several Investors named therein and Amdocs
(Exhibit 4.5 to Amdocs' Registration Statement on Form F-1
dated June 19, 1998; Registration No. 333-8826)
4.6 Conditional Investment Agreement, dated as of September 22,
1997, among the several Investors named therein and Amdocs
(Exhibit 4.6 to Amdocs' Registration Statement on Form F-1
dated June 19, 1998; Registration No. 333-8826)
4.7 Letter Agreement, dated September 22, 1997, as amended as of
May 20, 1998, between Amdocs and Welsh, Carson, Anderson and
Stowe, on behalf of the Investors named therein (Exhibit 4.7
to Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826)
</TABLE>
II-2
<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
4.8 Letter of Understanding, dated September 22, 1997, between
Amdocs and Welsh, Carson, Anderson and Stowe, on behalf of
the Investors named therein (Exhibit 4.8 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826)
4.9 Shareholders Agreement, Summary of Terms, dated September
22, 1997 (Exhibit 4.9 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration No. 333-8826)
4.10 Certain proxies executed by investment partnerships
affiliated with Welsh, Carson, Anderson and Stowe and
certain other entities in favor of Conbond Holding Company
Ltd. (Exhibit 4.10 to Amdocs' Registration Statement on Form
F-1 dated June 19, 1998; Registration No. 333-8826)
*5.1 Opinion of Carey Langlois
10.1 Agreement No. C303410 for Joint Development and Marketing
between Southwestern Bell Telephone Company and Amdocs, Inc.
dated as of June 19, 1991, as amended(Exhibit 10.1 to
Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.2 General Agreement No. CGA0450 for Support Services effective
as of January 1, 1994 Southwestern Bell Telephone Company
and Amdocs, Inc.(Exhibit 10.2 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
10.3 Marketing and License Agreement between Southwestern Bell
Yellow Pages, Inc. and Amdocs, Inc. dated as of May 18,
1990, as amended(Exhibit 10.3 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
10.4 Joint Development Agreement between Southwestern Bell Mobile
Systems, Inc. and Amdocs, Inc., signed by the parties on
March 15, 1994 and March 31, 1994, respectively(Exhibit 10.4
to Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.5 Marketing Rights Agreement between Southwestern Bell Mobile
Systems, Inc. and Canadian Directory Technology Limited,
signed by the parties on March 14, 1994 and April 5, 1994,
respectively, as amended(Exhibit 10.5 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826).
10.6 Letter of Agreement between Southwestern Bell Mobile
Systems, Inc. and Canadian Directory Technology Limited
dated July 22, 1996 and signed on July 25, 1995(Exhibit 10.3
to Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.7 Development Agreement between Southwestern Bell
Communications Services, Inc. and Amdocs, Inc. dated as of
February 15, 1996(Exhibit 10.7 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
10.8 Marketing Rights Agreement between Southwestern Bell
Communications Services, Inc. and Canadian Directory
Technology Limited effective as of February 15, 1996, as
amended(Exhibit 10.8 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration No. 333-8826).
10.9 License and Maintenance Services Agreement between
GoldenLines Limited and Amdocs (UK) Limited, dated as of
November 15, 1996(Exhibit 10.9 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
</TABLE>
II-3
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.10 Customization and Support Services Agreement between
GoldenLines Limited and P.S. Publishing System Limited,
dated as of November 15, 1996(Exhibit 10.10 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826).
10.11 IT Services Provision Agreement between Pacific Access & Pty
Ltd., as agent for Telstra Corporation Limited, and Amdocs
(USA), Inc., dated as of May 7, 1998(Exhibit 10.11 to
Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.12 Guarantee and Indemnity between Amdocs Limited, as
Guarantor, and Pacific Access Pty Ltd., as Beneficiary,
dated as of May 7, 1995(Exhibit 10.12 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826).
**+10.13 Master Agreement No. 99006220 for Software and Services
between Amdocs, Inc. and SBC Operations, Inc. (effective
July 7, 1998), dated March 1999.
21.1 Subsidiaries of the Registrant (Exhibit 21.1 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826)
*23.1 Consent of Ernst & Young LLP, independent auditors.
*23.2 Consent of Carey Langlois (included in Exhibit 5.1).
**24.1 Powers of Attorney.
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
+ Confidential material redacted and complete exhibit has been separately filed
with the Securities and Exchange Commission.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, ordinary shares in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-4
<PAGE> 107
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York, State of New
York, on this 7th day of June, 1999.
AMDOCS LIMITED
By: /s/ BRUCE K. ANDERSON
------------------------------------
Bruce K. Anderson
Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<C> <S> <C>
/s/ BRUCE K. ANDERSON Chairman of the Board and Chief Executive June 7, 1999
- --------------------------------------- Officer
Bruce K. Anderson (Principal Executive Officer)
* Director and Chief June 7, 1999
- --------------------------------------- Financial Officer (Principal Financial and
Robert A. Minicucci Accounting Officer)
* Director June 7, 1999
- ---------------------------------------
Adrian Gardner
* Director June 7, 1999
- ---------------------------------------
Stephen Hermer
* Director June 7, 1999
- ---------------------------------------
James Kahan
* Director June 7, 1999
- ---------------------------------------
Paz Littman
* Director June 7, 1999
- ---------------------------------------
Avinoam Naor
* Director June 7, 1999
- ---------------------------------------
Revital Naveh
* Director June 7, 1999
- ---------------------------------------
Lawrence Perlman
Director
- ---------------------------------------
Michael J. Price
Director
- ---------------------------------------
Urs Suter
* Amdocs Limited's Authorized June 7, 1999
- --------------------------------------- Representative in the United States
Thomas G. O'Brien
</TABLE>
- ---------------
*By: /s/ BRUCE K. ANDERSON
--------------------------------------
Bruce K. Anderson
Attorney-in-Fact
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
**1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Association of Amdocs
Limited (Exhibit 3.1 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration No. 333-8826)
3.2 Memorandum of Association of Amdocs Limited (Exhibit 3.2 to
Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826)
4.1 Specimen certificate for the ordinary shares of the
Registrant (Exhibit 4.1 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration Number 333-8826)
4.2 Stock Option and Incentive Plan, as amended, of Amdocs
(Exhibit 4.2 to Amdocs' Registration Statement on Form F-1
dated June 19, 1998; Registration No. 333-8826)
4.3 Note Purchase Agreement, dated as of September 22, 1997,
among European Software Marketing Ltd., WCAS Capital
Partners III, L.P., as Agent, and the several Purchasers
named in Schedule 1 thereto (Exhibit 4.3 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826)
*4.4 Amended and Restated Credit Agreement, dated as of June 29,
1998, among European Software Marketing Limited, the other
subsidiaries of Amdocs named therein, the Initial Lenders,
Initial Issuing Bank and Swing Line Bank named therein, and
NationsBank, N.A., as Administrative Agent, and the Bank of
Nova Scotia, as Syndication Agent
4.5 Share Subscription Agreement, dated as of September 22,
1997, among the several Investors named therein and Amdocs
(Exhibit 4.5 to Amdocs' Registration Statement on Form F-1
dated June 19, 1998; Registration No. 333-8826)
4.6 Conditional Investment Agreement, dated as of September 22,
1997, among the several Investors named therein and Amdocs
(Exhibit 4.6 to Amdocs' Registration Statement on Form F-1
dated June 19, 1998; Registration No. 333-8826)
4.7 Letter Agreement, dated September 22, 1997, as amended as of
May 20, 1998, between Amdocs and Welsh, Carson, Anderson and
Stowe, on behalf of the Investors named therein (Exhibit 4.7
to Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826)
4.8 Letter of Understanding, dated September 22, 1997, between
Amdocs and Welsh, Carson, Anderson and Stowe, on behalf of
the Investors named therein (Exhibit 4.8 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826)
4.9 Shareholders Agreement, Summary of Terms, dated September
22, 1997 (Exhibit 4.9 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration No. 333-8826)
4.10 Certain proxies executed by investment partnerships
affiliated with Welsh, Carson, Anderson and Stowe and
certain other entities in favor of Conbond Holding Company
Ltd. (Exhibit 4.10 to Amdocs' Registration Statement on Form
F-1 dated June 19, 1998; Registration No. 333-8826)
*5.1 Opinion of Carey Langlois
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.1 Agreement No. C303410 for Joint Development and Marketing
between Southwestern Bell Telephone Company and Amdocs, Inc.
dated as of June 19, 1991, as amended(Exhibit 10.1 to
Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.2 General Agreement No. CGA0450 for Support Services effective
as of January 1, 1994 Southwestern Bell Telephone Company
and Amdocs, Inc.(Exhibit 10.2 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
10.3 Marketing and License Agreement between Southwestern Bell
Yellow Pages, Inc. and Amdocs, Inc. dated as of May 18,
1990, as amended(Exhibit 10.3 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
10.4 Joint Development Agreement between Southwestern Bell Mobile
Systems, Inc. and Amdocs, Inc., signed by the parties on
March 15, 1994 and March 31, 1994, respectively(Exhibit 10.4
to Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.5 Marketing Rights Agreement between Southwestern Bell Mobile
Systems, Inc. and Canadian Directory Technology Limited,
signed by the parties on March 14, 1994 and April 5, 1994,
respectively, as amended(Exhibit 10.5 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826).
10.6 Letter of Agreement between Southwestern Bell Mobile
Systems, Inc. and Canadian Directory Technology Limited
dated July 22, 1996 and signed on July 25, 1995(Exhibit 10.3
to Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.7 Development Agreement between Southwestern Bell
Communications Services, Inc. and Amdocs, Inc. dated as of
February 15, 1996(Exhibit 10.7 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
10.8 Marketing Rights Agreement between Southwestern Bell
Communications Services, Inc. and Canadian Directory
Technology Limited effective as of February 15, 1996, as
amended(Exhibit 10.8 to Amdocs' Registration Statement on
Form F-1 dated June 19, 1998; Registration No. 333-8826).
10.9 License and Maintenance Services Agreement between
GoldenLines Limited and Amdocs (UK) Limited, dated as of
November 15, 1996(Exhibit 10.9 to Amdocs' Registration
Statement on Form F-1 dated June 19, 1998; Registration No.
333-8826).
10.10 Customization and Support Services Agreement between
GoldenLines Limited and P.S. Publishing System Limited,
dated as of November 15, 1996(Exhibit 10.10 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826).
10.11 IT Services Provision Agreement between Pacific Access & Pty
Ltd., as agent for Telstra Corporation Limited, and Amdocs
(USA), Inc., dated as of May 7, 1998(Exhibit 10.11 to
Amdocs' Registration Statement on Form F-1 dated June 19,
1998; Registration No. 333-8826).
10.12 Guarantee and Indemnity between Amdocs Limited, as
Guarantor, and Pacific Access Pty Ltd., as Beneficiary,
dated as of May 7, 1995(Exhibit 10.12 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826).
**+10.13 Master Agreement No. 99006220 for Software and Services
between Amdocs, Inc. and SBC Operations, Inc. (effective
July 7, 1998), dated March 1999.
21.1 Subsidiaries of the Registrant (Exhibit 21-1 to Amdocs'
Registration Statement on Form F-1 dated June 19, 1998;
Registration No. 333-8826).
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
*23.1 Consent of Ernst & Young LLP, independent auditors.
*23.2 Consent of Carey Langlois (included in Exhibit 5.1).
**24.1 Powers of Attorney.
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
+ Confidential material redacted and complete exhibit has been separately filed
with the Securities and Exchange Commission.
<PAGE> 1
$120,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 29, 1998
Among
EUROPEAN SOFTWARE MARKETING LTD.
AMDOCS (U.K.) LTD.
AMDOCS, INC.
CANADIAN DIRECTORY TECHNOLOGY LTD.
AMDOCS (USA), INC.
as Borrowers
and
THE INITIAL LENDERS, INITIAL ISSUING BANK AND
SWING LINE BANK NAMED HEREIN
as Initial Lenders, Initial Issuing Bank and Swing Line Bank
and
NATIONSBANK, N.A.
as Administrative Agent
and
THE BANK OF NOVA SCOTIA
as Syndication Agent
<PAGE> 2
<TABLE>
<CAPTION>
SECTION PAGE
T A B L E O F C O N T E N T S
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
1.01. Certain Defined Terms ..................................................... 1
1.02. Computation of Time Periods ............................................... 17
1.03. Accounting Principles ..................................................... 18
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT
2.01. The Advances .............................................................. 18
2.02. Making the Advances ....................................................... 19
2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit ........ 21
2.04. Repayment of Advances ..................................................... 22
2.05. Termination or Reduction of the Commitments ............................... 23
2.06. Prepayments ............................................................... 24
2.07. Interest .................................................................. 25
2.08. Fees ...................................................................... 26
2.09. Conversion of Advances .................................................... 26
2.10. Increased Costs, Etc ...................................................... 27
2.11. Payments and Computations ................................................. 28
2.12. Taxes ..................................................................... 30
2.13. Sharing of Payments, Etc .................................................. 32
2.14. Use of Proceeds ........................................................... 33
2.15. Defaulting Lenders ........................................................ 33
SECTION 2.16. Increase in the Aggregate Commitments ............................. 35
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit ....................... 36
3.02. Conditions Precedent to Each Borrowing and Issuance ....................... 39
3.03. Determinations Under Section 3.01 ......................................... 40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrowers ........................... 40
</TABLE>
<PAGE> 3
ii
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE V
COVENANTS OF THE BORROWERS
<S> <C>
5.01. Affirmative Covenants ...................................................... 45
5.02. Negative Covenants ......................................................... 48
5.03. Reporting Requirements ..................................................... 56
5.04. Financial Covenants ........................................................ 58
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default ......................................................... 58
6.02. Actions in Respect of the Letters of Credit upon Default .................. 61
ARTICLE VII
ESM GUARANTY
SECTION 7.01. Guaranty .......................................................... 61
SECTION 7.02. Guaranty Absolute ................................................. 61
SECTION 7.03. Waiver ............................................................ 62
SECTION 7.04. Continuing Guaranty; Assignments .................................. 62
SECTION 7.05. Subrogation ....................................................... 62
ARTICLE VIII
THE AGENTS
8.01. Authorization and Action .................................................. 63
8.02. Administrative Agent's Reliance, Etc ...................................... 64
8.03. NationsBank and Affiliates ................................................ 64
8.04. Lender Party Credit Decision .............................................. 64
8.05. Indemnification ........................................................... 65
8.06. Successor Administrative Agent ............................................ 66
8.07. Defaults .................................................................. 67
ARTICLE IX
MISCELLANEOUS
9.01. Amendments, Etc ........................................................... 67
9.02. Notices, Etc .............................................................. 67
9.03. No Waiver; Remedies ....................................................... 68
9.04. Costs and Expenses ........................................................ 68
9.05. Right of Set-off .......................................................... 69
</TABLE>
<PAGE> 4
iii
<TABLE>
<CAPTION>
<S> <C>
9.06. Binding Effect ............................................................ 70
9.07. Assignments and Participations ............................................ 70
9.08. Execution in Counterparts ................................................. 72
9.09. No Liability of the Issuing Bank .......................................... 72
9.10. Confidentiality ........................................................... 73
9.11. Governing Law ............................................................. 73
9.12. Jurisdiction, Etc. ........................................................ 73
9.13. Judgment .................................................................. 74
9.14. Waiver of Jury Trial ...................................................... 75
</TABLE>
SCHEDULES
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Borrowers' Accounts
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(s) - Open Years
Schedule 4.01(y) - Existing Debt
Schedule 4.01(z) - Surviving Debt
Schedule 4.01(aa) - Owned Real Property
Schedule 4.01(bb) - Leased Real Property
Schedule 4.01(cc) - Investments
Schedule 4.01(dd) - Intellectual Property
Schedule 5.02(a) - Existing Liens
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement Supplement
Exhibit E - Form of Amendment to Deed of Charge over Shares
Exhibit F - Form of Consent to Guaranty of US Loan Parties
Exhibit G - Form of Consent to Guaranty of Non-US Loan Parties
Exhibit H - Form of Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol
Exhibit I-1 - Form of Opinion of Carey Langlois
Exhibit I-2 - Form of Opinion of Frere Cholmeley Bischoff
Exhibit J - Form of Opinion of Blackwell Sanders Peper Martin
Exhibit K - Form of Confidentiality Agreement
</TABLE>
<PAGE> 5
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 29,
1998 among European Software Marketing Ltd., a Guernsey company ("ESM"), Amdocs
(U.K.) Ltd., a corporation organized under the laws of England and Wales
("Amdocs UK"), Amdocs, Inc., a Delaware corporation ("Amdocs Inc."), Canadian
Directory Technology Ltd., a Delaware corporation ("CADET"), and Amdocs (USA),
Inc., a Delaware corporation ("Amdocs USA") (ESM, Amdocs UK, Amdocs Inc., CADET
and Amdocs USA are collectively the "Borrowers"), the banks, financial
institutions and other institutional lenders listed on the signature pages
hereof as the Initial Lenders (the "Initial Lenders"), the Initial Issuing Bank
(the "Initial Issuing Bank") and the Swing Line Bank (as hereinafter defined)
and NationsBank, N.A. ("NationsBank"), as administrative agent (together with
any successor appointed pursuant to Article VII, the "Administrative Agent"),
The Bank of Nova Scotia, as syndication agent, and The Industrial Bank of Japan,
Limited, as documentation agent, for the Lender Parties (as hereinafter
defined).
PRELIMINARY STATEMENT. The Existing Lenders (as hereinafter
defined) party to the Existing Credit Agreement (as hereinafter defined) and the
Borrowers have agreed to amend and restate the Existing Credit Agreement in
order to increase the Revolving Credit Commitments (as hereinafter defined) of
the Lender Parties and to amend certain of the covenants. The Lender Parties
have indicated their willingness to agree to amend and restate the Existing
Credit Agreement and to lend such amounts on the terms and conditions of this
Agreement.
NOW THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent with
NationsBank at its office at 901 Main Street, 14th Floor, Dallas, Texas
75202, Account No. 129-2000-883, Attention: Molly Oxford.
"Advance" means a Revolving Credit Advance, a Swing Line
Advance or a Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling," "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Agents" means the Administrative Agent, The Bank of Nova
Scotia in its capacity as syndication agent and The Industrial Bank of
Japan, Limited in its capacity as documentation agent.
<PAGE> 6
2
"Amdocs Inc." has the meaning specified in the recital of
parties to this Agreement.
"Amdocs (Israel)" means Amdocs (Israel) Limited, a corporation
organized under the laws of Israel.
"Amdocs UK" has the meaning specified in the recital of
parties to this Agreement.
"Amdocs USA" has the meaning specified in the recital of
parties to this Agreement.
"Annualized Interest Expense" means (a) for determination on
September 30, 1998, Interest Expense for the fiscal quarter most
recently ended multiplied by four; (b) for determination on December
31, 1998, Interest Expense for the two fiscal quarters most recently
ended multiplied by two; (c) for determination on March 31, 1999,
Interest Expense for the three fiscal quarters most recently ended
multiplied by 4/3; and (d) for determination on the last day of any
fiscal quarter ending on or after June 30, 1999, Interest Expense for
the four fiscal quarters most recently ended.
"Applicable Lending Office" means, with respect to each Lender
Party, such Lender Party's Domestic Lending Office in the case of a
Base Rate Advance and such Lender Party's Eurodollar Lending Office in
the case of a Eurodollar Rate Advance.
"Applicable Margin" means a percentage per annum determined by
reference to the Leverage Ratio as set forth below:
<TABLE>
<CAPTION>
Leverage Base Rate Advances Eurodollar Rate
Ratio Advances
----- --------
<S> <C> <C>
Level I 0.00% 0.50%
Leverage Ratio is 1.0:1.0 or less
Level II 0.00% 0.75%
Leverage Ratio is 1.5:1.0 or less and
greater than 1.0:1.
Level III 0.00% 1.00%
Leverage Ratio is 2.0:1.0 or less and
greater than 1.5:1.0
Level IV 0.25% 1.25%
Leverage Ratio is 2.25:1.0 or less
and greater than 2.0:1.0
Level V 0.50% 1.50%
Leverage Ratio greater than 2.25:1.0
</TABLE>
The Applicable Margin for each Advance shall be determined by reference
to the applicable Leverage Ratio in effect from time to time; provided,
however, that (A) until the end of the fiscal quarter ending September
30, 1998, the Applicable Margin shall be 0.875% for Eurodollar Rate
Advances and 0% for Base Rate Advances, (B) no change in the Applicable
Margin shall be effective until three Business Days after the date on
which the Administrative Agent receives financial statements pursuant
to Section 5.03(b) or (c) and a certificate of the chief financial
officer of ESM demonstrating the Leverage Ratio, (C) if ESM
<PAGE> 7
3
has not submitted to the Administrative Agent the information described
in clause (B) of this proviso as and when required under Section
5.03(b) or (c), as the case may be, the Applicable Margin shall be at
Level V for so long as such information has not been received by the
Administrative Agent.
"Applicable Percentage" means a percentage per annum
determined by reference to the Leverage Ratio as set forth below:
<TABLE>
<CAPTION>
Leverage Ratio Applicable Percentage
-------------- ---------------------
<S> <C>
Level I 0.250%
Leverage Ratio is 1.0:1.0 or less
Level II 0.250%
Leverage Ratio is 1.5:1.0 or less and greater than
1.0:1.0
Level III 0.275%
Leverage Ratio is 2.0:1.0 or less and greater than
1.5:1.0
Level IV 0.325%
Leverage Ratio is 2.25:1.0 or less and greater than
2.0:1.0
Level V 0.375%
Leverage Ratio greater than 2.25:1.0
</TABLE>
The Applicable Percentage shall be determined by reference to the
Leverage Ratio in effect from time to time; provided, however, that (A)
until the end of the fiscal quarter ending September 30, 1998, the
Applicable Percentage shall be as set forth opposite Level III above,
(B) no change in the Applicable Percentage shall be effective until
three Business Days after the date on which the Administrative Agent
receives financial statements pursuant to Section 5.03(b) or (c) and a
certificate of the chief financial officer of ESM demonstrating the
Leverage Ratio and (C) if ESM has not submitted to the Administrative
Agent the information described in clause (B) of this proviso as and
when required under Section 5.03(b) or (c), as the case may be, the
Applicable Percentage shall be at Level V for so long as such
information has not been received by the Administrative Agent.
"Appropriate Lender" means, at any time, with respect to (a)
the Revolving Credit Facility, a Lender that has a Commitment with
respect to such Facility at such time, (b) the Letter of Credit
Facility, (i) the Issuing Bank and (ii) if the other Lenders have made
Letter of Credit Advances pursuant to Section 2.03(c) that are
outstanding at such time, each such other Lender and (c) the Swing Line
Facility, (i) the Swing Line Bank and (ii) if the other Lenders have
made Swing Line Advances pursuant to Section 2.02(b) that are
outstanding at such time, each such other Lender.
"Arranger" means NationsBanc Montgomery Securities LLC.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender Party and an Eligible Assignee, and accepted
by the Administrative Agent, in accordance with Section 9.07 and in
substantially the form of Exhibit C hereto.
"Assuming Lender" has the meaning specified in Section
2.16(d).
<PAGE> 8
4
"Assumption Agreement" has the meaning specified in Section
2.16(d)(ii).
"Available Amount" of any Letter of Credit means, at any time,
the maximum amount available to be drawn under such Letter of Credit at
such time (assuming compliance at such time with all conditions to
drawing).
"Bank Hedge Agreement" means any interest rate Hedge Agreement
permitted under Article V that is entered into by and between any
Borrower and any Hedge Bank.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the higher of:
(a) the rate of interest most recently announced
publicly by NationsBank in Charlotte, North Carolina, as its
prime rate (which rate may not be the lowest rate of interest
charged by it to its customers); and
(b) 1/2 of one percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.07(b)(i).
"Borrower's Account" means, with respect to any Borrower, the
account of such Borrower maintained by such Borrower with NationsBank
at its office at 901 Main Street, 14th Floor, Dallas, Texas 75202, as
set forth opposite the name of such Borrower on Schedule II.
"Borrowers" has the meaning specified in the recital of
parties to this Agreement.
"Borrowing" means a Revolving Credit Borrowing or a Swing Line
Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in Dallas, Texas or New York,
New York and, if the applicable Business Day relates to any Eurodollar
Rate Advances, on which dealings are carried on in the London interbank
market.
"CADET" has the meaning specified in the recital of parties to
this Agreement.
"Capital Expenditures" means, without duplication, the
following, calculated on a Consolidated basis for Limited and its
Subsidiaries in accordance with GAAP: (a) the gross amount of
expenditures for fixed or capital assets (excluding such assets
acquired in connection with normal replacement and maintenance
programs) determined in accordance with GAAP, plus (b) the aggregate
amount of all monetary Obligations under Capitalized Leases to the
extent required to be capitalized in accordance with GAAP. For purposes
of this definition, the purchase price of equipment that is purchased
simultaneously with the trade-in of existing equipment or with
insurance proceeds shall be included in Capital Expenditures only to
the extent of the gross amount of such purchase price less the credit
granted by the seller of such equipment for the equipment being traded
in at such time or the amount of such proceeds, as the case may be.
"Capitalized Leases" means all leases that have been (or in
accordance with GAAP are required to be) recorded as capitalized
leases.
"Cash Collateral Account" has the meaning specified in the
Security Agreement.
<PAGE> 9
5
"Cash Equivalents" means any of the following, to the extent
owned free and clear of all Liens other than Liens created under the
Collateral Documents and having a maturity of not greater than 90 days
from the date of issuance thereof: (a) readily marketable direct
obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by
the full faith and credit of the Government of the United States, (b)
insured certificates of deposit of or time deposits with any commercial
bank that is (x) a Lender Party, (y) a member of the Federal Reserve
System or a bank organized in the United Kingdom or Israel that issues
(or the parent of which issues) commercial paper rated as described in
clause (c), and has combined capital and surplus of at least $1 billion
or (z) First International Bank of Israel, (c) commercial paper in an
aggregate amount of no more than $2,500,000 per issuer outstanding at
any time, issued by any corporation organized under the laws of any
State of the United States and rated at least "Prime-1" (or the then
equivalent grade) by Moody's Investors Service, Inc. or "A-1" (or the
then equivalent grade) by Standard & Poor's Ratings Group or (d) any
other cash equivalent agreed to in writing between the Borrowers and
the Administrative Agent.
"Collateral" means all "Collateral" referred to in the
Collateral Documents and all other property that is or is purported to
be subject to any Lien in favor of the Administrative Agent for the
benefit of the Secured Parties pursuant to the Collateral Documents.
"Collateral Documents" means the Security Agreement, the Deed
of Charge over Shares and any other agreement that creates or purports
to create a Lien in favor of the Administrative Agent for the benefit
of the Secured Parties.
"Commitment" means a Revolving Credit Commitment or a Letter
of Credit Commitment.
"Confidential Information" means information furnished by or
on behalf of the Borrowers (whether prepared by any Borrower, its
representatives or otherwise) to the Administrative Agent or any Lender
Party under circumstances where such information would reasonably be
anticipated to be confidential, excluding any such information (a) that
is or becomes generally available to the public other than as a result
of a breach by the Administrative Agent or any Lender Party of its
obligations hereunder or (b) that is or becomes available to the
Administrative Agent or such Lender Party from a source other than a
Borrower and the Administrative Agent or such Lender Party should not
reasonably know that such source is in breach of any confidentiality
obligations owed to any Loan Party.
"Consolidated" refers to the consolidation of accounts of
Limited and its Subsidiaries in accordance with GAAP.
"Consolidating" financial statements of Limited and its
Subsidiaries refers to the presentation of accounts of Limited, Amdocs
(Israel), Amdocs UK, Amdocs Inc., Amdocs USA and the other Consolidated
Subsidiaries of Limited (as a group).
"Conversion","Convert" and "Converted" each refer to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.09 or 2.10.
"CPIII" means WCAS Capital Partners III, L.P., a Delaware
limited partnership.
"Current Assets" of any Person means all assets of such Person
that would, in accordance with GAAP, be classified as current assets of
a company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a
reserve is required in accordance with GAAP.
<PAGE> 10
6
"Current Liabilities" of any Person means (a) all Debt of such
Person that by its terms is payable on demand or matures within one
year after the date of determination (excluding any Debt renewable or
extendible, at the option of such Person, to a date more than one year
from such date or Debt arising under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during
a period of more than one year from such date) in accordance with GAAP
and (b) all other items (including taxes accrued as estimated) that in
accordance with GAAP would be classified as current liabilities of such
Person.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of
such Person for the deferred purchase price of property or services
(other than accrued expenses or payables not overdue by more than 90
days incurred in the ordinary course of such Person's business), (c)
all Obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all Obligations of such Person created
or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such
property), (e) all Obligations (determined in accordance with GAAP) of
such Person as lessee under Capitalized Leases, (f) all Obligations,
contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all Obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in
respect of any capital stock of or other ownership or profit interest
in such Person or any other Person or any warrants, rights or options
to acquire such capital stock, valued, in the case of Redeemable
Preferred Stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all
Obligations of such Person in respect of Hedge Agreements, (i) all Debt
of others referred to in clauses (a) through (h) above or clause (j)
below guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through
an agreement (i) to pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(iii) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(iv) otherwise to assure a creditor against loss, and (j) all Debt
referred to in clauses (a) through (h) above of another Person secured
by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Debt.
"Deed of Charge over Shares" has the meaning specified in
Section 3.01(d)(vi).
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at
any time, the portion of any Advance required to be made by such Lender
Party to any Borrower pursuant to Section 2.01 or 2.02 at or prior to
such time which has not been made by such Lender Party or by the
Administrative Agent for the account of such Lender Party pursuant to
Section 2.02(e) as of such time. In the event that a portion of a
Defaulted Advance shall be deemed made pursuant to Section 2.15(a), the
remaining portion of such Defaulted Advance shall be considered a
Defaulted Advance originally required to be made pursuant to Section
2.01 on the same date as the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at
any time, any amount required to be paid by such Lender Party to the
Administrative Agent or any other Lender Party hereunder or under
<PAGE> 11
7
anyother Loan Document at or prior to such time which has not been so
paid as of such time, including, without limitation, any amount
required to be paid by such Lender Party to (a) the Swing Line Bank
pursuant to Section 2.02(b) to purchase a portion of a Swing Line
Advance made by the Swing Line Bank, (b) the Issuing Bank pursuant to
Section 2.03(c) to purchase a portion of a Letter of Credit Advance
made by the Issuing Bank, (c) the Administrative Agent pursuant to
Section 2.02(e) to reimburse the Administrative Agent for the amount of
any Advance made by the Administrative Agent for the account of such
Lender Party, (d) any other Lender Party pursuant to Section 2.13 to
purchase any participation in Advances owing to such other Lender Party
and (e) the Administrative Agent or the Issuing Bank pursuant to
Section 8.05 to reimburse the Administrative Agent or the Issuing Bank
for such Lender Party's ratable share of any amount required to be paid
by the Lender Parties to the Administrative Agent or the Issuing Bank
as provided therein. In the event that a portion of a Defaulted Amount
shall be deemed paid pursuant to Section 2.15(b), the remaining portion
of such Defaulted Amount shall be considered a Defaulted Amount
originally required to be paid hereunder or under any other Loan
Document on the same date as the Defaulted Amount so deemed paid in
part.
"Defaulting Lender" means, at any time, any Lender Party that,
at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b)
shall take any action or be the subject of any action or proceeding of
a type described in Section 6.01(f).
"Domestic Lending Office" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party,
as the case may be, or such other office of such Lender Party as such
Lender Party may from time to time specify to the Borrowers and the
Administrative Agent.
"EBITDA" means, for any period, the sum, determined on a
Consolidated basis of (a) net income (or net loss), (b) interest
expense, (c) income tax expense, (d) depreciation expense, (e)
amortization expense, (f) other non-cash charges (including any
non-cash charges incurred in connection with the transactions
contemplated by this Agreement), (g) non-recurring cash charges for
expenses related to the transactions contemplated by the Loan
Documents, minus (h) non-cash credits, in each case of Limited and its
Subsidiaries determined in accordance with GAAP for such period.
"Eligible Assignee" means (a) with respect to any Facility
(other than the Letter of Credit Facility), (i) a Lender; (ii) an
Affiliate of a Lender; and (iii) any other Person approved by the
Administrative Agent and, unless an Event of Default has occurred and
is continuing at the time any assignment is effected in accordance with
Section 9.07, ESM, such approval not to be unreasonably withheld or
delayed and (b) with respect to the Letter of Credit Facility, a Person
that is an Eligible Assignee under subclause (iii) of clause (a) of
this definition and is approved by the Administrative Agent and, unless
an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 9.07, ESM, such
approval not to be unreasonably withheld or delayed; provided, however,
that neither any Loan Party nor any Affiliate of a Loan Party shall
qualify as an Eligible Assignee under this definition.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, any Environmental Permit or Hazardous Material or arising from
alleged injury or threat to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or
other actions or damages and (b) by any governmental or regulatory
<PAGE> 12
8
authority or third party for damages, contribution, indemnification,
cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or
guidance relating to pollution or protection of the environment,
health, safety or natural resources, including, without limitation,
those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"Equity Investors" means Welsh, Carlson, Anderson & Stowe VII,
L.P., a Delaware limited partnership, and certain other affiliated
investors in the equity of Limited.
"ERISA"means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the controlled group of any Loan Party, or
under common control with any Loan Party, within the meaning of Section
414 of the Internal Revenue Code.
"ESM" has the meaning specified in the recital of parties to
this Agreement.
"Eurodollar Lending Office" means, with respect to any Lender
Party, the office of such Lender Party specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in the
Assignment and Acceptance pursuant to which it became a Lender Party
(or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender Party as such Lender Party may from
time to time specify to the Borrowers and the Administrative Agent.
"Eurodollar Rate" means, for the applicable Interest Period
for any Eurodollar Rate Advance comprising part of the same Borrowing,
an interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any
successor page) as the London interbank offered rate for deposits in
U.S. dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term
comparable to such Interest Period or, if for any reason such rate is
not available, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the
London interbank offered rate for deposits in U.S. dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is specified
on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to
the nearest 1/100 of 1%) by (b) a percentage equal to 100% minus the
Reserve Requirement for such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.07(b)(ii).
"Events of Default" has the meaning specified in Section 6.01.
<PAGE> 13
9
"Existing Credit Agreement" means the credit agreement dated
as of December 5, 1997 among the Borrowers (other than Amdocs USA), the
Existing Lenders, NationsBank of Texas, N.A., as administrative agent,
The Bank of Nova Scotia, as syndication agent, and The Industrial Bank
of Japan, Limited, as documentation agent, as amended as of January 6,
1998.
"Existing Debt" has the meaning specified in Section 4.01(y)
hereof.
"Existing Lenders" means the lenders party to the Existing
Credit Agreement.
"Facility" means the Revolving Credit Facility, the Swing Line
Facility or the Letter of Credit Facility.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Administrative Agent (in its individual capacity) on
such day on such transactions as determined by the Administrative
Agent.
"Fiscal Year" means a fiscal year of Limited and its
Consolidated Subsidiaries ending on September 30 in any calendar year.
"Funded Debt" of any Person means, on any date of
determination, the following, calculated on a Consolidated basis for
such Person and its Subsidiaries in accordance with GAAP: (a) all
obligations for borrowed money (whether as a direct obligation on a
promissory note, bond, zero coupon bond, debenture or other similar
instrument, as an unsatisfied reimbursement obligation on a drawn
letter of credit, as a guaranty (if payment on such obligation has been
demanded), or otherwise) plus (without duplication) (b) that portion of
all Capital Lease obligations required to be capitalized in accordance
with GAAP minus (c) cash and cash equivalents of such Person.
"GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board that
are applicable on the date of this Agreement, subject to changes
permitted by Section 1.03. "Guarantor" means ESM, Amdocs Inc., CADET,
Amdocs USA, Amdocs Services Inc., Sypress, Inc., Amdocs Japan Limited
and each other Person that shall become a guarantor in accordance with
Section 5.01(l).
"Guaranty" means the US Loan Party Guaranty or the Non-US Loan
Party Guaranty.
"Hazardous Materials" means (a) petroleum or petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
<PAGE> 14
10
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Hedge Bank" means any Lender Party or any of its Affiliates
in its capacity as a party to a Bank Hedge Agreement.
"Increase Date" has the meaning specified in Section 2.16(a).
"Indemnified Party" has the meaning specified in Section
9.04(b).
"Initial Extension of Credit" means the earlier to occur of
the initial Borrowing and the initial issuance of a Letter of Credit
hereunder.
"Initial Issuing Bank" has the meaning specified in the
recital of parties to this Agreement.
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"Interest Expense" means interest expense net of interest
income, whether paid or accrued, (including the interest component of
Capitalized Lease obligations) on all Funded Debt.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the applicable Borrower pursuant
to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by the applicable
Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months, as the
applicable Borrower may, upon notice received by the Administrative
Agent not later than 11:00 A.M. (Dallas, Texas time) on the third
Business Day prior to the first day of such Interest Period, select;
provided, however, that:
(a) the Borrowers may not select any Interest Period
that ends after the Termination Date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(d) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
<PAGE> 15
11
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or other
ownership or profit interest, warrants, rights, options, obligations or
other securities of such Person, any capital contribution to such
Person or any other investment in such Person.
"Issuing Bank" means the Initial Issuing Bank and each
Eligible Assignee to which the Letter of Credit Commitment hereunder
has been assigned pursuant to Section 9.07.
"L/C Cash Collateral Account" has the meaning specified in the
Security Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(f)(ii).
"Lender Party" means any Lender, the Issuing Bank or the Swing
Line Bank.
"Lenders" means the Initial Lenders, each Assuming Lender that
shall become a party hereto pursuant to Section 2.16 and each Person
that shall become a Lender hereunder pursuant to Section 9.07.
"Letter of Credit" has the meaning specified in Section
2.01(f).
"Letter of Credit Advance" means an advance made by the
Issuing Bank or any Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in
Section 2.03(a).
"Letter of Credit Commitment" means, with respect to the
Issuing Bank at any time, the amount set forth opposite the Issuing
Bank's name on Schedule I hereto under the caption "Letter of Credit
Commitment" or, if the Issuing Bank has entered into one or more
Assignments and Acceptances, set forth for the Issuing Bank in the
Register maintained by the Administrative Agent pursuant to Section
9.07(d) as the Issuing Bank's "Letter of Credit Commitment", as such
amount may be reduced at or prior to such time pursuant to Section
2.05.
"Letter of Credit Facility" means, at any time, an amount
equal to the amount of the Issuing Bank's Letter of Credit Commitment
at such time, as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Leverage Ratio" means, as of any date of determination, the
ratio of Consolidated Funded Debt as of such date of determination to
Consolidated EBITDA for the four fiscal quarters ending on or
immediately prior to such date of determination, in each case, of
Limited and its Subsidiaries.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Limited" means Amdocs Limited, a Guernsey corporation.
"Loan Documents" means (a) for purposes of this Agreement and
the Notes and any amendment or modification hereof or thereof and for
all other purposes other than for purposes of the Guaranty and
<PAGE> 16
12
the Collateral Documents, (i) this Agreement, (ii) the Notes, (iii) the
US Loan Party Guaranty, (iv) the Non-US Loan Party Guaranty, (v) the
Collateral Documents and (vi) each Letter of Credit Agreement and (b)
for purposes of each Guaranty and the Collateral Documents, (i) this
Agreement, (ii) the Notes, (iii) the US Loan Party Guaranty, (iv) the
Non-US Loan Party Guaranty, (v) the Collateral Documents, (vi) each
Letter of Credit Agreement and (vii) each Bank Hedge Agreement, in each
case as amended or otherwise modified from time to time.
"Loan Parties" means the Borrowers and the Guarantors.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations,
performance, properties or prospects of ESM and its Subsidiaries, taken
as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of ESM and its Subsidiaries, taken
as a whole, (b) the rights and remedies of the Administrative Agent or
any Lender Party under any Loan Document or Related Document or (c) the
ability of any Loan Party to perform its Obligations under any Loan
Document or Related Document to which it is or is to be a party.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of any Loan Party or any ERISA Affiliate and at least one
Person other than the Loan Parties and the ERISA Affiliates or (b) was
so maintained and in respect of which any Loan Party or any ERISA
Affiliate could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"NationsBank" has the meaning specified in the recital of
parties to this Agreement.
"Net Cash Proceeds" means, with respect to any sale, lease,
transfer or other disposition of any asset or the sale or issuance of
any Debt or capital stock or other ownership or profit interest, any
securities convertible into or exchangeable for capital stock or other
ownership or profit interest or any warrants, rights, options or other
securities to acquire capital stock or other ownership or profit
interest by any Person, or any Extraordinary Receipt received by or
paid to or for the account of any Person, the aggregate amount of cash
received from time to time (whether as initial consideration or through
payment or disposition of deferred consideration) by or on behalf of
such Person in connection with such transaction after deducting
therefrom only (without duplication) (a) reasonable and customary
brokerage commissions, underwriting fees and discounts, legal fees,
finder's fees and other similar fees and commissions, (b) the amount of
taxes payable in connection with or as a result of such transaction and
(c) the amount of any Debt secured by a Lien on such asset that, by the
terms of such transaction, is required to be repaid upon such
disposition, in each case to the extent, but only to the extent, that
the amounts so deducted are properly attributable to such transaction
or to the asset that is the subject thereof and are, in the case of
clauses (a) and (c), at the time of receipt of such cash, actually paid
to a Person that is not an Affiliate of such Person or any Loan Party
or any Affiliate of any Loan Party and, in the case of clause (b), on
the earlier of the dates on which the tax return covering such taxes is
filed or required to be
<PAGE> 17
13
filed actually paid to a Person that is not an Affiliate of such Person
or any Loan Party, provided that if the amount deducted pursuant to
clause (b) above is greater than the amount actually so paid, the
amount of such excess shall constitute "Net Cash Proceeds".
"Non-US Loan Party Guaranty" has the meaning specified in
Section 3.01(d)(ix).
"Note" means a promissory note of a Borrower payable to the
order of any Lender, in substantially the form of Exhibit A hereto,
evidencing the indebtedness of such Borrower to such Lender resulting
from the Revolving Credit Advances made by such Lender.
"Note Purchase Agreement" means the Note Purchase Agreement
dated as of September 22, 1997, as amended by a First Amendment
substantially in the form of the draft dated December 5, 1997, among
ESM, CPIII, as agent, and the purchasers of the Subordinated Notes,
pursuant to which the Subordinated Notes are issued.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
"Notice of Issuance" has the meaning specified in Section
2.03(a).
"Notice of Renewal" has the meaning specified in Section
2.01(f).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.02(b).
"Notice of Termination" has the meaning specified in Section
2.01(f).
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether
or not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured,
and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 6.01(f). Without
limiting the generality of the foregoing, the Obligations of the Loan
Parties under the Loan Documents for purposes of the Collateral
Documents include (a) the obligation to pay principal, interest, Letter
of Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by any Loan Party
under any Loan Document and (b) the obligation of any Loan Party to
reimburse any amount in respect of any of the foregoing that any Lender
Party, in its sole discretion, may elect to pay or advance on behalf of
such Loan Party.
"Open Year" has the meaning specified in Section 4.01(s).
"Other Taxes" has the meaning specified in Section 2.12(b).
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies not yet due and payable; (b) Liens
imposed by law, such as materialmen's, mechanics', carriers', workmen's
and repairmen's Liens and other similar Liens arising in theordinary
course of business securing obligations that are not overdue for a
period of more than 30 days; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or
to secure public or statutory obligations; and (d) easements, rights of
way and other encumbrances on title to real property that do not render
title to the property encumbered thereby unmarketable or materially
adversely affect the use of such property for its present purposes.
<PAGE> 18
14
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"Preferred Stock" means, with respect to any corporation,
capital stock issued by such corporation that is entitled to a
preference or priority over any other capital stock issued by such
corporation upon any distribution of such corporation's assets, whether
by dividend or upon liquidation.
"Pro Rata Share" of any amount means, with respect to any
Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Revolving Credit
Commitment at such time and the denominator of which is the Revolving
Credit Facility at such time.
"Redeemable" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any
such right or Obligation that (a) the issuer has undertaken to redeem
at a fixed or determinable date or dates, whether by operation of a
sinking fund or otherwise, or upon the occurrence of a condition not
solely within the control of the issuer or (b) is redeemable at the
option of the holder.
"Register" has the meaning specified in Section 9.07(d).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Related Documents" means the Subordinated Debt Documents.
"Required Lenders" means at any time Lenders owed or holding
at least a majority in interest of the sum of (a) the aggregate
principal amount of the Advances outstanding at such time, (b) the
aggregate Available Amount of all Letters of Credit outstanding at such
time and (c) the aggregate Unused Revolving Credit Commitments at such
time; provided, however, that if any Lender shall be a Defaulting
Lender at such time, there shall be excluded from the determination of
Required Lenders at such time (A) the aggregate principal amount of the
Advances owing to such Lender (in its capacity as a Lender) and
outstanding at such time, (B) such Lender's Pro Rata Share of the
aggregate Available Amount of all Letters of Credit issued by such
Lender and outstanding at such time and (C) the Unused Revolving Credit
Commitment of such Lender at such time. For purposes of this
definition, the aggregate principal amount of Swing Line Advances owing
to the Swing Line Bank and of Letter of Credit Advances owing to the
Issuing Bank and the Available Amount of each Letter of Credit shall be
considered to be owed to the Lenders ratably in accordance with their
respective Revolving Credit Commitments.
"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained
under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) by member banks of the
Federal Reserve System against "Eurocurrency liabilities" (as such term
is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (a) any category of
liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined, or (b) any category of extensions
of credit or other assets which include Eurodollar Rate Advances.
"Responsible Officer" of any Person means the chairman, vice
chairman, president, chief executive officer, chief financial officer,
controller or senior vice president of such Person.
<PAGE> 19
15
"Revolving Credit Advance" means has the meaning specified in
Section 2.01(a).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type.
"Revolving Credit Commitment" means, with respect to any
Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Revolving Credit Commitment" or,
if such Lender has entered into one or more Assignments and
Acceptances, set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 9.07(d) as such Lender's
"Revolving Credit Commitment", as such amount may be reduced at or
prior to such time pursuant to Section 2.05.
"Revolving Credit Facility" means, at any time, the aggregate
amount of the Lenders' Revolving Credit Commitments at such time.
"Scheduled Principal Payments" means for determination on the
last day of any fiscal quarter, scheduled principal payments of all
Funded Debt actually paid during the four fiscal quarters most recently
ended.
"Secured Parties" means the Administrative Agent, the Lender
Parties and the Hedge Banks.
"Security Agreement" has the meaning specified in Section
3.01(d)(v).
"Significant Subsidiary" means each Subsidiary of any Borrower
to which as of the end of any fiscal year of such Borrower is
attributed more than five percent of the Consolidated revenues or more
than five percent of the Consolidated cash flow, in each case of
Limited and its Subsidiaries taken as a whole, determined by reference
to the most recent annual audited financial statements delivered to the
Lenders pursuant to Section 5.03(c) or, in the case of any Subsidiary
of any Borrower that is acquired oris merged with or into any other
Subsidiary of any Borrower, determined by reference to the pro forma
financial statements of Limited and its Subsidiaries prepared in
accordance with GAAP as of the most recent fiscal year end of Limited,
giving effect to such acquisition or merger as if such transaction had
been consummated as of the last day of such fiscal year.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person,
(b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the present probable
liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to pay
such debts and liabilities as they mature and (d) such Person is not
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small capital under any applicable law. The
amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all the facts and circumstances existing
at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Standby Letter of Credit" means any Letter of Credit issued
under the Letter of Credit Facility, other than a Trade Letter of
Credit.
"Sublimit" means, for each Borrower, the amount set opposite
the name of such Borrower below, as such amounts may be reduced
pursuant to Section 2.05:
<PAGE> 20
16
<TABLE>
<CAPTION>
===============================================================
<S> <C>
ESM $ 70,000,000
===============================================================
Amdocs U.K. $ 50,000,000
===============================================================
Amdocs Inc. $100,000,000
===============================================================
Amdocs USA $ 60,000,000
===============================================================
CADET $ 20,000,000
===============================================================
</TABLE>
"Subordinated Debt" means the Subordinated Notes and any other
Debt of ESM that is subordinated to the Obligations of ESM under the
Loan Documents on, and that otherwise contains, terms and conditions
satisfactory to the Required Lenders.
"Subordinated Debt Documents" means the Note Purchase
Agreement and all other agreements, indentures and instruments pursuant
to which Subordinated Debt is issued or Liens securing the Subordinated
Debt are created.
"Subordinated Notes" means the subordinated notes of ESM in an
aggregate principal amount of $123,500,000 issued pursuant to the Note
Purchase Agreement.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, joint
venture or limited liability company or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Surviving Debt" has the meaning specified in Section 4.01(z).
"Swing Line Advance" means an advance made by (a) the Swing
Line Bank pursuant to Section 2.01(d) or (b) any Lender pursuant to
Section 2.02(b).
"Swing Line Bank" means NationsBank.
"Swing Line Borrowing" means a borrowing consisting of a Swing
Line Advance made by the Swing Line Bank.
"Swing Line Facility" has the meaning specified in Section
2.01(d).
"Tax Certificate" has the meaning specified in Section
5.03(n).
"Taxes" has the meaning specified in Section 2.12(a).
"Termination Date" means the earlier of June 30, 2001 and the
date of termination in whole of the Letter of Credit Commitments and
the Revolving Credit Commitment pursuant to Section 2.05 or 6.01.
<PAGE> 21
17
"Trade Letter of Credit" means any Letter of Credit that is
issued under the Letter of Credit Facility for the benefit of a
supplier of Inventory to a Borrower or any of its Subsidiaries to
effect payment for such Inventory.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"Unused Revolving Credit Commitment" means, with respect to
any Lender at any time, (a) such Lender's Revolving Credit Commitment
at such time minus (b) the sum of (i) the aggregate principal amount of
all Revolving Credit Advances, Swing Line Advances and Letter of Credit
Advances made by such Lender (in its capacity as a Lender) and
outstanding at such time, plus (ii) such Lender's Pro Rata Share of (A)
the aggregate Available Amount of all Letters of Credit outstanding at
such time, (B) the aggregate principal amount of all Letter of Credit
Advances made by the Issuing Bank pursuant to Section 2.03(c) and
outstanding at such time and (C) the aggregate principal amount of all
Swing Line Advances made by the Swing Line Bank pursuant to Section
2.01(e) and outstanding at such time.
"US Loan Party Guaranty" has the meaning specified in Section
3.01(g)(vii).
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Principles. Under the Loan Documents,
unless otherwise stated, (a) GAAP determines all accounting and financial terms
and compliance with financial covenants, (b) GAAP in effect on the date of this
Agreement determines compliance with financial covenants, (c) otherwise, all
accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period and
(d) all accounting and financial terms and compliance with financial covenants
must be determined based on the Consolidated financial position and results of
operations of Limited and its Subsidiaries as applicable.. If there is a change
in GAAP after the date hereof, each compliance certificate shall include
calculations setting forth the adjustments from the relevant financial items as
shown in the most recently delivered financial statements, based on the
then-current GAAP, to the corresponding financial items based on GAAP as used in
the most recently delivered financial statements delivered to the Administrative
Agent and Lender Parties on or prior to the date hereof, so as to demonstrate
how such financial covenant compliance was derived from the most recently
delivered financial statements.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances. (a) The Revolving Credit Advances.
Each Lender severally agrees, on the terms and conditions hereinafter set forth,
to make advances (each a "Revolving Credit Advance") to any Borrower from time
to time on any Business Day during the period from the date hereof until the
Termination Date in an amount for each such Advance not to exceed such Lender's
Unused Revolving Credit Commitment at
<PAGE> 22
18
such time and in an aggregate amount for each Borrower not to exceed such
Borrower's Sublimit. Each Revolving Credit Borrowing shall be in an aggregate
amount of $3,000,000 or an integral multiple of $1,000,000 in excess thereof and
shall consist of Revolving Credit Advances made simultaneously by the Lenders
ratably according to their Revolving Credit Commitments. Within the limits of
each Lender's Unused Revolving Credit Commitment in effect from time to time,
any Borrower may borrow under this Section 2.01(a), prepay pursuant to Section
2.06(a) and reborrow under this Section 2.01(a).
(b) The Swing Line Advances. Any Borrower may request the
Swing Line Bank to make, and the Swing Line Bank may, if in its sole discretion
it elects to do so, make, on the terms and conditions hereinafter set forth,
Swing Line Advances to such Borrower from time to time on any Business Day
during the period from the date hereof until the Termination Date (i) in an
aggregate amount not to exceed at any time outstanding $10,000,000 (the "Swing
Line Facility") and (ii) in an amount for each such Swing Line Borrowing not to
exceed the aggregate of the Unused Revolving Credit Commitments of the Lenders
at such time. No Swing Line Advance shall be used for the purpose of funding the
payment of principal of any other Swing Line Advance. Each Swing Line Borrowing
shall be in an amount of $500,000 or an integral multiple of $100,000 in excess
thereof and shall bear interest as set forth in Section 2.07(b)(iii). Within the
limits of the Swing Line Facility and within the limits referred to in clause
(ii) above, so long as the Swing Line Bank, in its sole discretion, elects to
make Swing Line Advances, the Borrowers may borrow under this Section 2.01(b),
repay pursuant to Section 2.04(e) or prepay pursuant to Section 2.06(a) and
reborrow under this Section 2.01(b).
(c) Letters of Credit. The Issuing Bank agrees, on the terms
and conditions hereinafter set forth, to issue letters of credit (the "Letters
of Credit") for the account of any Borrower from time to time on any Business
Day during the period from the date hereof until 60 days before the Termination
Date (i) in an aggregate Available Amount for all Letters of Credit not to
exceed at any time the Issuing Bank's Letter of Credit Commitment at such time
and (ii) in an Available Amount for each such Letter of Credit not to exceed the
Unused Revolving Credit Commitments of the Lenders at such time. No Letter of
Credit shall have an expiration date (including all rights of the applicable
Borrower or the beneficiary to require renewal) later than the earlier of 60
days before the Termination Date and (A) in the case of a Standby Letter of
Credit, one year after the date of issuance thereof, but may by its terms be
renewable annually upon notice (a "Notice of Renewal") given to the Issuing Bank
and the Administrative Agent on or prior to any date for notice of renewal set
forth in such Letter of Credit but in any event at least three Business Days
prior to the date of the proposed renewal of such Standby Letter of Credit and
upon fulfillment of the applicable conditions set forth in Article III unless
the Issuing Bank has notified the applicable Borrower (with a copy to the
Administrative Agent) on or prior to the date for notice of termination set
forth in such Letter of Credit but in any event at least 30 Business Days prior
to the date of automatic renewal of its election not to renew such Standby
Letter of Credit (a "Notice of Termination") and (B) in the case of a Trade
Letter of Credit, 60 days after the date of issuance thereof; provided that the
terms of each Standby Letter of Credit that is automatically renewable annually
shall (x) require the Issuing Bank to give the beneficiary named in such Standby
Letter of Credit notice of any Notice of Termination, (y) permit such
beneficiary, upon receipt of such notice, to draw under such Standby Letter of
Credit prior to the date such Standby Letter of Credit otherwise would have been
automatically renewed and (z) not permit the expiration date (after giving
effect to any renewal) of such Standby Letter of Credit in any event to be
extended to a date later than 60 days before the Termination Date. If either a
Notice of Renewal is not given by the applicable Borrower or a Notice of
Termination is given by the Issuing Bank pursuant to the immediately preceding
sentence, such Standby Letter of Credit shall expire on the date on which it
otherwise would have been automatically renewed; provided, however, that even in
the absence of receipt of a Notice of Renewal the Issuing Bank may in its
discretion, unless instructed to the contrary by the Administrative Agent or the
applicable Borrower, deem that a Notice of Renewal had been timely delivered and
in such case, a Notice of Renewal shall be deemed to have been so delivered for
all purposes under this Agreement. Within the limits of the Letter of Credit
Facility, and subject to the limits referred to above, the Borrowers may request
the issuance of Letters of Credit under this Section 2.01(c), repay any Letter
of
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Credit Advances resulting from drawings thereunder pursuant to Section 2.03(c)
and request the issuance of additional Letters of Credit under this Section
2.01(c).
SECTION 2.02. Making the Advances. (a) Except as otherwise
provided in Section 2.02(b) or 2.03, each Borrowing shall be made on notice,
given not later than 11:00 A.M. (Dallas, Texas time) on the third Business Day
prior to the date of the proposed Borrowing in the case of a Borrowing
consisting of Eurodollar Rate Advances, or the first Business Day prior to the
date of the proposed Borrowing in the case of a Borrowing consisting of Base
Rate Advances, by any Borrower to the Administrative Agent, which shall give to
each Appropriate Lender prompt notice thereof by telex or telecopier. Each such
notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed
immediately in writing, or telex or telecopier, in substantially the form of
Exhibit B hereto, specifying therein the requested (i) date of such Borrowing,
(ii) Facility under which such Borrowing is to be made, (iii) Type of Advances
comprising such Borrowing, (iv) aggregate amount of such Borrowing and (v) in
the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest
Period for each such Advance. Each Appropriate Lender shall, before 11:00 A.M.
(Dallas, Texas time) on the date of such Borrowing, make available for the
account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Lender's ratable portion
of such Borrowing in accordance with the respective Commitments under the
applicable Facility of such Lender and the other Appropriate Lenders. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower requesting such Borrowing by crediting
the Borrower's Account of such Borrower; provided, however, that, in the case of
any Revolving Credit Borrowing, the Administrative Agent shall first make a
portion of such funds equal to the aggregate principal amount of any Swing Line
Advances and Letter of Credit Advances made by the Swing Line Bank or the
Issuing Bank, as the case may be, and by any other Lender and outstanding on the
date of such Revolving Credit Borrowing, plus interest accrued and unpaid
thereon to and as of such date, available to the Swing Line Bank or the Issuing
Bank, as the case may be, and such other Lenders for repayment of such Swing
Line Advances and Letter of Credit Advances.
(b) Each Swing Line Borrowing shall be made on notice, given
not later than 11:00 A.M. (Dallas, Texas time) on the date of the proposed Swing
Line Borrowing, by any Borrower to the Swing Line Bank and the Administrative
Agent. Each such notice of a Swing Line Borrowing (a "Notice of Swing Line
Borrowing") shall be by telephone, confirmed immediately in writing, or telex or
telecopier, specifying therein the requested (i) date of such Borrowing, (ii)
amount of such Borrowing and (iii) maturity of such Borrowing (which maturity
shall be no later than the seventh Business Day after the requested date of such
Borrowing). If, in its sole discretion, it elects to make the requested Swing
Line Advance, the Swing Line Bank will make the amount thereof available to the
Administrative Agent at the Administrative Agent's Account, in same day funds.
After the Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower requesting such Swing Line
Borrowing by crediting the Borrower's Account. Upon written demand by the Swing
Line Bank, with a copy of such demand to the Administrative Agent, each other
Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall
sell and assign to each such other Lender, such other Lender's Pro Rata Share of
such outstanding Swing Line Advance as of the date of such demand, by making
available for the account of its Applicable Lending Office to the Administrative
Agent for the account of the Swing Line Bank, by deposit to the Administrative
Agent's Account, in same day funds, an amount equal to the portion of the
outstanding principal amount of such Swing Line Advance to be purchased by such
Lender. Each Borrower hereby agrees to each such sale and assignment. Each
Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line
Advance on (i) the Business Day on which demand therefor is made by the Swing
Line Bank, provided that notice of such demand is given not later than 11:00
A.M. (Dallas, Texas time) on such Business Day or (ii) the first Business Day
next succeeding such demand if notice of such demand is given after such time.
Upon any such assignment by the Swing Line Bank to any other Lender of a portion
of a Swing Line Advance, the Swing Line Bank represents and warrants to such
other Lender that the Swing Line Bank is the legal and beneficial owner of such
interest being
<PAGE> 24
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assigned by it, but makes no other representation or warranty and assumes no
responsibility with respect to such Swing Line Advance, the Loan Documents or
any Loan Party. If and to the extent that any Lender shall not have so made the
amount of such Swing Line Advance available to the Administrative Agent, such
Lender agrees to pay to the Administrative Agent forthwith on demand such amount
together with interest thereon, for each day from the date of demand by the
Swing Line Bank until the date such amount is paid to the Administrative Agent,
at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent
such amount for the account of the Swing Line Bank on any Business Day, such
amount so paid in respect of principal shall constitute a Swing Line Advance
made by such Lender on such Business Day for purposes of this Agreement, and the
outstanding principal amount of the Swing Line Advance made by the Swing Line
Bank shall be reduced by such amount on such Business Day.
(c) Anything in subsection (a) above to the contrary
notwithstanding, (i) no Borrower may select Eurodollar Rate Advances for the
initial Borrowing hereunder or for any Borrowing if the aggregate amount of such
Borrowing is less than $3,000,000 or if the obligation of the Appropriate
Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to
Section 2.09 or Section 2.10 and (ii) the Revolving Credit Advances made on any
date may not be outstanding as part of more than seven separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line
Borrowing shall be irrevocable and binding on the Borrower that delivers such
notice. In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower
delivering such notice shall indemnify each Appropriate Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to fulfill on
or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund the Advance to be made by such Lender as part of such
Borrowing when such Advance, as a result of such failure, is not made on such
date.
(e) Unless the Administrative Agent shall have received notice
from an Appropriate Lender prior to the date of any Borrowing under a Facility
under which such Lender has a Commitment that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) or (b) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make available to
the applicable Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available to
the Administrative Agent, such Lender and the applicable Borrower severally
agree to repay or pay to the Administrative Agent forthwith on demand such
corresponding amount and to pay interest thereon, for each day from the date
such amount is made available to such Borrower until the date such amount is
repaid or paid to the Administrative Agent, at (i) in the case of such Borrower,
the interest rate applicable at such time under Section 2.07 to Advances
comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds
Rate. If such Lender shall pay to the Administrative Agent such corresponding
amount, such amount so paid shall constitute such Lender's Advance as part of
such Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
issued upon notice, given not later than 11:00 A.M. (Dallas, Texas time) on the
tenth Business Day prior to the date of the proposed issuance of such Letter of
Credit,
<PAGE> 25
21
by any Borrower to the Issuing Bank, which shall give to the Administrative
Agent and each Lender prompt notice thereof by telex or telecopier. Each such
notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by
telephone, confirmed immediately in writing, or telex or telecopier, specifying
therein the requested (i) date of such issuance (which shall be a Business Day),
(ii) Available Amount of such Letter of Credit, (iii) expiration date of such
Letter of Credit, (iv) name and address of the beneficiary of such Letter of
Credit and (v) form of such Letter of Credit, and shall be accompanied by such
application and agreement for letter of credit as the Issuing Bank may specify
to the Borrower for use in connection with such requested Letter of Credit (a
"Letter of Credit Agreement"). If (x) the requested form of such Letter of
Credit is acceptable to the Issuing Bank in its sole discretion and (y) it has
not received notice of objection to such issuance from Lenders holding at least
a majority of the Revolving Credit Commitments, the Issuing Bank will, upon
fulfillment of the applicable conditions set forth in Article III, make such
Letter of Credit available to the Borrower requesting such Letter of Credit at
its office referred to in Section 9.02 or as otherwise agreed with such Borrower
in connection with such issuance. In the event and to the extent that the
provisions of any Letter of Credit Agreement shall conflict with this Agreement,
the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish
(i) to the Administrative Agent on the first Business Day of each week a written
report summarizing issuance and expiration dates of Letters of Credit issued
during the previous week and drawings during such week under all Letters of
Credit, (ii) to each Lender on the first Business Day of each month a written
report summarizing issuance and expiration dates of Letters of Credit issued
during the preceding month and drawings during such month under all Letters of
Credit and (iii) to the Administrative Agent and each Lender on the first
Business Day of each calendar quarter a written report setting forth the average
daily aggregate Available Amount during the preceding calendar quarter of all
Letters of Credit.
(c) Drawing and Reimbursement. The payment by the Issuing Bank
of a draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement the making by the Issuing Bank of a Letter of Credit Advance,
which shall be a Base Rate Advance, in the amount of such draft. Upon written
demand by the Issuing Bank, with a copy of such demand to the Administrative
Agent, each Lender shall purchase from the Issuing Bank, and the Issuing Bank
shall sell and assign to each such Lender, such Lender's Pro Rata Share of such
outstanding Letter of Credit Advance as of the date of such purchase, by making
available for the account of its Applicable Lending Office to the Administrative
Agent for the account of the Issuing Bank, by deposit to the Administrative
Agent's Account, in same day funds, an amount equal to the portion of the
outstanding principal amount of such Letter of Credit Advance to be purchased by
such Lender. Promptly after receipt thereof, the Administrative Agent shall
transfer such funds to the Issuing Bank. Each Borrower hereby agrees to each
such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of
an outstanding Letter of Credit Advance on (i) the Business Day on which demand
therefor is made by the Issuing Bank, provided notice of such demand is given
not later than 11:00 A.M. (Dallas, Texas time) on such Business Day or (ii) the
first Business Day next succeeding such demand if notice of such demand is given
after such time. Upon any such assignment by the Issuing Bank to any other
Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents
and warrants to such other Lender that the Issuing Bank is the legal and
beneficial owner of such interest being assigned by it, free and clear of any
liens, but makes no other representation or warranty and assumes no
responsibility with respect to such Letter of Credit Advance, the Loan Documents
or any Loan Party. If and to the extent that any Lender shall not have so made
the amount of such Letter of Credit Advance available to the Administrative
Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand
such amount together with interest thereon, for each day from the date of demand
by the Issuing Bank until the date such amount is paid to the Administrative
Agent, at the Federal Funds Rate for its account or the account of the Issuing
Bank, as applicable. If such Lender shall pay to the Administrative Agent such
amount for the account of the Issuing Bank on any Business Day, such amount so
paid in respect of principal shall constitute a Letter of Credit Advance made by
such Lender on such Business Day for purposes of this Agreement, and the
outstanding principal
<PAGE> 26
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amount of the Letter of Credit Advance made by the Issuing Bank shall be reduced
by such amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of
any Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Revolving Credit
Advances. Each Borrower shall repay to the Administrative Agent for the ratable
account of the Lenders on the Termination Date the aggregate outstanding
principal amount of the Revolving Credit Advances made to such Borrower then
outstanding.
(b) Swing Line Advances. Each Borrower that requests a Swing
Line Borrowing shall repay to the Administrative Agent for the account of the
Swing Line Bank and each other Lender that has made a Swing Line Advance to such
Borrower the outstanding principal amount of each Swing Line Advance made by
each of them on the earlier of the maturity date specified in the applicable
Notice of Swing Line Borrowing (which maturity shall be no later than the
seventh Business Day after the requested date of such Borrowing) and the
Termination Date.
(c) Letter of Credit Advances. (i) Each Borrower that requests
the issuance of a Letter of Credit shall repay to the Administrative Agent for
the account of the Issuing Bank and each other Lender that has made a Letter of
Credit Advance to such Borrower on the earlier of demand and the Termination
Date the outstanding principal amount of each Letter of Credit Advance made by
each of them.
(ii) The Obligations of the Borrowers under this Agreement,
any Letter of Credit Agreement and any other agreement or instrument relating to
any Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances (it being understood
that any such payment by any Borrower is without prejudice to, and does not
constitute a waiver of, any rights such Borrower might have or might acquire as
a result of the payment by the Issuing Bank of any draft or the reimbursement by
such Borrower thereof):
(A) any lack of validity or enforceability of any Loan
Document, any Letter of Credit Agreement, any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the applicable
Borrower in respect of any L/C Related Document or any other amendment
or waiver of or any consent to departure from all or any of the L/C
Related Documents;
(C) the existence of any claim, set-off, defense or other
right that the applicable Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any Persons for
whom any such beneficiary or any such transferee may be acting), the
Issuing Bank or any other Person, whether in connection with the
transactions contemplated by the L/C Related Documents or any unrelated
transaction;
(D) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(E) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral
or other collateral, or any release or amendment or waiver of or
consent to departure from the Guaranty or any other guarantee, for all
or any of the Obligations of the applicable Borrower in respect of the
L/C Related Documents; or
(G) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, the applicable Borrower or a guarantor.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. ESM may, on its own behalf and on behalf of the other Borrowers, upon
at least five Business Days' notice to the Administrative Agent, terminate in
whole or reduce in part the unused portions of the Letter of Credit Facility and
the Unused Revolving Credit Commitments; provided, however, that each partial
reduction of a Facility (i) shall be in an aggregate amount of $1,000,000 or an
integral multiple of $500,000 in excess thereof and (ii) shall be made ratably
among the Appropriate Lenders in accordance with their Commitments with respect
to such Facility.
(b) Mandatory. (i) The Revolving Credit Facility shall be
automatically and permanently reduced (A) on the date that is 180 days after the
date of receipt by any Borrower, any of its Subsidiaries, Limited or Amdocs
(Israel), as the case may be, of the Net Cash Proceeds from the sale, lease,
transfer or other disposition of any assets of any Borrower, any of its
Subsidiaries or Amdocs (Israel) (other than any sale, lease, transfer or other
disposition of assets to Amdocs (Israel), a Borrower or any of their
Subsidiaries or pursuant to clause (i) or (ii) of Section 5.02(e)), to the
extent that the amount of such Net Cash Proceeds has not been reinvested in the
business of such Borrower, such Subsidiary, Limited or Amdocs (Israel), as the
case may be, prior to such 180th day and such Net Cash Proceeds exceed
$15,000,000 from the date hereof and (B) on the date and in the amount of each
mandatory prepayment required under Section 2.06(b)(i)(B).
(ii) The Letter of Credit Facility shall be automatically and
permanently reduced from time to time on the date of each reduction in the
Revolving Credit Facility by the amount, if any, by which the amount of the
Letter of Credit Facility exceeds the Revolving Credit Facility after giving
effect to such reduction of the Revolving Credit Facility.
SECTION 2.06. Prepayments. (a) Optional. Each Borrower may,
upon at least one Business Day's notice in the case of Base Rate Advances and
three Business Days' notice in the case of Eurodollar Rate Advances, in each
case to the Administrative Agent (received not later than 11:00 A.M. (Dallas,
Texas time)) stating the proposed date and aggregate principal amount of the
prepayment, and if such notice is given such Borrower shall, prepay the
outstanding aggregate principal amount of the Advances comprising part of the
same Borrowing in whole or ratably in part, together, in the case of Eurodollar
Rate Advances, with accrued interest to the date of such prepayment on the
aggregate principal amount prepaid; provided, however, that (x) each partial
prepayment (other than prepayments of Swing Line Advances) shall be in an
aggregate principal amount of $1,000,000 or an integral multiple of $1,000,000
in excess thereof and (y) if any prepayment of a Eurodollar Rate Advance is made
on a date other than the last day of an Interest Period for such Advance such
Borrower shall also pay any amounts owing pursuant to Section 9.04(c).
(b) Mandatory. (i) ESM shall (A) on the date that is 180 days
after the date of receipt by any Borrower, any of its Subsidiaries, Limited or
Amdocs (Israel), as the case may be, of the Net Cash Proceeds from the sale,
lease, transfer or other disposition of any assets of any Borrower, any of its
Subsidiaries or Amdocs (Israel) (other than any sale, lease, transfer or other
disposition of assets to Amdocs (Israel), a Borrower or any of their
Subsidiaries or pursuant to clause (i) or (ii) of Section 5.02(e)), prepay an
aggregate principal amount of the
<PAGE> 28
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Advances comprising part of the same Borrowings equal to the amount of such Net
Cash Proceeds that has not been reinvested in the business of such Borrower,
such Subsidiary, Limited or Amdocs (Israel), as the case may be, prior to such
180th day to the extent that such Net Cash Proceeds exceed $5,000,000 in any
Fiscal Year and (B) within three Business Days following the date of receipt by
any Borrower, any of its Subsidiaries, Limited or Amdocs (Israel), as the case
may be, of the Net Cash Proceeds from the incurrence or issuance by any
Borrower, any of its Subsidiaries, Limited or Amdocs (Israel) of any Debt (other
than Debt incurred or issued to Amdocs (Israel), a Borrower or any of their
Subsidiaries or pursuant to Section 5.02(b)), prepay an aggregate principal
amount of the Advances comprising part of the same Borrowings equal to the
amount of such Net Cash Proceeds.
(ii) The Borrowers shall, on each Business Day, prepay an
aggregate principal amount of the Revolving Credit Advances comprising part of
the same Borrowings, the Letter of Credit Advances and the Swing Line Advances
equal to the amount by which (A) the sum of the aggregate principal amount of
(x) the Revolving Credit Advances, (y) the Letter of Credit Advances and (z) the
Swing Line Advances then outstanding plus the aggregate Available Amount of all
Letters of Credit then outstanding exceeds (B) the Revolving Credit Facility on
such Business Day.
(iii) The Borrowers shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral
Account to equal the amount by which the aggregate Available Amount of all
Letters of Credit then outstanding exceeds the Letter of Credit Facility on such
Business Day.
(iv) Each Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Revolving Credit Advances comprising part of
the same Borrowings made to such Borrower, the Letter of Credit Advances made to
such Borrower and the Swing Line Advances made to such Borrower equal to the
amount by which (A) the sum of the aggregate principal amount of (x) the
Revolving Credit Advances made to such Borrower, (y) the Letter of Credit
Advances made to such Borrower and (2) the Swing Line Advances made to such
Borrower then outstanding plus the Available Amount of all Letters of Credit
then outstanding at the request of such Borrower exceeds (B) such Borrower's
Sublimit on such Business Day.
(v) Prepayments of the Revolving Credit Facility made pursuant
to clause (iii) above shall be first, applied to prepay Letter of Credit
Advances then outstanding until such Advances are paid in full, second, applied
to prepay Swing Line Advances then outstanding until such Advances are paid in
full and third, applied to prepay Revolving Credit Advances then outstanding
comprising part of the same Borrowings until such Advances are paid in full.
(vi) All prepayments under this subsection (b) shall be made
together with accrued interest to the date of such prepayment on the principal
amount prepaid.
SECTION 2.07. Interest. (a) Scheduled Interest. Each Borrower
shall pay interest on the unpaid principal amount of each Advance owing to each
Lender by such Borrower from the date of such Advance until such principal
amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the sum of
(A) the Base Rate in effect from time to time plus (B) the Applicable
Margin in effect from time to time, payable in arrears monthly on the
last day of each month during such periods and on the date such Base
Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (A)
the Eurodollar Rate for such Interest Period for such Advance plus (B)
the Applicable Margin in effect
<PAGE> 29
25
from time to time payable in arrears on the last day of such Interest
Period and, if such Interest Period has a duration of more than three
months, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period and on the date such
Eurodollar Rate Advance shall be Converted or paid in full.
(iii) Swing Line Advances. So long as NationsBank, as the
Swing Line Bank, has not sold or assigned to any other Lender any
portion of such Swing Line Advance, a rate equal to the Federal Funds
Rate plus 0.50% plus the Applicable Margin applicable to the Revolving
Credit Facility and, at such time as NationsBank, as the Swing Line
Bank, shall have sold or assigned to any other Lender any portion of
such Swing Line Advance, such Advance shall bear interest at the Base
Rate plus the Applicable Margin applicable to the Revolving Credit
Facility.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default, each Borrower shall pay interest on (i) the
unpaid principal amount of each Advance owing to each Lender by such Borrower,
payable in arrears on the dates referred to in clause (a), (b)(i) or (b)(ii)
above and on demand, at a rate per annum equal at all times to 2% per annum
above the rate per annum required to be paid on such Advance pursuant to clause
(a), (b)(i) or (b)(ii) above and (ii) to the fullest extent permitted by law,
the amount of any interest, fee or other amount payable hereunder that is not
paid when due, from the date such amount shall be due until such amount shall be
paid in full, payable in arrears on the date such amount shall be paid in full
and on demand, at a rate per annum equal at all times to 2% per annum above the
rate per annum required to be paid, in the case of interest, on the Type of
Advance on which such interest has accrued pursuant to clause (a), (b)(i) or
(b)(ii) above, and, in all other cases, on Base Rate Advances pursuant to clause
(b)(i) above.
(c) Notice of Interest Rate. Promptly after receipt of a
Notice of Borrowing pursuant to Section 2.02(a), the Administrative Agent shall
give notice to the Borrowers and each Appropriate Lender of the applicable
interest rate determined by the Administrative Agent for purposes of clause (a),
(b)(i) or (b)(ii).
SECTION 2.08. Fees. (a) Commitment Fee. The Borrowers shall
pay to the Administrative Agent for the account of the Lenders a commitment fee,
from the date hereof in the case of each Initial Lender and from the effective
date specified in the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender until the Termination Date, payable in
arrears on the date of the initial Borrowing hereunder, thereafter quarterly on
the last Business Day of each March, June, September and December, commencing
September 30, 1998, and on the Termination Date, at the rate per annum equal to
the Applicable Percentage on the sum of the average daily Unused Revolving
Credit Commitment of such Lender plus its Pro Rata Share of the average daily
outstanding Swing Line Advances during such quarter; provided, however, that no
commitment fee shall accrue on any of the Commitments of a Defaulting Lender so
long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower requesting
the issuance of a Letter of Credit shall pay to the Administrative Agent for the
account of each Lender a commission, payable in arrears quarterly on the last
Business Day of each March, June, September and December, commencing September
30, 1998, and on the earliest to occur of the full drawing, expiration,
termination or cancellation of any such Letter of Credit and on the Termination
Date, on such Lender's Pro Rata Share of the average daily aggregate Available
Amount during such quarter of all Letters of Credit outstanding from time to
time at the rate per annum equal to the Applicable Margin for Eurodollar Rate
Advances under the Revolving Credit Facility.
(ii) The Borrower requesting the issuance of a Letter of
Credit shall pay to the Issuing Bank for its own account (A) a fronting fee
payable in arrears quarterly on the last Business Day of each March, June,
September and December, commencing September 30, 1998, and on the Termination
Date on the average daily amount of its Letter of Credit Commitment during such
quarter, at the rate of 0.25% per annum and (B) such other
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commissions, fronting fees, transfer fees and other fees and charges in
connection with the issuance or administration of each Letter of Credit as such
Borrower and the Issuing Bank shall agree.
(c) Agents' Fees. ESM shall pay to the Administrative Agent
for its own account such fees as may from time to time be agreed between ESM and
the Administrative Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. Any
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (Dallas, Texas time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.07 and 2.10, Convert all or any portion of the Advances of one Type made to
such Borrower comprising the same Borrowing into Advances of the other Type;
provided, however, that any Conversion of Eurodollar Rate Advances into Base
Rate Advances shall be made only on the last day of an Interest Period for such
Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar
Rate Advances shall be in an amount not less than the minimum amount specified
in Section 2.02(c), no Conversion of any Advances shall result in more separate
Borrowings than permitted under Section 2.02(c) and each Conversion of Advances
comprising part of the same Borrowing under any Facility shall be made ratably
among the Appropriate Lenders in accordance with their Commitments under such
Facility. Each such notice of Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Advances to
be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for such Advances. Each notice of
Conversion shall be irrevocable and binding on the Borrower giving such notice.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of all Eurodollar Rate Advances comprising any Borrowing shall
be reduced, by payment or prepayment or otherwise, to less than $3,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(ii) If any Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify such Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a
Eurodollar Rate Advance having an Interest Period of one month.
(iii) Upon the occurrence and during the continuance of any
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If after the date
hereof, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation after the date hereof or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) after the date
hereof, there shall be any increase in the cost to any Lender Party of agreeing
to make or of making, funding or maintaining Eurodollar Rate Advances made to a
Borrower or of agreeing to issue or of issuing or maintaining Letters of Credit
or of agreeing to make or of making or maintaining Letter of Credit Advances
made to a Borrower (excluding for purposes of this Section 2.10 any such
increased costs resulting from (x) Taxes or Other Taxes (as to which Section
2.12 shall govern) and (y) changes in the basis of taxation of overall net
income or overall gross income by the United States or by the foreign
jurisdiction or state under the laws of which such Lender Party is organized or
has its Applicable Lending Office or any political subdivision thereof), then
each such Borrower shall from time to time, upon demand by such Lender Party
through the Administrative Agent, pay to the Administrative Agent for the
account of such Lender Party additional amounts sufficient to compensate such
Lender Party for such increased cost; provided, however, that a Lender Party
claiming additional amounts under this Section 2.10(a) agrees to use reasonable
efforts (consistent with its
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27
internal policy and legal and regulatory restrictions) to designate a different
Applicable Lending Office if the making of such a designation would avoid the
need for, or reduce the amount of, such increased cost that may thereafter
accrue and would not, in the reasonable judgment of such Lender Party, be
otherwise disadvantageous to such Lender Party. A certificate as to the amount
of such increased cost (together with a schedule setting forth in reasonable
detail the reasons therefor and the calculation thereof), submitted to the
Borrowers by such Lender Party as promptly as reasonably practical after the
event or circumstances causing such increased cost, shall be conclusive and
binding for all purposes, absent manifest error. In determining such amount,
such Lender Party may use any reasonable averaging and attribution methods.
(b) If after the date hereof, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof, or (ii) the compliance with any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) after the date hereof, there shall be any increase in
the amount of capital required or expected to be maintained by any Lender Party
or corporation controlling such Lender Party as a result of or based upon the
existence of such Lender Party's commitment to lend or to issue Letters of
Credit hereunder and other commitments of such type or the issuance or
maintenance of the Letters of Credit (or similar contingent obligations), then,
upon demand by such Lender Party through the Administrative Agent, the Borrowers
shall pay to the Administrative Agent for the account of such Lender Party, from
time to time as specified by such Lender Party, additional amounts sufficient to
compensate such Lender Party in the light of such circumstances, to the extent
that such Lender Party reasonably determines such increase in capital to be
allocable to the existence of such Lender Party's commitment to lend or to issue
Letters of Credit hereunder or to the issuance or maintenance of any Letters of
Credit. A certificate as to such amounts (together with a schedule setting forth
in reasonable detail the reasons therefor and the calculation thereof) submitted
to the Borrowers by such Lender Party as promptly as reasonably practical after
the event or circumstances causing such increase in the amount of capital to be
maintained shall be conclusive and binding for all purposes, absent manifest
error. In determining such amount, such Lender Party may use any reasonable
averaging and attribution methods.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed at least a majority of the then aggregate unpaid
principal amount thereof notify the Administrative Agent that the Eurodollar
Rate for any Interest Period for such Advances will not adequately reflect the
cost to such Lenders of making, funding or maintaining their Eurodollar Rate
Advances for such Interest Period, the Administrative Agent shall forthwith so
notify the Borrowers and the Appropriate Lenders, whereupon (i) each such
Eurodollar Rate Advance under any Facility will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Alternate Base
Rate Advance and (ii) the obligation of the Appropriate Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrowers that such Lenders have
determined that the circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of any law or
regulation after the date hereof shall make it unlawful, or any central bank or
other governmental authority shall assert that it is unlawful, for any Lender or
its Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances hereunder, then, on notice thereof and demand therefor by such Lender
to the Borrowers through the Administrative Agent, (i) each Eurodollar Rate
Advance under each Facility under which such Lender has a Commitment will
automatically, upon such demand, Convert into a Alternate Base Rate Advance
until the applicable Lender shall notify the Borrowers as promptly as reasonably
practicable after the event or circumstances causing such conversion no longer
exist and (ii) the obligation of the Appropriate Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrowers as promptly as practicable but
in any event within three months after such Lender has determined that the
circumstances causing such suspension no longer exist; provided, however, that,
before making any such demand, such Lender agrees to use reasonable efforts
(consistent with its internal policy and legal
<PAGE> 32
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and regulatory restrictions) to designate a different Eurodollar Lending Office
if the making of such a designation would allow such Lender or its Eurodollar
Lending Office to continue to perform its obligations to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances and would
not, in the judgment of such Lender, be otherwise disadvantageous to such
Lender. If any such event described in this subsection ceases to exist as to any
Lender, such Lender shall as promptly as reasonably practical so notify the
Administrative Agent and so long as such circumstances no longer apply to any
Lender, the obligations of each lender to make, fund or maintain Eurodollar Rate
Advances hereunder shall be reinstated.
SECTION 2.11. Payments and Computations. (a) Each Borrower
shall make each payment hereunder and under the Notes, irrespective of any right
of counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 11:00 A.M. (Dallas, Texas time) on the day when due in U.S. dollars
to the Administrative Agent at the Administrative Agent's Account in same day
funds. The Administrative Agent will promptly thereafter cause like funds to be
distributed (i) if such payment by such Borrower is in respect of principal,
interest, commitment fees or any other Obligation then payable hereunder and
under the Notes to more than one Lender Party, to such Lender Parties for the
account of their respective Applicable Lending Offices ratably in accordance
with the amounts of such respective Obligations then payable to such Lender
Parties and (ii) if such payment by such Borrower is in respect of any
Obligation then payable hereunder to one Lender Party, to such Lender Party for
the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon any Assuming Lender's becoming
a Lender hereunder as a result of a Commitment Increase pursuant to Section
2.16, and upon the Administrative Agent's receipt of such Lender's Assumption
Agreement and recording of the information contained therein in the Register,
from and after the applicable Increase Date, the Administrative Agent shall make
all payments hereunder and under any Notes issued in connection therewith in
respect of the interest assumed thereby to the Assuming Lender. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 9.07(d), from and after
the effective date of such Assignment and Acceptance, the Administrative Agent
shall make all payments hereunder and under the Notes in respect of the interest
assigned thereby to the Lender Party assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) If the Administrative Agent receives funds for application
to the Obligations under the Loan Documents under circumstances for which the
Loan Documents do not specify the Advances or the Facility to which, or the
manner in which, such funds are to be applied, the Administrative Agent may, but
shall not be obligated to, elect to distribute such funds to each Lender Party
ratably in accordance with such Lender Party's proportionate share of the
principal amount of all outstanding Advances and the Available Amount of all
Letters of Credit then outstanding, in repayment or prepayment of such of the
outstanding Advances or other Obligations owed to such Lender Party, and for
application to such principal installments, as the Administrative Agent shall
direct.
(c) Each Borrower hereby authorizes each Lender Party, if and
to the extent payment owed to such Lender Party is not made when due hereunder
or, in the case of a Lender, under the Note held by such Lender, if an Event of
Default has occurred and is continuing, to charge from time to time against any
or all of such Borrower's accounts with such Lender Party any amount so due
(excluding any payroll or similar accounts).
(d) All computations of interest, fees and Letter of Credit
commissions shall be made by the Administrative Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest,
fees or commissions are payable. Each determination by the Administrative Agent
of an interest rate, fee or commission hereunder shall be conclusive and binding
for all purposes, absent manifest error.
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(e) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Administrative Agent shall have received notice
from a Borrower prior to the date on which any payment is due to any Lender
Party hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent any Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by any Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.11,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender Party and the
Administrative Agent, taxes that are imposed on its overall net income (and
franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction
under the laws of which such Lender Party or the Administrative Agent (as the
case may be) is organized or any political subdivision thereof and, in the case
of each Lender Party, taxes that are imposed on its overall net income (and
franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of
such Lender Party's Applicable Lending Office or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities in respect of payments hereunder or under the Notes
being hereinafter referred to as "Taxes"). If any Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder or under
any Note to any Lender Party or the Administrative Agent, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) such Lender Party or the Administrative Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions and (iii)
such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Borrower shall pay any present or future
stamp, documentary, excise, property or similar taxes, charges or levies that
arise from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performing under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) Each Borrower shall indemnify each Lender Party and the
Administrative Agent for and hold it harmless against the full amount of Taxes
and Other Taxes, and for the full amount of taxes of any kind imposed by any
jurisdiction on amounts payable under this Section 2.12, imposed on or paid by
such Lender Party or the Administrative Agent (as the case may be) and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30
days from the date such Lender Party or the Administrative Agent (as the case
may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes,
each Borrower shall furnish to the Administrative Agent, at its address referred
to in Section 9.02, the original or a certified copy of a receipt
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evidencing such payment. In the case of any payment hereunder or under the Notes
by or on behalf of a Borrower through an account or branch outside the
jurisdiction in which such Borrower is organized (the United States, the United
Kingdom and Guernsey, as the case may be) or by or on behalf of a Borrower
organized in the United States, the United Kingdom or Guernsey, respectively, by
a payor that is not a United States person or a corporation organized under the
laws of the United Kingdom or Guernsey, respectively, if such Borrower
determines that no Taxes are payable in respect thereof, such Borrower shall
furnish, or shall cause such payor to furnish, to the Administrative Agent, at
such address, an opinion of counsel acceptable to the Administrative Agent
stating that such payment is exempt from, or otherwise not subject to, Taxes.
For purposes of this subsection (d) and subsection (e), the terms "United
States" and "United States person" shall have the meanings specified in Section
7701 of the Internal Revenue Code.
(e) Each Lender Party, on or prior to the date of its
execution and delivery of this Agreement in the case of each Initial Lender or
Initial Issuing Bank and on the date of the Assignment and Acceptance pursuant
to which it becomes a Lender Party in the case of each other Lender Party, and
from time to time thereafter as requested in writing by any Borrower (but only
so long as such Lender Party remains lawfully able to do so), shall provide such
Borrower and the Administrative Agent with any form or certificate that is
required by any taxing authority including, if applicable, two original Internal
Revenue Service forms 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service or (in the case of a Lender Party
that is claiming exemption from United States withholding tax under Section
871(h) or 881(c) of the Internal Revenue Code with respect to payments of
"portfolio interest") two accurate and complete signed original Forms W-8 or any
successor form prescribed by the Internal Revenue Service (and, if such Lender
Party delivers Forms W-8, two signed certificates certifying that such Lender
Party is not (i) a "bank" for purposes of Section 881(c) of the Internal Revenue
Code, (ii) is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Internal Revenue Code) of any Borrower and (iii) is not a
controlled foreign corporation related to any Borrower (within the meaning of
Section 864(d)(4) of the Internal Revenue Code), as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
(if it is the case) that such Lender Party is exempt from or entitled to a
reduced rate of Home Jurisdiction Withholding Taxes (as defined below) on
payments pursuant to this Agreement or the Notes (or, in the case of a Lender
Party that initially becomes a party to this Agreement pursuant to an assignment
under Section 9.07, exempt from or entitled to a reduced rate of Home
Jurisdiction Withholding Taxes on payments made pursuant to this Agreement or
the Notes that is no greater than the rate to which the assigning Lender Party
was subject (assuming such assigning Lender Party provided such forms or
certificates as may be required by this subsection (e))); provided, however,
that such Lender Party shall have been advised in writing by each Borrower
(including at the time any renewal form is due) of the form or certificate
applicable to it, determined by reference to the jurisdiction of organization
and Applicable Lending Office of such Lender Party set forth on Schedule I
hereto, in the case of each Initial Lender or Initial Issuing Bank, or to the
jurisdiction of organization and Applicable Lending Office of such Lender Party
set forth in the Assignment and Acceptance pursuant to which it became a Lender
Party, in the case of each other Lender Party, or such other branch or office of
any Lender Party designated by such Lender Party from time to time. If any form
or document referred to in this subsection (e) requires the disclosure of
information not substantially similar to the information necessary to compute
the tax payable and information required on the date hereof by Internal Revenue
Service form 1001 or 4224 or United Kingdom Inland Revenue Form FD13, and which
a Lender Party reasonably considers to be confidential, such Lender Party shall
give notice thereof to the Borrowers and shall not be obligated to include in
such form or document such confidential information. If the accurate and
complete forms provided by a Lender Party at the time such Lender Party first
becomes a party to this Agreement indicate a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Lender Party provides the appropriate
form certifying that a lesser rate applies, whereupon withholding tax at such
lesser rate only shall be considered excluded from Taxes for periods governed by
such form; provided, however, that, if at the date of the Assignment and
Acceptance pursuant to which a Lender Party becomes a party to this Agreement,
the Lender Party assignor was entitled to payments under subsection (a) in
respect of United States withholding tax with respect to interest paid at such
date, then, to such extent, the term
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Taxes shall include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includible in Taxes) United States withholding
tax, if any, applicable with respect to the Lender Party assignee on such date.
"Home Jurisdiction Withholding Taxes" means (a) in the case of
Amdocs Inc., CADET and Amdocs USA, withholding taxes imposed by the United
States, (b) in the case of Amdocs UK, withholding taxes imposed by the United
Kingdom of Great Britain and Wales and (c) in the case of ESM, withholding taxes
imposed by Guernsey.
(f) For any period with respect to which a Lender Party has
failed to provide the Borrowers with the appropriate form described in
subsection (e) above (other than if such failure is due to a change in law
occurring after the date on which a form originally was required to be provided
or if such form otherwise is not required under subsection (e) above), such
Lender Party shall not be entitled to indemnification under subsection (a) or
(c) with respect to Taxes imposed by the United States, the United Kingdom or
Guernsey, as applicable, by reason of such failure; provided, however, that
should a Lender Party become subject to Taxes because of its failure to deliver
a form or certificate required hereunder, the Borrowers, at the expense of such
Lender, shall take such steps as such Lender Party shall reasonably request to
assist such Lender Party to recover such Taxes.
(g) Each Lender Party shall promptly upon the request of the
Administrative Agent take all action (including without limitation the
completion of forms and the provision of information to the appropriate taxing
authorities or to the Administrative Agent), of the kind prescribed in
regulations promulgated under Section 118H of the UK Income and Corporation
Taxes Act of 1988 (and any statements published by the Inland Revenue relating
thereto and having general application) and consistent with such Lender Party's
legal and regulatory restrictions, reasonably requested by the Administrative
Agent, and the Administrative Agent shall upon reasonable request from any
Borrower make such request of each Lender Party and shall itself (consistent
with the Administrative Agent's legal and regulatory restrictions), to the
extent appropriate and reasonable, take similar action, to secure the benefit of
any exemption from, or relief with respect to, Taxes or Other Taxes imposed by
the United Kingdom under Section 118H of the UK Income and Corporation Taxes Act
of 1988 in relation to any amounts payable under this Agreement or any of the
Notes.
(h) Any Lender Party or the Administrative Agent (as the case
may be) claiming any additional amounts payable pursuant to this Section 2.12
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its Applicable
Lending Office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts that may thereafter accrue and
would not, in the reasonable judgment of such Lender Party or the Administrative
Agent (as the case may be), be otherwise disadvantageous to such Lender Party or
the Administrative Agent (as the case may be). Each Borrower shall promptly upon
request by any Lender Party or the Administrative Agent take all actions
(including, without limitation, the completion of forms and the provision of
information to the appropriate taxing authorities) reasonably requested by such
Lender Party or the Administrative Agent to secure the benefit of any exemption
from, or relief with respect to, Taxes or Other Taxes in relation to any amounts
payable under this Agreement.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party
shall obtain at any time any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) (a) on account of
Obligations due and payable to such Lender Party hereunder and under the Notes
at such time in excess of its ratable share (according to the proportion of (i)
the amount of such Obligations due and payable to such Lender Party at such time
to (ii) the aggregate amount of the Obligations due and payable to all Lender
Parties hereunder and under the Notes at such time) of payments on account of
the Obligations due and payable to all Lender Parties hereunder and under the
Notes at such time obtained by all the Lender Parties at such time or (b) on
account of
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Obligations owing (but not due and payable) to such Lender Party hereunder and
under the Notes at such time in excess of its ratable share (according to the
proportion of (i) the amount of such Obligations owing to such Lender Party at
such time to (ii) the aggregate amount of the Obligations owing (but not due and
payable) to all Lender Parties hereunder and under the Notes at such time) of
payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such participations in the Obligations due and payable or
owing to them, as the case may be, as shall be necessary to cause such
purchasing Lender Party to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender Party, such purchase from each
other Lender Party shall be rescinded and such other Lender Party shall repay to
the purchasing Lender Party the purchase price to the extent of such Lender
Party's ratable share (according to the proportion of (i) the purchase price
paid to such Lender Party to (ii) the aggregate purchase price paid to all
Lender Parties) of such recovery together with an amount equal to such Lender
Party's ratable share (according to the proportion of (i) the amount of such
other Lender Party's required repayment to (ii) the total amount so recovered
from the purchasing Lender Party) of any interest or other amount paid or
payable by the purchasing Lender Party in respect of the total amount so
recovered. Each Borrower agrees that any Lender Party so purchasing a
participation from another Lender Party pursuant to this Section 2.13 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender Party were the direct creditor of such Borrower in the amount of
such participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances
and issuances of Letters of Credit shall be available (and each Borrower agrees
that it shall use such proceeds and Letters of Credit) solely (i) to pay
transaction fees and expenses, (ii) to provide working capital for the operating
Subsidiaries of ESM, (iii) to redeem the Subordinated Notes and (iv) from time
to time to finance general corporate purposes.
SECTION 2.15. Defaulting Lenders. (a) In the event that, at
any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such
Defaulting Lender shall owe a Defaulted Advance to any Borrower and (iii) such
Borrower shall be required to make any payment hereunder or under any other Loan
Document to or for the account of such Defaulting Lender, then such Borrower
may, so long as no Default shall occur or be continuing at such time and to the
fullest extent permitted by applicable law, set off and otherwise apply the
Obligation of such Borrower to make such payment to or for the account of such
Defaulting Lender against the obligation of such Defaulting Lender to make such
Defaulted Advance. In the event that, on any date, such Borrower shall so set
off and otherwise apply its obligation to make any such payment against the
obligation of such Defaulting Lender to make any such Defaulted Advance on or
prior to such date, the amount so set off and otherwise applied by such Borrower
shall constitute for all purposes of this Agreement and the other Loan Documents
an Advance by such Defaulting Lender made on the date of such set-off. Such
Advance shall be a Base Rate Advance and shall be considered, for all purposes
of this Agreement, to comprise part of the Borrowing in connection with which
such Defaulted Advance was originally required to have been made pursuant to
Section 2.01, even if the other Advances comprising such Borrowing shall be
Eurodollar Rate Advances on the date such Advance is deemed to be made pursuant
to this subsection (a). Each Borrower shall notify the Administrative Agent at
any time such Borrower exercises its right of set-off pursuant to this
subsection (a) and shall set forth in such notice (A) the name of the Defaulting
Lender and the Defaulted Advance required to be made by such Defaulting Lender
and (B) the amount set off and otherwise applied in respect of such Defaulted
Advance pursuant to this subsection (a). Any portion of such payment otherwise
required to be made by any Borrower to or for the account of such Defaulting
Lender which is paid by such Borrower, after giving effect to the amount set off
and otherwise applied by such Borrower pursuant to this subsection (a), shall be
applied by the Administrative Agent as specified in subsection (b) or (c) of
this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party
shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted
Amount to the Administrative Agent or any of the other Lender
<PAGE> 37
33
Parties and (iii) any Borrower shall make any payment hereunder or under any
other Loan Document to the Administrative Agent for the account of such
Defaulting Lender, then the Administrative Agent may, on its behalf or on behalf
of such other Lender Parties and to the fullest extent permitted by applicable
law, apply at such time the amount so paid by such Borrower to or for the
account of such Defaulting Lender to the payment of each such Defaulted Amount
to the extent required to pay such Defaulted Amount. In the event that the
Administrative Agent shall so apply any such amount to the payment of any such
Defaulted Amount on any date, the amount so applied by the Administrative Agent
shall constitute for all purposes of this Agreement and the other Loan Documents
payment, to such extent, of such Defaulted Amount on such date. Any such amount
so applied by the Administrative Agent shall be retained by the Administrative
Agent or distributed by the Administrative Agent to such other Lender Parties,
ratably in accordance with the respective portions of such Defaulted Amounts
payable at such time to the Administrative Agent and such other Lender Parties
and, if the amount of such payment made by any Borrower shall at such time be
insufficient to pay all Defaulted Amounts owing at such time to the
Administrative Agent and the other Lender Parties, in the following order of
priority:
(i) first, to the Administrative Agent for any Defaulted
Amount then owing to the Administrative Agent; and
(ii) second, to any other Lender Parties for any Defaulted
Amounts then owing to such other Lender Parties, ratably in accordance
with such respective Defaulted Amounts then owing to such other Lender
Parties.
Any portion of such amount paid by any Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party
shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a
Defaulted Advance or a Defaulted Amount and (iii) any Borrower, the
Administrative Agent or any other Lender Party shall be required to pay or
distribute any amount hereunder or under any other Loan Document to or for the
account of such Defaulting Lender, then such Borrower or such other Lender Party
shall pay such amount to the Administrative Agent to be held by the
Administrative Agent, to the fullest extent permitted by applicable law, in
escrow or the Administrative Agent shall, to the fullest extent permitted by
applicable law, hold in escrow such amount otherwise held by it. Any funds held
by the Administrative Agent in escrow under this subsection (c) shall be
deposited by the Administrative Agent in an account with NationsBank, in the
name and under the control of the Administrative Agent, but subject to the
provisions of this subsection (c). The terms applicable to such account,
including the rate of interest payable with respect to the credit balance of
such account from time to time, shall be NationsBank's standard terms applicable
to escrow accounts maintained with it. Any interest credited to such account
from time to time shall be held by the Administrative Agent in escrow under, and
applied by the Administrative Agent from time to time in accordance with the
provisions of, this subsection (c). The Administrative Agent shall, to the
fullest extent permitted by applicable law, apply all funds so held in escrow
from time to time to the extent necessary to make any Advances required to be
made by such Defaulting Lender and to pay any amount payable by such Defaulting
Lender hereunder and under the other Loan Documents to the Administrative Agent
or any other Lender Party, as and when such Advances or amounts are required to
be made or paid and, if the amount so held in escrow shall at any time be
insufficient to make and pay all such Advances and amounts required to be made
or paid at such time, in the following order of priority:
(i) first, to the Administrative Agent for any amount then due
and payable by such Defaulting Lender to the Administrative Agent
hereunder;
<PAGE> 38
34
(ii) second, to any other Lender Parties for any amount then
due and payable by such Defaulting Lender to such other Lender Parties
hereunder, ratably in accordance with such respective amounts then due
and payable to such other Lender Parties; and
(iii) third, to such Borrower for any Advance then required to
be made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under
this Section 2.15 are in addition to other rights and remedies that the
Borrowers may have against such Defaulting Lender with respect to any Defaulted
Advance and that the Administrative Agent or any Lender Party may have against
such Defaulting Lender with respect to any Defaulted Amount.
SECTION 2.16. Increase in the Aggregate Commitments. (a) The
Borrowers may, at any time (but not more than twice) prior to July 15, 1998, by
notice to the Administrative Agent, request that the aggregate amount of the
Commitments be increased by an amount of $5,000,000 or an integral multiple of
$5,000,000 in excess thereof (each a "Commitment Increase") to be effective as
of a date that is at least five days after such request (the "Increase Date") as
specified in the related notice to the Administrative Agent; provided, however,
that (i) in no event shall the aggregate amount of the Commitments at any time
exceed $120,000,000, and (ii) no Default shall have occurred and be continuing
as of the date of such request or as of the applicable Increase Date, or shall
occur as a result thereof.
(b) The Administrative Agent shall promptly notify the Lenders
of a request by the Borrowers for a Commitment Increase, which notice shall
include (i) the proposed amount of such requested Commitment Increase, (ii) the
proposed Increase Date and (iii) the date by which Lenders wishing to
participate in the Commitment Increase must commit to an increase in the amount
of their respective Commitments (the "Commitment Date"). Each Lender that is
willing to participate in the requested Commitment Increase (each an "Increasing
Lender") shall give written notice to the Administrative Agent on or prior to
the Commitment Date of the amount by which it is willing to increase its
Commitment. If the Lenders notify the Administrative Agent that they are willing
to increase the amount of their respective Commitments by an aggregate amount
that exceeds the amount of the requested Commitment Increase, the requested
Commitment Increase shall be allocated among the Lenders willing to participate
therein in such amounts as are agreed among the Borrowers and the Administrative
Agent.
(c) Promptly following each Commitment Date, the
Administrative Agent shall notify the Borrowers as to the amount, if any, by
which the Lenders are willing to participate in the requested Commitment
Increase. If the aggregate amount by which the Lenders are willing to
participate in the requested Commitment Increase on any such Commitment Date is
less than the requested Commitment Increase, then the Borrowers may extend
offers to one or more Eligible Assignees to participate in any portion of the
requested Commitment Increase that has not been committed to by the Lenders as
of the applicable Commitment Date; provided, however, that the Commitment of
each such Eligible Assignee shall be in an amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof.
(d) On each Increase Date, each Eligible Assignee that accepts
an offer to participate in the requested Commitment Increase in accordance with
Section 2.16(c) (each, an "Assuming Lender") shall become a
<PAGE> 39
35
Lender party to this Agreement as of such Increase Date and the Commitment of
each Increasing Lender for the requested Commitment Increase shall be so
increased by such amount (or by the amount allocated to such Lender pursuant to
the last sentence of Section 2.16(b)) as of such Increase Date; provided,
however, that the Administrative Agent shall have received on or before such
Increase Date the following, each dated such date:
(i) an assumption agreement from each Assuming Lender, if any,
in form and substance satisfactory to the Borrower and the
Administrative Agent (each an "Assumption Agreement"), duly executed by
such Eligible Assignee, the Administrative Agent and the Borrowers; and
(ii) confirmation from each Increasing Lender of the increase
in the amount of its Commitment in a writing satisfactory to the
Borrowers and the Administrative Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.16(d), the Administrative Agent
shall notify the Lenders (including, without limitation, each Assuming Lender)
and the Borrowers, on or before 1:00 P.M. (Dallas, Texas time), by telecopier or
telex, of the occurrence of the Commitment Increase to be effected on such
Increase Date and shall record in the Register the relevant information with
respect to each Increasing Lender and each Assuming Lender on such date. Each
Increasing Lender and each Assuming Lender shall, before 2:00 P.M. (Dallas,
Texas time) on the Increase Date, make available for the account of its
Applicable Lending Office to the Administrative Agent at the Administrative
Agent's Account, in same day funds, in the case of such Assuming Lender, an
amount equal to such Assuming Lender's ratable portion of the Revolving Credit
Borrowings then outstanding (calculated based on its Commitment as a percentage
of the aggregate Commitments outstanding after giving effect to the relevant
Commitment Increase) and, in the case of such Increasing Lender, an amount equal
to the excess of (i) such Increasing Lender's ratable portion of the Revolving
Credit Borrowings then outstanding (calculated based on its Commitment as a
percentage of the aggregate Commitments outstanding after giving effect to the
relevant Commitment Increase) over (ii) such Increasing Lender's ratable portion
of the Revolving Credit Borrowings then outstanding (calculated based on its
Commitment (without giving effect to the relevant Commitment Increase) as a
percentage of the aggregate Commitments (without giving effect to the relevant
Commitment Increase)). After the Administrative Agent's receipt of such funds
from each such Increasing Lender and each such Assuming Lender, the
Administrative Agent will promptly thereafter cause to be distributed like funds
to the other Lenders for the account of their respective Applicable Lending
Offices in an amount to each other Lender such that the aggregate amount of the
outstanding Revolving Credit Advances owing to each Lender after giving effect
to such distribution equals such Lender's ratable portion of the Revolving
Credit Borrowings then outstanding (calculated based on its Commitment as a
percentage of the aggregate Commitments outstanding after giving effect to the
relevant Commitment Increase). If and to the extent that any Assuming Lender or
any Increasing Lender shall not have so made such ratable portion available to
the Administrative Agent, such Lender and the Borrowers (ratably in accordance
with the amount of Advances then outstanding to each of them) severally agree to
pay or repay to the Administrative Agent forthwith on demand such corresponding
amount and to pay interest thereon, for each day from the relevant Increase Date
until the date such amount is repaid or paid to the Administrative Agent, at (i)
in the case of the Borrowers, the interest rate applicable at such time under
Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. Within five Business Days after the Borrowers
receive notice from the Administrative Agent, each Borrower, at its own expense,
shall execute and deliver to the Administrative Agent, Revolving Credit Notes
payable to the order of each Assuming Lender substantially in the form of
Exhibit A hereto. The Administrative Agent, upon receipt of such Revolving
Credit Notes, shall promptly deliver such Revolving Credit Notes to the
respective Assuming Lenders.
<PAGE> 40
36
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of
Credit. The obligation of each Lender to make an Advance or of the Issuing Bank
to issue a Letter of Credit on the occasion of the Initial Extension of Credit
hereunder is subject to the satisfaction of the following conditions precedent
before or concurrently with the Initial Extension of Credit:
(a) Before giving effect to the transactions contemplated by
this Agreement, there shall have occurred no material adverse change in
the business condition (financial or otherwise), operations,
performance, properties or prospects of any Loan Party, any of its
Subsidiaries or Limited since September 30, 1997.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) would be reasonably likely to have a
Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of this Agreement, any Note, any other Loan
Document, any Related Document or the consummation of the transactions
contemplated hereby.
(c) The Borrowers shall have paid all accrued fees and
expenses of the Administrative Agent and the Lender Parties (including
the accrued fees and expenses of counsel to the Administrative Agent
and local counsel to the Lender Parties).
(d) The Administrative Agent on behalf of the Lender Parties
shall have received on or before the day of the Initial Extension of
Credit the following, each dated such day (unless otherwise specified),
in form and substance satisfactory to the Lender Parties (unless
otherwise specified) and (except for the Notes) in sufficient copies
for each Lender Party:
(i) The Notes payable to the order of the Lenders.
(ii) Certified copies of the resolutions of the Board
of Directors or Executive Committee of each Borrower and each
other Loan Party (other than Amdocs Japan Limited and
Directory Technology Pty. Ltd.) approving this Agreement, the
Notes, each other Loan Document and each Related Document to
which it is or is to be a party, and of all documents
evidencing other necessary corporate action and governmental
and other third party approvals and consents, if any, with
respect to this Agreement, the Notes, each other Loan Document
and each Related Document.
(iii) A certificate of each Borrower and each other
Loan Party, signed on behalf of such Borrower and such other
Loan Party (other than Amdocs Japan Limited and Directory
Technology Pty. Ltd.) by its President or a Vice President and
its Secretary or any Assistant Secretary, dated the date of
the Initial Extension of Credit (the statements made in which
certificate shall be true on and as of the date of the Initial
Extension of Credit), certifying as to (A) the absence of any
amendments to the charter of such Borrower and such other Loan
Party since the date of the certificate referred to in Section
3.01(i)(iii) of the Existing Credit Agreement, (B) the due
incorporation and good standing (where applicable) of such
Borrower and such other Loan Party as a corporation organized
under the laws of the jurisdiction of its incorporation, and
the absence of any proceeding for the dissolution or
liquidation of such Borrower and such other Loan Party, (C)
the truth of the representations and warranties
<PAGE> 41
37
contained in the Loan Documents as though made on and as of
the date of the Initial Extension of Credit and (D) the
absence of any event occurring and continuing, or resulting
from the Initial Extension of Credit, that constitutes a
Default.
(iv) A certificate of the Secretary or an Assistant
Secretary of each Borrower and each other Loan Party
certifying the names and true signatures of the officers of
such Person authorized to sign this Agreement, the Notes, each
other Loan Document and each Related Document to which they
are or are to be parties and the other documents to be
delivered hereunder and thereunder.
(v) A security agreement supplement in the form of
Exhibit C to the security agreement dated as of January 6,
1998 made by the Grantors named therein in favor of the
Administrative Agent (as amended, supplemented or otherwise
modified from time to time in accordance with its terms and
together with each other security agreement delivered pursuant
to Section 5.01(k), in each case as amended, supplemented or
otherwise modified from time to time in accordance with its
terms, the "Security Agreement"), duly executed by Amdocs USA,
together with:
(A) certificates representing the Pledged
Shares referred to therein accompanied by undated
stock powers executed in blank and instruments
evidencing the Pledged Debt, if any, referred to
therein indorsed in blank,
(B) acknowledgment copies or stamped receipt
copies of proper financing statements or other
appropriate filings, duly filed on or before the day
of the Initial Extension of Credit under the Uniform
Commercial Code or other appropriate laws of all
jurisdictions that the Administrative Agent may deem
necessary or desirable in order to perfect and
protect the first priority liens and security
interests created under the Security Agreement,
covering the Collateral described in the Security
Agreement,
(C) completed requests for information,
dated on or before the date of the Initial Extension
of Credit, listing the financing statements or other
appropriate filings referred to in clause (B) above
and all other effective financing statements filed in
the jurisdictions referred to in clause (B) above
that name any Borrower or any other Loan Party as
debtor, together with copies of such other financing
statements or other appropriate filings,
(D) copies of the Assigned Agreements, if
any, referred to in the Security Agreement, together
with a consent to such assignment, in substantially
the form of Exhibit B to the Security Agreement, duly
executed by each party to such Assigned Agreements
other than the Borrowers,
(E) the Pledged Account Letters referred to
in the Security Agreement, duly executed by each
Pledged Account Bank referred to in the Security
Agreement, and
(F) evidence that all other action that the
Administrative Agent may reasonably deem necessary or
desirable in order to perfect and protect the first
priority liens and security interests created under
the Security Agreement have been taken.
(vi) An amendment to the deed of charge over shares
made by ESM in favor of the Administrative Agent dated as of
January 6, 1998 (as amended, supplemented or otherwise
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38
modified in accordance with its terms, the "Deed of Charge
over Shares"), in substantially the form of Exhibit E, duly
executed by ESM, together with evidence that all actions that
may be necessary or desirable in order to perfect and protect
the first priority liens, security interests and charges
created by the Deed of Charge over Shares have been taken.
(vii) A consent in substantially the form of Exhibit
F, by the Guarantors (as defined in the US Loan Party
Guaranty) in favor of the Administrative Agent under the
guaranty dated as of January 6, 1998 made by such Guarantors
in favor of the Administrative Agent (together with each other
guaranty delivered by a Person organized under the laws of the
United States or a political subdivision thereof pursuant to
Section 5.01(k) or 5.01(l), in each case as amended,
supplemented or otherwise modified from time to time in
accordance with its terms, the "US Loan Party Guaranty"), duly
executed by each Guarantor party thereto, consenting to the
amendment and restatement contemplated by this Agreement.
(viii) An assumption of guaranty in substantially the
form of Exhibit A to the US Loan Party Guaranty, duly executed
by Amdocs USA.
(ix) A consent in substantially the form of Exhibit
G, by the Guarantors (as defined in the Non-US Loan Party
Guaranty) in favor of the Administrative Agent under the
guaranty dated as of January 6, 1998 made by such Guarantors
in favor of the Administrative Agent (together with each other
guaranty delivered by a Person organized under the laws of a
jurisdiction outside the United States pursuant to Section
5.01(k) or 5.01(l), in each case as amended, supplemented or
otherwise modified from time to time in accordance with its
terms, the "Non-US Loan Party Guaranty"), duly executed by
each Guarantor party thereto (other than Amdocs Japan Limited
and Directory Technology Pty. Ltd.), consenting to the
amendment and restatement contemplated by this Agreement.
(x) Such financial, business and other information
regarding each Loan Party and its Subsidiaries as the Lender
Parties shall have requested, including, without limitation,
information as to possible contingent liabilities, tax
matters, environmental matters, obligations under employee
benefit plans, collective bargaining agreements and other
arrangements with employees and forecasts prepared by
management of the Borrowers, in form and substance
satisfactory to the Lender Parties, of balance sheets, income
statements and cash flow statements on a quarterly basis for
the first year following the day of the Initial Extension of
Credit and on an annual basis for each year thereafter until
2001.
(xi) A favorable opinion of Reboul, MacMurray,
Hewitt, Maynard & Kristol, counsel for the Loan Parties, in
substantially the form of Exhibit H and as to such other
matters as any Lender Party through the Administrative Agent
may reasonably request.
(xii) A favorable opinion of Carey Langlois, counsel
for ESM, and Frere Cholmeley Bischoff, counsel for Amdocs UK,
in substantially the forms of Exhibits I-1 and I-2 hereto, and
to such other matters as any Lender Party through the
Administrative Agent may reasonably request.
(xiv) A favorable opinion of Blackwell Sanders Peper
Martin, Missouri counsel for Amdocs Inc., CADET and Amdocs
USA, in substantially the forms of Exhibit J hereto, and to
such other matters as any Lender Party through the
Administrative Agent may reasonably request.
<PAGE> 43
39
(xv) A favorable opinion of Shearman & Sterling,
counsel for the Administrative Agent, in form and substance
satisfactory to the Administrative Agent.
SECTION 3.02. Conditions Precedent to Each Borrowing and
Issuance. The obligation of each Appropriate Lender to make an Advance (other
than a Letter of Credit Advance made by the Issuing Bank or a Lender pursuant to
Section 2.03(c) and a Swing Line Advance made by a Lender pursuant to Section
2.02(b)) on the occasion of each Borrowing (including the Initial Extension of
Credit), and the obligation of the Issuing Bank to issue a Letter of Credit
(including the initial issuance) or renew a Letter of Credit and the right of
the Borrowers to request a Swing Line Borrowing, shall be subject to the further
conditions precedent that on the date of such Borrowing or issuance or renewal
(a) the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing, Notice of Swing Line Borrowing, Notice of
Issuance or Notice of Renewal and the acceptance by the relevant Borrower of the
proceeds of such Borrowing or of such Letter of Credit or the renewal of such
Letter of Credit shall constitute a representation and warranty by such Borrower
that both on the date of such notice and on the date of such Borrowing or
issuance or renewal such statements are true):
(i) the representations and warranties set forth in Section
4.01(a) through (f), (i), (j), (w) and (x) are correct in all material
respects on and as of the date of such Borrowing or issuance or
renewal, before and after giving effect to such Borrowing or issuance
or renewal and to the application of the proceeds therefrom, as though
made on and as of such date (other than any such representations or
warranties that, by their terms, are made as of a date other than the
date of such Borrowing or issuance or renewal); and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or renewal or from the application of
the proceeds therefrom, that constitutes a Default;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Appropriate Lender through the Administrative Agent
may reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit, specifying its objection thereto
and if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrowers.
The Borrowers represent and warrant as follows:
(a) Each Loan Party (i) is a corporation duly organized,
validly existing and in good standing (where applicable) under the laws
of the jurisdiction of its incorporation, (ii) is duly qualified and in
good standing (where applicable) as a foreign corporation in each other
jurisdiction in which it owns or leases property or in which the
conduct of its business requires it to so qualify or be licensed except
where the failure to so qualify or be licensed is not reasonably likely
to have a Material Adverse
<PAGE> 44
40
Effect and (iii) has all requisite corporate power and authority
(including, without limitation, all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
All of the outstanding capital stock of each Borrower has been validly
issued, is fully paid and non-assessable and is owned free and clear of
all Liens, except those created under the Collateral Documents and the
Subordinated Debt Documents.
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of each Loan Party, showing as of the
date hereof (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the date hereof and the
percentage of the outstanding shares of each such class owned (directly
or indirectly) by such Loan Party and the number of shares covered by
all outstanding options, warrants, rights of conversion or purchase and
similar rights at the date hereof. All of the outstanding capital stock
of all of such Subsidiaries has been validly issued, is fully paid and
non-assessable and is owned by such Loan Party or one or more of its
Subsidiaries free and clear of all Liens, except those created under
the Loan Documents and the Subordinated Debt Documents. Each such
Subsidiary (i) is a corporation duly organized, validly existing and in
good standing (where applicable) under the laws of the jurisdiction of
its incorporation, (ii) is duly qualified and in good standing (where
applicable) as a foreign corporation in each other jurisdiction in
which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the
failure to so qualify or be licensed is not reasonably likely to have a
Material Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted.
(c) The execution, delivery and performance by each Loan Party
of this Agreement, the Notes, each other Loan Document and each Related
Document to which it is or is to be a party, and the consummation of
the transactions contemplated hereby, are within such Loan Party's
corporate powers, have been duly authorized by all necessary corporate
action, and do not (i) contravene such Loan Party's charter or bylaws
(or similar governing documents), (ii) violate any law (including,
without limitation, the Securities Exchange Act of 1934), rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or
result in the breach of, or constitute a default in any material
respect under, any contract, loan agreement, indenture, mortgage, deed
of trust, lease or other instrument binding on or affecting any Loan
Party, any of its Subsidiaries or any of their properties or (iv)
except for the Liens created under the Loan Documents, result in or
require the creation or imposition of any Lien upon or with respect to
any of the properties of any Loan Party or any of its Subsidiaries. No
Loan Party or any of its Subsidiaries is in violation of any such law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which would have a Material
Adverse Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by any Loan Party of this
Agreement, the Notes, any other Loan Document or any Related Document
to which it is or is to be a party, or for the consummation of the
transactions contemplated hereby, (ii) the grant by any Loan Party of
the Liens granted by it pursuant to the Collateral Documents, (iii) the
perfection or maintenance of the Liens created by the Collateral
Documents (including the first priority nature thereof) or (iv) the
exercise by the Administrative Agent or any Lender Party of its rights
under the Loan Documents or the remedies in respect of the Collateral
pursuant to the Collateral Documents, except for the authorizations,
approvals, actions, notices and filings that are required as of the
date hereof or, in the case of any such authorizations, approvals,
actions, notices
<PAGE> 45
41
and filings that are required after the date hereof, have been
disclosed to the Lender Parties and, in any case have been duly
obtained, taken, given or made and are in full force and effect.
(e) This Agreement has been, and each of the Notes, each other
Loan Document and each Related Document when delivered hereunder will
have been, duly executed and delivered by each Loan Party party
thereto. This Agreement is, and each of the Notes, each other Loan
Document and each Related Document when delivered hereunder will be,
the legal, valid and binding obligation of each Loan Party party
thereto, enforceable against such Loan Party in accordance with its
terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting
creditors rights generally.
(f) The Consolidated and Consolidating balance sheets of
Limited and its Subsidiaries as at September 30, 1997, and the related
Consolidated and Consolidating statements of income and Consolidated
statement of cash flows of Limited and its Subsidiaries for the fiscal
year then ended, accompanied by an opinion of Ernst & Young LLP,
independent public accountants, and the Consolidated and Consolidating
balance sheet of Limited and its Subsidiaries as at March 31, 1998, and
the related Consolidated and Consolidating statements of income and
cash flows of Limited and its Subsidiaries for the six months then
ended, duly certified by the chief financial officer of Limited, copies
of which have been furnished to each Lender Party, fairly present,
subject, in the case of said balance sheet as at March 31, 1998, and
said statements of income and cash flows for the six months then ended,
to year-end audit adjustments, the Consolidated and Consolidating
financial condition of Limited and its Subsidiaries as at such dates
and the Consolidated and Consolidating results of the operations of
Limited and its Subsidiaries for the periods ended on such dates, all
in accordance with generally accepted accounting principles applied on
a consistent basis, and since September 30, 1997, there has been no
Material Adverse Change.
(g) The Consolidated and Consolidating forecasted balance
sheets, income statements and cash flows statements of the Borrowers
and their Subsidiaries delivered to the Lender Parties pursuant to
Section 3.01(d)(x) were prepared in good faith on the basis of
assumptions which were believed to be reasonable at the time made in
the light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the Borrowers'
best estimate of their future financial performance.
(h) No written information, exhibit or report furnished by any
Loan Party to the Administrative Agent or any Lender Party in
connection with the negotiation of the Loan Documents or pursuant to
the terms of the Loan Documents contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements made therein not materially misleading at the time so made.
(i) There is no action, suit, investigation, litigation or
proceeding, including any Environmental Action, to which any Loan Party
or any of its Subsidiaries is a party, pending or threatened before any
court, governmental agency or arbitrator that (i) would be reasonably
likely to have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of this Agreement, any Note, any
other Loan Document or any Related Document or the consummation of the
transactions contemplated hereby.
(j) No Borrower is engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds
of any Advance or drawings under any Letter of Credit will be used to
purchase or carry any Margin Stock or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock.
<PAGE> 46
42
(k) Following application of the proceeds of each Advance or drawing
under each Letter of Credit, not more than 25 percent of the value of the
assets (either of a Borrower only or of such Borrower and its Subsidiaries
on a Consolidated basis) subject to the provisions of Section 5.02(a) or
5.02(e) or subject to any restriction contained in any agreement or
instrument between such Borrower and any Lender Party or any Affiliate of
any Lender Party relating to Debt and within the scope of Section 6.01(e)
will be Margin Stock.
(l) Neither any Loan Party nor any ERISA Affiliate has any
Multiemployer Plan or Multiple Employer Plan.
(m) With respect to each scheme or arrangement mandated by a
government other than the United States (a "Foreign Government Scheme or
Arrangement") and with respect to each employee benefit plan maintained or
contributed to by any Loan Party that is not subject to United States law
(a "Foreign Plan"):
(i) Any employer and employee contributions required by law or
by the terms of any Foreign Government Scheme or Arrangement or any
Foreign Plan have been made, or, if applicable, accrued, in
accordance with normal accounting practices,
(ii) The fair market value of the assets of each funded
Foreign Plan, the liability of each insurer for any Foreign Plan
funded through insurance or the book reserve established for any
Foreign Plan, together with any accrued contributions, is sufficient
to procure or provide for the accrued benefit obligations, as of the
date hereof, with respect to all current and former participants in
such Foreign Plan according to the actuarial assumptions and
valuations most recently used to determine employer contributions to
such Foreign Plan, and
(iii) Each Foreign Plan required to be registered has been
registered and has been maintained in good standing with applicable
regulatory authorities.
(n) Neither the business nor the properties of any Loan Party or any
of its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy or other casualty (whether or not
covered by insurance) that would be reasonably likely to have a Material
Adverse Effect.
(o) The operations and properties of each Loan Party and each of its
Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non-compliance with
such Environmental Laws and Environmental Permits has been resolved
without ongoing obligations or costs, and no circumstances exist that
would be reasonably likely to (i) form the basis of an Environmental
Action against any Loan Party or any of its Subsidiaries or any of their
properties that could have a Material Adverse Effect or (ii) cause any
such property to be subject to any restrictions on ownership, occupancy,
use or transferability under any Environmental Law.
(p) Neither any Loan Party nor any of its Subsidiaries is a party to
any indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that would
have a Material Adverse Effect.
(q) The Collateral Documents create a valid and perfected first
priority security interest in the Collateral as and to the extent set
forth in the Collateral Documents, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken. The Loan
Parties are the legal and beneficial owners of the
<PAGE> 47
43
Collateral free and clear of any Lien, except for the liens and security
interests created or permitted under the Loan Documents.
(r) Each Loan Party and each of its Subsidiaries has filed, has
caused to be filed or has been included in all material tax returns
(Federal, state, local and foreign) required to be filed and has paid all
taxes shown thereon to be due, together with applicable interest and
penalties.
(s) Set forth on Schedule 4.01(s) hereto is a complete and accurate
list, as of the date of the Existing Credit Agreement, of each taxable
year of each Loan Party and each of its Subsidiaries for which Federal
income tax returns have been filed and for which the expiration of the
applicable statute of limitations for assessment or collection has not
occurred by reason of extension or otherwise (an "Open Year").
(t) The aggregate unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of each Loan Party and
each of its Subsidiaries proposed by the Internal Revenue Service with
respect to Open Years does not exceed $2,000,000. No issues have been
raised by the Internal Revenue Service in respect of Open Years that, in
the aggregate, would have a Material Adverse Effect.
(u) The aggregate unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of each Loan
Party and its Subsidiaries proposed by all state, local and foreign taxing
authorities (other than amounts arising from adjustments to Federal income
tax returns) does not exceed $2,000,000. No issues have been raised by
such taxing authorities that, in the aggregate, would have a Material
Adverse Effect.
(v) No "ownership change" as defined in Section 382(g) of the
Internal Revenue Code, and no event that would result in the application
of the "separate return limitation year" or "consolidated return change of
ownership" limitations under the Federal income tax consolidated return
regulations, has occurred with respect to any Borrower or Limited since
September 30, 1992.
(w) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the issuance of any Letters of Credit, nor the
application of the proceeds or repayment thereof by the Borrowers, nor the
consummation of the other transactions contemplated hereby, will violate
any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(x) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(y) Set forth on Schedule 4.01(y) hereto is a complete and accurate
list of all Debt of the Borrowers outstanding on the date hereof and
having an outstanding principal amount or other payment obligation
(contingent or otherwise) of $1,000,000 or more (the "Existing Debt"),
showing as of the date hereof the principal amount outstanding thereunder.
(z) Set forth on Schedule 4.01(z) hereto is a complete and accurate
list of all Debt of the Borrowers, Amdocs (Israel) and their Subsidiaries
(the "Surviving Debt") that will remain outstanding after the application
of the proceeds of the Initial Extension of Credit, showing as of the date
hereof the principal amount outstanding thereunder, the maturity date
thereof and the amortization schedule therefor.
<PAGE> 48
44
(aa) Set forth on Schedule 4.01(aa) hereto is a complete and
accurate list of all real property owned by any Loan Party or any of its
Subsidiaries as of the date of the Existing Credit Agreement, showing as
of the date hereof the street address, county or other relevant
jurisdiction, state, record owner and book and estimated fair value
thereof. Each Loan Party or such Subsidiary has good, marketable and
insurable fee simple title to such real property, free and clear of all
Liens, other than Liens created or permitted by the Loan Documents.
(bb) Set forth on Schedule 4.01(bb) hereto is a complete and
accurate list of all leases of real property under which any Loan Party or
any of its Subsidiaries is the lessee for which annual rental payments
exceed $500,000, showing as of the date of the Existing Credit Agreement
the street address, county or other relevant jurisdiction, state, lessor,
lessee, expiration date and annual rental cost thereof. Each such lease is
the legal, valid and binding obligation of the lessor thereof, enforceable
in accordance with its terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency and other similar laws
affecting creditors rights generally.
(cc) Set forth on Schedule 4.01(cc) hereto is a complete and
accurate list of all Investments held by any Loan Party or any of its
Subsidiaries, showing as of the date hereof the amount, obligor or issuer
and maturity, if any, thereof.
(dd) Set forth on Schedule 4.01(dd) hereto is a complete and
accurate list of all patents, trademarks, trade names, service marks and
copyrights, and all applications therefor and licenses thereof, of each
Loan Party or any of its Subsidiaries, showing as of the date of the
Existing Credit Agreement the jurisdiction in which registered, the
registration number, the date of registration and the expiration date.
ARTICLE V
COVENANTS OF THE BORROWERS
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, each Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
material Subsidiaries to comply, in all material respects, with all
applicable laws, rules, regulations and orders, such compliance to
include, without limitation, compliance with Environmental Laws.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if
unpaid, might by law become a Lien upon its property; provided, however,
that neither any Borrower nor any of its Subsidiaries shall be required to
pay or discharge any such tax, assessment, charge or claim that is being
contested in good faith and by proper proceedings and as to which
appropriate reserves (to the extent required by GAAP) are being
maintained, unless and until any Lien (other than a Permitted Lien)
resulting therefrom attaches to its property and becomes enforceable
against its other creditors.
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is consistent with past practice and prudent business practices.
<PAGE> 49
45
(d) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its
existence, legal structure, legal name, rights (charter and statutory),
permits, licenses, approvals, privileges and franchises necessary to the
conduct of the business of such Borrower or such Subsidiary; provided,
however, that the Borrowers and their Subsidiaries may consummate any
merger or consolidation permitted under Section 5.02(d); and provided
further that no Borrower and none of its Subsidiaries shall be required to
preserve (i) any tax or exchange control approvals the absence of which
would not materially interfere with the conduct of the business of such
Borrower or such Subsidiary or (ii) any other right, permit, license,
approval, privilege or franchise if the Board of Directors of such
Borrower or such Subsidiary shall determine that the preservation thereof
is no longer desirable in the conduct of the business of such Borrower or
such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to such Borrower, such Subsidiary
or the Lender Parties.
(e) Visitation Rights. At any reasonable time and from time to time
upon reasonable notice, permit the Administrative Agent or any of the
Lender Parties or any agents or representatives thereof, to examine and
make copies of and abstracts from the records and books of account of, and
visit the properties of, such Borrower and any of its Subsidiaries, and to
discuss the affairs, finances and accounts of such Borrower and any of its
Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of such Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(h) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real
property to which such Borrower or any of its Subsidiaries is a party,
keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be forfeited
or canceled, notify the Administrative Agent of any default by any party
with respect to such leases and cooperate with the Administrative Agent in
all respects to cure any such default, and cause each of its Subsidiaries
to do so, except, in any case, where the failure to do so, either
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
(i) Performance of Related Documents. Perform and observe all of the
terms and provisions of each Related Document to be performed or observed
by it, maintain each such Related Document in full force and effect,
enforce such Related Document in accordance with its terms, take all such
action to such end as may be from time to time requested by the
Administrative Agent and, upon request of the Administrative Agent, make
to each other party to each such Related Document such demands and
requests for information and reports or for action as such Borrower is
entitled to make under such Related Document.
(j) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and not less favorable to such Borrower or such Subsidiary than
it would obtain in a comparable arm's-length transaction with a Person not
an Affiliate other than (i) transactions among the
<PAGE> 50
46
Loan Parties and (ii) commercial transactions with Affiliates of SBC
International Inc. that are consistent in nature, scope and terms with
past practices used by any Loan Party or Amdocs (Israel) with respect to
such Persons.
(k) Covenant to Give Security. Upon the request of the
Administrative Agent following the occurrence and during the continuance
of an Event of Default, and at the expense of such Borrower, (i) within 10
days after such request, furnish to the Administrative Agent a description
of the real and personal properties of such Borrower and its Subsidiaries
in detail satisfactory to the Administrative Agent, (ii) within 15 days
after such request, duly execute and deliver to the Administrative Agent
mortgages, pledges, assignments and other security agreements, as
specified by and in form and substance satisfactory to the Administrative
Agent, securing payment of all the Obligations of such Borrower under the
Loan Documents and constituting Liens on all such properties, (iii) within
30 days after such request, take whatever action (including, without
limitation, the recording of mortgages, the filing of Uniform Commercial
Code financing statements, the giving of notices and the endorsement of
notices on title documents) may be necessary or advisable in the opinion
of the Administrative Agent to vest in the Administrative Agent (or in any
representative of the Administrative Agent designated by it) valid and
subsisting Liens on the properties purported to be subject to the security
agreements delivered pursuant to this Section 5.01(k), enforceable against
all third parties in accordance with their terms, (iv) within 60 days
after such request, deliver to the Administrative Agent a signed copy of a
favorable opinion, addressed to the Administrative Agent, of counsel for
such Borrower acceptable to the Administrative Agent as to the matters
contained in clauses (i), (ii) and (iii) above, as to such security
agreements being legal, valid and binding obligations of such Borrower and
its Subsidiaries enforceable in accordance with their terms and as to such
other matters as the Administrative Agent may reasonably request and (v)
at any time and from time to time, promptly execute and deliver any and
all further instruments and documents and take all such other action as
the Administrative Agent may deem desirable in obtaining the full benefits
of, or in preserving the Liens of, such security agreements.
(l) Additional Loan Parties. Cause any newly organized or acquired
direct or indirect wholly owned Significant Subsidiary of such Borrower to
promptly execute and deliver to the Administrative Agent prior to any
Investment permitted by Section 5.02(f), and cause each Subsidiary which
is not a Guarantor but is indicated to be a Significant Subsidiary in the
audited financial statements delivered pursuant to Section 5.03(c) to
promptly execute and deliver to the Administrative Agent (i) a security
agreement supplement in the form of Exhibit C to the Security Agreement,
(ii) a Guaranty in form and substance satisfactory to the Administrative
Agent and the Lender Parties and (iii) such other documents, agreements,
certificates or instruments as the Administrative Agent may reasonably
request, in each case in form and substance reasonably satisfactory to the
Administrative Agent, and to take all such other actions that may be
necessary or that the Administrative Agent may deem reasonably desirable
in order to perfect and protect any pledge, assignment or security
interest granted by such security agreement (granting a security interest
in the receivables, inventory, deposit accounts, equipment, intellectual
property and other assets of such Significant Subsidiary) of such
Significant Subsidiary to the Administrative Agent for the benefit of the
Lender Parties) or to enable the Administrative Agent to exercise and
enforce its rights and remedies thereunder.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, no Borrower will, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien on or with respect to any of its properties of any character
(including, without limitation, accounts) whether now owned or hereafter
acquired, or sign or file or
<PAGE> 51
47
suffer to exist, or permit any of its Subsidiaries to sign or file or
suffer to exist, under the Uniform Commercial Code of any jurisdiction, a
financing statement that names such Borrower or any of its Subsidiaries as
debtor, or sign or suffer to exist, or permit any of its Subsidiaries to
sign or suffer to exist, any security agreement authorizing any secured
party thereunder to file such financing statement, or assign, or permit
any of its Subsidiaries to assign, any accounts or other right to receive
income, excluding, however, from the operation of the foregoing
restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and described on
Schedule 5.02(a) hereto;
(iv) purchase money Liens created by Amdocs (Israel), any
Subsidiary of a Borrower or any Borrower other than ESM upon or in
real property or equipment acquired or held by Amdocs (Israel), the
Borrowers or any of their Subsidiaries in the ordinary course of
business to secure the purchase price of such property or equipment
or to secure Debt incurred solely for the purpose of financing the
acquisition, construction or improvement of any such property or
equipment to be subject to such Liens, or Liens existing on any such
property or equipment at the time of acquisition (other than any
such Liens created in contemplation of such acquisition that do not
secure the purchase price), or extensions, renewals or replacements
of any of the foregoing for the same or a lesser amount; provided,
however, that no such Lien shall extend to or cover any property
other than the property or equipment being acquired, constructed or
improved, and no such extension, renewal or replacement shall extend
to or cover any property not theretofore subject to the Lien being
extended, renewed or replaced; and provided further that the
aggregate principal amount of the Debt secured by Liens permitted by
this clause (A) shall not exceed the amount permitted under Section
5.02(b)(iv)(A) at any time outstanding and that any such Debt shall
not otherwise be prohibited by the terms of the Loan Documents;
(v) Liens created by Amdocs (Israel), any Subsidiary of a
Borrower or any Borrower other than ESM arising in connection with
Capitalized Leases (including vehicle leases) permitted under
Section 5.02(b)(iv)(B); provided that no such Lien shall extend to
or cover any Collateral or assets other than the assets subject to
such Capitalized Leases including Liens in the lessee's rights under
such leases;
(vi) Liens created under the Subordinated Debt Documents;
(vii) Liens created by Amdocs (Israel) to secure Debt incurred
in accordance with Section 5.02(b)(v) and 5.02(b)(vi);
(viii) Liens on cash collateral advanced by its customers that
secure obligations incurred in the ordinary course of business
related to transactions with such customers or to secure letters of
credit that support such obligations;
(ix) Liens on cash collateral to secure obligations related to
transactions with vendors or related to Hedge Agreements other than
Bank Hedge Agreements or to secure letters of credit that support
such obligations in an aggregate amount of cash collateral permitted
under this clause (ix) not to exceed $5,000,000 at any time; and
<PAGE> 52
48
(x) the replacement, extension or renewal of any Lien
permitted by clause (iii) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or
contingent obligor) of the Debt secured thereby.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt
other than:
(i) in the case of ESM,
(A) Subordinated Debt evidenced by the Subordinated
Notes,
(B) Debt in respect of Hedge Agreements designed to
hedge against fluctuations in interest rates incurred in the
ordinary course of business and consistent with prudent
business practice in an aggregate notional amount (together
with Debt incurred pursuant to Section 5.02(b)(vii)(A)) not to
exceed $120,000,000 at any time outstanding;
(C) Debt in respect of Hedge Agreements designed to
hedge against fluctuations in foreign exchange rates incurred
in the ordinary course of business and consistent with past
practice; and
(D) Debt in respect of Redeemable Preferred Stock issued
to Persons that are shareholders of ESM on the date hereof
provided no mandatory redemption in respect thereof is
required at any time prior to the date that is six months
after the Termination Date;
(ii) in the case of Amdocs (Israel), any Borrower (other than
ESM) and its Subsidiaries, unsecured Debt in respect of performance
bonds in an aggregate principal amount for Amdocs (Israel), the
Borrowers and their Subsidiaries not to exceed the amount set forth
opposite each year set forth below at any time outstanding during
the Fiscal Year ending in such year:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $25,000,000
1999 40,000,000
2000 55,000,000
2001 and thereafter 60,000,000
</TABLE>
(iii) in the case of Amdocs (Israel), the Borrowers and any of
their Subsidiaries,
(A) Debt under the Loan Documents,
(B) the Surviving Debt,
(C) indorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary
course of business; and
(D) Debt owed to any Borrower or any other Loan Party;
<PAGE> 53
49
(iv) in the case of Amdocs (Israel), the Subsidiaries of any
Borrower or any Borrower other than ESM,
(A) Debt secured by Liens permitted by Section
5.02(a)(iv) in an aggregate principal amount for Amdocs
(Israel), the Borrowers and their Subsidiaries not to exceed
the amount set forth opposite each year set forth below at any
time outstanding during the Fiscal Year ending in such year:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $30,000,000
1999 45,000,000
2000 60,000,000
2001 and thereafter 60,000,000
</TABLE>
(B) Capitalized Leases (including vehicle leases) in an
aggregate principal amount for Amdocs (Israel), the Borrowers
and their Subsidiaries not to exceed the amount set forth
opposite each year set forth below incurred during the Fiscal
Year ending in such year:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $15,000,000
1999 18,000,000
2000 20,000,000
2001 and thereafter 20,000,000
</TABLE>
(C) any Debt extending the maturity of, or refunding or
refinancing, in whole or in part, any Surviving Debt, provided
that the terms of any such extending, refunding or refinancing
Debt, and of any agreement entered into and of any instrument
issued in connection therewith, are otherwise permitted by the
Loan Documents and provided further that the principal amount
of such Surviving Debt shall not be increased above the
principal amount thereof outstanding immediately prior to such
extension, refunding or refinancing, and the direct and
contingent obligors therefor shall not be changed, as a result
of or in connection with such extension, refunding or
refinancing,
(D) Debt of any Person that becomes a Subsidiary of a
Borrower or Amdocs (Israel) after the date hereof in
accordance with the terms of Section 5.02(f) that is existing
at the time such Person becomes a Subsidiary of such Borrower
or Amdocs (Israel) (other than Debt incurred solely in
contemplation of such Person becoming a Subsidiary of such
Borrower or Amdocs (Israel)),
(E) Debt of the type described in clause (i) of the
definition of "Debt" made in the ordinary course of business
guaranteeing (1) loans and advances made to employees by third
parties in an aggregate principal amount for Amdocs (Israel),
the Borrowers and their Subsidiaries not to exceed, together
with the amount of Investments permitted pursuant to Section
5.02(f)(ii), the amount set forth opposite each year set forth
below incurred during the Fiscal Year ending in such year:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $3,000,000
1999 5,000,000
2000 7,000,000
2001 and thereafter 9,000,000
</TABLE>
<PAGE> 54
50
(2) Obligations to customs officials in respect of the
importation of equipment in an aggregate amount for Amdocs
(Israel), the Borrowers and their Subsidiaries not to exceed
$1,000,000 at any time and (3) payments under lease
obligations for Amdocs (Israel), the Borrowers and their
Subsidiaries, and
(F) unsecured Debt not otherwise permitted under this
Section 5.02(b) in an aggregate principal amount for Amdocs
(Israel), the Borrowers and their Subsidiaries not to exceed
the amount set forth opposite each year set forth below at any
time outstanding during the Fiscal Year ending in such year:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $10,000,000
1999 20,000,000
2000 30,000,000
2001 and thereafter 35,000,000
</TABLE>
(v) in the case of Amdocs (Israel), Debt under a line of
credit to be established by First International Bank of Israel in an
aggregate principal amount outstanding not to exceed $40,000,000 at
any time, provided that the Lender Parties shall be reasonably
satisfied with the terms and conditions thereof, including, without
limitation, the term, covenants and events of default thereunder;
(vi) in the case of any Subsidiary of any Borrower, Debt owed
to a Borrower, provided that, in each case in which the amount of
such Debt is more than $2,000,000 or in which the maturity of such
Debt is more than one year, such Debt (x) shall constitute Pledged
Debt (as defined in the Security Agreement) and (y) shall be
evidenced by promissory notes in form and substance satisfactory to
the Administrative Agent and such promissory notes shall be pledged
as security for the Obligations of the holder hereof under the Loan
Documents to which the holder thereof is a party and delivered to
the Administrative Agent pursuant to the terms of the Collateral
Documents and provided further, that such Debt of Amdocs (Israel)
shall not exceed $20,000,000, such Debt of Directory Technology Pty.
Ltd. shall not exceed $10,000,000 and such Debt of Amdocs (Cyprus)
Ltd. shall not exceed $5,000,000; and
(vii) in the case of any Borrower other than ESM,
(A) Debt in respect of Hedge Agreements designed to
hedge against fluctuations in interest rates incurred in the
ordinary course of business and consistent with prudent
business practice and in an aggregate notional amount
(together with any Debt incurred pursuant to Section
5.02(b)(i)(A)) not to exceed $120,000,000 at any time
outstanding; and
(B) Debt in respect of Hedge Agreements designed to
hedge against fluctuations in foreign exchange rates incurred
in the ordinary course of business and consistent with past
practice.
(c) Lease Obligations. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any obligations as lessee for the rental or hire of
<PAGE> 55
51
real or personal property in connection with any sale and leaseback
transaction that would cause the direct and contingent liabilities of
Amdocs (Israel), the Borrowers and their Subsidiaries, on a Consolidated
basis, in respect of all such obligations of Amdocs (Israel), the
Borrowers and their Subsidiaries to exceed $15,000,000.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries to
do so, except that any Subsidiary of a Borrower or Amdocs (Israel), as the
case may be, may merge into or consolidate with any other Subsidiary of
such Borrower or Amdocs (Israel), as the case may be provided that, in the
case of any such merger or consolidation, the Person formed by such merger
or consolidation shall be a wholly-owned Subsidiary of such Borrower or
Amdocs (Israel), as the case may be, and, in the case of any such merger
or consolidation in which a Loan Party is a party, the Person formed by
such merger or consolidation shall be a Loan Party; provided, however,
that in each case, immediately after giving effect thereto, no event shall
occur and be continuing that constitutes a Default.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer or
otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets, except:
(i) sales of inventory or licensing of software in the
ordinary course of its business,
(ii) in a transaction authorized by subsection (d) of this
Section, and
(iii) sales of assets for cash and for fair value in an
aggregate amount for Amdocs (Israel), the Borrowers and their
Subsidiaries not to exceed $10,000,000 in any Fiscal Year.
(f) Investments in Other Persons. Make or hold, or permit any of its
Subsidiaries to make or hold, any Investment in any Person other than:
(i) Investments by Amdocs (Israel), the Borrowers and their
respective Subsidiaries in their Subsidiaries outstanding on the
date hereof;
(ii) loans and advances to employees in the ordinary course of
the business of Amdocs (Israel), the Borrowers and their
Subsidiaries as presently conducted in an aggregate principal amount
not to exceed, together with the amount of Debt permitted pursuant
to Section 5.02(b)(iv)(E)(1), the amount set forth opposite each
year set forth below incurred during the Fiscal Year ending in such
year:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $3,000,000
1999 5,000,000
2000 7,000,000
2001 and thereafter 9,000,000
</TABLE>
(iii) Investments by Amdocs (Israel), the Borrowers and their
Subsidiaries in Cash Equivalents;
(iv) Investments by ESM in Hedge Agreements permitted under
Section 5.02(b)(i)(B) and (C);
<PAGE> 56
52
(v) Investments existing on the date hereof and described on
Schedule 4.01(cc) hereto;
(vi) Investments by Amdocs (Israel) in any Subsidiary of ESM;
(vii) Investments in intercompany Debt permitted pursuant to
Section 5.02(b)(vi);
and
(viii) other Investments by Amdocs (Israel), any Borrower
other than ESM or by any Subsidiary of a Borrower in any entity that
concurrently with any such Investment becomes a Loan Party in an
aggregate amount invested not to exceed the amount set forth
opposite each year set forth below incurred during the Fiscal Year
ending in such year:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C> <C>
1998 $30,000,000
1999 40,000,000
2000 50,000,000
2001 and thereafter 60,000,000
</TABLE>
provided that with respect to Investments made under clause (viii) above:
(1) any newly acquired or created Subsidiary of any Borrower or any of its
Subsidiaries shall be a wholly owned Subsidiary thereof; (2) immediately
before and after giving effect thereto, no Default shall have occurred and
be continuing or would result therefrom; (3) any business acquired or
invested in pursuant to clause (viii) above shall be in the same line of
business as the business of such Borrower or any of its Subsidiaries; and
(4) for any Investments in an amount exceeding the amounts set forth
opposite each year set forth below for the Fiscal Year ended in such year
the Required Lenders shall be satisfied with the resulting organizational
and financial structure of the Borrowers and their Subsidiaries:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $25,000,000
1999 35,000,000
2000 40,000,000
2001 and thereafter 50,000,000
</TABLE>
(g) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its capital stock or
any warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, return any capital to its stockholders as such,
make any distribution of assets, capital stock, warrants, rights, options,
obligations or securities to its stockholders as such or issue or sell any
capital stock or any warrants, rights or options to acquire such capital
stock, or permit any of its Subsidiaries to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Borrower
or Amdocs (Israel), as the case may be, or any warrants, rights or options
to acquire such capital stock or to issue or sell any capital stock or any
warrants, rights or options to acquire such capital stock, except that, so
long as no Default shall have occurred and be continuing at the time of
any action described in clauses (i) through (v) below or would result
therefrom, (i) each Borrower and Amdocs (Israel) may declare and pay
dividends and distributions payable only in common stock of such Borrower
or Amdocs (Israel), as the case may be, (ii) any Subsidiary of such
Borrower or Amdocs (Israel), as the case may be, may declare and pay cash
dividends to such Borrower or Amdocs (Israel), as the case may be, and to
any other wholly-owned Subsidiary of such Borrower or Amdocs (Israel), as
the case may be, of which it is a Subsidiary, (iii) any Borrower or Amdocs
(Israel) may declare and pay cash dividends to Limited, provided that
Limited shall contemporaneously make a capital contribution or an
<PAGE> 57
53
advance to any Borrower in an amount equal to the cash proceeds of any
such dividend received by Limited; provided, however, that any such
advance shall have a maturity no earlier than a date that is one year
following the Termination Date, shall accrue cash interest no earlier than
a date that is one year following the Termination Date and shall be
subordinate to the Obligations of ESM under the Loan Documents on terms
acceptable to the Lender Parties, (iv) the Borrowers and Amdocs (Israel)
may declare and pay cash dividends to Limited in an aggregate amount not
to exceed 10% of Consolidated net income of Limited and its Subsidiaries,
arising after September 30, 1998 and computed on a cumulative basis and
(v) the Borrowers and Amdocs (Israel) may declare and pay cash dividends
to Limited to pay administrative and other expenses in an aggregate amount
not to exceed $2,000,000 in the Fiscal Year ended in 1998 and $1,000,000
in any Fiscal Year thereafter.
(h) Change in Nature of Business. (i) In the case of ESM, engage in
any business or activity other than (A) holding the capital stock of its
Subsidiaries and (B) entering into, and performing its obligations under,
the Loan Documents and the Related Documents and (ii) in the case of each
other Loan Party, make, or permit any of its Subsidiaries to make, any
material change in the nature of its business as carried on at the date
hereof.
(i) Charter Amendments. Amend, or permit any of its Subsidiaries to
amend, its certificate of incorporation or bylaws.
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as required by generally accepted accounting
principles or (ii) Fiscal Year.
(k) Prepayments, Etc. of Debt. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner,
or make any payment in violation of any subordination terms of, any Debt,
other than (i) the prepayment of the Advances in accordance with the terms
of this Agreement, (ii) the prepayment of advances made to Amdocs (Israel)
under the line of credit to be established by First International Bank of
Israel, (iii) regularly scheduled or required repayments or redemptions of
Surviving Debt, (iv) the prepayment of the Subordinated Notes, provided
that the amount of prepayment permitted under this clause (iv) shall not
exceed the result of (x) the aggregate amount of the Commitments minus (y)
$25,000,000 and (v) the prepayment of the Subordinated Notes payable in an
aggregate amount not to exceed (x) the aggregate amount of such
Subordinated Notes outstanding on June 29, 1998 minus (y) the aggregate
amount paid pursuant to the preceding subclause (iv), or amend, modify or
change in any manner any term or condition of any Surviving Debt or
Subordinated Debt, or permit any of its Subsidiaries to do any of the
foregoing other than to prepay any Debt payable to such Borrower.
(l) Amendment, Etc. of Related Documents. Cancel or terminate any
Related Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition of
any Related Document or give any consent, waiver or approval thereunder,
waive any default under or any breach of any term or condition of any
Related Document, agree in any manner to any other amendment, modification
or change of any term or condition of any Related Document or take any
other action in connection with any Related Document, in all cases, that
would impair the value of the interest or rights of such Borrower
thereunder or that would impair the rights or interests of the
Administrative Agent or any Lender Party, or permit any of its
Subsidiaries to do any of the foregoing.
(m) Negative Pledge. Enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets other than (i) in favor of the Secured
Parties or (ii) in connection with (A) any Surviving Debt or (B) any Debt
permitted by Section 5.02(b)(iv)(A) or (B) hereof so long as such
<PAGE> 58
54
limitation applies solely to the assets that are the subject of Liens or
Capitalized Leases referred to in such Sections.
(n) Partnerships, Etc. Become a general partner in any general or
limited partnership or similar joint venture, or permit any of its
Subsidiaries to do so, other than any Subsidiary the sole assets of which
consist of its interest in such partnership or joint venture.
(o) Speculative Transactions. Enter into, or permit any of its
Subsidiaries to enter into, in any transaction involving commodity options
or futures contracts or any similar speculative transactions (including,
without limitation, take-or-pay contracts), except for Hedge Agreements
permitted under Section 5.02(b).
(p) Capital Expenditures. Make, or permit any of its Subsidiaries to
make, any Capital Expenditures that would cause the aggregate of all such
Capital Expenditures made by Amdocs (Israel), the Borrowers and their
Subsidiaries in any period set forth below to exceed the amount set forth
below for such period:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING IN AMOUNT
--------------------- ------
<S> <C>
1998 $30,000,000
1999 35,000,000
2000 45,000,000
2001 63,000,000
</TABLE>
plus, for each Fiscal Year set forth above, an amount not more than the
amount set forth above for the immediately preceding Fiscal Year (the
"Prior Year") equal to the excess of the amount of Capital Expenditures
permitted to be made by the Borrowers, Amdocs (Israel) and their
Subsidiaries in such Prior Year over the aggregate amount of Capital
Expenditures made by the Borrowers, Amdocs (Israel) and their Subsidiaries
during such Prior Year.
(q) ERISA. Have, or permit any of its Subsidiaries or ERISA
Affiliate to have, any Multiemployer Plan or Multiple Employer Plan.
(r) Cash at Amdocs (Israel). In the case of Amdocs (Israel),
maintain an aggregate balance of cash and cash equivalents of more than
$20,000,000 for a period of more than 30 consecutive days.
SECTION 5.03. Reporting Requirements. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrowers will furnish to the
Administrative Agent in sufficient copies for each Lender Party as requested by
the Administrative Agent:
(a) Default Notice. As soon as possible and in any event within two
Business Days after the occurrence and continuation of each Default or any
event, development or occurrence reasonably likely to have a Material
Adverse Effect, a statement of the chief financial officer of ESM setting
forth details of such Default, event, development or occurrence and the
action that the Borrowers have taken and propose to take with respect
thereto.
(b) Quarterly Financials. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each
Fiscal Year, unaudited Consolidated and Consolidating balance sheets of
Limited and its Subsidiaries as of the end of such quarter and unaudited
Consolidated and Consolidating statements of income and an unaudited
Consolidated statement of cash flows of Limited
<PAGE> 59
55
and its Subsidiaries for the period commencing at the end of the previous
fiscal quarter and ending with the end of such fiscal quarter and
unaudited Consolidated and Consolidating statements of income and an
unaudited Consolidated statement of cash flows of Limited and its
Subsidiaries for the period commencing at the end of the previous Fiscal
Year and ending with the end of such quarter, setting forth in each case
in comparative form the corresponding figures for the corresponding period
of the preceding Fiscal Year, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer of
Limited as having been prepared in accordance with GAAP, together with (i)
a certificate of the chief financial officer of ESM stating that, to the
best of its knowledge, no Default has occurred and is continuing or, if a
Default has occurred and is continuing, a statement as to the nature
thereof and the action that the Borrowers have taken and propose to take
with respect thereto and (ii) a schedule in form satisfactory to the
Administrative Agent of the computations used by ESM in determining
compliance with the covenants contained in Sections 5.04(a) through (d).
(c) Annual Financials. As soon as available and in any event within
90 days after the end of each Fiscal Year, a copy of the annual audit
report for such year for Limited and its Subsidiaries, including therein
Consolidated and Consolidating balance sheets of Limited and its
Subsidiaries as of the end of such Fiscal Year and Consolidated and
Consolidating statements of income and a Consolidated statement of cash
flows of Limited and its Subsidiaries for such Fiscal Year, in each case
accompanied by an opinion reasonably acceptable to the Required Lenders of
Ernst & Young LLP or other independent public accountants of recognized
standing acceptable to the Required Lenders, together with (i) a
certificate of such accounting firm addressed to the Lender Parties
stating that in the course of the regular audit of the business of Limited
and its Subsidiaries, which audit was conducted by such accounting firm in
accordance with generally accepted auditing standards, such accounting
firm has obtained no knowledge that a Default has occurred and is
continuing, or if, in the opinion of such accounting firm, a Default has
occurred and is continuing, a statement as to the nature thereof, (ii) a
schedule in form satisfactory to the Administrative Agent of the
computations used by such accountants in determining, as of the end of
such Fiscal Year, compliance with the covenants contained in Sections
5.04(a) through (d) and (iii) a certificate of the chief financial officer
of ESM stating that no Default has occurred and is continuing or, if a
default has occurred and is continuing, a statement as to the nature
thereof and the action that the Borrowers have taken and propose to take
with respect thereto.
(d) Annual Forecasts. As soon as available and in any event no later
than 15 days before the end of each Fiscal Year, forecasts prepared by
management of the Borrowers, in form satisfactory to the Administrative
Agent, of Consolidated balance sheets, income statements and cash flow
statements on a quarterly basis for the Fiscal Year following such Fiscal
Year then ended and on an annual basis for each Fiscal Year thereafter
until 2001, together with a certificate of a Responsible Officer of ESM
stating that such forecasts were prepared in good faith on the basis of
assumptions which were believed to be reasonable at the time made in light
of the conditions existing at the time of delivery of such forecasts, and
represented, at the time of delivery, the Borrowers' best estimate of
their future financial performance.
(e) Litigation. Promptly after the commencement thereof, notice of
all actions, suits, investigations, litigation and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party or any of
its Subsidiaries of the type described in Section 4.01(i).
(f) Securities Reports. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports
that any Loan Party or any of its Subsidiaries sends to its stockholders,
and copies of all regular, periodic and special reports, and all
registration statements, that any Loan Party or any of its Subsidiaries
files with the Securities and Exchange Commission or any governmental
authority that may be substituted therefor, or with any national
securities exchange.
<PAGE> 60
56
(g) Agreement Notices. Promptly upon receipt thereof, copies of all
notices, requests and other documents received by any Loan Party or any of
its Subsidiaries under or pursuant to any Related Document or indenture,
loan or credit or similar agreement regarding or related to any breach or
default by any party thereto or any other event that could materially
impair the value of the interests or the rights of any Loan Party or
otherwise have a Material Adverse Effect and copies of any amendment,
modification or waiver of any provision of any Related Document or
indenture, loan or credit or similar agreement and, from time to time upon
request by the Administrative Agent, such information and reports
regarding the Related Documents as the Administrative Agent may reasonably
request.
(h) Revenue Agent Reports. Within 10 days after receipt, copies of
all Revenue Agent Reports (Internal Revenue Service Form 886), or other
written proposals of the Internal Revenue Service, that propose, determine
or otherwise set forth positive adjustments to the Federal income tax
liability of the affiliated group (within the meaning of Section
1504(a)(1) of the Internal Revenue Code) of which any Borrower is a member
aggregating $3,000,000 or more.
(i) Tax Certificates. Promptly, and in any event within five
Business Days after the due date (with extensions) for filing the final
Federal income tax return in respect of each taxable year, a certificate
(a "Tax Certificate"), signed by the President or the chief financial
officer of ESM, stating that each of Amdocs Inc. and Sypress, Inc. has
paid to the Internal Revenue Service or other taxing authority, or to such
Borrower, the full amount that such affiliated group is required to pay in
respect of Federal income tax for such year and that the Borrowers and
their Subsidiaries have received any amounts payable to them, and have not
paid amounts in respect of taxes (Federal, state, local or foreign) in
excess of the amount they are required to pay, under the Tax Agreements in
respect of such taxable year.
(j) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
any Lender Party (through the Administrative Agent) may from time to time
reasonably request in connection with its Commitment or Advances
hereunder.
SECTION 5.04. Financial Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the following financial covenants shall be
observed:
(a) Interest Coverage Ratio. Limited shall have maintained at the
end of each fiscal quarter of Limited ending on or after September 30,
1998 a ratio of Consolidated EBITDA of Limited and its Subsidiaries to
Annualized Interest Expense of not less than 3.50:1.00.
(b) Leverage Ratio. Limited shall have maintained at the end of each
fiscal quarter of Limited ending on or after September 30, 1998 a Leverage
Ratio of not more than 2.50:1.00.
(c) Fixed Charge Coverage Ratio. Limited shall have maintained at
the end of each fiscal quarter of Limited ending on or after September 30,
1998 a ratio of (i) Consolidated EBITDA of Limited and its Subsidiaries
minus Capital Expenditures of Limited and its Subsidiaries to the sum of
(i) Annualized Interest Expense plus (ii) Scheduled Principal Payments of
Limited and its Subsidiaries plus (iii) Cash Taxes payable by Limited and
its Subsidiaries of, in the case of the fiscal quarter ended September 30,
1998, 1.75:1.00 and, in the case of each fiscal quarter ended on or after
December 31, 1998, not less than 2.00:1.00.
<PAGE> 61
57
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) (i) any Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) any Borrower shall fail
to pay any interest on any Advance, or any Loan Party shall fail to make
any other payment under any Loan Document, in each case under this clause
(ii) within three Business Days after the same becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) any Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 2.14, 5.01(d), (e), (j), (k) or (l),
5.02 or 5.03; or
(d) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 10 Business Days
after the earlier of the date on which (A) a Responsible Officer of any
Loan Party becomes aware of such failure or (B) written notice thereof
shall have been given to such Loan Party by the Administrative Agent or
any Lender Party; or (e) any Loan Party, Amdocs (Israel) or any of their
respective Subsidiaries shall fail to pay any principal of or premium or
interest on any Debt that is outstanding in a principal or notional amount
of at least $10,000,000 either individually or in the aggregate (but
excluding Debt outstanding hereunder) of such Loan Party, Amdocs (Israel)
or such Subsidiary (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist under
any agreement or instrument relating to any such Debt and shall not have
been waived and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity
of such Debt or otherwise to cause, or to permit the holder thereof to
cause, such Debt to mature; or any such Debt shall be declared to be due
and payable or required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) any Loan Party, Amdocs (Israel) or any of their respective
Subsidiaries shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against any Loan Party, Amdocs
(Israel) or any of their respective Subsidiaries seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and,
in the case of any such proceeding instituted against it (but not
instituted by it) that is being diligently contested by it in good faith,
either such proceeding shall remain undismissed or unstayed for a period
of 60 days or any of
<PAGE> 62
58
the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or any substantial
part of its property) shall occur; or any Loan Party, Amdocs (Israel) or
any of their respective Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against any Loan Party, Amdocs (Israel) or
any of their respective Subsidiaries and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment
or order or (ii) there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect and such judgment or
order remains unsatisfied; or
(h) any non-monetary judgment or order shall be rendered against any
Loan Party, Amdocs (Israel) or any of their respective Subsidiaries that
is reasonably likely to have a Material Adverse Effect, and there shall be
any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01, 5.01(k) or 5.01(l) shall for any reason cease to
be valid and binding on or enforceable against any Loan Party party to it,
or any such Loan Party shall so state in writing; or
(j) any Collateral Document after delivery thereof pursuant to
Section 3.01, 5.01(k) or 5.01(l) shall for any reason (other than pursuant
to the terms thereof) cease to create a valid and perfected first priority
lien on and security interest in the Collateral purported to be covered
thereby (other than Collateral which is de minimus in value), to the
extent required by, and subject to exceptions permitted in the Loan
Documents; or
(k) the Consolidated financial condition or results of operations of
Limited and its Subsidiaries shall fail to be in compliance with any
financial covenant contained in Section 5.04; or
(l) (i) during any period of up to 24 consecutive months, commencing
after the date of this Agreement, individuals (or their designees or other
individuals appointed by the same designating party) who at the beginning
of such 24-month period were directors of Limited (together with any new
directors whose election to the board of directors of Limited or whose
nomination for election by the shareholders of Limited was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) shall cease for any reason to
constitute a majority of the board of directors of Limited; or (ii) any
Person or two or more Persons acting in concert other than the Equity
Investors or SBC International Inc. shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of the power to
exercise, directly or indirectly, a controlling influence over the
management or policies of Limited; or (iii) any Equity Investor shall
create or suffer to exist any Lien on Voting Stock of Limited that
effectively transfers the voting power thereof to a third party; or (iv)
Limited shall create or suffer to exist any Lien on the Voting Stock of
ESM; or (v) any Person or two or more Persons acting in concert (other
than the Equity Investors, SBC International Inc. or Morris Kahn) shall
have acquired beneficial ownership (within the meaning of Rule 14-d-3 of
the Securities and Exchange Commission under the Securities Exchange Act
of 1934), directly or indirectly, of Voting Stock of Limited (or
securities convertible into such Voting Stock) representing 20% or more of
the combined voting power of all Voting Stock of Limited; or
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(m) any Loan Party or any ERISA Affiliate shall have any
Multiemployer Plan or Multiple Employer Plan; or
(n) Limited shall conduct or engage in any business or activities
other than those incidental to holding, or shall cease to own directly or
indirectly 100% of, the capital stock of the Borrowers or Amdocs (Israel);
or
(o) Amdocs (Israel) shall have failed to observe any provision
contained in Article V of this Agreement to the same extent as if Amdocs
(Israel) were a Borrower hereunder;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrowers,
declare the obligation of each Appropriate Lender to make Advances (other than
Letter of Credit Advances by the Issuing Bank or a Lender pursuant to Section
2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of
the Issuing Bank to issue Letters of Credit to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrowers, declare the Notes,
all interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Notes, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers; provided, however, that
in the event of an actual or deemed entry of an order for relief with respect to
any Loan Party under the Federal Bankruptcy Code, (x) the obligation of each
Lender to make Advances (other than Letter of Credit Advances by the Issuing
Bank or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender
pursuant to Section 2.02(b)) and of the Issuing Bank to issue Letters of Credit
shall automatically be terminated and (y) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrowers.
SECTION 6.02. Actions in Respect of the Letters of Credit upon
Default. If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon each Borrower to, and forthwith upon such
demand such Borrower will, pay to the Administrative Agent on behalf of the
Lender Parties in same day funds at the Administrative Agent's office designated
in such demand, for deposit in the L/C Cash Collateral Account, an amount equal
to the aggregate Available Amount of all Letters of Credit requested by such
Borrower then outstanding. If at any time the Administrative Agent determines
that any funds held in the L/C Cash Collateral Account are subject to any right
or claim of any Person other than the Administrative Agent and the Lender
Parties or that the total amount of such funds is less than the aggregate
Available Amount of all Letters of Credit, the applicable Borrower will,
forthwith upon demand by the Administrative Agent, pay to the Administrative
Agent, as additional funds to be deposited and held in the L/C Cash Collateral
Account, an amount equal to the excess of (a) such aggregate Available Amount
over (b) the total amount of funds, if any, then held in the L/C Cash Collateral
Account that the Administrative Agent determines to be free and clear of any
such right and claim.
ARTICLE VII
ESM GUARANTY
SECTION 7.01. Guaranty. ESM hereby unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of each other Loan Party organized
under the laws of a jurisdiction outside of the United States now or hereafter
existing
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under any Loan Document, whether for principal, interest, fees, expenses or
otherwise (such obligations, to the extent not paid by such Loan Party, being
the "Guaranteed Obligations"), and agrees to pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Administrative Agent or
the Lenders in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, ESM's liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by any other
Loan Party to the Administrative Agent or any Lender Party under any Loan
Document but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
any such Loan Party.
SECTION 7.02. Guaranty Absolute. ESM guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the
Administrative Agent or the Lender Parties with respect thereto. The obligations
of ESM under this Article VII are independent of the Guaranteed Obligations, and
a separate action or actions may be brought and prosecuted against ESM to
enforce this Article VII, irrespective of whether any action is brought against
any other Loan Party or whether any such Loan Party is joined in any such action
or actions. The liability of ESM under this Article VII shall be irrevocable,
absolute and unconditional irrespective of, and ESM hereby irrevocably waives
any defenses it may now or hereafter have in any way relating to, any or all of
the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any other Loan Party
or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any change, restructuring or termination of the corporate
structure or existence of any other Loan Party; or
(e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Administrative Agent or any Lender Party that might
otherwise constitute a defense available to, or a discharge of, ESM, any
other Loan Party or any other guarantor or surety.
This Article VII shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Administrative Agent or any
Lender Party upon the insolvency, bankruptcy or reorganization of any Loan Party
or otherwise, all as though such payment had not been made.
SECTION 7.03. Waiver. ESM hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Article VII and any requirement that the Administrative
Agent or any Lender Party exhaust any right or take any action against any other
Loan Party or any other Person or any Collateral. ESM acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 7.03 is
knowingly made in contemplation of such benefits. ESM hereby waives any right to
revoke this Article VII, and acknowledges that
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this Article VII is continuing in nature and applies to all Guaranteed
Obligations, whether existing now or in the future.
SECTION 7.04. Continuing Guaranty; Assignments. This Article VII is
a continuing guaranty and shall (a) remain in full force and effect until the
later of the cash payment in full of the Guaranteed Obligations and all other
amounts payable under this Article VII and the Termination Date, (b) be binding
upon ESM, its successors and assigns and (c) inure to the benefit of and be
enforceable by the Lender Parties, the Administrative Agent and their
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Lender Party may assign or otherwise transfer all or
any portion of its rights and obligations hereunder (including, without
limitation, all or any portion of its Commitments, the Advances owing to it and
the Note or Notes held by it) to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender Party herein or otherwise, in each case as provided in Section 9.07.
SECTION 7.05. Subrogation. ESM will not exercise any rights that it
may now or hereafter acquire against any other Loan Party or any other insider
guarantor that arise from the existence, payment, performance or enforcement of
ESM's obligations under this Agreement, including, without limitation, any right
of subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy of the Administrative Agent or
any Lender Party against a Loan Party or any other insider guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from a Loan Party or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless and
until all of the Guaranteed Obligations and all other amounts payable under this
Article VII shall have been paid in full in cash and the Termination Date shall
have occurred. If any amount shall be paid to ESM in violation of the preceding
sentence at any time prior to the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Article VII and
the Termination Date, such amount shall be held in trust for the benefit of the
Administrative Agent and the Lender Parties and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Guaranteed Obligations
and all other amounts payable under this Article VII, whether matured or
unmatured, in accordance with the terms of this Agreement, or to be held as
collateral for any Guaranteed Obligations or other amounts payable under this
Article VII thereafter arising. If (i) ESM shall make payment to the
Administrative Agent or any Lender Party of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts
payable under this Article VII shall be paid in full in cash and (iii) the
Termination Date shall have occurred, the Administrative Agent and the Lender
Parties will, at ESM's request and expense, execute and deliver to ESM
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to ESM of an interest in the
Guaranteed Obligations resulting from such payment by ESM.
ARTICLE VIII
THE AGENTS
SECTION 8.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender, the Swing Line Bank (if applicable), the Issuing Bank
(if applicable) and a potential Hedge Bank) hereby irrevocably appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Loan Documents as are delegated to the Administrative Agent by the terms hereof
and thereof, together with such powers and discretion as are reasonably
incidental thereto. The Administrative Agent, its Affiliates and its or its
Affiliates directors, officers, agents and employees shall not have any duties
or responsibilities except that those expressly set forth in this Agreement and
shall not be
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a trustee or fiduciary for any Lender Party. As to any matters not expressly
provided for by the Loan Documents (including, without limitation, enforcement
or collection of the Notes), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action that exposes the Administrative Agent to personal liability or that
is contrary to this Agreement, any Loan Document or applicable law or unless the
Administrative Agent shall first be indemnified to its satisfaction by the
Lender Parties against any and all liability and expense which may be incurred
by the Administrative Agent by reason of taking any such action. Each Lender
Party (in its capacities as a Lender, the Swing Line Bank (if applicable), the
Issuing Bank (if applicable) and a potential Hedge Bank) hereby agrees that the
Agents other than the Administrative Agent shall have no duties under this
Agreement or applicable law. The Administrative Agent agrees to give to each
Lender Party prompt notice of each notice given to it by the Borrowers pursuant
to the terms of this Agreement.
SECTION 8.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent, its Affiliates nor any of its or its Affiliates'
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with the Loan
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Administrative Agent:
(a) may treat the payee of any Note as the holder thereof until the
Administrative Agent receives and accepts an Assumption Agreement entered into
by an Assuming Lender as provided in Section 2.16 or an Assignment and
Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
(b) may consult with and rely on legal counsel (including counsel for any Loan
Party), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (c)
makes no warranty or representation to any Lender Party and shall not be
responsible to any Lender Party for any recitals, statements, warranties or
representations (whether written or oral) made in or in connection with the Loan
Documents or any certificate or other document referred to or provided for in,
or received by any of them under, any Loan Document; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of any Loan Document on the part of any Loan
Party or to inspect the property (including the books and records) of any Loan
Party; (e) shall not be responsible to any Lender Party for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or purported to
be created under or in connection with, any Loan Document or any other
instrument or document furnished pursuant thereto; (f) shall not be required to
initiate or conduct any litigation or collection proceedings under any Loan
Document; (g) shall be entitled to rely upon any certification, notice,
instrument, writing or other communication (including, without limitation, any
thereof by telephone or telecopy) believed by it to be genuine and correct and
to have been signed, sent or made by or on behalf of the proper Person or
Persons; and (h) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, telecopy or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 8.03. NationsBank and Affiliates. With respect to its
Commitments, the Advances made by it and the Notes issued to it, NationsBank
shall have the same rights and powers under the Loan Documents as any other
Lender Party and may exercise the same as though it were not the Administrative
Agent; and the term "Lender Party" or "Lender Parties" shall, unless otherwise
expressly indicated, include NationsBank in its individual capacity. NationsBank
(and any successor acting as Administrative Agent) and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from, accept fees and other consideration from
and generally engage in any kind of business with, any Loan Party, any of its
Subsidiaries and any Person who may do business with or own securities of any
Loan Party or any such Subsidiary, all as if NationsBank were not the
Administrative Agent and without any duty to account therefor to the Lender
Parties.
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SECTION 8.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender Party and based on the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and the Loan Documents. Each Lender Party also acknowledges
that it will, independently and without reliance upon the Administrative Agent
or any other Lender Party and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the Loan Documents. Except
for notices, reports and other documents and information expressly required to
be furnished to the Lender Parties by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender Party with any credit or other information concerning the affairs,
financial condition or business of any Loan Party or any of its Subsidiaries or
Affiliates that may come into the possession of the Administrative Agent or any
of its Affiliates.
SECTION 8.05. Indemnification. (a) Each Lender Party severally
agrees to indemnify the Administrative Agent (to the extent not promptly
reimbursed by the Borrowers) from and against such Lender Party's ratable share
(determined as provided below) of any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by, or
asserted against the Administrative Agent in any way relating to or arising out
of the Loan Documents or any action taken or omitted by the Administrative Agent
under the Loan Documents (including any of the foregoing arising from the
negligence of the Administrative Agent); provided, however, that no Lender Party
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's gross negligence or willful misconduct
or breach of its obligations set forth in this Agreement. Without limitation of
the foregoing, each Lender Party agrees to reimburse the Administrative Agent
promptly upon demand for its ratable share of any costs and expenses (including,
without limitation, fees and expenses of counsel) payable by the Borrowers under
Section 9.04, to the extent that the Administrative Agent is not promptly
reimbursed for such costs and expenses by the Borrowers. For purposes of this
Section 8.05(a), the Lender Parties' respective ratable shares of any amount
shall be determined, at any time, according to the sum of (a) the aggregate
principal amount of the Advances outstanding at such time and owing to the
respective Lender Parties, (b) their respective Pro Rata Shares of the aggregate
Available Amount of all Letters of Credit outstanding at such and (c) their
respective Unused Revolving Credit Commitments at such time; provided that the
aggregate principal amount of Swing Line Advances owing to the Swing Line Bank
and of Letter of Credit Advances owing to the Issuing Bank shall be considered
to be owed to the Revolving Credit Lenders ratably in accordance with their
respective Revolving Credit Commitments. In the event that any Defaulted Advance
shall be owing by any Defaulting Lender at any time, such Lender Party's
Commitment with respect to the Facility under which such Defaulted Advance was
required to have been made shall be considered to be unused for purposes of this
Section 8.05(a) to the extent of the amount of such Defaulted Advance. The
failure of any Lender Party to reimburse the Administrative Agent promptly upon
demand for its ratable share of any amount required to be paid by the Lender
Party to the Administrative Agent as provided herein shall not relieve any other
Lender Party of its obligation hereunder to reimburse the Administrative Agent
for its ratable share of such amount, but no Lender Party shall be responsible
for the failure of any other Lender Party to reimburse the Administrative Agent
for such other Lender Party's ratable share of such amount. Without prejudice to
the survival of any other agreement of any Lender Party hereunder, the agreement
and obligations of each Lender Party contained in this Section 8.05(a) shall
survive the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrowers) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or
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omitted by the Issuing Bank under the Loan Documents; provided, however, that no
Lender Party shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Issuing Bank's gross negligence or willful
misconduct or breach of its obligations set forth in this Agreement. Without
limitation of the foregoing, each Lender Party agrees to reimburse the Issuing
Bank promptly upon demand for its ratable share of any costs and expenses
(including, without limitation, fees and expenses of counsel) payable by the
Borrowers under Section 9.04, to the extent that the Issuing Bank is not
promptly reimbursed for such costs and expenses by such Borrowers. For purposes
of this Section 8.05(b), the Lender Parties' respective ratable shares of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time
plus (c) their respective Unused Revolving Credit Commitments at such time;
provided that the aggregate principal amount of Swing Line Advances owing to the
Swing Line Bank and of Letter of Credit Advances owing to the Issuing Bank shall
be considered to be owed to the Lenders ratably in accordance with their
respective Revolving Credit Commitments. In the event that any Defaulted Advance
shall be owing by any Defaulting Lender at any time, such Lender Party's
Commitment with respect to the Facility under which such Defaulted Advance was
required to have been made shall be considered to be unused for purposes of this
Section 8.05(b) to the extent of the amount of such Defaulted Advance. The
failure of any Lender Party to reimburse the Issuing Bank promptly upon demand
for its ratable share of any amount required to be paid by the Lender Parties to
the Issuing Bank as provided herein shall not relieve any other Lender Party of
its obligation hereunder to reimburse the Issuing Bank for its ratable share of
such amount, but no Lender Party shall be responsible for the failure of any
other Lender Party to reimburse the Issuing Bank for such other Lender Party's
ratable share of such amount. Without prejudice to the survival of any other
agreement of any Lender Party hereunder, the agreement and obligations of each
Lender Party contained in this Section 8.05(b) shall survive the payment in full
of principal, interest and all other amounts payable hereunder and under the
other Loan Documents.
SECTION 8.06. Successor Administrative Agent. The Administrative
Agent may resign as to any or all of the Facilities at any time by giving
written notice thereof to the Lender Parties and the Borrowers and may be
removed as to all of the Facilities at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Administrative Agent as to such of
the Facilities as to which the Administrative Agent has resigned or been
removed. If no successor Administrative Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lender Parties, appoint a
successor Administrative Agent, which successor Administrative Agent shall be a
commercial bank organized under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $250,000,000. Upon
the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent as to all of the Facilities and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Administrative Agent shall succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations under the Loan Documents. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent as to less than all of the Facilities and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Administrative Agent shall succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Administrative Agent as to such Facilities, other than with respect to
funds transfers and other similar aspects of the administration of
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Borrowings under such Facilities, issuances of Letters of Credit
(notwithstanding any resignation as Administrative Agent with respect to the
Letter of Credit Facility) and payments by the Borrowers in respect of such
Facilities, and the retiring Administrative Agent shall be discharged from its
duties and obligations under this Agreement as to such Facilities, other than as
aforesaid. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent as to all of the Facilities, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent as to any Facilities under
this Agreement.
SECTION 8.07. Defaults. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of a Default unless the
Administrative Agent has received written notice from a Lender Party or a
Borrower specifying such Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives such a Notice of
Default, the Administrative Agent shall give prompt notice thereof to the Lender
Parties. The Administrative Agent shall (subject to Article VI) take such action
with respect to such Default as shall reasonably be directed by the Required
Lenders; provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the Lender
Parties.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by any Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed (or, in the case of the
Collateral Documents, consented to) by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that (a) no amendment,
waiver or consent shall, unless in writing and signed by all of the Lenders
(other than any Lender Party that is, at such time, a Defaulting Lender), do any
of the following at any time: (i) waive any of the conditions specified in
Section 3.01 or, in the case of the Initial Extension of Credit, Section 3.02,
(ii) change the number of Lenders or the percentage of (x) the Commitments, (y)
the aggregate unpaid principal amount of the Advances or (z) the aggregate
Available Amount of outstanding Letters of Credit that, in each case, shall be
required for the Lenders or any of them to take any action hereunder, (iii)
reduce or limit the obligations of the Guarantor under Section 1 of the Guaranty
or otherwise limit the Guarantor's liability with respect to the Obligations
owing to the Administrative Agent and the Lender Parties, (iv) release all or
substantially all of the Collateral in any transaction or series of related
transactions or permit the creation, incurrence, assumption or existence of any
Lien on all or substantially all of the Collateral in any transaction or series
of related transactions to secure any Obligations other than Obligations owing
to the Secured Parties under the Loan Documents, (v) amend this Section 9.01, or
(vi) limit the liability of any Loan Party under any of the Loan Documents and
(b) no amendment, waiver or consent shall, unless in writing and signed by the
Required Lenders and each Lender that is affected by such amendment, waiver or
consent, (i) increase the Commitments of such Lender or subject such Lender to
any additional obligations, (ii) reduce the principal of, or interest on,
Advances payable to such Lender or any fees or other amounts payable hereunder
to such Lender, (iii) postpone any date fixed for any payment of principal of,
or interest on, the Advances payable to such Lender or any fees or other amounts
payable hereunder to such Lender or (iv) change the order of application of any
prepayment set forth in Section 2.06 in any manner that materially affects such
Lender; provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Swing Line Bank or the Issuing Bank, as the case may
be, in addition to the Lenders required above to take such action, affect the
rights or obligations of the Swing Line Bank or of the Issuing Bank, as the case
may be, under this Agreement; and provided further that no amendment, waiver or
consent shall, unless in writing and
<PAGE> 70
66
signed by the Administrative Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Administrative Agent under
this Agreement.
SECTION 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered,
if to ESM, at its address at Sarnia Management Corporation Limited, P.O. Box
263, Suite 5, Tower Hill House, Bordage, St. Peter Port, Guernsey, Channel
Islands GY13QT, Attention Lisa Davey; if to Amdocs UK, at its address at Taylor,
Joynson, Garrett, Carmelite, 50 Victoria Embankment, Blackfriars, London EC4Y
0DX, UK, Attention: Diarnuid Cumming; if to Amdocs Inc., at its address at 1610
Des Peres Road, Suite 170, St. Louis, Missouri 63131, USA, Attention: Thomas G.
O'Brien; if to CADET, at its address at 2129 Barrett Station Road, Suite 302,
St. Louis, Missouri 63131, USA, Attention: Amos Galon; if to Amdocs USA, at its
address at 1610 Des Peres Road, Suite 170, St. Louis, Missouri 63131 USA,
Attention: Jeffery D. Wilson; if to any Initial Lender or the Initial Issuing
Bank, at its Domestic Lending Office specified opposite its name on Schedule I
hereto; if to any other Lender Party, at its Domestic Lending Office specified
in the Assignment and Acceptance pursuant to which it became a Lender Party; and
if to the Administrative Agent, at its address at 901 Main Street, Dallas, Texas
75202, Attention: Yousef Omar; or, as to the Borrowers or the Administrative
Agent, at such other address as shall be designated by such party in a written
notice to the other parties and, as to each other party, at such other address
as shall be designated by such party in a written notice to ESM and the
Administrative Agent. All such notices and communications shall, when mailed,
telegraphed, telecopied or telexed, be effective when deposited in the mails,
delivered to the telegraph company, transmitted by telecopier or confirmed by
telex answerback, respectively, except that notices and communications to the
Administrative Agent pursuant to Article II, III or VII shall not be effective
until received by the Administrative Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any
Lender Party or the Administrative Agent to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 9.04. Costs and Expenses. (a) The Borrowers jointly and
severally agree to pay on demand (i) all reasonable costs and expenses of the
Administrative Agent and the Arrangers in connection with the preparation,
execution, delivery, administration, modification and amendment of the Loan
Documents (including, without limitation, (A) all reasonable due diligence,
collateral review, syndication, transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees and
expenses and (B) the reasonable fees and expenses of counsel for the
Administrative Agent with respect thereto, with respect to advising the
Administrative Agent as to its rights and responsibilities, or the perfection,
protection or preservation of rights or interests, under the Loan Documents,
with respect to negotiations with any Loan Party or with other creditors of any
Loan Party or any of its Subsidiaries arising out of any Default or any events
or circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto) and (ii) all costs and expenses of the
Administrative Agent and the Lender Parties in connection with the enforcement
of the Loan Documents, whether in any action, suit or litigation, any
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally (including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent and each Lender Party with respect
thereto).
(b) Each Borrower agrees to indemnify and hold harmless the
Administrative Agent, each Lender Party and each of their Affiliates and their
officers, directors, employees, agents and advisors (each, an
<PAGE> 71
67
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in connection therewith)
(i) the Facilities, the actual or proposed use of the proceeds of the Advances
or the Letters of Credit, the Loan Documents or any of the transactions
contemplated thereby, including, without limitation, any acquisition or proposed
acquisition (including, without limitation, the transactions contemplated
hereby) by the Equity Investors or any of their Subsidiaries or Affiliates of
all or any portion of the stock or substantially all the assets of Limited or
any of its Subsidiaries or (ii) the actual or alleged presence of Hazardous
Materials on any property of any Loan Party or any of its Subsidiaries or any
Environmental Action relating in any way to any Loan Party or any of its
Subsidiaries, except to the extent such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct or breach of the obligations of such Indemnified Party set
forth in this Agreement. In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section 9.04(b) applies, such
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by any Loan Party, its directors, shareholders or
creditors or an Indemnified Party or any Indemnified Party is otherwise a party
thereto and whether or not the transactions contemplated hereby are consummated.
The Borrowers also agree not to assert any claim against the Administrative
Agent, any Lender Party or any of their Affiliates, or any of their respective
officers, directors, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to the Facilities, the actual or proposed use of the
proceeds of the Advances or the Letters of Credit, the Loan Documents or any of
the transactions contemplated thereby.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by any Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, such Borrower shall, upon demand by such Lender Party (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender Party any amounts required to compensate such Lender
Party for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender
Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent or any Lender
Party, in its sole discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrowers contained in Sections 2.10 and 2.12 and this
Section 9.04 shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under any of the other Loan Documents.
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) other than
payroll accounts maintained in the ordinary course of business at any time held
and other indebtedness at any time owing by such Lender Party or such Affiliate
to or for
<PAGE> 72
68
the credit or the account of any Borrower against any and all of the Obligations
of such Borrower now or hereafter existing under this Agreement and the Note or
Notes (if any) held by such Lender Party, irrespective of whether such Lender
Party shall have made any demand under this Agreement or such Note or Notes and
although such obligations may be unmatured. Each Lender Party agrees promptly to
notify the applicable Borrower after any such set-off and application; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender Party and its respective
Affiliates under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that such Lender Party
and its respective Affiliates may have.
SECTION 9.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrowers and the Administrative Agent
and when the Administrative Agent shall have been notified by each Initial
Lender and the Initial Issuing Bank that such Initial Lender and the Initial
Issuing Bank has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrowers, the Administrative Agent and each Lender Party and
their respective successors and assigns, except that no Borrower shall have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lender Parties.
SECTION 9.07. Assignments and Participations. (a) Each Lender may
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, the Advances owing to it and the Note
or Notes held by it); provided, however, that (i) each such assignment shall be
of a uniform, and not a varying, percentage of all rights and obligations under
and in respect of one or more Facilities, (ii) except in the case of an
assignment to a Person that, immediately prior to such assignment, was a Lender
or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$5,000,000, (iii) each such assignment shall be to an Eligible Assignee, (iv) no
such assignments shall be permitted without the consent of the Administrative
Agent until the Administrative Agent shall have notified the Lender Parties that
syndication of the Commitments hereunder has been completed, (v) each of the
Administrative Agent and, so long as no Default has occurred and is continuing,
ESM has consented to such assignment (which consent shall not be unreasonably
withheld or delayed, and such approval shall be deemed given by ESM if no
objection is received by the assigning Lender and the Administrative Agent
within two Business Days after notice of such proposed assignment is delivered
to ESM) and (vi) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,500.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as
the case may be, hereunder and (y) the Lender or Issuing Bank assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's or Issuing Bank's rights and obligations under this
Agreement, such Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution,
<PAGE> 73
69
legality, validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or purported to
be created under or in connection with, this Agreement or any other Loan
Document or any other instrument or document furnished pursuant hereto or
thereto; (ii) such assigning Lender Party makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrowers or any other Loan Party or the performance or observance by any Loan
Party of any of its obligations under any Loan Document or any other instrument
or document furnished pursuant thereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Administrative Agent, such assigning
Lender Party or any other Lender Party and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Loan Documents as
are delegated to the Administrative Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender or Issuing Bank, as the case may be.
(d) The Administrative Agent, acting for this purpose (but only for
this purpose) as the agent of the Borrowers, shall maintain at its address
referred to in Section 9.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lender Parties and the Commitment under each Facility of, and
principal amount of the Advances owing under each Facility to, each Lender Party
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Administrative Agent and the Lender Parties shall treat each
Person whose name is recorded in the Register as a Lender Party hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by any Borrower or any Lender Party at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to ESM.
In the case of any assignment by a Lender, within five Business Days after its
receipt of such notice, each Borrower, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for the surrendered Note or
Notes a new Note to the order of such Eligible Assignee in an amount equal to
the Commitment assumed by it under a Facility pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder
under such Facility, a new Note to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit A hereto.
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment at any time; provided, however, that (i) each such assignment shall
be to an Eligible Assignee, (ii) each of the Administrative Agent and, so long
as no Default has occurred and is continuing, ESM has consented to such
assignment (which consent shall not be unreasonably withheld or delayed, and
such approval shall be deemed given by ESM if no objection is received by the
Issuing Bank and the Administrative Agent from ESM within two Business Days
after notice of such proposed assignment is delivered to ESM) and (iii) the
parties to each such assignment shall execute and deliver to the Administrative
<PAGE> 74
70
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with a processing and recordation fee of $3,500.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) the amount
of the Commitment or Advances being participated shall in no event be less than
$5,000,000, (ii) such Lender Party's obligations under this Agreement
(including, without limitation, its Commitments) shall remain unchanged as if it
had not sold such participation, (iii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iv) such Lender Party shall remain the holder of any such Note for all purposes
of this Agreement, (v) the Borrowers, the Administrative Agent and the other
Lender Parties shall continue to deal solely and directly with such Lender Party
in connection with such Lender Party's rights and obligations under this
Agreement and (vi) no participant under any such participation shall have any
right under any Loan Document, including without limitation the right to require
such Lender Party to take or to omit to take any action hereunder or approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would reduce or postpone the date fixed for any payment of the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder (except any reductions specified in this Agreement), in each case to
the extent subject to such participation, or release all or substantially all of
the Collateral. Except in the case of the sale of a participating interest to
another Lender Party, the relevant participation agreement shall prohibit the
participant from transferring, pledging, assigning, selling participations in,
or otherwise encumbering its portion of such Lender Party's obligations
hereunder.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Lender
Party by or on behalf of the Borrowers; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party by executing a confidentiality agreement
in the form of Exhibit K hereto with such Lender Party. Such Lender Party shall
notify the Borrowers in writing of the identity of any assignee or proposed
assignee, and, upon request, such Lender Party shall provide any Borrower with a
copy of such executed confidentiality agreement.
(i) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 9.08. Execution in Counterparts. This Agreement and each
other Loan Document may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement or any other Loan Document (other than the
Notes) by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement or such other Loan document, as the case may be.
SECTION 9.09. No Liability of the Issuing Bank. Each Borrower
assumes all risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of such Letter of Credit. Neither
the Issuing Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use that may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (b)
the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents
<PAGE> 75
71
should prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (c) payment by the Issuing Bank against presentation of documents that
do not comply with the terms of a Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of Credit;
or (d) any other circumstances whatsoever in making or failing to make payment
under any Letter of Credit, except that such Borrower shall have a claim against
the Issuing Bank, and the Issuing Bank shall be liable to such Borrower, to the
extent of any direct, but not consequential, damages suffered by such Borrower
that such Borrower proves were caused by (i) the Issuing Bank's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms of the Letter of Credit or (ii) the
Issuing Bank's willful failure to make lawful payment under a Letter of Credit
after the presentation to it of a draft and certificates strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
SECTION 9.10. Confidentiality. Neither the Administrative Agent nor
any Lender Party shall disclose any Confidential Information to any Person
without the consent of ESM, other than (a) to the Administrative Agent's or such
Lender Party's Affiliates and their officers, directors, employees, agents and
advisors and to actual or prospective Eligible Assignees and participants, and
then only on a confidential basis, (b) as required by any law, rule or
regulation or judicial process and (c) as requested or required by any state,
federal or foreign authority or examiner regulating banks or banking and then
only to such authority or examiner or the authority to which such examiner
reports.
SECTION 9.11. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.12. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, the Notes, or any of the Loan Documents to which it is a party, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. The Borrowers
hereby agree that service of process in any such action or proceeding brought in
any such New York State court or in such federal court may be made upon CT
Corporation System at its offices at 1633 Broadway, New York, New York 10019,
Attention: Jennifer Leigh Morgia (the "Process Agent"), and hereby further
agrees that any failure of the Process Agent to give any notice of any such
service to any Borrower shall not impair or affect the validity of such service
or of any judgment rendered in any action or proceeding based thereon. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement, the Notes or any other Loan Document in
the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement, the Notes or
any of the Loan Documents to which it is a party in any New York State or
federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) To the extent that any Borrower has or hereafter may acquire any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to
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72
judgment, attachment in aid of execution, execution or otherwise) with respect
to itself or its property, such Borrower hereby irrevocably waives such immunity
in respect of its obligations under this Agreement and the other Loan Documents.
SECTION 9.13. Judgment. (a) Rate of Exchange. If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum due hereunder
or under any other Loan Document in another currency into U.S. dollars, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which, in accordance with normal
banking procedures, the Administrative Agent could purchase such other currency
with U.S. dollars in New York City, New York, at the close of business on the
Business Day immediately preceding the day on which final judgment is given,
together with any premiums and costs of exchange payable in connection with such
purchase.
(b) Currency Indemnity. The obligation of the Borrowers in respect
of any sum due from it to the Administrative Agent or any Lender hereunder or
under any other Loan Document shall, notwithstanding any judgment in a currency
other than U.S. dollars, be discharged only to the extent that on the Business
Day next succeeding receipt by the Administrative Agent or such Lender of any
sum adjudged to be so due in such other currency, the Administrative Agent or
such Lender, as the case may be, may, in accordance with normal banking
procedures, purchase U.S. dollars with such other currency. If the U.S. dollars
so purchased are less than the sum originally due to the Administrative Agent or
such Lender in U.S. dollars, each Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Administrative Agent or such
Lender against such loss, and if the U.S. dollars so purchased exceed the sum
originally due to the Administrative Agent or any Lender in U.S. dollars, the
Administrative Agent or such Lender agrees to remit to such Borrower such
excess.
<PAGE> 77
SECTION 9.14. Waiver of Jury Trial. Each of the Borrowers, the
Administrative Agent and the Lender Parties irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the Advances or the actions of the Administrative Agent or any Lender
Party in the negotiation, administration, performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWERS
EUROPEAN SOFTWARE MARKETING LTD.
By __________________________________
Title:
By __________________________________
Title:
AMDOCS (U.K.) LTD.
By __________________________________
Title:
AMDOCS, INC.
By __________________________________
Title:
CANADIAN DIRECTORY TECHNOLOGY LTD.
By __________________________________
Title:
AMDOCS (USA), INC.
By __________________________________
Title:
<PAGE> 78
ADMINISTRATIVE AGENT
NATIONSBANK, N.A., as Administrative Agent
By __________________________________
Title:
INITIAL LENDERS
NATIONSBANK, N.A.
By __________________________________
Title:
<PAGE> 79
THE BANK OF NOVA SCOTIA
By __________________________________
Title:
<PAGE> 80
THE INDUSTRIAL BANK OF JAPAN, LTD.
By __________________________________
Title:
<PAGE> 81
FLEET BANK, N.A.
By __________________________________
Title:
<PAGE> 82
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NAME OF INITIAL LENDER Revolving Letter of Domestic Eurodollar
Credit Credit Lending Lending
Commitment Commitment Office Office
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NationsBank, N.A. $25,000,000 $3,333,333.34 901 Main Street 901 Main Street
Dallas, TX 75202 Dallas, TX 75202
- -------------------------------------------------------------------------------------------------------------
The Bank of Nova $25,000,000 $3,333,333.33 One Liberty Plaza One Liberty Plaza
Scotia 26th Floor 26th Floor
New York, NY 10006 New York, NY 10006
- -------------------------------------------------------------------------------------------------------------
The Industrial Bank of $25,000,000 $3,333,333.33 New York Branch New York Branch
Japan, Ltd. 1251 Avenue of the 1251 Avenue of the
Americas Americas
New York, NY New York, NY
10020-1104 10020-1104
- -------------------------------------------------------------------------------------------------------------
Fleet Bank, N.A. $15,000,000 One Federal Street One Federal Street
Mail Stop MA0FD07A Mail Stop MA0FD07A
Boston, MA 02110 Boston, MA 02110
Attn: Pauline Kowalezyk Attn: Pauline Kowalezyk
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 83
EXHIBIT A
REVOLVING CREDIT
PROMISSORY NOTE
Up to $_______________ Dated: June __, 1998
FOR VALUE RECEIVED, the undersigned, ________________________,
_________________________, a __________ corporation (the "Borrower"), HEREBY
PROMISES TO PAY to the order of _________________________ (the "Lender") for the
account of its Applicable Lending Office (as defined in the Credit Agreement
referred to below) the aggregate principal amount of the Revolving Credit
Advances (as defined below) owing to the Lender by the Borrower pursuant to the
Credit Agreement dated as of June __, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"; terms defined
therein being used herein as therein defined) among the Borrower, certain other
Borrowers party thereto, the Lender and certain other lender parties party
thereto, and NationsBank, N.A., as Administrative Agent for the Lender and such
other lender parties, on the Termination Date.
The Borrower promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to NationsBank, N.A., as Administrative Agent, at 901
Main Street, Dallas, Texas 75202, in same day funds. Each Revolving Credit
Advance owing to the Lender by the Borrower and the maturity thereof, and all
payments made on account of principal thereof, shall be recorded by the Lender
and, prior to any transfer hereof, endorsed on the grid attached hereto, which
is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and
is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of advances (the "Revolving
Credit Advances") by the Lender to the Borrower from time to time in an
aggregate amount not to exceed at any time outstanding the US dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each such
Revolving Credit Advance being evidenced by this Promissory Note, and (ii)
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
The obligations of the Borrower under this Promissory Note, and the obligations
of the other Loan Parties under the Loan Documents, are secured by the
Collateral as and to the extent provided in the Loan Documents.
[NAME OF BORROWER]
By ________________________________
Title:
[By ________________________________
Title: ]
<PAGE> 84
EXHIBIT B
TO THE CREDIT AGREEMENT
FORM OF NOTICE OF BORROWING
NationsBank, N.A.,
as Administrative Agent
under the Credit Agreement
referred to below
____________________
____________________ [Date]
Attention: _______________
Ladies and Gentlemen:
The undersigned, [Name of Borrower], refers to the Credit
Agreement dated as of June 29, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement", the terms defined therein
being used herein as therein defined), among the undersigned, certain other
Borrowers party thereto, certain Lender Parties party thereto, and NationsBank,
N.A., as Administrative Agent for said Lender Parties, and hereby gives you
notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is _________
__, 199_.
(ii) The Facility under which the Proposed Borrowing is
requested is the _______________ Facility.
(iii) The Type of Advances comprising the Proposed Borrowing
is [Base Rate Advances] [Eurodollar Rate Advances].
(iv) The aggregate amount of the Proposed Borrowing is
$__________.
[(v) The initial Interest Period for each Eurodollar Rate
Advance made as part of the Proposed Borrowing is __________ month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Borrowing:
(A) the representations and warranties set forth in Section
4.01 (a) through (f), (i), (j), (w) and (x) of the Credit Agreement are
correct in all material respects on and as of the date of the Proposed
Borrowing, before and after giving effect to the Proposed Borrowing and
to the application of the proceeds therefrom, as though made on and as
of such date (other than any such representations and warranties that,
by their terms, are made as of a date other than the date of the
Proposed Borrowing); and
<PAGE> 85
B-2
(B) no event has occurred and is continuing, or would result
from such Proposed Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
Very truly yours,
[NAME OF BORROWER]
By ________________________________
Title:
[By _______________________________
Title: ]
<PAGE> 86
EXHIBIT C
TO THE CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of June 29,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among European Software Marketing Ltd. and certain other
Borrowers (as defined in the Credit Agreement), the Lender Parties (as defined
in the Credit Agreement), and NationsBank, N.A., as administrative agent for the
Lender Parties (the "Administrative Agent"). Terms defined in the Credit
Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof equal to the percentage interest specified on Schedule 1 hereto of
all outstanding rights and obligations under the Credit Agreement Facility or
Facilities specified on Schedule 1 hereto. After giving effect to such sale and
assignment, the Assignee's Commitments and the amount of the Advances owing to
the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, the
Loan Documents or any other instrument or document furnished pursuant thereto;
and (iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Loan Party or the performance or
observance by any Loan Party of any of its obligations under any Loan Document
or any other instrument or document furnished pursuant thereto; and (iv)
attaches the Note or Notes held by the Assignor and requests that the
Administrative Agent exchange such Note or Notes for a new Note or Notes payable
to the order of the Assignee in an amount equal to the Commitments assumed by
the Assignee pursuant hereto or new Notes payable to the order of the Assignee
in an amount equal to the Commitments assumed by the Assignee pursuant hereto
and the Assignor in an amount equal to the Commitments retained by the Assignor
under the Credit Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Lender
Party and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) confirms that it is an Eligible
Assignee; (iv) appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Loan Documents as are delegated to the Administrative Agent by the terms
thereof, together with such powers and discretion as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms all of
the obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender Party; and (vi) attaches any US Internal Revenue
Service forms required under Section 2.12 of the Credit Agreement.
<PAGE> 87
C-2
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Administrative Agent for acceptance and recording by
the Administrative Agent. The effective date for this Assignment and Acceptance
(the "Effective Date") shall be the date of acceptance hereof by the
Administrative Agent, unless otherwise specified on Schedule 1 hereto.
5. Upon such acceptance and recording by the Administrative
Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Lender Party thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative
Agent, from and after the Effective Date, the Administrative Agent shall make
all payments under the Credit Agreement and the Notes in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest and commitment fees with respect thereto) to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the Credit
Agreement and the Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
<PAGE> 88
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
As to the _____Facility in respect of which an interest is being assigned:
<TABLE>
<S> <C>
Percentage interest assigned: __________%
Assignee's Commitment: $__________
Aggregate outstanding principal amount of Advances assigned: $__________
Principal amount of Note payable to Assignee: $__________
Principal amount of Note payable to Assignor: $__________
</TABLE>
Effective Date (if other than date of acceptance by Administrative Agent):
(1)________ __, 199_
[NAME OF ASSIGNOR], as Assignor
By ________________________________
Title:
Dated: _________ __, 199_
[NAME OF ASSIGNEE], as Assignee
By ________________________________
Title:
Dated: _________ __, 199_
Domestic Lending Office:
Eurodollar Lending Office:
- ----------
(1) This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Administrative Agent.
<PAGE> 89
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
As to the Facility in respect of which an interest is being assigned:
Percentage interest assigned: %
Assignee's Commitment: $
Aggregate outstanding principal amount of Advances assigned: $
Principal amount of Note payable to Assignee: $
Principal amount of Note payable to Assignor: $
Effective Date (if other than date of acceptance by Administrative Agent):
(1) , 199
[NAME OF ASSIGNOR], as Assignor
By
Title:
Dated: , 199
[NAME OF ASSIGNEE], as Assignee
By
Title:
Dated: , 199
Domestic Lending Office:
Eurodollar Lending Office:
- -----------------
(1) This date should be no earlier than five Business Days after the delivery of
this Assignment and Acceptance to the Administrative Agent.
<PAGE> 90
Accepted and Approved this
day of , 199
NATIONSBANK, N.A.
By
Title:
Approved this day
of , 199
EUROPEAN SOFTWARE MARKETING LTD.
By
Title:
By
Title:
<PAGE> 91
EXHIBIT D
FORM OF SECURITY AGREEMENT SUPPLEMENT
July 8, 1998
NationsBank, N.A. as
Administrative Agent
901 Main Street, 14th Floor
Dallas, Texas 75202
Attention: Patrick Honey
Security Agreement dated January 6, 1998
among the Grantors named therein and
NationsBank of Texas, N.A. now known as NationsBank, N.A.
as Administrative Agent
Ladies and Gentlemen:
Reference is made to the above-captioned Security Agreement(as amended,
supplemented or otherwise modified, the "Security Agreement"). Unless otherwise
defined herein, terms defined in the Security Agreement are used herein as
therein defined.
Each of the undersigned hereby agrees, as of the date first above written,
to become a Grantor under the Security Agreement as if it were an original party
thereto and agrees that each reference in the Security Agreement to a "Grantor"
shall also mean and be a reference to each of the undersigned.
Each of the undersigned hereby assigns and pledges to the Administrative
Agent for its benefit and the ratable benefit of the Secured Parties and hereby
grants to the Administrative Agent for its benefit and the ratable benefit of
the Secured Parties as collateral for the Secured Obligations a pledge and
assignment of, and a security interest in, all of the right, title and interest
of the undersigned in and to its Collateral, whether now owned or hereafter
acquired, subject to all of the terms and provisions of the Security Agreement,
as if such Collateral of the undersigned had been subject to the Security
Agreement on the date of its original execution.
Each of the undersigned has attached hereto supplements to Schedules I
through V to the Security Agreement, and each of the undersigned hereby
certifies that such
<PAGE> 92
supplements have been prepared by the undersigned in substantially the form of
the Schedules to the Security Agreement and are accurate and complete as of the
date first above written.
Each of the undersigned hereby makes each representation and warranty set
forth in Section 9 of the Security Agreement as to itself and as to its
Collateral to the same extent as each other Grantor and hereby agrees to be
bound as a Grantor by all of the terms and provisions of the Security Agreement
to the same extent as all other Grantors.
This letter shall be governed by and construed in accordance with the laws
of the State of New York.
Very truly yours,
AMDOCS (USA), INC.
By ___________________________________
Name:
Title:
Address:
<PAGE> 93
EXHIBIT E
EUROPEAN SOFTWARE MARKETING LIMITED
- AS CHARGOR-
- AND -
NATIONSBANK, N.A.
(FORMERLY KNOWN AS
NATIONSBANK OF TEXAS, N.A.)
- AS TRUSTEE -
----------
FORM OF DEED OF AMENDMENT
----------
SHEARMAN & STERLING
LONDON
<PAGE> 94
THIS DEED OF AMENDMENT is made the 6th July, 1998
BETWEEN:
(1) EUROPEAN SOFTWARE MARKETING LIMITED (THE "CHARGOR"); AND
(2) NATIONSBANK, N.A. (FORMERLY KNOWN AS NATIONSBANK OF TEXAS, N.A.) (THE
"TRUSTEE").
WHEREAS:
(1) The Chargor and the Trustee have entered into a share charge dated
January 6 1998 (the "DEED OF CHARGE OVER SHARES") under which certain
shares were charged as security pursuant to a credit agreement dated
December 5 1997 (as from time to time amended, the "CREDIT AGREEMENT")
made between the Chargor (1), Amdocs (U.K.) Limited (2), Amdocs, Inc.
(3), Canadian Directory Technology Limited (4), the banks listed
therein (5), the initial issuing bank as defined therein (6), the
swingline bank as defined therein (7), NationsBank of Texas, N.A. (8),
The Bank of Nova Scotia (9) and The Industrial Bank of Japan, Limited
(10).
(2) The parties hereto have agreed that the Deed of Charge over Shares
shall be amended in accordance with the provisions set out below.
NOW IT IS HEREBY AGREED as follows:
1. Words or expressions defined in the Deed of Charge over Shares or, as
appropriate, the Credit Agreement shall, unless the context otherwise
requires, bear the same meaning or construction in this Deed.
2. The Deed of Charge over Shares shall be amended as follows:
(a) in the second line of recital A the words "from time to time" shall be
inserted after the word "amended";
(b) by insertion of the following definition of "Loan Parties" in Part 1:
""LOAN PARTIES" has the meaning given to it in the Credit Agreement;"
(c) in the definition of "Secured Obligations" by deleting the word
"Chargor" and replacing it with the words "Loan Parties owed to the Lender
Parties"; and.
(d) in the Schedule (Details of Investments):
<PAGE> 95
(i) the figure "L100,000" in the second column shall be deleted
and replaced by the figure "L65,000"; and
(ii) the figure "100,000.00" in the third column shall be deleted
and replaced by the figure "65,000.00".
3. The Chargor acknowledges and agrees that failure to perform and comply
with the obligation expressed to be assumed by it pursuant to paragraph 4 shall
constitute a Default under the Credit Agreement.
4. The Chargor shall, from time to time on demand of the Trustee,
reimburse the Trustee for all costs and expenses (including legal fees) together
with any VAT thereon reasonably incurred by it in connection with the
negotiation, preparation and execution of this Deed and the completion of the
transactions herein contemplated.
5. The Chargor represents to the Trustee in the same terms mutatis
mutandis as are set out in Part 4 of the Deed of Charge over Shares by reference
to the facts and circumstances as at the date hereof and as if reference therein
to "Deed of Charge over Shares" and any derivative terms were references to (a)
the Deed of Charge over Shares as the same shall be amended by this Deed and (b)
this Deed.
6. The Chargor and the Trustee hereby agree that the rights and
obligations of each of them under the Deed of Charge over Shares shall not be
affected or impaired by the execution, delivery and performance of this Deed
except in the manner and to the extent herein stated.
7. Save as varied and amended hereby the Deed of Charge over Shares and
every Clause thereof shall continue to be of full force and effect and binding
on the parties hereto.
8. The Trustee hereby agrees to the release of such of the shares charged
under the Deed of Charge over Shares as will result in the amended schedule (as
set out at 2(d) above) being correct.
9. This Deed may be executed in any number of counterparts and by
different parties hereto on separate counterparts each of which, when executed
and delivered, shall constitute an original, but all the counterparts shall
together constitute one and the same instrument.
10. This Deed shall be governed by and construed in accordance with English
law.
<PAGE> 96
AS WITNESS the hands of the duly authorised representative of the parties hereto
the day and year first before written
THE CHARGOR
Executed as a deed by European Software Marketing )
Limited acting by the names of authorised signatories )
in the presence of:- )
Signature of witness:
Name of witness:
Address:
Occupation:
Address:
Telex No.:
Facsimile No.:
THE TRUSTEE
NationsBank, N.A.
Address:
Telex No:
Facsimile No:
<PAGE> 97
EXHIBIT F
FORM OF CONSENT TO US LOAN PARTY GUARANTY
Dated as of July ___, 1998
The undersigned, each a Guarantor under the US Loan Party
Guaranty in favor of the Administrative Agent, for its benefit and the benefit
of the Lender Parties parties to the Credit Agreement dated as of December 5,
1997 as amended and restated by the Amended and Restated Credit Agreement (as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, the "Amended and Restated Credit Agreement"; terms not otherwise
defined herein shall have the meaning herein as therein ascribed to them) among
European Marketing Software Ltd., a Guernsey company, Amdocs (U.K.) Ltd., a
corporation organized under the laws of England and Wales, Amdocs, Inc., a
Delaware corporation, Amdocs USA, Inc. a Delaware Corporation, and Canadian
Directory Technology Ltd., a Delaware corporation, as Borrowers, the Lender
Parties referred to therein, and NationsBank, N.A. (formerly known as
NationsBank of Texas, N.A.), as Administrative Agent, The Bank of Nova Scotia,
as syndication agent, and The Industrial Bank of Japan, Limited, as
documentation agent for the Lender Parties, hereby consent to such amendment and
restatement of the Existing Credit Agreement and hereby confirm and agree that
notwithstanding the effectiveness of such amendment and restatement, the US Loan
Party Guaranty shall continue to be in full force and effect and is hereby
ratified and confirmed in all respects, except that, on and after the
effectiveness of the Amended and Restated Credit Agreement, each reference in
the US Loan Party Guaranty to the "Credit Agreement", "thereunder", "thereof" or
words of like import shall mean and be a reference to the Amended and Restated
Credit Agreement.
AMDOCS, INC.
By_________________________
Title:
<PAGE> 98
SYPRESS, INC.
By_________________________
Title:
CANADIAN DIRECTORY
TECHNOLOGY, LTD.
By_________________________
Title:
AMDOCS SERVICES, INC.
By_________________________
Title:
<PAGE> 99
EXHIBIT G
FORM OF CONSENT
TO NON-US LOAN PARTY GUARANTY
Dated as of July ___, 1998
The undersigned, each a Guarantor under the Non-US Loan Party
Guaranty in favor of the Administrative Agent, for its benefit and the benefit
of the Lender Parties parties to the Credit Agreement dated as of December 5,
1997 as amended and restated by the Amended and Restated Credit Agreement (as
amended, supplemented or otherwise modified from time to time in accordance with
its terms, the "Amended and Restated Credit Agreement"; terms not otherwise
defined herein shall have the meaning herein as therein ascribed to them) among
European Marketing Software Ltd., a Guernsey company, Amdocs (U.K.) Ltd., a
corporation organized under the laws of England and Wales, Amdocs, Inc., a
Delaware corporation, Amdocs USA, Inc. a Delaware Corporation, and Canadian
Directory Technology Ltd., a Delaware corporation, as Borrowers, the Lender
Parties referred to therein, and NationsBank, N.A. (formerly known as
NationsBank of Texas, N.A.), as Administrative Agent, The Bank of Nova Scotia,
as syndication agent, and The Industrial Bank of Japan, Limited, as
documentation agent for the Lender Parties, hereby consent to such amendment and
restatement of the Existing Credit Agreement and hereby confirm and agree that
notwithstanding the effectiveness of such amendment and restatement, the US Loan
Party Guaranty shall continue to be in full force and effect and is hereby
ratified and confirmed in all respects, except that, on and after the
effectiveness of the Amended and Restated Credit Agreement, each reference in
the Non-US Loan Party Guaranty to the "Credit Agreement", "thereunder",
"thereof" or words of like import shall mean and be a reference to the Amended
and Restated Credit Agreement.
AMDOCS (U.K.) LIMITED
By_________________________
Title:
<PAGE> 100
EUROPEAN SOFTWARE MARKETING
LIMITED
By_________________________
Title:
<PAGE> 1
Exhibit 5.1
[CAREY LANGLOIS LETTERHEAD]
Amdocs Limited
Tower Hill House
Le Bordage
St. Peter Port
Guernsey
Channel Islands
Our Ref: NC/FJF/CB/A 774007
7 June 1999
Dear Sirs
RE: AMDOCS LIMITED
REGISTRATION STATEMENT ON FORM F-1
We have acted as counsel to Amdocs Limited, a Guernsey corporation (the
"Company"), in connection with its Registration Statement on Form F-1 (the
"Registration Statement"), filed under the Securities Act of 1933, as amended
(the "Act"), relating to the proposed public offering of up to 23,000,000
Ordinary Shares, Pound Sterling 0.01 par value (the "Shares"), of the Company.
In that connection, we have examined originals, or copies, certified or
otherwise identified to our satisfaction of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for purposes
of this opinion, including the Amended and Restated Articles of Association and
the Memorandum of Association of the Company.
Based upon the foregoing, we are of the opinion that:
1. The Company has duly organised and is validly existing as a corporation
under the laws of Guernsey.
2. The Shares have been duly authorised, and the Shares being sold by the
Company when issued and, together with the other Shares, sold in accordance
with the terms of the Underwriting Agreement in substantially the form
filed as Exhibit 1.1 to the Registration Statement, will be validly issued,
fully paid, and non-assessable.
.../Continued
<PAGE> 2
CAREY LANGLOIS
Amdocs Limited 2 3 June 1999
- --------------------------------------------------------------------------------
We hereby consent to the use of this opinion as an exhibit to the Registration
Statement, and to the reference to our firm under "Enforceability of Civil
Liabilities" and "Legal Matters" in the Prospectus comprising a part of the
Registration Statement.
Yours faithfully
/s/ Carey Langlois
- ------------------
Carey Langlois
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Consolidated Financial Information," "Selected Consolidated Financial
Information" and "Experts" and to the use of our report dated November 8, 1998,
in Amendment No. 3 to the Registration Statement (Form F-1 No. 333-75151) and
related Prospectus of Amdocs Limited for the registration of 34,500,000 shares
of its ordinary shares.
/s/ ERNST & YOUNG LLP
St. Louis, Missouri
June 4, 1999
