United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the thirteen-week period ended: December 26, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________________
Commission file number: 0-10726
C-COR ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 24-0811591
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
60 Decibel Road, State College, PA 16801
(Address of principal executive offices) (Zip Code)
(814) 238-2461
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.10 Par Value - 9,153,443 shares as of January 30, 1998.
<PAGE>
INDEX
C-COR ELECTRONICS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Condensed consolidated balance sheets -- June 27, 1997, and
December 26, 1997.
Condensed consolidated statements of operations -- thirteen-weeks
ended December 26, 1997, and December 27, 1996; twenty-six-weeks
ended December 26, 1997, and December 27, 1996.
Condensed consolidated statements of cash flows -- twenty-six
weeks ended December 26, 1997, and December 27, 1996.
Notes to condensed consolidated financial statements --
December 26, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of shareholders.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
<TABLE>
Item 1. Financial Statements
<CAPTION>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 26, June 27,
ASSETS 1997 1997
----------- ----------
(Unaudited) (Note)
(000's omitted)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 141 $ 452
Marketable securities 352 359
Accounts receivable 19,549 19,299
----------- ----------
20,042 20,110
----------- ----------
Inventories:
Raw materials 16,627 14,358
Work-in-process 2,690 3,346
Finished goods 2,883 1,436
----------- ----------
Total inventories 22,200 19,140
----------- ----------
Deferred taxes 2,640 2,616
Other current assets 1,746 1,893
Net current assets of discontinued operations 513 0
----------- ----------
TOTAL CURRENT ASSETS 47,141 43,759
----------- ----------
PROPERTY, PLANT, AND EQUIPMENT, NET 26,442 25,060
INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS, NET 1,068 785
Net noncurrent assets of discontinued operations 457 1,515
----------- ----------
TOTAL ASSETS $ 75,108 $ 71,119
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 18,666 $ 15,461
Line-of-credit 2,013 3,466
Current portion of long-term debt 844 834
Noncurrent liabilities of discontinued operations 0 1,253
----------- ----------
TOTAL CURRENT LIABILITIES 21,523 21,014
----------- ----------
LONG-TERM DEBT, less current portion 5,942 6,367
DEFERRED TAXES 1,367 1,311
OTHER LONG-TERM LIABILITIES 936 749
----------- ----------
TOTAL LIABILITIES 29,768 29,441
----------- ----------
SHAREHOLDERS' EQUITY
Common Stock, $.10 par; authorized shares
24,000,000; issued shares of 9,652,738 on 12/26/97,
and 9,633,435 on 06/27/97. 965 963
Additional paid-in capital 20,119 19,963
Retained earnings 30,099 26,632
Translation adjustment (69) (101)
Net unrealized loss on marketable securities (9) (14)
Treasury Stock (5,765) (5,765)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 45,340 41,678
----------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 75,108 $ 71,119
=========== ==========
<FN>
Note: The balance sheet at June 27, 1997, has been derived from audited
financial statements at that date.
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Thirteen-Weeks Ended Twenty-Six-Weeks Ended
December 26, December 27, December 26, December 27,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 37,185 $ 30,701 $ 74,250 $ 62,545
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 29,124 24,719 57,597 49,366
Selling, general and administrative
expenses 3,772 3,761 7,327 7,233
Research and product development costs 1,690 1,402 3,463 2,781
Interest expense 76 54 153 116
Investment income (6) (38) (13) (65)
Foreign exchange loss (gain) 165 (29) 144 (27)
Other expense (income) (34) 46 289 45
----------- ----------- ----------- -----------
34,787 29,915 68,960 59,449
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,398 786 5,290 3,096
INCOME TAXES 812 223 1,823 1,000
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 1,586 563 3,467 2,096
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
business segment, less applicable
income tax benefit 0 (228) 0 (1,002)
----------- ----------- ----------- -----------
NET INCOME $ 1,586 $ 335 $ 3,467 $ 1,094
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - (BASIC):
Continuing operations $ 0.17 $ 0.06 $ 0.38 $ 0.22
Discontinued operations 0.00 (0.03) 0.00 (0.11)
----------- ----------- ----------- -----------
NET INCOME PER SHARE $ 0.17 $ 0.03 $ 0.38 $ 0.11
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - (ASSUMING DILUTION):
Continuing operations $ 0.17 $ 0.06 $ 0.37 $ 0.21
Discontinued operations 0.00 (0.03) 0.00 (0.10)
----------- ----------- ----------- -----------
NET INCOME PER SHARE $ 0.17 $ 0.03 $ 0.37 $ 0.11
=========== =========== =========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
C-COR ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Twenty-Six-Weeks Ended
December 26, December 27,
1997 1996
----------- -----------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 3,467 $ 1,094
Adjustments to reconcile net income to net cash
and cash equivalents provided by operating
activities:
Depreciation and amortization 3,275 2,640
Provision for deferred retirement salary plan 187 146
Loss on sales of property, plant and equipment - 46
Changes in operating assets and liabilities:
Accounts receivable (250) 5,898
Inventories (3,060) (2,944)
Other assets (136) 303
Accounts payable 954 1,234
Accrued liabilities 2,251 (2,089)
Deferred income taxes 29 566
Discontinued Operations - working capital changes
and noncash charges (730) (1,742)
NET CASH AND CASH EQUIVALENTS PROVIDED BY ----------- -----------
OPERATING ACTIVITIES 5,987 5,152
----------- -----------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,625) (2,768)
Purchase of marketable securities - (200)
Proceeds from sale of marketable securities 15 5
Proceeds from sales of property, plant, and equipment - 12
Investing activities of discontinued operations 22 (403)
NET CASH AND CASH EQUIVALENTS ----------- -----------
USED IN INVESTING ACTIVITIES (4,588) (3,354)
----------- -----------
FINANCING ACTIVITIES
Payment of debt and capital lease obligations (415) (419)
Proceeds from line-of-credit 26,300 555
Payment of line-of-credit (27,753) (1,702)
Tax benefit deriving from exercise and
sale of stock option shares - 71
Issue common stock to employee stock purchase plan 24 45
Proceeds from exercise of stock options 134 95
NET CASH AND CASH EQUIVALENTS USED IN ----------- -----------
FINANCING ACTIVITIES (1,710) (1,355)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (311) 443
Cash and cash equivalents at beginning of period 452 1,474
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 141 $ 1,917
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
C-COR ELECTRONICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying, unaudited, condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information, and in the opinion of management, contain all
adjustments (consisting only of normal, recurring adjustments) necessary to
fairly present the Company's financial position as of December 26, 1997, and the
results of its operations for the thirteen-week and twenty-six-week periods then
ended. Operating results for the thirteen-week and twenty-six week periods are
not necessarily indicative of the results that may be expected for the year
ending June 26, 1998. For further information, refer to financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended June 27, 1997.
2. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
Accounts payable and accrued liabilities consist of:
<CAPTION>
December 26, June 27,
1997 1997
---------------- ----------------
(000's omitted)
<S> <C> <C>
Accounts payable $ 9,590 $ 8,636
Accrued incentive plan expense 1,257 0
Accrued vacation expense 1,353 1,358
Accrued salary expense 627 569
Accrued payroll and sales tax expense 770 555
Accrued warranty expense 2,368 2,185
Accrued workers compensation
self-insurance expense 1,522 1,162
Income taxes payable 103 137
Accrued other 1,076 859
---------------- ----------------
$18,666 $15,461
================ ================
</TABLE>
<PAGE>
===============================================================================
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
General
The following discussion addresses the financial condition of the Company as of
December 26, 1997, and the results of operations for the thirteen-week and
twenty-six-week periods ended December 26, 1997, compared with the corresponding
periods of the prior year. This discussion should be read in conjunction with
the Management's Discussion and Analysis section for the fiscal year ended June
27, 1997, included in the Company's Annual Report on Form 10-K.
Disclosure Regarding Forward-Looking Statements:
Some of the information presented in this report constitutes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including, without limitation, statements concerning the continuation of
increased domestic spending for network upgrades, the continuation of
competitive pricing pressures, anticipated new product development initiatives,
and the continued availability of capital resources. Although the Company
believes its expectations are based on reasonable assumptions within the bounds
of its knowledge of its business and operations, there can be no assurance that
actual results will not differ materially from its expectations. Factors which
could cause actual results to differ from expectations include the timing of
orders received from customers, the gain or loss of significant customers,
changes in the mix of products sold, new product development activities, changes
in the cost and availability of parts and supplies, fluctuations in warranty
costs, economic conditions affecting domestic and international markets,
regulatory changes affecting the telecommunications industry, in general, and
the Company's operations, in particular, competition and changes in domestic and
international demand for the Company's products, and other factors which may
impact operations and manufacturing. For additional information concerning these
and other important factors which may cause the Company's actual results to
differ materially from expectations and underlying assumptions, please refer to
the Company's reports filed on Form 10-K and other reports filed with the
Securities and Exchange Commission.
Accounting Changes
During the quarter, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share", which establishes standards for
computing and presenting earnings per share ("EPS") data. SFAS No. 128 replaces
the previous standards for presentation of primary and fully diluted EPS with
basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS includes the dilution of common
stock equivalents, and is computed similarly to fully diluted EPS pursuant to
APB Opinion 15. All prior periods presented have been restated to reflect this
adoption.
<PAGE>
Results of Operations
Net sales for the thirteen-week period ended December 26, 1997, were
$37,185,000, an increase of 21% from the prior year's sales of $30,701,000 for
the corresponding period. Net sales for the twenty-six-week period ended
December 26, 1997, were $74,250,000, an increase of 19% from the prior year's
sales of $62,545,000 for the corresponding period. The increases in sales for
the 1997 periods were primarily attributable to increased demand for RF
distribution products by domestic and international customers in the cable
television (CATV) industry.
Domestic sales, as a percentage of total consolidated sales, were 69% for the
quarter ended December 26, 1997, and 70% for the period year-to-date. This
compares to 73% and 77% for the corresponding periods of the prior year. Sales
to domestic customers increased 16% during the quarter ended December 26, 1997,
and 8% for the period year-to-date, compared to the corresponding periods of the
prior year. The Company believes that many domestic CATV operators have
increased their capital spending, and as a result, the Company has experienced
increased demand for hybrid/fiber coax (HFC) distribution equipment. The Company
believes the increased capital spending is driven by customer demands for
improved services, affecting not only voice and video requirements, but also
demand for high-speed data transmission. This increased demand by CATV
operators for improved services has translated into an increased need for higher
bandwidth products in order to support these services.
International sales, as a percentage of total consolidated sales, were 31% for
the quarter ended December 26, 1997, and 30% for the period year-to-date. This
compares to 27% and 23% for the corresponding periods of the prior year. Sales
to international customers increased 36% during the quarter ended December 26,
1997, and 53% for the period year-to-date, compared to the corresponding periods
of the prior year. The increase for the quarter resulted primarily from
increased demand in Canada, and Latin America. The increase, year-to-date
derives primarily from increased demand in Canada, Asia, and Europe. The Company
is continuing to monitor its business activities in the Asian market and the
effect that current economic conditions may have on present and future order
trends. The international markets continue to represent distinct markets for
CATV equipment, and, in general, demand can be highly variable.
The Company's backlog of sales orders at December 26, 1997, was approximately
$36.8 million, down from approximately $37.9 million at the end of the previous
quarter ended September 26, 1997. The Company booked approximately $36.1 million
of new sales orders during the quarter ended December 26, 1997.
Gross profit percentage for the thirteen-week period ended December 26, 1997,
was 21.7% versus 19.5% for the same period the prior year. Gross profit
percentage for the twenty-six-week period ended December 26, 1997, was 22.4%
versus 21.1% for the same period the prior year. The increase in the gross
profit margin for the quarter and year-to-date periods is primarily a result of
changes in customer and product sales mix, and efficiencies resulting from
higher production volumes. Although pricing pressures continue, the Company has
undertaken initiatives to mitigate these pressures. The Company has taken steps
to lower manufacturing costs and is continuing efforts to improve manufacturing
processes in order to enhance efficiency and productivity, and to redesign
products to enhance manufacturability and reduce material costs. As one of these
initiatives, the Company has begun manufacturing the power supply component of
its RF amplifier products in Tijuana, Mexico. The Company continues to ramp up
production at this new manufacturing facility.
Selling, general and administrative expenses for the thirteen-week period ended
December 26, 1997, were $3,772,000, compared to $3,761,000 for the same period
of the prior year. Selling, general and administrative expenses for the
twenty-six-week period ended December 26, 1997, were $7,327,000, a 1% increase
over the prior year's total of $7,233,000 for the same period. The increases for
the quarter and year-to-date periods are primarily the result of an increase in
accrued profit incentive expense under the Company's profit sharing plan, and
increases in various operating costs to support current business levels.
Research and product development costs for the thirteen-week period ended
December 26, 1997, were $1,690,000, an increase of 21% over the prior year's
total of $1,402,000 for the same period. Research and product development costs
for the twenty-six-week period ended December 26, 1997, were $3,463,000, an
increase of 25% over the prior year's total of $2,781,000 for the same period.
The increase is a result of higher personnel costs, including the aforementioned
higher accrued profit incentive expense, and additional expenditures for AM
fiber optics and network management product development. Anticipated new product
development initiatives are expected to increase research and product
development expenses in future periods.
A foreign exchange loss of $165,000 was incurred for the thirteen-week period
ended December 26, 1997. The loss derived primarily from Canadian dollar
transactions. The Canadian dollar weakened versus the U.S. dollar during the
quarter, resulting in a foreign exchange loss for the current quarter and
year-to-date periods.
Other expense for the twenty-six-week period ended December 26, 1997, was $289.
This compares to $45 for the same period the prior year. The increase is
primarily a result of expense accrued during the previous quarter for the
settlement of litigation.
The effective income tax rate for the thirteen-week period ended December 26,
1997, was 33.9%. This compares to an effective income tax rate of 28.3% for the
corresponding period the prior year. The effective income tax rate for the
twenty-six-week period ended December 26, 1997, was 34.5%. This compares to an
effective income tax rate of 32.3% for the corresponding period the prior year.
The fluctuations in the effective income tax rate from period to period reflect
changes in permanent tax differences, the relative profitability related to both
U.S. and non-U.S. operations, and differences in statutory rates.
Net income for the thirteen-week period ended December 26, 1997, was $1,586,000
or $.17 per share on a diluted basis, versus $335,000 or $.03 per share on a
diluted basis for the same period of the prior year. Net income for the second
quarter of the prior year reflects income from continuing operations of $786,000
or $.06 per share on a diluted basis, and a loss from discontinued operations of
($228,000), net of applicable tax benefit, or ($.03) per share on a diluted
basis. Net income for the twenty-six-week period ended December 26, 1997, was
$3,467,000 or $.37 per share on a diluted basis, versus $1,094,000 or $.11 per
share on a diluted basis for the same period the prior year. Net income for the
six months of the prior year reflects income from continuing operations of
$2,096,000 or $.21 per share on a diluted basis, and a loss from discontinued
operations of ($1,002,000), net of applicable tax benefit, or ($.10) per share
on a diluted basis.
Results of Discontinued Operations
On July 10, 1997, the Company announced the discontinuation of its digital fiber
optic business segment located in Fremont, California, in a phase-down process
expected to span nine months. Anticipated wind-down costs were recorded as a
loss on disposal of the discontinued segment in the results of discontinued
operations for the Company's prior fiscal year ended June 27, 1997. Thus, no
wind-down costs from operations of the discontinued business segment were
recorded for the quarter and year-to-date periods ended December 26, 1997. This
compares to a loss from operations of the discontinued business segment for the
same quarter the prior year of ($228,000), net of applicable tax benefit of
($96,000), and a loss year-to-date of ($1,002,000), net of applicable tax
benefit of ($473,000).
Liquidity and Capital Resources
The Company's current ratio at December 26, 1997, was 2.2, an increase from 2.1
at June 27, 1997. The Company's cash and cash equivalents decreased $311,000
during the first 6 months of fiscal year 1998. Net cash provided by operating
activities generated $5,987,000, after $730,000 was used for payment of expenses
related to discontinued operations.
The Company's working capital increased $2,873,000 since June 27, 1997.
Inventory levels increased from $19,140,000 to $22,200,000, resulting in a
$3,060,000 use of cash, primarily attributable to purchase requirements to meet
increased volume levels. Accounts payable and accrued liabilities increased from
$15,461,000 at June 27, 1997, to $18,666,000 as of December 26, 1997, due
primarily to increased accounts payable resulting from higher inventory
purchases and expense accrued under the Company's profit incentive plan.
Cash used in investing activities totaled $4,588,000 as of December 26, 1997,
compared to $3,354,000 for the corresponding period the prior year. Investing
activities consisted primarily of purchases and replacement of property, plant,
and equipment.
Cash used in financing activities totaled $1,710,000 as of December 26, 1997,
compared to $1,355,000 for the corresponding period the prior year. Financing
activities consisted primarily of borrowings and payments on the Company's
line-of-credit.
On September 4, 1997, the Company announced a stock repurchase program to
repurchase up to 500,000 shares of C-COR Common Stock. The shares may be
purchased from time to time in the open market through block or privately
negotiated transactions, or otherwise. The Company intends to use its currently
available capital resources to fund the purchases. The repurchased stock is
expected to be held by the Company as treasury stock to be used to meet the
Company's obligations under its present and future stock option plans and for
other corporate purposes. To date, no shares have been repurchased under this
new stock repurchase program adopted in September 1997.
The Company maintains a line-of-credit with a bank pursuant to which it may
borrow the lesser of $23,000,000 or a percentage of eligible accounts receivable
and inventory. Borrowings under the line-of-credit are secured by accounts
receivable and inventory. The line-of-credit is committed through October 30,
1998, at which time the Company anticipates renewal. The Company had borrowings
on the line-of-credit as of December 26, 1997, of $2,013,000. This compares to
an outstanding balance of $3,466,000 at the end of the Company's fiscal year
ended June 27, 1997. Based upon the Company's analysis of eligible accounts
receivable and inventory, an additional $16,497,031 was available under the
line-of-credit at December 26, 1997.
Management believes that operating cash flow, as well as the line-of-credit,
will be adequate to provide for all cash requirements for the foreseeable
future, subject to requirements that additional growth or strategic development
might dictate.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of shareholders
The Company's annual meeting of shareholders was held on October 14, 1997, at
which the holders of at least 8,806,840 shares of common stock of the Company
(out of a total of 9,141,514 shares outstanding and entitled to vote at such
annual meeting), were present in person or represented by proxy (representing a
quorum for the transaction of business). The election of three directors was
submitted to a vote of shareholders.
Details were provided to shareholders in the form of a Notice of the Annual
Meeting of Shareholders dated September 15, 1997, and mailed on or about
September 16, 1997.
Messrs. Richard E. Perry and Donald M. Cook, Jr. were re-elected as directors of
the Company until the year 2000, and Mr. Javad K. Hassan was elected as a
director until the year 2000.
The voting results for the election of directors are set forth as follows:
<TABLE>
<S> <C> <C>
Name of Nominee Votes For Votes Withheld
Richard E. Perry 8,746,669 60,171
Donald M. Cook, Jr. 8,727,302 79,538
Javad K. Hassan 8,723,069 83,771
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
The following exhibits are included herein:
(10)(a) Notes and Security Agreement effective December 30, 1997,
between the Registrant and Mellon Bank, N.A.
(10)(b) Supplement to Note and Security Agreement effective December
30, 1997, between the Registrant and Mellon Bank, N.A.
(10)(c) Revolving Line of Credit Agreement effective December 30,
1997, between the Registrant and Mellon Bank, N.A.
(10)(d) Supplement to Revolving Line of Credit Agreement effective
December 30, 1997, between the Registrant and Mellon Bank,
N.A.
(11) Statement re: computation of earnings per share
(27) Financial Data Schedule
Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
C-COR ELECTRONICS, INC.
(Registrant)
Date: February 9, 1998 /s/ CHRIS A. MILLER
----------------------- --------------------------
C.P.A., Vice President-Finance
Secretary and Treasurer
(Principal Financial Officer)
Date: February 9, 1998 /s/ JOSEPH E. ZAVACKY
----------------------- ---------------------------
Controller and Assistant Secretary
(Principal Accounting Officer)
Note and Security Agreement
$ 23,000,000.00
December 30, 1997
For value received, and intending to be legally bound,
Undersigned, as defined below, promises to pay to
Mellon Bank, N.A.
("Bank") or its order at Harrisburg, Pennsylvania, the sum of Twenty-Three
Million and NO/100 ($ 23,000,000.00), or such lesser or greater principal amount
as may be outstanding from time to time under the Revolving Line of Credit
Agreement dated August 31, 1994 (as amended and supplemented from time to time,
the "Credit Agreement"), outstanding balance from the date of this Note and
Security Agreement ("Note") at the rate(s) ("Contractual Rate(s)") specified
herein.
Payment and principal and interest shall be due and payable, as set forth in the
attached supplement to Note and Security Agreement.
This Note and Security Agreement is given in replacement of that original Note
and Security Agreement dated August 31, 1994, and as amended and restated on
November 1. 1994, December 29, 1994, February 1, 1995, April 3, 1995, June 21,
1995, and November 14, 1996, in order to extend the maturity date. This is not a
novation of the prior Note and Security Agreement(s). All prior security
interests granted shall carry to this Note and Security Agreement.
After maturity, whether by acceleration or otherwise, interest shall accrue at a
rate 2 percent per annum above the Contractual Rate(s) specified until all sums
due hereunder are paid. Interest shall continue to accrue after the entry of
judgment by confession or otherwise at the Contractual Rate(s) until all sums
due hereunder and/or under the judgment are paid, unless the Contractual Rate(s)
is (are) altered by Subsequent maturity. Undersigned agrees to pay to Bank, as
consideration for Bank's commitment under the Credit Agreement, (i) a commitment
fee equal to N/A % per annum on the unborrowed Commitment Amount (as defined in
the Credit Agreement), from time to time, for each day of the Commitment Period
(as defined in the Credit Agreement), and (ii) a facility fee equal to N/A % per
annum in the Commitment Amount (whether borrowed or unborrowed) for each day of
the Commitment Period, in each base payable for the preceding period for which
such fee has not been paid, (a) on the last day of each N/A, and N/A after the
date hereof, (b) on the date of each reduction of the Commitment amount on the
amount so reduced, and (c) on the last day of the Commitment Period.
If any law, regulation, order, decree or guideline or interpretation or
application thereof by any governmental authority charged with the
interpretation or administration thereof or compliance by Bank with any request
or directive of any governmental authority (whether or not having the force of
law) shall either impose, modify or deem applicable any capital adequacy or
similar requirement against assets (funded or contingent) of, or credits or
commitments to extend credit extended by Bank and the result of any of the
foregoing is to increase the cost to, reduce the income receivable by, or impose
any expense (including loss of margin) upon Bank with respect to the Credit
Agreement, this Note, or the making, maintenance or funding of any part of the
Loans (or, in the case of capital adequacy or similar requirement, to have the
effect of reducing the rate of return on Bank's capital, taking into account
Bank's policies with regard to adequacy) by an amount which Bank deems to be
material, Bank shall from time to time notify Undersigned of the amount
determined in good faith by Bank (which determination shall be conclusive absent
manifest error) to be necessary to compensate Bank for such increase, reduction
or imposition. Such amount shall be due and payable by Undersigned to Bank ten
(10) business days after such notice is given.
So long as Bank is the holder hereof, Bank's book's, and records shall be
presumed, except in the case or manifest error, to accurately evidence at all
times all amounts outstanding under this Note and the date and amount of each
advance and payment made pursuant hereto.
The prompt and faithful performance of all of Undersigned's obligations
hereunder, including without limitation time of payment, is of the essence of
this Note.
Certain terms used in this Note are defined in Section 9 below.
1. Security Interest. Undersigned hereby grants to Bank a security interest in
the following property now owned or hereafter acquired by Undersigned:
(b) all inventory (whether held for sale or lease or to be furnished under
contracts of service), raw materials, work in process, and materials used or
consumed in the conduct of Undersigned's business, and all books, records,
invoices and other documents which describe or evidence the same;
(d) all accounts, contract rights, general intangibles, choses in action,
instruments, chattel paper, documents (including all documents of title and
warehouse receipts) and all rights to the payment of money, however evidenced or
arising;
(g) In addition to the foregoing, Undersigned (1) grants to Bank a security
interest in all accessions, parts, accessories, attachments and appurtenances in
any way used with, attached or related to, installed in, any equipment or
inventory constituting "Collateral" hereunder; (2) grants to Bank a security
interest in all substitutions for, renewals of, improvements, replacements and
additions to, and the products and proceeds (cash and non-cash) of all property
constituting "Collateral" hereunder and any insurance policies relating thereto;
(3) grants to Bank a security interest in, lien upon, and right of setoff
against, all deposit accounts, credits, securities, moneys or other property of
Undersigned which may at any time be in the possession of, delivered to, or owed
by Bank, including any proceeds or returned or unearned premiums of insurance,
and the proceeds (cash and non-cash) of all the foregoing property; and (4)
assigns to Bank all moneys which may become payable on any policy of insurance
required to be maintained under this Note, including any returned or unearned
premiums.
All such property subject to Bank's security interests described in this section
1 is referred to herein collectively as the "Collateral". With respect to
Section 4 hereunder, the term "Collateral" shall not include the property
described in subsections (g) (3) and (g) (4) of this Section 1.
All security interests in Collateral shall be deemed to arise and be perfected
under and governed by the Uniform Commercial Code, except to the extent that
such law does not apply to certain types of transactions or Collateral, in which
case applicable law shall govern.
2. Obligations Secured. The Collateral shall secure the following obligations
("Obligations") of Undersigned to Bank: (a) all amounts at any time owing or
payable under this Note; (b) all costs and expenses incurred by Bank in the
collection or enforcement of this Note or the protection of the Collateral; (c)
all future advances made by bank for taxes, levies, insurance, and repairs to or
maintenance of the Collateral; and (d) any other indebtedness, liability or
obligation of Undersigned to Bank, past, present, or future, direct or indirect,
absolute or contingent, individual, joint or several, now due or to become due,
whether as drawer, maker, endorser, guarantor, surety or otherwise, except that
none of the security interests created herein shall secure any obligation
incurred by Undersigned which is defined as "consumer credit" by Federal Reserve
Board Regulation Z, 12 C.F.R. 226.1 et seq., and is not exempted from the
application of that Regulation.
3. Representations. Undersigned hereby makes the following representations and
warranties which shall be true and correct on the date of this Note and shall
continue to be true and correct at the time of the creation of any Obligation
secured hereby and until the Obligations secured hereby shall have been paid in
full: (a) Undersigned's residence and/or Chief Executive Office, as the case may
be, is as stated below or as otherwise stated in a subsequent written notice
delivered to Bank pursuant to the terms hereof, (b) Undersigned has good and
marketable title to the Collateral subject to no security interest, lien or
encumbrance, except as indicated to the contrary to Bank in writing prior to the
execution of this Note; and (c) if any of the Undersigned is an individual, each
such individual is at least 18 years of age and under no legal disability or
incapacity.
4. Covenants. Undersigned covenants and agrees that until the Obligations
secured hereunder have been paid in full, Undersigned shall: (a) use the
proceeds of the Loans evidenced hereby only for the purpose(s) specified to the
Bank at or prior to the execution hereof, (b) not permit use of the Collateral
for any illegal purposes; (c) promptly notify Bank in writing of any change in
its or their residence or Chief Executive Office; (d) not permit removal of any
of the Collateral from county to county or state to state unless Bank has given
written consent in advance; (e) maintain at all times good and marketable title
to all Collateral, free and clear of any security interest, lien or encumbrance
(except as to which Bank may grant its prior written consent pursuant to section
4(f) below), and defend such title against the claims and demands of all
persons; (f) not (1) affix the Collateral or permit the Collateral to be affixed
to real estate or to any other goods, (2) lease, mortgage, pledge or encumber
the Collateral, (3) permit the Collateral's identity to be lost, (4) permit the
Collateral to be levied upon or attached under any legal process, (5) permit or
cause any security interest or lien to arise with respect to the Collateral
(other than those created in this Note), or (6) except Collateral customarily
sold by Undersigned in the ordinary course of business and so sold in such
manner for full value, sell, consign, part with possession of, or otherwise
dispose of the Collateral or any rights therein, except as Bank may grant its
prior specific written consent with respect to acts or events specified in
subsections (1), (2), (5) or (6) hereof-, (g) maintain the Collateral in good
condition and repair, excepting only reasonable wear and tear; pay and discharge
all taxes and other levies on the Collateral, as well as the costs of repair and
maintenance thereof; and furnish to Bank upon request documentary proof of
payment of such taxes, levies and costs; (h) provide additional collateral at
such times and having such value as Bank may request, if Bank shall have
reasonable grounds for believing that the value of the Collateral has become
insufficient to secure all Obligations evidenced or secured by this Note; (i)
purchase and maintain policies of insurance (including flood insurance) to
protect the Collateral or other property against such risks and casualties, and
in such amounts, as shall be required by Bank and/or applicable law, which
policies shall (1) be in form and substance satisfactory to Bank, (2) designate
Bank as loss payee and, at Bank's option, as additional insured, and (3) be (or
certificates evidencing same shall be deposited with Bank; (j) provide, upon
request, financial or other information, documentation or certifications to Bank
(including balance sheets and income statements), all in form and content
satisfactory to Bank; (k) execute, upon demand by Bank, any financing statements
or other documents which Bank may deem necessary to perfect or maintain
perfection of the security interests created in this Note and pay all costs and
fees pertaining to the filing of any financing, continuation or termination
statements with regard to such security interests; (l) procure, and cause a
statement of Bank's security interest to be noted on, any certificate of title
issued or required by law to be issued with respect to any motor vehicle
constituting part of the Collateral, and cause any such certificate to be
delivered to Bank within 10 days from the later of the date of this Note or the
date of the issuance of such certificate; (m) pay, upon demand, all amounts
incurred by Bank in connection with any action or proceeding taken or commenced
by Bank to enforce or collect this Note or protect, insure or realize upon the
Collateral, including attorney's fees equal to the lesser of (a) 20% of the
above sum and interest then due hereunder, or $500.00, whichever is greater, or
(b) the maximum amount permitted by law, and attorney's costs and all costs of
legal proceedings; and (n) immediately notify Bank if any of Undersigned's
accounts arise out of contracts with the United States or any department, agency
or instrumentality thereof, and execute any instruments and take any steps
required by Bank in order that all moneys due and to become due under any such
contracts shall be assigned to Bank and notice thereof given to the United
States under the Federal Assignment of Claims Act.
5. Events of Default. The occurrence of any of the following shall constitute an
"Event of Default' hereunder:(a) default in payment or performance of any of the
Obligations evidenced or secured by this Note or any other evidence of liability
of Undersigned to Bank; (b) the breach by any Obligor (defined as Undersigned
and each surety or guarantor of any of Undersigned's liabilities to Bank, as
well as any person or entity granting Bank a security interest in property to
secure the Obligations evidenced hereby) of any covenant contained in the Credit
Agreement, this Note, or in any separate security, guarantee or suretyship
agreement between Bank and any Obligor, the occurrence of any default hereunder
or under the terms of any, such agreement or the discovery by Bank of any false
or misleading representation made by any Obligor herein or in any such agreement
or in any other information submitted to Bank by any Obligor; (c) with respect
to any, Obligor: (1) death or incapacity of any individual or general partner;
or (2) dissolution of any partnership or corporation; (d) any assignment for the
benefit of creditors by any Obligor; (e) insolvency of any Obligor; (f) the
filing or commencement of any petition, action, case or proceeding, voluntary or
involuntary, under any state or federal law regarding bankruptcy, insolvency,
reorganization, receivership or dissolution, including the Bankruptcy Reform Act
of 1978, as amended, by or against any Obligor; (g) default under the terms of
any lease of or mortgage on the premises where any Collateral is located; (h)
garnishment, attachment or taking by governmental authority of any Collateral or
other property of the Undersigned which is in Bank's possession; (i) a
determination by bank, which determination shall be conclusive if made in good
faith, that a material adverse change has occurred in the financial or business
condition of Undersigned; or (j) the maturity of any life insurance policy held
as Collateral under this Note by reason of the death of the insured or
otherwise.
6. Acceleration; Remedies. Upon the occurrence of any Event of Default: (a) all
amounts due under this Note, including the unpaid balance of principal and
interest hereof, shall become immediately due and payable at the option of Bank,
without any demand or notice whatsoever; (b) Undersigned shall, upon demand by
Bank, assemble the Collateral and promptly make it available to Bank at any
place designated by Bank with is reasonably convenient to both parties; (c) Bank
may immediately and without demand exercise any of it s rights and remedies
granted herein, under applicable law, or which it may otherwise have, against
the Undersigned, the Collateral, or otherwise; and (d) Bank may, without notice
or process of any sort, peaceably enter any premises where any vehicle
constituting a part of the Collateral is located and take possession, retain and
dispose of such vehicle and all property located in or upon it. Bank shall have
no obligation to return any property not constituting Collateral found in any
such vehicle unless Bank actually receives Undersigned's written request
therefor specifically describing such property within 72 hours after
repossession thereof. Notwithstanding any provision to the contrary contained
herein, upon the occurrence of an Event of Default as described in Section 5 (f)
hereof, all amounts due under this Note shall become immediately due and
payable, without any demand, notice, or further action by Bank whatsoever, and
an action therefor shall immediately accrue.
7. Bank's Rights. Undersigned hereby authorizes Bank, and Bank shall have the
continuing right, at its sole option and discretion, to: (a) do anything which
Undersigned is required but fails to do hereunder, and in particular Bank may,
if Undersigned fails to do so, (1) insure or take any reasonable steps to
protect the Collateral, (2) pay all taxes, levies, expenses and costs arising
with respect to the Collateral, or (3) pay any premiums payable on any policy of
insurance required to be obtained or maintained hereunder, and add any amounts
paid under this Section 7(a) to the principal amount of the indebtedness secured
by this Note; (b) direct any insurer to make payment of any insurance proceeds,
including any returned or unearned premiums, directly to Bank, and apply such
moneys to any Obligations or other amounts evidenced or secured hereby in such
order of fashion as Bank may elect; (c) inspect the Collateral at any reasonable
time; (d) pay any amounts Bank elects to pay or advance hereunder on account of
insurance, taxes, or other costs, fees, or charges arising in connection with
the Collateral, either directly to the payee of such cost, fee, or charge,
directly to Undersigned, or to such payee(s) and Undersigned jointly, and (e)
pay the proceeds of the Loans evidenced by this Note to any or all of the
Undersigned Individually or jointly, or to such other persons as any of the
Undersigned may direct.
In addition to all rights given to Bank by this Note, Bank shall have all the
rights and remedies of a secured party under any applicable law, including
without limitation, the Uniform Commercial Code.
B. Miscellaneous Provisions (a) Undersigned waives protest of all commercial
paper at any time held by Bank on which Undersigned is in any way liable, notice
of nonpayment at maturity of any and all accounts, and (except where requested
hereby) notice of action taken by Bank; and hereby ratifies and confirms
whatever Bank may do. Bank shall be entitled to exercise any right
notwithstanding any prior exercise, failure to exercise or delay in exercising
any such right. (b) Bank shall retain the lien of any judgment entered on
account of the indebtedness evidenced hereby, as well as any security interest
previously granted to secure repayment of the indebtedness evidenced hereby, and
Undersigned warrants that Undersigned has no defense whatsoever to any action or
proceeding that may be brought to enforce or realize on such judgment or
security interest. (c) If any provision hereof shall for any reason be held
invalid or unenforceable, no other provision shall be affected thereby, and this
Note shall be construed as if the invalid or unenforceable provision had never
been a part of it. The descriptive headings of this Note are for convenience
only and shall not in any way affect the meaning or construction of any
provision hereof. (a) The rights and privileges of Bank contained in this Note
shall inure to the benefit of its successors and assigns, and the duties of
Undersigned shall bind all heirs, personal representatives, successors and
assigns. (a) This Note shall in all respects be governed by the laws of the
state in which this Note is payable (except to the extent that federal law
governs), and all references to the Uniform Commercial Code shall be deemed to
refer to the Uniform Commercial Code as enacted in such state. (f) Undersigned
hereby irrevocably appoints Bank and each holder hereof as Undersigned's
attorney-in-fact to: (1) endorse Undersigned's name to any draft or check which
may be payable to Undersigned in order to collect the proceeds of any insurance
or any returned or unearned premiums in respect of any policies of insurance
required to be maintained hereunder; and (2) take any action Bank deems
necessary to perfect or maintain perfection of any security interest granted to
Bank herein, including executing any document on Undersigned's behalf. (g)
Undersigned shall bear the risk of loss of, damage to, or destruction of the
Collateral, and Undersigned hereby releases Bank from all claims for loss or
damage to the Collateral caused by any act or omission on the part of Bank,
except for willful misconduct. (h) Copies or reproductions of this document or
of any financing statement may be filed as a Financing statement.
9. Definitions. As used herein: (a) "account", "chattel paper", "contract
right", "document", "instrument", and "inventory" have the same respective
meanings given to those terms in the Uniform Commercial Code; (b) "general
intangibles" has the meaning given to that term in the Uniform Commercial Code,
including without limitation, customer lists, books and records (including
without limitation, all correspondence, files, tapes, cards, book entries,
computer runs computer programs and other papers and documents, whether in the
possession or control of Undersigned or any computer service bureau), rights in
franchises and sales contracts, patents, copyrights, trademarks, logos,
goodwill, trade names, label designs, royalties, brand names, plans, blueprints,
inventions, patterns, trade secrets, licenses, jigs, dies, molds, and formulas;
(c) "Chief Executive Office" means the place from which the main part of the
business operations of an entity is managed; and (d) "Undersigned" refers
individually and collectively to all makers of this Note, including, in the case
of any partnership, all general partners of such partnership individually and
collectively, whether or not such partners sign below. Undersigned shall be
jointly and severally bound by the terms hereof, and, with respect to any
partnership executing this Note, each general partner shall be bound hereby both
in such general partner's individual and partnership capacities.
Capitalized terms not defined in this Note shall have the same meanings set
forth in the Credit Agreement.
10. Confession of Judgment. Undersigned hereby empowers the prothonotary or any
attorney of any court of record to appear for Undersigned and to confess
judgment as often as necessary against Undersigned in favor of the holder
hereof, as of any term, for the above sum plus interest due under the terms
hereof, together with costs of legal proceedings and an attorney's commission
equal to the lesser of (a) 20% of the above sum and interest then due hereunder
or $500.00, whichever is greater, or (b) the maximum amount permitted by law,
with release of all errors. Undersigned waives all laws exempting real or
personal property from execution.
SIGNATURES
Attest/Witness:
/s/ Joseph E. Zavacky
Controller and Assistant Secretary
Corporation
C-COR Electronics, Inc.
/s/ Chris A. Miller
VP-Finance
Business Address:
60 Decibel Road
State College, PA 16801
AMENDED AND RESTATED
SUPPLEMENT TO NOTE AND SECURITY AGREEMENT
This Amended and Restated Supplement to Note and Security Agreement (this
"Supplement") is annexed to and is part of the Amended and Restated Note and
Security Agreement, dated December 30, 1997 of Undersigned payable to MELLON
BANK, N.A. ("Bank") in the stated principal amount of TWENTY-THREE Million
Dollars and No Cents ($23,000,000.00). Such Note and Security Agreement as
supplemented by this Supplement, shall be referred to as the "Note".
1. Payment. Principal on the Note shall be due and payable on October 30, 1998.
Accrued interest on the Prime Rate Portion, ABS Rate Portion, and As Offered
Rate Portion shall be due and payable on the last Business Day of each calendar
month after the date hereof and on October 30, 1998. Interest on each Rate
Segment of the LIBOR-Rate Portion shall be due and payable on the last day of
the corresponding Rate Period, but in no case less frequently than 90 days after
the previous interest payment on account of such LIBOR-Rate Portion. After
maturity of any part of the Note (by acceleration or otherwise), interest on
such part of the Note shall be due and payable on demand.
2. Interest Rate Options. The unpaid principal amount of the Note shall bear
interest for each day until due on one or more bases selected by Undersigned
from among the interest rate options ("Interest Rate Options") set forth below.
Undersigned understands and agrees: (a) that Bank may in its sole discretion
from time to time determine that the right of Undersigned to select, convert to
or renew the Prime Rate Option, the ABS Rate Option, the LIBOR-Rate Option, or
As-Offered Rate Option is not available, although Bank agrees to make a good
faith effort to provide all Interest Rate Options to Borrower, and (b) that
subject to the provisions of this Supplement, Undersigned may select any number
of Interest Rate Options to apply simultaneously to different parts of the
unpaid principal amount of the Note and may select any number of Rate Segments
to apply simultaneously to different parts of the LIBOR-Rate Portion.
Available Interest Rate Options
Prime Rate Option: A rate per annum (computed on the basis of a year
Of 360 days and actual days elapsed) for each day equal to the
Prime Rate.
ABS Rate Option: A rate per annum (computed on the basis of a
year of 360 days and actual days elapsed) for each day equal to
the ABS Rate for such day plus 110 Basis Points.
LIBOR-Rate Option: For each Rate Segment of the LIBOR-Rate
Portion, a rate per annum (computed on the basis of a year of 360
days and actual days elapsed) for each day equal to the
LIBOR-Rate for such Rate Segment for such day plus 110 Basis.
As-Offered Rate Option: For each Rate Segment of the As-Offered
Rate Portion, a rate per annum (computed on the basis of a year
of 360 days and actual days elapsed) for each day equal
to the As-Offered Rate for such Rate Segment for such day plus
110 Basis Points.
3. Rate Periods. At any time when Undersigned selects, converts to or renews the
LIBOR-Rate Option or As-Offered Rate Option, Undersigned shall fix a period (the
"Rate Period") which shall be one, two, or three months and in the case of the
As-offered Rate Option, shall be such number of days as Bank may offer at its
sole discretion, which shall be acceptable to Bank in Bank's sole discretion,
during which the LIBOR-Rate Option or As-Offered Rate Option shall apply to the
corresponding Rate Segment. Bank's right to payment of principal and interest
under the Note shall in no way be affected by the fact that one or more Rate
Periods may be in effect.
4. Amounts. Every selection of, conversion to or renewal of the ABS Rate Option,
the LIBOR-Rate Option, or the As-Offered Rate Option shall be in a principal
amount selected by Undersigned but limited to no more than four interest rate
segments at any one time.
5. Interest After Maturity. After the principal amount of any part of the Prime
Rate Portion or the ABS Rate Portion shall have become due and payable, such
amount shall bear interest for each day until paid (before and after judgment)
at a rate per annum (based on a 360 day year and actual days elapsed) which for
each day shall be the greater of (a) 2% above the Prime Rate Option on the day
such amount became due and (b) 2% above the Prime Rate Option, such interest
rate to change automatically from time to time effective as of the effective
date of each change in the Prime Rate. After the principal amount of any part of
the LIBOR-Rate Portion or the As-Offered Rate Option shall have become due and
payable, such amount shall bear interest for each day until paid (before and
after judgment) (a) until the end of the applicable then-current Rate Period at
a rate per annum 2% above the LIBOR-Rate Option or the As-Offered Rate Option
otherwise applicable to such part and (b) thereafter in accordance with the
first sentence of this Section 5.
6. Late Payment Charge. If any payment (including without limitation any
regularly scheduled payment, balloon payment and final payment) is not paid
within 25 days after it is due, Undersigned will pay a late charge equal to 5%
of the entire payment due (regardless of whether part of the payment due had
been made, and regardless of whether the payment due consists of principal and
interest, principal only or interest only). (Such late charge will be in
addition to any increase made to the interest rate(s) applicable to the
outstanding balance hereof as a result of maturity of this Note or otherwise, as
well as in addition to any other applicable fees, charges and costs.) Also, Bank
reserves the right to modify, in its sole discretion and upon thirty (30) days
prior written notice to Undersigned, the late charge set forth herein.
7. Selection, Conversion or Renewal of Rate Options. Subject to the other
provisions of this Supplement, Undersigned may select any interest Rate Option
to apply to any borrowing evidenced by the Note. Subject to the other provisions
of this Supplement, Undersigned may convert any part of the unpaid principal
amount of the Note from any Interest Rate Option to any other Interest Rate
Option and may renew the LIBOR-Rate Option as to any Rate Segment: (a) at any
time with respect to conversion from the Prime Rate Option or ABS Rate Option to
any other Interest Rate Option and (b) at the expiration of any Rate Period with
respect to conversion from or renewals of the LIBOR-Rate Option or As-Offered
Rate Option as to the Rate Segment corresponding to such expiring Rate Period.
Whenever Undersigned desires to select, convert or renew the LIBOR-Rate Option
or As-Offered Rate Option, Undersigned shall give Bank Standard Notice thereof
(which shall be irrevocable), specifying the date, amount and type of the
proposed new Interest Rate Option. If such notice has been duly given, and if
Bank in its sole discretion (based on a good faith effort to provide all
Interest Rate Options) approves the proposed selection, conversion or renewal,
on and after the date specified in such notice interest shall be calculated upon
the unpaid principal amount of the Note taking into account such selection,
conversion or renewal.
8. Prime Rate Fallback. If any Rate Period expires, any part of the Rate Segment
corresponding to such Rate Period which has not been converted or renewed in
accordance with Section 7 hereof automatically shall be converted to the Prime
Rate Option. If at any time the ABS Rate Option is determined to exceed the
Prime Rate Option, the ABS Rate Portion shall automatically convert to the Prime
Rate Option. If Undersigned fails to select, or if Bank fails to approve
(because an Interest Option is not available in Bank's good faith
determination), an Interest Rate Option to apply to any borrowing evidenced by
the Note, such borrowing shall be deemed to be at the Prime Rate Option. If at
any time the Bank shall have determined in good faith (which determination shall
be conclusive) that the accrual of interest at any of the Interest Rate Options
has been made impractical or unlawful by compliance with the Bank in good faith
with any law (including common law), constitution, statute, treaty, regulation,
rule, ordinance, order, injunction, writ, decree, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic, or
administration thereof by any official body charged with the interpretation or
administration thereof or with any request or directive of any such official
body (whether or not having the force of law), then, and in any such event, the
Outstanding principal amount of this Note subject to such Interest Rate Option
shall accrue interest at the Prime Rate Option and the Undersigned shall not
have the right to select such Interest Rate Option.
9. Prepayments. Undersigned shall have the right at its option from time to time
to prepay the Prime Rate Portion and ABS Rate Portion in whole or in part.
Undersigned shall have no right to prepay any part of the LIBOR-Rate Portion or
As-Offered Rate Portion at any time without the prior written consent of Bank
except that Undersigned may prepay any part of any Rate Segment at the
expiration of the Rate Period corresponding to such Rate Segment. Prepayments
shall be made by giving the Bank Standard Notice thereof (which shall be
irrevocable), specifying the date, and amount and type of prepayment, and upon
such date the amount so specified and accrued interest thereon shall be due and
payable.
10. Indemnity. Undersigned shall indemnify Bank against any loss or expense
(including loss of margin) which Bank has sustained or incurred as a consequence
of:
(i) payment, prepayment or conversion of any part of any Rate Segment of the
LIBOR-Rate Portion or As-Offered Rate Portion on a day other than the last day
of the corresponding Rate Period (whether or not any such payment is pursuant to
demand by Bank under the Note and whether or not any such payment, prepayment or
conversion is consented to by Bank, unless Bank shall have expressly waived such
indemnity in writing);
(ii) attempt by Undersigned to revoke in whole or part any irrevocable notice
given pursuant to Section 6 of this Supplement; or
(iii) breach of or default by any obligor in the performance or observance of
any covenant or condition contained in the Loan Agreement (if any), the Note or
any separate security, guarantee or suretyship agreement between Bank and any
Obligor.
If Bank sustains any such loss or expense it shall from time to time notify
Undersigned of the amount determined in good faith by Bank (which determination
shall be conclusive) to be necessary to indemnify Bank for such loss or expense.
Such amount shall be due and payable by Undersigned on demand.
11. Records. The unpaid principal amount of the Note, the unpaid interest
accrued thereon, the interest rate or rates applicable to such unpaid principal
amount, the duration of such applicability and the date and amount of each
payment or demand shall at all times be ascertained from the books and records
created by Bank, which shall be conclusive absent manifest error.
12. Notices. All notices under Sections 7 or 9 of this Supplement shall be in
writing or by telephone promptly confirmed in writing, and all such writings
shall be sent by first-class, first-class express or certified mail or by hand
delivery, in all cases with charges prepaid. All notices shall be sent to the
applicable party at the address stated on the signature page hereof or in
accordance with the last unrevoked written direction from such party to the
other parties hereto. All notices by Undersigned shall be effective when
received by Bank and all notices by Bank shall be effective when telephoned,
deposited in the mail or hand delivered. Written notices or confirmations by
Undersigned shall not be deemed records of Bank within the meaning of Section 11
of this Supplement whether or not received by Bank. Bank may conclusively rely
without inquiry on any notice or confirmation purporting to be from or
authorized by Undersigned.
13. Definitions. As used in this Supplement:
"ABS Rate" shall mean a per annum rate of interest equal to the rate
of interest determined by Bank, in its sole discretion, from time to time, to be
its ABS Rate. Such ABS Rate shall change from time to time as of the effective
date of each change in the ABS Rate as determined in the sole discretion of
Bank. The ABS Rate may be greater or less than other interest rates charged by
Bank to other borrowers and is not solely based or dependent upon the interest
rate which Bank may charge any particular borrower or class of borrowers.
"As-Offered Rate Option" shall mean a rate per annum offered by Bank
in its sole discretion to Undersigned from time to time for such Rate Period for
such Rate Segment as Bank may offer in its sole discretion, such interest rate
to remain fixed for the duration of such Rate Period.
"Business Day" shall mean any day on which Bank is open for business
at the location where the Note is payable.
"LIBOR-Rate" for any day for any proposed or existing Rate Segment
corresponding to a Rate Period shall mean the rate per annum determined by Bank
to be the rate per annum obtained by dividing (the resulting quotient to be
rounded upward to the nearest 1/100 of 1%) (A) the rate of interest (which shall
be the same for each day in such Rate Period) estimated in good faith by Bank in
accordance with its usual procedures (which determination shall be conclusive)
to be the average of the rates per annum for deposits in United States dollars
offered to major money center banks in the London interbank market at
approximately 11:00 a.m., London time, two London Business Days prior to the
first day of such Rate Period for delivery on the first day of such Rate Period
in amounts comparable to such Rate Segment (or, if there are no such comparable
amounts actively traded, the smallest amounts actively traded) and having
maturities comparable to such Rate Period by (B) a number equal to 1.00 minus
the LIBOR-Rate Reserve Percentage for such day.
The "LIBOR-Rate" may also be expressed by the following formula:
(average of rates offered to major )
(money banks in the London inter- )
(bank market estimated by the Bank )
LIBOR-Rate = (subsection (A)(1) I
(1-00 - LIBOR-Rate Reserve Percentage]
"LIBOR-Rate Reserve Percentage" for any day shall mean the percentage
(rounded upward to the nearest 1/100 of 1%), as determined in good faith by Bank
(which determination shall be conclusive) as representing for such day the
maximum effective reserve requirement (including without limitation
supplemental, marginal and emergency requirements) for member banks of the
Federal Reserve System with respect to eurocurrency funding (currently referred
to as "Euro-currency liabilities") of any maturity. Each LIBOR-Rate shall be
adjusted automatically as of the effective date of any change in the LIBOR-Rate
Reserve Percentage.
"London Business Day" shall mean a day for dealing in deposits in
United States dollars by and among banks in the London interbank market.
"Portion": "Prime Rate Portion shall mean at any time the part,
including the whole, of the unpaid principal amount of the Note bearing interest
at such time under the Prime Rate Option or in accordance with the first
sentence of Section 5 of this Supplement. "ABS Rate Portion" shall mean at any
time the part, including the whole, of the unpaid principal amount of the Note
bearing interest at such time under the ABS Rate Option or in accordance with
the first sentence of Section 5 of this Supplement. "LIBOR-Rate Portion" or
"As-Offered Rate Portion" shall mean at any time the part, including the whole,
of the unpaid principal amount of the Note bearing interest at such time under
the LIBOR-Rate Option or As-Offered Rate Portion as the case may be, or at a
rate determined by reference to the LIBOR-Rate Option pursuant to Section 5 of
this Supplement.
"Prime Rate" shall mean the interest rate per annum announced from
time to time by Banks as its Prime Rate. The Prime Rate may be greater or less
than other interest rates charged by Bank to other borrowers and is not solely
based or dependent upon the interest rate which Bank may charge any particular
borrower or class of borrowers.
"Rate Segment" of the LIBOR-Rate Portion at any time shall mean the
entire principal amount of such Portion to which at such time there is
applicable a particular Rate Period beginning on a particular day and ending on
another particular day. (By definition, each Portion is at all times composed of
an integral number of discrete Rate Segments, each corresponding to a particular
Rate Period, and the sum of the principal amounts of all Rate Segments of a
particular Portion at any time equals the principal amount of such Portion at
such time).
"Standard Notice" shall mean an irrevocable notice provided to the Bank on
Business Day which is
(i) at least one Business Day in advance in the case of selection of, conversion
to or renewal of the Prime Rate Option or prepayment of any Prime Rate Portion;
(ii) at least one Business Day in advance in the case of, conversion to or
renewal of the ABS Rate Option or prepayment of any ABS Portion:
(iii) at least two London Business Days in advance in the case of selection of,
conversion to or renewal of the LIBOR-Rate Option or prepayment of any
LIBOR-Rate Option or prepayment of any LIBOR-Rate Portion, and
(iv) at least one Business Day in advance in the case of selection of,
conversion to or renewal of the As-Offered Rate Option or Prepayment of any
As-Offered Rate Portion.
Standard Notice must be provided no later than 1:00 o'clock p.m., Pittsburgh
time, on the last day permitted for such notice.
Witness the due execution hereof intending to be legally bound this 30th day of
December, 1997.
Attest:
/s/ Joseph E. Zavacky
Controller & Assistant Secretary
C-COR ELECTRONICS, INC.
By:
/s/ Chris A. Miller
Title: Vice President - Finance
Address for Notices to Undersigned:
60 Decibel Road
State College, PA 16801,
MELLON BANK, N.A.
By: Milton S. Hefft
Address for Notices to Bank:
Mellon Bank N.A.
Attn: Middle Market Banking
P.O. Box 1010
Harrisburg, PA 17108
Revolving Line of Credit Agreement
AMENDED AND RESTATED
C-COR Electronics, Inc. ("Borrower")
has requested Mellon Bank, N.A.
("Bank") to make loans (the "Loans") to Borrower from time to time during the
period set forth below (the "Commitment Period") in an aggregate principal
amount outstanding at any one time not to exceed Bank's commitment set forth
below (the "Commitment Amount")find, and subject to the terms and conditions set
forth herein and in the Note and the other Credit Documents (hereinafter
defined) and, relying upon the representations and warranties herein and therein
set forth, Bank is willing to make such Loans.
Commitment Period: From the date hereof to but not including October 31, 1998.
Commitment Amount: The lesser of (i) $ 23,000,000.00 or (ii) the sum of 80% of
Eligible Accounts (as hereinafter defined) and 20% of Eligible Inventory (as
hereinafter defined).
Within the limits of time and amount set forth above and subject to the terms
and conditions set forth herein and in the Note and the other Credit Documents,
Borrower may borrow, repay and reborrow hereunder. Borrower may at any time or
from time to time reduce the Commitment Amount to an amount not less than the
sum of the unpaid principal amount of the Loans then outstanding plus the
principal amount of all Loans not yet made as to which notice has been given by
Borrower under Section 2 hereof, by providing not less than five days' prior
written notice (which notice shall be irrevocable) to such effect to Bank. If
Bank allows Loans above the Commitment Amount, all the terms and conditions set
forth herein and in the Note and the other Credit Documents will apply to such
Loans.
The obligation of Borrower to repay the Loans, to pay interest thereon and to
pay fees, if any, with respect to the Commitment Amount shall be evidenced by
one or more promissory notes, note and security agreements, letter of credit
applications, or other instruments or documents (collectively, the "Note"),
which together with this Agreement, including any Supplement hereto and any
security agreements, instruments and other documents executed by Borrower in
connection herewith are sometimes referred to herein as the "Credit Documents".
In consideration of the foregoing and intending to be legally bound, Borrower
agrees with Bank as follows:
1. Representations and Warranties. In addition to the representations and
warranties contained in the Note and any other Credit Documents, Borrower hereby
makes the following representations and warranties which shall be true an
correct on the date hereof and shall continue to be true and correct at the time
of the creation of any of the Loans and until the Loans shall have been paid in
full, or if there are no Loans outstanding so long as the Commitment Period has
not expired:
(a) Organization-Corporation and Partnership. If Borrower is a corporation or a
partnership, Borrower is duly organized, validly existing, and in good standing
under the laws in which Borrower is incorporated or was formed; Borrower has the
power and authority to own its properties and assets, to carry on its businesses
as now being conducted and is qualified to do business in every jurisdiction in
which it is required to qualify to do business.
(b) Validity and Binding Nature. Borrower has the power to execute, deliver, and
perform this Agreement, the Note and all other Credit Documents, and when
executed and delivered, this Agreement, the Note and all other Credit Documents
will be valid and binding obligations of Borrower, enforceable in accordance
with their terms; provided, however, that this representation with respect to
enforceability is limited by bankruptcy, insolvency, or other laws of general
application relating to or affecting the enforcement of creditors' rights.
(c) Due Authorization-Corporation and Partnership. The execution, delivery and
performance of this Agreement, the Note and all other Credit Documents have been
duly authorized by all corporate or partnership action required for the lawful
creation and issuance and performance thereof and will not violate any provision
of law, any order of any court or governmental agency, the charter documents and
by-laws of, or partnership agreement of Borrower.
(d) Conflicting Instruments. The execution, delivery and performance of this
Agreement, the Note and all other Credit Documents will not violate any
provisions of any indenture, agreement, or other instrument to which Borrower or
any of Borrower's properties or assets are bound, and will not be in conflict
with, result in a breach of, or constitute (with due notice and/or lapse of
time) a default under any such indenture, agreement, or other instrument, or
result in the creation or imposition of any lien charge or encumbrance of any
nature whatsoever upon any of the properties or assets of Borrower.
(e) Authorization and Consents. No authorization, consent, approval, license or
exemption of, and no registration, qualification, designation, declaration or
filing with any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, is necessary to the valid
execution, delivery and performance of this Agreement, the Note or any other
Credit Document.
(f) Financial Condition. The most recent financial statements of Borrower
delivered to the Bank are true and correct and represent fairly its financial
position as of the date thereof-, and the results of its operations for the
period or periods indicated; and show all known liabilities, direct or
contingent, of Borrow as oft a ate thereof. Since the date of such financial
statements, there has been no material adverse change in the condition,
financial or otherwise, of Borrower or in the operations, business, prospects or
properties of Borrower and, since such date, Borrower has not incurred, other
than in the ordinary course of business, any indebtedness, liabilities,
obligations or commitments, contingent or otherwise, other than indebtedness
created hereunder.
(g) Compliance with Laws. Neither the Borrower nor any subsidiary is in
violation of or subject to any contingent liability on account of any law or any
order or regulation issued by any court or governmental authority, state or
federal, including but not limited to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as amended
(the "Code"), any applicable occupational and health or safety law,
environmental protection or pollution control law or hazardous waste or toxic
substances management, handling or disposal law.
(h) Litigation. Except as previously disclosed in writing to Bank prior to the
date of this Agreement, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending, or to the knowledge of Borrower, threatened by or against or affecting
Borrower or any of the properties or rights of Borrower which, if adversely
determined, would impair the right of Borrower to carry on its business
substantially as now conducted or would adversely affect the financial
condition, business or operations of Borrower.
(i) Misrepresentation. Neither this Agreement, the Note, the other Credit
Documents, nor any other document, statement, financial statement, or
certificate furnished to Bank by or on behalf of Borrower in connection
herewith, contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading
and, insofar as Borrower can now foresee, there is no event or condition which
may in the future materially adversely affect the financial condition,
operations or properties of Borrower which has not been set forth in this
Agreement or in a document, statement, financial statement, or certificate
furnished to Bank in connection herewith.
2. Conditions. The obligation of Bank to make any Loan hereunder is subject to
the performance by Borrower of its obligations to be performed hereunder and
under the Note and the other Credit Documents on or before the date of such
Loan and to the satisfaction of the following further conditions:
(a) The representations and warranties contained herein, in the Note and in the
other Credit Documents shall be true on and as of the date of each Loan
hereunder with the same effect as though made on and as of each such date; on
each such date no "Event of Default" under and as defined in the Note and no
event, act or condition which with notice or the passage of time or both would
constitute such an Event of Default shall have occurred and be continuing or
exist or shall occur or exist after giving effect to the Loan to be made on such
date; and any request for borrowing under Section 2.(b) below shall constitute a
certification by Borrower to both such effects.
(b) Borrower shall have provided Bank with written notice (or telephonic notice
confirmed in writing) of the proposed loan specifying the principal amount
thereof and proposed date thereof, which notice shall be received by Bank office
no later 1:00pm., local time at the place where the proposed loan is payable, on
the date (which shall be a day on which the Bank is open for business) of such
proposed Loan. Such notice shall contain a certification as to the amounts of
the then current Eligible Accounts and Eligible Inventory. In the event Bank
receives telephonic notice, Bank may act in reliance upon such telephonic
notice, provided Bank has acted in good faith.
(c) The conditions, if any, specified in any Supplement hereto and in the Note
or any Credit Document shall have been met to the satisfaction of Bank.
(d) All legal details and proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory to Bank and Bank shall have
received all such counterpart originals or certified or other copies of such
documents and records of proceedings in connection with such transactions, in
form and substance satisfactory to Bank, as Bank may from time to time request.
3. General Covenants. In addition to the covenants contained in the Note and the
other Credit Documents, Borrower hereby covenants and agrees that, so long as
any of the Loans are outstanding, or if there are no Loans outstanding so long
as the Commitment Period has not expired, Borrower shall, except as Bank may
otherwise agree in writing:
(a) Financial Statements-Annual. Furnish to Bank, within 90 days after the end
of each fiscal year of Borrower, a financial statement of Borrower's profit and
loss and surplus for such fiscal year and a balance sheet as of the end of such
fiscal year, in each case setting forth in comparative form the corresponding
figures for the preceding fiscal year, all in reasonable detail and audited by
an independent certified public accountant not unsatisfactory to Bank.
(b) Accounts Receivable and Inventory Reporting. Furnish to Bank, on or before
the 45 day of each calendar month, a report, as at the end of the preceding
calendar month, containing Borrower's account receivable aging and a description
of raw material and finished goods, including a listing of Eligible Accounts and
Eligible Inventory, all in reasonable detail and in form and content
satisfactory to Bank.
(c) Financial Statements-Other. Furnish to Bank each financial statement
required to be delivered to Bank by any supplement, addendum or amendment
hereto, and such other information concerning the financial or business affairs
of Borrower as may be requested by Bank from time to time.
(d) Property. Maintain and keep all its property in good repair, working order
and condition and make or cause to be made all necessary or appropriate repairs,
renewals, replacements, substitutions, additions, betterments and improvements
thereto so that the efficiency of all such properties shall at all times be
properly preserved and maintained.
(e) Taxes and Assessments. Duly pay and discharge all taxes, assessments and
governmental charges levied upon or assessed against it or against its
properties or income prior to the date on which penalties are attached thereto,
unless and except to the extent only that such taxes, assessments and charges
shall be contested in good faith an by appropriate proceedings diligently
conducted by Borrower (unless and until foreclosure, distraint, sale or other
similar proceedings shall have been commenced) and provided that such reserve or
their appropriate provisions, if any, as shall be required by generally accepted
accounting principles shall have been made therefor.
(f) Litigation. Promptly give notice in writing to Bank of the occurrence of
material litigation, arbitration or governmental proceeding affecting the
Borrower, and of any governmental investigation or labor dispute pending or, to
the knowledge of Borrower threatened which could reasonably be excepected to
interfere substantially with normal operation of the business of Borrower or
materially adversely, affect the financial condition, business, or operations of
Borrower.
(g) Books and Records. Maintain and keep proper records and books of account in
conformance with generally accepted accounting principles applied on a
consistent basis in which full, true and correct entries shall be made of all
its dealings and business affairs.
(h) Access to Properties, Books and Records. Permit any of the officers,
employees or representatives of Bank to visit and inspect any of the properties
of Borrower and to examine its books and records and discuss the affairs,
finances and accounts of Borrower with representatives thereof, during normal
business hours, and as often as Bank may request.
(i) Financial Information-Guarantors. Cause any third party guarantor of the
Loans to submit annually or at any time there is a material change in their
financial position, personal or business financial statements containing such
financial information as may be requested by Bank from time to time.
(j) Other Obligations. Maintain all obligations of Borrower in whatsoever manner
incurred, including but not limited to obligations for borrowed money or for
services or goods purchased by Borrower, in a current status.
(k) Continuance of Business. Not engage in any line of business other than
those in which it is actively engaged in on the date hereof.
(1) Compliance with Laws. Comply, and shall cause any subsidiary to comply with
all laws, and all regulations or orders issued pursuant thereto, including but
not limited to ERISA, the Code, any applicable occupational, and health or
safety law, environmental protection or pollution control law or hazardous waste
or toxic substances management, handling or disposal law.
(m) Sale of Assets. Except for sales or other dispositions of inventory in the
ordinary course of business, not sell, lease, transfer, or otherwise dispose of
in a single transaction, or a series of related transactions, all or a
substantial part of the property and assets of Borrower. whether now owned or
hereafter acquired, to any person, firm or corporation.
(n) Acquisition of Assets. Not purchase or otherwise acquire all or
substantially all of the operating assets of any other person, firm or
corporation and, if Borrower is a corporation, not merge or consolidate with or
into any other person, firm or corporation, or permit any other person, firm or
corporation to merge with or into it, or acquire all or substantially all of the
property or assets of any other person, firm or corporation.
(o) Selling Accounts Receivable. Not sell, assign or discount any of its
accounts receivable or any promissory note held by it, with or without recourse,
other than the discount of such receivables or notes in the ordinary course of
business for collection.
(p) Payments on Outstanding Stock. Pursuant to or in contemplation of
termination, liquidation, dissolution or winding up of Borrower, not purchase,
redeem or retire or make any dividend on or distribution on account of, if
Borrower is a corporation, any shares of the capital stock of Borrower or if
Borrower is a partnership, any capital account of any partner of such
partnership.
(q) Affiliated Entities. Not establish any partnership, subsidiary, corporation,
joint venture or other form of business combination.
(r) Insurance. Keep all insurable property, real and personal, now owned or
hereafter acquired, insured at all times against loss or damage by fire and
extended coverage risks and other hazards of the kinds d against and in amounts
customarily carried by businesses engaged in comparable businesses and
comparably situated; effect all such insurance under valid and enforceable
policies issued by insurers of recognized responsibility not unacceptable to
Bank; and, promptly from time to time upon request of Bank, deliver to Bank a
summary schedule indicating all insurance then in effect.
(s) Investments. Not purchase, own, invest in or otherwise acquire, directly or
indirectly, any stock or other securities, or make or permit to exist any
investment or capital contribution or acquire any interest whatsoever in any
other person, firm or corporation or permit to exist any loans or advances for
such purposes except for investments in direct obligations of the United States
of America or any agency thereof, obligations guaranteed by the United States of
America, certificates of deposit issued by a bank or trust company, organized
under the laws of the United States, or any state thereof, or marketable
securities which are publicly traded on a nationally recognized market.
(t) Patents. Preserve and protect its patents, franchises, licenses, trademarks,
trademark rights, tradenames, tradename rights, and copyrights used or useful in
the conduct of its business.
(u) Guarantees and Contingencies. Not endorse, assume, guarantee, become surety
for, or otherwise become or remain liable in connection with the obligations of
any person, firm or corporation, except Borrower may endorse negotiable or other
instruments for deposit of collection or similar transactions in the ordinary
course of business.
(v) Transactions with Affiliates. Not enter into any transaction, including,
without limitation, the purchase, sale, leasing or exchange of property, real or
personal, or the rendering of any service, with any person, firm or corporation
affiliated with Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than would be obtained in a comparable
arm's-length transaction with any other person, firm or corporation not
affiliated with Borrower.
(w) Modifications to Other Agreements. Not amend or modify any existing
agreement with an person, firm or corporation in any manner materially adverse
to Borrower.
(x) Notice of Event of Default. Promptly give notice in writing to Bank of the
occurrence of any Event of Default under and as defined in the Note, and of any
condition, event, act or omission which, with the giving of notice or the lapse
of time or both, would constitute such an Event of Default.
General Provisions.
(a) Waivers. The provisions of this Agreement may from time to time be waived in
writing by Bank in its sole discretion. Any such waiver of any kind on the part
of Bank of any breach or default under this Agreement or any waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only to the extent set forth in such writing. No delay by Bank in
exercising any right or remedy hereunder shall operate as a waiver thereof.
(b) Financial Covenants. Compliance or non-compliance with all financial
covenants of Borrower contained herein, or in any supplement, addendum or
amendment hereto, shall be determined in accordance with generally accepted
accounting principles applied on a consistent basis. All financial statements of
Borrower required to be delivered to Bank hereby, or by any written supplement
now or hereafter executed by Borrower in which reference to this Agreement is
made, shall be prepared on the basis of generally accepted accounting principles
applied on a consistent basis.
(c) Binding Nature. The rights and privileges of Bank contained in this
Agreement shall inure to the benefit of its successors and assigns, and the
duties of Borrower shall bind all heirs, personal representatives, successors,
and assigns. "Borrower" refers individually and collectively to all signers of
this Agreement, including, in the case of any partnership, all general partners
of such partnership individually and collectively, whether or not such partners
sign below. Each of the signers shall be jointly and severally bound by the
terms hereof, and, with respect to any partnership executing this Agreement,
each general partner sha11 be bound hereby both in such general partner's
individual and partnership capacities.
(d) Governing Law. Time of performance hereunder is of the essence of this
Agreement. This Agreement and any written supplement hereto executed by Borrower
in which reference to this Agreement is made shall in all respects be governed
by the laws of the state where the Note is payable (except to the extent that
federal law governs).
(e) Severability. If any provision hereof shall for any reason be held invalid
or unenforceable, no other provision shall be affected thereby, and this
Agreement shall be construed as if the invalid or unenforceable provision had
never been a part of it. The descriptive headings hereof are for convenience
only and shall not in any way affect the meaning or construction of any
provision hereof.
(f) Definitions.
i) "Eligible Accounts" shall be defined as trade accounts receivable created or
acquired by Borrower in the ordinary course of business which are and at all
times continue to be acceptable to Bank and in which Bank has a Prior Security
Interest at all times. Standards of acceptability shall be fixed and may be
revised from time to time solely by Bank in its exclusive judgment.
ii) "Eligible Inventory" shall be defined as Borrower's inventory, excluding
work in process, of saleable raw materials and finished goods manufactured or
acquired by Borrower in the ordinary course of business, in its sole possession
or control, stored in a location or locations and in a manner acceptable to
Bank, valued at the lower of cost or market value, which inventory is and at all
times continues to be acceptable to Bank and in which Bank has a Prior Security
Interest at all times. Standards of acceptability shall be fixed and may be
revised from time to time solely by Bank in its exclusive judgment.
iii) "Prior Security Interest" shall be defined as an enforceable, perfected
security interest (under the Uniform Commercial Code), which interest is senior
and prior to all liens (including without limitation all security interests,
pledges, bailments, leases, mortgages, conditional sales and title retention
agreements, charges, claims, encumbrances, judgments, levies and all other types
of liens whatsoever).
5. Loans Above Commitment Amount. Notwithstanding any other provision of this
Agreement, the Note or the other Credit Documents, if, in Bank's sole
determination, the principal balance of the Loans hereunder shall at any time
exceed the Commitment Amount, Borrower shall pay such excess to Bank on demand.
6. Special Covenants. In addition to the covenants contained herein and in the
Note and the other Credit Documents, Borrower hereby agrees that, so long as any
of the Loans are outstanding, or if there are no Loans outstanding so long as
the Commitment Period has not expired, Borrower shall, except as Bank may grant
its prior written consent, comply with the special provisions, or covenants set
forth in any written supplement, now or hereafter executed by Borrower, in which
reference to this Agreement is made.
Witness the due execution hereof intending to be legally bound this 30th day of
December, 1997.
Attest/Witness:
/s/ Joseph E. Zavacky
Controller and Assistant Secretary
Corporation or Other Entity
C-COR Electronics, Inc.
By: /s/ Chris A. Miller
VP-Finance
Business Address:
60 Decibel Road, State College, PA 16801
Mellon Bank, N.A.
By: /s/ Milton S. Hefft
P.O. Box 1010
Harrisburg, PA 17108
SUPPLEMENT TO REVOLVING LINE OF CREDIT AGREEMENT
AMENDED AND RESTATED
The following constitutes the special provisions and/or special covenants and/or
modifications referred to in that Revolving Line of Credit Agreement dated
August 31, 1994 (the "Credit Agreement") covering the Loans (as that term is
defined in the Credit Agreement) of the undersigned (the "Borrower") from Mellon
Bank, N.A. ("Bank").
The following shall supersede any special provision or covenant contained in any
prior Supplement to Revolving Line of Credit Agreement and shall be applicable
to all Loans in existence on the date hereof or incurred hereafter.
1. The provisions of this Supplement shall, as of the date hereof, be deemed to
be fully incorporated by reference in, constitute a part of, and supplement the
provisions of, the Credit Agreement, which, except as supplemented hereby, shall
continue in full force and effect in accordance with its terms and conditions.
2. Borrower hereby covenants and agrees that, so long as any Loans are
outstanding, Borrower shall, except as Bank may grant its prior written consent:
A. Furnish to Bank, within 90 days after the end of each fiscal year of
Borrower, a financial statement of Borrower's profit and loss and surplus of
such fiscal year and a balance sheet as of the end of such fiscal year, in each
case setting forth in comparative form the corresponding figures for the
preceding fiscal year, all in reasonable detail and audited by an independent
certified public accountant not unsatisfactory to Bank, and certified by the
principal financial officer of Borrower.
B. Provide within 45 days from the end of each quarter an internal financial
statement of Borrowers profit and loss and a balance sheet as of the end of such
period, in each case setting forth in comparative form corresponding figures for
the preceding like period, all in reasonable detail. Borrower to also furnish to
Bank, within 45 days from the end of each quarter, a report, as of the end of
the preceding fiscal quarter, containing Borrower's accounts receivable aging
and a description of raw material and finished goods inventory, including a
listing of eligible Accounts Receivable and eligible Inventory, all in
reasonable detail and in form and content satisfactory to Bank.
C. Furnish to Bank a copy of Form(s) 10-K and 10-Q when provided to the
Securities and Exchange Commission.
D. Maintain at all times a ratio of Borrower's total liabilities to tangible
net worth (as defined by GAAP) of not more than 1 to 1.
For purposes of this agreement, Tangible Net Worth shall mean stockholder's
equity in Borrower less treasury stock and less all items properly classified as
intangible, as determined in accordance with generally accepted accounting
principles consistently applied.
E. Maintain minimum net income from continuing operations of $5OO,OOO, to be
measured on a rolling four quarter basis. First measurement will be the quarter
ending 12/31/97. This net income covenant will exclude the following:
- - Exclude impact of discontinued operation in Fremont, California.
- - Exclude impact of benefit from possible tax refunds due to operating loss.
F. Not permit the outstanding balance and accrued but unpaid interest under
Borrower's Line of Credit extended pursuant to the term hereof (The Revolving
"Line of Credit") to exceed an amount equal to the sum of 80% of the outstanding
dollar amount of Borrower's Eligible Accounts (as defined below) plus 20% of the
outstanding dollar amount of Borrower's Eligible Inventory (as defined below),
however that at no time shall the portion of loans based on Eligible Inventory
exceed $5 million.
"Eligible Accounts"' means United States accounts, and Canadian accounts aged 90
days or less, created or acquired by Borrower in the ordinary course of business
which are and at all times continue to be acceptable to Bank and in which Bank
has a prior security interest at all times.
"Eligible Inventory" shall mean all raw materials and finished goods.
Borrower agrees and acknowledges that Bank, at its sole discretion, may lend
additional amounts to Borrower in excess of the limitations set forth above and
may, upon an event of default as defined in the Revolving Line of Credit
Agreement, change the percentage loan limit of Eligible Accounts set forth
above.
If the outstanding principal balance and accrued but unpaid interest on
Borrower's Line of Credit shall at any time exceed the limit set forth above,
then Borrower shall, upon Bank's request, pay immediately to Bank such
additional collateral security as Bank in its sole discretion may deem
appropriate.
G. Not incur, create, assume or permit to exist ' any pledge, lien, charge or
other encumbrance of any nature whatsoever on any of its accounts receivable and
inventory, now or hereafter owned, other then (I) such encumbrances reflected in
the most recent financial statement of Borrower submitted to Bank prior hereto,
(ii) security interests granted in favor of Bank, (iii) pledges or deposits
under workers' compensation, unemployment insurance and social security laws, or
to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases or to secure statutory obligations or
surety or other similar bonds used in the ordinary course of business, (iv) tax
liens which are being contested in good faith and by appropriate proceedings
diligently conducted (unless and until foreclosure, sale or other similar
proceedings have been commenced) and provided that such reserve or other
appropriate provisions, if any, as shall be required by generally accepted
accounting principles shall have been made therefore, and (v) any unfilled
materialmen's, mechanic's, workmen's and repairman's liens (provided, that if
such a lien shall be perfected, it shall be discharged of record immediately by
payment, bond or otherwise).
Regulation U: The borrower hereby represents and warrants that it will make no
borrowings hereunder for the purpose of buying or carrying any "margin stock",
as such term is used in Regulation U of the board of governors of the federal
reserve system, as amended from time to time. Neither the Borrower nor any
subsidiary owns any "margin stock". Neither the borrower nor any subsidiary is
engaged in the business of extending credit to others for such purpose, and no
part of the proceeds of any borrowing hereunder 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".
SIGNATURES
Witness the due execution hereof intending to be legally bound this 30th day of
December, 1997.
Attest:
By: /s/ Joseph E. Zavacky
Controller & Assistant Secretary
C-COR Electronics, Inc.
By: /s/ Chris A. Miller
Vice President - Finance, Secretary
& Treasurer
Mellon Bank, N.A.
P.O. Box 1010
10 S. 2nd Street
Harrisburg, PA 17101
By: /s/ Milton S. Hefft
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
December 26, December 27, December 26, December 27,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
Basic:
Weighted average shares outstanding 9,148 9,613 9,143 9,610
------------ ------------ ------------ ------------
Total 9,148 9,613 9,143 9,610
Income from continuing operations $ 1,586 $ 563 $ 3,467 $ 2,096
Loss from discontinued operations 0 (228) 0 (1,002)
------------ ------------ ------------ ------------
Net income $ 1,586 $ 335 $ 3,467 $ 1,094
------------ ------------ ------------ ------------
Net income (loss) per share
Continuing operations $ 0.17 $ 0.06 $ 0.38 $ 0.22
Discontinued operations 0.00 (0.03) 0.00 (0.11)
------------ ------------ ------------ ------------
Net income per share $ 0.17 $ 0.06 $ 0.38 $ 0.11
------------ ------------ ------------ ------------
Diluted:
Weighted average shares outstanding 9,148 9,613 9,143 9,610
Weighted average common stock
equivalents 288 182 228 189
------------ ------------ ------------ ------------
Total 9,436 9,795 9,371 9,799
Income from continuing operations $ 1,586 $ 563 $ 3,467 $ 2,096
Loss from discontinued operations 0 (228) 0 (1,002)
------------ ------------ ------------ ------------
Net income $ 1,586 $ 335 $ 3,467 $ 1,094
------------ ------------ ------------ ------------
Net income (loss) per share
Continuing operations $ 0.17 $ 0.06 $ 0.37 $ 0.21
Discontinued operations 0.00 (0.03) 0.00 (0.10)
------------ ------------ ------------ ------------
Net income per share $ 0.17 $ 0.06 $ 0.37 $ 0.11
------------ ------------ ------------ ------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-26-1998
<PERIOD-START> JUN-28-1997
<PERIOD-END> DEC-26-1997
<CASH> 141
<SECURITIES> 352
<RECEIVABLES> 20,133
<ALLOWANCES> 584
<INVENTORY> 22,200
<CURRENT-ASSETS> 47,141
<PP&E> 51,358
<DEPRECIATION> 24,916
<TOTAL-ASSETS> 75,108
<CURRENT-LIABILITIES> 21,523
<BONDS> 0
0
0
<COMMON> 965
<OTHER-SE> 44,375
<TOTAL-LIABILITY-AND-EQUITY> 75,108
<SALES> 37,185
<TOTAL-REVENUES> 37,185
<CGS> 29,124
<TOTAL-COSTS> 5,462
<OTHER-EXPENSES> 125
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 2,398
<INCOME-TAX> 812
<INCOME-CONTINUING> 1,586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,586
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
