SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1997
or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______ .
0-11521
(Commission File Number)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1701520
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
Great Valley Corporate Center
4 Country View Road
Malvern, Pennsylvania 19355
(Address of principal executive offices)
Registrant's telephone number, including area code: (610) 647-5930
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
16,289,975 Common shares, $.01 par value, as of August 6, 1997
Page 1 of 18 consecutively numbered pages
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX
PART I, UNAUDITED FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1997 and September 30, 1996
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1997 and 1996
Condensed Consolidated Statements of Operations -
Nine Months Ended June 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Operations and Financial Condition
PART II, OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
June 30, September 30,
1997 1996
(UNAUDITED) (NOTE)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,750 $ 12,303
Receivables, including $64,204
and $55,146 of earned revenues
in excess of billings, net of
allowance for doubtful accounts
of $2,609 and $1,590 102,176 77,161
Prepaid expenses and other receivables 13,178 10,208
-------- --------
TOTAL CURRENT ASSETS 126,104 99,672
PROPERTY AND EQUIPMENT--net of
accumulated depreciation 37,861 35,222
CAPITALIZED COMPUTER SOFTWARE COSTS,
net of accumulated amortization 14,213 10,510
COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED, net of accumulated
amortization 8,275 8,740
OTHER ASSETS AND DEFERRED CHARGES 6,646 9,115
-------- --------
TOTAL ASSETS $193,099 $163,259
======== ========
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
June 30, September 30,
1997 1996
(UNAUDITED) (NOTE)
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,597 $ 6,674
Current portion of long-term debt 7,385 200
Income taxes payable 485 398
Accrued expenses 23,657 12,358
Deferred revenue 10,051 12,653
-------- --------
TOTAL CURRENT LIABILITIES 49,175 32,283
LONG-TERM DEBT, less current portion 750 31,590
DEFERRED TAXES AND OTHER
LONG-TERM LIABILITIES 2,960 2,590
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per
share--authorized 3,000 shares,
none issued
Common stock, par value $.01 per share--
authorized 24,000 shares, issued
17,317 and 15,245 shares 173 152
Capital in excess of par value 89,408 60,526
Retained earnings 54,202 39,687
-------- --------
143,783 100,365
Less
Held in treasury, 1,151 common
shares--at cost (2,959) (2,959)
Notes receivable from stockholders (610) (610)
-------- --------
140,214 96,796
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $193,099 $163,259
======== ========
Note: The condensed consolidated balance sheet at September 30, 1996 has
been derived from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
For the Three Months Ended
June 30,
1997 1996
Revenues:
OnSite services $24,715 $22,068
Software sales 20,460 12,760
Maintenance and enhancements 12,602 10,545
Software services 17,156 10,703
Interest and other revenue 161 240
------- -------
75,094 56,316
Expenses:
Cost of OnSite services 20,056 18,196
Cost of software sales and
maintenance and enhancements 11,556 9,825
Cost of software services 14,199 9,206
Selling, general and administrative 18,608 13,343
Interest expense 0 637
------- -------
64,419 51,207
Income before income taxes 10,675 5,109
Provision for income taxes 4,270 2,197
------- -------
Net Income $ 6,405 $ 2,912
======= =======
Per common share:
Net income
Primary $ 0.39 $ 0.19
Fully diluted $ 0.37 $ 0.19
Common shares and equivalents outstanding
Primary 16,544 15,045
Fully diluted 17,355 17,130
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
For the Nine Months Ended
June 30,
1997 1996
Revenues:
OnSite services $ 70,149 $ 62,079
Software sales 50,554 33,382
Maintenance and enhancements 38,003 30,923
Software services 43,899 29,917
Interest and other revenue 406 590
------- -------
203,011 156,891
Expenses:
Cost of OnSite services 57,190 50,210
Cost of software sales and
maintenance and enhancements 33,063 27,833
Cost of software services 36,150 27,116
Selling, general and administrative 51,064 39,660
Interest expense 1,123 1,724
------- -------
178,590 146,543
Income before income taxes 24,421 10,348
Provision for income taxes 9,906 4,407
------- -------
Net Income $14,515 $ 5,941
======= =======
Per common share:
Net income
Primary $ 0.95 $ 0.39
Fully diluted $ 0.87 $ 0.39
Common shares and equivalents outstanding
Primary 15,271 15,096
Fully diluted 17,293 15,096
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
For the Nine Months Ended
June 30,
1997 1996
OPERATING ACTIVITIES
Net income $14,515 $ 5,941
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 9,527 7,701
Provision for doubtful accounts 1,732 803
Changes in operating assets and
liabilities:
(Increase) in receivables (26,745) (15,611)
(Increase) in other current assets,
principally prepaid expenses (2,970) (2,862)
Increase in accrued expenses 11,299 2,971
(Decrease) in deferred revenue (2,602) (9,084)
Other, net 620 (381)
-------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,376 (10,522)
INVESTING ACTIVITIES
Purchase of property and equipment (7,297) (7,455)
Capitalized computer software costs (5,633) (5,408)
Proceeds from sale or maturity of
investments available-for-sale 0 13,504
Purchase of subsidiary assets, net of
cash acquired 0 (657)
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (12,930) (16)
FINANCING ACTIVITIES
Principal payments on short-term debt (1,700) (1,600)
Proceeds from borrowings 7,700 12,100
Repurchase and retirement of Company stock (1,271) 0
Proceeds from exercise of stock options 1,330 373
Redemption of subordinated debentures
not converted (58) 0
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,001 10,873
(DECREASE)INCREASE IN CASH & CASH EQUIVALENTS (1,553) 335
CASH & CASH EQUIVALENTS-BEGINNING OF PERIOD 12,303 1,602
-------- --------
CASH & CASH EQUIVALENTS-END OF PERIOD $10,750 $ 1,937
======== ========
SUPPLEMENTAL INFORMATION
Noncash investing and financing actvities:
Conversion of subordinated debentures
to common stock 30,294 0
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
June 30, 1997
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 1O-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended September 30, 1996. Operating results for the three and nine-month
periods ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1997.
NOTE A--RECLASSIFICATION
Certain prior year information has been reclassified to conform with
the current year format.
NOTE B--CASH AND CASH EQUIVALENTS
Cash equivalents--Cash equivalents are defined as short-term highly liquid
investments with a maturity of three months or less at the date of purchase.
NOTE C--INCOME PER SHARE
Primary income per share is computed using the weighted average number of
common shares outstanding, plus, to the extent dilutive, common stock
equivalents. Fully diluted income per share is based on an increased
number of shares that would be outstanding assuming the exercise of stock
options when the Company's stock price at the end of the period is higher than
the average stock price within the respective period, plus to the extent
dilutive, the increased number of shares that would be outstanding, assuming
conversion of the 6 1/4% convertible subordinated debentures at the
beginning of the period presented. Net income used in the calculation of
fully diluted income per share in each period presented is adjusted for
interest expense (net of tax) on the convertible subordinated debentures.
See Note F--New Accounting Standards.
NOTE D--STOCK REPURCHASE
In October 1996, the Company repurchased 185 shares of common stock at
$15 per share, originally issued in the acquisition of Adage Systems
International, Inc. in June 1995. The purchase of treasury stock reduced
stockholders' equity. All of these shares have subsequently been retired.
Pursuant to the stock repurchase, the Company agreed to pay $1,271
immediately, and signed a note for $1,500 with amounts payable in October
1997 and 1998.
NOTE E--BOND REDEMPTION
On April 9, 1997, the Company called for redemption on May 9, 1997 all
of its outstanding 6 1/4% convertible subordinated debentures due September
1, 2003. The Company issued 1,816 shares of common stock for the
conversion of bonds with a principal amount of $27.3 million. The
Company redeemed bonds not converted with a principal, accrued interest, and
premium amount of $58.
NOTE F--NEW ACCOUNTING STANDARDS
On October 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" (SFAS 121). The Statement requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
SFAS 121 also addresses the accounting for long-lived assets that are expected
to be sold or discarded. As the Company's accounting policies prior to the
adoption of SFAS 121 have provided for similar accounting treatment, the
effect of adoption was not material to the Company's financial condition or
results of operations.
Also on October 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation". The Statement
requires that companies with stock-based compensation plans either recognize
compensation expense based on new fair-value accounting methods or continue
to apply the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and disclose in its annual
financial statements pro forma net income and earnings per share assuming the
fair value method had been applied. The Company has elected to adopt the
disclosure alternative, which will be presented in its year-end financial
statements, and continue accounting for its stock-based compensation plans
under the provisions of APB 25.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (SFAS 128), which is effective for periods
ending after December 15, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements primary earnings per share will
exclude the dilutive effect of stock options and fully diluted earnings per
share must include the dilutive effect of stock options even if the dilutive
effect is immaterial. The impact is expected to result in an increase in
primary earnings per share for the nine months ended June 30, 1997 and 1996 of
$.05 and $.03 per share, respectively. The impact of SFAS 128 on the
calculation of primary earnings per share for the quarters ended June 30, 1997
and 1996 and the calculation of fully diluted earnings per share for the these
quarters and the nine-month periods then ending is not expected to be
material.
NOTE G--OTHER
Product development expenditures, including software maintenance
expenditures, for the nine months ended June 30, 1997 and 1996, were
approximately $18,890 and $15,085, respectively. After capitalization
these amounts were approximately $13,257 and $9,677, respectively, and were
charged to operations as incurred. For the same periods, amortization of
capitalized software costs amounted to $1,929 and $832, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
The purpose of this section is to give interpretive guidance to the reader of
the financial statements.
RESULTS OF OPERATIONS
The following table sets forth: (a) certain income statement items as a
percentage of total revenues and (b) for revenues, the percentage change
for each item from the prior year comparative period.
% of Total Revenues % Change from
Prior Year
Three Mos. Nine Mos. Three Mos. Nine Mos.
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
Revenues:
OnSite services 33% 39% 35% 40% 12% 13%
Software sales 27% 23% 25% 21% 60% 51%
Maintenance and enhancements 17% 19% 19% 20% 20% 23%
Software services 23% 19% 21% 19% 60% 47%
---- ---- ---- ----
Total 100% 100% 100% 100% 33% 29%
Expenses:
Cost of services, sales and
maintenance and enhancements 61% 66% 62% 67%
Selling, general and
administrative 25% 24% 25% 25%
Interest expense 0% 1% 1% 1%
Income before income taxes 14% 9% 12% 7%
The following table sets forth the gross profit for each of the following
revenue categories as a percentage of revenue for each such category and the
total gross profit as a percentage of total revenue (excluding interest and
other revenue). The Company does not separately present the cost of
maintenance and enhancements revenue as it is impracticable to separate such
cost from the cost of software sales and services.
Three Months Nine Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
Gross Profit:
OnSite services 19% 18% 18% 19%
Software sales and maintenance
and enhancements 65% 58% 63% 57%
Software services 17% 14% 18% 9%
--- --- --- ---
Total 39% 34% 38% 33%
<PAGE>
Revenues
The 12% and 13% increases in OnSite services revenues in the third quarter and
first nine months of fiscal year 1997 are primarily the result of (1)
increases in outsourcing services provided to the City of Indianapolis and
MediaOne (formerly Continental Cablevision, Inc.), (2) first quarter contracts
with the University of Memphis and Norshipco and (3) new contracts signed in
the third quarter including the University of Montevallo. These increases
were partially offset by decreased revenues compared to the prior year periods
resulting from contracts which ended during the period.
Software sales increased 60% in the third quarter of fiscal year 1997 compared
with the third quarter of fiscal year 1996 due primarily to increased licenses
of ADAGE Enterprise Resource Planning (ERP) software to the manufacturing
market and BANNER software licenses to the higher education market. Software
sales increased 51% in the first nine months of fiscal year 1997 compared with
the corresponding period in fiscal year 1996 due primarily to increased
licenses of ADAGE ERP software in the second and third quarters, increased
BANNER software licenses to the higher education market during the third
quarter, and increased licenses of BANNER Customer Information System (CIS)
software to the utility market in the first and second quarters of fiscal year
1997.
The 20% and 23% increases in maintenance and enhancements revenues in the
third quarter and first nine months of fiscal year 1997 are the result of the
growing installed base of clients primarily in the higher education market and
the utility marketplace. In addition, the Company continues to experience a
high annual renewal rate on maintenance contracts.
Software services revenue increased 60% and 47% in the third quarter and first
nine months of fiscal year 1997, compared with the corresponding periods of
fiscal year 1996, primarily as the result of increases in implementations and
integration services in the U.S. and international utility markets and the
higher education market and increases in ADAGE ERP implementations and support
services to the manufacturing market.
Gross Profit
Gross profit increased as a percentage of total revenue (excluding interest
and other revenue) from 34% to 39% for the third quarter of fiscal year 1997
and from 33% to 38% for the first nine months of fiscal year 1997 as compared
with the respective periods in the prior fiscal year. The increase in the
software sales and maintenance and enhancements gross profit was the result of
significant growth in license fee revenue. The software services margin
increased primarily as a result of increases in the utility business gross
margin. In the first nine months of fiscal year 1996, the cost of software
services reflected increased expenditures in the utility business. In the
second quarter of fiscal year 1996, the Company recorded a contract loss
provision of $1.25 million to reflect the cost of satisfying certain
obligations relating to the CIS product for U.S. utilities. These obligations
were satisfied in the first quarter of fiscal year 1997. The increases in
gross profit for the three and nine-month periods ended June 30, 1997 were
offset by decreases in the international utility business where additional
costs were incurred in the third quarter as a result of contract delays and
overruns.
Seasonality
Certain factors have resulted in quarterly fluctuations in operating results,
including variability of software license fee revenues, seasonal patterns of
capital spending by clients, the timing and receipt of orders, competition,
pricing, new product introductions by the Company or its competitors, levels
of market acceptance for new products, and general economic and political
conditions. While the Company has historically generated a greater portion of
license fees in total revenue in the last two fiscal quarters, the
non-seasonal factors cited above may have a greater effect than seasonality on
the Company's results of operations.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
The Company's cash and cash equivalents balance was $10.8 million and $12.3
million at June 30, 1997 and September 30, 1996, respectively.
Cash provided by operating activities was $5.3 million for the first nine
months of fiscal year 1997 compared to cash used of $10.5 million for the
prior-year period. Operating cash flows have increased primarily due to an
increase in income before depreciation and amortization. Additionally,
increases in other accrued expenses are primarily the result of employee
related accruals and increases in client equipment purchase obligations
resulting from OnSite services contracts. The increases in accounts
receivable at June 30, 1997 compared to September 30, 1996 balances are due to
increases in revenues and the timing of billings on the Company's software
services contracts and software licenses.
The Company provides OnSite services and software-related services, including
systems implementation and integration services. Contract fees from OnSite
services are typically based on multi-year contracts ranging from five to 10
years and provide a recurring revenue stream throughout the term of the
contract. Software services contracts usually have shorter terms than OnSite
services contracts, and billings are sometimes milestone based. During the
beginning of a typical OnSite services contract, services are performed and
expenses are incurred by the Company at a greater rate than in the later part
of the contract. Billings usually remain constant during the term of the
contract and, in some cases, when a contract term is extended, the billing
period is also extended over the new life of the contract. Revenue is usually
recognized as work is performed. The resulting excess of revenues over
billings is reflected on the Company's Consolidated Balance Sheet as unbilled
accounts receivable. As an OnSite contract proceeds, services are performed
and expenses are incurred at a lesser rate, resulting in billings exceeding
revenue recognized, which causes a decrease in the unbilled accounts
receivable, as will the achievement of a milestone in a software services
contract.
During the first nine months of fiscal year 1997, the Company's primary use of
$12.9 million cash for investing activities was the purchase of equipment and
capitalization of newly developed software. During the first nine months of
fiscal year 1996, the uses of cash for equipment purchases and software
capitalization were largely offset by the proceeds from the sale or maturity
of available-for-sale investments.
The Company signed a long-term lease agreement in May 1997 for a new office
building in its Malvern campus. The Company anticipates that it will begin to
incur fit-up and remodeling costs in approximately the second quarter of
fiscal year 1998 and rent payments should begin shortly thereafter. Fiscal
year 1997 capitalized software expenditures are expected to remain at
approximately the same level as fiscal year 1996 expenditures. Although there
has been a reduction in the capitalization of costs related to ADAGE ERP
software, a major version of which was completed and released in November
1996, these reductions should be offset by increases in the capitalization of
costs related to the continual development of Banner products, particularly
higher education software.
Financing activities provided cash of $6.0 million and $10.9 million at June
30, 1997 and 1996, respectively. During the first nine months of fiscal year
1997, cash was primarily provided by borrowings on the Company's senior
revolving credit facility. This was offset by cash used to repurchase and
subsequently retire 185 thousand shares of stock originally issued in
connection with the purchase of Adage Systems International, Inc. in June
1995. Pursuant to the stock repurchase, the Company signed a note for $1.5
million with amounts payable in October 1997 and 1998. Similarly, cash was
primarily provided during the first nine months of fiscal year 1996 by
borrowings on the Company's credit facility.
On April 9, 1997, the Company announced that it called for redemption all of
its outstanding 6 1/4% convertible subordinated debentures due September 1,
2003. The redemption date was May 9, 1997. Of the $27.3 million principal
amount of debentures outstanding at April 8, 1997, all but $55 thousand were
converted into shares of the Company's common stock. This resulted in the
issuance of 1,816 thousand shares of common stock.
The Company has a senior revolving credit facility, available for general
corporate purposes, which was renegotiated during the quarter ended June 30,
1997. The amended agreement provides for a permanent increase in the amount
of the revolving credit to $30 million. The credit facility agreement expires
in June 1999 with optional annual extensions. As long as borrowings are
outstanding and as a condition precedent to new borrowings, the Company must
comply with certain covenants, and the Company is prohibited from paying any
dividends other than stock dividends. At June 30, 1997 $6.2 million was
outstanding. The Company repaid these amounts in July 1997 using cash
provided by operations.
The Company believes that its cash and cash equivalents, cash provided by
operations, and borrowing arrangements should satisfy its needs for the
foreseeable future.
Contingencies
A purported class action complaint was filed against the Company and certain
of its officers and directors on October 4, 1995. The plaintiff filed an
amended complaint on November 28, 1995. The amended complaint alleged
violations of certain disclosure and related provisions of the Federal
Securities Laws. The amended complaint sought damages in unspecified amounts
as well as equitable relief. In April 1996, the Company's motion to dismiss
the amended complaint was granted in part and denied in part. On February 3,
1997, the plaintiff filed a Second Amended Complaint alleging violations of
certain disclosure and related provisions of the Federal Securities Laws and
negligent misrepresentation. On February 18, 1997, the Company filed a motion
to dismiss the plaintiff's Second Amended Complaint, which motion is presently
pending before the Court. Management believes the claims in the Second
Amended Complaint are without merit and intends to contest the allegations
vigorously. While management, based on its investigation to date, believes
that resolution of this action will not have a materially adverse effect on
the Company's consolidated financial position, the ultimate outcome of this
matter cannot presently be determined.
New Accounting Standards
On October 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS 121). The Statement requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
SFAS 121 also addresses the accounting for long-lived assets that are expected
to be sold or discarded. As the Company's accounting policies prior to the
adoption of SFAS 121 have provided for similar accounting treatment, the
effect of adoption was not material to the Company's financial condition or
results of operations.
Also on October 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation". The Statement
requires that companies with stock-based compensation plans either recognize
compensation expense based on new fair-value accounting methods or continue to
apply the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and disclose in its annual
financial statements pro forma net income and earnings per share assuming the
fair value method had been applied. The Company has elected to adopt the
disclosure alternative, which will be presented in its year-end financial
statements, and continue accounting for its stock-based compensation plans
under the provisions of APB 25.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (SFAS 128), which is effective for periods
ending after December 15, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements primary earnings per share will
exclude the dilutive effect of stock options and fully diluted earnings per
share must include the dilutive effect of stock options even if the dilutive
effect is immaterial. The impact of FAS 128 on the calculation of primary and
fully diluted earnings per share is not expected to be material.
Cautionary Statement
The matters discussed herein and elsewhere that are forward-looking statements
including statements concerning the Company's or management's intentions,
beliefs, expectations or predictions for the future, are based on current
management expectations that involve risks and uncertainties which could cause
actual results to differ materially from those anticipated. Potential risks
and uncertainties that could affect the Company's future operating results
include without limitation, the effect of publicity on demand for the
Company's products and services, general economic conditions, the Company's
ability to attract and retain highly skilled technical, managerial, sales and
marketing personnel, continued market acceptance of the Company's products and
services, the timing of the receipt of software licenses, the timing of
services contracts and renewals, the timing and complexity of large
transactions, continued competitive and pricing pressures in the marketplace,
the Company's ability to develop and market new and updated products and
enhancements cost effectively and on a timely basis, and the Company's ability
to complete fixed-price contracts profitably. The Company is investing in the
development of new products and in improvements to existing products; however,
software development is a complex and creative process that can be difficult
to accurately schedule and predict.
Since a significant part of the Company's business results from software
licensing, the Company's business is characterized by a high degree of
operating leverage. The Company's expense levels are based, in significant
part, on the Company's expectations as to future revenues and are therefore
relatively fixed in the short term. If software licensing revenues do not
meet expectations, net income is likely to be disproportionately adversely
affected. There can be no assurance that the Company will be able to increase
or even maintain its current level of profitability on a quarterly or annual
basis in the future. It is therefore possible that in one or more future
quarters the Company's operating results will be below expectations. In such
event, the price of the Company's common stock could be adversely affected.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
PART II
Item 1. Legal Proceedings
On October 4, 1995, John J. Wallace filed a purported class action lawsuit in
the United States District Court for the Eastern District of Pennsylvania
against the Company; Michael J. Emmi, Chairman of the Board, President and
Chief Executive Officer of the Company; Michael D. Chamberlain, Senior Vice
President and a director of the Company; and Eric Haskell, Senior Vice
President, Finance and Administration, Treasurer and Chief Financial Officer
of the Company. The plaintiff filed an amended complaint on November 28,
1995. The amended complaint alleged that the defendants violated sections 10
(b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder by making misstatements and omissions regarding the
Company's financial performance in the second half of fiscal year 1995. The
class period alleged is from June 5, 1995 through October 2, 1995. The
amended complaint seeks damages in unspecified amounts as well as equitable
relief.
In April 1996, the Company's Motion to Dismiss the Amended Complaint was
granted in part and denied in part. On February 3, 1997, the
plaintiff filed a Second Amended Complaint alleging violations of
certain disclosure and related provisions of the Federal Securities
Laws and negligent misrepresentation. On February 18, 1997, the
Company filed a motion to dismiss the plaintiff's Second Amended
Complaint, which motion is presently pending before the Court. Management
believes the claims in the Second Amended Complaint are without merit and
intends to contest the allegations vigorously. While management, based on
its investigation to date, believes that resolution of this action will not
have a materially adverse effect on the Company's consolidated financial
position, the ultimate outcome of this matter cannot be presently determined.
Item 6(a). Exhibits
Exhibit 10.1 -- Amendment and Modification to Credit Agreement dated as of
April 8, 1997 among Registrant and SCT Software & Resource Management
Corporation as Borrowers and Mellon Bank, N.A.
Exhibit 10.2 -- Second Amendment and Modification to Credit Agreement dated
as of April 8, 1997 among Registrant and SCT Software & Resource Management
Corporation as Borrowers and Mellon Bank, N.A.
Exhibit 10.3 -- Third Amendment and Modification to Credit Agreement dated
as of June 4, 1997 among Registrant and SCT Software & Resource Management
Corporation as Borrowers and Mellon Bank, N.A.
Exhibit 11 -- Statement re: Computation of Per Share Earnings
Exhibit 27 -- Financial Data Schedule
Item 6(b). Reports on Form 8-K
The registrant filed a current report on Form 8-K dated April 9, 1997. Under
Item 5, the registrant gave notice that it elected to redeem and will redeem
on May 9, 1997 all of its outstanding, authenticated and registered 6 1/4 %
Convertible Subordinated Debentures Due 2003. As of April 8, 1997, the
principal amount of Debentures outstanding was $27,295.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
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.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(Registrant)
Date: 08/14/97 /s/ Eric Haskell
________________________________
Eric Haskell
Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer
<TABLE>
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
<CAPTION>
Three months ended Nine months ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
PRIMARY
<S> <C> <C> <C> <C>
Average shares outstanding 15,539,888 14,066,445 14,552,365 14,061,623
Net effect of dilutive stock options--
based on the treasury stock method
using average market price 1,004,451 978,503 718,348 1,034,288
----------- ----------- ----------- -----------
Total 16,544,339 15,044,948 15,270,713 15,095,911
=========== =========== =========== ===========
Net income $ 6,405,000 $ 2,912,000 $14,515,000 $ 5,941,000
=========== =========== =========== ===========
Net income per share $0.39 $0.19 $0.95 $0.39
===== ===== ===== =====
FULLY DILUTED
Average shares outstanding 15,539,888 14,066,445 14,552,365 14,061,623
Net effect of dilutive stock options--
based on the treasury stock method
using the end of period market price,
if higher than average market price 1,209,024 978,503 1,209,024 1,034,288
Assumed conversion of 6 1/4%
convertible subordinated debentures 606,556 2,085,000 1,531,945 0
----------- ----------- ----------- -----------
Total 17,355,468 17,129,948 17,293,334 15,095,911
=========== =========== =========== ===========
Net Income $ 6,405,000 $ 2,912,000 $14,515,000 $ 5,941,000
Add 6 1/4 % convertible subordinated
debenture interest, net of
income tax effect 0 300,000 521,000 0
Net income, as adjusted $ 6,405,000 $ 3,212,000 $15,036,000 $ 5,941,000
=========== =========== =========== ===========
Net income per share $0.37 $0.19 $0.87 $0.39
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
June 30, 1997 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,750,000
<SECURITIES> 0
<RECEIVABLES> 104,785,000
<ALLOWANCES> 2,609,000
<INVENTORY> 0
<CURRENT-ASSETS> 126,104,000
<PP&E> 64,350,000
<DEPRECIATION> 26,489,000
<TOTAL-ASSETS> 193,099,000
<CURRENT-LIABILITIES> 49,175,000
<BONDS> 750,000
0
0
<COMMON> 173,000
<OTHER-SE> 140,041,000
<TOTAL-LIABILITY-AND-EQUITY> 193,099,000
<SALES> 202,605,000
<TOTAL-REVENUES> 203,011,000
<CGS> 126,403,000
<TOTAL-COSTS> 177,467,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,123,000
<INCOME-PRETAX> 24,421,000
<INCOME-TAX> 9,906,000
<INCOME-CONTINUING> 14,515,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,515,000
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.87
</TABLE>
AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT
THIS AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT (the
"Amendment") is made as of the 8th day of April, 1997, by and among
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION ("Company"), SCT SOFTWARE &
RESOURCES MANAGEMENT CORPORATION ("Borrowing Subsidiary") (collectively,
"Borrowers" and individually a "Borrower") and MELLON BANK, N.A.
("Bank").
BACKGROUND
A. By a Credit Agreement dated June 20, 1994, (the "Credit
Agreement"), by and among Bank and Borrowers, Bank agreed, inter alia,
to extend to Borrowers a revolving credit facility in the principal
amount of up to Twenty Million Dollars ($20,000,000.00) (the "Revolving
Credit"), as further evidenced by that certain Promissory Note dated
June 20, 1994 payable to Bank in the original principal amount of Twenty
Million Dollars ($20,000,000.00) (the "Revolving Credit Note").
B. Borrowers have requested that Bank (i) extend through June 20,
1999 the Maturity Date of the Revolving Credit; and (ii) amend certain
financial and other covenants contained in the Credit Agreement; all of
which Bank is willing to do on the terms set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. CAPITALIZED TERMS. Capitalized terms not otherwise defined
herein will have the meanings set forth therefor in the Credit
Agreement.
2. EXTENSION. The "Maturity Date" as defined in Section 1.01 of
the Credit Agreement is hereby amended to be "June 20, 1999."
3. QUICK ASSETS. The definition of "Consolidated Quick Assets"
contained in Section 1.01 of the Credit Agreement is hereby amended to
be as follows:
"'Consolidated Quick Assets'. At any date of determination
the total cash, marketable securities and billed accounts receivable of
the Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP."
4. FINANCIAL AND OTHER COVENANTS. The following provisions of the
Credit Agreement are hereby amended as follows:
(a) Section 6.02(a) is hereby deleted and replaced with the
following:
"(a) Asset Coverage Ratio.
Permit the ratio of (i) Borrowers'
Quick Assets plus 0% of Borrowers'
unbilled receivables to (ii)
Borrowers' Consolidated Current
Liabilities plus the outstanding
balance of all Debt to Bank, to
fail to exceed 1.0 to 1.0 measured
as of the end of each fiscal
quarter of the Company."
(b) Section 6.02(c) is hereby deleted and replaced with
the following:
"(c) Debt Coverage Ratio. Permit
the ratio of Senior Debt to
Consolidated Cash Flow, all
determined as of the end of each
fiscal quarter for the four (4)
fiscal quarters then ended, to
exceed (i) 2.5 to 1.0 as of
September 30, 1997 and as of the
end of each fiscal quarter
thereafter through and including
June 30, 1998 and (ii) 1.5 to 1.0
as of September 30, 1999 and as of
the end of each fiscal quarter
thereafter."
(c) Dividends. Section 6.02(g) is hereby deleted and replaced
with the following:
"(g) Dividends, Etc. Declare or
pay any dividends, purchase or
otherwise acquire for value any of
its capital stock now or hereafter
outstanding, or make any
distribution of assets to its
stockholders as such, or permit any
of its Subsidiaries to purchase or
otherwise acquire for value any
stock of the Company; provided,
however, that as long as no Event
of Default or Potential Event of
Default exists, Borrowers may
declare or pay dividends,
repurchase their capital stock or
make distributions of assets to
shareholders as long as the
dividends and distributions are
payable in capital stock of the
Borrowers or (ii) the aggregate
amount of all non-stock dividends,
repurchases and distributions
effected after March 20, 1997 does
not exceed $5,000,000.00."
5. ADDITIONAL DOCUMENTS; FURTHER ASSURANCES. Each Borrower
covenants and agrees to execute and deliver to Bank, or to cause to be
executed and delivered to Bank, contemporaneously herewith, at the sole
cost and expense of Borrowers, any and all documents, agreements,
statements, resolutions, certificates, consents and information as Bank
may require in connection with the matters or actions described herein.
Each Borrower further covenants and agrees to execute and deliver to
Bank or to cause to be executed and delivered at the sole cost and
expense of Borrowers, from time to time, any and all other documents,
agreements, statements, certificates and information as Bank shall
reasonably request to evidence or effect the terms hereof, the Credit
Agreement, as amended, or any of the other Loan Documents.
6. FURTHER AGREEMENTS AND REPRESENTATIONS. Each Borrower does
hereby:
(a) ratify, confirm and acknowledge that the Credit Agreement,
as amended, and the other Loan Documents continue to be and are valid,
binding and in full force and effect;
(b) covenant and agree to perform all obligations of Borrowers
contained herein, under the Note, and under the Credit Agreement, as
amended, and the other Loan Documents;
(c) acknowledge and agree that such Borrower has no defense,
set-off, counterclaim or challenge against the payment of any sums owing
under Loan Documents, the enforcement of any of the terms of the Credit
Agreement, as amended, or the other Loan Documents;
(d) acknowledge and agree that except as previously disclosed
to and consented to by Bank in writing, all representations and
warranties of Borrowers contained in the Credit Agreement and/or the
other Loan Documents are true, accurate and correct on and as of the
date hereof as if made on and as of the date hereof;
(e) represent and warrant that no Event of Default or
Potential Event of Default exists and all information described in the
foregoing Background is true, accurate and complete;
(f) acknowledge and agree that nothing contained herein and no
actions taken pursuant to the terms hereof is intended to constitute a
novation of the Credit Agreement or any of the other Loan Documents, and
does not constitute a release, termination or waiver of any of the
guarantees, rights or remedies granted to the Bank therein, which
guarantees, rights and remedies are hereby ratified, confirmed, extended
and continued as security for the obligations of Borrowers to Bank under
the Credit Agreement and the other Loan Documents, including, without
limitation, this Amendment;
(g) acknowledge and agree that a Borrower's failure to comply
with or perform any of its covenants, agreements or obligations
contained in this Amendment shall constitute an Event of Default under
the Credit Agreement and each of the Loan Documents; and
(h) acknowledge and confirm that SCT Software & Technology
Services, Inc. merged with and into Borrowing Subsidiary with Borrowing
Subsidiary being the surviving corporation, and SCT Public Sector, Inc.
changed its corporate name to "SCT Government Systems, Inc."
7. COSTS AND EXPENSES. Borrowers shall pay to Bank all costs and
expenses incurred by Bank in connection with the review, preparation and
negotiation of this Amendment and all documents in connection therewith,
including, without limitation, all of Bank's attorneys' fees and costs.
8. INCONSISTENCIES. To the extent of any inconsistency between
the terms, conditions and provisions of this Amendment and the terms,
conditions and provisions of the Credit Agreement or the other Loan
Documents, the terms, conditions and provisions of this Amendment shall
prevail. All terms, conditions and provisions of the Credit Agreement
and the other Loan Documents not inconsistent herewith shall remain in
full force and effect and are hereby ratified and confirmed by
Borrowers.
9. CONSTRUCTION. All references to the Credit Agreement therein
or in any other Loan Documents shall be deemed to be a reference to the
Credit Agreement as amended hereby.
10. NO WAIVER. Nothing contained herein and no actions taken
pursuant to the terms hereof are intended to nor shall they constitute a
waiver by the Bank of any rights or remedies available to Bank at law or
in equity or as provided in the Credit Agreement or the other Loan
Documents. Nothing contained herein constitutes an agreement or
obligation by Bank to grant any further extensions of the Maturity Date.
11. BINDING EFFECT. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns.
12. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
13. HEADINGS. The headings of the sections of this Amendment are
inserted for convenience only and shall not be deemed to constitute a
part of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By: /s/ Eric Haskell
Eric Haskell, Senior Vice President
[CORPORATE SEAL]
SCT SOFTWARE & RESOURCE MANAGEMENT CORPORATION
By: /s/ Eric Haskell
Eric Haskell, Senior Vice President
[CORPORATE SEAL]
MELLON BANK, N.A.
By: /s/ Jacob E. Reiter
Jacob E. Reiter, First Vice President
ACKNOWLEDGMENT AND CONSENT
The undersigned Guarantors hereby acknowledge and consent to the
foregoing Amendment and agree that the foregoing Amendment shall not
constitute a release or waiver of any of the obligations of the
undersigned to the Bank under the terms of their respective Subsidiary
Guaranty Agreements dated June 20, 1994, all of which are ratified and
confirmed.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed this Acknowledgment and Consent, effective as of
the date of the foregoing Agreement.
SCT UTILITY SYSTEMS, INC.
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT GOVERNMENT SYSTEMS, INC.
(formerly known as "SCT Public Sector, Inc.")
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT FINANCIAL CORPORATION
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT INTERNATIONAL LIMITED
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT PROPERTY, INC.
By: /s/ Eric Haskell
Name/Title: Sr. VP
SECOND AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT
THIS SECOND AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT (the
"Amendment") is made as of the 8th day of April, 1997, by and among
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION ("Company"), SCT SOFTWARE &
RESOURCES MANAGEMENT CORPORATION ("Borrowing Subsidiary") (collectively,
"Borrowers" and individually a "Borrower") and MELLON BANK, N.A.
("Bank").
BACKGROUND
A. By a Credit Agreement dated June 20, 1994, as amended by
Amendment and Modification to Credit Agreement dated of even date
(collectively, the "Credit Agreement"), by and among Bank and Borrowers,
Bank agreed, inter alia, to extend to Borrowers a revolving credit
facility in the principal amount of up to Twenty Million Dollars
($20,000,000.00) (the "Revolving Credit"), as further evidenced by that
certain Promissory Note dated June 20, 1994 payable to Bank in the
original principal amount of Twenty Million Dollars ($20,000,000.00)
(the "Note").
B. Borrowers have requested that Bank (i) permanently increase the
maximum amount of the Revolving Credit to $30,000,000.00; and (ii)
provide for a temporary increase in the Revolving Credit of
$5,000,000.00 to a total of $35,000,000.00; all of which Bank is willing
to do on the terms set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. CAPITALIZED TERMS. Capitalized terms not otherwise defined
herein will have the meanings set forth therefor in the Credit
Agreement.
2. PERMANENT INCREASE.
(a) The definition of "Revolving Commitment" contained in
Section 1.01 of the Credit Agreement is hereby amended to be
"$30,000,000.00 plus the Temporary Increase until the Temporary Increase
expires as provided in Section 2.01(a)(1) of the Credit Agreement."
(b) The reference to "Twenty Million Dollars
($20,000,000.00)" contained in Section 2.01(a) of the Credit Agreement
is hereby deleted and replaced with "Thirty Million Dollars
($30,000,000.00)".
3. THE NOTE. The form of Note attached to the Credit Agreement as
Exhibit "A" is hereby deleted and replaced with the form of Amended and
Restated Note attached hereto as Exhibit "A" (the "Amended and Restated
Note").
4. TEMPORARY INCREASE. The following is hereby added to and made
a part of the Credit Agreement as Section 2.01(a)(1) thereof:
"2.01(a)(1) Temporary Increase in the Revolving Commitment.
Notwithstanding the limitation on the aggregate
outstanding amount of the Revolving Loans contained in
Section 2.01(a) above, subject to the other terms and
conditions of this Agreement, the maximum amount of the
Revolving Loans shall be increased by the principal amount
of Five Million Dollars ($5,000,000.00) (the "Temporary
Increase"). The Temporary Increase shall be available to
Borrowers under the Revolving Commitment for a period (the
"Redemption Period") commencing on April 9, 1997 and
terminating upon the first to occur of (i) October 9, 1997;
or (ii) the date of an advance under the Term Loan
contemplated in that certain Commitment Letter dated March
20, 1997 from Bank to Borrowers. Borrowers shall use
proceeds of the Temporary Increase solely to fund redemption
payments by Borrowers on the Subordinated Indenture. Upon
expiration of the Redemption Period, the Temporary Increase
shall expire and the maximum amount available to Borrowers
under the Revolving Loans shall automatically, without
further action by or notice to or consent of Borrowers,
reduce to Thirty Million Dollars ($30,000,000.00).
All sums advanced under the Temporary Increase shall be
evidenced by Borrowers' joint and several promissory note in
the principal amount of Five Million Dollars ($5,000,000.00)
(the "Increase Note"), which shall be in the form attached
hereto as Exhibit "A-I", with the blanks appropriately
filled in. The entire outstanding principal amount of the
Increase Note, and all accrued but unpaid interest thereon,
shall be due and payable in full upon the expiration of the
Redemption Period. Accrued interest on the Increase Note
shall be payable at all times, at the rates and in the same
manner as accrued interest on the Note, provided that
Borrower may not select an As-offered Interest Period or an
Interest Period for any Eurodollar Loan for sums advanced
under the Temporary Increase if such As-offered Interest
Period or Interest Period extends beyond the expiration of
the Redemption Period. Until the expiration of the
Redemption Period and except as provided in this Section
2.01(a)(1), advances shall be available under the Temporary
Increase in the same manner and subject to the same
limitations as advances under the original Revolving
Commitment.
All Revolving Loans shall be made under the Note until
the aggregate amount of outstanding advances thereunder
equals Thirty Million Dollars ($30,000,000.00); thereafter,
advances shall be made under the Increase Note in accordance
with the foregoing. All principal payments actually
received by Bank from Borrowers on Revolving Loans shall be
applied as follows: (i) first, to repayment of all principal
advanced and outstanding under the Increase Note, then (ii)
to payment of principal advanced and outstanding under the
Note.
Except to the extent necessary to avoid confusion or
inconsistency with the terms of this Section 2.01(a)(1), all
references in this Agreement and the other Loan Documents to
the "Note" shall mean the Note and the Increase Note,
collectively."
5. USAGE FEE. Borrowers and Bank hereby clarify and confirm that
until the Temporary Increase expires as provided in Section 2.01(a)(1)
of the Credit Agreement, the commitment fee required under Section
2.01(d) of the Credit Agreement shall be calculated on 5/16 of 1% per
annum of the unused portion of the $35,000,000.00 then available under
the Revolving Commitment, payable quarterly as provided in Section
2.01(d). After the Temporary Increase expires, the commitment fee shall
be calculated on 5/16 of 1% per annum of the unused portion of the
$30,000,000.00 then available under the Revolving Commitment, subject to
an increase to 3/8 of 1% per annum upon the occurrence of an Event of
Default.
6. DEFINED TERMS. Borrowers and Bank hereby agree that, except as
necessary to avoid confusion or inconsistency with the terms of this
Amendment or the other Loan Documents, all references in the Loan
Documents to: (a) the "Note" shall include the Amended and Restated Note
and the Increase Note executed pursuant to this Amendment, as each may
hereafter be amended, and (b) "Loan Documents" includes, inter alia,
this Amendment, the Amended and Restated Note and the Increase Note.
7. ADDITIONAL DOCUMENTS. Borrowers shall execute and deliver to
Bank, at Borrowers' sole cost and expense, (i) the Amended and Restated
Promissory Note in the form of Exhibit "A" attached hereto; (ii) the
Increase Note in the form of Exhibit "A-I" attached hereto; and (iii)
any and all other documents, agreements, corporate resolution, searches,
certificates and opinions as Bank shall request in connection with the
execution and delivery of this Amendment or any documents in connection
herewith, or to further evidence effect, enforce or protect any of the
terms hereof or the rights or remedies granted or intended to be granted
to Bank herein or therein, each of which shall be in form and content
applicable to Bank. At Borrowers' request, Bank has agreed to accept
delivery of an opinion of Borrowers' and Guarantors' counsel on or
before April 17, 1997. Borrowers agree that (i) such opinion shall be
in form and content acceptable to Bank; and (ii) failure to deliver such
opinion by the foregoing date shall, without further notice to or
consent of Borrowers or Guarantors, constitute an Event of Default under
the Credit Agreement and each of the other Loan Documents.
8. SECURITY. Each Borrower acknowledges, confirms and agrees that
the Revolving Commitment, as permanently and temporarily increased
hereby, the Amended and Restated Note, the Increase Note and all other
Debt owing by Borrowers, or either of them, to Bank are and shall
continue to be secured by all rights and remedies securing the Revolving
Commitment, including, without limitation, all the Guaranties and all
rights and remedies granted to Bank in the Credit Agreement and/or the
other Loan Documents, which Guaranties, rights and remedies are hereby
reaffirmed and continued as security for the foregoing; and all of the
Loan Documents are hereby amended to reflect the same.
9. FURTHER ASSURANCES. Each Borrower covenants and agrees to
execute and deliver to Bank or to cause to be executed and delivered at
the sole cost and expense of Borrowers, from time to time, any and all
other documents, agreements, statements, certificates and information as
Bank shall reasonably request to evidence or effect the terms hereof,
the Credit Agreement, as amended, or any of the other Loan Documents.
10. FURTHER AGREEMENTS AND REPRESENTATIONS. Each Borrower does
hereby:
(a) ratify, confirm and acknowledge that the Credit
Agreement, as amended, and the other Loan Documents continue to be and
are valid, binding and in full force and effect;
(b) covenant and agree to perform all obligations of
Borrowers contained herein, under the Amended and Restated Note, the
Increase Note, and under the Credit Agreement, as amended, and the other
Loan Documents;
(c) acknowledge and agree that such Borrower has no defense,
set-off, counterclaim or challenge against the payment of any sums owing
under Loan Documents, the enforcement of any of the terms of the Credit
Agreement, as amended, or the other Loan Documents;
(d) acknowledge and agree that except as previously
disclosed to and consented to by Bank in writing, all representations
and warranties of Borrowers contained in the Credit Agreement and/or the
other Loan Documents are true, accurate and correct on and as of the
date hereof as if made on and as of the date hereof;
(e) represent and warrant that no Event of Default or
Potential Event of Default exists and all information described in the
foregoing Background is true, accurate and complete;
(f) acknowledge and agree that nothing contained herein and
no actions taken pursuant to the terms hereof is intended to constitute
a novation of the Credit Agreement or any of the other Loan Documents,
and does not constitute a release, termination or waiver of any of the
guarantees, rights or remedies granted to the Bank therein, which
guarantees, rights and remedies are hereby ratified, confirmed, extended
and continued as security for the obligations of Borrowers to Bank under
the Credit Agreement and the other Loan Documents, including, without
limitation, this Amendment; and
(g) acknowledge and agree that a Borrower's failure to
comply with or perform any of its covenants, agreements or obligations
contained in this Amendment shall constitute an Event of Default under
the Credit Agreement and each of the Loan Documents.
11. BANK FEE, COSTS AND EXPENSES. Upon execution of this
Amendment, Borrowers shall pay to Bank a fee in the amount of Fifty
Thousand Dollars ($50,000.00), which fee is payable to Bank in
consideration for Bank's agreement to permanently and temporarily
increase the Revolving Commitment as provided herein, is fully earned on
the date hereof and is non-refundable for any reason. Borrowers shall
also pay to Bank all costs and expenses incurred by Bank in connection
with the review, preparation and negotiation of this Amendment and all
documents in connection therewith, including, without limitation, all of
Bank's attorneys' fees and costs.
12. INCONSISTENCIES. To the extent of any inconsistency between
the terms, conditions and provisions of this Amendment and the terms,
conditions and provisions of the Credit Agreement or the other Loan
Documents, the terms, conditions and provisions of this Amendment shall
prevail. All terms, conditions and provisions of the Credit Agreement
and the other Loan Documents not inconsistent herewith shall remain in
full force and effect and are hereby ratified and confirmed by
Borrowers.
13. CONSTRUCTION. All references to the Credit Agreement therein
or in any other Loan Documents shall be deemed to be a reference to the
Credit Agreement as amended hereby.
14. NO WAIVER. Nothing contained herein and no actions taken
pursuant to the terms hereof are intended to nor shall they constitute a
waiver by the Bank of any rights or remedies available to Bank at law or
in equity or as provided in the Credit Agreement or the other Loan
Documents. Nothing contained herein constitutes an agreement or
obligation by Bank to grant any further increases in the Revolving
Commitment.
15. BINDING EFFECT. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
16. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
17. HEADINGS. The headings of the sections of this Amendment are
inserted for convenience only and shall not be deemed to constitute a
part of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By:./s/ Eric Haskell
Eric Haskell, Senior Vice President
[CORPORATE SEAL]
SCT SOFTWARE & RESOURCE MANAGEMENT
CORPORATION
By: /s/ Eric Haskell
Eric Haskell, Senior Vice President
[CORPORATE SEAL]
MELLON BANK, N.A.
By: /s/ Jacob E. Reiter
Jacob E. Reiter, First Vice President
ACKNOWLEDGMENT AND CONSENT
The undersigned Guarantors hereby acknowledge and consent to the
foregoing Amendment and agree that (i) all sums advanced under the
Amended and Restated Note and/or the Increase Note, each as referenced
in the Amendment, constitute "Guarantied Obligations under the terms of
their respective Subsidiary Guaranty Agreements dated June 20, 1994,
(the "Guarantees"); and (ii) the foregoing Amendment shall not
constitute a release or waiver of any of the obligations of the
undersigned to the Bank under any of the Guarantees, all of which are
hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed this Acknowledgment and Consent, effective as of
the date of the foregoing Agreement.
SCT UTILITY SYSTEMS, INC.
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT GOVERNMENT SYSTEMS, INC.
(formerly known as "SCT Public Sector, Inc.")
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT FINANCIAL CORPORATION
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT INTERNATIONAL LIMITED
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT PROPERTY, INC.
By: /s/ Eric Haskell
Name/Title: Sr. VP
THIRD AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT
THIS THIRD AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT (the
"Amendment") is made as of the 4th day of June, 1997, by and among
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION ("Company"), SCT SOFTWARE &
RESOURCES MANAGEMENT CORPORATION ("Borrowing Subsidiary") (collectively,
"Borrowers" and individually a "Borrower") and MELLON BANK, N.A.
("Bank").
BACKGROUND
A. By a Credit Agreement dated June 20, 1994, as amended by
Amendment and Modification to Credit Agreement dated April 8, 1997, and
by a Second Amendment and Modification to Credit Agreement dated April
8, 1997 by and among Bank and Borrowers (collectively, the "Credit
Agreement"), each Bank agreed, inter alia, to (i) extend to Borrowers a
revolving credit facility in the principal amount of up to Thirty
Million Dollars ($30,000,000.00) (the "Revolving Credit"), as further
evidenced by that certain Amended and Restated Promissory Note dated
April 8, 1997 payable to Bank in the original principal amount of Thirty
Million Dollars ($30,000,000.00) (the "A&R Note"); and (ii) make
available a temporary increase in the Revolving Credit of Five Million
Dollars ($5,000,000.00) to a total of Thirty-Five Million Dollars
($35,000,000.00), as further evidenced by that certain Note dated April
8, 1997 payable to Bank in the original principal amount of Five Million
Dollars ($5,000,000.00) (the "Increase Note").
B. Borrowers have requested that Bank terminate the temporary
increase, which Bank is willing to do on the terms set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. CAPITALIZED TERMS. Capitalized terms not otherwise defined
herein will have the meanings set forth therefor in the Credit
Agreement.
2. TEMPORARY INCREASE.
(a) Section 2.01(a)(1) of the Credit Agreement is hereby
deleted and not replaced.
(b) The Increase Note shall be marked "canceled" or "void".
(c) Commencing on the date hereof, the commitment fee
required under Section 2.01(d) of the Credit Agreement shall be
calculated as if the Temporary Increase had expired, i.e., the
commitment fee shall be calculated on 5/16 of 1% per annum of the unused
portion of the $30,000,000.00 then available under the Revolving
Commitment, subject to an increase to 3/8 of 1% per annum upon the
occurrence of an Event of Default.
3. FURTHER ASSURANCES. Each Borrower covenants and agrees to
execute and deliver to Bank or to cause to be executed and delivered at
the sole cost and expense of Borrowers, from time to time, any and all
other documents, agreements, statements, certificates and information as
Bank shall reasonably request to evidence or effect the terms hereof,
the Credit Agreement, as amended, or any of the other Loan Documents.
4. FURTHER AGREEMENTS AND REPRESENTATIONS. Each Borrower does
hereby:
(a) ratify, confirm and acknowledge that the Credit
Agreement, as amended, and the other Loan Documents continue to be and
are valid, binding and in full force and effect;
(b) acknowledge and agree that such Borrower has no defense,
set-off, counterclaim or challenge against the payment of any sums owing
under Loan Documents, the enforcement of any of the terms of the Credit
Agreement, as amended, or the other Loan Documents; and
(c) acknowledge and agree that nothing contained herein and
no actions taken pursuant to the terms hereof is intended to constitute
a novation of the Credit Agreement or any of the other Loan Documents,
and does not constitute a release, termination or waiver of any of the
guarantees, rights or remedies granted to the Bank therein, which
guarantees, rights and remedies are hereby ratified, confirmed, extended
and continued as security for the obligations of Borrowers to Bank under
the Credit Agreement and the other Loan Documents, including, without
limitation, this Amendment.
5. COSTS AND EXPENSES. Borrowers shall pay to Bank all costs and
expenses incurred by Bank in connection with the review, preparation and
negotiation of this Amendment and all documents in connection therewith,
including, without limitation, all of Bank's attorneys' fees and costs.
6. INCONSISTENCIES. To the extent of any inconsistency between
the terms, conditions and provisions of this Amendment and the terms,
conditions and provisions of the Credit Agreement or the other Loan
Documents, the terms, conditions and provisions of this Amendment shall
prevail. All terms, conditions and provisions of the Credit Agreement
and the other Loan Documents not inconsistent herewith shall remain in
full force and effect and are hereby ratified and confirmed by
Borrowers.
7. CONSTRUCTION. All references to the Credit Agreement therein
or in any other Loan Documents shall be deemed to be a reference to the
Credit Agreement as amended hereby.
8. NO WAIVER. Nothing contained herein and no actions taken
pursuant to the terms hereof are intended to nor shall they constitute a
waiver by the Bank of any rights or remedies available to Bank at law or
in equity or as provided in the Credit Agreement or the other Loan
Documents. Nothing contained herein constitutes an agreement or
obligation by Bank to grant any further increases in the Revolving
Commitment.
9. BINDING EFFECT. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
10. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
11. HEADINGS. The headings of the sections of this Amendment are
inserted for convenience only and shall not be deemed to constitute a
part of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By: /s/ Eric Haskell
Eric Haskell, Senior Vice President
[CORPORATE SEAL]
SCT SOFTWARE & RESOURCE MANAGEMENT
CORPORATION
By: /s/ Eric Haskell
Eric Haskell, Senior Vice President
[CORPORATE SEAL]
MELLON BANK, N.A.
By: /s/ Jacob E. Reiter
Jacob E. Reiter, First Vice President
ACKNOWLEDGMENT AND CONSENT
The undersigned Guarantors hereby acknowledge and consent to the
foregoing Amendment and agree that the foregoing Amendment shall not
constitute a release or waiver of any of the obligations of the
undersigned to the Bank under the terms of their respective Subsidiary
Guaranty Agreements dated June 20, 1994, all of which are hereby
ratified and confirmed.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed this Acknowledgment and Consent, effective as of
the date of the foregoing Agreement.
SCT UTILITY SYSTEMS, INC.
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT GOVERNMENT SYSTEMS, INC.
(formerly known as "SCT Public Sector, Inc.")
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT FINANCIAL CORPORATION
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT INTERNATIONAL LIMITED
By: /s/ Eric Haskell
Name/Title: Sr. VP
SCT PROPERTY, INC.
By: /s/ Eric Haskell
Name/Title: Sr. VP
