<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-12317
------------------------
[LOGO]
(Exact name of registrant as specified in its charter)
DELAWARE 75-1558550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5080 SPECTRUM DRIVE,
SUITE 400E,
DALLAS, TEXAS 75248 75248
(Address of principal executive
offices) (Zip Code)
------------------------
Registrant's telephone number, including area code: (214) 386-0020
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------- ----------------------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
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 ____
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on June 8, 1995 as
reported by the National Market Segment of the Nasdaq Stock Market, was
approximately $127,813,738. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
The number of outstanding shares of the registrant's Common Stock on June 8,
1995 was 14,428,812.
DOCUMENTS INCORPORATED BY REFERENCE
Registrants Proxy Statement to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which Proxy Statement is anticipated to be filed within
120 days after the end of the registrant's fiscal year ended March 31, 1995 is
incorporated by reference in Part III hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
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<PAGE>
PART I
(All dollar amounts referenced in Part I are presented in thousands, unless
otherwise noted.)
ITEM 1. BUSINESS.
Founded in Dallas, Texas, in 1977, Hogan Systems, Inc. ("Hogan" or the
"Company") provides integrated software applications and related professional
services to financial institutions worldwide. This marketplace includes
international and regional banks, money centers, thrifts, building societies,
credit unions, card-processing services and other institutions, generally with
asset bases in excess of $3 billion (collectively referred to as the "Financial
Industry"). The Financial Industry utilizes the Company's software applications
to assist in conducting various data processing, information management and
marketing activities. Included in these activities are deposits and loans
accounting, new product introduction, customer profile analysis, profitability
analysis, budget and forecasting, credit risk management, branch automation and
plastic card transaction processing. The Company's software products are modular
in structure to facilitate the application of upgrades and enhancements. In
addition, the modular design allows the Company's software to greatly reduce the
cost of changes to applications programs and allows upward compatibility for
changes in computer hardware and systems software.
Hogan provides professional services to the users of its mainframe banking
applications. The Company's comprehensive range of professional services
includes systems implementation, consultation and planning, as well as special
projects, such as the introduction of new banking products, conversion of branch
facilities and integration of system upgrades. The Company also provides
maintenance support services, which include selected modifications to the
software products.
In a strategic move, Hogan acquired the marketing and support service rights
for its Integrated Banking Applications (IBA) and certain other products in the
United States, Canada, Puerto Rico and Latin America from International Business
Machines Corporation ("IBM") effective February 1, 1994 (marketing) and March 1,
1994 (support).
Today, Hogan primarily markets its products through direct sales efforts. It
maintains sales and sales support offices in England, Germany, Australia and
Italy as well as in its Dallas, Texas, headquarters.
The Company has licensed and delivered more than 800 software products to
approximately 160 customers.
PRODUCTS AND SERVICES
The following table sets forth the Company's revenues by type, together with
their corresponding percentages of total revenues for the three years ended
March 31, 1995:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------
1995 1994 1993
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Professional service fees........ $ 62,563 67.6% $ 43,297 60.4% $ 46,529 72.1%
Software product license fees.... 13,991 15.1 17,199 24.0 8,277 12.8
Maintenance fees................. 16,052 17.3 11,144 15.6 9,712 15.1
--------- --------- --------- --------- --------- ---------
Total revenues................. $ 92,606 100.0% $ 71,640 100.0% $ 64,518 100.0%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
PROFESSIONAL SERVICES
Professional service fees accounted for $62,563 (67.6%) of the Company's
total revenues for the 1995 fiscal year, representing growth of 34.5% since the
1993 fiscal year. These services provide a full
1
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range of business solutions, including consulting, installation, customization
and training for customers after their initial licensing of software. The
Company also provides data processing services and rental of excess computer
time. Professional services are provided either at the customer site or at the
Company's offices.
SOFTWARE PRODUCTS
The Company's software products are comprised of a family of integrated
software modules that support financial institutions' data processing,
information management and marketing activities. These products have been
designed to meet the needs of large money centers and regional financial
institutions. Customers use various Hogan modules to establish customer and
account relationships, offer flexible deposit instruments, support on-line
teller terminal transactions, provide preferred client services and more
efficiently manage loan accounting and collections operations.
All Hogan products are based on a unique architecture, which significantly
benefits customers because:
- business users modify the products using parameters, rather than having
programmers develop code;
- common functions and data are utilized system-wide rather than replicated
by application, providing significant production efficiencies; and
- all applications are independent of the supporting technical environment
allowing for rapid exploitation of new technology.
The Company's software products include applications in the following areas:
- ENTERPRISE MANAGEMENT SOLUTIONS -- Transform corporate-wide data into
meaningful management information. Determine customer, organizational and
product profitability. Support the budget and planning process and analyze
credit risk.
- RELATIONSHIP MANAGEMENT SOLUTIONS -- Allow for a more comprehensive view
of customer and account affiliations. Consolidate all relationship
information into a common analytical repository.
- DELIVERY SOLUTIONS -- Utilizing Windows and OS/2, deliver unparalleled
power at a bank's customer contact point through a tight integration with
Hogan's back office and information management systems.
- CARD SOLUTIONS -- Offer an integrated approach to debit, credit, and
merchant business needs. Tools enable banks to optimize credit cycles,
deliver differentiated card-based offerings, and segment and manage the
card profile.
- TRANSACTION ACCOUNT SOLUTIONS -- Provide integrated high-volume deposit
and loan systems, support the tactical need for rapid product deployment,
and accelerate mergers, acquisitions, and consolidations.
Because of the comprehensive nature of its software products, the time
required for system installation and implementation for a complete integrated
system provided under professional service agreements can range from six months
to two years. The period of system installation and implementation is dependent
upon many variables, including the level of commitment by the customer.
Software product license fees accounted for $13,991 (15.1%) of the Company's
total revenues for the 1995 fiscal year, representing growth of 69.0% since the
1993 fiscal year.
MAINTENANCE
Hogan provides performance enhancements to its software on a periodic basis,
as well as product updates necessary to accommodate functional, technological
and regulatory changes. The Company
2
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also provides problem resolution services. These product updates and services
are available to customers for a specified period after initial licensing. After
that, customers pay an annual fee to continue to receive these services and
product updates.
Through February 28, 1994, Hogan acted as a subcontractor to IBM in
providing these maintenance services to IBA customers in the United States,
Canada, Puerto Rico and Latin America and was compensated by IBM for providing a
portion of these support services. In connection with the revised maintenance
support agreements between Hogan and IBM, Hogan acquired IBM's rights to control
maintenance support services effective March 1, 1994.
Maintenance fees accounted for $16,052 (17.3%) of the Company's total
revenues for the 1995 fiscal year, representing growth of 65.3% since the 1993
fiscal year.
MARKETING AND CUSTOMERS
The Company markets its products and services to the Financial Industry with
primary focus on North and South America, Europe, South Africa, Southern Asia
and Australia. Hogan utilizes its internal marketing and sales force of
approximately 60 people to market its products and services. As discussed
earlier, IBM served as the exclusive distributor of a portion of Hogan's banking
application products in the United States, Canada, Puerto Rico and Latin America
through January 31, 1994.
Hogan's personnel work extensively with each prospective customer, analyzing
its specific requirements. Consequently, the marketing process may extend over
several months for a prospective customer seeking a major automation or
information solution.
The majority of the Company's revenues are generated from products and
services provided in the United States, although the Company has customers in
approximately 20 different countries. The following table illustrates the
relative percentages of the Company's total revenues by customer location:
<TABLE>
<CAPTION>
PERCENT OF REVENUE
YEAR ENDED MARCH 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
United States.................................................... 57.1% 46.5% 67.3%
North America, excluding U.S..................................... 7.8 9.6 0.8
South America.................................................... 14.8 11.8 1.0
Europe and Africa................................................ 13.9 24.4 25.7
Asia Pacific..................................................... 6.4 7.7 5.2
</TABLE>
Norwest Financial Services and First Interstate Bancorp each accounted for
11% of the Company's revenues in fiscal 1995. Revenues from IBM aggregated 7%,
35% and 61% of total revenues in 1995, 1994 and 1993, respectively.
COMPETITION
In the highly-competitive computer software and services industry,
competition is based primarily on service, price, functionality, technological
advances, and vendor reliability. Financial institutions have several
alternatives for satisfying their needs for computer applications software
systems, including third-party vendors of standardized software such as that
offered by the Company, internal software development staffs, and customized
software systems developed by third-party consultants. In addition, there are a
number of larger companies, including computer hardware manufacturers and
computer service companies, that have substantially greater financial resources
than the Company and the technological ability to develop products similar to
those offered by the Company.
Hogan seeks to meet this competition by exploiting its industry-specific
knowledge, its expertise with important business functions and new technologies,
its proprietary computer application products, and its experience in managing
very large design and implementation projects. Although price is always a factor
in Hogan's clients' decisions, it is typically not the major factor. Other
important factors are proven experience, the capabilities of the proposed
computer application packages, the quality of the proposed staff, and the
proposed completion time of the project.
3
<PAGE>
PRODUCT DEVELOPMENT
The computer software industry requires a continuing commitment on the part
of the software designer to enhance functionality and performance of existing
products and to develop new products. To the extent that the Company does not
make changes in response to customer needs and technological and regulatory
changes, the Company's products may become obsolete. Accordingly, Hogan Systems
is committed to the continued enhancement of its existing products and to the
development of complementary new products.
During the fiscal year ended March 31, 1993, the Company's Board of
Directors approved a multi-year product development plan to accelerate the
introduction of its management information products, develop a branch automation
system and enhance its core production systems. The first of these systems,
Earnings Analysis 2.0, Budget and Planning 1.0 and Credit Risk 1.0, were
successfully delivered on schedule in March 1994. During fiscal 1995, Hogan
successfully delivered Retail Sales and Service 1.1, the Company's branch
automation system, as well as Customer Information System Release 3,
Relationship and Profitability Manager Release 3, Relationship Information
System 1.0 and Deposits System 2.0.
For the fiscal years ended 1995, 1994 and 1993, software development and
product support expenses (excluding capitalized costs) were $10,769, $6,256 and
$6,951, respectively. Capitalized costs for internally-developed software
aggregated $13,170, $17,171 and $3,003 in 1995, 1994 and 1993, respectively.
LICENSES AND PRODUCT PROTECTION
Hogan owns or has applied for various patents, trademarks and copyrights.
The Company believes that because of the rapid technological change in the
computer software industry, it must rely principally upon innovative software
engineering skills, service experience and the marketing ability of its
personnel.
The Company seeks to protect its proprietary software products by
incorporating restrictions into its license agreements which prohibit resale,
transfer, disclosure or reproduction of the software except to provide back-up
copies, and restrict the customer's use to designated sites. Additionally, the
Company requires key employees to execute agreements which restrict disclosure
of proprietary materials and competition. The Company generally retains
exclusive ownership rights to all software it has developed, including software
developed pursuant to participation agreements.
EMPLOYEES
The Company had approximately 600 full-time employees and 100
sub-contractors as of March 31, 1995.
The Company believes that its success in the future will depend in part on
its ability to continue to attract and retain highly skilled technical,
marketing and management personnel who are in great demand. Although software
engineers have been in short supply generally, to date the Company has
consistently been able to employ and retain highly qualified software personnel.
No employees are covered by a collective bargaining agreement, and there have
been no work stoppages.
ITEM 2. PROPERTIES.
The Company leases 95,500 square feet of office space in Dallas, Texas for
an annual rental of approximately $1,460 under a ten year lease expiring in June
1996. The Company's executive, management support, marketing, customer
education, product development and support activities, as well as its computer
center, are located at this office. The Company has also leased an additional
27,000 square feet of office space in Dallas under a one year lease expiring in
April 1996 at an annual rental of approximately $246. In April 1994, the Company
purchased at a total cost of $2,894, the building which it had previously leased
for its Woking, England, office. This building has 9,650 square feet of office
space.
The Company believes the existing facilities are adequate for its immediate
needs and that suitable additional space is available to accommodate further
expansion of the Company's operations.
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
There is presently no pending or threatened litigation involving the Company
which management believes would have a material effect on the Company's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's $.01 par value common stock is traded on the National Market
segment of The Nasdaq Stock Market under the symbol "HOGN." The following table
sets forth the high and low market prices for the Company's common stock for the
fiscal periods indicated:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
HIGH LOW HIGH LOW
----- ----- ----- -----
<S> <C> <C> <C> <C>
First Quarter....................................... 10 3/4 6 3/8 8 1/8 6 1/4
Second Quarter...................................... 8 1/8 5 7/8 11 3/4 8
Third Quarter....................................... 7 5 1/8 11 3/4 7 3/4
Fourth Quarter...................................... 7 4 5/8 10 3/4 7 7/8
</TABLE>
On May 5, 1994, the Board of Directors approved payment of a $0.17 per share
special dividend to shareholders of record as of May 31, 1994, with a payment
date of June 16, 1994. As of June 8, 1995 there were 1,595 shareholders of
record.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data with respect to the
Company and should be read in conjunction with the financial statements of the
Company and the related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," which are included elsewhere
in this document. The financial data presented below for each of the five years
in the period ended March 31, 1995 is derived from the Company's financial
statements.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(AMOUNT IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues............................................... $ 92,606 $ 71,640 $ 64,518 $ 56,111 $ 44,402
Income before income taxes, discontinued operations and
cumulative effect of accounting change................ 8,994 10,492 9,650 4,490 8,876
Net income............................................. 6,294 6,242 5,480 1,940 4,095
Income per common share from continuing operations
before discontinued operations and cumulative effect
of accounting change.................................. $ .43 $ .39 $ .38 $ .19 $ .49
Net income per common share............................ $ .43 $ .41 $ .38 $ .14 $ .30
Weighted average shares outstanding.................... 14,800 15,300 14,500 14,300 13,500
At year end:
Working capital...................................... $ 18,771 $ 25,309 $ 43,011 $ 37,020 $ 32,685
Total assets......................................... 96,681 83,490 71,645 61,419 59,666
Shareholders' equity................................. 56,670 52,129 49,805 43,927 42,512
Cash dividends declared per common share............... $ .17 $ .17 $ .15 $ .15 $ --
</TABLE>
5
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(All dollar amounts are shown in thousands and all references to years are
fiscal years ended March 31, unless otherwise noted)
The following table sets forth the relative percentages which certain items
in Hogan's Consolidated Statements of Income bear to revenues and the percentage
changes in these items from year to year.
<TABLE>
<CAPTION>
YEAR TO YEAR PERCENTAGE INCREASE
PERCENTAGE OF REVENUES (DECREASE)
------------------------------------- --------------------------------
1995 1994 1993 1995 VS. 1994 1994 VS. 1993
----------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Professional service fees..................... 68% 60% 72% 44% (7)%
License fees.................................. 15 24 13 (19) 108
Maintenance fees.............................. 17 16 15 44 15
--- --- ---
Total revenues.................................. 100 100 100 29 11
Expenses:
Professional services......................... 53 47 50 45 4
Development and product support............... 11 9 11 72 (10)
Selling and marketing......................... 16 19 15 9 44
General and administrative.................... 10 12 11 10 13
--- --- ---
Total expenses.................................. 90 87 87 35 10
--- --- ---
Operating income................................ 10 13 13 (7) 17
Interest income, net............................ -- 1 2 (109) (41)
--- --- ---
Income before income taxes, and accounting
change......................................... 10 14 15 (14) 9
Income taxes.................................... 3 6 6 (41) 10
--- --- ---
Income before accounting change................. 7 8 9 7 8
Accounting change............................... -- 1 -- (100) --
--- --- ---
Net income...................................... 7% 9% 9% 1% 14%
--- --- ---
--- --- ---
</TABLE>
OVERVIEW
Since 1993, Hogan has made two significant investment decisions. First, the
Company developed a plan to improve and increase its product base, and second,
the Company regained control of its marketing and support functions in certain
geographical regions.
During 1993, the Company began a multi-year plan to develop a branch
automation system and enhance its core production systems including, among
others, the Company's integrated banking and enterprise management applications.
During 1994 and 1995, the Company capitalized software development costs
totaling $30,341 under this plan, which is scheduled for completion during the
first quarter of 1996.
During 1994, the Company and IBM entered into agreements which revised IBM's
marketing and maintenance support rights to the Company's Integrated Banking
Applications ("IBA") software. Under prior agreements, IBM obtained exclusive
marketing rights and the right to control maintenance support services of the
Company's IBA software in the United States, Canada, Puerto Rico and Latin
America. Effective February 1, 1994, IBM transferred its marketing rights of the
IBA products to Hogan. Effective March 1, 1994, IBM transferred its right to
control maintenance support services to the Company. The Company paid IBM $6.0
million in connection with the new agreements.
6
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1995 COMPARED TO 1994
The Company's 29 percent growth in total revenues is primarily a result of a
44% increase in its professional services revenue. The following table sets
forth comparable data regarding the Company's professional services business:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Professional Service Fees............................................ $ 62,563 $ 43,297 $ 46,529
Professional Service Expenses........................................ 48,752 33,648 32,372
--------- --------- ---------
Margin............................................................... $ 13,811 $ 9,649 $ 14,157
--------- --------- ---------
--------- --------- ---------
Margin percentage.................................................... 22% 22% 30%
--------- --------- ---------
--------- --------- ---------
</TABLE>
The increase in professional service fees from 1994 to 1995 is primarily
attributable to increased consulting rates and current year increases in the
number and scope of new service contracts attached to the license agreements
entered into by the Company during 1994 and 1995. While the related expenses
increased from 1994 to 1995 as expected, the Company's professional services
margin remained stable at 22 percent for the year.
License fee revenues decreased $3,208 or 19 percent from 1994 to 1995. This
decrease is attributable to the decline in the number of software products
licensed during the year, as compared to 1994.
The 44 percent increase in 1995 maintenance fees from $11,144 in 1994 to
$16,052 in 1995 results principally from the March 1994 acquisition of IBM's
rights to provide maintenance support services for the Company's IBA software
products in the United States, Canada, Puerto Rico and Latin America.
Development and product support expense increased 72 percent to $10,769 from
$6,256, while remaining relatively stable as a percentage of total revenues.
This increase is partially attributable to a significant increase in software
amortization expense from $641 to $2,155 in 1994 and 1995, respectively,
resulting from new product releases during 1994 and 1995. Also, the Company has
incurred an additional $1,963 in direct customer support expenses due to
increased labor costs resulting from the acquisition of IBM's rights to provide
support services for the Company's IBA software products, as discussed earlier.
Total selling and marketing costs decreased as a percent of total revenues
from 19% to 16% in 1994 and 1995, respectively. This percentage decrease is
attributable to the decrease in license revenues and the related commission
expense. The gross increase in these expenses of $1,215 is due primarily to
increased headcount required to support the acquisition of IBM's marketing
rights.
The 10% increase of $789 in general and administrative expense is
attributable to increased office rent and insurance charges.
The Company incurred net interest expense of $68 in 1995 compared to earning
net interest income of $775 in 1994. The change is attributable to reduced cash
balances and the related interest expense incurred as a result of the Company's
borrowing under its line of credit.
Total tax expense decreased 41% as a result of an evaluation of and changes
to the Company's worldwide operating strategy. These changes should result in
consistent effective tax rates which approximate the United States combined
federal and state statutory rate in future periods.
1994 COMPARED TO 1993
As a result of improved license sales, total revenues increased 11 percent
from 1993 to 1994.
Professional services fees decreased 7 percent from 1993 as a result of the
changing mix of service engagements, including the loss of potential revenue as
a result of termination of a subcontract
7
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between IBM and Hogan for professional services during the fourth quarter of
1993 and a development engagement between IBM and Hogan during the first quarter
of 1994. The increase in professional services expenses is attributable to
increased personnel and travel costs. Additionally, in 1994 the Company made a
significant investment in the infrastructure of the professional services
organization resulting in a decreased margin from 1993 to 1994, as shown in the
table on page 7.
License fee revenues of $17,199 in 1994 increased $8,922 or 108 percent from
$8,277 in 1993. This increase is attributable to increased international license
sales of the Company's software products during 1994. License fees from
international contracts in 1994 increased 211 percent over 1993, representing 76
percent of total 1994 license revenue, compared with 51 percent in 1993.
The 15 percent increase in 1994 maintenance fees from $9,712 in 1993 to
$11,144 in 1994 results principally from an increase in license revenues during
the current and prior fiscal years.
Development and product support expense decreased $695 from 1993 to 1994.
Contributing to the decrease was a $1,480 decline in research and development
costs attributable to the transfer of employees from development to projects for
which $17,171 in internally developed software was capitalized during 1994. The
decline in research and development costs was offset by a $685 increase in
direct customer support costs which grew primarily as a result of the addition
of new maintenance contracts in 1994.
The increase in selling and marketing expense of 44 percent from $9,645 to
$13,891 resulted from increases in compensation, outside consulting services and
travel expenses due to increased sales and marketing efforts which resulted in
the improved license sales discussed earlier.
The Company also wrote off the unamortized cost of approximately $550
related to previously amended agreements between the Company and IBM giving IBM
certain exclusive marketing and support rights to the Company's IBA products.
These agreements with IBM were terminated during 1994 in connection with the new
agreements dated February and March 1, 1994.
The $916 or 13 percent increase in general and administrative expense was
primarily attributable to increases in compensation and outside service expenses
related to upgrading the Company's local area network system.
The decrease in net interest income of 41 percent in 1994 compared to 1993
results principally from a decrease in the Company's cash balance.
SEASONALITY, INFLATION AND CURRENCY RISK
The Company's quarterly revenues and net income have historically been
variable. This is due principally to the number of software licenses executed
and products delivered in any fiscal quarter. These products are sophisticated
software products that typically require a significant purchase commitment by
customers. Therefore, the sales cycle varies in length as the Company markets to
customers having different business needs and financial resources.
The Company believes that the relatively moderate rate of inflation in
recent years has not had a significant impact on the Company's revenues or
profitability.
Although the Company's contracts are typically denominated in United States
dollars, there is a risk that the customer's functional currency will adjust
rapidly causing exposure to the Company. Management believes that the risk in
this area is low, but will continue to monitor and react to the markets in which
it operates.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the Company's primary sources and uses of
funds:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Cash balances at beginning of period............................... $ 10,374 $ 39,353 $ 30,409
Cash provided by operating activities.............................. 17,189 4,072 13,951
Investment in capitalized software................................. (14,363) (18,599) (3,407)
Purchase of marketing and support service rights from IBM.......... -- (6,000) --
Special dividends paid............................................. (2,443) (2,510) (2,098)
Purchase of treasury stock from IBM................................ -- (5,855) --
</TABLE>
The Company has applied a significant portion of its cash flow from
operations and existing cash balances to its investment in new software product
development. Additionally, in 1994 the Company paid IBM a total of $11.9 million
to acquire certain marketing and support service rights to the Company's IBA
products and to repurchase IBM's share of the Company's capital stock.
In 1994, the Company's cash provided by operating activities of $4,072 was
negatively impacted by an increase in accounts receivable of $13,759 resulting
from increased revenues spurred by license sales. The license contracts
generally call for a down payment upon signing and the remaining balance on
specified dates, with acceleration upon certain events.
The Company's 1993 software investment plan, under which approximately $30
million was capitalized in 1994 and 1995, is substantially completed as of March
31, 1995 and the ongoing investment in software to be sold is planned to consist
primarily of enhancements and refinements of existing projects. Thus, management
believes, subject to market changes, that its cash flow from operations and its
available credit facilities will provide an adequate source of funds for the
Company's planned working capital, capital equipment and software development
expenditures in the future.
9
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
HOGAN SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................ $ 7,764 $ 10,374
Accounts receivable, net of allowance for doubtful accounts of $911 and $525............. 40,577 35,484
Deferred income taxes.................................................................... 905 799
Prepaid expenses and other current assets................................................ 1,685 3,253
--------- ---------
Total current assets................................................................... 50,931 49,910
Long-term receivables...................................................................... 359 1,204
Property and equipment at cost, net of accumulated depreciation of $8,220 and $6,365....... 7,236 4,587
Capitalized software costs, net of accumulated amortization of $10,894 and $7,827.......... 32,149 20,853
Intangible assets.......................................................................... 5,136 6,000
Other assets............................................................................... 870 936
--------- ---------
Total assets............................................................................. $ 96,681 $ 83,490
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................................... $ 5,666 $ 3,630
Accrued salary and employee benefits..................................................... 7,795 5,291
Working capital line of credit........................................................... 1,920 --
Deferred maintenance revenue............................................................. 11,741 10,097
Deferred support revenue................................................................. 1,011 538
Other.................................................................................... 4,027 5,045
--------- ---------
Total current liabilities.............................................................. 32,160 24,601
Deferred maintenance revenue............................................................... 3,092 4,115
Deferred income taxes...................................................................... 4,502 2,485
Other long-term liabilities................................................................ 257 160
--------- ---------
Total liabilities...................................................................... 40,011 31,361
Shareholders' equity:
Preferred stock, no par value -- authorized 1,000 shares -- none issued
Common stock, par value $.01 -- authorized 50,000 shares --issued 15,078 and 15,070
shares at March 31, 1995 and 1994, respectively -- outstanding 14,390 and 14,381 shares
at March 31, 1995 and 1994, respectively................................................ 151 151
Capital in excess of par value........................................................... 44,618 44,625
Foreign currency translation adjustments................................................. (886) (1,577)
Retained earnings........................................................................ 18,636 14,785
--------- ---------
62,519 57,984
Less: Treasury stock at cost, 688 and 689 shares....................................... (5,849) (5,855)
--------- ---------
Shareholders' equity.............................................................. 56,670 52,129
--------- ---------
Total liabilities and shareholders' equity............................................. $ 96,681 $ 83,490
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
HOGAN SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Professional service fees.................................................... $ 62,563 $ 43,297 $ 46,529
License fees................................................................. 13,991 17,199 8,277
Maintenance fees............................................................. 16,052 11,144 9,712
--------- --------- ---------
Total revenues............................................................. 92,606 71,640 64,518
Expenses:
Professional services........................................................ 48,752 33,648 32,372
Development and product support.............................................. 10,769 6,256 6,951
Selling and marketing........................................................ 15,106 13,891 9,645
General and administrative................................................... 8,917 8,128 7,212
--------- --------- ---------
Total expenses............................................................. 83,544 61,923 56,180
--------- --------- ---------
Operating income............................................................... 9,062 9,717 8,338
Interest income................................................................ 301 845 1,383
Interest expense............................................................... (369) (70) (71)
--------- --------- ---------
Income before taxes............................................................ 8,994 10,492 9,650
Provision for income taxes..................................................... 2,700 4,600 4,170
--------- --------- ---------
Income before cumulative effect of accounting change........................... 6,294 5,892 5,480
Cumulative effect of change in accounting for income taxes..................... -- 350 --
--------- --------- ---------
Net income..................................................................... $ 6,294 $ 6,242 $ 5,480
--------- --------- ---------
--------- --------- ---------
Per share data:
Income before cumulative effect of accounting change......................... $ 0.43 $ 0.39 $ 0.38
--------- --------- ---------
--------- --------- ---------
Net income................................................................... $ 0.43 $ 0.41 $ 0.38
--------- --------- ---------
--------- --------- ---------
Weighted average number of common shares....................................... 14,800 15,300 14,500
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
HOGAN SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------
1995 1994 1993
--------- ---------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Income before cumulative effect of accounting change........................ $ 6,294 $ 5,892 $ 5,480
Cumulative effect of change in accounting for income taxes.................. -- 350 --
--------- ---------- ---------
Net income.................................................................... 6,294 6,242 5,480
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization............................................... 6,274 3,185 2,021
Provision for losses on accounts receivable................................. 420 468 858
Foreign currency translation................................................ 691 (167) (762)
Cancellation of stock subscription receivable............................... (80) -- --
Changes in assets and liabilities:
Accounts receivable....................................................... (5,513) (13,759) 446
Current deferred income taxes............................................. (106) -- --
Prepaid expenses and other current assets................................. 1,568 (849) (71)
Accounts payable.......................................................... 2,036 1,237 191
Accrued salary and employee benefits...................................... 2,504 1,039 1,144
Deferred maintenance revenue.............................................. 621 3,713 3,763
Deferred support.......................................................... 473 (309) 537
Long-term deferred income taxes........................................... 2,017 2,611 87
Other assets and long-term receivables.................................... 911 180 725
Other current liabilities................................................. (1,018) 547 139
Other long-term liabilities............................................... 97 (66) (607)
--------- ---------- ---------
17,189 4,072 13,951
--------- ---------- ---------
Cash flow from investing activities:
Purchase of property and equipment.......................................... (5,102) (3,113) (1,260)
Proceeds from sale of property and equipment................................ 110 -- --
Purchase of marketing and support rights.................................... -- (6,000) --
Additions to capitalized software........................................... (14,363) (18,599) (3,407)
--------- ---------- ---------
(19,355) (27,712) (4,667)
--------- ---------- ---------
Cash flow from financing activities:
Proceeds from working capital line of credit................................ 1,920 -- --
Dividends paid.............................................................. (2,443) (2,510) (2,098)
Purchase of treasury stock.................................................. -- (5,855) --
Exercise of stock options................................................... 79 3,026 1,758
--------- ---------- ---------
(444) (5,339) (340)
--------- ---------- ---------
Net increase (decrease) in cash and cash equivalents.......................... (2,610) (28,979) 8,944
--------- ---------- ---------
Cash and cash equivalents at beginning of period.............................. 10,374 39,353 30,409
--------- ---------- ---------
Cash and cash equivalents at end of period.................................... $ 7,764 $ 10,374 $ 39,353
--------- ---------- ---------
--------- ---------- ---------
Supplemental cash flow information:
Cash paid for interest...................................................... $ 300 $ 65 $ 74
--------- ---------- ---------
--------- ---------- ---------
Cash paid for income taxes.................................................. $ 900 $ 2,000 $ 3,000
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
HOGAN SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN FOREIGN CURRENCY
-------------------- EXCESS OF TRANSLATION RETAINED TREASURY
SHARES AMOUNT PAR VALUE ADJUSTMENTS EARNINGS STOCK TOTAL
--------- --------- ----------- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1992.............. 14,002 $ 155 $ 44,553 $ (648) $ 7,671 $ (7,804) $ 43,927
Exercise of stock options.......... 403 4 1,754 1,758
Special dividend -- $.15 per common
share............................. (2,098) (2,098)
Retirement of treasury stock....... (15) (7,789) 7,804 --
Tax benefit from exercise of stock
options........................... 1,500 1,500
Translation adjustment............. (762) (762)
Net income......................... 5,480 5,480
--------- --------- ----------- ------- --------- --------- ---------
Balance, March 31, 1993.............. 14,405 144 40,018 (1,410) 11,053 -- 49,805
Exercise of stock options.......... 665 7 3,019 3,026
Special dividend -- $.17 per common
share............................. (2,510) (2,510)
Acquisition of treasury stock...... (689) (5,855) (5,855)
Tax benefit from exercise of stock
options........................... 1,588 1,588
Translation adjustment............. (167) (167)
Net income......................... 6,242 6,242
--------- --------- ----------- ------- --------- --------- ---------
Balance, March 31, 1994.............. 14,381 151 44,625 (1,577) 14,785 (5,855) 52,129
Exercise of stock options.......... 21 79 79
Issuance of treasury stock......... 1 (6) 6 --
Special dividend -- $.17 per common
share............................. (2,443) (2,443)
Cancellation of stock
subscription...................... (13) (80) (80)
Translation adjustment............. 691 691
Net income......................... 6,294 6,294
--------- --------- ----------- ------- --------- --------- ---------
Balance, March 31, 1995.............. 14,390 $ 151 $ 44,618 $ (886) $ 18,636 $ (5,849) $ 56,670
--------- --------- ----------- ------- --------- --------- ---------
--------- --------- ----------- ------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
13
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Hogan Systems,
Inc. ("Hogan" or the "Company") and its wholly-owned subsidiaries. All
intercompany transactions and balances have been eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated into United
States dollars using exchange rates prevailing at the balance sheet date. Income
and expense accounts are translated at average exchange rates prevailing during
the year. Resulting translation adjustments are included in retained earnings.
Transaction gains or losses, which historically have not been material, are
included in the results of operations of the period in which they occur.
REVENUE RECOGNITION
The Company's revenues are generated primarily by licensing to customers
standardized financial software systems and providing related services and
support to the banking industry.
The Company enters into agreements whereby the Company licenses software to
a customer under the terms of nontransferable and nonexclusive license
agreements. An agreement provides the customer the right to use the software and
usually obligates the Company to provide post-contract support (PCS) in the form
of maintenance for a period of time, typically one year, at no additional cost
to the customer. Revenue related to the PCS is carved out of the contract price
and recognized ratably over the period of the PCS arrangement. Software license
revenue is recognized upon the execution of a contract and delivery of system
software.
The Company enters into professional service contracts with customers,
whereby the Company provides consulting, installation, customization and
training. These services are generally provided under time and materials
contracts and in some circumstances under fixed price arrangements. Under fixed
price contracts, revenue is recognized on the basis of the estimated percentage
of completion of services provided. Changes in estimates to complete and losses,
if any, are recognized in the period in which they are determined.
Hogan offers maintenance support to customers in addition to the PCS
arrangements. This support is contracted and billed independently of other
arrangements and generally begins after the initial PCS period and continues in
annual increments. Maintenance revenue is recognized ratably over the term of
the maintenance period.
Deferred revenue consists primarily of advance billing for maintenance and
professional services and is recognized as revenue when the services are
provided.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Such cash
equivalents aggregated $274 and $494 at March 31, 1995 and 1994, respectively.
PROPERTY AND EQUIPMENT
Property and equipment, including equipment acquired under capital leases,
are recorded at cost. Property and equipment are depreciated on a straight-line
basis over their estimated useful lives. Assets acquired under capital leases
are amortized over the term of the related lease.
14
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CAPITALIZED SOFTWARE COSTS
In accordance with the Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed", certain costs incurred in the internal development of computer
software which is to be licensed to customers and costs of purchased computer
software are capitalized. These costs are amortized at the greater of the amount
computed using (a) the ratio of current gross revenues of a product to the total
of current and anticipated future gross revenues of that product or (b) the
straight-line method over the remaining estimated economic life of the product.
The amount by which unamortized software costs exceed the net realizable value,
if any, is recognized in the period it is determined.
INTANGIBLE ASSETS
Intangible assets are amortized at the greater of the amount computed using
(a) the ratio of current cash flows to the total of current and anticipated
future cash flows or (b) the straight-line method over their estimated useful
lives. It is the Company's policy to periodically review the net realizable
value of its intangible assets through an assessment of the estimated future
cash flows related to such assets. The specific business to which these
intangible assets relate is reviewed to determine whether future cash flows,
over the remaining estimated life of the asset, provide for recovery of the
assets. In the event that assets are found to be stated at amounts which are in
excess of those which are supported by estimated future cash flows, then the
intangible assets are adjusted for impairment to a level commensurate with a
discounted cash flow analysis of the underlying assets.
INCOME TAXES
The provision for income taxes and corresponding balance sheet accounts are
determined in accordance with the Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (FAS 109). Under FAS 109, the deferred
tax liabilities and assets are determined based on temporary differences between
the bases of certain assets and liabilities for income tax and financial
reporting purposes. These differences are primarily attributable to differences
in the recognition of depreciation and amortization of property, equipment and
intangible assets and certain software development. The Company adopted FAS 109
effective April 1, 1993.
NET INCOME PER SHARE
Net income per common share has been computed using the treasury stock
method based on the weighted average number of common shares and equivalent
common shares outstanding.
BASIS OF PRESENTATION
For comparative purposes, certain amounts have been reclassified for years
prior to 1995.
15
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 2 -- ACCOUNTS RECEIVABLE
Accounts receivable at March 31, 1995 and 1994 are comprised of the
following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Billed........................................................................... $ 21,106 $ 19,953
Unbilled......................................................................... 19,063 15,581
Employee......................................................................... 246 261
Other............................................................................ 1,432 1,418
--------- ---------
41,847 37,213
Less allowance for doubtful accounts............................................. 911 525
--------- ---------
40,936 36,688
Less amounts not collectible until after one year................................ 359 1,204
--------- ---------
Current accounts receivable, net................................................. $ 40,577 $ 35,484
--------- ---------
--------- ---------
</TABLE>
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED LIFE 1995 1994
-------------- --------- ---------
<S> <C> <C> <C>
Building and improvements....................................... 40 years $ 2,894 $ --
Furniture and equipment......................................... 2-7 years 10,587 9,232
Remaining life
Leasehold improvements.......................................... of lease 1,975 1,720
--------- ---------
15,456 10,952
Less accumulated depreciation and amortization.................. 8,220 6,365
--------- ---------
$ 7,236 $ 4,587
--------- ---------
--------- ---------
</TABLE>
The Company is committed under operating leases, domestically and abroad,
for office space and office equipment as follows:
<TABLE>
<CAPTION>
OFFICE OFFICE
SPACE EQUIPMENT
--------- -----------
<S> <C> <C>
Year ending March 31,
1996........................................................................... $ 2,030 $ 1,575
1997........................................................................... 703 1,534
1998........................................................................... 233 345
1999........................................................................... 233 --
2000........................................................................... 116 --
--------- -----------
$ 3,315 $ 3,454
--------- -----------
--------- -----------
</TABLE>
Rent expense was $1,993, $1,831, and $1,683 for fiscal years 1995, 1994, and
1993, respectively. Leases for office space provide that the base rent may be
increased to cover increased building operating expenses. The lease for the
Company's home office in Dallas, Texas, expires in June 1996. Management is
currently exploring alternatives, including renewal of the current lease, which
will meet the Company's needs at that date.
In April 1994, the Company made a cash payment of $2,894 to acquire the
building which it had leased for its United Kingdom office.
16
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 4 -- CAPITALIZED SOFTWARE COSTS
The Company capitalizes both software to be sold (internally developed
software) and software purchased for internal use (purchased software) which is
not sold, leased or otherwise marketed. A summary of capitalized software costs
at March 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
INTERNALLY DEVELOPED PURCHASED
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Capitalized software costs.................................. $ 34,922 $ 21,752 $ 8,121 $ 6,928
Less accumulated amortization............................... 4,781 2,626 6,113 5,201
--------- --------- --------- ---------
Net......................................................... $ 30,141 $ 19,126 $ 2,008 $ 1,727
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Amortization charged to expense for internally developed software amounted
to $2,155, $641 and $541 in 1995, 1994 and 1993, respectively. Amortization
charged to expense for purchased software was $912, $521 and $122 in 1995, 1994
and 1993, respectively.
NOTE 5 -- DEVELOPMENT AND PRODUCT SUPPORT
Development and product support expense for the three years ended March 31,
1995 is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Customer Support........................................................ $ 5,849 $ 3,886 $ 3,201
Research and development................................................ 2,765 1,729 3,209
Amortization of internally developed software costs..................... 2,155 641 541
--------- --------- ---------
$ 10,769 $ 6,256 $ 6,951
--------- --------- ---------
--------- --------- ---------
</TABLE>
Customer support represents the direct costs of providing maintenance to
customers. Amortization reflects the amortization of internally developed
capitalized software costs as described in Note 1 to the financial statements.
Research and development expense reflects the software development costs
incurred for product development prior to capitalization under FAS 86, as well
as costs of minor modifications to existing products. Such modifications benefit
both existing maintenance customers and future product licensees.
NOTE 6 -- INTANGIBLE ASSETS
Hogan acquired the marketing and support service rights to the Company's
Integrated Banking Application software and certain other products in the United
States, Canada, Puerto Rico and Latin America from International Business
Machines Corporation ("IBM") effective February 1, 1994 (marketing) and March 1,
1994 (maintenance support). The Company is amortizing the rights over the
anticipated periods of benefit of 15 months and 12 years for the maintenance
support and marketing rights, respectively. Amortization charged to expense for
these rights amounted to $864 in 1995.
NOTE 7 -- FINANCING ARRANGEMENT
The Company entered into an unsecured bank revolving credit agreement on
March 4, 1994 which provides for borrowings up to $20,000 through June 14, 1996.
Borrowings under the credit agreement will, at the Company's option, bear
interest at either the Prime Rate (9% at March 31, 1995) or a rate based on the
London Interbank Offered Rate plus .875 percent (7.625% at March 31, 1995). The
agreement contains, among other covenants, provisions requiring certain
financial ratios be maintained and limits on loan indebtedness, advances and
investments. A commitment fee of 0.125 percent is paid on the unused portion of
the revolving credit agreement and no compensating balances are required. At
March 31, 1995, the unused portion of the revolving credit agreement was
$18,080.
17
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
There are no outstanding claims against the Company which management
believes will have a material adverse effect on the Company's financial position
or results of operations.
NOTE 9 -- SHAREHOLDERS' EQUITY
The Company has 1,000,000 shares of authorized preferred stock. The Board of
Directors has the authority to determine the terms and provisions of any series
of preferred stock.
During fiscal 1994, the Company repurchased 688,772 shares of Hogan stock
from IBM for $5,855.
NOTE 10 -- BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company supplies integrated software products and support services to
financial institutions and operates from three principal geographic areas: 1)
the United States, 2) Europe and Africa and 3) Asia Pacific. The following is a
summary of information by area:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
United States...................................................... $ 70,636 $ 45,754 $ 43,772
Europe and Africa.................................................. 17,163 22,280 17,224
Asia Pacific....................................................... 4,807 3,606 3,522
--------- --------- ---------
Total revenues................................................... $ 92,606 $ 71,640 $ 64,518
--------- --------- ---------
--------- --------- ---------
Operating income (loss):
United States...................................................... $ 1,190 $ 9,372 $ 8,671
Europe and Africa.................................................. 6,884 1,175 (141)
Asia Pacific....................................................... 988 (830) (192)
--------- --------- ---------
9,062 9,717 8,338
Interest income (expense), net....................................... (68) 775 1,312
--------- --------- ---------
Income before income taxes, and cumulative effect of accounting
change.............................................................. $ 8,994 $ 10,492 $ 9,650
--------- --------- ---------
--------- --------- ---------
Identifiable Assets:
United States...................................................... $ 82,834 $ 65,309 $ 59,278
Europe and Africa.................................................. 12,337 16,722 11,244
Asia Pacific....................................................... 1,510 1,459 1,123
--------- --------- ---------
Total assets..................................................... $ 96,681 $ 83,490 $ 71,645
--------- --------- ---------
--------- --------- ---------
</TABLE>
During 1995, the Company changed its agreements with regard to its foreign
subsidiaries. The agreements resulted in substantial financial support of the
foreign operations by the parent. The application of this modification resulted
in the fluctuation in the operating income figures detailed in the table above.
Total 1995 U.S. revenues include export sales to unaffiliated customers
principally in South America, Australia, Canada and Mexico of $22,977. In fiscal
years 1994 and 1993, total U.S. revenues included export sales to unaffiliated
customers principally in Canada, South America, Mexico, Australia and Europe of
$13,440 and $2,268, respectively.
18
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 10 -- BUSINESS SEGMENTS AND FOREIGN OPERATIONS (CONTINUED)
Professional services, license fee and maintenance fee revenues from two
customers aggregated 11% of total revenues in 1995. Revenues from IBM aggregated
7%, 35% and 61% of total revenues in 1995, 1994 and 1993, respectively.
NOTE 11 -- EMPLOYEE BENEFIT PLANS
A total of 3,500,000 shares of common stock have been reserved under the
Company's 1984 and 1985 stock option plans. The option prices of grants made
under these plans are equal to the fair market value of the Company's stock on
the date of grant. The options are exercisable cumulatively at rates varying
from 20 percent to 50 percent annually and expire ten years from the date of
grant. At March 31, 1995, options for 1,153,473 shares were exercisable under
the stock option plans. As of March 31, 1995, there were 2,013 shares available
for grant under the Company's stock option plans.
<TABLE>
<CAPTION>
NUMBER OF SHARES PRICE PER SHARE
----------------- ------------------
<S> <C> <C>
Outstanding, March 31, 1992...................................... 2,192,823 $1.675-$10.375
Granted........................................................ 1,327,000 $3.75-$7.625
Exercised...................................................... (403,441) $1.675-$5.75
Cancelled...................................................... (538,417) $2.375-$6.875
-----------------
Outstanding, March 31, 1993...................................... 2,577,965 $3.625-$10.375
Granted........................................................ 262,000 $10.00-$11.125
Exercised...................................................... (664,159) $3.625-$6.875
Cancelled...................................................... (112,234) $3.625-$7.125
-----------------
Outstanding, March 31, 1994...................................... 2,063,572 $3.625-$11.125
Granted........................................................ 604,600 $5.50-$5.75
Exercised...................................................... (21,332) $6.00-$9.625
Cancelled...................................................... (108,703) $3.625-$11.125
-----------------
Outstanding, March 31, 1995...................................... 2,538,137 $3.625-$11.125
</TABLE>
The Company has a Savings and Profit Sharing Plan pursuant to Section 401(k)
of the Internal Revenue Code. Company contributions to the plan aggregated $965
for 1995; $820 for 1994 and $600 for 1993.
NOTE 12 -- INCOME TAXES
Effective April 1, 1993, the Company adopted FAS 109. The cumulative effect
of the change in the method of accounting for income taxes of $350 was
determined as of April 1, 1993 and is reported separately in the Consolidated
Statements of Income for the fiscal year ended March 31, 1994. Prior years'
financial statements have not been restated to apply the provisions of SFAS No.
109.
Pursuant to the deferred method under APB Opinion 11, which was applied in
fiscal years ended March 31, 1993 and prior, deferred income taxes are
recognized for income and expense items that are reported in different years for
financial reporting purposes and income tax purposes using the tax rate
applicable for the year of the calculation.
19
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 12 -- INCOME TAXES (CONTINUED)
The components of income tax expense (benefit) are:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal.............................................................. $ (73) $ (1,138) $ 3,088
Foreign.............................................................. 2,246 1,788 282
State................................................................ -- -- 260
Deferred............................................................... 527 3,950 540
--------- --------- ---------
Total Provision...................................................... $ 2,700 $ 4,600 $ 4,170
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of income tax expense at the statutory rate to income tax
expense at the Company's effective rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Computed tax at the Federal statutory rate of 34%...................... $ 3,058 $ 3,567 $ 3,281
Benefit of net operating loss.......................................... -- (761) --
Foreign tax withheld................................................... 1,745 1,401 130
Foreign net operating loss, not previously benefited................... (2,908) -- --
Rate differential on foreign subsidiary income......................... 367 -- 120
State income tax and other............................................. 438 393 639
--------- --------- ---------
Income tax expense..................................................... $ 2,700 $ 4,600 $ 4,170
--------- --------- ---------
--------- --------- ---------
</TABLE>
The components of the non-current deferred tax liability are as follows at
March 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Non-current deferred tax liability:
Capitalized software............................................................ $ 9,097 $ 6,956
State taxes..................................................................... 411 316
Non-current deferred tax assets:
Depreciation.................................................................... (309) (278)
Deferred revenue................................................................ (658) (267)
Foreign subsidiary net operating loss carryforwards............................. -- (2,908)
R&D credit carryforward......................................................... (5,138) (3,488)
Other carryforwards............................................................. -- (520)
Other........................................................................... 1,099 (234)
Valuation allowance:
Foreign subsidiary net operating loss carryforwards............................. -- 2,908
--------- ---------
Non-current deferred tax liability.............................................. $ 4,502 $ 2,485
--------- ---------
--------- ---------
The components of the current deferred tax asset are as follows:
Allowance for doubtful accounts................................................. $ 209 $ 107
Various accruals................................................................ 696 692
--------- ---------
Current deferred tax asset...................................................... $ 905 $ 799
--------- ---------
--------- ---------
</TABLE>
20
<PAGE>
HOGAN SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 12 -- INCOME TAXES (CONTINUED)
As of March 31, 1995, for tax purposes the Company has $5,138 of available
general business credits which expire from 1998 to 2010. Under Section 382 of
the Internal Revenue Code, annual use of loss or credit carryforwards may be
limited if a cumulative change in ownership of more than 50 percent occurs
within a three year period. The 1995 reduction in the valuation allowance was
attributable to the realization of foreign net operating loss carryforwards not
previously benefited.
NOTE 13 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the two years ended March 31, 1995 is as
follows:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------
JUN. 30, SEP. 30, DEC. 31, MAR. 31,
1994 1994 1994 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues................................................. $ 19,784 $ 23,409 $ 20,316 $ 29,097
Operating income......................................... 150 2,349 647 5,916
Net income............................................... 80 1,343 307 4,564
Net income per share..................................... $ .01 $ .09 $ .02 $ .31
<CAPTION>
QUARTER ENDED
------------------------------------------
JUN. 30, SEP. 30, DEC. 31, MAR. 31,
1993 1993 1993 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues................................................. $ 15,629 $ 14,726 $ 18,608 $ 22,677
Operating income......................................... 2,014 563 3,053 4,087
Net income............................................... 1,804 332 1,658 2,448
Net income per share..................................... $ .12 $ .02 $ .11 $ .16
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Hogan Systems, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity, present fairly, in all material respects, the financial position of
Hogan Systems, Inc. and its subsidiaries at March 31, 1995 and 1994 and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 12 to the financial statements, the Company changed its
method of accounting for income taxes in the year ended March 31, 1994.
PRICE WATERHOUSE LLP
Dallas, Texas
April 21, 1995
22
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT.
Information required for this Item 10 is hereby incorporated by reference to
the Company's proxy statement "Proxy Statement" to be filed pursuant to
Regulation 14A promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, which proxy statement is anticipated to be
filed within 120 days after the end of the Company's fiscal year ended March 31,
1995.
ITEM 11. EXECUTIVE COMPENSATION.
Information required for this Item 11 is hereby incorporated by reference to
the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required for this Item 12 is hereby incorporated by reference to
the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required for this Item 13 is hereby incorporated by reference to
the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
1. FINANCIAL STATEMENT SCHEDULE. The following Financial Statement Schedule
of Hogan Systems, Inc., is filed as part of this Annual Report on Form
10-K.
Report of Independent Accountants on Financial Statement Schedules (page
29).
II -- Valuation and Qualifying Accounts for the years ended March 31,
1995, 1994 and 1993 (page 30).
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
2. EXHIBITS:
<TABLE>
<C> <S>
3 (i) Restated Certificate of Incorporation, Hogan Systems, Inc., a Delaware
Corporation. (5)
(ii) By-Laws of Hogan Systems, Inc., a Delaware Corporation. (5)
4.1 Stock certificate evidencing shares of common stock of Hogan Systems,
Inc., a Delaware Corporation. (7)
10.1 Agreement for the Purchase and Sale of the Transaction System dated as of
July 27, 1977, between Mercantile National Bank of Dallas and the
Registrant. (1)
10.9 Registrant's Standard Form License Agreement. (2)
10.17 1982 Non-Statutory Option Plan and forms of Stock Option Agreements and
Stock Restriction Agreement. (1)
10.18 1982 Incentive Stock Option Plan and form of Incentive Stock Option
Agreement, Amendment to Stock Option Agreement and Stock Restriction
Agreement. (1)
</TABLE>
23
<PAGE>
<TABLE>
<C> <S>
10.19 Stock Purchase Agreement dated as of November 3, 1982, between Registrant
and William O. Hunt. (1)
10.21 1984 Incentive Stock Option Plan and form of Incentive Stock Option Agree-
ment. (3)
10.22 1984 Non-Statutory Stock Option Plan and form of Stock Option Agreement.
(3)
10.23 Lease dated January 20, 1984, between 805 Third Avenue Company and the
Registrant. (3)
10.26 1985 Incentive Stock Option Plan. (5)
10.27 1985 Non-Statutory Stock Option Plan. (5)
10.28 License Agreement for Use and Marketing of Program Materials dated as of
May 7, 1986, between Registrant and International Business Machines
Corporation. (4)
10.29 Marketing Agreement dated May 7, 1986, between Registrant and
International Business Machines Corporation. (4)
10.30 Product Support and Service Agreement dated May 7, 1986, between
Registrant and International Business Machines Corporation. (4)
10.31 Master Development Agreement dated May 7, 1986, between Registrant and
International Business Machines Corporation. (4)
10.32 Master Services Agreement dated May 7, 1986, between Registrant and
International Business Machines Corporation. (4)
10.33 Assets Purchase Agreement between Systems 4 of Durango, Inc., Raymond L.
Walters, Tommy Lee Stuber, Robert Frasscanito and Hogan Systems, Inc. (7)
10.34 Agreement and Plan of Reorganization for the acquisition of GDK Systems,
Inc. by Hogan Systems, Inc. (6)
10.35 Lease Agreement effective July 1, 1986, between Spectrum Center, Ltd. and
the Registrant. (7)
10.38 Assets Purchase Agreement effective June 8, 1990 between Hogan Systems,
Inc. and B-V Systems, Inc. (8)
10.39 Employment Agreement dated July 22, 1987 and Stock Option Agreement dated
September 24, 1987 between Gary W. Fiedler and the Registrant. (8)
10.40 Agreement dated as of June 30, 1990 between Gary W. Fiedler and the Regis-
trant. (8)
10.41 Amendment dated June 30, 1990 to the License Agreement Number 604 dated on
or about May 7, 1986 between Registrant and International Business
Machines Corporation. (9)
10.42 Amendment dated June 30, 1990 to the Marketing Agreement Number 605 dated
on or about May 7, 1986 between Registrant and International Business Ma-
chines Corporation. (9)
10.43 Amendment dated June 30, 1990 to the Product Support and Service Agreement
Number 606 dated on or about May 7, 1986 between Registrant and
International Business Machines Corporation. (9)
10.44 Amendment dated June 30, 1990 to the Master Development Agreement Number
607 dated on or about May 7, 1986 between Registrant and International
Business Machines Corporation. (9)
</TABLE>
24
<PAGE>
<TABLE>
<C> <S>
10.45 Amendment dated June 30, 1990 to the Master Services Agreement Number 608
dated on or about May 7, 1986 between Registrant and International
Business Machines Corporation. (9)
10.46 Stock Purchase Agreement dated September 10, 1990 between Registrant and
International Business Machines Corporation. (9)
10.47 Software Marketing and License Agreement dated February 28, 1991 between
Banc A Corporation and the Registrant. (10)
10.48 An Agreement to provide remote computer services dated March 29, 1991 be-
tween Hogan Systems, Inc. and Citicorp Information Resources. (10)
10.49 Asset Purchase Agreement dated September 4, 1991, between Registrant and
Surecomp Sales, Inc. (11)
10.50 Agreement dated June 29, 1992 between Michael H. Anderson and the Regis-
trant. (12)
10.51 Stock Repurchase Agreement dated October 4, 1993 between International
Business Machines Corporation and the Registrant. (13)
10.52 Amendment dated January 28, 1994 to the License Agreement Number 604 dated
on or about May 7, 1986 between Registrant and International Business Ma-
chines Corporation. (13)
10.53 Agreement dated January 28, 1994 between Registrant and International
Business Machines Corporation to revise License Agreement Number 604 and
Product Support and Services Agreement Number 606 and to terminate the
Marketing Agreement Number 605, the Master Development Agreement Number
607 and the Master Services Agreement Number 608. (13)
10.54 Revolving Credit Note dated March 4, 1994 between Hogan Systems, Inc. and
NationsBank of Texas, N.A. (13)
10.55 Loan Agreement dated March 4, 1994 between Hogan Systems, Inc. and
NationsBank of Texas, N.A. (13)
10.56 Building Purchase Agreement dated April 25, 1994 between the Registrant
and Barclays Nominees (George Yard) Limited. (13)
10.57 Renewal and Extension Agreement dated March 3, 1995 between Hogan Systems,
Inc. and NationsBank of Texas, N.A.
10.58 Renewal and Extension Agreement dated June 15, 1995 between Hogan Systems,
Inc. and NationsBank of Texas, N.A.
10.59 Renewal Revolving Credit Note dated June 15, 1995 between Hogan Systems,
Inc. and NationsBank of Texas, N.A.
11.1 Weighted Average Number of Common Shares Outstanding/Computation of
Earnings Per Share (included on Page 31).
20.1 Press release dated June 7, 1995. (14)
21.1 List of Subsidiaries (included on page 31).
23.1 Consent of Independent Accountants (included on page 32.)
24.1 Power of Attorney (included on page 28.)
27.1 Financial Data Schedule.
<FN>
- ------------------------
(1) Incorporated by reference to the same numbered exhibit to Registrant's
Registration Statement on Form S-1 and Amendment No. 1 thereto (File No.
2-80203) which became effective December 10, 1982.
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
(2) Incorporated by reference to the same numbered exhibit to Registrant's
Registration Statement on Form S-1 (File No. 2-87937) which became
effective December 13, 1983.
(3) Incorporated by reference to the same numbered exhibit to the Company's
report on Form 10-K for the fiscal year ended March 31, 1984.
(4) Incorporated by reference to the exhibits listed at Item 7. in the
Company's report on Form 8-K dated May 7, 1986 and filed May 22, 1986.
(5) Incorporated by reference to the same numbered exhibit to the Company's
report on Form 10-K for the fiscal year ended March 31, 1986.
(6) Incorporated by reference to Exhibit No. 2(a) at Item 7. in the Company's
report on Form 8-K dated May 14, 1987, and Filed May 28, 1987.
(7) Incorporated by reference to the same numbered exhibit to the Company's
report on Form 10-K for the fiscal year ended March 31, 1987.
(8) Incorporated by reference to the same numbered exhibit to the Company's
report on Form 10-K for the fiscal year ended March 31, 1990.
(9) Incorporated by reference to the exhibits listed at Item 7. in the
Company's report on Form 8-K dated November 1, 1990 and filed November 7,
1990.
(10) Incorporated by reference to the same numbered exhibit to the Company's
report on Form 10-K for the fiscal year ended March 31, 1991.
(11) Incorporated by reference to the exhibits listed at Item 7. in the
Company's report on Form 8-K dated September 6, 1991 and filed September
20, 1991.
(12) Incorporated by reference to the exhibit listed at Item 6. to the Company's
report on Form 10-Q for the first quarter of fiscal year ended March 31,
1993.
(13) Incorporated by reference to the same numbered exhibit to the Company's
report on Form 10-K for the fiscal year ended March 31, 1994.
(14) Incorporated by reference to the exhibit listed at Item 7. in the Company's
report on Form 8-K dated June 7, 1995 and filed June 16, 1995.
</TABLE>
4. REPORTS ON FORM 8-K.
No report on Form 8-K was filed during the fiscal year ended March 31,
1995.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
HOGAN SYSTEMS, INC.
By: /s/ MICHAEL H. ANDERSON
-----------------------------------
Michael H. Anderson
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE: June 27, 1995
27
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael H. Anderson and David R. Bankhead,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on June 27, 1995.
SIGNATURE CAPACITY
- ----------------------------------------------------------------------
/s/ MICHAEL H. ANDERSON Chairman, President and
- -----------------------------------
Chief Executive Officer
Michael H. Anderson (Principal Executive Officer)
/s/ CAROL F. DRESSLER Director
- -----------------------------------
Carol F. Dressler
/s/ WILLIAM H. DOUGHERTY Director
- -----------------------------------
William H. Dougherty
/s/ WILLIAM O. HUNT Director
- -----------------------------------
William O. Hunt
/s/ PAUL J. PALMER Director
- -----------------------------------
Paul J. Palmer
/s/ DAVID R. BANKHEAD Senior Vice President Finance and
- -----------------------------------
Chief Financial Officer
David R. Bankhead (Principal Financial Officer)
/s/ SARAH M. BUTTON Controller
- -----------------------------------
(Principal Accounting Officer)
Sarah M. Button
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Hogan Systems, Inc.
Our audits of the consolidated financial statements referred to in our
report dated April 21, 1995 appearing on page 22 of this Annual Report on Form
10-K also included an audit of the Financial Statement Schedule listed in Item
14(a) of this Form 10-K. In our opinion, the Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Dallas, Texas
April 21, 1995
29
<PAGE>
HOGAN SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO WRITE-OFF OF BALANCE AT
BEGINNING COSTS AND OTHER UNCOLLECTIBLE END OF
OF PERIOD EXPENSES ACCOUNTS ACCOUNTS PERIOD
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Year Ended March 31, 1995..................... $ 525,000 $ 420,000 $ -- $ 34,000 $ 911,000
Year Ended March 31, 1994..................... 373,000 $ 468,000 226,000(A) 542,000 525,000
Year Ended March 31, 1993..................... 325,000 858,000 -- 810,000 373,000
<FN>
- ------------------------
(A) Reclassification from another balance sheet account.
</TABLE>
30
<PAGE>
RENEWAL AND EXTENSION AGREEMENT
Date: As of March 3, 1995
NationsBank of Texas, N.A.
901 Main Street
Dallas, Texas 75201
Gentlemen:
The undersigned, Hogan Systems, Inc., a Delaware corporation ("BORROWER"),
entered into a Loan Agreement (the "LOAN AGREEMENT") dated March 4, 1994, with
NationsBank of Texas, N.A., a national banking association ("LENDER"). Pursuant
to the Loan Agreement, Lender agreed, under certain terms and conditions, to
extend a loan (the "LOAN") to Borrower evidenced by a Revolving Credit Note
dated March 4, 1994, executed by Borrower and payable to the order of Lender in
the original principal amount of $20,000,000.00 (the "NOTE").
Borrower has requested that Lender renew and extend the term of the Loan
Agreement and the Note. Lender has advised Borrower that Lender is willing do
so upon the terms and subject to the conditions set forth in this Renewal and
Extension Agreement (the "AGREEMENT"). Unless otherwise defined herein or
unless the context hereof otherwise indicates, each term used herein and defined
in the Loan Agreement has the same meaning herein as in the Loan Agreement. In
consideration for the above premises and mutual promises and covenants herein
contained, Borrower and Lender do hereby agree as follows:
1. RENEWAL REVOLVING CREDIT NOTE.
(a) Contemporaneously with the execution hereof, Borrower shall
execute a Renewal Revolving Credit Note in the form of EXHIBIT "A" attached
hereto (the "RENEWAL NOTE"), dated as of March 3, 1995, made payable to the
order of Lender in the principal amount of $20,000,000.00, which Renewal
Note shall renew, extend and modify the Note in its entirety, but shall not
extinguish the indebtedness evidenced thereby. All outstanding principal
of the Renewal Note shall be due and payable in full on the Revolving Loan
Expiration Date (as such term is defined in the Loan Agreement as amended
hereby). Accrued and unpaid interest on the Renewal Note shall be due and
payable on each Interest Payment Date and on the Revolving Loan Expiration
Date (as such terms are defined in the Loan Agreement as amended hereby).
<PAGE>
NationsBank of Texas, N.A.
As of March 3, 1995
Page 2
2. LOAN AGREEMENT. Effective as of the date hereof, the Loan Agreement
is hereby amended as follows:
(a) The date "March 3, 1995" contained in the definition of
"REVOLVING LOAN EXPIRATION DATE" in SECTION 1.1 of the Loan Agreement is
hereby amended to read "July 31, 1995" and
(b) The amount "$150,000" contained in SECTION 5.2(e)(iv) of the Loan
Agreement is hereby amended to read "$250,000."
3. CONDITIONS PRECEDENT. Lender's willingness to enter into this
Agreement is subject to the conditions precedent that, as of the date hereof:
(a) Lender shall receive the following (the "AMENDMENT DOCUMENTS"),
duly executed by each party thereto, other than Lender, each in form and
substance satisfactory to Lender:
(i) this Agreement;
(ii) the Renewal Note; and
(iii) all other documents that Lender may reasonably request with
respect to any matter relevant to this Agreement or the
transactions contemplated hereby.
(b) The representations and warranties of Borrower contained herein
shall be true and correct in all material respects on and as of the date
hereof; Borrower shall have complied with all of the terms and conditions
herein; and the execution by Borrower of this Agreement is hereby deemed to
constitute a representation and warranty by Borrower to the foregoing
effect.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement, Borrower hereby represents and warrants to Lender that:
(a) The Loan Papers are the legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights;
<PAGE>
NationsBank of Texas, N.A.
As of March 3, 1995
Page 3
(b) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions herein contemplated, nor compliance
with the terms and provisions hereof will contravene or conflict with any
provision of law, statute or regulation to which Borrower is subject or any
judgment, license, order or permit applicable to Borrower or any indenture,
mortgage, deed of trust or other instrument to which Borrower may be
subject; no consent, approval, authorization or order of any court,
governmental authority or third party is required in connection with the
execution, delivery, or performance by Borrower of this Agreement or to
consummate the transactions contemplated herein;
(c) To the best of Borrower's knowledge, all financial statements
delivered by Borrower to Lender prior to the date hereof are true and
correct, fairly present the financial condition of Borrower and have been
prepared in accordance with generally accepted accounting principles,
consistently applied; as of the date hereof, there are no obligations,
liabilities or indebtedness (including contingent and indirect liabilities)
which are material to Borrower and not reflected in such financial
statements;
(d) To the best of Borrower's knowledge, no litigation,
investigation, or governmental proceeding is pending, or, to the knowledge
of any of Borrower's officers, threatened against or affecting Borrower,
which may result in any material adverse change in Borrower's business,
properties or operations, except as has been previously disclosed by
Borrower to Lender;
(e) To the best of Borrower's knowledge, Borrower owns all of the
assets reflected on its most recent balance sheet free and clear of all
liens, security interests or other encumbrances, other than those (if any)
in favor of Lender;
(f) To the best of Borrower's knowledge, Borrower is not in violation
of any law, ordinance, governmental rule or regulation to which it is
subject, and is not in default under any material agreement, contract or
understanding to which it is a party, except as has been previously
disclosed by Borrower to Lender; and
(g) All of the representations and warranties contained in ARTICLE 4
of the Loan Agreement are true and correct on and as of the date hereof
with the same force and effect as if made on and as of the date hereof,
provided that the representations and warranties contained in SECTION 4.3
of the Loan Agreement are made with respect to the financial statements
most recently submitted to Lender pursuant to SECTION 5.3 of the Loan
Agreement.
<PAGE>
NationsBank of Texas, N.A.
As of March 3, 1995
Page 4
5. MISCELLANEOUS.
(a) WAIVER. No failure to exercise, and no delay in exercising, on
the part of Lender, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The rights of
Lender hereunder and under the other Loan Papers shall be in addition to
all other rights provided by law. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand.
(b) GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED, IN THE STATE OF TEXAS, AND THE SUBSTANTIVE
LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT AND ALL OTHER LOAN PAPERS, EXCEPT TO THE
EXTENT: (i) OTHERWISE SPECIFIED THEREIN; (ii) THE FEDERAL LAWS GOVERNING
NATIONAL BANKS EXPRESSLY SUPERSEDE AND HAVE CONTRARY APPLICATION; OR
(iii) FEDERAL LAWS GOVERNING MAXIMUM INTEREST RATES SHALL PROVIDE FOR RATES
OF INTEREST HIGHER THAN THOSE PERMITTED UNDER THE LAWS OF THE STATE OF
TEXAS.
(c) INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of
this Agreement, and the remaining provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal, invalid
or unenforceable provision or by its severance from this Agreement.
(d) MAXIMUM INTEREST RATE. Regardless of any provisions contained in
this Agreement or in any of the other Loan Papers, Lender shall never be
deemed to have contracted for or be entitled to receive, collect or apply
as interest on the Note, any amount in excess of the maximum rate of
interest permitted to be charged by applicable law, and, in the event
Lender ever receives, collects or applies as interest any such excess, such
amount which would be excessive interest shall be deemed to be a partial
prepayment of principal and treated hereunder as such, and, if the
principal balance of the Note is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest
paid or payable under any specific contingency exceeds the highest lawful
rate,
<PAGE>
NationsBank of Texas, N.A.
As of March 3, 1995
Page 5
Borrower, and Lender shall, to the maximum extent permitted under
applicable law, (i) characterize any non-principal payment (other than
payments which are expressly designated as interest payments hereunder) as
an expense, fee, or premium, rather than as interest, (ii) exclude
voluntary prepayments and the effect thereof, and (iii) spread the total
amount of interest throughout the entire contemplated term of the Note so
that the interest rate is uniform throughout such term.
(e) ENTIRETY AND AMENDMENTS. The Loan Papers embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof,
and this Agreement and the other Loan Papers may be amended only by an
instrument in writing executed by the party, or an authorized officer of
the party, against whom such amendment is sought to be enforced.
(f) PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns
and legal representatives; provided, however, that Borrower may not,
without the prior written consent of Lender, assign any rights, powers,
duties or obligations hereunder.
(g) PAYMENT OF EXPENSES. Borrower agrees to pay all costs and
expenses of Lender (including, without limitation, the reasonable
attorneys' fees of Lender's legal counsel) incurred by Lender in connection
with the preparation of this Agreement and the preservation and enforcement
of Lender's rights under this Agreement and the other Loan Papers.
(h) HEADINGS. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original
and all of which are identical.
(J) EFFECT OF THIS AGREEMENT. The Loan Agreement, as amended by this
Agreement, shall remain in full force and effect except that any reference
therein, or in any other Loan Paper referring to the Loan Agreement, shall
be deemed to refer to the Loan Agreement as amended by this Agreement and
any reference in any Loan Paper to the Note shall be deemed to refer to the
Renewal Note.
6. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
PAPERS AS WRITTEN, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF
<PAGE>
NationsBank of Texas, N.A.
As of March 3, 1995
Page 6
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If Lender agrees to the foregoing, Lender should execute this Agreement in
the space indicated below.
BORROWER:
HOGAN SYSTEMS, INC.
By: /s/ DAVID R. BANKHEAD
--------------------------------------------
Name: David R. Bankhead
--------------------------------------------
Title: SVP/Chief Financial Officer
--------------------------------------------
ACCEPTED:
NATIONSBANK OF TEXAS, N.A.
By: /s/ BRIAN GORDON
--------------------------------------------
Name: Brian Gordon
--------------------------------------------
Title: Assistant Vice President
--------------------------------------------
Exhibit "A" - Promissory Note
<PAGE>
NationsBank of Texas, N.A.
As of March 3, 1995
Page 7
The undersigned consents to the provisions of the foregoing Agreement and
confirms that the obligations of the undersigned under the Loan Papers executed
by the undersigned (including, without limitation, the Guaranty Agreement dated
as of March 4, 1994, executed by the undersigned in favor of the Lender) remain
in full force and effect notwithstanding the provisions of the foregoing
Agreement. There are no defenses, offsets or counterclaims to the performance
by the undersigned of his obligations under the Loan Papers to which the
undersigned is a party.
GUARANTOR:
HOGAN SYSTEMS (U.K.) LTD.
By: /s/ R. EDWIN PEARCE
-----------------------------------------
R. Edwin Pearce
Director
The undersigned consents to the provisions of the foregoing Agreement and
confirms that the obligations of the undersigned under the Loan Papers executed
by the undersigned (including, without limitation, the Guaranty Agreement dated
as of March 4, 1994, executed by the undersigned in favor of the Lender) remain
in full force and effect notwithstanding the provisions of the foregoing
Agreement. There are no defenses, offsets or counterclaims to the performance
by the undersigned of his obligations under the Loan Papers to which the
undersigned is a party.
GUARANTOR:
HOGAN SYSTEMS (PTY.) LTD.
By: /s/ R. EDWIN PEARCE
-----------------------------------------
R. Edwin Pearce
Director
<PAGE>
EXHIBIT "A"
Form of Renewal Revolving Credit Note
<PAGE>
RENEWAL REVOLVING CREDIT NOTE
$20,000,000.00 Dallas, Texas March 3, 1995
FOR VALUE RECEIVED, the undersigned corporation, HOGAN SYSTEMS, INC.
("MAKER"), a Delaware corporation, hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("PAYEE"), a national banking association, the
principal sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00), or so much
thereof as may be advanced by Payee under the Revolving Loan Facility pursuant
to the Loan Agreement (as such term is hereinafter defined), together with
interest, as hereinbelow provided. All payments on this Renewal Note shall be
due and payable, in lawful currency of the United States of America, in
immediately available funds at Payee's main office located at 901 Main Street,
Dallas, Texas 75202, or at such other place as may be designated by Payee from
time to time.
This Renewal Note is executed and delivered pursuant to and is subject to
the terms and provisions of that certain Loan Agreement dated as of March 4,
1994, by and between Maker and Payee (as amended by that certain Renewal and
Extension Agreement dated as of March 3, 1995, and as the same may be hereafter
amended, renewed, extended, restated or supplemented from time to time,
hereinafter called the "LOAN AGREEMENT"), and is the Renewal Note referred to in
the Loan Agreement. The holder of this Renewal Note shall be entitled to,
without limitation, the benefits provided in the Loan Agreement. Reference is
also made to the Loan Agreement for a statement of certain terms and provisions
relevant to this Renewal Note but not contained herein, including, without
limitation, provisions relating to prepayment and acceleration of the maturity
hereof upon the occurrence of an Event of Default, but neither reference herein
to the Loan Agreement nor to any term or provision thereof shall affect or
impair the absolute and unconditional obligation of Maker to pay the principal
of and interest accrued on this Renewal Note when the same is due and payable as
provided herein.
Unless otherwise defined herein or unless the context hereof otherwise
indicates, each term used herein and defined in the Loan Agreement has the same
meaning herein as in the Loan Agreement.
The entire unpaid principal balance of this Renewal Note shall be due and
payable in full on the earlier of July 31, 1995 or the date on which the
Revolving Loans mature by virtue of any acceleration of maturity or otherwise.
Accrued and unpaid interest on this Renewal Note shall be due and payable on
each Interest Payment Date and on the earlier of July 31, 1995 or the date on
which the Revolving Loans mature by virtue of any acceleration of maturity or
otherwise.
The unpaid principal amount of this Renewal Note from time to time
outstanding shall bear interest at the rate(s) specified in SECTION 2.5 of the
Loan Agreement, which interest shall be calculated on the basis specified in
SECTION 2.5(e) of the Loan Agreement.
RENEWAL REVOLVING CREDIT NOTE Page 1
<PAGE>
All advances under this Renewal Note made by Payee to Maker pursuant to the
Loan Agreement, the Interest Periods applicable thereto and all payments of
principal or interest with respect thereto may, at the option of Payee, be noted
by Payee on schedules from time to time attached to this Renewal Note; PROVIDED,
HOWEVER, that any failure of Payee to make any such notation shall not limit or
otherwise affect the indebtedness, liabilities or obligations of Maker under
this Renewal Note or the Loan Agreement.
Upon the occurrence and during the continuation of an Event of Default, the
entire unpaid principal balance of, and all accrued and unpaid interest on, this
Renewal Note shall immediately, without notice or demand (which are hereby
waived), become due and payable at the option of the holder hereof unless such
acceleration of the maturity hereof is automatic as provided in the Loan
Agreement. In such event, the holder of this Renewal Note may (a) setoff
against this Renewal Note any sum or sums owed by the holder hereof to Maker,
and/or (b) proceed to protect and enforce any one or more of its rights and
remedies by suit in equity, action at law or other appropriate proceedings,
means or actions, whether for the specific performance of any agreement or
covenant contained in the Loan Papers, in aid of the exercise of any right or
remedy granted by the Loan Papers or to enforce any other legal or equitable
right or remedy of the holder of this Renewal Note.
In the event this Renewal Note is placed in the hands of an attorney for
collection, or in the event this Renewal Note is collected in whole or in part
through legal proceedings of any nature, Maker hereby promises to pay all costs
of collection, including, but not limited to, attorneys' fees, incurred by the
holder hereof on account of such collection, whether or not suit is filed.
No delay on the part of the holder of this Renewal Note in the exercise of
any right or remedy under this Renewal Note, or under any other agreement,
document or instrument executed pursuant hereto, shall operate as a waiver of
such right or remedy, nor shall a single or partial exercise of any such right
or remedy operate as a waiver of such right or remedy. Enforcement by the
holder of this Renewal Note of any security for the payment of this Renewal Note
shall not constitute any election by it of remedies so as to preclude the
exercise of any other right or remedy available to it.
Regardless of any provision contained in this Renewal Note or any other
Loan Paper, Payee shall never be entitled to contract for, charge, receive,
take, collect, reserve or apply, as interest on this Renewal Note, any amount in
excess of the Maximum Lawful Rate, and in the event Payee ever contracts for,
charges, receives, takes, collects, reserves or applies, as interest, any such
excess, such amount which would be deemed excessive interest shall be deemed a
partial prepayment of principal on this Renewal Note and treated hereunder as
such; and if this Renewal Note is paid in full, any remaining excess shall
promptly be paid to Maker. In determining whether the interest paid or payable,
under any specific contingency, exceeds the Maximum Lawful Rate, Maker and Payee
shall, to the maximum extent permitted under applicable law, (a) characterize
any nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate and spread, as appropriate to reflect variations in the
Maximum Lawful Rate, the total amount of interest throughout the entire
contemplated term of the Obligations, so that the interest rate does not exceed
the Maximum Lawful Rate at any time during the term of the Obligations; PROVIDED
THAT, if the unpaid principal balance hereof is paid and performed
RENEWAL REVOLVING CREDIT NOTE Page 2
<PAGE>
in full prior to the end of the full contemplated term hereof, and if the
interest received for the actual period of existence hereof exceeds the Maximum
Lawful Rate, Payee shall refund to Maker the amount of such excess and, in such
event, Payee shall not be subject to any penalties provided by any laws for
contracting for, charging, receiving, taking, collecting, reserving or applying
interest in excess of the Maximum Lawful Rate.
Maker and each surety, endorser, guarantor and other party ever liable for
the payment of any sum of money payable on this Renewal Note jointly and
severally waive demand, presentment, protest, notice of nonpayment, notice of
intention to accelerate, notice of acceleration, notice of protest and any and
all lack of diligence or delay in collection or the filing of suit hereon which
may occur, and agree that their liability on this Renewal Note shall not be
affected by any renewal or extension in the time or payment hereof, by any
indulgences or by any release or change in any security for the payment of this
Renewal Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes.
All of the covenants, stipulations, promises and agreements in this Renewal
Note by or on behalf of Maker shall bind Maker's successors and assigns, whether
so expressed or not; provided, however, that Maker may not, without the prior
written consent of Payee, assign any indebtedness, liabilities or obligations of
Maker, or any rights or remedies (if any) of Maker, under this Renewal Note.
Any provision in this Renewal Note prohibited by law shall be ineffective
only to the extent of such prohibition and shall not invalidate the remainder of
this Renewal Note.
THIS RENEWAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES FEDERAL LAW.
This Renewal Note is executed in renewal and extension of, but not in
discharge, novation or satisfaction of the indebtedness evidenced by that
certain Revolving Credit Note dated March 4, 1994, executed by Maker and payable
to the order of Payee in the original principal amount of $20,000,000.00 (the
"NOTE"). All amounts outstanding under the Note as of the date hereof shall be
deemed to be outstanding under and due and payable in accordance with the terms
of this Renewal Note.
Executed as of the day and year first above written.
HOGAN SYSTEMS, INC.
By:
-----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
RENEWAL REVOLVING CREDIT NOTE Page 3
<PAGE>
RENEWAL AND EXTENSION AGREEMENT
Date: As of June 15, 1995
NationsBank of Texas, N.A.
901 Main Street
Dallas, Texas 75201
Gentlemen:
The undersigned, Hogan Systems, Inc., a Delaware corporation ("BORROWER"),
entered into a Loan Agreement (the "ORIGINAL LOAN AGREEMENT") dated as of
March 4, 1994, with NationsBank of Texas, N.A., a national banking association
("LENDER"). Pursuant to the Loan Agreement, Lender agreed, under certain terms
and conditions, to extend a loan (the "LOAN") to Borrower evidenced by that
certain Revolving Credit Note, dated March 4, 1994, executed by Borrower and
payable to the order of Lender in the original principal amount of
$20,000,000.00 (the "ORIGINAL NOTE").
The Original Loan Agreement and the Original Note were renewed and extended
pursuant to that certain Renewal and Extension Agreement dated as of March 3,
1995, by and between Borrower and Lender (the "PRIOR AGREEMENT"; the Original
Loan Agreement, as renewed and extended by the Prior Agreement is referred to
hereinafter as the "LOAN AGREEMENT"). Pursuant to the Prior Agreement, Lender
renewed and extended the term of the Loan Agreement and the Original Note, and
Borrower concurrently therewith executed that certain Renewal Revolving Credit
Note, dated March 3, 1995, payable to the order of the Lender in the principal
amount of $20,000,000.00 (the "PRIOR RENEWAL NOTE").
Borrower has requested that Lender further renew and extend the term of the
Loan Agreement and the Prior Renewal Note. Lender has advised Borrower that
Lender is willing do so upon the terms and subject to the conditions set forth
in this Renewal and Extension Agreement (the "AGREEMENT"). Unless otherwise
defined herein or unless the context hereof otherwise indicates, each term used
herein and defined in the Loan Agreement has the same meaning herein as in the
Loan Agreement. In consideration for the above premises and mutual promises and
covenants herein contained, Borrower and Lender do hereby agree as follows:
1. RENEWAL REVOLVING CREDIT NOTE.
(a) Contemporaneously with the execution hereof, Borrower shall
execute a Renewal Revolving Credit Note in the form of EXHIBIT "A" attached
hereto (the
<PAGE>
NationsBank of Texas, N.A.
As of June 15, 1995
Page 2
"REVOLVING NOTE"), dated June 15, 1995, made payable to the order of Lender
in the principal amount of $20,000,000.00, which Revolving Note shall
renew, extend and modify the Prior Renewal Note in its entirety, but shall
not extinguish the indebtedness evidenced thereby. All outstanding
principal of the Revolving Note shall be due and payable in full on the
Revolving Loan Expiration Date (as such term is defined in the Loan
Agreement as amended hereby). Accrued and unpaid interest on the Revolving
Note shall be due and payable on each Interest Payment Date and on the
Revolving Loan Expiration Date (as such terms are defined in the Loan
Agreement as amended hereby).
2. LOAN AGREEMENT. Effective as of the date hereof, the Loan Agreement
is hereby amended as follows:
(a) The date "July 31, 1995" contained in the definition of
"REVOLVING LOAN EXPIRATION DATE" in SECTION 1.1 of the Loan Agreement is
hereby amended to read "June 14, 1996" and
(b) Exhibit "E" to the Loan Agreement, the Compliance Certificate, is
hereby amended and restated to read in its entirety as shown on Schedule
"E" to this Agreement.
3. CONDITIONS PRECEDENT. Lender's willingness to enter into this
Agreement is subject to the conditions precedent that, as of the date hereof:
(a) Lender shall receive the following (the "AMENDMENT DOCUMENTS"),
duly executed by each party thereto, other than Lender, each in form and
substance satisfactory to Lender:
(i) this Agreement;
(ii) the Revolving Note; and
(iii) all other documents that Lender may reasonably request with
respect to any matter relevant to this Agreement or the
transactions contemplated hereby.
(b) The representations and warranties of Borrower contained herein
shall be true and correct in all material respects on and as of the date
hereof; Borrower shall have complied with all of the terms and conditions
herein; and the execution by Borrower of
<PAGE>
NationsBank of Texas, N.A.
As of June 15, 1995
Page 3
this Agreement is hereby deemed to constitute a representation and warranty
by Borrower to the foregoing effect.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement, Borrower hereby represents and warrants to Lender that:
(a) The Loan Papers are the legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights;
(b) Neither the execution and delivery of this Agreement nor the
consummation of any of the transactions herein contemplated, nor compliance
with the terms and provisions hereof will contravene or conflict with any
provision of law, statute or regulation to which Borrower is subject or any
judgment, license, order or permit applicable to Borrower or any indenture,
mortgage, deed of trust or other instrument to which Borrower may be
subject; no consent, approval, authorization or order of any court,
governmental authority or third party is required in connection with the
execution, delivery, or performance by Borrower of this Agreement or to
consummate the transactions contemplated herein;
(c) To the best of Borrower's knowledge, all financial statements
delivered by Borrower to Lender prior to the date hereof are true and
correct, fairly present the financial condition of Borrower and have been
prepared in accordance with generally accepted accounting principles,
consistently applied; as of the date hereof, there are no obligations,
liabilities or indebtedness (including contingent and indirect liabilities)
which are material to Borrower and not reflected in such financial
statements;
(d) To the best of Borrower's knowledge, no litigation,
investigation, or governmental proceeding is pending, or, to the knowledge
of any of Borrower's officers, threatened against or affecting Borrower,
which may result in any material adverse change in Borrower's business,
properties or operations, except as has been previously disclosed by
Borrower to Lender;
(e) To the best of Borrower's knowledge, Borrower owns all of the
assets reflected on its most recent balance sheet free and clear of all
liens, security interests or other encumbrances, other than those (if any)
in favor of Lender;
<PAGE>
NationsBank of Texas, N.A.
As of June 15, 1995
Page 4
(f) To the best of Borrower's knowledge, Borrower is not in violation
of any law, ordinance, governmental rule or regulation to which it is
subject, and is not in default under any material agreement, contract or
understanding to which it is a party, except as has been previously
disclosed by Borrower to Lender; and
(g) All of the representations and warranties contained in ARTICLE 4
of the Loan Agreement are true and correct on and as of the date hereof
with the same force and effect as if made on and as of the date hereof,
provided that the representations and warranties contained in SECTION 4.3
of the Loan Agreement are made with respect to the financial statements
most recently submitted to Lender pursuant to SECTION 5.3 of the Loan
Agreement.
5. MISCELLANEOUS.
(a) WAIVER. No failure to exercise, and no delay in exercising, on
the part of Lender, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The rights of
Lender hereunder and under the other Loan Papers shall be in addition to
all other rights provided by law. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand.
(b) GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED, IN THE STATE OF TEXAS, AND THE SUBSTANTIVE
LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT AND ALL OTHER LOAN PAPERS, EXCEPT TO THE
EXTENT: (I) OTHERWISE SPECIFIED THEREIN; (ii) THE FEDERAL LAWS GOVERNING
NATIONAL BANKS EXPRESSLY SUPERSEDE AND HAVE CONTRARY APPLICATION; OR
(iii) FEDERAL LAWS GOVERNING MAXIMUM INTEREST RATES SHALL PROVIDE FOR RATES
OF INTEREST HIGHER THAN THOSE PERMITTED UNDER THE LAWS OF THE STATE OF
TEXAS.
(c) INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of
this Agreement, and the remaining provisions of this Agreement shall remain
in full
<PAGE>
NationsBank of Texas, N.A.
As of June 15, 1995
Page 5
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
(d) MAXIMUM INTEREST RATE. Regardless of any provisions contained in
this Agreement or in any of the other Loan Papers, Lender shall never be
deemed to have contracted for or be entitled to receive, collect or apply
as interest on the Revolving Note, any amount in excess of the maximum rate
of interest permitted to be charged by applicable law, and, in the event
Lender ever receives, collects or applies as interest any such excess, such
amount which would be excessive interest shall be deemed to be a partial
prepayment of principal and treated hereunder as such, and, if the
principal balance of the Revolving Note is paid in full, any remaining
excess shall forthwith be paid to Borrower. In determining whether or not
the interest paid or payable under any specific contingency exceeds the
highest lawful rate, Borrower, and Lender shall, to the maximum extent
permitted under applicable law, (I) characterize any non-principal payment
(other than payments which are expressly designated as interest payments
hereunder) as an expense, fee, or premium, rather than as interest,
(ii) exclude voluntary prepayments and the effect thereof, and (iii)
spread the total amount of interest throughout the entire contemplated term
of the Revolving Note so that the interest rate is uniform throughout such
term.
(e) ENTIRETY AND AMENDMENTS. The Loan Papers embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof,
and this Agreement and the other Loan Papers may be amended only by an
instrument in writing executed by the party, or an authorized officer of
the party, against whom such amendment is sought to be enforced.
(f) PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns
and legal representatives; provided, however, that Borrower may not,
without the prior written consent of Lender, assign any rights, powers,
duties or obligations hereunder.
(g) PAYMENT OF EXPENSES. Borrower agrees to pay all costs and
expenses of Lender (including, without limitation, the reasonable
attorneys' fees of Lender's legal counsel) incurred by Lender in connection
with the preparation of this Agreement and the preservation and enforcement
of Lender's rights under this Agreement and the other Loan Papers.
(h) HEADINGS. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Agreement.
<PAGE>
NationsBank of Texas, N.A.
As of June 15, 1995
Page 6
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original
and all of which are identical.
(j) EFFECT OF THIS AGREEMENT. The Loan Agreement, as amended by this
Agreement, shall remain in full force and effect except that any reference
therein, or in any other Loan Paper referring to the Loan Agreement, shall
be deemed to refer to the Loan Agreement as amended by this Agreement and
any reference in any Loan Paper to the Revolving Note shall be deemed to
refer to the Original Note as renewed and extended by Prior Renewal Note
and the Revolving Note referred to herein.
6. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
PAPERS AS WRITTEN, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
If Lender agrees to the foregoing, Lender should execute this Agreement in
the space indicated below.
BORROWER:
HOGAN SYSTEMS, INC.
By: /s/ David R. Bankhead
----------------------------------------------
Name: David R. Bankhead
--------------------------------------------
Title: SVP/Chief Financial Officer
-------------------------------------------
<PAGE>
NationsBank of Texas, N.A.
As of June 15, 1995
Page 7
ACCEPTED:
LENDER:
NATIONSBANK OF TEXAS, N.A.
By: /s/ BRIAN GORDON
--------------------------
Name: Brian Gordon
Title: Vice President
Exhibit "A" - Form of Renewal Revolving Credit Note
Exhibit "E" - Compliance Certificate
<PAGE>
NationsBank of Texas, N.A.
As of June 15, 1995
Page 8
The undersigned consents to the provisions of the foregoing Agreement and
confirms that the obligations of the undersigned under the Loan Papers executed
by the undersigned (including, without limitation, the Guaranty Agreement dated
as of March 4, 1994, executed by the undersigned in favor of the Lender) remain
in full force and effect notwithstanding the provisions of the foregoing
Agreement. There are no defenses, offsets or counterclaims to the performance
by the undersigned of its obligations under the Loan Papers to which the
undersigned is a party.
GUARANTOR:
HOGAN SYSTEMS (U.K.) LTD.
By: /s/ R. Edwin Pearce
------------------------------------------
R. Edwin Pearce
Director
The undersigned consents to the provisions of the foregoing Agreement and
confirms that the obligations of the undersigned under the Loan Papers executed
by the undersigned (including, without limitation, the Guaranty Agreement dated
as of March 4, 1994, executed by the undersigned in favor of the Lender) remain
in full force and effect notwithstanding the provisions of the foregoing
Agreement. There are no defenses, offsets or counterclaims to the performance
by the undersigned of its obligations under the Loan Papers to which the
undersigned is a party.
GUARANTOR:
HOGAN SYSTEMS (PTY.) LTD.
By: /s/ R. Edwin Pearce
------------------------------------------
R. Edwin Pearce
Director
<PAGE>
EXHIBIT "A"
Form of Renewal Revolving Credit Note
<PAGE>
RENEWAL REVOLVING CREDIT NOTE
$20,000,000.00 Dallas, Texas June 15, 1995
FOR VALUE RECEIVED, the undersigned corporation, HOGAN SYSTEMS, INC.
("MAKER"), a Delaware corporation, hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("PAYEE"), a national banking association, the
principal sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00), or so much
thereof as may be advanced by Payee under the Revolving Loan Facility pursuant
to the Loan Agreement (as such term is hereinafter defined), together with
interest, as hereinbelow provided. All payments on this Revolving Note shall be
due and payable, in lawful currency of the United States of America, in
immediately available funds at Payee's main office located at 901 Main Street,
Dallas, Texas 75202, or at such other place as may be designated by Payee from
time to time.
This Revolving Note is executed and delivered pursuant to and is subject to
the terms and provisions of that certain Loan Agreement dated as of March 4,
1994, by and between Maker and Payee (as amended by that certain Renewal and
Extension Agreement dated as of March 3, 1995, and as further amended by that
certain Renewal and Extension Agreement dated as of June 15, 1995, and as the
same may be hereafter further amended, renewed, extended, restated or
supplemented from time to time, hereinafter called the "LOAN AGREEMENT"), and is
the Revolving Note referred to in the Loan Agreement. The holder of this
Revolving Note shall be entitled to, without limitation, the benefits provided
in the Loan Agreement. Reference is also made to the Loan Agreement for a
statement of certain terms and provisions relevant to this Revolving Note but
not contained herein, including, without limitation, provisions relating to
prepayment and acceleration of the maturity hereof upon the occurrence of an
Event of Default, but neither reference herein to the Loan Agreement nor to any
term or provision thereof shall affect or impair the absolute and unconditional
obligation of Maker to pay the principal of and interest accrued on this
Revolving Note when the same is due and payable as provided herein.
Unless otherwise defined herein or unless the context hereof otherwise
indicates, each term used herein and defined in the Loan Agreement has the same
meaning herein as in the Loan Agreement.
The entire unpaid principal balance of this Revolving Note shall be due and
payable in full on the earlier of June 14, 1996 or the date on which the
Revolving Loans mature by virtue of any acceleration of maturity or otherwise.
Accrued and unpaid interest on this Revolving Note shall be due and payable on
each Interest Payment Date and on the earlier of June 14, 1996 or the date on
which the Revolving Loans mature by virtue of any acceleration of maturity or
otherwise.
The unpaid principal amount of this Revolving Note from time to time
outstanding shall bear interest at the rate(s) specified in SECTION 2.5 of the
Loan Agreement, which interest shall be calculated on the basis specified in
SECTION 2.5(E) of the Loan Agreement.
<PAGE>
All advances under this Revolving Note made by Payee to Maker pursuant to
the Loan Agreement, the Interest Periods applicable thereto and all payments of
principal or interest with respect thereto may, at the option of Payee, be noted
by Payee on schedules from time to time attached to this Revolving Note;
PROVIDED, HOWEVER, that any failure of Payee to make any such notation shall not
limit or otherwise affect the indebtedness, liabilities or obligations of Maker
under this Revolving Note or the Loan Agreement.
Upon the occurrence and during the continuation of an Event of Default, the
entire unpaid principal balance of, and all accrued and unpaid interest on, this
Revolving Note shall immediately, without notice or demand (which are hereby
waived), become due and payable at the option of the holder hereof unless such
acceleration of the maturity hereof is automatic as provided in the Loan
Agreement. In such event, the holder of this Revolving Note may (a) set off
against this Revolving Note any sum or sums owed by the holder hereof to Maker,
and/or (b) proceed to protect and enforce any one or more of its rights and
remedies by suit in equity, action at law or other appropriate proceedings,
means or actions, whether for the specific performance of any agreement or
covenant contained in the Loan Papers, in aid of the exercise of any right or
remedy granted by the Loan Papers or to enforce any other legal or equitable
right or remedy of the holder of this Revolving Note.
In the event this Revolving Note is placed in the hands of an attorney for
collection, or in the event this Revolving Note is collected in whole or in part
through legal proceedings of any nature, Maker hereby promises to pay all costs
of collection, including, but not limited to, attorneys' fees, incurred by the
holder hereof on account of such collection, whether or not suit is filed.
No delay on the part of the holder of this Revolving Note in the exercise
of any right or remedy under this Revolving Note, or under any other agreement,
document or instrument executed pursuant hereto, shall operate as a waiver of
such right or remedy, nor shall a single or partial exercise of any such right
or remedy operate as a waiver of such right or remedy. Enforcement by the
holder of this Revolving Note of any security for the payment of this Revolving
Note shall not constitute any election by it of remedies so as to preclude the
exercise of any other right or remedy available to it.
Regardless of any provision contained in this Revolving Note or any other
Loan Paper, Payee shall never be entitled to contract for, charge, receive,
take, collect, reserve or apply, as interest on this Revolving Note, any amount
in excess of the Maximum Lawful Rate, and in the event Payee ever contracts for,
charges, receives, takes, collects, reserves or applies, as interest, any such
excess, such amount which would be deemed excessive interest shall be deemed a
partial prepayment of principal on this Revolving Note and treated hereunder as
such; and if this Revolving Note is paid in full, any remaining excess shall
promptly be paid to Maker. In determining whether the interest paid or payable,
under any specific contingency, exceeds the Maximum Lawful Rate, Maker and Payee
shall, to the maximum extent permitted under applicable law, (a) characterize
any nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate and spread, as appropriate to reflect variations in the
Maximum Lawful Rate, the
<PAGE>
total amount of interest throughout the entire contemplated term of the
Obligations, so that the interest rate does not exceed the Maximum Lawful Rate
at any time during the term of the Obligations; PROVIDED that, if the unpaid
principal balance hereof is paid and performed in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence hereof exceeds the Maximum Lawful Rate, Payee shall refund
to Maker the amount of such excess and, in such event, Payee shall not be
subject to any penalties provided by any laws for contracting for, charging,
receiving, taking, collecting, reserving or applying interest in excess of the
Maximum Lawful Rate.
Maker and each surety, endorser, guarantor and other party ever liable for
the payment of any sum of money payable on this Revolving Note jointly and
severally waive demand, presentment, protest, notice of nonpayment, notice of
intention to accelerate, notice of acceleration, notice of protest and any and
all lack of diligence or delay in collection or the filing of suit hereon which
may occur, and agree that their liability on this Revolving Note shall not be
affected by any renewal or extension in the time or payment hereof, by any
indulgences or by any release or change in any security for the payment of this
Revolving Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes.
All of the covenants, stipulations, promises and agreements in this
Revolving Note by or on behalf of Maker shall bind Maker's successors and
assigns, whether so expressed or not; provided, however, that Maker may not,
without the prior written consent of Payee, assign any indebtedness, liabilities
or obligations of Maker, or any rights or remedies (if any) of Maker, under this
Revolving Note.
Any provision in this Revolving Note prohibited by law shall be ineffective
only to the extent of such prohibition and shall not invalidate the remainder of
this Revolving Note.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES FEDERAL LAW.
This Revolving Note is executed in renewal and extension of, but not in
discharge, novation or satisfaction of the indebtedness evidenced by that
certain Revolving Credit Note dated March 4, 1994, executed by Maker and payable
to the order of Payee in the original principal amount of $20,000,000.00, as
renewed and extended by that certain Renewal Revolving Credit Note dated March
3, 1995, executed by Maker and payable to the order of Payee in the original
principal amount of $20,000,000.00 (together, the "NOTES"). All amounts
outstanding under the Notes as of the date hereof shall be deemed to be
outstanding under and due and payable in accordance with the terms of this
Revolving Note.
<PAGE>
Executed as of the day and year first above written.
HOGAN SYSTEMS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
<PAGE>
EXHIBIT "E"
Compliance Certificate
<PAGE>
COMPLIANCE CERTIFICATE
FOR [QUARTER] [YEAR] ENDED ______________, 199__
From: Hogan Systems, Inc.
5080 Spectrum Drive, Suite 400E
Dallas, Texas 75248
To: NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Attention: Mr. Frank Izzo
Re: Loan Agreement dated as of March 4, 1994, by and between Hogan Systems,
Inc. ("BORROWER") and NationsBank of Texas, N.A. ("BANK") (as the same may
be amended, renewed, extended, restated or supplemented, the "AGREEMENT")
Date:_______________, 19__
- -------------------------------------------------------------------------------
1. This Compliance Certificate is delivered pursuant to SECTION 5.3(C) of
the Agreement. Unless otherwise defined herein or the context hereof otherwise
requires, all terms defined in the Agreement shall have the same meanings
herein.
2. The undersigned hereby certifies to Bank as follows:
(a) I am the [President] [Vice President] [Chief Financial Officer]
of Borrower on the date hereof.
(b) The consolidating and consolidated Financial Statements attached
hereto were prepared in accordance with GAAP and present fairly the
consolidating and consolidated financial condition and results of
operations of Borrower and its Subsidiaries as of, and for the [quarter]
[year] ended on, ______________, 199__ (the "SUBJECT PERIOD"), [subject to
changes resulting from year-end adjustments made in accordance with GAAP].
(c) A review of the activities of Borrower and its Subsidiaries
during the Subject Period has been made under my supervision with a view to
determining whether, during the Subject Period, Borrower has observed and
performed (and has caused its Subsidiaries to observe and perform) all of
its covenants and agreements under the Loan Papers. During the Subject
Period, Borrower has observed and performed (and has caused its
Subsidiaries to observe and perform) each and every covenant and agreement
of the Loan Papers (except as may be described on SCHEDULE 1 attached
hereto).
<PAGE>
(d) The status of compliance by Borrower with certain financial
covenants in the Agreement as of and for the period ended on the last day
of the Subject Period is set forth on SCHEDULE 2 attached hereto. (The
language set forth on SCHEDULE 2 is intended only to paraphrase or
summarize certain provisions of such covenants and shall not constitute a
modification of such provisions. The terms and provisions of the Loan
Agreement shall control in all events.)
(e) During the Subject Period, neither a Potential Default nor an
Event of Default occurred which has not been cured or waived (except the
Potential Defaults or Events of Default, if any, described on SCHEDULE 1
attached hereto).
IN WITNESS WHEREOF, the undersigned has duly executed this Compliance
Certificate as of _________________, 199__.
HOGAN SYSTEMS, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE>
SCHEDULE 1
POTENTIAL DEFAULTS AND EVENTS OF DEFAULT
(to be provided, if applicable)
<PAGE>
SCHEDULE 2
<TABLE>
<CAPTION>
COMPLIANCE WITH CERTAIN COVENANTS
Section Required or Permitted Actual
- -------------------------------------------------------------------------------
<C> <S> <C>
5.2(a) FIXED CHARGE COVERAGE RATIO:
(i) EBIT PLUS Lease Expense $____________
(ii) Interest Expense PLUS
Lease Expense $____________
(iii) (i) divided by (ii)
shall not be less than 2.0 _____________
5.2(b) CURRENT RATIO:
(i) Current Assets $____________
(ii) Current Liabilities $____________
(iii) (i) divided by (ii)
shall not be less than 1.5 _____________
5.2(c) LIABILITIES/NET WORTH RATIO:
(i) Total Liabilities LESS
Subordinated Debt $____________
(ii) Tangible Net Worth PLUS
Subordinated Debt $____________
(iii) (i) divided by (ii)
shall not be more than 1.0 _____________
<PAGE>
5.2(e) LOANS/ADVANCES/INVESTMENTS:
(i) Advances to Hogan Systems
GmbH $____________
(ii) Advances to Hogan Services
(PTY.) Ltd. $____________
(iii) (i) plus (ii) shall not exceed
$2,000,000 in the aggregate _____________
</TABLE>
<PAGE>
RENEWAL REVOLVING CREDIT NOTE
$20,000,000.00 Dallas, Texas June 15, 1995
FOR VALUE RECEIVED, the undersigned corporation, HOGAN SYSTEMS, INC.
("MAKER"), a Delaware corporation, hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("PAYEE"), a national banking association, the
principal sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00), or so much
thereof as may be advanced by Payee under the Revolving Loan Facility pursuant
to the Loan Agreement (as such term is hereinafter defined), together with
interest, as hereinbelow provided. All payments on this Revolving Note shall be
due and payable, in lawful currency of the United States of America, in
immediately available funds at Payee's main office located at 901 Main Street,
Dallas, Texas 75202, or at such other place as may be designated by Payee from
time to time.
This Revolving Note is executed and delivered pursuant to and is subject to
the terms and provisions of that certain Loan Agreement dated as of March 4,
1994, by and between Maker and Payee (as amended by that certain Renewal and
Extension Agreement dated as of March 3, 1995, and as further amended by that
certain Renewal and Extension Agreement dated as of June 15, 1995, and as the
same may be hereafter further amended, renewed, extended, restated or
supplemented from time to time, hereinafter called the "LOAN AGREEMENT"), and is
the Revolving Note referred to in the Loan Agreement. The holder of this
Revolving Note shall be entitled to, without limitation, the benefits provided
in the Loan Agreement. Reference is also made to the Loan Agreement for a
statement of certain terms and provisions relevant to this Revolving Note but
not contained herein, including, without limitation, provisions relating to
prepayment and acceleration of the maturity hereof upon the occurrence of an
Event of Default, but neither reference herein to the Loan Agreement nor to any
term or provision thereof shall affect or impair the absolute and unconditional
obligation of Maker to pay the principal of and interest accrued on this
Revolving Note when the same is due and payable as provided herein.
Unless otherwise defined herein or unless the context hereof otherwise
indicates, each term used herein and defined in the Loan Agreement has the same
meaning herein as in the Loan Agreement.
The entire unpaid principal balance of this Revolving Note shall be due and
payable in full on the earlier of June 14, 1996 or the date on which the
Revolving Loans mature by virtue of any acceleration of maturity or otherwise.
Accrued and unpaid interest on this Revolving Note shall be due and payable on
each Interest Payment Date and on the earlier of June 14, 1996 or the date on
which the Revolving Loans mature by virtue of any acceleration of maturity or
otherwise.
The unpaid principal amount of this Revolving Note from time to time
outstanding shall bear interest at the rate(s) specified in SECTION 2.5 of the
Loan Agreement, which interest shall be calculated on the basis specified in
SECTION 2.5(E) of the Loan Agreement.
<PAGE>
All advances under this Revolving Note made by Payee to Maker pursuant to
the Loan Agreement, the Interest Periods applicable thereto and all payments of
principal or interest with respect thereto may, at the option of Payee, be noted
by Payee on schedules from time to time attached to this Revolving Note;
PROVIDED, HOWEVER, that any failure of Payee to make any such notation shall not
limit or otherwise affect the indebtedness, liabilities or obligations of Maker
under this Revolving Note or the Loan Agreement.
Upon the occurrence and during the continuation of an Event of Default, the
entire unpaid principal balance of, and all accrued and unpaid interest on, this
Revolving Note shall immediately, without notice or demand (which are hereby
waived), become due and payable at the option of the holder hereof unless such
acceleration of the maturity hereof is automatic as provided in the Loan
Agreement. In such event, the holder of this Revolving Note may (a) set off
against this Revolving Note any sum or sums owed by the holder hereof to Maker,
and/or (b) proceed to protect and enforce any one or more of its rights and
remedies by suit in equity, action at law or other appropriate proceedings,
means or actions, whether for the specific performance of any agreement or
covenant contained in the Loan Papers, in aid of the exercise of any right or
remedy granted by the Loan Papers or to enforce any other legal or equitable
right or remedy of the holder of this Revolving Note.
In the event this Revolving Note is placed in the hands of an attorney for
collection, or in the event this Revolving Note is collected in whole or in part
through legal proceedings of any nature, Maker hereby promises to pay all costs
of collection, including, but not limited to, attorneys' fees, incurred by the
holder hereof on account of such collection, whether or not suit is filed.
No delay on the part of the holder of this Revolving Note in the exercise
of any right or remedy under this Revolving Note, or under any other agreement,
document or instrument executed pursuant hereto, shall operate as a waiver of
such right or remedy, nor shall a single or partial exercise of any such right
or remedy operate as a waiver of such right or remedy. Enforcement by the
holder of this Revolving Note of any security for the payment of this Revolving
Note shall not constitute any election by it of remedies so as to preclude the
exercise of any other right or remedy available to it.
Regardless of any provision contained in this Revolving Note or any other
Loan Paper, Payee shall never be entitled to contract for, charge, receive,
take, collect, reserve or apply, as interest on this Revolving Note, any amount
in excess of the Maximum Lawful Rate, and in the event Payee ever contracts for,
charges, receives, takes, collects, reserves or applies, as interest, any such
excess, such amount which would be deemed excessive interest shall be deemed a
partial prepayment of principal on this Revolving Note and treated hereunder as
such; and if this Revolving Note is paid in full, any remaining excess shall
promptly be paid to Maker. In determining whether the interest paid or payable,
under any specific contingency, exceeds the Maximum Lawful Rate, Maker and Payee
shall, to the maximum extent permitted under applicable law, (a) characterize
any nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate and spread, as appropriate to reflect variations in the
Maximum Lawful Rate, the
<PAGE>
total amount of interest throughout the entire contemplated term of the
Obligations, so that the interest rate does not exceed the Maximum Lawful Rate
at any time during the term of the Obligations; PROVIDED that, if the unpaid
principal balance hereof is paid and performed in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence hereof exceeds the Maximum Lawful Rate, Payee shall refund
to Maker the amount of such excess and, in such event, Payee shall not be
subject to any penalties provided by any laws for contracting for, charging,
receiving, taking, collecting, reserving or applying interest in excess of the
Maximum Lawful Rate.
Maker and each surety, endorser, guarantor and other party ever liable for
the payment of any sum of money payable on this Revolving Note jointly and
severally waive demand, presentment, protest, notice of nonpayment, notice of
intention to accelerate, notice of acceleration, notice of protest and any and
all lack of diligence or delay in collection or the filing of suit hereon which
may occur, and agree that their liability on this Revolving Note shall not be
affected by any renewal or extension in the time or payment hereof, by any
indulgences or by any release or change in any security for the payment of this
Revolving Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes.
All of the covenants, stipulations, promises and agreements in this
Revolving Note by or on behalf of Maker shall bind Maker's successors and
assigns, whether so expressed or not; provided, however, that Maker may not,
without the prior written consent of Payee, assign any indebtedness, liabilities
or obligations of Maker, or any rights or remedies (if any) of Maker, under this
Revolving Note.
Any provision in this Revolving Note prohibited by law shall be ineffective
only to the extent of such prohibition and shall not invalidate the remainder of
this Revolving Note.
THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES FEDERAL LAW.
This Revolving Note is executed in renewal and extension of, but not in
discharge, novation or satisfaction of the indebtedness evidenced by that
certain Revolving Credit Note dated March 4, 1994, executed by Maker and payable
to the order of Payee in the original principal amount of $20,000,000.00, as
renewed and extended by that certain Renewal Revolving Credit Note dated March
3, 1995, executed by Maker and payable to the order of Payee in the original
principal amount of $20,000,000.00 (together, the "NOTES"). All amounts
outstanding under the Notes as of the date hereof shall be deemed to be
outstanding under and due and payable in accordance with the terms of this
Revolving Note.
<PAGE>
Executed as of the day and year first above written.
HOGAN SYSTEMS, INC.
By: /s/ David R. Bankhead
-------------------------------------
Name: David R. Bankhead
-----------------------------------
Title: SVP and Chief Financial Officer
-----------------------------------
<PAGE>
EXHIBIT 11.1
HOGAN SYSTEMS, INC.
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Shares outstanding at beginning of period............................ 14,381,000 14,405,000 14,002,000
Issuance of stock.................................................... 10,000 390,000 160,000
Common share equivalents, assuming exercise of stock options......... 409,000 848,000 338,000
Acquisition of treasury stock........................................ -- (343,000) --
------------- ------------- -------------
Weighted average number of common shares and common share equivalents
outstanding......................................................... 14,800,000 15,300,000 14,500,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<S> <C>
1. Hogan Systems (UK) Limited
2. Hogan Systems Pty Limited
3. Hogan Systems GmbH
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-82594, No 2-93562, No. 2-96080) of Hogan Systems,
Inc. of our report dated April 21, 1995 appearing in the Hogan Systems, Inc.
1995 Annual Report on Form 10-K (Form 10-K). We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears in the Form 10-K.
PRICE WATERHOUSE LLP
Dallas, Texas
June 27, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 7,764
<SECURITIES> 0
<RECEIVABLES> 40,169
<ALLOWANCES> 911
<INVENTORY> 0
<CURRENT-ASSETS> 50,931
<PP&E> 15,456
<DEPRECIATION> 8,220
<TOTAL-ASSETS> 96,681
<CURRENT-LIABILITIES> 32,160
<BONDS> 0
<COMMON> 151
0
0
<OTHER-SE> 56,519
<TOTAL-LIABILITY-AND-EQUITY> 96,681
<SALES> 92,606
<TOTAL-REVENUES> 92,606
<CGS> 83,544
<TOTAL-COSTS> 83,544
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 420
<INTEREST-EXPENSE> 369
<INCOME-PRETAX> 8,994
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 6,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,294
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
