<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to______________
Commission File Number
0-17195
Landmark Graphics Corporation
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0029459
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
15150 MEMORIAL DRIVE
HOUSTON, TEXAS 77079-4304
(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 560-1000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if
changed since last report)
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 number of shares outstanding of the Registrant's common stock, $0.05 par
value, as of February 6, 1995 was 16,349,363.
Page 1 of 18
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
As of December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations -
For the Three Months and Six Months Ended December 31, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
For the Six Months Ended December 31, 1994 and 1993 . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . 12
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
Page 2 of 18
<PAGE> 3
LANDMARK GRAPHICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
------------ ---------
(Restated)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 65,890 $ 73,840
Receivables:
Trade accounts, net . . . . . . . . . . . . . . . . . 40,861 40,705
Current income tax receivable . . . . . . . . . . . . 1,003 1,003
Accrued revenue and other receivables . . . . . . . . 7,769 7,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . 4,833 3,444
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 3,231 3,618
Deferred income taxes, net of valuation allowance . . . . 5,132 4,667
-------- --------
Total current assets . . . . . . . . . . . . . . . . . 128,719 134,277
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 857 851
Property and equipment, net . . . . . . . . . . . . . . . . . . 42,115 40,493
Software development costs, net . . . . . . . . . . . . . . . . 6,463 5,781
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . 11,321 129
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . 3,940 4,561
--------- ---------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 193,415 $ 186,092
========= =========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 8,728 $ 7,915
Accrued liabilities . . . . . . . . . . . . . . . . . . . 7,838 6,473
Accrued commissions . . . . . . . . . . . . . . . . . . . 2,329 1,565
Deferred maintenance fees . . . . . . . . . . . . . . . . 8,866 10,136
Income taxes payable . . . . . . . . . . . . . . . . . . . 1,811 1,596
Current maturities of long-term debt . . . . . . . . . . . 1,009 1,150
--------- ---------
Total current liabilities . . . . . . . . . . . . . . 30,581 28,835
Deferred income taxes, net of current portion . . . . . . . . . 4,161 4,161
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 11,500 12,000
Other long-term liabilities . . . . . . . . . . . . . . . . . . 62 -
Common stockholders' equity:
Common stock, $0.05 par value; 16,348 and 16,269
shares issued, respectively . . . . . . . . . . . . . 817 813
Paid-in capital . . . . . . . . . . . . . . . . . . . . . 120,072 118,590
Retained earnings . . . . . . . . . . . . . . . . . . . . 26,222 21,693
--------- ---------
Total common stockholders' equity . . . . . . . . . . 147,111 141,096
--------- ---------
Total Liabilities and Common Stockholders' Equity . . . . . . . $ 193,415 $ 186,092
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 18
<PAGE> 4
LANDMARK GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ----------------------
1994 1993 1994 1993
-------- --------- -------- --------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues:
Software product sales. . . . . . . . . . . . . . $ 20,804 $ 17,976 $ 34,508 $ 32,987
Hardware product sales . . . . . . . . . . . . . 9,259 10,297 15,243 15,552
Maintenance and other . . . . . . . . . . . . . . 13,288 9,459 23,794 18,273
-------- --------- -------- --------
Total revenues . . . . . . . . . . . . . . . . 43,351 37,732 73,545 66,812
Cost of revenues:
Cost of software product sales. . . . . . . . . . 2,332 1,452 4,077 3,095
Cost of hardware product sales. . . . . . . . . . 7,638 8,686 12,610 12,858
Cost of maintenance and other . . . . . . . . . . 7,733 5,878 14,029 11,297
Bad debt expense . . . . . . . . . . . . . . . . 403 405 753 855
-------- --------- -------- --------
Total cost of revenues . . . . . . . . . . . . 18,106 16,421 31,469 28,105
-------- --------- -------- --------
Gross profit . . . . . . . . . . . . . . . 25,245 21,311 42,076 38,707
Operating expenses:
Research and development . . . . . . . . . . . . 4,486 4,181 8,572 9,160
Selling, marketing and administrative . . . . . . 14,053 11,522 25,785 21,468
Merger costs . . . . . . . . . . . . . . . . . . - - 1,153 -
Restructuring charges and non-recurring costs . . - - 1,809 -
-------- --------- -------- --------
Total operating expenses . . . . . . . . . . . 18,539 15,703 37,319 30,628
-------- --------- -------- --------
Income from operations . . . . . . . . . . . . . . . 6,706 5,608 4,757 8,079
Other, net . . . . . . . . . . . . . . . . . . . . . 750 463 1,619 856
-------- --------- -------- --------
Income before income taxes . . . . . . . . . . . . . 7,456 6,071 6,376 8,935
Provision for income taxes . . . . . . . . . . . . . 1,847 1,053 1,847 1,699
-------- --------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . $ 5,609 $ 5,018 $ 4,529 $ 7,236
======== ========= ======== ========
Income per common and common equivalent share . . . $ 0.34 $ 0.32 $ 0.27 $ 0.49
======== ========= ======== ========
Weighted average common and common equivalent shares
outstanding . . . . . . . . . . . . . . . . . . . 16,645 15,749 16,770 14,780
Pro forma information:
Net income as reported . . . . . . . . . . . . . $ 5,018 $ 7,236
Pro forma charge in lieu of income taxes. . . . . 748 885
--------- --------
Pro forma net income . . . . . . . . . . . . . . $ 4,270 $ 6,351
========= ========
Pro forma income per share . . . . . . . . . . . $ 0.27 $ 0.43
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 18
<PAGE> 5
LANDMARK GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------
1994 1993
-------- --------
(Restated)
<S> <C> <C>
Cash flows from:
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,529 $ 7,236
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,919 3,580
Adjustment to reduce net income of Advance Geophysical
Corporation to a three month amount. . . . . . . . . . . . . . . . . . . . - (393)
Compensation related to acquired company's Phantom Stock Plan . . . . . . . - 696
Amortization of goodwill/other assets . . . . . . . . . . . . . . . . . . . 462 64
Amortization of capitalized software development costs . . . . . . . . . . . 1,469 1,114
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . 753 819
Amortization of field service and lease inventory . . . . . . . . . . . . . 425 522
Provision for product upgrade costs . . . . . . . . . . . . . . . . . . . . 125 100
Provision for inventory obsolescence . . . . . . . . . . . . . . . . . . . . 89 150
Net loss on disposal of property and equipment . . . . . . . . . . . . . . . . 45 73
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (56)
Changes in assets and liabilities, net of the effects of purchased business:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 (5,955)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,896) (144)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 (1,039)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562 149
Accounts payable/accrued liabilities . . . . . . . . . . . . . . . . . . . . 2,246 4,647
Deferred maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . (2,258) 1,737
Deferred income taxes/income taxes payable . . . . . . . . . . . . . . . . . 152 617
-------- --------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . 11,720 13,917
Investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,211) (19,821)
Payment for purchased business acquired, net of cash acquired of $466 . . . . (12,803) -
Capitalized software development costs . . . . . . . . . . . . . . . . . . . (1,578) (994)
Investment in equity securities . . . . . . . . . . . . . . . . . . . . . . . (6) (400)
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . 160 229
-------- --------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . (19,438) (20,986)
Financing activities:
Additions to debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14,132
Reduction of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,193) (1,776)
Proceeds from sale of common stock, net of registration costs . . . . . . . . - 45,300
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . 1,051 1,624
Distributions to S Corporation stockholders . . . . . . . . . . . . . . . . . - (1,021)
Issuance costs related to stock-based financing activities . . . . . . . . . (90) -
-------- --------
Net cash provided by (used in) financing activities. . . . . . . . . . . . (232) 58,259
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . (7,950) 51,190
Cash and cash equivalents at beginning of period, as restated . . . . . . . . . . 73,840 20,511
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . $ 65,890 $ 71,701
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 18
<PAGE> 6
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of
Landmark Graphics Corporation and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the audited financial statements
and accompanying notes included in the Company's 1994 Annual Report on Form
10-K.
The Consolidated Statements of Operations for the three month and six
month periods ended December 31, 1993 and the Consolidated Balance Sheet as of
June 30, 1994 have been restated to include the accounts of Stratamodel Inc.
("Stratamodel"). On September 28, 1994, the Company acquired all of the equity
interests of Stratamodel in a transaction accounted for as a pooling of
interests.
The unaudited consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments and adjustments to
reflect the pooling of interests) which the Company considers necessary for a
fair presentation of the interim periods. Results for the interim periods are
not necessarily indicative of results for the year. All significant
intercompany balances and transactions have been eliminated.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
current year presentation.
ACQUISITIONS
Stratamodel
Stratamodel is engaged in the development of reservoir characterization
and modeling software products designed to aid geoscientists in oil and gas
exploration and production. In connection with the acquisition, the Company
issued a total of 413,911 shares of its common stock, in exchange for all of
the equity interests of Stratamodel, which included common stock, stock options
and warrants. In addition, the Company retired all of Stratamodel's
outstanding debt of approximately $510,000 and paid certain acquisition-related
expenses of Stratamodel of approximately $293,000.
Stratamodel previously reported its financial results on a December
31 fiscal year-end basis. In connection with the acquisition, Stratamodel
changed its fiscal year-end from December 31 to June 30. As a result, the
financial statements presented combine both entities' financial results for the
same periods. In addition to the adjustments made to effect the change in
fiscal years, certain adjustments were made in order to conform Stratamodel's
method of accounting for software development costs and income taxes to the
Company's method.
Page 6 of 18
<PAGE> 7
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company capitalizes software development costs when an operative
version of the product is ready for initial testing, whereas Stratamodel
capitalized costs at points prior to initial testing. Additionally, the
Company accounted for income taxes under Accounting Principles Board Opinion
No. 11 until it was required to adopt Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Stratamodel had
applied Statement of Financial Accounting Standards No. 96, "Accounting for
Income Taxes" until adopting SFAS 109. In connection with the acquisition,
Stratamodel conformed it's accounting policies to those of the Company. The
effect of these conforming adjustments decreased Stratamodel's net income for
the three months and six months ended December 31, 1993 by approximately
$190,000 and $33,000, respectively.
The Stratamodel acquisition was consummated on September 28, 1994.
The following summarizes the revenues and net income (loss) of the separate
companies included in the results of operations for the three months ended
September 30 (in thousands) (unaudited):
<TABLE>
<CAPTION>
1994 1993
-------- ---------
(Restated)
<S> <C> <C>
Revenues
Company . . . . . . . . . . $ 28,404 $ 27,021
Stratamodel . . . . . . . . 1,790 2,059
-------- ---------
Combined . . . . . . . $ 30,194 $ 29,080
======== =========
Net income (loss)
Company . . . . . . . . . . $ (639) $ 1,755
Stratamodel . . . . . . . . (441) 463
-------- ---------
Combined . . . . . . . $ (1,080) $ 2,218
======== =========
</TABLE>
MGA
On September 29, 1994, the Company purchased all the issued and
outstanding capital stock of MGI Associates, Inc., ("MGA"). The acquisition
was recorded using the purchase method of accounting and, accordingly, the
acquired operations of MGA have been included in the results of operations
since the date of acquisition.
MGA, based in Dallas, Texas, develops personal computer-based
economics and reservoir engineering software products designed to aid
geoscientists in oil and gas exploration. The Company acquired MGA for
consideration of approximately $13.3 million which consisted of cash of $10.5
million paid to acquire the stock, cash of $1.3 million paid to retire certain
related party debt and the accrual of approximately $1.6 million of
acquisition-related costs. The acquisition was accounted for using the
purchase method of accounting and, accordingly, the purchase price has been
allocated to the net assets acquired based on estimated fair market values at
the date of acquisition.
Page 7 of 18
<PAGE> 8
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVENTORY
Inventory is recorded at the lower of cost or market on a first-in,
first-out basis. Inventory consists of the following (in thousands)
(unaudited):
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
------------ ---------
(Restated)
<S> <C> <C>
Component parts . . . . . . . . . . . . . $ 3,965 $ 1,958
Field service parts . . . . . . . . . . . 252 775
Lease units . . . . . . . . . . . . . . . 467 509
Finished goods . . . . . . . . . . . . . 145 180
Work in progress . . . . . . . . . . . . 4 22
--------- ---------
$ 4,833 $ 3,444
========= =========
</TABLE>
SOFTWARE DEVELOPMENT COSTS
In addition to the $1.6 million software development costs capitalized
in the six months ended December 31, 1994, the Company recorded approximately
$573,000 of software development costs in connection with the MGA acquisition.
The amounts recorded in connection with the MGA acquisition reflect the fair
market value of the software acquired.
GOODWILL
Goodwill represents the cost in excess of the fair market value of the
net assets of companies acquired and is being amortized on a straight-line
basis over eight years. During the current quarter, the Company finalized the
purchase price allocation for the acquisition of MGA and adjusted the goodwill
recorded to $11.6 million.
INCOME TAXES
The Company recorded the following additional net deferred tax assets
in connection with the acquisition of MGA (in thousands) (unaudited):
<TABLE>
<S> <C>
Deferred tax assets:
Deferred revenue . . . . . . . . . . . . . . . . . . $ 223
Foreign net operating loss . . . . . . . . . . . . . 148
Other. . . . . . . . . . . . . . . . . . . . . . . . 359
-------
Total deferred tax assets . . . . . . . . . . . 730
Valuation allowance for deferred tax assets . . . . . . . (265)
-------
Net deferred tax assets . . . . . . . . . . . . . . . . . $ 465
=======
</TABLE>
Page 8 of 18
<PAGE> 9
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The valuation allowance is offset against the total deferred tax
assets to reflect the net deferred tax assets. The net deferred tax assets
reflect the portion which the Company believes there is a greater than 50
percent probability of realization.
MERGER COSTS
Merger costs included in the Consolidated Statements of Operations
consist primarily of accounting, legal and investment banking costs related to
the completion of the Stratamodel acquisition.
RESTRUCTURING CHARGES AND NON-RECURRING COSTS
In connection with the Stratamodel acquisition, the Company adopted a
restructuring plan designed to eliminate redundancies and consolidate
operations. Under the plan, the Company recorded approximately $1.2 million in
restructuring charges consisting of severance costs for terminated employees
and lease costs associated with duplicate facilities. Additionally,
non-recurring costs of approximately $600,000 were incurred in connection with
the acquisition including relocation and other acquisition-related costs.
OTHER, NET
Other, net consists of the following (in thousands) (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ---------------------
1994 1993 1994 1993
------- ------- ------- -------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Foreign currency gains (losses) . . . . $ (36) $ (1) $ (145) $ 29
Interest income . . . . . . . . . . . . 991 626 2,059 1,019
Interest expense . . . . . . . . . . . . (262) (216) (534) (467)
Other . . . . . . . . . . . . . . . . . 57 54 239 275
------- -------- -------- --------
$ 750 $ 463 $ 1,619 $ 856
======= ======== ======== ========
</TABLE>
INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Income per common and common equivalent share is computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period. Common stock equivalents include the number of
shares issuable upon exercise of stock options, less the number of shares that
could have been repurchased with the exercise proceeds using the treasury stock
method.
Page 9 of 18
<PAGE> 10
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For purposes of the income per share computation, the shares issued in
exchange for the equity interests of Stratamodel have been treated as if they
had been issued and outstanding for all periods presented.
The number of shares used in the computation was determined as follows
(in thousands) (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- --------------------
1994 1993 1994 1993
------ ------ ------ ------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding . . . . . . . . . . . . 16,330 15,199 16,312 14,250
Common stock equivalents . . . . . . . . . . . 315 550 458 530
------ ------ ------ ------
Shares used in computing income per share . . . 16,645 15,749 16,770 14,780
====== ====== ====== ======
</TABLE>
PRO FORMA PROVISION FOR INCOME TAXES
Prior to the merger, Advance Geophysical Corporation ("Advance"), a
wholly-owned subsidiary acquired on March 25, 1994, had elected S Corporation
status for federal income tax purposes; therefore, the tax liability associated
with its income was the responsibility of the shareholders. To reflect the
earnings of Advance on an after-tax basis, an unaudited pro forma provision for
income taxes has been included in the accompanying Consolidated Statements of
Operations for the three months and six months ended December 31, 1993. This
provision was computed as if Advance were a C Corporation and responsible for
its federal and state income taxes.
CASH FLOW INFORMATION
Net cash provided by operating activities reflects cash payments for
interest and income taxes as follows (in thousands) (unaudited):
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------
1994 1993
-------- --------
(Restated)
<S> <C> <C>
Income taxes . . . . . . . . . . . . . . . . . . . . . . $ 1,324 $ 515
Interest . . . . . . . . . . . . . . . . . . . . . . . . 490 437
</TABLE>
Page 10 of 18
<PAGE> 11
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following schedule summarizes investing activities, as adjusted,
related to the current year acquisition of MGA (in thousands) (unaudited):
<TABLE>
<S> <C>
Adjusted total assets, after purchase
price allocation, net of cash acquired . . . $ 15,306
Less: Total liabilities assumed . . . . . . . 2,503
---------
Cash paid, net of cash acquired . . . . . . . . $ 12,803
=========
</TABLE>
During the six month period ended December 31, 1993, there were
non-cash investing activities of approximately $1.5 million relating to stock
issued in connection with the purchase of the corporate headquarters.
During the six month periods ended December 31, 1994 and 1993, there
were non-cash financing activities of $267,000 and $375,000, respectively,
relating to tax benefits received from the exercise of non-qualified stock
options by employees.
CONTINGENCIES
Under the terms of the MGA acquisition agreement, the Company may be
obligated to make earn-out payments over a period of four years with a net
present value of up to $6.0 million. The amount of earn-out payments made,
which is dependent upon the operating income of MGA in each of the twelve month
periods ending June 30, 1995 through 1998, may range from zero to approximately
$8.7 million. Under the terms of the agreement, the Company has the option to
prepay the earn-out payments at any time at their net present value, computed
as defined in the agreement.
Additionally, in connection with the MGA transaction, the Company
acquired an option to purchase the equity interests of a related party in
exchange for a line of credit guarantee. The option is exercisable no later
than October 31, 1997 at an exercise price which is based upon the related
party's financial results. In no event will the net present value of the
option price be less than $8.0 million.
SUBSEQUENT EVENT
On February 2, 1995 the Company signed a letter of intent to purchase
certain assets of DRD Corporation, of Tulsa, Oklahoma in exchange for cash of
approximately $6.0 million. The transaction is subject to, among other
conditions, a due-diligence examination by the Company, the signing of a
definitive agreement and final approval of the Board of Directors. It is
anticipated that the transaction will be consummated in February 1995. Due to
the significant uncertainties inherent in the due-diligence process, no
assurance can be given as to whether this transaction will be consummated.
Page 11 of 18
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Management's Discussion and Analysis of Financial Condition and
Results of Operations is the Company's analysis of its financial performance
and of significant trends which may impact future performance. It should be
read in conjunction with the consolidated financial statements of the Company
and the related notes thereto. The financial statements for the fiscal 1994
periods presented have been restated to account for the acquisition of
Stratamodel, Inc. ("Stratamodel") on a pooling-of-interests basis.
A significant portion of the Company's revenue is derived from sales
into certain geographic or market sectors which, due to regulatory requirements
and other constraints, may have lengthy sales cycles. Accordingly, the timing
of revenue recognition on these transactions may have a noticeable effect on
the quarter-to-quarter and year-to-year financial performance.
RESULTS OF OPERATIONS
Total revenues. Total revenues for the second quarter of fiscal 1995
increased approximately 15% compared to the same quarter in the prior year.
Sales for the first half of fiscal 1995 were up approximately $6.7 million, or
10% over the comparable period in fiscal 1994. The increase in total revenues
was due to the growth experienced in software maintenance revenues and the
impact of the MGA acquisition. Decreased domestic spending by customers
combined with continued expansion into developing markets in Europe and Latin
America has resulted in international revenues increasing from 54% of total
revenues for the first six months of fiscal 1994 to 59% for the same period in
fiscal 1995.
Software product sales. Software product sales consist of licensing
fees for the Company's proprietary and third party software. Software product
sales increased approximately $2.8 million and $1.5 million during the second
quarter and first six months of fiscal 1995, respectively, an increase of 16%
and 5% over the comparable periods in fiscal 1994. The increase was primarily
attributable to the inclusion of several large international orders and
revenues related to MGA's applications. These increases were somewhat offset
by reduced spending by customers in the domestic market. Software product
sales as a percentage of total revenues, or software mix, continues to remain a
significant percentage of the Company's revenues. Management expects this
trend to continue; however, future revenue growth is, in part, dependent on the
Company's ability to bring innovative software products to the market ahead of
its competitors. The Company intends to release several new software products
during the remainder of fiscal 1995; however, there can be no assurance that
these new products will result in significant revenue growth.
Hardware product sales. Hardware product sales relate to the resale
of third party computer hardware. Hardware product sales decreased
approximately $1.0 million and $300,000 during the second quarter and first six
months of fiscal 1995, respectively, a decrease of 10% and 2% over the
comparable periods in fiscal 1994. The decreases are primarily a result of
reduced spending by major oil companies in the domestic market.
Page 12 of 18
<PAGE> 13
Maintenance and other. Maintenance and other revenues relate to
maintenance and support of the Company's hardware and software products as well
as revenues from other services, including consulting, offered to customers.
Maintenance and other revenues increased approximately $3.8 million and $5.5
million during the second quarter and first six months of fiscal 1995,
respectively, an increase of 40% and 30% over the comparable periods in fiscal
1994. The increase is a result of increased software maintenance revenues,
which continue to increase as the installed base of applications under service
contracts grow. This increase was partially offset by decreased processing
services revenues, which result from the Company's decision to discontinue
offering processing services in fiscal 1994.
Cost of software product sales. Cost of software product sales, as a
percentage of software product sales, increased from 8% for the second quarter
and 9% for the first six months of fiscal 1994 to 11% and 12%, respectively, in
fiscal 1995. This increase as a percentage of sales was primarily attributable
to the increase in royalty costs resulting from a significant increase in sales
of third party software applications over the prior fiscal year. As customers
demand a broader range of applications, including those offered by third party
vendors, royalty costs and the resulting impact on software product margins may
continue.
Cost of hardware product sales. Cost of hardware product sales, as a
percentage of hardware product sales, decreased from 84% in the second quarter
of fiscal 1994 to 82% in the current quarter; however, for the six month period
the cost of hardware product sales remained relatively constant from year to
year at 83%. The quarter to quarter decrease is a result of closing several
large orders with international customers which yielded higher than average
hardware margins. Although the current quarter's hardware margin was
positively impacted by these orders, management believes price competition in
the computer hardware industry has negatively impacted the hardware product
margins and anticipates lower hardware margins may be realized in the future.
Although hardware has become less profitable as a result of price competition,
the Company will continue to offer hardware to accommodate sales of software
and services to customers who desire comprehensive CAEX solutions.
Cost of maintenance and other. Cost of maintenance and other has
decreased as a percentage of the related revenues from 62% in both the second
quarter and the first six months of fiscal 1994 to 58% and 59% in the current
quarter and the first six months of fiscal 1995, respectively. This decrease
is attributable to the Company's decision to discontinue offering processing
services in fiscal 1994 which resulted in a reduction of the related costs.
Research and development. Whereas gross research and development
costs increased approximately 11% from the second quarter in the previous
fiscal year, gross costs for the six month period remained fairly constant.
The majority of the increase over the second quarter in the prior year relates
to the addition of the MGA development function. The Company believes that
continued investments in research and development are important to its future
growth and competitive position in the marketplace.
Selling, marketing and administrative. Selling, marketing and
administrative expenses increased approximately $2.5 million over the second
quarter of fiscal 1994; however, as a percentage of revenue, the costs
increased approximately 1%. For the six month period selling, marketing and
administrative costs increased approximately $4.3 million over the comparable
period in the prior fiscal year. The increases in absolute costs relates to
Page 13 of 18
<PAGE> 14
incremental costs associated with the MGA operations and selling costs
associated with expanding the international scope of the sales and distribution
function.
Merger costs. Merger costs, which approximate 2% of total revenues
for the first six months of fiscal 1995, consist of accounting, legal and
investment banking costs related to the acquisition of Stratamodel.
Restructuring and other non-recurring charges. Restructuring and
other non-recurring charges, which approximate 2% of revenues for the first six
months of fiscal 1995, relate to the Company's restructuring plan which was
designed to eliminate redundancies and consolidate the Stratamodel operations.
Under the plan, the Company accrued approximately $1.2 million of restructuring
charges consisting of approximately $500,000 of severance costs for terminated
employees and approximately $700,000 of lease costs associated with duplicate
facilities. Management expects this restructuring plan to result in reduced
spending for the Company. Additionally, non-recurring costs of approximately
$600,000 were accrued in connection with the Stratamodel acquisition. These
non-recurring costs include approximately $400,000 in relocation costs and
approximately $200,000 in other acquisition-related charges.
Other, net. Other, net increased approximately $287,000 and $763,000
for the second quarter and the first six months of fiscal 1995, respectively,
from the same periods in fiscal 1994. The fluctuations are primarily
attributable to higher net interest income. For the six month period, the
increase was partially offset by increased foreign currency losses over the
first six months of fiscal 1994 due to unfavorable fluctuations in currency
exchange rates.
Taxes. During the second quarter of fiscal 1995, the effective tax
rate was lower than the statutory rate and higher than the prior year's rate.
The provision increased primarily due to the application of
pooling-of-interests accounting to the acquisition of a Subchapter S
Corporation in fiscal 1994. This required the results of operations for the
acquired company for periods prior to the merger to be included in income
before income taxes, however the related income tax liability was excluded, as
it was the responsibility of the S Corporation's stockholders. In the current
quarter the effective rate was less than the statutory rate due mainly to the
recognition of deferred tax benefits.
FINANCIAL CONDITION AND LIQUIDITY
Cash and cash equivalents decreased approximately $8.0 million from
June 30, 1994. A substantial amount of this decrease relates to amounts used
in connection with fiscal 1995 acquisitions. After excluding the effect of
cash utilized for acquisitions during the six month period, cash generated
internally exceeded the cash required to support the Company's operations by
approximately $6.7 million.
Trade accounts receivable increased by $156,000 due primarily to the
higher revenues recognized in the second quarter of fiscal 1995 as compared to
the fourth quarter of the previous fiscal year. Management continued its focus
on collection efforts, resulting in a reduction of days sales outstanding
during the quarter from 98 days to 87 days. Management intends to continue its
focus on maintaining days sales outstanding within these parameters.
Page 14 of 18
<PAGE> 15
Goodwill increased approximately $11.2 million from the balance at
June 30, 1994. This amount relates to the MGA acquisition and represents the
cost in excess of fair value of the net assets acquired. The goodwill recorded
is being amortized on a straight-line basis over a period of eight years.
The Company's primary internal source of liquidity is cash flow
generated from operations. External sources of liquidity include debt and
equity financing. The Company believes funds generated from operations will be
sufficient to meet liquidity requirements in the foreseeable future. Although
the Company normally covers capital expenditures with funds generated
internally, long-term financing vehicles may be used in connection with
unusually large capital expenditure programs.
Subsequent to December 31, 1994, the Company signed a letter of intent
related to the acquisition of DRD Corporation which is expected to be accounted
for as a purchase. Under the current terms of the transaction, management
expects to use approximately $6 million of the Company's cash and cash
equivalents to effect the transaction. Aside from the planned acquisition,
management regularly evaluates opportunities to acquire or license products,
technologies or businesses complementary to the Company's business. These
acquisition opportunities, if they arise, may involve the use of cash or,
depending upon the size and terms of the acquisition, may require debt or
equity financing.
Page 15 of 18
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Marlene Malek and Abraham Slomovics v. Landmark Graphics Corporation
and C. Eugene Ennis; The Registrant and C. Eugene Ennis, the Registrant's
former chief executive officer, have been named as defendants in a class action
lawsuit filed in the United States District Court for the Southern District of
Texas, Houston Division. The action is on behalf of those individuals who
purchased the Company's Common Stock between September 30, 1991 and March 10,
1992 and alleges that the Company and Mr. Ennis violated the federal securities
laws and state law in connection with reporting the Company's financial
information. The Company and Mr. Ennis moved for summary judgment on all of
the plaintiffs' claims following the close of discovery. On July 12, 1994, the
trial court granted summary judgment on all of the state law claims and on some
of the federal claims. This matter was last discussed in the Company's filing
on Form 10-Q for the quarterly period ended September 30, 1994. The case has
been scheduled on the trial docket for March, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted to stockholders for approval a proposal to
re-elect the existing Board of Directors. At the annual meeting of
stockholders held on November 3, 1994, Charles L. Blackburn, S. Rutt Bridges,
James A. Downing, II, Lucio L. Lanza, Theodore Levitt, Robert P. Peebler and
Sam K. Smith were re-elected as directors of the Company. Such re-election was
approved with 13,959,297, 13,966,686, 13,961,686, 13,964,686, 13,982,386,
13,957,713, 13,964,286 for Charles L. Blackburn, S. Rutt Bridges, James A.
Downing, II, Lucio L. Lanza, Theodore Levitt, Robert P. Peebler and Sam K.
Smith, respectively. Votes withheld totaled 415,923, 408,534, 413,534,
410,534, 392,834, 417,507, 410,934 for Charles L. Blackburn, S. Rutt Bridges,
James A. Downing, II, Lucio L. Lanza, Theodore Levitt, Robert P. Peebler and
Sam K. Smith, respectively.
At the annual meeting of stockholders, a proposal was submitted to
approve the adoption of the 1994 Flexible Incentive Plan. The 1994 Flexible
Incentive Plan was approved by the stockholders with 8,710,125 share voting for
adoption, 4,055,074 shares voting against adoption and 33,236 shares withheld.
Broker non-votes totaled 1,576,785.
Page 16 of 18
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
(10) Material Contracts
10.1 The Letter Loan Agreement dated October 31, 1994 by and
between the Registrant and NationsBank of Texas, N.A. and the
related Second Modification and Renewal Agreement of a $25
million revolving note and a $10 million term note.
10.2 The 1994 Flexible Incentive Plan.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed a Form 8-K on October 13, 1994 and filed an
amendment on November 17, 1994 reporting the acquisitions of
Stratamodel and MGA under "Item 2. Acquisition or Disposition of
Assets" and "Item 7. Financial Statements and Exhibits". The
following financial statements were included under Item 7:
(a) Financial Statements of businesses acquired. Pursuant to Rule
3-05(b) of Regulation S-X, no financial statements were
required.
(b) Restated and Pro Forma financial information.
Restated and Pro Forma Condensed Combined Balance Sheet as of
June 30, 1994.
Restated and Pro Forma Condensed Combined Statement of
Operations for the year ended June 30, 1994.
Restated Condensed Statement of Operations for the year ended
June 30, 1993.
Restated Condensed Statement of Operations for the year ended
June 30, 1992.
Notes to Financial Statements.
Page 17 of 18
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANDMARK GRAPHICS CORPORATION
Registrant
Date: February 13, 1995 By: /s/ Robert P. Peebler
Robert P. Peebler
President and
Chief Executive Officer
Date: February 13, 1995 By: /s/ William H. Seippel
William H. Seippel
Vice President, Finance and
Chief Financial Officer
(Principal Accounting Officer)
Page 18 of 18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- - -------
<S> <C>
10.1 The Letter Loan Agreement dated October 31, 1994 by and between
the Registrant and NationsBank of Texas, N.A. and the related
Second Modification and Renewal Agreement of a $25 million
revolving note and a $10 million term note.
10.2 The 1994 Flexible Incentive Plan.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
LETTER LOAN AGREEMENT
October 31, 1994
Landmark Graphics Corporation
15150 Memorial Drive
Houston, Texas 77079
Gentlemen:
This Letter Loan Agreement ("Agreement") confirms the mutual
agreements among (i) Landmark Graphics Corporation ("Borrower"), a Delaware
corporation, (ii) LMK Land Company, a Delaware corporation, Landmark America
Latina, S.A., a Delaware corporation, LANDMARK Graphics International, Inc., a
Texas corporation, Landmark Graphics Europe/Africa, Inc., a Delaware
corporation, Landmark/ITA Ltd., an Alberta corporation, Landmark/CAEX, Inc., a
Delaware corporation, Landmark Finance Corporation, a Delaware corporation,
CAEX Services, Inc., a Delaware corporation, and MGI Associates, Inc., a Texas
corporation (such corporations referred to in this subpart (ii) herein being
collectively called "Guarantors"), and (iii) NationsBank of Texas, N.A.
("Lender") in connection with the loans (collectively called the "Loan") from
Lender to Borrower more fully described herein. As used herein, the following
terms shall have the meanings indicated:
(1) "Acquisition" means a direct or indirect purchase for
cash, stock or other securities, whether in one or more related
transactions, of all or substantially all of the assets or voting
securities of a Person, a business unit of a Person, or any related
group of the foregoing.
(2) "Advance" shall mean any advance made or to be made
to the Borrower under the Revolving Note.
(3) "Available Amount" shall mean, at any given time, the
amount by which the then Maximum Amount exceedsthe then Deemed
Outstanding Principal Amount.
(4) "Base Rate" shall mean the variable rate of interest
announced by Lender (or any successor to all or substantially all of
Lender's assets) from time to time as its base or prime rate of
interest and, without notice to Borrower or any other person, such
rate of interest shall change as and when changes in that base rate of
interest are announced. The Base Rate is setby Lender as a general
reference rate of interest, taking into account such factors as Lender
may deem appropriate, it being understood that although many of
Lender's commercial or other loans are priced in relation to such
<PAGE> 2
Landmark Graphics Corporation
October 31, 1994
Page 2
rate, it is not necessarily the lowest or best rate of interest
actually charged on any loan, and that Lender may make various
commercial or other loans at rates of interest having no relationship
to the Base Rate. If at any time the Base Rate of Lender is no longer
available, then the owner of the applicable Note may designate a
different base rate as announced by a money center financial
institution of such owner's choice.
(5) "Base Rate Portion" shall mean, at any given time,
the entire outstanding principal amount of the Revolving Credit
Facility at such time, save and except the aggregate amount of all
LIBOR Rate Portions of the Revolving Note and all Optional Currency
Portions at such time.
(6) "Borrowing Date" shall mean, in relation to any
Advance, the date on which that Advance is made to the Borrower.
(7) "Borrowing Group" shall mean Borrower and all
Guarantors.
(8) "Business Day" shall mean a day when the main office
of the Lender is open for business in Houston, Texas and on which
dealings are carried on in the LIE Market if Dollars only are involved
and, if an Optional Currency is involved, a day on which dealings in
Dollars and such Optional Currency and the exchange thereof can be
carried on in, at Lender's option, either (a) the London foreign
currency deposit market dealing with such Optional Currency or (b) the
principal financial center of the country in which such Optional
Currency is legal tender.
(9) "Consolidated Borrowing Group" shall mean Borrower
and all of Borrower's Subsidiaries.
(10) "Credit Facilities" shall have the meaning given such
term in Section 1(b) hereof.
(11) "Deemed Outstanding Principal Amount" shall mean, at
any given time, the sum of (x) the Dollar Portion at such time, (y)
one hundred fifteen percent (115%) of the Dollar Equivalent of the
aggregate amount of the Optional Currency Portions at such time, and
(z) the Letter of Credit Exposure at such time.
(12) "Default Rate" shall have the meaning given such term
in Section 11(m) hereof.
<PAGE> 3
Landmark Graphics Corporation
October 31, 1994
Page 3
(13) "Dollar Advance" shall mean any Advance other than an
Optional Currency Advance.
(14) "Dollar Equivalent" shall mean, on any particular
date and with respect to a particular amount in Optional Currency, the
amount in Dollars which could be purchased for such amount of Optional
Currency at or from, at Lender's option, either (a) prime banks in the
London foreign currency deposit market or (b) the principal financial
center of the country in which such Optional Currency is legal tender,
for delivery on such date at the spot rate of exchange prevailing on
such date (as presumptively ascertained by Lender, absent manifest
error, in accordance with its customary general practice).
(15) "Dollar Portion" shall mean, at any given time, the
unpaid principal balance of the Revolving Credit Facility at such
time, less the aggregate amount of all Optional Currency Portions at
such time.
(16) "Dollar Reference Rate" shall mean a variable rate of
interest per annum equal to (a) with respect to the Base Rate Portion,
the Base Rate, as it fluctuates, or (b) for each LIBOR Rate Portion of
the Revolving Note, the applicable LIBOR Rate plus the Margin
Percentage, as it fluctuates (it being understood that the LIBOR Rate
for any given Interest Period shall not change, although the Margin
Percentage during such period may change).
(17) "Dollars" shall mean U.S. dollars, which are legal
tender in the United States of America.
(18) "Event of Default" shall have the meaning given such
term in Section 8 hereof.
(19) "Funded Debt/Cash Flow Ratio" shall have the meaning
given such term in Section 7(b) hereof.
(20) "Interest Payment Date" shall mean, with respect to
any Optional Currency Advance, the last day of the Interest Period
related thereto.
(21) "Interest Period" shall mean, (a) with respect to
each LIBOR Rate Portion, the Interest Period specified in Section 2(b)
hereof, or, (b) with respect to each Optional Currency Advance, the
period commencing on the date of such Advance and expiring no less
than thirty (30) days and no more than ninety (90) days thereafter,
all as specified by the Borrower as contemplated in Section 1(a)(3)
hereof. Notwithstanding anything to the
<PAGE> 4
Landmark Graphics Corporation
October 31, 1994
Page 4
contrary contained in this Agreement, no Interest Period relating to a
LIBOR Rate Portion for the Revolving Note shall extend past the
Termination Date of the Revolving Note, no Interest Period relating to
a LIBOR Rate Portion for the Term Note shall extend past the
Termination Date of the Term Note and no Interest Period relating to
an Optional Currency Advance shall extend past the Revolving Loan
Conversion Date. If any Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the
next preceding or the next succeeding day which is a Business Day as
determined conclusively by the Lender.
(22) "Letter of Credit" shall have the meaning given such
term in Section 1(a)(5) hereof.
(23) "Letter of Credit Exposure" shall mean, at any given
time, the aggregate amount of liability (whether contingent or
otherwise) of Lender under all outstanding Letters of Credit.
(24) "LIBOR Deposits" shall have the meaning set forth in
the definition of LIBOR Rate.
(25) "LIBOR Rate" shall mean the then available interest
rate per annum (rounded upward, if necessary, to the nearest 1/16th of
1%) in which deposits ("LIBOR Deposits") in Dollars in an amount
comparable to the applicable LIBOR Rate Portion for the applicable
Interest Period are available to Lender from prime banks in the LIE
Market at 11:00 a.m. London time (or as soon thereafter as is
reasonably practicable) on the second Business Day immediately
preceding the first day of such Interest Period, adjusted for the
reserve requirements (including, without limitation, basic,
supplemental, marginal and emergency reserves) as required by the
Board of Governors of the Federal Reserve System (or any successor
governmental body) for deposits in the amount of such LIBOR Rate
Portion for periods similar in duration to the applicable Interest
Period. The LIBOR Rate shall be determined by Lender in accordance
with its customary general practice. Lender's determination of the
LIBOR Rate shall be presumptive evidence of the accuracy thereof,
absent manifest error.
(26) "LIBOR Rate Option" shall have the meaning given such
term in Section 2(b) hereof.
(27) "LIBOR Rate Portion" shall mean each portion of the
unpaid principal balance of the Revolving Note and
<PAGE> 5
Landmark Graphics Corporation
October 31, 1994
Page 5
the Term Note which is to accrue interest based on the LIBOR Rate.
(28) "LIE Market" shall mean the London Interbank
Eurodollar Market.
(29) "Loan Documents" shall have the meaning given such
term in Section 9 hereof.
(30) "Margin Percentage" shall mean (i) 1.00%, for the
period of time from the date hereof through October 31, 1994, and (ii)
for each twelve (12) month period thereafter, commencing on November
1, 1994, the Margin Percentage shall be based on the Funded Debt/Cash
Flow Ratio as of June 30 immediately prior to the then applicable
twelve (12) month period, as follows:
<TABLE>
<CAPTION>
Funded Debt/Cash Flow Ratio
as of June 30 of Immediately
Preceding 12 Month Period Margin Percentage
---------------------------- -----------------
<S> <C>
Less than or equal to 1.0 1.00%
Greater than 1.0 and Less than 2.0 1.25%
Greater than or equal to 2.0 1.50%
</TABLE>
By way of illustration only, if the Funded Debt/Cash Flow Ratio as of
June 30, 1995 is 1.75, then the Margin Percentage for the twelve (12)
month period commencing on November 1, 1995 and ending on October 31,
1996 will be 1.25%.
(31) "Material Adverse Effect" shall mean the ability of
the Consolidated Borrowing Group to conduct their business as now
being conducted being materially adversely affected or the ability of
the Consolidated Borrowing Group to perform their obligations under
this Agreement and the other Loan Documents being materially adversely
affected.
(32) "Maximum Amount" shall mean $25,000,000.00.
(33) "Maximum Rate" shall mean the maximum non-usurious
interest rate permitted by applicable law from time to time in effect
as such law may be interpreted, amended, revised, supplemented or
enacted.
(34) "Notes" shall have the meaning given such term in
Section 1(b) hereof.
<PAGE> 6
Landmark Graphics Corporation
October 31, 1994
Page 6
(35) "Obligations" shall mean all of the duties,
liabilities and obligations of the Borrowing Group under the Notes,
this Agreement and the other Loan Documents, including without
limitation, all indebtedness evidenced by the Notes.
(36) "Optional Currency" shall mean Deutsche marks, French
francs, Dutch guilders, Japanese Yen, British Pound and Australian
dollars to the extent that they are freely convertible into Dollars by
the Lender and are traded in the London foreign currency deposits
market.
(37) "Optional Currency Advance" shall mean any Advance
denominated in Optional Currency in accordance with Section 1(a)(3)
hereof upon which interest will accrue based on the Optional Currency
Rate.
(38) "Optional Currency Deposits" shall have the meaning
set forth in the definition of Optional Currency Rate.
(39) "Optional Currency Portion" shall mean each portion
of the unpaid principal balance of the Revolving Credit Facility which
is to bear interest based on the Optional Currency Rate.
(40) "Optional Currency Rate" shall mean the then
available interest rate per annum (rounded upward, if necessary, to
the nearest 1/16th of one percent (1%)) in which deposits ("Optional
Currency Deposits") in the applicable Optional Currency in an amount
comparable to the applicable Optional Currency Advance for the
applicable Interest Period are available to Lender, at Lender's
option, either (a) from prime banks in the London foreign currency
deposit market or (b) at the principal financial center of the country
in which such Optional Currency is legal tender at or about 11:00 a.m.
London time (or as soon thereafter as is reasonably practicable) on
the second Business Day immediately preceding the first day of such
Interest Period, adjusted for the reserve requirements (including,
without limitation, basic, supplemental, marginal and emergency
reserves) as required by the Board of Governors of the Federal Reserve
System (or any successor governmental body) for deposits in the amount
of such Optional Currency Advance for periods similar in duration to
the applicable Interest Period. The Optional Currency Rate shall be
determined by Lender in accordance with its customary general
practice. Lender's determination of the Optional Currency Rate shall
be presumptive evidence of the accuracy thereof, absent manifest
error.
<PAGE> 7
Landmark Graphics Corporation
October 31, 1994
Page 7
(41) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, court, government or governmental or
political subdivision or agency thereof.
(42) "Potential Event of Default" shall mean any fact,
circumstance or event which, with due notice, lapse of time, or both,
would become or give rise to an Event of Default.
(43) "Revolving Credit Facility" shall have the meaning
given such term in Section 1(a) hereof.
(44) "Revolving Loan Conversion Date" shall have the
meaning given such term in the Revolving Note.
(45) "Revolving Note" shall have the meaning given such
term in Section 1(a) hereof.
(46) "Stated Rate" shall mean (a) the applicable Optional
Currency Rate, plus the Margin Percentage, as it fluctuates (it being
understood that the Optional Currency Rate during any applicable
Interest Period shall not change, although the Margin Percentage
during such period may change), with respect to each Optional Currency
Portion, (b) the Dollar Reference Rate with respect to the Dollar
Portion and (c) the Term Rate with respect to the Term Loan.
(47) "Subsidiaries" shall mean any corporation of which
more than fifty percent (50%) of the securities having ordinary voting
power for the election of directors is now, or shall hereafter be,
owned or controlled, directly or indirectly, by Borrower, by one or
more Subsidiaries, or both.
(48) "Term Loan Facility" shall have the meaning given
such term in Section 1(b) hereof.
(49) "Term Note" shall have the meaning given such term in
Section 1(b) hereof.
(50) "Term Rate" shall mean a variable rate of interest
per annum equal to (a) with respect to the portion of the Term Loan
which is not a LIBOR Rate Portion, the Base Rate as it fluctuates, or
(b) for each LIBOR Rate Portion of the Term Note, the applicable LIBOR
Rate plus the Term LIBOR Rate Margin Percentage, as it fluctuates (it
being understood that the LIBOR Rate for any given Interest Period
shall not change, although the
<PAGE> 8
Landmark Graphics Corporation
October 31, 1994
Page 8
Term LIBOR Rate Margin Percentage during such period may change).
(51) "Term LIBOR Rate Margin Percentage" shall mean (i)
1.50% per annum for the period of time from the date hereof through
October 31, 1994, and (ii) for each twelve (12) month period
thereafter, commencing on November 1, 1994, the Term LIBOR Rate Margin
Percentage shall be based on the Funded Debt/Cash Flow Ratio as of
June 30 immediately prior to the then applicable twelve (12) month
period, as follows:
<TABLE>
<CAPTION>
Funded Debt/Cash Flow Ratio Term LIBOR
as of June 30 of Immediately Rate Margin
Preceding 12 Month Period Percentage
---------------------------- ----------
<S> <C>
Less than or equal to 1.0 1.50%
Greater than 1.0 and Less than 2.0 1.75%
Greater than or equal to 2.0 2.00%
</TABLE>
By way of illustration only, if the Funded Debt/Cash Flow Ratio as of June 30,
1995 is 1.4, then the Term LIBOR Rate Margin Percentage for the twelve (12)
month period commencing on November 1, 1995 and ending on October 31, 1996 will
be 1.75% per annum.
(52) "Termination Date" shall mean the maturity date of
the Revolving Note or the Term Note, as applicable.
Section 1. Credit Facilities. Subject to the terms of this Agreement,
Lender agrees to lend and Borrower agrees to borrow certain amounts pursuant to
the following terms and conditions:
(a) Revolving Credit Facility ("Revolving Credit Facility"):
(1) Note: Borrower's obligation to repay the Revolving
Credit Facility is evidenced by that certain Promissory Note
("Revolving Note") dated November 30, 1993, payable to the order of
Lender, in the stated amount of $25,000,000.00, and executed by
Borrower.
(2) Maximum Availability: The Maximum Amount.
(3) Advance Procedures:
(A) Subject to the terms and conditions hereof,
Lender agrees to make Advances to Borrower from time to time
on or before the Revolving Loan Conversion Date, in Dollars,
or, if the Borrower requests and subject to Section 1(a)(3)(C)
hereof,
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in an Optional Currency, not to exceed (regardless of whether
such Advance is in Dollars or an Optional Currency) at anytime
the then Available Amount. The Borrower shall have the right
to borrow, repay and reborrow as set forth herein through the
Revolving Loan Conversion Date. In no event, however, shall
the aggregate outstanding Optional Currency Portions exceed
the Dollar Equivalent of $5,000,000.00 at any one time. If
any Advance is denominated in an Optional Currency, such
Advance shall be for the Dollar Equivalent of at least
$500,000.00 and shall be in a multiple of $100,000.00.
(B) Whenever Borrower desires that it is entitled
herein to receive an Advance, Borrower shall submit to Lender
a request therefor in the form attached hereto as Exhibit "A".
In the case of a Dollar Advance, such request shall be
received by Lender not later than 10:00 a.m., Houston, Texas
time, at least one (1) Business Day prior to the requested
Borrowing Date for such Advance. In the case of an Optional
Currency Advance, such request shall be delivered to Lender
not later than 10:00 a.m., Houston, Texas time, at least three
(3) Business Days prior to the date of the Borrowing Date for
such Advance. Each request for an Advance shall be in the
form attached hereto as Exhibit "A" and shall set forth, among
other matters, (i) the Borrowing Date (which must be a
Business Day) and the amount of such Advance, stated either in
Dollars or an Optional Currency, (ii) with respect to an
Optional Currency Advance, the Interest Period for such
Optional Currency Advance (which Interest Period shall not
extend past the Revolving Loan Conversion Date), and (iii) the
Borrower's bank account with the Lender, or in the case of an
Optional Currency Advance, the depository to which payment of
the proceeds thereof is to be made, which depository must be
authorized to receive such Optional Currency.
(C) If Lender determines in good faith (which
determination shall be conclusive) at any time prior to an
Advance of an Optional Currency that the designated Optional
Currency is not freely transferrable and convertible into
Dollars or that it will be illegal or impossible for Lender to
fund such portion of the principal amount of the Revolving
Note in such Optional Currency, then Lender shall so notify
Borrower, and such portion
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of the principal amount of the Revolving Note shall not be
advanced, notwithstanding any contrary election by the
Borrower or any other provision hereof or any other Loan
Document.
(4) Purpose: Working capital requirements of Borrower.
(5) Concerning Letters of Credit: No letter of credit
("Letter of Credit") issued under the Revolving Credit Facility may
have an expiration date later than thirty (30) days prior to the
Revolving Loan Conversion Date. All issuances of letters of credit
are subject to the execution by Borrower of Lender's standard
documentation therefor including, without limitation, provisions
regarding capital adequacy. The amount drawn or paid under any Letter
of Credit shall be deemed an Advance to Borrower under the Revolving
Credit Facility in such amount. At no time shall the Letter of Credit
Exposure exceed $5,000,000.00. All Letters of Credit shall bear a
fee, payable in advance to Lender, in the amount specified by Lender.
(b) Term Loan Facility ("Term Loan Facility" and, together with
the Revolving Credit Facility, the "Credit Facilities"):
(1) Note: Borrower's obligation to repay the Term Loan
Facility is evidenced by that certain Promissory Note ("Term Note")
dated July 1, 1993, payable to the order of Lender, in the stated
amount of $10,000,000.00, and executed by Borrower. As used herein,
the term "Notes" shall mean the Term Note and the Revolving Note.
(2) Purpose: Acquisition by Borrower of its corporate
headquarters.
Section 2.Interest Rate, Fees and Repayment Terms.
(a) Interest Rate. The Notes shall bear interest at the lesser of
the Stated Rate and the Maximum Rate.
(b) LIBOR Rate Option. Borrower shall have the option ("LIBOR
Rate Option") to cause interest to accrue on portions of the Term Note and the
Dollar Portion of the Revolving Note based on the LIBOR Rate instead of the
Base Rate, subject to and in accordance with the following terms and
provisions:
(1) Borrower may exercise the LIBOR Rate Option only by
giving Lender at least three (3) Business Days prior written notice
thereof in the form attached hereto
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as Exhibit "A". Borrower, in such notice, among other things, shall
specify or certify the following:
(i) The portion of such Dollar Portion
or Term Note which is affected by the exercise of the LIBOR
Rate Option (such portion herein being called a "LIBOR Rate
Portion"); provided, however, no LIBOR Rate Portion shall be
less than $250,000.00 and each LIBOR Rate Portion shall be a
multiple of $50,000.00.
(ii) The Interest Period for which the
applicable LIBOR Rate Portion shall bear interest based on the
LIBOR Rate; provided, however, such Interest Period shall be
30, 60, 90, 180 or 360 days and shall never extend past the
Termination Date for the Revolving Note.
(2) No Event of Default then exists.
(3) If, upon receipt by Lender of Borrower's notice to
exercise any LIBOR Rate Option, Lender determines in good faith that
the applicable LIBOR Deposits are not available to Lender, then the
exercise of such LIBOR Rate Option shall be ineffective, the LIBOR
Rate Portion covered by such exercise of such LIBOR Rate Option shall
remain a Base Rate Portion and shall continue to bear interest at the
Stated Rate based on the Base Rate.
(c) Additional LIBOR Rate and Optional Currency Rate Provisions.
(1) If any of the following events occur:
(A) Lender is subjected to any tax (including
without limitation, any United States interest equalization or
similar tax, however named), duty, penalty, fine or other
charge, cost or expense (including without limitation,
imposition or increase of any insurance premium or similar
charges by the Federal Deposit Insurance Corporation or other
governmental authority) with respect to the LIBOR Deposits or
Optional Currency Deposits or the basis of taxation of
payments of the principal of or interest on the LIBOR Deposits
or Optional Currency Deposits or of any amounts due under the
Notes, this Agreement or the other Loan Documents relating to
the LIBOR Deposits or Optional Currency Deposits changes
(except for changes in the rate of tax on the overall net
income of Lender imposed by the United States or
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any political subdivision thereof) as the result of (y) the
adoption after the date hereof of any legal requirement, or
any change therein after the date hereof, or any change after
the date hereof in the interpretation or administration
thereof by any governmental authority or (z) compliance by
Lender with any request or directive (whether or not having
the force of law) of any governmental authority made after the
date hereof;
(B) any governmental authority imposes, modifies
or deems applicable any reserve (including without limitation,
any imposed by the Board of Governors of the United States
Federal Reserve System), special deposits or similar
requirement against assets of, deposits with, or for the
account of, or credit extended by, Lender, or imposes on
Lender any other condition affecting or in any way relating to
the LIBOR Deposits (to the extent any such action is not taken
into account by Lender in determining any LIBOR Rate) or
Optional Currency Deposits (to the extent any such action is
not taken into account by Lender in determining any Optional
Currency Rate);
(C) any of the events set forth or described in
the definition of LIBOR Rate or Optional Currency Rate or in
this Agreement regarding making it unlawful or impossible for
Lender to obtain LIBOR Deposits or Optional Currency Deposits
or otherwise to accrue interest hereunder based on the LIBOR
Rate or Optional Currency Rate occurs;
(D) Lender accelerates the maturity of either of
the Notes pursuant to a right to do so;
(E) Borrower makes any prepayment under the
Notes; or
(F) Borrower fails to obtain an Advance under
this Agreement after it has requested an Advance pursuant to
Section 1 hereof (unless such failure is a result of Lender's
wrongful refusal to make any such Advance);
and the result of any of the foregoing is to increase the cost to
Lender of obtaining, establishing, maintaining or paying LIBOR
Deposits or Optional Currency Deposits or to reduce the amount of any
sum received, receivable or retainable by Lender under the Notes, this
Agreement or any other Loan Document by a material amount, then
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Borrower shall pay to Lender such additional amount or amounts as will
fully compensate Lender for such increased cost or reduction; provided
however, in the case of any voluntary prepayment by Borrower of any
LIBOR Rate Portion, the amount of such compensation shall be
determined as follows:
The product obtained by multiplying (i) the amount (if any) by
which the LIBOR Rate for such LIBOR Rate Portion exceeds the
LIBOR Rate for such LIBOR Rate Portion as of the date of such
prepayment for the remaining term of the Interest Period for
such LIBOR Rate Portion, times (ii) the amount of such LIBOR
Rate Portion, times (iii) a fraction, the numerator of which
is the total number of days remaining in the Interest Period
relating to such LIBOR Rate Portion as of the date of such
prepayment and the denominator of which is 360.
A certificate of Lender claiming compensation under this Section 2(c)(1),
setting forth the additional amount or amounts to be paid to it by Borrower and
accompanied by reasonable verification by Lender of such additional amount
shall be presumptive evidence of the accuracy thereof, absent manifest error.
Any compensation or other payments to be made hereunder by Borrower to Lender
shall be payable by Borrower within sixty (60) days after receipt of such
certificate, shall bear interest at the Default Rate from the date which is
sixty (60) days after such certificate is delivered to Borrower until paid and
shall be secured by the Loan Documents.
(2) If (x) any legal requirement (or any change in the
interpretation or administration thereof by any governmental
authority), (y) any compliance by Lender with any request or directive
of any governmental authority (whether or not having the force of law)
or (z) any other circumstance whatsoever shall (1) make it illegal or
impossible (in Lender's good faith judgment) for Lender to borrow the
LIBOR Deposits or Optional Currency Deposits or to accrue interest
hereunder based on the LIBOR Rate or the Optional Currency Rate or (2)
require Lender to repay the LIBOR Deposits or the Optional Currency
Deposits prior to the originally scheduled repayment date, then (A)
the LIBOR Rate Portions affected, upon demand by Lender, shall bear
interest from and after such demand is made as if no LIBOR Rate was in
effect and the Stated Rate was based on the Base Rate for such LIBOR
Rate Portions, Borrower shall pay all reasonable costs of Lender
incurred as a result of such change in the manner of accruing interest
hereunder and under the Notes and the LIBOR Rate Option
<PAGE> 14
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shall terminate and be of no further force and effect and (B) the
Optional Currency Portions affected (together with all accrued
interest thereon) shall be due and payable in full upon demand by
Lender, Borrower shall pay all reasonable costs of Lender incurred as
a result of Borrower's payment of such Optional Currency Portion prior
to its originally scheduled maturity and, at Lender's election,
Borrower's right to request additional Optional Currency Advances
under this Agreement and the other Loan Documents shall terminate and
be of no further force and effect. A certificate of Lender claiming
compensation under this Section 2(c)(2), setting forth the amount of
the reasonable costs of Lender incurred as the result of any such
change in the manner of accruing interest hereunder or as a result of
any such payment prior to maturity and accompanied by reasonable
verification by Lender of the amount of such reasonable cost shall be
presumptive evidence of the accuracy thereof. Any compensation or
other payments to be made hereunder by Borrower to Lender shall be
payable by Borrower within sixty (60) days after receipt of such
certificate, shall bear interest at the Default Rate from the date
which is sixty (60) days after such certificate is delivered to
Borrower until paid and shall be secured by the Loan Documents.
(d) General Provisions. The following provisions shall apply to
both of the Notes, notwithstanding any provision to the contrary contained in
either of the Notes:
(1) It is the intention of the parties hereto to comply
with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provision to the contrary in this Agreement or any
other Loan Document, no such provision shall require the payment or
permit the collection of interest in excess of the maximum rate of
interest permitted by applicable law ("Maximum Rate"). If any excess
interest in such respect is provided for, or without taking into
account the provisions of this Section 2(d)(1) shall be adjudicated to
be so provided for, in this Agreement or in any other Loan Document,
then, in such event, (i) the provisions of this Section 2(d)(1) shall
govern and control, (ii) neither Borrower nor its heirs, legal
representatives, successors or assigns nor any other party liable for
the payment of such excess interest shall be obligated to pay the
amount of such interest to the extent that it is in excess of the
Maximum Rate, (iii) any such excess which may have been collected
shall be either applied as a credit against the then unpaid principal
amount of the Loan or refunded to Borrower and (iv) the provisions of
the Loan
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Documents shall be automatically reformed so that the effective rate
of interest shall be reduced to the Maximum Rate. Determination of
the rate of interest under this Agreement and the other Loan Documents
for the purpose of determining whether the Loan is usurious shall be
made by amortizing, prorating, allocating and spreading, during the
time amounts are outstanding under the Loan, all interest at any time
contracted for, charged or received in connection with the Loan.
(2) Each determination of the amount of interest owing on
the Loan shall be computed on the basis of actual days elapsed, but
computed on the basis of a year consisting of 360 days for purposes of
determining the Stated Rate. Interest shall accrue from and including
the day on which any borrowing is made to, but excluding, the day on
which any amount is repaid to Lender. Calculation of the Maximum Rate
shall be based on a year consisting of the number of days actually
contained in the year in question.
(3) Lender shall determine the interest rates applicable
to the Loan in accordance with the terms of this Agreement.
(4) The Maximum Rate to be charged or collected pursuant
to the Loan shall be the applicable indicated rate ceiling as defined
in TEX. REV. CIV. STAT. ANN. art. 5069-1.04, provided that Lender may
rely on other applicable laws, including without limitation, the laws
of the United States, for calculation of the Maximum Rate if the
application thereof results in a greater Maximum Rate. The provisions
of TEX. REV. CIV. STAT. ANN. art. 5069-15.01, et seq, as may be
amended, shall not apply to the Loan or any of the Loan Documents.
(e) Payment Provisions. The Notes shall be payable in accordance
with their terms. Additionally, the following provisions shall apply with
respect to payment of the Notes:
(1) The Base Rate Portion may be prepaid in whole or in
part, without penalty and without notice at any time. No prepayments
prior to the end of the applicable Interest Period shall be permitted
for any Optional Currency Portion or any LIBOR Rate Portion unless
Borrower pays the amount called for in Section 2(c)(1) of this
Agreement.
(2) Each payment payable by the Borrower under the Notes
(i) denominated in Dollars shall be made in Dollars to the Lender's
main office in Houston, Texas, U.S.A. in
<PAGE> 16
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October 31, 1994
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immediately available funds, on or prior to 11:00 a.m., Houston,
Texas, U.S.A. time, on the due day of such payment or, (ii)
denominated in any Optional Currency shall be made in the Optional
Currency denominated in the Advance at a depository designated by the
Lender in the country in which such Optional Currency is legal tender
on or prior to 11:00 a.m., local time in the location of such
depository, on the due date of such payment. If any sum would, but
for the provisions hereof, become due and payable hereunder on a day
which is not a Business Day, then such sum shall become due and
payable on the next succeeding Business Day.
(3) If at any time the Deemed Outstanding Principal
Amount is greater than the Maximum Amount, then Borrower shall make a
prepayment on the Revolving Note in an amount sufficient to reduce the
Deemed Outstanding Principal Amount to an amount not greater than the
Maximum Amount within thirty (30) days after Lender requests Borrower
to make such prepayment. Borrower shall pay prepayments first against
the Base Rate Portion, second against the Optional Currency Portions
and third against the LIBOR Rate Portions.
(f) Fees.
(1) Borrower has previously paid Lender a commitment fee
in the amount of $18,750.00 in connection with the increase of the
Revolving Credit Facility from $10,000,000.00 to $25,000,000.00.
(2) Borrower shall pay Lender a commitment fee in the
amount of one-fourth percent (1/4%) per annum of the average unused
portion of the Revolving Credit Facility, payable quarterly in
arrears.
(3) Borrower shall pay Lender an amendment fee each time
any of the Loan Documents is amended in the amount (if any) by which
$2,500.00 exceeds the amount of Lender's legal fees and expenses paid
by Borrower in connection with the negotiation and preparation of any
such amendment. By providing for payment of such fee, Lender is not
agreeing to amend any of the Loan Documents in any respect.
Section 3. Representation and Warranties. The Borrowing Group hereby
represents and warrants to Lender that, as of the date hereof and as of the
date of each advance under the Revolving Credit Facility:
(a) Organization, Authority, Etc.
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(i) Each member of the Consolidated
Borrowing Group is a corporation, duly organized, legally
existing and in good standing under the laws of the
jurisdiction pursuant to which it was incorporated, and is
duly qualified as a foreign corporation in all jurisdictions
except in those jurisdictions where failure to qualify will
not result in a Material Adverse Effect.
(ii) Each member of the Borrowing Group
is duly authorized and empowered to execute and deliver the
Loan Documents to which it is a party, and all corporate
action requisite for the due execution, issuance and delivery
of the Loan Documents has been duly and effectively taken.
(iii) This Agreement, the Notes and the
other Loan Documents to which any member of the Borrowing
Group is a party constitute the valid and binding obligations
of such member enforceable against it in accordance with their
terms (subject to any applicable bankruptcy, insolvency or
other laws generally affecting the enforcement of creditors'
rights).
(iv) This Agreement, the Notes and the
other Loan Documents do not violate any provision of the
corporate charter or bylaws of any member of the Borrowing
Group, or any contract, agreement, law or regulation to which
any such member is subject, and the same do not require the
consent or approval of any regulatory authority or
governmental body of the United States, any state of the
United States (or other political subdivision thereof),
Canada, or any province of Canada (or other political
subdivision thereof).
(v) All of the outstanding and issued
shares of capital stock of each member of the Consolidated
Borrowing Group are duly authorized, validly issued and
outstanding, fully paid and non- assessable, free and clear of
any liens, claims and other encumbrances. No member of the
Consolidated Borrowing Group has any outstanding securities
convertible into or exchangeable for any shares of the capital
stock, or any outstanding rights (either preemptive or
otherwise) to subscribe for or purchase, or any outstanding
options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any outstanding
calls, commitments or claims of any
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character relating to any capital stock or any stock or
securities convertible into or exchangeable for any capital
stock of any such member. No such member is subject to any
obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or
any convertible securities, rights or options of the type
described in this Section 3(a)(v). No such member is a party
to any agreement restricting the transfer of any shares of
such member's capital stock.
(vi) All of the capital stock of each
Subsidiary is currently owned, both legally and beneficially,
by Borrower or another Subsidiary of Borrower, free and clear
of any liens, claims and other encumbrances.
(b) Financial Statements. All financial statements of
Consolidated Borrowing Group delivered to Lender are complete and
correct and have been prepared in accordance with generally accepted
accounting principles, consistently applied. The financial statements
dated June 30, 1994, of Consolidated Borrowing Group (the "Prior
Financial Statements") delivered to Lender are complete and correct,
have been prepared in accordance with generally accepted accounting
principles consistently applied and no material adverse change in the
condition of Consolidated Borrowing Group, financial or otherwise, has
occurred since the date of the most recent financial statements of
Consolidated Borrowing Group in Lender's possession.
(c) Investments and Liabilities. None of the
Consolidated Borrowing Group has made any investments, guarantees or
advances or incurred any liabilities except (i) for investments in,
guarantees of, or advances to other entities in the ordinary course of
business and liabilities incurred in the ordinary course of business,
(ii) as disclosed in the most recent financial statements of
Consolidated Borrowing Group in Lender's possession, and (iii) all
proposed investments which are currently under consideration by
Borrower and which have been disclosed in writing to Lender.
(d) Title. Each of the Consolidated Borrowing Group has
good title to its assets and properties, free and clear of adverse
claims, except as disclosed in the most recent financial statements of
Consolidated Borrowing Group in Lender's possession.
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(e) Tax Returns. Each of Consolidated Borrowing Group
has filed all federal and state tax returns required to be filed as of
the date of this Agreement and has paid all taxes or assessments
related to said returns.
(f) No Default. Each member of the Consolidated
Borrowing Group is not, and after giving effect to any requested
Advance under the Revolving Credit Facility will not be, in default in
any respect under this Agreement, any other Loan Document, or any
other contract, agreement, or instrument to which such member is a
party or by which such member may be bound, and each such member is in
compliance with all applicable laws and regulations.
(g) ERISA; Margin Securities. No fact exists, including
but not limited to any reportable event or prohibited transaction (as
defined in the Employee Retirement Income Security Act of 1974, as
amended ["ERISA"]) which might constitute grounds for termination of
any plan of any member of the Consolidated Borrowing Group or
appointment of a trustee to administer such plan. No member of the
Consolidated Borrowing Group owns any "margin security" or "margin
stock" as defined in Regulations G, U, or X of the Board of Governors
of the Federal Reserve System except for margin securities and margin
stock which (i) have been acquired in accordance with the current
investment practice of members of the Consolidated Borrowing Group and
(ii) have not been acquired with any proceeds of the Loan.
(h) Patents, Etc. Each member of the Consolidated
Borrowing Group has all patents, licenses, trademarks, franchises and
the like necessary to conduct its business and is not aware of any
conflict with the rights of others.
(i) No Untrue Statements. Neither this Agreement nor any
other information furnished by any member of the Consolidated
Borrowing Group to Lender contains any material untrue statement of a
fact or omits a material fact necessary to make the statements not
materially misleading.
(j) Guarantors. Each Guarantor is a Subsidiary.
Section 4. Reporting Requirements. The Borrowing Group will deliver
the following reports to Lender:
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(a) Annual Financial Statements: Within one hundred
twenty (120) days after the last day of each fiscal year of Borrower,
the consolidated balance sheets of the Consolidated Borrowing Group as
of the end of such year and the consolidated statements of income,
cash flow, and shareholders' equity of the Consolidated Borrowing
Group for such year, together with, in the case of consolidated
statements, comparative figures for the preceding fiscal year, the
consolidated statements being certified as being true, correct and
complete, without qualification, by independent certified public
accountants acceptable to Lender and the consolidated statements being
certified as being true, correct and complete by the chief financial
officer of Borrower. Simultaneously with the delivery of such
financial statements, Borrower shall deliver to Lender a Compliance
Certificate in the form attached hereto as Exhibit "B".
(b) Quarterly Financial Statements: Within sixty (60)
days after the last day of each fiscal quarter of Borrower, the
consolidated balance sheet of the Consolidated Borrowing Group as of
the end of such quarter, and the consolidated statements of income,
cash flow and shareholders' equity for such quarter, all in reasonable
detail and certified as being true and correct by the chief financial
officer of Borrower. Simultaneously with the delivery of such
financial statements, Borrower shall deliver to Lender a Compliance
Certificate in the form attached hereto as Exhibit "B".
(c) Notice of Default: Within ten (10) days after the
occurrence of a default under this Agreement which may result in a
Material Adverse Effect, notice of such default together with the
Borrowing Group's plans to correct such default.
(d) Notice of Litigation: Promptly, but in any event
within fifteen (15) days after receipt of service of the petition,
notice of any litigation against any member of the Consolidated
Borrowing Group which may result in a Material Adverse Effect.
(e) Other Information: Such other information as Lender
may reasonably request from time to time.
Section 5. Affirmative Covenants.
(a) Compliance and Performance. Borrower will comply and shall
cause each member of the Consolidated Borrowing Group to comply with all
statutes and governmental regulations (except where non-compliance will not
have a Material Adverse Effect) and will
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pay and shall cause each member of the Consolidated Borrowing Group to pay all
taxes, assessments, governmental charges, claims for labor and the like except
where contested in good faith by the applicable member of the Consolidated
Borrowing Group and except where the failure to pay any such amount will not
have a Material Adverse Effect. Borrower will maintain and shall cause each
member of the Consolidated Borrowing Group to maintain its corporate existence
and will remain and shall cause each member of the Consolidated Borrowing Group
to remain in good standing in all jurisdictions except in those jurisdictions
where failure to qualify will not result in a Material Adverse Effect and will
maintain its properties in good and workable condition at all times except
where failure to so maintain its properties will not result in a Material
Adverse Effect. Borrower will perform and shall cause each member of the
Consolidated Borrowing Group to perform all obligations under this Agreement
and the other Loan Documents. Borrower will perform and shall cause each
member of the Consolidated Borrowing Group to perform all obligations under all
indentures, agreements, and contracts by which any of them is bound except
where failure to perform will not result in a Material Adverse Effect and
except where such member is protesting, in good faith, the performance of such
obligation, so long as such protest will not result in a Material Adverse
Effect. Borrower will maintain and shall cause each member of the Consolidated
Borrowing Group to maintain with financially sound and reputable insurers
acceptable to Lender insurance with respect to its properties and business
against such liabilities, casualties, risks and contingencies as is customary
for its business naming Lender as loss payee with respect to any insurance
covering collateral securing the loans hereunder, and, upon Lender's request,
Borrower will provide and shall cause each member of the Consolidated Borrowing
Group to provide satisfactory evidence of such insurance. Upon Lender's giving
the applicable member of the Consolidated Borrowing Group at least five (5)
Business Days prior notice, Borrower will provide and shall cause each member
of the Consolidated Borrowing Group to provide Lender and/or Lender's
representatives access to its books, records and properties at such times
during ordinary business hours as Lender may request; provided however, Lender
shall not request such access more than once each calendar quarter and, with
respect to each member of the Consolidated Borrowing Group, Lender shall not
request such access more than once each twelve month period.
(b) Reimbursement; Indemnity. Borrower and Guarantors, jointly
and severally, will reimburse Lender for all its reasonable costs and expenses
in connection with this Agreement, including, without limitation, any and all
reasonable legal fees and expenses incurred in the preparation or enforcement
of this Agreement or any other Loan Document and all reasonable costs Lender
may incur in evaluating collateral or reviewing Borrower's financial records.
Borrower and Guarantors agree, jointly and severally, to indemnify
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and hold Lender harmless from any reasonable costs or expenses incurred by
Lender as a result of the provisions of federal, state and local environmental
laws and ordinances, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, as such laws and
ordinances may relate to any member of the Consolidated Borrowing Group or any
property or operations of any such member unless any such costs or expenses are
incurred by Lender solely as a result of Lender's gross negligence or willful
misconduct.
(c) Security. Reference is hereby made to the following
instruments (collectively called the "Deeds of Trust"):
(1) Deed of Trust, Security Agreement and Assignment of
Leases and Rents [Office Building - Term Note] dated July 1, 1993,
executed by Borrower, in favor of Michael F. Hord, Trustee, for the
benefit of Lender, covering the office building ("Office Building")
described therein, filed for record in the Official Public Records of
Real Property of Harris County, Texas under Clerk's File No. P314300
and securing payment of the Term Note.
(2) Deed of Trust, Security Agreement and Assignment of
Leases and Rents [Office Building - Revolving Note] dated July 1,
1993, executed by Borrower, in favor of Michael F. Hord, Trustee, for
the benefit of Lender, covering the Office Building, filed for record
in the Official Public Records of Real Property of Harris County,
Texas under Clerk's File No. P314301 and securing payment of the
Revolving Note.
(3) Deed of Trust, Security Agreement and Assignment of
Leases and Rents [Adjacent Land] dated July 1, 1993, executed by LMK
Land Company, in favor of Michael F. Hord, Trustee, for the benefit of
Lender (covering the land ("Adjacent Land") described therein, filed
for record in the Official Public Records of Real Property of Harris
County, Texas under Clerk's File No. P314302 and securing payment of
the Notes.
The Notes and the other indebtedness hereunder are secured by liens on the
Office Building and the Adjacent Land and all proceeds of the foregoing. As
used herein, the term "Collateral" shall mean all property (whether real,
personal or mixed) which secures payment of the Notes, including without
limitation, the property described in subparts (c) and (d) of this Section 5.
(d) Additional Security. If the Funded Debt/Cash Flow Ratio
(herein defined) is greater than 2.0 as of June 30 of any year after the
Revolver Loan Conversion Date, then, at Lender's request,
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Borrower shall grant Lender a first lien security interest in all of Borrower's
accounts receivables and inventory to secure payment of the Notes. In that
connection, Borrower shall grant such security interest in a manner reasonably
satisfactory in all respects to Lender and shall execute all documents and
instruments and take such other action as Lender may reasonably request in
order to effectuate the granting of such security interest.
Section 6. Negative Covenants. Unless waived by Lender in writing:
(a) Investments, Loans and Advances. Borrower shall not
permit any member of the Consolidated Borrowing Group (including
Borrower) to make or hold any direct or indirect investment in any
Person, including capital contributions to any Person, investments in
the debt or equity securities of any Person, and loans, guaranties,
trade credit or other extensions of credit to any Person, except for
short-term investments made in the ordinary course of business,
Borrower's ownership of the Subsidiaries, investments in the form of
Acquisitions made in accordance with Section 6(h) hereof and
investments in Novera Energy, Inc. (so long as the aggregate
investment in Novera Energy, Inc. does not exceed $5,000,000.00).
(b) Corporate Transactions. Borrower shall not permit
any member of the Consolidated Borrowing Group (including Borrower) to
merge with or into any other Person, change its name or reincorporate
in another jurisdiction, create or suffer to exist any Subsidiary not
existing on the date of this Agreement, or sell or otherwise dispose
of its ownership interest in any Subsidiary, except that (a) any
member of the Consolidated Borrowing Group may form or acquire
Subsidiaries in connection with any Acquisition made in accordance
with Section 6(h) hereof and (b) any member of the Consolidated
Borrowing Group may merge with any Person formed or acquired in
connection with any Acquisition made in accordance with Section 6(h)
if the Borrower or other member of the Consolidated Borrowing Group,
as the case may be, is the surviving entity following the merger.
(c) Dividends and Distributions. Borrower will not
declare or pay any dividends or distributions in cash or otherwise or
purchase or redeem any stock of Borrower.
(d) Sale of Assets. Borrower shall not permit any member
of the Consolidated Borrowing Group (including Borrower) to sell,
transfer or otherwise dispose of any
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of its assets or enter into any arrangement accomplishing
substantially the same purpose, except that the foregoing restrictions
shall not apply to transactions in the ordinary course of business or
to the sale of any property of the Consolidated Borrowing Group not in
the ordinary course of business other than accounts receivable,
inventory, the Office Building and the Adjacent Property, so long as
such sale will not result in a Material Adverse Effect.
(e) Indebtedness. Borrower shall not permit any member
of the Consolidated Borrowing Group (including Borrower) to incur,
create, assume or guarantee in any manner any indebtedness (as such
term is defined in Section 7 hereof), except for (i) indebtedness
under the Credit Facilities, (ii) indebtedness incurred in the
ordinary course of its business and (iii) indebtedness assumed
pursuant to any Acquisition as contemplated in Section 6(h), provided
that the aggregate amount of indebtedness assumed pursuant to such
Acquisitions does not exceed $15,000,000.00.
(f) Liens. Borrower shall not permit any member of the
Consolidated Borrowing Group (including Borrower) to create or permit
to exist any lien, security interest or other encumbrance on any of
its properties or assets (including without limitation, any of
Borrower's accounts receivables and inventory) except (1) liens in
favor of Lender, (2) as disclosed on the Prior Financial Statements,
(3) liens for taxes or other governmental charges not yet due or
contested in good faith, (4) liens in connection with workers'
compensation, unemployment insurance or other such obligations not yet
due and payable, (5) legal or equitable encumbrances deemed to exist
by reason of this negative pledge covenant, (6) vendors', mechanics',
or other like liens securing amounts not yet due and payable, (7)
servitudes, easements and other similar property rights approved by
Lender, or (8) liens on property other than accounts receivable,
inventory, the Office Building and the Adjacent Property, so long as
the existence or foreclosure of such liens will not result in a
Material Adverse Effect.
(g) Change in Business. Borrower shall not permit any
member of the Consolidated Borrowing Group (including Borrower) to
pursue, without the prior written approval of Lender, any line of
business other than the lines of business which such members are
presently pursuing or which are directly related or incidental to such
lines of business.
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(h) Acquisitions. Borrower shall not permit any member
of the Consolidated Borrowing Group (including Borrower) to make any
Acquisition except in compliance with the following terms: the
Acquisitions since October 31, 1994 (or such later date specified by
Lender if, in connection with any extension of the Revolving Loan
Conversion Date or any review of this Section 6(h) by Lender at
Borrower's request, Lender elects to extend the date from which the
amount of Acquisitions is measured) cannot involve an aggregate of
cash paid and Debt assumed by any member of the Consolidated Borrowing
Group of more than $50,000,000.00 (all future investments in Novera
Energy, Inc. as contemplated in Section 6(a) above shall be included
within such $50,000,000.00 limitation) (without restricting Borrower's
ability to use its stock and other equity securities as consideration
for an Acquisition). Promptly after the consummation of any
Acquisition Borrower shall provide to Lender historical financial
information which is no older than ninety (90) days prior to the date
of such Acquisition regarding the Person acquired and other financial
information relating to such Acquisition which may be reasonably
requested by Lender and such other due diligence information and other
information as Lender may reasonably request in relation thereto. If
the Acquisition involves the formation or acquisition of a new
Subsidiary, then such new Subsidiary shall execute a Specific Guaranty
of the Loan and all other documents and agreements reasonably
requested by Lender, all in form and substance satisfactory to Lender.
Section 7. Financial Covenants.
(a) The Borrowing Group will not at any time permit:
(1) the Cash Flow Coverage Ratio on a consolidated basis
for the Consolidated Borrowing Group to be less than 2.0 to 1.0.
(2) the Net Worth on a consolidated basis for the
Consolidated Borrowing Group to be less than $123,000,000.00.
(3) the ratio of (i) the total liabilities on a
consolidated basis of the Consolidated Borrowing Group to (ii) the
Tangible Net Worth on a consolidated basis for the Consolidated
Borrowing Group to exceed .75 to 1.0.
(4) the Consolidated Borrowing Group, on a consolidated
basis, to sustain an operating loss in two (2) consecutive fiscal
years of Borrower.
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(5) The Consolidated Borrowing Group, on a consolidated
basis, to sustain a net loss in excess of $2,500,000.00 for the
previous twelve (12) month period (excluding any non-recurring
expenses related to Acquisitions and any non-recurring non-cash
expenses related to the write-down of fixed assets).
(b) For the purposes of this Agreement, the following terms have
the following meanings:
(1) "Cash Flow" shall mean net income after taxes, plus
deferred tax provisions, plus depreciation, depletion, amortization
and other non-cash charges, less capitalized software development
costs expensed during the applicable period of time.
(2) "Cash Flow Coverage Ratio" shall mean the ratio of
Cash Flow for the preceding twelve (12) months (excluding any
non-recurring expenses relating to Acquisitions) to the sum of (i)
Debt Service for the twelve (12) months immediately thereafter, (ii)
25% of the then unpaid principal balance of the Revolving Note and
(iii) 25% of the then unpaid principal balance of that certain
Promissory Note dated September 29, 1994, executed by 619068 Alberta
Ltd., payable to the order of Lender, in the stated principal amount
of $5,000,000.00 and guaranteed by Borrower.
(3) "Debt Service" shall mean required principal and
interest payments on all Funded Debt (other than balloon payments),
plus required payments on capitalized lease agreements and
lease-purchase agreements.
(4) "Funded Debt" shall mean indebtedness for borrowed
money which is currently funded and outstanding.
(5) "Funded Debt/Cash Flow Ratio" shall mean as of June
30 of any year the ratio of Funded Debt on a consolidated basis of the
Consolidated Borrowing Group as of May 31 of such year to Cash Flow on
a consolidated basis of the Consolidated Borrowing Group for the year
ending as of such June 30.
(6) "Net Worth" shall mean the sum of (i) par value of
capital stock, (ii) capital in excess of par value, and (iii) retained
earnings.
(7) "Tangible Net Worth" shall mean Net Worth less (i)
all intangible assets such as goodwill and patent rights and (ii) all
notes or accounts receivable due from
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affiliates, but expressly including capitalized software costs.
All terms not expressly defined shall be defined in accordance with generally
accepted accounting principles. All determinations under this Agreement shall
be made in accordance with generally accepted accounting principles
consistently applied, except where expressly provided to the contrary. All
references to a preceding period shall mean the period ending as of the end of
the month, quarter or fiscal year for which the applicable report is delivered.
All references to a period immediately following shall mean the period
beginning on the first day of the month, quarter or fiscal year following the
end of the period for which the applicable report is delivered.
Section 8. Default and Remedies. It shall constitute an event of
default ("Event of Default") hereunder if (a) Borrower or any Guarantor fails
to make when due any payment on any of the Notes or on any other indebtedness
hereunder and such failure continues for a period of ten (10) days after
Borrower has been given notice of such default, (b) Borrower or any Guarantor
fails to perform any of its other agreements contained herein and such failure
continues for a period of twenty (20) days after Borrower has been given notice
of such default, (c) Borrower or any Guarantor defaults under the terms or
provisions of any other Loan Document or any other agreement and such failure
continues for a period of twenty (20) days after Borrower has been given notice
of such default, instrument or document executed in connection with or as
security for one or more of the Credit Facilities, (d) any representation or
warranty of Borrower or any Guarantor proves to have been untrue when made in
any material respect, (e) any petition in bankruptcy is filed by or against
Borrower or any Guarantor, or any order granting relief under any bankruptcy or
receivership law is filed with respect to Borrower or any Guarantor and, only
in the case of an involuntary action against Borrower or any Guarantor, such
petition or order is not withdrawn, denied or otherwise terminated within
ninety (90) days, (f) Borrower or any Guarantor permits a monetary judgment
against it to remain undischarged for a period in excess of thirty (30) days,
(g) Borrower or any Guarantor dissolves, (h) any of the stock of any of the
Consolidated Borrowing Group is sold, assigned, pledged or otherwise
transferred, or (i) Borrower or any other member of the Consolidated Borrowing
Group fails to pay at the originally scheduled maturity (but after expiration
of any grace period applicable to such maturity) or when due, whether by
acceleration or otherwise, all or any part of any Funded Debt of Borrower or
any other member of the Consolidated Borrowing Group of $500,000.00 or more to
any other person or entity. Upon the occurrence of an Event of Default
specified in clause (e) above, immediately, and upon the occurrence of any
other Event of Default at the option of Lender, without notice to Borrower, any
Guarantor or any other
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person, the obligation of Lender to fund additional amounts to Borrower shall
be terminated, all indebtedness of Borrower to Lender shall be immediately due
and payable and Lender may take any other actions as may be permitted by this
Agreement or any other Loan Document or as may be permitted in equity or at
law. Borrower and all Guarantors expressly waive presentment, demand, protest,
notice of protest, or other notice of dishonor of any kind including, without
limitation, notice of intent to accelerate the maturity of the Notes and other
indebtedness hereunder and notice of acceleration of the maturity of the Notes
and other indebtedness hereunder.
Section 9. Closing. This Agreement shall not become effective unless
and until Lender has received the following documents, instruments and
certificates (such documents, instruments and certificates, together with any
and all other documents previously, now or hereafter executed by any member of
the Borrowing Group or any other person or entity to further evidence or secure
the payment, performance, satisfaction or discharge of the obligations of
Borrower and the other members of the Borrowing Group under the Notes and this
Agreement, including all amendments, modifications, renewals, rearrangements
and extensions of the foregoing, herein being collectively called the "Loan
Documents"), each of which shall be satisfactory in form and substance to
Lender and its counsel:
(a) this Agreement executed by Borrower and Guarantors;
(b) a Modification and Renewal Agreement ("Second
Modification Agreement") executed by Borrower, Lender and each
Guarantor;
(c) the legal opinion of Borrower's in-house general
counsel;
(d) a certificate of the Secretary of each member of the
Borrowing Group, certifying as to the Articles of Incorporation and
Bylaws of each, director's resolutions of each, and the signatures of
authorized officers of each;
(e) resolutions of the Board of Directors of each member
of the Borrowing Group;
(g) as appropriate, Certificates of Incorporation,
Existence, Authority and Good Standing with respect to each Guarantor
which is executing its Guaranty as of the date hereof; and
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(h) such other documents and instruments as may be
reasonably requested by Lender or its counsel.
In addition to the above specified instruments, the term "Loan Documents" also
includes (without limitation) each of the following:
(A) The Notes;
(B) The Deeds of Trust; and
(C) The Specific Guaranty executed by each Guarantor.
Section 10. Disclosure. Any additions or exceptions applicable to
the terms of this Agreement, the representations and warranties of the
Borrowing Group herein or the covenants hereof shall only be those disclosed in
writing to Lender concurrently with the execution hereof.
Section 11. Miscellaneous.
(a) Notices. All notices, demands, requests, and other
communications required or permitted hereunder and under the other Loan
Documents shall be in writing (except telephone notices as specifically
provided for herein) and may be personally served or sent by telex, telecopier,
mail or the express mail service of the United States Postal Service, Federal
Express or other equivalent overnight or expedited delivery service and (i) if
given by personal service, telex (confirmed by telephone) or telecopier
(confirmed by telephone), it shall be deemed to have been given upon receipt,
(ii) if sent by telex or telecopier without telephone confirmation, it shall be
deemed to have been given upon receipt, (iii) if sent by mail, it shall be sent
by certified mail, return receipt requested and shall be deemed to have been
given upon receipt and (iv) if sent by Federal Express, the express mail
service of the United States Postal Service or other equivalent overnight or
expedited delivery service, it shall be deemed given upon receipt. For
purposes hereof, the addresses of Borrower, Guarantors and Lender shall be as
follows:
<TABLE>
<S> <C>
Borrower: Landmark Graphics Corporation
15150 Memorial Drive
Houston, Texas 77079
Telecopy No.: (713) 560-1382
Telephone No.: (713) 560-1206
</TABLE>
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October 31, 1994
Page 30
<TABLE>
<S> <C>
with a copy to: Mr. Robert E. Crawford, Jr.
Winstead Sechrest & Minick P.C.
1201 Elm St., Suite 5400
Dallas, Texas 75270
Telecopy No.: (214) 745-5390
Telephone No.: (214) 745-5120
Guarantors: LMK Land Company
Landmark America Latina, S.A.
LANDMARK Graphics International, Inc.
Landmark Graphics Europe/Africa, Inc.
Landmark/ITA Ltd.
Landmark/CAEX, Inc.
Landmark Finance Corporation
CAEX Services, Inc.
MGI Associates, Inc.
15150 Memorial Drive
Houston, Texas 77079
Telecopy No.: (713) 560-1382
Telephone No.: (713) 560-1206
with a copy to: Mr. Robert E. Crawford, Jr.
Winstead Sechrest & Minick P.C.
1201 Elm St., Suite 5400
Dallas, Texas 75270
Telecopy No.: (214) 745-5390
Telephone No.: (214) 745-5120
Lender: NationsBank of Texas, N.A.
700 Louisiana, 7th Floor
Houston, Texas 77002
Attention: Mr. Timothy W. Meinardus
Telecopy No.: (713) 247-7175
Telephone No.: (713) 247-6932
with a copy to: Sewell & Riggs
A Professional Corporation
333 Clay Avenue, Suite 800
Houston, Texas 77002
Attention: Gary Rachlin
Telecopy No.: (713) 652-8808
Telephone No.: (713) 652-8725
</TABLE>
Any party may, by proper written notice hereunder to the other parties, change
the address to which notices shall thereafter be sent to it.
(b) Successors and Assigns. All covenants and agreements herein
contained by or on behalf of the Borrowing Group shall bind their respective
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns.
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(c) Renewals and Extensions. All provisions of this Agreement
shall apply with equal force and effect to each and all renewals and
extensions, in whole or in part, of the Notes or the Credit Facilities.
(d) No Waiver; Remedies Cumulative. No course of dealing on the
part of Lender or its officers or employees, or any failure or delay by Lender
with respect to exercising any right, power, or privilege of Lender under this
Agreement or any other Loan Document shall operate as a waiver thereof. The
rights and remedies of Lender under this Agreement and the other Loan Documents
shall be cumulative and the exercise or partial exercise of any such right or
remedy shall not preclude the exercise of any other right or remedy.
(e) Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS FROM TIME TO TIME IN
EFFECT, EXCEPT TO THE EXTENT UNITED STATES FEDERAL LAW PERMITS LENDER TO
CONTRACT FOR, CHARGE OR RECEIVE A GREATER RATE OR AMOUNT OF INTEREST.
(f) Invalid Provisions. In the event any one or more of the
provisions contained in this Agreement or any of the other Loan Documents
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or the other Loan Documents. Furthermore, in
lieu of such invalid, illegal or unenforceable provision, there shall
automatically be added a provision as similar in terms to such invalid, illegal
or unenforceable provision as may be possible and as may be valid, legal and
enforceable.
(g) Headings. The captions, headings and arrangements used in
this Agreement are for convenience only and do not in any way affect, limit,
amplify or modify the terms and provisions hereof.
(h) Lender's Benefit. All conditions to the obligations of Lender
to make advances hereunder are imposed solely and exclusively for the benefit
of Lender and its successors and assigns, as permitted hereunder, and no other
person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make advances in the absence of strict compliance with any or all of such terms
and any or all of such conditions may be freely waived in whole or in part by
Lender at any time if in its discretion it deems it advisable to do so;
provided, however, this sentence shall not be deemed to reduce or eliminate the
obligations of Lender hereunder. Borrower is not a joint venturer, agent or
representative of Lender, and Lender shall not be liable to any Person
asserting a claim against Borrower, or against any of the
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Collateral. The rights granted to Lender by Borrower in this Agreement are
granted for the protection of Lender and shall not be construed to be for the
benefit of any Person not a party to this Agreement.
(i) Controlling Document. Should an inconsistency or conflict
exist between the specific terms of this Agreement, and those of the Note or
any of the other Loan Documents, then the relevant terms of this Agreement
shall govern and control.
(j) Setoff. Upon the occurrence and during the continuance of any
Event of Default, Lender is hereby authorized at any time and from time to
time, without notice to Borrower or any other member of the Borrowing Group
(any such notice being expressly waived by Borrower and all other members of
the Borrowing Group), to setoff and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by Lender to or
for the credit or the account of Borrower and all other members of the
Borrowing Group against any and all of the Obligations, irrespective of whether
or not Lender shall have made any demand under this Agreement or any other Loan
Documents and although such Obligations may be unmatured. In that connection,
each member of the Borrowing Group hereby grants to Lender a lien on any of
such member's funds which may from time to time be deposited with Lender. The
rights of Lender under this Section 11(j) are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which Lender
may have hereunder, at law or in equity.
(k) Further Assurances; Power of Attorney. Each member of the
Borrowing Group, upon the request of Lender, shall execute, acknowledge,
deliver and record and/or file such further instruments (including security
agreements and financing statements covering all or portions of the Collateral
specified by Lender) and do such further acts as may be reasonably necessary,
desirable or proper to carry out more effectively the intent and purposes of
the Loan Documents and to subject to the Lender's liens any property intended
by the terms thereof to be covered thereby, including specifically but without
limitation, any renewals, additions, substitutions, replacements, betterments,
or appurtenances to the then Collateral. In this connection, each member of
the Borrowing Group does hereby irrevocably constitute and appoint Lender, with
full power of substitution, as its true and lawful attorney-in-fact and agent
with full power and authority to act in its name, place and stead in the
performance of such member's obligations under this Section 11(k), including
without limitation, the execution, acknowledgment, swearing to, delivering,
filing and recording of any instrument or other document, or the taking of any
other action, which Lender deems reasonably necessary, desirable or proper to
carry out more effectively the intents and purposes of this Agreement and the
other Loan Documents. The power of attorney
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granted hereby shall be deemed to be coupled with an interest, shall be
irrevocable, shall survive the death, disability, dissolution, liquidation or
other termination of each member of the Borrowing Group, shall be binding on
all heirs, legal representatives, successors and assigns of each member of the
Borrowing Group and shall inure to the benefit of and be enforceable by Lender
and its successors and assigns. Lender shall not exercise any of its power of
attorney rights hereunder except during the existence of an Event of Default.
(l) Recording and Filing. Borrower shall pay all recording,
filing, rerecording and refiling taxes, fees and other charges incurred in
connection with Lender or Lender's designee recording, filing, rerecording and
refiling of the Loan Documents and all amendments and supplements thereto and
substitutions therefor.
(m) Lender's Right to Perform the Obligations of Borrower.
(i) If any member of the Borrowing Group shall
fail, refuse or neglect to make any payment or perform any act
required by the Loan Documents, then at any time thereafter, and
without notice to or demand upon any member of the Borrowing Group and
without waiving or releasing any other right, remedy or recourse
Lender may have because of same, Lender may (but shall not be
obligated to) make such payment or perform such act for the account of
and at the expense of the Borrowing Group. If Lender shall elect to
pay any tax or other imposition or other sums due with reference to
the Collateral, Lender may do so in reliance on any bill, statement or
assessment procured from the appropriate governmental authority or
other issuer thereof without inquiring into the accuracy or validity
thereof. Similarly, in making any payments to protect the security
intended to be created by the Loan Documents, Lender shall not be
bound to inquire into the validity of any apparent or threatened
adverse encumbrance before making an advance for the purpose of
preventing or removing the same.
(ii) The Borrowing Group shall indemnify and
reimburse Lender for all losses, expenses, damages, claims and causes
of action, including reasonable attorneys' fees, incurred or accruing
by reason of any acts performed by Lender pursuant to the provisions
of this Section 11(m) or by reason of any other provision in the Loan
Documents or otherwise arising out of in any way relating to the Loan,
except for those losses, expenses, damages, claims and causes of
action caused by Lender's willful misconduct or gross negligence. All
sums paid by Lender pursuant to this Section 11(m) or such other
provision of the Loan Documents, and all other sums
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Page 34
expended by Lender to which it shall be entitled to be indemnified or
reimbursed, together with interest thereon at the Default Rate, shall
constitute additions to the Obligations, shall be secured by the
Lender's liens and shall be paid by the Borrowing Group to Lender upon
demand. As used herein, the term "Default Rate" shall mean a rate of
interest per annum equal to the lesser of (A) four percent (4%) above
the Base Rate as it fluctuates, or (B) the Maximum Rate.
(n) Participations and Assignments. The Lender shall have the
right, subject to the prior written consent of Borrower, to assign its entire
interest in, or to invite any person to participate in portions of, the Loan
and the Loan Documents.
(o) Concerning Representations and Warranties. No investigation
at any time made by or on behalf of the Lender shall diminish its rights to
rely upon the representations and warranties contained herein. All statements
contained in any certificate or other instrument delivered by the Borrower, any
Subsidiary or other person under or pursuant to this Agreement or in connection
with the transactions contemplated hereby, shall constitute additional
representations and warranties made by the Borrower. The representations and
warranties contained herein shall be true and correct at all times during the
term hereof including, without limitation, at the time each financial statement
is submitted by Borrower to the Lender and at the time of each advance
hereunder.
(p) DTPA Waiver. The Borrowing Group hereby represents, warrants
and agrees with Lender that (a) the Borrowing Group is not in a significantly
disparate bargaining position, (b) the Borrowing Group is represented by legal
counsel of its choice, in seeking or acquiring goods or services, other than
the purchase or lease of a family residence occupied or to be occupied as the
residence of a member of the Borrowing Group, by a purchase or a lease for a
consideration paid or to be paid that exceeds $500,000.00, (c) this Agreement
is being executed by the Borrowing Group in connection with such purchase or
lease in that the proceeds of the Loan will be used by members of the Borrowing
Group in purchasing Collateral for an aggregate consideration in excess of
$500,000.00, (d) the Borrowing Group, on a consolidated basis, is a business
consumer with assets of $5,000,000 or more according to the most recent
financial statements of members of the Borrowing Group prepared in accordance
with generally accepted accounting principles, (e) the Borrowing Group has
knowledge and experience in financial and business matters that enable it to
evaluate the merits and risks of a transaction and (f) the Loan Documents are
not a result of any disparity in bargaining position between the Borrowing
Group and Lender, were negotiated by the parties hereto on an arms-length
basis and represent the bargained- for agreement of the parties hereto. THE
BORROWING GROUP HEREBY WAIVES THE PROVISIONS OF THE
<PAGE> 35
Landmark Graphics Corporation
October 31, 1994
Page 35
DECEPTIVE TRADE PRACTICES ACT - CONSUMER PROTECTION ACT AS SET FORTH IN CHAPTER
17 OF THE TEXAS BUSINESS AND COMMERCE CODE, EXCEPT FOR SECTION 17.555 THEREOF.
(q) Final Agreement of the Parties.
(i) THE LOAN DOCUMENTS ARE A WRITTEN LOAN
AGREEMENT UNDER SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE.
(ii) SUCH WRITTEN LOAN AGREEMENT (BEING ALL OF THE
LOAN DOCUMENTS) REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
(iii) THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES.
(r) Joinder by Guarantor. Each Guarantor is executing this
Agreement and its Specific Guaranty in consideration for Lender's making the
Loan to Borrower. Each Guarantor, by executing and delivering this Agreement,
its Specific Guaranty and any other Loan Documents that it executes, agrees,
acknowledges, represents and warrants that (i) such Guarantor is a Subsidiary,
(ii) such Guarantor will benefit, directly or indirectly, by the advancement of
funds under the Revolving Note, any advancement of funds under the other Loan
Documents, and the execution of this Agreement and the Second Modification
Agreement and (iii) but for the execution and delivery of this Agreement, the
Guaranty and any other Loan Document executed by Guarantor and Guarantor's
agreement to be bound by the provisions hereof and thereof, Lender would not
have entered into this Agreement and the Second Modification Agreement and
would not have advanced additional proceeds of the Revolving Note to Borrower.
Each Guarantor is joining in the execution of this Agreement to evidence its
agreement to the terms and provisions of this Agreement applicable to it and to
evidence its agreement to cause Borrower to be able to perform its obligations
under this Agreement and the other Loan Documents.
(s) Arbitration.
(i) Any controversy or claim between or among the
parties hereto, including but not limited to those arising out of or
relating to this Agreement or the Loan Documents, including any claim
based on or arising from an alleged tort, shall be determined by
binding arbitration in accordance with the Federal Arbitration Act (or
if not applicable, the applicable state law), the rules of practice
and procedure for the arbitration of commercial disputes of Judicial
Arbitration and Mediation
<PAGE> 36
Landmark Graphics Corporation
October 31, 1994
Page 36
Services, Inc. ("JAMS"), and the "special rules" set forth in
paragraph (2) below. In the event of any inconsistency, the special
rules shall control. Judgment upon any arbitration award may be
entered in any court having jurisdiction. Any party to this Agreement
or other Loan Document may bring an action, including a summary or
expedited proceeding, to compel arbitration of any controversy or
claim to which this Agreement or any of the Loan Documents applies in
any court having jurisdiction over such action.
(ii) The arbitration shall be conducted in
Houston, Texas, and administered by JAMS, who shall appoint an
arbitrator; if JAMS is unable or legally precluded from administering
the arbitration, then the American Arbitration Association shall
serve. All arbitration hearings shall be commenced within 90 days of
the demand for arbitration; further, the arbitrator shall only, upon a
showing of cause, be permitted to extend the commencement of such
hearing for up to an additional 60 days.
(ii) Nothing in this Agreement or other Loan
Document shall be deemed to (i) limit the applicability of any
otherwise applicable statutes of limitation or repose and any waivers
contained in this Agreement or the other Loan Documents; or (ii) be a
waiver by Lender of the protection afforded to it by 12 U.S.C. Sec.
91 or any substantially equivalent state law; or (iii) limit the right
of the Lender hereto (A) to exercise self-help remedies such as (but
not limited to) setoff, or (B) to foreclose against any real or
personal property collateral, or (C) to obtain from a court
provisional or ancillary remedies such as (but not limited to)
injunctive relief, writ of possession or the appointment of a
receiver. Lender may exercise such self-help rights, foreclose upon
such property, or obtain such provisional or ancillary remedies
before, during, or after the pendency of any arbitration proceeding
brought pursuant to this Agreement. Neither this exercise of
self-help remedies nor the institution or maintenance of an action for
foreclosure or provisional or ancillary remedies shall constitute a
waiver of the right of any party, including the claimant in any such
action, to arbitrate the merits of the controversy or claim
occasioning resort to such remedies.
<PAGE> 37
Landmark Graphics Corporation
October 31, 1994
Page 37
(t) Prior Letter Loan Agreement. This Agreement supersedes and
replaces in its entirety that certain Letter Loan Agreement dated November 30,
1993 by and among Lender, Borrower and certain of the Guarantors.
If this evidences your understanding of the agreements herein, please
execute in the space provided.
Sincerely,
NATIONSBANK OF TEXAS, N.A.
By: /s/ Timothy W. Meinardus
Timothy W. Meinardus
Senior Vice President
ACCEPTED AND AGREED TO
LANDMARK GRAPHICS CORPORATION
By: /s/ William H. Seippel
William H. Seippel,
Vice President
"BORROWER"
LMK LAND COMPANY
By: /s/ William H. Seippel
William H. Seippel,
Vice President
LANDMARK AMERICA LATINA, S.A.
By: /s/ Patti L. Massaro
Patti L. Massaro
Vice President & Secretary
<PAGE> 38
Landmark Graphics Corporation
October 31, 1994
Page 38
LANDMARK GRAPHICS INTERNATIONAL, INC.
By: /s/ Patti L. Massaro
Patti L. Massaro
Vice President & Secretary
LANDMARK GRAPHICS EUROPE/AFRICA, INC.
By: /s/ Patti L. Massaro
Patti L. Massaro
Vice President & Secretary
LANDMARK/ITA Ltd.
By: /s/ Larry J. White
Larry J. White, President
LANDMARK/CAEX, INC.
By: /s/ Patti L. Massaro
Patti L. Massaro
Vice President & Secretary
LANDMARK FINANCE CORPORATION
By: /s/ Patti L. Massaro
Patti L. Massaro
Vice President & Secretary
CAEX SERVICES, INC.
By: /s/ Carole P. Driver
Carole P. Driver
Secretary
<PAGE> 39
Landmark Graphics Corporation
October 31, 1994
Page 39
MGI ASSOCIATES, INC.
By: /s/ Patti L. Massaro
Patti L. Massaro
Vice President & Secretary
"GUARANTORS"
<PAGE> 40
EXHIBIT "A"
FORM OF NOTICE OF BORROWING
DATE _______________
NationsBank of Texas, N.A.
700 Louisiana
Houston, Texas 77002
Attention: Commercial Lending Group
Ladies and Gentlemen:
The undersigned hereby certifies that he or she is authorized to execute this
Notice of Borrowing on behalf of Borrower. Pursuant to the Credit Agreement
dated July 1, 1993, by and between Borrower and NationsBank of Texas, N.A., as
amended, restate, and supplemented from time to time (the "Credit Agreement"),
the undersigned, on behalf of Borrower, hereby requests a Revolving Loan Advance
as follows:
1. Amount: ___________ U.S. Dollars
___________ Foreign Currency
___________ Equivalent of U.S. Dollars in Forein Exchange
Circle specified foreign currency:
1. Deutsche Marks 2. French Francs 3. Dutch Guilders
4. Japenese Yen 5. British Pound 6. Australian Dollars
Circle funding information:
1. New Advance
2. Advance to pay existing _____(Amount) maturing on _________(Date)
3. Advance to convert Base Rate Loan _______(Amount) to Libor Rate
Loan/Optional Currency
3. Type of Loan and Interest Period:
__________ Libor Rate Loan
__________ 30 days
__________ 60 days
__________ 90 days
__________ 180 days
__________ 360 days
<PAGE> 41
__________ Optional Currency
__________ 30 days
__________ 60 days
__________ 90 days
__________ Base Rate Loan
4. Instructions for Loan Proceeds:
__________ Deposit proceeds in the following account ________
__________ Debit above account and then wire per the
instructions below
__________ Wire loan proceeds directly per the instructions
Amount: _____________________
Currency: _____________________
Name of Bank/Rounting #:__________________________________________
__________________________________________________________________
Branch: ___________________
City: ___________________
Country: ___________________
Account Name: ___________________
Account Number: ___________________
Special Instructions: ___________________________________________
__________________________________________________________________
By:__________________________________
Printed Name:________________________
Title:_______________________________
<PAGE> 42
EXHIBIT "B"
Compliance Certificate
In accordance with Section 4 of the Letter Loan Agreement ("Loan
Agreement") dated October 31, 1994 among NationsBank of Texas, N.A. ("Lender"),
Landmark Graphics Corporation ("Borrower") and the other parties thereto, I,
______________, the chief financial officer of Borrower, do hereby certify that
I have made a review of the activities of the Borrower and the other members of
the Borrowing Group during the previous _______________ with a view to
determining whether the Borrower and the other members of the Borrowing Group
have kept, observed, performed and fulfilled all of their obligations under the
Loan Agreement and the other Loan Documents, and the following is true and
correct as of ______________, 199__, to the best of my knowledge and belief
after due inquiry:
1. The Borrower and the other members of the Borrowing Group have
kept, observed, performed and fulfilled each and every covenant and condition
contained in the Loan Agreement and the other Loan Documents and are not now in
default in the observance, performance or fulfillment of any such covenant or
condition, except as described below, which description, if any, specifies each
default, the nature and status thereof and what action, if any, has been taken
to remedy such default.
2. There is no litigation against any member of the Consolidated
Borrowing Group (a) in which the claimed liability of such member is greater
than $250,000.00 (or alleging unspecified damages) or (b) which may otherwise
result in a Material Adverse Effect, except as described below.
3. The financial condition of the Consolidated Borrowing Group
for the __________ ending __________________, 199__ is as follows:
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED RATIO/AMOUNT ACTUAL RATIO/
------------------ --------------------- -------------
AMOUNT
------
<S> <C> <C> <C>
(a) Cash Flow Coverage Ratio equal to or greater than ______________
2.0/1.0
(b) Net Worth $123,000,000.00 ______________
(c) Ratio of (i) total liabilities to (ii) equal to or less than .75/1.0 ______________
Tangible Net Worth
</TABLE>
The foregoing terms are used as defined in the Loan Agreement.
________________________________________
(Signature of chief financial officer)
<PAGE> 43
SECOND MODIFICATION AND RENEWAL AGREEMENT
THE STATE OF TEXAS (
( KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF HARRIS (
That this MODIFICATION AND RENEWAL AGREEMENT ("Agreement") is executed
effective as of the 31st day of October, 1994, by and among (i) LANDMARK
GRAPHICS CORPORATION ("Borrower"), a Delaware corporation, (ii) LMK LAND COMPANY
("LMK"), a Delaware corporation, LANDMARK AMERICA LATINA, S.A., a Delaware
corporation, LANDMARK GRAPHICS INTERNATIONAL, INC., a Texas corporation,
LANDMARK GRAPHICS EUROPE/AFRICA, INC., a Delaware corporation, LANDMARK/ITA
LTD., an Alberta corporation, LANDMARK/CAEX, INC., a Delaware corporation,
LANDMARK FINANCE CORPORATION, a Delaware corporation, CAEX SERVICES, INC., a
Delaware corporation, and MGI ASSOCIATES, INC., a Texas corporation (such
corporations described in this subpart (ii) herein being collectively called
"Guarantors"), and (iii) NATIONSBANK OF TEXAS, N.A. ("Lender").
Recitals
A. Lender has loaned or agreed to lend to Borrower, and Borrower has
borrowed or agreed to borrow from Lender, up to an aggregate princpal amount of
TWENTY FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) under a Revolving
Credit Facility and TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) under a
Term Facility (such loans herein being called the "Loans"), evidenced, in part,
by the following instruments:
(i) Letter Loan Agreement ("Loan Agreement") dated October 31,
1994, by and among Borrower, Lender and Guarantors. The Loan Agreement
supersedes and replaces in its entirety that certain Letter Loan
Agreement ("Prior Loan Agreement") dated November 30, 1993 by and
among Borrower, certain of the Guarantors and Lender.
(ii) Promissory Note [Lankmark Revolving Note] ("Revolving
Note") dated November 30, 1993, executed by Borrower, payable to the
order of Lender and in the stated principal amount of $25,000,000.00.
The Revolving Note supersedes and replaces in its entirety that
certain Promissory Note [Lankmark Revolving Note] ("Prior Revolving
Note") dated July 1, 1993, executed by Borrower, payable to the order
of Lender and in the stated principal amount of $10,000,000.00
(iii) Promissory Note [Landmark Term Note] ("Term Note") dated
July 1, 1993, executed by Borrower, payable to the order of Lender and
in the stated princpal amount of $10,000,000.00. As used herein, the
<PAGE> 44
term "Notes" shall mean the Revolving Note and the Term Note.
(iv) Deed of Trust, Security Agreement and Assignment of
Leases and Rent [Office Building - Term Note] ("Office Building - Term
Note Deed of Trust") dated July 1, 1993, executed by Borrower, in
favor of Michael F. Hord, Trustee, for the benefit of Lender and filed
for record in the Official Public Records of Real Property of Harris
County, Texas under Clerk's File No. P314300.
(v) Deed of Trust, Security Agreement and Assignment of
Leases and Rents [Office Building - Revolving Note] ("Office
Building - Revolving Note Deed of Trust") dated July 1, 1993, executed
by Borrower, in favor of Michael F. Hord, Trustee, for the benefit of
Lender and filed for record in the Official Public Records of Real
Property of Harris County, Texas under Clerk's File No. P314301.
(vi) Deed of Trust, Security Agreement and Assignment of
Leases and Rents [Adjacent Land] ("Adjacent Land Deed of Trust") dated
July 1, 1993, executed by LMK, in favor of Michael F. Hord, Trustee,
for the benefit of Lender and filed for record in the Official Public
Records of Real Property of Harris County, Texas under Clerk's File
No. P314302. As used herein, the term "Deeds of Trust" shall mean the
Office Building - Revolving Note Deed of Trust, the Office Building -
Term Note Deed of Trust and the Adjacent Land Deed of Trust.
(vii) Nine (9) Specific Guaranties (collectively called the
"Guaranties") five of which were dated July 1, 1993 and the remaining
four of which were dated October 31, 1994, each of which was executed
by one Guarantor and each in favor of Lender.
(viii) Modification and Renewal Agreement ("Modification
Agreement") dated November 30, 1993, executed by Borrower, Lender and
certain of the Guarantors and filed for record in the Official Public
Records of Real Property of Harris County, Texas under Clerk's
File No. P594158.
B. The Notes, the Deeds of Trust, the Guaranties, the Loan Agreement,
the Modification Agreement and all other documents and instruments previously,
now or hereafter executed as security for or otherwise in connection with the
Loans are herein collectively called the "Loan Documents" and are hereby
incorporated by this reference for all purposes to the same extent as if set
out herein verbatim.
-2-
<PAGE> 45
C. The property ("Property") covered by the Deeds of Trust is and
continues to be subject to the liens, rights and interests (collectively called
the "Liens") securing payment of the Notes, including the liens, rights and
interests created by the Deeds of Trust.
D. Borrower, Guarantors and lender desire to modify the Loan
Documents as herein provided.
Agreement
In consideration of the Recitals, the covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confessed, the parties hereto hereby agree as follows:
1. The Revolving Loan Conversion Date (as such term is used in the
Revolving Note) is hereby extended to October 31, 1996.
2. All references to the Prior Loan Agreement in any of the Loan
Documents are hereby amended to refer to the Loan Agreement.
3. All references to any of the Loan Documents in any of the other
Loan Documents are hereby amended to refer to each such Loan Document as hereby
amended.
4. Borrower and Guarantors hereby reaffirm each of the
representations, warranties, covenants and agreements of them set forth in the
Loan Documents, with the same force and effect as if each were separately
stated herein and made as of the date hereof.
5. Each of Borrower and Guarantors hereby (i) ratifies, affirms,
reaffirms, acknowledges, confirms and agrees that each and every Loan Document
to which it is a party represents the valid and enforceable obligation of it,
(ii) further acknowledges that, to each of their knowledge, there are no
existing claims, defenses or rights of set off with respect to any of the Loan
Documents or Lender's administration of the Loans in general and (iii)
acknowledges, represents and warrants that no Event of Default or Potential
Event of Default (as such terms are defined in the Loan Agreement) currently
exist.
6. This Agreement modifies the Loan Documents and in no way acts as a
release or relinquishment of the Liens, including without limitation, the liens
created by the Deeds of Trust, and the Liens are hereby renewed, extended,
ratified, confirmed, and carried forward by Borrower and LMK in all respects.
7. Except as expressly modified herein, all of the terms and
provisions of the Loan Documents are hereby ratified and reaffirmed.
-3-
<PAGE> 46
8. Each Guarantor hereby consents to the execution and delivery of
the Loan Agreement and this Agreement (collectively called the "New
Agreements"), and to all of the matters set forth in the New Agreements.
Additionally, each Guarantor hereby agrees the the New Agreements in no way act
as a release or relinquishment of its Guaranty, and its Guaranty is renewed,
extended, ratified, confirmed and carried forward by such Guarantor in all
respects. Each Guarantor further agrees that (i) its liability under the Loan
Documents shall not be reduced, altered, limited, lessened or in any way
affected by the execution, delivery and performance of the New Agreements
except to the extent that its Guaranty is expressly amended by the New
Agreements and (ii) its Guaranty, as amended by the New Agreements, is and
shall remain enforceable in accordance with its terms.
9. This Agreement shall be binding upon and inure to the benefit of
Lender, Borrower, Guarantors and their respective heirs, legal representatives,
successors, and assigns.
10. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" UNDER SECTION 26.02 OF THE TEXAS BUSINESS & COMMERCE CODE AND
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
(b) THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
11. This Agreement may be executed in any number of counterparts, each
of which shall be deemed for all purposes an original, with the same effect as
if all of the signatures were upon the same instrument.
This Agreement has been executed as of the date set forth above.
LANDMARK GRAPHICS CORPORATION
By: /s/ WILLIAM H. SEIPPEL
William H. Seippel
Vice President
"BORROWER"
-4-
<PAGE> 47
LMK LAND COMPANY
By: /s/ WILLIAM H. SEIPPEL
William H. Seippel
Vice President
LANDMARK AMERICA LATINA, S.A.
By: /s/ PATTI L. MASSARO
Patti L. Massaro
Vice President & Secretary
LANDMARK GRAPHICS INTERNATIONAL, INC.
By: /s/ PATTI L. MASSARO
Patti L. Massaro
Vice President & Secretary
LANDMARK GRAPHICS EUROPE/AFRICA, INC.
By: /s/ PATTI L. MASSARO
Patti L. Massaro
Vice President & Secretary
LANDMARK/ITA Ltd.
By: /s LARRY J. WHITE
Larry J. White
President
LANDMARK/CAEX, INC.
By: /s/ PATTI L. MASSARO
Patti L. Massaro
Vice President & Secretary
-5-
<PAGE> 48
LANDMARK FINANCE CORPORATION
By: PATTI L. MASSARO
Patti L. Massaro
Vice President & Secretary
CAEX SERVICES, INC.
By: CAROLE P. DRIVER
Carole P. Driver
Secretary
MGI ASSOCIATES, INC.
By: PATTI L. MASSARO
Patti L. Massaro
Vice President & Secretary
"GUARANTORS"
NATIONSBANK OF TEXAS, N.A.
By: TIMOTHY W. MEINARDUS
Timothy W. Meinardus
Senior Vice President
"LENDER"
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by William H. Seippel, Vice President of LANDMARK GRAPHICS
CORPORATION, a Delaware corporation, on behalf of said corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
-6-
<PAGE> 49
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1955, by William H. Seippel, Vice President of LMK LAND COMPANY,
a Delaware corporation, on behalf of said corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Patti L. Massaro, Vice President & Secretary of LANDMARK
AMERICA LATINA, S.A., a Delaware corporation, on behalf of said corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Patti L. Massaro, Vice President & Secretary of LANDMARK
GRAPHICS INTERNATIONAL, INC., a Texas corporation, on behalf of said
corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
-7-
<PAGE> 50
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Patti L. Massaro, Vice President & Secretary of LANDMARK
GRAPHICS EUROPE/AFRICA, INC., a Delaware corporation, on behalf of said
corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Larry J. White, President of LANDMARK/ITA LTD., an
Alberta corporation, on behalf of said corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Nortary Public in and for
The State of Texas
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Patti L. Massaro, Vice President & Secretary of
LANDMARK/CAEX, INC., a Delaware corporation, on behalf of said corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
-8-
<PAGE> 51
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Patti L. Massaro, Vice President & Secretary of LANDMARK
FINANCE CORPORATION, a Delaware corporation, on behalf of said corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Carole P. Driver, Secretary of CAEX SERVICES, INC., a
Delaware corporation, on behalf of said corporation.
/s/ KATHRYN M. HICKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Patti L. Massaro, Vice President & Secretary of MGI
ASSOCIATES, INC. a Texas corporation, on behalf of said corporation.
/s/ KATHRYN M. HIKMAN
Kathryn M. Hickman
Notary Public in and for
The State of Texas
-9-
<PAGE> 52
THE STATE OF TEXAS (
(
COUNTY OF HARRIS (
This instrument was acknowledged before me on the 13th day of
February, 1995, by Timothy W. Meinardus, Senior Vice President of
NATIONSBANK OF TEXAS, N.A., a national banking association, on behalf of said
banking association.
/s/ GRACE L. MAREK
Grace L. Marek
Notary Public in and for
The State of Texas
-10-
<PAGE> 1
EXHIBIT 10.2
APPENDIX A
LANDMARK GRAPHICS CORPORATION
1994 FLEXIBLE INCENTIVE PLAN
____________________________________
SECTION 1. PURPOSE OF THE PLAN
The purposes of the Landmark Graphics Corporation 1994 Flexible
Incentive Plan (the "Plan") are to promote the interests of Landmark Graphics
Corporation (together with any successor thereto, the "Company") and its
stockholders by enabling the Company to attract, motivate and retain key
employees of the Company and its Subsidiaries by offering such key employees
performance-based stock incentives and other equity interests in the Company
and other incentive awards that recognize the creation of value for the
stockholders of the Company and promote the Company's long-term growth and
success. To achieve these purposes, eligible persons may receive stock
options, Stock Appreciation Rights, Restricted Stock, Performance Awards,
performance stock, Dividend Equivalent Rights and any other Awards, or any
combination thereof.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below unless the content otherwise requires:
2.1 "Award" shall mean the grant of a stock option, a
Stock Appreciation Right, a Restricted Stock, a Performance Award,
performance stock, a Dividend Equivalent Right or any other award
under the Plan.
2.2 "Board" shall mean the Board of Directors of the
Company, as the same may be constituted from time to time.
2.3 "Change in Control" shall mean, after the effective
date of the Plan, (i) the occurrence of an event of a nature that
would be required to be reported in response to Item 1 or Item 2 of a
Form 8-K Current Report of the Company promulgated pursuant to
Sections 13 and 15(d) of the Exchange Act provided that, without
limitation, such a Change in Control shall be deemed to have occurred
if (a) any "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the
Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities or (b) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election by the Board or the nomination
for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the two-year period or whose
election or nomination for election was previously so approved; (ii)
the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%) of
the combined voting power of the voting securities of the surviving
entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to
implement a reorganization or recapitalization of the Company, or a
similar transaction (collectively, a "Reorganization"), in which no
"person" acquires more than twenty percent (20%) of the combined
voting power of the Company's then outstanding securities shall not
constitute a Change in Control of the Company; or (iii) the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
<PAGE> 2
2.4 "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
2.5 "Committee" shall mean the Stock Option and
Compensation Committee of the Board of Directors of the Company. The
Committee shall meet the applicable requirements for "disinterested
administration" within the requirements of Rule 16b-3 promulgated
under the Exchange Act and any successor thereunder promulgated during
the duration of the Plan. The Board may amend the Plan to modify the
definition of Committee within the limits of Rule 16b-3 to assure that
the Plan is administered in compliance with Rule 16b-3. Initially,
the Committee will consist of not less than three (3) members of the
Board who are appointed by, and serve at the pleasure of, the Board
and who are (i) "disinterested" within the meaning of Rule 16b-3 and
(ii) "outside director," as required under Section 162(m) of the Code
and such Treasury Regulations as may be promulgated thereunder.
2.6 "Common Stock" shall mean the Common Stock, par value
$.05 per share, of the Company.
2.7 "Designated Beneficiary" shall mean the beneficiary
designated by a Participant, in a manner determined by the Committee,
to exercise rights of the Participant in the event of the
Participant's death. In the absence of an effective designation by a
Participant, the Designated Beneficiary shall be the Participant's
estate.
2.8 "Disability" shall mean permanent and total inability
to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than twelve (12) months, as
determined in the sole and absolute discretion of the Committee.
2.9 "Dividend Equivalent Right" shall mean the right of
the holder thereof to receive credits based on the cash dividends that
would have been paid on the Shares specified in an Award granting
Dividend Equivalent Rights if the Shares subject to such Award were
held by the person to whom the Award is made.
2.10 "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
2.11 "Fair Market Value" shall mean with respect to the
Shares, as of any date, (i) the last reported sales price on any stock
exchange on which the Common Stock is traded or, if not reported on
such exchange, on the composite tape, or, in case no such sale takes
place on such day, the average of the reported closing bid and asked
quotations on such exchange; (ii) if the Common Stock is not listed on
a stock exchange or no such quotations are available, the closing
price of the Common Stock as reported by the National Market System of
the National Association of Securities Dealers, Inc., or, if no such
quotations are available, the average of the high bid and low asked
quotations in the over-the-counter market as reported by the National
Quotation Bureau Incorporated, or similar organization; or (iii) in
the event that there shall be no public market for the Common Stock,
the fair market value of the Common Stock as determined (which
determination shall be conclusive) in good faith by the Committee,
based upon the value of the Company as a going concern, as if such
Common Stock were publicly owned stock, but without any discount with
respect to minority ownership.
2.12 "Incentive Stock Option" shall mean any stock option
awarded under the Plan which qualifies as an "Incentive Stock Option"
under Section 422 of the Code or any successor provision.
2.13 "Non-Tandem Stock Appreciation Right" shall mean any
Stock Appreciation Right granted alone and not in connection with an
Award which is a stock option.
2.14 "Non-Qualified Stock Option" shall mean any stock
option awarded under the Plan that does not qualify as an Incentive
Stock Option.
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2.15 "Optionee" shall mean any person who has been granted
a stock option under the Plan and who has executed a written stock
option agreement with the Company reflecting the terms of such grant.
2.16 "Performance Award" shall mean any Award hereunder of
Shares, units or rights based upon, payable in, or otherwise related
to, Shares (including Restricted Stock), or cash of an equivalent
value, as the Committee may determine, at the end of a specified
performance period established by the Committee.
2.17 "Plan" shall mean the Landmark Graphics Corporation
1994 Flexible Incentive Plan set forth herein.
2.18 "Reload Option" shall mean a stock option as defined
in Subsection 6.6(b) herein.
2.19 "Restricted Stock" shall mean any Award of Shares
under the Plan that are subject to restrictions or risk of forfeiture.
2.20 "Retirement" shall mean termination of employment,
other than discharge for cause, after age 65 or on or before age 65 if
pursuant to the terms of any retirement plan maintained by the Company
in which such person participates.
2.21 "Shares" shall mean shares of the Company's Common
Stock and any shares of capital stock or other securities of the
Company hereafter issued or issuable upon, in respect of or in
substitution or exchange for such Shares.
2.22 "Stock Appreciation Right" shall mean the right of
the holder thereof to receive an amount in cash or Shares equal to the
excess of the Fair Market Value of a Share on the date of exercise
over the Fair Market Value of a Share on the date of the grant (or
such other value as may be specified in the agreement granting the
Stock Appreciation Right).
2.23 "Subsidiary" shall mean a subsidiary corporation of
the Company, as defined in Section 424(f) of the Code.
2.24 "Tandem Stock Appreciation Right" shall mean a Stock
Appreciation Right granted in connection with an Award which is a
stock option.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Plan shall be administered and
interpreted by the Committee.
3.2 Awards. Subject to the provisions of the Plan and
directions from the Board, the Committee is authorized to:
(a) determine the persons to whom Awards are to
be granted;
(b) determine the types and combinations of
Awards to be granted, the number of Shares to be covered by
the Award, the pricing of the Award, the time or times when
the Award shall be granted and may be exercised, the terms,
performance criteria or other conditions, vesting periods or
any restrictions for an Award, any restrictions on Shares
acquired pursuant to the exercise of an Award and any other
terms and conditions of an Award;
(c) conclusively interpret the provisions of the
Plan;
(d) prescribe, amend and rescind rules and
regulations relating to the Plan or make individual decisions
as questions arise, or both;
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<PAGE> 4
(e) determine whether, to what extent and under
what circumstances to provide loans from the Company to
participants to purchase Shares subject to Awards under the
Plan, and the terms and conditions of such loans;
(f) rely upon employees of the Company for such
clerical and recordkeeping duties as may be necessary in
connection with the administration of the Plan; and
(g) make all other determinations and take all
other actions necessary or advisable for the administration of
the Plan.
3.3 Procedures. A majority of the Committee members
shall constitute a quorum. All determinations of the Committee shall
be made by a majority of its members. All questions of interpretation
and application of the Plan or pertaining to any question of fact or
Award granted hereunder shall be decided by the Committee, whose
decision shall be final, conclusive and binding upon the Company and
each other affected party.
SECTION 4. SHARES SUBJECT TO PLAN
4.1 Limitations. The maximum number of Shares that may
be issued with respect to Awards under the Plan shall not exceed
1,000,000 unless such maximum shall be increased or decreased by
reason of changes in capitalization of the Company as hereinafter
provided. The Shares issued pursuant to the Plan may be authorized
but unissued Shares, or may be issued Shares which have been
reacquired by the Company.
4.2 Changes. To the extent that any Award under the
Plan, or any stock option or performance award granted under any prior
incentive plan of the Company, shall be forfeited, shall expire or
shall be cancelled, in whole or in part, then the number of Shares
covered by the Award or stock option so forfeited, expired or
cancelled may again be awarded pursuant to the provisions of the Plan.
In the event that Shares are delivered to the Company in full or
partial payment of the exercise price for the exercise of a stock
option granted under the Plan or any prior incentive plan of the
Company, the number of Shares available for future Awards under the
Plan shall be reduced only by the net number of Shares issued upon the
exercise of the option. Awards that may be satisfied either by the
issuance of Shares or by cash or other consideration shall, until the
form of consideration to be paid is finally determined, be counted
against the maximum number of Shares that may be issued under the
Plan. If the Award is ultimately satisfied by the payment of
consideration other than Shares, as, for example, a stock option
granted in tandem with a Stock Appreciation Right that is settled by a
cash payment of the stock appreciation, such Shares may again be made
the subject of an Award under the Plan. Awards will not reduce the
number of Shares that may be issued pursuant to the Plan if the
settlement of the Award will not require the issuance of Shares, as,
for example, a Stock Appreciation Right that can be satisfied only by
the payment of cash.
SECTION 5. ELIGIBILITY
Eligibility for participation in the Plan shall be confined to those
persons who are employed by the Company or a Subsidiary, and who are either
officers of the Company or a Subsidiary, or who are in managerial or other key
positions within the Company or a Subsidiary. In making any determination as
to persons to whom Awards shall be granted, the type of Award, and/or the
number of Shares to be covered by the Award, the Committee shall consider the
position and responsibilities of the person, his or her importance to the
Company, the duties of such person, his or her past, present and potential
contributions to the growth and success of the Company, and such other factors
as the Committee shall deem relevant in connection with accomplishing the
purposes of the Plan.
SECTION 6. STOCK OPTIONS
6.1 Grants. The Committee may grant stock options alone
or in addition to other Awards granted under the Plan to any eligible
officer or other key employee. Each person so selected shall be
offered an option to purchase the number of Shares determined by the
Committee. The Committee shall
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<PAGE> 5
specify whether such option is an Incentive Stock Option or
Non-Qualified Stock Option and any other terms or conditions relating
to such Award. To the extent that any stock option does not qualify
as an Incentive Stock Option (whether because of its provisions or the
time or manner of its exercise or otherwise), such stock option or the
portion thereof which does not qualify shall constitute a separate
Non-Qualified Stock Option. Each such person so selected shall have a
reasonable period of time within which to accept or reject the offered
option. Failure to accept within the period so fixed by the Committee
may be treated as a rejection. Each person who accepts an option
shall enter into a written agreement with the Company, in such form as
the Committee may prescribe, setting forth the terms and conditions of
the option, consistent with the provisions of the Plan. The Optionee
and the Company shall enter into option agreements for Incentive Stock
Options and Non-Qualified Stock Options. At any time and from time to
time, the Optionee and the Company may agree to modify an option
agreement so that an Incentive Stock Option may be converted to a
Non-Qualified Stock Option.
The Committee may require that an Optionee meet certain
conditions before the option or a portion thereof may vest or be
exercised, as, for example, that the Optionee remain in the employ of
the Company or a Subsidiary for a stated period or periods of time
before the option, or stated portions thereof, may vest or be
exercised.
6.2 Option Price. The option exercise price of the
Shares covered by each stock option shall be determined by the
Committee; provided, however, that the option exercise price of an
Incentive Stock Option shall not be less than one hundred percent
(100%) of the Fair Market Value of Shares on the date of the grant of
such Incentive Stock Option.
6.3 Incentive Stock Options Limitations.
(a) In no event shall any person be granted
Incentive Stock Options to the extent that the Shares covered
by any Incentive Stock Options (and any incentive stock
options granted under any other plans of the Company and its
Subsidiaries) that may be exercised for the first time by such
person in any calendar year have an aggregate Fair Market
Value in excess of $100,000. For this purpose, the Fair
Market Value of the Shares shall be determined as of the dates
on which the Incentive Stock Options are granted. It is
intended that the limitation on Incentive Stock Options
provided in this Subsection 6.3(a) be the maximum limitation
on options which may be considered Incentive Stock Options
under the Code.
(b) Notwithstanding anything herein to the
contrary, in no event shall any employee owning more than ten
percent (10%) of the total combined voting power of the
Company or any Subsidiary be granted an Incentive Stock Option
hereunder unless the option exercise price shall be at least
one hundred ten percent (110%) of the Fair Market Value of the
Shares subject to such Incentive Stock Option at the time that
the Incentive Stock Option is granted and the term of such
Incentive Stock Option shall not exceed five (5) years.
6.4 Option Term. Subject to Subsection 6.3(b) hereof,
the term of a stock option shall be for such period of months or years
from the date of its grant as may be determined by the Committee;
provided, however, that no Incentive Stock Option shall be exercisable
later than ten (10) years from the date of its grant. Furthermore, no
Incentive Stock Option may be exercised unless, at the time of such
exercise, the Optionee is, and has been continuously since the date of
grant of his or her Incentive Stock Option, employed by the Company or
a Subsidiary, except that:
(a) An Incentive Stock Option may, to the extent
vested, be exercised within the period of three months after
the date the Participant ceases to be an employee of the
Company (or within such lesser period as may be specified in
the applicable option agreement), provided that the option
agreement may designate a longer exercise period and that the
exercise after such three-month period shall be treated as the
exercise of a Non-Qualified Stock Option under the Plan;
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(b) If the Optionee dies while in the employ of
the Company or a Subsidiary, or within three months after the
Optionee ceases to be such an employee, the Incentive Stock
Option may, to the extent vested, be exercised by the
Optionee's Designated Beneficiary within the period of one
year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(c) If the Optionee ceases to be an employee of
the Company or a Subsidiary by reason of the Optionee's
Disability, the Incentive Stock Option may be exercised within
the period of one year after the date of Disability (or within
such lesser period as may be specified in the applicable
option agreement).
6.5 Vesting of Stock Options.
(a) Each stock option granted hereunder may only
be exercised to the extent that the Optionee is vested in such
option. Each stock option shall vest separately in accordance
with the option vesting schedule, if any, determined by the
Committee in its sole discretion, which will be incorporated
in the stock option agreement entered into between the Company
and each Optionee. The option vesting schedule will be
accelerated if, in the sole discretion of the Committee, the
Committee determines that acceleration of the option vesting
schedule would be desirable for the Company.
(b) In the event of the dissolution or
liquidation of the Company, each stock option granted under
the Plan shall terminate as of a date to be fixed by the
Board; provided, however, that not less than thirty (30) days'
written notice of the date so fixed shall be given to each
Optionee and each such Optionee shall be fully vested in and
shall have the right during such period to exercise the
option, even though such option would not otherwise be
exercisable under the option vesting schedule. At the end of
such period, any unexercised option shall terminate and be of
no further effect.
(c) In the event of a Reorganization (as defined
in Section 2.3 hereof):
(1) If there is no plan or agreement
respecting the Reorganization, or if such plan or
agreement does not specifically provide for the
change, conversion or exchange of the Shares under
outstanding and unexercised stock options for other
securities, then the provisions of Subsection 6.5(b)
shall apply as if the Company had dissolved or been
liquidated on the effective date of the
Reorganization; or
(2) If there is a plan or agreement
respecting the Reorganization, and if such plan or
agreement specifically provides for the change,
conversion or exchange of the Shares under
outstanding and unexercised stock options for
securities of another corporation, then the Board
shall adjust the Shares under such outstanding and
unexercised stock options (and shall adjust the
Shares remaining under the Plan which are then
available to be awarded under the Plan, if such plan
or agreement makes no specific provision therefor) in
a manner not inconsistent with the provisions of such
plan or agreement for the adjustment, change,
conversion or exchange of such Shares and such
options.
(d) In the event of a Change in Control of the
Company, all stock options and any associated Stock
Appreciation Rights shall become fully vested and immediately
exercisable and the vesting of all performance-based stock
options shall be determined as if the performance period or
cycle applicable to such stock options had ended immediately
upon such Change in Control; provided, however, that if in the
opinion of counsel to the Company the immediate exercisability
of options when taken into consideration with all other
"parachute payments" as defined in Section 280G of the Code,
as amended, would result in an "excess parachute payment" as
defined in such section as well as an excise tax imposed by
Section 4999 of the Code, such options and any
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<PAGE> 7
associated Stock Appreciation Rights shall become fully vested
and immediately exercisable, except as and to the extent
the Committee, in its sole discretion, shall otherwise
determine, and which determination by the Committee shall
be based solely upon maximizing the after-tax benefits to be
received by any such Optionee.
6.6 Exercise of Stock Options.
(a) Stock options may be exercised as to Shares
only in amounts and at intervals of time specified in the
written option agreement between the Company and the Optionee.
Each exercise of a stock option, or any part thereof, shall be
evidenced by a notice in writing to the Company. The purchase
price of the Shares as to which an option shall be exercised
shall be paid in full at the time of exercise, and may be paid
to the Company either:
(1) in cash (including check, bank draft
or money order);
(2) by the delivery of Shares having a
Fair Market Value equal to the aggregate option price;
(3) by a combination of cash and Shares;
or
(4) by other consideration deemed
acceptable by the Committee in its sole discretion.
(b) If an Optionee delivers Shares (including
Shares of Restricted Stock) already owned by him or her in
full or partial payment of the exercise price for any stock
option granted under the Plan or any prior incentive plan of
the Company, or if the Optionee elects to have the Company
retain that number of Shares out of the Shares being acquired
through the exercise of the option having a Fair Market Value
equal to the exercise price of the stock option being
exercised, the Committee may authorize the automatic grant of
a new option (a "Reload Option") for that number of Shares as
shall equal the number of already owned Shares surrendered
(including Shares of Restricted Stock) or newly acquired
Shares being retained in payment of the option exercise price
of the underlying stock option being exercised. The grant of
a Reload Option will become effective upon the exercise of the
underlying stock option. The option exercise price of the
Reload Option shall be the Fair Market Value of a Share on the
effective date of the grant of the Reload Option. Each Reload
Option shall be exercisable no earlier than six (6) months
from the date of its grant and no later than the time when the
underlying stock option being exercised could be last
exercised. The Committee may also specify additional terms,
conditions and restrictions for the Reload Option and the
Shares to be acquired upon the exercise thereof.
(c) The amount, as determined by the Committee,
of any federal, state or local tax required to be withheld by
the Company due to the exercise of a stock option shall be
satisfied, at the election of the Optionee, either (a) by
payment by the Optionee to the Company of the amount of such
withholding obligation in cash or other consideration
acceptable to the Committee in its sole discretion (the
"Non-Share Method") or (b) through either the retention by the
Company of a number of Shares out of the Shares being acquired
through the exercise of the option or the delivery of already
owned Shares having a Fair Market Value equal to the amount of
the withholding obligation (the "Share Retention Method"). If
an Optionee elects to use the Share Retention Method in full
or partial satisfaction for any tax liability resulting from
the exercise of a stock option, the Committee may authorize
the grant of a Reload Option for that number of Shares as
shall equal the number of Shares used to satisfy the tax
liabilities of the stock option being exercised on the price
and terms set forth in Subsection (b) above. The cash payment
or the amount equal to the Fair Market Value of the Shares so
withheld, as the case may be, shall be remitted by the Company
to the appropriate taxing authorities. The Committee shall
determine the time and manner in which an Optionee may elect
to satisfy a withholding obligation by either the Non-Share
Method or the Share Retention Method.
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(d) An Optionee shall not have any of the rights
of a stockholder of the Company with respect to the Shares
covered by a stock option except to the extent that one or
more certificates representing such Shares shall have been
delivered to the Optionee, or the Optionee has been determined
to be a stockholder of record by the Company's transfer agent,
upon due exercise of the option.
6.7 Date of a Stock Option Grant. The granting of a
stock option shall take place only upon the execution and delivery by
the Company and an optionee of an option agreement. Neither any
action taken by the Board nor anything contained in the Plan or in any
resolution adopted or to be adopted by the Board or the stockholders
of the Company shall constitute the granting of a stock option under
the Plan.
SECTION 7. STOCK APPRECIATION RIGHTS
7.1 Grants. The Committee may grant to any eligible
employee either Non-Tandem Stock Appreciation Rights or Tandem Stock
Appreciation Rights. Stock Appreciation Rights shall be subject to
such terms and conditions as the Committee shall impose. The grant of
the Stock Appreciation Right may provide that the holder may be paid
for the value of the Stock Appreciation Right either in cash or in
Shares, or a combination thereof, at the discretion of the Committee.
In the event of the exercise of a Stock Appreciation Right payable in
Shares, the holder of the Stock Appreciation Right shall receive that
number of whole Shares of stock of the Company having an aggregate
Fair Market Value on the date of exercise equal to the value obtained
by multiplying (i) either (a) in the case of a Tandem Stock
Appreciation Right, the difference between the Fair Market Value of a
Share on the date of exercise over the per share exercise price of the
related option, or (b) in the case of a Non-Tandem Stock Appreciation
Right, the difference between the Fair Market Value of a Share on the
date of exercise over the Fair Market Value on the date of the grant
by (ii) the number of Shares as to which the Stock Appreciation Right
is exercised. However, notwithstanding the foregoing, the Committee,
in its sole discretion, may place a ceiling on the amount payable upon
exercise of a Stock Appreciation Right, but any such limitation shall
be specified at the time that the Stock Appreciation Right is granted.
7.2 Exercisability. A Tandem Stock Appreciation Right
may be granted at the time of the grant of the related stock option
or, if the related stock option is a Non-Qualified Stock Option, at
any time thereafter during the term of the stock option. A Tandem
Stock Appreciation Right granted in connection with an Incentive Stock
Option (i) may be exercised at, and only at, the times and to the
extent the related Incentive Stock Option is exercisable, (ii) expires
upon the termination of the related Incentive Stock Option, (iii) may
not exceed 100% of the difference between the exercise price of the
related Incentive Stock Option and the market price of the Shares
subject to the related Incentive Stock Option at the time the Tandem
Stock Appreciation Right is exercised and (iv) may be exercised at,
and only at, such times as the market price of the Shares subject to
the related Incentive Stock Option exceeds the exercise price of the
related Incentive Stock Option. The Tandem Stock Appreciation Right
may be transferred at, and only at, the times and to the extent the
related stock option is transferable. If a Tandem Stock Appreciation
Right is granted, there shall be surrendered and cancelled from the
related option at the time of exercise of the Tandem Stock
Appreciation Right, in lieu of exercise under the related option, that
number of Shares as shall equal the number of Shares as to which the
Tandem Stock Appreciation Right shall have been exercised.
7.3 Certain Limitations on Non-Tandem Stock Appreciation
Rights. A Non-Tandem Stock Appreciation Right will be exercisable as
provided by the Committee and will have such other terms and
conditions as the Committee may determine. A Non-Tandem Stock
Appreciation Right is subject to acceleration of vesting or immediate
termination in certain circumstances in the same manner as stock
options pursuant to Subsections 6.4 and 6.5 of the Plan.
7.4 Limited Stock Appreciation Rights. The Committee is
also authorized to grant "limited stock appreciation rights," either
as Tandem Stock Appreciation Rights or Non-Tandem Stock Appreciation
Rights. Limited stock appreciation rights would become exercisable
only upon the occurrence of a Change in Control or such other event as
the Committee may designate at the time of grant or thereafter.
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SECTION 8. RESTRICTED STOCK
8.1 Grants. The Committee may grant Awards of Restricted
Stock for no cash consideration, for such minimum consideration as may
be required by applicable law, or for such other consideration as may
be specified by the grant. The terms and conditions of the Restricted
Stock shall be specified by the grant agreement. The Committee, in
its sole discretion, may specify any particular rights which the
person to whom an Award of Restricted Stock is made shall have in the
Restricted Stock during the restriction period and the restrictions
applicable to the particular Award, the vesting schedule (which may be
based on service, performance or other factors) and rights to
acceleration of vesting (including, without limitation, whether
non-vested Shares are forfeited or vested upon termination of
employment). Further, the Committee may award performance-based
Restricted Stock by conditioning the grant, or vesting or such other
factors, such as the release, expiration or lapse of restrictions upon
any such Award (including the acceleration of any such conditions or
terms) of such Restricted Stock upon the attainment of specified
performance goals or such other factors as the Committee may
determine. The Committee shall also determine when the restrictions
shall lapse or expire and the conditions, if any, under which the
Restricted Stock will be forfeited or sold back to the Company. Each
Award of Restricted Stock may have different restrictions and
conditions. The Committee, in its discretion, may prospectively
change the restriction period and the restrictions applicable to any
particular Award of Restricted Stock. Unless otherwise set forth in
the Plan, Restricted Stock may not be disposed of by the recipient
until the restrictions specified in the Award expire.
8.2 Awards and Certificates. Any Restricted Stock issued
hereunder may be evidenced in such manner as the Committee, in its
sole discretion, shall deem appropriate including, without limitation,
book-entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect
of Shares of Restricted Stock awarded hereunder, such certificate
shall bear an appropriate legend with respect to the restrictions
applicable to such Award. The Company may retain, at its option, the
physical custody of any stock certificate representing any awards of
Restricted Stock during the restriction period or require that the
Restricted Stock be placed in escrow or trust, along with a stock
power endorsed in blank, until all restrictions are removed or expire.
SECTION 9. PERFORMANCE AWARDS
9.1 Grants. A Performance Award may consist of either or
both, as the Committee may determine, of (i) "Performance Shares" or
the right to receive Shares, Restricted Stock or cash of an equivalent
value, or any combination thereof as the Committee may determine, or
(ii) "Performance Units," or the right to receive a fixed dollar
amount payable in cash, Common Stock, Restricted Stock or any
combination thereof, as the Committee may determine. The Committee
may grant Performance Awards to any eligible employee, for no cash
consideration, for such minimum consideration as may be required by
applicable law or for such other consideration as may be specified at
the time of the grant. The terms and conditions of Performance Awards
shall be specified at the time of the grant and may include provisions
establishing the performance period, the performance criteria to be
achieved during a performance period, the criteria used to determine
vesting (including the acceleration thereof), whether Performance
Awards are forfeited or vest upon termination of employment during a
performance period and the maximum or minimum settlement values. Each
Performance Award shall have its own terms and conditions, which shall
be determined in the discretion of the Committee. If the Committee
determines, in its sole discretion, that the established performance
measures or objectives are no longer suitable because of a change in
the Company's business, operations, corporate structure or for other
reasons that the Committee deems satisfactory, the Committee may
modify the performance measures or objectives and/or the performance
period.
9.2 Terms and Conditions. Performance Awards may be
valued by reference to the Fair Market Value of a Share or according
to any formula or method deemed appropriate by the Committee, in its
sole discretion, including, but not limited to, achievement of
specific financial, production, sales, cost or earnings performance
objectives that the Committee believes to be relevant to the Company's
business and for remaining in the employ of the Company for a
specified period of time, or the Company's
-9-
<PAGE> 10
performance or the performance of its Common Stock measured against
the performance of the market, the Company's industry segment or its
direct competitors. Performance Awards may be paid in cash, Shares
(including Restricted Stock) or other consideration, or any
combination thereof. If payable in Shares, the consideration for the
issuance of the Shares may be the achievement of the performance
objective established at the time of the grant of the Performance
Award. Performance Awards may be payable in a single payment or in
installments and may be payable at a specified date or dates or upon
attaining the performance objective, all at the Committee's
discretion. The extent to which any applicable performance objective
has been achieved shall be conclusively determined by the Committee.
SECTION 10. DIVIDEND EQUIVALENT RIGHTS
The Committee may grant a Dividend Equivalent Right, either as a
component of another Award or as a separate Award, and, in general, each such
holder of a Dividend Equivalent Right that is outstanding on a dividend record
date for the Company's Common Stock shall be credited with an amount equal to
the cash or stock dividends or other distributions that would have been
received had the Shares covered by the Award been issued and outstanding on the
dividend record date. The terms and conditions of the Dividend Equivalent
Right shall be specified by the grant. Dividend equivalents credited to the
holder of a Dividend Equivalent Right may be paid currently or may be deemed to
be reinvested in additional Shares (which may thereafter accrue additional
Dividend Equivalent Rights). Any such reinvestment shall be at the Fair Market
Value at the time thereof. Dividend Equivalent Rights may be settled in cash
or Shares, or a combination thereof, in a single payment or in installments. A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement
or payment for or lapse of restrictions on such other Award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other Award.
SECTION 11. OTHER AWARDS
The Committee may grant to any eligible employee other forms of Awards
based upon, payable in or otherwise related to, in whole or in part, Shares, if
the Committee, in its sole discretion, determines that such other form of Award
is consistent with the purposes and restrictions of the Plan. The terms and
conditions of such other form of Award shall be specified by the grant,
including, but not limited to, the price, if any, and the vesting schedule, if
any. Such Awards may be granted for no cash consideration, for such minimum
consideration as may be required by applicable law or for such other
consideration as may be specified by the grant.
SECTION 12. COMPLIANCE WITH SECURITIES AND OTHER LAWS
In no event shall the Company be required to sell or issue Shares
under any Award if the sale or issuance thereof would constitute a violation of
applicable federal or state securities laws or regulations or a violation of
any other law or regulation of any governmental or regulatory agency or
authority or any national securities exchange. As a condition to any sale or
issuance of Shares, the Company may place legends on Shares, issue stop
transfer orders and require such agreements or undertakings as the Company may
deem necessary or advisable to assure compliance with any such laws or
regulations, including, if the Company or its counsel deems it appropriate,
representations from the person to whom an Award is granted that he or she is
acquiring the Shares solely for investment and not with a view to distribution
and that no distribution of the Shares will be made unless registered pursuant
to applicable federal and state securities laws, or in the opinion of counsel
of the Company, such registration is unnecessary.
SECTION 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR
REORGANIZATION
The value of an Award in Shares shall be adjusted from time to time as
follows:
(a) Subject to any required action by stockholders, the
number of Shares covered by each outstanding Award, and the exercise
price, shall be proportionately adjusted for any increase or decrease
in the number of issued Shares of the Company resulting from a
subdivision or consolidation of Shares or
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<PAGE> 11
the payment of a stock dividend (but only in Shares) or any other
increase or decrease in the number of Shares effected without receipt
of consideration by the Company.
(b) Subject to any required action by stockholders, if
the Company shall be the surviving corporation in any Reorganization,
merger or consolidation, each outstanding Award shall pertain to and
apply to the securities to which a holder of the number of Shares
subject to the Award would have been entitled, and if a plan or
agreement reflecting any such event is in effect that specifically
provides for the change, conversion or exchange of Shares, then any
adjustment to Shares relating to an Award hereunder shall not be
inconsistent with the terms of any such plan or agreement.
(c) In the event of a change in the Shares of the
Company as presently constituted, which is limited to a change of par
value into the same number of Shares with a different par value or
without par value, the Shares resulting from any such change shall be
deemed to be the Shares within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Board, whose determination shall be final, binding and conclusive.
Except as hereinbefore expressly provided in the Plan, any
person to whom an Award is granted shall have no rights by reason of
any subdivision or consolidation of stock of any class or the payment
of any stock dividend or any other increase or decrease in the number
of shares of stock of any class or by reason of any dissolution,
liquidation, reorganization, merger or consolidation or spinoff of
assets or stock of another corporation, and any issue by the Company
of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or exercise price of
Shares subject to an Award.
The grant of an Award pursuant to the Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, Reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell or transfer all or any part of its business or
assets.
SECTION 14. AMENDMENT OR TERMINATION OF THE PLAN
14.1 Amendment of the Plan. Notwithstanding anything contained in
the Plan to the contrary, all provisions of the Plan may at any time or from
time to time be modified or amended by the Board; provided, however, that no
Award at any time outstanding under the Plan may be modified, impaired or
cancelled adversely to the holder of the Award without the consent of such
holder; and provided, further, that the Plan may not be amended without
approval by the holders of a majority of the Shares of the Company represented
and voted at a meeting of the stockholders (a) to increase the maximum number
of Shares subject to the Plan, (b) to materially modify the requirements as to
eligibility for participation in the Plan, (c) to decrease the minimum exercise
price for options, (d) to otherwise materially increase the benefits accruing
to persons to whom Awards may be made under the Plan, as amended, or (e) if
such approval is otherwise necessary, to comply with Rule 16b-3 promulgated
under the Exchange Act, as amended, or to comply with any other applicable
laws, regulations or listing requirements, or to qualify for an exemption or
characterization that is deemed desirable by the Board.
14.2 Termination of the Plan. The Board may suspend or terminate
the Plan at any time, and such suspension or termination may be retroactive or
prospective. However, no Award may be granted on or after the tenth
anniversary of the adoption of the Plan. Termination of the Plan shall not
impair or affect any Award previously granted hereunder and the rights of the
holder of the Award shall remain in effect until the Award has been exercised
in its entirety or has expired or otherwise has been terminated by the terms of
such Award.
-11-
<PAGE> 12
SECTION 15. AMENDMENTS AND ADJUSTMENTS TO AWARDS
The Committee may amend, modify or terminate any outstanding Award
with the Participant's consent at any time prior to payment or exercise in any
manner not inconsistent with the terms of the Plan, including, without
limitation, (i) to change the date or dates as of which (A) an option becomes
exercisable or (B) a performance-based Award is deemed earned, (ii) to amend
the terms of any outstanding Award to provide an exercise price per share which
is higher or lower than the then current exercise price per share of such
outstanding Award or (iii) to cancel an Award and grant a new Award in
substitution therefor under such different terms and conditions as it
determines in its sole and complete discretion to be appropriate including, but
not limited to, having an exercise price per share which may be higher or lower
than the exercise price per share of the cancelled Award. The Committee is
also authorized to make adjustments in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 13 hereof)
affecting the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent reduction or enlargement of the benefits or
potential benefits intended to be made available under the Plan. Any provision
of the Plan or any agreement regarding an Award to the contrary
notwithstanding, the Committee may cause any Award granted to be cancelled in
consideration of a cash payment or alternative Award made to the holder of such
cancelled Award equal in value to the Fair Market Value of such cancelled
Award. The determinations of value under this Section 15 shall be made by the
Committee in its sole discretion.
SECTION 16. GENERAL PROVISIONS
16.1 No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company from adopting or continuing in
effect other compensation arrangements, and such arrangements may be either
generally applicable or applicable only in specific cases.
16.2 No Right to Employment. Nothing in the Plan or in any Award,
nor the grant of any Award, shall confer upon or be construed as giving any
recipient of an Award any right to remain in the employ of the Company.
Further, the Company may at any time dismiss a participant in the Plan from
employment, free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award agreement. No
employee, participant or other person shall have any claim to be granted any
Award, and there is no obligation for uniformity or treatment of employees,
participants or holders or beneficiaries of Awards.
16.3 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THE
PLAN AND ANY RULES AND REGULATIONS RELATING TO THE PLAN SHALL BE DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
16.4 Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be
construed or deemed amended without, in the sole determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or Award and the
remainder of the Plan and any such Award shall remain in full force and effect.
16.5 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any
rights thereto shall be cancelled, terminated or otherwise eliminated.
16.6 Headings. Headings are given to the Subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
16.7 Effective Date. The Plan shall be effective as of the date of
its approval by the holders of a majority of the Shares of the Company
represented and voting at the next Annual Meeting of Stockholders. If the
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<PAGE> 13
Plan is not approved by the stockholders at the 1994 Annual Meeting, after such
date, the Plan and all Awards granted hereunder, if any, shall be void.
16.8 Non-Transferability of Awards. Awards shall not be
transferable otherwise than by will or the laws of descent and distribution,
and Awards may be exercised, during the lifetime of the holder, only by the
holder; provided, however, that with the approval of the Committee, Awards
other than Incentive Stock Options may be transferred as directed under a
qualified domestic relations order. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Award contrary to the
provisions hereof, or the levy of any execution, attachment or similar process
upon an Award shall be null and void and without effect.
SECTION 17. NAMED EXECUTIVE OFFICERS
17.1 Applicability of Section 17. The provisions of this Section
17 shall apply only to those executive officers (i) whose compensation is
required to be reported in the Company's proxy statement pursuant to Item
402(a)(3)(i) and (ii) of Regulation S-K under the general rules and regulations
under the Exchange Act, as amended, and (ii) whose total compensation,
including estimated Awards, is determined by the Committee to possibly be
subject to the limitations on deductions imposed by Section 162(m) of the Code
("Named Executive Officers"). In the event of any inconsistencies between this
Section 17 and the other Plan provisions as they pertain to Named Executive
Officers, the provisions of this Section 17 shall control.
17.2 Establishment of Performance Goals. Awards for Named
Executive Officers, other than stock options and Stock Appreciation Rights,
shall be based on the attainment of certain performance goals. No later than
the earlier of (i) ninety (90) days after the commencement of the applicable
fiscal year or such other award period as may be established by the Committee
("Award Period") and (ii) the completion of twenty-five percent (25%) of such
Award Period, the Committee shall establish, in writing, the performance goals
applicable to each such Award for Named Executive Officers. At the time the
performance goals are established by the Committee, their outcome must be
substantially uncertain. In addition, the performance goal must state, in
terms of an objective formula or standard, the method for computing the amount
of compensation payable to the Named Executive Officer if the goal is obtained.
Such formula or standard shall be sufficiently objective so that a third party
with knowledge of the relevant performance results could calculate the amount
to be paid to the subject Named Executive Officer. The material terms of the
performance goals for Named Executive Officers and the compensation payable
thereunder shall be submitted to the shareholders of the Company for their
review and approval if and to the extent required under Section 162(m) of the
Code, and the Treasury Regulations thereunder. Shareholder approval, if
necessary, shall be obtained for such performance goals prior to any Award
being paid to such Named Executive Officer. If shareholder approval is
required and not received with respect to such performance goals, no amount
shall be paid to such Named Executive Officer for such applicable Award Period
under the Plan.
17.3 Components of Awards. Each Award of a Named Executive
Officer, other than stock options and Stock Appreciation Rights, shall be based
on performance goals which are sufficiently objective so that a third party
having knowledge of the relevant facts could determine whether the goal was
met. Except as provided in Subsection 17.8 herein, performance measures which
may serve as determinants of Named Executive Officers' Awards shall be limited
to the following measures: earnings per share; return on assets; return on
equity; return on capital; net profit after taxes; net profit before taxes;
operating profits; stock price; and sales or expenses. Within ninety (90) days
following the end of each Award Period, the Committee shall certify in writing
that the performance goals, and any other material terms were satisfied.
Thereafter, Awards shall be made for each Named Executive Officer as determined
by the Committee. The Awards may not vary from the preestablished amount based
on the level of achievement.
17.4 No Mid-Year Change in Awards. Except as provided in
Subsections 17.8 and 17.9 herein, each Named Executive Officer's Awards shall
be based exclusively on the performance measures established by the Committee
pursuant to Subsection 17.2.
17.5 No Partial Award Period Participation. A Named Executive
Officer who becomes eligible to participate in the Plan after performance goals
have been established in an Award Period pursuant to Subsection 17.2
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<PAGE> 14
may not participate in the Plan prior to the next succeeding Award Period,
except with respect to Awards which are stock options or Stock Appreciation
Rights.
17.6 Performance Goals. Except as provided in Subsection 17.8
herein, performance goals shall not be changed following their establishment,
and Named Executive Officers shall not receive any payout, except with respect
to Awards which are stock options or Stock Appreciation Rights, when the
minimum performance goals are not met or exceeded.
17.7 Individual Performance and Discretionary Adjustments. Except
as provided in Subsection 17.8 herein, subjective evaluations of individual
performance of Named Executive Officers shall not be reflected in their Awards,
other than Awards which are stock options or Stock Appreciation Rights. The
payment of such Awards shall be entirely dependent upon the attainment of the
preestablished performance goals.
17.8 Amendments. No amendment of the Plan with respect to any
Named Executive Officer may be made which would (i) increase the maximum amount
that can be paid to any one Participant under the Plan, (ii) change the
specified performance goal for payment of Awards, or (iii) modify the
requirements as to eligibility for participation in the Plan, unless the
Company's shareholders have first approved such amendment in a manner which
would permit the deduction under Section 162(m) of the Code of such payment in
the fiscal year it is paid. The Committee shall amend this Section 17 and such
other provisions as it deems appropriate, to cause amounts payable to Named
Executive Officers to satisfy the requirements of Section 162(m) and the
Treasury Regulations promulgated thereunder.
17.9 Stock Options and Stock Appreciation Rights. Notwithstanding
any provision of the Plan (including the provisions of this Section 17) to the
contrary, the amount of compensation which a Named Executive Officer may
receive with respect to stock options and Stock Appreciation Rights which are
granted hereunder is based solely on an increase in the value of the applicable
Shares after the date of grant of such Award. Thus, no stock option may be
granted hereunder to a Named Executive Officer with an exercise price less than
the Fair Market Value of Shares on the date of grant. Furthermore, the maximum
number of Shares (or cash equivalent value) with respect to which stock options
or Stock Appreciation Rights may be granted hereunder to any Named Executive
Officer during any calendar year may not exceed 200,000 Shares, subject to
adjustment as provided in Section 13 hereunder.
17.10 Maximum Amount of Compensation. The maximum amount of
compensation payable as an Award (other than an Award which is a stock option
or Stock Appreciation Right) to any Named Executive Officer during any calendar
year may not exceed $1,000.000.
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FILING ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 65,890
<SECURITIES> 0
<RECEIVABLES> 42,400
<ALLOWANCES> 1,539
<INVENTORY> 4,833
<CURRENT-ASSETS> 128,719
<PP&E> 70,969
<DEPRECIATION> 28,854
<TOTAL-ASSETS> 193,415
<CURRENT-LIABILITIES> 30,581
<BONDS> 11,500
<COMMON> 817
0
0
<OTHER-SE> 146,294
<TOTAL-LIABILITY-AND-EQUITY> 193,415
<SALES> 49,751
<TOTAL-REVENUES> 73,545
<CGS> 16,687
<TOTAL-COSTS> 30,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 753
<INTEREST-EXPENSE> 534
<INCOME-PRETAX> 6,376
<INCOME-TAX> 1,847
<INCOME-CONTINUING> 4,529
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,529
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
