<PAGE> BOSTON TECHNOLOGY, INC.
100 Quannapowitt Parkway
Wakefield, MA 01880
December 16, 1996 VIA EDGAR
Securities and Exchange Commission
Division of Corporation Finance
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Boston Technology, Inc.
Commission File No. 0-17384
Form 10-Q
Dear Sir/Madam:
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), enclosed for filing in EDGAR electronic format
is a copy of the Form 10-Q and required Exhibits for the nine months ended
October 31, 1996.
If you have any questions or comments regarding the enclosed material, please
contact the undersigned.
Very truly yours,
/s/ Carol B. Langer
________________________________
Carol B. Langer, Secretary
<PAGE>
<PAGE>
=============================================================================
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 quarter ended October 31, 1996
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 No. 0-17384
Boston Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3073385
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
100 Quannapowitt Parkway
Wakefield, Massachusetts 01880
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (617) 246-9000
___________________________
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 at least the past 90 days.
Yes X No .
___ ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Class of Securities (as of December 10, 1996)
____________________ ___________________
Common Stock, $.001 par value per share 25,282,777
=============================================================================
<PAGE>
<PAGE>
INDEX
BOSTON TECHNOLOGY, INC.
PART I. FINANCIAL INFORMATION Page No.
________
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets:
As of October 31, 1996 (Unaudited) and January 31, 1996............ 3
Unaudited Consolidated Statements of Income:
For the three and nine months ended
October 31, 1996 and 1995.......................................... 4
Unaudited Consolidated Statements of Cash Flows:
For the nine months ended
October 31, 1996 and 1995.......................................... 5
Notes to Consolidated Financial Statements......................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................15
Item 2. Changes in Securities..............................................15
Item 3. Defaults upon Senior Securities....................................15
Item 4. Submission of Matters to a Vote of Security Holders................15
Item 5. Other Information..................................................15
Item 6. Exhibits and Reports on Form 8-K...................................15
Signatures.................................................................15
Exhibit Index..............................................................16
Page 2<PAGE>
<PAGE>
PART I
BOSTON TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, 1996 January 31, 1996
_________________ ________________
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,544,000 $ 13,929,000
Accounts receivable, less allowances of
$1,703,000 and $1,554,000 62,677,000 28,892,000
Net investment in sales type leases 2,091,000 2,771,000
Inventories 16,456,000 16,951,000
Prepaid Taxes 520,000 3,886,000
Prepaid expenses and other current assets 2,458,000 2,130,000
___________ __________
Total current assets 89,746,000 68,559,000
Net investment in sales type leases 0 357,000
Property and equipment, net 20,593,000 10,597,000
Deferred Taxes 2,080,000 2,080,000
Other assets 5,500,000 3,068,000
___________ __________
TOTAL ASSETS $ 117,919,000 $ 84,661,000
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 1,000,000 275,000
Accounts payable 13,111,000 11,253,000
Accrued expenses 20,016,000 9,981,000
AT & T Contract Accrual 0 2,060,000
Deferred customer funding 744,000 2,825,000
Deferred revenues 6,733,000 3,536,000
___________ __________
Total current liabilities 41,604,000 29,930,000
Long-term debt and other long-term liabilities 9,241,000 417,000
Stockholders' equity:
Common stock, $.001 par value, 60,000,000 shares authorized;
25,344,814 and 25,344,814 shares issued 25,000 25,000
Additional paid-in capital 57,579,000 57,048,000
Retained earnings 10,946,000 5,557,000
Cumulative translation adjustment 299,000 283,000
Treasury Stock, at cost, 142,008 and 613,119 shares (1,775,000) (8,599,000)
___________ __________
Total stockholders' equity 67,074,000 54,314,000
___________ __________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 117,919,000 $ 84,661,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3<PAGE>
<PAGE>
BOSTON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended October 31, Nine months ended October 31,
_____________________________ ____________________________
1996 1995 1996 1995
___________ ___________ ___________ ____________
<S> <C> <C> <C> <C>
Revenues $ 52,818,000 $ 19,519,000 $ 130,024,000 $ 71,667,000
Cost and expenses:
Cost of revenues 23,235,000 8,636,000 56,644,000 26,257,000
Research and development 10,067,000 6,099,000 25,345,000 15,424,000
Marketing, general and adminstrative 12,593,000 9,775,000 33,378,000 26,699,000
__________ __________ __________ __________
45,895,000 24,510,000 115,367,000 68,380,000
Income (loss) from operations 6,923,000 (4,991,000) 14,657,000 3,287,000
Interest income (expense) net (213,000) 203,000 (315,000) 936,000
Other expense, net (293,000) (214,000) (816,000) (19,000)
_________ _________ _________ _________
Income (loss) before provision for
income taxes 6,417,000 (5,002,000) 13,526,000 4,204,000
Provision (benefit) for income taxes 2,246,000 (1,624,000) 4,734,000 1,344,000
_________ _________ _________ _________
Net income (loss) $ 4,171,000 $ (3,378,000) $ 8,792,000 $ 2,860,000
========= ========= ========= =========
Net income (loss) per share $ .15 $ (.14) $ .32 $ .11
========= ========= ========= =========
Weighted average number of common and
common equivalent shares outstanding 28,144,000 24,937,000 27,823,000 26,140,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4<PAGE>
<PAGE>
BOSTON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended October 31,
____________________________
1996 1995
___________ _____________
<S> <C> <C>
Cash flows from (used by) operating activities:
Net Income $ 8,792,000 $ 2,860,000
Reconciliation to cash flows from (used by)
operating activities:
Depreciation and amortization 5,720,000 3,342,000
Rent expense in excess of payments (144,000) (147,000)
Loss on disposal of fixed assets 127,000 0
Changes in operating assets and liabilities:
Accounts receivable (33,785,000) 1,308,000
Net investment in sales type leases 1,037,000 1,249,000
Inventories 495,000 (7,646,000)
Prepaid expenses and other current assets (328,000) (294,000)
Accounts payable 1,858,000 5,286,000
Accrued expenses 7,975,000 665,000
Deferred revenues 3,197,000 492,000
Deferred Customer funding (2,081,000) (372,000)
Other long-term liabilities (33,000) (57,000)
Income taxes 3,896,000 (4,173,000)
__________ __________
Cash flows from (used by) operating activities: (3,274,000) 2,513,000
Cash flows from (used by) investing activities:
Purchase of Property and equipment (15,157,000) (4,817,000)
Purchase of investments 0 (3,429,000)
Redemption of investments 0 7,168,000
Purchase of license agreements and other assets (1,118,000) (22,000)
__________ __________
Cash flows used by investing activities (16,275,000) (1,100,000)
Cash flows from financing activities:
Principal payments under financing obligations (275,000) (542,000)
Borrowings under revolving credit agreements 18,600,000 0
Repayments under revolving credit agreements (10,600,000) 0
Purchase of Treasury Stock 0 (10,663,000)
Proceeds from exercise of common stock options 2,641,000 2,147,000
Proceeds from employee stock purchase plan 781,000 615,000
__________ __________
Cash flows from (used by) financing activities 11,147,000 (8,443,000)
Effect of exchange rate changes on cash 17,000 156,000
__________ __________
Net decrease in cash and cash equivalents (8,385,000) (6,874,000)
Cash and cash equivalents at beginning of period 13,929,000 19,715,000
__________ __________
Cash and cash equivalents at end of period $ 5,544,000 $ 12,841,000
========== ==========
</TABLE> Page 5<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Supplemental disclosure of cash flow information:
<S> <C> <C>
Tax benefit of disqualifying dispositions of
incentive stock options $ 530,000 $ 923,000
Income taxes paid 2,021,000 5,047,000
Interest paid 712,000 126,000
Non cash investing activities:
Purchase of license agreements 2,000,000 0
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 6<PAGE>
<PAGE>
Boston Technology, Inc.
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Boston Tech-
nology, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and pursuant
to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accord-
ingly, these consolidated financial statements do not include all of the infor-
mation and footnote disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the unaudited consolidated statements of income for the
three and nine months ended October 31, 1996 and 1995, the unaudited
consolidated statements of cash flows for the nine months ended October 31,
1996 and 1995, and the unaudited consolidated balance sheet at October 31,
1996 have been made.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates
included in these financial statements include the reserve for bad debts,
reserve for warranty, inventory valuation reserve and certain accrued
liabilities.
It is suggested that the financial statements contained herein be read in con-
junction with the consolidated financial statements and notes thereto included
in the Company's audited Annual Report on Form 10-K for the year ended
January 31, 1996. The results for interim periods are not necessarily
indicative of the results for the full fiscal year.
Certain amounts in the fiscal 1996 financial statements have been reclassified
to conform to the fiscal 1997 presentation.
2. CASH AND CASH EQUIVALENTS
In accordance with the terms of a patent license agreement, the Company had
restricted cash of $275,000 at January 31, 1996. This amount was paid in
February 1996.
3. INVENTORIES
Inventories consist of: October 31, 1996 January 31, 1996
______________ ________________
(Unaudited)
Materials and purchased parts $ 9,200,000 $ 8,179,000
Work in process 6,878,000 6,858,000
Finished goods 378,000 1,914,000
__________ __________
Total $ 16,456,000 $16,951,000
========== ==========
Page 7<PAGE>
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4. FINANCING ARRANGEMENTS
The Company maintains a revolving credit facility with two banks. On November
19, 1996 the Company increased its available line of credit with these two
banks from $25,000,000 to $35,000,000. Borrowings are collateralized by the
Company's accounts receivable and inventories and bear interest at the prime
rate. The credit facility is scheduled to expire on November 19, 1998. As of
October 31, 1996, the Company had $8,000,000 outstanding under the
credit facility.
Page 8<PAGE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-Q contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated in such
forward-looking statements. These factors include, without limitation, those
set forth below under the caption "Certain Factors That May Affect Future
Operating Results."
1. Results of Operations
Three Months Ended October 31, 1996 versus Three Months Ended October 31, 1995
Net Sales.
Revenues for the third quarter were $52,818,000 versus $19,519,000 for the
prior year period, an increase of $33,299,000, or 171%. North American
revenues, generated by sales to Regional Bell Operating Companies, long-
distance carriers, and other network operators, were approximately $42,301,000,
an increase of $36,024,000, or 574%, versus the prior year period. North
American revenues increased to 80% of total revenues versus 32% in the prior
year comparable period due primarily to higher incremental volume from several
existing customers. International revenues for the third quarter were
$10,517,000, a decrease of $2,725,000, or 21%, versus the prior year period.
International revenues decreased due primarily to lower volume from the
Company's existing Pacific Rim customers, partially offset by incremental
revenue from four new International customers. International revenues comprised
20% of total third quarter 1997 revenues versus 68% in the prior year period.
Page 9<PAGE>
<PAGE>
Gross Profit.
As a percentage of revenues, gross profit was approximately 56% for the third
quarter, consistent with the comparable period in the prior year. For the
remainder of fiscal 1997, the Company expects to continue to ship a larger
percentage of smaller systems, with gross profit as a percentage of revenues
to continue to run below fiscal 1996 levels.
Research and Development Expenses.
Net research and development expenses were $10,067,000 for the third quarter
versus $6,099,000 for the prior year period. As a percentage of revenues, net
research and development expenses decreased to 19% for the third quarter versus
31% for the prior year period due primarily to higher incremental revenue.
Excluding the effect of customer funding and certain reclassifications, gross
research and development spending in the third quarter of fiscal 1997 in-
creased $4,821,000, or 66%, over the prior year period primarily due to an
increase in headcount to support ongoing development projects. The Company
expects to continue to make a significant investment in research and develop-
ment, including research and development required under certain recent customer
contracts. The Company is also involved in research and development programs
that are funded in whole or in part by its customers. Customer funding is
recognized as a reduction to research and development expense as development
activities occur. Customer funding offsets against expense for the third
quarter of fiscal 1997 and 1996 were $1,213,000 and $924,000, respectively.
In addition to customer funding offsets, the Company periodically capitalizes
expenditures incurred under long-term custom modification contracts. These
expenditures are classified as work in process and are recognized in cost of
sales as product is delivered. Reclassifications against expense for these
long-term custom modification contracts for the third quarter of fiscal 1997
and 1996 amounted to $835,000 and $271,000, respectively.
Marketing, General and Administrative Expenses.
Marketing, general and administrative expenses for the third quarter were
$12,593,000 versus $9,775,000 for the prior year period. As a percentage of
revenues, these expenses decreased from 50% at October 31, 1995 to 24% at
October 31, 1996 due primarily to higher incremental revenue. Gross spending
increased $2,818,000 versus the prior year period due primarily to the
expansion of the worldwide customer service and sales organizations,
particularly in Mexico and the Far East, as well as increased staffing to
support the overall growth of the Company's business.
Interest.
Interest income for the third quarter decreased by $140,000 to $119,000
at October 31, 1996 due primarily to lower average cash balances.
Interest expense for the third quarter increased by $276,000 to $332,000 as a
result of borrowings against the Company's line of credit. As a result of such
borrowings, the Company expects to continue to incur interest expense that is
higher than in past periods.
Other Expense.
Other expense increased $79,000 to $293,000 at October 31, 1996 due primarily
to the Company's share of a loss incurred by the joint venture established in
December 1995 in Brazil as well as a loss related to a disposal of fixed assets.
Page 10<PAGE>
<PAGE>
Nine Months Ended October 31, 1996 versus Nine Months Ended October 31, 1995
Net Sales.
Revenues for the nine months ended were $130,024,000 versus $71,667,000 for
the prior year period, an increase of $58,357,000, or 81%. North American
revenues, generated by sales to Regional Bell Operating Companies, long
distance carriers and other network operators, were approximately $89,302,000,
an increase of $64,745,000, or 264%, versus the prior year period. North
American revenues increased due primarily to higher volume from several
existing customers as well as to incremental revenue from three new customers.
International revenues for the nine months ended October 31, 1996 were
$40,722,000, a decrease of $6,387,000, or 14%, versus the prior year period.
International revenues decreased due primarily to lower volume from the
Company's existing Pacific Rim customers, partially offset by incremental
revenue from several new International customers. International revenues
comprised 31% of total revenues for the first nine months of fiscal 1997, as
compared to 66% for the same period in fiscal 1996.
Gross Profit.
As a percentage of revenues, gross profit was approximately 56% for the nine
months ended October 31, 1996 versus approximately 63% the prior year period.
The decrease was primarily due to an increase in the number of smaller systems
shipped, which traditionally have lower margins. The Company expects to
continue to ship a larger percentage of smaller systems during the balance of
fiscal 1997, with gross profit as a percentage of revenues to continue to run
below fiscal 1996 levels.
Research and Development Expenses.
Net research and development expenses were $25,345,000 for the nine months ended
October 31, 1996 versus $15,424,000 for the prior year period. As a percentage
of revenues, net research and development expenses were 19% for the first nine
months of fiscal 1997 versus 22% for the prior year period. Excluding the
effect of customer funding and certain reclassifications, gross research and
development spending in the first nine months of fiscal 1997 increased
$10,897,000, or 53%, over the prior year period primarily due to an increase in
headcount to support ongoing development projects. Customer funding offsets
against expense for the first nine months of fiscal 1997 and 1996 amounted to
$3,294,000 and $3,618,000, respectively. Reclassifications against expense
for long-term custom modification contracts for the first nine months of fiscal
1997 and 1996 amounted to $2,933,000 and $1,633,000, respectively.
Marketing, General and Administrative Expenses.
Marketing, general and administrative expenses for the nine months ended
October 31, 1996 were $33,378,000 versus $26,699,000 for the prior year period.
As a percentage of revenues, these expenses decreased from 37% at October 31,
1995 to 26% at October 31, 1996 due primarily to higher incremental revenue.
Absolute spending increased due primarily to additional staffing in the world-
wide customer service and sales organizations, to support the Company's growth
and worldwide expansion.
Page 11<PAGE>
<PAGE>
Interest.
Interest income for the nine months ended October 31,1996 decreased by $591,000
to $470,000 due primarily to lower average cash and investment balances.
Interest expense for the nine months ended October 31,1996 increased by
$660,000 to $785,000 as a result of borrowings against the Company's line of
credit.
Other Expense.
Other expense increased by $797,000 to $816,000 at October 31, 1996 due
primarily to the Company's share of a loss incurred by a joint venture
established in December 1995 in Brazil as well as a loss related to a disposal
of fixed assets.
Provision for Income Taxes.
The effective tax rate for the three and nine months ended October 31, 1996 and
1995, was 35% and 32%, respectively. The increase in the tax rate from fiscal
year 1996 to fiscal year 1997 was due primarily to changes in U.S. tax
regulations eliminating the ability for the company to utilize Research and
Development tax credits in fiscal 1997. The Company expects the effective rate
to remain at approximately 35% throughout the remainder of fiscal 1997.
2. Liquidity and Capital Resources
Cash and cash equivalents decreased by $8,385,000 to $5,544,000 at October 31,
1996 versus $13,929,000 at January 31, 1996. The decrease in cash and cash
equivalents is due primarily to a $33,785,000 increase in accounts receivable
and capital expenditures of $15,157,000. This decrease was partially offset by
increases in accounts payable and accrued expenses of $9,833,000, net income
of $8,792,000 and net borrowings under a revolving credit facility of
$8,000,000.
The increase of $33,785,000 in accounts receivable from $28,892,000 at
January 31, 1996 to $62,677,000 at October 31, 1996 was due primarily to higher
sales volume during the third quarter of fiscal 1997 versus the fourth
quarter of fiscal 1996.
The $15,157,000 increase in property and equipment (at cost) was concentrated
in the area of research and development and was due primarily to the purchase
of computer workstations to support increased headcount, test equipment to
support increased manufacturing and research and development volume.
Additionally, the Company invested in an enterprise-wide computer
system upgrade.
Page 12<PAGE>
<PAGE>
The Company had net borrowings under its revolving credit facilities of
$8,000,000 outstanding at October 31, 1996, which are included on the Balance
Sheet under Long-term debt and other long-term liabilities. The Company
anticipates that its cash and cash equivalents, along with cash generated
from operations and existing credit facilities will be sufficient to meet
the Company's cash requirements at least through January 31, 1998.
Accounts payable and accrued expenses increased $9,833,000 to $33,127,000 at
October 31, 1996. Accrued distributor commissions increased from January 31,
1996 levels due to the timing of certain international sales and the timing of
the payment of these commissions. Accrued royalties increased due primarily to
a higher number of product licensing agreements with certain key vendors for
components incorporated into the Access NP product line. Product warranty
reserves and sales/use taxes payable increased due primarily to incremental
sales volume.
The $3,896,000 decrease in net taxes receivable was due primarily to refunds
received during the first quarter of fiscal 1997, as well as to provisions
for amounts due for fiscal 1997 taxes.
3. Certain Factors That May Affect Future Operating Results
The reader should consider the following important factors, among others,
which in some cases have affected, and in the future could affect, the
Company's actual results in future quarters and fiscal years to differ
materially from those expressed in forward-looking statements made by, or
on behalf of, the Company.
The Company has operated historically with minimal backlog, although backlog
has increased over the past three quarters. Revenues earned in any quarter will
continue to be somewhat dependent on orders booked, built, and shipped in that
quarter. The Company continues to experience a pattern of recording the
majority of its quarterly revenues in the third month of the quarter.
Historically, the Company's revenues have been attributed to a limited number
of customers, with a high average system revenue per transaction. Therefore,
the loss of any one customer, or a significant decline in their volume, could
have a material adverse effect on the Company's business and its results of
Page 13<PAGE>
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operations. The Company's ability to increase future revenues may depend on
its ability to generate sufficient revenues to substitute for reduced pur-
chases by one or more major customers. In addition, the Company's operating
expenses are incurred ratably throughout each quarter and are relatively fixed
in the short term. As a result, if projected revenues are not realized in the
expected period, the Company's operating results for that period could be
adversely affected.
The Company's revenue stream depends on its ability to enhance its existing
software products and to introduce new products on a timely and cost-effective
basis. This includes any customer-required custom software enhancements
required in the normal course of product delivery. If the Company were to
delay the introduction of new products, or to delay the delivery of specific
custom software enhancements, the Company's operating results could be
adversely affected.
The International portion of the Company's business, which represented 31% of
revenues for the first nine months of fiscal 1997, is subject to a number of
inherent risks, including difficulties in building and managing international
operations, international service and support of the Company's products,
difficulties or delays in translating products into foreign languages,
fluctuations in the value of foreign currencies, import/export duties and
quotas, and unexpected regulatory, economic or political changes in inter-
national markets. Due to the competitive environment in the international
marketplace, certain international customers may require longer payment terms;
as a result, days sales outstanding may fequently extend beyond ninety days on
amounts due from these customers.
Some of the Company's revenue may be denominated in foreign currencies. To
date, foreign currency fluctuations have not had a material adverse effect on
the Company's operating results. While the Company has periodically engaged in
hedging transactions to cover its currency translation exposure, International
business may require the Company to engage in these types of transactions more
frequently to mitigate the effect of foreign currency fluctuations.
The Company sells substantially all of its product to companies in the tele-
communication industry. This industry is undergoing significant change as a
result of deregulation and privatization worldwide, reducing restrictions
on competition within the industry. Unforseen changes in the regulary
environment may have an impact on the Company's revenues and/or costs in any
given part of the world. The enhanced services systems industry is already
highly competitive and the Company expects competition to intensify.
Competition for the sale of enhanced services systems to network operators is
based principally on capacity, high reliability and ability to provide multiple
applications platforms integrated with telecommunications networks. The Company
believes that it will continue to encounter substantial competition from its
existing competitors, and that other companies, many with considerably greater
financial, technical, marketing and sales resources than Boston Technology, may
enter the enhanced services systems markets.
Certain components of the Company's products are currently purchased from a
single source and, although the Company believes that alternate sources are
available, any interruption in the supply of such components could adversely
effect the Company's operating results.
Page 14<PAGE>
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PART II.
ITEM 1. Legal Proceedings
Reference is made to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1996 for a description of certain legal
proceedings (Civil Action Nos. 95-CV-7236, 95-CV-7295 and 95-CV-7317)
commenced in the United States District Court for the Eastern District
of Pennsylvania against the Company and certain of its current and
former officers and directors alleging violations of Section 10(b) of
the Securities Exchange Act of 1934, as amended, and Rule 10b-5 there-
under. On November 14, 1996 the United States District Court for the
Eastern District of Pennsylvania ordered the cases transferred to the
United States District Court for the District of Massachusetts.
Boston Technology and the defendants continue to deny the allegations
and intend to contest these cases vigorously.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the Exhibit Index are filed as
part of or included in this report.
(b) Reports on Form 8-K
None.
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.
BOSTON TECHNOLOGY, INC.
Date: December 16, 1996
/s/ Carol B. Langer
By: ____________________________
Carol B. Langer
Senior Vice President of Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
(principal financial officer)
Page 15<PAGE>
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BOSTON TECHNOLOGY. INC.
EXHIBIT INDEX
Exhibit
Number Title of Document
_______ ___________________________________________________
10.15 Loan Document Modification Agreement dated
November 19, 1996
11 Statement re: Weighted Shares used in Computation
of Earnings per Share
27 Financial Data Schedule
Page 16<PAGE>
LOAN DOCUMENT MODIFICATION AGREEMENT (NO. 2)
Dated as of November 19, 1996
LOAN DOCUMENT MODIFICATION AGREEMENT NO. 2 (the "Agreement") dated
as of November 19, 1996 by and between BOSTON TECHNOLOGY, INC., a Delaware
corporation with its principal place of business at 100 Quannapowitt Parkway,
Wakefield, Massachusetts 01880 (the "Borrower"), SILICON VALLEY BANK ("SVB"),
a California chartered bank with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054, and with a loan production office located
at Wellesley Office Park, 40 William Street, Wellesley, Massachusetts 02181,
doing business under the name "Silicon Valley East", CORESTATES BANK, N.A., a
national banking association, with its principal place of business at 1345
Chestnut Street, Philadelphia, Pennsylvania 19107 ("CoreStates" and together
with SVB, the "Lenders") and CORESTATES BANK, N.A. as agent for the Lenders (in
such capacity, the "Agent").
1. Reference to Existing Loan Documents.
Reference is hereby made to that Credit Agreement dated as of January 31, 1996
among SVB, CoreStates, SVB as agent for the Lenders, and the Borrower, as
previously amended as of July 6, 1996 (with the attached schedules and
exhibits, the "Credit Agreement") and the Loan Documents referred to therein,
including without limitation a certain Amended and Restated Promissory Note
of the Borrower in favor of SVB, dated as of July 6, 1996, in the principal
amount of $12,500,000 (the "SVB Note") and a certain Amended and Restated
Promissory Note of the Borrower in favor of CoreStates, dated as of July 6,
1996, in the principal amount of $12,500,000 (the "CoreStates Note", and
together with the SVB Note, the "Notes"), and the Security Documents referred
to therein. Unless otherwise defined herein, capitalized terms used in this
Agreement shall have the same respective meanings as set forth in the Credit
Agreement.
2. Effective Date.
This Agreement shall become effective as of November 19, 1996 (the "Effective
Date"), provided that the Agent shall have received the following on or before
November 24, 1996;
a. two copies of this Agreement, duly executed by the Borrower, the Lender
and the Agent; and
b. amended and restated promissory notes payable to each of the Lenders in
the form enclosed herewith (the "Amended Notes"), duly executed by the Borrower;
C. an agency agreement in the form enclosed herewith, by and between SVB,
as a lender, and CoreStates, as a lender and Agent, accepted and agreed to by
the Borrower (the "Agency Agreement"); and
d. evidence of the due recording or filing of financing statements,
amendments to previously filed financing statements and other appropriate
documentation as may be requested
Page 17<PAGE>
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by the Agent relating to the Security interests and rights granted pursuant to
the Security Instruments, duly executed by the Borrower;
e. a certificate of the Secretary or Assistant Secretary of the Borrower
certifying as to (i) the corporate charter of the Borrower, a copy of which as
certified by the Secretary of State of Delaware shall be attached thereto; (ii)
the By-Laws of the Borrower, a copy of which shall be attached thereto; (iii)
resolutions of the Borrower's Board of Directors authorizing the execution,
delivery and performance of this Agreement and the execution and delivery of
the Amended Notes; and (iv) the incumbency and signatures of officers of the
Borrower who have executed any documents in connection with the transactions
contemplated by this Agreement;
f. a certificate issued as of a recent date (I) by the Secretary of State
of Delaware as to the legal existence and good standing of the Borrower and
(II) by the Secretary of State of Massachusetts as to the due qualification of
the Borrower in that jurisdiction;
g. a certificate of an Authorized Officer of the Borrower and a duly
authorized officer of each Lender and the Agent certifying and attaching true,
accurate and complete copies of the Credit Agreement and Loan Documents amended
hereby;
h. an updated Perfection Certificate executed by an Authorized Officer of
the Borrower;
i. financial projections for the current and ensuing fiscal year of the
Borrower, satisfactory to the Borrowers in form and substance;
j. the favorable opinion of the counsel for the Borrower, in form and
substance satisfactory to the Agent and its special counsel; and
k. a check in the amount of $10,000 payable to the order of the Agent in
satisfaction of the Agent's Fee.
By the signature of its authorized officer below, the Borrower is hereby
representing that, except as modified in Schedule A attached hereto, the
representations of the Borrower set forth in the Loan Documents (including
those contained in the Credit Agreement, as amended by this Agreement) are true
and correct as of the Effective Date as if made on and as of such date and
that no Default or Event of Default has occurred and is continuing as of the
Effective Date. Finally, the Borrower represents that, as of the Effective
Date, it is not aware of any defenses against its obligations to pay any
amounts under the Credit Agreement and the other Loan Documents.
3. Description of Changes in Terms.
a. As of the Effective Date, the Credit Agreement is modified in the
following respects:
Page 18<PAGE>
-3-
(i) Cover Page. The cover page is hereby amended in the following respects:
(A) replacing the date "January 31, 1996" with "November 19, 1996", (B)
replacing the reference to "SILICON VALLEY BANK, AS AGENT" with "CORESTATES
BANK, N.A., AS AGENT", and (C) replacing the reference to the dollar amount
of the credit facility in the amount of "$25,000,000" with "$35,000,000".
(ii) Preamble. The Preamble is hereby amended by replacing the reference to
"SILICON VALLEY BANK" as the Agent in line 10 with "CORESTATES BANK, N.A."
(iii) Section 1. 1: Amount. Section 1. 1 is hereby amended by replacing the
reference to "October 6, 1997" in the fourth line thereof with "November 19,
1998".
(iv) Section 1.2: Line of Credit Commitment. Section 1.2 is hereby restated
in its entirety as follows:
"1.2 Line of Credit Commitment. The Total Line of Credit Commitment shall be,
in the aggregate, $35,000,000; CoreStates shall have a Line of Credit
Commitment of $22,500,000 and SVB shall have a Line of Credit Commitment of
$12,500,000."
(v) Section 1.5: Requests for Line of Credit Loans. Section 1.5 is hereby
amended by restating the second sentence as follows:
"Such notice shall specify the effective date, Type and the amount of
such Loan."
(vi) Section 1.6: Limitations on Extensions of Credit. Section 1.6 is
hereby restated in its entirety as follows:
"The Borrower shall not permit or request the Lenders (or the Agent on their
behalf) to make any Extension of Credit that would cause the sum of (a) the
aggregate unpaid principal amount of all Line of Credit Loans under this
Agreement plus (b) the aggregate of (i) the Applicable LC Percentage of all
amounts available to be drawn under any Letters of Credit issued for the
account of the Borrower as provided in Section 1.9 (involving the dollar
equivalent of all Letters of Credit issued in a currency other than United
States Dollar) and (ii) all unreimbursed drawings under such Letters of Credit
(the sum of (i) and (ii) referred to herein as the "Letter of Credit Usage"),
to exceed at any time an amount equal to the lesser of (x) the Total Line of
Credit Commitment then in effect; or (y) 80% of Eligible Accounts Receivable
(such amount, the "Borrowing Base"). For purposes hereof, the "Applicable LC
Percentage" shall be: (1) 50% with respect to Letters of Credit which have an
expiration date six months or less subsequent to the applicable measuring date;
and (11) 100% with respect to the Letters of Credit which have an expiration
date more than six months subsequent to the applicable measuring date.
"If the sum of Extensions of Credit shall at any time exceed the Borrowing
Base, the Borrower shall, on the next Banking Day, prepay or repay (together
with accrued interest thereon) such principal amount of the Line of Credit
Loans and unreimbursed
Page 19<PAGE>
-4-
drawings under the Letters of Credit such that, giving effect to such pre-
payment or repayment, the sum of the Extensions of Credit shall not exceed the
Borrowing Base."
(vii) Section 1.7: Maturity Date of Line of Credit Loans and Other
Extensions of Credit. Section 1.7 is hereby amended by replacing the reference
to "October 6, 1997" in the third line thereof with "November 19, 1998".
(viii) Section 1.8: Termination of Commitment. Section 1.8 is hereby amended
by replacing the reference to "two (2) Banking Days"' in the first and second
line thereof, to "three (3) Banking Days"' and by inserting at the end of such
section the following "or reduce the Total Line of Credit Commitment in
increments of not less than $5,000,000."
(ix) Section 1.9: Letters of Credit
a. Section 1.9(a) is hereby amended by replacing the words "either Lender
as designated from time to time by the Borrower" with "the Agent."
b. Section 1.9(b) is hereby amended by replacing "$20,000,000" in the last
line thereof with "the Total Line of Credit Commitment."
C. Sections 1.9(g) and (h) are hereby restated in their entirety as
follows:
" (g) The Borrower shall pay the Issuing Bank, for the benefit of each of the
Lenders based upon their respective Commitment Percentages, a fee with respect
to each Letter of Credit issued equal to 1.625% per annum of the face value
amount of the Letter of Credit. Such fee shall be payable upon the issuance of
the requested Letter of Credit and shall be nonrefundable.
(h) The Borrower shall pay the Issuing Bank for its sole benefit a fronting
fee with respect to each Letter of Credit issued equal to one-eighth of I% per
annum of the face amount of the Letter of Credit. Such fee shall be payable
upon the issuance of the requested Letter of Credit and shall be non-
refundable."
(x) Section 1. 10: Clean-Up Requirement.
Section 1. 1 0 is hereby deleted in its entirety.
(xi) Section 2. 1: Interest Rates.
a. Sections (i) and (ii) of Section 2.l(a) are hereby restated in their
entirety as follows:
" (i) for Base Rate Loans, at the Base Rate per annum; and
(ii) for LIBO Rate Loans, at the LIBO Rate, plus 175 basis points
per annum."
Page 20<PAGE>
-5-
b. All references in the Credit Agreement to "Prime Rate" and "Prime Rate
Loans" shall be changed to "Base Rate" and 'Base Rate Loans". All references
in the Credit Agreement to "LIBOR Loans" and "LIBOR Rate Loans" shall be
changed to "LIBO Loans" and "LIBO Rate Loans".
C. Section 2.1 (b) is hereby amended by restating the second sentence in
its entirety as follows:
"Accrued interest on each Base Rate Loan shall be payable monthly in arrears
on the first day of each month. Accrued interest on each LIBO Loan shall be
payable on the last day of each Interest Period; provided that if the Interest
Period is six (6) months, the accrued interest shall be payable on the
ninetieth (90th) day and on the last day of the Interest Period. In any event,
accrued interest on each Base Rate Loan and LIBO Loan shall be payable upon the
payment, prepayment or conversion thereof, but only on the principal so paid
or prepaid or converted; provided that when the terms of this Agreement require
that interest be paid at the Post-Default Rate, such interest shall be payable
from time to time on demand of any Lender. "
(xii) Section 2.5: Minimum and Maximum Amounts.
. Clauses (a) and (b) of Section 2.5 are hereby restated in their entirety as
follows:
"(a) in the case of LIBO Loans, $1,000,000 or a larger multiple of $100,000
and (b) in the case of Base Rate Loans, $1,000,000 or a larger multiple of
$100,000, provided that there shall be no minimum amount for prepayments of
Base Rate Loans. "
b. Section 2.5 is further amended by inserting the following sentence at
the end thereof:
"In no event may the Borrower have more than six (6) tranches, including any
Base Rate tranche, outstanding at any one time."
(xiii) Section 2.6: Certain Notices. Section 2.6 is hereby amended by
restating the notice periods for the following actions as set forth below:
"Termination of Line of Credit
Commitment 3 Banking Days
Borrowings or prepayment of
Prime Rate Loans 2 Banking Days
Prepayment of, conversion into,
or duration of Interest Periods for
LIBOR loans 3 London Banking Days"
Page 21<PAGE>
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(xiv) Section 4.8: Facility Fee. Section 4.8 is hereby amended by changing
the reference to "one-half of one percent (1/2%)" in the third line thereof to
"three-eighths of one percent (3/8%)".
(xv) Section 6.4: Financial Statements, Etc. Section 6.4(d) is hereby
amended in its entirely as follows:
"(d) within thirty (30) days after the last day of each calendar month, (1) an
accounts receivable aging for the Borrower as of the end of such month in such
form as the Agent may reasonably prescribe, all in reasonable detail, and (11)
a Borrowing Base Certificate signed by an Authorized Officer of the Borrower
in the form attached to this Agreement as Exhibit D, appropriately completed;"
(xvi) Section 6.13: Compliance with Laws. There is hereby added to Section
6 the following new Section 6.13:
"6.13 Compliance With Laws. The Borrower shall comply and shall cause each of
its Subsidiaries to comply with all laws, statutes and regulations applicable
to its business, noncompliance with which could have a Material Adverse
Effect."
(xvii) Section 7.3: Consolidation, Merger or Acquisition. Section 7.3 is
hereby amended by restating the second proviso contained therein as follows:
"provided further, that as long as no Event of Default has occurred and is
continuing or would arise therefrom, the Borrower may make an acquisition of
business, assets or stock of another Person engaged in the same or a related
business as long as the aggregate consideration expended by the Borrower in
connection with any such transactions does not exceed (a) in the case of a
transaction involving cash consideration, $5,000,000 in cash for such
transaction or $10,000,000 in cash when taken together with any other such
transactions since November 19, 1996, or (b) in the case of a transaction
involving stock of the Borrower as consideration, $25,000,000 in the market
value of the stock for stock transaction or $35,000,000 when taken together
with any other such transactions since November 19, 1996."
(xviii) Section 7.5: Indebtedness. Section 7.5 is hereby amended by adding to
the end thereof the following new subsection (f):
"(f) Purchase Money Indebtedness in an aggregate amount not to exceed
$8,000,000 in any fiscal year, provided that after giving effect to the
incurrence of such Purchase Money Indebtedness and to the receipt and
application of the proceeds thereof, no Default or Event of Default shall have
occurred and be continuing. "
(xix) Section 7.6: Liens. There is hereby added to the end of Section 7.6
the following new subsection (h):
" (h) Purchase Money Security interests to secure Purchase Money Indebtedness
permitted pursuant to Section 7.5 (f) hereof,"
Page 22<PAGE>
-7-
(xx) Sections 7. 11 to 7.13: Financial Covenants. Sections 7. 11 to 7.13
are hereby restated in their entirety as follows:
"7. 11 Quick Ratio. The Borrower will not permit the Quick Ratio at the end of
any fiscal quarter to be less than 1.25 to 1.
7.12 Minimum Profitability . The Borrower will not (a) incur Net Losses in
excess of $1,500,000 in any fiscal quarter ending after January 3i, 1996, or
(b) permit cumulative Net Income to be less than $2,500,000 over a period of
any four consecutive fiscal quarters, commencing with the quarter ending
January 31, 1997.
7.13 Leverage. The Borrower will not permit the ratio of Total Liabilities
to Tangible Net Worth at the end of any fiscal quarter to exceed 1.50 to 1."
(xxi) Section 7.15: Guarantees. The following new section 7.15 is hereby
added to Section 7:
"7.15 Guarantees. The Borrower will not, and will not permit, any Subsidiary
to enter into a Guarantee or otherwise in any manner become or be responsible
for indebtedness or obligations (including working capital maintenance and
take-or-pay contracts) of any other Person, contingently or otherwise, except
(a) the endorsement of negotiable instruments of deposit in the normal course
of business; (b) guarantees by the Borrower or any Subsidiary issued to secure
any Indebtedness or obligation which is otherwise expressly permitted
hereunder; or (c) guarantees in the ordinary course of business by the Borrower
of obligations of any Subsidiary in respect of performance under any agreement
or arrangement with a customer (but in no event any Indebtedness or payment of
any monetary obligation)."
(xxii) Section 9. 1: Certain Definitions.
a. The following definitions are hereby restated in their entirety as
follows:"
"Banking Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks in Philadelphia, Pennsylvania or
The Commonwealth of Massachusetts or State of California are
authorized or required to close under the laws of the Commonwealth of
Pennsylvania, the Commonwealth of Massachusetts or the State of
California and, if the applicable day relates to LIBO Rate Loan, or
notice with respect to a LIBO Rate Loan, a day on which dealings in
Dollar deposits are also carried on in the London interbank market
and banks are open for business in London ("London Banking Day").
"Interest Period" shall mean with respect to any LIBO Rate Loan, each period
commencing on the date any such Loan is made, or, with respect to a Loan being
renewed, the last day of the next preceding Interest Period with respect to a
Loan, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day of the calendar month) in the
first, second, third or sixth calendar month thereafter as selected under the
procedures specified in Section 2.6,
Page 23<PAGE>
-8-
if the Lenders are then offering LIBO Rate Loans for such period; provided
that each LIBO Rate Loan Interest Period which would otherwise end on a day
which is not a Banking Day (or, for purposes of Loans to be repaid on a London
Banking Day, such day is not a London Banking Day) shall end on the next
succeeding Banking Day (or London Banking Day, as appropriate) unless such next
succeeding Banking Day (or London Banking Day, as appropriate) falls in
the next succeeding calendar month, in which case the Interest Period shall
end on the next preceding Banking Day (or London Banking Day, as appropriate).
'LIBO Rate" (formerly LIBOR Rate) shall mean, for the applicable Interest
Period, (i) the rate, rounded upwards to the next one-sixteenth of one
percent, determined by the Agent two (2) London Banking Days prior to the date
of the corresponding LIBO Rate Loan, at which the Agent is offered deposits in
dollars at approximately 11:00 A.M., London time by leading banks in the
interbank eurodollar or eurocurrency market for delivery on the date of such
Loan in an amount and for a period comparable to the amount and Interest Period
of such Loan and in like funds, divided by (ii) a number equal to one (1.0)
minus the Reserve Requirement. The LIBO Rate shall be adjusted automatically
with respect to any LIBO Rate Loan outstanding on the effective date of any
change in the Reserve Requirement, as of such effective date. LIBO Rate
shall be calculated on the basis of the number of days elapsed in a year of
360 days.
"Office of the Agent" shall initially mean the banking office of the Agent
located at 1345 Chestnut Street, Philadelphia, Pennsylvania 19107, or such
other location of which the Agent shall notify the Borrower.
"Reserve Requirement" shall mean, for any LIBO Rate Loan for any Interest
Period therefor, the daily average of the stated maximum rate (expressed as a
decimal carried to four places; e.g. 7.5% would equal .0750) at which reserves
(including any marginal, supplemental, or emergency reserves) are required to
be maintained during such Interest Period under Regulation D by the Agent
against "Eurocurrency liabilities" (as such term is used in Regulation D) but
without benefit of credit proration, exemptions, or offsets that might
otherwise be available to the Agent from time to time under Regulation D.
Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by the Agent against (i)
any category of liabilities which includes deposits by reference to which
the rate for LIBO Rate Loans is to be determined; or (ii) any category of
extension of credit or other assets which include LIBO Rate Loans.
"Total Liabilities" means, at any time, the consolidated liabilities of the
Borrower and its Subsidiaries at such time (including Letter of Credit Usage),
determined in accordance with GAAP, less all then outstanding Subordinated
Debt, provided, however, for purposes of calculating the leverage ratio under
Section 7.13, Total Liabilities shall not include Deferred Revenues but only
to the extent that they do not exceed $12,000,000 in the aggregate.
Page 24<PAGE>
-9-
b. The following definitions are hereby amended as follows:
"Post-Default Rate" The reference to "4%" in the fifth line thereof is changed
to "3%".
"Quick Ratio" There is hereby added to the end of such definition the
following:
"For purposes of calculating the Quick Ratio, Line of Credit Loans (but not
Letter of Credit Usage) shall be considered as Current Liabilities."
c. The following definitions are hereby added to Section 9.1 in
alphabetical order:
"Authorized Officer" The President, Chief Financial Officer or other executive
officer of the Borrower authorized to take the action in question by vote or
resolution of the Board of Directors of the Borrower.
"Applicable LC Percentage" shall have the meaning specified in Section 1.6.
"Base Rate" shall mean, for any day, the higher of the Federal Funds Rate plus
one-half percent (1/2%) per annum or the Prime Rate, calculated on the basis
of the actual number of days elapsed in a year of 360 days.
For purposes hereof, "Federal Funds Rate" shall mean, for any day, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1 %) equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers
on such day, as published by the Federal Reserve Bank of New York on the
Banking Day next succeeding such day, provided that if the day for which such
rate is to be determined is not a Banking Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Banking Day.
"Borrowing Base" shall have the meaning set forth in Section 1.6.
"Eligible Accounts Receivable" shall mean an account receivable owing to the
Borrower (and in no event to a Subsidiary) which met the following
specifications at the time it came into existence and continues to meet the
same until it is collected in full:
(a) The original stated maturity of the account is not more than one
hundred twenty (120) days after the invoice date thereof, and the account
(regardless of its stated maturity date) does not remain unpaid more than one
hundred twenty (120) days after such invoice date.
(b) The account arose from the performance of services or an outright
sale of goods or license of intellectual property by Borrower, such services
have been rendered or such goods or intellectual property have been shipped to
the
Page 25<PAGE>
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account debtor, and such account is evidenced by a receipt or other writing
in form acceptable to the Agent in its reasonable business judgment.
(c) The account is owned solely by the Borrower, and is not subject to any
assignment, claim, lien or security interest, other than a security interest
in favor of the Lenders.
(d) The account is not subject to set-off, credit, allowance or adjustment
by the account debtor, except discount allowed for prompt payment; the account
is not one as to which the account debtor disputes liability or makes any
claim with respect thereto or as to which the Agent believes, in its reasonable
business judgment, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or which involves an
account debtor subject to any insolvency proceeding, or becomes insolvent, or
goes out of business.
(e) The account arose in the ordinary course of Borrower's business, and
did not arise from the performance of services or a sale of goods to an
employee of the Borrower.
(f) No notice of bankruptcy or insolvency of the account debtor has been
received by or is known to the Borrower.
(g) The Borrower has pledged any instrument or chattel paper evidencing
the account to the Agent pursuant to the provisions of the Security Agreement.
(h) Not more than 50% of the aggregate receivables of the account debtor
have remained unpaid for a period of more than one hundred twenty (120) days
from the invoice date.
(i) If the aggregate accounts receivables from the account debtor
(including its Subsidiaries and Affiliates) exceed 25% of the total Eligible
Accounts Receivable of the Borrower, then that portion of the account over
the 25% level will be disqualified.
j) The account does not relate to goods placed on consignment, guaranteed
sale, sale or return, sale on approval, bill and hold, or other terms by reason
of which the payment by the account debtor may be conditional.
(k) The account debtor is not an Affiliate, officer or employee of the
Borrower.
(1) The account debtor is not a Governmental Authority.
(m) If the Borrower owes any amounts to the account debtor for goods sold,
services rendered or otherwise in an aggregate amount of $50,000 or
Page 26<PAGE>
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greater, then the accounts of such account debtor in an amount equal to the
total amounts owned by the Borrower to the account debtor shall be
disqualified.
(n) The Lenders have not notified the Borrower that the Lenders have
determined that an account or account debtor is unsatisfactory for credit
reasons (which determination shall not be made unreasonably).
"Letter of Credit Usage" shall mean, at any time, the aggregate at such time
of (a) the maximum amount then available to be drawn under all outstanding
Letters of Credit, and (b) all then unreimbursed drawings under any Letters of
Credit.
"Purchase Money Indebtedness" shall mean Indebtedness incurred to finance the
acquisition of assets or the cost of improvements on real property or
leaseholds, in each case in an amount not in excess of the lesser of (a) the
purchase price or acquisition cost of said assets or the cost of said
improvements and (b) the fair market value of said assets or said improvements
on the date of acquisition of said assets or contract for said improvements.
"Purchase Money Security Interest" shall mean (a) a security interest securing
Purchase Money Indebtedness, which security interest applies solely to the
particular assets acquired with the Purchase Money Indebtedness that said
Purchase Money Security secures, and (b) the renewal, extension and refunding
of such Purchase Money Indebtedness in an amount not exceeding the amount
thereof remaining unpaid immediately prior to such renewal, extension or
refunding.
(xxiii) Section 10.3: Notices, Etc. Section 10.3 is hereby restated in its
entirety as follows:
"All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand, by a nationally recognized commercial
overnight delivery service, by first class mail or by telecopy, delivered,
addressed or transmitted, if to the Borrower, at its address at 100
Quannapowitt Parkway, Wakefield, Massachusetts 01880, Attention: Carol B.
Langer, Chief Financial Officer, Telecopy No. (617) 245-5322; if to
the Agent, at its address at CoreStates Bank, N.A., National Middle Market,
NY/NE/NJ, FC 1-1-3-36, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107,
Attention: R. Thomas Esser, Vice President, Telecopy No. (215) 973-1882; if to
CoreStates, to the address given for the Agent; if to SVB, at its address at
Wellesley Office Park, 40 William Street, Wellesley, Massachusetts 02181,
Attention: Jane A. Braun, Vice President, Telecopy No. (617) 431-9906; as to
each party to this Agreement, at such other address as shall be designated by
such party in a written notice to the other parties. All notices and
communications shall be deemed effective, (a) in the case of hand deliveries,
when delivered; (b) in the case of an overnight delivery service or first class
mail, when received; and (c) in the case of telecopy notices, when electronic
indication of receipt is received; except that notices to the Agent pursuant to
the provisions of Section 6.5 shall not be effective until received by Agent."
Page 27<PAGE>
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(xxiv) Section 10.6: Expenses: Indemnification. Section 10.6(b) is hereby
amended as follows:
Replace "'Me Borrower agrees ... expenses of any kind" with "The Borrower
agrees to indemnify the Agent and each Lender and its officers, directors,
employees, agents and counsel and hold the Agent and each Lender and its
officers, directors, employees, agents and counsel harmless from and against
any and all liabilities, losses, claims, damages, costs and expenses of any
kind".
(xxv) Section 10.9: Governing Law: Agreement Under Seal. Section 10.9 is
hereby amended by replacing "Massachusetts" with "Pennsylvania".
(xxvi) Section 10.11: VENUE, CONSENT TO SERVICE OF PROCESS. Section
10.11 is hereby restated in its entirety as follows:
" 10. 11 VENUE, CONSENT TO SERVICE OF PROCESS. THE BORROWER
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF MASSACHUSETTS OR THE COMMONWEALTH OF
PENNSYLVANIA IN ANY ACTION, SUIT OR PROCEEDING OF ANY KIND
AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS AGREEMENT,
THE NOTES, ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IRREVOCABLY AGREES TO BE
BOUND BY ANY FINAL JUDGMENT RENDERED BY ANY SUCH COURT IN
ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT SHALL HAVE BEEN
SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
SUBJECT TO EXERCISE AND EXHAUSTION OF ALL RIGHTS OF APPEAL AND
TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES
NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN
SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT ITS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION,
THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT IN ANY
INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER."
(xxvii) Section 10. 14: Lenders' Assignment. The following new section 10. 14
is hereby added to Section 10:
"Lenders may sell assignments or participations of up to 49% of their
commitments subject to the consent of the Borrower, which consent shall not be
unreasonably withheld. Assignees would assume all the rights and obligations
of the Lenders' and shall pay a $2,500 assignment fee to the Agent.
Notwithstanding the foregoing, no assignment or participation may reduce any
Lender's commitments below $5,000,000. Participations may be granted with
voting rights limited to changes in maturity, increases in the Commitment
Amount and decreases in interest margins."
Page 28<PAGE>
-13-
(xxviii) Certain Exhibits.
Exhibit B (Confirmation of Borrowing Request), Exhibit C (Compliance
Certificate) and Exhibit D (Borrowing Base Certificate) are hereby restated in
their entirety in the forms of attached Exhibits B, C and D respectively.
b. As of the Effective Date, the Security Agreement between the Lenders
and the Borrower dated as of January 31, 1991, as amended by an Amendment dated
as of January 14, 1993, and by Second Amendment dated as of July, 28, 1993
(the "Security Agreement") is modified in the following respects:
(i) Preamble. The Preamble is hereby amended by replacing the reference
to SILICON VALLEY BANK" as the Agent in line 3 with "CORESTATES BANK, N.A."
and CoreStates Bank, N.A., is for all purposes hereby substituted as Silicon
Valley Bank as Agent under the Security Agreement.
(ii) Recital. The first recital clause to the Security Agreement is hereby
restated in its entirety to read as follows:
"WHEREAS, Silicon Valley Bank ("SVB") and CoreStates Bank, N.A.
("CoreStates")(which also conducts business as "Philadelphia National
Bank")(collectively, the "Banks"), SVB as agent for the Banks and the
Company are parties to a Credit Agreement dated as of January 31, 1996
(which amended and restated the Commitment Letter dated as of January
31, 1991, as amended by amendments thereto dated as of July 10, 1992,
July 14, 1993, July 28, 1993, September 15, 1993 and July 11, 1994), as
amended by a letter amendment dated as of July 6, 1996 and a Loan
Modification Agreement (No. 2) dated as of November 14, 1996
("Amendment No. 2")(as so amended, and as the same may be further
amended, modified and supplemented from time to time, the "Credit
Agreement") providing, subject to the terms and conditions thereof, for
advances to be made by the Banks to the Company, and for letters of
credit to be issued for the account of the Company by the Agent ( in
such capacity, the "Issuing Bank");
WHEREAS, pursuant to Amendment No. 2, CoreStates has succeeded SVB as
Agent under the Credit Agreement and this Security Agreement;
(iii) All references in the Security Agreement to the "Commitment Letter"
shall be changed to the "Credit Agreement".
(iv) Section 13. Notices. Section 13 is hereby amended by replacing the
reference to "Section 17" in line 2 thereof with "Section 10.3".
Page 29<PAGE>
-14-
(v) Section 17. Massachusetts Law. Section 17 is hereby restated in its
entirety as follows:
"SECTION 17. Governing Law
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, EXCEPT AS OTHERWISE
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT
THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN
PENNSYLVANIA ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION."
C. The Credit Agreement, the Security Agreement and the other Loan
Documents are hereby amended wherever necessary or appropriate to reflect
the foregoing changes.
4. Continuing Validity.
Upon the effectiveness hereof, each reference in each Security Instrument or
other Loan Document to "the Credit Agreement", "thereunder", "thereof",
"therein", or words of like import referring to the Credit Agreement, shall
mean and be a reference to the Credit Agreement, as amended hereby, and each
reference to "the Security Agreement", "thereunder", "thereof", "therein", or
words of like import referring to the Security Agreement, shall mean and be a
reference to the Security Agreement, as amended hereby. Except as specifically
set forth above, the Credit Agreement and the Security Agreement shall remain
in full force and effect and are hereby ratified and confirmed.
Each of the Loan Documents is in full force and effect and is hereby ratified
and confirmed. The amendments set forth above (i) do not constitute a waiver
or modification of any term, condition or covenant of the Credit Agreement,
the Security Agreement or any other Loan Document, other than as expressly set
forth herein, and (ii) shall not prejudice any rights which the Lenders may now
or hereafter have under or in connection with the Credit Agreement or the
Security Agreement, as modified hereby, or the other Loan Documents and shall
not obligate the Lenders to assent to any further modifications.
5. Miscellaneous.
a. This Agreement may be signed in one or more counterparts each of which
taken together shall constitute one and the same document.
b. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
C. THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF PENNSYLVANIA
OR THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, OR PROCEEDRNG OF ANY KIND
AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THE CREDIT AGREEMENT, THIS LOAN
MODIFICATION AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Page 30<PAGE>
-15-
d. The Borrower agrees to promptly pay on demand all costs and expenses
of the Lenders in connection with the preparation, reproduction, execution and
delivery of this Agreement and the other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses
of Sullivan & Worcester LLP, special counsel for the Agent and the Lenders
with respect thereto.
IN WITNESS THEREOF, the Lenders and the Borrowers have caused this Agreement
to be signed under seal by their respective duly authorized officers as of
the date set forth above.
Sincerely,
CORESTATES BANK, as Lender and Agent
By:/s/ R. Thomas Esser
-------------------
Name R. Thomas Esser
Title: Vice President
SILICON VALLEY EAST, a Division
of Silicon Valley Bank, as Lender
By:/s/ Jane A. Braun
-----------------
Name Jane A. Braun
Title: Vice President
SILICON VALLEY BANK, as Lender
By:/s/ Christine Ware
------------------
Name Christine Ware
Title: Vice President
(signed in Santa Clara, CA)
BOSTON TECHNOLOGY, INC., as Borrower
By:/s/ Carol B. Langer
-------------------
Name: Carol B. Langer
Title Sr. V.P. Finance & Administration
Page 31<PAGE>
<PAGE>
EXHIBIT 11
BOSTON TECHNOLOGY, INC.
Weighted Shares used in Computation of Earnings Per Share
(in thousands)
<TABLE>
<CAPTION>
Three months ended October 31, nine months ended October 31,
1996 1995 1996 1995
_______ _______ ______ ______
<S> <C> <C> <C> <C>
Common stock outstanding, beginning of period 25,033 25,309 24,732 24,759
Weighted average common stock issued during
the three and nine months ended October 31, 56 44 193 319
Weighted effect of treasury stock -- (416) -- (140)
Weighted average common stock equivalents 8,145 7,991 2,831
Weighted average treasury shares acquired using
the treasury stock method (5,090) -- (5,093) (1,629)
______ ______ ______ ______
Weighted average shares of common stock outstanding 28,144 24,937 27,823 26,140
====== ====== ====== ======
</TABLE>
Page 32<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 5544
<SECURITIES> 0
<RECEIVABLES> 62677
<ALLOWANCES> 1703
<INVENTORY> 16456
<CURRENT-ASSETS> 89746
<PP&E> 41224
<DEPRECIATION> 20631
<TOTAL-ASSETS> 117919
<CURRENT-LIABILITIES> 41604
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 67049
<TOTAL-LIABILITY-AND-EQUITY> 117919
<SALES> 52818
<TOTAL-REVENUES> 52818
<CGS> 23235
<TOTAL-COSTS> 23235
<OTHER-EXPENSES> 22660
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 213
<INCOME-PRETAX> 6417
<INCOME-TAX> 2246
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4171
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
