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PART I.
ITEM 1. BUSINESS
Background
Boston Technology, Inc. (the "Company" or "Boston Technology") develops,
manufactures, markets and supports platforms (hardware and software) and
applications (software) that provide enhanced voice, facsimile, and
information processing services with multimedia capabilities (collectively,
"enhanced services"). The Company's products are designed for use in
wireline, cable wireline, and wireless networks, operating with existing
network database and switching equipment and delivering services accessible
through commonly available telephones, handsets, fax machines, pagers, and
personal computers. The Company sells its products to network operators,
enabling these providers to sell enhanced services to residential,
business, and wireless users. Boston Technology's principal enhanced
services platforms are its Access NP (TRADEMARK) and CO ACCESS (REGISTERED
TRADEMARK) Network Services Platforms. Boston Technology's principal
applications include voice messaging, fax processing, and paging. Each of
these applications allow users to improve their communications through
recording, storage, access, and distribution of messages or information.
Boston Technology's AccessMAX (TRADEMARK) Application Software Environment
is an object-oriented software environment designed to facilitate development
of applications for its Access NP and CO ACCESS Network Services Platforms,
allowing network operators to create and adapt their service offerings to
meet changing market needs and bring new services to market.
The Company's executive offices are located at 100 Quannapowitt Parkway,
Wakefield, Massachusetts 01880; its telephone number is (617) 246-9000. A
predecessor of the Company was incorporated on April 7, 1986. On January
31, 1987, the Company was merged into its predecessor. On November 1,
1989, the Company was reincorporated in Delaware.
Market
The Company's principal market is telecommunications network operators.
This market includes the international network operators, Regional Bell
Operating Companies ("RBOCs"), wireless operators, cable companies,
independent telephone companies, competitive access providers ("CAPS"), and
interexchange (long distance) carriers, as well as Post Telegraph &
Telephone ("PTT") organizations. The wireless operators include companies
deploying cellular and personal communication services ("PCS").
The network operators purchase, install and maintain the Company's
platforms in or near their central switching offices, exchanges or wireless
switching centers, and offer enhanced services through their networks to
their residential, business, wireless and cable customers. For a monthly
flat rate and/or usage-based charges, these customers receive access to a
variety of enhanced services, through the operators' network, without
having to assume the capital, administrative or maintenance requirements of
purchasing their own enhanced services systems.
Network operators typically serve large populations of customers, requiring
large-capacity equipment that can support enhanced services deployed on a
mass scale with the corresponding high volume of usage. The capacity needs
of a network operator will vary with the number of customers served. In
addition, network operators have established an extremely high standard of
service reliability and availability, with stringent engineering
requirements for equipment intended for use within the telephone company
central office switching environment.
Customer Base
North America
North American revenues decreased from $59,404,000 in fiscal 1995 to
$42,480,000 in fiscal 1996, representing a decrease of 28%. Sales to Bell
Atlantic accounted for 13%, 48% and 44% of the Company's revenues during
fiscal 1996, 1995 and 1994, respectively. Sales to SBC Communications
accounted for 11% and 14% of the Company's revenues during fiscal 1996 and
1994, respectively. Sales to Southwestern Bell for fiscal year 1995 were
less than 10% of the Company's revenues. Sales to BellSouth accounted for
16% of the Company's revenues during fiscal 1994, but were less than 10% of
the Company's revenues in fiscal 1995 and 1996.
Boston Technology has agreements with a variety of RBOCs, cable companies,
local exchange providers, service bureaus, and universities to purchase the
Company's platforms and applications software. RBOC customers include
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Ameritech, Bell Atlantic, BellSouth and SBC Communications, which use the
Company's platforms to offer enhanced services to residential, business and
wireless subscribers in selected areas. During the fiscal year ended
January 31, 1996, the Company entered into agreements with AT&T Wireless
Services, formerly McCaw Communications, the largest wireless operator in
the United States; AT&T, the largest long distance provider in the world;
Telefonos de Mexico ("TELMEX"), the largest telephone company in Mexico;
and Time Warner, Boston Technology's first cable customer.
International
International revenues increased from $29,652,000 in fiscal year 1995 to
$62,787,000 in fiscal year 1996, representing an increase of 112%. In
fiscal 1995 and 1994, sales to customers outside of North America accounted
for approximately 33% and 20%, respectively, of the Company's revenues. In
fiscal 1996, International revenue was 60% of total revenues, with NTT
DoCoMo and DDI accounting for 22% and 13% of the Company's total revenues,
respectively.
During the fiscal year ended January 31, 1996, the Company entered into
purchase agreements with the following customers: Telstra Mobile
Communication Services, formerly known as Telecom Australia, which provides
wireless voice mail services to more than 2.5 million subscribers;
Teleceara of Brazil, one of the twenty-eight operating companies of
Telebras; Telepar, the sole provider of telecommunications services in the
state of Parana in Brazil; Chongqing Telecom Bureau, the wireline provider
in the city of Chongqing, the most populated city in China;
Telecommunication Bureau of Harbin, the telephone operator in the capital
of China's Heilongjiang province; Nippon Telegraph and Telephone
Corporation (NTT), the largest telecommunications network operator in the
world; MRCB/Emartel, one of the new PCS operators in Malaysia; Telekom
Malaysia, the PTT in Malaysia; Paktel Limited, a Cable and Wireless
Company, the leading cellular company in Pakistan; and TelecomAsia, the
largest non-government telephone company in Thailand.
Products
Boston Technology manufactures and distributes the following principal
product groups: its Access NP and CO ACCESS Network Services Platforms, its
AccessMAX Application Software Environment, and a suite of enhanced
services applications.
Platforms
The Access NP and CO ACCESS Network Services Platforms provide processing
capabilities to run the enhanced service applications through the wireline
and wireless networks. These platforms also provide operations,
administration and management for the operator. The Company's platforms
support domestic and most international signaling protocols and large
processing capacities for enhanced services deployed on a mass scale.
These platforms are designed to help operators take advantage of the
Intelligent Network ("IN") architecture by operating as either a Service
Node ("SN") or Intelligent Peripheral ("IP"). By providing a Service Node
compliant architecture with switching, service logic and resource elements
all on one platform, Boston Technology supplies operators worldwide with
capabilities that maximize IN-based applications. The open architecture of
Boston Technology's platforms gives operators the flexibility to run
different network interfaces simultaneously, including ISDN, SS7,
ISUP/TCAP, and IS41, so a single system can interface with multiple
networks and multiple terminal devices.
Access NP platforms include the Access NP 5 Series, the 50 and 60 Series,
and the 100 Series. CO ACCESS platforms include the models 200, 500, 600,
and 600S. The list price of a configured platform and applications
typically increases as its capacity grows. The Company offers discounts
from its list prices for volume purchases or long-term commitments. The
platforms have been sold at prices ranging from approximately $100,000 to
$3,200,000, depending upon the platform's configuration.
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Platform configurations provide the following capacities:
<TABLE>
<CAPTION>
System Type CO ACCESS Access NP Access NP Clustered
600 S 50 60 Access NP
Platforms
100 Series
__________________________________________________________________________
<S> <C> <C> <C> <C>
Subscriber 80,000 100,000 300,000 3,600,000
Configuration Limit (1)
Maximum Busy 24,000 30,000 60,000 720,000
Hour Calls (2)
Min. - Max. 24 to 768 24/30 to 24/30 to to 11,520
Ports (T1/E1) 768/960 768/960
Available 55 to 3,520 135 to 12,960 135 to 12,960 to 1,483,776
Storage Hours (1,3)
</TABLE>
___________________________________________________________________________
(1) Dependent on user profile
(2) Varies with network integration
(3) Both redundant and non-redundant configurations
The platforms are built with a patented distributed hardware architecture.
The Access NP Network Services Platform subsystems are linked by a
parallel, redundant Ethernet local area network. The hardware "front end"
consists of a queueing digital switching matrix ("DSM") that routes
incoming calls from the network to their assigned application processing
unit ("APU") ports. One incoming port on a platform corresponds to one
incoming facility or transmission path from the network switch. Voice
processing applications run on one or more APUs, each of which has local
disk storage, for voice prompts and messages. A master control unit
directs all system operations, including assignment of incoming calls to
APU ports and directing the DSM to make the connection. Auxiliary
interface subsystems support system administration, connection to other
voicemail systems, customer billing, and connection to a GSM message
center.
The Access NP Network Services Platform, which Boston Technology introduced
in fiscal 1996, offers the following features:
Capacity -- Depending on user profile, the Access NP platform supports up
to 300,000 mailboxes with a configuration of up to 960 ports. It provides
redundant storage for up to 26,496 hours of voice messages or 123,648 hours
of non-redundant storage. Its non-blocking digital switch accepts calls
even during demanding peaks in volume. Up to 12 Access NP systems can be
clustered together to operate as one. The Access NP 100 Series Models can
support up to 3.6 million mailboxes with a configuration up to 11,520
ports. This configuration provides 317,952 hours of redundant storage or
1.5 million hours of non-redundant storage.
Scalability --The Access NP platform enables network operators to install
the features they initially require and add on as their subscriber base and
demands grow. Application Processing Units or disk drives can be added to
the system ensuring the capacity to meet growing market demands. In
addition, innovative procedures for balancing resources across systems let
network operators grow without interruption to service.
Availability -- The Access NP platform is designed to deliver a standard of
availability in excess of 99.998%. For reliability, redundancy options in
major areas of operation eliminate single points of failure within the
platform architecture.
Flexibility -- The Access NP platform offers the flexibility and
adaptability required to accommodate different types of media as the
enhanced services market grows and matures. The Digital Signal Processing
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(DSP) capabilities of the platform provide a "Universal Port" designed to
handle a variety of multimedia services including fax, voice recognition,
text-to-speech, video, and more.
Serviceability -- Major components are hot-swappable allowing quick slide-
in replacement with convenient single-sided access. Diagnostics are
performed on-line, with little or no downtime required. On-line
documentation, visual indicators and real-time, and multiple level alarming
are available to assist in identifying any failed components.
The Access NP platform, like the CO ACCESS platform, has been designed to
integrate into the networks of Boston Technology's existing customers.
Subscriber applications, networks, and interfaces to operational support
systems are nearly identical across both the Access NP and CO ACCESS
platforms, allowing network operators to serve single markets with both
systems. Furthermore, migration tools allow customers to manage traffic
engineering requirements accommodating systems capacity growth.
AccessMAX (TRADEMARK) Application Software Environment
The AccessMAX Application Software Environment is an object-oriented tool
written in C++ programming language. The AccessMAX environment allows
application developers to design and implement applications to run on both
the ACCESS NP and the CO ACCESS Network Services Platforms. Using the
telecommunications services object library and a workstation, the developer
changes existing, or builds new, applications by pointing, clicking,
dragging, and dropping the services icons.
The AccessMAX environment has been designed to provide the Company's
customers with a tool to differentiate their services in an increasingly
competitive market. This software allows them to create, customize and
modify new or existing services to address the needs of their particular
market and subscribers.
Enhanced Services Applications
Enhanced services are functions beyond basic dialtone. The most basic
enhanced service, call answering, receives forwarded calls from the network
on ring-no-answer or busy, answers them, and provides a "mailbox" into
which callers can place voice or fax messages. Below is a brief
description of enhanced services applications currently being offered on
the Access NP and/or the CO ACCESS platforms.
Call Answering: The Call Answering application allows subscribers to
have their telephone answered automatically, play a personalized greeting
for callers, and allows callers to leave a private voice message. When
callers try to reach a subscriber and get a busy signal or "ring-no-
answer", their call is automatically forwarded to a platform located at the
network operator's central office or switching exchange. Subscribers can
retrieve their messages from any Touch-Tone telephone using a personal
passcode.
Partitioned Mailboxes: The Partitioned Mailbox application provides Call
Answering subscribers with the ability to create submailboxes for multiple
members of a household, or individual employees in small businesses.
Voice Messaging: The Voice Messaging application allows a subscriber to
create and send voice messages to other mailbox subscribers without the
need to actually speak to the recipient. Voice Messaging often includes
all of the Call Answering features described above, as well as the ability
to reply to, forward and send copies of messages.
Fax Services: Boston Technology supports a portfolio of facsimile
applications, collectively being marketed as its AccessFAX (TRADEMARK)
Applications. With Boston Technology's AccessFAX products, facsimile
messages (documents) are stored within the subscriber's multimedia mailbox,
and are managed in a similiar manner to voice messages, and can be outdialed
and delivered to a fax machine.
Virtual Telephone Service: Virtual Telephone Service provides the
subscriber with a mailbox that is associated with a telephone number, but
not with a telephone. The subscriber can receive voice messages without
receiving direct telephone calls and can access the mailbox through use of
a subscriber passcode using a public telephone or any available tone-
generating telephone.
Reminder Service: The Reminder Service application allows subscribers to
record a reminder message for themselves and specify a future time and date
when they would like to receive the reminder.
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Pager Notification: The Pager Notification application is used by
subscribers who wish to be notified by their paging system when messages
have been deposited in their mailbox. When a caller leaves a message in
the subscriber's mailbox, the platform stores the message in the mailbox
and sends a signal to the subscriber's paging system, which then notifies
the subscriber by pager that a message has arrived.
Special Delivery: With the Special Delivery feature, subscribers can
designate a telephone number or group of numbers where message notification
should be sent whenever they are temporarily away from their telephone.
When a message is received in a subscriber's mailbox, the platform will
dial the specified number and inform the person who answers that a message
has arrived.
QuickACCESS (and design) (REGISTERED TRADEMARK) Automated Attendant: The
QuickACCESS automated attendant application is used in a company to auto-
matically answer incoming calls and route callers to the desired party or
redirect calls when a line is busy or goes unanswered. The QuickACCESS
application functions like a receptionist to answer an organization's main
number or extensions and can be implemented full time or used as a back-up
to a "live" receptionist. It is usually configured with Voice Messaging and
provides multiple levels of administration to meet the needs of individual
organizations.
Bulletin Board: The Bulletin Board application allows businesses,
agencies, and other organizations to provide an automated way for callers
to obtain information about their services or offerings. A caller to a
bulletin board will encounter a general greeting followed by an audio menu
of choices. The caller may select any item on the menu by pressing keys on
the telephone keypad. The selection may then play the desired information
or advance the caller to another menu level with additional selections.
Other Current capabilities offered on the platforms include:
Digital Message Networking: Digital Message Networking capabilities
allow operators to support area-wide exchange of voice messages among voice
mailboxes located on multiple platforms residing in dispersed central
offices. Subscribers are able to send, reply to, and forward messages
among subscriber mailboxes regardless of the location of the originating or
destination mailboxes.
Addressing Domain: The Addressing Domain feature allows operators to
group together Voice Messaging subscribers into common areas, such as area
codes, city codes, or corporate networks, including customized numbering
plans for subscribers in these areas.
Multiple Language Support: With Multiple Language Support, subscribers
hear instructions in the language specified by the system administrator, or
subscribers can select a language when they first set up their mailboxes.
Languages which have been implemented include Arabic, Cantonese, English,
Japanese, Mandarin, Portuguese, Spanish and Thai.
Operations, Administration and Maintenance (OA&M): Boston Technology
provides a number of valuable features to assist the platform
administrators in managing subscriber mailboxes, administering billing,
collecting and reporting platform data, tracking alarm conditions, and
ensuring platform security. OA&M capabilities are designed to easily
integrate with existing network operations and engineering systems, and to
allow operators to manage subscriber growth in a cost-effective manner.
New Multimedia Products in Development
Videoconferencing and Video On-Demand: Boston Technology demonstrated
integrated Videoconferencing and interactive Video On-Demand at Telecom 95
in Geneva in October 1995. Videoconferencing allows businesses to
establish meetings that include both audio and visual real time
communications. Video On-Demand is a capability that will have multiple
applications with consumer and business vertical markets worldwide,
including entertainment, education, and marketing.
AccessWEB (TRADEMARK) Internet Messaging: AccessWEB Internet Messaging is an
application that will give end users access to their voice and fax messages
from anywhere in the world, via the World Wide Web. Messages can be viewed
on a personal computer screen and heard in a real-time environment and
stored. AccessWEB Internet Messaging also allows the creation of custom
distribution lists via the user's personal computer.
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Product Development
Boston Technology believes that the ongoing, timely development of new
products and applications and enhancements to existing products will be
essential for the Company to maintain its competitive position, and the
Company expects to continue to devote substantial resources to its research
and development activities during fiscal year 1997. The Company also
commits research and development resources to meet specific customer
requests for particular hardware or software features when the volume of
potential business justifies such an investment. Research and development
expense for fiscal years 1996, 1995 and 1994 was $21,884,000, $13,709,000
and $15,000,000, respectively.
During its fiscal year ending January 31, 1997, Boston Technology expects
to introduce enhancements to several of its applications and administration
features, including Voice Messaging Services, Message Delivery Services,
Fax Services and Digital Messaging, and deploy new software releases on the
Access NP and the CO ACCESS Network Services Platforms. These releases
will include applications targeted to North American and International
consumer, business, and mobile markets.
Service and Support
Boston Technology's Worldwide Customer Service and Support organization
provides the Company's customers with broad hardware and software support
services. These services include technical training, full systems
installation and network integration, as well as a variety of cost-
effective services including and Customer-Assisted service programs. The
Company maintains a centralized worldwide Technical Assistance Center
("TAC") at its headquarters in Wakefield, Massachusetts, and has regional
satellite centers in Hong Kong and Tokyo.
The Company's standard warranty policy is to repair or replace faulty
equipment during the warranty period, which is usually for a period of one
year from system installation. Boston Technology also offers a
supplemental and higher level of service coverage during the warranty
coverage as part of its Systems Installation Service and also offers post-
warranty service under its Service Max (TRADEMARK) Service Program.
Sales
The Company sells and licenses its systems in North America to operators
through a direct sales organization. Because of the stringent technical
and support requirements of the operators, the Company has developed close
working relationships with its customers. By doing so, the Company
believes that it is able to identify and meet future needs for new system
features and capabilities.
Internationally, the Company works with both direct sales and local
representatives to market and distribute its products. The Company has
entered into distribution and marketing agreements with telecommunications
companies in, among other places, Brazil, the Peoples Republic of China,
Japan, Malaysia, Thailand and Taiwan, which the Company believes will help
to expand sales of its products to international network operators. In
fiscal 1996, the Company entered into a joint venture with Computel
Computadores e Telecommunicacoes S.A. to sell and service Boston
Technology's Platforms and Computel's Speech Bus products in Brazil.
The Company has gained extensive experience in deploying and marketing
network services to mass markets. It is of direct interest to the Company
to ensure that its customers succeed when introducing new services, or
embarking on an enhanced services projects for the first time. Therefore,
the Company's MEDALIST (REGISTERED TRADEMARK) Market Success Program is a key
component of its overall marketing effort. The MEDALIST program is designed
to assist the Company's customers in developing and implementing marketing
programs for the enhanced services supported by the Company's platforms. In
connection with the program, the Company provides consulting support, market-
ing materials, seminars and other marketing tools to customers. By assisting
its existing and prospective customers in developing the market for
enhanced services, the Company believes that the market for, and usage of,
its systems will continue to increase.
The Company currently has sales and technical support offices in the
following areas: Wakefield, Massachusetts; San Ramon, California; Atlanta,
Georgia; Park Ridge, Illinois; St. Louis, Missouri; Dallas, Texas;
McKinney, Texas; Reston, Virginia; Seattle, Washington; Brookfield,
Wisconsin; Canada; England; Germany; Hong Kong; Japan; Mexico; The
Netherlands; and The United Arab Emirates.
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Backlog
The Company's backlog at March 31, 1996 was approximately $77,000,000,
compared to approximately $20,300,000 at March 31, 1995. The Company
includes in backlog all purchase orders and other purchase commitments
shippable within the next ten (10) months. Products shipped for customer
trials are not included in backlog or revenue. The Company's backlog at
any particular time may not be indicative of future revenues because of the
possibility of order cancellations or changes.
Competition
The enhanced services systems industry is highly competitive and the
Company expects that competition will intensify. Boston Technology's
principal competitors in the operators market are Brite Voice Systems,
Centigram Communications Corporation, Comverse Technology, Inc., Digital
Sound Corporation, Glenayre Electronics, Inc., Octel Communications
Corporation, Tecnomen Oy, and Unisys Corporation. Competition for the sale
of enhanced services systems to network operators is based principally on
capacity, high reliability and ability to provide multiple-application
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 North American and
International enhanced services systems markets.
Manufacturing
Boston Technology's manufacturing operations consist primarily of final
assembly, integration, test and quality control of subsystem and system
products. The Company presently uses third parties to perform printed
circuit card assembly and sheet metal fabrication.
The Company supplements the standard parts and equipment that are procured
from multiple sources with that of specific custom designed and contract
manufactured assemblies. The Company currently procures digital switches,
baseboards, voice cards and power supplies for its systems from sole source
suppliers. The Company maintains stocking and/or manufacturing licensing
arrangements with its key suppliers to mitigate the effects of any short-
term delivery delays or interruptions. Alternate sources of all its
components are available, however, the inability to obtain adequate supplies
of any essential component could adversely effect the Company's operations.
The Company currently has approximately 25,000 square feet of space
allocated to system assembly, integration, testing, quality control and
inventory storage for manufacturing activities.
Employees
As of March 31, 1996, the Company employed 559 persons, including 98
contractors/temporary employees, of which 306 are employed in research and
development. The Company believes that its future growth and success will
depend in large part upon its ability to continue to attract and retain
highly qualified personnel, who are in great demand. None of the Company's
employees is represented by a labor union. The Company has never had a
work stoppage and considers its employee relations to be very good.
Government Regulation
The Company attempts to stay abreast of regulatory issues in the areas of
the world where it does business. Regulatory changes sometimes occur
rapidly, and are not always predictable. Sudden or unforseen changes in
the regulatory environment may have an impact on the Company's revenues
and/or costs in any given part of the world.
North America
Regulatory and judicial decisions at both the Federal and State level in
the United States continue to impact the market for enhanced services.
Regulatory activities at the state level have already opened many states to
competition in the local exchange market. The Company believes that the
February 1996 passage of the Telecommunications Act of 1996 will produce
favorable conditions for expanded deployment of enhanced services by
further opening the local and long distance telephone markets as well as
the cable market to competition. Local and long distance telephone
companies, competitive access providers, wireless providers, cable
companies, and utilities will all be able to compete for telephone and
cable customers. Additionally, the implementation of the
Telecommunications Act will enable a broader range of enhanced services,
such as information services and fax messaging, to be offered.
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Opportunities for new enhanced services, such as Video On-Demand, have been
created by advances in technology and regulatory decisions. Boston
Technology has designed its network services software and platforms to
support new enhanced services and believes it is well positioned to take
advantage of the additional opportunities created by regulatory and
technological changes. The Company believes that the domestic telephone
market for traditional and new enhanced services will drive demand for
Boston Technology's products and services as this market continues to
expand.
International
Telecommunications deregulation around the world will also impact the
International markets' demand for enhanced services. While some countries
continue to have a monopolistic telephone company providing service, most
of the world is moving toward deregulation and will be closely watching the
progress in the United States. Developing countries such as the
Philippines, Malaysia, and Chile have dismantled the state-owned telephone
monopolies and invited competitors to enter the market. A key driver is
the much needed capital investment to build the telecommunications
infrastructure in these developing countries so that they can compete
globally. On January 1, 1998, the European telecommunications market will
open to competition, as fifteen European Union countries plus Switzerland
and Norway liberalize their markets. England, Sweden and Finland have open
markets now; in England cable telephony has been successful in reaching
consumers by bundling cable and telephony services at competitive rates.
Companies are already active in forming consortiums, partnerships and other
joint ventures to position themselves as the European alternative operators
when the markets are opened, and these new players are investing billions
of dollars in building networks and alliances.
Outside of Europe there are deregulatory activities in a variety of
countries. Brazil recently passed legislation aimed at opening up the
telecommunications market to competition but is meeting resistance from the
strong labor unions concerned with the impact of competition on jobs. This
will be a continued theme worldwide. The Japanese government has
considered dividing NTT into one long-distance and two local carriers
serving the eastern and western halves of Japan. In March of 1996 it was
announced that consideration of this breakup was being postponed until the
next regular parliamentary session, which begins in January 1997. The
Mexican government has announced that the local and long distance telephone
services market will be opened to competition on January 1, 1997, which
will challenge TELMEX's monopoly. The Company believes that opportunities
for enhanced services will be created by both technological changes,
regulatory actions, and company restructuring in the international market.
Patents
The Company relies on a combination of patent, trade secret and copyright
law, license, escrow and non-disclosure agreements, and technical measures
to protect its rights in its products.
The Company currently holds nine United States patents, two Australian
patents, two New Zealand patents, and one Canadian patent. The Company's
patents expire at various times beginning in 2008.
The Company believes intellectual property protection is important in the
highly competitive market for enhanced service systems, and intends to seek
additional patent protection. There can be no assurance, however, that any
patent application filed by the Company will result in a patent being
issued, or that any patent issued to the Company will be held valid if
challenged. Furthermore, the Company may become the subject of claims that
the Company's products infringe upon the propriety rights of others, and
there can be no assurance that any claims against the Company will not
result in costly litigation or require the Company to license the
intellectual property rights of third parties.
Trademarks and Service Marks
QuickACCESS (and design), CO ACCESS and MEDALIST are registered trademarks
of the Company. Access NP, AccessMAX, AccessWEB, and AccessFAX are trademarks
of the Company. Connect With Success, Communications for the Way We Live and
AccessMAX Connect Alliance are service marks of the Company. Touch-Tone is a
federally registered trademark of AT&T, UL is a federally registered trademark
of Underwriters Laboratories, Inc. and Advanced Intelligent Network is a
trademark of BellSouth Telecommunications, Inc.
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Technology Licenses
Boston Technology has entered into patent license agreements with three
companies, under which the Company has obtained non-exclusive licenses to
make, have made, use and sell certain inventions relating to voice
messaging and voice processing covered by the claims of the licensors'
products.
The Company has a perpetual, fully-paid license to certain technology owned
by Northern Telecom to facilitate integration of the Company's products to
Northern Telecom's switches. Boston Technology has obtained certain non-
exclusive, non-transferable, non-assignable source code licenses from The
Santa Cruz Operation, Inc. and Novell, Inc. that allow the Company to use
specified source code and related documentation for certain support and
maintenance of the Company's CO ACCESS systems. No royalty payments are
required under Boston Technology's license with the Santa Cruz Operation,
Inc. An annual right-to-use fee was paid to Novell, Inc. in fiscal 1995 for
the use of its source code.
ITEM 2. PROPERTIES
As of January 31, 1996, the Company leased approximately 170,000 square
feet in Wakefield, Massachusetts pursuant to a lease that expires in fiscal
2004. In March of 1996, the Company leased an additional 15,000 square
feet and plans to occupy another 15,000 square feet in May of 1996. The
Company also leases approximately 16,000 square feet in Woburn,
Massachusetts pursuant to a lease which is due to expire in October of
1996. This lease may be extended, but if it is terminated the Woburn
employees will be consolidated into the Wakefield facility. The Company is
currently evaluating the need for additional space requirements based on
the forecasted growth of its employee base.
The Company also leases sales and support offices in seven different
locations throughout the United States and one in each of Germany, Hong
Kong, Japan, Mexico and the Netherlands. The current aggregate annual base
rent for all leased offices for fiscal 1997 will be approximately
$4,025,000.
ITEM 3. LEGAL PROCEEDINGS
On or about November 16, 1995, a complaint was filed in the United States
District Court for the Eastern District of Pennsylvania captioned "John
Eades v. Boston Technology, Inc., Greg C. Carr, Francis E. Girard, Joseph
E. Norberg, Paul W. DeLacey, William J. Burke and John C.W. Taylor", Civil
Action No. 95-CV-7236. On or about November 20 and 21, 1995, respectively,
essentially identical complaints were filed in the same court captioned
"Jacob Turner v. Boston Technology, Inc., Greg C. Carr, Francis E. Girard,
Joseph E. Norberg, Paul W. DeLacey, William J. Burke and John C.W. Taylor",
Civil Action No. 95-CV-7295, and "Gerald Tobin v. Boston Technolgy, Inc.,
Greg C. Carr, Francis E. Girard, Joseph E. Norberg, Paul W. DeLacey,
William J. Burke and John C.W. Taylor", Civil Action No. 95-CV-7317. Each
of the plaintiffs purports to represent a class of purchasers of the common
stock of the Company between and including May 17, 1995 through November
15, 1995. Each complaint claims that the named defendants violated Section
10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated
pursuant thereto, by virtue of false or misleading statements made during
the class period. Each complaint claims that the individual defendants are
liable as "control persons" under Section 20(a) of that Act. In addition,
the complaints claim that the individual defendants sold some of their own
common stock of the Company, during the purported class period, at times
when the market price for the stock allegedly was inflated. No response
has been made to the three complaints, which have been consolidated by the
Court. The plaintiffs are required to file an amended complaint which will
govern proceedings in all three cases on or before May 6, 1996. Boston
Technology and the defendants deny the allegations and intend to contest
these cases vigorously.
On December 29, 1995, AudioFAX, Inc., a Georgia corporation, brought a
breach of contract action and a patent infringement action against the
Company in the U.S. District Court for the Northern District of Georgia,
Atlanta division, alleging breach of contract and infringement of certain
of its facsimile processing patents (the "AudioFAX Patents"). In its
Complaint, AudioFAX is seeking to enjoin Boston Technology from allegedly
-9-<PAGE>
<PAGE>
continuing to breach the technology license agreement between the parties,
to enjoin the Company from allegedly continuing to infringe the AudioFAX
Patents, and to be awarded an unspecified amount of compensatory damages in
excess of $50,000, treble damages as a result of the alleged willful
infringement, and interest, expenses and attorneys' fees. The parties are
engaged in settlement discussions and have stipulated that the Company will
file an Answer to AudioFAX's action by May 17, 1996. Boston Technology
believes that it does not infringe any valid, enforceable claim of the
AudioFAX Patents. The Company intends to contest AudioFAX's claims
vigorously. However, if a final decision is reached on the merits of the
action and the Company is found to have infringed the AudioFAX Patents,
such a decision may have a material adverse effect on the Company.
No loss provisions have been made for these lawsuits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
<TABLE>
<CAPTION>
1996 Fiscal Quarter Ended
April 30 July 31 October 31 January 31
________ _______ __________ __________
Common stock prices
<S> <C> <C> <C> <C>
High $16.75 $20.63 $19.13 $15.63
Low $12.13 $13.50 $12.25 $11.00
1995 Fiscal Quarter Ended
April 30 July 31 October 31 January 31
________ _______ __________ __________
Common stock prices
High $14.38 $13.75 $16.50 $18.63
Low $10.25 $ 7.88 $ 9.00 $12.75
</TABLE>
The above figures are based upon the daily closing stock prices as reported
by NASDAQ, and may not reflect higher or lower individual stock trades.
As of March 31, 1996, there were approximately 2,012 holders of record of
the Company's common stock.
The Company's shares are traded on the Nasdaq National Market ("NNM"). No
cash dividends have been paid on the Company's common stock. The Company
currently intends to retain all of its earnings to finance future growth
and, accordingly, does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Company's line of credit prohibits
the payment of dividends without the consent of the lender.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following tables should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this report.
<TABLE>
<CAPTION>
Consolidated Statements of For years ended January 31,
Operations: 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $105,267 $89,056 $70,315 $49,451 $36,397
Cost and expenses:
Cost of revenues 41,087 28,257 22,695 17,246 13,354
Research and development 21,884 13,709 15,000 10,338 11,665
Marketing, general and
administrative 37,085 29,510 23,692 18,160 14,722
Warrants & other costs
associated with
contract acquisition 21,000 -- -- -- --
------ ------ ------ ------ ------
(Loss) income from operations (15,789) 17,580 8,928 3,707 (3,344)
Interest income, net 1,004 891 367 290 729
------ ------ ------ ------ ------
(Loss) income before provision
for (benefit from)
income taxes (14,785) 18,471 9,295 3,997 (2,615)
Provision for (benefit from)
income taxes 105 5,527 2,598 927 (236)
------ ------ ------ ------ ------
Net (loss) income $(14,890) $12,944 $6,697 $3,070 $(2,379)
Net (loss) income per share $(.60) $.50 $.27 $.13 $(.11)
Weighted average number of common
and common equivalent
shares outstanding 24,859 25,751 25,107 23,475 22,505
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet Data: January 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Working capital $38,629 $44,316 $31,284 $22,326 $15,185
Total assets 84,661 80,289 65,274 41,270 32,281
Short-term debt, including
current portion of
long-term debt 275 542 155 180 143
Long-term debt, excluding
current portion -- 500 1,042 190 343
Stockholders' equity 54,314 56,792 40,841 31,643 24,929
</TABLE>
-11-<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
General. This annual report on Form 10-K contains forward-looking
statements that involve a number of risks and uncertainties. There are a
number of factors that could cause the Company's actual results to differ
materially from those forecasted or projected in such forward-looking
statements. These factors include, without limitation, those set forth
below under the caption "Future Operating Results and Risk Factors."
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. The Company undertakes
no obligations to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurence of
unanticipated events.
Significant Transactions. During the fourth quarter of fiscal 1996,
the Company entered into an agreement with AT&T Corporation (AT&T) for the
supply of the Company's Access NP Network Services Platform and its
AccessMAX object-oriented software. The service offering targeted by AT&T
with this platform is community telephone messaging for the 110,000 primary
and secondary schools in the United States as a part of the AT&T Learning
Network announced October 31, 1995. Pursuant to the agreement, the Company
issued to AT&T warrants to purchase 4,908,800 shares of Boston Technology's
common stock at an exercise price of $14.00 per share. The warrants vest
over a five year period. In conjunction with the issuance of the warrants
and the start-up costs associated with the agreement, Boston Technology
took a non-cash, non-deductible charge of $21,000,000 to earnings in the
fourth quarter of fiscal 1996. The $21,000,000 charge was due primarily to
the fair market value of the warrants (see Note 8 to the Financial
Statements).
Excluding the $21,000,000 charge for the AT&T contract, fiscal 1996 pro
forma income from operations, net income and earnings per common share
versus fiscal 1995 would have been as follows:
<TABLE>
<CAPTION>
PRO FORMA: For the twelve
months ended January 31,
1996 1995
---- ----
<S> <C> <C>
Income from operations, excluding AT&T charge $5,211,000 $17,580,000
Net income $4,918,000 $12,944,000
Net income per share $.19 $.50
Weighted average common and common
equivalent shares outstanding 26,014,000 25,751,000
</TABLE>
Results of Operations
Revenues. Total revenues for the year ended January 31, 1996 were
$105,267,000, an increase of $16,211,000, or 18%, over fiscal 1995. Total
North American revenues, generated by sales to Regional Bell Operating
Companies (RBOCs), independent telephone companies, a cable company and a
competitive access provider, were $42,480,000, a decrease of $16,924,000,
or 28%, versus fiscal 1995. This decrease in revenue was due primarily to
a reduction in volume from Bell Atlantic and also to lower average system
prices in fiscal 1996 due to a higher volume of smaller system sales.
Total International revenues were $62,787,000, an increase of $33,135,000,
or 112%, versus fiscal 1995. This increase was due to additional sales to
existing international customers, particularly in Japan, expansion into new
geographic markets, and custom modification and enhancement activities. In
fiscal 1996, International revenues comprised 60% of the Company's total
revenues. In fiscal 1997, the Company anticipates International revenues
to approximate fiscal 1996 levels, with potential growth in North American
revenues over fiscal 1996.
Total revenues for the year ended January 31, 1995 were $89,056,000, an
increase of $18,741,000, or 27%, over the previous year. Total North
American revenues, generated by sales to RBOCs, independent telephone
companies and a competitive access provider, were $59,404,000, an increase
of $3,109,000, or 6%, over fiscal 1994. Total International revenues were
$29,652,000, an increase of $15,632,000, or 111%, compared to fiscal 1994.
This increase was due to additional sales to existing international
customers, expansion into new geographic markets, and custom modification
and enhancement activities. In fiscal 1995, International revenues
comprised 33% of total revenues.
-12-<PAGE>
<PAGE>
Gross Profit. Gross profit increased by 6% from fiscal 1995 to fiscal
1996, by 28% from fiscal 1994 to fiscal 1995, and by 48% from fiscal 1993
to fiscal 1994, principally as a result of increased revenues. As a
percentage of revenues, gross profit decreased to 61.0% in fiscal year 1996
versus 68.3% in fiscal 1995 due primarily to a significantly higher number
of smaller system sales, which carry lower profit margins. As a percentage
of revenues, gross profit increased slightly to 68.3% in fiscal 1995 from
67.7% in fiscal 1994. This increase in gross profit as a percentage of
revenues in fiscal 1995 was due primarily to increased sales of system
upgrades, which carry a higher gross margin, partially offset by lower
margins achieved on custom modification and enhancement activities. Due to
competitive pricing pressures and the potential for the continued
deployment of smaller, low margin systems during fiscal 1997, especially
under the AT&T agreement described above, the Company expects gross margin
as a percentage of revenues to decline during fiscal 1997 from fiscal 1996
levels.
Research and Development Expenses. The Company is involved in several
research and development programs that are funded in whole or in part by
its customers. Customer funding is recorded as a reduction to research and
development expense, and is recognized as development activities occur.
Amounts received from customers for research and development funding are
included on the balance sheet as deferred customer funding until they are
recognized. Customer funding offsets against research and development
expense for the years ended January 31, 1996, 1995 and 1994 amounted to
approximately $5,051,000, $8,162,000 and $3,241,000, respectively.
Net research and development expenses for fiscal 1996 increased by
$8,175,000, or 60%, over fiscal 1995 due partially to a $3,111,000 decrease
in customer funding offsets against these expenses in fiscal 1996 compared
to fiscal 1995. Excluding the effect of customer funding offsets, absolute
research and development spending in fiscal 1996 increased $5,064,000, or
23%, over fiscal 1995, reflecting customers' increased demand for unique
products as well as for custom modifications and enhancements for their
installed base of equipment. As a result, net research and development
expense was 21% of total revenues for fiscal 1996. Software development
costs incurred after the establishment of technological feasibility, which
would be eligible for capitalization, have not been significant and have
not been capitalized.
Net research and development expenses for fiscal 1995 decreased by
$1,291,000 due to a $4,921,000 increase in customer funding offsets against
these expenses in fiscal 1995 compared to fiscal 1994. Excluding the
effect of customer funding offsets, absolute research and development
spending in fiscal 1995 increased $3,630,000 over fiscal 1994, due
primarily to increased demand for custom modifications and enhancements.
As a percentage of revenues, net research and development expense was 15%
and 21% for the years ended January 31, 1995 and 1994, respectively.
The Company continues to improve its products and to develop new
products and system features, including new hardware platforms, advanced
networking and call processing applications and enhancements to its
software to meet market requirements. Research and development expenses,
both on a net and absolute spending basis, for fiscal year 1997 are
expected to increase from fiscal 1996 levels as the Company continues to
develop new applications and enter new markets.
Marketing, General and Administrative Expenses. Marketing, general and
administrative expenses were $37,085,000, an increase of $7,575,000, or
26%, from fiscal 1995 to fiscal 1996 as compared to an increase of 25% from
fiscal year 1994 to 1995. The absolute spending increases in fiscal 1996
and 1995 were primarily due to the Company's additional staffing in the
marketing and worldwide sales and service organizations to support the
Company's growth. As a percentage of total revenues, marketing, general
and administrative expenses increased to 35% in fiscal 1996 from 33% in
fiscal 1995, and from 34% in fiscal 1994. The Company significantly
increased its international presence during fiscal 1996, and, as a result,
expects marketing, general and administrative expenses in fiscal 1997 to
increase in absolute dollars.
Operating (Loss) Income. The Company had a loss from operations of
$15,789,000 for fiscal 1996, versus income from operations of $17,580,000
in fiscal 1995. The loss was due primarily to a $21,000,000 charge in the
fourth quarter of fiscal 1996 for the acquisition of a contract with AT&T
(see Note 8 and under "General" section above). In fiscal 1995, the
Company had income from operations of $17,580,000, an increase of
$8,652,000, or 97%, over income from operations in fiscal 1994. The
Company had income from operations of $8,928,000 for fiscal 1994, an
increase of $5,221,000, or 141%, over income from operations of $3,707,000
for fiscal 1993. The increases in operating income in fiscal 1995 and 1994
reflect increased total revenues and improved gross margins, partially
offset by increased research and development expenses and marketing,
general and administrative expenses.
-13-<PAGE>
<PAGE>
Interest Income. Net interest income for fiscal 1996 was $1,004,000,
versus $891,000 in fiscal 1995 and $367,000 in fiscal 1994. The increase
in interest income in fiscal 1996 and 1995 over 1994 was due partially to
higher average investment balances, to slightly higher interest rates and
to interest income on long term leases.
Income Taxes. For the fiscal year ended January 31, 1996, the Company
recorded a provision for income taxes of $105,000, which was lower than the
expected tax benefits due principally to the non-recognition of the tax
benefits related to the AT&T warrants issued. For the fiscal year ended
January 31, 1995, the Company recorded a provision for income taxes of
$5,527,000, which includes a reduction of the valuation allowance for the
utilization of research and development tax credits. For the fiscal year
ended January 31, 1994, the Company recorded a provision for income taxes
of $2,598,000, which includes a reduction of the valuation allowance for
the utilization of net operating loss carryforwards and research and
development tax credits.
Future Operating Results and Risk Factors
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.
Historically, the Company has operated with minimal backlog, however, at
March 31, 1996, backlog is $77,000,000, up from $20,300,000 at March 31,
1995. Although this backlog increase has provided greater visibility for
near-term revenues, revenues earned in any quarter will continue to be
largely dependent on orders booked, built, and shipped in that quarter.
The Company has also experienced a pattern of recording the majority of its
quarterly revenues in the third month of the quarter.
Historically, a substantial portion of the Company's revenues have been
attributed to a limited number of customers in North America, Bell Atlantic
in particular. The Company also has 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 operations. Although North American
revenue was significantly lower during fiscal 1996 versus fiscal 1995,
increased International business mitigated any adverse effect. The
Company's ability to increase future revenues may depend on its ability to
generate sufficient revenues to substitute for reduced purchases 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
60% of fiscal 1996 revenues, is subject to a number of inherent risks,
including difficulties in building and managing international operations
and international reseller networks, 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 international 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 periodically extend
beyond ninety days on amounts due from these customers.
As a result of the increase in International business, the Company's
revenues may increasingly 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, the increase
in 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
telecommunication industry. This industry is undergoing significant change as
a result of the recent passage of the telecommunications bill, reducing
restrictions on competition within the industry. The enhanced services systems
-14-<PAGE>
<PAGE>
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. Also,
sudden or unforseen changes in the regulatory environment may have an impact
on the Company's revenues and/or costs in any given part of the world.
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 affect the Company's operating results.
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments decreased by
$11,843,000, or 46%, from January 31, 1995 levels to $13,929,000 at January
31, 1996. The decrease is due primarily to the repurchase of 750,000
shares of the Company's common stock for $10,663,000. Also during fiscal
1996, the Company invested $1,000,000 in a joint venture in Brazil (see
Note 6). Pursuant to the joint venture agreement, the Company must provide
$1,000,000 to the joint venture for working capital during each of fiscal
years 1997 and 1998. Cash, cash equivalents and short-term investments
decreased to $25,772,000 at January 31, 1995, from $31,848,000 at January
31, 1994, a decrease of $6,076,000.
Net cash from operations totalled $4,310,000 for the year ended January
31, 1996 versus cash used by operations of $3,043,000 for the year ended
January 31, 1995, and compared to net cash provided by operations totaling
$21,683,000 for the year ended January 31, 1994. Accounts receivable
decreased $1,584,000 to $28,892,000 at January 31, 1996 versus $30,476,000
at January 31, 1995 due to improved cash collection efforts. Accounts
receivable increased $15,183,000 over fiscal 1994 to $30,476,000 as of
January 31, 1995. This increase had three major components. The first
component was approximately $7,789,000 due from contracts for custom
modification and enhancement activities. The second component was
approximately $3,435,000 due from certain international accounts as a
result of extended payment terms. The third component was approximately
$3,959,000 due to incremental sales made to customers in North America.
Due to the competitive environment in the international marketplace,
certain international customers may require longer payment terms; as a
result, days sales outstanding may periodically extend beyond ninety days
on amounts due from these customers.
Inventories at January 31, 1996, 1995, and 1994 were $16,951,000,
$8,298,000 and $5,340,000, respectively. The increase in inventories at
January 31, 1996 was due primarily to the transition from the CO ACCESS
platform to the Access NP Network Services Platform, as additional
inventories were necessary to support the introduction of Access NP
Platforms while also maintaining adequate support for the CO ACCESS
customer base. The increase in inventories at January 31, 1995 was
required to support ongoing customer trials, higher planned revenues, and
the new Access NP Platform introduction.
The Company's investment in sales type leases was $3,128,000 as of
January 31, 1996, a decrease of $1,224,000 versus January 31, 1995 due
primarily to scheduled customer payments. The Company's investment in
sales type leases was $4,352,000 as of January 31, 1995, an increase of
$1,679,000 over fiscal 1994. In fiscal 1995, approximately $3,913,000 of
sales type lease receivables were originated with international customers
while approximately $2,234,000 of sales type lease receivables were sold
with recourse or collected.
Prepaid expenses at January 31, 1996 increased $1,266,000 due primarily
to a $1,131,000 prepayment for production materials under a volume purchase
agreement (see Note 11). At January 31, 1996, the Company had a receivable
of $3,886,000 representing estimated federal and state tax overpayments
(see Note 10), and also recorded a net deferred tax asset of $2,080,000,
versus $183,000 at January 31, 1995 (see Note 10). Accounts payable
increased $6,373,000 to $11,253,000 at January 31, 1996, due primarily to
higher inventory levels.
Purchases of property, equipment, license agreements, and other assets
were $8,143,000, $4,832,000, and $4,517,000, in fiscal years 1996, 1995,
and 1994, respectively. The increase in property and equipment during
fiscal 1996 was due primarily to the purchase of computer workstations as a
result of increased headcount, and test equipment as a result of the
release of the new Access NP Platform. Management believes that capital
-15-<PAGE>
<PAGE>
expenditures for fiscal 1997 will approximate fiscal 1996 levels and will
continue to be concentrated in the areas of research and development and
computer equipment.
Cash flow used by financing activities was $8,309,000, as compared to
cash flow from financing activities of $1,816,000 and $1,683,000 in fiscal
years 1995 and 1994, respectively. The decrease in cash flow was due
primarily to the repurchase during fiscal 1996 of 750,000 shares of common
stock at an average price of $14.22 per share. In fiscal 1995 and 1994,
cash flows consisted primarily of proceeds from the purchase of common
stock through the exercise of stock options and through the Company's
employee stock purchase plan.
The Company maintains a $25,000,000 revolving credit facility with two
banks. 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 July 6, 1997. This revolving credit facility
also has a 1/2 of 1% annual commitment fee on the unused portion. The
facility contains quarterly covenants which, among other things, require
the Company to maintain certain financial ratios, specified levels of
equity, and other restrictions. The Company also has available an aggregate
$50,000,000 uncollateralized line of credit for forward foreign exchange
contracts with two banks. These lines of credit are scheduled to expire on
July 6, 1997.
The Company believes that its cash, cash equivalents and short-term
investments, along with cash generated from operations and unused credit
facilities will be sufficient to meet the Company's cash requirements and
to fund operations at least through January 31, 1997.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (FAS 123). Under FAS 123 the Company is required to elect
either expense recognition or the disclosure-only alternative for stock
based employee compensation. The expense recognition provision encouraged
by FAS 123 would require fair-value based financial accounting to recognize
compensation expense for employee stock compensation plans. FAS 123 must
be adopted in the Company's fiscal 1997 financial statements with
comparable disclosures for the prior years presented. The Company has
determined that it will elect the disclosure-only alternative. The Company
will be required to disclose the pro forma income or loss and the per share
amounts in the notes to the financial statements using the fair value based
method. The Company has not determined the impact of these pro forma
adjustments.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED
FINANCIAL STATEMENT SCHEDULE
Sequential
Description Page Number
<S> <C>
Report of Independent Accountants ................................. 18
Consolidated Balance Sheets as of January 31, 1996 and 1995........ 19
Consolidated Statements of Operations for the Years Ended
January 31, 1996, 1995 and 1994.................................... 20
Consolidated Statements of Stockholders' Equity for the Years
Ended January 31, 1994, 1995 and 1996.............................. 21
Consolidated Statements of Cash Flows for the Years Ended
January 31, 1996, 1995 and 1994.................................... 22
Notes to Consolidated Financial Statements......................... 23
Report of Independent Accountants ................................. 35
Schedule II-Valuation and Qualifying Accounts for the Years
Ended January 31, 1996, 1995 and 1994.............................. 36
</TABLE>
All other schedules are omitted since they are either not required, not
applicable, or the information is otherwise shown in the Consolidated
Financial Statements or the Notes thereto.
-17-<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Boston Technology, Inc.:
We have audited the accompanying consolidated balance sheets of Boston
Technology, Inc. as of January 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three fiscal years in the period ended January 31, 1996. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Boston
Technology, Inc. as of January 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three fiscal
years in the period ended January 31, 1996 in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 29, 1996
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<PAGE>
BOSTON TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
1996 1995
ASSETS ---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $13,929,000 $19,715,000
Short-term investments -- 6,057,000
Accounts receivable, less allowances
of $1,554,000 and $799,000 28,892,000 30,476,000
Net investment in sales type leases 2,771,000 1,234,000
Inventories 16,951,000 8,298,000
Income taxes receivable 3,886,000 --
Prepaid expenses and other current assets 2,130,000 864,000
---------- ----------
Total current assets 68,559,000 66,644,000
Net investment in sales type leases 357,000 3,118,000
Property and equipment, net 10,597,000 7,474,000
Deferred taxes 2,080,000 183,000
Other assets 3,068,000 2,870,000
---------- ----------
TOTAL ASSETS $84,661,000 $80,289,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 275,000 $ 542,000
Accounts payable 11,253,000 4,880,000
Income taxes payable -- 669,000
Accrued expenses 9,981,000 10,229,000
AT&T contract accrual 2,060,000 --
Deferred customer funding 2,825,000 4,267,000
Deferred revenues 3,536,000 1,741,000
---------- ----------
Total current liabilities 29,930,000 22,328,000
Long-term debt and other long-term liabilities 417,000 1,169,000
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $.001 par value, 60,000,000 and
35,000,000 shares authorized; 25,344,814 and
24,759,302 shares issued 25,000 25,000
Additional paid-in capital 57,048,000 35,094,000
Retained earnings 5,557,000 21,689,000
Treasury stock, at cost, 613,119 shares (8,599,000) --
Cumulative translation adjustment 283,000 (16,000)
---------- ----------
Total stockholders' equity 54,314,000 56,792,000
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $84,661,000 $80,289,000
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-19-<PAGE>
<PAGE>
BOSTON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended January 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues $105,267,000 $89,056,000 $70,315,000
Costs and expenses:
Cost of revenues 41,087,000 28,257,000 22,695,000
Research and development 21,884,000 13,709,000 15,000,000
Marketing, general and
administrative 37,085,000 29,510,000 23,692,000
Warrants & other costs
associated with AT&T contract
acquisition (see Note 8) 21,000,000 -- --
----------- ---------- ----------
121,056,000 71,476,000 61,387,000
(Loss) income from operations (15,789,000) 17,580,000 8,928,000
Interest income 1,169,000 1,098,000 470,000
Interest expense (165,000) (207,000) (103,000)
----------- ---------- ----------
(Loss) income before provision for
income taxes (14,785,000) 18,471,000 9,295,000
Provision for income taxes 105,000 5,527,000 2,598,000
----------- ---------- ----------
Net (loss) income $(14,890,000) $12,944,000 $6,697,000
=========== ========== =========
Net (loss) income per share $(.60) $.50 $.27
Weighted average number of common
and common equivalent shares
outstanding 24,859,000 25,751,000 25,107,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-20-<PAGE>
<PAGE>
BOSTON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Years Ended January 31, 1994, 1995 and 1996
(in thousands, except share amounts)
Additional Cumulative Total
Common Stock Paid-In Retained Treasury Stock Translation Stockholders'
Shares Amount Capital Earnings Shares Amount Adjustment Equity
______ ______ _______ ________ _______ ______ __________ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1993 23,602,830 $24 $29,571 $2,048 -- -- -- $31,643
Exercise of stock options 521,306 -- 1,448 -- -- -- -- 1,448
Employee stock purchase plan 93,047 -- 408 -- -- -- -- 408
Tax benefit of disqualifying
dispositions of incentive
stock options -- -- 645 -- -- -- -- 645
Net income for the year
ended January 31, 1994 -- -- -- 6,697 -- -- -- 6,697
__________ ____ ______ ______ _____ _____ _______ _______
Balance, January 31, 1994 24,217,183 24 32,072 8,745 -- -- -- 40,841
Exercise of stock options 482,431 1 1,470 -- -- -- -- 1,471
Employee stock purchase plan 59,688 -- 500 -- -- -- -- 500
Tax benefit of disqualifying
dispositions of incentive
stock options -- -- 1,052 -- -- -- -- 1,052
Translation adjustments $(16) (16)
Net income for the year
ended January 31, 1995 -- -- -- 12,944 -- -- -- 12,944
__________ ____ ______ ______ _____ _____ _______ _______
Balance, January 31, 1995 24,759,302 25 35,094 21,689 -- -- (16) 56,792
Common stock purchased -- -- -- -- (750,000) $(10,663) -- (10,663)
Exercise of stock options 557,967 -- 2,003 (1,146) 109,334 1,649 -- 2,506
Employee stock purchase plan 27,545 -- 296 (96) 27,547 415 -- 615
Tax benefit of disqualifying
dispositions of incentive
stock options -- -- 1,055 -- -- -- -- 1,055
Stock warrants issued -- -- 18,600 -- -- -- -- 18,600
Translation adjustments -- -- -- -- -- -- 299 299
Net loss for the year
ended January 31, 1996 -- -- -- (14,890) -- -- -- (14,890)
__________ ____ ______ ______ _______ _____ ______ ________
Balance, January 31, 1996 25,344,814 $25 $57,048 $5,557 (613,119) $(8,599) $283 $54,314
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-21-<PAGE>
<PAGE>
BOSTON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended January 31,
1996 1995 1994
__________ ___________ __________
Cash flows (used by) from operating activities:
<S> <C> <C> <C>
Net (loss) income $(14,890,000) $12,944,000 $6,697,000
Reconciliation of net (loss) income
to cash flows from (used by) operating
activities:
Depreciation and amortization 4,822,000 3,756,000 3,221,000
Provision for bad debt 755,000 509,000 140,000
Rent expense in excess of payments (195,000) (153,000) (69,000)
Deferred income taxes (1,897,000) (92,000) (91,000)
Non-cash charge for warrants
issued 18,600,000 -- --
Changes in operating assets
and liabilities:
Accounts receivable 829,000 (15,692,000) (4,119,000)
Net investment in sales
type leases 1,224,000 (1,679,000) 1,150,000
Inventories (8,653,000) (2,958,000) (779,000)
Prepaid expenses and other
current assets (1,266,000) (102,000) (33,000)
Accounts payable 6,373,000 923,000 216,000
Accrued expenses 1,812,000 4,799,000 953,000
Deferred revenues 1,795,000 15,000 1,431,000
Deferred customer funding (1,442,000) (5,914,000) 10,181,000
Other long-term liabilities (57,000) 147,000 --
Income taxes (3,500,000) 454,000 2,785,000
__________ __________ __________
Cash flows from (used by)
operating activities 4,310,000 (3,043,000) 21,683,000
Cash flows used by investing activities:
Purchase of property and
equipment, net (6,546,000) (4,442,000) (2,842,000)
Purchase of investments (3,429,000) (14,946,000) (11,238,000)
Redemption of investments 9,486,000 12,694,000 9,662,000
Investment in joint venture (1,000,000) -- --
Purchase of license agreements
and other assets (597,000) (390,000) (1,675,000)
__________ __________ __________
Cash flows used by
investing activities (2,086,000) (7,084,000) (6,093,000)
Cash flows from (used by) financing activities:
Principal payments under
financing obligations (767,000) (155,000) (173,000)
Proceeds from issuance of
common stock 2,506,000 1,471,000 1,448,000
Purchases of treasury stock (10,663,000) -- --
Proceeds from employee stock
purchase plan 615,000 500,000 408,000
__________ __________ __________
Cash flows (used by) from financing
activities (8,309,000) 1,816,000 1,683,000
Effect of exchange rate changes
on cash 299,000 (17,000) --
___________ __________ __________
Net (decrease) increase in cash
and cash equivalents (5,786,000) (8,328,000) 17,273,000
Cash and cash equivalents at
beginning of year 19,715,000 28,043,000 10,770,000
___________ ___________ ___________
Cash and cash equivalents at
end of year $13,929,000 $19,715,000 $28,043,000
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Supplemental disclosures of cash flow information:
<S> <C> <C> <C>
Interest paid $ 185,000 $ 163,000 $ 137,000
Income taxes paid 5,047,000 4,300,000 385,000
Supplemental disclosures of non-cash investing and
financing activities:
Tax benefit of disqualifying dispositions
of incentive stock options 1,055,000 1,052,000 645,000
License agreement acquired for
long-term debt -- -- 1,000,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-22-<PAGE>
<PAGE>
Notes To Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS
Boston Technology, Inc. (the "Company") provides specialized technology
and support to enable network operators to develop customized telecommunica-
tions services across the country and around the world. The Company provides
network-based platforms, software and applications to wireless and wireline
operators. These services give growing numbers of people conveniences like
call answering, voice messaging and fax services over wireless and wireline
networks.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated. The equity method of accounting is used
for an investment in a joint venture.
Reclassifications
Certain amounts in fiscal 1995 and fiscal 1994 financial statements have
been reclassified to conform to the fiscal 1996 presentation.
Cash and Cash Equivalents
All highly liquid investments purchased with an original maturity of
three months or less are considered to be cash equivalents. In accordance
with the terms of a patent license agreement, as of January 31, 1996, the
Company had restricted cash of $275,000 which is included in cash and cash
equivalents. This amount was paid in February, 1996 (see Note 9). At
January 31, 1995, the Company had restricted cash of $1,000,000 of which
$500,000 was included in cash and cash equivalents, and $500,000 was
included in short-term investments.
Investments
Investments that mature ninety-one days to twelve months from the date
of purchase are classified as short-term investments, and investments with
maturities of greater than twelve months are included in other assets.
Short-term investments consist of certificates of deposit, commercial paper
and U.S. government obligations. Investments are stated at amortized cost,
which approximates market value, and interest income is recorded on an
accrual basis.
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" at the
beginning of fiscal 1995. The Company has the intent and ability to hold
to maturity all securities that mature in less than one year. Accordingly,
these "held-to-maturity" securities have been recorded at amortized cost.
Risks, Uncertainties and Estimates
Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash equivalents, short-
term investments, and accounts receivable. The Company's cash equivalents
are in high quality securities placed with major international banks and
financial institutions. The Company's investment policy limits its
exposure to concentrations of credit risk. The Company's customer base
includes telephone companies in North America, South America, Asia and the
Middle East. Although the Company is directly affected by the well being
of the telecommunications industry, management does not believe significant
credit risk exists at January 31, 1996 and addresses this risk on a regular
basis.
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
-23-<PAGE>
<PAGE>
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.
Inventories
Inventories are carried and charged to revenue at standard cost, which
is updated regularly and which approximates the lower of cost (first-in,
first-out) or market. Inventories are subject to rapid technological
obsolescence.
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight
line basis over the estimated useful life of the assets as follows:
Manufacturing and test equipment 3 - 7 years
Office equipment and furniture 5 - 7 years
Equipment leased to others 5 years
Leasehold improvements and other assets 3 - 8 years
Leasehold improvements and assets under capital lease are amortized on
a straight line basis over the estimated useful life of the asset or the
related lease term, whichever is shorter. Certain manufacturing and test
equipment are subject to technological obsolescence. Maintenance and repair
costs are charged to operations when incurred; additions and improvements are
capitalized. Upon retirement or sale, the cost of the asset disposed of and
the related accumulated depreciation are removed from the accounts and any
resulting gain or loss is credited or charged to income.
Intangible Assets
Patent and software license agreements are carried at cost less
accumulated amortization which is calculated on a straight-line basis over
their estimated useful lives. These assets are amortized generally over
periods from three to ten years. At January 31, 1996 and 1995,
approximately $1,975,000 and $2,519,000 of net intangible assets are
included in other assets. At January 31, 1996 and 1995, accumulated
amortization is $1,032,000 and $633,000, respectively. The Company
continuously evaluates the realizeability of intangibles and accelerated
the writeoff of approximately $200,000 and $300,000 of intangible assets in
fiscal 1996 and 1995, respectively.
Forward Foreign Exchange Contracts
The Company periodically enters into forward foreign exchange contracts
to hedge specific scheduled foreign currency denominated sales. Effects of
changes in currency rates are therefore minimized and any gains or losses
are recognized as part of the underlying transactions being hedged. The
parties to these financial instruments consist of large financial
institutions. The Company monitors its positions and the credit ratings of
the parties to these financial instruments, and by policy, limits the
amounts of credit exposure to any one party. While the Company may be
exposed to potential losses due to credit risk in the event of non-
performance by the parties to these financial instruments, it does not
anticipate losses. There were no open foreign exchange contracts at
January 31, 1996.
Royalty Expense
Royalty expense with respect to sales of product under royalty
agreements is recorded when revenue is recognized.
Warranty Costs
The Company generally warrants its products for one to two years after
delivery. A provision for estimated warranty costs is recorded at the time
revenue is recognized.
-24-<PAGE>
<PAGE>
Revenue Recognition
Product revenues are recognized at the time the hardware and/or
software is shipped, collection is probable and no significant post shipment
obligations remain. Unearned billings are recorded as deferred revenues.
Products shipped for customer trials are carried in finished goods
inventory until customer acceptance is obtained, at which time revenue is
recognized. Installation fees are recognized when products are installed.
Revenue from sales type leases and the associated cost of revenue is
recognized upon shipment of the equipment to customers. Interest income is
recognized over the life of the sale type lease. Rental income on
equipment under operating leases is recognized ratably over the lease term,
and the related equipment is depreciated over its estimated useful life.
Maintenance revenue is recognized ratably over the term of the maintenance
contract.
The Company's products are standard hardware and software configurations
which are developed according to internally generated product
specifications. Development costs for standard product configurations are
charged to research and development expense as incurred. Development work
is frequently required for new customers in order to adapt otherwise
standard products to specific languages, user interfaces and network
interfaces. From time to time, customers may contract for custom
modifications and enhancements to standard product configurations. The
proceeds from the sale of such modifications and enhancements as well as
the excess of customer funding received over and above associated costs are
included in revenues upon shipment of the related hardware and/or software.
Such revenues for the fiscal years ended January 31, 1996, 1995, and 1994
were approximately $2,978,000, $10,483,000, and $850,000, respectively.
Software Development Costs
Software development costs are expensed as incurred until technological
feasibility has been established. At the present time, the Company
believes that under its current process for developing software, the
software is essentially completed concurrently with the establishment of
technological feasibility. Software development costs incurred after the
establishment of technological feasibility, which would be eligible for
capitalization, have not been significant and have not been capitalized.
Contract Accounting
Earnings on long-term contracts are determined on the percentage of
completion method, based on the ratio of costs incurred to date to the
total estimated costs or the ratio of the number of units completed to date
to the total number of units to be completed. Provisions are made
currently for all known or anticipated losses. Costs or earnings in excess
of billings are classified in inventory as work-in-process and represent
amounts not yet billed under the terms of the contract but are recoverable
from customers. The Company has entered into two contracts requiring the
modification of existing products to meet customer specifications. As of
January 31, 1996 the Company has included in inventory $675,000 in costs
related to one of these custom development contracts. Under the terms of
this contract, the Company would receive reimbursement for these costs if
the contract were cancelled. The second contract is with AT&T (see Note 8).
Customer Funding
The Company is involved in several software 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,
and is recognized as development activities occur. Amounts received from
customers for research and development funding are included on the balance
sheet as deferred customer funding until they are recognized. Customer
funding offsets against research and development expense for the years
ended January 31, 1996, 1995 and 1994 amounted to approximately $5,051,000,
$8,162,000 and $3,241,000, respectively.
Income Taxes
The Company utilizes the asset and liability approach of accounting for
income taxes, as set forth in Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (FAS 109). Under the asset and
liability approach, deferred taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse.
-25-<PAGE>
<PAGE>
Net Income Per Share
Net income per share is computed based on the weighted average number of
common and dilutive common equivalent shares outstanding. Primary and
fully-diluted earnings per share are the same for all periods presented.
3. SALES TYPE LEASES
The Company has entered into several sales type leases for its products.
At January 31, 1996, the future minimum payments receivable under these
arrangements are as follows:
<TABLE>
<CAPTION>
Sales type
Years Ending January 31, leases
----------
<S> <C>
1997 $3,476,000
1998 856,000
----------
4,332,000
Less: unearned income (1,204,000)
----------
Net investment in sales type leases 3,128,000
Less: current portion (2,771,000)
----------
Long term portion $ 357,000
==========
</TABLE>
4. INVENTORIES
<TABLE>
<CAPTION>
Inventories at January 31, consist of:
1996 1995
---- ----
<S> <C> <C>
Materials and purchased parts $8,179,000 $3,285,000
Work in process 6,858,000 4,349,000
Finished goods 1,914,000 664,000
---------- ----------
$16,951,000 $8,298,000
========== ==========
</TABLE>
5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment at January 31, consist of:
1996 1995
---- ----
<S> <C> <C>
Manufacturing and test equipment $20,531,000 $13,900,000
Office equipment and furniture 5,741,000 5,007,000
Equipment leased to others 207,000 207,000
Leasehold improvements and other assets 542,000 361,000
---------- ----------
27,021,000 19,475,000
Less: accumulated depreciation
and amortization (16,424,000) (12,001,000)
---------- ----------
$10,597,000 $ 7,474,000
========== ==========
</TABLE>
Depreciation expense totaled $4,423,000, $3,108,000 and $2,809,000 for the
years ended January 31, 1996, 1995 and 1994, respectively.
6. JOINT VENTURE
During fiscal 1996, the Company entered into a joint venture with a
company that formerly acted as distributor of the Company's products in
Brazil. Under the terms of the joint venture agreement, the Company is
committed to provide a minimum of $3,000,000 for working capital purposes,
of which $1,000,000 has been paid at January 31, 1996 and is included in
other assets. Another $1,000,000 is to be provided during fiscal 1997, and
the final $1,000,000 is to be provided on or before March 1997. The
Company's ownership interest in the joint venture is 30%, which will be
accounted for using the equity method.
In addition to all necessary personnel, assets and related business
activities, the former distributor has assigned its exclusive distribution
agreement with the Company to the joint venture, thereby establishing the
-26-<PAGE>
<PAGE>
joint venture as the exclusive distributor of the Company's products in
Brazil. The Company has committed to provide all necessary marketing,
sales and customer service personnel to assist the joint venture in
developing marketing and sales plans, and to provide technical assistance
on customer service matters. At January 31, 1996, no operating activity
had been incurred by the joint venture.
The Company also presently has a significant business relationship with
the joint venture partner, as a customer of the Company. At January 31,
1996, the joint venture partner owed approximately $7,321,000 to the
Company, which is included in accounts receivable and investment in sales
type leases.
7. ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses at January 31, consist of:
1996 1995
---- ----
<S> <C> <C>
Accrued payroll, vacation and bonuses $1,664,000 $1,800,000
Accrued commissions 1,683,000 2,946,000
Accrued warranty 1,352,000 788,000
Accrued subcontract fees 1,241,000 1,346,000
Other accrued expenses 4,041,000 3,349,000
--------- ----------
$9,981,000 $10,229,000
========== ===========
</TABLE>
8. AT&T CONTRACT ACCRUAL
In November, 1995 the Company entered into an agreement with AT&T to
supply its Access NP Network Services Platform and AccessMAX object-
oriented software. Pursuant to this agreement, the Company issued to AT&T
warrants to purchase 4,908,800 shares of its common stock at an exercise
price of $14.00 per share. The warrants become exerciseable in five equal
annual increments of 981,760 shares each, commencing with the first
anniversary date of the grant, and remain exerciseable for thirty months
after first becoming exerciseable. In the event that any person or entity
acquires a majority of the Company's outstanding voting securities, the
warrants will become immediately exerciseable in full. Any stock issued as
a result of the exercise of the warrants would be for AT&T's investment
purposes only, and would be "restricted securities" under Rule 144 of the
Securities Act of 1933. Through December 31, 2000, AT&T is restricted from
acquiring greater than a 30% ownership of Boston Technology's outstanding
common stock.
The Company estimates that compliance with the terms of the Agreement
would result in a $21,000,000 loss, which was recognized in the fourth
quarter of fiscal 1996, establishing the AT&T Contract Accrual.
Approximately $18,940,000 in related expenses have been charged to this
accrual as of January 31, 1996, including $18,600,000 for the fair value of
the warrants issued to AT&T. The fair market value of the warrants was
based on an evaluation performed by an investment banking firm.
9. FINANCING ARRANGEMENTS
<TABLE>
<CAPTION>
Long-term debt at January 31, consists of:
1996 1995
---- ----
<S> <C> <C>
Note payables--patent license agreements $275,000 $1,042,000
Less: current portion (275,000) (542,000)
-------- ---------
$ -- $ 500,000
======== =========
</TABLE>
The Company has entered into several patent license agreements (the
"Agreements") whereby the Company obtained a non-exclusive license to make,
have made, use and sell certain inventions relating to voice messaging and
voice processing covered by the claims of the patents. The license fees
are due in installments through fiscal year 1996. In addition, some of the
Agreements provide that the Company shall pay to the licensor a royalty
based on a percentage of defined revenues derived by the Company from the
use, sale, lease or rental of the products incorporating the licensed
-27-<PAGE>
<PAGE>
technology. Royalty expense relating to the Agreements was $902,000,
$199,000 and $85,000 for the years ended January 31, 1996, 1995 and 1994,
respectively.
The note payable of $275,000 at January 31, 1996 represents a payment
made by the Company in February, 1996 for the settlement of a patent
license agreement. The balance decreased from $500,000 at January 31, 1995
due to a mutually agreed reduction in the settlement amount.
Credit Agreements
The Company maintains a $25,000,000 revolving credit facility with two
banks. Borrowings are collateralized by the Company's accounts receivable
and inventories and bear interest at the prime rate (8.5% at January 31,
1996). The credit facility is scheduled to expire on July 6, 1997. This
revolving credit facility also has a 1/2 of 1% annual commitment fee on the
unused portion. The facility contains quarterly covenants which, among
other things, require the Company to maintain certain financial ratios,
specified levels of equity, and other restrictions. At January 31, 1996
and 1995, stand-by letters of credit of approximately $203,000 and
$792,000, respectively, had been issued under this agreement.
The Company also has available an aggregate $50,000,000 uncollateralized
lines of credit for foreign exchange contracts with two banks. These lines
of credit are scheduled to expire on July 6, 1997. At January 31, 1996 and
1995, there were no outstanding forward foreign exchange contracts.
10. INCOME TAXES
<TABLE>
<CAPTION>
The provision for income taxes at January 31, consists of the following:
1996 1995 1994
---- ---- ----
Federal and foreign income taxes:
<S> <C> <C> <C>
Currently payable $1,689,000 $5,135,000 $2,158,000
Deferred (1,584,000) (95,000) (40,000)
---------- --------- ---------
105,000 5,040,000 2,118,000
State income taxes:
Currently payable 313,000 483,000 490,000
Deferred (313,000) 4,000 (10,000)
---------- --------- ---------
-- 487,000 480,000
Total $105,000 $5,527,000 $2,598,000
</TABLE>
The difference between taxes at the statutory federal income tax rate
and the Company's effective income tax rate for the years ended January 31,
is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Tax at the federal income tax rate $(5,105,000) $6,465,000 $3,160,000
State income tax, net of federal
tax benefit -- 539,000 309,000
Tax credits (708,000) (1,723,000) (526,000)
Tax effect of AT&T warrants issued for
which no deduction is available 6,510,000 -- --
Tax benefit of net operating loss
carryforwards -- -- (231,000)
Foreign sales corporation benefit (466,000) (204,000) (139,000)
Other (126,000 450,000 25,000
---------- ---------- ----------
Provision for income taxes $105,000 $5,527,000 $2,598,000
</TABLE>
A valuation reserve against net deferred assets is required if, based
upon weighted available evidence, it is more likely than not that some or
all the of the deferred tax assets will not be realized. Based on the
Company's projection of future earnings, management believes that sufficient
income will be generated in the future to realize the deferred tax asset.
The amount of the deferred tax asset considered realizeable,
-28-<PAGE>
<PAGE>
however, could be reduced in the near term if future taxable income is
reduced. Accordingly, the Company has provided no valuation reserve for
deferred tax assets at January 31, 1996.
The components of the net deferred tax asset as of January 31, consist of:
<TABLE>
<CAPTION>
1996 1995
---- ----
Deferred tax assets:
<S> <C> <C>
Reserves $3,081,000 $1,283,000
Depreciation (665,000) (666,000)
Other 131,000 196,000
--------- ---------
Total deferred tax assets $2,547,000 $ 813,000
Deferred tax liabilities:
Deferred compensation 22,000 --
Sales type lease 445,000 630,000
--------- ---------
Total deferred tax liabilities $ 467,000 $ 630,000
---------- ---------
Net deferred tax asset $2,080,000 $ 183,000
========== =========
</TABLE>
The Company has income taxes receivable of $3,886,000 at January 31,
1996, primarily representing estimated refunds receivable resulting from
federal and state income tax payments made during fiscal 1996. The tax
benefits related to the $18,600,000 charge for the AT&T warrants (see Note
8) are contingent upon the timing of the exercise of the warrants and the
stock value at that time. The tax benefit, if any, is not included in the
deferred tax asset.
11. COMMITMENTS AND CONTINGENCIES
The Company leases a building in Wakefield, Massachusetts that is being
used as its principal manufacturing facility and corporate headquarters.
The lease expires in fiscal 2004, and is renewable for an additional five-
year term. In addition, the Company has the option to purchase the
property at the greater of $35,500,000 or fair market value, at any time
after November 15, 1995. The Company also leases office facilities and
certain equipment under various operating leases expiring at various dates
through fiscal 2000.
As of January 31, 1996, the future minimum payments under operating
leases are as follows:
<TABLE>
<CAPTION>
Years Ending January 31,
<S> <C>
1997 $4,025,000
1998 3,725,000
1999 3,461,000
2000 3,436,000
2001 3,329,000
Beyond 8,477,000
----------
Total minimum lease payments $26,453,000
</TABLE>
Rent expense was $2,875,000, $2,071,000 and $1,648,000 for the years
ended January 31, 1996, 1995 and 1994, respectively.
During fiscal 1995, the Company received $1,741,000 from the sale of
sales type lease receivables, and at January 31, 1996, was contingently
liable for $1,278,000.
During fiscal 1996, the Company entered into a volume purchase
agreement with one of its key suppliers. Under the terms of the agreement,
the Company issued a non-cancelable purchase order to purchase a total of
$11,311,000 in production materials in return for substantial price
discounts. In accordance with the payment terms, the Company prepaid
$1,131,000, which is included in prepaid assets at January 31, 1996.
Delivery of the materials and payment of the remaining balance will take
place during fiscal 1997.
On or about November 16, 1995, a complaint was filed in the United
States District Court for the Eastern District of Pennsylvania captioned
-29-<PAGE>
<PAGE>
"John Eades v. Boston Technology, Inc., Greg C. Carr, Francis E. Girard,
Joseph E. Norberg, Paul W. DeLacey, William J. Burke and John C.W. Taylor",
Civil Action No. 95-CV-7236. On or about November 20 and 21, 1995,
respectively, essentially identical complaints were filed in the same court
captioned "Jacob Turner v. Boston Technology, Inc., Greg C. Carr, Francis E.
Girard, Joseph E. Norberg, Paul W. DeLacey, William J. Burke and John C.W.
Taylor", Civil Action No. 95-CV-7295, and "Gerald Tobin v. Boston Technolgy,
Inc., Greg C. Carr, Francis E. Girard, Joseph E. Norberg, Paul W. DeLacey,
William J. Burke and John C.W. Taylor", Civil Action No. 95-CV-7317. Each
of the plaintiffs purports to represent a class of purchasers of the common
stock of the Company between and including May 17, 1995 through November
15, 1995. Each complaint claims that the named defendants violated Section
10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated
pursuant thereto, by virtue of false or misleading statements made during
the class period. Each complaint claims that the individual defendants are
liable as "control persons" under Section 20(a) of that Act. In addition,
the complaints claim that the individual defendants sold some of their own
common stock of the Company, during the purported class period, at times
when the market price for the stock allegedly was inflated. No response
has been made to the three complaints, which have been consolidated by the
Court. The plaintiffs are required to file an amended complaint which will
govern proceedings in all three cases on or before May 6, 1996. Boston
Technology and the defendants deny the allegations and intend to contest
these cases vigorously.
On December 29, 1995, AudioFAX, Inc., a Georgia corporation, brought a
breach of contract action and a patent infringement action against the
Company in the U.S. District Court for the Northern District of Georgia,
Atlanta division, alleging breach of contract and infringement of certain
of its facsimile processing patents (the "AudioFAX Patents"). In its
Complaint, AudioFAX is seeking to enjoin Boston Technology from allegedly
continuing to breach the technology license agreement between the parties,
to enjoin the Company from allegedly continuing to infringe the AudioFAX
Patents, and to be awarded an unspecified amount of compensatory damages in
excess of $50,000, treble damages as a result of the alleged willful
infringement, and interest, expenses and attorneys' fees. The parties are
engaged in settlement discussions and have stipulated that the Company will
file an Answer to AudioFAX's action by May 17, 1996. Boston Technology
believes that it does not infringe any valid, enforceable claim of the
AudioFAX Patents. The Company intends to contest AudioFAX's claims
vigorously. However, if a final decision is reached on the merits of the
action and the Company is found to have infringed the AudioFAX Patents,
such a decision may have a material adverse effect on the Company.
No loss provisions have been made for these lawsuits.
12. STOCKHOLDER RIGHTS PLAN
In May 1991, the Board of Directors of the Company adopted a Stockholder
Rights Plan pursuant to which common stock purchase rights ("Rights") were
distributed as a dividend at the rate of one Right for each share of common
stock held as of May 31, 1991, and one Right will be issued for each share
of common stock issued after May 31, 1991 and before the Rights become
exercisable. Each Right entitles the holder of common stock to purchase
four-tenths of one share of common stock at an exercise price of $12.40 per
Right ($31.00 per share). The Rights will be exercisable only if a person
or group has acquired beneficial ownership of 20 percent or more of common
stock (excluding persons or groups beneficially owning 20 percent or more
as of May 9, 1991) or announces a tender or exchange offer that would
result in such person or group owning 30 percent or more of the common
stock. If any person becomes the beneficial owner of 25 percent or more of
the common stock, except pursuant to a tender or exchange offer for all
shares at a fair price as determined by the outside Board members, or if a
20 percent or more shareholder consolidates or merges into or engages in
certain self-dealing transactions with the Company, or if there occurs any
reclassification, merger or other transaction or transactions which
increases by more than 1 percent the proportionate share of the Company's
outstanding common stock held by a 20 percent or more shareholder, each
Right not owned by a 20 percent or more shareholder will enable its holder
to purchase that number of shares of common stock which equals the exercise
price of the Right divided by one-half of the current market price of such
common stock at the date of the occurrence of the event. The Company will
generally be entitled to redeem the Rights at $.02 per Right at any time
until the tenth day following the public announcement that a 20 percent
stock position has been acquired and in certain other circumstances. The
Rights expire on May 31, 2001 unless earlier redeemed or exchanged.
-30-<PAGE>
<PAGE>
13. STOCK OPTIONS
The Company has issued options to purchase shares of common stock to
officers and employees under employment agreements, and to officers,
employees and directors under various Company stock option plans. The
following table summarizes stock option transactions under all plans:
<TABLE>
<CAPTION>
Option Option Price
Shares Range
________ ________________
<S> <C> <C>
Outstanding, January 31, 1993 2,786,158 $ 2.00 - $ 9.75
Granted 597,653 $ 6.63 - $11.50
Exercised (521,309) $ 2.00 - $4.50
Canceled (311,063) $ 2.00 - $7.75
Outstanding, January 31, 1994 2,551,439 $ 2.00 - $11.50
Granted 941,714 $ 8.75 - $17.75
Exercised (482,431) $ 2.00 - $12.31
Canceled (101,265) $ 2.13 - $11.50
Outstanding, January 31, 1995 2,909,457 $ 2.00 - $16.56
Granted 1,041,600 $ 11.06 - $15.75
Exercised (667,301) $ 2.00 - $14.33
Canceled (152,408) $ 3.25 - $12.75
Outstanding, January 31, 1996 3,131,348 $ 2.00 - $17.75
Exercisable at January 31, 1996 1,376,467 $ 2.00 - $17.75
</TABLE>
Directors' Stock Option Plan
In connection with the election of directors, the Company granted
options to purchase 95,000 shares of common stock at exercise prices of
$2.06 or $2.75 per share, vesting in two equal annual installments
commencing one year from the date of issuance and exercisable at any time
prior to November 1995, and options to purchase 20,000 shares of common
stock at an exercise price of $2.81, vesting immediately and exercisable at
any time prior to December 5, 2001, in fiscal 1991 and fiscal 1992,
respectively. The exercise price for all options was the fair market value
at date of grant.
During fiscal 1993, the stockholders of the Company approved the
1992 Directors' Stock Option Plan (the " 1992 Directors' Plan"). The 1992
Directors' Plan provides for the granting of non-transferable non-qualified
options to purchase a maximum of 135,000 shares of the Company's common
stock to outside (i.e., non-employee) directors of the Company. The option
price is equal to the fair market value at date of grant. Each eligible
director was granted an option to purchase 15,000 shares of common stock
annually commencing March 1, 1992 through and including March 1, 1994,
provided the individual was an eligible director on the date of grant. All
options granted under the 1992 Directors' Plan are immediately exercisable
in full upon grant, provided however, that no options granted under the
1992 Directors' Plan may be exercised more than six months after the
optionee ceases to serve as a director of the Company, and all options
terminate on the tenth anniversary of the date of grant. The 1992
Directors' Plan terminates upon the earlier of December 31, 1994 or the
date on which all shares available for issuance under the 1992 Directors'
Plan have been issued.
During fiscal 1995, the stockholders of the Company approved an
Amendment to the 1992 Directors' Plan which increased the number of shares
authorized to be issued under the 1992 Directors' Plan from 135,000 to
-31-<PAGE>
<PAGE>
150,000 shares of the Company's common stock to outside directors of the
Company. All other terms and conditions of the 1992 Directors' Plan
remained the same. During fiscal 1995, 1994 and 1993, options to purchase
60,000, 45,000 and 45,000 shares of common stock, respectively, were
automatically issued to eligible directors; and 15,000 shares were
exercised during 1996.
During fiscal 1996, the stockholders of the Company approved the 1995
Director Stock Option Plan (the "1995 Director Plan"). The 1995 Director
Plan provides for the granting of non-transferable non-qualified options to
purchase a maximum of 180,000 shares of the Company's common stock to
eligible outside (i.e., non-employee) directors of the Company on March 1,
1995. Accordingly, on March 1, 1995, 120,000 shares of the Company's
common stock were issued to the eligible directors at an exercise price of
$13.63 per shares, the closing sale price of the Company's common stock on
the Nasdaq National Market on the date of grant. The 1995 Director Plan
also provides that an option to purchase 30,000 shares shall be granted to
an eligible director upon his or her initial election as a director. All
options granted under the 1995 Director Plan vest and become exercisable in
increments of 10,000 each on the date of the first, second and third annual
meetings of the stockholders following the date of grant.
Employment Agreements
Under employment agreements, certain officers and employees have been
granted non-qualified options to purchase 376,892 shares of the Company's
common stock at prices ranging from $2.00 to $11.50, which equaled fair
market value at the date of grant. Options become exercisable in annual
installments over one to ten years and expire ten years from the date of
grant. Options to purchase 17,500, 30,967 and 32,300 shares of common
stock were exercised during the years ended January 31, 1996, 1995 and
1994, respectively. As of January 31, 1996, 15,065 shares remained
available for future option grants.
1989 Stock Option Plan
During fiscal 1993, the stockholders of the Company approved an increase
in the number of shares reserved for issuance under the 1989 Stock Option
Plan ("the Plan") to an aggregate of 3,500,000 shares. The Plan was also
amended to authorize the grant of non-statutory options, in addition to
incentive stock options intended to qualify under Section 422 of the
Internal Revenue Code of 1986. The maximum term for options granted under
the Plan is ten years (five years for holders of more than 10% of the
Company's common stock). The exercise price at which shares of common
stock may be purchased upon exercise of options granted under the Plan must
equal at least 100% (110% for holders of more than 10% of the Company's
common stock) of the fair market value of the common stock on the date of
grant. The aggregate fair market value (determined at the time of grant)
of shares for which incentive stock options granted under the Plan are
exercisable for the first time by the optionee in any one calendar year may
not exceed $100,000. During the years ended January 31, 1994 and 1993,
options to purchase 422,095 and 1,382,333 shares of common stock had been
granted and were exercisable at prices ranging from $6.63 to $11.50 and
$2.50 to $9.75, respectively. As of January 31, 1996, 2,281,698 shares had
been issued upon option exercises and 82,106 shares remained available for
future stock option grants.
1994 Stock Incentive Plan
During fiscal 1996, the Board of Directors of the Company, subject to
stockholder approval, amended the 1994 Stock Incentive Plan (the "Incentive
Plan") to increase the number of shares reserved for issuance to an
aggregate of 2,500,000. The Incentive Plan provides for the granting of
shares issuable pursuant to incentive stock options, non-statutory stock
options, stock appreciation rights, performance shares, restricted stock
awards or non-restricted stock awards to employees, officers, directors,
consultants and advisors of the Company and its subsidiaries. During the
years ended January 31, 1996, 1995 and 1994, 921,600, 839,714 and 82,283
stock options had been granted at prices ranging from $11.06 to $15.75,
$8.75 to $17.75, and $11.50, respectively. As of January 31, 1996, 39,767
shares had been issued upon exercise of options, and 781,482 shares
remained available for future option grants.
Options Granted by Stockholders
During fiscal 1993, the two founding stockholders of the Company, who
were also directors of the Company at the time the options were granted,
granted options to purchase an aggregate of 187,500 shares of common stock
owned by them to certain employees of the Company in recognition of the
contributions made by these employees to the Company. The options were
granted at fair market value at the time of grant. As of January 31, 1996
-32-<PAGE>
<PAGE>
and 1995, 75,000 options had been exercised at prices ranging from $3.31 to
$5.00, and 112,500 options remained outstanding and exercisable at prices
ranging from $3.31 to $5.00 per share. No options were exercised during
fiscal 1996.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (FAS 123). Under FAS 123 the Company is required to elect
either expense recognition or the disclosure-only alternative for stock
based employee compensation. The expense recognition provision encouraged
by FAS 123 would require fair-value based financial accounting to recognize
compensation expense for employee stock compensation plans. FAS 123 must
be adopted in the Company's fiscal 1997 financial statements with
comparable disclosures for the prior years presented. The Company has
determined that it will elect the disclosure-only alternative. The Company
will be required to disclose the pro forma income or loss and the per share
amounts in the notes to the financial statements using the fair value based
method. The Company has not determined the impact of these pro forma
adjustments.
14. MAJOR CUSTOMERS
Substantially all of the Company's revenues were attributable to sales
to the network operator market. The following table summarizes revenues
from major customers for the years ended January 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NTT (DoCoMo and ISDN) 27% 12% 4%
DDI 13 10 4
Bell Atlantic 13 48 44
Southwestern Bell 11 9 14
BellSouth 6 4 13
All others 30 17 21
--- --- ---
Total 100% 100% 100%
</TABLE>
Geographically, the Company's revenues for the years ended January 31, are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
North America 40% 67% 80%
Asia 52 29 11
South America 4 4 6
Other 4 -- 3
---- ---- ----
Total 100% 100% 100%
</TABLE>
15. EMPLOYEE BENEFIT PLANS
The Company has an Employee Savings and Profit Sharing Plan (the
"Savings Plan"), under Section 401(k) of the Internal Revenue Code of 1986,
as amended. All employees of the Company, including executive officers,
are eligible to participate in the Savings Plan. A participating employee
may elect to defer on a pre-tax basis up to 15% of his or her salary. This
amount, plus a matching amount provided by the Company, is contributed to
the Savings Plan. All amounts granted vest in their entirety upon
completion of one year of service. The full amount vested in a
participant's account will be distributed to a participant upon termination
of employment, retirement, disability or death. Company contributions to
the Savings Plan for the years ended January 31, 1996, 1995 and 1994
amounted to $321,000, $268,000, and $184,000, respectively.
The Company does not currently offer postretirement benefits, and the
effect of postemployment benefits is immaterial. As of December 31, 1993,
the Company implemented the Officers' Deferred Compensation Plan (the Plan)
providing elected officers with the opportunity to participate in an
unfunded, deferred compensation program. Under the Plan, officers may
defer up to 100% of their base salary and/or incentive compensation until
retirement, separation or a fixed date at least five (5) years from the
date of election. The deferred amounts are retained as Company assets and
are included in other assets on the Consolidated Balance Sheet. The
deferred amounts are invested, at the officer's election, in either
treasury bonds or a designated mutual fund. Officers are 100% vested in
their deferral balances at all times. The total amount deferred under the
-33-<PAGE>
<PAGE>
Plan, which is reflected in other long-term liabilities, was $90,000 and
$147,000 as of January 31, 1996 and 1995, respectively. The expense for
the Plan was $9,000 in fiscal 1995, there was no expense in fiscal 1996.
16. EMPLOYEE STOCK PURCHASE PLANS
Under the 1991 Employee Stock Purchase Plan (the "1991 Stock Purchase
Plan"), all employees who had completed three months of employment, except
for those employees who possessed at least 5% of the voting power of the
Company's common stock were entitled, through payroll deductions of amounts
up to 10% of his or her base salary, to purchase shares of the Company's
common stock at the lesser of 85% of the market price at the offering
commencement date or the offering termination date.
During fiscal 1994, the stockholders of the Company approved the 1993
Employee Stock Purchase Plan (the "1993 Stock Purchase Plan"). The 1993
Stock Purchase Plan was in all material respects identical to the 1991
Employee Stock Purchase Plan. This plan was closed during fiscal 1996 and
was replaced by the 1995 Employee Stock Purchase Plan (the "1995 Stock
Purchase Plan").
During fiscal 1996, the stockholders of the Company approved the 1995
Stock Purchase Plan. The 1995 Stock Purchase Plan is in all material
respects identical to the 1991 and 1993 Employee Stock Purchase Plans. The
number of shares available for issuance under the 1995 Stock Purchase Plan
is 200,000. For the offering period ended February 29, 1996, 35,206 shares
of common stock were issued to employees at a price of $10.63 per share.
The number of shares available for subsequent offerings may be increased,
at the election of the Board of Directors, by the shares, if any, which
were made available but not purchased during any previous offerings.
17. Unaudited Quarterly Financial Information:
<TABLE>
<CAPTION>
1996 Fiscal Quarter Ended
April 30 July 31 October 31 January 31
-------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $26,021 $26,127 $19,519 $33,600
Operating income (loss) 4,569 3,904 (5,205) (19,057)
Net income (loss) 3,278 2,960 (3,378) (17,750)
Net income (loss) per
share (a) .13 .11 (.14) (.72)
</TABLE>
<TABLE>
<CAPTION>
1995 Fiscal Quarter Ended
April 30 July 31 October 31 January 31
-------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $18,286 $21,78 $23,122 $25,866
Operating income 3,075 4,650 4,825 5,030
Net income 2,266 3,381 3,541 3,756
Net income per share .09 .13 .14 .14
</TABLE>
(a) Earnings per common share calculations for each of the quarters were
based on the weighted average number of shares outstanding for each period,
and the sum of the quarters may not necessarily be equal to the full year
earnings per common share amount.
-34-<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Boston
Technology, Inc. has been incorporated in this fiscal 1996 Annual Report to
the Stockholders of Boston Technology, Inc. on Form 10-K. In connection
with our audits of such financial statements, we have also audited the
related financial statement schedule listed in Item 14(a)(2) of this Form
10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 29, 1996
-35-<PAGE>
<PAGE>
Boston Technology, Inc.
Schedule II - Valuation and Qualifying Accounts
For the Years Ended January 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
________ ________ _________ ________ ________
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
_____________________________________________________________________________
Accounts Receivable Allowance -
deducted from accounts receivable
on the balance sheet:
For the period ended January 31:
<S> <C> <C> <C> <C>
1996 $799,000 $997,000 $242,000 $1,554,000
1995 290,000 536,000 27,000 799,000
1994 150,000 144,000 4,000 290,000
Reserve for inactive, obsolete
and surplus inventory - deducted
from inventories on the balance sheet:
For the period ended January 31:
1996 $518,000 $440,000 $151,000 $807,000
1995 350,000 440,000 272,000 518,000
1994 300,000 92,000 42,000 350,000
</TABLE>
-36-<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated herein by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held on June 25, 1996 (the "Proxy Statement") under the captions "Election
of Directors" and "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
the Proxy Statement under the captions "Compensation Tables," "Director
Compensation," "Employment Agreements", "Employee Severance Benefit Plan"
and "Compensation Committee Interlocks and Inside Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference to
the Proxy Statement under the caption "Beneficial Ownership."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference to
the Proxy Statement under the caption "Compensation Committee Interlocks
and Insider Participation."
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of or are included in this
Annual Report on Form 10-K:
1. The financial statements listed in the Index to Consolidated
Financial Statements and Consolidated Financial Statement
Schedule, filed as part of this Annual Report on Form 10-K.
2. The financial statement schedule listed in the Index to
Consolidated Financial Statements and Consolidated Financial
Statement Schedule, filed as part of this Annual Report on Form 10-K.
3. The exhibits listed in the Exhibit Index filed with or
incorporated into this Annual Report on Form 10-K.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by the
Company during the last quarter of the year ended January 31, 1996.
-37-<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 26, 1996
BOSTON TECHNOLOGY, INC.
By: /s/ JOHN C. W. TAYLOR
__________________________
John C. W. Taylor, Ph.D.
President and Chief
Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ----
<S> <S> <S>
/s/ GREG C. CARR Chairman of the Board April 26, 1996
__________________________ of Directors
Greg C. Carr
/s/ RICHARD J. CONNAUGHTON Director April 26, 1996
__________________________
Richard J. Connaughton
/s/ HERMAN B. LEONARD Director April 26, 1996
__________________________
Herman B. Leonard
/s/ JOSEPH E. NORBERG Director April 26, 1996
__________________________
Joseph E. Norberg
/s/ RICHARD K. SNELLING Director April 26, 1996
__________________________
Richard K. Snelling
/s/ JOHN C. W. TAYLOR Director, President and Chief April 26, 1996
__________________________ Executive Officer
John C. W. Taylor (principal executive officer)
/s/ CAROL B. LANGER Senior Vice President of Finance April 26, 1996
__________________________ and Administration, Chief Financial
Carol B. Langer Officer, Treasurer and Secretary
(principal financial officer)
/s/ DAVID J. BEAUREGARD Corporate Controller April 26, 1996
__________________________ (principal accounting officer)
David J. Beauregard
-38-<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Title
________ ________
(2) 3.1 -Certificate of Incorporation of Registrant, as amended
(9) 3.2 -By-laws of the Registrant, as amended
(9) 4.1 -Specimen Common Stock Certificate
(10) 4.2 -Shareholder Rights Agreement dated as of May 9, 1991 between
the Registrant and The First National Bank of Boston
(1) 4.2(a) -Assignment of Shareholder Rights Agreemment
(1) 10.1 -$25 Million Credit Agreement dated January 31, 1996 between
the Registrant and Silicon Valley Bank and CoreStates Bank
(1)t 10.2 -AT&T Memorandum of Agreement dated November 22, 1995
(6) 10.3 -Lease dated November 5, 1990 between the Registrant and
Wakefield Park Limited Partnership
(3) 10.4 -First Amendment dated as of March 31, 1993 to Lease dated
November 5, 1990 between the Registrant and Wakefield Park
Limited Partnership
(4) 10.5 -Second Amendment dated as of August 31, 1994 to Lease dated
November 5, 1990 between the Registrant and Wakefield Park
Limited Partnership
(9) 10.6 -License Agreement dated November 15, 1988 between the
Registrant and VMX, Inc
(7) 10.7 -License Agreement dated January 22, 1990 between the
Registrant and Dytel Corporation
(5) 10.8 -Settlement Agreement dated December 28, 1993 between the
Registrant and Theis Research, Inc. and Peter F. Theis
(2)* 10.9 -1995 Director Stock Option Plan
(5)* 10.10 -1992 Directors' Stock Option Plan, as amended
(5)* 10.11 -1994 Stock Incentive Plan
(8)* 10.12 -1989 Incentive Stock Option Plan, as amended
(9)* 10.13 -Employee Savings and Profit Sharing Plan
(10)* 10.14 -Employee Severance Benefit Plan
(1) 11. -Statement of Weighted Shares Used in Computation of Earnings
Per Share
(1) 23. -Consent of Coopers & Lybrand L.L.P
(1) 27. -Financial Data Schedule
__________________________
(1) Filed herewith.
(2) Incorporated by reference to the Registrant's Form 10-Q for the
period ended July 31, 1995.
(3) Incorporated by reference to the Registrant's Form 10-Q for the
period ended October 31, 1993.
(4) Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended January 31, 1995.
(5) Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended January 31, 1994.
(6) Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended January 31, 1991.
(7) Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended January 31, 1990.
(8) Incorporated by reference to the Definitive Proxy Materials for the
Registrant's Annual Meeting of Stockholders held July 14, 1992.
(9) Incorporated by reference to the Registrant's Form S-1 (Registration
No. 33-32134).
(10) Incorporated by reference to the Registrant's Form 8-K dated May 9,
1991.
* Management contract, compensation plan or arrangement filed as an
exhibit pursuant to Item 14(c) of Form 10-K.
t Confidential treatment requested as to certain portions.
-39-<PAGE>
</TABLE>
<PAGE>
EXHIBIT 4.2(a)
AGREEMENT
Boston Technology, Inc. ("the Company") hereby appoints State Street Bank
and Trust Company ("the Successor") as Rights Agent, and the Successor hereby
agrees to serve as Rights Agent, under the Rights Agreement ("the Agreement")
dated as of May 9, 1991 by and between the Company and the First National
Bank of Boston, such appointment to be effective as of January 16, 1995 (the
"Commencement Date"). From and after the Commencement Date, the parties
hereto agree that the Successor shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named as Rights Agent
under the Agreement without further act or deed. The address of the Successor
for any notice given or made under Section 25 of the Agreement shall be:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Corporate Stock Transfer Division
EXECUTED as of the 26th day of April, 1996.
STATE STREET BANK AND TRUST COMPANY
By: \s\Stephen Cesso
__________________________
Name: Stephen Cesso
Title: Corporate Counsel
BOSTON TECHNOLOGY, Inc.
By: \s\Carol B. Langer
____________________________
Name: Carol B. Langer
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.1
PAGE 1 OF 62
Dated as of January 31, 1996
among
BOSTON TECHNOLOGY, INC., as Borrower,
SILICON VALLEY BANK as Lender,
CORESTATES BANK, N.A., as Lender,
and
SILICON VALLEY BANK, as Agent
Line of Credit Commitment
Up To $25,000,000
Section 5 Representations and Warranties
5.1 Corporate Status
5.2 No Violation
5.3 Corporate Power and Authority
5.4 Enforceability
5.5 Governmental Approvals
5.6 Financial Statements
5.7 No Material Change
5.8 Litigation.
5.9 Compliance with Other Instruments; Compliance with Law
5.10 Subsidiaries
5.11 Investment Company, Status; Limits on Ability to Incur
Indebtedness
5.12 Title to Property
5.13 ERISA
5.14 Taxes
5.15 Environmental Matters
5.16 Intellectual Property
Section 6 Affirmative Covenants.
6.1 Maintenance of Existence
6.2 Taxes and Other Liens
6.3 Insurance
6.4 Financial Statements, Etc.
6.5 Notice of Default
6.6 Environmental Matters
6.7 ERISA Information
6.8 Inspection
6.9 Use of Proceeds
6.10 Further Assurances
6.11 Depository Accounts
6.12 Subsidiaries
<PAGE>
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EXHIBIT 10.1
PAGE 2 OF 62
Section 7 Negative Covenants
7.1 ERISA.
7.2 Transactions with Affiliates
7.3 Consolidation, Merger or Acquisition
7.4 Disposition of Assets; Sales-Type Leases
7.5 Indebtedness
7.6 Liens
7.7 Restricted Payments
7.8 Investments.
7.9 Sale and Leaseback
7.10 Additional Stock Issuance by Subsidiaries
7.11 Quick Ratio
7.12 Minimum Profitability
7.13 Leverage
7.14 Tangible Net Worth
Section 8 Events of Default
8.1 Events of Default
8.2 Remedies Upon an Event of Default
Section 9 Definitions
9.1 Certain Definitions
Section 10 Miscellaneous
10.1 Accounting Terms and Definitions
10.2 Amendments, Etc.
10.3 Notices- Etc.
10.4 No Waiver; Remedies
10.5 Right of Set-off
10.6 Expenses; Indemnification
10.7 Binding Effect.
10.8 Severability.
10.9 GOVERNING LAW; AGREEMENT UNDER SEAL
10.10 WAIVER OF JURY TRIAL
10.11 VENUE- CONSENT TO SERVICE OF PROCESS.
10.12 Headings
10.13
Exhibits
A-I Amended and Restated Promissory Note (SVB)
A-2 Amended and Restated Promissory Note (CoreStates)
B Confirmation of Borrowing Request
C Compliance Certificate
D Borrowing Base Certificate
Schedules
A Disclosure Schedule
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 3 OF 62
[Amending and Restating 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]
This CREDIT AGREEMENT (the "Agreement"), dated as of January 31, 1996, is
entered into by and among BOSTON TECHNOLOGY, INC., a Delaware corporation
with its principal place of business at I00 Quannapowitt Parkway, Wakefield,
Massachusetts 01880 (the "Borrower"), SILICON VALLEY BANK, a California-
chartered bank, with its principal place of business at 3003 Tasman Drive,
Santa Clara, California 95454 and a loan production office located at Wellesley
Office Park, 40 William Street, Wellesley, Massachusetts 02181 doing business
under the name Silicon Valley East (together with its successors, SVB").
CORESTATES BANK, N.A., a national banking association, with its principal
place of business at 1345 Chestnut Street, Philadelphia, Pennsylvania 19107
(together with its successors, "CoreStates") and SILICON VALLEY BANK as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "Agent"). This Agreement amends and restates in its entirety
the Commitment Letter dated as of January 31, 1991 between the Borrower and
SVB, as amended by amendments thereto dated as of July 10, 1992, July 14, 1993,
July 28, 1993, September 15, 1993 and July 11, 1994 (the 1991 Commitment
Letter")
Section I Line of Credit Loans.
1.1 Amount. Upon the terms and subject to the conditions set forth below,
each of the Lenders severally agrees to make loans (each a "Line of
Credit Loan" and, collectively, the "Line of Credit Loans") to the
Borrower under this Section 1.1 from time to time to and including
July 6, 1997 (the "Commitment Expiration Date"), unless the Total Line
of Credit Commitment is earlier terminated pursuant to Sections 1.9
or 1.10, in an aggregate principal amount not to exceed at any one time
outstanding their respective Line of Credit Commitments, as set forth
in Section 1.2, and subject to the limitations set forth in Sections
1.6. Within the limit of the Total Line of Credit Commitment and the
limitation stated in Section 1.6, the Borrower may borrow, repay and
reborrow at any time or from time to time until the Commitment
Expiration Date or the termination of the Line of Credit Commitment,
whichever occurs earlier.
1.2 Line of Credit Commitment. The Total Line of Credit Commitment
shall be, in the aggregate, $25,000,000; each of the Lenders shall
have a respective Line of Credit Commitment of $12,500,000.
1.3 Existing Indebtedness. The Line of Credit Loans and other Extensions
of Credit made by the Lenders under this Agreement shall be deemed
to include any and all Extensions of Credit for which the Borrower
is indebted to the Lenders as of the date hereof under or with respect
to the 1991 Commitment Letter. Interest on these Line of Credit Loans,
to the extent that they represent direct dollar borrowings, shall be
calculated from this date forward as if made hereunder on the date hereof.
<PAGE>
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EXHIBIT 10.1
PAGE 4 OF 62
1.4 Line of Credit Notes. The Line of Credit Loans made by each Lender
shall be evidenced (i) in the case of SVB, by an amended and restated
promissory note payable to the order of SVB with interest in accordance
with the terms of the Amended and Restated Promissory Note of the
Borrower to be issued in substantially the form of attached Exhibit
A-1, dated the date hereof and (ii) in the case of CoreStates, by a
promissory note payable to the order of CoreStates with interest in
accordance with the terms of the Promissory Note of the Borrower to
be issued in substantially the form of attached Exhibit A-2, dated
the date hereof. The Amended and Restated Promissory Note and the
Promissory Note are collectively referred to herein as the "Notes".
1.5 Requests For Line of Credit Loans. (a) Whenever the Borrower desires
to obtain a Line of Credit Loan, it shall notify the Agent by telex,
telecopy or telephone call received no later than 1:00 p.m. (Boston
time) one Banking Day before the day on which the requested Line of
Credit Loan is to be made. Such notice shall specify the effective
date and the amount of such Loan. Each such notice (a "Notice of
Borrowing") shall be irrevocable and shall be immediately followed by
written confirmation in substantially the form of attached Exhibit B;
provided, however, that if the action requested in such written
confirmation differs in any material respect from the action taken by
the Agent for the account of the Lenders, the records of the Agent
concerning the instructions received from the Borrower shall control
absent manifest error. Not later than 11:00 a.m. (Boston time) on
the date specified for the making of each such Line of Credit Loan,
each Lender shall, subject to the terms and conditions of this
Agreement, make available to the Borrower an amount equal to such
Lender's respective Commitment Percentage multiplied by the amount of
the Line of Credit Loan requested as set forth above, by crediting the
same, in immediately available funds, to the Borrower's regular
deposit account with either Lender, as specified by the Borrower.
1.6 Limitations on Extensions of Credit.
The Borrower shall not permit or request the Lenders (or the Agent
acting 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) all
amounts available to be drawn under any Letters of Credit issued for
the account of the Borrower as provided in Section 1.9 below (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 Total Line of Credit Commitment then in effect.
If the sum of the Extensions of Credit shall at any time exceed the
Total Line of Credit Commitment, 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, any unreimbursed
drawings under such Letters of Credit such that, giving effect to such
prepayment or repayment, the sum of the Extensions of Credit shall
not exceed the Total Line of Credit Commitment.
<PAGE>
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EXHIBIT 10.1
PAGE 5 OF 62
1.7 Maturity Date of Line of Credit Loans and Other Extensions of Credit.
All Line of Credit Loans shall mature and the total unpaid principal
amount thereunder shall be due and payable on July 6, 1997 (the
"Maturity Date"), at which time all Extensions of Credit under this
Section 1, together with all accrued interest and other obligations
owed to the Lenders, shall also be immediately due and payable.
1.8 Termination of Commitment. The Borrower, upon (a) at least two
(2) Banking Days' prior written notice to the Agent and the Lenders
in accordance with Section 2.6 and (b) the repayment in full of the
outstanding principal balance of the Line of Credit Loans and all
other Extensions of Credit (and accrued interest thereon) and the
payment in full of the unpaid balance of the Facility Fee provided
for in Section 4.8 through the Commitment Expiration Date together
with any expenses or other fees owed by the Borrower to the Agent or
the Lenders under or pursuant to this Agreement, may terminate
permanently the Total Line of Credit Commitment.
1.9 Letters of Credit. (a) Subject to the limitations stated in Section
1.6 and the requirements set forth below, the Borrower may use the
Line of Credit Commitment for Letters of Credit to be issued by either
Lender as designated from time to time by the Borrower (the "Issuing
Bank") for the account of the Borrower, provided that (i) the Borrower
executes and delivers a letter of credit application and reimbursement
agreement in the Issuing Bank's standard form and complies with any
conditions to the issuance of such Letter of Credit (including the
payment of any applicable fees) set forth therein, (ii) the Issuing
Bank approves the form of such Letter of Credit and the purpose of
its issuance; (iii) such Letter of Credit bears an expiration date
not later than the Commitment Expiration Date, provided, however,
any such Letters of Credit may bear an expiration date up to 180 days
subsequent to the Commitment Expiration Date provided that the
Borrower maintains at all times during such extended period cash balances
with the Issuing Bank in an amount equal to the aggregate amount of
such Letters of Credit; and (iv) the conditions set forth in Sections
4.2 and 4.3 below have been satisfied as of the date of the
issuance of such Letter of Credit.
(b) The Issuing Bank shall not be obligated or permitted under this
Section 1.9 to issue any Standby Letter of Credit for the account of
the Borrower to the extent that the sum of (i) the amount that would
be available to be drawn under the proposed Standby Letter of Credit
plus (ii) the sum of all amounts available to be drawn under
outstanding Standby Letters of Credit plus (iii) all unreimbursed
drawings under such outstanding Standby Letters of Credit, shall
exceed $20,000,000.
(c) The Borrower's obligations under this Section 1.9 shall be absolute
and unconditional under any and all circumstances and irrespective
of the occurrence of any Default or Event of Default or any condition
precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Issuing Bank, the
Agent, any Lender or any beneficiary of a Letter of Credit. The Borrower
further agrees that the Issuing Bank, the Agent and the Lenders shall
<PAGE>
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EXHIBIT 10.1
PAGE 6 OF 62
not be responsible for, and the Borrower's reimbursement obligations
shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrower, the
beneficiary of any Letter of Credit or any financing institution or
other party to which any Letter of Credit may be transferred or any
claims or defenses whatsoever of the Borrower, against the beneficiary
of any Letter of Credit or any such transferee. The Issuing Bank,
the Agent and the Lenders shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of
Credit. The Borrower agrees that any action taken or omitted by the
Issuing Bank, the Agent or any Lender under or in connection with each
Letter of Credit and the related drafts and documents, if done in
good faith and without willful misconduct or gross negligence on the
part of the Agent or the Lenders, shall be binding upon the Borrower
and shall not result in any liability on the part of the Issuing Bank,
the Agent or any Lender to the Borrower; provided, however, in no
event shall the Agent or the Lenders be liable for any consequential damages.
(d) To the extent not inconsistent with Section 1.9(c), the Issuing Bank
and the Agent shall be entitled to rely, and shall be fully protected
in relying upon, any Letter of Credit, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel, independent accountants
and other experts selected by the Issuing Bank and the Agent.
(e) If any draft shall be presented or other demand for payment shall be
made under any Letter of Credit, the Issuing Bank shall notify the
Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft
or honor such demand for payment. On the date that such draft is
paid or other payment is made by the Issuing Bank, the Issuing Bank
shall promptly notify the Lenders of the amount of any unpaid
reimbursement obligation. All such unpaid reimbursement obligations
with respect to Letters of Credit shall be deemed to be Line of
Credit Loans and subject to the limitations and requirements
stated in Sections 1.2 and 1.6.
(f) Effective immediately upon the issuance of each Letter of Credit for
the account of the Borrower and without further action on the part
of the Issuing Bank, the Issuing Bank shall be deemed to have
granted to each Lender, and each Lender shall be deemed to have
irrevocably purchased and received from such Issuing Bank without
recourse or warranty, an undivided interest and participation in
such Letter of Credit to the extent of each Lender's Commitment
Percentage. Each Lender agrees that it shall be absolutely liable,
to the extent of its Commitment Percentage thereof, to reimburse the
Issuing Bank on demand for the amount of each draft paid by the
Issuing Bank under each Letter of Credit to the extent that such
amount is not reimbursed by the Borrower,
<PAGE>
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EXHIBIT 10.1
PAGE 7 OF 62
(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 Standby Letter of Credit issued equal to
1.75% per annum of the amount that is available to be drawn under
such Standby Letter of Credit. Each of the aforementioned fees
shall be payable upon the issuance of the requested Letter of Credit.
(h) The Borrower shall pay the Issuing Bank, for the benefit of the
Lenders as their interests shall appear, a fee with respect to each
Trade Letter of Credit issued in an amount to be agreed upon by the
Borrower and the Issuing Bank at the time of issuance.
(i) The Issuing Bank shall be entitled to administer each Letter of
Credit in the ordinary course of business and in accordance with its
usual practices, modified from time to time as it deems appropriate
under the circumstances, and shall be entitled to use its discretion
in taking or refraining from taking any action in connection herewith
as if it were the sole party involved. Any action taken or omitted
to be taken by the Issuing Bank under or in connection with any Letter
of Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not create for the Issuing Bank any
resulting liability to any other Lender.
1.10 Clean-Up Requirement. For a period of at least thirty (30)
consecutive days during each fiscal year of the Borrower, the
Borrower will not permit any Line of Credit Loan to be outstanding
under the Total Line of Credit Commitment.
Section 2 Interest Rates: Payments and Optional Prepayments
2.1 Interest Rates.
(a) The Borrower agrees to pay interest on the unpaid principal amount
of each Line of Credit Loan for each day from and including the date
such Line of Credit Loan was made to but excluding the date the
principal on such Line of Credit Loan is due (whether at maturity,
by acceleration or otherwise), at the fluctuating rates per annum:
(i) for Prime Rate Loans, at the Prime Rate per annum; and
(ii) for LIBOR Loans, at the LIBOR Rate, plus 225 basis points per annum.
(b) Notwithstanding the foregoing, the Borrower will pay to the Lenders
interest at the applicable Post-Default Rate on any principal of any
Line of Credit Loan and on any other amount payable by the Borrower
hereunder (but, if such amount is interest, only to the extent
legally enforceable), which shall not be paid in full when due
(whether at stated maturity, by acceleration or otherwise), for the
period commencing on the due date thereof until the same is paid in
full. Accrued interest on each Prime Rate Loan and LIBOR Loan shall
be payable monthly in arrears on the first day of each month and in
any event, 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. Promptly after the determination of any
interest rate provided for herein or any change therein, each Lender
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EXHIBIT 10.1
PAGE 8 OF 62
shall notify the Borrower thereof notwithstanding the foregoing provisions
of this Section 3. 1, if at any time the rate of interest set forth
above (the "Stated Rate") exceeds the maximum non-usurious interest
rate permissible for any Lender to charge commercial borrowers under
applicable law (the "Maximum Rate"), the rate of interest charged on the
Line of Credit Loans by such Lender hereunder shall be limited to the
Maximum Rate.In the event the Stated Rate that has theretofore been
subject to the preceding paragraph at any time is less than the
Maximum Rate in respect of the Line of Credit Loans hereunder by any
Lender, the principal amount of the Line of Credit Loans by such Lender
shall bear interest at the Maximum Rate until the total amount of interest
paid to such Lender or accrued on the Line of Credit Loans by such Lender
hereunder equals the amount of interest which would have been paid to such
Lender or accrued on the Line of Credit Loans by such Lender hereunder if
the Stated Rate had at all times been in effect.In the event that upon
payment in full of all amounts payable hereunder, the total amount of
interest paid to any Lender under the terms of this Agreement is less than
the total amount of interest which would have been paid to such Lender or
accrued on such Lender's Line of Credit Loans if the Stated Rate had at all
times been in effect, then the Borrower shall, to the extent permitted by
applicable law, pay to such Lender an amount equal to the difference between
(a) the lesser of (i) the amount of interest which would have accrued on the
Line of Credit Loans if the Maximum Rate had at all times been in effect or
(ii) the amount of interest which would have accrued on the Line of Credit
Loans if the Stated Rate had at all times been in effect and (b) the amount
of interest actually paid to such Lender or accrued on the Line of Credit
Loans under this Agreement.In the event any Lender ever receives, collects or
applies as interest any sum in excess Of the Maximum Rate, such excess amount
shall be applied to the reduction of the principal balance of the Line of
Credit Loans or to other amounts (other than interest) payable hereunder, and
if no such principal is then outstanding, such excess or part thereof
remaining shall be paid to the Borrower.In the event any Lender ever receives,
collects or applies as interest any sum in excess of the Maximum Rate, such
excess amount shall be applied to the reduction of the principal balance of
the Line of Credit Loans in respect of which such interest was paid or to
other amounts (other than interest) payable hereunder, and if no such
principal is then outstanding, such excess or part thereof remaining shall
be paid to the Borrower,
2.2 Manner and Place of Payment. All payments under this Agreement or
otherwise in respect of any Line of Credit Loan shall be made not
later than 2;00 p.m. (Boston Time) on the date when due and shall be
made in immediately available funds at the Office of the Lender
which has made such Line of Credit Loan or by a Borrower's check
drawn on the depository account(s) maintained by the Borrower with
such Lender payable to such Lender or its order. All payments shall
be made without setoff, counterclaim, withholding or reduction of
any kind whatsoever. The Borrower hereby requests and authorizes
each Lender to debit any of the Borrower's accounts with such Lender
for payments of interest and principal due on the Line of Credit
Loans and any other obligations owing by the Borrower to such Lender.
Each Lender will notify the Borrower of all debits which such Lender
makes against the Borrower's accounts. Any such debits against the
Borrower's accounts in no way shall be deemed a setoff
<PAGE>
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EXHIBIT 10.1
PAGE 9 OF 62
2.3 Payments Due on Saturdays, Sundays and Holidays. Whenever any
payment to be made hereunder or under the Notes shall be due on a
day which is not a Banking Day, such payment may be made on the next
succeeding Banking Day, and such extension of time shall be included
in computing any interest or fees due.
2.4 Computations. Interest on the Line of Credit Loans shall be computed
on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for
which payable.
2.5 Minimum and Maximum Amounts. Each borrowing, conversion and
prepayment of principal of Line of Credit Loans shall be in an
aggregate principal amount equal to (a) in the case of LIBOR Loans,
$200,000 or a larger multiple of $50,000 and (b) in the case of Prime
Rate Loans, without any minimum amount or any minimum integral
multiple thereof (conversions or prepayments of Line of Credit Loans
of different Types or, in the case of LIBOR Loans, having different
Interest Periods, at the same time hereunder to be deemed separate
conversions and prepayments for purposes of the foregoing, one
for each Type or Interest Period); provided that any payment or
prepayment in full of any Line of Credit Loans may be in the
aggregate outstanding principal amount thereof
2.6 Certain Notices. Notices to the Lenders of (a) termination of the
Line of Credit Commitment, (b) borrowings of Line of Credit Loans,
(c) conversions and prepayments of Line of Credit Loans and of the
duration of Interest Periods, shall be irrevocable and shall be
effective only if received by the Lender in question not later than
12:00 Noon (Boston time) on the number of Banking Days prior to the
date of the termination, borrowing, conversion and/or prepayment
specified below:
Number of Banking Days Prior Notice
Termination of Line of Credit Commitment 2
Borrowings, or prepayment of Prime Rate Loans 1
Prepayment of, conversion into, or duration of Interest Periods for,
LIBOR Loans 3
Each notice of borrowing, conversion or prepayment shall specify,
the amount, the Type of the Line of Credit Loan to be borrowed,
converted or prepaid, the date of borrowing, conversion or prepaymen
(which shall be a Banking Day in the case of the prepayment of a
Prime Rate Loan, or a Working Day in the case of the conversion or
prepayment of a LIBOR Loan) and, in the case of LIBOR Loans, the
duration of the Interest Period therefor (subject to the definition
of Interest Period). Each such notice of duration of an Interest
Period shall specify the Line of Credit Loans to which such Interest
Period is to relate. In the event that the Borrower fails to select
the duration of any Interest Period for any LIBOR Loan within the
time period and otherwise as provided in this Section 2.6, such
LIBOR Loan will be automatically converted into a Prime Rate Loan on
the last day of the then current Interest Period for such LIBOR Loan
or (if outstanding as Prime Rate Loans) will remain as, or (if
not then outstanding) will be made as Prime Rate Loans.
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EXHIBIT 10.1
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2.7 Additional Costs,
(a) The Borrower shall pay to each Lender from time to time such amounts
as such Lender may reasonably determine to be necessary to compensate
it for any costs incurred by such Lender which such Lender determines
are attributable to its making or maintaining of any LIBOR Loans
hereunder or its obligation to make any of such Line of Credit Loans
hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any LIBOR Loan or such obligation (such
increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), in each case resulting from any Regulatory
Change which:
(1) changes the basis of taxation of any amounts payable to such Lender
under this Agreement or the Note or Notes held by such Lender in
respect of any LIBOR Loan; or
(2) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, such Lender (including
any LIBOR Loan or any deposits referred to in the definition of
"LIBOR Rate" below).
Each Lender will notify the Borrower of any event occurring after
the date of this Agreement which will entitle such Lender to
compensation pursuant to this Section 2.7 as promptly as practicable
after it obtains knowledge thereof and determines to request such
compensation. Such Lender will furnish the Borrower with a statement,
in reasonable detail, setting forth the basis and amount of each request
by such Lender for compensation under this Section 2.7.
(b) Without limiting the effect of the foregoing provisions of this
Section 2.7 in the event that, by reason of any Regulatory Change,
any Lender either (i) incurs Additional Costs based on or measured by
the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits
by reference to which the interest rate on LIBOR Loans is determined
as provided in this Agreement or a category of extensions of credit
or other assets of such Lender which includes LIBOR Loans or
(ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if
such Lender so elects by notice to the Borrower, the obligation
of such Lender to make LIBOR Loans hereunder shall be suspended
until the date such Regulatory Change ceases to be in effect.
(c) Determinations and allocations by any Lender for purposes of this
Section 2.7 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make LIBOR Loans or of making or
maintaining LIB3OR Loans or on amounts receivable by it in respect
of LIBOR Loans, and of the additional amounts required to compensate
such Lender in respect of any Additional Costs, shall be conclusive
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EXHIBIT 10.1
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absent manifest error, provided that such determinations and
allocations are made on a reasonable basis, and provided further
that in administering this Section each Lender shall not single out
the Borrower for different treatment but shall deal with them on the
same basis as the Lender deals with its other customers generally.
2.8 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, with respect to any LIBOR Loans, any Lender
determines (which determination shall be conclusive) that the
relevant rates of interest referred to in the definition of
"LIBOR Rate" in Section 9.1 below upon the basis of which the rates
of interest for any LIBOR Loan are to be determined do not accurately
reflect the cost to such Lender of making or maintaining such LIBOR
Loans for the Interest Period therefor, then such Lender shall
promptly notify the Borrower, and so long as such condition remains
in effect, such Lender shall be under no obligation to convert Prime
Rate Loans into LIBOR Loans and the Borrower shall, on the last day(s)
of the then current Interest Period(s) for the outstanding LIBOR
Loans, either prepay such LIBOR Loans or convert such LIBOR
Loans into Prime Rate Loans in accordance with Section 2.13.
2.9 Illegality. Notwithstanding any other provision of this Agreement to
the contrary, in the event that it becomes unlawful for any Lender
to (a) honor its obligation to make LIBOR Loans hereunder, or
(b) maintain LIBOR Loans (identifying the illegality in question in
reasonable detail) hereunder, then such Lender shall promptly notify
the Borrower and the other Lender thereof and such Lender's
obligation to make LIBOR Loans hereunder shall be suspended until
such time as such Lender may again make and maintain LIBOR Loans.
2.10 Substitute Prime Rate Loans. If the obligation of any Lender to
make LIBOR Loans shall be suspended pursuant to Section 2.7, 2.8
or 2.9 hereof, all Line of Credit Loans which would otherwise be
made by such Lender as LIBOR Loans shall be made instead as Prime
Rate Loans (and, if an event referred to in Section 2.7(b) or 2.9
has occurred and such Lender so requests, by notice to the Borrower,
each LIBOR Loan of such Lender then outstanding shall be
automatically converted into a Prime Rate Loan on the date specified
by such Lender in such notice) and, to the extent that LIBOR Loans
are so made as (or converted into) Prime Rate Loans, all payments of
principal which would otherwise be applied to such LIBOR Loans shall
be applied instead to such Prime Rate Loans.
2.11 Compensation. If any payment, prepayment or conversion of a LIBOR
Loan occurs on a date other than the last day of an Interest Period
for such Loan other than by reason of an error on the part of either
Lender, the Borrower shall pay to any Lender, upon the request of
such Lender, as compensation for any loss, cost or expense incurred
by such Lender as the result of such payment, prepayment or
conversion, an amount (if a positive number) equal to:
A x (B-C) X D360
where:
"A" equals the principal amount of the LIBOR Loan so paid,
prepaid or converted (the "Affected LIBOR Loan");
"B" equals the LIBOR Rate (expressed as a decimal)
applicable to the Affected LIBOR Loan;
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EXHIBIT 10.1
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"C" equals the applicable LIBOR Rate (expressed as a decimal) in
effect on or about the date of such payment, prepayment or conversion,
for deposits in an amount equal approximately to the principal amount
of the Affected LIBOR Loan with an interest Period (the "Remaining
Interest Period") beginning on the date of such payment, prepayment or
conversion to but excluding the last day of the existing interest Period; and
"D" equals the number of days in the Remaining Interest Period; and
any other out-of-pocket loss or expense (including any internal
processing charge customarily charged by such Lender) suffered by
such Lender in liquidating deposits prior to maturity in amounts which
correspond to the principal amount of the Affected LIBOR Loan; provided
that such Lender shall have delivered to the Borrower a certificate,
in reasonable detail, as to the amount of such loss and expense along
with the basis for calculation thereof
2.12 Capital Adequacy. If any Lender shall determine that the
applicability of any law, rule, regulation or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital
Standards", or the adoption after the date hereof of any other
applicable law, rule, regulation or guideline regarding capital
adequacy, or any change in the foregoing or in the enforcement,
interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or
administration thereof, or compliance by such Lender or any Person
controlling such Lender (a "Parent") with any request or directive
regarding capital adequacy (whether or not having the force of law)
of any such Governmental Authority, has or would have the effect of
reducing the rate of return on capital of such Lender or its Parent
as a consequence of such Lender's obligations hereunder to a level
below that which such Lender (or its Parent) could have achieved but
for such applicability, adoption, change or compliance (taking into
consideration the policies of such Lender (or its Parent) with
respect to capital adequacy) by an amount reasonably deemed by such
Lender to be material, then from time to time, within the second
Banking Day after demand by such Lender, the Borrower shall pay to
such Lender such additional amount or amounts as will compensate
such Lender for such reduction in the rate of return, together with
interest on each such amount from the thirtieth day after such demand
until payment in full thereof (as well after as before judgment) at the
Post-Default Rate. A statement of such Lender, in reasonable detail,
claiming compensation under this Section 2.12 and setting forth the
additional amount or amounts to be paid to it hereunder shall be
conclusive absent manifest error; provided that the determination
thereof is made on a reasonable basis and provided further that the
Borrower shall not be obligated to compensate any Lender for any such
reduction occurring more than 30 days prior to the time the Lender
first notifies the Borrower of such adoption, implementation, charge
or compliance, and provided further that in administering this Section.
In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
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EXHIBIT 10.1
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2.13 Optional Prepayments. Subject to the provisions of this Section
2.13, the Borrower shall have the right to prepay the Line of Credit
Loans in whole or in part and to convert Line of Credit Loans of one
Type into another Type, without premium or penalty, at any time and
from time to time, provided that (i) at the time of the prepayment
in full of all Extensions, the Borrower shall pay all interest
accrued on the amount prepaid, (ii) the Borrower shall give the
Lender or Lenders in question notice of such prepayment as provided
in Section 2.6, (iii) the LIBOR Loans may be converted into Prime
Rate Loans only on the last day of an Interest Period thereof, and (iv)
such Lender or Lenders shall be paid, at the time of any prepayment of
a LIBOR Loan that is being prepaid on other than the last day of an
Interest Period therefor, the amount provided for in Section 2.11.
Principal amounts repaid or prepaid under the Notes or under the Total
Line of Credit Commitment may be reborrowed by the Borrower subject
to the terms hereof, provided, however, that any funds repaid or prepaid
on or after the earlier to occur of (a) the Commitment Expiration Date
or (b) the termination of the Total Line of Credit Commitment pursuant
to Section 1.8 hereof, may not be reborrowed or readvanced thereafter.
Section 3 Security
3.1 Continuation of Prior Security Interests. Payment and performance
of all of the Borrower's present or future obligations to the Agent
and the Lenders and the Issuing Bank under this Agreement, the Notes
and the other Loan Documents shall continue to be secured by a
security interest in, and a lien on, all right, title and interest
of the Borrower in and to all accounts receivable and inventory of
the Borrower pursuant to the terms of that certain Security Agreement
dated January 31, 1991, as amended (the "Security Agreement") which
is hereby reaffirmed.
Section 4 Conditions Precedent
Notwithstanding that this Agreement shall become effective as of the
date hereof, the Lenders shall not be obligated to make any Extension
of Credit hereunder until the following
4.1 This Agreement, the Notes and the Security Instruments. This
Agreement, each Extension of Credit hereunder, the Notes, the
Security Instruments and all transactions contemplated by this
Agreement and the Security Instruments shall have been duly
authorized by the Borrower. The Borrower shall have duly executed and
delivered to the Agent and the Lenders this Agreement, the Notes,
the Security Instruments and any other documentation that the Agent
may reasonably require hereunder, all to be in form and substance
satisfactory to the Agent and its counsel.
4.2 No Default. On the date hereof and on the date of the making of
each Extension of Credit, no Default or Event of Default shall have
occurred and be continuing.
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EXHIBIT 10.1
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4.3 Correctness of Representations. On the date hereof and on the date
of each Extension of Credit, all representations and warranties made
by the Borrower in Section 5 below or otherwise in writing in
connection herewith shall be true and correct with the same effect
as though such representations and warranties had been made on and
as of today's date, except that representations and warranties
expressly limited to a certain date shall be true and correct as
of that date.
4.4 Opinion of Counsel for the Borrower. On the date hereof, the
Lenders shall have received the favorable opinion of the General
Counsel for the Borrower, in form and substance satisfactory to the
Agent and its counsel.
4.5 Governmental Approvals. On the date hereof and on the date of each
Extension of Credit, all necessary approvals, licenses, permissions,
registrations or validations of any Governmental Authority required
for the execution, delivery, performance or carrying out of the
provisions of this Agreement, the Notes and the Security Instruments
or for the validity or enforceability of the obligations incurred
thereunder, shall have been obtained and shall be in full force and
effect and copies thereof certified by a duly authorized officer of
the Borrower to such effect shall have been delivered to the Agent.
4.6 Filing of Financing Statements, etc. On or before the making of
any Extension of Credit, financing statements, continuation
statements, and other appropriate documentation relating to the
security interests and rights granted pursuant to the Security
Instruments, executed and delivered by the Borrower to the Agent,
shall have been duly recorded or filed in such manner and in such
places as is required by law (including pursuant to the UCC) to
establish, preserve, protect and perfect such security interests
and rights; and all taxes, fees and other charges in connection
with the execution, delivery and filing of this Agreement and such
financing statements and other appropriate documentation shall
have been duly paid.
4.7 Supporting Documents. On or before the date hereof, there shall
have been delivered to the Agent the following supporting documents:
(a) long-form legal existence and corporate good standing certificates
with respect to the Borrower dated as of a recent date issued by the
appropriate Secretary of State or other official;
(b) certificates dated as of a recent date with respect to the due
qualification of the Borrower to do business in Massachusetts and
each other jurisdiction where the failure to be so qualified would
have a Material Adverse Effect, issued by the Secretary of State of
each such jurisdiction;
(c) copies of the corporate charter of the Borrower, certified by the
appropriate Secretary of State or other official, as in effect on
the date hereof,
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EXHIBIT 10.1
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(d) a certificate of the Secretary or Assistant Secretary of the Borrower
cart as to (i) the By-Laws of the Borrower as in effect on the date
hereof, (ii) the incumbency and signatures of the officers of the
Borrower who have executed any documents in connection with the
transactions contemplated by this Agreement; and (iii) the resolutions
of the Board of Directors and, to the extent required by law, the
shareholders, of the Borrower authorizing the execution, delivery and
performance of this Agreement and the making of the Extensions of Credit
hereunder, and the execution and delivery of the Notes; and
(e) all other information and documents which the Agent or its counsel may
request in connection with the transactions contemplated by this Agreement.
4.8 Facility Fee. The Borrower agrees to pay each Lender an annual
facility fee for the period from the date hereof to and excluding
the Commitment Expiration Date equal to one-half of one percent
(1/2%) of the average of the daily excess of such Lender's Line of
Credit Commitment over the aggregate unpaid Extensions of Credit
under such Line of Credit Commitment. Such facility fee shall be
calculated on the basis of a 360-day year and the actual number of
days elapsed and shall be payable on the last day of each calendar
quarter and upon the termination of the Line of Credit Commitment,
provided, however, in the event that the Borrower requests
termination of the Total Line of Credit Commitment, the payment of
the unpaid portion of the facility fee for the period through the
Commitment Expiration Date shall be accelerated and shall be
immediately payable in full in accordance with Section 1.8.
4.9 Compliance Certificate. The Borrower shall have furnished to the
Agent a Compliance Certificate in the form of attached Exhibit C
appropriately completed and signed by an Authorized Officer of the
Borrower, which certificate shall reflect compliance by the Borrower
with the requirements of this Agreement.
4.10 Legal Matters- All documents and legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory to
Sullivan & Worcester, special counsel for the Agent and the Lenders.
Each borrowing hereunder shall constitute a representation
and warranty by the Borrower to the Lenders that all of the
conditions specified in this Section 4 have been complied with
as of the time of any such Extension of Credit.
Section 5 Representations and Warranties.
In order to induce the Lenders to enter into this Agreement
and to make the contemplated Extensions of Credit, the Borrower
hereby represents and warrants as follows (except to the extent
qualified by supplemental disclosure set forth on Schedule A
hereto) and the following representations and warranties as so
qualified shall survive the execution and delivery of this
Agreement and the Line of Credit Loans:
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EXHIBIT 10.1
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5.1 Corporate Status. The Borrower and each of its Subsidiaries
(if any) is a duly organized and validly existing corporation in
good standing under the laws of the jurisdiction of its incorporation
and is duly qualified or licensed as a foreign corporation in good
standing in each jurisdiction in which the failure to do so would
have a Material Adverse Effect.
5.2 No Violation. Neither the execution, delivery or performance of
this Agreement or any other Loan Document, nor consummation of the
contemplated transactions will contravene any law, statute, rule or
regulation to which the Borrower or any of its Subsidiaries is subject
or any judgment, decree, franchise, order or permit applicable to the
Borrower or any of its Subsidiaries, or will conflict or be inconsistent
with or will result in any breach of, or constitute a default under, or
result in or require the creation or imposition of any Lien (other than
the lien created by the Security Instruments) upon any of the property
or assets of the Borrower or any of its Subsidiaries pursuant to, any
Contractual Obligation of the Borrower or any of its Subsidiaries, or
violate any provision of the corporate charter or by-laws of the
Borrower or any of its Subsidiaries.
5.3 Corporate Power and Authority. The execution, delivery and
performance of this Agreement and the other Loan Documents are
within the corporate powers of the Borrower and have been duly
authorized by all necessary corporate action.
5.4 Enforceability, This Agreement and each other Loan Document
constitutes a valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms,
except as be limited by applicable Bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and subject to general principles of
equity, whether applied in a court of equity or at law.
5.5 Governmental Approvals. No order, permission, consent, approval,
license, authorization, registration or validation of, or filing
with, or exemption by, any Governmental Authority is required to
authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or any other Loan
Document by the Borrower, or the taking of any action contemplated
hereby or thereby, except for the filing of financing statements or
related documents in the appropriate UCC filing offices listed
on the Perfection Certificate (as defined in the Security Agreement).
5.6 Financial Statements.
(a) The Borrower has furnished the Agent with complete and correct
copies of the audited consolidated balance sheet of the Borrower and
its Subsidiaries as of the Financial Statements Date, and the
related audited consolidated statements of income and of cash flows
for the fiscal year of the Borrower and its Subsidiaries ended on
such date, examined by the Accountants. Such financial statements
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EXHIBIT 10.1
PAGE 17 OF 62
(including the related schedules and notes) fairly present the
consolidated financial condition of the Borrower and its Subsidiarie
as of the Financial Statements Date, and the consolidated results of
their operations and their consolidated cash flows for the fiscal
year then ended.
(b) Neither the Borrower nor any of its Subsidiaries has any material
liabilities, contingent or otherwise, including liabilities for
taxes or any unusual forward or long-term commitments or any
Guarantee, which are not disclosed by or included in the
above-referenced financial statements or the accompanying notes and
there are no unrealized or anticipated losses from any unfavorable
commitments of the Borrower or any of its Subsidiaries which may
have a Material Adverse Effect.
(c) All the above-referenced financial statements (including the related
schedules and notes) have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as
approved by the Accountants and disclosed therein and, in the case
of interim financial statements, subject to normal year-end
adjustments and the absence of footnotes and schedules).
5.7 No Material Change. Since the Financial Statements Date there has
been no development or event, nor to the best knowledge of the
Borrower, any prospective development or event, which has had or
could have a Material Adverse Effect.
5.8 Litigation. There are no actions, suits or proceedings pending or
threatened against or affecting the Borrower or any of its Subsidiaries
before any Governmental Authority, which in any one case or in the
aggregate, if determined adversity to the interests of the Borrower
or any Subsidiary thereof, would have a Material Adverse Effect.
5.9 Compliance with Other Instruments; Compliance with Law. Neither the
Borrower nor any Subsidiary thereof is in default under (a) any
Contractual Obligation, where such default could have a Material
Adverse Effect, or (b) the terms of any Contractual Obligation
relating to any Indebtedness of the Borrower or such Subsidiary.
Neither the Borrower nor any Subsidiary thereof is in default and or
in violation of any applicable statute, rule, writ, injunction,
decree, order or regulation of any Governmental Authority having
jurisdiction over the Borrower or any Subsidiary thereof which
default or violation could have a Material Adverse Effect.
5.10 Subsidiaries. The Borrower has no Subsidiaries except as set forth
on attached Schedule A,
5.11 Investment Company Status; Limits on Ability to Incur Indebtedness.
Neither the Borrower nor any of its Subsidiaries is an "investment
company" or a company "controlled by" an investment company within
the meaning of the Investment Company Act of 1940, as amended. -The
Borrower is not subject to regulation under any Federal or State
statute or regulation which limits its ability to incur Indebtedness.
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EXHIBIT 10.1
PAGE 18 OF 62
5.12 Title to Property. The Borrower and each of its Subsidiaries has
good and marketable title to all of its properties and assets,
including the properties and assets reflected in the consolidated
balance sheet of the Borrower and its Subsidiaries as of the
Financial Statements Date, except such as have been disposed of
since that date in the ordinary course of business, and none of
such properties or assets is subject to (a) any Lien except for
Permitted Liens, or (b) any defect in title or other claim other
than defects and claims that, in the aggregate, would have no
Material Adverse Effect. The Borrower and each of its Subsidiaries
enjoys peaceful and undisturbed possession under all leases necessary
in any material respect for the operation of its properties and assets,
none of which contains any unusual or burdensome provisions which
might materially affect or impair such properties or assets. All
such leases are valid and subsisting and are in full force and effect.
5.13 ERISA. The Borrower and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of
ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the presently applicable provisions of
ERISA and the Code, and have not incurred any liability to the PBGC
or a Plan under Title IV of ERISA (other than to make contributions
or premium payments in the ordinary course).
5.14 All tax returns of the Borrower and its Subsidiaries required to be
filed have been timely filed, all taxes, fees and other governmental
charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate
reserves have been established and, in the case of ad valorem taxes
or betterment assessments, no proceedings to foreclose any lien with
respect thereto have been commenced and, in all other cases, no notice
of lien has been filed or other action taken to perfect or enforce
such lien) shown thereon which are payable have been paid. The charges
and reserves on the books of the Borrower and its Subsidiaries for
all income and other taxes are adequate, and the Borrower knows of no
additional assessment or any basis therefor. The Federal income tax
returns of the Borrower and its Subsidiaries have not been audited
within the last three years, all prior audits have been closed, and
there are no unpaid assessments, penalties or other charges arising
from such prior audits.
5.15 Environmental Matters.
(a) The Borrower and each of its Subsidiaries have obtained all
Governmental Approvals that are required for the operation of its business
under any Environmental Law, except where the failure to so obtain a
Governmental Approval would not have a Material Adverse Effect.
(b) The Borrower and each of its Subsidiaries are in compliance with all
terms and conditions of all required Governmental Approvals and are
also in compliance with all terms and conditions of all applicable
Environmental Laws, noncompliance with which would have a Material
Adverse Effect.
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EXHIBIT 10.1
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(c) There is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter pending or, to the best knowledge of the
Borrower threatened against the Borrower or any Subsidiary thereof
relating in any way to the Environmental Laws, and there is no Lien
of any private entity or Governmental Authority against any property
of the Borrower or any Subsidiary thereof relating in any way to
the Environmental Laws.
(d) There has been no claim, complaint, notice, or request for information
received by the Borrower with respect to any site listed on the
National Priority List promulgated pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"),
42 USC E 9601 et seq., or any state list of sites requiring investigation
or cleanup with respect to contamination by Hazardous Substances.
(e) To the best of the Borrower's knowledge, there has been no release
or threat of release of any Hazardous Substance at any Borrower
Property which would likely result in liability being imposed upon
the Borrower or any Subsidiary thereof, which liability would have
a Material Adverse Effect.
5.16 Intellectual Property. The Borrower and each of its Subsidiaries
owns, possesses or licenses such copyrights, patents, trademarks and
similar rights (collectively, "Intellectual Property") necessary for
the conduct of its business as now conducted, without any known
conflict with the rights of others which would have a
Material Adverse Effect.
Section 6 Affirmative Covenants.
The Borrower covenants and agrees that for so long as
this Agreement is in effect and until the Notes, together with
all interest thereon and all other Obligations of the Borrower
to the Lenders are paid or satisfied in full:
6.1 Maintenance of Existence. The Borrower will, and will cause each of
its Subsidiaries to, maintain its existence and comply with all
applicable statutes, rules and regulations and to remain duly
qualified as a foreign corporation, licensed and in good standing in
each jurisdiction where such qualification or licensing is required
by the nature of its business, the character and location of its
property, business, or the ownership or leasing of its property,
except where such noncompliance or failure to so qualify would not
have a Material Adverse Effect, and the Borrower will, and will
cause each of its Subsidiaries to, maintain its properties in good
operating condition, and continue to conduct its business in the
ordinary course of its business,
6.2 Taxes and Other Liens. The Borrower will, and will cause each of
its Subsidiaries to, pay when due all taxes, assessments,
governmental charges or levies, or claims for labor, supplies, rent
and other obligations made against it which, if unpaid, might become
a Lien against the Borrower or such Subsidiary or on its property,
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EXHIBIT 10.1
PAGE 20 OF 62
except liabilities being contested in good faith and by proper
proceedings, as to which adequate reserves are maintained on the
books of the Borrower or its Subsidiaries, in accordance with GAAP.
6.3 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and
reputable insurance companies in such amounts and against such risks
as is usually carried by owners of similar businesses and properties
in the same general areas in which the Borrower and its Subsidiaries
operate, provided that in any event the Borrower and its Subsidiaries
shall maintain or cause to be maintained (a) insurance against
casualty, loss or damage covering all property and improvements
of the Borrower and its Subsidiaries in amounts and in respect
of perils usually carried by owners of similar businesses and
properties in the same general areas in which Borrower and its
Subsidiaries operate; (b) comprehensive general liability
insurance against claims for bodily injury, death or property
damage in amounts and in respect of perils usually carried by
owners of similar businesses and properties in the same general
areas in which Borrower and its Subsidiaries operate; and (c)
workers' compensation insurance to the extent required by
applicable law. In the case of policies referenced in clauses
(a) and (b) above, all such insurance shall (i) name the
Borrower and the Lenders as loss payees and additional insureds
as their interests may appear; (ii) provide that no termination,
cancellation or material reduction in the amount or material
modification to the extent of coverage shall be effective until
at least 15 days after receipt by the Agent of notice thereof,
and (iii) be reasonably satisfactory in all other respects to
the Agent and each of the Lenders.
6.4 Financial Statements, Etc. The Borrower will furnish to the Agent
and each of the Lenders:
(a) within forty-five (45) days after the end of each fiscal quarter
(including the last quarter of the fiscal year), the unaudited
consolidated balance sheet and income statement of the Borrower and
its Subsidiaries as at the end of, and for, such quarter,
accompanied by a certificate of the chief financial officer of the
Borrower to the effect that such financial statements fairly present
the consolidated financial condition of the Borrower and its
Subsidiaries as of the end of such quarter, and the consolidated
results of their operations for such quarter, in each case in
accordance with GAAP (except for the absence of footnotes)
consistently applied (subject to normal year-end audit adjustments);
(b) within ninety (90) days after the last day of each fiscal year of
the Borrower, the audited consolidated balance sheet and income
statement and statement of cash flows of the Borrower and its
Subsidiaries as at and for the fiscal year then ended, certified by
the Accountants (the substance of such report to be satisfactory to
the Lenders), together with a certificate of the chief financial
officer of the Borrower to the effect that such financial statements
fairly present the consolidated financial condition of the Borrower
and its Subsidiaries as of the end of such fiscal year, and the
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EXHIBIT 10.1
PAGE 21 OF 62
consolidated results of their operations for such fiscal year, in each
case in accordance with GAAP. The Borrower shall indicate on said
financial statements all guarantees or unusual forward or long-term
commitments made by the Borrower or any Subsidiary thereof,
(c) at the time of the delivery of the financial statements for each fiscal
quarter end and yearly financial statements required by Sections 6.4(a)
and 6.4(b), a Compliance Certificate signed by an Authorized Officer of
the Borrower in the form attached to this Agreement as Exhibit C,
appropriately completed;
(d) within thirty (30) days after the last day of each calendar month
during which the aggregate principal amount of Line of Credit Loans
outstanding at any time exceeds $10,000,000, a Borrowing Base
Certificate signed by an Authorized Officer of the Borrower in the
form attached to this Agreement as Exhibit D, appropriately completed;
(e) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports,
proxy statements and other materials;
(f) promptly upon request by any Lender, copies of any management letter
provided by the Accountants, provided that the Borrower shall promptly
advise the Agent in the event the Borrower receives any such letter;
(g) promptly upon the filing thereof by the Borrower with the SEC (and in
any event within five (5) days of such filing), copies of any registration
statements and reports on Forms 10-K, 10-Q and 8-K (or their equivalents if
such forms no longer exist), it being understood that the submission of the
Form 10-Q filing for a fiscal quarter will satisfy the financial statement
submission requirements of Section 6.4(a);
(h) promptly upon becoming aware of any litigation or other proceeding
against the Borrower or any Subsidiary thereof that may have a
Material Adverse Effect, notice thereof, and
(i) promptly following the request of any Lender, such further information
concerning the business, affairs and financial condition or operations
of the Borrower and its Subsidiaries as such Lender may reasonably request.
6.5 Notice of Default. As soon as practicable, and in any event, within
three (3) Banking Days of becoming aware of the existence of any
condition or event which constitutes a Default, the Borrower will
provide the Agent and each Lender with written notice specifying the
nature and period of existence thereof and what action the Borrower
is taking or proposes to take with respect thereto.
6.6 Environmental Matters.
(a) The Borrower and each of its Subsidiaries shall comply with all
terms and conditions of all applicable Governmental Approvals and
all applicable Environmental Laws, except where failure to comply
would not have a Material Adverse Effect.
(b) The Borrower shall promptly notify the Agent should the Borrower become
aware of
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EXHIBIT 10.1
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(i) any spill, release, or threat of release of any Hazardous Substance
at or from any Borrower Property or by any Person for whose conduct
the Borrower or any Subsidiary thereof is responsible, to the extent
the Borrower is required by Environmental Laws to report such to
any Governmental Authority;
(ii) any action or notice with respect to a civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or threatened
against the Borrower or any Subsidiary thereof relating in any way to the
Environmental Laws, or any Lien of any Governmental Authority or any other
Person against any Borrower Property relating in any way to the
Environmental Laws;
(iii) any claim made or threatened by any Person against the Borrower or
any Subsidiary thereof or any property of the Borrower or any Subsidiary
thereof relating to damage, contribution, cost recovery compensation,
loss or injury resulting from any Hazardous Substance pertaining to
such property or the business or operations of the Borrower or such
Subsidiary; and
(iv) any occurrence or condition on any real property adjoining or in the
vicinity of any Borrower Property known to the officers or supervisory
personnel of the Borrower or any Subsidiary thereof or other employees
having responsibility for the compliance by the Borrower or any Subsidiary
thereof with Environmental Laws, without any independent investigation,
which does cause, or could cause, such Borrower Property, or any part
thereof, to contain Hazardous Substances in violation of any Environmental
Laws, or which doescause, or is reasonably likely to cause, such Borrower
Property to be subject to any restrictions on the ownership, occupancy,
transferability or use thereof by the Borrower or any Subsidiary thereof.
(c) The Borrower will, and will cause each of its Subsidiaries to, at
its own cost and expense, and within such period as may be required
by applicable law or regulation, initiate all remedial actions and
thereafter diligently prosecute such action as shall be required by
law for the cleanup of such Borrower Property, including all removal,
containment and remedial actions in accordance with all applicable
Environmental Laws and shall further pay or cause to be paid, at no
expense to the Agent or the Lenders, all cleanup, administrative, and
enforcement costs of applicable Government Authorities asserted against
such Borrower Property, except to the extent the Borrower or such
Subsidiary shall be contesting the same in good faith in appropriate
proceedings.
6.7 ERISA Information. If and when the Borrower or any member of the
Controlled Group (a) gives or is required to give notice to the PBGC
of any "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of
any such reportable event, (b) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or (c) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer the Plan, the Borrower shall in each
such instance promptly furnish to the Agent a copy of any such notice.
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EXHIBIT 10.1
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6.8 Inspection, Upon request of the Agent, the Borrower will, and will
cause each of its Subsidiaries to, permit a representative of the
Agent (including any field examiner retained by the Agent) to
inspect and make copies of the Borrower's or such Subsidiary's books
and records, and to discuss its affairs, finances and accounts with
its officers and accountants, at such reasonable times and as often
as the Agent may request, subject to such undertakings of
confidentiality on the part of the Agent and/or such field
representative as the Borrower may reasonably request.
6.9 Use of Proceeds. The Borrower shall use the proceeds of the
borrowings under the Line of Credit Notes for the working capital
purposes of the Borrower. Without limiting the foregoing, no part
of such proceeds will be used for the purpose of purchasing or
carrying any "margin security" as such term is defined in Regulation
U of the Board of Governors of the Federal Reserve System.
6.10 Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, execute and deliver to the Agent any writings and
do all things necessary, effectual or reasonably requested by the
Agent to carry into effect the provisions and intent of this
Agreement or any other Loan Document.
6.11 Depository Accounts. The Borrower shall maintain an operating
deposit account at an office of each Lender.
6.12 Subsidiaries. The Borrower shall immediately notify the Agent of the
organization of any foreign or domestic Subsidiaries of the Borrower.
Section 7 Negative Covenants.
The Borrower covenants and agrees that for so long as this Agreement
is in effect and until the Notes, together with all interest thereon
and all other Obligations of the Borrower to the Agent or the Lenders
are paid or satisfied in full, without the prior written consent of the
Lenders:
7.1 ERISA. The Borrower will not permit any pension plan maintained by
the; Borrower or by any member of a "Controlled Group" (ERISA E 210
(c) or ERISA E 210 (d)) of which the Borrower is a member to:
(a) engage in any "prohibited transaction" (ERISA E 2003(c));
(b) fail to report to the Agent a "reportable event" (ERISA E 4043)
within 30 days after its occurrence or as to any reportable event as
to which the 30-day notice period requirement of Section 4043(b) of
Title IV of ERISA has been waived by the PBGC, within 30 days of
such time as the Borrower is requested to notify the PBGC of such
reportable event; (c) incur any "accumulated funding deficiency"
(ERISA E 302); (d) terminate its existence at any time in a
manner which could result in the imposition of a Lien on the
property of the Borrower or any Subsidiary thereof, or (e) fail
to report to the Agent any "complete withdrawal" or "partial
withdrawal" by the Borrower or an affiliate from a "multiemployer
plan" (ERISA EE 4203, 4205, and 4001, respectively). The quoted
terms are defined in the respective sections of ERISA cited above.
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EXHIBIT 10.1
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7.2 Transactions with Affiliates. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, pay any
funds to or for the account of, make any Investment in, lease, sell,
transfer or otherwise dispose of any assets, tangible or intangible,
or engage in any transaction in connection with any joint enterprise
or other joint arrangement with, any Affiliate of the Borrower, unless
such transaction is otherwise permitted under this Agreement, is in the
ordinary course of the Borrower's or such Subsidiary's business, and
is upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary as those that could be obtained in a comparable
arm's length transaction with a Person not an Affiliate.
7.3 Consolidation, Merger or Acquisition. The Borrower will not, and
will not permit any of its Subsidiaries to, merge or consolidate
with or into any other Person, or make any acquisition of the
business of any other Person unless it obtains the prior written
consent of the Lenders; provided that any Subsidiary may merge into
Borrower or any wholly-owned Subsidiary of the Borrower, and 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 the business, assets or stock of another Person as long as the
aggregate consideration expended by the Company in connection with
such transactions in any fiscal year does not exceed $5,000,000 in cash.
7.4 Disposition of Assets: Sales-Type Leases, etc. The Borrower will
not, and will not permit any of its Subsidiaries to:
(a) convey, sell, lease, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation,
accounts receivable and leasehold assets), whether now owned or
hereafter acquired, except:
(i) obsolete or worn out property disposed of in the ordinary course of
business;
(ii) the sale or other disposition of any property in the ordinary course
of business, provided that the aggregate book value of all
assets (other than inventory) so sold or disposed of in any period
of twelve consecutive months shall not exceed 5% of the consolidated
total assets of the Borrower and its Subsidiaries as at the beginning
of such twelve month period; and
(iii) the sale of inventory in the ordinary course of business; or
(b) enter into, as lessor, any lease that would be treated as a capital
lease in accordance with GAAP (including any "sales-type" lease)
if such lease would cause the aggregate net investment in all capital
leases reflected on the consolidated balance sheet of
the Borrower and its Subsidiaries to exceed $8,000,000.
7.5 Indebtedness. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Obligations to the Lenders, the Agent and the Issuing Bank hereunder;
<PAGE>
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EXHIBIT 10.1
PAGE 25 OF 62
(b) existing Indebtedness, including Subordinated Debt, if any, listed
on Schedule A hereto;
(c) Subordinated Debt incurred by the Borrower after the date hereof,
provided that, giving effect to the incurrence of such Subordinated
Debt and to the receipt and application of the proceeds thereof, no
Default or Event of Default shall have occurred and be continuing; and
(d) Purchase and sales of foreign currency through either Lender or any
other banking institution; and
(e) Obligations in respect of additional operating leases.
7.6 Liens. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien
on any of its properties or assets, except the following
(collectively, "Permitted Liens"):
(a) Liens for taxes not delinquent or being contested in good faith
and by proper proceedings;
(b) carriers', warehousemen's, mechanics', materialmen's or similar
liens imposed by law incurred in the ordinary course of business
in respect of obligations not overdue, or being contested in good
faith and by proper proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other types of social security legislation;
(d) security deposits made to secure the performance of leases, licenses
and statutory obligations incurred in the ordinary course of business;
(e) Liens in favor of the Lenders, the Agent and the Issuing Bank in
order to secure obligations of the Borrower hereunder;
(f) existing Liens, if any, listed on Schedule A hereto; provided that
no such Lion is spread to cover any additional property after the
date hereof, and the amount of the Indebtedness secured thereby is
not increased; and
(g) a judgment or judgments for the payment of money not exceeding
$50,000 in the aggregate, rendered against the Borrower and unsatisfied
or unstayed for a period not in excess of thirty (30) days.
7.7 Restricted Payments. The Borrower will not, and will not permit
any of its Subsidiaries to, declare or make any Restricted Payment.
Notwithstanding the foregoing,
(a) Subsidiaries of the Borrower shall be permitted
(i) to pay dividends or make other distributions with respect to shares of
their capital stock to the extent that these payments or other distributions
are made to, and received by, the Borrower as the owner of such shares and
further provided that no Event of Default has occurred and is continuing
and that it is not reasonably foreseeable that the dividend or other
distribution will result in an Event of Default; and
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EXHIBIT 10.1
PAGE 26 OF 62
(ii) to make payments on account of the purchase, redemption, retirement
or acquisition of shares of the capital stock of a Subsidiary or
options, warrants, convertible securities or other rights to acquire
shares of the capital stock of a Subsidiary to the extent that such
payments are made to, and received by, the Borrower on account of
shares, options, warrants, convertible securities or other rights
that are being purchased, redeemed, retired or acquired from the
Borrower; and further provided that no Event of Default shall have
occurred and be continuing and that it shall not be reasonably
foreseeable that such payment will result in an Event
of Default; and
(b) the Borrower may, with the prior written consent of the Lender,
purchase shares of its stock from employees or former emplo Lenders:
7.1 ERISA. The Borrower will not permit any pension plan maintained by
the; Borrower or by any member of a "Controlled Group" (ERISA E 210
(c) or ERISA E 210 (d)) of which the Borrower is a member to:
(a) engage in any "prohibited transaction" (ERISA E 2003(c));
within 30 days after its occurrence or as to any reportable event as
to which the 30-day notice period requirement of Section 4043(b) of
Title IV of ERISA has been waived by the PBGC, within 30 days of
such time as the Borrower is requested to notify the PBGC of such
reportable event; (c) incur any "accumulated funding deficiency"
(ERISA E 302); (d) terminate its existence at any time in a
manner which could result in the imposition of a Lien on the
property of the Borrower or any Subsidiary thereof, or (e) fail
to report to the Agent any "complete withdrawal" or "partial
withdrawal" by the Borrower or an affiliate from a "multiemployer
plan" (ERISA EE 4203, 4205, and 4001, respectively). The quoted
nts maintained with the Lenders or any other
Lender or trust company meeting the requirements stated in
Section 7.8(b) above;
(d) stock or obligations issued to the Borrower or any Subsidiary
thereof in settlement of claims against others by reason of an event
of Bankruptcy or a composition or the readjustment of debt or a
reorganization of any debtor of the Borrower or such Subsidiary,
(e) commercial paper with maturities of not more than 180 days having
the highest rating then given by Moody's Investors Services, Inc.
or Standard & Poor's Corporation,
(f) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subparagraph
7.8(a) above entered into with the Lenders or any of the Lenders
referred to in subparagraph 7.8(b) above;
(g) shares in money market mutual funds substantially all the assets of
which consist of securities or other obligations of the type
described in subparagraphs (a), (b). (d), (e) and (f) above;
<PAGE>
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EXHIBIT 10.1
PAGE 27 OF 62
(h) loans or advances not exceeding $250,000 in aggregate principal
amount at any one time outstanding to officers and employees of the
Borrower, and
(i) existing Investments by the Borrower in its Subsidiaries and
additional investments by the Borrower in its Subsidiaries
(including investments in newly formed Subsidiaries) made after the
date hereof, provided that such Subsidiaries (old and now) are
operated as sales offices and that any such additional
Investments are limited to those amounts necessary to
fund working capital and equipment needs of such Subsidiaries
consistent with past practice.
7.9 Sale and Leaseback. Neither the Borrower nor any of its
Subsidiaries shall enter into any arrangement, directly or
indirectly, whereby it shall sell or transfer any
property owned by it in order to lease such property or lease
other property that the Borrower or any such Subsidiary intends
to use for substantially the same purpose as the property being
sold or transferred; provided, however, that the Borrower and
its Subsidiaries shall be free to enter into such transactions
to the extent that the aggregate amount thereof outstanding at
any time does not exceed $100,000,
7.10 Additional Stock Issuance by Subsidiaries. The Borrower shall not
permit any of its Subsidiaries to issue any additional shares of
their capital stack or other equity securities, any options therefor
or any securities convertible thereto other than to the Borrower.
7.11 Quick Ratio. The Borrower will not permit the Quick Ratio at the
end of' any fiscal quarter to be less than 2.0 to 1.
7.12 Minimum Profitability. The Borrower will not (a) incur Net Losses
in excess of $ 1,000,000 in any fiscal quarter ending after
January 31, 1996, or (b) permit cumulative Net Income to be less
than $1.00 over a period of any three consecutive fiscal quarters
beginning after January 31, 1996.
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 0.75 to 1.
7.14 Tangible Net Worth. The Borrower will not permit its Tangible Net
Worth at the end of any fiscal quarter to be less than $50,000,000
plus (a) 50% of Net Income earned in each fiscal quarter after January
31, 1996 (with no offset or reduction for Net Losses) and (b) 50% of
any increase in Stockholders' Equity resulting from the issuance of
any shares of capital stock or Subordinated Debt of the Borrower or
any of its Subsidiaries after January 31, 1996.
Section 8 Events of Default.
8.1 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
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EXHIBIT 10.1
PAGE 28 OF 62
(a) The Borrower (i) shall default in the due and punctual payment of
principal or interest on either or both of the Notes, or (ii) shall
default in the payment of any other amount due under any Loan
Document and for such payment is made; or
(b) Any representation, warranty or statement made herein or any other
Loan Document, or in any certificate or statement furnished pursuant
to or in connection herewith or therewith, shall prove to be
incorrect, misleading or incomplete in any material
respect on the date as of which made or deemed made; or
(c) The Borrower shall default in the performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to Sections 7.11 through 7.14; or
(d) The Borrower shall default in the performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to any of the provisions of this Agreement or
any other Loan Document (other than those referred to in
paragraphs 8. 1 (a) through 8. 1 (c) above) and such default shall
continue unremedied for a period of ten (10) calendar days after
the occurrence of such default; or
(e) Any obligation of the Borrower or any Subsidiary thereof in respect
of any Indebtedness (other than the Notes) or any Guarantee shall be
declared to be or shall become due and payable prior
to the stated maturity thereof, or such Indebtedness
or Guarantee shall not be paid as and when the same becomes due and
payable, or there shall occur and be continuing any default under
any instrument, agreement or evidence of indebtedness relating to
any such Indebtedness the effect of which is to permit the
holder or holders of such instrument, agreement or evidence of
indebtedness,; or a trustee, agent or other representative on behalf
of such holder or holders, to cause such Indebtedness to become due
prior to its stated maturity; or
(f) The Borrower or a Subsidiary thereof shall (i) apply for or consent
to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under
the Bankruptcy Code, (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts,
(v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of
the foregoing; or
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EXHIBIT 10.1
PAGE 29 OF 62
(g) A proceeding or case shall be commenced, without the application or
consent of the Borrower or any Subsidiary thereof in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of the Borrower or such Subsidiary or of all
or any substantial part of its assets, or (iii) similar relief in
respect of the Borrower or such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order. judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 days; or an order for relief
against the Borrower or such Subsidiary shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $500,000 (net of insurance proceeds) in the aggregate shall be
rendered against the Borrower or any Subsidiary thereof and any
such judgment or judgments shall not have been vacated, discharged,
stayed or bonded pending appeal within thirty (30) days from
the entry thereof, or
(i) The Borrower or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of
$ 100,000 which it is obligated to pay to the PBGC or to a Plan
under Title IV of ERISA; or a notice of intent to terminate
a Plan or Plans having aggregate Unfunded Liabilities in excess of
$100,000 shall be filed under Title IV of ERISA by the Borrower or
any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or
Plans against the Borrower or any member of the Controlled Group to
enforce Sections 515 or 4219(c)(5) of ERISA; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans must be terminated;
or there shall occur a complete or partial withdrawal form or a
default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could cause the
Borrower or one or more members of the Controlled Group to incur a
current payment obligation in excess of $100,000; or
j) The Borrower or any Subsidiary thereof shall default in the
performance or observance of any material term, covenant or
agreement on its part to be performed or observed pursuant to any of
the provisions of any agreement with the Lenders or any
instrument delivered in favor of the Lenders (other than, in either
case, a Loan Document), and such default shall continue unremedied
beyond the grace period (in any) provided for therein; or
(k) Any Security Instrument shall cease for any reason to be in full
force and effect or shall cease to be effective to grant a perfected
security interest in the Collateral described in such Security
Instrument with the priority stated to be granted thereby; or
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EXHIBIT 10.1
PAGE 30 OF 62
(1) The Borrower shall make any payment on account of its Subordinated
Debt, except to the extent such payment is expressly permitted hereby
or under any subordination agreement entered into with the
Agent and the Lenders,
8.2 Remedies Upon an Event of Default. If any Event of Default shall
have occurred and be continuing, the Agent upon direction of all
the Lenders may (a) declare the Total Line of Credit Commitment
terminated (whereupon the Total Line of Credit Commitment shall be
terminated) and/or (b) declare the principal amount then outstanding
of, and the accrued interest on, the Line of Credit Loans and
commitment fees and all other amounts payable hereunder and under
the Notes to be forthwith due and payable, whereupon such amounts
shall be and become immediately due and payable, without notice
(including, without limitation, notice of intent to accelerate),
presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower;
provided that in the case of the occurrence of an Event of
Default with respect to the Borrower referred to in clauses 8.1
(f) and 8.1 (g) of Section 8.1, the Total Line of Credit
Commitment shall be automatically terminated and the principal
amount then outstanding of and the accrued interest on the Line
of Credit Loans and commitment fees and all other amounts
payable hereunder and under the Notes shall be and become
automatically and immediately due and payable, without notice
(including, without limitation, notice of intent to accelerate),
presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
Section 9 Definitions.
9.1 Certain Definitions.
"Accountants" means Coopers & Lybrand or another accounting
firm of national reputation or other certified public
accountants selected by the Borrower and approved by the Agent.
"Affiliate" means, with respect to any specified Person
(the "Specified Person") , any Person directly or indirectly
controlling, controlled by or under direct or indirect common
control with, the Specified Person and, without limiting the
generality of the foregoing, includes (i) any director or
officer of the Specified Person or any Affiliate of the
Specified Person, (ii) any such director's or officer's parent,
spouse, child or child's spouse (a "relative'), (iii) any group
acting in concert, of one or more such directors, officers,
relatives or any combination thereof (a "group"), (iv) any
Person controlled by any such director, officer, relative or
group in which any such director, officer, relative or group
beneficially owns or holds 5% or more of any class of voting
securities or a 5% or greater equity or profits interest and
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EXHIBIT 10.1
PAGE 31 OF 62
(v) any Person or group which beneficially owns or holds 5% or
more of any class of voting securities or a 5% or greater equity
or profits interest in the Specified Person. For the purposes of
this definition, the term "control" when used with respect to
any Specified Person means the possession, directly or indirectly,
of the power to direct or cause the direction of the
management or policies of such Specified Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" shall have the meaning specified in the Preamble.
"Agreement" shall mean this Credit Agreement.
"Authorized Officer of the Borrower" means an officer of
the Borrower had been duly authorized by all appropriate
corporate action to execute and deliver this Agreement, the
Notes, any other Loan Documents and any certificate furnished on
behalf of the Borrower in connection therewith, evidence of
which authorization has been furnished to the Agent,
"Banking Day" shall mean any day, excluding Saturday and
Sunday and excluding any other day which in The Commonwealth of
Massachusetts, the State of California or the Commonwealth of
Pennsylvania is a legal holiday or a day on which banking
institutions are authorized by law to close.
"Borrower"-shall have the meaning specified in the Preamble hereto.
"Borrower Property" means any real property owned, occupied, or
operated by the Borrower or any of its Subsidiaries.
"Capital Lease Obligations" means, as to any Person, the
obligations of such Person to pay rent or other amounts under a
lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are required to be
classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of
Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board) and, for purposes of this Agreement,
the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP (including FASB
Statement No. 13).
"Code" means the Internal Revenue Code of 1986, as amended,
or any successor statute,
"Collateral" shall have the meaning given that term in the
Security Agreement.
"Commitment Expiration Date" shall have the meaning
specified in Section 1.1.
"Commitment Percentage" shall mean, with respect to any
Lender, that Lender's Line of Credit Commitment expressed as a
percentage of the total Line of Credit Commitments of all Lenders.
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EXHIBIT 10.1
PAGE 32 OF 62
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person
is a party or by which it or any of its property is bound.
"Controlled Group" means all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414
of the Code.
"1991 Commitment Letter" shall have the meaning specified
in the Preamble hereto.
"CoreStates" shall have the meaning specified in the
Preamble hereto.
"Current Liabilities" means, at any time, all liabilities of the
Borrower and its Subsidiaries at such time, on a consolidated
basis, that would be classified as current liabilities in
accordance with GAAP, including, without limitation, all
Indebtedness of the Borrower and its Subsidiaries payable on
demand or maturing within one year of such time, or renewable at
the option of the Borrower or such Subsidiary for a period of
not more than one year from such time, and all serial maturity
and periodic or installment payments on any Indebtedness, to the
extent such payments are required to be made within one year
from such time, provided. however, for purposes of calculating
the Quick Ratio under Section 7.11, Current Liabilities shall not
include Deferred Revenues; but only to the extent that they
do not exceed $12,000,000 in the aggregate.
"Default" means any condition or event that constitutes an Event of
Default or that with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Deferred Customer Funding" means payments received by the
Borrower or its Subsidiaries from customers for funded research
and development that are deferred in accordance with GAAP.
"Deferred Revenues" means revenues of the Borrower and its
Subsidiaries that are deferred in accordance with GAAP,
including without limitation Deferred Customer Funding.
"Environmental Laws" means all federal, state, local and foreign
laws, and all regulations, notices or demand letters issued,
promulgated or entered thereunder, relating to pollution or
protection of the environment and to occupational health and
safety, including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or Hazardous Substances
into the environment (including. without limitation, ambient
<PAGE>
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EXHIBIT 10.1
PAGE 33 OF 62
air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or Hazardous
Substances.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, or any successor statutes.
"Event of Default" has the meaning set forth in Section 8.1.
"Extension of Credit" means the making of any Line of
Credit Loan or the issuance of any Letter of Credit or both.
"Financial Statements Date" means January 31, 1995.
"GAAP" means accounting principles generally accepted in
the United States applied on a consistent basis.
"Governmental Approvals" shall mean any authorization,
consent, order, approval, license, lease, ruling, permit,
tariff, rate, certification, validation, exemption, filing or
registration by or with, or notice to, any Governmental Authority.
"Governmental Authority" shall mean any federal, state,
municipal or other governmental department, commission, board,
bureau, agency, court, tribunal or other instrumentality,
domestic or. foreign, and any arbitrator.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Indebtedness or
other obligation of an other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise of such Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-
pay, or to maintain financial statement conditions or otherwise) or (b)
entered into for the purpose of assuring in any other manner the obligee
of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" shall mean all hazardous and toxic substances,
wastes or materials, hydrocarbons (including naturally occurring or
man-made petroleum and hydrocarbons), flammable explosives, urea
formaldehyde insulation, radioactive materials, biological substances,
PCBS, pesticides, herbicides and any other kind and/or type of pollutants,
or contaminates and/or any other similar substances or materials which,
because of toxic, flammable, explosive, corrosive, reactive, radioactive
or other properties that may be hazardous to human health or the environment,
are included under or regulated by any Environmental Laws.
<PAGE>
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EXHIBIT 10.1
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"Indebtedness" of any Person at any date shall mean, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (excluding
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices, but
including any class of capital stock of such Person with fixed
payment obligations or with redemption at the option of the
holder), or which is evidenced by a note, bond, debenture or
similar instrument, (b) all obligations of such Person under
leases that should be treated as capitalized leases in
accordance with GAAP, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such
Person, and all reimbursement obligations (contingent or
otherwise) of such Person in respect of any letters of credit
issued for the account of such Person, and (d) all liabilities
secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable
for the payment thereof
"Insured" shall have the meaning specified in Section 1.7.
"Intellectual Property" shall have the meaning specified in
Section 5. 16.
"Interest Period" means, with respect to any LIBOR Loan,
the period commencing on the date such LIBOR Loan is converted
from a Prime Rate Loan or the last day of the next preceding
Interest Period with respect to such LIBOR Loan and ending on
the numerically corresponding day in the first, second or third
calendar month thereafter, as the Borrower may select as
provided in Section 2.6, except that each such Interest Period
which commences on the last Banking Day of a calendar month (or
on any day for which there is no numerically corresponding day
in the appropriate subsequent calendar month) shall end on the
last Banking Day of the appropriate subsequent calendar month.
"Investments" means, with respect to any Person (the
"Investor") (a) any investment by, the Investor in any other
Person, whether by means of share purchase, capital contribution,
purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise and
(b) any Guarantee by the Borrower of any Indebtedness or other
obligation of any other Person.
"Issuing Bank" shall have the meaning specified in Section 1.9(a).
"Lenders" means SVB, CoreStates and each other Person that may after
the date hereof become a party to this Agreement as a "Lender" hereunder.
"Letter of Credit" means any commercial letter of credit or
standby letter of credit issued by the Issuing Bank for the
account of the Borrower as provided in this Agreement.
"LIBOR Loan" means, at any time, that principal amount of the Line of
Credit Loans, the interest on which is determined at such time on the
basis of rates referred to in the definition of "LIBOR Rate".
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EXHIBIT 10.1
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"LIBOR Rate" means with respect to any Interest Period
pertaining to a LIBOR Loan, the rate per annum (rounded upwards,
if necessary, to the nearest 1 1/16th of 1%) equal to the
quotient of (a) the rate determined by SVB in the case of
Working Capital Line of Credit Loans to be the prevailing per
annum rate at which deposits in U. S. dollars are offered to
such Lender by first-class banks two Working Days prior to the
beginning of such Interest Period in the London interbank market
at or about10: 00 a.m., Boston time, for delivery on the first
day of such Interest Period for the number of days comprised
therein and in an amount equal to the amount of the LIBOR Loan
to be outstanding during such Interest Period, divided by (b) a
number equal to 1.00 minus the Reserve Requirement for such
LIBOR Loan during such Interest Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement or security
arrangement of any kind, encumbrance, lien (statutory or other),
preference or priority of any kind or nature whatsoever
(including, without limitation, any conditional sale or other
title retention agreement, any lease that should be capitalized
in accordance with GAAP, and the filing of a financing statement
under the Uniform Commercial Code or comparable law of any
jurisdiction), together with any renewal or extension thereof.
"Line of Credit Commitment" shall have the meaning
specified in Section 1.2.
"Line of Credit Loans" shall have the meaning specified in Section 1.1.
"Loan Documents" means, collectively, this Agreement, the
Notes, any Letters of Credit, the Security Instruments and all
other agreements and instruments that are from time to time
executed in connection with the foregoing, as each of such
agreements and instruments may be amended, modified or
supplemented from time to time.
"Material Adverse " means a material adverse effect on (a)
the business, operations, property, condition (financial or
otherwise) or prospects of the Borrower, or of the Borrower and
its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform its obligations under this Agreement, the
Notes or any of the other Loan Documents, or (c) the validity or
enforceability of this Agreement, the Notes or any of the other
Loan Documents, or the rights or remedies of the Agent or the
Lenders hereunder or thereunder.
"Maturity Date" shall have the meaning specified in Section 1.8.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA
to which the Borrower or any member of the Controlled Group is
then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a
member of the Controlled Group during such five year period.
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EXHIBIT 10.1
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"Net Income" or "Net Loss" for any period in respect of
which the amount thereof shall be determined, shall mean the
aggregate of the consolidated net income (or net loss) after
taxes for such period (taken as a cumulative whole) of the
Borrower and its Subsidiaries, determined in accordance with GAAP.
"Notes" shall have the meaning set forth in Section 1.4.
"Notice of Borrowing" shall have the meaning specified in Section 1.5.
"Obligations" shall have the meaning given the term
"Secured Obligations" in the Security Agreement.
"Office of the Agent" shall initially mean the banking
office of the Agent located at 3003 Tasman Drive, Santa Clara,
California 95454, or such other location of which the Agent
shall notify the Borrower.
"Office of the Lender" shall mean (a) in the case of SVB,
3003 Tasman Drive, Santa Clara, California 95454, or such other
location of which SVB shall notify the Borrower and the other
Lenders; and (b) in the case of CoreStates, 1345 Chestnut
Street, Philadelphia, Pennsylvania 19107 or such other location
of which CoreStates shall notify the Borrower and the other Lender.
"Parent" shall have the meaning specified in Section 2.5.
"Participation Percentage" shall mean for both SVB and
CoreStates fifty percent (50 %).
"PBGC" means the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall have the meaning set forth in Section 7.6.
"Person" shall mean and include any individual, firm,
corporation, trust or other unincorporated organization or
association or other enterprise or any government or political
subdivision, agency, department or instrumentality thereof.
"Plan" means any employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (a)
maintained by the Borrower or any member of the Controlled Group
for employees of the Borrower or any member of the Controlled
Group or (b) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one
employer makes contributions and to which the Borrower or any
member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding
five plan years made contributions.
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EXHIBIT 10.1
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"Post-Default Rate" means, in respect of any principal of
the Line of Credit Loans or any other amount payable by the
Borrower under this Agreement which is not paid when due
(whether at stated maturity, by acceleration or otherwise), a
rate per annum during the period commencing on the due date
until such amount is paid in full (after as well as before
judgment) equal to the sum of 4% per annum plus the higher of
(i) the rate of interest applicable to Prime Rate Loans and
(ii) in the case of any LIBOR Loan, the rate of interest otherwise
applicable to such LIBOR Loan.
"Prime Rate" shall mean the per annum rate of interest from
time to time announced and made effective by the Agent as its
Prime Rate (which rate may or may not be the lowest rate
available from the Agent at any given time).
"Prime Rate Loan" means at any time the principal amount of
the Line of Credit Loans which bears interest at the Prime Rate.
"Quick Ratio" means, at any time, all cash, Short Term
Investments and accounts receivable, less reserves for doubtful
accounts, of the Borrower and its Subsidiaries at such time, on
a consolidated basis, determined in accordance with GAAP,
divided by the aggregate of all Current Liabilities at such time.
"Regulation D" means Regulation D of the Board of Governors
of the Federal Reserve System as the same may be amended or
supplemented from time to time.
"Regulatory Change" means any change on or after the date
of this Agreement in United States federal, state or foreign
laws or regulations, including Regulation D, or the adoption or
making on or after such date of any interpretations, directives
or requests applying to a class of lenders including the Banks
of or under any United States federal or state, or any foreign,
laws or regulations (whether or not having the force of law) by
any court or governmental or monetary authority charged with the
interpretation or administration thereof (other than changes
which affect taxes measured by or imposed on the overall net
income of any Bank by the jurisdiction in which such Bank has
its principal office.
"Reserve Requirement" means, for any LIBOR Loans for any
Interest Period therefor, the average maximum rate at which
reserves (including any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest
Period under Regulation D by the Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D).
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EXHIBIT 10.1
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"Restricted Payment" means, with respect to the Borrower or
any Subsidiary thereof, (a) any dividend or other distribution
on any shares of capital stock of the Borrower or such
Subsidiary (except dividends payable solely in shares of such
capital stock or rights to acquire such capital stock) or (b)
any payment or other distribution on account of the purchase,
redemption, retirement or acquisition of (i) any shares of the
capital stock of the Borrower or a Subsidiary thereof or (ii)
any option, warrant, convertible security or other right to
acquire shares of the capital stock of the Borrower or a
Subsidiary thereof
"SEC" means the Securities and Exchange Commission.
"Security Agreement" shall have the meaning set forth in Section 3.1.
"Security Instruments" means, collectively, the Security
Agreement and each other instrument or agreement that purports
to secure the obligations of the Borrower to the Lenders or the Agent.
"Short Term Investments" means marketable obligations having a
maturity of less than 90 days from the date of purchase.
"Standby Letter of Credit" means a letter of credit,
commonly known as a "standby" or "guaranty" letter of credit,
issued to pay the beneficiary in the event of the account
party's failure to perform an obligation.
"Subordinated Debt" means Indebtedness of the Borrower that
is subordinated to the Indebtedness of the Borrower owing to the
Lenders either (a) pursuant to a subordination agreement in form
and substance satisfactory to the Agent between the Lenders and
the holder(s) of such Indebtedness, or (b) pursuant to the terms
thereof, where the Agent has confirmed in writing that such
terms are satisfactory to it.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors
or other Persons performing similar functions are at the time directly
or indirectly owned by such Person.
"SVB" shall have the meaning specified in the Preamble hereto.
"Tangible Net Worth" means, at any time, the consolidated
stockholders' equity of the Borrower and its Subsidiaries at
such time determined in accordance with GAAP, less all assets
that are reflected on the consolidated balance sheet of the
Borrower and its Subsidiaries at such time that would be treated
as intangibles under GAAP (including, but not limited, to
goodwill, capitalized software and excess purchase costs), plus
all then outstanding Subordinated Debt.
"Total Line of Credit Commitment" shall have the meaning
specified in Section 1.2.
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EXHIBIT 10.1
PAGE 39 OF 62
"Total Liabilities" means, at any time, the consolidated
liabilities of the Borrower and its Subsidiaries at such time,
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.
"Trade Letter of Credit" means a letter of credit, commonly
known as a "trade" or "commercial" letter of credit, payable
upon the presentation of a draft and specified documents and
issued to facilitate payment for the purchase of goods.
"UCC" shall have the meaning given such term in the Security Agreement.
"Unfunded Liabilities" means, with respect to any Plan at
any time the amount (if any) by which (a) the present value of
all benefits under such Plan exceeds (b) the fair market value
of all Plan assets allocable to such benefits, all determined as
of the then most recent valuation date for such Plan, but only
to the extent that such excess represents a potential liability
of the Borrower or any member of the Controlled Group to the
PBGC or such Plan under Title IV of ERISA.
"Working Day" means any day on which dealings in foreign
currency and exchange between banks may be carried on in the
Offices of the Lenders.
Section 10 Miscellaneous.
10.1 Accounting Terms and Definitions Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be
made, and all financial statements and certificates and reports as
to financial matters required to be delivered hereunder shall be
prepared, in accordance with GAAP, provided that if any change in
GAAP in itself materially affects the calculation of any financial
covenant in this Agreement, the Borrower may, by notice to the Agent,
or the Agent may by notice to the Borrower, require that such covenant
thereafter be calculated in accordance with GAAP as in effect, and
applied by the Borrower, immediately before such change in GAAP occurs.
If such notice is given, the compliance certificates delivered
pursuant to Section 6.4(c) after such change occurs shall be
accompanied by reconciliations of the difference between the calcu-
lation set forth therein and a calculation made in accordance with
GAAP as in effect from time of time after such change occurs. To
enable the ready determination of compliance with the covenants set
forth in this Agreement, the Borrower will not change the date on
which its fiscal year or any of its fiscal quarters end without the
prior consent of the Agent.
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EXHIBIT 10.1
PAGE 40 OF 62
10.2 Amendments, Etc. (a) No amendment or waiver of any provision of this
Agreement or the Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lenders and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose
for which given.(b) In consideration of any waiver of any compliance
with the express terms hereof, the Borrower may be required to pay to
the Agent for the account of the Lenders a waiver fee as determined by
the Lenders at such time.
10.3 Notices, Etc. 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 Wellesley Office Park, 40 William Street, Wellesley, Massachusetts
02181, Attention: Jane A. Braun, Vice President, Telecopy No.
(617) 431-9906; if to SVB, to the address given for the Agent; if to
CoreStates, 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 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 such 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, on the
next Banking Day after being placed in the possession of such
delivery service, with delivery charges prepaid; (c) in the case of
mail, three days after deposit in the postal system, first class
postage prepaid; and (d) 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 the Agent.
10.4 No Waiver: Remedies. No failure on the part of the Agent or the
Lenders to exercise, and no delay in exercising, any right hereunder
or under the Notes shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder or under the Notes
preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
10.5 Right of Set-off, (a) Upon the occurrence and during the continuance
of any Event of Default, the Agent and each of the Lenders is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Agent or any of the
Lenders to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or hereafter
existing under this Agreement and the Notes, irrespective of whether
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 41 OF 62
or not the Agent or such Lender shall have made any demand hereunder
and although such obligations may be contingent or unmatured.(b) The
Agent and each Lender agrees promptly to notify the Borrower after
any such set-off and application, provided that the failure to give
such notice shall not affect the validity of such set-off and application.
The rights of the Agent and the Lenders under this Section11.5 are in
addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Agent and the Lenders may have.
10.6 Expenses: Indemnification, (a) The Borrower shall pay on demand (i) the
reasonable fees and disbursements of counsel to the Agent in connection
with the preparation of this Agreement and the preparation or review of
each agreement, opinion, certificate and other document referred to in
or delivered pursuant hereto; (ii) all out-of-pocket costs and expenses
of the Agent in connection with the administration of this Agreement
and the other Loan Documents, and any waiver or amendment of any
provision hereof or thereof, including without limitation, the reasonable
fees and disbursements of counsel for the Agent, and of any field
examiner or auditor retained by the Agent as contemplated in Section
6.8; and (iii) if any Event of Default occurs, all costs and expenses
incurred by the Agent and each Lender, including the reasonable fee
and disbursements of counsel to the Agent and each Lender, and of any
appraisers, environmental engineers or consultants, or investment
banking firms retained by the Agent in connection with such Event of
Default or collection, bankruptcy, insolvency and other enforcement
proceedings related thereto. The Borrower agrees to pay, indemnify
and hold the Agent and each Lender harmless from, any and all
recording and filing fees, and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise or other
taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of or the consummation or
administration of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement or the other Loan Documents,
or any documents delivered pursuant hereto or thereto.(b) The Borrower
agrees to indemnify the Agent and each Lender and its officers and
directors and hold the Agent and each Lender and its officers and
directors harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind (including, without limitation,
the reasonable fees and disbursements of counsel for the Agent and
each Lender in connection with any investigative, administrative
or judicial proceeding initiated by a third party, whether or not the
Agent or a Lender shall be designated a party thereto) which may be
incurred by the Agent or a Lender, relating to or arising out of this
Agreement or any other Loan Document, or the existence of any Hazardous
Substance on, in, or under any Borrower Property, or any violation of
any applicable Environmental Laws for which the Borrower or any Subsidiary
thereof has any liability or which occurs upon any Borrower Property,
or the imposition of any Lien under any Environmental Laws, provided
that the Agent and the Lenders shall not have the right to be indemnified
hereunder for their own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.(c) The agreements in
this Section 10.6 shall survive the repayment of the Notes and all
other amounts payable under this Agreement and the other Loan Documents.
<PAGE>
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EXHIBIT 10.1
PAGE 42 OF 62
10.7 Binding Effect. This Agreement shall become effective when it shall
have been executed by the Borrower, each of the Lenders and the Agent
(provided, however, that in no event shall this Agreement become
effective until signed by an officer of SVB in California) and thereafter
shall be binding upon and inure to the benefit of the Borrower, the
Lenders and the Agent and their respective successors and assigns,
except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the Agent and the Lenders. The Lenders may assign to any
financial institution all or any part of, or any interest (undivided
or divided) in, their respective rights and benefits under this
Agreement or the Notes, and to the extent of that assignment such
assignee shall have the same rights and benefits against the Borrower
hereunder as it would have had if such assignee were the Lenders
making the Line of Credit Loans hereunder.
10.8 Severability. Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
10.9 GOVERNING LAW: AGREEMENT UNDER SEAL. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL, UPON ACCEPTANCE BY THE
BORROWER, CONSTITUTE AN AGREEMENT UNDER SEAL AMONG THE PARTIES,
10.10 WAIVER OF JURY TRIAL. THE LENDERS, THE AGENT AND THE BORROWER
AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A)
SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY
OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, ANY
RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH
HAVE BEEN FULLY DISCUSSED BY THE LENDERS AND THE BORROWER, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE
LENDERS NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE
OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
10.11 VENUE, CONSENT TO SERVICE OF PROCESS. THE BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS
(AND IN THE EVENT SVB IS FOR ANY REASON DENIED ACCESS TO THE COURTS
OF MASSACHUSETTS, THEN SOLELY IN SUCH CASE, CALIFORNIA) 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
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 43 OF 62
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 AN
INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND
AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION,
SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE
GENERAL LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES
OF CIVIL PROCEDURE, SECTION 415.40 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE OR RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
10.12 Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
10.13 Counterparts. This Agreement may be signed in one or more counterparts
each of which shall constitute an original and all of which taken
together shall constitute one and the same instrument.
[Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
BOSTON TECHNOLOGY, INC., as Borrower
By:
Name: Carol B. Langer
By: /s/ Carol B. Langer
___________________________
Title: SVP Finance & Admin.
SILICON VALLEY EAST,
a Division of Silicon Valley Bank,
as a Lender and the Agent
By: \s\Jane A. Braun
_____________________
Name: Jane A. Braun
Title: Vice President
SILICON VALLEY BANK,
as a Lender and the Agent
By: \s\Gregory T. Linvill
____________________________
Name: Gregory T. Linvill
Title: Vice President
(Signed at Santa Clara, California)
CORESTATES BANK, N.A., as a Lender
By: \s\R. Thomas Esser
________________________
Name: R. Thomas Esser
Title: Vice President
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 44 OF 62
Exhibit A-1
AMENDED AND RESTATED PROMISSORY NOTE
$12,500,000 Wakefield, Massachusetts
Dated as of January 31, 1996 (Originally, dated as of January 31, 1991,
as amended by an Allonge and Amendment dated July 15, 1992, and as amended
and restated by Amended and Restated Promissory Notes dated as of July 28,
1993 and July 11, 1994.)
For value received, the undersigned, BOSTON TECHNOLOGY, INC., a Delaware
corporation (the "Borrower"), promises to pay to SILICON VALLEY BANK
(the "Bank") at its office located at 3003 Tasman Drive, Santa Clara,
California 95454, or to its order, the lesser of TWELVE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($12,500,000) or the outstanding principal amount of all
advances made by the Bank pursuant to the Credit Agreement hereinafter
referred to, on July 6, 1997 (the "Maturity Date") in lawful money of the
United States and in immediately available funds, together with interest on
the principal amount hereof from time to time outstanding at the rates
provided in the Credit Agreement referred to below until maturity, payable
monthly in arrears on the first day of each calendar month occurring after
the date hereof and on the Maturity Date.
Computations of interest shall be made by the Bank on the basis of a year of
360 days for the actual number of days occurring in the period for which
such interest is payable.
This promissory note amends and restates the terms and conditions of the
obligations of the Borrower under the promissory note dated January 31, 1991,
as amended by an Allonge and Amendment dated July 15, 1992, and as further
amended and restated by Amended and Restated Promissory Notes dated as of
July 28, 1993 and July 11, 1994 (the "Original Note"), by the Borrower to the
Bank. This note is one of the promissory notes (collectively, the "Notes")
referred to in the Credit Agreement dated as of January 31, 1996 (together
with all related schedules), as the same may be amended, amended and restated,
modified or supplemented from time to time (the "Credit Agreement") among
the Borrower, the Lenders named therein (including the Bank), and the Bank in
its capacity as Agent and is subject to optional and mandatory prepayment as
provided therein, and is entitled to the benefits thereof and of the other
Loan Documents referred to therein. Each occurrence in each Loan Document
(as defined in the Credit Agreement) of "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Original Note, shall
mean and be a reference to the Original Note as amended and restated hereby.
After the occurrence and during the continuance of an Event of Default under
and as defined in the Credit Agreement, the Agent (but only with the consent
of each of the Banks) may (a) declare the Line of Credit Commitments (as such
term is defined in the Credit Agreement) terminated (whereupon the Line of
Credit Commitments shall be terminated), by notice to the Borrower, and/or
(b) declare the principal amount then outstanding of and the accrued interest
on the advances under the Notes and all other amounts payable under the Notes
to be forthwith due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including, without limitation,
notice of intent to accelerate), presentment, demand, protest or other
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 45 OF 62
formalities of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the case of the occurrence of any Event of Default
with respect to the Borrower referred to in Section 8.1 to the Credit
Agreement, the Line of Credit Commitments shall be automatically terminated
and the principal amount then outstanding of and the accrued interest on the
advances hereunder and under the Notes and all other amounts payable hereunder
and under the Notes shall be and become automatically and immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate), presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
The amount, date and Type of all advances made to the Borrower pursuant to
the Credit Agreement and all payments of principal and interest in respect of
such advances shall be evidenced by the Bank's records, which shall, in the
absence of manifest error, be conclusive as to the outstanding amount of
all advances and interest thereon.
The undersigned agrees to pay all costs and expenses of the Agent and the
Bank (including, without limitation, the reasonable fees and expenses of
attorneys) in connection with the enforcement of this note and the other Loan
Documents and the preservation of their respective rights hereunder and
thereunder.
No delay or omission on the part of the Bank in exercising any right hereunder
shall operate as a waiver of such right or of any other right of the Bank,
nor shall any delay, omission or waiver on any one occasion be deemed a bar
to or waiver of the same or any other right on any future occasion. The
Borrower and every endorser or guarantor of this note regardless of the time,
order or place of signing waives presentment, demand, protest and notices of
every kind and assents to any one or more extensions or postponements of the
time of payment or any other indulgences, to any substitutions, exchanges or
releases of collateral for this note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
THIS NOTE HAS BEEN DELIVERED TO THE BANK AND ACCEPTED BY
THE BANK IN THE STATE OF CALIFORNIA.THE BORROWER HEREBY EXPRESSLY WAIVES ANY
RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR
PROCEEDING WHICH ARISES OUT OF OR BY REASON OF THIS NOTE, ANY LOAN DOCUMENT
(AS DEFINED IN THE CREDIT AGREEMENT), OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 46 OF 62
Exhibit A-2
AMENDED AND RESTATED PROMISSORY NOTE
$12,500,000 Wakefield, Massachusetts
Dated as of January 31, 1996
(Originally dated as of January 31, 1991, as amended by an Allonge and
Amendment dated July 15, 1992, and as amended and restated by Amended and
Restated Promissory Notes dated as of July 28, 1993 and July 11, 1994.)
For value received, the undersigned, BOSTON TECHNOLOGY, INC., a Delaware
corporation (the "Borrower"), promises to pay to CORESTATES BANK, N.A.
(the "Bank") at its office located 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107, or to its order, the lesser of TWELVE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($12,500,000) or the outstanding principal amount of
all advances made by the Bank pursuant to the Credit Agreement hereinafter
referred to, on July 6, 1997 (the "Maturity Date") in lawful money of the
United States and in immediately available funds, together with interest on
the principal amount hereof from time to time outstanding at the rates
provided in the Credit Agreement referred to below until maturity, payable
monthly in arrears on the first day of each calendar month occurring after
the date hereof and on the Maturity Date.
Computations of interest shall be made by the Bank on the basis of a year of
360 days for the actual number of days occurring in the period for which
such interest is payable.
This promissory note amends and restates the terms and conditions of the
obligations of the Borrower under the promissory note dated January 31, 1991,
as amended by an Allonge and Amendment dated July 15, 1992, and as further
amended and restated by Amended and Restated Promissory Notes dated as of
July 28, 1993 and July 11, 1994 (the "Original Note"), by the Borrower to the
Bank. This note is one of the promissory notes (collectively, the "Notes")
referred to in the Credit Agreement dated as of January 31, 1996 (together
with all related schedules), as the same may be amended, amended and restated,
modified or supplemented from time to time (the "Credit Agreement") among the
Borrower, the Lenders named therein (including the Bank), and the Bank in its
capacity as Agent and is subject to optional and mandatory prepayment as
provided therein, and is entitled to the benefits thereof and of the other
Loan Documents referred to therein. Each occurrence in each Loan Document
(as defined in the Credit Agreement) of "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Original Note, shall
mean and be a reference to the Original Note as amended and restated hereby.
After the occurrence and during the continuation of an Event of Default under
and as defined in the Credit Agreement, the Agent (but only with the consent
of each of the Banks) may (a) declare the Line of Credit Commitments (as such
term is defined in the Credit Agreement) terminated (whereupon the Line of
Credit Commitments shall be terminated), by notice to the Borrower, and/or
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 47 OF 62
(b) declare the principal amount then outstanding of and the accrued interest
on the advances under the Notes and all other amounts payable under the Notes
to be forthwith due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including, without limitation,
notice of intent to accelerate), presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the case of the occurrence of any Event of Default
with respect to the Borrower referred to in Section 8.1 to the Credit
Agreement, the Line of Credit Commitments shall be automatically terminated
and the principal amount then outstanding of and the accrued interest on the
advances hereunder and under the Notes and all other amounts payable hereunder
and under the Notes shall be and become automatically and immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate), presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
The amount, date and Type of all advances made to the Borrower pursuant to the
Credit Agreement and all payments of principal and interest in respect of such
advances shall be evidenced by the Bank's records, which shall, in the absence
of manifest error, be conclusive as to the outstanding amount of all advances
and interest thereon.
The undersigned agrees to pay all costs and expenses of the Agent and the
Bank (including, without limitation, the reasonable fees and expenses of
attorneys) in connection with the enforcement of this note and the other Loan
Documents and the preservation of their respective rights hereunder and
thereunder.
No delay or omission on the part of the Bank in exercising any right hereunder
shall operate as a waiver of such right or of any other right of the Bank,
nor shall any delay, omission or waiver on any one occasion be deemed a bar
to or waiver of the same or any other right on any future occasion. The
Borrower and every endorser or guarantor of this note regardless of the time,
order or place of signing waives presentment, demand, protest and notices of
every kind and assents to any one or more extensions or postponements of the
time of payment or any other indulgences, to any substitutions, exchanges or
releases of collateral for this note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
THIS NOTE HAS BEEN DELIVERED TO THE BANK AND ACCEPTED BY
THE BANK IN THE COMMONWEALTH OF PENNSYLVANIA.
THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE
TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY
REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT),
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 48 OF 62
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, THE BORROWER ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE COMMONWEALTH OF MASSACHUSETTS (AND, IN THE EVENT THE BANK IS DENIED
ACCESS TO THE COURTS OF MASSACHUSETTS, THEN SOLELY IN SUCH CASE, CALIFORNIA)
IN ANY ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF
OR BY REASON OF TIES NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT
AGREEMENT), OR THE TRANSACTIONS CONTEMPLATED HEREBY, 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 AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND
AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION, SUIT OR
PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF
MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL
PROCEDURE OR RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS AND THIS NOTE SHALL BE DEEMED TO BE UNDER SEAL.
BOSTON TECHNOLOGY, INC.
By \s\ Carol B. Langer
- --------------------------
Name: Carol B. Langer
Title: SVP - Finance & Admin.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 49 OF 62
Exhibit B
Loan Payment/Advance Telephone Request Form
Deadline For Same Day Processing Is 3:00 P.M., E.S.T.
To: Central Client Service Division Date:
Fax#: (617)431-9906 Time:
FROM:
CLIENT NAME (BORROWER)
REQUESTED BY:
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
PHONE NUMBER:
FROM ACCOUNT # TO ACCOUNT #
REQUESTED TRANSACTION TYPE, REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment
transfer/loan advance on the advance designated account and is
known to me.
Authorized Requester Phone
Received By (Bank) Phone#
Authorized Signature (Bank)
- -3-
Name:
Title:
Date:
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 50 OF 62
Exhibit C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK, as a lender and as Agent
3003 Tasman Drive
Santa Clara, California 95054
CORESTATES BANK, N.A.
National Middle Market, NY/NE/NJ
FC 1-1-3-36
1345 Chestnut Street Philadelphia, PA 19107
The undersigned authorized officer of Boston Technology, Inc. (the "Borrower")
does hereby certify, with respect to the Credit Agreement dated as of January
31, 1996 between Silicon Valley Bank CoreStates Bank, N.A. and Silicon Valley
Bank as Agent for the Lenders, and the Borrower as amended through the date
hereof (the "Credit Agreement"), that (a) the Borrower has been in complete
compliance for the period from __/ /__ to __/__/__ (the "Applicable
Financial Statements Date") with the covenants of the Borrower contained
therein, as demonstrated below, and (b) no Default has occurred and is
continuing as of the date hereof, except, in either case, as noted below.
All capitalized terms used herein and not otherwise defined shall have the
meanings prescribed therefor in the Credit Agreement.
COVENANT REQUIRED ACTUAL AS
OF ______
Financial
Statements Quarterly w/in 45 days
Annually
w/in 90 days
All documents
filed with SEC Within 5 days after
filing
Minimum Quick Ratio (cash, short term investments & accounts receivable/current
liabilities 2.0:1 at all times __.__:1
($_______to
$__________)
Minimum
Profitability Maximum Net Loss of $1,000,000 for any quarter ending after
1/31/96; Minimum Net Income of $1.00 over any period of three consecutive fiscal
quarters beginning after 1/31/96
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 51 OF 62
$___________
Limit on Capital Leases Maximum investment in all capital leases of $8,000,000
$___________
Minimum Tangible Net Worth $50,000,000 plus (a) 50% of Net Income in
each fiscal quarter after 1/31/96 (no offset for losses) and (b) 50% of
increase in Stockholder Equity from issuances of stock or Subordinated
Debt after 1/31/96
Calculation of
Tangible Net Worth stockholders' equity
- - intangible assets (including without limitation, goodwill, capitalized
software and excess purchase costs)
+ Subordinated Debt
Total Tangible Net Worth $_______
$________
$________
$________
Maximum Ratio of Total Liabilities to Tangible Net Worth
0.75:1 at the end of any fiscal quarter __.__:1
($_______ to
$_________)
Comments Regarding Exceptions:
Attached hereto are financial statements as of and for the fiscal [quarter]
(year] ended on the Applicable Financial Statements Date, which have been
certified by the [undersigned] [Accountants] as required by Section 6.4 of
the Credit Agreement.
Submitted by:
By:
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 52 OF 62
Exhibit D
Borrowing Base Certificate**
for
Boston Technology
(To be completed only if borrowings exceed $10,000,000
during any one month)
1. Gross A/R per (date) statements:
2. Less A/R over 90 days:
3. Line# I minus Line #2:
4. Line #3 multiplied by 80% = Available A/R
5. Total outstanding
6. This advance amount
7. Line #4 minus line #5 and line #6 = Reserve
8. Letters of Credit outstanding
9. Line #7 minus line #8*
* Must be less than $25,000,000
** For monitoring purposes only.
AMENDED AND RESTATED PROMISSORY NOTE
$12,500,000 Wakefield, Massachusetts
Dated as of January 31, 1996 (Originally dated as of January 31, 1991, as
amended by an Allonge and Amendment dated July 15, 1992, and as amended and
restated by Amended and Restated Promissory Notes dated as of July 28, 1993
and July 11, 1994.)
For value received, the undersigned, BOSTON TECHNOLOGY, INC., a Delaware
corporation (the "Borrower"), promises to pay to SILICON VALLEY BANK (the
"Bank") at its office located at 3003 Tasman Drive, Santa Clara, California
95454, or to its order, the lesser of TWELVE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($12,500,000) or the outstanding principal amount of all advances
made by the Bank pursuant to the Credit Agreement hereinafter referred to, on
July 6, 1997 (the "Maturity Date") in lawful money of the United States and
in immediately available funds, together with interest on the principal amount
hereof from time to time outstanding at the rates provided in the Credit
Agreement referred to below until maturity, payable monthly in arrears on the
first day of each calendar month occurring after the date hereof and on the
Maturity Date.
Computations of interest shall be made by the Bank on the basis of a year of
360 days for the actual number of days occurring in the period for which such
interest is payable.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 53 OF 62
This promissory note amends and restates the terms and conditions of the
obligations of the Borrower under the promissory note dated January 31, 1991,
as amended by an Allonge and Amendment dated July 15, 1992, and as further
amended and restated by Amended and Restated Promissory Notes dated as of
July 28, 1993 and July 11, 1994 (the "Original Note"), by the Borrower to the
Bank. This note is one of the promissory notes (collectively, the "Notes")
referred to in the Credit Agreement dated as of January 31, 1996 (together
with all related schedules), as the same may be amended, amended and restated,
modified or supplemented from time to time (the "Credit Agreement") among the
Borrower, the Lenders named therein (including the Bank), and the Bank in its
capacity as Agent and is subject to optional and mandatory prepayment as
provided therein, and is entitled to the benefits thereof and of the other
Loan Documents referred to therein. Each occurrence in each Loan Document
(as defined in the Credit Agreement) of "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Original Note, shall
mean and be a reference to the Original Note as amended and restated hereby.
After the occurrence and during the continuance of an Event of Default under
and as defined in the Credit Agreement, the Agent (but only with the consent
of each of the Banks) may (a) declare the Line of Credit Commitments (as such
term is defined in the Credit Agreement) terminated (whereupon the Line of
Credit Commitments shall be terminated), by notice to the Borrower, and/or
(b) declare the principal amount then outstanding of and the accrued interest
on the advances under the Notes and all other amounts payable under the Notes
to be forthwith due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including, without limitation,
notice of intent to accelerate), presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the case of the of the occurrence of any Event of
Default with respect to the Borrower referred to in Section 8.1 to the Credit
Agreement, the Line of Credit Commitments shall be automatically terminated
and the principal amount then outstanding of and the accrued interest on
the advances hereunder and under the Notes and all other amounts payable
hereunder and under the Notes shall be and become automatically and
immediately due and payable, without notice (including, without limitation,
notice of intent to accelerate), presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower,
The amount, date and Type of all advances made to the Borrower pursuant to
the Credit Agreement and all payments of principal and interest in respect of
such advances shall be evidenced by the Bank's records, which shall, in the
absence of manifest error, be conclusive as to the outstanding amount of
all advances and interest thereon.
The undersigned agrees to pay all costs and expenses of the Agent and the
Bank (including, without limitation, the reasonable fees and expenses of
attorneys) in connection with the enforcement of this note and the other Loan
Documents and the preservation of their respective rights hereunder and
thereunder.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 54 OF 62
No delay or omission on the part of the Bank in exercising any right hereunder
shall operate as a waiver of such right or of any other right of the Bank,
nor shall any delay, omission or waiver on any one occasion be deemed a bar
to or waiver of the same or any other right on any future occasion. The
Borrower and every endorser or guarantor of this note regardless of the
time, order or place of signing waives presentment, demand, protest and
notices of every kind and assents to any one or more extensions or post-
ponements of the time of payment or any other indulgences, to any
substitutions, exchanges or releases of collateral for this note, and to
the additions or releases of any other parties or persons primarily or
secondarily liable.
THIS NOTE HAS BEEN DELIVERED TO THE BANK AND ACCEPTED BY
THE BANK IN THE STATE OF CALIFORNIA.
THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW
OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR
PROCEEDING WHICH ARISES OUT OF OR BY REASON OF THIS NOTE, ANY
LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, THE BORROWER ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE COMMONWEALTH OF MASSACHUSETTS (AND, IN THE EVENT THE BANK IS DENIED
ACCESS TO THE COURTS OF MASSACHUSETTS, THEN SOLELY IN SUCH CASE, CALIFORNIA)
IN ANY ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF
OR BY REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT
AGREEMENT), OR THE TRANSACTIONS CONTEMPLATED HEREBY, 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 AN
INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND AGREES THAT
PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN THE
MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF MASSACHUSETTS, RULE 4
OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4 OF THE FEDERAL RULES
OF CIVIL PROCEDURE.
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS AND THIS NOTE SHALL BE DEEMED TO BE UNDER SEAL.
BOSTON TECHNOLOGY, INC.
By \s\Carol B. Langer
--------------------------
Name: Carol B. Langer
Title: SVP - Finance & Admin.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 55 OF 62
AMENDED AND RESTATED PROMISSORY NOTE
$12,500,000 Wakefield, Massachusetts
Dated as of January 31, 1996
(Originally dated as of January 31, 1991, as amended by an Allonge and
Amendment dated July 15, 1992, and as amended and restated by Amended and
Restated Promissory Notes dated as of July 28, 1993 and July 11, 1994.)
For value received, the undersigned, BOSTON TECHNOLOGY, INC., a Delaware
corporation (the "Borrower"), promises to pay to CORESTATES BANK, N.A.
(the "Bank") at its office located 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107, or to its order, the lesser of TWELVE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($12,500,000) or the outstanding principal amount of
all advances made by the Bank pursuant to the Credit Agreement hereinafter
referred to, on July 6, 1997 (the "Maturity Date") in lawful money of the
United States and in immediately available funds, together with interest on
the principal amount hereof from time to time outstanding at the rates provided
in the Credit Agreement referred to below until maturity, payable monthly in
arrears on the first day of each calendar month occurring after the date
hereof and on the Maturity Date.
Computations of interest shall be made by the Bank on the basis of a year of
360 days for the actual number of days occurring in the period for which
such interest is payable.
This promissory note amends and restates the terms and conditions of the
obligations of the Borrower under the promissory note dated January 31, 1991,
as amended by an Allonge and Amendment dated July 15, 1992, and as further
amended and restated by Amended and Restated Promissory Notes dated as of
July 28, 1993 and July 11, 1994 (the "Original Note"), by the Borrower to the
Bank. This note is one of the promissory notes (collectively, the "Notes")
referred to in the Credit Agreement dated as of January 31, 1996 (together
with all related schedules), as the same may be amended, amended and restated,
modified or supplemented from time to time (the "Credit Agreement") among the
Borrower, the Lenders named therein (including the Bank), and the Bank in its
capacity as Agent and is subject to optional and mandatory prepayment as
provided therein, and is entitled to the benefits thereof and of the other
Loan Documents referred to therein. Each occurrence in each Loan Document
(as defined in the Credit Agreement) of "the Note", "thereof', "therein",
"thereunder", or words of like import referring to the Original Note, shall
mean and be a reference to the Original Note as amended and restated hereby.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 56 OF 62
After the occurrence and during the continuance of an Event of Default under
and as defined in the Credit Agreement, the Agent (but only with the consent
of each of the Banks) may (a) declare the Line of Credit Commitments (as such
term is defined in the Credit Agreement) terminated (whereupon the Line of
Credit Commitments shall be terminated), by notice to the Borrower, and/or
(b) declare the principal amount then outstanding of and the accrued interest
on the advances under the Notes and all other amounts payable under the Notes
to be forthwith due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including, without limitation,
notice of intent to accelerate), presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the case of the occurrence of any Event of Default
with respect to the Borrower referred to in Section 8.1 to the Credit
Agreement, the Line of Credit Commitments shall be automatically terminated
and the principal amount then outstanding of and the accrued interest on the
advances hereunder and under the Notes and all other amounts payable hereunder
and under the Notes shall be and become automatically and immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate), presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
The amount, date and Type of all advances made to the Borrower pursuant to
the Credit Agreement and all payments of principal and interest in respect of
such advances shall be evidenced by the Bank's records, which shall, in the
absence of manifest error, be conclusive as to the outstanding amount of
all advances and interest thereon.
The undersigned agrees to pay all costs and expenses of the Agent and the
Bank (including, without limitation, the reasonable fees and expenses of
attorneys) in connection with the enforcement of this note and the other
Loan Documents and the preservation of their respective rights hereunder and
thereunder. No delay or omission on the part of the Bank in exercising any
right hereunder shall operate as a waiver of such right or of any other right
of the Bank, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future
occasion. The Borrower and every endorser or guarantor of this note
regardless of the time, order or place of signing waives presentment, protest
and notices of every kind and assents to any one or more extensions or
postponements of the time of payment or any other indulgences, to any
substitutions, exchanges or releases of collateral for this note, and to the
additions or releases of any other parties or persons primarily or
secondarily liable.
THIS NOTE HAS BEEN DELIVERED TO THE BANK AND ACCEPTED BY
THE BANK IN THE COMMONWEALTH OF PENNSYLVANIA.
THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE
TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY
REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT),
OR THE TRANSACTIONS CONTEMPLATED HEREBY. BY ITS EXECUTION AND DELIVERY OF
THIS NOTE, THE BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 57 OF 62
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF
MASSACHUSETTS (AND, IN THE EVENT THE BANK IS DENIED ACCESS TO THE COURTS OF
MASSACHUSETTS, THEN SOLELY IN SUCH CASE, CALIFORNIA) IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY, 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, WAIVE 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
FORUM OR ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
THE VENUE THEREOF IS IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT
IN ANY SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A
OF THE GENERAL LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF
CIVIL PROCEDURE OR RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS AND THIS NOTE SHALL BE DEEMED TO BE UNDER SEAL.
BOSTON TECHNOLOGY, INC.
By:\s\ Carol B. Langer
- ------------------------
Name: Carol B. Langer
Title: SVP Finance & Admin.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 58 OF 62
AGENCY AGREEMENT
AGREEMENT dated as of January 31, 1996 among the banks listed on the signature
pages hereof under the caption "Banks", and Silicon Valley Bank ("SVB"), as
agent (in such capacity, "Agent").
WITNESSETH:
WHEREAS, Boston Technology, Inc., a Delaware corporation (with its successors,
the "Company"), the Banks and the Agent are parties to a Credit Agreement dated
as of January 31, 1996 (including the exhibits and schedules thereto, and as
the same may be amended, modified or supplemented from time to time, the
"Credit Agreement"), providing for the Banks to make advances to the Company;
and
WHEREAS, the Banks have agreed to appoint SVB as their agent to act in such
capacity under the Credit Agreement upon the terms and conditions provided
below;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Definitions. Terms defined in the Credit Agreement and not otherwise
defined herein have, as used herein, the respective meanings provided
for therein; provided, however, that this Agreement shall not be
considered a Loan Document.
2. Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes SVB to act as its agent under the Loan
Documents with such powers as are specifically delegated to the Agent
by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. The Agent (which term, as used in
Paragraphs 2 through 8 hereof, shall include reference to its
affiliates and its own and its affiliates' officers, directors,
employees and agents): (a) shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Loan
Documents, and shall not by reason of this Agreement or any Loan
Document be a trustee for any Bank; (b) shall not be responsible to
the Banks for any recitals, statements, representations or warranties
contained in this Agreement or any Loan Document, or in any
certificate or other document (other than those made by the Agent
under this Agreement) referred to or provided for in, or received by
any of them under, any Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any Loan
Document or any other document referred to or provided for therein or
for any failure by the Company or any other Person to perform any of
its obligations thereunder; and (c) required to initiate or conduct
any litigation or collection proceedings hereunder or under any Loan
Document except to the extent provided in Paragraph 4 below, and (d)
shall not be responsible for any action taken or omitted to be taken
by it hereunder or under any Loan Document or any other document or
instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence
or willful misconduct. The Agent may employ agents and attorneys-in-
fact and shall not be responsible for the negligence or misconduct of
any such agents or attorneys-in-fact selected by it with reasonable
care.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 59 OF 62
3. Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof
by telephone, telex, telegram or cable) reasonably believed by it to
be genuine and correct and to have been signed or sent by or on behalf
of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by
the Agent. As to any matters not expressly provided for by this
Agreement or any Loan Document, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions signed by each of the
Banks, and such instructions of the Banks and any action taken
or failure to act pursuant thereto shall be binding on each of the Banks.
4. Default. The Agent shall not be deemed to have knowledge of the
occurrence of a Default or Event of Default (other than the non-
payment of principal of or interest on advances under the Credit
Agreement) unless the Agent has received notice from a Bank or the
Company specifying such Default or Event of Default and stating that
such notice is a "notice of Default" or "notice of Event of Default."
In the event that the Agent receives such a notice of the occurrence
of a Default or Event of Default, the Agent shall give prompt notice
thereof to the Banks (and shall give each Bank prompt notice of each
such non-payment). The Agent shall (subject to Paragraph 8 hereof)
take such action with respect to such Default or Event of Default as
shall be directed unanimously by the Banks, provided that, unless and
until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default
as it shall deem advisable in the best interests of the Banks. The
Agent shall (subject to Paragraph 8 hereof) take such action with
respect to such Default or Event of Default as shall be directed
unanimously by the Banks, and shall not be required to take any other
action in connection therewith.
5. Rights as a Bank. With respect to its Line of Credit Commitment and
the advances made by it, SVB in its capacity as a Bank, shall have the
same rights and powers hereunder and under the Loan Documents as any
other Bank and may exercise the same as though it were not acting as
the Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include SVB in its capacity as a Bank. The Agent
may (without having to account therefor to any Bank) accept deposits
from, lend money to and generally engage in any kind of banking, trust
or other business with the Company (and any of its Affiliates) as if
it were not acting as the Agent, and the Agent may accept fees and
other consideration from the Company (in addition to the agency fees
and arrangement fees heretofore agreed to between the Company and the
Agent) for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 60 OF 62
6. Indemnification. The Banks agree to indemnify the Agent (to the
extent not reimbursed by the Company under the applicable provisions
of the Credit Agreement, but without limiting the obligations of the
Company under said provisions), ratably in accordance with their
respective Line of Credit Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against the Agent in
anyway relating to or arising out of this Agreement or any Loan
Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses which the
Company is obligated to pay under Section 10.6 of the Credit Agreement,
but excluding, unless a Default or Event of Default has occurred and
is continuing, normal administrative costs and expenses incident to
the performance of the Agent's agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such
other documents, provided that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or
willful misconduct of the Agent, or arise out of actions taken by the
Agent outside the scope of its appointment hereunder or of any
applicable unanimous directions by the Banks under Paragraph 4 hereof.
7. Non-Reliance on Agent and Other Banks. Each Bank agrees that it has,
independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate,
made its own credit analysis of the Company and decision to enter into
the Credit Agreement and this Agreement, and that it will, independently
and without reliance upon the Agent or any other Bank, and based on
such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or
not taking action under this Agreement or any Loan Documents. The
Agent shall not be required to keep itself informed as to the
performance or observance by the Company of any of the Loan Documents
or any other document referred to or provided for herein or therein
or to inspect the properties or books of the Company. Except for
notices, reports and other documents and information expressly required
to be furnished by the Company to the Agent under the Credit Agreement,
the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the affairs,
financial condition or business of the Company (or any of its
Affiliates) which may come into the possession of the Agent.
8. Failure to Act. Except for action expressly required of the Agent
hereunder and under the Loan Documents, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction
by the Banks of their indemnification obligations under this Agreement
against any and all liability and expense which may be incurred by the
Agent by reason of taking or continuing to take any such action.
9. Consents under Loan Documents. Without the prior written consent of
each of the Banks, the Agent will not consent to any modification,
supplement or waiver under any of the Loan Documents.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 61 OF 62
10. Sharing of Payments. If any Bank shall receive any payment (whether
voluntary, involuntary, through the exercise of any right of set-off
or otherwise) on account of the Note held by it in excess of its
ratable share of payments on account of the Notes obtained by the
Banks, such Bank shall purchase from the other Bank a participation
in the Note held by such other Bank as shall be necessary to cause
such purchasing Bank to share the excess payment ratably with such
other Bank; provided, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Bank, the
purchase from such other Bank shall be rescinded and such other Bank
shall repay to the purchasing Bank the purchase price to the extent
of such recovery together with an amount equal to such other Bank's
ratable share (according to the proportion of (a) the amount of
such other Bank's required prepayment to (b) the total amount recovered
from the purchasing bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
11. Resignation or Removal of Agent. The Agent may resign at any time by
giving 30 days prior written notice thereof to the Lenders and the
Company, Upon any such resignation, the Lenders shall have the right
to appoint a successor Agent which shall be reasonably acceptable to
the Company and shall be a Lender or another financial institution
having a combined capital and surplus in excess of $100,000,000. If
no successor Agent shall have been so appointed by the Lenders and
shall have accepted such appointment within 30 days after the retiring
Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent which shall
be reasonably acceptable to the Borrower and shall be a financial
institution having a combined capital and surplus in excess of
$100,000,000. Upon the acceptance of any appointment as Agent
hereunder of a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any
retiring Agent's resignation, the provisions of this Agreement shall
continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
12. Assignment. The provision of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
13. Notices. All notices, requests and other communications to any party
hereunder shall be given in accordance with the provisions of the
Credit Agreement.
14. Amendments and Waivers of this Agreement- Any provision of this
Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by each of the Banks and the Agent.
15. MASSACHUSETTS LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
<PAGE>
<PAGE>
EXHIBIT 10.1
PAGE 62 OF 62
16. Counterparts; Integration; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement constitutes the
entire agreement and understanding among the parties hereto and
supersedes any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof. This Agreement shall
become effective when the Agent shall have received counterparts
hereof signed by all of the parties hereto.
17. Section References. If, after this Agreement becomes effective, any
other agreement is amended so as to redesignate or change the subject
matter of any Section or clause thereof which is referred to in this
Agreement, the reference to such Section or clause in this Agreement
shall be deemed to be a reference to the redesignated provision or
other comparable provision of such amended agreement, however
designated at the time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers under seal as of the day
and year first above written.
SILICON VALLEY BANK, as a Bank
By: \s\Jane A. Braun
------------------------
Name: Jane A Braun
Title: Vice President
CORESTATES BANK N.A., as a Bank
By: \s\R. Thomas Esser
---------------------------
Name: R. Thomas Esser
Title: Vice President
SILICON VALLEY BANK, as Agent
By: \s\Jane A. Braun
--------------------------
Name: Jane A. Braun
Title: Vice President
Accepted and Agreed to:
BOSTON TECHNOLOGY, INC.
By: \s\Carol B. Langer
___________________________
Name: Carol B. Langer
Title: SVP Finance & Admin.
<PAGE>
<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement ("MOA") is effective this 22nd
day of November 1995 between AT&T Corp., a New York corporation
with its principal place of business at 295 N. Maple Avenue,
Basking Ridge, New Jersey 07920 (hereinafter "AT&T") and Boston
Technology, Inc., a Delaware corporation with its principal place
of business at 100 Quannapowitt Parkway, Wakefield, MA 01880
(hereinafter "BTI").
WHEREAS, AT&T has selected BTI as a vendor to provide BTI's
AccessNP Services Platform for deployment in support of AT&T's
mailbox and messaging services; and
WHEREAS, AT&T, with this selection, has agreed to commit to
purchase and license from BTI its AccessNP System, including
Hardware and Software, for an initial commitment of $15 million,
with planned purchases of an additional $30 million during
calendar year 1996; and
WHEREAS, AT&T is desirous of purchasing a shareholder
interest in BTI, as described in this MOA.
NOW, THEREFORE, it is hereby agreed by the parties hereto
that:
1. This MOA states the terms and conditions related to the
Purchase and License by AT&T of BTI's Platforms and
Software, and the issuance of Warrants to AT&T by BTI in
conjunction with this Agreement. It is further agreed
by BTI and AT&T, that this entire MOA and the related
attachments in the following order of precedence, is
deemed a binding Agreement: (a) the provisions of this
MOA and its Attachment A, (b) Exhibit A - Product
Requirement Summary; (c) Exhibit B - the relevant terms
from AT&T's Standard Procurement Terms; (d) Exhibit C -
the relevant terms from BTI's Purchase and License
Agreement; and (e) Exhibit D - Common Stock Purchase
Warrant. The parties agree to work together and within
the next thirty (30) days of the date hereof,
incorporate the above items into a Master Purchase and
License Agreement, which if successfully completed would
replace this MOA and the aforesaid Exhibits. This
agreement will commence on the date of this MOA and
continue for a period of five (5) years.<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
2. AT&T will purchase from BTI, between ******* AccessNP
50/60 Platforms equipped with Universal APU's each
configured for ** ports, and ***************, with an
initial minimum of ** ports. Such purchases will also
conform to the Product Requirements Summary shown in
Exhibit A and will commence on the date of this MOA, and
continue through December 31, 1996. All such Platforms
are to be installed by BTI by January 31, 1997. Each
AccessNP 50/60 with Universal APU's will be priced at
*************** and each Access NP 5 with Universal
APU's will be priced at **************. The pricing
described above, for this product and any successor
product referred to in the next sentence, will continue
for the life of this Agreement (five (5) years) at the
lower of the above prices, or the most favored nation
pricing in effect at the time of an Order. BTI will
make this product, or a fully compatible product,
substantially similar to this product in form, fit and
function, and which has performance equal to this
product, available to AT&T during the full term of this
Agreement.
3. AT&T will further license from BTI, its Operating System
and Application Software, (BTI Software) to run on the
Platforms for a one-time royalty fee of **************
which will also include the royalty fees for any
software referenced in paragraphs 7 and 8 below and
Exhibit A, payment for which will be due within thirty
(30) days after such BTI Software is installed and
Accepted and the ports are made available for service on
each Platform.
4. BTI represents that the prices for products and services
which it provides to AT&T under this Agreement are not
less favorable than the prices offered to any of BTI's
other customers acquiring such products and services in
similar or lesser quantities during the term of this
Agreement. If BTI offers lower prices to any customer
inconsistent with this provision, then BTI agrees to
promptly notify AT&T of such occurrence, and to
concurrently extend such prices to AT&T. This Agreement
and any applicable orders, at AT&T's option, shall be
deemed amended to provide such terms to AT&T.
- 2 -<PAGE>
<PAGE>
5. BTI will be responsible for shipping, insurance,
delivery to the site designated by AT&T, and
installation. Title to each Platform will pass upon
shipment, with payment due within thirty (30) days after
each Platform is Accepted by AT&T.
6. The initial orders for $15 million in purchases under
paragraphs 2 and 3, will be issued by January 31, 1996,
and subject to the last sentence in paragraph 12 herein,
with further orders, planned for an additional $30
million in purchases, being issued through December 31,
1996. BTI will install Platforms and BTI Software
pursuant to an installation schedule agreed upon by the
parties.
7. Upon installation of the BTI Software on each of the
Platforms, BTI will grant to AT&T a non-exclusive, non-
transferable license to use the BTI Software, and the
accompanying Documentation, in accordance with the
attached End-User Software License Agreement (Attachment
A). To the extent, however, that BTI's existing
contracts or agreements with other AT&T controlled
entities allow, software developed for these AT&T
entities shall be made available to AT&T, for its use,
under equivalent terms.
8. BTI will license to AT&T its AccessMAX Software Tool set
for use by AT&T, on its premises, to develop and test
applications to run on BTI Platforms. Any Application
Software developed by AT&T, which are not derivatives of
BTI's Software, will be wholly owned by AT&T.
9. As to the ownership of Intellectual Property under this
Agreement, in addition to the ownership rights described
in paragraphs 7 and 8 above, AT&T shall exclusively own
Software developed by BTI for AT&T which AT&T pays for
pursuant to a Contract Services Agreement, or on a Time
and Materials basis. AT&T shall exclusively own
AccessMAX Applications which may use AccessMAX objects
and require the AccessMAX runtime environment, if they
are developed by AT&T, or for AT&T by BTI under a
Contract Services Agreement or on a Time and Materials
basis. If AT&T allows a third party, not covered by
this Agreement, to use such Applications, then AT&T will
require such third party to obtain a license from BTI to
use the AccessMAX runtime environment. Unless otherwise
agreed, either party shall own any Software which that
party develops at its own expense.
- 3 -<PAGE>
<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
Except as provided above, if BTI owned Software is to be used by
AT&T to develop Applications for use by AT&T on the BTI platforms,
such use of BTI owned Software and the terms and conditions of the
ownership of such Applications will be mutually agreed upon in a
separate Agreement.
For any Applications owned exclusively by AT&T, BTI will not
provide Software support unless otherwise agreed to between the
parties.
10. BTI will warrant the Platforms and BTI Software for a
period of one (1) year after Acceptance in accordance
with the enclosed warranty terms. After the first year,
AT&T may choose to have BTI provide Tier 2 and Tier 3
Maintenance Services on a Time and Materials *******
****************** basis, or on a fixed rate as provided
for in BTI's Extended Material Support and Technical
Service Proposal.
11. BTI will provide post warranty Annual Software
Maintenance at a fee, not to exceed the lower of *****
********************** of the then in effect most
favored nation pricing for equivalent software, for the
useful life of the BTI Software. Software maintenance
will include fixes and extensions of functionality, in
the form of upgrades, and updates to the extent provided
to other BTI customers with Software Maintenance
Agreements for such Software.
12. AT&T may further agree to enter into a generic Contract
Services Agreement with BTI for the provision of
services such as Custom Software Development, Dedicated
Application Development Engineers and Medalist
Marketing Support Services (beyond the services provided
free-of-charge with each such Platform purchased or
those referenced in paragraph 13). AT&T agrees to pay
BTI its Cost for each service on a Time and Material,
*************** basis.
Except for AT&T's commitment to purchase Platforms in
paragraph 2, to license Software in paragraph 3, to
acquire Software Maintenance in paragraph 11, and to
acquire Contract Services as expressly stated in this
MOA and Exhibit A, AT&T is not obligated to acquire
products and services from BTI except as the parties
expressly agree in the form of Accepted Purchase Orders
or other binding contractual arrangements.
- 4 -<PAGE>
<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
13. **** will provide **************************************
for ****************************************
************************ for ************************
and ****************************************************
and *************************************************
********* for each *********************************
*** will also provide *********************************
********** commensurate with the ********************
*********** however, **** further agrees to *********
**************************************************
***************************************.
14. In conjunction with the ***********************
**************************************************
*****************. BTI will be responsible for
providing a minimum 24 hour response time for Spare
Parts. The determination as to the location of the
Spare Part Depots will be based upon a mutual agreement
between AT&T and BTI.
15. In consideration of the minimum purchase commitments
described above, BTI hereby grants to AT&T a warrant to
purchase 4,908,800 shares of BTI Common Stock ("The
Warrant") at an exercise price of $14 per share (subject
to proportionate adjustment for stock splits, stock
dividends and other similar events affecting the Common
Stock after the date hereof). The above shares of BTI
Common Stock represent 19.9% of the outstanding shares
of BTI Common Stock as of the end of the business day on
November 17, 1995. The Warrant will become exercisable
in annual increments of 981,760 shares each, commencing
on the Anniversary Date of this MOA, and for four (4)
years thereafter. The Warrant will be non-transferable,
and each exercisable portion of the Warrant will remain
exercisable for a period of two and one-half (2 1/2)
years after such portion first becomes exercisable, at
which time such portion will expire and no longer be
exercisable. The shares issued upon exercise of the
Warrant will be "Restricted securities" under Rule 144
under the Securities Act of 1933, as amended (the
"Securities Act"). The definitive form of Warrant is
attached hereto as Exhibit D, and shall be executed
simultaneously with the execution of this Agreement.
- 5 -<PAGE>
<PAGE>
16. Restrictions on Certain Actions. AT&T acknowledges that
it is acquiring the Warrants and the shares of Common
Stock issuable upon exercise of the Warrants (the
"Warrant Shares") (the Warrants and the Warrant Shares
are collectively referred to as the "Securities") for
investment purposes and that AT&T is not acquiring the
Securities with the intent or objective of affecting or
influencing the management or control of the business,
operations or affairs of BTI. In furtherance of the
foregoing, AT&T agrees, for a period beginning on the
date hereof and ending on December 31, 2000 (the
"Restricted Period"), that it shall not, directly or
indirectly, and shall not permit any of its Affiliates
or Associates (as such terms are defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), directly or
indirectly, to, without the prior written consent of
BTI:
(a) purchase, acquire or own, or offer or agree to
purchase, acquire or own, any securities of BTI or
any of its subsidiaries which are entitled to, or
may be entitled to, vote or by the terms thereof
are convertible into or exchangeable for securities
which are entitled to vote (collectively, "Voting
Securities"), other than (i) the Securities, (ii)
any securities which may be issued with respect to
the Securities as a result of any stock splits,
dividends, distributions, recapitalizations or
similar events and (iii) other Voting Securities so
long as its beneficial ownership (as defined in
Rule 13 d-3 under the Exchange Act) after giving
effect to the acquisition of beneficial ownership
of such additional Voting Securities does not
exceed 30% of the Company's outstanding Voting
Securities; or
(b) make, or in any way participate in, any
"solicitation" of proxies or be a "Participant" in
an "election contest" or "solicitation" (as such
terms are defined or used in Regulation 14A under
the Exchange Act), initiate, propose, communicate
with or otherwise solicit stockholders of BTI for
the approval of one or more stockholder proposals
or induce or attempt to induce any other person to
initiate any stockholder proposal; or
(c) form, join, in any way participate in, or encourage
the formation of, a group (as such term is defined
in Section 13 (3) of the Exchange Act) with respect
to any Voting Securities; or
- 6 -<PAGE>
<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
(d) deposit any Voting Securities into a voting trust,
or subject any Voting Securities to any agreement
or arrangement with respect to the voting of any
Voting Securities or other agreement having similar
effect, except as provided herein; or
(e) otherwise act, alone or in concert with others, to
seek to affect or influence the control of the
management or Board of Directors of BTI or the
business, operations or affairs of BTI or its
subsidiaries; or
(f) take any other action inconsistent with the
foregoing;
(g) notwithstanding any provisions of this Agreement to
the contrary, the trusts for any of the benefit
plans of AT&T or any of its affiliates may acquire
or dispose of shares of the Company's securities in
the ordinary course of their business.
17. Purchase Not For Distribution. AT&T hereby represents
and warrants to BTI that the Warrant and, if and to the
extent the Warrant is exercised, the Warrant Shares are
being acquired for investment and not with a view to the
public distribution thereof, and will not be transferred
or otherwise disposed of except in a transaction
registered or exempt from registration under the
Securities Act and in compliance with any applicable
state securities law and this Agreement. This
representation shall be deemed to be remade and ratified
upon each exercise of the Warrant with respect to the
Warrant Shares acquired upon such exercise.
18. *****************, during the term of this Agreement,
and *************************************************
************************************************ and
*************************************************
subject to *****************************************
*************. Thereafter, and *******************
***************************************************
*************************************** shall (subject
to the following sentence) ***************
************************** as are used with respect to
*******************************************. In the
event that ***********************************
************************* to the ***************
***************************************************
***************************************************
***************.
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<PAGE>
19. Nothing in this Agreement shall restrict in any way the
business and activities of, nor in any way bind or
obligate, the entities that AT&T will be spinning off or
out or otherwise disposing of as part of the planned
restructuring announced September 20, 1995, after such
entities become public companies or are sold or have
substantially all of their assets sold or are otherwise
disposed of.
20. AT&T and BTI agree that they will jointly approve a News
Release regarding the subject matter of this
transaction, and will make no other public statements or
statements to third parties, beyond those contained in
such approved News Release or other jointly approved
public statements. If either party, including their
officers, directors, employees or agents make false,
misleading or incorrect statements regarding the subject
matter of this MOA, or beyond those contained in jointly
approved statements, then they each agree to indemnify
and hold each other, their affiliates, officers,
directors, shareholders, employees, and agents harmless
(including the reimbursement of reasonable attorney's
fees and all associated costs of the litigation) against
any claims brought against the other relating in any way
to such communications.
IN WITNESS WHEREOF, each party hereto has executed this
Memorandum of Agreement by a representative duly authorized as of
the date set forth above.
AT&T CORP. BOSTON TECHNOLOGY, INC.
By:/s/Waring Partridge By:/s/John C. W. Taylor
________________________ ________________________
Waring Partridge Dr. John C. W. Taylor
Print Name Print Name
Title: V.P.-Consumer, Multimedia Title: President & Chief
Messaging and Wireless Executive Officer
Services
- 8 -<PAGE>
<PAGE>
PAGES 9 THROUGH 14
CONTAIN CONFIDENTIAL MATERIALS WHICH HAVE BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
- 9 -<PAGE>
<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
ATTACHMENT A
PRODUCT REQUIREMENTS 10/31/95
System Level Requirements:
** ***************
** ***************
** ***************
**
**
**
**
***************
Applications Requirements:
** ***************
**
**
**
**
**
Administrative Requirements:
** ***************
** ***************
Network Interface Requirements:
** ***************
**
**
***************
***************
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<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
Notification Requirements:
** ***************
** ***************
** ***************
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<PAGE>
PAGE 17
CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
- 17 -<PAGE>
<PAGE>
EXHIBIT B SELECTED TERMS AND CONDITIONS
Definitions
The definitions of this Exhibit B, which are set forth below in
capital letters, apply to all the terms of this Exhibit B:
ASSOCIATED ENTITY means a corporation partnership or venture,
a majority of whose voting stock or ownership interest is
owned directly or indirectly by AT&T Corp. and includes those
listed in Appendix A.
EQUIPMENT means data processing and similar equipment and
also includes options, accessories and attachments for more
basic equipment. EQUIPMENT includes as a component thereof
any MEDIA fixedly embedded therein in that it is not normally
replaced except for maintenance and repair. EQUIPMENT may
include in its meaning, depending upon context, a system of
systems consisting of tangible EQUIPMENT and intangible
SOFTWARE.
IDENTIFICATION means any copy or semblance of any trade name,
trademark, service mark, insignia, symbol, logo, or any other
product, service, or organization designation, or any
specification or drawing of AT&T Corp. or an ASSOCIATED
ENTITY, or evidence of inspection by or for any of them.
INDEMNITEES means AT&T, its customers, officers, directors,
employees and representatives, others doing work under its
immediate or ultimate direction and control, its end
customers and intermediaries in the distribution chain, and
its successors and assigns.
INFORMATION means any idea, data, program, technical,
business or other intangible information, however conveyed.
LEASE means rental and does not include third-party leasing
transactions.
MATERIALS mean repair, maintenance or replacement parts for
EQUIPMENT, MEDIA not fixedly embedded in EQUIPMENT, and
tangible supplies of other kinds which are for or associated
with EQUIPMENT.
MEDIA or MEDIUM means any document, print, tape, disc,
semiconductor chip or other tangible information-conveying
article.
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<PAGE>
ORDER means AT&T's form of purchase order or contract used
for the purpose of ordering EQUIPMENT, SOFTWARE, SERVICES or
MATERIALS.
SERVICES mean maintenance services and other services in
support of purchased or leased EQUIPMENT.
SOFTWARE means intangible INFORMATION constituting one or
more computer or apparatus programs and the informational
content of such programs, together with any documentation
supplied in conjunction with and supplementing such programs,
the foregoing being provided to AT&T by way of electronic
transmission or by being fixed in MEDIA furnished to AT&T.
WORK means (1) the provision of maintenance or other SERVICES
under this Agreement and (2) the subject matter called for by
any ORDER, specifications, drawings, and samples.
INSTALLATION DATE means the dates by which the EQUIPMENT or
MATERIALS are (1) to be delivered and (2) to be installed and
ready for use.
ENHANCEMENTS mean all SOFTWARE changes, including
enhancements, new releases, product improvements, system
modifications, updates, upgrades, field modifications and the
like.
MODIFICATIONS mean AT&T additions to the SOFTWARE, deletions
from the SOFTWARE, or merges of the SOFTWARE with one or more
programs owned or licensed by AT&T forming an updated and
otherwise modified SOFTWARE.
SOFTWARE SOURCE MATERIAL means INFORMATION consisting of all
intangible source programs, technical documentation and other
information required for maintenance, modification or
correction of the most current version of the SOFTWARE
supplied to AT&T.
SPECIFICATIONS means the SPECIFICATIONS for the SOFTWARE as
set forth in the ORDER, or if not so set forth, shall mean
BTI's current published SPECIFICATIONS and user documentation
for the SOFTWARE as of the date of the ORDER. Any provisions
contained in BTI's SPECIFICATIONS in conflict with the
provisions of this Agreement shall be deemed deleted.
USE means use by any individual having authorized access to the
computer on which the SOFTWARE is operated.
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<PAGE>
Sale
BTI shall sell its EQUIPMENT and MATERIALS to AT&T upon provisions
set forth in this Agreement and in ORDERS placed by AT&T pursuant
to this Agreement. Contents of Order
An ORDER for the purchase of EQUIPMENT or MATERIALS shall be
written on AT&T's purchase order form and shall contain the
following:
1. The incorporation by reference of this Agreement;
2. The incorporation by reference of the applicable
functional performance specifications;
3. A complete list of the EQUIPMENT or MATERIALS to be
purchased specifying quantity, type, model, feature
description and purchase price to be paid (net of
purchase option credit if applicable) and the invoice
address;
4. The location at which the EQUIPMENT is to be installed
or the MATERIALS to be delivered and used including
floor, street, city and state;
5. The INSTALLATION DATE; and
6. A complete list of the SERVICES and associated costs, if
any, such as, but not limited to, training, if any
required, and a schedule of their performance.
Ordered items shall be shipped complete on date(s) specified in an
ORDER unless otherwise agreed to by AT&T.
Equipment Modification
AT&T may substitute components or supplement the EQUIPMENT by
making alterations or installing attachments to modify the range
of features that the EQUIPMENT provides. AT&T shall notify BTI in
advance of its intent to modify, and BTI shall grant a trade-in
allowance against the purchase price of the new items in
accordance with applicable allowances in effect at the time of
modification.
Operating System Software
Title to intellectual property rights in operating system software
shall remain in BTI. For the life of the EQUIPMENT listed in the
ORDER for purchased EQUIPMENT, or during the duration of the
EQUIPMENT LEASE ORDER, as applicable, BTI grants to AT&T a
- 20 -<PAGE>
<PAGE>
nonexclusive license to use, and have used therefor, SOFTWARE on
the EQUIPMENT or for which it was delivered. AT&T may copy the
SOFTWARE for use on such EQUIPMENT with or for which it was
delivered, and for archival purposes, but shall not knowingly
reproduce either the original operating system software or other
of the SOFTWARE for distribution to others. AT&T may not add to,
delete from or modify the SOFTWARE, in any manner nor alter BTI's
intellectual property rights to such delivered SOFTWARE.
Price Adjustment
If BTI's published price for any EQUIPMENT or MATERIALS is lower
on the delivery date for MATERIALS or the INSTALLATION DATE for
EQUIPMENT than the price stated in an ORDER, the price for the
EQUIPMENT or MATERIALS shall be reduced to the published price.
Return of Equipment
Whenever EQUIPMENT under warranty is shipped for repair or
replacement purposes from and then back to AT&T, BTI shall furnish
all labor and MATERIALS necessary for packing the EQUIPMENT at no
charge to AT&T. BTI shall arrange for and bear all costs
including, but not limited to, those of packing, rigging,
transportation and insurance. BTI shall also bear all risk of
loss or damage from the time the EQUIPMENT is removed from AT&T's
site until the EQUIPMENT is returned to the site.
Return of Materials
BTI shall accept for credit MATERIALS returned under any of the
following circumstances:
1. AT&T termination or cancellation of an ORDER for BTI's
EQUIPMENT or exchange by AT&T of one BTI machine for another
BTI machine within ninety (90) days of the termination or
cancellation, provided MATERIALS are not usable in other
equipment within the location;
2. BTI or AT&T error in the ordering or shipping process,
provided the MATERIALS are returned by AT&T to BTI within
ninety (90) days of receipt; or
3. Receipt of defective MATERIALS or failure of MATERIALS under
the applicable warranty.
MATERIALS returned for credit must be in complete cartons and in
good resalable condition, except where the MATERIALS are defective
or fail under the applicable warranty.
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<PAGE>
Risk of Loss
BTI shall retain risk of loss and damage to the EQUIPMENT or
MATERIALS prior to the passage of title pursuant to the Title
clause unless caused by the willful or negligent acts of AT&T or
its employees.
Site Preparation and Installation
BTI shall promptly furnish to AT&T detailed written site
preparation specifications to ensure that the EQUIPMENT to be
installed will operate in an efficient and environmentally safe
manner. AT&T shall prepare the site at its own expense and in
accordance with the specifications furnished by BTI. Any
alterations or modifications in site preparation that are
attributable to BTI's incomplete or erroneous specifications shall
be made at BTI's expense.
BTI shall, at its expense, ship and install the EQUIPMENT ready
for use by the INSTALLATION DATE, furnish all labor and MATERIALS
necessary for unpacking, placement and installation of the
EQUIPMENT, which BTI shall supervise, without charge to AT&T. Not
later than the INSTALLATION DATE, BTI shall certify in writing to
AT&T that the EQUIPMENT has been properly installed and is ready
for use and that the SOFTWARE routines, if any, specified in an
ORDER are operational. If the EQUIPMENT is certified to be ready
for use prior to the day before the INSTALLATION DATE, AT&T may
elect to use the EQUIPMENT and change the INSTALLATION DATE
accordingly. At any time prior to the date indicated in an ORDER
for delivery of the EQUIPMENT, AT&T may, upon written notice to
BTI, delay the INSTALLATION DATE, but such delay shall not exceed
thirty (30) days.
Standard of Performance and Acceptance of Equipment and Software
The intent of this clause is to establish a standard of
performance which must be attained before AT&T accepts the
EQUIPMENT and SOFTWARE.
1. If the purchase price of the EQUIPMENT is less than $10,000,
BTI shall certify to AT&T in writing that the EQUIPMENT has
been properly installed and is being operated by AT&T's
personnel in conformance with BTI's technical specifications
and any specifications submitted to BTI by AT&T. Upon
satisfactory attainment of this standard of performance, the
EQUIPMENT shall be accepted in writing by AT&T.
If the purchase price of the EQUIPMENT is greater than
$10,000, paragraph 2 through 7 of this clause shall apply.
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<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
2. The performance period shall begin on the INSTALLATION DATE
and shall end when the EQUIPMENT and SOFTWARE, operated by
AT&T personnel, has met with both BTI's technical
specifications (Systems Acceptance Test) and any
specifications submitted to BTI by AT&T at an average
effectiveness level of one hundred (100) percent for a period
of ************************* days. AT&T may shorten the
Acceptance Test period if it deems that a shorter period will
be adequate to accurately evaluate the EQUIPMENT and
SOFTWARE. AT&T will, with BTI's assistance develop a Systems
Acceptance Test which establishes appropriate load testing
and other criteria. If the hundred (100) percent
effectiveness level is not attained during the initial
************************* day period, the performance period
shall be extended ********************* until the hundred
(100) percent effectiveness level has been attained for
************************* days. If the hundred (100) percent
effectiveness level has not been attained for *************
*********** days within *************** calendar days from
the INSTALLATION DATE, AT&T may either (a) terminate the
ORDER and have the EQUIPMENT and SOFTWARE promptly removed,
(b) require a replacement be installed, or (c) continue the
performance period subject to its rights under clauses (a)
and (b) of this sentence.
3. EQUIPMENT and SOFTWARE which shall have been accepted by AT&T
and then modified or replaced shall be deemed to have met
AT&T's standard of performance if it operates in conformance
with both BTI's published technical specifications, and any
specifications submitted to BTI by AT&T, at an average
effectiveness level of one hundred (100) percent or more
during a ************************* day period.
4. AT&T shall maintain appropriate daily records to reflect
operation of the EQUIPMENT and SOFTWARE pursuant to this
Standard of Performance and Acceptance of EQUIPMENT and
SOFTWARE clause.
5. Upon satisfactory completion of the System Acceptance Test,
the EQUIPMENT and SOFTWARE shall be accepted in writing by
AT&T.
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<PAGE>
Title
AT&T shall accept title to the EQUIPMENT after the EQUIPMENT
satisfactorily attains the standard of performance pursuant to the
Standard Of Performance And Acceptance Of Equipment clause. Upon
receipt of payment, BTI shall furnish AT&T a bill of sale and all
other documents requested by AT&T to enable it to perfect
unencumbered title to the EQUIPMENT.
Title to MATERIALS shall rest in AT&T upon their acceptance which
shall be deemed to occur upon receipt of the MATERIALS at AT&T's
receiving dock unless otherwise specified by AT&T before or
promptly after such receipt.
Equipment Warranty
BTI warrants to AT&T and its customers that the EQUIPMENT and
MATERIALS furnished shall be merchantable and free from defects in
design, material and workmanship and shall conform to and perform
in accordance with the specifications, drawings and samples.
These warranties extend to the future performance of the EQUIPMENT
and MATERIALS and shall continue for the longer of (a) one year
after the EQUIPMENT or MATERIALS are accepted by AT&T, or (b) a
greater period if specified elsewhere in this Agreement or an
ORDER. BTI also warrants to AT&T and its customers that the
EQUIPMENT and MATERIALS shall be new or remanufactured and that
SERVICES shall be performed in a first class, workmanlike manner.
In addition, if the EQUIPMENT or MATERIALS furnished contains one
(1) or more manufacturer's warranties, BTI hereby assigns those
warranties to AT&T and its Customers. EQUIPMENT, MATERIALS or
SERVICES not meeting the warranties will, at AT&T's option, (a) be
returned for or subject to refund, repair, replacement, or
reperformance by BTI at no cost to AT&T or its customers and with
transportation costs and risk of loss and damage in transit borne
by BTI, or (b) be subject to refund.
All warranties shall continue in full force and effect
notwithstanding transfer of title to the EQUIPMENT or MATERIALS by
AT&T, so long as AT&T, its customers or its ASSOCIATED ENTITIES
shall remain the user of the EQUIPMENT or MATERIALS. All
warranties shall also survive inspection, acceptance and payment.
License Grant
BTI hereby grants to AT&T a nonexclusive, nontransferable (except
as set forth in this Agreement) perpetual license so USE the
SOFTWARE. Upon delivery to AT&T, all media shall become the
property of AT&T except that fixed in EQUIPMENT, title to which
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<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
shall pass to AT&T upon acceptance of the EQUIPMENT. SOFTWARE
includes the basic items defined in the SOFTWARE and Programming
aids clause and any other basic items listed on an ORDER. The
foregoing license extends to any use of any program or software
derived from the SOFTWARE. The foregoing license is for SOFTWARE
different from the originally delivered SOFTWARE referred to in
the Operating System Software clause.
License Fee
Fees for the license of the SOFTWARE and the maintenance of the
SOFTWARE are designated in this Agreement or will be separately
agreed to by the parties. Once a year only, BTI may change the
fees for recurring charges if (1) such change is part of a change
to BTI's published price list, and (2) if ninety (90) days prior
written notice is given to AT&T. Any provisions included in BTI's
published price list other than those relating to price and
description of items to which prices apply shall be deemed
deleted. Fee(s) changes shall not become effective until BTI
receives AT&T's written consent to the specific fee(s) changes (or
until ninety (90) days from BTI's notice with no reply from AT&T.)
BTI agrees that any increase in fees will be no more than ****
************ of the fees in effect at the time of the written
notice of such change.
Centralized Maintenance
AT&T may specify in an ORDER that, for centralized maintenance
purposes all SOFTWARE changes, including ENHANCEMENTS, provided by
BTI shall be provided only to the AT&T's Centralized Support
Organization. BTI will in that event, be responsive to
maintenance requests which the AT&T's Centralized Support
Organization issues. This Organization will be responsible for
SOFTWARE application, initial acceptance testing and distribution
of the SOFTWARE to all licensed installations.
BTI grants AT&T the right to transmit the SOFTWARE by means of
data links from AT&T's Centralized Support Organization to each
licensed installation.
BTI grants to AT&T, ********************* a license to USE a copy
of the SOFTWARE for centralized maintenance purposes only. BTI
shall provide this maintenance copy of the SOFTWARE in response to
an ORDER requesting same. The maintenance copy provided to the
AT&T's Centralized Support Organization will be used only to
perform systems or application support functions for the AT&T's
application programmers, except as provided hereinafter. If the
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<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
maintenance copy of the SOFTWARE provided pursuant to this clause
or a copy thereof is later incorporated by the AT&T's Centralized
Support Organization into a AT&T system or application support
SOFTWARE, AT&T shall notify BTI and shall pay BTI the current
applicable rate paid by AT&T for USE of the SOFTWARE.
Contents of Order
An ORDER for SOFTWARE shall be written on AT&T's purchase order
form and shall contain the following:
1. The incorporation by reference of this Agreement;
2. A complete list of the SOFTWARE to be included in the
license, including a reference to and incorporation of
the applicable SOFTWARE reference manuals;
3. The fee for the SOFTWARE furnished and license granted;
4. The location or locations at which the SOFTWARE is to be
delivered and invoiced;
5. The date or dates by which the SOFTWARE shall be
delivered; and
6. Any other special provisions agreed upon by both
parties.
Enhancements and Maintenance
BTI shall promptly furnish to AT&T during the duration of the
ORDER, at an agreed upon charge, if any, all SOFTWARE
ENHANCEMENTS, made available by BTI to any of its customers and
shall promptly provide to AT&T any revisions to the basic Software
items defined in the SOFTWARE and Programming Aids clause to
reflect the ENHANCEMENTS. All ENHANCEMENTS shall be considered
SOFTWARE subject to the provisions of the ORDER. AT&T may
incorporate the ENHANCEMENTS into the SOFTWARE or continue using
previous versions of the SOFTWARE, at AT&T's option. AT&T may, at
any time and at its discretion, discontinue maintenance of the
SOFTWARE. BTI shall not charge AT&T for ENHANCEMENTS or any other
maintenance during the warranty period. Charges for upgrading a
license from one tier grouping to a higher tier grouping shall not
exceed ***************** of the license fee paid for the current
license.
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<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
Intellectual Property Rights
Title to the SOFTWARE and to intellectual property rights therein
shall remain in BTI or BTI's licensor, as applicable. AT&T shall
have the right to make a reasonable number of copies of the
SOFTWARE for USE as authorized in the ORDER or elsewhere in this
Agreement. AT&T however, shall not knowingly reproduce copies of
the SOFTWARE for the purpose of supplying it to others except
individuals authorized herein. This Paragraph applies only to
preexisting BTI software and not to software developed by or for
AT&T.
Remote Access
AT&T shall have the right at no additional charge or fee, to have,
the SOFTWARE used at any other location by means of remote
electronic access.
Risk of Loss
If any SOFTWARE fixed in MEDIA is lost, damaged or made invalid
during shipment, BTI will promptly replace the SOFTWARE and MEDIA
therefor at no additional charge to AT&T. If any SOFTWARE is
lost or damaged while in the possession of AT&T, BTI will promptly
replace the SOFTWARE at the established charge for the associated
MEDIA unless such is provided by AT&T.
SOFTWARE and Programming Aids
On the delivery date, BTI shall furnish to AT&T, ****************
************** at least the following basic items:
1. Object program (the fully compiled or assembled series of
instructions, written in machine language, ready to be loaded
into the computer, that guides the operations of the
computer) stored in a MEDIUM compatible with the equipment
described in the ORDER;
2. Program implementation and user instructions and required
procedures;
3. The SOFTWARE SPECIFICATIONS, as well as the required machine
configuration;
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<PAGE>
Confidential materials omitted and filed separately with the
Commission. Asterisks denote such omissions.
4. Sample data output, such as printouts or typical screen
displays, and any other programs, routines, subroutines,
utility or service programs, flow charts, logic diagrams and
listings, descriptive SPECIFICATIONS and acceptance
SPECIFICATIONS or related material BTI may have which is
necessary or useful for the full implementation and USE of
the SOFTWARE and which BTI normally furnishes to users of the
SOFTWARE ********************************.
5. Source Program (the computer program expressed in a source
language) if licensed by BTI as part of the SOFTWARE ordered
hereunder.
Source Programs and Technical Documentation
BTI shall, at AT&T's request, enter into an Escrow Agreement
substantially the same in form and substance to the form attached
(Appendix B) to this Agreement to safeguard BTI's SOFTWARE
SPECIFICATIONS and source code at any time during the duration of
this Agreement. Both parties shall negotiate in good faith such
Escrow Agreement.
If the parties have not entered into an Escrow Agreement then the
following clause shall apply:
If BTI, among other things, becomes insolvent, ceases to carry on
business on a regular basis or fails to perform its obligations
under the ORDER, and during a period of thirty (30) days
thereafter BTI (or some other financially and technically
responsible successor in interest acceptable to AT&T which assumes
in writing BTI's obligations, under the ORDER) does not continue
to perform those obligations, then (a) BTI, or others acting on
behalf of BTI, shall furnish to AT&T all SOFTWARE SOURCE MATERIALS
and (b) BTI will be deemed to have granted to AT&T a perpetual
non-exclusive royalty-free right to USE the SOFTWARE and the
SOFTWARE SOURCE MATERIALS under the provisions of the ORDER. If
AT&T's USE of the SOFTWARE Source Materials involves USE or
copying of copyrighted material or the practice of any invention
covered by a patent, BTI shall not assert the copyright or patent
against AT&T.
Software Warranty
BTI warrants to AT&T and its customers all of the following:
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<PAGE>
1. The SOFTWARE will be free from significant errors, will
conform to and perform in accordance with the
SPECIFICATIONS and will function properly. The MEDIA
conveying the SOFTWARE will be free from defects in
material and workmanship. The SOFTWARE will be
compatible with and may be used in conjunction with
other SOFTWARE as described in the SPECIFICATIONS. If
an ORDER states that the SOFTWARE is to be used in
conjunction with certain data processing equipment, the
SOFTWARE shall be compatible with that equipment. The
foregoing warranties extend to the future performance of
the SOFTWARE or of products which incorporate the
SOFTWARE and shall continue for the longer of (a) the
warranty period applicable to AT&T's sublicense to its
customers of the SOFTWARE or of the products which
incorporate the SOFTWARE, (b) twelve (12) months after
the SOFTWARE is accepted by AT&T, or (c) a greater
period specified elsewhere in this Agreement or an
ORDER.
2. WORK will be performed in a first-class, workmanlike
manner.
3. There are no copy protection or similar mechanisms
within the SOFTWARE which will, either now or in the
future, interfere with the grants made in this Agreement
or an ORDER.
4. AT&T and its customers shall have quiet enjoyment of the
SOFTWARE.
5. As to SOFTWARE for which BTI does not solely own all
intellectual property rights, BTI has full right, power
and authority to license the SOFTWARE to AT&T and its
customers as provided in this Agreement or an ORDER.
6. If the SOFTWARE, or any portion thereof, is or becomes
unusable, totally, or in any respect during the
applicable warranty period, or if the WORK fails to meet
the warranties, BTI will reperform WORK, correct errors,
defects and nonconformities and restore the SOFTWARE to
conforming condition free of significant errors at no
cost to AT&T or its customers. Corrected SOFTWARE shall
be warranted as set forth in this clause.
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<PAGE>
7. The SOFTWARE does not contain any malicious code,
program, or other internal component (e.g. computer
virus, computer worm, computer time bomb, or similar
component), which could damage, destroy, or alter
SOFTWARE, firmware, or hardware or which could, in any
manner, reveal, damage, destroy, or alter any data or
other information accessed through or processed by the
SOFTWARE in any manner. BTI shall immediately advise
AT&T, in writing, upon reasonable suspicion or actual
knowledge that the SOFTWARE provided under this
Agreement or an ORDER may result in the harm described
above. BTI shall indemnify and hold AT&T and its
customers harmless from any damage resulting from the
harm described above.
8. All warranties shall survive inspection, acceptance and
payment.
Taxes
AT&T shall reimburse BTI for only the following tax payments with
respect to transactions under this Agreement or an ORDER unless
AT&T advises BTI that an exemption applies: State and local sales
and uses taxes, as applicable. Taxes payable by AT&T shall be
billed as separate items on BTI's invoices and shall not be
included in BTI's prices. AT&T shall have the right to have BTI
contest any such taxes that AT&T deems improperly levied at AT&T's
expense and subject to AT&T's direction and control.
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EXHIBIT C
BTI Purchase and License Agreement
1. DEFINITIONS
1.1 For the purpose of this Agreement, the terms below shall
have the following definitions as indicated:
1.1.1 "Effective Date" -- the earliest date that a
duly authorized officer of both parties sign
this Agreement.
1.1.2 "Equipment" -- means Access NP Platforms.
1.1.3 "Software" -- the executable (object code)
version of BTI's proprietary computer software
as developed by and/or licensed to BTI.
Software does not include any customized
software prepared by or for AT&T.
1.1.4 "System(s)" -- means collectively the
Equipment and Software as those terms are
defined above.
1.1.5 "Documentation" -- all existing written user
manuals, reference manuals, training manuals,
release notes and/or other relevant materials
in English, as may be further described in
Schedule A attached hereto, that are produced
by BTI to assist AT&T on how to use the
System.
2. TERM
2.1 The term of this Agreement shall commence on the
Effective Date and unless otherwise terminated as
provided herein, shall continue in full force and
effect.
3. SCOPE OF AGREEMENT
3.1 BTI agrees to sell and license to AT&T, and AT&T may
purchase and license from BTI, the System(s) for AT&T's
internal use only.
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3.2 In performing its obligations hereunder, each party
shall employ its own personnel and shall be responsible
for them and their acts. Each party shall in no way be
liable for any losses, injuries, or damages caused by or
attributed to the acts and/or omissions of the other
party, its employees, or its agents.
3.3 The parties hereto agree that they are independent
contractors. This Agreement shall not be construed to
create or result in a partnership or joint venture
between the parties hereto, nor to make either party the
agent of the other party.
4. ORDERS
4.1 Unless otherwise agreed, the prices for the Systems on
all orders placed by AT&T hereunder must be stated in
U.S. dollars.
4.2 On all purchase orders placed, AT&T shall have the right
to modify or change each System assembly up to thirty
(30) days prior to scheduled shipment, without incurring
any additional charge. In the event AT&T desires to
modify or change a System assembly mix less than thirty
(30) days prior to shipment, BTI reserves the right to
place additional charges on such shipment upon BTI's
showing of incremental costs substantiating such
charges, and advance notice to AT&T, and AT&T agrees to
pay such charges. Such additional charges shall
represent BTI's cost for labor, materials, and expedited
materials, plus a reasonable profit, for such requested
assembly mix modifications or changes. No such
modifications or changes may be made after shipment.
4.3 AT&T may purchase and license each System by submitting
purchase orders for same by hard copy or facsimile. All
orders conforming with the agreements between BTI and
AT&T must be accepted.
4.4 Unless BTI expressly agrees in writing, no additional or
different provisions appearing anywhere on AT&T's
purchase order shall become part of such order.
4.5 BTI shall have the right to modify, in any manner, the
System(s), spares and/or services offered hereunder upon
thirty (30) days prior written notice to AT&T, subject
to AT&T's acceptance.
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5. ACCEPTANCE AND SHIPMENT OF ORDERS
5.1 BTI agrees to notify AT&T promptly regarding a) whether
BTI accepts or, solely if an order does not conform with
the Agreement between the parties, rejects each of
AT&T's purchase orders, b) shipping details associated
with each order, and c) any subsequent changes in BTI's
delivery schedule and/or shipping plans subject to
approval by AT&T.
5.2 Shipment of standard Systems will be on terms agreed to
by the parties and shipment of customized Systems must
be negotiated by the parties.
6. DELIVERY
6.1 Except as otherwise agreed, BTI shall deliver each
System to AT&T F.O.B. point of destination. In the
absence of specific shipping instructions from AT&T, BTI
will select a common and/or freight forwarder carrier,
and shall assume any liability in connection with the
shipment of any System delivered hereunder.
6.2 Insurance coverage for in-transit goods, beyond such
coverage provided by the common carrier/freight
forwarder, will be agreed to by the parties.
7. LICENSES
7.1 AT&T shall not remove or alter, nor permit the removal
or alteration of, any designated BTI trademarks, tags,
labels or other identifying markings placed by BTI on
any Systems, products, packages or containers provided
hereunder without the prior written consent of BTI. In
no event shall AT&T have the right to market, sell,
lease, license or otherwise distribute, directly or
indirectly, the Systems.
8. WARRANTIES
8.1 Each party hereto warrants to the other party that it
has full right, interest and authority to enter into and
perform its obligations under this Agreement.
8.2 BTI warrants to AT&T that upon payment in full of the
purchase price, AT&T shall acquire good title to the
Equipment being purchased hereunder, free and clear of
all liens and encumbrances.
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8.3 BTI warrants that the Equipment delivered hereunder will
be free from material defects in workmanship and
materials for a period of one (1) year starting at the
later of AT&T's date of acceptance or forty-five (45)
days after the date of initial shipment of the Equipment
to AT&T (the "Warranty Period"). If any item of
Equipment shall require repair or replacement by BTI in
accordance with such warranty, BTI will effect
replacement or repair as soon as possible and subject to
service commitments agreed to by the parties. BTI also
warrants that the repaired or replacement item will be
free from material defects in workmanship and materials
for the balance of the Warranty Period of the replaced
item, or for ninety (90) days, whichever is longer. BTI
warrants all spare parts will be free from material
defects in workmanship and materials for a period of
ninety (90) days from the date of installation.
8.3.1 Upon notice to BTI, defective Equipment will
be returned to BTI for repair or replacement,
at BTI's election, with risk of in-transit
loss or damage borne by AT&T and
transportation charges paid by BTI. AT&T is
responsible for obtaining an appropriate
Return Material Authorization ("RMA") from BTI
prior to returning defective Equipment to BTI
in accordance with the Return Material
Authorization Procedure, as set forth in
Schedule C attached hereto. Unless otherwise
agreed upon by BTI and AT&T, BTI shall
complete repairs and ship the repaired
Equipment within twenty (20) business days of
receipt of defective Equipment. BTI shall
bear the risk of in-transit loss or damage and
shall prepay and bear the cost of
transportation charges for shipments to AT&T
of any repaired or replaced Equipment.
8.4 During the Warranty Period referenced in Section 8.3
above, all Software licensed hereunder will conform to
BTI's applicable then current published specifications
when delivered. AT&T must notify BTI in writing of any
defect in the Software, and if the Software is found to
be substantially defective, BTI's obligation under this
warranty is to correct such defect. BTI does not
warrant that the Software will meet all requirements of
AT&T, or that the operation of the Software will be
completely error free, or that all non-material Software
defects will be corrected. BTI will correct any and all
service affecting Software deficiencies or provide an
adequate work-around(s) for same.
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8.5 The foregoing warranties above are contingent upon
proper use and maintenance of the System by AT&T, in
accordance with written standards communicated by BTI to
AT&T. In addition, however, the foregoing warranties
shall not apply to defects or failures in the System
due, without limitation, to the following to the extent
caused by AT&T's negligence: (i) accident, neglect or
misuse; (ii) failure or defect of electrical power,
electrical static discharges, external electrical
circuitry, air-conditioning or humidity control; (iii)
the use of items not provided by BTI; (iv) unusual
stress; or (v) any party other than BTI or a AT&T
representative trained and certified by BTI modifying,
adjusting, repairing, servicing or installing the
System.
8.6 Post-Warranty Support. Upon the expiration of the
Warranty Period for the System, BTI will provide the
same support services described in this Section 8 for
each System, provided AT&T has paid to BTI the annual
support fee set forth in Schedule A or as subsequently
mutually agreed to by the parties.
8.7 SUBJECT TO THE FOREGOING WARRANTIES, BTI MAKES NO
IMPLIED WARRANTIES HEREUNDER, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
9. INDEMNIFICATION
9.1 BTI agrees to defend, indemnify and hold AT&T harmless
from and against any and all loss, damage, liability or
expense (including reasonable attorneys' fees) assessed
against AT&T or incurred by AT&T, arising out of any
claim, suit or proceeding brought against AT&T asserting
or alleging that the System in the form furnished
hereunder constitutes an infringement of any patent,
trademark or copyright, provided AT&T notifies BTI
promptly in writing information of any such claim, suit
or proceeding and gives full and complete authority, and
acts reasonably, providing information, and assistance
to BTI in the defense of such claim, suit or proceeding,
and provided further that BTI shall have control of the
defense of any such claim, suit or proceeding and of all
negotiations for its settlement or compromise.
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9.2 If the System is held to be infringing and its use is
enjoined, BTI shall be discharged from its prospective
liabilities if, at its own expense and election, it does
one of the following: (1) procure for AT&T the right to
continue using the System, or (2) modify the System so
it becomes non-infringing. BTI shall not have any
liability to AT&T under this Agreement if any allegation
of infringement is based upon the interconnection and/or
modification and/or use of the System in combination
with other devices not furnished by BTI and which have
not been disclosed to BTI as part of AT&T's proposed
configuration where the System would not by itself be
infringing, or if the infringement arises out of
compliance with AT&T's specifications or designs or out
of modifications made to the System unless such
modifications are made by BTI.
9.3 Nothing in this Agreement grants to either party rights
to the other party's patents or copyrights.
Furthermore, BTI has no rights to AT&T's other
Intellectual Property except as otherwise agreed to
herein.
10. LIMITATION OF LIABILITY
10.1 IN NO EVENT SHALL BTI BE LIABLE HEREUNDER FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL
DAMAGES WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
LEGAL THEORY, EVEN IF BTI HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
11. DEFAULT AND OPPORTUNITY TO CURE
11.1 Subject to the provisions of Section 12.1 below, neither
party shall be deemed to be in default under the terms
of this Agreement unless the party alleging the default
sends a written notice setting forth the nature of the
alleged default, and the defaulting party shall fail to
substantially cure such default within thirty (30) days
following the receipt of such notice.
12. TERMINATION
12.1 For Cause -- This Agreement may be terminated by either
party upon the failure of the other party to cure any
material default following the notice and opportunity to
cure set forth in Section 11.1. above, provided,
however, that:
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12.1.1 Sixty (60) days prior written notice shall be
required and this Agreement shall terminate
after said sixty (60) day period if any of the
following circumstances remain uncured: (i)
if the other party becomes insolvent or unable
to pay its debts in the ordinary course of its
business; (ii) if a voluntary or involuntary
petition under applicable bankruptcy laws is
filed by or against the other party; (iii) if
a receiver is appointed for the business
affairs of the other party or the other party
makes an assignment for the benefit of
creditors; (iv) if the other party liquidates
or ceases doing business as a going concern;
or (v) if there is a change in the control or
majority ownership of one party not otherwise
expressly assented to by the other party.
13. TRAINING AND OTHER SUPPORT SERVICES
13.1 BTI will provide technical training for AT&T's
personnel to prepare them to operate, administer
and maintain the System. AT&T shall be responsible
for all travel and living expenses of its employees
related to such training. Training for additional
employees of AT&T will be available in accordance
with BTI's then standard practices and pricing.
14. LAWS AND REGULATIONS
14.1 This Agreement is specifically made subject to any and
all laws, regulations, orders or other restrictions on
the export from the United States of America of computer
software, hardware, telecommunications equipment and
technical knowledge or know-how relating thereto, which
may be imposed from time to time by the Government of
the United States of America. AT&T agrees that Systems
purchased/licensed hereunder will not be exported or
otherwise transferred, directly or indirectly, in whole
or in part, without AT&T first obtaining , where
applicable, a license from the U.S. Department of
Commerce and/or any other appropriate agency of the U.S.
Government, as required.
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15. GENERAL PROVISIONS
15.1 All notices required to be given hereunder shall be in
writing and shall be deemed given if delivered
personally, or if sent by facsimile (whereby the
receiving party shall acknowledge receipt of same by
facsimile within two (2) business days from receipt of
the initial facsimile) with a copy of such notice sent
by air mail, to the person identified below at the
address as set forth at the beginning of this Agreement,
or such other person or address as may be specified in a
written notice delivered in accordance with this
Section 15.1:
If to BTI: Attention: A. K. Wnorowski
Senior Vice President,
Strategic Alliances
If to AT&T: Attention: ________________________
__________________________
15.2 Neither party may assign its rights and/or obligations
hereunder without the prior written consent of the other
party, which consent shall not be unreasonably withheld
provided, however, AT&T reserves the right to assign its
rights to any successor corporation which assumes
responsibility for the businesses contemplated
hereunder.
15.3 This Agreement shall be governed by, and construed in
accordance with, the laws of New York, without reference
to the conflict of laws provisions thereof.
15.4 If any provision of this Agreement is held to be invalid
under any applicable law, such provision shall, to the
extent of such invalidity, be deemed to be omitted here
from, and all other provisions of this Agreement shall
continue in full force and effect.
15.5 Any failure by either party to enforce strict
performance by the other party of any provision herein
shall not constitute a waiver of the right to
subsequently enforce such provision or any other
provision of this Agreement.
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15.6 Any controversy or claim arising out of or related to
this Agreement shall be submitted to binding arbitration
in New York City, before a single arbitrator in
accordance with the then prevailing Rules of the
American Arbitration Association. Any such arbitration
shall be held in English and shall be administered by
the American Arbitration Association. Any arbitrator(s)
used shall be knowledgeable in telecommunications and
data processing systems. The parties consent to the
jurisdiction of the Courts of New York in connection
with respect to any award made by the arbitrator(s).
Each party shall bear its own costs, expenses of fees
(including attorneys' fees) incurred in connection with
this Section 15.6. The parties hereby acknowledge that
monetary damages may not be a sufficient remedy for
breaches of Section 7, above and that either party, as
appropriate, may be entitled to such injunctive or
equitable relief for actions or claims arising solely
under Section 7, as may be deemed proper by a court of
competent jurisdiction.
15.7 Neither party shall be liable to the other party for any
failure to perform hereunder due to contingencies beyond
its reasonable control, including but not limited to,
riots, wars, fires or Acts of God; in the event of such
situation, the party excused from such obligation shall
use best efforts to meet its commitments as soon as
possible, and the other party reserves its rights to
cancel its corresponding obligations effective upon
notice.
15.8 No modification of this Agreement shall be binding upon
either party unless made in writing and executed on
behalf of that party by its duly authorized
representative.
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THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Number of Shares: 4,908,800 shares (subject to adjustment as
provided herein)
Date of Issuance: November 22, 1995
BOSTON TECHNOLOGY, INC.
Common Stock Purchase Warrant
Boston Technology, Inc., a Delaware corporation (the
"Company"), for value received, hereby certifies that AT&T
Corporation ("AT&T"), is entitled, subject to the terms set forth
below, to purchase from the Company, at any time or from time to
time during the periods specified herein, 4,908,800 shares of
Common Stock, $.001 par value per share, of the Company (the
"Common Stock"), at a purchase price of $14.00 per share. The
shares purchasable upon exercise of this Warrant, and the purchase
price per share, each as adjusted from time to time pursuant to
the provisions of this Warrant, are hereinafter referred to as the
"Warrant Shares" and the "Purchase Price", respectively.
1. Exercise.
(a) This Warrant shall become exercisable as to twenty
percent (20%) of the Warrant Shares on each of the first five
anniversaries of the date hereof. This Warrant shall remain
exercisable as to particular Warrant Shares for a period of thirty
(30) months after such Warrant Shares first become exercisable,
and no longer, and shall expire as to such Warrant Shares if not
exercised prior to the end of such thirty-month period. The
following table summarizes the foregoing:
Warrant Shares Become Exercisable Expire
981,760 November 22, 1996 May 22, 1999
981,760 November 22, 1997 May 22, 2000
981,760 November 22, 1998 May 22, 2001
981,760 November 22, 1999 May 22, 2002
981,760 November 22, 2000 May 22, 2003
In addition to the foregoing, in the event that any person or
entity acquires a majority of the Company's outstanding voting
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securities, then this Warrant shall immediately become exercisable
in full.
(b) Each exercise of this Warrant shall be effected by
surrender of this Warrant, with the purchase form appended hereto
as Exhibit I duly executed by AT&T, at the principal office of the
Company, accompanied by payment in full, by wire transfer, bank
check or other method acceptable to the Company, of the Purchase
Price payable in respect of the number of Warrant Shares purchased
upon such exercise.
(c) AT&T may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by
cancelling a portion of this Warrant (to the extent then
exercisable) with respect to such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such
exercise by (ii) the excess of the Fair Market Value per share of
Common Stock as of the effective date of exercise, as determined
below (the "Exercise Date"), over the Purchase Price per share.
The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) If the Common Stock is listed on a national
securities exchange, the Nasdaq National Market or another
nationally recognized exchange or trading system as of the
Exercise Date, the Fair Market Value per share of Common Stock
shall be deemed to be the last reported sale price per share of
Common Stock thereon on the Exercise Date, or, if no such price is
reported on such date, such price on the next preceding business
day for which such price is reported.
(ii) If the Common Stock is not listed on a
national securities exchange, the Nasdaq National Market or
another nationally recognized exchange or trading system as of the
Exercise Date, the Fair Market Value per share of Common Stock
shall be deemed to be the amount determined in good faith by the
Board of Directors to represent the fair market value per share of
the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock
under an employee benefit plan of the Company).
(d) Each exercise of this Warrant shall be deemed to
have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the
Company as provided in Section 1(b) above. At such time, AT&T
shall be deemed to have become the holder of record of the Warrant
Shares issuable upon such exercise.
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(e) As soon as practicable after the exercise of this
Warrant in full or in part, the Company, at its expense (including
without limitation the payment of any applicable stamp taxes),
will cause to be issued in the name of, and delivered to, AT&T:
(i) a certificate for the number of full Warrant
Shares to which AT&T shall be entitled upon such exercise plus, in
lieu of any fractional share to which AT&T would otherwise be
entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new
warrant (dated the date hereof) of like tenor, calling on the face
thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares
called for on the face of this Warrant minus the sum of (a) the
number of such shares purchased by AT&T upon such exercise plus
(b) the number of Warrant Shares (if any) covered by the portion
of this Warrant cancelled in payment of the Purchase Price payable
upon such exercise pursuant to Section 1(c) above.
2. Adjustments.
(a) If outstanding shares of the Common Stock shall be
subdivided into a greater number of shares or a dividend in Common
Stock shall be paid in respect of Common Stock, the Purchase Price
in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness
of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of
Common Stock shall be combined into a smaller number of shares,
the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination,
be proportionately increased. When any adjustment is required to
be made in the Purchase Price, the number of Warrant Shares
purchasable upon the exercise of this Warrant shall be changed to
the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase
Price in effect immediately prior to such adjustment, by (ii) the
Purchase Price in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Common Stock (other than a change in par
value or a subdivision or combination as provided for in
Section 2(a) above), or any consolidation or merger of the Company
with or into another corporation, or a transfer of all or
substantially all of the assets of the Company, then, as part of
any such reorganization, reclassification, consolidation, merger
or sale, as the case may be, lawful provision shall be made so
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that AT&T shall have the right thereafter to receive upon the
exercise hereof the kind and amount of shares of stock or other
securities or property which AT&T would have been entitled to
receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger or sale, as the case may
be, AT&T had held the number of shares of Common Stock which were
then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined in good
faith by the Board of Directors of the Company) shall be made in
the application of the provisions set forth herein with respect to
the rights and interests thereafter of AT&T, such that the
provisions set forth in this Section 2 (including provisions with
respect to adjustment of the Purchase Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to
any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in the
Purchase Price, the Company shall promptly mail to AT&T a
certificate setting forth the Purchase Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and
amount of stock or other securities or property into which this
Warrant shall be exercisable following the occurrence of any of
the events specified in Section 2(a) or Section 2(b) above.
3. Fractional Shares. The Company shall not be required
upon the exercise of this Warrant to issue any fractional shares,
but shall make an adjustment therefor in cash on the basis of the
Fair Market Value per share of Common Stock, as determined
pursuant to Section 1(c) above.
4. Transfer Restrictions.
(a) This Warrant may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of,
whether voluntarily or by operation of law.
(b) Upon each and every exercise of this Warrant
(whether an exercise for cash or in a "cashless" exercise as
permitted by Section 1(c) above), AT&T agrees not to sell,
exchange, transfer, pledge, hypothecate or otherwise dispose of
the Warrant Shares issued upon such exercise for a period of time
after such exercise (the "Rule 144 Period") determined as follows.
The Rule 144 Period shall be two years, unless the Securities and
Exchange Commission (the "SEC") reduces the holding period
specified in paragraph (d) of Rule 144 ("Rule 144") under the
Securities Act of 1933, as amended (the "Securities Act"), in
which event the Rule 144 Period shall simultaneously be reduced to
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such shorter period as has been established by the SEC for
paragraph (d) of Rule 144.
(c) After the expiration of the Rule 144 Period, the
Warrant Shares may be sold or transferred if either (i) they first
shall have been registered under the Securities Act or (ii) the
Company first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration
requirements of the Securities Act.
(d) Each certificate representing Warrant Shares shall
bear a legend substantially in the following form:
"The securities represented by this
certificate are subject to restrictions
on transfer and may not be sold,
exchanged, transferred, pledged,
hypothecated or otherwise disposed of
except in accordance with and subject to
all the terms and conditions of a certain
Warrant dated as of November 22, 1995, a
copy of which the Company will furnish to
the holder of this certificate upon
request and without charge."
"The securities represented by this
certificate have not been registered
under the Securities Act of 1933, as
amended, and may not be sold, exchanged,
transferred, pledged, hypothecated or
otherwise disposed of unless and until
such securities are registered under such
Act or an opinion of counsel satisfactory
to the Company is obtained to the effect
that such registration is not required."
5. No Impairment. The Company will not, by amendment of
its charter or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the
rights of AT&T against impairment.
6. Notices of Record Date, etc. In case:
(a) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at the time
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deliverable upon the exercise of this Warrant) for the purpose of
entitling or enabling them to receive any dividend or other
distribution, or to receive any right to subscribe for or purchase
any shares of stock of any class or any other securities, or to
receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the
Company is the surviving entity), or any transfer of all or
substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be
mailed to AT&T a notice specifying, as the case may be, (i) the
date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the
effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other
stock or securities at the time deliverable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common
Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified
in such notice.
7. Covenants of the Company.
(a) Exchange Listing. The Company will at all times
that this Warrant remains exercisable, in whole or in part,
maintain the listing (or authorization for quotation) of the
Common Stock on a national securities exchange, the Nasdaq
National Market or another nationally recognized exchange or
trading system.
(b) Reservation of Shares. The Company will at all
times reserve and keep available, solely for issuance and delivery
upon the exercise of this Warrant, such number of Warrant Shares
and other stock, securities and property, as from time to time
shall be issuable upon the exercise of this Warrant.
- 45 -<PAGE>
<PAGE>
(c) Rule 144 Information. The Company will at all
times that this Warrant remains exercisable, in whole or in part,
maintain "adequate current public information" regarding the
Company within the meaning of paragraph (c) of Rule 144.
(d) Required Registration. If the Company fails to
maintain "adequate current public information" as required by
Section 7(c), AT&T may request, in writing, that the Company
effect the registration on Form S-3, or if the Company is not then
eligible to use Form S-3 for such a registration, on Form S-1, of
the Warrant Shares for resale of the Warrant Shares. If AT&T
intends to distribute the Warrant Shares by means of an
underwriting, AT&T shall so advise the Company in its request.
Upon receipt of such request, the Company shall, as expeditiously
as possible, use its best efforts to effect the registration on
Form S-3 or on Form S-1, as the case may be, of the Warrant
Shares. The Company shall not be required to effect more than one
registration pursuant to this Section 7(d).
(e) Registration Procedures. If the Company is
required by the provisions of this Agreement to use its best
efforts to effect the registration of the Warrant Shares under the
Securities Act, the Company shall:
(i) file with the SEC a Registration Statement
with respect to the Warrant Shares and use its best efforts to
cause that Registration Statement to become and remain effective
until the earlier of (x) the time all Warrant Shares have been
sold pursuant thereto or otherwise; (y) the time all Warrant
Shares could be sold by AT&T within a three-month period without a
registration statement under Rule 144 or otherwise; or (z) 45 days
from the date that such Registration Statement is declared
effective by the SEC;
(ii) as expeditiously as possible prepare and file
with the SEC any amendments and supplements to the Registration
Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration Statement
effective;
(iii) as expeditiously as possible furnish to AT&T
such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as AT&T may reasonably
request in order to facilitate the public sale or other
disposition of the Warrant Shares; and
(iv) as expeditiously as possible use its best
efforts to register or qualify the Warrant Shares covered by the
Registration Statement under the securities or "Blue Sky" laws of
- 46 -<PAGE>
<PAGE>
such states as AT&T shall reasonably request, and do any and all
other acts and things that may be necessary or desirable to enable
AT&T to consummate the public sale or other disposition in such
states of the Warrant Shares; provided, however, that the Company
shall not be required in connection with this paragraph (iv) to
qualify as a foreign corporation or execute a general consent to
service of process in any jurisdiction.
If the Company has delivered preliminary or final
prospectuses to AT&T and after having done so the prospectus is
amended to comply with the requirements of the Securities Act, the
Company shall promptly notify AT&T and, if requested, AT&T shall
immediately cease making offers of Warrant Shares and return all
prospectuses to the Company. The Company shall promptly provide
AT&T with revised prospectuses and, following receipt of the
revised prospectuses, AT&T shall be free to resume making offers
of the Warrant Shares.
(f) Prospectus Delivery Requirements. AT&T shall not
make any sales of Warrant Shares without causing the prospectus
delivery requirements under the Securities Act to be satisfied and
AT&T shall promptly advise the Company of any changes in the
information concerning AT&T contained in any prospectus included
in any Registration Statement. AT&T acknowledges that
occasionally there may be times when the Company must suspend the
use of the prospectus forming a part of a Registration Statement
until such time as an amendment to such Registration Statement has
been filed by the Company and declared effective by the SEC, or
until such time as the Company has filed an appropriate report
with the SEC pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Without limiting the generality of
the foregoing, the Company shall be entitled to suspend the use of
the prospectus forming a part of such Registration Statement in
any of the following periods:
(i) any period during which the Company is engaged
in any activity or transaction or preparations or negotiations for
any activity or transaction ("Company Activity") that the Company
desires to keep confidential for business reasons, if the Company
determines in good faith that the public disclosure requirements
imposed on the Company under the Securities Act in connection with
the Registration Statement would require disclosure of the Company
Activity; or
(ii) any period during which the Company is
offering or selling shares of its capital stock pursuant to a
registration statement (other than a registration statement on
Form S-4 or Form S-8, or any successor Form) filed with the SEC
under the Securities Act (with such period to begin three weeks
prior to the date established in good faith by the Company as its
- 47 -<PAGE>
<PAGE>
target date for the pricing of such offering and terminate upon
the closing of (or decision to abandon) the sale of such shares).
AT&T hereby covenants that it will not offer or sell any
Warrant Shares pursuant to any prospectus during the period
commencing at the time at which the Company gives it notice of the
suspension of the use of said prospectus and ending at the time
the Company gives it notice that AT&T may thereafter effect sales
pursuant to said prospectus.
(g) Allocation of Expenses. The Company shall pay all
Registration Expenses of any registration under this Section 7.
The term "Registration Expenses" shall mean all expenses incurred
by the Company in complying with the registration provisions of
this Setion 7, including without limitation all registration and
filing fees, exchange listing fees, printing expenses, fees and
expenses of counsel for the Company and state "Blue Sky" fees and
expenses, but excluding underwriting discounts, selling
commissions and the fees and expenses of AT&T's own counsel.
(h) Indemnification.
(i) In the event of registration of the Warrant
Shares under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless AT&T, each underwriter of
such Warrant Shares, and each other person, if any, who controls
AT&T or such underwriter within the meaning of the Securities Act
or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which AT&T or such underwriter
or controlling person may become subject under the Securities Act,
the Exchange Act, state securities or "Blue Sky" laws or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Warrant
Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or
alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading; and the Company will reimburse AT&T and such
underwriter and each such controlling person for any legal or any
other expenses reasonably incurred by AT&T and such underwriter or
controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises
out of or is based upon any untrue statement or omission made in
such Registration Statement, preliminary prospectus or final
- 48 -<PAGE>
<PAGE>
prospectus, or any such amendment or supplement, in reliance upon
and in conformity with information furnished to the Company, in
writing, by or on behalf of AT&T or such underwriter or
controlling person specifically for use in the preparation
thereof.
(ii) In the event of registration of the Warrant
Shares under the Securities Act pursuant to this Agreement, AT&T
will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter
within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or
several, to which the Company, such directors and officers,
underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or "Blue Sky" laws
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement under which
such Warrant Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to AT&T and furnished
in writing to the Company by or on behalf of AT&T specifically for
use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement; provided, however,
that the obligations of AT&T hereunder shall be limited to an
amount equal to the proceeds to AT&T of the Warrant Shares sold in
connection with such registration.
(iii) Each party entitled to indemnification under
this Section 7(h) (the "Indemnified Party") shall give notice to
the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit
the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld); and, provided,
further, that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7(h). The Indemnified Party may
participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expense if
- 49 -<PAGE>
<PAGE>
representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnified Party and
any other party represented by such counsel in such proceeding.
No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any
judgment or settle such claim or litigation without the prior
written consent of the Indemnifying Party.
(i) Information by AT&T. AT&T shall furnish to the
Company such information regarding AT&T and the distribution
proposed by AT&T as the Company may reasonably request in
connection with, and otherwise cooperate with the Company in the
filing of, any registration, qualification or compliance referred
to in this Agreement.
(j) Transfers of Rights. None of the rights set forth
in this Section 7 may be transferred or assigned, whether
voluntarily or by operation of law, without the prior written
consent of the Company.
8. Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and (in the case of
loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of
mutilation) upon surrender and cancellation of this Warrant, the
Company will issue, in lieu thereof, a new Warrant of like tenor.
9. Mailing of Notices. All notices and other
communications in connection herewith from the Company to AT&T
shall be mailed by first-class certified or registered mail,
postage prepaid, to the address furnished to the Company in
writing by AT&T. All notices and other communications from AT&T
in connection herewith to the Company shall be mailed by first-
class certified or registered mail, postage prepaid, to the
address furnished to AT&T in writing by the Company.
10. No Rights as Stockholder. Until the exercise of this
Warrant, AT&T shall not have or exercise any rights by virtue
hereof as a stockholder of the Company.
-50-<PAGE>
<PAGE>
11. Change or Waiver. Any term of this Warrant may be
changed or waived only by an instrument in writing signed by the
party against which enforcement of the change or waiver is sought.
12. Headings. The headings in this Warrant are for purposes
of reference only and shall not limit or otherwise affect the
meaning of any provision of this Warrant.
13. Governing Law. This Warrant will be governed by and
construed in accordance with the laws of the State of Delaware.
BOSTON TECHNOLOGY, INC.
By: \s\ John C.W. Taylor
_________________________
Title: President and CEO
AGREED:
AT&T CORPORATION
By: \s\ Waring Partridge
________________________
Title: Vice President, Multimedia
Messaging and Wireless Services
EXHIBIT I
PURCHASE FORM
To: Boston Technology, Inc. Dated:______________
The undersigned, pursuant to the provisions set forth in the
attached Warrant, hereby irrevocably elects to purchase _____
shares of the Common Stock covered by such Warrant. The
undersigned herewith makes payment of $____________, representing
the full purchase price for such shares at the price per share
- 51 -<PAGE>
<PAGE>
provided for in such Warrant. Such payment takes the form of
(check applicable box or boxes):
___
|___| $_________ by wire transfer, bank check or other
method acceptable to Boston Technology, Inc.,
and/or
___
|___| the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of
$_______ per share for purposes of this
calculation).
AT&T CORPORATION
By:________________________________
Title:_____________________________
- 52 -<PAGE>
<PAGE>
EXHIBIT 11
Boston Technology, Inc.
Weighted Shares Used in Computation of Primary Earnings Per Share
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended January 31,
1996 1995 1994
____ ____ ____
<S> <C> <C> <C>
Common stock outstanding, beginning
of period 24,759 24,217 23,603
Weighted average common stock issued during
the twelve months ended January 31, 394 228 214
Repurchase of treasury stock (294) -- --
Weighted average common stock equivalents -- 2,663 2,363
Weighted average shares acquired using
the treasury stock method -- (1,357) (1,073)
______ ______ ______
Weighted average shares common
stock outstanding 24,859 25,751 25,107
</TABLE>
Primary and fully diluted earnings per share are the same for all periods
presented.
(a) Weighted average common stock equivalents and treasury shares acquired
under the treasury stock method were not considered in the January 31, 1996
calculation since they would be anti-dilutive.
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated February 29,
1996 on our audits of the consolidated financial statements of Boston
Technology, Inc. as of January 31, 1996 and 1995, and for the years ended
January 31, 1996, 1995 and 1994 which report is included in this Annual
Report on Form 10-K, into the Company's previously filed Registration
Statements on Form S-8, File Nos. 33-35135, 33-42808, 33-52298, 33-52296,
33-80734, 33-80720, 33-60703 and 33-60707.
By /s/ Coopers & Lybrand L.L.P.
------------------------
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 13,929
<SECURITIES> 0
<RECEIVABLES> 30,446
<ALLOWANCES> 1,554
<INVENTORY> 16,951
<CURRENT-ASSETS> 68,559
<PP&E> 27,021
<DEPRECIATION> 16,424
<TOTAL-ASSETS> 84,661
<CURRENT-LIABILITIES> 29,930
<BONDS> 0
<COMMON> 25
0
0
<OTHER-SE> 54,289
<TOTAL-LIABILITY-AND-EQUITY> 84,661
<SALES> 105,267
<TOTAL-REVENUES> 105,267
<CGS> 41,087
<TOTAL-COSTS> 41,087
<OTHER-EXPENSES> 79,969
<LOSS-PROVISION> 997
<INTEREST-EXPENSE> 165
<INCOME-PRETAX> (14,785)
<INCOME-TAX> 105
<INCOME-CONTINUING> (14,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,890)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> (.60)
</TABLE>
