SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-17384
Boston Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3073385
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
100 Quannapowitt Parkway
Wakefield, Massachusetts 01880
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (617) 246-9000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for at least the past 90 days.
Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares Outstanding
Class of Securities (as of August 19 , 1997)
Common Stock, $.001 par value per share 27,301,781
<PAGE>
<PAGE>
BOSTON TECHNOLOGY, INC.
FORM 10-Q
Index
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets
As of July 31, 1997 (Unaudited) and January 31, 1997............. 3
Consolidated Statements of Operations
For the three and six months ended July 31, 1997 and 1996........ 4
Consolidated Statements of Cash Flows
For the six months ended July 31, 1997 and 1996.................. 5
Notes to the Consolidated Financial Statements................... 6
ITEM 2. Management's Discussion and Analysis of Financial
. Conditions and Results of Operations ................. 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings...................................... 13
ITEM 2. Changes in Securities.................................. 13
ITEM 3. Defaults upon Senior Securities........................ 13
ITEM 4. Submission of Matters to a Vote of Security Holders... 14
ITEM 5. Other Information...................................... 14
ITEM 6. Exhibits and Reports on Form 8-K....................... 14
Signatures....................................................... 15
Exhibit Index.................................................... 16
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
. BOSTON TECHNOLOGY, INC.
. CONSOLIDATED BALANCE SHEETS
. (dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
. July 31, January 31,
. 1997 1997
. -------- ---------
Assets (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $38,146 $14,032
Accounts receivable, less allowances of $9,415 and $3,656 61,125 54,405
Notes receivable 3,618 ---
Net investment in sales type leases 611 645
Inventories, net 24,762 19,046
Prepaid expenses and other current assets 9,276 2,771
Prepaid taxes 4,184 ---
. ------- -------
Total current assets 141,722 90,899
Property and equipment, net 35,429 25,568
Deferred taxes 4,284 4,284
Other assets 4,267 7,422
. -------- --------
. TOTAL ASSETS $185,702 $128,173
. ======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long term debt $1,563 $1,000
Accounts payable 14,152 15,235
Accrued expenses 31,007 21,556
Income taxes payable --- 2,618
Deferred customer funding 1,788 1,140
Deferred revenues 17,690 8,939
. ------ ------
Total current liabilities 66,200 50,488
Long term debt and other long term liabilities 13,602 1,193
Stockholders' Equity:
Common stock, $.001 par value, 60,000,000 shares authorized
27,295,561 and 25,501,691 shares issued 27 25
Additional paid in capital 72,779 60,557
Retained earnings 32,651 15,516
Cumulative translation adjustment 443 394
Total stockholders' equity 105,900 76,492
. -------- --------
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $185,702 $128,173
. ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-3-
<PAGE>
<PAGE>
. BOSTON TECHNOLOGY, INC.
. CONSOLIDATED STATEMENTS OF OPERATIONS
. (dollars in thousands, except per share amounts)
. (unaudited)
<TABLE>
<CAPTION>
. Three months ended July 31, Six months ended July 31,
. 1997 1996 1997 1996
. -------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $66,361 $41,455 $129,736 $77,206
Cost and expenses:
Cost of revenues 26,449 19,192 54,143 37,168
Research and development 14,121 8,185 28,097 15,278
Marketing, general and administrative 15,695 9,148 27,719 17,026
. ------ ------ ------- ------
. 56,265 36,525 109,959 69,472
Income from operations 10,096 4,930 19,777 7,734
Interest expense, net (84) (167) (340) (102)
Other income (expense), net 126 (470) (210) (523)
. ------ ----- ------ -----
Income before income taxes 10,138 4,293 19,227 7,109
Provision (benefit) for income taxes (429) 1,502 2,753 2,488
. ------- ------ ------- ------
Net income $10,567 $2,791 $16,474 $4,621
. ======= ====== ======= ======
Net income per share $.37 $.10 $.58 $.17
. ======= ====== ======= ======
Weighted average common and common
equivalent shares outstanding 28,792 28,005 28,415 27,835
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-4-
<PAGE>
<PAGE>
. BOSTON TECHNOLOGY, INC.
. CONSOLIDATED STATEMENTS OF CASH FLOWS
. (dollars in thousands)
. (unaudited)
<TABLE>
<CAPTION>
. Six months ended July 31,
. 1997 1996
. -------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $16,474 $4,621
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization and other 6,752 3,464
Payments made in excess of rent expense (100) (96)
Provision for sales allowances 5,759 (16)
Changes in assets and liabilities:
Accounts receivable (12,024) (23,000)
Net investment in sales type leases 34 (1,242)
Inventories (5,716) (4,453)
Prepaid expenses and other current assets (6,496) (221)
Accounts payable (2,060) 573
Accrued expenses 9,433 4,327
Deferred revenue 7,497 1,584
Income taxes (5,243) (2,081)
Deferred customer funding 648 17
Other liabilities 434 3,689
. ------ -------
Net cash provided by (used in) operating activities 15,392 (12,834)
Cash Flows From Investing Activities
Purchase of property and equipment (13,428) (9,575)
Purchase of license agreements and other assets 281 (560)
. ------ ------
Net cash used in investing activities (13,147) (10,135)
Cash Flows From Financing Activities
Exercise of stock options 10,126 1,685
Purchase of stock through Employee Stock Purchase Plan 536 374
Principal payments under financing obligations (500) (275)
Borrowings under revolving credit agreements 25,000 18,600
Repayments under revolving credit agreements (15,000) (5,000)
. ------ ------
Net cash provided by financing activities 20,162 15,384
Effect of exchange rate on cash and cash equivalents 49 (5)
. ------ ------
Net increase (decrease) in cash and cash equivalents 22,456 (7,590)
Cash acquired in pooling of
Enhanced Communications Corporation 1,658 ---
Cash and cash equivalents, beginning of period 14,032 13,929
. ------- ------
Cash and cash equivalents, end of period $38,146 $6,339
. ======= ======
</TABLE>
<TABLE>
<CAPTION>
Supplemental Disclosure of Cash Flow Information:
<S> <C> <C>
Income taxes paid $7,481 $10
Interest paid 738 344
Non cash transactions:
Tax benefit of disqualifying dispositions
of incentive stock options $1,559 $290
Sale of Joint Venture for a note receivable 3,618 ---
Purchase of license agreements --- 2,530
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-5-
<PAGE>
<PAGE>
BOSTON TECHNOLOGY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Boston
Technology, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for the interim financial information and
pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, these consolidated financial statements do not include all of the
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) necessary for a fair
representation of the unaudited consolidated statements of income for the three
and six months ended July 31, 1997 and 1996, the unaudited consolidated
statements of cash flows for the six months ended July 31, 1997 and 1996, and
the unaudited consolidated balance sheet at July 31, 1997 have been made.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates
included in these financial statements include the reserve for sales
allowances, reserve for warranty, inventory valuation reserve, estimates to
complete and certain accrued liabilities.
It is suggested that the financial statements contained herein be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
January 31, 1997. The results of the interim periods are not necessarily
indicative of the results for the full fiscal year.
Certain amounts in the fiscal 1997 (year ended January 31, 1997) financial
statements have been reclassified to conform to the fiscal 1998 (year ending
January 31, 1998) presentation.
2. INVENTORIES
Inventories consisted of: July 31, 1997 January 31, 1997
. ------------- ----------------
Materials and purchased parts $10,784 $7,735
Work in process 5,035 9,585
Finished goods 8,943 1,726
. ------- -------
Total $24,762 $19,046
. ======= =======
3. FINANCING ARRANGEMENTS
The Company maintains a revolving credit facility with two banks totaling $60
million. Borrowings are collateralized by the Company's accounts receivable and
inventories and bear interest at the prime rate (8.5% at July 31, 1997) or the
LIBOR rate plus 175 basis points. The credit facility is scheduled to expire
on November 19, 1998. As of July 31, 1997, the Company had $10 million
outstanding under the credit facility.
From time to time, the Company grants its customers extended payment terms and,
upon occasion, sells those accounts receivable without recourse. During the
quarter ended July 31, 1997, the Company sold $18 million of receivables.
4. RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued Statement No. 128
("SFAS 128"), "Earnings per Share", which modifies the way in which earnings
per share (EPS) is calculated and disclosed. Upon adoption of this standard
for the fiscal period ending January 31, 1998, the Company will disclose basic
and diluted EPS and will restate all prior period EPS data presented. Basic
EPS excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS, similar to fully diluted EPS, reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Management
believes the adoption of SFAS 128 will not have a material impact on reported
earnings per share.
-6-
<PAGE>
<PAGE>
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income". This Statement
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements. The
Statement will become effective for fiscal years beginning after December 15,
1997. The Company will adopt the new standard beginning in the first quarter of
the fiscal year ending January 31, 1999.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosure about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 specifies
new guidelines for determining a company's operating segments and related
requirements for disclosure. The Company is in the process of evaluating the
impact of the new standard on the presentation of its financial statements and
the disclosures therein. The Statement will become effective for fiscal years
beginning after December 15, 1997. The Company will adopt the new standard for
the fiscal year ending January 31, 1999.
5. ACQUISITION OF ENHANCED COMMUNICATION CORPORATION
On February 20, 1997, the Company acquired all of the outstanding stock of
Enhanced Communications Corporation ("ECC"), a company providing outsourcing of
voice messaging for Bell South Telecommunications, Inc. and Bell South Personal
Communications, Inc. for 250,000 shares of the Company's Common Stock. The
combination has been accounted for as a pooling of interests in accordance with
APB 16. The Company did not restate prior period financial statements for this
acquisition due to immateriality, and recorded the book value of the net assets
of ECC in the period ended April 30, 1997 amounting to $661,000.
Change in stockholders' equity:
Balance at January 31, 1997 $ 76,492
Net income for current period 16,474
Net book value of assets acquired in pooling of interest 661
Stock issued for options and warrants, related tax
benefits and other 12,273
. -------
Balance at July 31, 1997 $ 105,900
=======
6. REVENUE RECOGNITION
Most of the Company's products are standard hardware and software configurations
which are developed according to internally generated product specifications.
Generally, product revenues are recognized at the time the standard hardware
and/or software is shipped, collection is probable and no significant post
shipment obligations remain. 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 sales-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.
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. For large contracts containing
significant customization efforts spanning two or more quarters, revenue is
recognized on a percent of completion basis.
7. SALE OF JOINT VENTURE
As of May 31, 1997, the Company sold its 30% share in the Brazil joint venture
it had established in fiscal 1996 to its joint venture partner. Upon
completion of the sale, the Company recorded the purchase price, net of imputed
interest, as a note receivable. No gain has been recognized on this
transaction.
-7-
<PAGE>
<PAGE>
8. CUSTOMER DISPUTE
The Company is engaged in a dispute with one of its customers, Sprint PCS
("Sprint"), regarding product and software deliverables and performance under
agreements against which approximately $26 million has been invoiced. Sprint
has purported to terminate its agreements with the Company and refused to pay
the balance due of approximately $19 million. Of this outstanding balance, a
significant portion has been recorded as deferred revenue and the Company
believes it has established adequate reserves to cover any exposure associated
with this dispute. The Company believes that Sprint's assertions are without
merit and that the unpaid amounts are due and owing. The Company has discussed
the dispute with Sprint but no resolution has yet been reached. The agreements
between the Company and Sprint require that disputes be submitted to binding
arbitration if not resolved by mutual agreement. Although the Company believes
that its position has merit, there can be no assurances the outcome will not
have a material adverse effect on the Company.
9. INCOME TAXES
The effective tax rate for the three months ended July 31, 1997 (before the
effect of the AT&T warrant exercise) and 1996 was 35%. During the second
quarter of fiscal 1998, the Company realized a one time tax benefit of
$3,976,000 associated with the July 30, 1997 exercise of 981,760 warrants by
AT&T. The Company determined that the realization of this tax benefit became
more likely than not during the second quarter of fiscal 1998. No benefit has
been recognized for unexercised warrants. The tax benefit associated with
future exercises of warrants by AT&T is contingent upon the timing of the
exercise of the warrants and the stock value at that time. The Company expects
its normal tax rate to remain at approximately 35% throughout the remainder of
fiscal 1998.
10. SUBSEQUENT EVENT
On August 21, 1997, the Company announced that it had agreed to merge with
Comverse Technology, Inc. ("Comverse") in a stock merger in which each
outstanding share of Common Stock of the Company would be converted into .65
share of Common Stock of Comverse. The merger is subject to regulatory
approval, approval by the stockholders of the Company and Comverse, and various
other conditions, and is expected to be completed in late 1997. The merger of
the companies may result in duplicate facilities or distribution channels and
other relationships which could result in adjustments or write-offs upon the
completion of the merger to the carrying value of certain assets.
-8-
<PAGE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-Q contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated in such forward looking
statements. These factors include, without limitation, those set forth below
the caption "Certain Factors That May Affect Future Operating Results."
Results of Operations
Three months Ended July 31, 1997 versus Three Months Ended July 31, 1996
Net Sales
Revenues for the second quarter of fiscal year 1998 were $66,361,000 versus
$41,455,000 for the prior period, an increase of $24,906,000, or 60%. North
American revenues, generated by sales to Regional Bell Operating Companies, long
distance carriers, and other network operators, were approximately $34,666,000,
an increase of $5,808,000, or 20%, over the prior year period. North American
revenues decreased to 52% of total revenues versus 70% in the prior year due
primarily to changes in customers buying patterns relating to their deployment
of services. International revenues for the second quarter were $31,695,000,
an increase of $19,098,000, or 152%, over the prior year period. International
revenues increased primarily due to higher volume from the Company's existing
Pacific Rim and Australian customers as well as several new customers in Brazil.
International revenues comprised 48% of total second quarter fiscal 1998
revenues verses 30% in the prior year period.
Gross Profit
Gross profit for the second quarter of fiscal 1998 increased over the
corresponding prior year period by $17,649,000, or 79%, to $39,912,000. As a
percentage of revenues, gross profit was approximately 60% for the three months
ended July 31, 1997 compared to approximately 54% for the comparable prior year
period. The increase in gross profit as a percentage of revenues was due
primarily to an increase in the number of larger systems shipped as well as a
higher volume of capacity upgrades, which traditionally have higher margins.
Assuming a stabilization of prices with increased revenues, the Company
anticipates that gross profit as a percentage of revenues will increase in
fiscal 1998 compared to fiscal 1997, however, quarter to quarter changes may
not be indicative of the trend for the year.
Research and Development Expenses
Research and development expenses were $14,121,000 for the second quarter of
fiscal 1998 verses $8,185,000 for the prior period. As a percentage of
revenues, research and development expenses increased to 21% for the second
quarter versus 20% for the prior year. Excluding the effect of customer funding
and certain reclassifications, gross research and development spending in the
second quarter of fiscal 1998 increased $8,225,000, or 80%, over the prior year
period primarily due to an increase in headcount required to support ongoing
development projects. The Company expects to continue to make significant
investments in research and development, including research and development
required under certain recent customer contracts. The Company is also involved
in research and development programs that are funded in whole or in part by its
customers. Customer funding is recognized as a reduction to research and
development expense as development activities occur. Customer funding offsets
against expense for the second quarter of fiscal 1998 and 1997 were $2,394,000
and $621,000, respectively. In addition to customer funding offsets, the
Company periodically defers expenditures incurred under long term custom
modification contracts. The deferred expenditures of $5,047,000 at July 31,
1997 are included in prepaid expenses and other current assets and will be
recognized in cost of sales as the associated revenue is recognized. These
deferred expenditures associated with long term custom modification contracts
for the second quarter 1998 and 1997 amounted to $2,026,000 and $1,510,000,
respectively.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses for the second quarter were
$15,695,000 versus $9,148,000 for the prior period. As a percentage of
revenues, these expenses increased from 22% in the prior year period to 24% in
the second quarter of fiscal 1998 due primarily to a significant increase to the
reserve for sales allowances and the expansion of the worldwide customer service
and sales organizations, particularly in Mexico, the United Kingdom and the Far
East, as well as increased staffing to support the overall growth of the
Company's business.
Net Interest (Expense) Income
Interest income for the quarter increased by $252,000 to $328,000 at July 31,
1997 due primarily to higher average cash balances. Interest expense for the
second quarter increased by $169,000 to $412,000 as a result of borrowings
against the Company's line of credit. The Company expects to continue to
borrow against its line of credit in the future and incur interest expense that
is higher than past periods.
-9-
<PAGE>
<PAGE>
Other Income, Net
Other income increased $596,000 to $126,000 for the three months ended July 31,
1997 due primarily to the Company's portion of the income generated by the
joint venture prior to the May 31, 1997 sale of the Company's share of the
joint venture, partially offset by a foreign exchange loss.
Provision for Income Taxes
The effective tax rate for the three months ended July 31, 1997 (before the
effect of the AT&T warrant exercise) and 1996 was 35%. During the second
quarter of fiscal 1998, the Company realized a one time tax benefit of
$3,976,000 associated with the July 30, 1997 exercise of 981,760 warrants by
AT&T. The Company determined that the realization of this tax benefit became
more likely than not during the second quarter of fiscal 1998. No benefit has
been recognized for unexercised warrants. The tax benefit associated with
future exercises of warrants by AT&T is contingent upon the timing of the
exercise of the warrants and the stock value at that time. The Company expects
its normal tax rate to remain at approximately 35% throughout the remainder of
fiscal 1998.
Results of Operations
Six months Ended July 31, 1997 versus Six Months Ended July 31, 1996
Net Sales
Revenues for the six months ended July 31, 1997 were $129,736,000 versus
$77,206,000 for the prior period, an increase of $52,530,000, or 68%. North
American revenues, generated by sales to Regional Bell Operating Companies,
long distance carriers, and other network operators, were approximately
$73,794,000, an increase of $26,793,000, or 57%, over the prior year period.
North American revenues decreased to 57% of total revenues versus 61% in the
prior year due primarily to changes in customers buying patterns relating to
their deployment of services. International revenues for the first six months
of fiscal 1998 were $55,942,000, an increase of $25,737,000, or 85%, over the
prior year period. International revenues increased primarily due to higher
volume from the Company's existing Pacific Rim and Australian customers.
International revenues comprised 43% of revenues for the first six months
of fiscal 1998 revenues verses 39% in the prior period.
Gross Profit
Gross profit for the first six months of fiscal 1998 increased over the
corresponding prior year period by $35,555,000, or 89%, to $75,593,000. As a
percentage of revenues, gross profit was approximately 58% for the six months
ended July 31, 1997 compared to approximately 52% for the comparable prior year
period. The increase in gross profit as a percentage of revenues was due
primarily to an increase in the number of larger systems shipped as well as a
higher volume of capacity upgrades, which traditionally have higher margins.
Assuming a stabilization of prices with increased revenues, the Company
anticipates that gross profit as a percentage of revenues will increase in
fiscal 1998 compared to fiscal 1997, however, quarter to quarter changes
may not be indicative of the trend for the year.
Research and Development Expenses
Research and development expenses were $28,097,000 for the six month period
ended July 31, 1997 verses $15,278,000 for the prior period. As a percentage
of revenues, research and development expenses increased to 22% for the first
six months of fiscal 1998 versus 20% for the prior year. Excluding the effect
of customer funding and certain reclassifications, gross research and
development spending in the first six months of fiscal 1998 increased
$16,065,000, or 83%, over the prior year period primarily due to an increase
in headcount required to support ongoing development projects. The Company
expects to continue to make significant investments in research and development,
including research and development required under certain recent customer
contracts. The Company is also involved in research and development programs
that are funded in whole or in part by its customers. Customer funding is
recognized as a reduction to research and development expense as development
activities occur. Customer funding offsets against expense for the first six
months of fiscal 1998 and 1997 were $3,627,000 and $2,081,000, respectively.
In addition to customer funding offsets, the Company periodically defers
expenditures incurred under long term custom modification contracts. These
deferred expenditures of $5,047,000 at July 31, 1997 are included in prepaid
expenses and other assets and will be recognized in cost of sales as the
associated revenue is recognized. The deferred expenditures associated with
long term custom modification contracts for the first six months of fiscal
1998 and 1997 amounted to $3,798,000 and $2,098,000, respectively.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses for the six month period ended
July 31, 1997 were $27,719,000 versus $17,026,000 for the prior period. As a
percentage of revenues, these expenses decreased from 22% in the prior year
period to 21% in the first six months of fiscal 1998 due primarily to higher
incremental revenue. Marketing, general and administrative expenses increased
$10,693,000 versus the prior period due primarily a significant increase in the
reserve for sales allowances and the expansion of the worldwide customer service
and sales organizations, particularly in Mexico, the United Kingdom and the Far
East, as well as increased staffing to support the overall growth of the
Company's business.
-10-
<PAGE>
<PAGE>
Net Interest (Expense) Income
Interest income for the six months ended July 31, 1997 increased by $64,000 to
$415,000 due primarily to higher average cash balances. Interest expense for
the first six months of fiscal 1998 increased by $302,000 to $755,000 as a
result of borrowings against the Company's line of credit. The Company expects
to continue to borrow against its line of credit in the future and incur
interest expense that is higher than past periods.
Other Expense, Net
Other expense decreased $313,000 to $210,000 for the six months ended July 31,
1997 due primarily to the Company's portion of the income generated by the
joint venture prior to the May 31, 1997 sale of the Company's share of the joint
venture, partially offset by a foreign exchange loss.
Provision for Income Taxes
The effective tax rate for the six months ended July 31, 1997 (before the
effect of the AT&T warrant exercise) and 1996 was 35%. During the second
quarter of fiscal 1998, the Company realized a one time tax benefit of
$3,976,000 associated with the July 30, 1997 exercise of 981,760 warrants by
AT&T. The Company determined that the realization of this tax benefit became
more likely than not during the second quarter of fiscal 1998. No benefit has
been recognized for unexercised warrants. The tax benefit associated with
future exercises of warrants by AT&T is contingent upon the timing of the
exercise of the warrants and the stock value at that time. The Company expects
its normal tax rate to remain at approximately 35% throughout the remainder of
fiscal 1998.
Liquidity and Capital Resources
The Company has funded its operations to date primarily through cash flow from
operations and its bank lines of credit. At July 31, 1997 and January 31, 1997,
the Company had available cash and cash equivalents of $38,146,000 and
$14,032,000, respectively, and working capital of $75,572,000 and $40,411,000,
respectively. The Company increased its revolving credit facility with two
banks from $35,000,000 to $60,000,000. Borrowings are collateralized by the
Company's accounts receivable and inventories and bear interest at the prime
rate (8.5% at July 31, 1997) or the LIBOR rate plus 175 basis points. The
credit facility is scheduled to expire on November 19, 1998. 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 had borrowings under its revolving
credit facilities of $10,000,000 outstanding at July 31, 1997. The Company
also has available uncollateralized lines of credit for forward foreign exchange
contracts with three banks. There was no outstanding balance on these lines of
credit at July 31, 1997. From time to time, the Company grants its customers
extended payment terms and, upon occasion, sells those accounts receivable
without recourse. During the quarter ended July 31, 1997, the Company sold
$18 million of receivables without recourse.
Net cash provided by operating activities for the six months ending July 31,
1997 was $15,392,000. In the six months ending July 31, 1997, net cash
provided by operating activities consisted primarily of net income of
$16,464,000, an increase in accrued expenses of $9,433,000 and an increase in
deferred revenue of $7,497,000, offset by an increase in accounts receivable
of $12,024,000 and an increase in prepaid expenses and other current assets of
$6,496,000.
Net cash used in investing activities for the six months ending July 31, 1997
was $13,147,000. This reflects primarily purchases of property and equipment
of $13,428,000, consisting primarily of computer workstations and test
equipment, as a result of increased headcount and growth of revenues.
Net cash provided by financing activities for the six months ending July 31,
1997 was $20,162,000. This reflects net borrowings made under the revolving
credit agreements of $10,000,000, and proceeds from exercise of common
stock options of $10,126,000.
The Company believes that its cash and cash equivalents, 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, 1998.
Certain Factors That May Affect Future Operating Results
The reader should consider the following important factors, among others,
which in some cases have affected, and in the future could affect, the Company's
actual results and could cause the Company's 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, a substantial portion of the Company's revenues have been
attributed to a limited number of customers. The Company expects to continue
to rely on a limited number of customers for a significant portion of its
revenue. In addition, 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. 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.
-11-
<PAGE>
<PAGE>
The Company's industry is subject to rapid technological change. 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-requested custom software enhancements required in the
normal course of product delivery. The Company's products involve
sophisticated hardware and software technology platforms that perform critical
functions to highly demanding standards. There can be no assurance the
Company's current or future products will not develop operational problems,
which could have a material adverse effect on the Company. In addition, 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 43% of
revenues for the first six months of fiscal 1998, 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 resulting in greater difficulty in accounts
receivable collection. In addition, while the Company's products are designed
to meet the regulatory standards of foreign markets, any inability to obtain
foreign regulatory approvals or to meet other required standards on a timely
basis could have a material adverse effect on the Company's operating results.
As a result of the expected 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 expected
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.
Although backlog has increased compared to the prior year period, historically,
the Company has operated with minimal backlog. While the increased backlog 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. Other factors that may impact the Company's ability
to convert backlog into revenues for any given quarter are development efforts
that may span several quarters, the ability to secure hardware components from
single source suppliers and the fact that orders may be canceled or delivery
schedules modified. The Company has also experienced a pattern of recording
the majority of its quarterly revenues in the third month of the quarter.
The Company sells substantially all of its products to companies in the
telecommunication industry. This industry is undergoing significant change as
a result of deregulation and privatization worldwide, reducing restrictions on
competition in the industry. Unforeseen changes in the regulatory environment
may have an impact on the Company's revenues and/or costs in any given part of
the world. The worldwide enhanced services systems industry is already highly
competitive and the Company expects competition to intensify. 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 the Company, may enter
the enhanced services systems markets.
Certain components of the Company's products are currently purchased from a
single source, and, although the Company believes that alternate sources are
available, any interruption or discontinuation in the supply of such components
could adversely affect the Company's operating results.
The Company's growth and success depend upon its ability to attract, motivate
and retain highly skilled employees, especially technical employees and key
executives. Qualified technical employees are in great demand and are
likely to remain a limited resource for the foreseeable future. There can be
no assurance the Company will be successful in hiring and retaining the
required personnel.
The growth of the Company has placed and is expected to continue to place
significant demands on the Company's operational, administrative and financial
resources. There can be no assurance the Company will be able to maintain its
historic growth rate or that any future growth will not have a material
adverse effect on the Company.
The Company's ability to compete effectively will depend to a significant extent
on its ability to protect its proprietary rights and operate without infringing
the proprietary rights of others, and there can be no assurance the Company will
be able to do so. In addition, any litigation involving such proprietary rights
could have a material adverse effect on the Company.
-12-
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Reference is made to the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1997 for a description of certain legal
proceedings (Civil Action Nos. 95-CV-7236, 95-CV-7295 and 95-CV-7317) commenced
in the United States District Court for the Eastern District Court for Eastern
District of Pennsylvania against the Company and certain of its current and
former officers and directors alleging violations of Section 10(b) of the
Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder. On
November 14, 1996, the United States District Court of the Eastern District of
Pennsylvania ordered the cases transferred to the United States District court
for the District of Massachusetts. On January 19, 1997, the defendants filed a
Motion to Dismiss on the grounds that the Amended Complaint fails to state a
claim under the relevant sections of the Securities Exchange Act of 1934, and
under the law as applied by the United States Court of Appeals for the First
Circuit. Oral argument was held on the Motion to Dismiss and the Plaintiffs
Reply to the Motion on March 20, 1997. At the time of the oral argument the
court indicated that it expected to render a decision by August, 1997, however,
it has not yet done so. Boston Technology and the defendants continue to deny
the allegations and will continue to contest these cases vigorously. The outcome
of this lawsuit is neither probable nor estimable; accordingly, no loss
provision has been made for this lawsuit.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults upon Senior Securities
Not applicable.
-13-
<PAGE>
<PAGE>
ITEM 4. Submission of matters to Vote of Security Holders
At the Annual Meeting of Stockholders on June 25, 1997, the Company's
stockholders adopted the following proposals by the votes specified below.
<TABLE>
<CAPTION>
. Against or Broker
Proposal For Withheld Abstain non-votes
1.To elect seven directors for the ensuing year:
<S> <C> <C> <C> <C>
Greg C. Carr 21,720,843 --- 345,965 ---
Richard J. Connaughton 21,718,905 --- 347,903 ---
Francis E. Girard 21,715,355 --- 351,453 ---
Herman B. Leonard 21,719,573 --- 347,235 ---
Joseph E. Norberg 21,718,793 --- 348,015 ---
Robert J. Slezak 21,715,473 --- 351,335 ---
Richard K. Snelling 21,716,213 --- 350,595 ---
2. To approve an Amendment to the Company's
1996 Stock Incentive Plan as described in the
Proxy Statement 11,171,494 3,756,925 60,047 7,078,342
3. To approve an Amendment to the Company's
1995 Employee Stock Purchase Plan as described
in the Proxy Statement. 14,522,187 406,792 59,487 7,078,342
4. To approve an Amendment to the Company's
1995 Director Stock Option Plan as described in
the Proxy Statement. 13,758,831 1,119,129 110,506 7,078,342
</TABLE>
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports
(a) Exhibits
The exhibits listed in the Exhibits Index are filed as part of or included in
this report.
(b) Reports on Form 8-K
None.
-14-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 25, 1997
BOSTON TECHNOLOGY, INC.
By: /s/ Carol B. Langer
Carol B. Langer
Senior Vice President of Finance,
Chief Financial Officer,
Treasurer and Secretary
-15-
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Title
10.22 $60,000,000 Revolving Credit Agreement dated
July 17, 1997 between Registrant and Corestates Bank
and other financial institutions.
11 Statement Re: Weighted Shares used in Computation
of Earnings per Share
27 Financial Data Schedule
-16-
<PAGE>
REVOLVING CREDIT AGREEMENT
Dated as of July 17, 1997
among
BOSTON TECHNOLOGY, INC., and
ENHANCED COMMUNICATIONS CORPORATION, as Borrowers
and
CORESTATES BANK, N.A., as Agent
and
VARIOUS FINANCIAL INSTITUTIONS NOW OR HEREAFTER
PARTIES HERETO, as Lenders
______________________________
$60,000,000 Revolving Credit Commitment
________________________________
<PAGE>
<PAGE>
TABLE OF CONTENTS
Section 1. Loans 1
1.1 Loans. 1
1.2. Lending Offices. 1
1.3. Termination of Commitment 1
1.4. Notes 2
1.5. Several Obligations; Remedies Independent 2
1.6. Fees 2
Section 2. Borrowings, Conversions and Prepayments, Payments of
Principal
and Interest. 2
2.1. Borrowings 2
2.2. Prepayments and Conversions 3
2.3. Mandatory Prepayment 3
2.4. Repayment of Loans 4
2.5. Interest. 4
Section 3. Payments; Pro Rata Treatment; Computation, Etc. 5
3.1. Payments 5
3.2. Payments Due on Saturdays, Sundays and Holidays 5
3.3. Pro Rata Treatment. 5
3.4. Computations 5
3.5. Minimum and Maximum Amounts; Types 5
3.6. Certain Notices 6
3.7. [Intentionally Omitted] 6
3.8. Sharing of Payments; Waiver of Enforcement
Without Consent, Etc. 7
3.9. Withholding Tax Exemption 8
Section 4. Yield Protection and Illegality. 8
4.1. Additional Costs 8
4.2. Limitation on Types of Loans 9
4.3. Illegality. 9
4.4. Substitute Base Rate Loans. 10
4.5. Compensation 10
4.6. Capital Adequacy 10
Section 5. Letters of Credit 12
5.1. Letter of Credit Commitment. 12
5.2. Issuance, Etc. 12
Section 6. Security 16
6.1. Grant of Security Interests 16
Section 7. Conditions Precedent 16
7.1. Conditions Precedent to Extensions of Credit 16
7.2. Conditions Precedent to Initial Extension of Credit. 16
Section 8. Representations and Warranties 18
8.1. Corporate Status 18
8.2. No Violation 18
8.3. Corporate Power and Authority 18
8.4. Enforceability 18
8.5. Governmental Approvals 19
8.6. Financial Statements 19
8.7. No Material Change 19
8.8. Litigation 19
8.9. Compliance with Other Instruments; Compliance
with Law 19
8.10. Subsidiaries 20
8.11. Investment Company Status; Limits on Ability to
Incur Indebtedness 20
8.12. Title to Property 20
8.13. ERISA 20
8.14. Taxes 20
8.15. Environmental Matters 20
8.16. Intellectual Property 21
8.17. Solvency. 21
8.18. Disclosure Generally. 21
Section 9. Affirmative Covenants 22
9.1. Maintenance of Existence and Properties 22
9.2. Taxes and Other Liens 22
9.3. Insurance 22
9.4. Financial Statements, Etc 22
9.5. Notice of Default 24
9.6. Environmental Matters 24
9.7. ERISA Information 25
9.8. Inspection 25
9.9. Use of Proceeds 25
9.10. Further Assurances 25
9.11. Depository Accounts 26
9.12. Subsidiaries 26
9.13. Compliance with Laws 26
Section 10. Negative Covenants 26
10.1. ERISA 26
10.2. Transactions with Affiliates 26
10.3. Consolidation, Merger or Acquisition 26
10.4. Disposition of Assets; Sales-Type Leases 27
10.5. Indebtedness 27
10.6. Liens 28
10.7. Restricted Payments 28
10.8. Investments 28
10.9. Sale and Leaseback 29
10.10. Additional Stock Issuance by Subsidiaries 30
10.11. Quick Ratio 30
10.12. Minimum Fixed Charge Coverage Ratio. 30
10.13. Leverage 30
10.14. Tangible Net Worth 30
10.15. Guarantees 30
Section 11. Events of Default 30
11.1. Events of Default 30
11.2. Remedies Upon an Event of Default 33
Section 12. Agent 33
12.1. Appointment and Authorization 33
12.2. Duties and Obligations. 33
12.3. The Agent as a Lender. 34
12.4. Independent Credit Decisions. 34
12.5. Indemnification. 35
12.6. Successor Agent. 35
12.7. Allocations Made By Agent. 35
Section 13. Definitions 35
13.1. Certain Definitions. 35
13.2. Accounting Terms and Definitions. 47
13.3. Currency Equivalents. 47
Section 14. Miscellaneous 48
14.1. Amendments, Etc. 48
14.2. Notices, Etc 48
14.3. No Waiver; Remedies 48
14.4. Expenses; Indemnification 49
14.5. Binding Effect 49
14.6. Participation and Assignment. 49
14.7. Lenders' Obligations Several; Independent Nature of
Lenders' Rights. 50
14.8. Joint and Several Obligations. 51
14.9. The Company as Agent for Borrowers. 51
14.10. Severability 51
14.11. Judgment Currency. 52
14.12. GOVERNING LAW; AGREEMENT UNDER SEAL 52
14.13. WAIVER OF JURY TRIAL 52
14.14. VENUE, CONSENT TO SERVICE OF PROCESS. 52
14.15. Headings 53
14.16. Counterparts 53
Exhibits
A Form of Promissory Note
B Notice of Borrowing
C Compliance Certificate
D Security Agreement
E Administrative Questionnaire
Schedules
1 Commitments of the Lenders
2 Disclosure Schedule
3 Existing Letters of Credit
<PAGE>
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT (the "Agreement"),
dated as of July 17, 1997, among BOSTON TECHNOLOGY, INC., a
Delaware corporation with its principal place of business at 100
Quannapowitt Parkway, Wakefield, Massachusetts 01880 (the "Company"),
ENHANCED COMMUNICATIONS CORPORATION, a Delaware
corporation with its principal place of business at 100 Quannapowitt
Parkway, Wakefield, Massachusetts 01880 ("ECC", together with the
Company, each a "Borrower" and collectively the "Borrowers"),
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"); the other
financial institutions listed on Schedule 1 hereto and CORESTATES
BANK, N.A. as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Agent"). Certain capitalized terms used
herein are defined in Section 13.
WHEREAS, the Borrowers have requested the Lenders to extend
credit in the form of loans and letters of credit, and the Lenders are willing
to make loans to the Borrowers and the Issuing Bank is willing to issue
Letters of Credit, in each case on the terms subject to the conditions set
forth herein.
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1. Loans.
1.1. Loans.
(1) Upon the terms and subject to the conditions set forth
below, each of the Lenders severally agrees to make loans (each a "Loan"
and, collectively, the "Loans") to the Borrowers (i) in Dollars as Base Rate
Loans or Eurodollar Loans, or (ii) (subject to the following sentence) in an
Alternative Currency as Multicurrency Loans, from time to time to but
excluding the Maturity Date (as hereinafter defined), unless the
Commitments are earlier terminated as provided herein, in an unpaid
aggregate principal amount not to exceed at any time, for any Lender, its
Commitment, less such Lender's Commitment Percentage of the aggregate
Letter of Credit Liabilities at such time (such Lender's "Available
Commitment"). Notwithstanding the foregoing, the equivalent in Dollars
of the aggregate outstanding principal amount of all Multicurrency Loans
by the Lenders shall not at any time exceed the Multicurrency Sublimit.
Subject to the terms and conditions of this Agreement, until the Maturity
Date or the date the commitments are earlier terminated as provided herein,
the Borrowers may borrow, repay and reborrow the amount of the
Commitments by means of Base Rate Loans, Eurodollar Loans or
Multicurrency Loans, and may convert Loans of one Type into Loans of
another Type (subject as provided herein) or continue Eurodollar Loans or
Multicurrency Loans, as the case may be, for subsequent Interest Periods.
1.2. Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending
Office for Loans of such Type.
-1-
<PAGE>
<PAGE>
1.3. Termination of Commitment. Upon at least three (3)
Banking Days' prior irrevocable written or telecopy notice to the Agent, the
Borrowers may at any time in whole permanently terminate, or from time to
time in part permanently reduce, the Commitments; provided, however, that
(i) each partial reduction of the Commitments shall be in an integral
multiple of $3,000,000 and in a minimum amount of $3,000,000 (or its
equivalent in Dollars); (ii) the Commitments shall not be reduced to an
amount that is less than the sum of (x) the aggregate outstanding principal
amount of all Base Rate Loans and Eurodollar Loans, plus (y) the
equivalent in Dollars of the aggregate outstanding principal amount of all
Multicurrency Loans, plus (z) the aggregate amount of all Letter of Credit
Liabilities at such time.
1.4. Notes. The Loans made by each Lender shall be evidenced
by a promissory note of the Borrowers payable to the order of such Lender
in substantially the form of Exhibit A attached and otherwise appropriately
completed (collectively, the "Notes"). Each Lender is hereby authorized by
the Borrowers to endorse on the schedule (or a continuation thereof)
attached to the Note of such Lender, to the extent applicable, the date,
amount and Type of and the Interest Period (if any) for each Loan made by
such Lender to the Borrowers hereunder, and the date and amount of each
payment or prepayment of principal of such Loan received by such Lender,
provided that any failure by such Lender to make any such endorsement
shall not affect the obligations of the Borrowers under such Note or
hereunder in respect of such Loan.
1.5. Several Obligations; Remedies Independent. The failure of
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither the Agent nor any Lender shall be responsible for the
failure of any other Lender to make a Loan to be made by such other
Lender. The amounts payable by the Borrowers at any time hereunder and
under the Notes to each Lender shall be a separate and independent debt
and each Lender shall be entitled to protect and enforce its rights arising out
of this Agreement and the Notes, and it shall not be necessary for any other
Lender or the Agent to consent to, or be joined as an additional party in, any
proceedings for such purposes.
1.6. Fees. The Borrowers shall pay to the Agent for the account
of each Lender non-refundable commitment fees on the daily average
unused amount of such Lender's Commitment (for which purpose such
Lender's Commitment Percentage of any Letter of Credit Liabilities shall
be deemed to be a use of each Lender's Commitment) for the period from
the Closing Date to and including the earlier of the date the Commitments
are terminated and the Maturity Date, of 1/4 of 1% per annum calculated on
the basis of a year of 360 days and actual number of days elapsed. Accrued
commitment fees under this Section 1.6 shall be payable on the Quarterly
Dates and on the earlier of the date the Commitments are terminated and
the Maturity Date. The Borrowers shall pay to the Agent on the Closing
Date and on each anniversary thereof, so long as any of the Commitments
are in effect and until payment in full of all Loans hereunder, all interest
thereon and all other amounts payable hereunder, an annual agency fee in
the amount heretofore mutually agreed in writing.
Section 2. Borrowings, Conversions and Prepayments, Payments of
Principal and Interest.
2.1. Borrowings. The Borrowers shall give the Agent notice of
each Loan to be made hereunder as provided in Section 3.6 hereof. Not
later than 10:00 A.M. Philadelphia time on the date specified for each such
borrowing, each Lender shall make available the amount of the Loan to be
made by it on such date to the Agent for account of the Borrowers, at a
deposit account specified by the Agent, if in respect of Base Rate Loans or
Eurodollar Loans in Dollars and immediately available funds, and, if in
respect of Multicurrency Loans, in the requested Alternative Currency and
in such funds as shall be customary in the country of issue of such
Alternative Currency for the settlement of international payments in such
currency. The amount so received by the Agent shall, subject to the terms
and conditions of this Agreement, be made available to the Borrowers by
depositing the same, in immediately available funds, in an account of the
Borrowers designated by the Borrowers with the Agent or its affiliates or
correspondents.
-2-
<PAGE>
<PAGE>
2.2. Prepayments and Conversions.
(1) Optional Prepayments and Conversions.
(1) The Borrowers shall have the right to prepay the
Loans of any Type in whole or in part, without premium or penalty,
at any time and from time to time; provided that (i) at the time of the
prepayment of any Loan, the Borrowers shall pay all interest
accrued on the amount prepaid; (ii) the Borrowers shall give the
Lenders notice of such prepayment as provided in Section 3.6; and
(iii) if any Eurocurrency Loan is prepaid other than on the last day
of an Interest Period therefor the Borrowers shall, at the time of
such prepayment, pay all amounts due with respect of such
prepayment under Section 4.5.
(2) The Borrowers shall have the right to convert Base
Rate Loans into Eurodollar Loans and vice versa, at any time and
from time to time; provided that (i) the Borrowers shall give the
Lenders notice of such conversion as provided in Section 3.6; and
(ii) Eurodollar Loans may be converted into Base Rate Loans only
on the last day of an Interest Period thereof.
(3) In order to redenominate the currency of any
Multicurrency Loans into Dollars or another Alternative Currency
available hereunder, the Borrowers shall give notice of prepayment
in whole of such Multicurrency Loans pursuant to Section 3.6 and
of a request for a borrowing in Dollars or in another Alternative
Currency available hereunder in accordance with Section 3.6, and
the Lenders shall, but only on the terms and conditions set forth
herein, make Loans to the Borrowers on the date of such
prepayment of whole of, and in an amount in Dollars or such other
Alternative Currency then equivalent to the amount of, such
outstanding Multicurrency Loans.
2.3. Mandatory Prepayments
(1) If on any date the sum of (x) the aggregate
outstanding principal amount of all Base Rate Loans and Eurodollar Loans,
plus (y) the equivalent in Dollars of the aggregate outstanding principal
amount of all Multicurrency Loans, plus (z) the aggregate amount of all
Letter of Credit Liabilities, shall exceed the aggregate Commitments then in
effect, the Borrowers shall prepay Loans on the next Banking Day in an
amount sufficient to eliminate such excess together with accrued interest
thereon, and any amount payable in respect thereof under Section 4.5.
-3-
<PAGE>
<PAGE>
(2) If on any date the equivalent in Dollars of the
aggregate outstanding principal amount of all Multicurrency Loans shall
exceed the aggregate Multicurrency Sublimit, the Borrowers shall prepay
Multicurrency Loans within two Banking Days in an amount sufficient to
eliminate such excess, together with accrued interest thereon, and any
amount payable in respect thereof under Section 4.5.
2.4. Repayment of Loans. The Borrowers hereby promise to pay
to the Agent for the account of each Lender the entire outstanding principal
amount of such Lender's Loans, and each Loan shall mature, on July 17,
1999; provided, however, that such maturity date shall be extended to July
17, 2000, if, prior to May 17, 1998 (but not before January 1, 1998) (i) the
Borrowers shall, by written notice to the Agent and the Lenders, request
such extension, and (ii) each of the Lenders shall have consented in writing
to the request for such extension (such maturity date, as it may be extended
as provided herein, the "Maturity Date").
2.5. Interest.
(1) The Borrowers agree to pay interest on the unpaid
principal amount of each Loan for each day from and including the date
such Loan was made to but excluding the date the principal on such Loan is
due (whether at maturity, by acceleration or otherwise), at the following
rates per annum:
(1) for Base Rate Loans, at the Base Rate;
(2) for Eurodollar Loans, at the Eurodollar Rate plus 175
basis points per annum; and
(3) for Multicurrency Loans, at the Multicurrency Rate
plus 200 basis points per annum.
Notwithstanding the foregoing, the Borrowers will pay to the
Lenders interest at the applicable Post-Default Rate on any principal of any
Loan and on any other amount payable by the Borrowers 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.
(2) Accrued interest on each Base Rate Loan shall be
payable monthly in arrears on the first Banking Day of each calendar
month. Accrued interest on each Eurocurrency Loan shall be payable on
the last day of each Interest Period therefor; provided that if such Interest
Period for such Eurocurrency Loan is six (6) months, accrued interest shall
be payable on the ninetieth (90th) day and on the last day of such Interest
Period. In any event, accrued interest on each Base Rate Loan, Eurodollar
Loan or Multicurrency Loan shall be payable upon the payment,
prepayment or conversion thereof, but only on the principal so paid or
prepaid or converted; provided that when the terms of this Agreement
require that interest be paid at the Post-Default Rate, such interest shall be
payable from time to time on demand of the Agent. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Agent shall notify the Borrowers thereof.
-4-
<PAGE>
<PAGE>
Notwithstanding the foregoing provisions of this Section 2.5, 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 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 Loans hereunder by any Lender, the principal amount of the 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 Loans by such Lender
hereunder equals the amount of interest which would have been paid to
such Lender or accrued on the 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 Loans if the
Stated Rate had at all times been in effect, then the Borrowers 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 Loans if the Maximum Rate had at all times
been in effect or (ii) the amount of interest which would have accrued on
the 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 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 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 Borrowers.
Section 3. Payments; Pro Rata Treatment; Computation, Etc.
3.1. Payments. All payments made by the Borrowers (i) under
this Agreement or the Notes on account of principal of or interest on any
Multicurrency Loans shall be made in the Alternative Currency in which
such Loans are then denominated, to the Agent at the office designated by
the Agent located in the country of issue of such Alternative Currency, not
later than 12:00 noon (local time) on the date when due in such funds as
shall be customary in such country for the settlement of international
payments in such Alternative Currency, and (ii) under this Agreement on
account of any other amounts payable hereunder, shall be made in Dollars,
not later than 12:00 noon (Philadelphia Time) on the date when due in
immediately available funds at the principal office of the Agent in
Philadelphia, Pennsylvania. All payments shall be made without setoff,
counterclaim, withholding or reduction of any kind whatsoever
3.2. 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.
-5-
<PAGE>
<PAGE>
3.3. Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each borrowing from the Lenders under Section 2.1
hereof shall be made from the Lenders, each payment of commitment fees
under Section 1.6 hereof shall be made for the account of the Lenders, and
each termination or reduction of the Commitments under Section 1.3 hereof
shall be applied to the Commitments of the Lenders, pro rata according to
the Lenders' respective percentages of the Commitments, (b) each payment
by the Borrowers of principal or interest on Loans of a particular Type
(other than payments in respect of Loans of individual Lenders provided for
by Section 4.1 hereof) shall be made to the Agent for the account of the
Lenders pro rata in accordance with the respective unpaid principal
amounts of such Loans held by the Lenders and (c) each conversion of
Loans of a particular Type (other than conversions of Loans of individual
Lenders pursuant to Section 4.4 hereof) shall be made pro rata among the
Lenders in accordance with the respective principal amounts of such Loans
held by the Lenders.
3.4. Computations. Interest on the 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.
3.5. Minimum and Maximum Amounts; Types.
(1) Each borrowing, conversion and prepayment of
principal of Loans shall be in an aggregate principal amount equal to (i) for
Base Rate Loans, $1,000,000 or a larger multiple of $100,000, (ii) for
Eurodollar Loans, $2,000,000 or a larger multiple of $100,000, and (iii) for
Multicurrency Loans, the Dollar equivalent of the applicable Alternative
Currency equal to $2,000,000 or a larger multiple of $1,000,000, calculated
on the date of such borrowing, conversion or prepayment.
(2) In no event may the Borrowers have more than (i) six
(6) Tranches of Base Rate Loans, Eurodollar Loans and Multicurrency
Loans outstanding at any one time or (ii) four (4) Tranches of
Multicurrency Loans outstanding at any one time.
3.6. Certain Notices. Notices to the Agent of termination or
reduction of the Commitments, borrowings of Loans, conversions of Base
Rate Loans into Eurodollar Loans and vice versa, and prepayments of
Loans and of the duration of Interest Periods, shall be irrevocable and shall
be effective only if received by the Agent not later than 10:00 A.M.
(Philadelphia time) on the number of Banking Days prior to the date of the
termination, borrowing, conversion and/or prepayment specified below:
-6-
<PAGE>
<PAGE>
Action
Minimum Notice
Termination or reduction of
Commitment
3 Banking Days
Borrowings or prepayments of Base
Rate Loans
1 Banking Day
Borrowings or prepayments of
Eurocurrency Loans, conversions of
Eurodollar Loans into Base Rate
Loans, conversions of Base Rate
Loans into Eurodollar Loans, or
duration of Interest Periods for
Eurocurrency Loans
3 Banking Days
Each notice of borrowing, conversion or prepayment shall specify, the
amount, the Type of the Loan to be borrowed, converted or prepaid, the
date of borrowing, conversion or prepayment (which shall be a Banking
Day) and, in the case of Eurodollar Loans or Multicurrency 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
Eurodollar Loans or the Multicurrency Loans to which such Interest Period
is to relate. In the event that the Borrowers fail to select the duration of
any Interest Period for Eurodollar Loans within the time period and otherwise
as provided in this Section 3.6, such Eurodollar Loan will be automatically
converted into a Base Rate Loans on the last day of the then current Interest
Period for such Eurodollar Loans or (if outstanding as Base Rate Loans)
will remain as, or (if not then outstanding) will be made as Base Rate
Loans. In the event that the Borrowers fail to select the duration of any
Interest Period for Multicurrency Loans within the time period and
otherwise as provided in this Section 3.6, a one-month Interest Period shall
automatically be deemed to have been selected for such Multicurrency
Loans.
3.7. [Intentionally Omitted]
3.8. Sharing of Payments; Waiver of Enforcement Without
Consent, Etc.
(1) The Borrowers agree that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender
may otherwise have, each Lender shall be entitled, at its option, to offset
balances held by it for the account of any of the Borrowers at any of its
offices, in Dollars or in any other currency, against any principal of or
interest on any of such Lender's Loans or Reimbursement Obligations to
the Borrowers hereunder, or any other obligation of the Borrowers
hereunder, which is not paid when due (regardless of whether such balances
are then due to the Borrowers), in which case it shall promptly notify the
Borrowers and the Agent thereof, provided that such Lender's failure to
give such notice shall not affect the validity thereof. The Borrowers agree,
to the fullest extent they may effectively do so under applicable law, that
any Person purchasing a participation in the Loans made, or other
obligations held, by another Person, whether or not acquired pursuant to the
foregoing arrangements, may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully as
if such Lender were a direct holder of Loans or other obligations in the
amount of such participation.
-7-
<PAGE>
<PAGE>
(2) If a Lender shall obtain payment of any principal of
or interest on any Loan made by it under this Agreement, or on any other
obligation then due to such Lender hereunder, through the exercise of any
right of set-off, banker's lien, counterclaim or similar right, or otherwise,
it shall promptly notify the Agent and purchase from the other Lenders
participations in the Loans made, or other obligations held, by the other
Lenders in such amounts, and make such other adjustments from time to
time as shall be equitable to the end that all the Lenders shall share the
benefit of such payment (net of any expenses which may be incurred by
such Lender in obtaining or preserving such benefit) pro rata in accordance
with the unpaid principal and interest on the Loans or other obligations then
due to each of them. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be restored
(including the payment of interest to the extent that the Lender obligated to
return such funds is obligated to return interest).
(3) Nothing contained herein shall require any Lender to
exercise any right of set-off, banker's lien, counterclaim or similar right or
shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or
obligation of the Borrowers.
(4) This Section 3.8 is for the benefit of the Lenders only
and does not constitute a waiver of any rights against the Borrowers or any
of its Subsidiaries or against any property held as security for any
obligations hereunder or under any other Loan Document.
3.9. Withholding Tax Exemption. At least five Banking Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws
of the United States of America or a state thereof agrees that it will deliver
to each of the Borrowers and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in
either case that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United
States federal income taxes. Each Lender which so delivers a Form 1001 or
4224 further undertakes to deliver to each of the Borrowers and the Agent
two additional copies of such form (or a successor form) on or before the
date that such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrowers or the Agent, in each case certifying
that such Lender is entitled to receive payments under this Agreement and
the Notes without deduction or withholding of any United States federal
income taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the
Borrowers and the Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income tax.
-8-
<PAGE>
<PAGE>
Section 4. Yield Protection and Illegality.
4.1. Additional Costs.
(1) The Borrowers 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
Eurocurrency Loans hereunder or its obligation to make any of such
Eurocurrency Loans hereunder, or any reduction in any amount receivable
by such Lender hereunder in respect of any Eurocurrency 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 held by such
Lender in respect of any Eurocurrency 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 Eurocurrency Loan or any deposits referred to in the
definition of "Eurodollar Rate" or "Multicurrency Rate" below); or
(3) imposes any other condition affecting this Agreement
or any Note (or any of such extensions of credit or liabilities).
Each Lender will notify the Borrowers and the Agent of any event
occurring after the date of this Agreement which will entitle such Lender to
compensation pursuant to this Section 4.1 as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
Such Lender will furnish the Borrowers and the Agent with a statement, in
reasonable detail, setting forth the basis and amount of each request by such
Lender for compensation under this Section 4.1.
(2) Without limiting the effect of the foregoing
provisions of this Section 4.1 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 Eurocurrency Loans is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Lender which includes Eurocurrency 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
Borrowers, the obligation of such Lender to make Eurocurrency Loans
hereunder shall be suspended until the date such Regulatory Change ceases
to be in effect.
(3) Determinations and allocations by any Lender for
purposes of this Section 4.1 of the effect of any Regulatory Change on its
costs of maintaining its obligations to make Eurocurrency Loans or of
making or maintaining Eurocurrency Loans or on amounts receivable by it
in respect of Eurocurrency Loans, and of the additional amounts required to
compensate such Lender in respect of any Additional Costs, shall be
conclusive 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 Borrowers
for different treatment but shall deal with them on the same basis as the
Lender deals with its other customers generally.
-9-
<PAGE>
<PAGE>
4.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, with respect to any Eurocurrency Loans, any
Lender determines (which determination shall be conclusive) that the
relevant rates of interest referred to in the definition of "Eurodollar Rate"
or "Multicurrency Rate" in Section 13 below upon the basis of which the rates
of interest for any Eurocurrency Loan are to be determined do not
accurately reflect the cost to such Lender of making or maintaining such
Eurocurrency Loans for the Interest Period therefor (including the cost of
obtaining any relevant Alternative Currency), then such Lender shall
promptly notify the Borrowers, and so long as such condition remains in
effect, such Lender shall be under no obligation to make Eurocurrency
Loans or to convert Base Rate Loans into Eurodollar Loans and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurocurrency Loans, either prepay such Eurocurrency
Loans or convert such Eurocurrency Loans (if Eurodollar Loans) into Base
Rate Loans in accordance with Section 2.2.
4.3. 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 Eurocurrency Loans hereunder,
or (b) maintain Eurocurrency Loans (identifying the illegality in question in
reasonable detail) hereunder, then such Lender shall promptly notify the
Borrowers and the other Lenders thereof and such Lender's obligation to
make Eurocurrency Loans hereunder shall be suspended until such time as
such Lender may again make and maintain Eurocurrency Loans.
4.4. Substitute Base Rate Loans. If the obligation of any Lender
to make Eurocurrency Loans shall be suspended pursuant to Section 4.1,
4.2 or 4.3 hereof, all Loans which would otherwise be made by such Lender
as Eurocurrency Loans shall be made instead as Base Rate Loans (and, if an
event referred to in Section 4.1(b) or 4.3 has occurred and such Lender so
requests, by notice to the Borrowers, (i) each Eurodollar Loan of such
Lender then outstanding shall be automatically converted into a Base Rate
Loan and (ii) the Multicurrency Loan of such Lender then outstanding shall
be prepaid on the date specified by such Lender in such notice) and, to the
extent that Eurocurrency Loans are so made as (or converted into) Base
Rate Loans, all payments of principal which would otherwise be applied to
such Eurocurrency Loans shall be applied instead to such Base Rate Loans.
4.5. Compensation. If any payment, prepayment or conversion
of a Eurocurrency Loan of any Lender occurs on a date other than the last
day of an Interest Period for such Loan, the Borrowers shall pay to such
Lender, upon its request, 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 D
---
360
-10-
<PAGE>
<PAGE>
where:
"A" equals the principal amount of the Eurocurrency Loan (or the
Dollar equivalent thereof, if payable in an Alternative Currency) so paid,
prepaid or converted (the "Affected Eurocurrency Loan");
"B" equals the Eurodollar Rate or the Multicurrency Rate
(expressed as a decimal) applicable to the Affected Eurocurrency Loan;
"C" equals the applicable Eurodollar Rate or the Multicurrency 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 Eurocurrency 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 Eurocurrency Loan;
provided that such Lender shall have delivered to the Borrowers a
certificate, in reasonable detail, as to the amount of such loss and expense
along with the basis for calculation thereof.
4.6. 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 ten (10)
Banking Days after demand by such Lender, the Borrowers 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 4.6 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 Borrowers shall not be obligated to compensate any Lender
for any such reduction occurring more than 90 days prior to the time the
Lender first notifies the Borrowers of such adoption, implementation,
charge or compliance, and provided further that in administering this
Section. In determining such amount, such Lender shall use reasonable
averaging and attribution methods.
-11-
<PAGE>
<PAGE>
4.7. Taxes. All payments hereunder and under the Notes shall be
made without set-off or counterclaim and free and clear of any deductions,
including deductions for Taxes, unless the Borrowers are required by law to
make such deductions. If (i) any Lender shall be subject to any Tax with
respect to any payment of principal, interest or other amount hereunder or
under any other Loan Documents or its obligations hereunder or (ii) the
Borrowers shall be required to withhold or deduct any Tax on any such
payment, within 15 days after the receipt by the Borrowers of a certificate
from such Lender setting forth why it is claiming compensation under this
Section 4.7 and computations (in reasonable detail) of the amount thereof,
the Borrowers shall pay to the Agent for such Lender's account such
additional amount as is necessary to enable such Lender to receive the
amount of Tax so imposed on the Lender's obligations hereunder or the full
amount of all payments which it would have received hereunder or under
any other Loan Documents in the absence of such Tax, as the case may be,
together with interest at the Post-Default Rate on such amount from the
15th day after receipt of such certificate until payment in full thereof.
Whenever Taxes must be withheld by the Borrowers with respect to any
payments hereunder or under any other Loan Documents, the Borrowers
shall promptly furnish to the Agent for the account of the applicable Lender
official receipts (to the extent that the relevant governmental authority
delivers such receipts) evidencing payment of any such Taxes so withheld.
If the Borrowers fail to pay any such Taxes when due or fail to remit to the
Agent for the account of the applicable Lender the required receipts
evidencing payment of any such Taxes so withheld or deducted, the
Borrowers shall indemnify the affected Lender for any incremental Taxes
and interest or penalties that may become payable by such Lender as a
result of any such failure. The determination by such Lender of the amount
of such Tax and the basis therefor shall, in the absence of manifest error, be
conclusive.
Section 5. Letters of Credit.
5.1. Letter of Credit Commitment. Subject to the terms and
conditions of this Agreement, the Commitments may be utilized, upon the
request of the Borrowers, in addition to the Loans provided for by Section
1.1 hereof, by the issuance by the Issuing Bank of standby letters of credit
(each a "Letter of Credit", and collectively with the Existing Letters of
Credit, "Letters of Credit") for account of the Borrowers, provided that in
no event shall (i) the aggregate amount of all Letter of Credit Liabilities,
together with the aggregate outstanding principal amount of the Base Rate
Loans and the Eurodollar Loans and the equivalent in Dollars of the
aggregate outstanding principal amount of the Multicurrency Loans, exceed
the aggregate amount of the Commitments as in effect from time to time,
(ii) the aggregate outstanding amount of all Letter of Credit Liabilities
(including the equivalent in Dollars of Letter of Credit Liabilities for
letters of credit denominated in Alternative Currency) exceed $15,000,000 and
(iii) the expiration date of any Letter of Credit extend beyond the earlier of
the Maturity Date and the date twelve months following the issuance of
such Letter of Credit (provided that any Letter of Credit with a twelve-
month tenor may provide for the renewal thereof for additional twelve-
month periods, which periods shall in any event not extend beyond the
Maturity Date). On the Closing Date, all Existing Letters of Credit shall
automatically, without any action on the part of any Person, be deemed to
be Letters of Credit issued and outstanding hereunder.
-12-
<PAGE>
<PAGE>
5.2. Issuance, Etc. The following additional provisions shall
apply to Letters of Credit:
(1) The Borrowers shall give the Agent at least three (3)
Banking Days' irrevocable prior notice (effective upon receipt) specifying
the Banking Day (which shall be no later than 30 days preceding the
Maturity Date) on which each Letter of Credit is to be issued and the
account party or parties therefor and describing in reasonable detail the
proposed terms of such Letter of Credit (including the beneficiary thereof)
and the nature of the transactions or obligations proposed to be supported
thereby. Upon receipt of any such notice, the Agent shall advise the Issuing
Bank of the contents thereof.
(2) On each day during the period commencing with the
issuance by the Issuing Bank of any Letter of Credit and until such Letter of
Credit shall have expired or been terminated, the Commitment of each
Lender shall be deemed to be utilized for all purposes of this Agreement in
an amount equal to such Lender's Commitment Percentage of the then
undrawn face amount of such Letter of Credit. Each Lender (other than the
Issuing Bank) agrees that, upon the issuance of any Letter of Credit
hereunder, it shall automatically acquire a participation in the Issuing
Bank's liability under such Letter of Credit in an amount equal to such
Lender's Commitment Percentage of such liability, and each Lender (other
than the Issuing Bank) thereby shall automatically absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and be unconditionally obligated to the Issuing Bank to pay and
discharge when due, its Commitment Percentage of the Issuing Bank's
liability under such Letter of Credit.
(3) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment under such Letter of Credit, the Issuing
Bank shall promptly notify the Borrowers (through the Agent) of the
amount to be paid by the Issuing Bank as a result of such demand and the
date on which payment is to be made by the Issuing Bank to such
beneficiary in respect of such demand. Notwithstanding the identity of the
account party of any Letter of Credit, the Borrowers hereby unconditionally
agree to pay and reimburse the Agent for account of the Issuing Bank for
the amount of each demand for payment under such Letter of Credit that is
in substantial compliance with the provisions of such Letter of Credit at or
prior to the date on which payment is to be made by the Issuing Bank to the
beneficiary thereunder, without presentment, demand, protest or other
formalities of any kind.
(4) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 5.2, the Borrowers shall advise the Agent
whether or not the Borrowers intend to borrow hereunder to finance their
obligation to reimburse the Issuing Bank for the amount of the related
demand for payment and, if they do, submit a notice of such borrowing as
provided in Section 3.6 hereof.
(5) Each Lender (other than the Issuing Bank) shall pay
to the Agent for account of the Issuing Bank at an account in Philadelphia,
Pennsylvania specified by the Agent in Dollars and in immediately
available funds the amount of such Lender's Commitment Percentage of
any payment under a Letter of Credit upon notice by the Issuing Bank
(through the Agent) to such Lender requesting such payment and specifying
such amount. Each such Lender's obligation to make such payment to the
Agent for account of the Issuing Bank under this paragraph (e), and the
Issuing Bank's right to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the failure of any other Lender to make its
payment under this paragraph (e), the financial condition of the Borrowers
(or any other account party), any failure to satisfy any condition precedent
to any Loan, the existence of any Default or the termination of the
Commitments. Each such payment to the Issuing Bank shall be made
without any offset, abatement, withholding or reduction whatsoever. If any
Lender shall default in its obligation to make any such payment to the
Agent for account of the Issuing Bank, for so long as such default shall
continue the Agent may at the request of the Issuing Bank withhold from
any payments received by the Agent under this Agreement or any Note for
account of such Lender the amount so in default and, to the extent so
withheld, pay the same to the Issuing Bank in satisfaction of such defaulted
obligation.
-13-
<PAGE>
<PAGE>
(6) Upon the making of each payment by a Lender to the
Issuing Bank pursuant to paragraph (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of the Agent, the Issuing Bank or such Lender, acquire (i) a
participation in an amount equal to such payment in the Reimbursement
Obligation owing to the Issuing Bank by the Borrowers hereunder and
under the Letter of Credit Documents relating to such Letter of Credit and
(ii) a participation in a percentage equal to such Lender's Commitment
Percentage in any interest or other amounts payable by the Borrowers
hereunder and under such Letter of Credit Documents in respect of such
Reimbursement Obligation (other than the commissions, charges, costs and
expenses payable to the Issuing Bank pursuant to paragraph (g) of this
Section 5.2). Upon receipt by the Issuing Bank from or for account of the
Borrowers of any payment in respect of any Reimbursement Obligation or
any such interest or other amount (including by way of setoff or application
of proceeds of any collateral security) the Issuing Bank shall promptly pay
to the Agent for account of each Lender entitled thereto such Lender's
Commitment Percentage of such payment, each such payment by the
Issuing Bank to be made in the same money and funds in which received by
the Issuing Bank. In the event any payment received by the Issuing Bank
and so paid to the Lenders hereunder is rescinded or must otherwise be
returned by the Issuing Bank, each Lender shall, upon the request of the
Issuing Bank (through the Agent), repay to the Issuing Bank (through the
Agent) the amount of such payment paid to such Lender, with interest at the
rate specified in paragraph (j) of this Section 5.2.
(7) The Borrowers shall pay the Issuing Bank, for the
account of each of the Lenders based upon their respective Commitment
Percentages, a fee with respect to each Letter of Credit issued in the amount
of 1.625% per annum of the face amount of such Letter of Credit. Such fee
shall be payable upon the issuance of such requested Letter of Credit and
shall be non-refundable.
(8) In addition, the Borrowers shall pay the Issuing
Bank, solely for its account, a fronting fee with respect to each Letter of
Credit issued in the amount of 1/8th of 1% per annum of the face amount of
such Letter of Credit. Such fee shall be payable upon the issuance of such
requested Letter of Credit and shall be non-refundable. The Borrower shall
also pay all commissions, charges, costs and expenses in the amounts
customarily charged by the Issuing Bank from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.
-14-
<PAGE>
<PAGE>
(9) Promptly following the end of each calendar month,
the Issuing Bank shall deliver (through the Agent) to each Lender and the
Borrowers a notice describing the aggregate amount of all Letters of Credit
outstanding at the end of such month. Upon the request of any Lender from
time to time, the Issuing Bank shall deliver any other information
reasonably requested by such Lender with respect to each Letter of Credit
then outstanding.
(10) The issuance by the Issuing Bank of each Letter of
Credit shall, in addition to the conditions precedent set forth in Section 7.1
hereof, be subject to the conditions precedent that (i) such Letter of Credit
shall be in such form, contain such terms and support such transactions as
shall be satisfactory to the Issuing Bank consistent with its then current
practices and procedures with respect to letters of credit of the same type
and (ii) the Borrowers shall have executed and delivered such applications,
agreements and other instruments relating to such Letter of Credit as the
Issuing Bank shall have reasonably requested consistent with its then
current practices and procedures with respect to letters of credit of the same
type, provided that in the event of any conflict between any such
application, agreement or other instrument and the provisions of this
Agreement or any Security Instrument, the provisions of this Agreement
and the Security Instruments shall control.
(11) To the extent that any Lender shall fail to pay any
amount required to be paid pursuant to paragraph (e) or (f) of this Section
5.2 on the due date therefor, such Lender shall pay interest to the Issuing
Bank (through the Agent) on such amount from and including such due date
to but excluding the date such payment is made at a rate per annum equal to
the Federal Funds Effective Rate, provided that if such Lender shall fail to
make such payment to the Issuing Bank within three Banking Days of such
due date, then, retroactively to the due date, such Lender shall be obligated
to pay interest on such amount at the Post-Default Rate. In no event shall
the Borrowers be required to pay any amount under this paragraph (k) of
this Section 5.2.
(12) The issuance by the Issuing Bank of any
modification or supplement to any Letter of Credit hereunder shall be
subject to the same conditions as are applicable under this Section 5.2 to the
issuance of new Letters of Credit, and no such modification or supplement
shall be issued hereunder unless either (i) the respective Letter of Credit
affected thereby would have complied with such conditions had it originally
been issued hereunder in such modified or supplemented form or (ii) each
Lender shall have consented thereto.
(13) The Borrowers hereby indemnify and hold harmless
each Lender (including the Issuing Bank) and the Agent from and against
any and all claims and damages, losses, liabilities, costs or expenses that
such Lender or the Agent may incur (or that may be claimed against such
Lender or the Agent by any Person whatsoever) by reason of or in
connection with the execution and delivery or transfer of or payment or
refusal to pay by the Issuing Bank under any Letter of Credit; provided that
the Borrowers shall not be required to indemnify any Lender or the Agent
for any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (x) the willful misconduct or gross
negligence of the Issuing Bank in determining whether a request presented
under any Letter of Credit complied with the terms of such Letter of Credit
or (y) in the case of the Issuing Bank, such Lender's failure to pay under
any Letter of Credit after the presentation to it of a request strictly
complying with the terms and conditions of such Letter of Credit. Nothing
in Section 5.1 or in this Section 5.2 is intended to limit the other obligations
of the Borrowers, any Lender or the Agent under this Agreement.
-15-
<PAGE>
<PAGE>
(14) Additional Costs in Respect of Letters of Credit.
Without limiting the obligations of the Borrowers under Section 4.6 hereof
(but without duplication), if as a result of any Regulatory Change or any
risk-based capital guideline or other requirement heretofore or hereafter
issued by any government or governmental or supervisory authority
implementing at the national level the Basle Accord there shall be imposed,
modified or deemed applicable any tax, reserve, special deposit, capital
adequacy or similar requirement against or with respect to or measured by
reference to Letters of Credit issued or to be issued hereunder and the result
shall be to increase the cost to any Lender or Lenders of issuing (or
purchasing participations in) or maintaining its obligation hereunder to
issue (or purchase participations in) any Letter of Credit hereunder or
reduce any amount receivable by any Lender hereunder in respect of any
Letter of Credit (which increases in cost, or reductions in amount
receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from
such event), then, upon demand by such Lender or Lenders (through the
Agent), the Borrowers shall pay immediately to the Agent for account of
such Lender or Lenders, from time to time as specified by such Lender or
Lenders (through the Agent), such additional amounts as shall be sufficient
to compensate such Lender or Lenders (through the Agent) for such
increased costs or reductions in amount. A statement as to such increased
costs or reductions in amount incurred by any such Lender or Lenders,
submitted by such Lender or Lenders to the Borrowers, shall be conclusive
in the absence of manifest error as to the amount thereof.
Section 6. Security
6.1. Grant of Security Interests. Payment and performance of all
of the Borrowers' 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 be secured by a first priority security interest in, and a lien
on, all right, title and interest of each Borrower in and to all accounts
receivable and inventory of such Borrower pursuant to the terms of and as
more particularly described in that certain Security Agreement dated as of
the date hereof (the "Security Agreement").
Section 7. Conditions Precedent.
7.1. Conditions Precedent to Extensions of Credit.
The obligation of each Lender to make an Extension of Credit
hereunder is subject to the satisfaction of the following conditions
precedent:
(1) No Default or Event of Default. On the date of the
making of such Extension of Credit, no Default or Event of Default shall
have occurred and be continuing; and
-16-
<PAGE>
<PAGE>
(2) Correctness of Representations. On the date of the
making of such Extension of Credit, all representations and warranties
made by each Borrower in Section 8 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 such date,
except that representations and warranties expressly limited to a certain date
shall be true and correct as of that date.
(3) Compliance with Covenants. Each Person that is a
party thereto other than the Lenders and the Agent shall be in compliance
with all covenants, agreements and conditions in each Loan Document.
(4) Notice of Borrowing. The Borrowers shall have
delivered and the Agent shall have received a duly completed Notice of
Borrowing.
(5) No Material Adverse Effect. No development or
event shall have occurred which, in the reasonable opinion of the Agent or
the Required Lenders, may have a Material Adverse Effect.
Each request for an Extension of Credit hereunder shall constitute a
representation and warranty by each Borrower to the Lenders that all of the
conditions specified in this Section 7.1 have been complied with as of the
time of such Extension of Credit.
7.2. Conditions Precedent to Initial Extension of Credit. The
obligation of the Lenders to make the initial Extension of Credit is subject
to the fulfillment of the following conditions precedent to the satisfaction of
the Lenders:
(1) Section 7.1 Conditions Precedent. The conditions set
forth in Section 7.1 shall have been complied with on the date of the initial
Extension of Credit, and the Agent on behalf of the Lenders shall have
received a certificate of the chief financial officer of each Borrower to such
effect.
(2) Corporate Action. The Agent on behalf of the
Lenders shall have received certified copies of the corporate charter and by-
laws of each Borrower and all corporate action taken by each Borrower
authorizing the execution, delivery and performance of this Agreement
(including, without limitation, a certificate of such Borrower setting forth
the resolutions of its Board of Directors authorizing the transactions
contemplated hereby), together with Certificate of Good Standing from any
jurisdiction where the nature of its business or the ownership of its
properties requires such qualification except where the failure to be so
qualified would not have a Material Adverse Effect.
(3) Incumbency. Each Borrower shall have delivered to
the Agent on behalf of the Lenders a certificate signed by the secretary or
assistant secretary of such Borrower in respect of the name and specimen
signature of each of the officers (i) who is authorized to sign on its behalf
this Agreement and other Loan Documents and (ii) who will, until replaced
by another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement. The Agent and
each Lender may conclusively rely on such certificates until it receives a
further certificate of the secretary or assistant secretary of such Borrower
amending or replacing the prior certificate.
-17-
<PAGE>
<PAGE>
(4) Notes. The Agent on behalf of the Lenders shall
have received Notes for each Lender, duly completed and executed, in
conformity with Section 1.4.
(5) Opinion of Counsel to the Borrower. The Agent on
behalf of the Lenders shall have received an opinion, satisfactory in form
and substance to the Lenders, of Hale and Dorr LLP, legal counsel to the
Borrowers, addressed to the Lenders, covering such matters related to the
Loan Documents and the Borrowers as the Lenders may reasonably request.
(6) Counterparts. The Agent shall have received duly
executed counterparts of this Agreement, the Security Agreement and other
Loan Documents, each executed by the parties thereto.
(7) Payment of Fees and Expenses. The Borrowers shall
have paid to the Agent all fees and expenses then due and payable under the
Loan Documents.
(8) No Change. No development or event, including any
litigation which is pending or threatened against any Borrower, shall have
occurred since the Financial Statements Date which, in the opinion of the
Lenders, may have a Material Adverse Effect.
(9) Receipt of Financial Projections. The Lenders shall
have received from the Borrowers annual financial projections for the two
years following the date of this Agreement which shall be, in form and in
substance, satisfactory to the Lenders.
(10) Diligence Review. The Lenders shall have
completed and in their sole discretion be satisfied with the results of their
review of the financial condition and business of each of the Borrowers.
(11) Existing Credit Agreement. The Credit Agreement,
dated as of January 31, 1996, among Silicon Valley Bank, CoreStates and
the Company shall have been terminated and all Indebtedness of the
Company thereunder shall have been repaid in full.
(12) Other. The Agent shall have received such other
documents in connection herewith as the Agent or any Lender through the
Agent shall have reasonably requested.
Section 8. Representations and Warranties.
In order to induce the Lenders to enter into this Agreement and to
make the contemplated Extensions of Credit, each Borrower represents and
warrants as follows (except to the extent qualified by supplemental
disclosure set forth on Schedule 2 hereto) and the following representations
and warranties as so qualified shall survive the execution and delivery of
this Agreement and the payment of the Loans:
8.1. Corporate Status. Each Borrower and each of its
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority necessary to own its assets and carry on its
business. Each Borrower and each of its Subsidiaries possesses all permits,
licenses and franchises necessary to the conduct of its business as presently
conducted or as presently proposed to be conducted, except where failure to
possess the same would not have a Material Adverse Effect, 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.
-18-
<PAGE>
<PAGE>
8.2. 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 any Borrower or any of its Subsidiaries
is subject or any judgment, decree, franchise, order or permit applicable to
any 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 any
Borrower or any of its Subsidiaries pursuant to, any Contractual Obligation
of any Borrower or any of its Subsidiaries, or violate any provision of the
corporate charter or by-laws of any Borrower or any of its Subsidiaries.
8.3. Corporate Power and Authority. The execution, delivery
and performance of this Agreement and the other Loan Documents are
within the corporate powers of each Borrower and have been duly
authorized by all necessary corporate action.
8.4. Enforceability. This Agreement and each other Loan
Document constitutes a valid and binding obligation of each Borrower
enforceable against each 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.
8.5. 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 any 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 Certificates (as defined in the Security
Agreement).
8.6. Financial Statements.
(1) The audited consolidated financial statements of the
Borrowers as of and for the fiscal year ending January 31, 1997, consisting
of a balance sheet, a statement of operations, a statement of shareholders'
equity, a statement of cash flows and accompanying footnotes, and the
interim consolidated financial statements of the Borrowers as of the fiscal
quarter ending April 30, 1997 furnished to the Lenders in connection
herewith, present fairly, in all material respects, the consolidated financial
position, results of operations and cash flows of the Borrowers and their
Subsidiaries as of the dates and for the periods referred to.
-19-
<PAGE>
<PAGE>
(2) Neither the Borrowers nor any of their 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 any Borrower or
any of its Subsidiaries which may have a Material Adverse Effect.
(3) 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).
8.7. No Material Change. Since the Financial Statements Date
there has been no development or event, nor to the best knowledge of any
Borrower, any prospective development or event, which has had or could
have a Material Adverse Effect.
8.8. Litigation. There are no actions, suits or proceedings
pending or threatened against or affecting any Borrower or any of its
Subsidiaries before any Governmental Authority, which in any one case or
in the aggregate, if determined adversely to the interests of such Borrower
or any Subsidiary thereof, would have a Material Adverse Effect.
8.9. Compliance with Other Instruments; Compliance with Law.
No Borrower nor any Subsidiary thereof is in default under any Contractual
Obligation, where such default could have a Material Adverse Effect, or the
terms of any Contractual Obligation relating to any Indebtedness of such
Borrower or such Subsidiary. No 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 such Borrower or any Subsidiary thereof which default or
violation could have a Material Adverse Effect. No Borrower nor any
Subsidiary is a party to or bound by any agreement or instrument or subject
to any corporate or other restriction, the performance or observance of
which now has or, as far as the Borrower or any Subsidiary can reasonably
foresee, may have a Materially Adverse Effect.
8.10. Subsidiaries. All of the Borrowers' Subsidiaries (including
Significant Subsidiaries which are so identified) are set forth on the
attached Schedule 2.
8.11. Investment Company Status; Limits on Ability to Incur
Indebtedness. No Borrower or 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. No
Borrower is subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness.
8.12. Title to Property. Each Borrower and each of its
Subsidiaries has good and marketable title to all of its properties and assets,
including its properties and assets reflected in the consolidated balance
sheet of the Borrowers and their 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 Liens permitted hereunder and under the other Loan
Documents, or (b) any defect in title or other claim other than defects and
claims that, in the aggregate, would have no Material Adverse Effect. Each
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.
-20-
<PAGE>
<PAGE>
8.13. ERISA. Each 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).
8.14. Taxes. All tax returns of each 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 each Borrower and its Subsidiaries for all income and other
taxes are adequate, and no Borrower knows of any additional assessment or
any basis therefor. No Federal income tax return of any Borrower or its
Subsidiaries has 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.
8.15. Environmental Matters.
(1) Each Borrower and each of its Subsidiaries has
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.
(2) Each Borrower and each of its Subsidiaries is in
compliance with all terms and conditions of all required Governmental
Approvals and is also in compliance with all terms and conditions of all
applicable Environmental Laws, noncompliance with which would have a
Material Adverse Effect.
(3) 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 each Borrower
threatened against any 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 any Borrower or any
Subsidiary thereof relating in any way to the Environmental Laws.
-21-
<PAGE>
<PAGE>
(4) There has been no claim, complaint, notice, or
request for information received by any 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 U.S.C. Sec 9601 et seq., or any state list of sites requiring
investigation or cleanup with respect to contamination by Hazardous
Substances.
(5) To the best of each 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 any Borrower or any Subsidiary thereof, which liability would have a
Material Adverse Effect.
8.16. Intellectual Property. Each 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.
8.17. Solvency. The Borrowers, on a consolidated basis, are, and
after giving effect to the transactions contemplated hereby, will be, Solvent.
8.18. Disclosure Generally. The representations and statements
made by or on behalf of the Borrowers in connection with this Credit
Agreement and each Extension of Credit hereunder, including
representations and statements in each of the Loan Documents, do not
contain any untrue statement of a material fact or omit to state a material
fact or any fact necessary to make the representations made not materially
misleading. No written information, exhibit, report or financial statement
furnished by any Borrower to the Lenders in connection with this
Agreement, any Extension of Credit, or any other Loan Document contains
any material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not materially
misleading.
Section 9. Affirmative Covenants.
Each 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 Borrowers to the Lenders are paid or
satisfied in full:
9.1. Maintenance of Existence and Properties. Each 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 each
Borrower will, and will cause each of its Subsidiaries to, maintain its
properties necessary or useful in the conduct of its business in good
operating condition, ordinary wear and tear excepted, and continue to
conduct its business in the ordinary course of its business. In addition, each
Borrower will and will cause each of its Subsidiaries to, preserve and
maintain its Intellectual Property and licenses thereof consistent with good
business practice.
-22-
<PAGE>
<PAGE>
9.2. Taxes and Other Liens. Each 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
such Borrower or such Subsidiary or on its property, except liabilities being
contested in good faith and by proper proceedings, as to which adequate
reserves are maintained on the books of such Borrower or its Subsidiaries,
in accordance with GAAP.
9.3. Insurance. Each 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 such Borrower and its Subsidiaries operate, provided that in
any event the Borrower shall maintain or cause to be maintained (a)
insurance against casualty, loss or damage covering all property and
improvements of such 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 such 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 such 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 such 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.
9.4. Financial Statements, Etc. The Borrowers will furnish to the
Agent and each of the Lenders:
(1) 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 Borrowers and their
Subsidiaries as at the end of, and for, such quarter, accompanied by a
certificate of the chief financial officer of the Company to the effect that
such financial statements fairly present the consolidated financial condition
of the Borrowers and their 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);
(2) within ninety (90) days after the last day of each
fiscal year of the Borrowers, the audited consolidated balance sheet and
income statement and statement of cash flows of the Borrowers and their
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 Company to
the effect that such financial statements fairly present the consolidated
financial condition of the Borrowers and their Subsidiaries as of the end of
such fiscal year, and the consolidated results of their operations for such
fiscal year, in each case in accordance with GAAP. The Borrowers shall
indicate on said financial statements all guarantees or unusual forward or
long-term commitments made by any Borrower or any Subsidiary thereof.
In addition to the annual financial statements, the Borrowers shall, promptly
upon receipt thereof, furnish to the Lenders a copy each other report
submitted to the Board of Directors of any Borrower by the Accountants in
connection with any annual, interim or special audit made by them of the
financial records of any Borrower.
-23-
<PAGE>
<PAGE>
(3) at the time of the delivery of the financial statements
for each fiscal quarter end and yearly financial statements required by
Sections 9.4(a) and 9.4(b), a Compliance Certificate signed by the Chief
Financial Officer of the Company in the form attached to this Agreement as
Exhibit C, appropriately completed;
(4) within thirty (30) days after the last day of each
Borrower's fiscal quarter, an accounts receivable aging for each Borrower
as of the end of such quarter in such form as the Agent may reasonably
prescribe, all in reasonable detail.
(5) promptly upon the mailing thereof to the
shareholders of the Company generally, copies of all financial statements,
reports, proxy statements and other materials;
(6) promptly upon request by any Lender, copies of any
management letter provided by the Accountants, provided that each
Borrower shall promptly advise the Agent in the event such Borrower
receives any such letter;
(7) promptly upon the filing thereof by any 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 9.4(a);
(8) copies of all reports and forms (including details of
any "reportable event" under ERISA) filed with respect to all Plans, except
as filed in the normal course of business and that would not result in an
adverse action to be taken under ERISA;
(9) promptly upon becoming aware of any litigation,
administrative proceeding, investigation, business development, change in
financial condition against any Borrower or any Subsidiary thereof that may
have a Material Adverse Effect, notice thereof; and
(10) promptly following the request of any Lender, such
further information concerning the business, affairs and financial condition
or operations of any Borrower and its Subsidiaries as such Lender may
reasonably request.
9.5. Notice of Default. As soon as practicable, and in any event,
within three (3) Banking Days of any Borrower becoming aware of the
existence of any condition or event which constitutes a Default, such
Borrower will provide the Agent and each Lender with written notice
specifying the nature and period of existence thereof and what action the
Borrowers are taking or propose to take with respect thereto.
-24-
<PAGE>
<PAGE>
9.6. Environmental Matters.
(1) Each 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.
(2) The Borrowers shall promptly notify the Agent
should any Borrower become aware of:
(1) any spill, release, or threat of release of any
Hazardous Substance at or from any Borrower Property or by any
Person for whose conduct any Borrower or any Subsidiary thereof is
responsible, to the extent such Borrower is required by
Environmental Laws to report such to any Governmental Authority;
(2) 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 any 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;
(3) any claim made or threatened by any Person against
any Borrower or any Subsidiary thereof or any property of any
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 such Borrower or such Subsidiary; and
(4) 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 any Borrower or any Subsidiary
thereof or other employees having responsibility for the compliance
by any 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 does cause, or is reasonably likely to cause, such Borrower
Property to be subject to any restrictions on the ownership,
occupancy, transferability or use thereof by any Borrower or any
Subsidiary thereof.
(3) Each 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 such Borrower or such Subsidiary shall be contesting the same in
good faith in appropriate proceedings.
-25-
<PAGE>
<PAGE>
9.7. ERISA Information. If and when any Borrower or any
member of the Controlled Group 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, receives notice of complete or partial withdrawal liability under Title
IV of ERISA or receives notice from the PBGC under Title IV of ERISA of
an intent to terminate or appoint a trustee to administer the Plan, the
Borrowers shall in each such instance promptly furnish to the Agent a copy
of any such notice.
9.8. Inspection. Upon request of the Agent, each 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 such 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 such Borrower may reasonably
request.
9.9. Use of Proceeds. Each Borrower shall use the proceeds of
the borrowings under the Notes for the general corporate purposes of such
Borrower and/or to repay obligations under the Credit Agreement described
in Section 7.2(k) hereof. 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.
9.10. Further Assurances. Each 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.
9.11. Depository Accounts. The Company shall maintain an
operating deposit account at an office of the Agent.
9.12. Subsidiaries. The Borrowers shall immediately notify the
Agent of the organization of any foreign or domestic Significant Subsidiary
of any Borrower. Upon the request of the Agent, the Borrowers shall cause
any such Significant Subsidiary to execute such documentation as the
Agent might require in order that it become a party to this Credit
Agreement and a Borrower hereunder.
9.13. Compliance with Laws. Each Borrower shall comply and
shall cause each of its Subsidiaries to comply with all laws, statutes and
regulations applicable to its business, noncompliance with which could
have a Material Adverse Effect.
-26-
<PAGE>
<PAGE>
Section 10. Negative Covenants.
Each 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 Borrowers to the Agent or the Lenders are
paid or satisfied in full, without the prior written consent of the Required
Lenders:
10.1. ERISA. No Borrower will permit any pension plan
maintained by such Borrower or by any member of a "Controlled Group"
(ERISA Sec 210(c) or ERISA Sec 210(d)) of which such Borrower is a member
to: engage in any "prohibited transaction" (ERISA Sec 2003(c)); fail to
report to the Agent a "reportable event" (ERISA Sec 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 such Borrower is
requested to notify the PBGC of such reportable event; incur any
"accumulated funding deficiency" (ERISA Sec 302); terminate its existence at
any time in a manner which could result in the imposition of a Lien on the
property of such Borrower or any Subsidiary thereof; or fail to report to the
Agent any "complete withdrawal" or "partial withdrawal" by such
Borrower or an affiliate from a "multiemployer plan" (ERISA Sec 4203,
4205, and 4001, respectively). The quoted terms are defined in the
respective sections of ERISA cited above.
10.2. Transactions with Affiliates. No Borrower will, and no
Borrower will 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 such Borrower, unless such transaction is
otherwise permitted under this Agreement, is in the ordinary course of such
Borrower's or such Subsidiary's business, and is upon fair and reasonable
terms no less favorable to such Borrower or such Subsidiary as those that
could be obtained in a comparable arm's length transaction with a Person
not an Affiliate.
10.3. Consolidation, Merger or Acquisition. No Borrower will,
and no Borrower will 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 ECC may merge with the Company, any Subsidiary may
merge into any Borrower or any wholly-owned Subsidiary of any Borrower,
and provided further that as long as no Event of Default has occurred and is
continuing or would arise therefrom, any Borrower may make an
acquisition of business, assets or stock of another Person engaged in the
same or a related business to the business of such Borrower as long as the
aggregate consideration expended by the Borrowers in connection with any
such transactions does not exceed (i) in the event such consideration is paid
in cash or cash equivalents, $5,000,000 for such transaction or $10,000,000
when taken together with any other cash consideration transactions
completed since the date of this Agreement and (ii) in the event such
consideration is paid in stock, $10,000,000 for such transaction or
$20,000,000 when taken together with any other stock consideration
transactions completed since the date of this Agreement, provided that
although the Borrowers may use as consideration a combination of cash and
stock within the limitations described above, the aggregate consideration
for any single transaction shall not exceed $10,000,000 and for all
transactions completed since the date of this Agreement shall not exceed
$20,000,000..
-27-
<PAGE>
<PAGE>
10.4. Disposition of Assets; Sales-Type Leases, etc. No Borrower
will, and no Borrower will permit any of its Subsidiaries to:
(1) 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:
(1) obsolete or worn out property disposed of in the
ordinary course of business;
(2) 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 such Borrower and its Subsidiaries as at
the beginning of such twelve month period;
(3) the sale of inventory in the ordinary course of
business; and
(4) sale of certain contracts and rights related to such
contracts by the Company to Sanwa Business Credit Corporation
pursuant to a Letter Agreement, dated June 10, 1994 between such
parties; or
(2) 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 Borrowers and
their Subsidiaries, to exceed $10,000,000.
10.5. Indebtedness. No Borrower will, and no Borrower will
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except:
(1) Obligations to the Lenders, the Agent and the Issuing
Bank under the Loan Documents;
(2) existing Indebtedness, including Subordinated Debt,
if any, listed on Schedule A hereto;
(3) unsecured Subordinated Debt incurred by any
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 shall have occurred and be continuing;
(4) Purchase and sales of foreign currency through the
Lenders or any other banking institution;
(5) Obligations in respect of additional operating leases;
and
-28-
<PAGE>
<PAGE>
(6) Purchase Money Indebtedness in an aggregate
amount not to exceed $10,000,000 in any fiscal year, provided that after
giving effect to the incurrence of such Purchase Money Indebtedness and to
the receipt and application of the proceeds thereof, no Default shall have
occurred and be continuing.
10.6. Liens. No Borrower will, and no Borrower will permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on
any of its assets, including its Intellectual Property, except for Permitted
Liens.
10.7. Restricted Payments. No Borrower will, and no Borrower
will permit any of its Subsidiaries to, declare or make any Restricted
Payment. Notwithstanding the foregoing,
(1) Any Subsidiary of a Borrower which is not itself a
Borrower hereunder shall be permitted:
(1) 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 solely made to, and received by,
the Borrower which is 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
(2) 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 solely made to, and received by, any
Borrower on account of shares, options, warrants, convertible
securities or other rights that are being purchased, redeemed, retired
or acquired from such 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
(2) each Borrower may, with the prior written consent of
the Required Lenders, purchase shares of its stock from employees or
former employees or in the open market.
10.8. Investments. No Borrower will, and no Borrower will
permit any of its Subsidiaries to, make, maintain or acquire any Investment
in any Person other than:
(1) marketable obligations issued or guaranteed by the
United States of America having a maturity of two years or less from the
date of purchase; provided, that at no time shall more than 20% of the
aggregate principal amount of all Investments made pursuant to this
paragraph (a) have a maturity of more than one year from the date of
purchase;
(2) certificates of deposit, eurodollar time deposits,
commercial paper or any other obligations of the Lenders or of any other
bank or trust company organized or licensed to conduct a banking business
under the laws of the United States or any State thereof and which has
capital surplus and undivided profits of not less than $100,000,000;
-29-
<PAGE>
<PAGE>
(3) depository accounts at the Agent or the Lenders; and
depository accounts maintained with the Lenders or any other bank or trust
company meeting the requirements stated in paragraph (b) above;
(4) stock or obligations issued to any 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 any Borrower or such Subsidiary;
(5) commercial paper with maturities of not more than
180 days having the highest rating then given by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Services;
(6) repurchase obligations with a term of not more than
seven (7) days for underlying securities of the types described in paragraph
(a) above entered into with the Lenders or any of the banks or trust
companies referred to in paragraph (b) above;
(7) shares in money market mutual funds substantially
all the assets of which consist of securities or other obligations of the type
described in paragraphs (a), (b), (d), (e) and (f) above;
(8) loans or advances not exceeding $250,000 in
aggregate principal amount at any one time outstanding to officers and
employees of the Borrowers and their Subsidiaries; and
(9) existing Investments by any Borrower in its
Subsidiaries and additional investments by each Borrower in its
Subsidiaries (including investments in newly formed Subsidiaries) made
after the date hereof; provided that such Subsidiaries (old and new) 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.
10.9. Sale and Leaseback. No Borrower shall and no Subsidiary
of any Borrower 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 such Borrower or such Subsidiary
intends to use for substantially the same purpose as the property being sold
or transferred; provided, however, that the Borrowers and their 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.
10.10. Additional Stock Issuance by Subsidiaries. No Borrower
shall permit any of its Subsidiaries to issue any additional shares of its
capital stock or other equity securities, any options therefor or any securities
convertible thereto other than to a Borrower.
10.11. Quick Ratio. The Borrowers will not permit the Quick Ratio
to be less than 1.0 to 1.0 at any time.
-30-
<PAGE>
<PAGE>
10.12. Minimum Fixed Charge Coverage Ratio. The Borrowers
will not permit at any time the ratio of (i) EBITDA, as determined at the
end of each fiscal quarter for the four fiscal quarters then ended, to (ii) the
sum of Interest Expense, current maturities of long-term Indebtedness of
the Borrowers and their Subsidiaries, dividends paid in cash by the
Borrowers and their Subsidiaries to Persons other than any of the
Borrowers, Capital Lease Obligations of the Borrowers and their
Subsidiaries and taxes paid in cash by the Borrowers and their Subsidiaries,
as determined at the end of each fiscal quarter for the four quarters then
ended to be less than (a) 1.15 to 1.0 through October 31, 1997 and (b) 1.30
to 1.0 commencing with the fiscal quarter ending January 31, 1997 and for
each fiscal quarter thereafter.
10.13. Leverage. The Borrowers will not permit at any time the
ratio of Total Funded Debt to EBITDA as determined at the end of each
fiscal quarter for the four quarters then ended to exceed 2.5 to 1.0.
10.14. Tangible Net Worth. The Borrowers will not permit
Tangible Net Worth at the end of any fiscal quarter to be less than
$75,000,000 plus (a) 50% of Net Income for each fiscal quarter after April
30, 1997 (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 of any Borrower or any of its Subsidiaries after April 30, 1997.
10.15. Guarantees. No Borrower will, and no Borrower will permit
any of its Subsidiaries to enter into a Guarantee or otherwise in any manner
become or be responsible for indebtedness or obligations (including
working capital maintenance and take-or-pay contracts) of any other
Person, contingently or otherwise, except (a) the endorsement of negotiable
instruments of deposit in the normal course of business; (b) guarantees by
any Borrower or any of its Subsidiaries issued to secure any Indebtedness or
obligation which is otherwise expressly permitted hereunder; or (c)
guarantees in the ordinary course of business by any Borrower of
obligations of any Subsidiary of any Borrower in respect of performance
under any agreement or arrangement with a customer (but in no event any
Indebtedness or payment of any monetary obligation).
Section 11. Events of Default.
11.1. Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(1) Any Borrower (i) shall default in the due and
punctual payment of principal or interest on the Notes, or (ii) shall default
in the payment of any other amount due under any Loan Document; or
(2) 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
-31-
<PAGE>
<PAGE>
(3) Any 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 10.11 through 10.14; or
(4) Any 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 11.1(a)
through 11.1(c) above) and such default shall continue unremedied for a
period of ten (10) calendar days after the occurrence of such default; or
(5) Any obligation of any Borrower or any Subsidiary
thereof in respect of any Indebtedness or any Guarantee (other than any
Indebtedness or Guarantee hereunder) 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
(6) Any Borrower or a Subsidiary thereof shall 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, make a general assignment for the benefit of its creditors,
commence a voluntary case under the United States Bankruptcy Code, file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or readjustment of
debts, 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
United States Bankruptcy Code, or take any corporate action for the
purpose of effecting any of the foregoing; or
(7) A proceeding or case shall be commenced, without
the application or consent of any Borrower or any Subsidiary thereof in any
court of competent jurisdiction, seeking its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts,
the appointment of a trustee, receiver, custodian, liquidator or the like of
such Borrower or such Subsidiary or of all or any substantial part of its
assets, or similar relief in respect of such 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 such Borrower
or such Subsidiary shall be entered in an involuntary case under the United
States Bankruptcy Code; or
(8) 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 any 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
-32-
<PAGE>
<PAGE>
(9) Any 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 any 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 any 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 any Borrower or one or more members of the Controlled
Group to incur a current payment obligation in excess of $100,000; or
(10) Any 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
(11) 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
(12) Any 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; or
(13) Francis E. Girard and Carol B. Langer shall each
cease to serve as President and Chief Financial Officer, respectively, or as
other equivalent officers, of the Company and no replacements of
comparable experience reasonably acceptable to the Agent shall have been
appointed to such offices within 90 days of the date on which such persons
ceased to hold such offices (the 90 day period shall run from the date which
is later in time in the event such officers ceased to hold their respective
offices on different dates).
11.2. Remedies Upon an Event of Default. If any Event of
Default shall have occurred and be continuing, the Agent upon direction of
the Required Lenders may (a) declare all the Commitments terminated
(whereupon all the Commitments shall be terminated) and/or (b) declare the
principal amount then outstanding of, and the accrued interest on, the Loans
and commitment fees and all other amounts payable hereunder and under
the Notes including the Letter of Credit Liabilities 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 each Borrower; provided
that in the case of the occurrence of an Event of Default with respect to the
Borrower referred to in paragraphs (f) and (g) of Section 11.1, all the
Commitments shall be automatically terminated and the principal amount
then outstanding of and the accrued interest on the Loans and commitment
fees and all other amounts payable hereunder and under the Notes including
the Letter of Credit Liabilities 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 each
Borrower.
-33-
<PAGE>
<PAGE>
Section 12. Agent.
12.1. Appointment and Authorization. Each Lender hereby
irrevocably appoints and authorizes the Agent to take such action on its
behalf and to exercise such powers under this Agreement and the Loan
Documents as are specifically delegated to the Agent by the terms hereof or
thereof, together with such other powers as are reasonably incidental
thereto. The relationship between the Agent and each Lender has no
fiduciary aspects, and the Agents's duties (as Agent) hereunder are
acknowledged to be only ministerial and not involving the exercise of
discretion on its part. Nothing in this Agreement or any Loan Document
shall be construed to impose on the Agent any duties or responsibilities
other than those for which express provision is made herein or therein. In
performing its duties and functions hereunder, the Agent does not assume
and shall not be deemed to have assumed, and hereby expressly disclaims,
any obligation with or for the Borrowers. As to matters not expressly
provided for in this Agreement or any Loan Document, the Agent shall not
be required to exercise any discretion or to take any action or communicate
any notice, but shall be fully protected in so acting or refraining from acting
upon the instructions of the Required Lenders and their respective
successors and assigns; provided, however, that in no event shall the Agent
be required to take any action which exposes it to personal liability or
which is contrary to this Agreement, any Loan Document or applicable law,
and the Agent shall be fully justified in failing or refusing to take any action
hereunder unless it shall first be specifically indemnified to its satisfaction
by the Lenders against any and all liability and expense which may be
incurred by it by reason of taking or omitting to take any such action. If an
indemnity furnished to the Agent for any purpose shall, in the reasonable
opinion of the Agent, be insufficient or become impaired, the Agent may
call for additional indemnity from the Lenders and not commence or cease
to do the acts for which such indemnity is requested until such additional
indemnity is furnished.
12.2. Duties and Obligations. In performing its functions and
duties hereunder on behalf of the Lenders, the Agent shall exercise the
same care and skill as it would exercise in dealing with loans for its own
account. Neither the Agent nor any of its directors, officers, employees or
other agents shall be liable for any action taken or omitted to be taken by it
or them under or in connection with this Agreement or any Loan Document
except for its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Agent (a) may consult with
legal counsel and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by its in good faith and in accordance
with the advice of such experts; (b) makes no representation or warranty to
any Lender as to, and shall not be responsible to any Lender for, any recital,
statement, representation or warranty made in or in connection with this
Agreement, any Loan Document or in any written or oral statement
(including a financial or other such statement), instrument or other
document delivered in connection herewith or therewith or furnished to any
Lender by or on behalf of the Borrowers; (c) shall have no duty to ascertain
or inquire into the Borrowers' performance or observance of any of the
covenants or conditions contained herein or to inspect any of the property
(including the books and records) of the Borrowers or inquire into the use
of the proceeds of the Loans or (unless the officers of the Agent active in
their capacity as officers of the Agent on the Borrowers' account have
actual knowledge thereof or have been notified in writing thereof) to
inquire into the existence or possible existence of any Event of Default or
Default; (d) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, effectiveness, genuineness, sufficiency,
collectability or value of this Agreement or any other Loan Document or
any instrument or document executed or issued pursuant hereto or in
connection herewith, except to the extent that such may be dependent on
the due authorization and execution by the Agent itself; (e) except as
expressly provided herein in respect of information and data furnished to
the Agent for distribution to the Lenders, shall have no duty or
responsibility, either initially or on a continuing basis, to provide to any
Lender any credit or other information with respect to the Borrowers,
whether coming into its possession before the making of the Loans or at any
time or times thereafter; and (f) shall incur no liability under or in respect
of this Agreement or any other Loan Document for, and shall be entitled to
rely and act upon, any notice, consent, certificate or other instrument or
writing (which may be by facsimile (telecopier), telegram, cable, or other
electronic means) believed by it to be genuine and correct and to have been
signed or sent by the proper party or parties.
-34-
<PAGE>
<PAGE>
12.3. The Agent as a Lender. With respect to its Commitments
and the Loans made and to be made by it, the Agent shall have the same
rights and powers under this Agreement and all other Loan Documents as
the other Lenders and may exercise the same as if it were not the Agent.
The terms "Lender" and "Lenders" as used herein shall, unless otherwise
expressly indicated, include the Agent in its individual capacity. The Agent
and any successor Agent which is a commercial bank, and their respective
affiliates, may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with, the
Borrowers and their Affiliates from time to time, all as if such entity were
not the Agent hereunder and without any duty to account therefor to any
Lender.
12.4. Independent Credit Decisions. Each Lender acknowledges
to the Agent that it has, independently and without reliance upon the Agent
or any other Lender, and based upon such documents and information as it
has deemed appropriate, made its own independent credit analysis and
decision to enter into this Agreement. Each Lender acknowledges that it
will, independently or through other advisers and representatives but
without reliance upon the Agent or any other Lender, and based upon such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or refraining from
taking any action under this Agreement or any Loan Document.
12.5. Indemnification. The Lenders agree to indemnify the Agent
(to the extent not reimbursed by the Borrowers), ratably in proportion to
each Lender's Commitment Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in such
capacity in any way relating to or arising out of this Agreement or any Loan
Document or any action taken or omitted to be taken by the Agent in such
capacity hereunder or under any Loan Document; provided that none of the
Lenders shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful
misconduct. Without limiting the generality of the foregoing, each Lender
agrees to reimburse the Agent, promptly on demand, for such Lender's
ratable share (based upon the aforesaid apportionment) of any out-of-pocket
expenses (including counsel fees and disbursements) incurred by the Agent
in connection with the preparation, execution, administration or
enforcement of, or the preservation of any rights under, this Agreement and
the Loan Documents to the extent that the Agent is not reimbursed for such
expenses by the Borrowers.
-35-
<PAGE>
<PAGE>
12.6. Successor Agent. The Agent may resign at any time by
giving written notice of such resignation to the Lenders and the Borrowers,
such resignation to be effective only upon the appointment of a successor
Agent as hereinafter provided. Upon any such notice of resignation, the
Required Lenders shall appoint a successor Agent upon written notice to
the Borrowers and the retiring Agent. If no successor Agent shall have
been appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent shall have given
notice of resignation, the retiring Agent may, upon notice to the Borrowers
and the Lenders, appoint a successor Agent. Upon its acceptance of any
appointment as Agent hereunder, the successor Agent shall 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 as Agent under this Agreement and the Loan Documents.
After any retiring Agent's resignation hereunder, the provisions hereof shall
inure to its benefit as to any actions taken or omitted to be taken by its
while it was the Agent under this Agreement and the Loan Documents.
12.7. Allocations Made By Agent. As between the Agent and the
Lenders, unless a Lender objecting to a determination or allocation made by
the Agent pursuant to this Agreement delivers to the Agent written notice
of such objection within one hundred twenty (120) days after the date any
distribution was made by the Agent, such determination or allocation shall
be conclusive on such one hundred twentieth day and only those items
expressly objected to in such notice shall be deemed disputed by such
Lender. The Agent shall not have any duty to inquire as to the application
by the Lenders of any amounts distributed to them.
Section 13. Definitions.
13.1. Certain Definitions.
"Accountants" means Coopers & Lybrand or another accounting
firm of national reputation or other certified public accountants selected by
the Borrowers and approved by the Agent.
"Additional Costs" shall have the meaning set forth in Section 4.1.
"Administrative Questionnaire" shall mean a questionnaire
substantially in the form attached hereto as Exhibit E.
"Affected Eurocurrency Loan" shall have the meaning set forth in
Section 4.5.
"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 (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.
-36-
<PAGE>
<PAGE>
"Agent" shall have the meaning specified in the Preamble.
"Agreement" means this Credit Agreement.
"Alternative Currency" means any currency other than Dollars that
the Agent determines is freely convertible and freely transferable into
Dollars and for which there exists a recognized interbank, forward
exchange and deposit market outside the country of issue.
"Applicable Lending Office" means, for each Lender and for each
Type of Loan, the lending office of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan in the Administrative
Questionnaire of such Lender or such other lending office of such Lender
(or of an affiliate of such Lender) as such Lender may from time to time
specify to the Agent and the Borrowers as the office by which its Loans of
such Type are to be made and maintained.
"Authorized Officer" The President, Chief Financial Officer or
other executive officer of a Borrower authorized to take the action in
question by vote or resolution of the Board of Directors of such Borrower.
"Available Commitment" shall have the meaning set forth in
Section 1.1.
"Banking Day" means any day other than a Saturday, Sunday, or
other day on which commercial banks in Philadelphia, Pennsylvania are
authorized or required to close under the laws of the Commonwealth of
Pennsylvania, and (i) if the applicable day relates to Eurodollar Loan, or
notice with respect to a Eurodollar Loan, a day on which dealings in Dollar
deposits are also carried on in the London interbank market and banks are
open for business in London and (ii) if the applicable day relates to a
Multicurrency Loan, or notice with respect to a Multicurrency Loan, a day
on which dealings in Dollar deposits and in the relevant Alternative
Currency can be carried on in the interbank foreign exchange market and in
the principal financial center of the country in which such Alternative
Currency is legal tender.
-37-
<PAGE>
<PAGE>
"Base Rate" means, for any day, the higher of the Federal Funds
Rate plus one-half of one percent (1/2 of 1%) per annum or the Prime Rate
"Base Rate Loan" means at any time the principal amount of the
Loans which bears interest at the Base Rate.
"Borrower" and "Borrowers" shall have their respective meanings
specified in the Preamble hereto.
"Borrower Property" means any real property owned, occupied, or
operated by any Borrower or any of their 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).
"Closing Date" means the date on which all conditions set forth in
Section 7.2 will have been satisfied.
"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" means, in relation to any particular Lender, the
maximum dollar amount of Loans that such Lender has agreed to make
available to the Borrowers upon the terms and subject to the conditions of
this Agreement, initially as set forth in Schedule 1 attached hereto, as such
Lender's Commitment may be modified pursuant hereto and in effect from
time to time. Schedule 1 shall be amended from time to time to reflect any
changes in the Commitments of the Lenders.
"Commitment Percentage" means, with respect to any Lender, that
Lender's Commitment expressed as a percentage of the aggregate
Commitments.
"Company" shall have the meaning set forth in the Preamble hereto.
"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 any of the Borrowers, are
treated as a single employer under Section 414 of the Code.
-38-
<PAGE>
<PAGE>
"CoreStates" shall have the meaning specified in the Preamble
hereto.
"Current Assets" means, at any time, all assets of the Borrowers and
their Subsidiaries at such time, on a consolidated basis, that would be
classified as current assets in accordance with GAAP, except for inventory
of the Borrowers and their Subsidiaries.
"Current Liabilities" means, at any time, all liabilities of the
Borrowers and their 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 Borrowers and their
Subsidiaries payable on demand or maturing within one year of such time,
or renewable at the option of the Borrowers or any 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.
"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.
"Dollars" and "$" means lawful money of the United States of
America.
"EBITDA" shall mean for any fiscal period, an amount equal to Net
Income for such period, plus each of the following (without duplication), to
the extent deducted or excluded in computing such Net Income: (i) Interest
Expense, (ii) taxes, (iii) depreciation, and (iv) amortization.
"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 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.
"Eurodollar Loan" means, at any time, that principal amount of any
Loan, the interest on which is determined at such time on the basis of rates
referred to in the definition of "Eurodollar Rate".
-39-
<PAGE>
<PAGE>
"Eurodollar Rate" shall mean, for the applicable Interest Period for
any Eurodollar Loan the interest rate per annum (rounded upwards to the
next one-one hundredth of one percent) equal to the product of (i) the rate,
determined by the Agent at approximately 9:00 A.M., Philadelphia time
two (2) Banking Days prior to the date of such Eurodollar Loan, to be the
prevailing rate per annum at which Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the
principal amount of the Multicurrency Loan of CoreStates to which such
Interest Period relates are offered to CoreStates by leading banks in the
interbank eurodollar market in which CoreStates normally participates, and
by (ii) the Statutory Reserves.
"Eurocurrency Loan" shall mean any Eurodollar Loan or
Multicurrency Loan.
"Event of Default" has the meaning set forth in Section 11.1.
"Existing Letters of Credit" means the letters of credit in existence
as of the Closing Date which are set forth in Schedule 3 hereto.
"Extension of Credit" shall mean any Loan, Letter of Credit and/or
unreimbursed drawing under any Letter of Credit (collectively, the
"Extensions of Credit").
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers
on such day, as published by the Federal Reserve Bank of New York on the
Banking Day next succeeding such day, provided that if the day for which
such rate is to be determined is not a Banking Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Banking Day as so published on the next succeeding Banking Day.
"Financial Statements Date" means January 31, 1997.
"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 any 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.
-40-
<PAGE>
<PAGE>
"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.
"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.
"Intellectual Property" shall have the meaning specified in Section
8.16.
"Interest Expense" shall mean for any fiscal period, the consolidated
interest expense and amortized debt discount on Indebtedness of the
Borrowers and their Subsidiaries for such period.
"Interest Period" shall mean with respect to any Eurocurrency Loan,
each period commencing on the date such Eurocurrency Loan is made, or,
with respect to a Eurocurrency Loan being renewed, the last day of the next
preceding Interest Period with respect to such Eurocurrency Loan, and
ending (i) for any Eurodollar or Multicurrency Loans, on the numerically
corresponding day (or, if there is no numerically corresponding day, on the
last day of the calendar month) in the first, second, third or sixth month
thereafter or (ii) in the case of Multicurrency Loans, on the same day of the
second week thereafter, in each case as selected under the procedures
specified in Section 3.6; provided that
(A) if any Interest Period would otherwise end after the
Maturity Date, it shall end on the Maturity Date;
(B) each Interest Period which would otherwise end on a day
which is not a Banking Day shall end on the next succeeding
Banking Day unless such next succeeding Banking Day falls in the
next succeeding calendar month, in which case the Interest Period
shall end on the next preceding Banking Day; and
-41-
<PAGE>
<PAGE>
(C) the Borrowers may not select more than twelve two-
week Interest Periods during any period of twelve consecutive
months.
"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 any Borrower of any Indebtedness or
other obligation of any other Person.
"Issuing Bank" means CoreStates, as the issuer of Letters of Credit
under Section 5.2 hereof, together with its successors and assigns in such
capacity.
"Lenders" means CoreStates and each other Person that is, or that
may after the date hereof become, a party to this Agreement as a "Lender"
hereunder.
"Letters of Credit" shall have the meaning set forth in Section 5.1.
"Letter of Credit Documents" shall mean, with respect to any Letter
of Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application
or applicable only to such Letter of Credit) governing or providing for (a)
the rights and obligations of the parties concerned or at risk with respect to
such Letter of Credit or (b) any collateral security for any of such
obligations, each as the same may be modified and supplemented and in
effect from time to time.
"Letter of Credit Liability" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit plus (b) the aggregate unpaid principal
amount of all Reimbursement Obligations of the Borrowers at such time
due and payable in respect of all drawings made under such Letter of
Credit. For purposes of this Agreement, a Lender (other than the Issuing
Bank) shall be deemed to hold a Letter of Credit Liability in an amount
equal to its participation interest in the related Letter of Credit under
Section 5.2 hereof, and the Issuing Bank shall be deemed to hold a Letter of
Credit Liability in an amount equal to its retained interest in the related
Letter of Credit after giving effect to the acquisition by the Lenders other
than the Issuing Bank of their participation interests under said Section 5.2.
"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 UCC or comparable law of any jurisdiction), together
with any renewal or extension thereof.
"Loan" shall have the meaning set forth in Section 1.1.
"Loan Documents" means, collectively, this Agreement, the Notes,
any Letters of Credit, the Security Instruments, any instruments or
agreements relating to the purchase by any Lender of accounts receivable or
chattel paper from any Borrower, 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.
-42-
<PAGE>
<PAGE>
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, assets, condition (financial or otherwise) or prospects
of any Borrower, or of the Borrowers and their Subsidiaries taken as a
whole, (b) the ability of any 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 2.4.
"Maximum Rate" shall have the meaning set forth in Section 2.5.
"Multicurrency Rate" shall mean, for the applicable Interest Period
for any Multicurrency Loan, (i) the rate, rounded upwards to the next one-
sixteenth of one percent, determined by the Agent at approximately 9:00
A.M., Philadelphia time two (2) Banking Days prior to the date of such
Multicurrency Loan, to be the prevailing rate per annum at which deposits
in the Alternative Currency in which such Loan is denominated having a
term comparable to such Interest Period and in an amount comparable to
the principal amount of the Multicurrency Loan of CoreStates to which
such Interest Period relates are offered to CoreStates by leading banks in
the interbank eurocurrency market in which CoreStates normally
participates, divided by (ii) a number equal to one (1.0) minus the Reserve
Requirement. The Multicurrency Rate shall be adjusted automatically with
respect to any Multicurrency Loan outstanding on the effective date of any
change in the Reserve Requirement, as of such effective date.
"Multicurrency Loan" shall mean any Loan denominated in an
Alternative Currency the interest on which is determined at such time on
the basis of rates referred to in the definition of "Multicurrency Rate".
"Multicurrency Sublimit" shall mean the maximum dollar amount
of all Multicurrency Loans that the Lenders have agreed to make available
to the Borrowers upon the terms and subject to the conditions of this
Agreement, which amount shall be $15,000,000 in the aggregate and which
for each Lender shall be its Commitment Percentage of such aggregate
amount.
"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.
"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 Borrowers and their Subsidiaries, determined in
accordance with GAAP.
"Notes" shall have the meaning set forth in Section 1.4.
"Obligations" shall have the meaning given the term "Secured
Obligations" in the Security Agreement.
-43-
<PAGE>
<PAGE>
"Office of the Agent" shall initially mean the banking office of the
Agent located at 1345 Chestnut Street, Philadelphia, Pennsylvania 19107,
or such other location of which the Agent shall notify the Borrower.
"Parent" shall have the meaning specified in Section 4.6.
"Payor" shall have the meaning set forth in Section 3.7.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean the following:
(A) Liens in favor of the Agent, the Issuing Bank or any
of the Lenders to secure the Obligations;
(B) Liens existing as of the date of this Agreement and
disclosed in Schedule 2 hereto;
(C) Liens securing Purchase Money Indebtedness to the
extent such Purchase Money Indebtedness is permitted by Section
10.5(f), provided that (i) each such Lien is given solely to secure the
purchase price of such property, does not extend to any other
property and is given contemporaneously with the acquisition of the
property, and (ii) the Purchase Money Indebtedness secured thereby
does not exceed the lesser of the cost of such property or its fair
market value at the time of acquisition;
(D) Liens for taxes, fees, assessments and other
governmental charges to the extent that payment of the same may be
postponed or is not required in accordance with the provisions of
Section 9.2.
(E) Landlords' and lessors' liens in respect of rent not in
default or liens in respect of pledges or deposits under workmen's
compensation, unemployment insurance, social security laws, or
similar legislation (other than ERISA) or in connection with appeal
and similar bonds incidental to litigation; mechanics',
warehousemen's, laborers' and materialmen's and similar liens, if
the obligations secured by such liens are not then delinquent; liens
securing the performance of bids, tenders, contracts (other than for
the payment of money); and liens securing statutory obligations or
surety, indemnity, performance, or other similar bonds incidental to
the conduct of the Borrowers' or any of their Subsidiaries' business
in the ordinary course and that do not in the aggregate materially
detract from the value of their property or materially impair the use
thereof in the operation of their business;
(F) judgment liens securing judgments that (i) are not
fully covered by insurance, and (ii) shall not have been in existence
for a period longer than 10 days after the creation thereof or, if a
stay of execution shall have been obtained, for a period longer than
10 days after the expiration of such stay;
-44-
<PAGE>
<PAGE>
(G) rights of lessors under Capital Lease Obligations to
the extent such Capital Lease Obligations are permitted hereunder;
(H) easements, rights of way, restrictions and other
similar charges or Liens relating to real property and not interfering
in a material way with the ordinary conduct of the Borrowers'
business; and
(I) Liens constituting a renewal, extension or
replacement of any Permitted Lien.
"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 any Borrower or
any member of the Controlled Group for employees of any 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 any 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.
"Post-Default Rate" shall mean a rate equal to the sum of 3% plus
the higher of (i) the rate of interest applicable to Base Rate Loans and (ii) in
the case of any Eurocurrency Loan, the rate of interest (if any) otherwise
applicable to such Loan.
"Prime Rate" shall mean the per annum rate of interest from time to
time announced and made effective by CoreStates as its Prime Rate (which
rate may or may not be the lowest rate available from CoreStates at any
given time).
"Purchase Money Indebtedness" shall mean Indebtedness
(including, without limitation, Capital Lease Obligations) incurred to
finance the acquisition of assets or the cost of improvements on real
property or leaseholds, in each case in an amount not in excess of the lesser
of (a) the purchase price or acquisition cost of said assets or the cost of said
improvements and (b) the fair market value of said assets or said
improvements on the date of acquisition of said assets or contract for said
improvements.
"Quarterly Dates" shall mean the last Banking Day of each April,
July, October and January.
"Quick Ratio" means, at any time, Current Assets of the Borrowers
and their Subsidiaries at such time, on a consolidated basis divided by the
aggregate of all Current Liabilities at such time. For purposes of
calculating the Quick Ratio, all Loans (and the Letter of Credit Liabilities)
shall be considered as Current Liabilities.
-45-
<PAGE>
<PAGE>
"Required Lenders" means as of any date, the holders of sixty-six
and two-thirds percent (66.6%) of the aggregate Commitments or if the
Commitments have been terminated, the holders of sixty-six and two-thirds
percent (66.6%) of the outstanding principal amount of the Loans.
"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 Lenders 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 Lender by the jurisdiction in
which such Lender has its principal office).
"Reimbursement Obligations" means, at any time, the obligations of
the Borrowers then outstanding to reimburse amounts paid by the Issuing
Bank in respect of any drawings under a Letter of Credit.
"Remaining Interest Period" shall have the meaning set forth in
Section 4.5.
"Required Payment" shall have the meaning set forth in Section 3.7.
"Restricted Payment" means, with respect to any Borrower or any
Subsidiary thereof, (a) any dividend or other distribution on any shares of
capital stock of such 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 such Borrower or a Subsidiary thereof or (ii) any option,
warrant, convertible security or other right to acquire shares of the capital
stock of such Borrower or a Subsidiary thereof.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" shall have the meaning set forth in Section
6.1.
"Security Instruments" means, collectively, the Security Agreement
and each other instrument or agreement that purports to secure the
Obligations of each 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.
-46-
<PAGE>
<PAGE>
"Significant Subsidiary" shall mean a Subsidiary with (a) total
revenues for its most recent fiscal year of $5,000,000 or more; or (b) total
assets (including intangible assets) of $5,000,000 or more as set forth on the
most recent balance sheet of such Subsidiary (the date of such balance sheet
shall be no earlier than the last day of such Subsidiary's most recently
completed fiscal quarter).
"Solvent" means, with respect to any Person, that the aggregate
present fair saleable value of such Person's assets is in excess of the total
amount of its probable liabilities on its existing debts as they become
absolute and matured, such Person has not incurred debts beyond its
foreseeable ability to pay such debts as they mature, and such Person has
capital adequate to conduct the business it is presently engaged in or is
about to engage in.
"Stated Rate" shall have the meaning set forth in Section 2.5.
"Statutory Reserves" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental
reserves) expressed as a decimal established by the Federal Reserve Board
and any other banking authority, domestic or foreign, to which the Agent or
any Lender (including any branch, Affiliate, or other fronting office making
or holding a Loan) is subject for Eurocurrency Liabilities (as defined in
Regulation D of the Federal Reserve Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D. Eurocurrency
Loans shall be deemed to constitute Eurocurrency Liabilities and to be
subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to
any Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Subordinated Debt" means Indebtedness of any Borrower that is
subordinated to the Indebtedness of such Borrower owing to the Lenders
either (a) pursuant to a subordination agreement in form and substance
satisfactory to the Agent between the Agent 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.
"Tangible Net Worth" means, at any time, the consolidated
stockholders' equity of the Borrowers and their Subsidiaries at such time
determined in accordance with GAAP, less all assets that are reflected on
the consolidated balance sheet of the Borrowers and their 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.
"Tax" means any present or future tax, levy, duty, impost,
deduction, withholding or other charges of whatever nature at any time
required by any applicable law, rule or regulation (a) to be paid by any
Lender or (b) to be withheld or deducted from any payment otherwise
required hereby to be made to any Lender, in each case on or with respect to
its obligations hereunder, any Loan, any payment payable hereunder or
under any other Loan Document , or any deposit which was used (or
deemed to have been used) to fund any portion of any Eurocurrency Loan,
and any portion of any Eurocurrency Loan funded (or deemed to have been
funded) with the proceeds of any such deposit, to the extent not included in
the foregoing; provided, however, that the term "Tax" shall not include
taxes imposed upon or measured by the net income of such Lender (other
than withholding taxes) or franchise taxes.
-47-
<PAGE>
<PAGE>
"Total Funded Debt" means, at any time, the consolidated
outstanding Indebtedness of the Borrowers and their Subsidiaries at such
time (including Letter of Credit Liabilities), determined in accordance with
GAAP.
"Tranche" means Loans of the same Type and Interest Period.
"Type" refers to the type of Loan made hereunder (i.e., a Base Rate
Loan, a Eurodollar Loan or a Multicurrency Loan).
"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 any Borrower or any member of the Controlled Group to the PBGC or
such Plan under Title IV of ERISA.
13.2. 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
Borrowers may by notice to the Agent, or the Agent may by notice to the
Borrowers, require that such covenant thereafter be calculated in
accordance with GAAP as in effect, and applied by the Borrowers,
immediately before such change in GAAP occurs. If such notice is given,
the compliance certificates delivered pursuant to Section 9.4(c) after such
change occurs shall be accompanied by reconciliations of the difference
between the calculation set forth therein and a calculation made in
accordance with GAAP as in effect from time to time after such change
occurs. To enable the ready determination of compliance with the
covenants set forth in this Agreement, the Borrowers will not change the
date on which its fiscal year or any of its fiscal quarters end without the
prior written consent of the Agent.
13.3. Currency Equivalents. For the purposes of this Agreement,
(1) the equivalent in Dollars of an Alternative Currency
shall be determined by the Agent by using the quoted spot rate at
which CoreStates offers to exchange Dollars for such Alternative
Currency in the interbank currency markets at 9:00 A.M.
(Philadelphia time) two Banking Days prior to the date upon which
such equivalent is to be determined; and
-48-
<PAGE>
<PAGE>
(2) the equivalent in an Alternative Currency of Dollars
shall be determined by the Agent by using the quoted spot rate at
which CoreStates offers to exchange such Alternative Currency for
Dollars in the interbank currency markets at 9:00 A.M.
(Philadelphia time) two Banking Days prior to the date upon which
such equivalent is to be determined.
Section 14. Miscellaneous.
14.1. Amendments, Etc.
(1) No amendment or waiver of any provision of this
Agreement or the Notes, nor consent to any departure by the Borrowers
therefrom, shall in any event be effective unless the same shall be approved
in writing by the Required Lenders in writing and signed by the Agent and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. Notwithstanding any other
provision contained in any Loan Document, no amendment, modification,
termination or waiver shall (i) affect the payment of principal (including
without limitation the date when due), reduce any interest rate margin or
any fee provided herein, increase the amount of the total Commitments,
modify the definition of "Required Lenders" or any voting rights of the
Lenders without the written consent of all Lenders, or (ii) increase the
Commitment of any Lender without the consent of such Lender. The rights
and responsibilities of the Agent hereunder cannot be changed without the
Agent's prior written consent.
(2) In consideration of any waiver of any compliance
with the express terms hereof, the Borrowers may be required to pay to the
Agent for the account of the Lenders a waiver fee as determined by the
Required Lenders at such time.
14.2. 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, (a) if to the
Borrowers, at Boston Technology, Inc., 100 Quannapowitt Parkway,
Wakefield, Massachusetts 01880, Attention: Carol B. Langer, Chief
Financial Officer, Telecopy No. (617) 245-5322 with a copy to Hale and
Dorr LLP, 60 State Street, Boston, MA 02109, Attention: Paul P. Daley,
Esq., Telecopy No. (617) 526-5000; (b) if to the Agent, at its address at
CoreStates Bank, N.A., National Middle Market, FC 1-8-4-2, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107, Attention: R. Thomas
Esser, Vice President, Telecopy No. (215) 973-5831 and Stacy Shegda,
Assistant Vice President, Telecopy No. (215) 973-1887, with a copy to
Sullivan & Worcester LLP, One Post Office Square, Boston, MA 02110
Attention: Dennis J. White, Esq., Telecopy No. (617) 338-2880; and if to
the Lenders, at their respective addresses set forth on Schedule 1.
14.3. 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 or any of the other Loan Documents 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.
-49-
<PAGE>
<PAGE>
14.4. Expenses; Indemnification.
(1) The Borrowers 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 9.8 and (iii) if any
Event of Default occurs, all costs and expenses incurred by the Agent and
each Lender, including the reasonable fees 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.
(2) The Borrowers agree 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 Borrowers' use of the Loans, 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.
(3) The agreements in this Section 14.4 shall survive the
repayment of the Notes, and all other amounts payable under this
Agreement and the other Loan Documents.
14.5. Binding Effect. This Agreement shall become effective
when it shall have been executed by each of the Borrowers, each of the
Lenders and the Agent and thereafter shall be binding upon and inure to the
benefit of the Borrowers, the Lenders and the Agent and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign their rights hereunder or any interest herein without the prior written
consent of the Agent and all of the Lenders.
-50-
<PAGE>
<PAGE>
14.6. Participation and Assignment. Each of the Borrowers
hereby acknowledges and agrees that a Lender may at any time: (a) grant
participations in up to 49% of its Commitments or Extensions of Credit, or
any Note or of its right, title and interest therein or in or to this Agreement
(collectively, "Participations") (but only with the consent of the Borrowers
and the Agent, which consent shall not be unreasonably conditioned,
withheld or delayed) to any other bank, lending institution or other entity
which has the requisite sophistication to evaluate the merits and risks of
investments in Participations ("Participants"); provided, however, that: (i)
all amounts payable by the Borrowers hereunder shall be determined as if
such Lender had not granted such Participation; (ii) any agreement pursuant
to which any Lender may grant a Participation: (x) shall provide that such
Lender shall retain the sole right and responsibility to enforce the
obligations of the Borrowers hereunder including, without limitation, the
right to approve any amendment, modification or waiver of any provisions
of this Agreement; (y) such participation agreement may provide that such
Lender will not agree to any modification, amendment or waiver of this
Agreement without the consent of the Participant if such modification,
amendment or waiver would reduce the principal of or rate of interest on its
Extensions of Credit or postpone the date fixed for any payment of
principal of or interest on its Extensions of Credit or increase the amount of
the total Commitments; and (z) shall not relieve such Lender from its
obligations, which shall remain absolute, to make Extensions of Credit
hereunder; and (b) each Lender may assign up to 49% of its Commitment or
Extensions of Credit or Notes (but only with the consent of the Borrowers
and the Agent, which consent shall not be unreasonably conditioned,
withheld or delayed), provided that each assignment by a Lender of its
Extensions of Credit, or Commitment shall be made in such manner so that
the same portion of its Extensions of Credit, Commitment and Notes is
assigned to the respective assignee. Upon execution and delivery by the
assignee to the Borrowers and the Agent of any instrument in writing
pursuant to which such assignee agrees to become a "Lender" hereunder (if
not already a Lender) having the Commitment and Extensions of Credit
specified in such instrument, and upon consent thereto by the Borrowers
and the Agent, to the extent required above, the assignee shall have, to the
extent of such assignment (unless otherwise provided in such assignment
with the consent of the Borrowers and the Agent), the obligations, rights
and benefits of a Lender hereunder holding the Commitment and
Extensions of Credit (or portions thereof) assigned to it (in addition to the
Commitment and Extensions of Credit, if any, theretofore held by such
assignee) and the assigning Lender shall, to the extent of such assignment,
be released from the Commitment (or portion(s) thereof) so assigned.
Upon each such assignment the assigning Lender shall pay the Agent an
assignment fee of $3,500. Notwithstanding anything to the contrary
contained herein, no assignment or Participation may reduce any Lender's
Commitment together with its Extensions of Credit below $5,000,000.
14.7. Lenders' Obligations Several; Independent Nature of
Lenders' Rights. The obligation of each Lender hereunder is several and
not joint and no Lender shall be the agent of any other (except to the extent
the Agent is authorized to act as such hereunder). No Lender shall be
responsible for the obligation or commitment of any other Lender
hereunder. Nothing contained in any Loan Document and no action taken
by Agent or any Lender pursuant hereto or thereto shall be deemed to
constitute Lenders to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and, subject to the terms
of this Agreement, each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any
other Lender to be joined as an additional party in any proceeding for such
purpose.
-51-
<PAGE>
<PAGE>
14.8. Joint and Several Obligations. Each and every
representation, warranty, covenant and agreement made by any of the
Borrowers, hereunder and under the other Loan Documents shall be joint
and several, whether or not so expressed, and such obligations of any of the
Borrowers shall not be subject to any counterclaim, setoff, recoupment or
defense based upon any claim any Borrower may have against any other
Borrower, the Agent or a Lender, and shall remain in full force and effect
without regard to, and shall not be released, discharged or in any way
affected by, any circumstance or condition affecting any other Borrower,
including without limitation (a) any waiver, consent, extension, renewal,
indulgence or other action or inaction under or in respect of this Agreement
or any other Loan Document, or any agreement or other document related
thereto with respect to any other Borrower, or any exercise or nonexercise
of any right, remedy, power or privilege under or in respect of any such
agreement or instrument with respect to any other Borrower, or the failure
to give notice of any of the foregoing to any other Borrower; (b) any
invalidity or unenforceability, in whole or in part, of any such agreement or
instrument with respect to any other Borrower; (c) any failure on the part of
any other Borrower for any reason to perform or comply with any term of
any such agreement or instrument; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or
similar proceeding with respect to any other Borrower or its properties or
creditors; or (e) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, with respect to any other Borrower. Each
Borrower hereby waives any requirement of diligence or promptness on the
part of the Agent or the Lenders in the enforcement of their respective
rights hereunder or under any other Loan Document with respect to the
obligations of itself or of the other Borrowers. Without limiting the
foregoing, any failure to make any demand upon, to pursue or exhaust any
rights or remedies against a Borrower, or any delay with respect thereto,
shall not affect the obligations of the other Borrowers hereunder or under
any other Loan Document.
14.9. The Company as Agent for Borrowers. Each Borrower
hereby appoints the Company as its agent with respect to receiving and
giving of any notices, requests, instructions, reports, schedules, revisions,
financial statements or any other written or oral communications hereunder
or under the other Loan Documents. The Company shall keep complete,
correct and accurate records of all Loans and the application of proceeds
thereof, all Letters of Credit and all payments in respect of Loans and other
amounts due hereunder. The Company shall determine the allocation of
proceeds of Loans among the Borrowers. The Agent and the Lenders are
hereby entitled to rely on any communications given or transmitted by the
Company as if such communication were given or transmitted by each and
every Borrower; provided, however, that any communication given or
transmitted by any Borrower other than the Company shall be binding with
respect to such Borrower. Any communication given or transmitted by the
Agent or any of the Lenders to the Company shall be deemed given and
transmitted to each and every Borrower.
14.10. 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.
-52-
<PAGE>
<PAGE>
14.11. Judgment Currency. If for the purposes of obtaining a
judgment in any court or obtaining an order enforcing a judgment it is
necessary to convert any amount due from the Borrowers hereunder or
under the Notes in the currency expressed to be payable herein or under the
Notes (the "specified currency") into another currency, then the conversion
shall be made at CoreStates' spot rate of exchange for buying the specified
currency with such other currency, in accordance with normal banking
procedures, prevailing at the close of business on the Banking Day next
preceding the day on which the judgment is given or the order is made. In
the event that there is a difference between the rate of exchange on the basis
of which the amount of such judgment or order is determined and the rate
of exchange prevailing on the date of payment, the Borrowers shall pay
such additional amount as may be necessary to ensure that the amount paid
is the amount of such other currency which permits the relevant Lender to
purchase the amount of the specified currency due when such judgment or
order is issued, in accordance with normal banking procedures, prevailing
at the Lender's opening of business on the date of payment.
14.12. GOVERNING LAW; AGREEMENT UNDER SEAL.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH
OF PENNSYLVANIA AND SHALL, UPON ACCEPTANCE BY THE
PARTIES HERETO, CONSTITUTE AN AGREEMENT UNDER SEAL
AMONG THE PARTIES.
14.13. WAIVER OF JURY TRIAL. THE LENDERS, THE
AGENT AND THE BORROWERS AGREE THAT NONE 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 BORROWERS, AND
THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER THE LENDERS NOR THE BORROWERS HAVE AGREED
WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
14.14. VENUE, CONSENT TO SERVICE OF PROCESS. EACH
PARTY HERETO ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF PENNSYLVANIA IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF
OR BY REASON OF THIS AGREEMENT, THE NOTES, ANY OTHER
LOAN DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IRREVOCABLY AGREES TO BE BOUND
BY ANY FINAL JUDGMENT RENDERED BY ANY SUCH COURT IN
ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT SHALL
HAVE BEEN SERVED WITH PROCESS IN THE MANNER
HEREINAFTER PROVIDED, SUBJECT TO EXERCISE AND
EXHAUSTION OF ALL RIGHTS OF APPEAL AND TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE,
IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH
COURT, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM
ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN ANY INCONVENIENT FORUM OR
THAT THE VENUE THEREOF IS IMPROPER.
-53-
<PAGE>
<PAGE>
14.15. 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.
14.16. 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.
-54-
<PAGE>
<PAGE>
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.
BORROWERS:
BOSTON TECHNOLOGY, INC.
By: /s/ Carol B. Langer
----------------
Name: Carol B. Langer
Title: SVP Finance & CFP
ENHANCED COMMUNICATIONS
CORPORATION
By: /s/ Carol B. Langer
----------------
Its: Treasurer
<PAGE>
<PAGE>
AGENT AND LENDERS:
CORESTATES BANK, N.A., as
Agent and as a Lender
By: /s/ R. Thomas Esser
----------------
Name: R. Thomas Esser
Title: Vice President
SILICON VALLEY EAST, a
Division of Silicon Valley Bank; as a
Lender
By: /s/ Jane A. Braun
--------------
Name: Jane A. Braun
Title: Vice President
SILICON VALLEY BANK, as a
Lender
By: /s/ Amy Young
----------
Name: Amy Young
Title: Assistant Vice President
(Signed at Santa Clara, California)
BANKBOSTON, N.A., as a Lender
By: /s/ John B. Desmond
----------------
Name: John B. Desmond
Title: Vice President
THE CHASE MANHATTAN
BANK, as a Lender
By: /s/ Roger A. Stone
---------------
Name: Roger A. Stone
Title: Senior Vice President
<PAGE>
Exhibit 11
. Boston Technology, Inc.
Statement of Weighted Shares used in Computation of Earnings Per Share
. (in thousands)
<TABLE>
<CAPTION>
. Three months ended July 31, Six months ended July 31,
. 1997 1996 1997 1996
. ------ ------ ------ -----
<S> <C> <C> <C> <C>
Common stock outstanding, beginning of period 26,043 24,917 25,501 24,732
Weighted average common stock issued 900 59 1,444 158
Weighted average common stock equivalents 6,798 8,019 6,749 7,912
Weighted average treasury shares acquired using
the treasury stock method (4,949) (4,990) (5,279) (4,967)
. ------- ------- ------- -------
Weighted average shares of common stock
outstanding 28,792 28,005 28,415 27,835
. ====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-31-1997
<CASH> 38146
<SECURITIES> 0
<RECEIVABLES> 61125
<ALLOWANCES> 9415
<INVENTORY> 24762
<CURRENT-ASSETS> 141772
<PP&E> 64884
<DEPRECIATION> 29455
<TOTAL-ASSETS> 185702
<CURRENT-LIABILITIES> 66200
<BONDS> 0
0
0
<COMMON> 27
<OTHER-SE> 105873
<TOTAL-LIABILITY-AND-EQUITY> 185702
<SALES> 129736
<TOTAL-REVENUES> 129736
<CGS> 56343
<TOTAL-COSTS> 56343
<OTHER-EXPENSES> 53616
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 344
<INCOME-PRETAX> 19227
<INCOME-TAX> 2753
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16474
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
