<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NUMBER: 33-64732
SPSS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2815480
(STATE OR OTHER JURISDICTION (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
444 N. MICHIGAN AVENUE, CHICAGO, ILLINOIS 60611
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (312)329-2400
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS 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 FILING REQUIREMENTS
FOR THE PAST 90 DAYS. YES X NO
AS OF MAY 1, 1996, THERE WERE 7,154,181 SHARES OF COMMON STOCK
OUTSTANDING, PAR VALUE $.01, OF THE REGISTRANT.
<PAGE> 2
SPSS INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1996
INDEX
PART I - FINANCIAL INFORMATION PAGE
----
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REVIEW REPORT 3
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND
MARCH 31, 1996 (UNAUDITED) 4
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED) AND 1996 (UNAUDITED) 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED) AND 1996 (UNAUDITED) 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
2
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ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors
SPSS Inc.:
We have reviewed the consolidated balance sheet of SPSS Inc. and subsidiaries
as of March 31, 1996, and the related consolidated statements of income and
cash flows for the three-month periods ended March 31, 1995 and 1996. These
consolidated financial statements are the responsibility of SPSS Inc.'s
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above, for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of SPSS Inc. and subsidiaries as of
December 31, 1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 21, 1996, except as to Note 14 which
is as of March 15, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1995, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
KPMG Peat Marwick LLP
Chicago, Illinois
May 10, 1996
3
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SPSS Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------ ---------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,778 $ 10,539
Accounts receivable, net of allowances 12,252 12,505
Inventories 1,590 1,242
Prepaid expenses and other current assets 1,469 1,580
-------- ---------
Total current assets 26,089 25,866
-------- ---------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost:
Furniture, fixtures and office equipment 3,494 3,387
Computer equipment and software 8,609 9,116
Leasehold improvements 1,413 1,420
-------- ---------
13,516 13,923
Less accumulated depreciation and amortization 9,179 9,570
-------- ---------
Net equipment and leasehold improvements 4,337 4,353
-------- ---------
Capitalized software development costs,
net of accumulated amortization 6,839 6,850
Goodwill, net of accumulated amortization 2,113 2,051
Other assets 1,999 1,975
-------- ---------
$ 41,377 $ 41,095
======== =========
CURRENT LIABILITIES:
Accounts payable $ 2,331 $ 2,655
Accrued royalties 496 494
Accrued rent 921 855
Other accrued liabilities 8,785 6,292
Income taxes and value added taxes payable 2,262 2,815
Customer advances 295 254
Deferred revenues 6,485 6,141
-------- ---------
Total current liabilities 21,575 19,506
-------- ---------
Deferred income taxes 2,015 2,015
Other noncurrent liabilities 288 225
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000 shares
authorized; 7,148,891 and 7,151,878 shares
issued and outstanding in 1995 and 1996,
respectively 71 72
Additional paid-in capital 37,126 37,179
Cumulative foreign currency
translation adjustments (699) (816)
Accumulated deficit (18,999) (17,086)
-------- ---------
Total stockholders' equity 17,499 19,349
-------- ---------
$ 41,377 $ 41,095
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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SPSS Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31,
1995 1996
--------- ---------
<S> <C> <C>
Net revenues:
Desktop products $ 10,347 $ 12,906
Large System products 2,560 2,855
Other products and services 1,855 1,302
--------- ---------
Net revenues 14,762 17,063
Cost of revenues 1,350 1,603
--------- ---------
Gross profit 13,412 15,460
--------- ---------
Operating expenses:
Sales and marketing 8,204 8,923
Product development 2,021 2,461
General and administrative 1,049 1,236
--------- ---------
Operating expenses 11,274 12,620
Operating income 2,138 2,840
Other income (expense):
Net interest income (expense) (4) 122
Other 67 (50)
--------- ---------
Other income (expense) 63 72
--------- ---------
Income before income taxes 2,201 2,912
Income tax expense 755 999
--------- ---------
Net income $ 1,446 $ 1,913
========= =========
Net earnings per share $ 0.20 $ 0.25
========= =========
Shares used in computing net earnings per share 7,163,898 7,758,154
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
SPSS Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1995 1996
<S> <C> <C>
------- -------
Cash flows from operating activities:
Net income $ 1,446 $ 1,913
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,083 1,088
Changes in assets and liabilities, net of effects of
the purchase of BMDP Statistical Software, Inc.:
Accounts receivable 337 (253)
Inventories 75 348
Accounts payable (1,316) 324
Accrued royalties (6) (2)
Accrued expenses (236) (2,314)
Other (511) (112)
------- -------
Net cash provided by operating activities 872 992
------- -------
Cash flows from investing activities:
Capital expenditures, net (1,035) (691)
Capitalized software development costs (866) (350)
Net payments for acquisitions -- (244)
------- -------
Net cash used in investing activities (1,901) (1,285)
------- -------
Cash flows from financing activities:
Net repayments under line-of-credit agreement (2,870) --
Net proceeds from issuance of common stock 9,176 50
Income tax benefit from stock option exercises -- 4
------- -------
Net cash provided by financing activities 6,306 54
------- -------
Net change in cash and cash equivalents 5,277 (239)
Cash and cash equivalents at beginning of period 1,714 10,778
------- -------
Cash and $ 6,991 $10,539
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 115 $ 12
Income taxes paid 1,084 306
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
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SPSS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary for
a fair presentation of the results of the interim periods presented. All such
adjustments are of a normal recurring nature.
These consolidated financial statements should be read in conjunction with
the Company's audited consolidated financial statements and notes thereto for
the year ended December 31, 1995, included in the Company's Form 10-K filed
with the Securities and Exchange Commission.
NOTE 2 - NET EARNINGS PER SHARE
Net earnings per common and common equivalent share has been computed
using the weighted average number of common and dilutive common equivalent
shares outstanding for each period (7,163,898 shares for the three months ended
March 31, 1995 and 7,758,154 shares for the comparable period in 1996). Common
equivalent shares consist of the shares issuable upon exercise of stock options
(using the treasury stock method).
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
The following table sets forth the percentages that selected items in
the Consolidated Statements of Income bear to net revenues:
SPSS Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Percentage of Net Revenues
--------------------------
Three Months Ended
March 31,
--------------------------
1995 1996
----- -----
<S> <C> <C>
Statement of Income Data:
Net revenues:
Desktop products 70% 76%
Large System products 17% 17%
Other products and services 13% 7%
----- -----
Net revenues 100% 100%
Cost of revenues 9% 9%
----- -----
Gross profit 91% 91%
----- -----
Operating expenses:
Sales and marketing 56% 53%
Product development 14% 14%
General and administrative 7% 7%
----- -----
Operating expenses 77% 74%
----- -----
Operating income 14% 17%
Other income (expense):
Net interest income (expense) -- --
Other 1% --
----- -----
Other income (expense) 1% --
----- -----
Income before income taxes 15% 17%
Income tax expense 5% 6%
----- -----
Net income 10% 11%
===== =====
</TABLE>
8
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COMPARISON OF THREE MONTHS ENDED MARCH 31, 1995 TO THREE MONTHS ENDED MARCH 31,
1996.
Net Revenues. Net Revenues were $14,762,000 and $17,063,000 for the three
months ended March 31, 1995 and 1996, respectively, an increase of 16%. This
revenue increase was influenced in part by the acquisition of BMDP Statistical
Software, Inc. ("BMDP"), effective December 29, 1995. The BMDP acquisition
accounted for approximately $270,000 of the Company's increase in net revenues.
(If all of BMDP's revenues had been included in the Company's first quarter
1995 revenues, the year to year increase in quarterly net revenues would have
been 13.5%.) Revenues from products designed for desktop computers ("Desktop
products") increased $2,559,000 (25%) over the corresponding period in 1995.
Additionally, revenues from products designed for mainframes, minicomputers,
and UNIX workstations ("Large System products") increased 12% over the
corresponding period in 1995. The increase in Desktop products reflected a
$1,511,000 increase in new revenues from SPSS for Windows. In addition,
revenues from annual license renewals of Desktop products increased by $845,000
reflecting a $1,041,000 increase in annual license renewals for SPSS for
Windows. The increase in Large System products was primarily due to an
increase in revenues from new UNIX licenses as a result of the BMDP
acquisition. Other products and services revenues decreased 30% because of the
decrease in revenues previously received from publications and student products
due to the end of the payment of guaranteed royalties for the Prentice Hall
Agreement in July 1995. Revenues for the first quarter of 1996 were adversely
affected by changes in foreign currency exchange rates.
Cost of Revenues. Cost of revenues consists of costs of goods sold,
amortization of capitalized software development costs, and royalties paid to
third parties. Cost of revenues was $1,350,000 and $1,603,000 in the three
months ended March 31, 1995 and 1996, respectively. Such costs increased due
to higher sales levels and higher royalties paid to third parties partially
offset by lower amortization amounts of capitalized software and product
translations. As a percentage of net revenues, cost of revenues remained
constant at 9%.
Sales and Marketing. Sales and marketing expenses were $8,204,000 and
$8,923,000 in the three months ended March 31, 1995 and 1996, respectively, an
increase of 9%. This increase was due to the expansion of the domestic and
international sales organizations, increased promotional costs, and salary and
commission increases. Such expenses decreased from 56% to 53% of net revenues.
Product Development. Product development expenses were $2,021,000 and
$2,461,000 (net of capitalized software development costs of $632,000 and
$283,000) in the three months ended March 31, 1995 and 1996, respectively, an
increase of 22%. In the corresponding periods in 1995 and 1996, the Company's
expense for amortization of capitalized software and product translations,
included in cost of revenues, was $372,000 and $338,000, respectively. The
increase in product development expenses was primarily due to salary increases,
depreciation expense on computer acquisitions and additions to the product
development staff. As a percentage of net revenues, product development
expenses remained constant at 14%.
9
<PAGE> 10
General and Administrative. General and administrative expenses were
$1,049,000 and $1,236,000 in the three months ended March 31, 1995 and 1996,
respectively, an increase of 18%. Such expenses increased primarily due to
increases in bad debt expense, professional fees, salary related expenses and
travel. As a percentage of net revenues, general and administrative expenses
remained constant at 7%.
Net Interest Income (Expense). Net interest income (expense) was ($4,000) in
1995 and $122,000 in the three months ended March 31, 1995 and 1996,
respectively. This favorable variance was primarily due to the interest earned
on short-term investments as well as the elimination of interest expense
related to the Company's line of credit which was repaid with the net proceeds
from the Company's public offering of common stock in February 1995.
Other Income (Expense). Other income (expense) consists of foreign currency
transaction gains and losses. Such transactions resulted in income of $67,000
for the three months ended March 31, 1995 and expense of $50,000 for the three
months ended March 31, 1996.
Provision for Income Taxes. Provision for income taxes was $755,000 and
$999,000 for the three months ended March 31, 1995 and 1996, respectively,
reflecting an effective tax rate of 34.3%.
LIQUIDITY AND CAPITAL RESOURCES
The Company had no long-term debt as of March 31, 1996 and held approximately
$10,539,000 in cash and cash equivalents. Funds in the first three months of
1996 were used in operations and for payments related to the Company's
acquisition of BMDP. Capital expenditures were also made for furniture,
computer equipment and leasehold improvements for newly hired employees and
product development.
The Company currently has an available $5,000,000 unsecured line of credit with
Bank of America N.T.S.A. ("B of A"), under which borrowings bear interest at
the reference rate (currently 8.25%). As of March 31, 1996, the Company had no
borrowings under this line of credit. The Company's credit agreement with B of
A requires the Company to comply with certain specified financial ratios and
tests, and restricts the Company's ability to, among other things (i) pay
dividends or make distributions, (ii) incur additional indebtedness, (iii)
create liens on assets, (iv) make investments, (v) engage in mergers,
acquisitions or consolidations, (vi) sell assets and (vii) engage in certain
transactions with affiliates.
The Company anticipates that amounts available under its line of credit,
existing sources of liquidity and cash flows generated from operations will be
sufficient to fund the Company's operations and capital requirements for the
foreseeable future. However, no assurance can be given that changing business
circumstances will not require additional capital for reasons that are not
currently anticipated or that the necessary additional capital will then be
available to the Company on favorable terms, or at all.
10
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INTERNATIONAL OPERATIONS
Significant growth in the Company's international operations continued during
the first quarter of 1996. The portion of revenues attributable to
international operations was positively impacted by the devaluation of the U.S.
dollar in relation to other foreign currencies. Net corporate revenues
increased 16% in the three months ended March 31, 1996, when compared to the
three months ended March 31, 1995. Net of the effects of changes in foreign
currency rates, the increase would have been approximately 17%.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Currently there are no material pending legal proceedings to which
the Company or any of its subsidiaries is a party or to which any
of their property is subject.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits (Note: Management contracts and compensatory plans or
arrangements are underlined in the following list.)
Incorporation
Exhibit by Reference
Number Description of Document (if applicable)
------- ----------------------- ---------------
3.1 Certificate of Incorporation of the Company * 3.2
3.2 By-Laws of the Company * 3.4
4.1 Credit Agreement
10.1 Employment Agreement with Jack Noonan + 10.1
10.2 Agreement with Valletta ** 10.2
10.3 Agreement between the Company and ** 10.5
Prentice-Hall
10.4 Software Distribution Agreement between ** 10.6
the Company and IBM
10.5 HOOPS Agreement ** 10.7
10.6 Stockholders Agreement * 10.8
11
<PAGE> 12
10.7 Agreements with CSDC * 10.9
10.8 Amended 1991 Stock Option Plan * 10.10
10.9 SYSTAT, INC. Asset Purchase Agreement ++ 10.9
10.10 Employment Agreement with Leland Wilkinson ++10.10
10.11 1994 Bonus Compensation +++10.11
10.12 Lease for Chicago, Illinois Office +++10.12
10.13 Amendment to Lease for Chicago, Illinois Office +++10.13
10.14 1995 Equity Incentive Plan - 10.14
10.15 1995 Bonus Compensation -- 10.15
10.16 Lease for Chicago, Illinois Office -- 10.16
15.1 Acknowledgment of Independent Certified
Public Accountants Regarding Independent
Auditors' Review Report
27.1 Financial Data Schedule
_______________________________
x Previously filed with SPSS' Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 1993.
* Previously filed with Amendment No. 2 to Form S-1 Registration Statement
of SPSS Inc. filed on August 4, 1993 (Registration No. 33-64732).
** Previously filed with Amendment No. 1 to Form S-1 Registration
Statement of SPSS Inc. filed on July 23, 1993 (Registration No. 33-64732).
+ Previously filed with the Form S-1 Registration Statement of SPSS Inc.
filed on June 22, 1993 (Registration No. 33-64732).
++ Previously filed with the Form S-1 Registration Statement of SPSS Inc.
filed on December 5, 1994 (Registration No. 33-86858).
+++ Previously filed with SPSS' Annual Report on Form 10-K for the Year Ended
December 31, 1994 (Registration No. 33-64732).
12
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- Previously filed with the Company's 1995 Proxy statement.
- -- Previously filed with the SPSS' Annual Report on Form 10-K for the Year
Ended December 31, 1995 (Registration No. 33-64732).
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the
fiscal quarter ended March 31, 1996.
13
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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.
SPSS INC.
DATE: MAY 14, 1996 BY: /S/ JACK NOONAN
JACK NOONAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE UNDERSIGNED, IN HIS CAPACITY AS THE PRINCIPAL
FINANCIAL OFFICER OF THE REGISTRANT.
DATE: MAY 14, 1996 BY: /S/ EDWARD HAMBURG
EDWARD HAMBURG
SENIOR VICE-PRESIDENT, CORPORATE
OPERATIONS AND CHIEF FINANCIAL OFFICER
14
<PAGE> 15
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
------- ------------------------ ------
4.1 Credit Agreement 16
15.1 Acknowledgment of Independent Certified
Public Accountants Regarding Independent
Auditors' Review Report 40
27.1 Financial Data Schedule 41
15
<PAGE> 1
EXHIBIT 4.1
CREDIT AGREEMENT
DATED AS OF MARCH 15, 1996
BETWEEN
SPSS INC.
AND
BANK OF AMERICA ILLINOIS
16
<PAGE> 2
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND FINANCIAL 1
REQUIREMENTS.
1.01 Definitions 1
1.02 Financial Requirements 4
ARTICLE II
THE CREDIT FACILITY 4
2.01 The Revolving Facility 4
2.02 Advances Under the Revolving Facility 4
2.03 Mandatory Payment 5
2.04 Commitment Fee 5
2.05 Automatic Conversion 5
2.06 Early Termination of Commitment 5
ARTICLE III
EXTENSIONS OF CREDIT, PAYMENTS AND INTEREST CALCULATIONS 5
3.01 Requests for Credit 5
3.02 Disbursements 5
3.03 Payments 6
3.04 Evidence of Indebtedness 6
3.05 Interest Calculation 6
3.06 Late Payments; Compounding 6
3.07 Business Day 6
3.08 Taxes and Other Charges 6
3.09 Illegality 7
3.10 Increased Costs 7
3.11 Funding Losses 7
3.12 Inability to Determine Rates 7
3.13 Certificate of the Bank 8
3.14 Survival 8
ARTICLE IV
CONDITIONS TO AVAILABILITY OF CREDIT 8
4.01 Conditions to First Extension of Credit 8
4.02 Conditions to Each Extension of Credit 8
17
<PAGE> 3
ARTICLE V
REPRESENTATIONS AND WARRANTIES 9
5.01 Corporate Existence and Power 9
5.02 Authorization 9
5.03 Enforceability 9
5.04 Compliance with Laws 9
5.05 Permits, Franchises 9
5.06 Litigation 10
5.07 No Event of Default 10
5.08 Other Obligations 10
5.09 Tax Returns 10
5.10 Information Submitted 10
5.11 No Material Adverse Effect 10
5.12 ERISA 10
5.13 Environmental Matters 10
ARTICLE VI
AFFIRMATIVE COVENANTS 11
6.01 Notices of Certain Events 11
6.02 Financial and Other Information 11
6.03 Books, Records, Audits and Inspections 12
6.04 Use of Facility 12
6.05 Insurance 12
6.06 Compliance with Laws 12
6.07 Change in Name, Structure or Location 12
6.08 Existence and Properties 12
6.09 Additional Acts 12
6.10 Existing Facility 12
ARTICLE VII
NEGATIVE COVENANTS 13
7.01 Other Indebtedness 13
7.02 Liens 13
7.03 Acquisitions 13
7.04 Dividends 13
7.05 Loans 13
7.06 Liquidations and Mergers 14
7.07 Sale of Assets 14
7.08 Business Activities; ERISA 14
7.09 Regulations G, T, U, and X 14
7.10 Quick Ratio. 14
7.11 Tangible Net Worth 14
7.12 Total Liabilities to Tangible Net Worth 15
7.13 Consecutive Quarterly Losses; Losses in One Quarter 15
18
<PAGE> 4
ARTICLE VIII
EVENTS OF DEFAULT 15
8.01 Events of Default 15
(a) Failure to Pay 15
(b) Breach of Representation or Warranty 15
(c) Specific Defaults 15
(d) Other Defaults 15
(e) Trade Suits 15
(f) Judgments 15
(g) Failure to Pay Debts; Voluntary Bankruptcy 15
(h) Involuntary Bankruptcy 15
(i) Default of Other Financial Obligations 16
(j) Default under other Credit Documents 16
(k) Default of Other Bank Obligations 16
(l) Material Adverse Effect 16
(o) Change of Control 16
8.02 Remedies 16
ARTICLE IX
MISCELLANEOUS 17
9.01 Successors and Assigns 17
9.02 Consents and Waivers 17
9.03 Governing Law 17
9.04 Costs and Attorneys' Fees 17
9.05 Integration; Amendment 17
9.06 Borrower's Documents 17
9.07 Participations 17
9.08 General Indemnification 18
9.09 Arbitration; Reference Proceeding 18
9.10 Notices 18
9.11 Headings; Interpretation 19
9.12 Severability 19
9.13 Counterparts 19
9.14 Termination of Existing Facility. 19
19
<PAGE> 5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (as amended or otherwise modified from time to time,
this "Agreement") is entered into as of March 15, 1996 between SPSS INC. (the
"Borrower"), and BANK OF AMERICA ILLINOIS (the "Bank").
In consideration of the mutual covenants and agreements contained herein,
the Borrower and the Bank agree as follows:
ARTICLE I
DEFINITIONS AND FINANCIAL REQUIREMENTS.
1.01 Definitions. The following terms (including plural and singular
versions thereof) have the meanings indicated:
"Advance": an advance hereunder.
"Availability Period": the period commencing on the date of this
Agreement and ending on the date that is the earlier to occur of (a) March 15,
1997, and (b) the date on which the Bank's commitment to extend credit
hereunder terminates.
"Borrowing Base": as of any date of determination, an amount equal to the
sum of 75% of the value of all Eligible Accounts outstanding at such date.
"Borrowing Base Certificate": a certificate setting forth the Borrowing
Base and related calculations, duly executed by a responsible officer of the
Borrower, in form and substance satisfactory to the Bank.
"Business Day": any day other than a Saturday, a Sunday, or other day on
which commercial banks in Chicago, Illinois, are authorized or required by law
to close and, if the applicable Business Day relates to any Offshore Rate
Advance, means such a day on which dealings are carried on in the applicable
offshore interbank market.
"Closing Date": the date on which all conditions to the initial extension
of credit hereunder are satisfied.
"Compliance Certificate": a certificate setting forth compliance with the
financial covenants contained herein and the related calculations, duly
executed by a responsible officer of the Borrower, in form and substance
satisfactory to the Bank.
"Credit Documents": collectively, this Agreement and each other
agreement, document and instrument now or hereafter delivered to the Bank in
connection with the credits established herein and the transactions
contemplated hereby.
"Credit Limit": the amount $5,000,000.
20
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"Default": any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Dollars", "dollars" and "$": each, lawful money of the United States.
"Eligible Account": at the time of any determination thereof, any bone
fide account receivable of the Borrower net of applicable reserves, according
to GAAP, arising in the ordinary course of the Borrower's business, as to which
each of the following requirements has been met to the satisfaction of the
Bank:
(a) The Borrower has lawful and absolute title to such account and
such account is, in the Borrower's reasonable judgment, collectible in the
ordinary course of business;
(b) Such account is not subject to any lien or encumbrance in favor
of any person, or any bona fide dispute, setoff, counterclaim or other
claim or defense on the part of any person (including the obligor thereon
of the account) denying liability thereunder; and
(c) Such account is denominated in U.S. dollars, and the obligor on
such account is not located outside of the United States.
"Environmental Laws": any foreign, federal, state, local, or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees,
requirements of any governmental authority, any and all requirements of law and
any and all common law requirements, rules, and bases of liability regulating,
relating to, or imposing liability or standards of conduct concerning pollution
or protection of human health or the environment, as now or may at any time
hereafter may be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder as from time to time in
effect.
"Event of Default": any event listed in Article VIII of this Agreement.
"Existing Facility": the Credit Agreement dated as of September 16, 1993
between the Borrower and the Bank (formerly known as Continental Bank N.A.), as
amended, and all of the agreement, documents and instruments executed in
connection therewith.
"FDIC": the Federal Deposit Insurance Corporation, or any entity
succeeding to any of its principal functions.
"FRB": the Board of Governors of the Federal Reserve System, or any
entity succeeding to any of its principal functions.
"GAAP" generally accepted accounting principles in effect from time to
time in the United States, consistently applied.
"Hazardous Substance": any hazardous or toxic substance, material, or
waste, defined, listed, classified, or regulated as such in or under any
Environmental Laws, including asbestos, petroleum, or petroleum products
(including gasoline, crude oil, or any fraction thereof), polychlorinated
biphenyls, and urea-formaldehyde insulation.
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"Material Adverse Effect": (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of the
Borrower to perform under any Credit Document; or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability of any Credit
Document.
"Offshore Rate": for each Offshore Rate Interest Period, the rate of
interest (rounded upward to the next 1/16th of 1%) determined pursuant to the
following formula:
Offshore Rate = LIBOR
---------------------
1.00 - Eurodollar Reserve Percentage
Where:
"LIBOR" means the rate of interest at which dollar deposits in
the approximate amount of the Offshore Rate Advance to be made and
having a maturity comparable to such Offshore Rate Interest Period
would be offered by the Bank's London Branch (or such other office
as may be designated for such purpose by the Bank) to major banks
in the London interbank market upon request of such banks at
approximately 11:00 a.m. (London, England time) two Business Days
prior to the first day of such Offshore Rate Interest Period.
"Eurodollar Reserve Percentage" means, for any Offshore Rate
Interest Period, the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect on the
first day of such Offshore Rate Interest Period (whether or not
applicable to the Bank) under regulations issued from time to time
by the FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities") having a term comparable
to such Offshore Rate Interest Period.
"Offshore Rate Advance": an Advance for which interest is based on the
Offshore Rate.
"Offshore Rate Interest Period": for each Offshore Rate Advance the
period commencing on the date the Offshore Rate Advance begins to bear interest
at a rate based on the Offshore Rate and ending one, two, three or six months
thereafter, as requested by the Borrower, or at such other period as agreed by
the Bank and the Borrower at the time the Borrower requests the Advance;
provided, however, that the last day of each Offshore Rate Interest Period
shall be determined in accordance with the practices of the applicable offshore
interbank markets as from time to time in effect, and provided further that no
such interest period shall extend beyond the last day of the Availability
Period.
"Plan": an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Borrower sponsors or maintains or to which the Borrower makes, is
making, or is obligated to make contributions, including any pension plan (as
defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the
Borrower sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five plan years.
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"Reference Rate": for any day, the rate of interest in effect for such
day as publicly announced from time to time by the Bank in Chicago, Illinois,
as its "reference rate." It is a rate set by the Bank based upon various
factors including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in the reference rate announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Reference Rate Advance": an Advance that bears interest based on the
Reference Rate.
"Revolving Facility": the line of credit described in Section 2.01.
"Subsidiary": of the Borrower, any corporation, association, partnership,
joint venture, or other business entity of which more than 50% of the voting
stock or other equity interests (in the case of entities other than
corporations), is owned or controlled directly or indirectly by the Borrower or
one or more Subsidiaries of the Borrower or a combination thereof.
"Tangible Net Worth": the gross book value of the assets of the Borrower
and its Subsidiaries on a consolidated basis (exclusive of goodwill, patents,
trademarks, trade names, organization expense, treasury stock, unamortized debt
discount and expense, deferred charges, and other like intangibles) less (a)
reserves applicable thereto, and (b) all liabilities (including accrued and
deferred income taxes).
1.02 Financial Requirements. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted,
all financial computations required under this Agreement shall be made, and all
financial information required under this Agreement shall be prepared, in
accordance with GAAP.
ARTICLE II
THE CREDIT FACILITY
2.01 The Revolving Facility. From time to time during the Availability
Period, subject to the terms and provisions hereof, the Bank, on a revolving
basis, will make dollar Advances to the Borrower ("Advances"). The aggregate
of all Advances may not exceed at any one time the lesser of: (a) the Credit
Limit, and (b) the Borrowing Base, calculated as of the date of the most
recently delivered Borrowing Base Certificate.
2.02 Advances Under the Revolving Facility. Subject to the other
provisions of this Section, Advances under the Revolving Facility shall bear
interest at a rate per annum equal to the Reference Rate. The Borrower shall
pay interest quarterly, on the last day of each calendar quarter until the last
day of the Availability Period, on which date all accrued and unpaid interest
shall be due and payable. The Borrower shall repay the principal amount of
each Reference Rate Advance on the date such advance is converted into an
Offshore Rate Advance under subsection (b) below, and on the last day of the
Availability Period.
(b) In lieu of the interest rate described above, the Borrower may elect
during the Availability Period to have all or portions of Advances under the
Revolving Facility bear interest at the Offshore Rate plus 1.5% per annum
during an Offshore Rate Interest Period, subject to the following requirements:
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(i) Each Offshore Rate Advance shall be for an amount not less than
a minimum amount satisfactory to the Bank.
(ii) The Borrower shall pay interest on each Offshore Rate Advance
on the last day of the Offshore Rate Interest Period for such Advance;
provided, however, that if any Interest Period for a Offshore Rate Advance
exceeds three months, interest shall also be payable on the date which
falls three months after the beginning of such Interest Period and on each
date which falls three months after any such interest payment date. The
Borrower shall repay the principal balance of each Offshore Rate Advance
on the last day of the Offshore Rate Interest Period for such Advance, and
(if sooner occurring) on the last day of the Availability Period.
(iii) Any payment of an Offshore Rate Advance prior to the last day
of the Offshore Rate Interest Period for such Advance, whether voluntary,
by reason of acceleration or otherwise, including any mandatory payments
required under this Agreement and applied by the Bank to an Offshore Rate
Advance, shall be accompanied by the amount of accrued interest on the
amount repaid and by the amount (if any) required by Section 3.11.
2.03 Mandatory Payment. If at any time and for any reason the aggregate
of all Advances exceeds the lesser of (a) the Credit Limit and (b) the
Borrowing Base, calculated as of the date of the most recently delivered
Borrowing Base Certificate, the Borrower shall make a mandatory prepayment of
the Advances in an amount equal to such excess. Payments under this Section
may be applied to the obligations of the Borrower to the Bank in the order and
manner as the Bank in its discretion may determine.
2.04 Commitment Fee. The Borrower shall pay to the Bank a commitment fee
at the rate of 0.375% per annum on the average daily unused portion of the
credit provided under this Agreement. The commitment fee shall be computed on
a calendar quarter basis, except for the first period which shall commence on
the Closing Date and end on March 31, 1996. The commitment fee shall be
payable in arrears on March 31, 1996, on the last day of each successive
calendar quarter thereafter, and on the last day of the Availability Period.
2.05 Automatic Conversion. Upon the occurrence and during the
continuation of any Event of Default, and without constituting a waiver of any
such Event of Default, all Offshore Rate Advances shall at the option of the
Bank be converted into Reference Rate Advances.
2.06 Early Termination of Commitment. The Borrower may at any time upon
no less than three Business Days' prior written notice, permanently terminate
the Bank's commitment to extend credit hereunder by notifying the Bank of the
same, and paying in full the entire amount of credit outstanding hereunder,
together with any sums due under Section 3.11.
ARTICLE III
EXTENSIONS OF CREDIT, PAYMENTS AND INTEREST CALCULATIONS
3.01 Requests for Credit. Each request for an extension of credit shall
be made in writing on a form acceptable to the Bank or in any other manner
acceptable to the Bank.
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3.02 Disbursements. Each extension of credit or disbursement by the Bank
under this Agreement shall be made in the funds and for the account of such
branch, office or affiliate of the Bank as the Bank may from time to time
select.
3.03 Payments. Each payment by the Borrower under this Agreement shall
be made in the funds and at such branch, office or affiliate of the Bank as the
Bank may from time to time select, without setoff or counterclaim. The
Borrower hereby authorizes the Bank to debit the Borrower's deposit account at
the Bank in the amount of principal, interest, fees or any other amount due
under this Agreement or under any instrument or agreement required under this
Agreement. The Bank may, at its option, debit the account on the date such
amounts become due, or, if such due date is not a Business Day, on the next
Business Day after such due date. If there are insufficient funds in the
account to cover the amount debited to the accounts in accordance with this
Section, such debit may be reversed in whole or in part, at the option of the
Bank in its sole discretion, and the amount not debited shall be deemed to
remain unpaid.
3.04 Evidence of Indebtedness. Principal, interest and all other sums
due to the Bank under this Agreement shall be evidenced by entries in records
maintained by the Bank and, if required by the Bank, by a promissory note or
notes. Each payment on and any other credits with respect to principal,
interest and all other sums due under this Agreement shall be evidenced by
entries to records maintained by the Bank. The loan accounts or records
maintained by the Bank shall be conclusive absent manifest error of the amount
of the credit extended hereunder and the interest and payments thereon. Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing.
3.05 Interest Calculation. Interest based on the Reference Rate shall be
computed on the basis of a 365/366-day year, actual days elapsed. All other
interest and fees payable under this Agreement shall be computed on the basis
of a 360 day year and actual days elapsed, which results in more interest or a
larger fee than if a 365-366 day year were used.
3.06 Late Payments; Compounding. Any sum payable by the Borrower
hereunder (including unpaid interest) if not paid when due shall bear interest
(payable on demand) from its due date until payment in full at a rate per annum
equal to the Reference Rate plus 2% per annum. At the option of the Bank, in
each instance, any sum payable hereunder which is not paid when due (including
unpaid interest) may be added to principal of the Revolving Facility and shall
thereafter bear interest at the rate applicable to principal.
3.07 Business Day. Any sum payable by the Borrower hereunder which
becomes due on a day which is not a Business Day shall be due on the next
Business Day after such due date, unless, in the case of an Offshore Rate
Advance, the result of such extension would be to carry such Offshore Rate
Interest Period into another calendar month, in which event such Offshore Rate
Interest Period shall end on the immediately preceding Business Day. Any
payments received by the Bank on a day which is not a Business Day shall be
deemed to be received on the next Business Day after such date of receipt.
3.08 Taxes and Other Charges. If any taxes (other than taxes on net
income imposed by the country or any subdivision of the country in which the
Bank's principal office or actual lending office is located and measured by the
United States taxable income the Bank would have received if all payments under
or in respect of this Agreement and any instrument or agreement required
hereunder were exempt from taxes levied by the Borrower's country) are at any
time imposed on any payments under or in respect of this Agreement or any
instrument or agreement required hereunder including, but not limited
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<PAGE> 11
to, payments made pursuant to this Section, the Borrower shall
pay all such taxes and shall also pay to the Bank, at the time interest is
paid, all additional amounts which the Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such taxes had not been
imposed. The Borrower will provide the Bank with original tax receipts,
notarized copies of tax receipts, or such other documentation as will prove
payment of tax in a court of law applying the United States Federal Rules of
Evidence, for all taxes paid by the Borrower pursuant to this Section. The
Borrower will deliver receipts to the Bank within 30 days after the due date
for the related tax.
3.09 Illegality. (a) If the Bank determines that (i) the introduction
of any law, rule, regulation, treaty, or determination of an arbitrator or
court or other governmental authority or any change in or in the interpretation
or administration thereof has made it unlawful, or that any central bank or
other governmental authority has asserted that it is unlawful, for the Bank to
make or extend any Advance or other credit under this Agreement, or (ii) any
order, judgment, or decree of any governmental authority or arbitrator purports
by its terms to enjoin or restrain the Bank from making or extending any
Advance or other credit hereunder, then, on notice thereof by the Bank to the
Borrower, the obligation of the Bank to make or extend such Advance or other
credit shall be suspended until the Bank shall have notified the Borrower that
the circumstances giving rise to such determination no longer exist.
(b) If the Bank determines that it is unlawful for it to maintain any
Offshore Rate Advance hereunder, the Borrower shall prepay in full all Offshore
Rate Advances then outstanding, together with interest accrued thereon, either
on the last day of the applicable Offshore Rate Interest Period if the Bank may
lawfully continue to maintain such Advances to such day and such loans have an
interest period, or immediately, if the Bank may not lawfully continue to
maintain such Advances or such loans have no interest period, together with any
amounts required to be paid in connection therewith pursuant to Section 3.11.
3.10 Increased Costs. The Borrower shall pay to the Bank, on demand, the
Bank's costs or losses arising from any statute or regulation, or any request
or requirement of a regulatory agency which is applicable to all national banks
or a class of all national banks. The costs and losses will be allocated to
this facility in a manner determined by the Bank, using any reasonable method.
The costs include (a) any reserve or deposit requirements, and (b) any capital
requirements relating to the Bank's assets and commitments for credit.
3.11 Funding Losses. The Borrower shall reimburse the Bank and hold the
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of the failure of the Borrower to make any payment or prepayment of
principal of any Advance hereunder made at a rate of interest related to the
Offshore Rate (including payments made after any acceleration thereof), or to
borrow at such a rate, or the prepayment of an Advance which bears interest at
such a rate on a day which is not the last day of the interest period with
respect thereto (including payments made after any acceleration thereof or
because the total amount of credit exceeds the limitations set forth herein),
or the redenomination and conversion, upon the occurrence of any Event of
Default, of an Advance which bears interest at such a rate; including any such
loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain its Advances made at a rate related to the Offshore Rate
hereunder or from fees payable to terminate any deposits from which such funds
were obtained or deemed obtained.
3.12 Inability to Determine Rates. The Bank has no obligation to accept
an election for an Offshore Rate Advance if (a) dollar deposits in the
principal amount, and for the period equal to the interest period, for such
Advance are not available in the applicable funding market, or (b) the Offshore
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Rate does not accurately reflect the cost of such Advance. Nothing contained
herein shall, however, obligate the Bank to obtain the funds for any Advance in
any particular manner.
3.13 Certificate of the Bank. If the Bank claims any reimbursement or
compensation pursuant to Section 3.10 or Section 3.11 hereof, then the Bank
shall deliver to the Borrower a certificate setting forth in reasonable detail
the amount payable to the Bank thereunder and such certificate shall be
conclusive and binding on the Borrower in the absence of manifest error.
3.14 Survival. The agreements and obligations of the Borrower under
Sections 3.08 through 3.11 hereof shall survive the payment of all other
obligations of the Borrower hereunder.
ARTICLE IV
CONDITIONS TO AVAILABILITY OF CREDIT.
The Bank's obligation to extend credit under this Agreement is subject to
the Bank's receipt of the following, each in form and substance satisfactory to
the Bank:
4.01 Conditions to First Extension of Credit. Before the first extension
of credit:
(a) This Agreement, executed by the Borrower;
(b) Satisfactory evidence of due authorization of the execution, delivery
and performance by the Borrower of this Agreement and any other Credit
Documents, including certified resolutions, incumbency certificate, articles of
incorporation and bylaws;
(c) If requested by the Bank, an opinion of counsel for the Borrower
(which counsel must be satisfactory to the Bank) with respect to such legal
matters relating hereto as the Bank may request;
(d) Certificates of state officials showing that the Borrower is in good
standing or qualified to conduct business under the laws of the state of its
organization and, if requested by the Bank, in any other state in which the
Borrower is required to be so qualified;
(e) A certificate of an appropriate officer of the Borrower as to the
matters set forth in Section 4.02(a) and (b);
(f) A Borrowing Base Certificate for the month ending February 29, 1996;
(g) Payment of any fee or expense required hereunder prior to the first
extension of credit; and
(h) Such other approvals, opinions, documents or instruments as the Bank
may request.
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4.02 Conditions to Each Extension of Credit. Before each extension or
renewal of credit (including pursuant to any election under Section 2.02(b)),
including the first:
(a) The representations and warranties of the Borrower contained in this
Agreement shall be true on and as of the date of each extension of credit;
(b) Immediately prior to and immediately after giving effect to such
extension of credit, no Default or Event of Default shall exist;
(c) A Borrowing Base Certificate, dated as of the last day of the
calendar month most recently ended at least 15 days prior to such extension of
credit, shall have been delivered to the Bank; and
(d) Such extension or renewal of credit will not cause the aggregate of
all Advances to exceed the lesser of: (a) the Credit Limit, and (b) the
Borrowing Base, calculated as of the date of the most recently delivered
Borrowing Base Certificate.
Each request for an extension of credit hereunder shall constitute a
representation and warranty by the Borrower, as of the date of each such
request and as of the date of each extension of credit, that the conditions in
this Section are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
5.01 Corporate Existence and Power. The Borrower: (a) is a corporation
duly organized and existing under the laws of the state of its organization;
(b) has the power and authority and all governmental licenses, authorizations,
consents, and approvals to own its assets, carry on its business, and to
execute, deliver, and perform its obligations under, the Credit Documents; and
(c) is duly qualified and properly licensed and in good standing under the laws
of each jurisdiction where its ownership, lease, or operation of property or
the conduct of its business requires such license or qualification.
5.02 Authorization. The execution, delivery and performance by the
Borrower of this Agreement and any other Credit Document have been duly
authorized by all necessary corporate action, and do not and will not: (a)
contravene the terms of any organizational or charter documents; (b) conflict
with or result in any breach or contravention of, or the creation of any lien,
security interest, or charge under, any agreement, contract, indenture,
document, or instrument to which the Borrower is a party or by which any
property is bound, or any order, injunction, writ, or decree of any
governmental authority to which the Borrower or any property is subject; or (c)
violate any law, rule, regulation, or determination of an arbitrator or of a
court or other governmental authority, in each case applicable to or binding
upon the Borrower or any property.
5.03 Enforceability. This Agreement is a legal, valid, and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and the other Credit Documents and any other instrument or agreement
required under this Agreement, when executed and delivered, will be legal,
valid, binding, and enforceable in accordance with its terms against the
Borrower.
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<PAGE> 14
5.04 Compliance with Laws. The Borrower is in compliance with all
foreign, federal, state and local laws, rules, regulations and determinations
of arbitrators, courts and other governmental authorities materially affecting
the business, operations or property of the Borrower (including Environmental
Laws).
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5.05 Permits, Franchises. The Borrower or its Subsidiaries possess all
permits, memberships, franchises, contracts and licenses required and all
trademark rights, trade name rights, patent rights and fictitious name rights
necessary to enable the Borrower and its Subsidiaries to conduct the businesses
in which they are now engaged.
5.06 Litigation. There is no litigation, tax claim, proceeding,
governmental or administrative action, arbitration proceeding or dispute
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any of its Subsidiaries or any of their properties, the adverse
determination of which would result in a Material Adverse Effect.
5.07 No Event of Default. There exists no Default or Event of Default.
5.08 Other Obligations. As of the Closing Date, the Borrower is not in
default under any other agreement involving the borrowing of money, the
extension of credit, or the lease of real or personal property, to which the
Borrower is a party as borrower, guarantor, installment purchaser, or lessee,
except as disclosed in writing to the Bank prior to the Closing Date.
5.09 Tax Returns. The Borrower has no knowledge of any material pending
assessments or adjustments with respect to its income tax liabilities for any
year, except as disclosed in writing to the Bank prior to the Closing Date.
5.10 Information Submitted. All financial and other information that has
been submitted by the Borrower to the Bank, including the Borrower's financial
statement delivered to the Bank most recently prior to the Closing Date: (a)
in the case of financial statements, is prepared in accordance with GAAP; and
(b) is true and correct in all material respects and is complete insofar as may
be necessary to give the Bank true and accurate knowledge of the subject
matter thereof.
5.11 No Material Adverse Effect. Since September 30, 1995, there has
been no Material Adverse Effect.
5.12 ERISA. Neither the Borrower nor any Subsidiary has any Plans.
5.13 Environmental Matters. (a) The properties of the Borrower and its
Subsidiaries do not contain and have not previously contained (at, under, or
about any such property) any Hazardous Substances or other contamination (i) in
amounts or concentrations that constitute or constituted a violation of, or
could give rise to liability under, any Environmental Laws, (ii) which could
interfere with the continued operation of such property, or (iii) which could
impair the fair market value thereof; and (b) there has been no transportation
or disposal of Hazardous Substances from, nor any release or threatened release
of Hazardous Substances at or from, any property of the Borrower or any of its
Subsidiaries in violation of or in any manner which could give rise to
liability under any Environmental Laws. Neither the Borrower nor any of its
Subsidiaries has received or is aware of any material claim or notice of
material violation, alleged material violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to the properties or operations of the Borrower
or any of its Subsidiaries, nor does the Borrower have knowledge or reason to
believe that any such action is being contemplated, considered, or threatened.
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ARTICLE VI
AFFIRMATIVE COVENANTS
So long as credit is available under this Agreement and until full and
final payment of all of the Borrower's obligations under this Agreement and any
other Credit Document:
6.01 Notices of Certain Events. The Borrower shall promptly give written
notice to the Bank of:
(a) all litigation, proceedings or actions affecting the Borrower or its
Subsidiaries where the amount claimed is $1,000,000 or more;
(b) any substantial dispute which may exist between the Borrower or its
Subsidiaries and any governmental regulatory body or law enforcement authority;
(c) any Default or Event of Default;
(d) any of the representations and warranties in Article V ceases to be
true and correct; and
(e) any other matter which has resulted or could reasonably be expected
to result in a Material Adverse Effect.
6.02 Financial and Other Information. The Borrower shall deliver to the
Bank in form and detail satisfactory to the Bank, and in such number of copies
as the Bank may request:
(a) Within 105 days after the end of each fiscal year, the Borrower's
consolidated financial statements for such year audited by a certified public
accountant, together with an unqualified opinion of such certified public
accountant, and including, at a minimum, the Borrower's balance sheet and
statements of income, retained earnings and cash flow;
(b) Within 60 days after the end of each fiscal quarter, the Borrower's
consolidated financial statements for such quarter certified by a responsible
officer of the Borrower as being true and correct, and including, at a minimum,
the Borrower's balance sheet and statements of income, retained earnings and
cash flow;
(c) Within 15 days after the date of filing with the Securities and
Exchange Commission, copies of any of the Borrower's Form 10-K Annual Reports,
Form 10-Q Quarterly Reports and Form 8-K Current Reports;
(d) Within 15 days after the end of each month during which any Advance
is outstanding hereunder, a Borrowing Base Certificate for as of the end of
such month;
(e) Concurrently with the delivery of the financial statements referred
to in subsections 6.02(a) and (b), a Compliance Certificate for such fiscal
period; and
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(f) Promptly upon request, such other materials and information relating
to the Borrower or its Subsidiaries as the Bank may request.
6.03 Books, Records, Audits and Inspections. The Borrower shall, and
shall cause its Subsidiaries to, maintain adequate books, accounts and records,
and prepare all financial statements required hereunder in accordance with
GAAP, and in compliance with the regulations of any governmental regulatory
body having jurisdiction over the Borrower or its Subsidiaries, or the
Borrower's or its Subsidiaries' businesses, and permit employees or agents of
the Bank at any reasonable time to inspect the Borrower's and its Subsidiaries'
properties, and to examine or audit the Borrower's and its Subsidiaries' books,
accounts, and records and make copies and memoranda thereof.
6.04 Use of Facility. The Borrower shall use the credit facility
provided herein solely for working capital and other general corporate purposes
not in contravention of any requirement of law.
6.05 Insurance. The Borrower shall maintain and keep in force insurance
of the types and in amounts customarily carried in lines of businesses similar
to those of the Borrower, including fire, extended coverage, public liability
(including coverage for contractual liability), property damage (including use
and occupance), business interruption, and workers' compensation, all carried
by insurers and in amounts satisfactory to the Bank, with loss payable
endorsements on such types of insurance as the Bank may request, and deliver to
the Bank from time to time, at the Bank's request, a copy of each insurance
policy, or if permitted by the Bank, a certificate of insurance setting forth
all insurance then in effect.
6.06 Compliance with Laws. The Borrower shall at all times comply with,
and cause its Subsidiaries to comply with, all laws, statutes (including any
fictitious name statute), rules, regulations, orders, and directions of any
governmental authority having jurisdiction over the Borrower or any of its
Subsidiaries or the business of the Borrower or any of its Subsidiaries
(including all Environmental Laws).
6.07 Change in Name, Structure or Location. The Borrower shall notify
the Bank in writing prior to any change in (a) the Borrower's name, (b) the
Borrower's business or legal structure, or (c) the Borrower's place of business
or chief executive office if the Borrower has more than one place of business.
6.08 Existence and Properties. The Borrower and each of its Subsidiaries
shall maintain and preserve its existence and all rights, privileges, and
franchises now enjoyed, conduct its business in an orderly, efficient, and
customary manner, keep all the its properties in good working order and
condition, and from time to time make all needed repairs, renewals, or
replacements thereto and thereof so that the efficiency of such property shall
be fully maintained and preserved.
6.09 Additional Acts. The Borrower shall perform, on request of the
Bank, such acts as may be necessary or advisable to perfect any lien or
security interest contemplated hereby or otherwise to carry out the intent of
this Agreement.
6.10 Existing Facility. As of the Closing Date, there are no outstanding
loans or other obligations owing to the Bank under the Existing Facility.
32
<PAGE> 18
ARTICLE VII
NEGATIVE COVENANTS
So long as credit is available under this Agreement and until full and
final payment of all of the Borrower's obligations under this Agreement and any
other Credit Document:
7.01 Other Indebtedness. The Borrower shall not, and shall not suffer or
permit any of its Subsidiaries to, create, incur, assume or permit to exist any
indebtedness or liabilities for or resulting from borrowed money, loans or
advances, or for the deferred purchase price of property under capital leases,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, or become liable as a guarantor, surety, accommodation
endorser, or otherwise for or upon the obligation of any other person, firm, or
corporation; provided, however, that this Section shall not prohibit: (a) the
acquisition of goods, supplies or merchandise on normal trade credit; (b) the
execution of bonds or undertakings in the ordinary course of its business as
presently conducted; (c) the endorsement of negotiable instruments received in
the ordinary course of its business as presently conducted; (d) purchase money
financing of equipment to the extend permitted by subsection 7.02(f); and (e)
other unsecured indebtedness in an aggregate principal amount not to exceed
$500,000 at any time.
7.02 Liens. The Borrower shall not, and shall not suffer or permit any
of its Subsidiaries to, create, assume or suffer to exist any security
interest, deed of trust, mortgage, lien (including the lien of an attachment,
judgment or execution) or encumbrance, securing a charge or obligation, on or
of any of its or their property, real or personal, whether now owned or
hereafter acquired, except: (a) liens, security interests and encumbrances in
favor of the Bank; (b) liens, security interests and encumbrances in existence
as of the date of this Agreement and disclosed to the Bank in writing prior to
the Closing Date; (c) liens for current taxes, assessments or other
governmental charges which are not delinquent or remain payable without any
penalty; (d) liens in connection with workers' compensation, unemployment
insurance or other social security obligations; (e) mechanics', worker's,
materialmen's, landlords', carriers' or other like liens arising in the
ordinary and normal course of business with respect to obligations which are
not due; and (f) purchase money security interests in personal property
hereafter acquired when the security interest does not extend beyond the
property purchased.
7.03 Acquisitions. The Borrower and its Subsidiaries shall not acquire
or purchase control of, or the assets or business of, any other person, firm or
corporation, except to the extent permitted by Section 7.05(b)(iv).
7.04 Dividends. Neither the Borrower nor any of its Subsidiaries that is
not wholly-owned by the Borrower shall declare or pay any dividends or
distributions on any of its shares now or hereafter existing, or purchase,
redeem or otherwise acquire for value any of its shares, or create any sinking
fund in relation thereto, except dividends payable solely in its capital stock.
7.05 Loans. Neither the Borrower nor any of its Subsidiaries shall: (a)
make any loans, advances or other extensions of credit to any of the Borrower's
or such Subsidiary's executives, officers or directors or shareholders (or any
relatives of any of the foregoing) other than in the ordinary course of
business; or (b) make loans, advances or other extensions of credit to
or invest in any other person, firm, corporation or other entity, other than
(i) investments in cash equivalents, (ii) extensions of credit in the nature of
accounts receivable or notes receivable arising from the sale or lease of goods
or services in the ordinary course of business, (iii) extensions of credit by
the Borrower to any of its wholly-owned Subsidiaries or by any of its
wholly-owned Subsidiaries to another of its wholly-owned Subsidiaries; and
33
<PAGE> 19
(iv) investments incurred in order to consummate acquisitions, provided, that
(i) the aggregate cash consideration, including assumption of existing
obligations, of all acquisitions after the Closing Date shall not exceed at the
time $1,000,000, (ii) such acquisition is undertaken in accordance with all
applicable requirements of law, (iii) the prior, effective written consent or
approval to such acquisition of the board of directors or equivalent governing
body of the acquiree is obtained, and (iv) the acquiree is in the Borrower's
general line of business.
7.06 Liquidations and Mergers. Neither the Borrower nor any of its
Subsidiaries shall liquidate or dissolve or enter into any consolidation,
merger, partnership, joint venture or other combination, except that any person
may merge with or into the Borrower or a Subsidiary in connection an
acquisition permitted by Section 7.05(b)(iv), provided that the Borrower or
such Subsidiary, as applicable, shall be the continuing or surviving
corporation.
7.07 Sale of Assets. Neither the Borrower nor any of its Subsidiaries
shall: (a) sell, lease or otherwise dispose of its business or assets as a
whole or such as in the opinion of the Bank constitutes a substantial portion
of its business or assets; (b) sell or otherwise dispose of any of its accounts
receivable except in connection with the collection of same in the ordinary
course of business; (c) sell or otherwise dispose of any of its assets except
for full, fair and reasonable consideration; or (d) enter into any sale and
leaseback agreement covering any of its fixed or capital assets.
7.08 Business Activities; ERISA. The Borrower shall not engage in any
business activities or operations substantially different from or unrelated to
present business activities and operations. Neither the Borrower nor any
Subsidiary shall create or permit to exist any Plan with respect to which it
may have any liability.
7.09 Regulations G, T, U, and X. The Borrower shall not, and shall not
permit any of its Subsidiaries to, use any portion of the proceeds of any
Advances or extensions of credit hereunder, directly or indirectly, (a) to
purchase or carry margin stock (within the meanings of Regulations G, T, U, and
X of the FRB), (b) to repay or otherwise refinance indebtedness of the Borrower
or others incurred to purchase or carry any such margin stock, (c) to extend
credit for the purpose of purchasing or carrying any such margin stock, or (d)
to acquire any security in any transaction that is subject to Section 13 or 14
of the Securities Exchange Act of 1934, as amended.
7.10 Quick Ratio. The Borrower shall not permit, as of the last day of
any fiscal quarter, on a consolidated basis, the ratio of its (a) sum of cash,
short-term cash investments, marketable securities not classified as long-term
investments and accounts receivable to (b) current liabilities, be less than
(i) 0.80:1.00, from the Closing Date through September 30, 1996, and (ii)
0.90:1.00 from December 31, 1996 and thereafter.
7.11 Tangible Net Worth. The Borrower shall not permit, as of the last
day of any fiscal quarter, on a consolidated basis, its Tangible Net Worth to
be less than $6,500,000 plus the sum of (i) 75% of net income after income
taxes (without subtracting losses) earned in each quarterly accounting period
commencing after the date of this Agreement, (ii) 100% of the net proceeds from
any equity securities issued after the date of this Agreement, and (iii)
any increase in stockholders' equity resulting from the conversion of debt
securities to equity securities after the date of this Agreement.
34
<PAGE> 20
7.12 Total Liabilities to Tangible Net Worth. The Borrower shall not
permit, as of the last day of any fiscal quarter, on a consolidated basis, the
its ratio of (a) total liabilities, to (b) Tangible Net Worth to be greater
than (i) 3.00:1.00, from the Closing Date through September 30, 1996, and (ii)
2.50:1.00 from December 31, 1996 and thereafter.
7.13 Consecutive Quarterly Losses; Losses in One Quarter. The Borrower,
on a consolidated basis, shall not incur: (a) any quarterly net or operating
loss in any two consecutive fiscal quarters, or (b) any quarterly net or
operating loss in excess of $1,000,000.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement:
(a) Failure to Pay. The Borrower fails to pay, when due, any installment
of principal, or within three days after the date when due, any interest, fee
or any other sum due under this Agreement or any other Credit Document in
accordance with the terms hereof or thereof.
(b) Breach of Representation or Warranty. Any representation or warranty
herein or in any other Credit Document proves to have been false or misleading
in any material respect when made.
(c) Specific Defaults. The Borrower fails to perform or observe any
term, covenant or agreement contained in Section 6.01, 6.02 or 6.03 or Article
VII hereof.
(d) Other Defaults. The Borrower fails to perform or observe any other
term or covenant contained in this Agreement or any Credit Document, and such
default shall continue unremedied for a period of 20 days after the earlier of
(i) the date upon which the chief executive or chief financial officer of the
Borrower knew or should have known of such failure or (ii) the date upon which
written notice thereof is given to the Borrower by the Bank.
(e) Trade Suits. One or more suits are filed against the Borrower or any
of its Subsidiaries by a trade creditor or trade creditors of the Borrower or
any of its Subsidiaries in the aggregate amount of $1,000,000 or more.
(f) Judgments. One or more judgments or arbitration awards are entered
against the Borrower or any of its Subsidiaries, or the Borrower or any of its
Subsidiaries enters into any settlement agreement with respect to any
litigation or arbitration, in the aggregate amount of $1,000,000 or more on a
claim or claims not covered by insurance.
(g) Failure to Pay Debts; Voluntary Bankruptcy. The Borrower or any
Subsidiary (i) fails to pay the Borrower's or such Subsidiary's debts generally
as they come due, or (ii) files any petition, proceeding, case, or action for
relief under any bankruptcy, reorganization, insolvency, or moratorium law, or
any other law or laws for the relief of, or relating to, debtors.
(h) Involuntary Bankruptcy. An involuntary petition is filed under any
bankruptcy or similar statute against the Borrower or any Subsidiary, or a
receiver, trustee, liquidator, assignee,
35
<PAGE> 21
custodian, sequestrator, or other similar official is appointed to take
possession of the properties of the Borrower or any Subsidiary; provided,
however, that such Event of Default shall be deemed cured if such petition or
appointment is set aside or withdrawn or ceases to be in effect within 30 days
from the date of said filing or appointment.
(i) Default of Other Financial Obligations. Any default occurs under any
other agreement involving the borrowing of money or the extension of credit to
which the Borrower or any Subsidiary may be a party as borrower, guarantor or
installment purchaser, if such default consists of the failure to pay any
obligation when due or if such default gives to the holder of the obligation
concerned the right to accelerate the obligation.
(j) Default under other Credit Documents. Any Credit Document (other
than this Agreement), or other agreement, document or instrument required
hereunder or executed in connection herewith is breached or becomes ineffective
or any default occurs under any such agreement or instrument.
(k) Default of Other Bank Obligations. Any default occurs under any
other obligation of the Borrower or any Subsidiary to the Bank or to any
subsidiary or affiliate of the Bank.
(l) Material Adverse Effect. There occurs a Material Adverse Effect.
(o) Change of Control. (i) Any person or two or more persons acting in
concert shall acquire beneficial ownership, directly or indirectly, of
securities of the Borrower (or other securities convertible into such
securities) representing 20% or more of the combined voting power of all
securities of the Borrower entitled to vote in the election of directors; or
(ii) during any period of up to 12 consecutive months, commencing after the
Closing Date, individuals who at the beginning of such 12-month period were
directors of the Borrower shall cease for any reason to constitute a majority
of the Board of Directors of the Borrower unless the persons replacing such
individuals were nominated by the Board of Directors of the Borrower; or (iii)
any person or two or more persons acting in concert acquiring by contract or
otherwise, or entering into a contract or arrangement which upon consummation
will result in its or their acquisition of, or control over, securities of the
Borrower (or other securities convertible into such securities) representing
20% or more of the combined voting power of all securities of the Borrower
entitled to vote in the election of directors.
8.02 Remedies. If any Event of Default occurs: (a) any indebtedness of
the Borrower hereunder or under any of the other Credit Documents, any term
hereof or thereof to the contrary notwithstanding, shall at the Bank's option
(but automatically upon the occurrence of an Event of Default described in
subsection 8.01(g) or subsection 8.01(h)) and without notice, become
immediately due and payable without presentment, demand, protest, or notice of
dishonor, or any other notice, all of which are hereby expressly waived by the
Borrower to the full extent permitted by law; (b) the obligation, if any, of
the Bank to make further loans or extensions of credit hereunder shall
immediately cease and terminate; and (c) the Bank shall have all rights, powers
and remedies available hereunder and under each of the other Credit Documents,
or accorded by law or equity. All rights, powers and remedies of the Bank may
be exercised at any time by the Bank and from time to time after the occurrence
of an Event of Default. All rights, powers, and remedies of the Bank in
connection with each of the Credit Documents are cumulative and not exclusive
and shall be in addition to any other rights, powers or remedies provided by
law or equity.
ARTICLE IX
36
<PAGE> 22
MISCELLANEOUS
9.01 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Borrower shall not assign this Agreement or any
other Credit Document or any of the rights, duties or obligations of the
Borrower hereunder without the prior written consent of the Bank.
9.02 Consents and Waivers. No failure to exercise and no delay in
exercising, on the part of the Bank, any right, remedy, power, or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power, or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power,
or privilege. No consent or waiver under this Agreement shall be effective
unless in writing. No waiver of any breach or default shall be deemed a waiver
of any breach or default thereafter occurring.
9.03 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Illinois.
9.04 Costs and Attorneys' Fees. The Borrower shall, whether or not the
transactions contemplated hereby shall be consummated, pay or reimburse the
Bank on demand for all costs and expenses incurred by the Bank in connection
with the development, preparation, delivery, administration and execution of,
and any amendment, supplement, waiver or modification to, this Agreement and
any other Credit Document and the consummation of the transactions contemplated
hereby and thereby, including reasonable attorney fees and disbursements and
the allocated cost of internal counsel and disbursements, incurred by the Bank
with respect thereto; and in connection with the enforcement, attempted
enforcement or preservation of any rights or remedies hereunder or under any
Credit Document, including any "workout" or restructuring under this Agreement,
including attorney fees and disbursements and the allocated cost of internal
counsel and disbursements.
9.05 Integration; Amendment. This Agreement, together with the other
Credit Documents, embodies the entire agreement and understanding between the
Borrower and the Bank. This Agreement may be amended or modified only in
writing, signed by the Borrower and the Bank.
9.06 Borrower's Documents. The Bank shall be under no obligation to
return any schedules, invoices, statements, budgets, forecasts, reports or
other papers delivered by the Borrower and shall destroy or otherwise dispose
of same at such time as the Bank, in its discretion, deems appropriate.
9.07 Participations. The Bank may at any time sell, assign, grant
participations in, or otherwise transfer to any other person, firm, corporation
or other entity (a "Participant") all or part of the obligations of the
Borrower under this Agreement and any other Credit Document. The Borrower
authorizes the Bank and each Participant, upon the occurrence of an Event of
Default, to proceed directly by right of setoff, banker's lien, or otherwise,
against any assets of the Borrower which may be in the hands of the Bank or
such Participant, respectively. The Borrower authorizes the Bank to disclose
to any prospective Participant and any Participant any and all information in
the Bank's possession concerning the Borrower and its Subsidiaries, this
Agreement or any other Credit Document; provided, however, that any such
prospective Participant or Participant shall agree to keep any such information
confidential.
9.08 General Indemnification. The Borrower shall pay and indemnify the
Bank, the Bank's affiliates, and each of their respective officers, directors,
employees, counsel, agents and
37
<PAGE> 23
attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses, or disbursements
(including attorneys' fees and disbursements and the allocated costs of
internal counsel) of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement and any other Credit Documents, or the transactions contemplated
hereby and thereby, and with respect to any investigation, litigation, or
proceeding related to this Agreement, any violation of any Environmental Law by
the Borrower or its Subsidiaries, any release of a Hazardous Substance at or
from any property of the Borrower or any of its Subsidiaries, or the loans and
other extensions of credit hereunder or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, that the Borrower shall
have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of such Indemnified Person. The agreements in this Section shall survive
payment of all other obligations of the Borrower hereunder or under the other
Credit Documents.
9.09 Arbitration; Reference Proceeding. Any controversy or claim between
or among the parties, including but not limited to those arising out of or
relating to this Agreement or any other Credit Document or other agreements or
instruments relating hereto or delivered in connection herewith and any claim
based on or arising from an alleged tort, shall at the request of any party be
determined by arbitration. The arbitration shall be conducted in accordance
with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding
any choice of law provision in this Agreement, and under the Commercial Rules
of the American Arbitration Association. The arbitrator(s) shall give effect
to statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver
of the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration if any other party contests such action for judicial
relief. No provision of this paragraph shall limit the right of any party to
this Agreement to exercise self-help remedies such as setoff, or to obtain
provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration or other proceeding.
The exercise of a remedy does not waive the right of either party to resort to
arbitration.
38
<PAGE> 24
9.10 Notices. (a) All notices, requests and other communications
provided for hereunder shall be in writing and mailed or delivered to a party
at its address specified on the signature pages hereof, or to such other
address as shall be designated by such party in a written notice to the other
parties. All such notices and communications shall, when transmitted by
overnight delivery, be effective when delivered for overnight delivery, or if
personally delivered, upon such personal delivery, except that notices pursuant
to Article II shall not be effective until actually received by the Bank.
(b) The Borrower acknowledges and agrees that any agreement of the Bank
pursuant to Article II hereof to receive notices by telephone or facsimile is
solely for the convenience and at the request of the Borrower. Telephone
requests may be made by any individual identified in writing to the Bank on a
form acceptable to the Bank as being authorized to make such requests. The
Bank shall be entitled to rely upon any written or telephone request from
persons it reasonably believes to be authorized by the Borrower to make such
requests without making independent inquiry. The Borrower assumes the full
risk of, and the Bank shall not be responsible for, any delays or errors in
transmission, and the obligation of the Borrower to repay the loans and other
extensions of credit hereunder shall not be affected in any way or to any
extent by any failure by the Bank to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Bank of a confirmation
which is at variance with the terms understood by the Bank to be contained in
the telephonic or facsimile notice.
9.11 Headings; Interpretation. Article, section, and paragraph headings
are for reference only and shall not affect the interpretation or meaning of
any provisions of this Agreement. The meaning of defined terms shall be
equally applicable to the singular and plural forms of the defined terms. The
words "hereof", "herein", "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The term
"including" is not limiting and means "including without limitation." In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to and including."
9.12 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not
in any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
9.13 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and
the same agreement.
9.14 Termination of Existing Facility. The Borrower hereby permanently
terminates the Bank's commitment to extend credit under the Existing Facility.
The Bank agrees to execute such termination statements and other documents as
may be reasonably required in order to release the liens granted to the Bank in
connection with the Existing Facility.
39
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SPSS INC.
By: _______________________________
Title:
Address where notices to
Borrower are to be sent:
SPSS Inc.
444 North Michigan Avenue
Chicago, IL 60611
Attention: Robert Brinkmann
Telephone: (312) 329-2400
Telecopier: (312) 329-3560
BANK OF AMERICA ILLINOIS
By: _______________________________
Title:
Address where notices to
Bank are to be sent:
Bank of America Illinois
c/o Bank of America National Trust
and Savings Association
The Mid-Cap Technology Group #3537
530 Lytton Avenue, Second Floor
Palo Alto, CA 94301
Attention: Cecily Person
Telephone: 415/853-4688
Telecopier: 415/853-4476
40
<PAGE> 1
EXHIBIT 15. 1
ACKNOWLEDGMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
REGARDING INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors
SPSS Inc.:
With respect to the Registration Statements on Form S-8 of SPSS Inc., we
acknowledge our awareness of the use therein of our report dated May 10, 1996
related to our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an account
or a report prepared or certified by an accountant within the meaning of
sections 7 and 11 of the Act.
KPMG Peat Marwick LLP
Chicago, Illinois
May 10, 1996
41
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPSS INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 AND CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,539
<SECURITIES> 0
<RECEIVABLES> 13,215
<ALLOWANCES> 710
<INVENTORY> 1,242
<CURRENT-ASSETS> 25,866
<PP&E> 13,923
<DEPRECIATION> 9,570
<TOTAL-ASSETS> 41,095
<CURRENT-LIABILITIES> 19,506
<BONDS> 0
0
0
<COMMON> 72
<OTHER-SE> 19,277
<TOTAL-LIABILITY-AND-EQUITY> 41,095
<SALES> 17,063
<TOTAL-REVENUES> 17,063
<CGS> 1,603
<TOTAL-COSTS> 1,603
<OTHER-EXPENSES> 12,620
<LOSS-PROVISION> 73
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 2,912
<INCOME-TAX> 999
<INCOME-CONTINUING> 1,913
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,913
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
