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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 SEPTEMBER 30, 1999
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)
233 S. WACKER DRIVE, CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (312) 651-3000
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 NOVEMBER 10, 1999, THERE WERE 9,069,805 SHARES OF COMMON STOCK
OUTSTANDING, PAR VALUE $.01, OF THE REGISTRANT.
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SPSS INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REVIEW REPORT 3
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND
SEPTEMBER 30, 1999 (UNAUDITED) 4
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
1998 (UNAUDITED) AND 1999 (UNAUDITED) 5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED) AND 1999 (UNAUDITED) 6
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED) AND 1999 (UNAUDITED) 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
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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 September 30, 1999 and the related consolidated statements of income and
comprehensive income for the three and nine-month periods ended September 30,
1998 and 1999 and the related consolidated statements of cash flows for the
nine-months ended September 30, 1998 and 1999. These consolidated financial
statements are the responsibility of SPSS Inc.
management.
We conducted our reviews 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 reviews, 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, 1998, and the related consolidated statements of income,
comprehensive income, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 17, 1999, 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, 1998, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
Chicago, Illinois
November 2, 1999
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SPSS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,912 $ 12,075
Accounts receivable, net of allowances 33,825 37,845
Inventories 2,871 3,019
Deferred income taxes 2,183 2,183
Prepaid expenses and other current assets 2,304 2,920
-------- --------
Total current assets 56,095 58,042
-------- --------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost:
Land and building 1,721 1,703
Furniture, fixtures, and office equipment 7,252 7,624
Computer equipment and software 23,068 25,947
Leasehold improvements 6,434 7,501
-------- --------
38,475 42,775
Less accumulated depreciation and amortization 22,783 25,781
-------- --------
Net equipment and leasehold improvements 15,692 16,994
-------- --------
Capitalized software development costs, net of accumulated amortization 10,658 11,980
Goodwill, net of accumulated amortization 5,110 4,717
Other assets 3,734 3,366
-------- --------
$ 91,289 $ 95,099
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 9,000 $ 8,000
Accounts payable 6,146 5,815
Accrued royalties 571 435
Accrued rent 847 1,006
Other accrued liabilities 10,431 8,340
Income taxes and value added taxes payable 5,822 3,521
Customer advances 579 1,106
Deferred revenues 10,310 8,881
-------- --------
Total current liabilities 43,706 37,104
-------- --------
Deferred income taxes 2,638 1,772
Other non-current liabilities 1,222 1,095
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; 50,000,000 shares authorized; 9,029,326 and
9,065,060 shares issued and outstanding in 1998 and
1999, respectively 90 91
Additional paid-in capital 47,054 47,514
Accumulated other comprehensive income (877) (770)
Retained earnings (accumulated deficit) (2,544) 8,293
-------- --------
Total stockholders' equity 43,723 55,128
-------- --------
$ 91,289 $ 95,099
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues:
Desktop products $ 21,328 $ 25,635 $ 63,487 $ 74,836
Large System products 3,981 4,229 11,973 12,812
Other products and services 4,302 4,401 11,809 12,478
----------- ----------- ----------- -----------
Net revenues 29,611 34,265 87,269 100,126
Cost of revenues 2,516 3,253 7,525 9,062
----------- ----------- ----------- -----------
Gross profit 27,095 31,012 79,744 91,064
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 14,108 15,961 43,648 48,875
Product development 5,334 6,499 15,075 18,239
General and administrative 2,620 2,413 6,625 7,128
----------- ----------- ----------- -----------
Operating expenses 22,062 24,873 65,348 74,242
----------- ----------- ----------- -----------
Operating income 5,033 6,139 14,396 16,822
----------- ----------- ----------- -----------
Other income (expense):
Net interest income (expense) 85 (335) 171 (504)
Other income (expense) 153 595 (46) 178
----------- ----------- ----------- -----------
Other income (expense) 238 260 125 (326)
----------- ----------- ----------- -----------
Income before income taxes 5,271 6,399 14,521 16,496
Income tax expense 1,807 2,195 4,980 5,658
----------- ----------- ----------- -----------
Net income $ 3,464 $ 4,204 $ 9,541 $ 10,838
=========== =========== =========== ===========
Basic net earnings per share $ 0.38 $ 0.46 $ 1.07 $ 1.20
=========== =========== =========== ===========
Shares used in computing basic
net earnings per share 9,022,720 9,059,623 8,949,088 9,048,232
=========== =========== =========== ===========
Diluted net earnings per share $ 0.36 $ 0.43 $ 1.00 $ 1.13
=========== =========== =========== ===========
Shares used in computing diluted
net earnings per share 9,591,083 9,736,705 9,565,561 9,629,516
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 3,464 $ 4,204 $ 9,541 $10,838
Other comprehensive income (loss):
Foreign currency translation adjustment (106) 1,116 (107) 107
------- ------- ------- -------
Comprehensive income $ 3,358 $ 5,320 $ 9,434 $10,945
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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SPSS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1998 1999
-------- --------
Cash flows from operating activities:
Net income $ 9,541 $ 10,838
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 4,815 6,419
Deferred income taxes -- (866)
Changes in assets and liabilities:
Accounts receivable (288) (4,020)
Inventories (249) (148)
Accounts payable 188 (331)
Accrued royalties (32) (136)
Accrued expenses (1,097) (1,932)
Accrued income taxes 2,222 (2,301)
Deferred revenues (1,080) (1,429)
Other (199) (354)
-------- --------
Net cash provided by operating activities 13,821 5,740
-------- --------
Cash flows from investing activities:
Capital expenditures, net (7,551) (4,494)
Capitalized software development costs (2,893) (3,543)
Net payments for acquisitions (72) --
-------- --------
Net cash used in investing activities (10,516) (8,037)
-------- --------
Cash flows from financing activities:
Net repayments on notes payable (71) (1,000)
Net proceeds from issuance of common stock 1,303 375
Income tax benefit from stock option exercises 314 85
-------- --------
Net cash provided by (used in) financing activities 1,546 (540)
-------- --------
Net change in cash and cash equivalents 4,851 (2,837)
Cash and cash equivalents at beginning of period 8,079 14,912
-------- --------
Cash and cash equivalents at end of period $ 12,930 $ 12,075
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 161 $ 762
Income taxes paid 3,995 9,501
======== ========
See accompanying notes to consolidated financial statements.
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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 SPSS'
audited consolidated financial statements and notes thereto for the year ended
December 31, 1998, included in SPSS' Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
NOTE 2 - LOAN AGREEMENT
See management discussion under "Liquidity and Capital Resources" for revision
of SPSS' loan agreement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following table sets forth the percentages that selected items in the
Consolidated Statements of Income bear to net revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES PERCENTAGE OF NET REVENUES
------------------------------- -------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
1998 1999 1998 1999
-------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Statement of Income Data:
Net revenues:
Desktop products 72% 75% 73% 75%
Large System products 13% 12% 14% 13%
Other products and services 15% 13% 13% 12%
-------------- --------------- ------------- ----------------
Net revenues 100% 100% 100% 100%
Cost of revenues 8% 9% 9% 9%
-------------- --------------- ------------- ----------------
Gross profit 92% 91% 91% 91%
Operating expenses:
Sales and marketing 48% 47% 50% 49%
Product development 18% 19% 17% 18%
General and administrative 9% 7% 8% 7%
-------------- --------------- ------------- ----------------
Operating expenses 75% 73% 75% 74%
-------------- --------------- ------------- ----------------
Operating income 17% 18% 16% 17%
Other income (expense):
Net interest income (expense) -- (1%) 1% (1%)
Other income (expense) 1% 2% -- --
-------------- --------------- ------------- ----------------
Other income (expense) 1% 1% 1% (1%)
-------------- --------------- ------------- ----------------
Income before income taxes 18% 19% 17% 16%
Income tax expense 6% 7% 6% 5%
-------------- --------------- ------------- ----------------
Net income 12% 12% 11% 11%
============== =============== ============= ================
</TABLE>
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THREE MONTHS ENDED
SEPTEMBER 30, 1999.
Net Revenues. Net Revenues were $29,611,000 in the three months ended September
30, 1998 and $34,265,000 in the three months ended September 30, 1999, an
increase of 16%. Revenues from products designed for desktop computers ("Desktop
products") increased $4,307,000 (20%) over the corresponding period in 1998. In
addition, revenues from annual license renewals of Desktop products increased by
$1,761,000, reflecting a $1,474,000 increase in annual license renewals for SPSS
for Windows. Revenues from products designed for mainframes, minicomputers, and
UNIX workstations ("Large System products") increased $248,000 (6%) compared to
the corresponding period in 1998. Other products and services revenues increased
2% due to an increase in consulting and training revenues offset partially by
reduced royalties from publication sales. Revenues for the third quarter of 1999
were adversely effected by changes in foreign currency exchange rates.
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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 $2,516,000 in the three months ended September 30, 1998 and
$3,253,000 in the three months ended September 30, 1999, an increase of 29%.
Such costs increased due to higher cost of goods sold resulting from increased
sales, increased amortization of capitalized software and increased royalty
expense. As a percentage of net revenues, cost of revenues increased from 8% to
9%.
Sales and Marketing. Sales and marketing expenses were $14,108,000 in the three
months ended September 30, 1998 and $15,961,000 in the three months ended
September 30, 1999, an increase of 13%. This increase was due to the addition of
the former Integral Solutions Limited ("ISL") and Surveycraft Pty. Ltd.
("Surveycraft") sales, marketing and services personnel, expansion of the
domestic and international sales organizations, higher cost of new, more senior
sales personnel and increased consulting expenses. These costs were partially
offset by a reduction in advertising and printing expenses. As a percentage of
net revenues, such expenses decreased from 48% to 47%.
Product Development. Product development expenses were $5,334,000 (net of
capitalized software development costs of $499,000) in the three months ended
September 30, 1998 and $6,499,000 (net of capitalized software development costs
of $712,000) in the three months ended September 30, 1999, an increase of 22%.
SPSS' expense for amortization of capitalized software and product translations,
included in cost of revenues, was $480,000 in the three months ended September
30, 1998 and $891,000 in the three months ended September 30, 1999. The increase
in product development expenses was primarily due to addition of the ISL
development group, other additions to the product development staff and
increases in staff compensation. As a percentage of net revenues, product
development expenses increased from 18% to 19%.
General and Administrative. General and administrative expenses were $2,620,000
in the three months ended September 30, 1998 and $2,413,000 in the three months
ended September 30, 1999, a decrease of 8%. Such expenses decreased primarily
due to a drop in charges for bad debt and other office management costs. This
decline was partially offset by the addition of amortization expense related to
ISL and Surveycraft intangibles and an increased administrative staff. As a
percentage of net revenues, general and administrative expenses decreased from
9% to 7%.
Net Interest Income (Expense). Net interest income (expense) was $85,000 in the
three months ended September 30, 1998 and ($335,000) in the three months ended
September 30, 1999. This unfavorable variance was primarily due to interest
expense relating to the 1995 and 1996 Internal Revenue Service audits and
interest expense on the line-of-credit borrowing during the three months ended
September 30, 1999 compared to no borrowings on the line-of-credit during the
comparable period of 1998.
Other Income. Other income was $153,000 in the three months ended September 30,
1998 and $595,000 in the three months ended September 30, 1999. Such
transactions consist of foreign currency transactions.
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Provision for Income Taxes. The provision for income taxes was $1,807,000 in the
three months ended September 30, 1998 and $2,195,000 in the three months ended
September 30, 1999. During 1998 and 1999, the provision for income taxes
represented an effective tax rate of approximately 34.3%.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 TO NINE MONTHS ENDED
SEPTEMBER 30, 1999.
Net Revenues. Net Revenues were $87,269,000 in the nine months ended September
30, 1998 and $100,126,000 in the nine months ended September 30, 1999, an
increase of 15%. Revenues from products designed for desktop computers ("Desktop
products") increased $11,349,000 (18%) over the corresponding period in 1998. In
addition, revenues from annual license renewals of Desktop products increased by
$3,689,000, reflecting a $3,407,000 increase in annual license renewals for SPSS
for Windows. Revenues from products designed for mainframes, minicomputers, and
UNIX workstations ("Large System products") increased $839,000 (7%) compared to
the corresponding period in 1998. Other products and services revenues increased
6% due to growth in training and consulting revenues partially offset by a
reduction in publication revenues. Revenues for the nine months of 1999 were
adversely effected 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 $7,525,000 in the nine months ended September 30, 1998 and
$9,062,000 in the nine months ended September 30, 1999, an increase of 20%. Such
costs increased due to higher cost of goods sold resulting from increased sales,
increased amortization of capitalized software and increased royalty expense. As
a percentage of net revenues, cost of revenues remained constant at 9%.
Sales and Marketing. Sales and marketing expenses were $43,648,000 in the nine
months ended September 30, 1998 and $48,875,000 in the nine months ended
September 30, 1999, an increase of 12%. This increase was due to the addition of
the former ISL and Surveycraft sales, marketing and services personnel,
expansion of the domestic and international sales organizations, higher cost of
new, more senior sales personnel and increased consulting expenses. These
expenses were partially offset by reductions in advertising and printing
expenses. As a percentage of net revenues, such expenses decreased from 50% to
49%.
Product Development. Product development expenses were $15,075,000 (net of
capitalized software development costs of $1,526,000) in the nine months ended
September 30, 1998 and $18,239,000 (net of capitalized software development
costs of $1,632,000) in the nine months ended September 30, 1999, an increase of
21%. In the corresponding period in 1998, SPSS' expense for amortization of
capitalized software and product translations, included in cost of revenues, was
$1,449,000 and in the corresponding period in 1999, SPSS' expense for
amortization of capitalized software and product translations, included in cost
of revenues was $2,222,000. The increase in product development expenses was
primarily due to addition of the
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ISL development group, other additions to the product development staff and
increases in staff compensation. As a percentage of net revenues, product
development expenses increased from 17% to 18%.
General and Administrative. General and administrative expenses were $6,625,000
in the nine months ended September 30, 1998 and $7,128,000 in the nine months
ended September 30, 1999, an increase of 8%. Such expenses increased primarily
due to the addition of amortization expense related to ISL and Surveycraft
intangibles and an increased administrative staff and increased bad debt
expense. As a percentage of net revenues, general and administrative expenses
decreased from 8% to 7%.
Net Interest Income (Expense). Net interest income (expense) was $171,000 in the
nine months ended September 30, 1998 and ($504,000) in the nine months ended
September 30, 1999. This unfavorable variance was primarily due to the interest
expense relating to the 1995 and 1996 Internal Revenue Service audits and
interest expense on the line-of-credit borrowing during the nine months ended
September 30, 1999 compared to no borrowings on the line-of-credit during the
comparable period of 1998.
Other Income (Expense). Other income (expense) was ($46,000) in the nine months
ended September 30, 1998 and $178,000 in the nine months ended September 30,
1999. Such transactions consist of foreign currency transactions.
Provision for Income Taxes. The provision for income taxes was $4,980,000 in the
nine months ended September 30, 1998 and $5,658,000 in the nine months ended
September 30, 1999. During 1998 and 1999, the provision for income taxes
represented an effective tax rate of approximately 34.3%.
LIQUIDITY AND CAPITAL RESOURCES
SPSS' other non-current liabilities as of September 30, 1999 represents a
mortgage on property in the United Kingdom. As of September 30, 1999, SPSS held
approximately $12,075,000 of cash and short-term investments.
Funds in the first nine months of 1999 were provided by operations. Capital
expenditures included, among other things, new computer systems for use in
internal product development and sales.
In June 1999, SPSS revised its loan agreement with American National Bank and
Trust Company of Chicago to replace its existing agreement with Bank of America,
N.T.S.A. Under the loan agreement, SPSS has an available $10,000,000 unsecured
line of credit with American National, under which borrowings bear interest at
either the prime interest rate or the Eurodollar Rate, depending on the
circumstances. As of September 30, 1999, SPSS had $8,000,000 outstanding under
this line of credit. SPSS' agreement with American National requires SPSS to
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comply with certain specified financial ratios and tests, and, among other
things, restricts SPSS' ability to:
- incur additional indebtedness,
- create liens on assets,
- make investments,
- engage in mergers, acquisitions or consolidations where SPSS is not
the surviving entity,
- sell assets,
- engage in certain transactions with affiliates and
- amend its organizational documents or make changes in capital
structure and
- be Year 2000 compliant in software and other information processing
capabilities.
Also in June 1999, SPSS entered into the First Amendment to the agreement with
American National. This amendment makes an additional $10,000,000 available to
SPSS for the acquisition of assets and further requires that SPSS:
- meet all original requirements of the Agreement and
- give American National the opportunity to use any proceeds from a
public offering of equity or debt securities to retire outstanding
amounts on the line of credit.
SPSS anticipates that amounts available under its lines of credit, existing
sources of liquidity and cash flows generated from operations will be sufficient
to fund SPSS' 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 SPSS on
favorable terms, or at all.
INTERNATIONAL OPERATIONS
Revenues from international operations were 47% of total net revenues in the
three months ended September 30, 1999 compared to 44% in the three months ended
September 30, 1998. For the first nine months, revenues from international
operations were 51% compared to 48% in 1998. The portion of revenues
attributable to international operations were negatively affected by changes in
foreign currency exchange rates. Net corporate revenues increased 16% in the
three month period ended September 30, 1999, when compared to the three month
period ended September 30, 1998, and increased 15% in the nine month period
ended September 30, 1999 compared to the nine month period ended September 30,
1998. Net of the effects of changes in foreign currency rates, the increase
would have been approximately 14% for the three months ended September 30, 1999
when compared to the three months ended September 30, 1998 and 14% for the nine
months ended September 30, 1999 when compared to the nine months ended September
30, 1998.
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SAFE HARBOR
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Certain statements in this report constitute "forward-looking statements"
within the meaning of Section 21E of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements involve known and unknown risks
and uncertainties which may cause SPSS' actual results, performance or
achievements, or industry results, to be materially different than any future
results, performance or achievements expressed or implied in or by such
forward-looking statements. By way of example and not limitation, known risks
and uncertainties include SPSS' ability to successfully integrate or improve the
performance of acquired businesses, change in market conditions or product
demand, competition and currency fluctuations, changes in product release
schedules and product acceptance. In light of these and other risks and
uncertainties, the inclusion of forward-looking statements in this report should
not be regarded as a representation by SPSS that any future results, performance
or achievements will be attained.
YEAR 2000
Many computer systems and applications currently use two digits to define the
applicable year. As a result, date-sensitive systems may recognize the year 2000
as 1900 or not at all, which could cause miscalculations or system failures.
SPSS uses software and other related technologies throughout its business and
also sells computer software that will be affected by the date change in the
year 2000. The four areas where year 2000 issues may affect SPSS include:
- SPSS' information technology (IT) systems;
- SPSS' non-IT systems;
- the computer software SPSS sells; and
- third parties with material relationships with SPSS, such as vendors
and suppliers.
To address the year 2000 issue, SPSS assembled a committee of representatives
from all divisions and operating areas in early 1998. An inventory of the
readiness of all major IT and non-IT systems has been completed and SPSS is in
the process of testing and replacing non-compliant systems. This process is
expected to be completed in November 1999. Likewise, SPSS has been testing the
software it sells to third parties. The year 2000 compliance of SPSS products is
detailed at SPSS' Web Site at www.spss.com. Finally, SPSS has sent compliance
question letters to all its major suppliers. Virtually all have responded and
most of those responding signed the standard compliance letter, as SPSS
requested. Those responding suppliers that did not sign the SPSS standard
compliance letter instead provided their own year 2000 compliance materials.
These materials have been forwarded to the appropriate members of SPSS' year
2000 committee for evaluation. Most material issues discovered by the committee
have already been addressed and the remaining ones are being addressed
currently. The SPSS year 2000 committee has developed a contingency plan.
While SPSS' year 2000 readiness plans are underway, the consequences of
non-compliance by SPSS, its major service providers, vendors or suppliers could
have a material adverse effect on
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SPSS' operations. Although SPSS does not anticipate any major non-compliance
issues, there can be no assurance that there will not be a delay in, or
increased costs associated with, the implementation of SPSS' year 2000 readiness
plan.
SPSS currently believes that the greatest risk of disruption in its business
exists in the event of non-compliance by its material third parties. Some of the
possible consequences of non-compliance by SPSS or its material third party
suppliers include:
- inability to efficiently contact customers to obtain orders;
- inability to get orders to fulfillment houses;
- inability to send product to customers; and
- invoice and collection errors.
Given these risks, SPSS has developed a contingency plan intended to mitigate
the possible disruption in business operations that may result from year 2000
non-compliance. It is currently estimated that the aggregate cost of SPSS' year
2000 efforts will be approximately $1.25 million to $1.5 million, of which
$1,150,000 has been incurred to date. These costs do not include any costs
associated with the implementation of contingency plans.
SPSS' year 2000 readiness plan is an ongoing process and the estimates of costs
and completion dates for various components of the program as described above
are subject to change.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
SPSS' market risk disclosures pursuant to item 3 are not material and
are therefore not required.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Currently there are no material pending legal proceedings to which
SPSS 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.)
<TABLE>
<CAPTION>
Incorporation
Exhibit by Reference
Number Description of Document (if applicable)
- ------ ----------------------- ---------------
<S> <C> <C>
3.1 Certificate of Incorporation of SPSS * 3.2
3.2 By-Laws of SPSS * 3.4
4.2 Rights Agreement, dated June 18, 1998 between ** Exhibit B
SPSS Inc. and Harris Trust and Savings Bank
10.1 Loan Agreement dated June 1, 1999 between
SPSS and American National Bank and Trust
Company of Chicago
10.2 First Amendment to Loan Agreement dated
June 1, 1999 between SPSS and American National
Bank and Trust Company of Chicago
15.1 Acknowledgment of Independent Certified
Public Accountants Regarding Independent
Auditors' Review Report
27.1 Financial Data Schedule
</TABLE>
- -------------------------------
* Previously filed with Amendment No. 2 to Form S-1 Registration Statement
of SPSS Inc. filed on August 4, 1993 (Registration No. 33-64732)
16
<PAGE> 17
** Previously filed with SPSS' Registration Statement on Form 8-A filed on
June 18, 1998
+ Previously filed with SPSS' 10-Q Quarterly Report for the quarterly period
ended June 30, 1998.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by SPSS during the fiscal
quarter ended September 30, 1999.
17
<PAGE> 18
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
SPSS INC.
DATE: NOVEMBER 12, 1999 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: NOVEMBER 12, 1999 BY: /s/ EDWARD HAMBURG
-----------------------------------------
EDWARD HAMBURG
EXECUTIVE VICE-PRESIDENT, CORPORATE
OPERATIONS AND CHIEF FINANCIAL OFFICER
18
<PAGE> 19
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
- ------ ----------------------- ------
10.1 Loan Agreement dated June 1, 1999 between SPSS and
American National Bank and Trust Company of Chicago
10.2 First Amendment to Loan Agreement dated June 1, 1999
between SPSS and American National Bank and Trust
Company of Chicago
15.1 Acknowledgement of Independent Certified Public
Accountants Regarding Independent Auditors' Review
Report
27.1 Financial Data Schedule
19
<PAGE> 1
EX-10.1
LOAN AGREEMENT
(ACQUISITION LINE OF CREDIT)
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF CHICAGO
CREDIT FACILITY FOR
SPSS, Inc.
JUNE 1, 1999
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS AND TERMS.................................................1
1.1. DEFINITIONS.................................................1
1.2. GAAP.......................................................11
1.3. BORROWER...................................................11
1.4. RULES OF CONSTRUCTION......................................11
1.5. SCHEDULES..................................................12
2. LOANS - GENERAL TERMS................................................13
2.1. REVOLVING LOAN.............................................13
2.2. MAXIMUM PRINCIPAL AMOUNT...................................13
2.3. MATURITY DATE; TERMINATION OF LOANS........................13
2.4. AUTHORIZED DISBURSEMENT OF PROCEEDS........................14
2.5. BORROWING PROCEDURE........................................14
2.6. INTEREST RATE..............................................15
2.7. CHANGE OF LAWS.............................................15
2.8. REGULATORY CHANGES.........................................15
2.9. ADVANCES PRIOR TO LIBOR RATE DETERMINATION.................16
2.10. EURODOLLAR ADVANCES AND CONVERSION.........................16
2.11. INTEREST PERIOD ELECTION...................................16
2.12. LIBOR BROKERAGE FEE........................................16
2.13. USURY......................................................17
3. PAYMENT TERMS........................................................17
3.1. LOAN ACCOUNT; METHOD OF MAKING PAYMENTS....................17
3.2. INTEREST PAYMENTS..........................................17
i
<PAGE> 3
3.3. PRINCIPAL PAYMENTS.................................................18
3.4. PLACE OF PAYMENT...................................................18
3.5. PAYMENT ON MATURITY AND PREPAYMENT.................................18
3.6. ADVANCES TO CONSTITUTE ONE LOAN....................................18
3.7. APPLICATION OF PAYMENTS AND COLLECTIONS............................18
3.8. MONTHLY STATEMENTS.................................................19
4. LETTERS OF CREDIT........................................................19
4.1. MECHANICS OF ISSUANCE..............................................19
4.2. LETTER OF CREDIT FEES..............................................20
4.3. DRAWINGS AND REIMBURSEMENT OF AMOUNTS DRAWN UNDER LETTERS
OF CREDIT.........................................................20
4.4. INTEREST ON AMOUNTS DRAWN UNDER LETTERS OF CREDIT..................21
4.5. OBLIGATIONS ABSOLUTE...............................................21
4.6. INDEMNIFICATION; NATURE OF BANK'S DUTIES...........................22
4.7. INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT............23
4.8. STANDARD LETTER OF CREDIT APPLICATION..............................24
5. GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS........................24
5.1. GENERAL REPRESENTATIONS AND WARRANTIES.............................24
5.2. REAFFIRMATION OF WARRANTIES AND REPRESENTATIONS....................31
5.3. SURVIVAL OF WARRANTIES AND REPRESENTATIONS.........................31
6. COVENANTS AND CONTINUING AGREEMENTS......................................31
6.1. FINANCIAL COVENANTS................................................31
6.2. AFFIRMATIVE COVENANTS..............................................32
6.3. NEGATIVE COVENANTS.................................................36
6.4. REQUIRED NOTICES...................................................37
6.5. PAYMENT OF CLAIMS..................................................38
6.6. YEAR 2000 COMPLIANCE...............................................39
ii
<PAGE> 4
7. DEFAULT..............................................................39
7.1. EVENTS OF DEFAULT...........................................39
7.2. REMEDIES CUMULATIVE.........................................42
7.3. ACCELERATION................................................42
7.4. REMEDIES....................................................42
7.5. INJUNCTIVE RELIEF...........................................42
7.6. ADVANCES DURING UNMATURED DEFAULT...........................42
8. CONDITIONS PRECEDENT TO DISBURSEMENT.................................42
8.1. CHECKLIST ITEMS.............................................42
8.2. NECESSARY ACTIONS...........................................42
8.3. CONDITIONS PRECEDENT........................................42
9. GENERAL..............................................................43
9.1. COMPLIANCE WITH ERISA.......................................43
9.2. COSTS.......................................................44
9.3. STATEMENT...................................................44
9.4. NOTICES.....................................................44
9.5. AMENDMENTS AND WAIVERS......................................45
9.6. NO IMPLIED WAIVER; REMEDIES CUMULATIVE......................45
9.7. SEVERABILITY................................................46
9.8. INCORPORATION OF OTHER AGREEMENTS...........................46
9.9. ACCEPTANCE..................................................46
9.10. KNOWLEDGE...................................................47
9.11. WAIVER BY BORROWER..........................................47
9.12. GOVERNING LAW...............................................47
9.13. WAIVER OF MARSHALING........................................48
9.14. LIMITATION BY LAW...........................................48
iii
<PAGE> 5
9.15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................48
9.16. SERVICE OF PROCESS.........................................48
9.17. REPRESENTATION BY COUNSEL..................................48
9.18. RELEASE OF BANK............................................48
9.19. INVALIDATED PAYMENTS.......................................48
9.20. DESIGNATED PERSON..........................................49
9.21. HEADINGS...................................................49
9.22. COUNTERPARTS...............................................49
9.23. FAX EXECUTION..............................................49
9.24. NO THIRD PARTY BENEFICIARIES...............................49
9.25. DOMICILE OF LOANS..........................................50
9.26. ENTIRE AGREEMENT...........................................50
9.27. CONSTRUCTION...............................................50
9.28. SUCCESSORS AND ASSIGNS.....................................50
9.29. WAIVER OF TRIAL BY JURY....................................50
iv
<PAGE> 6
LOAN AGREEMENT (ACQUISITION LINE OF CREDIT)
THIS LOAN AGREEMENT (Acquisition Line of Credit) (this "AGREEMENT"),
dated for reference purposes only as of June 1, 1999 by and between American
National Bank and Trust Company of Chicago, ("BANK"), a national banking
association with its principal place of business at 120 South LaSalle Street,
Chicago, IL 60603, and SPSS, Inc., a Delaware corporation ("BORROWER"), with its
principal place of business at 233 South Wacker Drive, 11th Floor, Chicago, IL
60606.
RECITALS:
A. Borrower has requested and Bank has agreed to provide Borrower
with a revolving credit facility in an amount not to exceed Ten Million Dollars
($10,000,000) (the "LOANS").
B. Borrower intends to use the proceeds of the Loans to acquire
assets and general corporate purposes.
C. Borrower and Bank have heretofore entered into a Loan and
Security Agreement dated as of May 28, 1998 (the "EXISTING CREDIT AGREEMENT")
pursuant to which Bank has agreed to make financial accommodations to Borrower
in an amount not to exceed $10,000,000 to be used for working capital and
general corporate purposes.
D. The parties deem it to be in their best interest to set forth
their mutual agreements herein.
NOW THEREFORE, in consideration of any loan, advance, extension of
credit and/or other financial accommodation at any time made by Bank to or for
the benefit of Borrower, and of the promises set forth herein, the parties
hereto agree as follows:
1. DEFINITIONS AND TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement, the following words, terms and/or phrases shall have the meanings set
forth thereafter and such meanings shall be applicable to the singular and
plural form thereof, giving effect to the numerical difference.
(a) "ADVANCE": any loan of monies made by Bank to Borrower
pursuant to the terms of Section 2.1.
(b) "ADVANCE DATE": with respect to each Advance, the Business Day
upon which the proceeds of such Advance are to made available to
Borrower.
<PAGE> 7
(c) "AFFILIATE": any Person (i) in which Borrower, one or more
equity interest holders owning twenty-five percent (25%) or more of the
total equity interest of Borrower, any Subsidiary, and/or any Parent,
individually, jointly and/or severally, now or at any time or times
hereafter, has or have an equity or other ownership interest equal to
or in excess of twenty-five percent (25%) of the total equity of or
other ownership interest in such Person; and/or (ii) which directly or
indirectly through one or more intermediaries controls or is controlled
by, or is under common control with Borrower; and/or (iii) any officer
or director of Borrower or any Subsidiary. For purposes of this
definition, "CONTROL" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
Stock, by contract or otherwise, and in any case shall include direct
or indirect ownership (beneficially or of record) of, or direct or
indirect power to vote, 25% or more of the outstanding shares of any
class of capital stock of such Person (or in the case of a Person that
is not a corporation, 25% or more of any class of equity interest).
(d) "AGREEMENT": this Loan Agreement, together with all
amendments, modifications, extensions, supplements, restatements
replacements and extensions hereto or hereof.
(e) "AND/OR": one or the other or both, or any one or more or all,
of the things or Persons in connection with which the conjunction is
used.
(f) "ASSETS": any and all real, personal and intangible property
of a Person, including, without limitation, accounts, chattel paper,
contract rights, letters of credit, instruments and documents,
equipment, general intangibles, inventory, leases, options, licenses,
and real property, whether now existing or hereafter acquired or
arising.
(g) "BANK": American National Bank and Trust Company of Chicago, a
national banking association, and its successors and assigns.
(h) "BORROWER": SPSS, Inc., a Delaware corporation, and its
permitted successors and assigns.
(i) "BORROWER'S LIABILITIES": all obligations and liabilities of
Borrower to Bank under the terms of this Agreement and the other Loan
Documents, and all extensions and renewals or refinancing thereof,
whether such obligation or liability is direct or indirect, secured or
unsecured, joint or several, absolute or contingent, due or to become
due, whether for payment or performance, whether heretofore arising,
now existing or hereafter arising, however evidenced, created,
incurred, acquired or owing and whether now contemplated or hereafter
arising. Without limitation of the foregoing, such liability and
obligations include the principal amount of Loans, interest, fees,
indemnities or expenses under this Agreement and all other Loan
Documents, and all extensions, renewals and refinancing thereof,
whether or not such Loans were made in compliance with the terms and
conditions
2
<PAGE> 8
of this Agreement or in excess of the obligation of Bank to lend.
Borrower's Liabilities shall remain Borrower's Liabilities,
notwithstanding any assignment or transfer or any subsequent assignment
or transfer of any of the Borrower's Liabilities or any interest
therein.
(j) "BORROWER'S OBLIGATIONS": all terms, conditions, warranties,
representations, agreements, undertakings, covenants and provisions
(other than Borrower's Liabilities) to be performed, discharged, kept,
observed or complied with by Borrower to or for the benefit of Bank,
under the terms of this Agreement and all other Loan Documents, and all
extensions and renewals or refinancing thereof, whether such obligation
is direct or indirect, secured or unsecured, joint or several, absolute
or contingent, due or to become due, whether heretofore arising, now
existing or hereafter arising, however evidenced, created, incurred,
acquired or owing and whether now contemplated or hereafter arising.
Borrower's Obligations shall remain Borrower's Obligations,
notwithstanding any assignment or transfer or any subsequent assignment
or transfer of any of the Borrower's Obligations or any interest
therein.
(k) "BORROWING REQUEST": a request for an Advance setting forth
the information required pursuant to Section 2.5(a).
(l) "BUSINESS DAY": (i) For all purposes other than as covered by
clause (ii) hereof, any day, other than a Saturday, Sunday, a day that
is a legal holiday under the laws of the State of Illinois, or any
other day on which banking institutions located in the State of
Illinois are authorized or required by law or other governmental action
to close; and (ii) with respect to determinations in connection with,
and payments of principal and interest in Eurodollar Advances, any day
which is a Business Day described in clause (i) and which is also a day
for trading by and between banks in U.S. dollar deposits in the London
Interbank Eurodollar Market.
(m) "CAPITALIZED LEASE" at any time any lease which is, or is
required under GAAP to be, capitalized on the balance sheet of the
lessee at such time, and "CAPITALIZED LEASE OBLIGATION" of any Person
at any time shall mean the aggregate amount which is, or is required
under GAAP to be, reported as a liability on the balance sheet of such
Person at such time as lessee under a Capitalized Lease.
(n) "CHARGES": all national, Federal, state, county, city,
municipal and/or other governmental (or any instrumentality, division,
agency, body or department thereof, including without limitation the
Pension Benefit Guaranty Corporation) taxes, levies, assessments,
charges, liens, claims or encumbrances upon and/or relating to the
Borrower's Assets, Liabilities, Borrower's business, Borrower's
ownership and/or use of any of its Assets, Borrower's income and/or
gross receipts and/or Borrower's ownership and/or use of any of its
material Assets.
(o) "CONSOLIDATED GROUP": Borrower and any Affiliates of Borrower
required to file consolidated tax returns pursuant to Section 1502 of
the Code.
3
<PAGE> 9
(p) "COSTS": any and all reasonable costs and expenses (including,
without limitation, the reasonable fees and expenses of any counsel,
accountants, appraisers or other professionals) incurred by Bank at any
time, in connection with: (i) the preparation, negotiation, execution
and administration of this Agreement and all other Loan Documents; (ii)
the preparation, negotiation and execution of any amendment or
modification of this Agreement or the other Loan Documents; (iii) the
custody, preservation, use or operation of, or the sale of, collection
from or other realization upon Assets of Borrower; (iv) the exercise or
enforcement of any of the rights of Bank hereunder; (v) any failure by
Borrower to perform or observe any of the provisions hereunder; (vi)
any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Bank, Borrower or any other Person) in any way relating
to this Agreement, the other Loan Documents, Borrower's Liabilities,
Borrower's affairs or any Affiliate's affairs in connection with which,
if Bank is the plaintiff it makes a recovery or obtains any final order
in favor of Bank, or if Bank is the defendant it is not found by a
court of competent jurisdiction to be liable; (vii) any attempt to
enforce any rights of Bank against Borrower or any other Person which
may be obligated to Bank by virtue of this Agreement or the other Loan
Documents in connection with which Bank makes a recovery or obtains a
final order in Bank's favor; and (viii) performing any of the
obligations relating to or payment of any of Borrower's Obligations
hereunder in accordance with the terms hereof.
(q) "DEFAULT RATE": interest at the rate of two percent (2%) per
annum plus the Prime Interest Rate.
(r) "DESIGNATED PERSON": any Person identified as a "DESIGNATED
PERSON" on Borrower's Secretary's Certificate dated of even date
herewith, as amended or superseded from time to time.
(s) "DOLLARS" and "$": the lawful currency of the United States of
America.
(t) "ENVIRONMENTAL LAWS": any Federal, state or local law, rule,
regulation, ordinance, order, code or statute applicable to Borrower or
its property, in each case as amended (whether now existing or
hereafter enacted or promulgated), controlling, governing or relating
to the pollution or contamination of the air, water or land or
concerning hazardous, special or toxic materials, wastes or substances,
or any judicial or administrative interpretation of such laws, rules or
regulations, including, without limitation, the Water Pollution Control
Act (33 U.S.C. ss. 1251 et seq.), Resource Conservation and Recovery
Act (42 U.S.C. ss. 6901 et seq.), Safe Drinking Water Act (42 U.S.C.
ss. 3000(f) et seq.), Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), Clean Air Act (42 U.S.C. ss. 7401 et seq.), and Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss.
9601 et seq.).
4
<PAGE> 10
(u) "EQUIPMENT LEASES": all leases or similar agreements pursuant
to which Borrower leases equipment.
(v) "EURODOLLAR ADVANCE": any portion of the Loan for which the
interest rate is based on the Eurodollar Rate, whether or not Bank
obtains Eurodollars equal to all or any portion of such Eurodollar
Advance.
(w) "EURODOLLAR RATE": with respect to each Eurodollar Advance
made at a time when Borrower's Liabilities are equal to or less than
Two Million Five Hundred Thousand Dollars ($2,500,000), the rate equal
to one and fifty one hundredths percent (1.50%) per annum plus the
LIBOR Rate and with respect to each Eurodollar Advance made at a time
when Borrower's Liabilities are more than Two Million Five Hundred
Thousand Dollars ($2,500,000), the rate equal to one and seventy-five
one hundredths percent (1.75%) per annum plus the LIBOR Rate.
(x) "EVENT OF DEFAULT": the definition ascribed to this term in
Section 7.1.
(y) "EXCHANGE RATE": means, on any date when an amount expressed
in a currency other than Dollars is to be determined with respect to
any Letter of Credit, the nominal rate of exchange of Bank in the New
York foreign exchange market for the purchase by Bank (by cable
transfer) of such currency in exchange for Dollars at 12:00 noon
(Chicago time) one Business Day prior to such date (or otherwise in
accordance with the normal practice of Bank), expressed as a number of
units of such currency per one Dollar.
(z) "EXISTING CREDIT DOCUMENTS" the Existing Credit Agreement and
all instruments, agreements, and documents executed or delivered by
Borrower to Bank in connection therewith, and all amendments,
modifications, renewals, replacements and supplements thereto or
thereof, whether now existing or contemplated or hereafter entered into
or delivered, including but not limited to modifications relating to
the extension of additional credit and modifications changing the
nature, maturity and payment of the credit.
(aa) "FINANCIALS": those financial statements of Borrower,
heretofore, concurrently herewith or hereafter delivered by or on
behalf of Borrower to Bank, including but not limited to those
financial statements and reports delivered by Borrower to Bank pursuant
to Section 6.2(c).
(bb) "GAAP": generally accepted accounting principles applied in
the preparation of the financial statements of a Person with such
changes thereto as: (i) shall be consistent with the then-effective
principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors and successors, and (ii) shall be concurred
in by the independent certified public accountants of recognized
standing acceptable to Bank reviewing such financial statements of such
Person.
5
<PAGE> 11
(cc) "GOVERNMENTAL AUTHORITY": any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal. grand
jury or arbitrator, in each case whether foreign or domestic.
(dd) "GUARANTY EQUIVALENT": any agreement, document or instrument
pursuant to which a Person directly or indirectly guarantees, becomes
surety for, endorses, assumes, agrees to indemnify the obligee of any
other Person against, or otherwise agrees, becomes or remains liable
(contingently or otherwise) for, such obligation, other than by
endorsements of instruments in the ordinary course of business. Without
limitation, a Guaranty Equivalent shall be deemed to exist if a Person
agrees, becomes or remains liable (contingently or otherwise), directly
or indirectly: (i) to purchase or assume, or to supply funds for the
payment, purchase or satisfaction of, an obligation; (ii) to make any
loan, advance, capital contribution or other investment in, or a
purchase or lease of any property or services from, a Person; (iii) to
maintain the solvency of such Person; (iv) to enable such Person to
meet any other financial condition; (v) to enable such Person to
satisfy any obligation or to make any payment; (vi) to assure the
holder of an obligation against loss; (vii) to purchase or lease
property or services from such Person regardless of the non-delivery of
or failure to furnish of such property or services; or (viii) in
respect of any other transaction the effect of which is to assure the
payment or performance (or payment of damages or other remedy in the
event of nonpayment or nonperformance) of any obligation.
(ee) "INDEBTEDNESS": with respect to any Person, at a particular
time (without duplication): (i) all obligations on account of money
borrowed by, or credit extended to or on behalf of, or for or on
account of deposits with or advances to, such Person; (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
similar instruments; (iii) all obligations of such Person for the
deferred purchase price of property or services other than trade
payables incurred in the ordinary course of business and on terms
customary in the trade; (iv) all obligations secured by a Lien on
property owned by such Person (whether or not assumed); and all
obligations of such Person under Capitalized Leases (without regard to
any limitation of the rights and remedies of the holder of such Lien or
the lessor under such Capitalized Lease to repossession or sale of such
property); (v) the face amount of all letters of credit issued for the
account of such Person and, without duplication, the unreimbursed
amount of all drafts drawn thereunder, and all other obligations of
such Person associated with such letters of credit or draws thereon;
(vi) all obligations of such Person in respect of acceptances or
similar obligations issued for the account of such Person; (vii) all
obligations of such Person under a product financing or similar
arrangement; (viii) all obligations of such Person under any interest
rate or currency protection agreement, interest rate or currency
future, interest rate or currency option, interest rate or currency
swap or cap or other interest rate or currency hedge agreement; and
(ix) all obligations and liabilities with respect to unfunded vested
benefits under any "EMPLOYEE BENEFIT PLAN" or with
6
<PAGE> 12
respect to withdrawal liabilities incurred under ERISA by Borrower or
any ERISA Affiliate to a "MULTIEMPLOYER PLAN", as such terms are
defined under the Employee Retirement Income Security Act of 1974.
(ff) "INDEBTEDNESS INSTRUMENT": any note, mortgage, indenture,
chattel mortgage, deed of trust, loan agreement, hypothecation
agreement, pledge agreement, security agreement, financing statement or
other document, instrument or agreement evidencing or securing the
payment of or otherwise relating to the borrowing of monies.
Indebtedness Instruments shall include, but not be limited to the Loan
Documents.
(gg) "INTEREST PERIOD": with respect to any Eurodollar Advance,
the period commencing on the date such Eurodollar Advance is made or
continued as a Eurodollar Advance, as the case may be, or the date on
which a Prime Rate Advance is converted into such Eurodollar Advance as
applicable, and ending one, two, three, six or twelve months
thereafter, as Borrower may elect in the applicable Borrowing Request
(or as Borrower shall be deemed to have elected, as applicable);
provided that any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Business Day. No Interest Period shall terminate after the end of the
Maturity Date.
(hh) "INTEREST RATE": the Prime Interest Rate or the Eurodollar
Rate, as determined in accordance with the provisions of Article 2.
(ii) "LETTER OF CREDIT" or "LETTERS OF CREDIT": any standby
letters of credit issued or to be issued by Bank for the account of
Borrower pursuant to Section 2.1(b) and Article 4.
(jj) "LETTER OF CREDIT USAGE": as at any date of determination,
the sum of (i) the maximum aggregate undrawn amount which is or at any
time thereafter may become available for drawing under all Letters of
Credit then outstanding plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by Bank and not theretofore reimbursed
by Borrower (whether such reimbursement is out of the proceeds of Loans
pursuant to Section 2.1(a) or otherwise). For purposes of this
definition, any amount described in clause (i) or (ii) of the preceding
sentence which is denominated in a currency other than Dollars shall be
valued based on the applicable Exchange Rate for such currency as of
the applicable date of determination .
(kk) "LIBOR BREAKAGE FEE": a fee equal to all losses (excluding
loss of anticipated profits) costs, or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by
Bank to fund or maintain the requested Eurodollar Advance, when, as a
result of such failure on the part of Borrower or prepayment by
Borrower (including, without limitation, any mandatory
7
<PAGE> 13
prepayment of principal and any prepayment resulting from the
liabilities being declared due and payable in accordance with their
terms hereof), interest on such Eurodollar Advance is not based on the
applicable Eurodollar Rate for the requested Interest Period.
(ll) "LIBOR RATE": for each Interest Period, a rate of interest,
per annum, equal to: (i) the rate of interest determined by the Bank at
which deposits in U.S. Dollars for the relevant Interest Period are
offered based on information presented on the Telerate Screen as of
11:00 A.M. (London time) on the applicable Interest Rate Determination
Date; provided that if more than one (1) offered rate appears on the
Telerate Screen in respect of such Interest Period, the arithmetic mean
of all such rates (as determined by the Bank) will be the rate used;
provided further that if Telerate ceases to provide LIBOR quotations,
such rate shall be the average rate of interest determined by the Bank
at which deposits in U.S. Dollars are offered for the relevant Interest
Period by banks or other financial institutions selected by Bank to
banks in London interbank markets as of 11:00 A.M. (London time) on the
applicable Interest Rate Determination Date, multiplied by (ii) the
LIBOR Rate Reserve Percentage. The LIBOR Rate shall be adjusted
automatically as of the effective date of each change in the LIBOR Rate
Reserve Percentage. The LIBOR Rate shall be calculated in accordance
with the foregoing whether or not Bank is actually required to hold
reserves in connection with its eurocurrency funding or, if required to
hold such reserves, is required to hold reserves at the LIBOR Rate
Reserve Percentage.
(mm) "LIBOR RATE RESERVE PERCENTAGE": for any day shall mean the
percentage (expressed as a decimal, rounded upward to the nearest 1/100
of 1%), as determined in good faith by Bank (which determination shall
be conclusive), which is in effect on such day as prescribed by the
Board of Governors of the Federal Reserve System (or any successor)
representing the maximum reserve requirement (including, without
limitation, supplemental, marginal and emergency reserve requirements)
with respect to eurocurrency funding (currently referred to as
"Eurocurrency liabilities") of a member bank in such system.
(nn) "LIEN": any mortgage, deed of trust, pledge, lien,
hypothecation, security interest, charge or other encumbrance or
security arrangement of any nature whatsoever, including but not
limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the
effect of, security.
(oo) "LOAN": any and all loans, advances, extensions of credit
and/or other financial accommodations of any kind or nature made by
Bank at any time to, for the benefit or at the request of Borrower
pursuant to this Agreement and/or any of the other Loan Documents.
(pp) "LOAN DOCUMENTS": this Agreement and the Other Agreements.
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(qq) "LOAN PARTY": Borrower and every other Person who is a party
to any one or more of the Loan Documents.
(rr) "MATURITY DATE": May 29, 2000, or such earlier date as all of
Borrower's Liabilities and Borrower's Obligations shall be due and
payable by acceleration or otherwise.
(ss) "MAXIMUM PRINCIPAL AMOUNT": the meaning set forth in Section
2.1(a).
(tt) "NOTE": that certain revolving promissory note dated even
date herewith, in the original principal amount of Ten Million Dollars
($10,000,000) made by Borrower payable to the order of Bank, as said
note may hereafter be amended, restated, modified, supplemented,
extended or replaced.
(uu) "NOTICE OF ISSUANCE OF LETTER OF CREDIT": means notice
delivered by Borrower to Bank, in form and substance acceptable to
Bank, together with any application for letter of credit that Bank
requires in accordance with its customary practice for the issuance of
letters of credit pursuant to Section 2.1(b) and Article 4 with respect
to the proposed issuance of a Letter of Credit of the type requested
(vv) "ORGANIC DOCUMENTS": with respect to any Person, its articles
or certificate of incorporation, by-laws, shareholder's agreement,
certificate of partnership, certificate of limited partnership,
partnership agreement, articles of organization, operating agreement,
or similar documents or agreements governing its management and the
rights and privileges of its equity owners.
(ww) "OTHER AGREEMENTS": the Note, together with all other
agreements, instruments and documents evidencing or securing the Loans
or the transactions contemplated herein, including, without limitation,
bond agreements, loan agreements, security agreements, guaranties,
mortgages, deeds of trust, notes, applications and agreements for
letters of credit, letters of credit, advances of credit, bankers
acceptances, pledges, powers of attorney, consents, assignments,
collateral assignments, contracts, notices, leases, financing
statements and all other written matter heretofore, now and/or from
time to time hereafter executed by and/or on behalf of Borrower, any
other Loan Party and delivered to Bank, or issued by Bank upon the
application and/or other request of, and on behalf of, Borrower.
(xx) "PARENT": any Person, now or at any time or times hereafter,
owning or controlling (alone or with Borrower, any Subsidiary and/or
any other Person) at least a majority of the issued and outstanding
Stock or other ownership interest of Borrower or any Subsidiary
(hereinafter defined). For purposes of this definition, "CONTROL" shall
have the same meaning ascribed to this term in Section 1.1(c).
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(yy) "PERMITTED LIENS": (i) any liens created in favor of Bank;
(ii) liens for Charges which are not yet due and payable or which are
expressly permitted pursuant to the terms hereof, or claims and
unfunded liabilities under ERISA not yet due and payable or which are
being contested in good faith; (iii) liens arising in connection with
worker's compensation, unemployment insurance, old age pensions and
social security benefits which are not overdue or are being contested
in good faith by appropriate proceedings diligently pursued, provided
that in the case of any such contest any proceedings commenced for the
enforcement of such lien shall have been duly suspended and such
provision for the payment of such lien has been made on the books of
Borrower (or the applicable Affiliate) as may be required by GAAP; (iv)
liens incurred in the ordinary course of business to secure the
performance of statutory obligations arising in connection with
progress payments or advance payments due under contracts with the
United States Government or any agency thereof entered into in the
ordinary course of business; (v) any liens securing indebtedness of
Borrower to any Persons in an aggregate amount less than $1,000,000;
(vi) purchase money liens in connection with the acquisition of Assets,
(vii) Liens granted solely upon Assets of Subsidiaries; and (viii)
those liens disclosed on Schedule 5.1(g).
(zz) "PERSON": any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, party or
government (whether national, Federal, state, county, city, municipal
or otherwise, including without limitation any instrumentality,
division, agency, body or department thereof).
(aaa) "PRIME INTEREST RATE": the prime or base rate of interest
quoted from time to time by the American National Bank and Trust
Company of Chicago as its base rate on corporate loans at large U.S.
money center commercial banks on such day; provided that in the event
the American National Bank and Trust Company of Chicago ceases quoting
a prime or base rate, then Prime Rate shall mean the per annum rate of
interest quoted as the Bank Prime Loan Rate for the most recent weekday
for which such rate is quoted in Statistical Release H.15 (519)
published from time to time by the Board of Governors of the Federal
Reserve System; provided further that in the event that both of the
aforesaid indices cease to be published or to quote rates of the
aforesaid types, the Prime Rate shall be determined from a comparable
index chosen by Bank in good faith. The Prime Rate shall change
effective on the date of the publication of any change in the
applicable index by which the Prime Rate is determined.
(bbb) "PRIME RATE ADVANCE": all or any portion of the Loan which
is not a Eurodollar Advance.
(ccc) "RECORDS": all books, records, computer records, computer
software, ledger cards, programs and other computer materials, customer
and supplier lists,
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invoices, orders and other property and general intangibles at any time
evidencing or relating to the Assets.
(ddd) "SEC": the Securities and Exchange Commission.
(eee) "SECURITIES": shall have the meaning ascribed to that term
in the Securities Act of 1934.
(fff) "SECURITIES LAWS": all applicable Federal and state
securities laws and regulations promulgated pursuant thereto.
(ggg) "STOCK": all shares, interests, participations or other
equivalents (however designated) of or in a corporation, whether voting
or non-voting, including, but not limited to, common stock, warrants,
preferred stock, convertible debentures and all agreements, instruments
and documents convertible, in whole or in part, into any one or more or
all of the foregoing.
(hhh) "SUBSIDIARY": any Person at least a majority of whose issued
and outstanding Stock or other ownership interests now or at any time
hereafter is owned by Borrower.
(iii) "TANGIBLE NET WORTH": as determined at any time, the total
of shareholders' equity (including capital stock, additional paid-in
capital and retained earnings after deducting treasury stock and
subordinated indebtedness approved in writing by Bank) of a Person,
less the sum of the total amount of any intangible assets, which, for
purposes of this definition, shall include, without limitation, general
intangibles, noncompetition agreements, consulting agreements,
capitalized software costs, unamortized deferred charges and goodwill,
all as determined in accordance with GAAP.
(jjj) "UNMATURED DEFAULT": any event or condition which, with the
passage of time or the giving of notice or both, would constitute an
Event of Default hereunder.
1.2 GAAP. Except as otherwise defined in this Agreement or the other
Loan Documents, all accounting terms used herein shall have the meaning ascribed
to that term in accordance with GAAP.
1.3 Borrower. Whenever the context so requires, the use of "IT" in
reference to Borrower shall mean Borrower as defined above.
1.4 Rules of Construction. In this Agreement, unless a clear contrary
intention appears:
(a) the singular number includes the plural number and vice versa;
reference to any gender includes each other gender;
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(b) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(c) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually;
provided that nothing in this clause is intended to authorize any
assignment not otherwise permitted by this Agreement;
(d) reference to any agreement, document or instrument means such
agreement, document or instrument as amended, supplemented or modified
and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof, and reference to any note
includes any note issued pursuant to any Loan Document in extension or
renewal thereof and in substitution or replacement therefor;
(e) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto:
(f) the words "INCLUDING" (and with correlative meaning "INCLUDE")
means including, without limiting the generality of any description
preceding such term:
(g) with respect to the determination of any period of time, the
word "from" means "from and including" and the word "to" means "to but
excluding;" and
(h) reference to any law means such as amended, modified, codified
or reenacted, in whole or in part, and in effect from time to time.
(i) The Article and Section headings herein are for convenience
only and shall not affect the construction hereof.
1.5 Schedules. Each Schedule and Exhibit referred to herein shall,
unless attached hereto, be deemed to refer to the Schedule of such member or
designation attached to the Existing Loan Agreement, as if such Schedule were
attached hereto and made a part hereof.
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2. LOANS - GENERAL TERMS
2.1 Revolving Loan/Letters of Credit.
(a) Revolving Loan. Subject to the terms and conditions hereof,
Bank shall make available to Borrower revolving Loans from time to time
in an aggregate principal amount not to exceed at any time outstanding
Ten Million Dollars ($10,000,000) (the "MAXIMUM PRINCIPAL AMOUNT"). The
Loans shall be further evidenced by the Note. The Loans shall be funded
and interest shall accrue and be paid thereon in accordance with this
Article 2. The entire unpaid principal balance plus accrued but unpaid
interest on the Loans is due and payable on the Maturity Date.
(b) Letters of Credit. In addition to the Loan made pursuant to
this Section 2.1, Borrower may request, in accordance with the
provisions of Article 4, from time to time and at any time prior to the
Maturity Date, that Bank issue Letters of Credit for the account of and
on behalf of Borrower for Borrower's working capital and general
corporate purposes. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of
Borrower herein set forth, Bank shall issue such Letters of Credit in
accordance with the provisions of Section 4; provided that Borrower
shall not request that Bank issue (and Bank shall not issue): (i) any
Letter of Credit if, after giving effect to such issuance, the
outstanding principal balance of the Loan plus the Letter of Credit
Usage would exceed Ten Million Dollars ($10,000,000); and (ii) any
Letter of Credit having an expiration date later than January 31, 2000,
provided that Bank may agree that a Letter of Credit will automatically
be extended for one or more successive periods.
2.2 Maximum Principal Amount. In the event that the outstanding
principal balance of the Loan plus the Letter of Credit Usage exceeds the
Maximum Principal Amount at any time, Borrower shall pay the amount of such
excess to Bank, without notice or demand, and any amount not so paid shall bear
interest at the Default Rate until paid. Borrower's obligation to pay principal
pursuant to this Section 2.2 shall include (but not be limited to) an obligation
to pay principal in an amount required to reduce the outstanding principal
balance of the Loan plus the Letter of Credit Usage to an amount equal to or
less than Ten Million Dollars ($10,000,000) at all times. This is an absolute
obligation to pay to Bank the amount of the unpaid principal balance of the Loan
plus the Letter of Credit Usage in excess of said Maximum Principal Amount,
regardless of the cause of such excess.
2.3 Maturity Date; Termination of Loans. Bank's obligation to make any
Advance to Borrower pursuant to the provisions hereof shall be in effect until
the Maturity Date, unless sooner terminated ( a) by Bank upon the occurrence of
an Event of Default, an Unmatured Default, or pursuant to the terms hereof or
(b) by Borrower at any time upon no less than three (3) Business days' prior
written notice, accompanied by payment in full all
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Borrower's Liabilities then outstanding, including without limitation all
principal and interest outstanding under Loans, together with all Costs.
2.4 Authorized Disbursement of Proceeds. Borrower hereby authorizes
and directs Bank to disburse, for and on behalf of Borrower and for Borrower's
account, the proceeds of any Loan to such Person as Borrower or any Designated
Person shall direct. In addition to Advances of Loan proceeds made pursuant to a
Borrowing Request made by Borrower from time to time, Borrower hereby
irrevocably authorizes Bank to disburse proceeds of the Loan to pay: (a)
interest which is accrued but unpaid and which is due and payable pursuant to
the terms hereof and of the Note until the Loan is paid in full; and (b) for any
and all Costs. The execution of this Agreement by Borrower shall, and hereby
does, constitute an irrevocable direction and authorization to Bank so to
disburse such funds described in this Section and to treat such Advances as
money loaned pursuant to this Agreement and as indebtedness evidenced by the
Note. No further direction or authorization from Borrower shall be necessary for
Bank to make such Advances, and all such Advances shall satisfy, to the extent
so disbursed, the obligations of Borrower hereunder and shall be evidenced by
the Note. Notwithstanding anything to the contrary contained herein, Bank is
under no duty or obligation to make such Advances and failure to make such
Advances shall not be deemed to be a default by Bank or impair any of Bank's
rights or remedies hereunder.
2.5 Borrowing Procedure.
(a) In order to request an Advance, Borrower shall hand deliver or
telecopy to Bank a duly completed Borrowing Request not later than
11:00 a.m. Chicago time: (i) at least two (2) Business Days before a
proposed Eurodollar Advance and (ii) on the day of a proposed Prime
Rate Advance. Each Borrowing Request shall be irrevocable and shall
specify: (w) the number and location of the account to which funds are
to be disbursed; (x) the date such Advance is to be made (which shall
be a Business Day); (y) the amount of such Advance; and (z) if
applicable, the information required to elect that such Advance be a
Eurodollar Advance, in compliance with the provisions of Sections 2.10
and 2.11.
(b) If Borrower in respect of an outstanding Eurodollar Advance
shall not have delivered a Borrowing Request in accordance with Section
2.5(a) at least three (3) Business Days prior to the end of the
Interest Period then in effect for such Eurodollar Advance and
requesting that such Eurodollar Advance be refinanced, then Borrower
shall (unless Borrower has notified the Bank not fewer than three (3)
Business Days prior to the end of such Interest Period, that such
Eurodollar Advance is to be repaid at the end of such Interest Period)
be deemed to have delivered a Borrowing Request requesting that such
Advance be refinanced with a new Advance of equivalent amount, and such
new Advance shall bear interest at the Prime Interest Rate.
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2.6 Interest Rate. The principal on the Note shall bear interest at
the Prime Interest Rate or, to the extent Borrower has fully and timely complied
with the provisions of Sections 2.10 and 2.11, at the Eurodollar Rate. Unless
Borrower has designated any Advance as a Eurodollar Advance in strict accordance
with the terms hereof, Borrower's Liabilities shall bear interest at the Prime
Interest Rate. Interest on all Prime Rate Advances and on all Eurodollar
Advances shall be computed on a 360 day year for the actual number of days
elapsed. After the occurrence of an Event of Default and during the continuation
thereof, all Loans shall bear interest at the Default Rate. The unpaid principal
balance of each Advance shall bear interest at the Interest Rate applicable
thereto, determined by Bank in accordance with the provisions hereof, which
determination shall be binding upon Borrower, absent manifest error.
2.7 Change of Laws. If Bank shall determine at any time after the date
hereof that the adoption of any law, rule or regulation regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or compliance by Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Bank's capital as a
consequence of its obligations hereunder to a level below that which Bank could
have achieved but for such adoption, change or compliance (taking into
consideration Bank's policies with respect to capital adequacy) by an amount
deemed by Bank to be material, then Borrower shall pay to Bank upon demand such
amount or amounts, in addition to the amounts payable under any other provision
of this Agreement or the Other Agreements, as will compensate Bank for such
reduction. Determinations by Bank for purposes of this Section of the additional
amount or amounts required to compensate Bank with respect to the foregoing
shall be conclusive in the absence of manifest error. In determining such amount
or amounts, Bank may use any reasonable averaging or attribution methods.
Notwithstanding the foregoing, no amounts shall be payable by Borrower to Bank
under the terms of this Section 2.7 if Liabilities are paid in full on or before
ten (10) days after the date on which Bank shall have notified Borrower that
amounts will be due under this Section 2.7. In the event of a prepayment
pursuant to this Section 2.7, any LIBOR Breakage Fee otherwise payable pursuant
to the terms of this Article 2 shall be waived by Bank and shall not be due or
payable.
2.8 Regulatory Changes. Notwithstanding any other provision herein
contained to the contrary, in the event that any regulatory change shall, in the
reasonable determination of Bank, make it unlawful for Bank to make or to
maintain any Eurodollar Advance or impose additional restrictions on Eurodollar
Advances by Bank, then, the obligation of Bank to make or maintain any such
Eurodollar Advance shall be terminated and all outstanding Eurodollar Advances
shall automatically be converted to Prime Rate Advances. Bank shall, as promptly
as practicable following any such determination, give Borrower a notice thereof
that sets forth the basis for any such determination. After such determination
and while such determination is in effect, Bank shall not be required to make
further Eurodollar Advances.
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2.9 Advances Prior to LIBOR Rate Determination. Anything herein to the
contrary notwithstanding, after notice but prior to making any requested
Eurodollar Advance if, for any reason whatsoever, LIBOR Rates are not then being
quoted for the requested Interest Period and in an amount approximating the
amount of such Eurodollar Advance, Bank shall give Borrower prompt notice
thereof and such Eurodollar Advance (if not yet made) shall be a Prime Rate
Advance and no conversions into Eurodollar Advances shall be permitted and no
new Eurodollar Advances shall be made so long as such condition exists.
2.10 Eurodollar Advances and Conversion. Provided no Event of Default
or Unmatured Default has occurred and is continuing, Borrower shall have the
option, subject to the other provisions of this Agreement, to: (i) request that
any Advance or any portion of an Advance in a minimum amount of $500,000 and in
multiples of $100,000, shall be deemed to be a Eurodollar Advance by giving
telephonic notice to Bank at least two (2) Business Days prior to the day any
Eurodollar Advance is to be made hereunder specifying the applicable Interest
Period; provided that Borrower gives Bank written confirmation by facsimile of
its telephonic notice on the same Business Day as such telephone notice is given
with respect to such Eurodollar Advance, and (ii) convert on any Business Day,
all or any portion of the outstanding principal amount of any Advance or any
portion of an Advance, in a minimum amount of $500,000 and in multiples of
$100,000, from one type of interest rate advance to another type of interest
rate advance by giving at least two (2) Business Days prior telephonic notice to
Bank thereof; provided that Borrower gives Bank written confirmation of its
telephonic notice by facsimile on the same Business Day that such telephonic
notice is given with respect to such conversion hereunder. Notwithstanding the
foregoing: (y) no Eurodollar Advance may be converted into a Prime Rate Advance
pursuant to this Section 2.10, except effective on the last day of the Interest
Period applicable thereto, and (z) Borrower shall have no more than five (5)
Eurodollar Advances with different interest periods at any one time.
2.11 Interest Period Election. Borrower may, by prior telephonic notice
to Bank, elect the Interest Period(s) to be applicable to all or any portion of
any Eurodollar Advance upon the expiration of the Interest Period then
applicable to such Eurodollar Advance; provided that such notice is given to
Bank at least two (2) Business Days prior to the expiration of the then Interest
Period and that Borrower gives written confirmation by facsimile of its
telephonic notice on the same Business Day that such telephonic notice is given.
In the event Borrower does not make such an election with respect to all or any
portion of a Eurodollar Advance for which the Interest Period is expiring, then,
upon the expiration of such Interest Period, the portion of such Eurodollar
Advance for which no such election has been made shall automatically convert to
a Prime Rate Advance.
2.12 Libor Brokerage Fee. In the event of any prepayment of an Advance
prior to the end of the then applicable Interest Period (by acceleration or
otherwise) or in the event any Advance is not made after delivery of a Borrowing
Request in accordance with the terms hereof, for any reason whatsoever, Borrower
shall pay to Bank an amount equal to
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the LIBOR Breakage Fee. Any fee payable under this Sections 2.12 not paid when
due shall bear interest at the Default Rate.
2.13 Usury. The provisions of this Section shall govern and control
over any irreconcilably inconsistent provision contained in this Agreement or in
any other document evidencing or securing the Loan. Bank shall never be entitled
to receive, collect, or apply as interest hereon (for purposes of this Section,
the word "INTEREST" shall be deemed to include any sums treated as interest
under applicable law governing matters of usury and unlawful interest), any
amount in excess of the Highest Lawful Rate (hereinafter defined) and, in the
event Bank ever receives, collects, or applies as interest any such excess, such
amount which would be excessive interest shall be deemed a partial prepayment of
principal and shall be treated hereunder as such; and, if the principal of this
Agreement is paid in full, any remaining excess shall forthwith be paid to
Borrower. In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the Highest Lawful Rate, Borrower and Bank shall,
to the maximum extent permitted under applicable law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) spread the
total amount of interest throughout the entire contemplated term of this
Agreement, provided, that if this Agreement is paid and performed in full prior
to the end of the full contemplated term hereof, and if the interest received
for the actual period of existence hereof exceeds the Highest Lawful Rate, Bank
shall refund to Borrower the amount of such excess and, in such event, Bank
shall not be subject to any penalties provided by any laws for contracting for,
charging or receiving interest in excess of the Highest Lawful Rate. "HIGHEST
LAWFUL RATE" shall mean the maximum rate of interest which Bank is allowed to
contract for, charge, take, reserve or receive under applicable law after taking
into account, to the extent required by applicable law, any and all relevant
payments or charges hereunder.
3. PAYMENT TERMS
3.1 Loan Account; Method of Making Payments. Bank shall maintain a
Loan Account on its books in which shall be recorded: (i) all Loans made by Bank
to Borrower pursuant to this Agreement; (ii) all payments made by Borrower on
all Loans; and (iii) all other appropriate debits and credits as provided in
this Agreement, including, without limitation, all fees, charges, expenses and
interest. All entries in the Loan Account shall be made in accordance with
Bank's customary accounting practices, in effect from time to time. The failure
of Bank to record any of the foregoing shall not in any way limit Borrower's
obligations under this Agreement.
3.2 Interest Payments.
(a) Accrued interest on all Prime Rate Advances shall be payable
monthly, in arrears, on the last Business Day of each month during the
term hereof, without notice or demand.
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(b) Accrued interest on any Eurodollar Advance shall not be due
and payable monthly, but, instead, shall be payable in arrears on the
last day, of the Interest Period applicable thereto.
3.3 Principal Payments. The unpaid principal balance, plus all accrued
but unpaid interest shall be due and payable in full on the Maturity Date,
without notice or demand.
3.4 Place of Payment. All payments to Bank hereunder and under the
Other Agreements shall be payable in immediately available funds on or before
3:00 p.m. Chicago time at the principal place business of Bank, or such place or
places as Bank may designate in writing to Borrower. All of such payments to
Persons other than Bank shall be payable at such place or places as Bank may
designate in writing to Borrower. Borrower's Liabilities will be payable as set
forth in the Note, this Agreement, and the Other Agreements.
3.5 Payment on Maturity and Prepayment. On the Maturity Date, whether
by acceleration or otherwise, Borrower shall pay to Bank, in full, in cash or
other immediately available funds, the outstanding amount of the Loan. Each
Prime Rate Advance may be repaid at any time, without premium or penalty by
Borrower giving telephonic notice to Bank of such prepayment no later than 3:00
p.m. Chicago time on the date of such prepayment, confirmed in writing by
facsimile of its telephonic notice on the same day. Each Eurodollar Advance may
be prepaid on the last day of the Interest Period applicable thereto, but only
by Borrower giving telephonic notice to Bank of such prepayment at least two (2)
Business Days prior to the day of such prepayment, such notice confirmed in
writing by facsimile on the day of the telephonic notice. Prepayment of any
Eurodollar Advance during an Interest Period is expressly prohibited. In the
event of an attempted prepayment of any Eurodollar Advance during any Interest
Period, Bank, at Borrower's option, shall either: (i) hold such funds in a
non-interest bearing cash collateral account to secure Borrower's Liabilities
and to apply such funds to Borrower's Liabilities on the last day of the
Interest Period, or (ii) apply such funds to Borrower's Liabilities, in which
event Borrower shall pay to Bank a LIBOR Breakage Fee immediately upon demand
therefor, and any amount not so paid shall bear interest at the Default Rate.
3.6 Advances to Constitute One Loan. All Advances, loans and any other
financial accommodations provided pursuant to the terms hereof by Bank to
Borrower shall constitute one loan and all indebtedness and obligations of
Borrower to Bank under this Agreement, the Other Agreements or otherwise shall
constitute one general obligation.
3.7 Application of Payments and Collections.
(a) Application of Payments. Bank shall have the right
unilaterally (and without notice to or the consent of any Person) to
allocate any and all payments which may be received by or tendered to
Bank made by Borrower or any other Person at any time or from time to
time and which relate in any way to the Loan or any other of Borrower's
Liabilities then due and payable in any order of priority as
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Bank in its reasonable discretion shall elect, as follows: (i) to the
payment of any Costs; (ii) to accrued but unpaid interest, penalties
and late payment fees; and (iii) to principal; provided that Bank shall
not allocate payments in a manner which would create a LIBOR Breakage
Fee or other fee or penalty payable by Borrower which would not
otherwise be imposed. Borrower (y) irrevocably waives the right to
direct the application of payments and collections received by Bank
from or on behalf of Borrower, and (z) agrees that Bank shall have the
continuing exclusive right to apply and reapply any and all such
payments and collections against the Loan or any other Borrower's
Liabilities or Liabilities then due and payable in such manner as Bank
may deem appropriate, notwithstanding any entry by Bank upon any of its
books and records.
(b) Reapplication of Payments. To the extent that Bank receives
any payment on account of Borrower's Liabilities, and any such
payment(s) and/or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
subordinated and/or required to be repaid to a trustee, receiver or any
other Person under any bankruptcy act, state or federal law, common law
or equitable cause, then, to the extent of such payment(s) or proceeds
received, Borrower's Liabilities or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if
such payment(s) and/or proceeds had not been received by Bank and
applied on account of the Borrower's Liabilities.
3.8 Monthly Statements. All Advances to Borrower and all other debits
and credits provided for in this Agreement shall be evidenced by entries made by
Bank in its internal data control systems showing the date, amount and reason
for each such debit or credit. Until such time as Bank shall have rendered to
Borrower written statements of account as provided herein, the balance in the
Loan Account, as set forth on Bank's most recent statement, shall be rebuttably
presumptive evidence of the amounts due and owing to Bank by Borrower. At Bank's
option, Bank may render a monthly statement to Borrower setting forth the
balance of the Loan Account, including principal, interest, costs, penalties,
charges and other fees. Each such statement shall be subject to subsequent
adjustment by Bank and Bank's right to reapply payments in accordance with
Section 3.7(b), but shall, as to statements of principal and interest then due
or having been paid, absent manifest errors or omissions, be presumed correct
and binding upon Borrower and shall constitute an account stated unless, within
thirty (30) days after receipt of any statement from Bank, Borrower shall
deliver to Bank written objection thereto, specifying the error or errors, if
any, contained in such statement.
3.9 Loan Fee. Concurrently with the execution of this Agreement,
Borrower shall pay to Lender a loan fee in an amount equal to $25,000.
4. LETTERS OF CREDIT
4.1 Mechanics of Issuance.
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(a) Notice of Issuance. Whenever Borrower desires the issuance of
a Letter of Credit, it shall deliver to Bank a Notice of Issuance of
Letter of Credit no later than 10:00 A.M. (Chicago time) at least three
(3) Business Days in advance of the proposed date of issuance. The
Notice of Issuance of Letter of Credit shall specify (i) the proposed
date of issuance (which shall be a Business Day), (ii) the face amount
of the Letter of Credit, in Dollars (which amount, in the case of a
drawing under a Letter of Credit which is denominated in a currency
other than Dollars, shall be calculated by reference to the applicable
Exchange Rate) as quoted by Bank to Borrower in connection with such
Letter of Credit, (iii) the expiration date of the Letter of Credit,
(iv) the name and address of the beneficiary, and (v) the verbatim text
of the proposed Letter of Credit or the proposed terms and conditions
thereof, including a precise description of any documents and the
verbatim text of any certificates to be presented by the beneficiary
which, if presented by the beneficiary prior to the expiration date of
the Letter of Credit, would require Bank to make payment under the
Letter of Credit; provided that, ------------- anything to the contrary
in this Agreement notwithstanding, Borrower may, with Bank's consent,
deliver a Notice of Issuance of Letter of Credit electronically to
Bank, in which such event Borrower shall be deemed for all purposes
hereunder and the other Loan Documents to have delivered a written
Notice of Issuance of Letter of Credit hereunder. Borrower shall notify
Bank prior to the issuance of any Letter of Credit in the event that
any of the matters to which Borrower is required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of Credit,
and upon the issuance of any Letter of Credit, Borrower shall be deemed
to have re-certified, as of the date of such issuance, as to the
matters to which Borrower is required to certify in the applicable
Notice of Issuance of Letter of Credit.
(b) Issuance of Letter of Credit. Upon satisfaction or waiver of
the conditions set forth herein, Bank shall issue the requested Letter
of Credit in accordance with Bank's standard operating procedures;
provided that the Bank, in its sole and absolute discretion, may
require changes in the text of the proposed Letter of Credit or any
such documents or certificates, and that no Letter of Credit shall
require payment against a conforming draft to be made thereunder on the
same Business Day that such draft is presented if such presentation is
made after 10:00 A.M. (Chicago time) on such Business Day; provided
further that Bank shall not be obligated to issue any Letter of Credit
denominated in a foreign currency which in the judgment of Bank is not
readily and freely available.
4.2 Letter of Credit Fees. Borrower agrees to pay the following
amounts to Bank with respect to Letters of Credit issued by Bank (a) an issuance
fee equal to 1.5% of the aggregate maximum amount available to be drawn under
such Letter of Credit for each 12 month period or portion thereof during which
such Letter of Credit is outstanding and (b) all issuing costs of Bank.
4.3 Drawings and Reimbursement of Amounts Drawn Under Letters of
Credit.
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(a) Responsibility of Bank With Respect to Requests For Drawings.
In determining whether to honor any request for drawing under any
Letter of Credit by the beneficiary thereof, Bank shall be responsible
only to determine that the documents and certificates required to be
delivered under such Letter of Credit have been delivered and that they
comply on their face with the requirements of such Letter of Credit.
(b) Reimbursement by Borrower of Amounts Drawn Under Letters of
Credit. In the event Bank has determined to honor a request for drawing
under a Letter of Credit issued by it, Bank shall immediately notify
Borrower, and Borrower shall reimburse Bank on or before the Business
Day immediately following the date on which such drawing is honored
(the "REIMBURSEMENT DATE") in an amount in Dollars (which amount, in
the case of a drawing under a Letter of Credit which is denominated in
a currency other than Dollars, shall be calculated by reference to the
applicable Exchange Rate on the date of such drawing) in same day funds
equal to the amount of such drawing; provided that, anything contained
in this Agreement to the contrary notwithstanding, (i) unless Borrower
shall have notified Bank prior to 10:00 A.M. (Chicago time) on the date
of such drawing that Borrower intends to reimburse Bank for the amount
of such drawing with funds other than the proceeds of Loans made
pursuant to Section 2.1(a), Borrower shall be deemed to have authorized
Bank to make a Loan on the Reimbursement Date in an amount equal to the
amount of such drawing, and (ii) subject to satisfaction or waiver of
all conditions to the making of Loans, Bank shall, on the Reimbursement
Date, make a Loan in the amount of such drawing, the proceeds of which
shall be applied directly by Bank to reimburse Bank for the amount of
such drawing. If for any reason proceeds of a Loan are not available to
Borrower in accordance with Section 2.1(a) in amount of such drawing,
Borrower shall reimburse Bank, on demand, an amount in same day funds
equal to the excess of the amount of such drawing over the aggregate
amount of such Loans, if any, which are so received.
4.4 Interest on Amounts Drawn Under Letters of Credit. Borrower agrees
to pay to Bank, with respect to drawings made under any Letters of Credit issued
by it, interest on the amount paid by Bank in respect of each such drawing from
the date of such drawing to but excluding the date such amount is reimbursed by
Borrower (including any such reimbursement out of the proceeds of Loans pursuant
to Sections 2.1(a) and 4.3 at the Prime Interest Rate.
4.5 Obligations Absolute. The obligation of Borrower to reimburse Bank
for drawings made under the Letters of Credit issued by it and to repay any
Loans made by Bank or other obligations of Borrower pursuant to Sections 4.3 and
4.4 above shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances including,
without limitation, the following circumstances:
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(a) any lack of validity or enforceability of any Letter of
Credit;
(b) the existence of any claim, set-off, defense or other right
which any Person may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), or whether in connection with this
Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between any Person
and the beneficiary for which any Letter of Credit was procured);
(c) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
accurate in any respect;
(d) payment by Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit;
(e) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of any Person;
(f) any breach of this Agreement or any other Loan Document by any
party thereto;
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(h) the fact that an Event of Default or an Unmatured Default
shall have occurred and be continuing;
provided, in each case, that payment by Bank under the applicable Letter of
Credit shall not have constituted willful misconduct of Bank or its officers,
employees or agents under the circumstances in question (as determined by a
final judgment of a court of competent jurisdiction).
4.6 Indemnification; Nature of Bank's Duties.
(a) Indemnification. In addition to amounts payable as provided in
any other provision of this Section 4, Borrower hereby agrees to
protect, indemnify, pay and save harmless Bank and its officers,
employees or agents from and against any and all claims, demands,
liabilities, damages, losses, and reasonable costs, charges and
expenses (including reasonable fees, expenses and disbursements of
counsel) which Bank may incur or be subject to as a consequence, direct
or indirect, of (i) the issuance of any Letter of Credit by Bank, other
than as a result of the willful misconduct of Bank or its officers,
employees or agents as determined by a final judgment of a court of
competent jurisdiction or, subject to the following clause (ii),
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the wrongful dishonor by Bank of a proper demand for payment made under
any Letter of Credit issued by it, or (iii) the failure of Bank to
honor a drawing under any such Letter of Credit as a result of any act
or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority (all such acts or
omissions herein called "GOVERNMENTAL ACTS").
(b) Nature of Bank's Duties. As between Borrower and Bank,
Borrower assumes all risks of the acts and omissions of, or misuse of
the Letters of Credit issued by Bank by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, Bank shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign any such Letter of Credit or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which may prove to be invalid
or ineffective for any reason; (iii) failure of the beneficiary of any
such Letter of Credit to comply fully with any conditions required in
order to draw upon such Letter of Credit; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, whether or not they be in
cipher; (v) errors in interpretation of technical terms; (vi) any loss
or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of any
such Letter of Credit of the proceeds of any drawing under such Letter
of Credit; or (viii) any consequences arising from causes beyond the
control of Bank, including without limitation any Governmental Acts,
and none of the above shall affect or impair, or prevent the vesting
of, any of Bank's rights or powers hereunder.
(c) Limitation of Bank's Liability. In furtherance and extension
and not in limitation of the specific provisions set forth in the first
paragraph of this Section 4.6, any action taken or omitted by Bank
under or in connection with the Letters of Credit issued by it or any
documents and certificates delivered thereunder, if taken or omitted in
good faith, shall not put Bank under any resulting liability to
Borrower.
4.7 Increased Costs and Taxes Relating to Letters of Credit. Without
limiting the other provision of Article 4, in the event that Bank shall
determine (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) that any change after the date
hereof in any law, treaty or governmental rule, regulation or order, or any
change therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by Bank
with any guideline, request
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or directive issued or made after the date hereof by any central bank or other
governmental or quasi-govern-mental authority (whether or not having the force
of law):
(a) subjects Bank (or its applicable lending or letter of credit
office) to any additional tax (other than any tax on the overall net
income of Bank) with respect to the issuing or maintaining of any
Letters of Credit or the purchasing or maintaining of any
participations therein or any other obligations under this Section 4,
whether directly or by such being imposed on or suffered by Bank;
(b) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement in respect of any Letters of Credit issued by Bank;
or
(c) imposes any other condition on or affecting Bank (or its
applicable lending or letter of credit office) regarding this Article 4
or any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to Bank of
agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to
purchase, purchasing or maintaining any participation therein or to reduce any
mount received or receivable by Bank (or its applicable lending or letter of
credit office) with respect thereto; then, in any case, Borrower shall promptly
pay to Bank, upon receipt if the statement referred to in the next sentence,
such additional amount or amounts as may be necessary to compensate Bank for any
such increased cost or reduction in amounts received or receivable hereunder.
Bank shall deliver to Borrower a written statement, setting forth in reasonable
detail the basis for calculating the additional amounts owed to Bank under this
Section 4.7, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
4.8 Standard Letter of Credit Application. Notwithstanding Section 9.8
below, if any provision contained in this Agreement is in conflict, or
inconsistent with any provision of a Letter of Credit Application executed by
Borrower and delivered to and accepted by Bank in connection with this
Agreement, then the provision(s) of such Letter of Credit Application shall
control.
5. GENERAL WARRANTIES, REPRESENTATIONS AND COVENANTS
5.1 General Representations, Warranties and Covenants. Except as
disclosed in writing to Bank concurrently herewith, Borrower warrants and
represents to and covenants with Bank that:
(a) Organization. Borrower is and at all times hereafter shall be
a corporation, duly organized and existing and in good standing under
the laws of the State of Delaware and qualified or licensed to do
business and in good standing in
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all states in which the laws thereof require Borrower to be so
qualified and/or licensed and in which the failure to so qualify could
have a material adverse effect on the business, Assets or condition
(financial or otherwise) of Borrower or its ability to perform its
obligations under the Loan Documents, including without limitation the
States of Illinois and Delaware.
(b) Entity Power. Borrower has corporate power and authority to
own its property and to transact the business in which it is engaged or
presently proposes to engage. Borrower has the corporate right, power
and capacity and is duly authorized and empowered to enter into,
execute, deliver and perform this Agreement and the other Loan
Documents to which it is a party, and all such action has been duly and
validly authorized by all necessary corporate proceedings on its part.
Without limitation of the foregoing, Borrower has the corporate power
and authority to borrow pursuant to the Loan Documents to the fullest
extent permitted hereby and thereby from time to time, and has taken
all necessary corporate action to authorize such borrowings.
(c) Violation of Organic Documents and Agreements. Neither the
execution and delivery of this Agreement or any other Loan Document,
nor consummation of the transactions herein or therein contemplated,
nor performance of or compliance with the terms and conditions hereof
or thereof, does or will (i) violate or conflict with any Law, or (ii)
violate, conflict with or result in a breach of any term or condition
of, or constitute a default under, or result in (or give rise to any
right, contingent or otherwise, of any Person to cause) any
termination, cancellation, prepayment or acceleration of performance
of, or result in the creation or imposition of (or give rise to any
obligation, contingent or otherwise, to create or impose) any lien upon
any of property of Borrower pursuant to, or otherwise result in (or
give rise to any right, contingent or otherwise, of any Person to
cause) any change in any right, power, privilege, duty or obligation of
Borrower under or in connection with (a) the Organic Documents of
Borrower, (b) any agreement or instrument creating, evidencing or
securing any Indebtedness or Guaranty Equivalent to which Borrower is a
party or by which its or any of its properties (now owned or hereafter
acquired) may be subject or bound, or (c) any other agreement or
instrument or arrangement to which Borrower is a party or by which it
or any of its properties (now owned or hereafter acquired) may be
subject or bound.
(d) Execution and Binding Effect. This Agreement and each other
Loan Document to which Borrower is a party and which is executed and
delivered or required to be executed and delivered on or before the
date of which this representation and warranty is made, or deemed made,
has been duly and validly executed and delivered by Borrower. This
Agreement and each such other Loan Document constitutes, and each other
Loan Document when executed and delivered by Borrower will constitute,
the legal, valid and binding obligations of Borrower, enforceable
against Borrower in accordance with its terms.
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(e) Ownership
(i) Schedule 5.1(e) sets forth all classes of stock of
Borrower, the shareholders thereof (other than
members of the general public), addresses of each
such shareholder, number of shares owned and how the
shares are held.
(ii) Schedule 5.1(e) (as may be amended from time to
time) sets forth all options, warrants and other
rights to acquire Stock or other equity interests of
Borrower, the nature of such option, warrant or
right and the conditions for the exercise thereof.
Bank hereby expressly consents to the transfer,
issuance or conveyance of Stock and/or other Equity
Interests of any Person in accordance with such
options, warrants and rights.
(iii) Borrower is not, and will not be, subject to any
obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its
capital stock. All of the outstanding shares of
Borrower's capital stock are and at all times will
be validly issued, fully paid and nonassessable.
There are no statutory or contractual stockholders'
preemptive rights with respect to Borrower's shares.
Borrower has not violated and will not violate any
applicable federal or state securities laws in
connection with the offer, sale and issuance of any
of its capital stock. There are no agreements
between Borrower's stockholders with respect to the
voting or transfer of Borrower's capital stock.
(f) Fictitious Names. Each of the fictitious names, if any, used
by Borrower during the five (5) year period preceding the date of this
Agreement is set forth on Schedule 5.1(f) attached hereto (as amended
from time to time) and none of such fictitious names are registered
trademarks or tradenames with the U.S. Patent and Trademark Office,
except as set forth in Schedule 5.1(f).
(g) Liens/Title. Schedule 5.1(g) is a true, accurate and complete
list of all Liens, relating to the Assets of Borrower on the date
hereof. At all times following acquisition thereof, Borrower shall have
good, indefeasible and merchantable title to and ownership of all of
its Assets, free and clear of all liens, claims, security interests and
encumbrances, except the Permitted Liens.
(h) Financial Warranty. Borrower: (i) is now, and at all times
hereafter shall be generally paying its debts as they mature, (ii) now
owns, and shall at all times hereafter own, property which, at a fair
valuation, is greater than the sum of its debt, and (iii) now has, and
shall have at all times hereafter, capital sufficient to carry on its
business and transactions and all businesses and transactions in which
it is about to engage.
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(i) Proceedings. There are no actions or proceedings which are
pending or threatened against Borrower which might result in any
material and adverse change in its business, operations, Assets,
condition (financial or otherwise) or its ability to fully perform its
obligations and liabilities under the Loan Documents to which it is a
party.
(j) Intentionally Deleted.
(k) Adequate Licenses. Borrower possesses adequate Assets,
licenses, patents, copyrights, trademarks and tradenames to continue to
conduct its business as previously conducted by it and as contemplated
in the foreseeable future except such licenses, patents, copyrights,
trademarks and trade names the failure of which to obtain could not
have a material adverse effect on Borrower's business, operations,
Assets, condition (financial or otherwise) or ability to perform its
obligations under those Loan Documents to which it is a party.
(l) Government Permits; Consents.
(i) Borrower has and is in good standing with respect to all
governmental permits, certificates, consents and
franchises necessary to continue to conduct its business
as previously conducted prior to the date hereof and to
own or lease and operate its properties as now owned or
leased by it. None of said permits, certificates,
consents or franchises contain any term, provision,
condition or limitation more burdensome than such as are
generally applicable to Persons engaged in the same or
similar business as the Borrower.
(ii) Except for the actions of Borrower's Board of Directors
authorizing this Agreement and the related transactions
and documents, Borrower does not require the approval,
consent or waiver by any other Person (including but not
limited to shareholders, partners, members, equity
owners, holders of Indebtedness Instruments, or any
owner of any lien upon the Assets of any one or more of
them or their Affiliates) for the consummation of the
transactions contemplated herein, including but not
limited to the borrowing of the Loan, and the payment
and performance of all Borrower's Liabilities and
Borrower's Obligations.
(m) Charge; Restrictions. To the best of Borrower's knowledge,
Borrower is not a party to (nor are any of its Assets otherwise subject
to) any contract or agreement or subject to any Charge restriction,
judgment, decree or order materially and adversely affecting its
business, property, assets, operations or condition, financial or
otherwise.
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(n) Compliance with Laws. To the best of Borrower's knowledge,
Borrower, is not and will not be during the term hereof, in violation
of any applicable statute, regulation, order or ordinance of the United
States of America, of any state, city, town, municipality, county or of
any other jurisdiction, or of any agency thereof, including the Federal
Reserve Board, in any respect materially and adversely affecting its
business, operations, Assets, or condition (financial or otherwise) or
its ability to perform its obligations under those Loan Documents to
which it is a party.
(o) Compliance with Indebtedness Instruments. Borrower is not and
at no time during the term hereof shall be in default under any
Indebtedness Instrument.
(p) Financials. The Financials heretofore delivered by Borrower,
or any other Loan Party to Bank, fairly and accurately present the
assets, liabilities and financial conditions and results of operations
of Borrower, and such other Persons described therein as of and for the
periods ending on such dates and have been prepared in accordance with
generally accepted accounting principles and such principles have been
applied on a basis consistently followed in all material respects
throughout the periods involved.
(q) Taxes. All tax and information returns required to be filed by
or on behalf of Borrower have been properly prepared, executed and
filed. All taxes, assessments, fees and other Charges upon Borrower, or
upon any of its properties, incomes, sales or franchises which are due
and payable have been paid other than those not yet delinquent and
payable without premium or penalty, and except for those being
diligently contested in good faith by appropriate proceedings, and in
each case adequate reserves and provisions for taxes have been made on
the books of Borrower. The reserves and provisions for taxes on the
books of Borrower are adequate for all open years and for its current
fiscal period. Borrower does not know of any proposed additional
assessment or basis for any material assessment for additional taxes
(whether or not reserved against). The federal, state and local income
tax liabilities of Borrower have been finally determined by the
Internal Revenue Service and other relevant taxing authorities, or the
time for audit has expired, for all fiscal periods ending on or prior
to December 31,1994 and all such liabilities (including all
deficiencies assessed following audit) have been satisfied.
(r) No Adverse Change. There has been no material and adverse
change in the Assets, liabilities or financial condition of Borrower
since the date of the Financials.
(s) No Indebtedness. Except as disclosed in the most recent
Financials heretofore delivered by Borrower to Bank or otherwise
disclosed in writing to Bank, none of Borrower nor any Affiliate has
any Indebtedness (except for Indebtedness arising in the ordinary
course of its business since the dates reflected in the
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Financials that is not Indebtedness for borrowed money), has guaranteed
or entered into any Guaranty Equivalent (other than as a result of the
endorsement of any instrument of items of payment for deposit or
collection in the ordinary course of business or as otherwise expressly
permitted pursuant to the terms hereof) the obligations of any Person,
and there are no actions or proceedings which are pending or, to the
best of Borrower's knowledge, threatened against Borrower or any
Affiliate which, in any of the foregoing cases, are reasonably likely
to result in any material adverse change in its financial condition or
materially adversely affect its assets or its ability to fully perform
and satisfy its obligations under the Loan Documents.
(t) Intentionally Deleted.
(u) No Liability on Bank. The execution, delivery and performance
by Borrower and each other Loan Party of this Agreement and/or the
Other Agreements will not, except to the extent caused by independent
actions of Bank, impose on or subject Bank to any liability, whether
fixed or contingent, in respect of any Environmental Law relating to
the operation of Borrower's business. Bank's exercise of any of the
rights or remedies described in this Agreement or in any of the Other
Agreements shall not constitute a breach of any provision contained in
any agreement, instrument or document concerning the assignment or
license of, or the payment of royalties for, any patents, patent
rights, tradenames, trademarks, trade secrets, know-how, copyrights or
any other form of intellectual property now or at any time or times
hereafter protected as such by any applicable law.
(v) Affiliates. Schedule 5.1(v) attached hereto is a true,
accurate and complete schedule of Borrower's Affiliates, together with
a description of Borrower's relationship to each such Affiliate.
Borrower is not a partner (general or limited) of any partnership, a
party to any joint venture or owns (beneficially or of record) any
equity or similar interest in any Person (including but not limited to
any interest pursuant to which Borrower has or may in any circumstance
have an obligation to make capital contributions to, or be generally
liable for or on account of the liabilities, acts or omissions of such
other Person).
(w) Real Property; Environmental Issues. Borrower does not now own
and at no time in the last five (5) years has owned, any real property.
Borrower has not received a summons, citation, notice, or directive
from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission resulting in the
releasing, or otherwise disposing of hazardous waste or hazardous
substances into the environment with respect to any real property.
(x) Investment Company Act and Public Utility Holding Company
Act. Borrower is not (a) an "investment company" or a company
"controlled" by an investment company within the meaning of the
Investment Company Act of 1940,
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as amended, (b) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (c) subject to any other law which
purports to restrict or regulate the ability to borrow money or obtain
credit.
(y) Intellectual Property. Attached hereto as Schedule 5.1(y) is a
true, accurate and complete list of all United States and foreign
patents, trademarks, tradenames, service marks, copyrights and
applications therefor owned and or used by Borrower (the "INTELLECTUAL
PROPERTY RIGHTS"). Except as set forth on Schedule 5.1(y), the
Intellectual Property Rights are owned by Borrower or Borrower will own
or possess the royalty-free licenses or other rights to use all
Intellectual Property Rights. To the best of Borrower's knowledge, none
of the products or processes used in Borrower's business conflicts with
or infringes or has infringed upon any patents, trademarks, trade
names, service marks or copyrights of any other person or entity; and
to the best of Borrower's knowledge, Borrower has the full right to
conduct its business as heretofore conducted by Borrower, without
incurring license fees or royalty or other payment obligations to any
person or entity in respect of the Intellectual Property Rights.
(z) WARN. Borrower is now, and at all times during the term or any
renewal term hereof Borrower shall be, in compliance with the Worker's
Adjustment and Retraining Notification Act.
(aa) REG U et al. Borrower warrants and represents to Bank that
Borrower shall use the proceeds of all Loans solely to and for general
corporate purposes and consistently with all applicable laws and
statutes. Borrower's use of the proceeds of any Loan made by Bank are
legal and proper uses (duly authorized by all requisite action of the
board of directors of Borrower), in accordance with applicable laws,
rules and regulations, as in effect from time to time. Borrower's
execution and delivery of this Agreement or any of the other Loan
Documents and Borrower's conduct of its business and use of proceeds of
the Loan does not and will not directly or indirectly violate or result
in a violation of the Securities Exchange Act of 1934, as amended, or
Regulations U, G, T and X of the Board of Governors of the Federal
Reserve System (12 CFR 221, 207, 220 and 224, respectively). Borrower
further warrants and represents to Bank and covenants with Bank that
Borrower is not in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Loans will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
(bb) Fiscal Year End. Currently and at all times when Borrower's
Liabilities are outstanding, Borrower's fiscal year will end December
31.
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(cc) Disclosure. To the best knowledge of Borrower, neither this
Agreement nor any Loan Document nor any statement, list, certificate or
other document or information, nor any schedules to this Agreement or
any other Loan Document, delivered or to be delivered to Bank, contains
or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make statements
contained herein or therein, in light of the circumstances in which
they are made, not misleading.
5.2 Reaffirmation of Warranties, Representations and Covenants. Each
request for an Advance made by Borrower pursuant to this Agreement or the Other
Agreements shall constitute (i) an automatic warranty and representation by
Borrower to Bank that there does not then exist an Event of Default or an
Unmatured Default, and (ii) a reaffirmation as of the date of said Borrowing
Request that each and every warranty and representation and covenant of Borrower
contained in this Article 5 and other sections of this Agreement and in the
Other Agreements, is true and correct in all material respects, except where
such representation or warranty specifically relates to an earlier date.
5.3 Survival of Warranties and Representations. Borrower covenants,
warrants and represents to Bank that all representations and warranties of
Borrower contained in this Agreement and the Other Agreements shall be true on
the date hereof, and shall survive the execution, delivery and acceptance hereof
and thereof by the parties thereto and the closing of the transactions described
herein and therein or related hereto or thereto. Unless expressly limited by the
terms of this Article 5, each representation and warranty shall be deemed to be
remade concurrently with each Advance hereunder.
6. COVENANTS AND CONTINUING AGREEMENTS.
6.1 Financial Covenants. Borrower shall, at all times during the term
hereof, measured quarterly:
(a) maintain a ratio of total liabilities (less deferred revenue)
to Tangible Net Worth of less than 1.35 to 1;
(b) maintain a ratio of current assets to current liabilities of
greater than 1.5 to 1; and
(c) maintain Tangible Net Worth greater than the applicable amount
below from and after each of the dates identified below:
May 29, 1998 $19,000,000
January 1, 1999 $20,000,000
January 1, 2000 $21,000,000
January 1, 2001 $22,000,000
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All covenants set forth herein shall be measured quarterly, upon receipt of the
statements delivered to Bank pursuant to Section 6.2(c)(iii) or the annual
consolidated financial statements delivered in accordance with Section
6.2(c)(i), if available. It is hereby acknowledged that the covenants set forth
in this Section 6.1 relate to a period of time after the Maturity Date. Such
covenants are incorporated herein as the agreement of the parties, if and when
they become applicable. Nothing contained in this Section 6.1 shall be deemed to
be an agreement by Bank to extend the Maturity Date of the Loans nor to provide
any financial accommodation to Borrower under the terms of this Agreement (or
any other agreement, except as expressly provided in the Existing Credit
Documents) after the Maturity Date.
6.2 Affirmative Covenants. Borrower warrants and represents to and
covenants with Bank that Borrower shall, unless Bank otherwise consents thereto
in writing, do all of the following during the term hereof:
(a) Representation and Warranties. To the extent any
representation or warranty contained herein refers to an event or state
of facts which exists on the date hereof and shall exist during the
term hereof or at the time of each Advance hereunder, said
representation or warranty shall be deemed to be an affirmative
covenant of Borrower to take all actions, omit to take such actions or
cause such actions to be taken which shall be necessary or desirable to
cause such representation or warranty to be true and accurate at all
times during the term hereof. To the extent any representation,
warranty or covenant herein (including the negative covenants set forth
in Section 6.3) relates to any other Person, it shall be deemed to be a
covenant of Borrower to cause such Person to comply with or otherwise
perform such representation, warranty or covenant, whether or not
Borrower has the legal, corporate or other ability to cause such
compliance or performance.
(b) Corporate Existence. Borrower shall preserve and maintain its
corporate existence, rights, privileges and franchises in the
jurisdiction of its incorporation or organization, and qualify and
remain qualified to do business in each other jurisdiction in which
such qualification is necessary in view of its business or operations,
except such jurisdictions where failure to qualify would not have a
material adverse effect on Borrower's, business, Assets, operations,
condition (financial or otherwise) or ability to perform its
obligations under the Loan Documents.
(c) Records; Reports. Borrower covenants with Bank that Borrower
shall keep Records and prepare financial statements and shall cause to
be furnished to Bank the following (all of the foregoing and following
which comprise financial statements are to be kept and prepared in
accordance with GAAP applied on a basis consistent with the Financials
unless Borrower's certified public accountants concur in any changes
therein and such changes are consistent with then applicable GAAP).
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(i) As soon as available but not later than ninety (90)
days after the close of each fiscal year of Borrower,
a balance sheet of Borrower as at the end of such
year, the related statement of operations (including
income statement) for such year and a reconciliation
of capital for such year, all certified on an
unqualified basis by a firm of independent certified
public accountants selected by Borrower and acceptable
to Bank, in Bank's sole and absolute discretion.
(ii) As soon as available but not later than forty-five
(45) days after the end of each calendar quarter
hereafter, a balance sheet of Borrower as at the end
of, and the related statement of operations for, both
such calendar quarter and the portion of such
Borrower's fiscal year then elapsed, all reviewed by a
firm of independent certified public accountants
selected by Borrower and acceptable to Bank, in Bank's
sole and absolute discretion.
(iii) Concurrently with delivery to its shareholders, copies
of all financial and other information delivered by
Borrower to such Persons, including without
limitation, its proxy statements and annual reports to
stockholders. Concurrently with delivery to the SEC by
Borrower, copies of all reports filed by Borrower with
the SEC, including without limitation, all reports on
Forms 10K, 10Q or 8K promulgated under the Securities
Exchange Act of 1934, as amended.
(iv) Concurrently with delivery of the Financials required
pursuant to Sections 6.2(c)(i) and (ii) hereof, a
certificate executed by the President, Treasurer or
Chief Financial Officer of Borrower that such
Financials present fairly the financial position and
results of operations of Borrower for the applicable
period, and that no Event of Default or Unmatured
Default has occurred and is continuing (including but
not limited to compliance with the covenants set forth
in Section 6.1) or if an Event of Default or Unmatured
Default has occurred, setting forth the details of
such event and the action which Borrower proposes to
take with respect thereto.
(v) In satisfaction of Borrower's obligation to deliver to
Bank the items identified at (i), (ii) and (iii)
above, Borrower's executive officer's certificate to
be delivered to Bank pursuant to (iv) above may
itemize those Financials, shareholder information and
SEC filings which at the relevant dates are available
in full text on the world wide web; provided that such
executive
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officer's certificate shall identify the world wide
web location of all documents that are not SEC filings
available in full text in a timely fashion in the
EDGAR database located at www.sec.gov. All of the
foregoing information that Bank expressly requests,
together with all other information required to be
delivered to Bank pursuant to (i), (ii) and (iii)
above, shall be delivered to Bank by Borrower in paper
form.
(vi) Such other data and information (financial and
otherwise) as Bank, from time to time, reasonably may
request bearing upon or related to Borrower's
financial condition and/or results of operations.
(d) Insurance. Borrower, at its sole cost and expense, shall keep
and maintain: (i) policies of insurance against all hazards and risks
ordinarily insured against by others in similar business or as
reasonably requested in writing by Bank; and (ii) public liability
insurance relating to Borrower's ownership and use of its Assets. All
such policies of insurance shall be in form, with insurers and in such
amounts as may be satisfactory to Bank. Promptly upon Bank's request,
Borrower shall deliver to Bank the original (or certified) copy of each
policy of insurance, and evidence of payment of all premiums for each
such policy. Such policies of insurance (except those of public
liability) shall contain an endorsement, in form and substance
acceptable to Bank, showing losses payable to Bank. Such endorsement or
an independent instrument furnished to Bank, shall provide that all
insurance companies will give Bank at least thirty (30) days prior
written notice before any such policy or policies of insurance shall be
altered or canceled and that no act or default of Borrower or any other
Person shall affect the right of Bank to recover under such policy or
policies of insurance in case of loss or damage. Borrower hereby
directs all insurers under such policies of insurance (except those of
public liability) following an Event of Default to pay all proceeds
payable thereunder directly to Bank. Following an Event of Default,
Borrower, irrevocably, appoints Bank (and all officers, employees or
agents designated by Bank) as Borrower's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing the name of Borrower
on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of
insurance. In the event Borrower at any time or times hereafter shall
fail to obtain or maintain any of the policies of insurance required
above or to pay any premium in whole or in part relating thereto, then
Bank, without waiving or releasing any of Borrower's Obligations or
Borrower's Liabilities or any Event of Default or Unmatured Default
hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and
pay such premium and take any other action with respect thereto which
Bank deems advisable. All sums so disbursed by Bank, including
reasonable attorneys' fees, court costs, expenses and other charges
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relating thereto, shall be part of Borrower's Liabilities, payable by
Borrower to Bank on demand. The Bank shall also have been named as an
additional insured with respect to Borrower's liability insurance.
(e) Payment of Charges. Borrower shall pay promptly, when due, all
Charges and Borrower, shall not permit the Charges to arise or to
remain unpaid, and will promptly discharge the same. In the event
Borrower, at any time or times hereafter, shall fail to pay the Charges
or to obtain such discharges as required herein, Borrower promptly
shall so advise Bank thereof in writing. Bank may, without waiving or
releasing any of Borrower's Obligations or Borrower's Liabilities or
any Event of Default or Unmatured Default hereunder, in its sole and
absolute discretion, at any time or times thereafter, make such
payment, or any part thereof, or obtain such discharge and take any
other action with respect thereto which Bank deems advisable. All sums
so paid by Bank and any expenses, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto, shall be part
of Borrower's Liabilities, payable by Borrower to Bank on demand.
Notwithstanding the foregoing, Borrower, may permit or suffer the
Charges to attach to its Assets and may dispute, without prior payment
thereof, the Charges, on the conditions that: (i) Borrower in good
faith, shall be contesting the same in an appropriate proceeding
diligently pursued; (ii) enforcement thereof against any Assets of
Borrower shall be stayed; and (iii) appropriate reserves therefor shall
have been established on the Records of Borrower in accordance with
GAAP.
(f) Pay Debts. Borrower shall pay or discharge or otherwise
satisfy all Indebtedness at or before maturity or before the same
becomes delinquent; provided that Borrower shall not be required to pay
any Indebtedness while the same is being contested by it in good faith
and by appropriate proceedings so long as Borrower shall have set aside
on its books reserves in accordance with GAAP with respect thereto and
title to any property of Borrower is not jeopardized.
(g) Compliance with Laws. Borrower shall comply with all laws,
rules, regulations and governmental orders (federal, state and local),
including all Environmental Laws, having applicability to it or to the
business or businesses at any time conducted by it, where the failure
to so comply would have a material adverse effect, either individually
or in the aggregate, on the business, Assets, operations, condition
(financial or otherwise) or its ability to perform its obligations
under the Loan Documents.
(h) Perform Obligations. Borrower shall duly and punctually pay
and perform each of its obligations under this Agreement and the Other
Agreements in accordance with the terms thereof.
(i) Operating and Disbursement Accounts. Borrower shall maintain
all of its general operating accounts and primary disbursement accounts
at Bank. Schedule 6.2(i) sets out all depository, investment and other
accounts maintained by
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<PAGE> 41
Borrower with financial institutions and/or brokers other than Bank.
Borrower promptly shall deliver an amended Schedule 6.2(i) to Bank
reflecting each addition to and deletion of such accounts.
6.3 Negative Covenants. Borrower warrants and represents to and
covenants with Bank that Borrower shall not, without Bank's prior written
consent, which Bank may or may not give in its sole and absolute discretion,
concurrently or hereafter do any of the following:
(a) Sell or Encumber Assets. Borrower, shall not assign, sell or
transfer any of its Assets to any Person, other than in the ordinary
course of business, nor permit, grant, or suffer a security interest,
lien, claim or encumbrance upon any of its Assets, except the Permitted
Liens.
(b) Attachment. Borrower, shall not permit or suffer any levy,
attachment or restraint to be made affecting any of its Assets;
(c) Receiver. Borrower, shall not permit or suffer any receiver,
trustee or assignee for the benefit of creditors, or any other
custodian to be appointed to take possession of all or any of its
Assets.
(d) Amend Organizational Documents; Business Objectives. Borrower,
shall not make any change: (i) in its Organic Documents or capital
structure; or (ii) in any of its business objectives, purposes and
operations, including by undertaking additional business activities.
Borrower shall not engage in any business not of the same general type
as those conducted by it on the date hereof.
(e) Mergers and Acquisitions. Neither Borrower nor any Subsidiary
shall liquidate, dissolve, enter into any merger, consolidation,
partnership, joint venture or other combination, except that any Person
which is in the general line of business of Borrower may merge into or
with or be acquired by Borrower or any Subsidiary, provided that
Borrower or such Subsidiary, as applicable, shall be the continuing or
surviving entity.
(f) Adverse Transactions. Borrower, shall not enter into any
transaction which materially and adversely affects its ability to
perform its obligations under the Loan Documents or to pay any other
Indebtedness.
(g) Investments. Borrower shall not make any investment in the
Stock, other equity interests in, or obligations of any Person;
provided that in connection with Borrower's management of its cash on a
short-term basis in the ordinary course of business Borrower may invest
in obligations of other Persons that are cash or cash equivalents and
provided that Borrower may create new Subsidiaries of which Borrower is
the 100% owner of all equity interests.
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<PAGE> 42
(h) Loan; Guaranty Debt. Borrower shall not make any loan to any
Person. Borrower has not entered into and shall not enter into any
Guaranty Equivalents.
(i) Borrow Indebtedness; Pay Indebtedness. Other than amounts
loaned by Bank to Borrower hereunder, Borrower shall not incur any
Indebtedness for borrowed money in excess on $1,000,000 of unsecured
borrowings in the aggregate outstanding at any one time. Except in the
ordinary course of business, Borrower, shall not defease, prepay,
repay, purchase, redeem or otherwise acquire any of its Indebtedness
for borrowed money.
(j) Issue Power of Attorney. Except pursuant to this Agreement and
the Other Agreements, Borrower, shall not issue any power of attorney
or other contract or agreement giving any Person power or control over
the day-to-day operations of Borrower's, business, other than in
connection with Permitted Liens or Indebtedness expressly permitted
pursuant to the terms of this Agreement.
(k) Amendment of Credit Agreements. Except in the ordinary course
of business, Borrower shall not amend, modify or extend any note,
credit agreement, security agreement or other document, instrument of
agreement evidencing or securing Indebtedness of Borrower, without in
each case Bank's prior written consent.
6.4 Required Notices.
(a) In addition to those notices required elsewhere in this
Agreement, Borrower shall notify Bank promptly after obtaining
knowledge of:
(i) except as otherwise previously disclosed in writing to
Bank, any event or occurrence which Borrower has
determined has caused a material loss or decline in
value of Borrower's, Assets due to casualty or any
other adverse occurrence and the estimated (or actual,
if available) amount of such loss or decline;
(ii) the institution of any suit or administrative
proceeding which, if determined adversely to Borrower,
is reasonably likely to materially adversely affect
the operations, financial condition or business of
Borrower;
(iii) Borrower, becoming subject to any Charge, restriction,
judgment, decree or order which could materially and
adversely affect Borrower's business, operations,
Assets, condition (financial or otherwise) or ability
to perform its respective obligations under the Loan
Documents.
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<PAGE> 43
(iv) the commencement of any lockout, strike or walkout
relating to any labor contract to which Borrower is a
party;
(v) except as otherwise previously disclosed, any event or
occurrence which Borrower has determined will have a
material adverse affect on the ability of any obligor
of a Pledged Note to repay the Note;
(vi) the occurrence of a default by Borrower, under any
agreement, document or instrument to which it is a
party which could materially and adversely affect its
business, operations, Assets, condition (financial or
otherwise) or ability to perform its respective
obligations under the Loan Documents;
(vii) the filing of a petition under any section or chapter
of the United States Bankruptcy Code or any similar
law or regulation shall be filed by or against
Borrower or Borrower shall make an assignment for the
benefit of its creditors or if any case or proceeding
is filed by or against Borrower for its dissolution or
liquidation;
(viii) the making of an application for the appointment of a
receiver, trustee or custodian for any of the assets
of Borrower;
(ix) as soon as possible and in any event within five (5)
days after Borrower shall have obtained knowledge of
the occurrence of an Event of Default or Unmatured
Default, the written statement of the chief financial
officer of Borrower setting forth the details of such
event and the action which Borrower proposes to take
with respect thereto; and
(x) the exercise of any holder of any option, warrant or
right to purchase any equity interest in Borrower,
other than the exercise of rights disclosed in Section
5.1(e).
6.5 Payment of Claims. Bank, in its sole and absolute discretion,
without waiving or releasing any of Borrower's Liabilities or Borrower's
Obligations or any Event of Default or Unmatured Event of Default, may at any
time or times hereafter, but shall be under no obligation to, pay, acquire
and/or accept an assignment of any security interest, lien, encumbrance or claim
asserted by any Person against the Assets of Borrower. All sums paid by Bank in
respect thereof and all reasonable Costs relating thereto incurred by Bank or
for which Bank becomes obligated on account thereof shall be part of Borrower's
Liabilities payable by Borrower to Bank on demand and any amount not paid on
demand shall bear interest at the Default Rate.
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<PAGE> 44
6.6 Year 2000 Compliance.
(a) Borrower is currently reviewing its computer and management
information systems to determine whether they are adequate for the
conduct of Borrower's business as presently conducted and as proposed
to be conducted and Borrower is actively addressing all known material
requirements for systems integration, upgrade and replacement, and
Borrower covenants and agrees promptly to notify Bank in writing of any
facilities or software inadequacies that could reasonably be expected
to have a material adverse effect on the business of the Borrower.
(b) The Borrower, will be Year 2000 Compliant on or before
September 30, 1999 and at all times thereafter. As used in the
preceding sentence, "YEAR 2000 COMPLIANT" means the ability of the
software and other information processing capabilities of Borrower to
correctly interpret and process all data in whatever form so as to
avoid errors that may otherwise occur because of the inability of
software or other information processing capabilities to recognize
accurately the year 2000 or subsequent dates.
(c) Any reprogramming required to permit the proper functioning of
the computer and management information systems of the Borrower during
and following the year 2000 will be completed by March 31, 1999 and the
cost of such reprogramming is not expected to have a material adverse
effect on the business of the Borrower.
6.7 Public Offering. Notwithstanding anything to the contrary
contained herein, Borrower shall have the right to publicly offer and sell
equity or debt Securities of Borrower under the following terms and conditions:
(i) Borrower shall deliver notice to Bank, within twenty-four (24) hours of any
filing with respect to such offering with the SEC; (x) Borrower shall fully and
timely comply with all Securities Laws and with all terms and provisions of the
underwriting agreement pursuant to which such Securities are offered for sale;
(ii) the prospectus and all other selling materials used by Borrower in such
offering shall not contain any misstatement of material fact or omit to state
any fact which would render the statements contained therein false or
misleading, and (iii) pay the net proceeds of such offering to Bank, in
accordance with the terms hereof. Bank shall have the right, in Bank's sole and
exclusive discretion to apply the net proceeds of such offering to the
Borrower's Liabilities hereunder, in such order of priority, as Bank, in its
sole discretion shall elect.
7. DEFAULT
7.1 Events of Default. The occurrence of any one of the following
events shall constitute a default ("EVENT OF DEFAULT") under this Agreement:
(a) If Borrower fails or neglects to perform, keep or observe any
of Borrower's Obligations and the same is not cured within thirty (30)
days after such
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<PAGE> 45
default or, if such default is not susceptible to cure within thirty
(30) days, then within ninety (90) days so long as Borrower is actively
taking all commercially reasonable measures to cure the same; provided
that all failures, if any, to timely pay Borrower's Liabilities are
governed by (c) below and that a breach of any of the provisions,
terms, conditions or covenants contained in Sections 6.2(d), 6.3 and
6.4 shall automatically be an Event of Default without any notice or
cure period;
(b) If any representation, warranty or material statement, report
or certificate made or delivered by Borrower, or any of its directors,
officers, authorized employees or agents, to Bank is not true and
correct;
(c) If Borrower fails to pay any of Borrower's Liabilities, when
due and payable or declared due and payable and the same is not cured
within five (5) days, provided however, that Interest shall accrue at
the Default Rate commencing immediately after non-payment;
(d) If Borrower shall be in default under the terms of any
Indebtedness Instrument, other than the Loan Documents;
(e) If Borrower fails or neglects to perform, keep or observe any
of Borrower's Obligations contained in Section 6.2(e) and the same is
not cured within ten (10) days after Bank gives Borrower notice of such
default;
(f) If any of Borrower's Assets or any portion thereof are
attached, seized, subjected to a writ of distress warrant, or are
levied upon, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within forty-five (45) days thereafter;
(g) If a petition under any section or chapter of the United
States Bankruptcy Code or any similar law or regulation shall be filed
by Borrower, or if Borrower shall make an assignment for the benefit of
its creditors or if any case or proceeding is filed by Borrower for its
dissolution or liquidation;
(h) If Borrower is enjoined, restrained or in any way prevented by
court order from conducting all or any material part of its business
affairs or if a petition under any section or chapter of the United
States Bankruptcy Code or any similar law or regulation is filed
against Borrower or if any case or proceeding is filed against Borrower
for its dissolution or liquidation and such injunction, restraint or
petition is not dismissed or stayed within forty-five (45) days after
the entry or filing thereof;
(i) If an application is made by Borrower for the appointment of a
receiver, trustee or custodian for any of its assets;
(j) If an application is made by any Person other than Borrower
for the appointment of a receiver, trustee, or custodian for any of the
Assets of Borrower
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<PAGE> 46
and the same is not dismissed within forty-five (45) days after the
application therefor;
(k) Except as expressly permitted pursuant to Section 6.2(e), (i)
if a notice of any Charge is filed of record with respect to all or any
of Borrower's Assets, or (ii) if any Charge becomes a lien or
encumbrance upon any of its assets and the same is not released within
forty-five (45) days after the same becomes a lien or encumbrance;
(l) The occurrence of an Event of Default under any of the Other
Agreements, which is not cured within the time, if any, specified
therefor in such Other Agreement;
(m) If any final non-appealable judgment for the payment of money
in excess of $1,000,000 (after giving effect to any amount covered by
insurance as to which the insurer shall not have defied or questioned
its obligation to pay) shall be rendered against Borrower and the same
shall remain undischarged for a period of thirty (30) days during which
execution shall not be effectively stayed or diligently contested in
good faith by appropriate proceedings;
(n) If Borrower or any ERISA Affiliate (i) shall effect a complete
or partial withdrawal (as defined in ERISA Sections 4203 or 4205) from
a Multiemployer Plan, if such withdrawal could subject either Borrower
or any ERISA Affiliate to liability; (ii) shall fail to pay when due an
amount that is payable by it to the PBGC or to an Employee Benefit
Plan; (iii) has instituted against it by a fiduciary of any
Multiemployer Plan an action to enforce ERISA Section 515 and such
proceedings shall not have been dismissed within thirty (30) days
thereafter; (iv) has imposed against it any tax under Code Section
4980B(a); (v) has assessed against it by the Secretary of Labor a civil
penalty with respect to any Employee Benefit Plan under ERISA Section
502(c) or 502(l); (vi) shall apply for a waiver of the minimum funding
standards of the Code; or (vii) shall permit any other event or
condition to occur or exist with respect to an Employee Benefit Plan
that could subject either Borrower or any ERISA Affiliate to liability;
(o) Except as set forth in Section 7.1(d) or (e), a default by
Borrower shall occur under any agreement, document or instrument (other
than this Agreement or any of the other Loan Documents) now or
hereafter existing, to which Borrower is a party and the effect of such
default is reasonably likely to have a material adverse effect on the
financial conditions or business operations of such Loan Party;
(p) If Borrower dissolves, liquidates or fails to maintain its
corporate existence, without the prior written consent of Bank; and
(q) An Event of Default occurs under the terms of the Existing
Credit Documents.
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7.2 Remedies Cumulative. All of Bank's rights and remedies under this
Agreement and the Other Agreements are cumulative and non-exclusive.
7.3 Acceleration. Upon the occurrence an Event of Default and the
continuation thereof, without notice by Bank to or demand by Bank to Borrower,
Bank shall have no further obligation to and may then forthwith cease advancing
monies, extending credit or issuing letters of credit to or for the benefit of
Borrower under this Agreement and the Other Agreements. Upon an Event of
Default, without notice by Bank to or demand by Bank to Borrower, all Borrower's
Liabilities shall be due and payable, forthwith.
7.4 Remedies. Upon the occurrence of an Event of Default and the
continuation thereof, Bank, in its sole and absolute discretion, may exercise
any and all rights and remedies that it may have under the other Loan Documents,
at law or in equity.
7.5 Injunctive Relief. Borrower recognizes that upon the occurrence of
an Event of Default, no remedy of law will provide adequate relief to Bank, and
agrees that Bank shall be entitled to temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages.
7.6 Advances During Unmatured Default. Upon the occurrence of any
Unmatured Default or Event of Default, Bank shall not be obligated to make any
Advances; provided that, nothing contained herein shall prohibit Bank from
making any Advances.
8. CONDITIONS PRECEDENT TO DISBURSEMENT
8.1 Checklist Items. The obligation of Bank to make the Loan to
Borrower is subject to the condition precedent that, in addition to satisfaction
of the conditions set forth in Sections 8.2 and 8.3, Bank shall have received,
prior to the first disbursement of the proceeds of any of the Loan hereunder all
documents, instruments, agreements, notes, evidences of Borrower's authority,
and all other instruments as Bank may reasonably request, including but not
limited to all items on the documentation checklist, delivered by Bank to
Borrower prior to the date hereof.
8.2 Necessary Actions. The obligation of Bank to make the Loan to
Borrower is subject to the further condition precedent that all proceedings
taken in connection with the transactions contemplated by this Agreement, and
all instruments, authorizations and other documents applicable thereto, shall be
reasonably satisfactory in form and substance to Bank and its counsel.
8.3 Conditions Precedent. In addition to the foregoing, prior to Bank
making any and all Loans hereunder, all of the following shall have been
satisfied in a manner satisfactory to Bank:
(a) no change in the condition or operations, financial or
otherwise, of Borrower shall have occurred which change, in the sole
credit judgment of Bank, may have a material adverse effect on
Borrower;
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<PAGE> 48
(b) no litigation shall be outstanding or have been instituted or
threatened which Bank determines to be material against Borrower;
(c) all of the representations and warranties of Borrower set
forth in this Agreement and each of the Other Agreements to which
Borrower is a party shall be true and correct on the date of the
contemplated Loan to the same extent as originally made on such date;
and
(d) no Event of Default or Unmatured Default shall exist or be
continuing.
9. GENERAL
9.1 ERISA Matters.
(a) Representations and Warranties. Borrower hereby represents and
warrants and covenants and agrees that:
(i) There are no Employee Benefit Plans maintained or
sponsored by or participated in or contributed to by
Borrower or any of its Subsidiaries or other
Affiliates or to which Borrower or any of its
Subsidiaries or other Affiliates have any obligations;
and
(ii) Borrower shall not, and shall not permit any of its
Subsidiaries or other Affiliates to establish,
maintain, contribute to or otherwise be or become
obligated with respect to one or more Employee Benefit
Plans without first receiving the prior written
consent of Bank, which Bank may grant or withhold in
its sole and absolute discretion.
(b) Definitions. For purposes of this Section 9.1, the following
definitions shall apply:
(i) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
(ii) "EMPLOYEE BENEFIT PLAN" shall mean an employee benefit
plan within the meaning of Section 3(3) of ERISA that
is maintained, sponsored, participated in or
contributed to by Borrower or any ERISA Affiliate.
(iii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, or
any successor thereto.
(iv) "ERISA AFFILIATE" shall mean any corporation, trade or
Business that is, along with Borrower, a member of a
controlled group
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<PAGE> 49
of trades or businesses, or a member of any group of organizations,
within the meaning of Sections 414(b), (c), (m) or (o) of the Code, and
any regulations thereunder.
9.2 Costs/Service Charges. Borrower hereby agrees that it shall
reimburse Bank on demand, as part of Borrower's Obligations, for any and all
Costs and any amount not paid on demand shall bear interest at the Default Rate.
Borrower acknowledges that Bank will charge Borrower monthly service charges for
various services performed by Bank in connection with the Loan and/or any other
aspect of the relationship between Borrower and Bank, which charges shall be
such as are generally imposed on customers of Bank for similar services.
Borrower hereby agrees that Bank may charge such service charges against
Borrower's operating account at Bank, or in the absence of sufficient collected
balances in such operating account to satisfy such service charges, the amount
thereof shall become a Loan hereunder bearing interest at the Prime Interest
Rate.
9.3 Statement. Each statement of account by Bank delivered to Borrower
relating to Borrower's Liabilities shall be presumed correct and accurate and
shall constitute an account stated between Borrower and Bank unless Bank
subsequently corrects such statement of its own volition or, within thirty (30)
days after Borrower's receipt of said statement, Borrower delivers to Bank, by
registered or certified mail addressed to Bank at the address specified in
Section 9.4, written objection thereto specifying the error or errors, if any,
which Borrower asserts are contained in any such statement.
9.4 Notices. Any and all notices given in connection with this
Agreement shall be deemed adequately given only if in writing (which term
"writing", for all purposes of this Agreement and the other Loan Documents,
shall include original signatures and other writings transmitted by telecopy)
and addressed to the party for whom such notices are intended at the address set
forth below. All notices shall be sent by personal delivery, Federal Express or
other over-night messenger service, first class registered or certified mail,
postage prepaid, return receipt requested or by other means at least as fast and
reliable as first class mail. A written notice shall be deemed to have been
given to the recipient party on the earlier of (a) the date it shall be
delivered to the address required by this Agreement; (b) the date delivery shall
have been refused at the address required by this Agreement; or (c) with respect
to notices sent by mail, the date as of which the postal service shall have
indicated such notice to be undeliverable at the address required by this
Agreement. Any and all notices referred to in this Agreement, or which either
party desires to give to the other, shall be addressed as follows:
IF TO BORROWER: SPSS, Inc.
233 South Wacker Drive
11th Floor
Chicago, IL 60606
Attn: William R. Nelson
Telecopy: 312-329-3560
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<PAGE> 50
IF TO BANK: American National Bank and Trust Company of
Chicago
120 South LaSalle Street
Second Floor
Chicago, IL 60603
Attn: Erik J. Langeland
Telecopy: 312-661-3566
WITH A COPY TO: Sachnoff & Weaver, Ltd.
Suite 2900
30 South Wacker Drive
Chicago, Illinois 60606
Attn: Frank D. Ballantine, Esq.
Telecopy: 312-207-6400
The above addresses may be changed by notice of such change, mailed as provided
herein, to the last address designated.
9.5 Amendments and Waivers. This Agreement and the other Loan
Documents may not be modified, altered or amended except by an agreement in
writing signed by Borrower and Bank. Borrower expressly agrees that for purposes
of this Agreement and each and every other Loan Document: (i) this Agreement and
each and every other Loan Document shall be a "credit agreement" under the
Illinois Credit Agreements Act, 815 ILCS 160/1 et. seq. (the "ACT"); (ii) the
Act applies to this transaction including, but not limited to, the execution of
this Agreement and each and every other Loan Document; and (iii) any action on
or in any way related to this Agreement and each and every other Loan Document
shall be governed by the Act. Borrower may not sell, assign or transfer this
Agreement or the Other Agreements or any portion thereof, including, without
limitation, Borrower's rights, titles, interests, remedies, powers and/or duties
hereunder or thereunder. Borrower hereby consents to Bank's sale, assignment,
transfer or other disposition, at any time and from time to time hereafter, of
this Agreement or the Other Agreements, or of any portion thereof or
participation therein, including, without limitation, Bank's rights, titles,
interests, remedies, powers and/or duties.
9.6 No Implied Waiver; Remedies Cumulative. Bank's failure at any time
or times hereafter to require strict performance by Borrower of any provision of
this Agreement or any other Loan Document shall not waive, affect or diminish
any right of Bank thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Bank of an Event of Default or an
Unmatured Default by Borrower or any other Loan Party under this Agreement or
the Other Agreements shall not suspend, waive or affect any other Event of
Default or Unmatured Default by Borrower or any other Loan Party under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or the Other Agreements and no Event of Default or
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<PAGE> 51
Unmatured Default by Borrower or any other Loan Party under this Agreement or
the Other Agreements shall be deemed to have been suspended or waived by Bank
unless such suspension or waiver is by an instrument in writing signed by an
officer of Bank and directed to Borrower or such applicable other Loan Party
specifying such suspension or waiver.
9.7 Severability. If any provision (in whole or in part) of this
Agreement or the other Loan Documents or the application thereof to any person
or circumstance is held invalid or unenforceable, then such provision shall be
deemed modified, restricted, or reformulated to the extent and in the manner
necessary to render the same valid and enforceable, or shall be deemed excised
from this Agreement or the other Loan Document, as the case may require, and
this Agreement and such other Loan Document shall be construed and enforced to
the maximum extent permitted by law, as if such provision had been originally
incorporated herein as so modified, restricted, or reformulated or as if such
provision had not been originally incorporated herein or therein, as the case
may be. The parties further agree to seek a lawful substitute for any provision
found to be unlawful. If such modification, restriction or reformulation is not
reasonably possible, the remainder of this Agreement and the other Loan
Documents and the application of such provision to other persons or
circumstances will not be affected thereby and the provisions of this Agreement
and the other Loan Documents shall be severable in any such instance.
9.8 Incorporation of Other Loan Documents. The provisions of the Other
Agreements are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in this Agreement and except as otherwise provided in the
Other Agreements by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in the Other Agreements or the other Loan
Documents, Bank shall have the right to elect, in its sole and absolute
discretion, which provision shall govern and control. Except to the extent
provided to the contrary in this Agreement and in the other Loan Documents, no
termination or cancellation (regardless of cause or procedure) of this Agreement
or the Other Agreements shall in any way affect or impair the powers,
obligations, duties, rights and liabilities of Borrower or Bank in any way or
respect relating to (a) any transaction or event occurring prior to such
termination or cancellation, and/or (b) any of the undertakings, agreements,
covenants, warranties and representations of Borrower contained in this
Agreement or the Other Agreements. All such undertakings, agreements, covenants,
warranties and representations shall survive such termination or cancellation.
9.9 Acceptance. This Agreement and the other Loan Documents are
submitted by Borrower to Bank (for Bank's acceptance or rejection thereof) at
Bank's principal place of business as an offer by Borrower to borrow monies from
Bank now and from time to time hereafter and shall not be binding upon Bank or
become effective until and unless accepted by Bank, in writing, at said place of
business. If so accepted by Bank, this Agreement and the other Loan Documents
and the other Loan Documents shall be deemed to have been made at said place of
business.
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<PAGE> 52
9.10 Knowledge. As used herein the phrase "TO THE BEST OF BORROWER'S
KNOWLEDGE" or words of such import shall mean all knowledge, including, actual
knowledge and knowledge of matters which any reasonable person in such position
knew or should have known, of the respective officers, directors and managers of
Borrower.
9.11 Waiver by Borrower. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS
AGREEMENT OR REQUIRED BY LAW, BORROWER WAIVES (A) PRESENTMENT, DEMAND AND
PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT,
MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY BANK ON WHICH BORROWER MAY IN ANY WAY
BE LIABLE; (B) ALL RIGHTS TO NOTICE AND A HEARING PRIOR TO BANK'S TAKING
POSSESSION OR CONTROL OF, OR TO BANK REPLEVY, ATTACHMENT OR LEVY UPON THE
COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING BANK TO EXERCISE ANY OF BANK'S REMEDIES; AND (C) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.
9.12 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS HAVE
BEEN DELIVERED FOR ACCEPTANCE BY BANK IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS INCLUDING,
BUT NOT LIMITED TO, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY (A) IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS OVER
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED
TO THIS AGREEMENT; (B) IRREVOCABLY WAIVES THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT; (C)
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (D) AGREES NOT TO
INSTITUTE OR MAINTAIN ANY LEGAL ACTION OR PROCEEDING AGAINST BANK OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING
ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN
ONE LOCATED IN COOK COUNTY, ILLINOIS. NOTHING IN THIS SECTION SHALL AFFECT OR
IMPAIR BANK'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR
BANK'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
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<PAGE> 53
9.13 Waiver of Marshaling. All rights of marshaling of assets of
Borrower, including any such right with respect to the Pledged Property, are
hereby waived by Borrower.
9.14 Limitation by Law. All rights, remedies and powers provided in
this Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable, in whole or in part,
or not entitled to be recorded, registered or filed under the provisions of any
applicable law.
9.15 Survival of Representations and Warranties. All representations
and warranties contained in this Agreement or made in writing by Borrower in
connection herewith shall survive the execution and delivery of this Agreement
and repayment of Borrower's Liabilities. Any investigation by Bank shall not
diminish in any respect whatsoever its rights to rely on such representations
and warranties.
9.16 Service of Process. Borrower hereby irrevocably appoints and
designates CT Corporation System, Inc., 208 S. LaSalle Street, Chicago, IL 60604
as its true and lawful attorney-in-fact and duly authorized agent for service of
legal process and agrees that service of such process upon such agent and
attorney-in- fact shall constitute personal service of such process upon
Borrower.
9.17 Representation by Counsel. Borrower hereby represents that it has
been represented by competent counsel of its choice in the negotiation and
execution of this Agreement and the other Loan Documents; that it has read and
fully understood the terms hereof; Borrower and its counsel have been afforded
an opportunity to review, negotiate and modify the terms of this Agreement, and
that it intends to be bound hereby. In accordance with the foregoing, the
general rule of construction to the effect that any ambiguities in a contract
are to be resolved against the party drafting the contract shall not be employed
in the construction and interpretation of this Agreement.
9.18 Release of Bank. Borrower releases Bank from any and all causes
of action or claims which Borrower may now or hereafter have for any asserted
loss or damage to Borrower claimed to be caused by or arising from any act or
omission to act on the part of Bank, its officers, agents or employees, except
for willful misconduct or gross negligence.
9.19 Invalidated Payments. To the extent that either Bank receives any
payment on account of Borrower's Liabilities, and any such payment(s) and/or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other Person under any bankruptcy act, state or
federal law, common law or equitable cause, then, to the extent of such
payment(s) or proceeds received, Borrower's Liabilities or part thereof intended
to be satisfied shall be revived and continue in full force and effect, as if
such
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<PAGE> 54
payment(s) and/or proceeds had not been received by Bank and applied on account
of Borrower's Liabilities.
9.20 Designated Person. Until Bank is notified by Borrower to the
contrary in accordance with Section 9.4, the signature upon this Agreement or
upon any of the Other Agreements of any partner, manager, employee or agent of
Borrower, or of any other Person designated in writing to Bank by any of the
foregoing, or of a "DESIGNATED PERSON" (as that term is defined in Borrower's
Secretary's Certificate of even date herewith, constituting one of the Other
Agreements) shall bind Borrower and be deemed to be the duly authorized act of
Borrower.
9.21 Headings. The descriptive headings of the various provisions of
this Agreement and the other Loan Documents are inserted for convenience of
reference only and shall not be deemed to affect the meaning or construction of
any of the provisions hereof.
9.22 Counterparts. This Agreement and the other Loan Documents may be
executed in any number of counterparts, and by the different parties hereto and
thereto on the same or separate counterparts, each of which when so executed and
delivered shall be deemed to be an original; all the counterparts for each such
Loan Document shall together constitute one and the same agreement.
9.23 Fax Execution. For purposes of negotiating and concluding this
Agreement and the Loan Documents (including any subsequent amendments thereto),
any signed document transmitted by facsimile machine ("FAX") shall be treated in
all manner and respects as an original document, except that delivery by FAX
shall not constitute delivery for the purposes of notices delivered pursuant to
Section 9.4 above. The original signature of any party that is transmitted by
FAX shall be considered for these purposes as an original signature. Any
document delivered by FAX shall be considered to have the same binding legal
effect as an original document, provided that an original of the faxed document
was mailed by certified or registered first class US Mail or personally
delivered to the recipient. At the request of either party, any FAX document
subject to this Agreement shall be re-executed by both parties in an original
form. The undersigned parties hereby agree that neither shall raise the use of
the FAX or the fact that any signature or document was transmitted or
communicated through the use of a FAX as a defense to the formation of this
Agreement or any other Loan Document.
9.24 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Bank, Borrower and their respective successors and assigns
(except as otherwise expressly provided herein) and nothing contained herein
shall be deemed to confer upon any Person other than Borrower and its successors
and assigns any right to insist on or to enforce the performance or observance
of any of the obligations contained herein. All conditions to the obligations of
the Bank to make the Loans hereunder are imposed solely and exclusively for the
benefit of the Bank and its respective successors and assigns and no other
Person shall have standing to require satisfaction of such conditions in
accordance
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<PAGE> 55
with their terms and no other Persons shall under any circumstances be deemed to
be a beneficiary of such conditions.
9.25 Domicile of Loans. Bank may make, maintain or transfer any of its
Loans hereunder to, or for the account of, any branch office, subsidiary or
affiliate of Bank.
9.26 Entire Agreement. This Agreement and the other Loan Documents
constitute the entire agreement of Borrower and Bank with respect to the subject
matter hereof and supersede all prior and contemporaneous negotiations,
agreements, understandings and communications. No representation, understanding,
promise or condition concerning the subject matter hereof shall be binding upon
Bank unless expressed herein or therein. No course of dealing, course or
performance, trade usage or parole evidence of any nature, whether based on
actions, omissions or circumstances occurring or existing heretofore or
hereafter, may be used in any way to alter or supplement the terms hereof.
9.27 Construction. In this Agreement, unless the context otherwise
clearly requires, references to the plural include the singular, the singular
the plural, and the part the whole; the neuter case includes the masculine and
feminine cases; and "or" is not exclusive. In this Agreement, any references to
property (and similar terms) include an interest in such property (or other item
referred to); "include," "includes," "including" and similar terms are not
limiting; and "hereof," "herein," "hereunder" and similar terms refer to this
Agreement as a whole and not to any particular provision; and "expenses,"
"costs," "out-of-pocket expenses" and similar terms include the charges of
in-house counsel, auditors and other professionals of the relevant Person to the
extent that such amounts are routinely identified and charged under such
Person's cost accounting system. Section and other references in this Agreement
are to this Agreement unless otherwise specified.
9.28 Successors and Assigns. This Agreement shall be binding upon
Borrower and its successors and assigns, and shall inure to the benefit of and
be enforceable by Bank and its successors and assigns. Without limitation of the
foregoing, Bank (and any successive assignee or transferee) from time to time
may assign or otherwise transfer all or any portion of its rights or obligations
under the Loan Documents (including all or any portion of any commitment to
extend credit), or any Borrower's Liabilities, to any other Person, and such
(including any Borrower's Liabilities resulting from extension of credit by such
other Person under or in connection with the Loan Documents) shall be and remain
Borrowers entitled to the benefit of this Agreement, and to the extent of its
interest in such Borrowers such other Person shall be vested with all the
benefits in respect thereof granted to Bank in this Agreement or otherwise.
9.29 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY LAW, BORROWER
AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER AGREEMENTS OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS
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OF EITHER PARTY IN CONNECTION HEREWITH. BORROWER HEREBY EXPRESSLY ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR BANK TO MAKE THE LOAN.
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<PAGE> 57
IN WITNESS WHEREOF, this Loan Agreement (Acquisition Credit Line) has
been duly executed and dated for reference purposes only as of June 1, 1999.
BORROWER:
SPSS, INC.
a Delaware corporation
By:
----------------------------------
Title:
BANK:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By:
----------------------------------
Title:
<PAGE> 1
EX-10.2
FIRST AMENDMENT
TO
LOAN AGREEMENT
SPSS, INC.
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT") is dated for
reference purposes only as of June 1, 1999, by and between American National
Bank and Trust Company of Chicago, a national banking association ("BANK") and
SPSS, Inc., a Delaware corporation ("BORROWER").
RECITALS:
A. Bank has made financial accommodations to Borrower evidenced by that
certain Loan Agreement dated as of May 29, 1998 (the "EXISTING LOAN AGREEMENT").
B. Borrower has requested that Bank make additional financial
accommodations to Borrower evidenced by that certain Loan Agreement (Acquisition
Line of Credit) dated for reference purposes only as of June 1, 1999 (the "LINE
OF CREDIT AGREEMENT"), pursuant to which Bank shall make available to Borrower a
credit facility in the amount of $10,000,000 to be used for the acquisition of
Assets.
C. It is a condition precedent to Bank's obligation to make the credit
accommodations to Borrower under the terms of the Line of Credit Agreement that
the obligations and liabilities of Borrower under the credit facility evidenced
by the Existing Loan Agreement and the credit facility evidenced by the Line of
Credit Agreement be cross defaulted.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Incorporation of Recitals. Borrower hereby represents and warrants
to Bank that the foregoing Recitals are (a) true and accurate, (b) an integral
part of this Amendment, and (c) hereby incorporated into this Amendment and made
a part hereof. All terms capitalized but not expressly defined herein shall, for
purposes hereof, have the respective meanings set forth in the Existing Loan
Agreement.
2. Amendment to Existing Loan Agreement.
(a) Section 1.1 of the Existing Loan Agreement is hereby amended by
adding the following definitions:
<PAGE> 2
"LINE OF CREDIT AGREEMENT": THE MEANING ASCRIBED TO THIS TERM
IN RECITAL B OF THE FIRST AMENDMENT TO THIS AGREEMENT.
"LINE OF CREDIT DOCUMENTS": THE LINE OF CREDIT AGREEMENT AND
ALL INSTRUMENTS, AGREEMENTS, AND DOCUMENTS EXECUTED OR
DELIVERED BY BORROWER TO BANK IN CONNECTION THEREWITH, AND ALL
AMENDMENTS, MODIFICATIONS, RENEWALS, REPLACEMENTS AND
SUPPLEMENTS THERETO OR THEREOF, WHETHER NOW EXISTING OR
CONTEMPLATED OR HEREAFTER ENTERED INTO OR DELIVERED, INCLUDING
ANY MODIFICATIONS PURSUANT TO WHICH BANK SHALL MAKE ADDITIONAL
CREDIT ACCOMMODATIONS OR AMENDING THE NATURE OR TERM OF THE
CREDIT FACILITIES PROVIDED THEREUNDER.
(b) The following is added as Section 6.7:
6.7 PUBLIC OFFERING. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, BORROWER SHALL HAVE THE RIGHT TO PUBLICLY
OFFER AND SELL EQUITY OR DEBT SECURITIES OF BORROWER UNDER THE
TERMS AND CONDITIONS SET FORTH IN THE LINE OF CREDIT AGREEMENT.
(c) The following is added as Section 7.1(q):
(Q) AN EVENT OF DEFAULT OCCURS UNDER THE TERMS OF THE LINE OF
CREDIT DOCUMENTS.
3. Expenses. Upon demand by Bank therefor, Borrower shall
reimburse Bank for all reasonable costs, fees and expenses incurred by Bank or
for which Bank becomes obligated, in connection with the negotiation,
preparation and conclusion of this Amendment, including without limitation,
reasonable attorney's fees, costs and expenses, search fees, title insurance
policy fees, costs and expenses, filing and recording fees and all taxes payable
in connection with this Amendment.
4. Waiver of Claims. Borrower hereby acknowledges, agrees and
affirms that it possesses no claims, defenses, offsets, recoupment or
counterclaims of any kind or nature against or with respect to the enforcement
of the Loan Agreement or any other Loan Document or any amendments thereto
(collectively, the "CLAIMS"), nor does Borrower now have knowledge of any facts
that would or might give rise to any Claims. If facts now exist which would or
could give rise to any Claim against or with respect to the enforcement of the
Loan Agreement or any other Loan Document, as amended by the amendments thereto,
Borrower hereby unconditionally, irrevocably and unequivocally waives and fully
releases any and all such Claims as if such Claims were the subject of a
lawsuit, adjudicated to final judgment from which no appeal could be taken and
therein dismissed with prejudice.
2
<PAGE> 3
5. Amendment Supplementary. This Amendment is supplementary to the
Existing Loan Agreement and the other Loan Documents, as amended by the
amendments thereto. All of the provisions of the Loan Documents, including
without limitation, the right to declare principal and accrued interest due for
any cause specifically in the Loan Documents, shall remain in full force and
effect except as herein or concurrently herewith expressly modified. The Loan
Documents and all rights and powers created thereby and thereunder are in all
respects ratified and confirmed. From and after the date hereof, the Existing
Loan Agreement shall be deemed to be amended and modified as herein provided,
but, except as so amended and modified, the Existing Loan Agreement shall
continue in full force and effect and the Existing Loan Agreement and this
Amendment shall be read, taken and construed as one and the same instrument. On
and after the date hereof, the term "LOAN AGREEMENT" and all references to
amendments thereof as used in the Note and the other Loan Documents shall mean
the Existing Loan Agreement as amended hereby. Nothing set forth in this
Amendment shall be deemed to be an agreement by Bank to make any other financial
accommodation to Borrower.
6. Jurisdictions. THIS AMENDMENT HAS BEEN DELIVERED FOR ACCEPTANCE BY
BANK IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE
STATE OF ILLINOIS. BORROWER HEREBY (i) IRREVOCABLY SUBMITS, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN CHICAGO, ILLINOIS, OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO THIS AMENDMENT; (ii) IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT; (iii) AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (iv) TO THE EXTENT
PERMITTED BY APPLICABLE LAW, BORROWER AGREES NOT TO INSTITUTE ANY LEGAL ACTION
OR PROCEEDING AGAINST BANK OR ANY OF BANK'S DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
AMENDMENT IN ANY COURT OTHER THAN ANY STATE OR FEDERAL COURT LOCATED IN COOK
COUNTY, ILLINOIS. NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR BANK'S RIGHT TO
SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR BANK'S RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION.
3
<PAGE> 4
7. Trial by Jury. TO THE EXTENT PERMITTED BY LAW, BORROWER AND BANK
EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AMENDMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY IN CONNECTION
HEREWITH. BORROWER HEREBY EXPRESSLY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT FOR BANK TO MAKE THE LOANS.
8. Representations. This Amendment shall be binding upon and inure to
the benefit of the parties hereby and their respective successors and assigns.
To induce Bank to enter into this Amendment, Borrower hereby represents and
warrants to Bank that:
(a) the execution and delivery of this Amendment, and the
performance by Borrower of its obligations under this Amendment and the
other Loan Documents as amended, are within Borrower's corporate
powers, have been duly authorized by all necessary corporate action,
have received all necessary governmental approval (if any shall be
required) and do not and will not contravene or conflict with any
provisions of law or the Articles of Incorporation or By-Laws of
Borrower or of any other agreement binding upon Borrower;
(b) this Amendment, and each other instrument executed by Borrower
concurrently herewith, is the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement thereof may be subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, and to the
general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law);
(c) all of the representations and warranties of Borrower made in
the Loan Documents are true and correct as of the date hereof, except
where such representation or warranty specifically relates to an
earlier date; and
(d) As of the date hereof no Event of Default or Unmatured Default
under the Loan Documents exists.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Loan
Agreement dated for reference purposes only as of June 1, 1999.
BORROWER:
SPSS, Inc.
By:
-----------------------------------------
Title:
BANK:
American National Bank and Trust Company of
Chicago
By:
-----------------------------------------
Title:
5
<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 (nos. 333-25869,
33-73130, 33-80799, 33-73120, 333-63167 and 33-74402), on Form S-3 (nos.
333-41207, 333-21025, 333-10423) and on Form S-4 (no. 333-15427) of SPSS Inc.,
we acknowledge our awareness of the use therein of our report dated November 2,
1999 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
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/ KPMG LLP
Chicago, Illinois
November 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPSS INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1999 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 0 12,075
<SECURITIES> 0 0
<RECEIVABLES> 0 39,784
<ALLOWANCES> 0 1,939
<INVENTORY> 0 3,019
<CURRENT-ASSETS> 0 58,042
<PP&E> 0 42,775
<DEPRECIATION> 0 25,781
<TOTAL-ASSETS> 0 95,099
<CURRENT-LIABILITIES> 0 37,104
<BONDS> 0 0
0 0
0 0
<COMMON> 0 91
<OTHER-SE> 0 55,037
<TOTAL-LIABILITY-AND-EQUITY> 0 95,099
<SALES> 34,265 100,126
<TOTAL-REVENUES> 34,265 100,126
<CGS> 3,253 9,062
<TOTAL-COSTS> 3,253 9,062
<OTHER-EXPENSES> 24,873 74,242
<LOSS-PROVISION> 240 794
<INTEREST-EXPENSE> 403 735
<INCOME-PRETAX> 6,399 16,496
<INCOME-TAX> 2,195 5,658
<INCOME-CONTINUING> 4,204 10,838
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,204 10,838
<EPS-BASIC> 0.46 1.20
<EPS-DILUTED> 0.43 1.13
</TABLE>
