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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
(AS AMENDED FEBRUARY 14, 1996)
[X] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Act of
1934 for fiscal year ended
DECEMBER 31, 1994
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES ACT
OF 1934
Commission File Number 0-4882
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Colorado 84-0581776
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State (or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1801 California Street, Denver, Colorado 80202
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(Address of principal executive offices including zip code)
(303) 292-1111
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(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Common Stock,
no par value
Name of each exchange on which registered: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ ] Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy of information statements
incorporated by reference in Part III of this Form 10-K or any amendment of
this Form 10-K. [X]
The approximate market value of stock held by non-affiliates is $20,100,707
based upon 5,743,059 shares held by such persons and the close price of $3.50
on January 31, 1996. The number of shares outstanding of the Registrant's no
par value common stock at January 31, 1996 was 8,276,545.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A in connection with the annual meeting of
shareholders:
Part III, Items 10, 11, 12 and 13 of this report.
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PART I
ITEM 1. BUSINESS
The Company
GENERAL
Scientific Software-Intercomp, Inc. (the "Company") develops and
markets sophisticated software for the development and production and pipeline
and surface facilities areas of the worldwide oil and gas industry and for
graphical user interface applications. The Company's computer-aided production
("CAP") software provides oil and gas industry professionals with a
comprehensive set of powerful, cost-effective tools that describe, simulate and
predict oil and gas production from reservoirs under alternative simulated
development plans. These predictions are used to determine optimal development
plans for maximizing recoverable reserves, thereby reducing oil and gas finding
costs per equivalent barrel. The Company's pipeline and surface facilities
software simulates and monitors oil and gas pipelines and surface facilities
for various uses including engineering design, leak detection, optimization of
transportation efficiency and pipeline dispatcher training. Its graphical user
interface ("GUI") software, Sammi, facilitates the creation of customized
graphical interfaces and the display of large quantities of static and real
time data from multiple sources primarily for the oil and gas, aerospace,
process control and manufacturing industries. The Company provides consulting
and technical support services in each of these areas.
Since its formation in 1968, the Company believes that it has
established a reputation for technical excellence of its software products and
consulting services in reservoir description, simulation and monitoring. In
the late 1980s, the Company recognized the need to provide an integrated system
of CAP products that could be more broadly utilized by the oil and gas
industry. Also, the availability of increasingly powerful and affordable
computers enables the Company's CAP software products to operate on UNIX-based
workstations and personal computers, and more recently on DOS/Windows-based
personal computers, with capabilities historically available only on mainframe
computers. The Company has developed Petroleum WorkBench, an integrated
software system that allows effective access to five of the Company's high
technology stand-alone CAP products. It is expected that future versions of
Petroleum WorkBench will increase the technical breadth of this software
package. These developments have had the effect of significantly expanding the
market for the Company's CAP software products from its historical market of
research experts and technical specialists using mainframe computers to include
non-expert industry professionals, such as petroleum engineers and geologists,
using workstations or personal computers. These developments have also
increased the functionality and ease of use of the Company's CAP products to
the oil and gas industry by lowering hardware costs and reducing the need to
utilize these experts in order to take advantage of the Company's technology.
The Company's objective is to be a leading provider of high technology
computing solutions and quality consulting services in each of its industry
areas. The Company's long range goal is to offer a fully integrated set of
software products that will permit non-expert professionals to describe,
simulate, monitor and manage the complete range of reservoir development and
production activities and oil and gas transmission and storage activities of
oil and gas fields from personal computers. The Company believes that its
current products encompass nearly all technologies necessary to accomplish its
objective of integrated computer-aided field management capabilities.
The Company's executive offices are located at 1801 California Street,
Suite 295, Denver, Colorado 80202 and its telephone number is (303) 292-1111.
COMPLETION OF PUBLIC OFFERING OF COMMON STOCK
On June 30, 1994, the Company sold 2.0 million newly issued shares of
common stock in a public offering from which the Company received net proceeds
of $8.1 million, net of related costs of
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approximately $270,000. The Company used the proceeds from the public offering
to repay its bank indebtedness of $5.1 million, to reduce accounts payable, and
to increase working capital.
In July 1994 the underwriters of the public offering exercised an
overallotment option, resulting in the sale by the Company of 383,000
additional newly issued shares of common stock, from which the Company received
net proceeds of approximately $1.6 million.
Simultaneously with completion of the public offering, Renaissance
Capital Partners II, Ltd. ("Renaissance") converted $1.75 million in principal
amount of convertible debentures (see Note 3 to Consolidated Financial
Statements) into 653,846 shares of common stock, which Renaissance sold in the
public offering. As a result of the Renaissance conversion, the Company
reduced paid-in capital by $119,000 for unamortized debt issuance costs related
to the converted debentures.
HISTORY
The Company, a Colorado corporation, was formed in 1968 and, since
that time, has developed and marketed sophisticated applications software
together with computer-related consulting services, principally for reservoir
description and reservoir and pipeline simulation. These technologically
complex products have been, and continue to be, sold primarily to major
multinational and large independent oil companies for use by research experts
and technical specialists. The Company believes that it has established a
reputation for technical excellence of its software products and consulting
services in reservoir description, simulation and monitoring.
In June 1983, the Company acquired Intercomp Resource Development and
Engineering, Inc. ("IRDE"), which had developed additional software products
for reservoir simulation. In January 1984, the Company acquired CRC Bethany
International, Inc. ("CRC"), a wholly owned subsidiary of Crutcher Resources
Corporation. The acquisition of CRC provided the Company with software systems
that modeled real-time data collected and stored by Supervisory Control and
Data Acquisition ("SCADA") systems installed on oil and gas pipelines.
Several trends, including lower oil and gas prices, are driving the
oil and gas industry to reduce the risk and cost, and to increase the
effectiveness, of development and production activities. This has led many
energy companies to reduce budgets, including a decline in the employment of
research and technical experts in the various petroleum industry disciplines,
in favor of non-expert industry professionals. The Company recognized the need
to provide an integrated system of CAP products for use by these non-experts.
By 1991, the Company had developed Petroleum WorkBench which provides the
industry with broader access to sophisticated engineering solutions.
Management believes that these developments, coupled with the availability of
increasingly powerful and affordable workstations and personal computers, has
opened a significant market for Petroleum WorkBench.
STRATEGY
The Company's strategy is to provide complete, high technology,
computing solutions and other services for the development and production of
oil and gas reservoirs and the pipeline transportation of oil and gas. The
Company executes this strategy in the following ways:
INTEGRATION OF HIGH TECHNOLOGY PRODUCTS. Since its formation, the
Company has developed a series of software products designed to describe,
simulate and monitor oil and gas reservoirs, simulate and monitor oil and gas
pipelines and surface facilities, and develop graphical user interfaces. These
products cover nearly all technologies needed to simulate, study, optimally
develop and monitor oil and gas reservoirs and oil and gas pipelines. These
products also include nearly all facets of technology necessary for field
management and field monitoring in the oil and gas industry. The Company has
begun integrating these products, which increase the functionality and ease of
use of the high technology solutions provided by the Company's products.
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The initial integrated product, Petroleum WorkBench, includes five of
the Company's major stand-alone CAP products. It is the Company's intention to
continue integrating its products until the full breadth of the Company's
technology is included within one integrated, easily accessible product that
will allow a single non-expert professional to work in multiple disciplines,
using the same database and applications software.
EXPANSION OF MARKETING EFFORTS AND CUSTOMER BASE. The Company
believes that, by continuing the integration and accessibility of its software,
the market for its CAP software and related consulting services can be expanded
to increase sales to non-expert industry professionals. The Company intends to
intensify its marketing efforts to this larger market, in addition to
continuing to market its products to its established customer base of expert
users generally employed by major multinational and large independent oil
companies.
The Company also intends to expand its customer base in the pipeline
and surface facilities market through the testing and possible introduction in
1996 of a new leak detection product for smaller pipelines. Finally, the
Company intends to intensify its marketing efforts for Sammi to customers
outside the oil and gas industry.
COMPLETE RANGE OF SERVICES. The Company believes that offering a
complete range of consulting and training services is a critical component of
its business and it intends to continue enhancing and expanding the range of
consulting services to meet the growing requirements of its customers. The
Company also believes that providing sophisticated and comprehensive consulting
services promotes and advances acceptance and awareness of its products.
TECHNICAL LEADERSHIP. The Company intends to continue developing new
software products and enhancing existing software products, both internally and
through jointly-funded development efforts, to respond to developments by
competitors and changes in technology. The Company also intends to continue to
attract and retain highly-skilled professionals in computer software
programming and various petroleum industry disciplines in order to provide for
the development and enhancement of its products and services. Finally, the
Company intends to continue to evaluate, and, if attractive, acquire or license
products and technologies which it believes are important to achieving its
strategy.
PRODUCTS, SERVICES AND CUSTOMERS
CAP PRODUCTS AND SERVICES
The Company's CAP products and related consulting services address the
development and production areas of reservoir description and simulation. The
Company's reservoir description products provide for the analysis of well logs
and core and 3-D seismic data, analysis of pressure and performance of wells
and mapping and analysis of the basic geology and reservoir rock parameters.
Reservoir description data is then input into mathematical reservoir simulators
offered by the Company to predict future production performance under various
simulated development scenarios after matching historical performance. Use of
reservoir simulation provides more accurate forecasts of oil and gas recovery
and assists in the determination of how reservoirs should be optimally
developed. The primary CAP products being marketed by the Company are:
LOGCALC (well log analysis). Used to calculate rock and fluid
properties around a wellbore from well logs in order to determine the presence
and quantities of hydrocarbons.
INTERPRET/2 (well test analysis). Used to analyze pressure and flow
tests of a well to predict reservoir flow capability and other formation
parameters such as the location of barriers in the reservoir.
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WPM (well productivity model). Used to analyze and simulate the
productivity of a well under various alternative completion practices, such as
hydraulic fracturing and artificial lift, so that the optimum economics for the
well can be achieved.
PVT (pressure-volume-temperature correlations for hydrocarbon fluids).
Used to analyze laboratory tests of oil and gas samples gathered from a
reservoir to determine the accuracy of the data and to construct equations for
use of the data.
SimBest II (reservoir simulator for oil, water and gas). Used to
model the behavior of an oil and gas reservoir in order to predict the results
of various types of reservoir development options, such as in-fill drilling,
water floods and gas injection, in order to determine the optimal development
plan for the reservoir. The simulator calculates the flow of oil, water and
gas in three dimensions through a complex reservoir, including the flow through
the wellbores to the surface.
COMP III, COMP 4 (compositional reservoir simulators for oil, water
and gas). Used when the complex fluid behavior in the reservoir requires that
oil and gas be defined more precisely by their molecular components such as
methane, ethane and propane. This simulator is most often used to simulate and
determine the optimum development of gas condensate reservoirs and oil
reservoirs undergoing high pressure gas injection.
THERM (thermal reservoir simulator). Used when modeling thermal
enhanced oil recovery processes such as steam injection and in-situ combustion
and is the most complex simulator because it also includes mathematical
simulation of such thermodynamic factors as combustion reaction kinetics. This
simulator is used to predict optimum recovery using thermal enhanced recovery
processes for reservoir development.
SimEase (interactive pre/post processor for the Company's reservoir
simulators). Used to prepare data easily for input to the Company's reservoir
simulators and to view the results in color. This software includes such
displays as color 3-D and 4-D (showing the passage of time) maps and simulated
color visualizations of fluids flowing through the reservoir.
AHM (adaptive history matching system for use with reservoir
simulators). Used to help match a reservoir's historical production of oil,
gas and water at various pressures. A final calibrated (history matched) model
can then be used to simulate future production under various hypothetical
operating scenarios.
PETROLEUM WORKBENCH (an integrated set of high technology products for
reservoir management). This integrated set of products is used to perform
reservoir description, simulation and monitoring on a workstation or personal
computer. Either an expert or non-expert professional can use this integrated
set of products to select optimum reservoir development plans using the highest
technology more quickly and efficiently than with non-integrated and
individually designed products. The current version of Petroleum WorkBench
includes Logcalc, Interpret/2, SimBest II, parts of SimEase and PDA (the
Company's production data analysis system), plus various display capabilities
including mapping and cross-sections. The Company's strategy for development
of Petroleum WorkBench includes making the Company's technology accessible to a
much larger market of non-expert professionals. Petroleum WorkBench is also a
first step toward the future integration of the Company's other products to
encompass all technologies necessary to develop and manage oil and gas fields.
Petroleum WorkBench was originally developed for the UNIX operating
system because of the size and complexity of the code, the graphics and the
need for networking with other desktop computers. These capabilities are now
available on the existing DOS/Windows operating systems.
In addition, the Company has a number of other CAP products including
PDA (production data analysis), PROBE (probability analysis for geoscientists),
PERMPROBE (statistical reservoir
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permeability analysis), GEOPROBE (statistical reservoir geology analysis),
EORPM (enhanced oil recovery prediction models), CHEMFLOOD (chemical flooding
reservoir simulator), N-Hance (enhanced recovery reservoir simulator), OMEGA
(gas storage reservoir simulator), OMNET (reservoir simulator for multiple gas
storage reservoirs and pipelines), MATBAL (material balance reservoir
simulator), VFLOW (wellbore vertical flow simulator), IPS (investment planning
system), and GUESS (general uncertainty economic simulator).
The Company also provides consulting, including training, on the use
and actual application of the Company's products and technology to a client's
reservoir management problems. The Company provides consulting services in the
areas of geophysics, geology, petrophysics, reservoir engineering and
production and completion engineering. The Company has designed cost-effective
exploitation methods, production and injection operations, and enhanced oil
recovery schemes. The Company also has performed reserve evaluations and
special simulation techniques for artificial lift, horizontal drilling and
massive hydraulic fracturing. In addition, the Company has designed
development plans of an entire oil field, including the operation and
monitoring of well and reservoir performance.
Customers include major international oil companies such as Amoco,
British Petroleum, Mobil Oil, Phillips Petroleum, Royal Dutch Shell, Texaco and
Unocal; independent oil and gas companies such as Amerada Hess, Meridian Oil
and Pennzoil; and domestic and foreign governmental agencies and
government-sponsored companies such as the United States Department of Energy
and PEMEX.
PIPELINE AND SURFACE FACILITIES PRODUCTS, SERVICES AND CUSTOMERS
The Company's software and related services for the pipeline and
surface facilities area simulate and monitor oil and gas pipelines and surface
facilities, such as compressor stations, tank farms and pumping stations, for
uses including engineering design, leak detection, optimization of
transportation efficiency and pipeline dispatcher training. The systems are
used in either an "on-line" or "off-line" mode. In the on-line mode, data is
continuously collected by a SCADA system from various points along a pipeline,
or from surface facilities, and used by the software for simulation and
monitoring purposes. In the off-line mode, real-time data is not used and is
replaced by user-provided data for engineering or training purposes. The
Company's historical focus in this area has been on providing simulation and
monitoring software to operators of large and complex pipelines and surface
facilities. The current focus of the Company in this area is to develop and
market a standardized and modular system that is cost-effective for smaller
pipeline systems and to expand the types of facilities that utilize these
products. The primary software products being marketed by the Company in this
area include:
TGNET (transient gas pipeline network simulator). Used off-line by
pipeline engineers to study portions of gas pipeline networks in order to
simulate the design and operation of the pipeline system.
TLNET (transient liquid pipeline network simulator). Like TGNET, used
off-line for liquid pipeline design and operations studies.
MNET (multiphase pipeline network steady state simulator). Like
TGNET, used off-line for pipeline design and operations studies for the
simultaneous flow of oil, gas and/or water.
INTERACT (interactive pipeline network simulators). Used by pipeline
engineers to plan future flows and to train pipeline dispatchers. INTERACT is
comprised of three separate software products for gas, liquid and multiphase
pipeline flow and can be operated either on-line using real-time data or
off-line using historical pipeline operating data.
PIPELINE MONITOR (leak detection system for intermediate complexity
pipeline networks). Used continuously by the pipeline operating staff to
detect leaks and to manage pipeline operations with versions available for both
oil and gas pipelines.
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ON-LINE SYSTEM (pipeline leak detection and operating efficiency
software modules). A series of software modules that can be integrated to
provide leak detection plus additional options such as product batch tracking
in liquid systems and compressor utilization for complex gas pipeline networks.
The software operates continuously, often with full backup computers, to manage
pipeline operations.
In addition to the products described above, the Company has various
specialty software products such as HOT (simulation of heated pipelines) and
DYNAFLEX (pipeline stress analysis).
The Company has also developed a prototype system for low cost leak
detection that can be easily installed on a single pipe. Offline testing with
real data has been successful and field testing is expected in the first half
of 1996. If successful, this system will address the much larger market of all
pipeline segments.
The Company also provides consulting, including training, as required
by customers who use the technology and/or the products. Training is provided
for both the use of the Company's software and to train dispatchers to handle
pipeline operational problems such as leaks and product batch tracking. A
typical consulting project would be to configure the customer's actual pipeline
and surface facilities field data that describes the pipeline network, ensure
that the data accurately describes the field operations and then install and
test the data running in configuration with the Company's product at the
customer's site.
Customers in this area include companies such as Tenneco Gas, Brooklyn
Union Gas, Alyeska Pipeline, Pacific Gas & Electric and Statoil; SCADA vendors
such as Valmet Automation and Asea Brown Boveri (ABB); and domestic and foreign
governmental agencies and government-sponsored companies such as the United
States Department of Transportation and Saudi ARAMCO.
GRAPHICAL USER INTERFACE PRODUCTS, SERVICES AND CUSTOMERS
The Company's graphical user interface ("GUI") software product,
Sammi, facilitates the creation of customized graphical interfaces and displays
large quantities of static and real-time data from multiple sources. Sammi
permits the creation of these customized graphical interfaces without the need
for extensive software code development. The base technology for Sammi was
originally designed to provide for the development of real-time pipeline
displays but was found to have major applications in other markets such as
process control, transportation, aerospace and manufacturing. The Company's
main products in this area are:
Sammi (a GUI software toolkit). Used to develop color display screens
and to connect the graphical image on the screen with a static or real-time
data stream. In operational mode, Sammi processes and displays the data as
requested by the operator.
SDK (Sammi development kit). An open version of Sammi that enables
users to input graphical applications from other tool kits and to develop their
own graphic applications.
GUI consulting is focused primarily on building graphical display
items to meet customer needs for specific applications and in assisting the
customer in using the Company's GUI products. The Company also provides
training schools in the use of its products.
Sammi is used in the aerospace, process control-manufacturing, and
transportation industries and is suitable for other applications requiring
graphical display of large quantities of mission-critical real-time or
database-resident information. Kinesix' major customers include NASA sites
(Johnson Space Center, Goddard, and Marshall), the U.S. Air Force, Loral,
Siemens, ABB, IBM, Hughes, Arco, Bristol Babcock, and Harris.
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RESEARCH AND DEVELOPMENT
The Company is committed to the continued enhancement of its petroleum
industry and GUI software and to the development of software and services
having new or related applications. The Company's objective is to develop
products that are considered to be high quality and technically advanced and
that are capable of dominating their major market areas.
In the CAP area, enhancement of Petroleum WorkBench will continue over
the next year with a new reservoir description module, addition of the Well
Productivity Model and updates to the other modules. A new version of SimBest
is also expected to be released in 1996. Further, enhancements are also
expected to most other CAP stand-alone products.
In the pipeline and surface facilities area, new versions of all
off-line products are expected to be released in 1996 with easier-to-use
graphical interfaces. The Company also is developing new software that is
expected to assist in the reduction of the cost of gas used for compression,
one of the major operating costs of gas pipelines. Additional enhancements are
also expected to all the other stand-alone products in this area.
In the GUI area, Kinesix announced its release of Sammi 3.0 in April
1994 and introduced an advanced tool, the Sammi Development Kit (SDK) at the
same time. For the first time, Sammi's users were able to import third party
or custom graphics code into Sammi's high performance run-time framework.
Plans for 1996 include a new Format Editor and Microsoft Windows (NT and Win95)
versions of Sammi.
During the years ended December 31, 1994, 1993 and 1992, the Company
spent $6.1 million, $5.5 million, and $6.9 million, respectively, for
development of new products and the improvement and enhancement of existing
products. The number of employees and consultants engaged on a full or part
time basis in software development was 62 in 1994, 75 in 1993, and 73 in 1992.
Management believes that the major development costs for the initial
versions of the Company's new products have been incurred and the Company is
well positioned to capitalize on the markets for these products.
MARKETING, SALES AND CUSTOMER SUPPORT
MARKETING STRATEGY
The Company's marketing strategy is to create customer awareness of
existing and new products and to publicize its technical expertise through
participation at technical meetings and conferences, publication of scientific
papers, presentation of technical proposals to existing and potential
customers, and sponsorship of product focus groups. The Company also
continually surveys the market and analyzes the products and services offered
by the Company and its competitors in order to identify new developments,
market trends and changing preferences and requirements of the market place.
The Company will develop marketing plans specifically tailored for its products
that identify the appropriate distribution channels to reach the target market
or market segment and will permit the effective promotion of the products. The
Company supports its customers by providing complete consulting, technical and
training services by experts in computer systems and the various technical
applications disciplines for all product areas.
SALES STAFF, LOCATIONS AND CUSTOMER SUPPORT
The Company sells its products, consulting and other services on a
worldwide basis primarily through its 25-member worldwide direct sales force.
Since sales of the Company's products require technical interaction with
customers, members of the sales force generally are technically qualified as
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well as having significant sales and marketing experience. In addition, sales
and marketing personnel are actively supported by technical personnel and
senior management of the Company.
Sales personnel are located in each of the Company's offices in
Denver, Houston, Calgary and London. Smaller sales offices are located in
Atlanta, Georgia; Dallas, Texas; northern California; and in Kuala Lumpur and
Abu Dhabi. Local sales agents are utilized principally in third world
countries if local representation is necessary or appropriate. The Company
markets certain of its products through resellers and local agents in certain
foreign countries.
The Company provides installation and product training, on-site
consulting and 24-hour telephone availability of systems and technical experts
as part of its customer support services.
BACKLOG
The Company's backlog at December 31, 1994 and 1993, was $8.8 million
and $10.6 million, respectively.
COMPETITION
The market for most of the products and services offered by the
Company is highly competitive, although the number of competitors generally is
limited. Certain of the Company's competitors have substantially greater
marketing and financial resources than the Company, although management
believes the Company's senior management and technical staff compare favorably
with those of its competitors.
The principal competitive factors faced by the Company are product
functionality and performance, product price in relation to performance and
consulting and customer support services. Management also believes that the
Company competes effectively due to its broad product line, large customer base
and reputation for quality products and expert services. However, sales of the
Company's products and services would be adversely affected should competitors
introduce new products with better functionality, performance, price or other
competitive characteristics.
The principal competitors in the licensing and sale of development and
production software are Intera ECL Petroleum Technologies, a subsidiary of
Intera Information Technologies Corporation, which markets a black oil and
compositional simulator, and Integrated Technologies, a division of Western
Atlas International, which markets a line of reservoir simulators.
The competition in the licensing and sale of pipeline and surface
facilities software is fragmented with individual companies often marketing
only one or two products. Significant competitors in software licensing and
supply of related services of real time, on-line products in the leak detection
and real-time modeling areas are Stoner and Associates and Lic Consult.
In the GUI market, the principal competitor is V.I. Corporation which
markets a series of products which, taken as a whole, compete with Sammi. The
Company also competes with S.L. Corporation and various small companies that
market products having portions of the functionality of Sammi.
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GEOGRAPHIC AND BUSINESS LINE DATA
GEOGRAPHIC REVENUE DATA
The following table sets forth the Company's revenue by geographic
area for 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
United States . . . . . . . . . $ 9,695 $11,773 $12,079
Foreign:
Far East . . . . . . . . . . 4,362 2,597 1,670
Middle East . . . . . . . . . 1,624 2,028 3,298
Canada . . . . . . . . . . . 966 1,474 2,515
Europe . . . . . . . . . . . 4,220 7,152 7,157
Central and South America . . 3,614 3,262 1,992
Africa . . . . . . . . . . . 3,428 2,028 513
------- ------- -------
Total Foreign . . . . . . . . . 18,214 18,541 17,145
------- ------- -------
27,909 30,314 29,224
======= ======= =======
</TABLE>
Revenue derived from foreign sources amounted to $18.2 million (65% of
total revenue), $18.5 million (61% of total revenue), and $17.1 million (59% of
total revenue), in 1994, 1993, and 1992, respectively. The significant levels
of foreign revenue resulted from continued unfavorable economic conditions in
the domestic petroleum industry and continued penetration of new international
markets as a result of strategic marketing efforts in these areas. Foreign
revenue is subject to a number of factors such as political instability,
changes in protective tariffs, tax policies, and export-import controls. See
Note 7 to Consolidated Financial Statements for the Company's United States
export revenue and selected financial data of foreign subsidiaries.
Much of the Company's business is conducted with large, established
U.S. and foreign companies (sometimes acting as government contractors),
governments and national petroleum companies of foreign governments.
Qualifying foreign receivables are insured, subject to a deductible loss
amount, under an insurance policy with the Foreign Credit Insurance
Association, an agency of the United States Export-Import Bank. The Company
performs credit evaluations when considered necessary and generally does not
require collateral.
BUSINESS LINE DATA
The following table sets forth the percentage of total revenue
contributed by each of the Company's classes of products and services for 1994,
1993 and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Development and production
Consulting and training . . . . . . . . 39% 39% 36%
Licenses and maintenance . . . . . . . 22% 19% 20%
Other . . . . . . . . . . . . . . . . . 1% 1% 1%
------- ------- -------
Total . . . . . . . . . . . . . . . . 62% 59% 57%
------- ------- -------
Pipeline and surface facilities
Consulting and training . . . . . . . . 10% 14% 18%
Licenses and maintenance . . . . . . . 15% 12% 12%
Other . . . . . . . . . . . . . . . . . *% 1% *%
------- ------- -------
Total . . . . . . . . . . . . . . . . 25% 27% 30%
------- ------- -------
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Graphical user interface
Consulting and training . . . . . . . . 5% 5% 3%
Licenses and maintenance . . . . . . . 7% 9% 10%
Other . . . . . . . . . . . . . . . . . *% *% *%
------- ------- -------
Total . . . . . . . . . . . . . . . . 12% 14% 13%
------- ------- -------
Other . . . . . . . . . . . . . . . . . . 1% *% *%
------- ------- -------
Total . . . . . . . . . . . . . 100% 100% 100%
======= ======= =======
</TABLE>
* Less than 1%.
During 1994, approximately 450 customers utilized the Company's
software products and related services, the loss of any one of which would not
have a material adverse effect on the Company's business. During 1994, 1993,
and 1992, the Company generated $1.2 million, $2.0 million, and $2.0 million,
which were 4%, 6%, and 7%, respectively, of its total revenue from contracts
to perform reservoir engineering, geological studies, and petrophysical
analysis at the Naval Petroleum Reserves in California. Revenue from this
project may decrease in the future.
PROPRIETARY RIGHTS
The Company has protected its proprietary computer software by
restricting access to the underlying source code through technical means and by
requiring its customers to enter into licensing arrangements that are
protective of the Company's intellectual property rights in such software. For
enforcement of its rights in the software, the Company relies upon laws
relating to trade secrets and the misappropriation of confidential business
information, as well as unfair competition laws, which are generally recognized
in both state and international judicial proceedings. Additionally, the
Company obtains federal and international protection of its computer software
through federal copyright and the international copyright protection afforded
by the Berne Convention with reciprocal copyright protection in over 75
countries. To date, the Company has not sought to patent any of its computer
software. While the Company does not rule out obtaining patent protection for
computer software at some future time, the present procedure for obtaining
patent protection would require the Company to secure a patent in the United
States and all foreign countries where the software might be utilized, even
though the patentability of software in some foreign countries remains
questionable and in the process of patenting the software in the United States
the Company would be required to fully disclose the source code to the public
through its patent application.
In addition, the Company requires all employees and consultants who
have access to its proprietary information and software to execute
confidentiality agreements.
EMPLOYEES
As of January 31, 1996, the Company employed 149 persons full-time in
all locations, plus several part-time technical consultants as required to
complete project work.
-11-
<PAGE> 12
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
executive officers and the members of the Board of Directors of the Company as
of January 31, 1996. All directors are elected for a term of one year and
serve until their successors are elected and qualified.
<TABLE>
<CAPTION>
Name Age Position
- ------------------------- --- -------------------------------------------------------
<S> <C> <C>
E. A. Breitenbach, Ph.D. 59 Chairman of the Board of Directors, Chief Executive
Officer
George Steel 49 President, Chief Operating Officer, Director
Alain C. Gringarten, Ph.D. 50 Executive Vice President-WorkBench, E&P Consulting West
Ronald J. Hottovy 49 Executive Vice President-Chief Financial Officer,
Treasurer, Secretary
Robert G. Parish, Ph.D. 54 Executive Vice President--Eastern Area, Pipeline
William B. Nichols, Ph.D. 67 Director
Edward O. Price, Jr. 66 Director
</TABLE>
There are no family relationships among any of the executive officers or
directors of the Company.
Dr. Breitenbach, one of the founders of the Company, served as its
President from 1968 to 1981 at which time he was elected Chairman of the Board
of Directors and Chief Executive Officer. Dr. Breitenbach has been a director
since 1968. From October, 1990, to January 15, 1996, Dr. Breitenbach assumed
the office of President in addition to continuing as Chairman and Chief
Executive Officer. His petroleum and computer experience is primarily in the
areas of reservoir simulation, well logging, and economic planning, and he has
published several technical papers on these subjects. He has taught at
Stanford University and at Colorado State University. Dr. Breitenbach received
his B.S., M.S., and Ph.D. degrees in petroleum engineering from Stanford
University. He served as 1994 President of the Society of Petroleum Engineers.
Mr. Steel joined the Company in January, 1996, and was elected
President, Chief Operating Officer and member of the Board of Directors,
effective January 15, 1996. He has extensive technical and managerial
experience in the international petroleum industry. He served as General
Manager of Snyder Oil Company's affiliate, Command Petroleum, in the Bay of
Bengal, India. Prior to that, he served as Vice President of Snyder's
Julesburg Rocky Mountain Business Unit. Mr. Steel was associated with Texas
Instruments and then Halliburton, the international oil field service company,
for over twenty-five years and was President of their geophysical subsidiary.
He has a B.S. degree in Natural Science from St. Andrews in Scotland and holds
membership in the Society of Exploration Geophysicists, American Association of
Petroleum Geologists, Society of Petroleum Engineers , the American Society for
Quality Control and the British Deming Association.
Dr. Gringarten joined IRDE in January 1983 as Vice President of
Research and Development in Europe. He has served in several senior technical
and management positions with the Company before being appointed Senior Vice
President, Exploration and Production Products, in September 1991. In 1994 he
was named Executive Vice President responsible for the WorkBench area and the
Company's other development and production software products. In June, 1995 he
also assumed responsibility for E&P Consulting in the West Area. He has over
24 years experience in the oil industry, mainly with service companies,
including Schlumberger, primarily in the field of well test
-12-
<PAGE> 13
analysis. He has an engineering degree from Ecole Centrale des Arts et
Manufactures in France and received his M.Sc. and Ph.D. degrees in petroleum
engineering from Stanford University in 1969 and 1971, respectively.
Mr. Hottovy joined the Company in December 1991, and effective January
1, 1993, was elected Chief Financial Officer, Treasurer, and Secretary. In
1994, he was also named Executive Vice President. For the 11 years prior to
joining the Company, Mr. Hottovy held various positions with Gold King
Consolidated, Inc., a public oil, gas and mining company, including Chief
Financial Officer and, most recently, President. From 1975 to 1980, Mr.
Hottovy held various positions at Coopers & Lybrand, most recently tax manager,
specializing in international tax and natural resource companies. From 1972 to
1975, Mr. Hottovy was employed by Peat Marwick Mitchell & Co. Mr. Hottovy
graduated from the University of Nebraska in 1969 with a B.S. in economics and
received an M.B.A. degree from the University of Wyoming in 1972.
Dr. Parish joined IRDE in April 1982 as Vice President of Technical
Products in Europe and is currently Managing Director of SSI UK, Ltd., the
Company's United Kingdom subsidiary. In 1994, was also named Executive Vice
President responsible for the Eastern Area. In June, 1995 he also assumed
responsibility for Pipeline. He served as Division Vice President, Exploration
and Production Products, from March 1987 to October 1990. Prior to that he was
Managing Director of the Company's U.K. subsidiary from February 1985 to March
1987. Dr. Parish has over twenty years experience in mathematical modeling and
software engineering. He graduated from London University with a B.Sc. with
honors in mathematics in 1963, and from North Carolina State University with a
Ph.D. in statistics in 1969.
Dr. Nichols was employed by Hercules Incorporated in research and
development for thirty-five years until his retirement in 1989. For the last
ten years he held various managerial positions. He received his B.S. degree
from Massachusetts Institute of Technology in 1950, and M.S. and Ph.D. degrees
from California Institute of Technology in 1954 and 1957, respectively, all in
chemical engineering.
Mr. Price was employed by Chevron Oil Company and Saudi Aramco for
over thirty-seven years until his retirement in 1990. For the last eleven
years he held various executive positions with Saudi Aramco in Dhahran, Saudi
Arabia, including Vice President of Petroleum Engineering and Vice President of
Exploration and Production. Prior to that time he held various management
positions in Chevron's operations in the U.S., Australia and Iran. He is
currently a private investor and consultant and is a director of First National
Bank - Mexia, Texas, Paragon Wireline Services, Advanced Reservoir Technologies
and Middle East Services. He received B.S. degrees in both petroleum
engineering and geological engineering from Texas A&M University in 1951 and
completed course work for an M.S. degree from the same school in 1953.
ITEM 2. PROPERTIES
All of the Company's operations are conducted in leased space as
follows:
<TABLE>
<CAPTION>
Approximate Current
Location Lease Expiration Sq. Ft. Annual Rent
<S> <C> <C> <C>
Denver, Colorado May 1997 17,200 $405,000
Houston, Texas December 1997 20,000 366,000
Houston, Texas(1) April 1997 7,000 78,000
Calgary, Alberta, Canada September 1996 10,700 107,000
Egham, Surrey, England March 2004 10,500 255,000
</TABLE>
(1) Kinesix Division.
-13-
<PAGE> 14
In addition, the Company maintains small sales offices in Atlanta,
Georgia; Dallas, Texas; and northern California for its Kinesix Division sales
representatives. Exploration and production sales offices are located in
Dallas, Texas; Kuala Lumpur; and Abu Dhabi.
ITEM 3. LEGAL PROCEEDINGS
To the knowledge of management, the only claim pending or threatened
against the Company or any of its subsidiaries which individually or
collectively could have a material adverse effect upon the Company or its
financial condition is the following:
Marshall Wolf, on his behalf and on behalf of all others similarly
situated vs. E. A. Breitenbach, R. J. Hottovy, Jimmy L. Duckworth, and
Scientific Software-Intercomp, Inc. On October 5, 1995, a claim was filed in
the United States District Court for the District of Colorado alleging that the
Defendants, who include the President and Chief Executive Officer of the
Company, its Chief Financial Officer and a former Executive Vice President,
violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5
promulgated thereunder in issuing financial reports for the first three
quarters of the Company's 1994 fiscal year which failed to comply with
generally accepted accounting principles with respect to revenues recognized
from the Company's contracts with value added resellers. The Plaintiff seeks
to have the Court determine that the lawsuit constitutes a proper class action
on behalf of all persons who purchased stock of the Company during the period
from May 30, 1994 through July 10, 1995, with certain exclusions. The
Company's independent auditors, Ehrhardt Keefe Steiner & Hottman PC, has issued
a report to the Company that the revenues from such contracts were recognized
in accordance with generally accepted accounting principles with the exception
of a $70,000 overstatement of revenue in the first quarter of 1994 which
exception they have concluded was immaterial assuming that the remaining
elements of such quarterly report were in accordance with generally accepted
accounting principles. Based thereon, it is the opinion of the Company's
counsel that the claim is without merit and it is the intention of the Company
and the other Defendants to vigorously defend the claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In the fourth quarter of 1994, the Company's shareholders voted in
favor of an increase in the number of authorized shares of common stock from
10,000,000 shares to 25,000,000 shares. Following is an accounting of the
votes of the shareholders:
<TABLE>
<CAPTION>
For Withheld
--------- --------
<S> <C>
5,405,716 504,674
========= ========
</TABLE>
The Registrant had 8,060,411 shares of no par value common stock
outstanding on October 26, 1994, the record date for the vote of the security
holders. The number of shares voted for the increase in the number of
authorized shares of common stock represented 67% of the total number of shares
outstanding, which was greater than the required two thirds of the total number
of shares outstanding.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock was traded on the Nasdaq National Market
("Nasdaq") under the symbol "SSFT." On July 11, 1995, the Company's stock was
delisted from Nasdaq as the result of the Company's failure to remedy its
public filing deficiency. At January 31, 1996, the Company had
-14-
<PAGE> 15
approximately 459 stockholders of record. The following table sets forth, for
the periods indicated, the high and low last reported sale prices of the Common
Stock as reported by Nasdaq. The third and fourth quarters of 1995 sale prices
were reported by the Trading Desk at Johnson Rice & Company, a market maker of
the Company stock.
<TABLE>
<CAPTION>
Quarter Ended Sale Prices
- ---------------------------- -----------------------------
High Low
---- ---
<S> <C> <C>
1995
First Quarter $6.63 $5.88
Second Quarter 5.88 3.00
Third Quarter 3.38 1.75
Fourth Quarter 3.38 2.63
1994
First Quarter $8.13 $4.50
Second Quarter 6.00 4.00
Third Quarter 7.13 4.13
Fourth Quarter 7.25 4.88
1993
First Quarter 4.13 3.13
Second Quarter 4.00 2.75
Third Quarter 4.00 3.13
Fourth Quarter 4.75 3.00
</TABLE>
The Company has not paid dividends on its Common Stock for several
years and does not intend to pay dividends on its Common Stock in the
foreseeable future. The payment of dividends on the Company's Common Stock is
also prohibited under the Company's current revolving credit facility.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth a summary of selected consolidated
financial data for the Company as of the dates and for the periods indicated.
The financial data is derived from the audited Consolidated Financial
Statements of the Company and Notes thereto. The data should be read in
conjunction with such financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
-15-
<PAGE> 16
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Consulting and training . . . . . . . . $15,038 $17,696 $16,523 $12,485 $11,520
Licenses and maintenance . . . . . . . 12,431 12,111 12,410 11,849 7,311
Other . . . . . . . . . . . . . . . . . 440 507 291 687 944
------- ------- ------- ------- -------
Total revenue . . . . . . . . . . . . 27,909 30,314 29,224 25,021 19,775
------- ------- ------- ------- -------
Costs and expenses:
Costs of consulting and training . . . 11,274 12,464 12,042 8,006 9,795
Costs of licenses and maintenance . . . 6,043 6,561 6,153 4,074 3,326
Selling, general and administrative . . 13,702 7,313 8,182 7,963 6,512
Other . . . . . . . . . . . . . . . . . 1,053 1,084 938 2,970 5,478
------- ------- ------- ------- -------
Total costs and expenses . . . . . . . 32,072 27,422 27,315 23,013 25,111
Income (loss) from operations . . . . . . (4,163) 2,892 1,909 2,008 (5,336)
Other (expense) . . . . . . . . . . . . . (467) (805) (251) (635) (1,248)
------- ------- ------- ------- -------
Net income (loss) before income taxes . . (4,630) 2,087 1,658 1,373 (6,584)
Provision for income taxes . . . . . . . (260) (375) (287) (299) (425)
------- ------- ------- ------- -------
Net income (loss) . . . . . . . . . . . . $(4,890) $ 1,712 $ 1,371 $ 1,074 $(7,009)
======= ======= ======= ======= =======
Net income (loss) per share . . . . . . . $ (0.75) $ 0.32 $ 0.27 $ 0.23 $ (1.87)
======= ======= ======= ======= =======
Net income per share (fully-diluted) . . $ * $ 0.31
=======
OTHER FINANCIAL DATA:
Revenue
Development and production
Consulting and training . . . . . . . $10,992 $12,047 $10,646 $ 7,864 $ 7,363
Licenses and maintenance . . . . . . . 6,218 5,712 5,824 6,011 4,717
Other . . . . . . . . . . . . . . . . 214 205 203 530 601
------- ------- ------- ------- -------
Total . . . . . . . . . . . . . . . 17,424 17,964 16,673 14,405 12,681
Pipeline and surface facilities
Consulting and training . . . . . . . 2,706 4,210 5,076 3,821 3,882
Licenses and maintenance . . . . . . . 4,268 3,696 3,601 4,058 1,393
Other . . . . . . . . . . . . . . . . 81 296 101 16 417
------- ------- ------- ------- -------
Total . . . . . . . . . . . . . . . 7,055 8,202 8,778 7,895 5,692
Graphical user interface
Consulting and training . . . . . . . 1,340 1,439 801 800 275
Licenses and maintenance . . . . . . . 1,945 2,703 2,985 1,780 1,201
Other . . . . . . . . . . . . . . . . 4 12 4 --- ---
------- ------- ------- ------- -------
Total . . . . . . . . . . . . . . . 3,289 4,154 3,790 2,580 1,476
Other income (expense) . . . . . . . . 141 (6) (17) 141 (74)
------- ------- ------- ------- -------
Total . . . . . . . . . . . . . . . $27,909 $30,314 $29,224 $25,021 $19,775
======= ======= ======= ======= =======
</TABLE>
-16-
<PAGE> 17
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA (CONTINUED):
Software research and development
Current expense . . . . . . . . . . . . . $ 793 $ 1,139 $ 1,080 $12,865 $ 2,951
Capitalized costs(1) . . . . . . . . . . 5,599 4,440 5,844 7,236 6,212
Amortization expense(2) . . . . . . . . . $ 4,589 $ 4,144 $ 3,628 $ 2,910 $ 2,204
BALANCE SHEET DATA:
Working capital (deficit) . . . . . . . . $ 3,466 $ 4,363 $ 1,916 $(4,956) $(2,626)
Software, net . . . . . . . . . . . . . . 27,656 26,646 26,350 24,134 19,808
Total assets . . . . . . . . . . . . . . 44,544 45,903 42,881 39,415 32,476
Long-term debt, net of current portion . 2,813 10,030 8,827 2,490 2,868
Redeemable convertible preferred stock . 4,000 4,000 4,000 4,000 3,000
Stockholders' equity . . . . . . . . . . $28,436 $20,539 $18,292 $15,816 $13,978
</TABLE>
* The effects of exercise or conversion of options or convertible
securities are immaterial or antidilutive. See Note 1 to the
Consolidated Financial Statements.
(1) The Company capitalizes qualifying costs incurred in developing and
enhancing its software products in accordance with FASB Statement 86.
See Note 1 to the Consolidated Financial Statements.
(2) The Company amortizes the capitalized software development costs of
its stand-alone software products and related enhancements over a
13-year period. The capitalized software development costs of
Petroleum WorkBench and Sammi are amortized over a seven-year period.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Computer Software Research and Development"
and Note 1 to the Consolidated Financial Statements.
-17-
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company develops and markets sophisticated software for the
development and production and pipeline and surface facilities areas of the
worldwide oil and gas industry and for graphical user interface applications.
The following discussion is management's assessment of the Company's
historical financial performance and condition. This discussion should be read
in conjunction with the Consolidated Financial Statements of the Company and
the related Notes thereto.
The Company recognizes software license revenue on delivery and
recognizes maintenance revenue on a straight-line basis over the term of the
contract. Certain combined software and service contracts are accounted for
using the percentage of completion method with contract revenue recognized
based on: (a) value-added output measures of progress for the software portion
of the contract after meeting certain specified contractual criteria, and
having used the installed software in completing specifications for the
engineering services on the project, which have been accepted by the client,
and (b) input measures of work performed on an hours-to-hours basis for the
services portion of the contract. Fixed-price contract revenue is recognized
using the percentage of completion method, calculated on the ratio of labor
hours incurred to total projected labor hours. Losses on contracts accounted
for using the percentage of completion method are recognized at the time they
are identified. See Note 1 to the Company's Consolidated Financial Statements.
The Company capitalizes qualifying costs incurred in developing and
enhancing its software products in accordance with FASB Statement 86. The
Company amortizes the capitalized software development costs of its stand-alone
software products and related enhancements over a 13-year period. The
capitalized software development costs of Petroleum WorkBench and Sammi are
amortized over a seven-year period. See Note 1 to the Company's Consolidated
Financial Statements and "Computer Software Research and Development" below.
LIQUIDITY AND CAPITAL RESOURCES
OVERALL FINANCIAL POSITION. The liquidity and financial condition of
the Company improved significantly during 1994 as a result of the sale of
common stock in the June 1994 public offering and other capital transactions
described below. At December 31, 1994, the Company's working capital ratio was
1.4 to 1, based on current assets of $12.7 million and current liabilities of
$9.2 million. The Company's working capital ratio at December 31, 1993, was
1.39 to 1. Total stockholders' equity increased to $28.4 million at December
31, 1994, from $20.5 million at December 31, 1993.
At December 31, 1993 and 1992, the Company had positive working
capital of $4.4 million and $1.9 million, respectively. During 1992 and 1993,
the Company undertook a series of steps to increase its financial flexibility
and liquidity. In September 1992, the Company issued a $2.5 million 7-year
convertible debenture to Renaissance Capital Partners II, Ltd. ("Renaissance")
and in September 1993 issued a $1.0 million 7-year convertible debenture to
Renaissance. See Note 3 to the Consolidated Financial Statements. In January
1994, the Company extended the maturity of its revolving credit facility, and
the related guarantee issued by the United States Export-Import Bank, through
January 1995. The $5.0 million outstanding under the Company's revolving
credit facility at December 31, 1993, was classified as a long-term liability.
The Company believes that its improved financial condition and
liquidity will enable increased efforts aimed at further market penetration of
its new WorkBench and Sammi products, as well as increased efforts aimed at
further market penetration of its traditional products and services.
-18-
<PAGE> 19
The Company's working capital and cash requirements will continue to
be influenced by the level of software research and development costs. During
the years ended December 31, 1994 and 1993, the Company reduced the level of
software research and development costs, in the aggregate and as a percentage
of total costs incurred (excluding software amortization), to $6.4 million and
20%, and $5.5 million and 20%, respectively, from a high of $9.2 million and
31%, respectively, during the year ended December 31, 1990. Although software
research and development costs will continue, management expects these costs to
decrease as a percentage of revenue in the future. In an effort to reduce the
internal capital requirements for these projects, the Company actively pursues
opportunities to fund software research and development costs through
development projects with oil and gas industry partners, government agencies
and others. In this type of funded development project, participating
companies or other entities provide all or a portion of the funds required to
develop or enhance a software product in exchange for access to the resulting
software at discounted or nominal prices with the Company retaining ownership
and licensing rights to the product. In accordance with generally accepted
accounting principles, the Company generally records as consulting revenue
amounts received from these third parties and capitalizes the qualifying
portion of related costs incurred as software development costs in accordance
with FASB Statement 86.
The Company believes that (a) amounts expected to continue to be
available under the Company's revolving credit facility and (b) internally
generated funds, should provide the Company with sufficient liquidity and
working capital to meet its anticipated operating needs. There can be no
assurance, however, that the Company will generate sufficient cash flow from
operations to meet its future operating needs or be successful in obtaining any
additional debt or equity financing.
PUBLIC OFFERING AND OTHER EQUITY TRANSACTIONS. On June 30, 1994, the Company
sold 2.0 million newly issued shares of common stock in a public offering from
which the Company received net proceeds of $8.1 million, net of related costs
of approximately $270,000. The Company used the proceeds from the public
offering to repay its bank indebtedness of $5.1 million, to reduce accounts
payable, and to increase working capital.
In July 1994 the underwriters of the public offering exercised an
overallotment option, resulting in the sale by the Company of 383,000
additional newly issued shares of common stock, from which the Company received
net proceeds of approximately $1.6 million.
Simultaneously with completion of the public offering, Renaissance
Capital Partners II, Ltd. ("Renaissance") converted $1.75 million in principal
amount of convertible debentures (see Notes 2 and 3 to Consolidated Financial
Statements) into 653,846 shares of common stock, which Renaissance sold in the
public offering. As a result of the Renaissance conversion, the Company
reduced paid-in capital by $119,000 for unamortized debt issuance costs related
to the converted debentures.
Also, in 1994, the Company received net proceeds of approximately $1.0
million from the sale of newly issued common stock in connection with exercises
of stock options.
BANK REVOLVING CREDIT FACILITY. Effective September 21, 1994, the Company
established a new primary banking relationship, which includes a loan agreement
with the bank that provides for a revolving credit facility pursuant to which
the Company may utilize up to $6.0 million for: (a) short-term borrowings for
working capital purposes and (b) the issuance of letters of credit for bid
guarantees, performance bonds, and advance payment guarantees.
Borrowings and outstanding letters of credit are collateralized by
substantially all the Company's assets, excluding those of the Company's
Canadian subsidiary. The maximum amount of cash borrowings and letters of
credit that may be outstanding at any time is determined by a borrowing base
formula related to available collateral. The credit facility consists of a
foreign portion under which up to $5.0 million cash borrowings and letters of
credit may be outstanding if sufficient collateral of foreign accounts
receivable is available and a domestic portion under which up to $1.5 million
of
-19-
<PAGE> 20
cash borrowings and letters of credit may be outstanding if sufficient
collateral of domestic accounts receivable is available. At December 31, 1994,
the Company elected to limit insurance coverage of domestic accounts receivable
because the Company did not require financing to the full extent of the
revolving credit facility. This enabled the Company to reduce insurance
premium costs and decreased the amount of available credit to $1.4 million.
On a fully-guaranteed, fully-insured basis, the Company estimates that
qualifying collateral would have resulted in total available credit of
approximately $4.8 million at December 31, 1994.
The foreign portion of the credit facility is supported by a $4.5
million guarantee by the Export-Import Bank of the United States. The
revolving credit facility is available through July 15, 1995, concurrent with
the term of the current Export-Import Bank guarantee. The Company believes
that, as in the past, the Export-Import Bank will continue to grant additional
terms of its guarantee. The Company intends to request an increase to the
amount guaranteed to $5 million if necessary for working capital needs. The
Company expects that the Export-Import Bank would agree to such an increase, if
requested.
As of December 31, 1994, the borrowing base, amounts of short-term
cash borrowings and letters of credit outstanding, and credit available under
the revolving credit facility were as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Revolving credit facility limit $6,000
======
Borrowing base (limited by insurance coverage
and amount of qualified receivables) $3,065
======
Amounts outstanding:
Short-term cash borrowings $1,000
Letters of credit 707
------
$1,707
======
Credit available as of December 31, 1994 $1,358
======
</TABLE>
Interest rates applicable to short-term cash borrowings under the
foreign portion of the credit facility are equal to the bank's prime rate of
interest. Interest rates applicable to short-term cash borrowings under the
domestic portion of the credit facility are equal to the bank's prime rate of
interest plus 1.5%. The weighted average interest rates incurred by the
Company were 8.7% and 8.5% in the years ended December 31, 1994 and 1993,
respectively. At December 31, 1994, the interest rates applicable to
short-term cash borrowings were 8.5% and 10.2% for the foreign and domestic
portions of the line of credit, respectively. The Company pays 2% annually for
outstanding letters of credit. The agreement requires that the Company meet
certain requirements regarding operating results and financial condition, and
prohibits the Company from paying dividends without the bank's prior written
consent. As of December 31, 1994, the Company is not in compliance with
certain financial covenants. The bank has agreed to a forbearance of these
covenant violations.
The Company pays to the Export-Import Bank an annual fee of $67,500,
equal to 1.5% of the amount of the guarantee. In addition, the Company is
required to purchase credit insurance for all foreign and certain domestic
receivables at a cost of 0.25% of the amount of the insured receivables.
In January 1995, the Company's United Kingdom subsidiary obtained a
bank line of credit of $300,000 for working capital financing of its projects.
This line of credit is collateralized by a Letter of Credit for $300,000, which
was issued by the Company's primary bank pursuant to the revolving credit
facility described above. Interest related to borrowings on the United Kingdom
line of credit is charged at a rate per annum equal to the bank's prime rate of
interest plus 1.75%.
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<PAGE> 21
The Company's Canadian subsidiary has a bank line of credit of
approximately $650,000 for working capital financing of its projects. At
December 31, 1994, the Canadian subsidiary had no outstanding borrowings under
this arrangement. Interest related to borrowings on the Canadian line of
credit is charged at a rate per annum equal to the bank's prime rate of
interest plus 1.25%.
RESULTS OF OPERATIONS
OVERALL OPERATING RESULTS
1994 Compared to 1993. The Company reported a loss before income
taxes of $4,630,000 in 1994. The Company reported income before income taxes
of $2,087,000 in 1993. In the fourth quarter of 1994 the Company increased its
provision for doubtful accounts by $5,854,000 because of uncertainty about
collectibility of accounts receivable from certain VARs, previously in the
Company's Pipeline and Facilities Division and London office. The 1994 loss
also resulted partly from lower development and production consulting revenue
due to the timing of work on large foreign consulting contracts. Additionally,
the Company increased its sales and marketing expenses, including increased
costs for further market penetration of the WorkBench and the Company's other
products. Increased investment in sales and marketing activities to contribute
to future growth of the Company was one of the intended uses of part of the
proceeds of the June 1994 public offering of common stock. The Company plans
to continue an increased level of sales and marketing expenses for several
additional quarters, which has the effect of decreasing reported income from
operations until such time that the Company realizes sufficient additional
revenue and profits as a result of the increased sales and marketing
activities.
Part of the Company's marketing strategy has been to establish
strategic alliances with quality VARs. VARs license the Company's software
products for remarketing and sublicensing to end users or to other VARs, either
for use on a specific project for a specific customer or for general marketing
to the VARs' current and future customers. The Company's VARs are generally
substantial companies with long operating histories. The software products
licensed to VARs are established, proven products that have long been widely
accepted in the marketplaces served by the Company.
In some cases, primarily to obtain preferential pricing, a VAR makes
an unconditional commitment to pay to the Company a fixed license fee for
software to be used on a specific project for a specific customer or an
unconditional commitment to pay to the Company a minimum fixed fee for the
right of general marketing to the VAR's current and future customers for a
specified period, usually one-year. In the case of general marketing rights, a
VAR is required to pay license fees as it has transactions with its customers.
On the due date or dates of a minimum fixed fee, which are payable either in
installments or at the end of the term of a VAR agreement, the VAR must pay to
the Company the amount, if any, required for total payments to equal the
required minimum fixed fee amount. General marketing VAR minimum fixed fees
are not subject to reduction based on the number of units marketed by a VAR and
are not otherwise contingent on whether a VAR is successful in marketing the
Company's software products or otherwise.
In accounting for a VAR agreement, the Company recognizes revenue at
inception of the contract only if collection is determined to be probable and
all other requirements for revenue recognition are met. These include: (a)
delivery of all software products on all platforms that a VAR has the right to
receive, (b) reviewing the VAR's credit status to determine whether the VAR
has the financial capability to make the required fixed minimum payments,
regardless of whether the VAR is successful in marketing the Company's software
products, (c) determining that the VAR is not new, undercapitalized, or in
financial difficulty, and (d) determining that the transaction is viable for
both parties.
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<PAGE> 22
In the fourth quarter of 1994, certain VARs of the Company's Pipeline
and Facilities Division did not pay fixed fees when due for certain software
licensed for use on specific projects for specific customers and also certain
minimum fixed fees for rights of general marketing.
In the fourth quarter of 1994 the Company increased its 1994 provision
for doubtful accounts by $5,854,000, of which $1,958,000 was related to the
fixed fee payments due from VARs. The Company has determined that the chance
is remote that it will be able to collect accounts receivable of $2,118,000, of
which $1,437,000 is related to fixed fee amounts from VARs. Accordingly, in
the December 31, 1994 balance sheet, the Company has written off accounts
receivable totaling $2,118,000. The Company had previously filed a Form 10-K
with unaudited financial statements for the year ended December 31, 1994 which
showed a fourth quarter provision for doubtful accounts in the amount of
$2,443,000. The increase of $3,411,000 is attributable to several accounts
which the Company has since been unable to collect and the Company, upon the
basis of facts and circumstances subsequent to the previously filed Form 10-K,
has determined that collection of these amounts is not now imminent.
The Company commenced and continues to have discussions with VARs that
owe the Company the remaining fixed fees and is in the process of determining
if resolutions acceptable to each VAR and the Company are possible. The need
of the Company to undertake an inquiry and the need of its auditors to await
the completion of the inquiry and to undertake their own due diligence resulted
in a substantial delay in completing the audit of the Company's 1994 financial
results.
Effective with the fourth quarter of 1994 the Company is using
significantly more stringent qualitative and quantitative criteria and
guidelines in deciding if a VAR's fee should be considered a fixed fee that
enables revenue recognition at inception of the VAR arrangement if all other
revenue recognition requirements are met.
In connection with the non-payment by VARs of minimum fixed fees,
which had been recognized by the Company as revenue, the Company conducted an
investigation and discovered that certain persons in its Pipeline and
Facilities Division had indicated in writing to some of the VARs in connection
with thirteen contracts involving aggregate payments of $2,331,000 that payment
of the fixed fees would not be required under specified conditions, generally
related to whether the VARs were successful in sublicensing the software to
specific customers for use on specific projects or to other customers of the
VARs. Most of such written representations were signed by Division employees
who are no longer employed by and have no present association with the Company.
Upon learning of the foregoing written representations, and after
consultation with the Company's auditors, Hein + Associates, the Audit
Committee of the Board of Directors of the Company on April 27, 1995 appointed
a Special Committee, consisting of an outside Director, the Company's outside
principal legal counsel and its Chief Financial Officer, to investigate the
circumstances related to these representations and the related VAR agreements.
During the following two months the Committee interviewed thirty current and
former Company employees and extensively reviewed Company files. Hein +
Associates was kept informed throughout of the results of the investigation and
from time to time made suggestions to the Special Committee for particular
inquiries, which suggestions were followed.
In a May 30, 1995 report to the Audit Committee and the Board of
Directors the Special Committee concluded that the representations to the VARs
were not authorized by the Company and were not approved in advance by any of
the Company's executive officers, except for one situation described below, nor
was their existence known by any of the Company's accounting personnel. The
Committee concluded that the individuals who made the representations about
deferral of the obligations of VARs to pay license fees until resales occurred
believed that such resales were certain to occur on a timely basis (which in a
number of instances proved correct) and therefore believed that the
representations were not material. The Company, with the consultation and
approval of the Board of Directors, has established rigorous controls and
procedures to guard against similar unauthorized
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<PAGE> 23
representations to the Company's clients in the future and the Board of
Directors has also determined sanctions for those few individuals that the
Company continues to employ who had involvement with the unauthorized
representations. These controls and procedures, as well as the sanctions, were
discussed with Hein + Associates prior to their implementation, who agreed to
their propriety.
Subsequent to the May 30, 1995 report, it was discovered that an
Executive Vice President and Director of the Company had been involved in a
similar representation to another VAR. The Special Committee supplemented its
inquiry to include that situation and concluded in a supplemental report to the
Board of Directors describing this situation that the Committee's previous
conclusions with respect to the non-involvement of any of the Company's other
executive officers and of its accounting personnel remained correct. The
Special Committee also concluded that there were no facts or circumstances that
suggested that there were any additional remaining similar representations to
VARs or others which had not been investigated. As a result of this situation,
on June 21, 1995, upon recommendation of the Chief Executive Officer of the
Company, the Board of Directors approved the immediate termination of such
Executive Vice President as an officer and employee of the Company.
The individuals who made the representations were not actually
authorized to do so by the Company. Also, legal counsel to the Company has
advised that there was no apparent authority basis for their representations.
Almost all of the related VAR agreements do not allow modifications to the
payment obligations of the VARs in the manner purported by the unauthorized
representations. The Company's legal counsel has advised it that the
representations are not enforceable, that they may be disavowed by the Company,
and that the fixed fees required by the VAR agreements are due and payable.
The Company remained in essentially daily communication with Hein +
Associates throughout this two month inquiry period. During June, the Company
also advised its former auditors, Ernst & Young, with respect to its 1992
audited financial statements of the situation with the representations to the
VARs and the special inquiry. Ernst & Young indicated to the Company that it
would need to perform its own extensive due diligence with respect to this
situation and the 1992 financial statements before it could consent to the use
of its audit opinion on those financial statements in spite of the fact that
Hein + Associates was able to advise Ernst & Young that nothing had come to
their attention with respect to the 1992 financial statements which would have
a material effect upon them. Ernst & Young could further not inform the
Company of how much time or how much expense might be involved in the work
which it would need to do in connection with the 1992 financial statements.
The Company considered a number of alternatives in connection with the 1992
financial statements including the possibility of having those financial
statements reaudited by Hein + Associates but no conclusion was reached in this
respect. . The unaudited financial statements for 1992 included herein are the
same as the audited statements previously filed in the Form 10-K for that year.
Throughout the month of June, 1995 the Company assumed, upon the basis
of its frequent communications with Hein + Associates, that the audit of its
1994 financial statements would be promptly completed and the numerous repeated
delays in such completion therefore were not anticipated by the Company. On
June 30, 1995, the Company was advised by Hein + Associates that it was
resigning as the Company's auditor for its 1994 financial statements although
it was not withdrawing its audit opinion with respect to the Company's 1993
financial statements. Hein + Associates had not previously discussed the
possibility of resignation during the two month special inquiry period. Hein +
Associates did not provide the Company with any specific reason or reasons for
its resignation other than to indicate that it was due to a number of factors.
Hein + Associates has however agreed with the Company that such resignation was
not due to any disagreement with the Company over accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
Hein + Associates did not furnish any reason to the Company at the
time of its June 30 resignation or in the July 3 meeting, or with the July 6
communication, for its resignation and declined repeated requests from the
Company and others during the following two weeks for an explanation. On
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<PAGE> 24
July 19, 1995 Hein + Associates furnished the Company with a letter advising it
that it had resigned because of a "risk of management misrepresentations" in
the financial statements. This was the first time any such allegation had been
made throughout the entire investigating period.
The July 19, 1995 letter of Hein + Associates also indicated that the
timing of adjustments related to the side letters was not resolved at the time
of its resignation. The Company was however led to believe through its daily
contacts with Hein + Associates that they had in fact reached agreement on the
accounting for the transactions involving the side letters, including the fact
that in mid-June Hein + Associates had approved a final draft of the financial
statements for filing with the SEC, which was then not filed only when the
additional side letter problem involving the Company's former Executive Vice
President was discovered and required analysis.
On September 22, 1995, the Board of Directors of the Company approved
the selection of Ehrhardt Keefe Steiner & Hottman PC as its auditors.
REVENUE
1994 COMPARED TO 1993. Total revenue decreased 8% to $27.9 million in
1994 from $30.3 million in 1993. The Company reported lower revenue from both
consulting and training and also licenses and maintenance, primarily because of
the reasons discussed in the "Overall Operating Results" section.
Total revenue from development and production products and services
decreased 3% to $17.4 million in 1994 from $18.0 million in 1993. However,
software license and maintenance revenue increased 11% to $6.2 million in 1994
from $5.7 million in 1993. Total revenue from the Petroleum WorkBench
increased 54% to $3.7 million in 1994 from $2.4 million in 1993. Consulting
and training revenue decreased 13% to $10.5 million in 1994 from $12.0 million
in 1993 because of the reason discussed in the "Overall Operating Results"
section.
Total revenue from pipeline and surface facilities products and
services decreased 13% to $7.1 million in 1994 from $8.2 million in 1993.
Consulting and training revenue decreased 36% to $2.7 million in 1994 from $4.2
million in 1993. In 1993, the pipeline and surface facilities division had
higher consulting revenue due to continued work on the final stages of several
of the significant combined software and services contracts that were initiated
in 1991. Software license and maintenance revenue increased 16% to $4.3
million in 1994 from $3.7 million in 1993.
Total revenue from graphical user interface ("GUI") products and
services decreased 21% to $3.3 million in 1994 from $4.2 million in 1993.
Software license and maintenance revenue decreased 26% to $2.0 million in 1994
from $2.7 million in 1993. The decrease was attributable primarily to what the
Company believes is a temporary decline in the aerospace industry market and
because of a temporary reduction in sales personnel during a period of internal
reorganization of the Kinesix division's sales force.
1993 COMPARED TO 1992. Total revenue increased 4% to $30.3 million in
1993 from $29.2 million in 1992 primarily as a result of increased sales of
Sammi and Petroleum WorkBench and related consulting services. Total revenue
from the Company's Sammi and Petroleum WorkBench products and services
increased 25% to $6.6 million in 1993 from $5.3 million in 1992. Revenue from
the Company's stand-alone products and services declined slightly to $23.7
million in 1993 as compared to $23.9 million in 1992.
Total consulting and training revenue increased 7% to $17.7 million in
1993 from $16.5 million in 1992, primarily as a result of higher consulting
revenue from new foreign contracts in the exploration and production division,
which was partially offset by a decline in revenue from the Company's pipeline
and surface facilities division. The Company's total license and maintenance
revenue declined by $299,000 during 1993 when compared to 1992, which was
partially offset by a $216,000 increase in other revenue.
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<PAGE> 25
Total revenue from development and production products and services
increased 8% to $18.0 million in 1993 from $16.7 million in 1992. Consulting
and training revenue in this area increased 13% to $12.0 million in 1993 from
$10.6 million in 1992 as a result of new foreign contracts. Development and
production software license and maintenance revenue decreased slightly to $5.7
million in 1993 as compared with $5.8 million in 1992 primarily due to
decreased sales of the Company's stand-alone products.
Total revenue from pipeline and surface facilities products and
services decreased 7% to $8.2 million in 1993 from $8.8 million in 1992 as a
result of a decrease in consulting and training revenue of 17% to $4.2 million
in 1993 from $5.1 million in 1992. In 1992, the pipeline and surface
facilities division had higher consulting revenue due to the significant
combined software and services contracts that were initiated in 1991.
Total revenue from GUI products and services increased 10% to $4.2
million in 1993 as compared to $3.8 million in 1992 as a result of an increase
in consulting and training revenue to $1.4 million in 1993 from $800,000 in
1992. The base of clients for GUI consulting and training services has
increased as a result of the sales of GUI software licenses during 1993 and
1992. Software license and maintenance revenue for GUI products decreased 10%
to $2.7 million in 1993 as compared with $3.0 million in 1992.
FOREIGN REVENUE
Revenue derived from foreign sources during 1994, 1993 and 1992 is set
forth below:
<TABLE>
<CAPTION>
Revenue From Percentage of
Year Foreign Sources Total Revenue
(In thousands)
<S> <C> <C>
1994 $18,214 65%
1993 18,541 61%
1992 17,145 59%
</TABLE>
Management believes that foreign revenue will continue to be an
important factor in the Company's business, primarily as a result of continued
penetration of international markets through the Company's strategic marketing
efforts. See "Business -- Geographic and Business Line Data" for information
regarding the particular geographic areas in which the Company generated
foreign source revenue during these periods.
COSTS OF CONSULTING AND COSTS OF LICENSES AND MAINTENANCE
1994 COMPARED TO 1993. Costs of consulting and training decreased to
$11.3 million in 1994 from $12.5 million in 1993. The decrease resulted
primarily from the lower level of consulting activity in 1994 because of the
reason discussed in the "Overall Operating Results" section. Costs of
consulting and training were 75% of consulting and training revenue in 1994 and
70% in 1993.
Costs of licenses and maintenance decreased to $6.0 million in 1994
from $6.6 million in 1993, including software amortization of $4.6 million in
1994 and $4.1 million in 1993. Costs of licenses and maintenance were 48% of
license and maintenance revenue in 1994 and 54% in 1993.
1993 COMPARED TO 1992. Direct costs of consulting and training
increased to $12.5 million in 1993 from $12.0 million in 1992. Direct costs of
consulting and training were 70% of consulting training revenue in 1993 as
compared to 73% in 1992. The decrease in consulting and training costs as a
percentage of revenue was attributable to minor variations in gross margins
realized on consulting contracts.
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<PAGE> 26
Costs of licenses and maintenance were $6.6 million in 1993 as
compared to $6.2 million in 1992, including amortization of software of $4.1
million in 1993 and $3.6 million in 1992. Total costs of license and
maintenance revenue were 54% of license and maintenance revenue in 1993 as
compared to 50% in 1992 with the increase being attributable primarily to
increased software amortization expense.
CONTRACT COST ACCRUALS (REVERSALS)
Contract cost accruals and reversals are recognized on certain
combined software and service contracts as required based on the percentage of
completion applied to total estimated project costs in order to recognize a
constant gross margin over the term of such contracts. Contract cost
(reversals) of ($4,000) in 1994, ($333,000) in 1993, and ($392,000) in 1992,
respectively, are included in costs and expenses in the statement of operations
and relate to the reversal of previous accruals to provide constant gross
margins over the terms of the contracts. Contract cost accruals result in the
recognition of a portion of contract costs as expenses before they are
incurred.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
1994 COMPARED TO 1993. Selling, general, and administrative expenses
increased to $13.7 million in 1994 from $7.3 million in 1993. The increase was
primarily attributable to the increase to the allowance for doubtful accounts
of $5,854,000, which is discussed under "Overall Operating Results." Also, the
Company increased its sales and marketing activities, including increased
costs for the purpose of further market penetration of the WorkBench and the
Company's other products.
1993 COMPARED TO 1992. Selling, general and administrative costs
decreased to $7.3 million in 1993 as compared to $8.2 million in 1992. The
decrease was primarily attributable to reorganization of the exploration and
production division's sales and marketing staff.
SOFTWARE RESEARCH AND DEVELOPMENT
Following is a summary of costs of development and enhancement of the
Company's software products for 1994, 1993, and 1992, the amounts capitalized
in accordance with FASB Statement No. 86, the amounts charged to research and
development expense, the amounts of capitalized costs amortized, and the total
amounts recognized as expense in the statements of operations.
<TABLE>
<CAPTION>
Total Total
Software Amount Amount Amount Charges to
Year Expenditures Capitalized Expensed Amortized Earnings
(In thousands)
<S> <C> <C> <C> <C> <C>
1994 $6,392 $5,599 $ 793 $4,589 $5,382
1993 5,579 4,440 1,139 4,144 5,283
1992 6,924 5,844 1,080 3,628 4,708
</TABLE>
The capitalized software costs of $5.6 million for 1994, include a
one-time payment by the Company of $100,000 to acquire a paid-up software
license for software owned by a third party that is included as a component of
several of the Company's software products. The Company had previously paid
royalties to the third party equal to a percentage of the Company's revenue
from those products. As a result of this payment, the Company will not be
required to pay such royalties in the future.
The Company has continued its commitment to the development and
enhancement of its software products. Capitalized software costs increased in
1994 partly as a result of acceleration of development activities for the
WorkBench. These activities were accelerated to enable providing an enhanced
product to the marketplace, which the Company believes will complement the
increased sales and marketing efforts.
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<PAGE> 27
The Company capitalizes qualifying costs incurred in developing and
enhancing its software products in accordance with FASB Statement 86 upon
determining technological feasibility with respect to the product or
enhancement. See Note 1 to the Consolidated Financial Statements. Capitalized
costs of each software product are amortized over the applicable useful life of
that product. The capitalized software development costs of the Company's
stand-alone software products are amortized over a 13-year useful life because
the fundamental equations that represent the foundations of these software
products are based upon unchanging scientific principles and thus management
believes these products have useful lives that are relatively longer than other
software products. The unchanging characteristics of the underlying
fundamental equations that represent the foundation of the Company's software
products also means that technological feasibility of new products and
enhancements is generally determined relatively early in the development
process. Thus, in accordance with Statement 86, the Company begins
capitalizing qualifying software development costs at a relatively earlier
stage than may be the case with other software companies.
The Company amortizes the capitalized costs of Petroleum WorkBench and
Sammi over a seven-year period. Although the amortization periods utilized by
the Company for its products are longer than the amortization periods generally
used in the software industry, management believes that these periods are
consistent with generally accepted accounting principles and are appropriate
based upon the relatively longer useful lives of the Company's software
products.
Capitalized software is stated at the lower of cost or net realizable
value. The Company capitalizes costs of purchased software and qualifying
internal costs of developing and enhancing its software products, in accordance
with FASB Statement 86.
Amortization of capitalized software costs is determined each year
based on the greater of: (1) the amount computed using the ratio of current
year gross revenues to the sum of current and anticipated future gross revenue
for that product, or (2) straight-line amortization. The Company uses the
following useful lives in computing straight-line amortization: basic
technology for exploration, production, and pipeline software products and
enhancements, 13 years; Petroleum WorkBench and Sammi, 7 years.
Effective January 1, 1994, the Company allocated 67% of the net book
value of its basic technology computer aided production software products,
amounting to $9,850,000, to the carrying value of the Petroleum WorkBench.
Petroleum WorkBench is an integrated software system that includes the basic
technology production software products. Petroleum WorkBench, which operates
on workstations and personal computers, enables integrated use of the basic
technology software products more quickly and efficiently than with individual
and non-integrated products. The Company will also continue to market the
basic technology production software products on a stand-alone basis.
The amounts allocated were substantially in proportion to respective
estimated future revenue projections for the Petroleum WorkBench and the basic
technology software products. The amounts allocated to the Petroleum WorkBench
are being amortized over a 7-year period commencing January 1, 1994. The
Company is continuing to amortize the remaining unamortized cost of the basic
technology software products over 13 years.
FOREIGN EXCHANGE GAINS (LOSSES)
The Company's foreign exchange gains and losses relate principally to
the effects of fluctuations in the exchange rate of the British pound on
transactions of the Company's subsidiary in the United Kingdom that are
denominated in other currencies.
In 1994 and 1993, the Company recognized net foreign exchange losses
of $84,000 and $141,000, respectively, primarily because of strengthening of
the British pound against the U.S. dollar. In 1992 the Company recognized net
foreign exchange gains of $116,000 principally as a result of the weakening of
the British pound against the U.S. dollar.
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<PAGE> 28
INTEREST INCOME (EXPENSE)
The following table summarizes the components of interest income
(expense) during 1994, 1993, and 1992. The interest capitalized was included
as a component of the capitalized cost of software development projects in
progress in accordance with FASB Statement No. 34.
<TABLE>
<CAPTION>
Interest
Interest Interest Interest Income
Year Income Incurred Capitalized (Expense)
(In thousands)
<S> <C> <C> <C> <C>
1994 $21 $(754) $350 $(383)
1993 17 (966) 285 (664)
1992 20 (680) 293 (367)
</TABLE>
INFLATION
The Company's results of operations have not been affected by
inflation and management does not expect inflation to have a significant effect
on its operations in the future.
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<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF EHRHARDT KEEFE STEINER & HOTTMAN PC 30
REPORT OF HEIN + ASSOCIATES LLP 31
REPORT OF ERNST & YOUNG LLP 32
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1994 AND 1993 33
CONSOLIDATED STATEMENTS OF OPERATIONS FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED DECEMBER 31, 1994 34
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994 35
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED DECEMBER 31, 1994 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 37
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES: II - VALUATION AND
QUALIFYING ACCOUNTS 54
</TABLE>
All other schedules have been omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
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<PAGE> 30
REPORT OF EHRHARDT KEEFE STEINER & HOTTMAN PC
The Board of Directors and Stockholders
Scientific Software-Intercomp, Inc.
Denver, Colorado
We have audited the accompanying consolidated balance sheet of Scientific
Software-Intercomp, Inc. and subsidiaries as of December 31, 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. Our audit also included the financial statement
schedules as of and for the year ended December 31, 1994 listed in the Index at
Item 8. These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Scientific
Software-Intercomp, Inc. and subsidiaries as of December 31, 1994, and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects, the information set forth therein.
Ehrhardt Keefe Steiner & Hottman PC
Certified Public Accountants
Denver, Colorado
February 2, 1996
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<PAGE> 31
REPORT OF HEIN + ASSOCIATES LLP
This report is a copy of a previously issued Hein + Associates LLP audit
report. Hein + Associates LLP resigned as Company auditors on June 30, 1995,
has not withdrawn its opinion for 1993, but has declined to reissue this
report. The 1993 financial statements included in this report are the same as
the audited financial statements previously filed in the Form 10-K for that
year. In the opinion of management, no events have occurred that would require
any change to the financial statements covered by the report.
Hein + Associates LLP declined to reissue its report initially unless it was
paid disputed audit fees for 1994 and subsequently reiterated its decline
without explanation.
The Board of Directors and Stockholders
Scientific Software-Intercomp, Inc.
Denver, Colorado
We have audited the accompanying consolidated balance sheet of Scientific
Software-Intercomp, Inc. and subsidiaries as of December 31, 1993, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. Our audit also included the financial statement
schedules as of and for the year ended December 31, 1993 listed in the Index at
Item 8. These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Scientific
Software-Intercomp, Inc. and subsidiaries as of December 31, 1993, and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects, the information set forth therein.
HEIN + ASSOCIATES
Certified Public Accountants
Denver, Colorado
March 21, 1994
-31-
<PAGE> 32
REPORT OF ERNST & YOUNG LLP
This report is a copy of a previously issued Ernst & Young LLP audit report.
Ernst & Young LLP resigned as Company auditors on August 5, 1993, has not
withdrawn its opinion for 1992, but has declined to reissue this report. The
1992 financial statements included in this report are the same as the audited
financial statements previously filed in the Form 10-K for that year. In the
opinion of management, no events have occurred that would require any change to
the financial statements covered by the report.
The Company's management understands that Ernst & Young LLP has declined to
reissue its report in light of the problems relating to the value added
reseller (VAR) contracts because the reissuance of said report would require an
amount of time and expense so as to make reissuance impracticable.
To the Board of Directors and Stockholders
Scientific Software-Intercomp, Inc.
We have audited the accompanying consolidated balance sheet of Scientific
Software-Intercomp, Inc. as of December 31, 1992, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years in the period ended December 31, 1992. Our audits also included the
financial statement schedules as of and for the years ended December 31, 1992
and 1991 listed in the Index at Item 14(a). These financial statements and
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Scientific
Software-Intercomp, Inc. at December 31, 1992, and the consolidated results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1992, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects, the information set forth therein.
ERNST & YOUNG
Denver, Colorado
April 14, 1993
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<PAGE> 33
SCIENTIFIC SOFTWARE-INTERCOMP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 588 $ 139
Accounts receivable, net of allowance for doubtful 6,145 10,317
accounts of $4,617and $831 . . . . . . . . . . . . . . . . . . . . . .
Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,973 4,476
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,055 765
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 12,761 15,697
----------- -----------
Software, net of accumulated amortization of
$25,524 and $21,102 . . . . . . . . . . . . . . . . . . . . . . . . . . 27,656 26,646
----------- -----------
Property and Equipment, net of accumulated
depreciation and amortization of $5,589 and $5,094 . . . . . . . . . . 1,917 1,431
----------- -----------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,210 2,129
----------- -----------
$ 44,544 $ 45,903
=========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK,
AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable and current portion of long-term obligations . . . . . . . $ 286 $ 652
Notes payable to bank . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 ---
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,703 3,260
Accrued salaries and fringe benefits . . . . . . . . . . . . . . . . . 1,387 2,881
Accrued lease obligations . . . . . . . . . . . . . . . . . . . . . . . 570 403
Deferred maintenance and other revenue . . . . . . . . . . . . . . . . 2,010 2,556
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . 1,339 1,582
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 9,295 11,334
Accrued Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . 720 1,128
----------- -----------
Long-Term Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 343 5,402
----------- -----------
Convertible Debentures . . . . . . . . . . . . . . . . . . . . . . . . . 1,750 3,500
----------- -----------
Redeemable Preferred Stock
Series A Redeemable Convertible Preferred Stock,
$5 par value; 1,200,000 shares authorized,
800,000 shares issued and outstanding . . . . . . . . . . . . . . . . . 4,000 4,000
----------- -----------
Commitments and Contingencies (Notes 8 and 9)
Stockholders' Equity
Common stock, no par value; $.10 stated value; 25,000,000
and 10,000,000 shares authorized, respectively; 8,064,000
and 4,667,000 shares issued and outstanding, respectively . . . . . . 806 467
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,233 35,860
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (20,046) (15,156)
Cumulative foreign currency translation adjustment . . . . . . . . . . (557) (632)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 28,436 20,539
----------- -----------
$ 44,544 $ 45,903
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-33-
<PAGE> 34
SCIENTIFIC SOFTWARE-INTERCOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For The Years Ended December 31,
------------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Revenue
Consulting and training . . . . . . . . . . . . $ 15,038 $ 17,696 $ 16,523
Licenses and maintenance . . . . . . . . . . . 12,431 12,111 12,410
Other . . . . . . . . . . . . . . . . . . . . . 440 507 291
------------ ------------ ------------
27,909 30,314 29,224
------------ ------------ ------------
Costs and Expenses
Costs of consulting and training . . . . . . . 11,274 12,464 12,042
Costs of licenses and maintenance,
including software amortization of
$4,589, $4,144, and $3,628 . . . . . . . . . . 6,043 6,561 6,153
Contract cost accruals (reversals) . . . . . . (4) (333) (392)
Costs of other revenue . . . . . . . . . . . . 264 278 250
Selling, general, and administrative . . . . . 13,702 7,313 8,182
Software research and development . . . . . . . 793 1,139 1,080
------------ ------------ ------------
32,072 27,422 27,315
------------ ------------ ------------
Income (Loss) from Operations (4,163) 2,892 1,909
Other Income (Expense):
Interest income (expense) . . . . . . . . . . . (383) (664) (367)
Foreign exchange gains (losses) . . . . . . . . (84) (141) 116
------------ ------------ ------------
Income (Loss) Before Income Taxes . . . . . . . . (4,630) 2,087 1,658
Provision For Income Taxes . . . . . . . . . . . 260 375 287
------------ ------------ ------------
Net Income (Loss) $ (4,890) $ 1,712 $ 1,371
============ ============ ============
Weighted Average Number of Common and
Common Equivalent Shares Outstanding:
Primary . . . . . . . . . . . . . . . . . . . . 6,468 5,354 5,137
============ ============ ============
Fully diluted . . . . . . . . . . . . . . . . . 6,568
============ ============
Income (Loss) Per Common and
Common Equivalent Share:
Primary . . . . . . . . . . . . . . . . . . . . $ (0.75) $ 0.32 $ 0.27
============ ============ ============
Fully diluted . . . . . . . . . . . . . . . . . $ 0.31
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-34-
<PAGE> 35
SCIENTIFIC SOFTWARE-INTERCOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Stock currency Treasury Stock
----------------- Paid-in Accumulated Translation ------------------ Stockholders'
Shares Amount Capital Deficit Adjustment Shares Amount Equity
----- ---- ------- -------- ----- ---- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992 . . . . . 4,141 $414 $34,504 $(18,239) $(438) (131) $(425) $15,816
Compensation, services, and
vendor payments . . . . . . . . . 320 32 765 --- --- 131 425 1,222
Foreign currency translation
adjustment . . . . . . . . . . . --- --- --- --- (117) --- --- (117)
Net income . . . . . . . . . . . . --- --- --- 1,371 --- --- --- 1,371
----- ---- ------- -------- ----- ---- ----- -------
Balance, December 31, 1992 . . . . 4,461 446 35,269 (16,868) (555) --- --- 18,292
Stock sold for cash . . . . . . . . 16 2 46 --- --- --- --- 48
Compensation, services, and
vendor payments . . . . . . . . . 190 19 545 --- --- --- --- 564
Foreign currency translation
adjustment . . . . . . . . . . . --- --- --- --- (77) --- --- (77)
Net income . . . . . . . . . . . . --- --- --- 1,712 --- --- --- 1,712
----- ---- ------- -------- ----- ---- ----- -------
Balance, December 31, 1993 . . . . 4,667 467 35,860 (15,156) (632) --- --- 20,539
Stock sold for cash . . . . . . . . 2,667 267 10,471 --- --- --- --- 10,738
Conversion of convertible
debentures into common stock . . 654 65 1,566 --- --- --- --- 1,631
Compensation and services . . . . . 76 7 336 --- --- --- --- 343
Foreign currency translation
adjustment . . . . . . . . . . . --- --- --- --- 75 --- --- 75
Net (loss) . . . . . . . . . . . . --- --- --- (4,890) --- --- --- (4,890)
----- ---- ------- -------- ----- ---- ----- -------
Balance, December 31, 1994 . . . . 8.064 $806 $48,233 $(20,046) $(557) --- $ --- $28,436
===== ==== ======= ======== ===== ==== ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-35-
<PAGE> 36
SCIENTIFIC SOFTWARE-INTERCOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Years Ended
-------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . . . . $(4,890) $ 1,712 $ 1,371
------- ------- -------
Adjustments: . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . 5,329 4,758 4,299
Contract cost accruals (reversals) . . . . . . . . (4) (333) (392)
Provision for losses on accounts receivable . . . 5,917 165 ---
Compensation and services paid in stock . . . . . --- 27 394
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
and work in progress . . . . . . . . . . . . . (2,439) (2,700) (1,583)
(Increase) decrease in other assets . . . . . . (230) (441) 461
Increase (decrease) in accounts payable and
accrued expenses . . . . . . . . . . . . . . . (1,947) 377 (672)
Decrease in accrued lease obligations . . . . . (241) (332) (539)
Increase (decrease) in deferred revenue . . . . (546) 55 113
------- ------- -------
Total adjustments . . . . . . . . . . . . . . . . 5,839 1,576 2,081
------- ------- -------
Net cash provided by operating activities . . . . 949 3,288 3,452
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized software costs . . . . . . . . . . . . (5,599) (4,400) (5,844)
Purchases of equipment . . . . . . . . . . . . . . (1,235) (619) (483)
------- ------- -------
Net cash utilized in investing activities . . . . (6,834) (5,019) (6,327)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of stock . . . . . . . . . . . . . . . . . . 10,738 48 205
Bank borrowings . . . . . . . . . . . . . . . . . . 1,104 531 749
Repayments of bank borrowings . . . . . . . . . . . (5,132) (212) ---
Proceeds from issuance of convertible debentures . --- 921 2,275
Repayments of other obligations . . . . . . . . . . (397) (44) (149)
------- ------- -------
Net cash provided by financing activities . . . . 6,313 1,244 3,080
------- ------- -------
Effect of exchange rates on cash . . . . . . . . . . 21 (31) (57)
------- ------- -------
Net increase (decrease) in cash and equivalents . . . 449 (518) 148
Cash and cash equivalents at beginning of year . . . 139 657 509
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . $ 588 $ 139 $ 657
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest, net of amounts capitalized . . . . . . . $ 437 $ 681 $ 374
Income taxes . . . . . . . . . . . . . . . . . . . 166 264 180
Obligations incurred in purchases of equipment . . . --- 93 ---
Exchange of convertible debenture for common stock . 1,750 --- ---
Software and equipment purchased for stock . . . . . --- 48 ---
Prior compensation and services paid in stock . . . . 343 449 584
</TABLE>
The accompanying notes are an integral part of the financial statements.
-36-
<PAGE> 37
SCIENTIFIC SOFTWARE-INTERCOMP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Scientific Software-Intercomp, Inc. ("the Company") develops and
markets sophisticated software for the development and production and pipeline
and surface facilities areas of the worldwide oil and gas industry and for
graphic user interface applications. The Company provides consulting and
technical support services in each of these areas.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Scientific Software-Intercomp, Inc. ("the Company"), and its wholly-owned
subsidiaries, after elimination of all significant intercompany balances and
transactions.
LIQUIDITY
The liquidity and financial condition of the Company improved
significantly during 1994 as a result of the sale of common stock in the June
1994 public offering and other capital transactions described below. At
December 31, 1994, the Company's working capital ratio was 1.4 to 1, based on
current assets of $12.7 million and current liabilities of $9.2 million. The
Company's working capital ratio at December 31, 1993, was 1.39 to 1. Total
stockholders' equity increased to $28.4 million at December 31, 1994, from
$20.5 million at December 31, 1993.
At December 31, 1993 and 1992, the Company had positive working
capital of $4.4 million and $1.9 million, respectively. During 1992 and 1993,
the Company undertook a series of steps to increase its financial flexibility
and liquidity. In September 1992, the Company issued a $2.5 million 7-year
convertible debenture to Renaissance Capital Partners II, Ltd. ("Renaissance")
and in September 1993 issued a $1.0 million 7-year convertible debenture to
Renaissance. See Note 3 to the Consolidated Financial Statements. In January
1994, the Company extended the maturity of its revolving credit facility, and
the related guarantee issued by the United States Export-Import Bank, through
January 1995. The $5.0 million outstanding under the Company's revolving credit
facility at December 31, 1993 was classified as a long-term liability.
The Company believes that its improved financial condition and
liquidity will enable increased efforts aimed at further market penetration of
its new WorkBench and Sammi products, as well as increased efforts aimed at
further market penetration of its traditional products and services.
The Company's working capital and cash requirements will continue to
be influenced by the level of software research and development costs. During
the years ended December 31, 1994 and 1993, the Company reduced the level of
software research and development costs, in the aggregate and as a percentage
of total costs incurred (excluding software amortization), to $6.4 million and
20%, and $5.5 million and 20%, respectively, from a high of $9.2 million and
31%, respectively, during the year ended December 31, 1990. Although software
research and development costs will continue, management expects these costs to
decrease as a percentage of revenue in the future. In an effort to reduce the
internal capital requirements for these projects, the Company actively pursues
opportunities to fund software research and development costs through
development projects with oil and gas industry partners, government agencies
and others. In this type of funded development project, participating
companies or other entities provide all or a portion of the funds required to
develop or enhance a software product in exchange for access to the resulting
software at discounted
-37-
<PAGE> 38
or nominal prices with the Company retaining ownership and licensing rights to
the product. In accordance with generally accepted accounting principles, the
Company generally records as consulting revenue amounts received from these
third parties and capitalizes the qualifying portion of related costs incurred
as software development costs in accordance with FASB Statement 86.
The Company believes that (a) amounts expected to continue to be
available under the Company's revolving credit facility and (b) internally
generated funds, should provide the Company with sufficient liquidity and
working capital to meet its anticipated operating needs. There can be no
assurance, however, that the Company will generate sufficient cash flow from
operations to meet its future operating needs or be successful in obtaining any
additional debt or equity financing.
REVENUE
The Company recognizes software license revenue on delivery and
recognizes maintenance revenue on a straight-line basis over the term of the
contract.
Beginning in 1991 the Company entered into certain combined software
and service contracts pursuant to which the Company provides off-the-shelf
software, combined with pipeline engineering services, relating to leak
detection and operations analysis of pipeline networks. The engineering
services provided pursuant to these contracts include analysis of the
characteristics of the client's specific pipeline network and entering these
characteristics into the Company's software. Programming changes to the
off-the-shelf software are not necessary for completion of the contract. The
Company also markets the off-the-shelf software for use by clients, as is,
without the services included in these contracts. The Company measures
progress-to-completion for combined software and services contracts on a value
added output basis for the off-the-shelf software portion of the contracts
when: (1) a license for the off-the-shelf software has been executed that is
enforceable for the customary price of the Company's off-the-shelf software,
(2) the off-the-shelf software has been installed on the project computer, and
(3) the installed off-the-shelf software has been used for completing and
providing to the client specifications for the engineering services on the
project, which have been accepted by the client. The Company measures
progress-to-completion for the engineering services portion of the contracts
based on labor hours incurred. Contract costs are recognized based on the
percentage of completion applied to total estimated project costs, resulting in
a constant gross margin percentage over the term of the contract. Net contract
cost (reversals) of ($4,000), ($333,000), and ($392,000), are included in costs
and expenses in the statements of operations for 1994, 1993 and 1992,
respectively, related to the accrual and reversal of costs to provide the
constant gross margin over the term of each contract.
Revenue earned in performance of time and material contracts is
recognized at contractual rates as labor hours and associated costs are
incurred. Fixed-price contract revenue is recognized using the percentage of
completion method, calculated based on the ratio of labor hours incurred to
total projected labor hours. Revenue accrued under time and material contracts
is classified as work in progress if contractual milestones for billing have
not been reached. Such amounts are later billed in accordance with applicable
contract terms. The work in progress amounts at December 31, 1994, are
expected to be billed and collected by December 31, 1995. Losses on contracts
accounted for using the percentage of completion method are recognized at the
time they are identified. Costs incurred for specific anticipated contracts
are deferred when recoverability of the costs from the anticipated contract is
determined to be probable.
Work in progress at December 31, 1994 and 1993, includes $301,000 and
$314,000, respectively, related to fixed price contracts for the development of
software that is funded by others. The revenue on these contracts is
recognized using the percentage of completion method, and related qualifying
software development costs are capitalized if the Company retains ownership and
the right to market the developed software.
-38-
<PAGE> 39
Part of the Company's marketing strategy has been to establish
strategic alliances with quality VARs. VARs license the Company's software
products for remarketing and sublicensing to end users or to other VARs, either
for use on a specific project for a specific customer or for general marketing
to the VARs' current and future customers. The Company's VARs are generally
substantial companies with long operating histories. The software products
licensed to VARs are established, proven products that have long been widely
accepted in the marketplaces served by the Company.
In some cases, primarily to obtain preferential pricing, a VAR makes
an unconditional commitment to pay to the Company a fixed license fee for
software to be used on a specific project for a specific customer or an
unconditional commitment to pay to the Company a minimum fixed fee for the
right of general marketing to the VAR's current and future customers for a
specified period, usually one-year. In the case of general marketing rights, a
VAR is required to pay license fees as it has transactions with its customers.
On the due date or dates of a minimum fixed fee, which are payable either in
installments or at the end of the term, the VAR must pay to the Company the
amount, if any, required for total payments to equal the required minimum
fixed fee amount. General marketing VAR minimum fixed fees are not subject to
reduction based on the number of units marketed by a VAR and are not otherwise
contingent on whether the a VAR is successful in marketing the Company's
software products or otherwise.
In accounting for a VAR agreement, the Company recognizes revenue at
inception of the contract only if collection is determined to be probable and
all other requirements for revenue recognition are met. These include: (a)
delivery of all software products on all platforms that a VAR has the right to
receive, (b) reviewing the VAR's credit status to determine whether the VAR
has the financial capability to make the required fixed minimum payments,
regardless of whether the VAR is successful in marketing the Company's software
products, (c) determining that the VAR is not new, undercapitalized, or in
financial difficulty, and (d) determining that the transaction is viable for
both parties.
In the fourth quarter of 1994 the Company increased its 1994 provision
for doubtful accounts by $5,854,000, of which $1,958,000 was related to the
fixed fee payments due from VARs. The Company has determined that the chance
is remote that it will be able to collect accounts receivable of $2,118,000, of
which $1,437,000 is related to fixed fee amounts from VARs. Accordingly, in
the December 31, 1994 balance sheet, the Company has written off accounts
receivable totaling $2,118,000. The Company had previously filed a Form 10-K
with unaudited financial statements for the year ended December 31, 1994 which
showed a fourth quarter provision for doubtful accounts in the amount of
$2,443,000. The increase of $3,411,000 is attributable to several accounts
which the Company has since been unable to collect and the Company, upon the
basis of facts and circumstances subsequent to the previously filed Form 10-K,
has determined that collection of these amounts is not now imminent.
The Company commenced and continues to have discussions with VARs that
owe the Company the remaining fixed fees and is in the process of determining
if resolutions acceptable to each VAR and the Company are possible. The need
of the Company to undertake the foregoing inquiry and the need of its auditors
to await the completion of the inquiry and to undertake their own due diligence
resulted in a substantial delay in completing the audit of the Company's 1994
financial results.
Effective with the fourth quarter of 1994 the Company is using
significantly more stringent qualitative and quantitative criteria and
guidelines in deciding if a VAR's fee should be considered a fixed fee that
enables revenue recognition at inception of the VAR arrangement if all other
revenue recognition requirements are met.
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<PAGE> 40
CAPITALIZED SOFTWARE COSTS
Capitalized software is stated at the lower of cost or net realizable
value. The Company capitalizes costs of purchased software and qualifying
internal costs of developing and enhancing its software products, in accordance
with FASB Statement 86.
Amortization of capitalized software costs is determined each year
based on the greater of: (1) the amount computed using the ratio of current
year gross revenues to the sum of current and anticipated future gross revenue
for that product, or (2) straight-line amortization. The Company uses the
following useful lives in computing straight-line amortization: basic
technology for exploration, production, and pipeline software products and
enhancements, 13 years; Petroleum WorkBench and Sammi, 7 years.
Effective January 1, 1994, the Company allocated 67% of the net book
value of its basic technology computer aided production software products,
amounting to $9,850,000, to the carrying value of the Petroleum WorkBench.
Petroleum WorkBench is an integrated software system that includes the basic
technology production software products. Petroleum WorkBench, which operates
on workstations and personal computers, enables integrated use of the basic
technology software products more quickly and efficiently than with individual
and non-integrated products. The Company will also continue to market the
basic technology production software products on a stand-alone basis.
The amounts allocated were substantially in proportion to respective
estimated future revenue projections for the Petroleum WorkBench and the basic
technology software products. The amounts allocated to the Petroleum WorkBench
are being amortized over a 7-year period commencing January 1, 1994. The
Company is continuing to amortize the remaining unamortized cost of the basic
technology software products over 13 years.
Following is a summary of capitalization and amortization for the Company's
software products.
<TABLE>
<CAPTION>
Basic
Technology
Products Other Products
(13 year life) (7 year life) Total
-------------- -------------- --------------
(In thousands)
<S> <C> <C> <C>
Capitalized Software Costs:
Balance, December 31, 1992 . . $ 31,615 $ 11,693 $ 43,308
1993 additions . . . . . . . . 2,357 2,083 4,440
-------------- -------------- --------------
Balance, December 31, 1993 . . 33,972 13,776 47,748
1994 additions . . . . . . . . 2,768 2,831 5,599
Allocations to WorkBench . . . (9,850) 9,850 ---
Retirements . . . . . . . . . (167) (167)
-------------- -------------- --------------
Balance, December 31, 1994 . . $ 26,723 $ 26,457 $ 53,180
============== ============== ==============
Accumulated Amortization:
Balance, December 31, 1992 . . $ 14,041 $ 2,917 $ 16,958
1993 amortization expense . . 2,369 1,775 4,144
-------------- -------------- --------------
Balance, December 31, 1993 . . 16,410 4,692 21,102
1994 amortization expense . . 1,166 3,423 4,589
Retirements . . . . . . . . . (167) (167)
-------------- -------------- --------------
Balance, December 31, 1994 . . $ 17,409 $ 8,115 $ 25,524
============== ============== ==============
</TABLE>
The Company capitalized interest costs of $350,000, $285,000, and
$293,000, during the years ended December 31, 1994, 1993, and 1992,
respectively, as part of the cost of software development projects in progress.
-40-
<PAGE> 41
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and depreciation and
amortization are provided on a straight-line basis over the estimated useful
lives of these assets. Maintenance and repairs are charged to expense as
incurred. The cost and accumulated depreciation and amortization of property
and equipment sold or otherwise disposed of are retired from the accounts and
the resulting gain or loss is included in profit or loss in the period
realized. Total depreciation expense was $740,000, $614,000, and $671,000 for
the years ended December 31, 1994, 1993, and 1992, respectively.
Following are the components of property and equipment:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Properties and leasehold improvements . . . . . . . . . $ 402 $ 356
Office furniture and equipment . . . . . . . . . . . . 2,406 2,351
Computer equipment . . . . . . . . . . . . . . . . . . 4,698 3,818
------- -------
7,506 6,525
Less, accumulated depreciation and amortization . . . . 5,589 5,094
------- -------
$ 1,917 $ 1,431
======= =======
</TABLE>
FOREIGN CURRENCY TRANSLATION
Gains and losses from the effects of exchange rate fluctuations on
transactions denominated in foreign currencies are included in results of
operations. Assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at period-end exchange rates, and their revenue
and expenses are translated at average exchange rates for the period. Deferred
taxes have not been allocated to the cumulative foreign currency translation
adjustment included in stockholders' equity because there is no intent to
repatriate earnings of the foreign subsidiaries.
INCOME TAXES
The Company accounts for income taxes in accordance with FASB
Statement No. 109, Accounting for Income Taxes. Under the provisions of
Statement 109, a deferred tax liability or asset is provided in the financial
statements by applying the provisions of applicable tax laws to measure the
deferred tax consequences of temporary differences that will result in net
taxable or deductible amounts in future years as a result of events recognized
in the financial statements in the current or preceding years. The types of
differences between the tax bases of assets and liabilities and their financial
reporting amounts that give rise to significant portions of the temporary
differences include: software development expenditures capitalized for books
and deducted currently for taxes and related amortization, depreciation of
property and equipment, amortization of rental obligations, losses accrued for
book purposes, the recognition of software license revenues, and goodwill
determined for tax purposes that is not deductible. Investment tax credits are
recognized using the flow-through method.
Foreign subsidiaries are taxed according to applicable laws of the
countries in which they do business. The Company has not provided U.S. income
taxes that would be payable on remittance of the cumulative undistributed
earnings of foreign subsidiaries because such earnings are intended to be
reinvested for an indefinite period of time. At December 31, 1994, the
undistributed earnings of the foreign subsidiaries were not significant.
-41-
<PAGE> 42
INCOME PER SHARE
Primary income per common and common equivalent share is computed
based on the weighted average number of common and dilutive common equivalent
shares consisting of stock options and redeemable preferred stock outstanding
during each period. For the year ended December 31, 1994, no common stock
equivalents and stock options are included in the income per share calculation.
Fully diluted income per share assumes the effects of conversion of all
potentially dilutive securities, including the convertible debentures (see Note
3). Fully diluted earnings per share is not presented for 1992 because the
effects of assumed conversion would be antidilutive. Fully diluted earnings
per share is not presented for 1994 because of the net loss.
CASH EQUIVALENTS
For purposes of the consolidated financial statements, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
NOTE 2 - COMPLETION OF PUBLIC OFFERING OF COMMON STOCK
On June 30, 1994, the Company sold 2.0 million newly issued shares of
common stock in a public offering from which the Company received net proceeds
of $8.1 million, net of related costs of approximately $270,000. The Company
used the proceeds from the public offering to repay its bank indebtedness of
$5.1 million, to reduce accounts payable, and to increase working capital.
In July 1994 the underwriters of the public offering exercised an
overallotment option, resulting in the sale by the Company of 383,000
additional newly issued shares of common stock, from which the Company received
net proceeds of approximately $1.6 million.
Simultaneously with completion of the public offering, Renaissance
Capital Partners II, Ltd. ("Renaissance") converted $1.75 million in principal
amount of convertible debentures (see Note 3) into shares of common stock,
which Renaissance sold in the public offering. As a result of the Renaissance
conversion, the Company reduced paid-in capital by $119,000 for unamortized
debt issuance costs related to the converted debentures.
NOTE 3 - BANKING ARRANGEMENTS, LONG-TERM OBLIGATIONS AND NOTE PAYABLE
BANKING ARRANGEMENTS
Effective September 21, 1994, the Company established a new primary
banking relationship, which includes a loan agreement with the bank that
provides for a revolving credit facility pursuant to which the Company may
utilize up to $6.0 million for: (a) short-term borrowings for working capital
purposes and (b) the issuance of letters of credit for bid guarantees,
performance bonds, and advance payment guarantees.
Borrowings and outstanding letters of credit are collateralized by
substantially all the Company's assets, excluding those of the Company's
Canadian subsidiary. The maximum amount of cash borrowings and letters of
credit that may be outstanding at any time is determined by a borrowing base
formula related to available collateral. The credit facility consists of a
foreign portion under which up to $4.5 million cash borrowings and letters of
credit may be outstanding if sufficient collateral of foreign accounts
receivable is available and a domestic portion under which up to $1.5 million
of cash borrowings and letters of credit may be outstanding if sufficient
collateral of domestic accounts receivable is available. At December 31, 1994,
the Company elected to limit insurance coverage of domestic accounts receivable
because the Company did not require financing to the full extent of the
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<PAGE> 43
revolving credit facility. This enabled the Company to reduce insurance
premium costs and decreased the amount of available credit to $1.4 million. On
a fully-guaranteed, fully-insured basis, the Company estimates that qualifying
collateral would have resulted in total available credit of approximately $4.8
million at December 31, 1994.
The foreign portion of the credit facility is supported by a $4.5
million guarantee by the Export-Import Bank of the United States. The
revolving credit facility is available through July 15, 1995, concurrent with
the term of the current Export-Import Bank guarantee. The Company believes
that, as it has for a number of years, the Export-Import Bank will continue to
grant additional terms of its guarantee. The Company intends to request an
increase to the amount guaranteed to $5 million if necessary for working
capital needs. The Company expects that the Export-Import Bank would agree to
such an increase, if requested.
As of December 31, 1994, the borrowing base, amounts of short-term
cash borrowings and letters of credit outstanding, and credit available under
the revolving credit facility were as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Revolving credit facility limit . . . . . . . . $6,000
======
Borrowing base (limited by insurance coverage
and amount of qualified receivables) . . . . . $3,065
======
Amounts outstanding:
Short-term cash borrowings . . . . . . . . . $1,000
Letters of credit . . . . . . . . . . . . . 707
------
$1,707
======
Credit available as of December 31, 1994 . . . $1,358
======
</TABLE>
Interest rates applicable to short-term cash borrowings under the
foreign portion of the credit facility are equal to the bank's prime rate of
interest. Interest rates applicable to short-term cash borrowings under the
domestic portion of the credit facility are equal to the bank's prime rate of
interest plus 1.5%. The weighted average interest rates incurred by the
Company were 7.5% and 8.5% in the years ended December 31, 1994 and 1993,
respectively. At December 31, 1994, the interest rates applicable to short-term
cash borrowings were 8.5% and 10.2% for the foreign and domestic portions of
the line of credit, respectively. The Company pays 2% annually for outstanding
letters of credit. The agreement requires that the Company meet certain
requirements regarding operating results and financial condition, and prohibits
the Company from paying dividends without the bank's prior written consent. As
of December 31, 1994, the Company is not in compliance with certain financial
covenants. The bank has agreed to a forbearance of these covenant violations.
The Company pays to the Export-Import Bank an annual fee of $67,500,
equal to 1.5% of the amount of the guarantee. In addition, the Company is
required to purchase credit insurance for all foreign and certain domestic
receivables at a cost of 0.25% of the amount of the insured receivables.
In January 1995, the Company's United Kingdom subsidiary obtained a
bank line of credit of $300,000 for working capital financing of its projects.
This line of credit is collateralized by a Letter of Credit for $300,000, which
was issued by the Company's primary bank pursuant to the revolving credit
facility described above. Interest related to borrowings on the United Kingdom
line of credit is charged at a rate per annum equal to the bank's prime rate of
interest plus 1.75%.
The Company's Canadian subsidiary has a bank line of credit of
approximately $650,000 for working capital financing of its projects. At
December 31, 1994, the Canadian subsidiary had no
-43-
<PAGE> 44
outstanding borrowings under this arrangement. Interest related to borrowings
on the Canadian line of credit is charged at a rate per annum equal to the
bank's prime rate of interest plus 1.25%.
CONVERTIBLE DEBENTURES
On September 30, 1992, the Company sold a $2.5 million 7-year
convertible debenture to Renaissance Capital Partners II, Ltd. ("Renaissance").
Proceeds from the sale of the convertible debenture were used to reduce
accounts payable. The debenture bears interest at 11% per annum and is
convertible into common stock of the Company at a conversion price of $2.50 per
share. The conversion price is adjustable if the Company issues significant
additional amounts of common stock for consideration less than the conversion
price of $2.50 per share. Interest is payable monthly with principal payments
of $25,000 commencing October 1, 1995.
On September 15, 1993, the Company sold a $1.0 million 7-year
convertible debenture to Renaissance. Proceeds from the sale of the debenture
were used by the Company for general working capital purposes. The debenture
bears interest at 11% per annum, payable monthly, and is convertible into
common stock of the Company at a conversion price of $3.25 per share. The
conversion price is adjustable if the Company issues significant additional
amounts of common stock for consideration less than the conversion price of
$3.25 per share. The principal of the debenture is payable in 48 equal monthly
installments of $10,000 over a four-year period commencing October 1, 1996 and
ending September 1, 2000, and $520,000 on October 1, 2000. See Note 2
regarding conversion of a portion of the debentures.
The financing agreement with Renaissance with respect to the
debentures requires that the Company satisfy certain financial covenants
regarding operating results and financial condition. As of December 31, 1994,
the Company is not in compliance with certain financial covenants. Renaissance
has agreed to waive the covenant violations through December 31, 1995.
Renaissance is also entitled to appoint an individual to participate in an
advisory capacity to the Company's Board of Directors as long as $850,000 in
principal amount of the debentures is outstanding. Commencing on October 1,
1996, the Company has the right at any time upon 90 days prior notice to call
both debentures for redemption. A call premium applies to such redemption
equal to 15% of the amount redeemed during the fourth year of the debentures,
10% during the fifth year, and 8% thereafter. During the initial three years
of the debentures, the debentures may be called for redemption at a premium of
20% only if the common stock of the Company has been trading for at least $7.50
per share for 14 trading days prior to the redemption notice and if the Company
has earned at least $.40 per share, in the aggregate, for the last four
consecutive quarters preceding the notice.
Simultaneously with completion of the Company's June 1994 public
offering of common stock (see Note 2), the Company agreed to change the
conversion price of the $2.5 million and $1.0 million convertible debentures to
$2.67, the average conversion price of both debentures. Renaissance then
converted $1.75 million in principal amount of the $2.5 million convertible
debentures into 653,846 shares of common stock, which Renaissance sold in the
public offering. The outstanding balance of $1.75 million consists of a
balance of $750,000 on the original $2.5 million debenture and the $1 million
debenture all of which is convertible at a $2.67 per share. The Company
reduced paid-in capital by $119,000 for unamortized debt issuance costs related
to the converted debentures.
-44-
<PAGE> 45
LONG-TERM OBLIGATIONS AND NOTE PAYABLE
The components of long-term obligations are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Note payable to bank . . . . . . . . . . . . . $ --- $ 5,028
Lease Obligations . . . . . . . . . . . . . . . 286 462
Other . . . . . . . . . . . . . . . . . . . . . 343 564
------- -------
629 6,054
Less current portion . . . . . . . . . . . . . (286) (652)
------- -------
$ 343 $ 5,402
======= =======
</TABLE>
Note payable and current portion of long-term obligations at December
31, 1993 included a note payable of $120,000 owed to the Company's Chairman,
with interest at 10%. The loan was made to the Company for working capital
purposes in June 1991. The original amount of the loan was $200,000, which was
collateralized by a lien on the Company's assets subordinate to senior liens on
such assets. The remaining balance of the note was paid in 1994.
Scheduled maturities of the above long-term obligations are $286,000
in 1995, $151,000 in 1996, $98,000 in 1997, $42,000 in 1998, $26,000 in 1999,
$13,000 in 1999, and $13,000 thereafter. See Note 8 for scheduled maturities
of accrued lease obligations that have been recorded as liabilities in the
balance sheet, which are not included in these amounts.
NOTE 4 - INCOME TAXES
The components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1994 1993 1992
-------- ---------- --------
(In thousands)
<S> <C> <C> <C>
Current:
U.S. Federal . . . . . . . . . . . . . . $ --- $ 5 $ ---
Foreign . . . . . . . . . . . . . . . . 255 354 263
State . . . . . . . . . . . . . . . . . 5 16 24
-------- ---------- --------
$ 260 $ 375 $ 287
======== ========== ========
</TABLE>
Following is a summary of United States and foreign pretax accounting
income (loss):
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1994 1993 1992
--------- -------- ---------
(In thousands)
<S> <C> <C> <C>
United States . . . . . . . . . . . . . . . $ (3,150) $ 1,375 $ (148)
Foreign . . . . . . . . . . . . . . . . . . (1,480) 712 1,806
--------- -------- ---------
$ (4,630) $ 2,087 $ 1,658
========= ======== =========
</TABLE>
-45-
<PAGE> 46
Following is a reconciliation of expected income tax provisions
computed at the applicable US Federal statutory rate to the provisions for
income taxes included in the statements of operations:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1994 1993 1992
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Taxes at U.S. Federal statutory rate . . . . . . . . . . . . $ (1,071) $ 710 $ 564
Federal alternative minimum tax . . . . . . . . . . . . . . . --- 5 ---
Foreign pretax (income) loss . . . . . . . . . . . . . . . . (8) (242) (614)
State income taxes . . . . . . . . . . . . . . . . . . . . . (157) 16 24
Foreign withholding taxes . . . . . . . . . . . . . . . . . . 255 354 263
U.S. net operating loss carry forward . . . . . . . . . . . . 1,331 (569) 29
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . (90) 101 21
--------- --------- ---------
$ 260 $ 375 $ 287
========= ========= =========
</TABLE>
The components of deferred taxes in the balance sheet, which were
fully eliminated by a valuation allowance, were as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1993
-------- -------
(In thousands)
<S> <C> <C>
Taxable temporary differences:
Capitalized software . . . . . . . . . . . . (10,132) (6,755)
-------- -------
(10,132) (6,755)
-------- -------
Deductible temporary differences:
Tax basis in excess of book basis of . . . . 80 114
property and equipment . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . 1,644 173
Rent expense . . . . . . . . . . . . . . . . 328 373
Change in method of revenue . . . . . . . . --- 60
recognition . . . . . . . . . . . . . . . . . .
Vacation pay and bonuses . . . . . . . . . . 184 356
Other . . . . . . . . . . . . . . . . . . . 33 ---
-------- -------
2,269 1,352
-------- -------
Carryovers:
Net operating losses . . . . . . . . . . . . 6,815 6,053
Research and other credits . . . . . . . . . 2,917 2,325
-------- -------
9,732 8,378
-------- -------
Net deferred tax asset . . . . . . . . . . . . 1,869 2,699
Valuation allowance . . . . . . . . . . . . . . (1,869) (2,699)
-------- -------
$ --- $ ---
======== =======
</TABLE>
-46-
<PAGE> 47
At December 31, 1994, the Company had the following net operating
loss, tax credit, and capital loss carry forwards. Included in the net
operating loss and credit carry forwards are tax benefits from an acquired
company, which can be utilized to offset future taxable income of that acquired
company.
<TABLE>
<CAPTION>
Amount Expiration
-------------- ------------
(In thousands)
<S> <C> <C>
Net operating loss carry forwards for U.S.
Federal income tax purposes . . . . . . . . . . . . . $ 19,000 2000 to 2009
Net operating loss carry forwards for US
Federal alternative minimum income
tax purposes . . . . . . . . . . . . . . . . . . . . . 16,700 2000 to 2009
Research credit carry forwards . . . . . . . . . . . . . 2,300 1996 to 2009
Investment tax credit carry forwards . . . . . . . . . . 600 1995 to 2000
Alternative minimum tax credit carry forwards . . . . . . 56 2007 to 2009
</TABLE>
In addition, the Company has net operating loss carryforwards for U.K.
and Canadian income tax purposes of approximately $12.0 million and $500,000,
respectively.
During 1992, the Company and the Internal Revenue Service settled a
proposed adjustment of tax deductions claimed in prior years for amortization
of software acquired in connection with the acquisition of a business. The
terms of the settlement resulted in a reallocation of acquisition cost for tax
purposes of approximately $4.5 million from software to goodwill, which is not
deductible in computing taxable income. The Company's net operating loss carry
forwards were reduced by the amount of acquisition cost allocated to goodwill.
NOTE 5 - CAPITAL STOCK
REDEEMABLE PREFERRED STOCK
In April 1990, Halliburton Company, a major oil and gas services
supplier, invested $3.0 million in a subordinated convertible debenture of the
Company and received non-exclusive rights to market certain of the Company's
new products and to incorporate them into Halliburton's product line. During
June 1990, following approval by the Company's shareholders for the issuance of
600,000 shares of Series A Redeemable Preferred Stock, par value $5.00 per
share (the "Preferred Stock") the debenture was exchanged for 600,000 shares of
Series A Convertible Preferred Stock. The preferred stock was convertible into
600,000 shares of common stock. In September 1990 Halliburton invested an
additional $1.0 million in a convertible debenture of the Company. In August
1991 the Company's shareholders authorized an additional 600,000 shares of
Preferred Stock and Halliburton exchanged the $1.0 million debenture for
200,000 shares of such stock which were convertible into 200,000 shares of
common stock. Redemption would have been at the greater of $5.00 per common
share equivalent or the then market price for the Common Stock.
In the consolidated balance sheet, the Preferred Stock has been
classified outside stockholders' equity in accordance with Rule 5-02.28 of
Regulation S-X, which requires that preferred stock for which redemption may be
required under any conditions beyond control of the issuer be classified
outside of permanent equity.
In 1994 the Company and Halliburton agreed to amend the conversion and
redemption provisions of the 800,000 shares of the Company's Preferred Stock
held by Halliburton. As amended, the Preferred Stock is convertible into
300,000 shares of the Company's common stock instead of 800,000 shares prior to
the amendment. The Company continues to have the right to redeem the Preferred
Stock at any time and also continues to be obligated to do so on the tenth
anniversary of the amendment if the Preferred Stock is still held by
Halliburton. The Preferred Stock continues to not be entitled to receive or
accrue dividends unless the Company pays dividends on its common stock and as
before the amendment, no interest accrues on the mandatory redemption amount.
Also, the
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<PAGE> 48
joint venture of the Company and Halliburton for the development and marketing
of reservoir monitoring technology and services was terminated and the Company
received a non-exclusive license for the use of certain reservoir monitoring
technology patents.
STOCK OPTION PLANS
The Board of Directors, at its discretion, may grant options to
purchase shares of the Company's common stock to key employees, officers, and
non-employee members of the Board of Directors. Prior to 1984 the options were
non-statutory and either vested over a three-year period or were exercisable
at any time for a five or ten-year period after the date of grant or at the
date of amendment of the options. In 1984 the Company established an incentive
stock option plan for key employees, pursuant to which options to purchase up
to 350,000 shares of Common Stock were reserved for grant.
In 1993 the Company adopted a stock option plan for non-employee
directors. Pursuant to the plan, each non-employee director is granted an
option to purchase 5,000 shares of Common Stock upon initial election to the
board. Exercise prices are set at the fair market value of the Common Stock on
the date of the grant. Upon re-election to the Board, for each year to be
served, each non-employee director is granted an option to purchase 2,500
shares of Common Stock at an exercise price set at the fair market value on the
date of the grant. Pursuant to this plan, options to purchase 12,500 shares at
an exercise price of $4.50 per share were issued in 1994 and options to
purchase 17,500 shares at an exercise price of $3.50 per share were issued in
1993.
Following is a summary of stock option activity for the three years
ended December 31, 1994:
<TABLE>
<CAPTION>
Option Price (equal to Market
Value at Date of Grant)
Number of ------------------------------
Shares Per Share Total
--------- ------------- ----------
<S> <C> <C> <C>
Balance at January 1, 1992 . . . . . . . 994,388 $2.00 to 4.88 $4,145,000
Grants . . . . . . . . . . . . . . . . 10,000 3.50 to 3.75 36,000
Cancellations . . . . . . . . . . . . (139,000) 2.00 to 4.88 (605,000)
Exercises . . . . . . . . . . . . . . (11,000) 2.00 to 3.75 (28,000)
--------- ----------
Balance at December 31, 1992 . . . . . . 854,388 2.00 to 4.88 $3,548,000
Grants . . . . . . . . . . . . . . . . 219,500 3.38 to 4.15 819,000
Cancellations . . . . . . . . . . . . (32,500) 3.50 to 3.75 (128,000)
Exercises . . . . . . . . . . . . . . (12,000) 2.00 to 3.50 (35,000)
--------- ----------
Balance at December 31, 1993 . . . . . . 1,029,388 2.00 to 4.88 4,204,000
Grants . . . . . . . . . . . . . . . . 105,000 4.50 to 7.13 601,000
Expirations . . . . . . . . . . . . . (50,109) 3.13 to 4.88 (206,000)
Exercises . . . . . . . . . . . . . . (285,017) 2.00 to 4.88 (1,067,000)
--------- ----------
Balance at December 31, 1994 . . . . . . 799,262 2.00 to 4.88 3,532,000
========= ==========
Number of shares exercisable:
December 31, 1994 . . . . . . . . . . . . 661,000
=========
December 31, 1993 . . . . . . . . . . . . 750,000
=========
</TABLE>
-48-
<PAGE> 49
Exercise prices of substantially all outstanding non-statutory options
and all outstanding incentive stock options were set at the fair market value
of the stock at the date of grant. No accounting recognition is given to
options granted at exercise prices equal to fair market value at date of grant
until they are exercised at which time the proceeds received by the Company are
credited to common stock and paid-in capital.
STOCK PURCHASE PLANS
The Company has a stock purchase plan, which was adopted in 1991,
under which employees and consultants to the Company can elect to receive
shares of common stock as payment for compensation, services, and expenses.
Pursuant to the plan, the Company issued 249,953 and 100,000 shares in 1993 and
1992, respectively. The Company did not issue any shares in 1994. The Company
also has a noncontributory employee stock purchase plan for employees to
purchase common stock through payroll deductions.
NOTE 6 - RETIREMENT AND COMPENSATION PLANS
The Company maintains a qualified target benefit retirement plan that
covers substantially all of its U.S. employees. Company contributions are
based on percentages of employee compensation and are allocated to individual
accounts for each employee. Employees may voluntarily supplement the Company's
contribution to their accounts in amounts up to 10% of salary. Amounts charged
to expense for Company contributions were $221,000, $228,000, and $277,000 in
1994, 1993, and 1992, respectively. At December 31, 1994 and 1993, the Company
owed contributions to the plan of $300,000 and $216,000, respectively, which
are included in accrued salaries and benefits and were paid subsequent to each
year end.
The Company also has a non-contributory employee stock ownership plan
that covers substantially all of its U.S. employees. Company contributions
are determined by the Board of Directors and can be made in stock or cash. In
1993 the Company accrued a $180,000 contribution, which was paid in 1994 with
approximately 37,000 shares of common stock. In 1994 the Company accrued a
$220,000 contribution, which was paid in 1994 with approximately 37,000 shares
of common stock.
The Company has similar retirement benefit plans, including employee
stock ownership programs, covering employees of its foreign subsidiaries.
Amounts charged to expense for these plans were $226,000, $213,000, and
$177,000 in 1994, 1993, and 1992, respectively.
NOTE 7 - INFORMATION ABOUT OPERATIONS
FOREIGN OPERATIONS AND EXPORT REVENUE
Following is financial information for the Company's foreign subsidiaries.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . $10,798 $11,244 $11,010
======= ======= =======
Income (loss) from operations . . . . $(1,480) $ 712 $ 1,806
======= ======= =======
Identifiable assets . . . . . . . . . $ 8,134 $ 7,461 $ 8,006
======= ======= =======
</TABLE>
-49-
<PAGE> 50
U.S. export revenues by geographic area were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Far East . . . . . . . . . . . . . . . . . . . $ 3,052 $ 2,175 $ 1,044
Middle East . . . . . . . . . . . . . . . . . . 524 224 617
Europe . . . . . . . . . . . . . . . . . . . . 345 1,235 1,201
Central and South America . . . . . . . . . . . 3,534 3,262 1,993
Canada . . . . . . . . . . . . . . . . . . . . 111 352 1,169
Other . . . . . . . . . . . . . . . . . . . . . --- 16 111
------- ------- -------
$ 7,566 $ 7,264 $ 6,135
======= ======= =======
</TABLE>
INDUSTRY SEGMENT INFORMATION
The Company operates in two significant industry segments. The
Company's principal operations are in the oil and gas software and services
industry. The other segment is the Company's Kinesix Division, which markets
Sammi, a graphic user interface for use in various industries, including the
aerospace, process control, and manufacturing industries.
Following is industry segment information 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Software and Graphic User Corporate
Services Interface Headquarters Consolidated
------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
Revenue . . . . . . . . . . . . . . . . . . $24,620 $ 3,289 $27,909
======= ======= =======
Income from operations . . . . . . . . . . . $(3,955) $ (208) $(4,163)
======= ======= =======
Depreciation and amortization . . . . . . . $ 4,232 $ 1,097 $ 5,329
======= ======= =======
Capital expenditures, including
capitalized software costs . . . . . . . . . $ 4,731 $ 1,661 $ 6,392
======= ======= =======
Identifiable assets . . . . . . . . . . . . $36,712 $ 6,632 $ 1,200 $44,544
======= ======= ======= =======
Year Ended December 31, 1993:
Revenue . . . . . . . . . . . . . . . . . . $26,160 $ 4,154 $30,314
======= ======= =======
Income from operations . . . . . . . . . . . $ 2,244 $ 648 $ 2,892
======= ======= =======
Depreciation and amortization . . . . . . . $ 3,935 $ 823 $ 4,758
======= ======= =======
Capital expenditures, including
capitalized software costs . . . . . . . . . $ 4,275 $ 1,304 $ 5,579
======= ======= =======
Identifiable assets . . . . . . . . . . . . $39,097 $ 5,642 $ 1,164 $45,903
======= ======= ======= =======
Year Ended December 31, 1992:
Revenues . . . . . . . . . . . . . . . . . . $25,434 $ 3,790 $29,224
======= ======= =======
Income from operations . . . . . . . . . . $ 1,413 $ 496 $ 1,909
======= ======= =======
Depreciation and amortization . . . . . . . $ 3,705 $ 594 $ 4,299
======= ======= =======
Capital expenditures, including
capitalized software costs . . . . . . . . . $ 5,403 $ 1,521 $ 6,924
======= ======= ======= =======
Identifiable assets . . . . . . . . . . . . $38,186 $ 3,817 $ 878 $42,881
======= ======= ======= =======
</TABLE>
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<PAGE> 51
CONCENTRATIONS OF CREDIT RISK
Most of the Company's clients are large, established U.S. and foreign
companies (sometimes acting as government contractors), governments, and
national oil and gas companies of foreign governments. Qualifying foreign
receivables are insured, subject to a deductible loss amount, under an
insurance policy with the Foreign Credit Insurance Association, an agency of
the United States Export-Import Bank. The Company performs credit evaluations
of its customers' financial condition when considered necessary and generally
does not require collateral. In the fourth quarter of 1994 the Company
increased its 1994 provision for doubtful accounts by $5,854,000, of which
$1,958,000 was related to the fixed fee payments due from VARs. See Note 10 to
the Company's Consolidated Financial Statements.
At December 31, 1994 and 1993, accounts receivable, net, and work in
progress related to the following customer groups:
<TABLE>
<CAPTION>
United States Foreign Total
------------- ------- -------
(In thousands)
<S> <C> <C> <C>
December 31, 1994:
Companies . . . . . . . . . . . . . . . . . $ 1,930 $5,258 $7,188
Governments and national
petroleum companies . . . . . . . . . . . . 71 3,395 3,466
Government contractors . . . . . . . . . . . 462 2 464
------- ------- -------
$ 2,657 $10,261 $11,118
======= ======= =======
December 31, 1993:
Companies . . . . . . . . . . . . . . . . . $ 2,483 $ 6,921 $ 9,404
Governments and national
petroleum companies . . . . . . . . . . . . 5 4,325 4,330
Government contractors . . . . . . . . . . . 692 367 1,059
------- ------- -------
$ 3,180 $11,613 $14,793
======= ======= =======
</TABLE>
NOTE 8 - LEASE COMMITMENTS
At December 31, 1994, the Company's minimum cash rental commitments
under operating leases for office space and equipment were as follows:
<TABLE>
<CAPTION>
Year Amount
- ---------- --------------
(In thousands)
<S> <C>
1995 $1,515
1996 1,322
1997 1,029
1998 333
1999 299
Thereafter 2,783
</TABLE>
Total rent expense amounted to $1.4 million in each of 1994, 1993,
and 1992.
The above minimum cash rental commitments include certain amounts that
have been recorded in the balance sheet as long-term accrued lease obligations
of $720,000 and $1.1 million at December 31, 1994 and 1993, respectively, and
short-term accrued lease obligations of $570,000 and $403,000 at December 31,
1994 and 1993, respectively. When these amounts are paid, they will be
recorded as a reduction of the accrued lease obligations liability and will not
result in expense in the statement of operations. The accrued lease
obligations relate to differences in the timing of reportable rental expense
for accounting purposes and the timing of cash receipts and disbursements
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<PAGE> 52
in connection with several office lease transactions. The accrued lease
obligations will be retired as follows: $616,000 in 1995, $403,000 in 1996,
$288,000 in 1997, and $32,000 in 1998. These amounts include approximately
$49,000 in interest expense that will be recognized representing the total
discount to present value of accrued lease obligations.
NOTE 9 - CLAIMS AND CONTINGENCIES
To the knowledge of management, the only claim pending or threatened
against the Company or any of its subsidiaries which individually or
collectively could have a material adverse effect upon the Company or its
financial condition is the following:
Marshall Wolf, on his behalf and on behalf of all others similarly
situated vs. E. A. Breitenbach, R. J. Hottovy, Jimmy L. Duckworth, and
Scientific Software-Intercomp, Inc. On October 5, 1995, a claim was filed in
the United States District Court for the District of Colorado alleging that the
Defendants, who include the President and Chief Executive Officer of the
Company, its Chief Financial Officer and a former Executive Vice President,
violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5
promulgated thereunder in issuing financial reports for the first three
quarters of the Company's 1994 fiscal year which failed to comply with
generally accepted accounting principles with respect to revenues recognized
from the Company's contracts with value added resellers. The Plaintiff seeks
to have the Court determine that the lawsuit constitutes a proper class action
on behalf of all persons who purchased stock of the Company during the period
from May 30, 1994 through July 10, 1995, with certain exclusions. The
Company's independent auditors, Ehrhardt Keefe Steiner & Hottman PC, has issued
a report to the Company that the revenues from such contracts were recognized
in accordance with generally accepted accounting principles with the exception
of a $70,000 overstatement of revenue in the first quarter of 1994 which
exception they have concluded was immaterial assuming that the remaining
elements of such quarterly report were in accordance with generally accepted
accounting principles. Based thereon, it is the opinion of the Company's
counsel that the claim is without merit and it is the intention of the Company
and the other Defendants to vigorously defend the claim.
Other assets at December 31, 1994 and 1993 includes $470,000 related
to a claim for costs incurred pursuant to a gas pipeline project in India.
Depending on the amount collected on a claim by the primary contractor against
the ultimate customer, the Company could receive up to $1.4 million. An
allowance for doubtful accounts of $470,000 has been recorded as of December
31, 1994.
In 1994 the Company settled a lawsuit against Central Hispano Banco
(U.K.) Limited (the "Bank") seeking a declaratory judgment on whether the
Company was liable on the Bank's claim of $473,000 representing unpaid rent
under a computer lease that was assigned to the Bank by the now bankrupt
lessor. The settlement, which is subject to court approval, did not result in
a material gain or loss.
The Company's long-term services contracts generally include
provisions for penalty charges for delay in the completion of contracts.
Certain contracts in progress at December 31, 1994 have not been subsequently
completed by the scheduled dates. Management believes that the delays were not
caused by the Company and that no significant penalties will be incurred.
NOTE 10 - FOURTH QUARTER ADJUSTMENTS
In the fourth quarter of 1994, certain VARs of the Company's Pipeline
and Facilities division did not pay when due fixed fees for certain software
licensed for use on specific projects for specific customers and also certain
minimum fixed fees for rights of general marketing. The related transactions
were originally recorded in 1992, 1993 and the first three quarters of 1994.
In the fourth quarter of 1994 the Company increased its 1994 provision for
doubtful accounts by $5,854,000, of which $1,958,000 was related to the fixed
fee payments due from VARs. The Company has
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<PAGE> 53
determined that the chance is remote that it will be able to collect accounts
receivable of $2,118,000, of which $1,437,000 is related to fixed fee amounts
from VARs, and accordingly, in the December 31, 1994 balance sheet, the Company
has written off accounts receivable totaling $2,118,000. The Company had
previously filed a Form 10-K with unaudited financial statements for the year
ended December 31, 1994 which showed a fourth quarter provision for doubtful
accounts in the amount of $2,443,000. The increase of $3,411,000 is
attributable to several accounts which the Company has since been unable to
collect and the Company, upon the basis of facts and circumstances subsequent
to the previously filed Form 10-K, has determined that collection of these
amounts is not now imminent.
The Company commenced and continues to have discussions with VARs that
owe the Company the remaining fixed fees and is in the process of determining
if resolutions acceptable to each VAR and the Company are possible. The need
of the Company to undertake the foregoing inquiry and the need of its auditors
to await the completion of the inquiry and to undertake their own due diligence
resulted in a substantial delay in completing the audit of the Company's 1994
financial results.
The Company also recorded adjustments in the fourth quarter of 1994
related to certain fixed-price contracts. The effect of these adjustments was
to reduce revenue by approximately $300,000.
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<PAGE> 54
FINANCIAL STATEMENT SCHEDULES
SCHEDULE II
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
VALUATION RESERVES
<TABLE>
<CAPTION>
Deductions
(Write-offs of
Balance at Additions Previously
Beginning of Charged to Costs Reserved Balance at End
Period and Expenses Amounts) of Period
------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Years Ended December 31,
1994 $ 831,000 $ 5,917,000 $ (2,131,000) $ 4,617,000
========= =========== ============ ===========
1993 $ 682,000 $ 165,000 $ (16,000) $ 831,000
========= =========== ============ ===========
1992 $ 670,000 $ 100,000 $ (88,000) $ 682,000
========= =========== ============ ===========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
Accounting and Financial Disclosure
On September 24, 1993, the Board of Directors of the Company approved
the engagement of Hein + Associates LLP, Denver, Colorado, to audit and report
on the Company's financial statements for the year ended December 31, 1993. On
August 5, 1993, the Company received the resignation of Ernst & Young, Denver,
Colorado, as the Company's previous auditors.
The report of Ernst & Young LLP on the Company's financial statements
as of December 31, 1992 and 1991, and for the years then ended, did not contain
any qualifications. During the fiscal years and any subsequent interim period
preceding the resignation of Ernst & Young, there were no disagreements with
Ernst & Young on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement, if
not resolved to the satisfaction of the former accountant, would have caused it
to make reference to the subject matter of the disagreement in connection with
its report.
The Company has provided the former accountant, Ernst & Young, with a
copy of the foregoing disclosures. A letter, addressed to the Commission, by
the former accountant stating that it agrees with the above statements made by
the Company, was provided to the Commission on August 17, 1993.
No consultation occurred between the Company and Hein + Associates
during the fiscal years ended December 31, 1992 and 1991 and any subsequent
interim period prior to Hein + Associates' appointment regarding the
application of accounting principles, the type of opinion, or other information
considered by the Company in reaching a decision as to an accounting, auditing,
or financial reporting issue.
On June 30, 1995, the Company was advised by Hein + Associates that it was
resigning as the Company's auditor for its 1994 financial statements although
it was not withdrawing its audit opinion with respect to the Company's 1993
financial statements. Hein + Associates had not previously discussed the
possibility of resignation during the two month special inquiry period. Hein +
Associates did not provide the Company with any specific reason or reasons for
its resignation other than to indicate that it was due to a number of factors.
Hein + Associates has however agreed with the Company that such resignation was
not due to any disagreement with the Company over accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
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<PAGE> 55
Hein + Associates did not furnish any reason to the Company at the
time of its June 30 resignation or in the July 3 meeting, or with the July 6
communication, for its resignation and declined repeated requests from the
Company and others during the following two weeks for an explanation. On July
19, 1995 Hein + Associates furnished the Company with a letter advising it that
it had resigned because of a "risk of management misrepresentations" in the
financial statements. This was the first time any such allegation had been
made throughout the entire investigating period.
The July 19, 1995 letter of Hein + Associates also indicated that the
timing of adjustments related to the side letters was not resolved at the time
of its resignation. The Company was however led to believe through its daily
contacts with Hein + Associates that they had in fact reached agreement on the
accounting for the transactions involving the side letters, including the fact
that in mid-June Hein + Associates had approved a final draft of the financial
statements for filing with the SEC, which was then not filed only when the
additional side letter problem involving the Company's former Executive Vice
President was discovered and required analysis.
On September 22, 1995, the Board of Directors of the Company approved
the selection of Ehrhardt Keefe Steiner & Hottman PC as its auditors.
PART III
Items 10, 11, 12 and 13 of Part III (except for information required
with respect to executive officers of the Company which is set forth under Item
1, Part I of this report) have been omitted from this report. The Company has
filed a definitive proxy statement pursuant to Regulation 14A concurrently with
the filing of its initial Annual Report on Form 10-K for the year ended
December 31, 1994. The information required by Items 10, 11, 12, and 13 of
this report is included in the definitive proxy statement and is incorporated
by reference thereto into Part III of this report.
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<PAGE> 56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) 1. Financial Statements. The following financial statements are filed
as a part of this Form 10-K: The Index to Consolidated Financial
Statements is set out in Item 8 herein.
2. Financial Statement Schedules. The following financial statement
schedules are filed as a part of this Form 10-K:
The Index to Consolidated Financial Statements is set out in Item 8
herein.
3. Exhibits
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement for public offering of
common stock completed June 30, 1994 (filed as Exhibit 1.1
to the Company's Form S-1 dated May 9, 1994 and
incorporated herein by reference).
3.1 Articles of Incorporation of the Company dated February 8,
1968, (filed as Exhibit 3.1 to the Company's Report on Form
10-K for the year ended December 31, 1984, and incorporated
herein by reference).
3.2 Articles of Amendment to the Articles of Incorporation of
the Company dated May 28, 1982 (filed as Exhibit 3.2 to the
Company's Report on Form 10-K for the year ended December
31, 1984, and incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation of
the Company dated June 7, 1984 (filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-3, Registration
No. 2-95792, and incorporated herein by reference).
3.4 Certificate of Correction to the Articles of Amendment to
the Articles of Incorporation of the Company dated October
23, 1985 (filed as Exhibit 3.4 to the Company's Report on
Form 10-K for the year ended December 31, 1985, and
incorporated herein by reference).
3.5 Articles of Amendment to Articles of Incorporation of the
Company dated August 9, 1991 (filed as Exhibit 3.1 to the
Company's Report on Form 8-K dated August 27, 1991, and
incorporated herein by reference).
3.6 Articles of Amendment to Articles of Incorporation of the
Company dated June 21, 1990 (filed as Exhibit 2.1 to the
Company's Report on Form 10-Q for the quarter ended June
30, 1990, and incorporated herein by reference).
3.7 Bylaws of the Company (filed as Exhibit 3.5 to the
Company's Report on Form 10-K for the year ended December
31, 1989, and incorporated herein by reference).
3.8 Amendment to the Bylaws of the Company (filed as Exhibit
3.1 to the Company's Report on Form 10-Q for the quarter
ended June 30, 1990, and incorporated herein by reference).
3.9 Articles of Amendment to Articles of Incorporation of the
Company dated August 9, 1991 (filed as Exhibit 3.1 on Form
8-K dated August 27, 1991, and incorporated herein by
reference).
</TABLE>
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<PAGE> 57
<TABLE>
<S> <C>
3.10 Articles of Amendment to Articles of Incorporation of the
Company dated December 14, 1994 increasing the number of
shares of authorized stock.
4.1 Agreement for Purchase and Sale of Debenture dated
September 24, 1990, by and between Halliburton Company and
Scientific Software-Intercomp, Inc. (filed as Exhibit 4.6
to the Company's Report on Form 10-K for the year ended
December 31, 1990, and incorporated herein by reference).
4.2 Convertible Subordinated Debenture dated September 24,
1990, between Halliburton Company and Scientific
Software-Intercomp, Inc. (filed as Exhibit 4.7 to the
Company's report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
4.3 Convertible Debenture Loan Agreement for $2,500,000 dated
September 30, 1992 between Renaissance Capital Partners
II, Ltd. and Scientific Software-Intercomp, Inc. (filed as
Exhibit 4.1 to the Company's Form 8-K dated October 19,
1992 and incorporated herein by reference).
4.4 0First Amendment to the Convertible Debenture Loan
Agreement for an additional $1,000,000, dated September
15, 1993, between Renaissance Capital Partners II, Ltd.
and Scientific Software-Intercomp, Inc. (filed as Exhibit
4.1 to the Company's Form 8-K dated October 19, 1992 and
incorporated herein by reference).
4.5 Form of Stockholder Lock-up Agreement (filed as Exhibit
4.5 to the Company's Form S-1 dated May 9, 1994 and
incorporated herein by reference).
4.6 Letter Agreement Dated May 5, 1994 between Renaissance
Capital Partners II, Ltd. and Scientific
Software-Intercomp, Inc., regarding conversion of
debentures (filed as Exhibit 4.6 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
5.1 Opinion of Cohen Brame & Smith Professional Corporation
(filed as Exhibit 5.1 to the Company's Amendment No. 1
dated June 3, 1994 to Form S-1 dated May 9, 1994 and
incorporated herein by reference).
10.1 Partnership Agreement dated October 28, 1983 (Microcomp)
(filed as Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1983, and
incorporated herein by reference).
10.2 Incentive Stock Option Plan dated February 22, 1984 (filed
as Exhibit 10.1 to the Company's Registration Statement on
Form S-3, Registration No. 2-95792, and incorporated
herein by reference).
10.3 Form of Stock Option Agreement for stock options issued
under the informal Non-Qualified Stock Option Plan (filed
as Exhibit 4.6 to the Company's Form S-1 dated May 9, 1994
and incorporated herein by reference).
10.4 HBJ Subcontract for Supply between Spie-Capag S.A. and
Scientific Software-Intercomp, Inc. dated January 16, 1987
(filed as Exhibit 10.26 to the Company's Report on Form
10-K for the year ended December 31, 1986, and
incorporated herein by reference).
10.5 HBJ Subcontract Work Agreement between Spie-Capag S.A. and
Scientific Software-Intercomp, Inc. dated January 16,
1987 (filed as Exhibit 10.27 to the Company's Report on
Form 10-K for the year ended December 31, 1986, and
incorporated herein by reference).
</TABLE>
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<PAGE> 58
<TABLE>
<S> <C>
10.6 Bonus Plan dated June 22, 1990, between the registrant and
E. A. Breitenbach, (filed as Exhibit 10.9 to the Company's
Report on Form 10-K for the year ended December 31, 1990,
and incorporated herein by reference).
10.7 Operating Agreement dated April 26, 1990, by and between
Halliburton Company and Scientific Software-Intercomp, Inc.
(filed as Exhibit 10.11 to the Company's Report on Form
10-K for the year ended December 31, 1989, and incorporated
herein by reference).
10.8 Agreement dated July 16, 1991, between Spie-Capag, S.A. and
Scientific Software-Intercomp, Inc. (filed as Exhibit 10.13
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by
reference).
10.9 Stock Purchase Plan dated June 1991, for 100,000 shares of
Common Stock, no par value (filed with the Company's
Registration Statement on Form S-8, Registration No.
3-41463, and incorporated herein by reference).
10.10 Stock Purchase Plan as amended in September 1991, to
increase the number of shares of Common Stock, no par
value, to 350,000 (filed with the Company's Registration
Statement on Form S-8, Registration No. 3-41463, and
incorporated herein by reference).
10.11 Amended and Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990 (filed as Exhibit 4.1
to the Company's Report on Form 10-K for the year ended
December 31, 1990, and incorporated herein by reference).
10.12 Promissory Note of Scientific Software-Intercomp, Inc., to
First Interstate Bank of Denver, N.A., dated November 1,
1990, for $2,000,000 (filed as Exhibit 4.3 to the
Company's Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
10.13 Promissory Note of Scientific Software-Intercomp, Inc., to
First Interstate Bank of Denver, N.A., dated November 1,
1990, for $3,500,000 (filed as Exhibit 4.4 to the
Company's Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
10.14 Letter Agreement dated January 30, 1991 from First
Interstate Bank of Denver, N.A., modifying the Amended and
Restated Loan Agreement dated November 1, 1990 (filed as
Exhibit 4.5 to the Company's Report on Form 10-K for the
year ended December 31, 1990, and incorporated herein by
reference).
10.15 Promissory Note and security agreement by and between
Scientific Software-Intercomp, Inc., and E. A. Breitenbach
dated June 13, 1991 (filed as Exhibit 4.12 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference).
10.16 Amendment No. 1 (dated June 26, 1991) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990 (filed as Exhibit 4.8
to the Company's report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference).
</TABLE>
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<PAGE> 59
<TABLE>
<S> <C>
10.17 Amendment No. Amendment No. 2 (dated August 31, 1991) to
Amended and Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.9 to the Company's report on Form
10-K for the year ended December 31, 1991, and
incorporated herein by reference).
10.18 Amendment No. 3 (dated December 6, 1991) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.10 to the Company's report on
Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference).
10.19 Amendment No. 5 (dated February 28, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.11 to the Company's report on
Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference). (There was no
Amendment No. 4.)
10.20 Amendment No. 6 (dated May 31, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.13 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
10.21 Amendment No. 7 (dated June 30, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.14 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
10.22 Amendment No. 8 (dated September 30, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.15 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
10.23 Amendment No. 9 (dated March 31, 1993) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.16 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
</TABLE>
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<PAGE> 60
<TABLE>
<S> <C>
10.24 Amendment No. 10 (dated January 31, 1994) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.17 to the Company's Report on
Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference).
10.25 Working Capital Agreement between First Interstate Bank of
Denver, N.A., and Export-Import Bank of the United States
dated December 5, 1990 (filed as Exhibit 4.2 to the
Company's Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
10.26 Working Capital Agreement between First Interstate Bank of
Denver, N.A., and Export-Import Bank of the United States
dated January 24, 1994 (filed as Exhibit 4.18 to the
Company's Report on Form 10-K for the year ended December
31, 1993, and incorporated herein by reference).
10.27 Letter Agreement between Renaissance Capital Partners II,
Ltd. and Scientific Software-Intercomp, Inc., regarding a
$500,000 standby line of credit dated November 3, 1993
(filed as Exhibit 10.13 to the Company's Report on Form
10-K for the year ended December 31, 1993, and
incorporated herein by reference).
10.28 Employees Stock Ownership Plan and Trust as restated on
January 1, 1989 (filed as Exhibit 10.28 to the Company's
Form S-1 dated May 9, 1994 and incorporated herein by
reference).
10.29 Target Benefit Plan as restated on January 1, 1989 (filed
as Exhibit 10.29 to the Company's Form S-1 dated May 9,
1994 and incorporated herein by reference).
10.30 First Interstate Bank of Denver, N.A. Defined Contribution
Master Plan and Trust Agreement (filed as Exhibit 10.30 to
the Company's Form S-1 dated May 9, 1994 and incorporated
herein by reference).
10.31 Adoption Agreement #001 Nonstandardized Code Section
401(K) Profit Sharing Plan dated July 1, 1990 (filed as
Exhibit 10.31 to the Company's Form S-1 dated May 9, 1994
and incorporated herein by reference).
10.32 Commission Plan for Jim Duckworth for 1995 dated March 23,
1994 (filed as Exhibit 10.32 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
10.33 Scientific Software-Intercomp, Inc. Deferred Compensation
Plan (filed as Exhibit 10.33 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
10.34 Letter Agreement between Hong Kong Bank of Canada and
Intercomp Resource Development and Engineering Ltd. dated
August 3, 1993, regarding certain revolving operating
loans to Intercomp Resource Development and Engineering
Ltd. (filed as Exhibit 10.34 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
10.35 Stock Appreciation Rights Plan (filed as Exhibit 10.35 to
the Company's Form S-1 dated May 9, 1994 and incorporated
herein by reference).
</TABLE>
-60-
<PAGE> 61
<TABLE>
<S> <C>
10.36 Letter of Intent between Halliburton Company and Scientific
Software-Intercomp, Inc. dated April 22, 1994 (filed as
Exhibit 10.36 to the Company's Amendment to Form S-1
dated June 3, 1994 and incorporated herein by reference).
10.37 Business Loan Agreement for $6.5 million dated September
20, 1994, between Bank One, Boulder, N.A. and Scientific
Software-Intercomp, Inc., including Working Capital
Guarantee Agreement dated September 29, 1994, between Bank
One, Boulder, N.A. and Export-Import Bank of the United
States referred to as "Exhibit B."
10.38 Promissory Note of Scientific Software-Intercomp, Inc. to
Bank One, Boulder, N.A. for $5,000,000, dated September
20, 1994.
10.39 Promissory Note of Scientific Software-Intercomp, Inc. to
Bank One, Boulder, N.A. for $1,500,000, dated September
20, 1994.
10.40 Letter Agreement between Scientific Software-Intercomp
(U.K.) Limited and Lloyds Bank Commercial Service dated
December 30, 1994.
10.41 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
May 31, 1995, extending maturity to July 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.42 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
July 15, 1995, extending maturity to August 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.43 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
August 15, 1995, extending maturity to September 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.44 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
September 15, 1995, extending maturity to September 30,
1995 relating to original Business Loan Agreement in the
amount of $6.5 million, dated September 20, 1994.
10.45 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
September 30, 1995, extending maturity to October 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.46 Business Loan Agreement for $5.13 million dated October
15, 1995, renewing maturity to March 30, 1996, between
Bank One, Boulder, N.A. and Scientific Software-Intercomp,
Inc., including Working Capital Guarantee Agreement dated
September 21, 1995, between Bank One, Boulder, N.A. and
Export-Import Bank of the United States referred to as
"Exhibit B."
10.47 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
November 15, 1995, in the amount of $500,000.00 relating
to original Business Loan Agreement in the amount of $5.13
million, dated October 15, 1995.
21 Subsidiaries of the Company
23.1 Consent of Ehrhardt Keefe Steiner & Hottman PC
23.2 Consent of Hein + Associates LLP
23.3 Consent of Ernst & Young LLP
</TABLE>
-61-
<PAGE> 62
b) Reports on Form 8-K
July 11, 1995. Reporting resignation of the accounting
firm of Hein + Associates LLP as independent accountants
for the Registrant.
August 1, 1995. Amendment No. 1 to Form 8-K filed on July
11, 1995 attaching former accountant's letter indicating
its response to the statements made by the Registrant to
Item 4 of its Report on Form 8-K dated June 30, 1995 and
filed on or about July 8, 1995.
August 14, 1995. Amendment No. 2 to Form 8-K filed on July
11, 1995 attaching the Company's response to its former
accountant's letter indicating its response to the
statements made by the Registrant to Item 4 of its Report
on Form 8-K dated June 30, 1995 and filed on or about July
8, 1995.
September 22, 1995. Announcement of appointment of
Ehrhardt Keefe Steiner & Hottman PC as Registrant's new
auditors.
October 13, 1995. Reporting claim which was filed against
Registrant seeking to have the Court determine that the
lawsuit constitutes a proper class action on behalf of all
persons who purchased stock of the Registrant during the
period from May 20, 1994 through July 10, 1995.
January 15, 1996. Announcing George Steel as President,
Chief Operating Officer and Director of the Registrant.
-62-
<PAGE> 63
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: February 14, 1996
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
February 14, 1996 /s/ E. A. Breitenbach
----------------------------------------
E. A. Breitenbach
Chairman of the Board of Directors,
Chief Executive Officer (a principal
executive officer and director)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
/s/ E. A. Breitenbach February 14, 1996
- -----------------------------------------------------
E. A. Breitenbach, Chairman of the Board of
Directors, Chief Executive Officer (a principal
executive officer and director)
/s/ George Steel February 14, 1996
- -----------------------------------------------------
George Steel, President, Chief Operating Officer,
Director (a principal executive officer and director)
/s/ William B. Nichols February 14, 1996
- -----------------------------------------------------
William B. Nichols, Director
/s/ Edward O. Price February 14, 1996
- -----------------------------------------------------
Edward O. Price, Director
/s/ Ronald J. Hottovy February 14, 1996
- -----------------------------------------------------
Ronald J. Hottovy, Executive Vice President-Chief
Financial Officer, Treasurer, Secretary (principal
accounting officer)
-63-
<PAGE> 64
EXHIBIT INDEX
<TABLE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement for public offering of
common stock completed June 30, 1994 (filed as Exhibit 1.1
to the Company's Form S-1 dated May 9, 1994 and
incorporated herein by reference).
3.1 Articles of Incorporation of the Company dated February 8,
1968, (filed as Exhibit 3.1 to the Company's Report on Form
10-K for the year ended December 31, 1984, and incorporated
herein by reference).
3.2 Articles of Amendment to the Articles of Incorporation of
the Company dated May 28, 1982 (filed as Exhibit 3.2 to the
Company's Report on Form 10-K for the year ended December
31, 1984, and incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation of
the Company dated June 7, 1984 (filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-3, Registration
No. 2-95792, and incorporated herein by reference).
3.4 Certificate of Correction to the Articles of Amendment to
the Articles of Incorporation of the Company dated October
23, 1985 (filed as Exhibit 3.4 to the Company's Report on
Form 10-K for the year ended December 31, 1985, and
incorporated herein by reference).
3.5 Articles of Amendment to Articles of Incorporation of the
Company dated August 9, 1991 (filed as Exhibit 3.1 to the
Company's Report on Form 8-K dated August 27, 1991, and
incorporated herein by reference).
3.6 Articles of Amendment to Articles of Incorporation of the
Company dated June 21, 1990 (filed as Exhibit 2.1 to the
Company's Report on Form 10-Q for the quarter ended June
30, 1990, and incorporated herein by reference).
3.7 Bylaws of the Company (filed as Exhibit 3.5 to the
Company's Report on Form 10-K for the year ended December
31, 1989, and incorporated herein by reference).
3.8 Amendment to the Bylaws of the Company (filed as Exhibit
3.1 to the Company's Report on Form 10-Q for the quarter
ended June 30, 1990, and incorporated herein by reference).
3.9 Articles of Amendment to Articles of Incorporation of the
Company dated August 9, 1991 (filed as Exhibit 3.1 on Form
8-K dated August 27, 1991, and incorporated herein by
reference).
</TABLE>
<PAGE> 65
<TABLE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<S> <C> <C>
3.10 Articles of Amendment to Articles of Incorporation of the
Company dated December 14, 1994 increasing the number of
shares of authorized stock.
4.1 Agreement for Purchase and Sale of Debenture dated
September 24, 1990, by and between Halliburton Company and
Scientific Software-Intercomp, Inc. (filed as Exhibit 4.6
to the Company's Report on Form 10-K for the year ended
December 31, 1990, and incorporated herein by reference).
4.2 Convertible Subordinated Debenture dated September 24,
1990, between Halliburton Company and Scientific
Software-Intercomp, Inc. (filed as Exhibit 4.7 to the
Company's report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
4.3 Convertible Debenture Loan Agreement for $2,500,000 dated
September 30, 1992 between Renaissance Capital Partners
II, Ltd. and Scientific Software-Intercomp, Inc. (filed as
Exhibit 4.1 to the Company's Form 8-K dated October 19,
1992 and incorporated herein by reference).
4.4 First Amendment to the Convertible Debenture Loan
Agreement for an additional $1,000,000, dated September
15, 1993, between Renaissance Capital Partners II, Ltd.
and Scientific Software-Intercomp, Inc. (filed as Exhibit
4.1 to the Company's Form 8-K dated October 19, 1992 and
incorporated herein by reference).
4.5 Form of Stockholder Lock-up Agreement (filed as Exhibit
4.5 to the Company's Form S-1 dated May 9, 1994 and
incorporated herein by reference).
4.6 Letter Agreement Dated May 5, 1994 between Renaissance
Capital Partners II, Ltd. and Scientific
Software-Intercomp, Inc., regarding conversion of
debentures (filed as Exhibit 4.6 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
5.1 Opinion of Cohen Brame & Smith Professional Corporation
(filed as Exhibit 5.1 to the Company's Amendment No. 1
dated June 3, 1994 to Form S-1 dated May 9, 1994 and
incorporated herein by reference).
10.1 Partnership Agreement dated October 28, 1983 (Microcomp)
(filed as Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1983, and
incorporated herein by reference).
10.2 Incentive Stock Option Plan dated February 22, 1984 (filed
as Exhibit 10.1 to the Company's Registration Statement on
Form S-3, Registration No. 2-95792, and incorporated
herein by reference).
10.3 Form of Stock Option Agreement for stock options issued
under the informal Non-Qualified Stock Option Plan (filed
as Exhibit 4.6 to the Company's Form S-1 dated May 9, 1994
and incorporated herein by reference).
10.4 HBJ Subcontract for Supply between Spie-Capag S.A. and
Scientific Software-Intercomp, Inc. dated January 16, 1987
(filed as Exhibit 10.26 to the Company's Report on Form
10-K for the year ended December 31, 1986, and
incorporated herein by reference).
10.5 HBJ Subcontract Work Agreement between Spie-Capag S.A. and
Scientific Software-Intercomp, Inc. dated January 16,
1987 (filed as Exhibit 10.27 to the Company's Report on
Form 10-K for the year ended December 31, 1986, and
incorporated herein by reference).
</TABLE>
<PAGE> 66
<TABLE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<S> <C> <C>
10.6 Bonus Plan dated June 22, 1990, between the registrant and
E. A. Breitenbach, (filed as Exhibit 10.9 to the Company's
Report on Form 10-K for the year ended December 31, 1990,
and incorporated herein by reference).
10.7 Operating Agreement dated April 26, 1990, by and between
Halliburton Company and Scientific Software-Intercomp, Inc.
(filed as Exhibit 10.11 to the Company's Report on Form
10-K for the year ended December 31, 1989, and incorporated
herein by reference).
10.8 Agreement dated July 16, 1991, between Spie-Capag, S.A. and
Scientific Software-Intercomp, Inc. (filed as Exhibit 10.13
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by
reference).
10.9 Stock Purchase Plan dated June 1991, for 100,000 shares of
Common Stock, no par value (filed with the Company's
Registration Statement on Form S-8, Registration No.
3-41463, and incorporated herein by reference).
10.10 Stock Purchase Plan as amended in September 1991, to
increase the number of shares of Common Stock, no par
value, to 350,000 (filed with the Company's Registration
Statement on Form S-8, Registration No. 3-41463, and
incorporated herein by reference).
10.11 Amended and Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990 (filed as Exhibit 4.1
to the Company's Report on Form 10-K for the year ended
December 31, 1990, and incorporated herein by reference).
10.12 Promissory Note of Scientific Software-Intercomp, Inc., to
First Interstate Bank of Denver, N.A., dated November 1,
1990, for $2,000,000 (filed as Exhibit 4.3 to the
Company's Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
10.13 Promissory Note of Scientific Software-Intercomp, Inc., to
First Interstate Bank of Denver, N.A., dated November 1,
1990, for $3,500,000 (filed as Exhibit 4.4 to the
Company's Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
10.14 Letter Agreement dated January 30, 1991 from First
Interstate Bank of Denver, N.A., modifying the Amended and
Restated Loan Agreement dated November 1, 1990 (filed as
Exhibit 4.5 to the Company's Report on Form 10-K for the
year ended December 31, 1990, and incorporated herein by
reference).
10.15 Promissory Note and security agreement by and between
Scientific Software-Intercomp, Inc., and E. A. Breitenbach
dated June 13, 1991 (filed as Exhibit 4.12 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference).
10.16 Amendment No. 1 (dated June 26, 1991) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990 (filed as Exhibit 4.8
to the Company's report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference).
</TABLE>
<PAGE> 67
<TABLE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<S> <C> <C>
10.17 Amendment No. Amendment No. 2 (dated August 31, 1991) to
Amended and Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.9 to the Company's report on Form
10-K for the year ended December 31, 1991, and
incorporated herein by reference).
10.18 Amendment No. 3 (dated December 6, 1991) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.10 to the Company's report on
Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference).
10.19 Amendment No. 5 (dated February 28, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc., and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.11 to the Company's report on
Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference). (There was no
Amendment No. 4.)
10.20 Amendment No. 6 (dated May 31, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.13 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
10.21 Amendment No. 7 (dated June 30, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.14 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
10.22 Amendment No. 8 (dated September 30, 1992) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.15 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
10.23 Amendment No. 9 (dated March 31, 1993) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.16 to the Company's Report on
Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
</TABLE>
<PAGE> 68
<TABLE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<S> <C> <C>
10.24 Amendment No. 10 (dated January 31, 1994) to Amended and
Restated Loan Agreement between Scientific
Software-Intercomp, Inc. and First Interstate Bank of
Denver, N.A., dated November 1, 1990, and related
extension of promissory notes for $3,500,000 and
$2,000,000 payable to First Interstate Bank of Denver,
N.A. (filed as Exhibit 4.17 to the Company's Report on
Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference).
10.25 Working Capital Agreement between First Interstate Bank of
Denver, N.A., and Export-Import Bank of the United States
dated December 5, 1990 (filed as Exhibit 4.2 to the
Company's Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference).
10.26 Working Capital Agreement between First Interstate Bank of
Denver, N.A., and Export-Import Bank of the United States
dated January 24, 1994 (filed as Exhibit 4.18 to the
Company's Report on Form 10-K for the year ended December
31, 1993, and incorporated herein by reference).
10.27 Letter Agreement between Renaissance Capital Partners II,
Ltd. and Scientific Software-Intercomp, Inc., regarding a
$500,000 standby line of credit dated November 3, 1993
(filed as Exhibit 10.13 to the Company's Report on Form
10-K for the year ended December 31, 1993, and
incorporated herein by reference).
10.28 Employees Stock Ownership Plan and Trust as restated on
January 1, 1989 (filed as Exhibit 10.28 to the Company's
Form S-1 dated May 9, 1994 and incorporated herein by
reference).
10.29 Target Benefit Plan as restated on January 1, 1989 (filed
as Exhibit 10.29 to the Company's Form S-1 dated May 9,
1994 and incorporated herein by reference).
10.30 First Interstate Bank of Denver, N.A. Defined Contribution
Master Plan and Trust Agreement (filed as Exhibit 10.30 to
the Company's Form S-1 dated May 9, 1994 and incorporated
herein by reference).
10.31 Adoption Agreement #001 Nonstandardized Code Section
401(K) Profit Sharing Plan dated July 1, 1990 (filed as
Exhibit 10.31 to the Company's Form S-1 dated May 9, 1994
and incorporated herein by reference).
10.32 Commission Plan for Jim Duckworth for 1995 dated March 23,
1994 (filed as Exhibit 10.32 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
10.33 Scientific Software-Intercomp, Inc. Deferred Compensation
Plan (filed as Exhibit 10.33 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
10.34 Letter Agreement between Hong Kong Bank of Canada and
Intercomp Resource Development and Engineering Ltd. dated
August 3, 1993, regarding certain revolving operating
loans to Intercomp Resource Development and Engineering
Ltd. (filed as Exhibit 10.34 to the Company's Form S-1
dated May 9, 1994 and incorporated herein by reference).
10.35 Stock Appreciation Rights Plan (filed as Exhibit 10.35 to
the Company's Form S-1 dated May 9, 1994 and incorporated
herein by reference).
</TABLE>
<PAGE> 69
<TABLE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<S> <C> <C>
10.36 Letter of Intent between Halliburton Company and Scientific
Software-Intercomp, Inc. dated April 22, 1994 (filed as
Exhibit 10.36 to the Company's Amendment to Form S-1
dated June 3, 1994 and incorporated herein by reference).
10.37 Business Loan Agreement for $6.5 million dated September
20, 1994, between Bank One, Boulder, N.A. and Scientific
Software-Intercomp, Inc., including Working Capital
Guarantee Agreement dated September 29, 1994, between Bank
One, Boulder, N.A. and Export-Import Bank of the United
States referred to as "Exhibit B."
10.38 Promissory Note of Scientific Software-Intercomp, Inc. to
Bank One, Boulder, N.A. for $5,000,000, dated September
20, 1994.
10.39 Promissory Note of Scientific Software-Intercomp, Inc. to
Bank One, Boulder, N.A. for $1,500,000, dated September
20, 1994.
10.40 Letter Agreement between Scientific Software-Intercomp
(U.K.) Limited and Lloyds Bank Commercial Service dated
December 30, 1994.
10.41 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
May 31, 1995, extending maturity to July 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.42 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
July 15, 1995, extending maturity to August 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.43 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
August 15, 1995, extending maturity to September 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.44 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
September 15, 1995, extending maturity to September 30,
1995 relating to original Business Loan Agreement in the
amount of $6.5 million, dated September 20, 1994.
10.45 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
September 30, 1995, extending maturity to October 15, 1995
relating to original Business Loan Agreement in the amount
of $6.5 million, dated September 20, 1994.
10.46 Business Loan Agreement for $5.13 million dated October
15, 1995, renewing maturity to March 30, 1996, between
Bank One, Boulder, N.A. and Scientific Software-Intercomp,
Inc., including Working Capital Guarantee Agreement dated
September 21, 1995, between Bank One, Boulder, N.A. and
Export-Import Bank of the United States referred to as
"Exhibit B."
10.47 Change in Terms Agreement between Scientific
Software-Intercomp, Inc. to Bank One, Boulder, N.A., dated
November 15, 1995, in the amount of $500,000.00 relating
to original Business Loan Agreement in the amount of $5.13
million, dated October 15, 1995.
21 Subsidiaries of the Company
23.1 Consent of Ehrhardt Keefe Steiner & Hottman PC
23.2 Consent of Hein + Associates LLP
23.3 Consent of Ernst & Young LLP
</TABLE>
<PAGE> 1
EXHIBIT 3.10
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is Scientific Software-Intercomp, Inc.
2. The amendment adopted by the corporation is attached hereto as Exhibit
A and incorporated herein by this reference.
3. The amendment was adopted by a vote of the shareholders on December
14, 1994. The number of shares voted in favor of the amendment was
sufficient for approval.
4. The amendment increases the corporation's stated capital by
authorizing the issuance of 15,000,000 additional shares of the
corporation's Common Stock.
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
By /s/ E.A. Breitenbach
-----------------------------------
Its President
By /s/ Ronald J. Hottory
-----------------------------------
Its Secretary
<PAGE> 2
EXHIBIT A
FIRST PARAGRAPH OF ARTICLE FOURTH
OF THE ARTICLES OF INCORPORATION
OF SCIENTIFIC SOFTWARE INTERCOMP, INC.
AS PROPOSED TO BE AMENDED
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 26,200,000 shares, consisting of
25,000,000 shares of common stock having no par value (the "Common Stock"), and
1,200,000 shares of Series A Preferred Stock, par value $5 per share (the
"Series A Preferred Stock").
<PAGE> 1
EXHIBIT 10.37
BANK ONE, BOULDER, N.A.
BUSINESS LOAN AGREEMENT
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC. Lender: ONE, BOULDER, N.A.
A COLORADO CORPORATION PO Box 59
1801 CALIFORNIA STREET, SUITE 295 1800 BROADWAY
Denver, CO 80202-2699 BOULDER, CO 80306
- --------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT between SCIENTIFIC SOFTWARE-INTERCOMP, INC., A
COLORADO CORPORATION ("Borrower") and BANK ONE, BOULDER, N.A. ("Lender") is made
and executed on the following terms and conditions. Borrower has applied to
Lender for a commercial loan or loans and other financial accommodations,
including those which may be described on any exhibit or schedule attached to
this Agreement. All such loans and financial accommodations, together with all
future loans and financial accommodations from Lender to Borrower, are referred
to in this Agreement individually as the "Loan" and collectively as the "Loans."
Borrower understands and agrees that: (a) In granting, renewing, or extending
any Loan, Lender is relying upon Borrower's representations, warranties, and
agreements, as set forth in this Agreement, (b) the granting, renewing, or
extending of an Loan by Leader at all times shall be subject to Lender's sole
judgment and discretion; and (c) all such Loans shall be and shall remain
subject to the following terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of September 20, 1994 and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All reference
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
Account. The word "Account" means a trade account, account receivable,
or other right to payment for goods or services rendered owing to borrower(or
to a third party grantor acceptable to Lender).
Account Debtor. The words "Account Debtor" mean the person or entity
obligated upon an Account.
Adjusted Net Income. The words "Adjusted Net Income" mean net income
after taxes plus depreciation, amortization, lease expense, and interest
expense.
Advance. The word "Advance" means a disbursement of Loan funds under
this Agreement.
Borrower. The word "Borrower" means SCIENTIFIC SOFTWARE-INTERCOMP,
INC., A COLORADO CORPORATION. The word "Borrower" also includes, as applicable,
all subsidiaries and affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and "Affiliates".
Borrowing Base. The words "Borrowing Base" mean, as determined by
Lender from time to time, the lesser of:
(1) $1,500,000.00 or 85% of Borrower's eligible domestic accounts
receivable as calculated on a monthly Borrowing Base certificate in the form
attached as Exhibit "A" delivered to Lender within 30 days after month end.
(2) The lesser of $5,000,000.00 or the value of the Export-Import Bank
of the U.S. Guaranty or 90% of Borrower's eligible export accounts receivable
(i.e., not more than ninety (90) days after the customer's acceptance nor more
than 150 days after invoice or shipment, whichever occurs earlier), as
calculated in a monthly Borrowing Base Certificate in the form attached as
Exhibit "A" delivered to Lender within 30 days after month end.
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization, less any amounts of R&D capitalized on the balance sheet.
Collateral. The word "Collateral" means and includes without
limitation all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or indirectly,
whether granted now or in the future, and whether granted in the form of a
security interest, mortgage, deed of trust, assignment, pledge chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
trust receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever whether created by law, contract, or otherwise.
Debt. The word "Debt" means all of Borrowers liabilities.
Eligible Accounts. The words "Eligible Domestic Accounts" mean, at any
time, only those insured by credit insurance acceptable to bank. The words
"Eligible Foreign Accounts" mean, at any time, only those accounts which are
insured by export credit insurance acceptable to Lender, backed by letters of
credit or from sales funded by the Export-Import Bank of the U.S. or the World
Bank. The net amount of any Eligible Account against which Borrower may borrow
shall exclude all returns, discounts,
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credits, and offsets of any nature. Unless otherwise agreed to by Lender in
writing, Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer,
an employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with or related to Borrower or its shareholders, officers, or
directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the Account
Debtor may be conditional.
(d) Accounts with respect to which Borrower is or may become liable to
the Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower.
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor,
except for fees for maintenance services, and except for partially completed
milestone performance contracts.
(g) Accounts of any Account debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or debtor-in-relief
acts; or who has had appointed a trustee, custodian, or received for the assets
of such Account Debtor; or who has made an assignment for the benefit of
creditors or has become insolvent or fails generally to pay its debts
(including its payrolls) as such debts become due.
(h) Accounts with respect to which the Account Debtor is the United
States Government or any department or agency of the United States.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of
the Events of Default set forth below in the section titled "EVENTS OF
DEFAULT."
FIXED CHARGES. The words "Fixed Charges" mean interest expense plus
lease expense, current maturities of long-term debt and current maturities of
capital leases.
GRANTOR. The word "Grantor" means and includes each and all the
persons or entities granting a Security interest in any Collateral for the
Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation,
each and all of the guarantors, sureties, and accommodation parties in
connection with any indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as all
claims by Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be
or hereafter may become barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means BANK ONE, BOULDER, N.A., its
successors and assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand,
plus government obligations with maturities less than 365 days, plus Borrower's
receivables.
LOAN. The word "Loan" or "Loans" means and includes any and all
commercial loans and financial accommodations from Lender to Borrower, whether
now or hereafter existing, and however evidenced, including without limitation:
(1) a $1,500,000.00 revolving Line of Credit to finance working capital needs
related to domestic sales and issue standby letters of credit, at an interest
rate of Bank One, Boulder, N.A. Prime Rate plus 1.50% and (2) a $5,000,000.00
export revolving Line of Credit to finance international related working
capital needs and issue U.S. Dollar and foreign currency standby letters of
credit to support international sales, at an interest rate of Bank One,
Boulder, N.A. Prime Rate.
NOTE. The word "Note" means Borrower's and any cosigners' promissory
note or notes, if any, evidencing Borrower's Loan obligations in favor of
Lender, as well as any substitute, replacement or refinancing note or notes
therefor.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form of a
lien charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust receipt,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
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LINE OF CREDIT. Lender agrees to make advances to Borrower and issue standby
letters of credit on Borrower's behalf from time to time from the date of this
Agreement to the maturity date of any line of credit, provided the aggregate
amount of such Advances or issued standby letters of credit outstanding at any
time does not exceed the Borrowing Base. For Borrowing Base purposes, standby
letters of credit denominated in foreign currencies will be marked up by 20% to
cover currency fluctuations unless hedged with a forward option currency
contract. Any letters of credit prior to the date of shipment of the Items
covered by the subject letter of credit are excluded from the borrowing
availability. Disbursements shall not be made to finance the cost of
manufacturing or selling of those Items which are to be sold on terms other than
those set forth in Item (7) the Transaction Attachment (Exhibit B).
Disbursements shall not be made (a) except for the purpose of enabling the
Borrower to finance the cost of manufacturing or selling the Items, and (b)
after the Availability Date set forth in item (10) of the Transaction
Attachment. Within the foregoing limits, Borrower may borrow, partially or
wholly prepay, and reborrow under this Agreement as follows.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any
Advance to or for the account of Borrower and to issue standby letters
of credit under this Agreement is subject to the following conditions
precedent, with all documents, instruments, opinions, reports, and
other items required under this Agreement to be in form and substance
satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.
(b) Lender shall have received such documents, and, if an Event of
Default has occurred, such opinion of counsel or supplemental opinion
as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall
be in full force and effect.
(d) All guaranties required by Lender for the Lines of Credit shall
have been executed by each Guarantor, delivered to Lender, and be in
full force and effect.
(e) Lender shall have received a 100% guarantee acceptable to Lender
from the Export-Import Bank of the U.S. for Lender's export revolving
line of credit to Borrower. The lack of this guarantee would also
preclude Lender from extending the domestic revolving line of credit
(Facility #1).
(f) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, Inventory, books, records,
and operations, and Lender shall be satisfied as to their condition.
(g) Borrower shall have paid or will pay to Lender all fees, costs and
expenses specified in this Agreement and the Related Documents as are
then due and payable. Lender will not impose any charge on Borrower in
connection with this Loan Agreement and the Note(s) other than
reasonable fees charged by the Lender in accordance with normal
commercial lending practices.
(h) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement.
MAKING LOAN ADVANCES. Advances under the credit facility, as well as
directions for payment from Borrower's accounts, may be requested
orally or in writing by authorized persons. Lender may, but need not,
require that all oral requests be confirmed in writing. Each Advance
shall be conclusively deemed to have been made at the request of and
for the benefit of Borrower (a) when credited to any deposit account
of Borrower maintained with Lender or (b) when advanced in accordance
with the instructions of an authorized person. Lender, at its option,
may set a cutoff time, after which all requests for Advances will be
treated as having been requested on the next succeeding Business Day.
MANDATORY LOAN REPAYMENTS/ADDITIONAL COLLATERAL. If at any time the
aggregate principal amount of the outstanding Advances plus issued
standby letters of credit shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender shall
either (a) pay to Lender an amount equal to the difference between the
outstanding principal balance of the Advances plus issued letters of
credit and the Borrowing Base or (b) furnish additional security to
Lender, in form and amount satisfactory to Lender and the Export-
Import Bank of the U.S.
LOAN ACCOUNT. Lender shall maintain on its books a record of account
in which Lender shall make entries for each Advance and such other
debits and credits as shall be appropriate with the credit facility.
Lender shall provide Borrower with periodic statements of Borrower's
accounts, which statements will be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to
the contrary with thirty (30) days after Borrower's receipt of any
such statement which Borrower deems to be incorrect.
REPAYMENT TERM. Provided that the Borrower and any and all Guarantors are not in
default as to the payment of either principal or interest on the Loan, after
all amounts under the Loan Agreement and the Note have been disbursed, all such
amounts shall be due and payable on the Business Day which occurs no later than
the earlier of: (1) the date of the Lender's receipt of all amounts deposited
into the Lender's Account in accordance with the paragraph titled "Lender's
Account" below; or (2) 180 calendar days from the Availability Date.
OPERATING ACCOUNT. Borrower shall utilize a regular operating account. Proceeds
from export sales generated by the United Kingdom and Canadian subsidiaries of
Borrower shall be deposited into an operating account set up by the Lender in
each country and the funds from these accounts shall be remitted to Lender in
the United States on a monthly basis.
COLLATERAL. To secure payment of the Lines of Credit and performance of all
other Loans, obligations and duties owed by Borrower to lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require (the "Collateral"), including without
limitation Borrower's present and future Accounts, contract rights, general
intangibles, proprietary software, equipment, inventory and assignment of
credit insurance and letter of credit proceeds. Lender's Security Interests in
the Collateral shall be continuing liens and shall include the proceeds and
products of the Collateral, including without limitation the proceeds of any
insurance. With respect to the Collateral, Borrower agrees and represents and
warrants to Lender:
PERFECTION OF SECURITY INTEREST. Borrower agrees to execute such
financing statements and to take whatever other actions are requested
by Lender to perfect and continue Lender's Security Interests in the
Collateral. Upon request of Lender, Borrower will deliver to Lender any
and all of the documents evidencing or constituting the Collateral, and
Borrower will note Lender's
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interest upon any all chattel paper if not delivered to Lender for
possession by Lender. Contemporaneous with the execution of this
Agreement, Borrower will execute one or more UCC financing statements
and any similar statements as may be required by applicable law, and
will file such financing statements and all such similar statements in
the appropriate location or locations. Borrower hereby appoints Lender
as its irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue any Security Interest.
Lender may, at any time, and without further authorization from
Borrower, file a carbon, photograph, facsimile, or other reproduction
of any financing statement for use as a financing statement. Borrower
will reimburse Lender for all expenses for the perfection,
termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify
Lender of any change in Borrower's name including any change to the
assumed business names of Borrower. Borrower also will promptly notify
Lender of any change in Borrower's Employer Identification Number.
Borrower further agrees to notify Lender in writing prior to any
change in address or location of Borrower's principal governance
office or should Borrower merge or consolidate with any other entity.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter
shall, keep correct and accurate records of the Collateral, all of
which records shall be available to Lender or Lender's representative
upon demand for inspection and copying at any reasonable time. With
respect to the Accounts, Borrower agrees to keep and maintain such
records as Lender may require, including without limitation
information concerning Eligible Accounts and Account balances and
agings. With respect to Inventory and Work in Progress, Borrower agrees
to keep and maintain such records as Lender may require, including
without limitation records itemizing and describing the kind, type,
quality and quantity of Inventory and Work in Progress, Borrower's
costs and selling prices, and the monthly withdrawals and additions to
Inventory and Work in Progress. The following is an accurate and
complete list of all locations at which Borrower keeps or maintains
business records concerning Borrower's Accounts, Inventory and Work in
Progress: 1801 CALIFORNIA STREET, SUITS 295, DENVER, COLORADO 80202.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of
this Agreement, Borrower hall execute and deliver to Lender schedules
of Accounts and Eligible Accounts, in form and substance satisfactory
to the Lender. Thereafter Borrower shall execute and deliver to Lender
such supplemental schedules of Eligible Accounts and such other
matters and information relating to the Accounts as Lender may
request.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to
the Accounts, Borrower represents and warrants to Lender: (a) Each
Account represented by Borrower to be an Eligible Account for purposes
of this Agreement conforms to the requirements of the definition of an
Eligible Account; (b) All Account information listed on schedules
delivered to Lender will be true and correct, subject to immaterial
variance; and (c) Lender, its assigns, or agents shall have the right
at any time and at Borrower's expense to inspect, examine, and audit
Borrower's records and to confirm with Account Debtors the accuracy of
such Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as
of the date of this Agreement and as of the date of each disbursement of Loan
proceeds:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing where incorporated. Borrower has the
full power and authority to own its properties and to transact the business in
which it is presently engaged or presently proposes to engage. Borrower also is
duly qualified as a foreign corporation and is in good standing in all states
in which the failure to so qualify would have a material adverse effect on its
businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all necessary
action by Borrower within two (2) days after the date of this Agreement; do not
require the consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation of, or
constitute a default under (a) any provision of its articles of incorporation,
operating agreement, or any other agreement or other instrument binding upon
Borrower or (b) any law, governmental regulation, court decree, or order
applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered will
constitute, legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not presently
due and payable, Borrower owns and has good title to all of Borrower's
properties free and clear of all Security interests, and has not executed any
security documents or financing statements relating to such properties except
those executed with First Interstate Bank prior to this Agreement. All of
Borrower's properties are titled in Borrower's legal name, and Borrower has not
used, or filed a financing statement under, any other name for at least the
last five (5) years.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has occurred
which may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that have
been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interest on or affecting any
of the Collateral directly or indirectly securing repayment of Borrower's Loan
and Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
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BINDING EFFECT. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note are
binding upon Borrower as well as upon Borrower's, successors, representatives
and assigns, and are legally enforceable in accordance with their respective
terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to any
such plan, (ii) Borrower has not withdrawn from any such plan or initiated
steps to do so, and (iii) no steps have been taken to terminate any such plan.
INVESTMENT COMPANY ACT. Borrower is not an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
PUBLIC UTILITY HOLDING COMPANY ACT. Borrower is not a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" or
a "holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding company Act of 1935 as
amended.
Regulations G, T and U. Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of the
Regulations G, T and U of the Board of Governors of the Federal Reserve
System).
Location of Borrower's Offices and Records. The chief place of
business of Borrower and the office or offices where Borrower keeps its records
concerning the Collateral in located at 1801 California Street, Suite 295,
Denver, Colorado 80202.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be true and
accurate in every material respect on the date as of which such information is
dated or certified; and none of such information is or will be incomplete by
omitting to state any material fact necessary to make such information not
misleading.
SURVIVAL OF REPRESENTATION AND WARRANTIES. Borrower understands and
agrees that Lender is relying upon the above representations and warranties in
extending Loan Advances to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and shall remain
in full force and effect until such time as Borrower's Loan and Note shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
DEPOSIT ACCOUNTS. Borrower will maintain all material deposit accounts
with Lender.
EXPORT-IMPORT BANK OF THE U.S. GUARANTY. At the request of Lender,
either orally or in writing, comply with any requirement imposed on Lender by
the Export-Import Bank of the U.S. in connection with their Guaranty.
LITIGATION. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all litigation and
claims and all threatened litigation and claims affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with: (a) as soon as available,
but in no event later than 120 days after the end of each fiscal year,
Borrower's annual audited financial statements prepared as Form 10K for the
year ended; (b) within 45 days after the end of each quarter, Borrower's
quarterly financial statements prepared as Form 10-Q; (c) within 30 days after
the end of each month, Borrower's internally prepared financial statements,
accounts receivable aging and Borrowing Base Certificate in the form attached
as Exhibit A; (d) within 45 days after the end of each month, Borrower's
shipment and credit insurance premium paid report. All financial reports
required to be provided under this Agreement shall be prepared in accordance
with generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
RECONCILIATION AND OTHER STATEMENTS. The Borrower shall submit to the
Lender monthly written inventory statements and accounts receivable
reconciliation statements covering the collateral.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, aging of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's or Guarantors' financial condition and business
operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants
and ratios:
Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less
than $9,500,000.00.
Net worth Ratio. Maintain a ratio of Total Liabilities (less deferred
revenue) to Tangible Net Worth of less than 1.75 to
1.00.
Current Ratio. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.3 to 1.00.
Cash Flow Requirements. Maintain a positive cash flow at the end of
each fiscal half.
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For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean Borrower's
total assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt. The term
"Debt" shall mean all of Borrower's liabilities. The term "Working Capital"
shall mean Borrower's current assets, excluding prepaid expenses, less
Borrower's, current liabilities. The term "Liquid Assets" shall mean Borrower's
a cash on hand plus Borrower's receivables. The term "Cash Flow" shall mean net
income after taxes, plus depreciation and amortization less any amounts of R&D
capitalized on the balance sheet. Except as provided above, all computations
made to determine compliance with the requirements contained in this paragraph
shall be made in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true and
correct.
FEES AND CHARGES. In addition to all other agreed upon fees and
charges, pay the following: 1) any fees charged by the Export-Import Bank of
the U.S. for providing its guarantee to Lender; 2) cost of an annual field
examination, not to exceed $2,000.00 per year; 3) standard Letter of Credit
fees as established by the International Division of Bank One, Boulder, N.A.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or certificates
of insurance in form satisfactory to Lender, including stipulations that
coverages will not be canceled or diminished without at least ten (10) days'
prior written notice to Lender. In connection with all policies covering assets
in which Lender holds or is offered a security for loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the name of
the insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and
(f) the expiration date of the policy.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
creditor and notify Lender immediately in writing of any default in connection
with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's and its
subsidiaries (as defined in the paragraph below entitled Subsidiaries and
Affiliates) business operations, unless specifically consented to the contrary
by Lender in writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the date
on which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrowers properties, income, or profits.
Provided however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the legality of
the same shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall have established on its books adequate reserves with respect to
such contested assessment, tax, charge, levy, lien, or claim in accordance with
generally accepted accounting practices. Borrower, upon demand of Lender, will
furnish to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate governmental
official to deliver to Lender at any time a written statement of any
assessments, taxes, charges, levies, liens and claims against Borrower's
properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in all other instruments and
agreements between Borrower and Lender in a timely manner, and promptly notify
Lender if Borrower learns of the occurrence of any event which constitutes an
Event of Default under this Agreement.
OPERATIONS. Substantially maintain its present executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and
other requirements of ERISA and other laws applicable to Borrower's employee
benefit plans.
INSPECTION. The Borrower shall permit a representative of the Lender
to make reasonable inspections at any time during normal business hours of the
Borrower's facilities, activities, books and records, and cause its officers
and employees to give full cooperation and assistance in connection therewith,
so that Lender can determine whether the Borrower has maintained the Collateral
Value at in accordance with the terms of this Agreement. If Borrower now or at
any time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of Lender,
shall notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense. Information that the Lender obtains shall
remain confidential and will not be disclosed to third parties.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that
while this Agreement is in effect, Borrower shall not, without the prior
written consent of Lender:
CAPITAL EXPENDITURES. Make or contract to make capital expenditures,
including leasehold improvements, in any fiscal year in excess of $900,000.00
during 1994 or $1,200,00.00 during 1995.
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money, including
capital leases, except debt to Renaissance Capital Partners II, Ltd. in the
form of convertible debentures, short-term debt up to $500,000.00 incurred by
Scientific Software-Intercomp (U.K.), Ltd. for working capital purposes or
otherwise (b) sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower's assets, except for financing
instruments sold in relation to Grantor sales or licensing of Grantor's
proprietary software, or (c) sell with recourse any of Borrower's accounts,
except to Lender and except liens for taxes not yet due
6
<PAGE> 7
or deposits or pledges in connection with or to secure payment of workmen's
compensation, unemployment insurance or other social security or in connection
with the good faith contest of any tax lien.
CONTINUITY OF OPERATIONS. (a) Engage or enter into any agreement to
engage in any business activities substantially different than those in which
Borrower in presently engaged, or (b) cease or enter into any agreement to
cease operations, liquidate, merge, transfer, acquire or consolidate with any
other entity, change ownership, dissolve or transfer or sell Collateral out of
the ordinary course of business, or (c) pay any dividends on Borrower's stock
(other than dividends payable in its stock and except tax distributions for
Subchapter S corporations) or purchase or retire any of Borrower's outstanding
shares with cash or (d) change or reduce the role and responsibilities of the
current Chief Executive Officer and Chairman of the Board (Lender will consider
at its discretion eliminating this covenant twelve months from closing).
LOANS, ACQUISITIONS, INVESTMENTS AND GUARANTIES. (a) Make, or permit
to exist, any investment, by loan, stock or security purchase or otherwise, in
any subsidiary or other entity of any kind with a value in excess of
$750,000.00, except in its existing subsidiaries as defined below in the
paragraph entitled "Subsidiaries and Affiliates", and except investments in
U.S. Government obligations or investment grade marketable securities, or (b)
incur any obligation as surety or guarantor, except by indorsement of
instruments for deposit, endorsement of financing instruments related to sales
on Borrower's behalf or collection in the ordinary course of business and
except for the guaranty of Borrower's Canadian subsidiary, IRDE, and its
financing arrangement with the Export Development Corporation.
SALE OF ASSETS. Dispose of, sell, lease or transfer all or
substantially all of its assets, other than sales of inventory in the ordinary
course of business.
TRANSFER OF CONTROLLING EQUITY INTEREST. The Borrower shall not
transfer, purchase or redeem, or permit any subsidiary to transfer or purchase,
any shares of the Borrower's capital stock resulting in a controlling equity
interest unless such transfer, purchase or redemption is effected solely from
the proceeds of and within a reasonable time after the issuance to third
parties by the Borrower or its subsidiary of capital stock which is in addition
to the capital stock of the Borrower or its subsidiary, as the case may be,
outstanding on the date of the Loan Agreement.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs
a material adverse change in Borrower's financial condition in the financial
condition of any Guarantor, or in the value of any Collateral securing any
Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such Guarantor's guaranty of the Loan or any other loan with Lender.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law to charge or setoff all sums, owing on the indebtedness against any and all
such accounts. However, the Lender's right of setoff will be limited to
Borrower's pro-rata share of any joint venture equity interest.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or
to perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower to
comply with or to perform any other term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower ten (10) days
after receiving written notice from Lender demanding cure of such default. If
the cure requires more than ten (10) days, Borrower shall immediately initiate
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter shall continue and complete all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's property or Borrower's or
any Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation, or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security interest) at any
time and for any reason.
INSOLVENCY. Any dissolution or termination of Borrower's existence as
a going business, insolvency, appointment of a receiver for any part of
Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDING. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Borrower, any creditor of any Grantor
against any collateral securing the indebtedness, or by any governmental
agency. This includes a garnishment, attachment, or levy on or of any of
Borrower's deposit accounts with Lender.
CHANGE IN OWNERSHIP. Any single change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, all
commitments and obligations of Lender under this agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all Loans immediately will become due and payable except that in the case of an
Event of Default of
7
<PAGE> 8
the type described in the "insolvency" subsection above, such acceleration shall
be automatic and not optional.
NOTICE IN EVENT OF FILING OF ACTION FOR DEBTOR'S RELIEF. The Borrower shall
promptly notify the Lender in writing of the occurrence of any of the
following: (1) the Borrower begins or consents in any manner to any proceeding
or arrangement for its liquidation in whole or in Part or to any other
proceeding or arrangement whereby any of its assets are subject generally to
the payment of its liabilities or where by any receiver, trustee, liquidator or
the like is appointed for it or any substantial part of its assets (including
without limitation the filing by the Borrower of a petition for appointment as
a debtor-in-possession under Title 11 of the U.S. Code); (2) the Borrower fails
to obtain the dismissal or stay on appeal within thirty (30) calendar days of
the commencement of any proceeding arrangement referred to in (1) above; (3)
the Borrower begins any other procedure for the relief of financially
distressed or insolvent debtors, or such procedure has been commenced against
it, whether voluntarily or involuntarily, and such procedure has not been
effectively terminated, dismissed or stayed within thirty (30) calendar days
after the commencement thereof, or (4) the Borrower begins any procedure for
its dissolution, or a procedure therefore has been commenced against it.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of Colorado. if there is a lawsuit, Borrower
agrees upon Lender's request to submit to the jurisdiction of the courts of
Boulder County, the State of Colorado. Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Borrower against the other. This Agreement shall be governed
by and construed in accordance with the laws of the State of Colorado.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
MULTIPLE PARTIES. All obligations of Borrower under this Agreement
shall be joint and several, and all references to Borrower shall mean each and
every Borrower. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including reasonable attorneys' fees, incurred in
connection with the preparation, execution, enforcement and collection of this
Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's attorney's fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorney's fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other sums
provided by law.
NOTICES. All notices required to be given under this Agreement shall
be effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail, first
class, postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address. To
the extent permitted by Applicable law, if there is more than one Borrower,
notice to any Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrower's
current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of the Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries of Borrower, with the exception of its Canadian
subsidiary, IRDE. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not, however,
have the right to assign its rights under this Agreement or any interest
therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument delivered
by Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery to
Lender of the Related Documents, regardless of any investigation made by Lender
or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a provision
of this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other
provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of Borrower
or of any Grantor as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
8
<PAGE> 9
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER 20, 1994.
BORROWER:
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
a Colorado Corporation
By: ___________________________________________
Ronald J. Hottovy, Vice President/Secretary
LENDER:
BANK ONE, BOULDER, N.A.
By: /s/ ERIC R. LONG
-------------------------------------------
Eric R. Long, Assistant Vice President
9
<PAGE> 10
Exhibit A
BORROWING BASE CERTIFICATE & CERTIFICATE OF COMPLIANCE
of
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
As Of The Period Ending ____________
<TABLE>
<S> <C> <C>
A. EXPORT LINE BORROWING BASE
Foreign Accounts Receivable:
*Borrower-Credit Insured
------------
*Borrower-L/C Backed
------------
*Borrower-Int'l Fin. Inst. Account
------------
SSI-UK-Credit Insured
------------
SSI-UK-L/C backed
------------
SSI-UK-Int'l Fin. Inst. Account
------------
-----------
Exclusions per Agreement
A/R over 150 days from invoice ( )
-----------
Disputed A/Rs ( )
-----------
Doubtful Value A/Rs ( )
-----------
No first lien on A/R ( )
-----------
Uninsured Foreign A/Rs ( )
-----------
-----------
Export Borrowing Base x 90% =
-----------
Less:
Export Line Outstandings ( )
-----------
Export USD L/C's ( )
-----------
Export For. Currency L/C's (+20%) ( )
-----------
Excess/Deficit Borrowing Base
-----------
B) DOMESTIC LINE BORROWING BASE
**Domestic Accounts Receivable:
Exclusions per Agreement
A/R over 150 days from invoice ( )
-----------
Disputed A/Rs ( )
-----------
Doubtful Value A/Rs ( )
-----------
No first lien on A/R ( )
-----------
Uninsured Domestic A/Rs ( )
-----------
-----------
Domestic Borrowing Base x 85% =
-----------
Less:
Domestic Line Outstandings ( )
-----------
Domestic L/C's ( )
-----------
Excess/Deficit Borrowing Base
-----------
</TABLE>
Notes
*Includes accounts of Borrower and all subsidiaries except of IRDE and SSI-UK.
**Includes accounts of Borrower and U.S. subsidiaries.
<PAGE> 11
FINANCIAL COVENANT COMPLIANCE
<TABLE>
<CAPTION>
Covenant Required Actual
- -------- -------- ------
<S> <C>
Tangible Net Worth Greater than $9,500,000
------------
Debt/Tangible Net Worth Less than 1.75:1
------------
Current Ratio Greater than 1.3:1
------------
Cash Flow Positive
------------
each fiscal half
</TABLE>
The undersigned further certifies that (a) Borrower is in compliance with all
of the covenants contained in the Agreement, and (b) there has been no Event of
Default under the Agreement which has not been cured or waived, and no
Potential Default has occurred.
By:
--------------------------------------------
Title:
-----------------------------------------
Date:
------------------------------------------
<PAGE> 12
EXHIBIT "B"
September 29, 1994
TRANSACTION ATTACHMENT
Set forth below are the specific terms and conditions of the Guarantee
Agreement, identified as Guarantee No. AP068039XX, the General Terms and
Conditions of which have been signed by the Lender named below and Eximbank.
(1) Lender's Name and Address:
Bank One, Boulder, NA
Boulder Banking Center
1800 Broadway
Boulder, CO 80302-5246
(2) Borrower's Name and Address:
Scientific Software-Intercomp, Inc.
1801 California Street, Suite 295
Denver, CO 80202-2699
(3) Guarantors, Names and Addresses (The guarantee shall be valid and
enforceable, of payment and not of collection; if more than one
guarantor, their obligations shall be joint and several):
Intercomp Resource Development & Engineering, (Canada) Ltd.
Sandman Center
840 7th Avenue, SW, Suite 1000
Calgary, Alberta T2P 3G2
Scientific Software Intercomp (U.K.) Ltd.
Monarch House
Crabtree Office Village
Eversly Way, Egham
Surrey TW20 BRY
United Kingdom
Scientific Software - Texas, Inc.
10333 Richmond Ave. - Suite 1000
Houston, TX 77042
SSI - Bethany, Inc.
10333 Richmond Ave. - Suite 1000
Houston, TX 77042
(4) The Items to be financed under the Eximbank guaranteed Loan:
A. The Items: Proprietary software, computer hardware and
consulting services.
B. Are Performance Guarantees to be used (e.g. bid bonds,
performance bonds, surety bonds, stand-by letters of
<PAGE> 13
2
credit)? Yes x ; No
------------- ---------------
(5) Loan Amount, Disbursement Rates, Terms and Conditions:
A. Loan Amount: $4,500,000
B. Disbursement Rates: Disbursements under the Loan shall be made
in accordance with the following rates, terms and conditions:
1. Inventory: Seventy-five (75) percent of the value of
the Borrower's eligible exportable inventory located
in the United States, valued at the lower of
wholesale cost or market value (including
work-in-process valued at the percentage of contract
completion minus the Borrower's profit); and
2. Receivables: Ninety (90) percent of the value of the
Borrower's eligible export receivables (i.e., not
more than ninety (90) days after the customer's
acceptance nor more than 150 days after invoice or
shipment, whichever occurs earlier).
C. Disbursement Terms and Conditions:
(1) Disbursements may only be made against firm written
export sales contracts and firm written export
purchase orders.
(2) Disbursements may be made for the purpose of opening
letters of credit which shall serve as performance,
bid or advance payment guarantees. Additionally,
these letters of credit may be issued for projects
that will exceed twelve months in duration with the
prior written consent of Eximbank.
(3) Disbursements may be made against certain receivables
of the Borrower's foreign subsidiaries in the United
Kingdom and Canada subject to Eximbank's prior
written approval. In this regard, the Lender shall
perfect and maintain valid and enforceable first
priority security interests in accordance with the
laws of the United Kingdom or Canada, as applicable,
in all such receivables generated by these foreign
subsidiaries and all the proceeds therefrom.
(4) Eligible exportable inventory shall specifically
exclude software and consist of computer hardware
products associated with an export transaction.
<PAGE> 14
3
(6) Security Interests in the Collateral
First Priority in the following:
All Exportable Inventory All Export Receivables
Other Security:
Proprietary Computer Software (Shared with Bank One, Boulder,
N.A.; on a pro-rata basis, based on the respective outstanding
loan balances at the time of default, comparing the balance on
Eximbank's Guaranteed Loan versus the balance on Bank One,
Boulder, N.A.'s domestic revolving working capital loan with
the Borrower).
(7) Terms of Sales: All export sales financed with the Loan shall be on
one of the following terms: (i)irrevocable letters of credit; (ii)
insured through Eximbank Export Credit Insurance or an insurance
agency approved by Eximbank; or (iii) funded by a multilateral
institution.
(8) Lender's Interest Rate: Bank One, Boulder, N.A. Prime Rate
(9) Facility Fee: None*
*Note: The fee of $67,500 for a full 12-month Availability period on a
Loan Amount of $4,500,000 was paid to Eximbank by First Interstate
Bank of Denver, N.A. on 2/8/94 for the original Guarantee no.
AP066827XX. That fee covers the fee for the remainder of the
Availability period for this replacement Guarantee (AP068039XX) which
expires on February 1, 1995.
(10) Special Conditions: (See attached.)
(11) Availability Date: February 1, 1995.
(12) Country Limitations: (See attached.)
<PAGE> 15
SPECIAL CONDITIONS: (AP068039XX)
1. Cross Default. The Lender and the Borrower shall enter into a loan
agreement for the Loan which shall include a provision stating that an
event of default has occurred under the Loan if the Borrower fails to
pay when due any amount payable to the Lender under any non-Eximbank
guaranteed loan to the Borrower. It shall further state that, in the
event of default under the Loan, Eximbank shall have the right to: (i)
direct the Lender to accelerate the maturities of the Loan; and (ii)
request that the Lender accelerate the maturities of any of the
Borrower's non-Eximbank guaranteed loans.
2. Assignment of Eximbank Export Credit Insurance Policy Proceeds. An
assignment of the proceeds of the Eximbank Export Credit Insurance
policy ("Eximbank Policy") opened by the Borrower shall be executed in
favor of the Lender for the benefit of the Loan. The proceeds of any
such assignment paid to the Lender shall be applied first towards
reducing any amount then outstanding under the Loan. The Lender shall
require that the Borrower notify the Lender and Eximbank in writing
immediately upon the event of an occurrence under the Eximbank Policy.
Thereafter, the Lender shall not make any further Disbursements to the
Borrower under the Loan without the prior written approval of
Eximbank.
3. Performance Guarantees. The terms of any and all bid bonds,
performance bonds, surety bonds, insurance bonds and standby letters
of credit ("Performance Guarantee,,) are subject to Eximbank's prior
approval as a condition to their being covered by the Guarantee
Agreement. Eximbank's Guarantee shall be null and void ab initio with
respect to any Performance Guarantee which terms conflict with the
terms and conditions of Eximbank's Guarantee.
4. Subordinated Non-Eximbank Debt. The Lender shall obtain a written
undertaking from Renaissance Capital Partners II, Ltd. and the
Borrower stating that repayment of the principal of the loans owed by
the Borrower to Renaissance Capital Partners II, Ltd. shall be
subordinated to repayment by the Borrower of all amounts due and
outstanding under the Loan.
5. The Loan may not be used to service any of the Borrower's pre-existing
or future indebtedness unrelated to the Loan. As a condition precedent
to the first Disbursement, the Lender shall obtain a written
undertaking from the Borrower stating that the Loan shall not be
utilized for the purpose of servicing any of the Borrower's
pre-existing or future indebtedness unrelated to the Loan.
Notwithstanding the foregoing, the first Disbursement on the Loan may
be used to support a single domestic letter of credit, with First
Interstate Bank of Denver, N.A.(FIBD) as beneficiary, which will, in
turn, support six (6) export related standby letters of credit issued
by FIBD under Eximbank guarantee no.
<PAGE> 16
2
will, in turn, support six (6) export related standby letters of
credit issued by FIBD under Eximbank guarantee no. AP066827XX. See
Special Condition no. 6 below.
6. Domestic Letter of Credit. The Lender may utilize the Loan to issue a
domestic letter of credit ("DLC") for the benefit of the First
Interstate Bank of Denver. Eximbank acknowledges that the DLC is being
issued to support the following six export related standby letters of
credit issued by FIBD under Eximbank guarantee no. AP066827XX:
<TABLE>
<CAPTION>
Standby L/C Expiry
----------- ------
<S> <C>
1. U.S. $7,000 12/26/94
2. U.S. $50,000 12/07/94
3. U.S. $4,800 12/31/94
4. U.S. $10,000 12/26/94
5. U.S. $20,000 1/31/95
6. British Pounds 132,500 7/30/95
</TABLE>
Eximbank acknowledges that the DLC issued by the Lender will have
individual expiry dates falling five days after each of the respective
expiry dates listed here.
7. Letter from Previous Lender. Concurrent with the first Disbursement of
the Loan, the First Interstate Bank of Denver, N.A. (FIBD) shall
provide a letter to Eximbank and the Lender indicating that the loan
covered by Guarantee no. AP066827XX has been paid in full, that the
security interests obtained by FIBD in the Borrower's assets in the
United States and its foreign subsidiaries' assets in the United
Kingdom and Canada (as applicable) have been released and the related
Guarantee has been canceled.
8. Lender's Account. Section 4(j) "Lender's Account" of the Guarantee
Agreement is hereby deleted. Instead of a restricted account, the
lender shall utilize a regular operating account. Proceeds from export
sales generated by the united Kingdom and Canadian subsidiaries of SSI
shall be deposited into an operating account set up by the Lender in
each country and the funds from these accounts shall be remitted to
the Lender in the United States on a monthly basis.
9. Transfer of Controlling Equity Interest. The language of Section 5(j),
"Transfer of Controlling Equity Interest", of the Guarantee Agreement
is hereby amended so that the clause "any shares of the borrower's
capital stock unless such transfer" is replaced with "any shares of the
Borrower's capital stock resulting in a transfer in controlling equity
interest unless such transfer".
10. Assignment of Letter of Credit Proceeds. Section 5(k)
<PAGE> 17
3
"Assignment of Letter of Credit Proceeds" of the Guarantee Agreement
is hereby deleted.
11. Assignment of Contract Proceeds. Section 5(1) "Assignment of Contract
Proceeds" of the Guarantee Agreement is hereby deleted.
<PAGE> 1
EXHIBIT 10.38
[BANK ONE LOGO]
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 09-20-1994 05-31-1995 4A 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC. LENDER: BANK ONE, BOULDER, N.A.
1801 CALIFORNIA STREET, STE 295 1800 BROADWAY
DENVER, CO 80202-2699 P.O. BOX 59
BOULDER, CO 80306
========================================================================================================================
PRINCIPAL AMOUNT: $5,000,000.00 INITIAL RATE: 7.750% DATE OF NOTE: SEPTEMBER 20, 1994
</TABLE>
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC. ("BORROWER") PROMISES TO
PAY TO BANK ONE, BOULDER, N.A. ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE MILLION & 00/100
DOLLARS ($5,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH
INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST
SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH
ADVANCE.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on May 31, 1995. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest beginning
October 31, 1994, and all subsequent interest payments are due on the last day
of each month after that. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Lender's prime rate
(the "Index"). Prime rate is the Lender's base Lending rate as announced by the
Lender from time to time at its sole discretion. At any given time, the Lender
may make loans at, above, or below its prime rate. Lender will tell Borrower
the current Index rate upon Borrower's request. Borrower understands that
Lender may make loans based on other rates as well. The interest rate change
will not occur more often than each day. The Index currently is 7.750% per
annum. The interest rate to be applied to the unpaid principal balance of this
Note will be at a rate equal to the Index, resulting in an initial rate of
7.750% per annum. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect. (e) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Note.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within ten (10) days; or
(b) if the cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.000 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any increased
rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited by
applicable law, Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered to Lender and accepted
by Lender in the State of Colorado. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Boulder County,
the State of Colorado. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Note shall be governed by and construed in
accordance with the laws of the State of Colorado.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Note against any and all such
accounts.
LINE OF CREDIT. This note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection with
the signing of this Note; (b) Borrower or any guarantor ceases doing business
or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such guarantor's guarantee of this Note or any other
loan with Lender; or (d) Borrower has applied funds provided pursuant to this
Note for purposes other than those authorized by Lender.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly slated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan, or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender's security interest in the collateral;
and take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made.
<PAGE> 1
EXHIBIT 10.39
[BANK ONE LOGO]
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 09-20-1994 05-31-1995 4a 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC. LENDER: BANK ONE, BOULDER, N.A.
1801 CALIFORNIA STREET, STE 295 1800 BROADWAY
DENVER, CO 80202-2699 P.O. BOX 59
BOULDER, CO 80306
========================================================================================================================
PRINCIPAL AMOUNT: $1,500,000.00 INITIAL RATE: 9.250% DATE OF NOTE: SEPTEMBER 20, 1994
</TABLE>
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC. ("BORROWER") PROMISES TO
PAY TO BANK ONE, BOULDER, N.A. ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF ONE MILLION FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($1,500,000.00) OR SO MUCH AS MAY BE OUTSTANDING,
TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH
ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL
REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON MAY 31, 1995. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest beginning
October 31, 1994, and all subsequent interest payments are due on the last day
of each month after that. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Lender's prime rate
(the "Index"). Prime rate is the Lender's base Lending rate as announced by the
Lender from time to time at its sole discretion. At any given time, the Lender
may make loans at, above, or below its prime rate. Lender will tell Borrower
the current Index rate upon Borrower's request. Borrower understands that
Lender may make loans based on other rates as well. The interest rate change
will not occur more often than each day. The Index currently is 7.750% per
annum. The interest rate to be applied to the unpaid principal balance of this
Note will be at a rate of 1.500 percentage points over the Index, resulting in
an initial rate of 9.250% per annum. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect. (e) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Note.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within ten (10) days, or
(b) if the cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.000 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any increased
rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by
applicable law, Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered to Lender and accepted
by Lender in the State of Colorado. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Boulder County,
the State of Colorado. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Note shall be governed by and construed in
accordance with the laws of the State of Colorado.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Note against any and all such
accounts.
LINE OF CREDIT. This note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's account with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection with
the signing of this Note; (b) Borrower or any guarantor ceases doing business
or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such guarantor's guarantee of this Note or any other
loan with Lender; or (d) Borrower has applied funds provided pursuant to this
Note for purposes other than those authorized by Lender.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly slated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan, or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender's security interest in the collateral;
and take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made.
<PAGE> 1
EXHIBIT 10.40
[LLOYDS BANK LETTERHEAD]
HEATHROW OFFICE
Your Ref: Our Ref:BP/KH 3 January, 1995
Dear Peter,
I have pleasure in enclosing a replacement Facility Letter, which has been
changed only to reflect the terms of the Standby Letter of Credit.
I would mention that the margin of 10% will only apply, of course, if part or
all of the facility is taken in Sterling at any time.
May I take this opportunity of wishing you and your colleagues a healthy, happy
and prosperous New year.
Kind regards
Yours sincerely,
/s/ BARRY PAVELY
B. Pavely
Senior Manager (Commercial Service)
<PAGE> 2
[LLOYDS BANK LETTERHEAD]
Your Ref: Our Ref:BP/KH 3 January, 1994
Dear Peter,
OVERDRAFT AND OTHER FACILITIES
We Lloyds Bank Plc (the "Bank") are pleased to offer to Scientific
Software-Intercomp (UK) Limited various facilities on your account number
0023664 on the following terms and conditions.
AMOUNT
The maximum aggregate amount outstanding under the facilities at any one time
shall not exceed the amount covered by the "security" described below up to a
maximum sum of US Dollars 300,000 or the sterling equivalent, including a
margin of 10% to cover any exchange risk.
AVAILABILITY
Any amounts from time to time owing under the facilities are repayable on
demand but it is the Bank's present intention to make the facilities available
until 30 May 1995 or such later date as may from time to time be advised in
writing by the Bank. All moneys from time to time owing to the Bank under these
facilities shall be repaid no later than the agreed expiry date. The amounts
owing at any time may include interest, costs or charges debited to the account
in accordance with the terms of this letter.
INTEREST
Interest will be payable on amounts owing on overdraft up to the aforesaid
limit at 1.75% per annum over the Bank's Base Rate from time to time (currently
8% per annum in total).
<PAGE> 3
-2-
Interest will be payable on amounts owing in excess of the agreed limit at
Lloyds Bank Unauthorized Overdraft Rate (presently 2% per month, equivalent
annual rate 24%).
Interest will be debited to the account quarterly in arrears normally on the
10th of each of March, June, September and December or on the next working day
and additionally on the date upon which the facility ceases to be available.
The interest rates may be varied (either up or down) by the Bank at any time.
Notices of changes will be displayed in all UK branches and in the press.
COSTS AND CHARGES
Charges will be payable on the account quarterly as follows: -
325.75 Pounds per quarter in accordance with the Tender dated July 1994.
These charges will be debited to the account and may be varied by the Bank at
any time and notice of changes will be advised to you.
An arrangement fee of 1% is payable on the overdraft element of the facility.
This will be debited to the Company's account when the facility is established.
OTHER FACILITIES
Incorporated in the overall facility, we are pleased to offer you the
facilities numbered 1-2 on the attached schedule.
These additional facilities will be available upon such terms and conditions as
shall from time to time be required by the Bank, and may be cancelled by the
Bank at any time, but is the Bank's present intention to keep these facilities
in place for the period of availability of the overdraft facility. Your
liability in respect of any utilisation of these facilities may, however,
extend beyond such period of availability.
SECURITY
It is a condition of the facility that the following security by provided to
the Bank in a form acceptable to the Bank:-
1. A general letter of approval in a form acceptable to the Bank from
any Debentureholder from time to time entitled to the assets of
Scientific Software-Intercomp (UK) Limited as security. This
approval will cover the normal conduct of a Current Account on
conventional Banking terms.
<PAGE> 4
-3-
2. A Standby Letter of Credit in an amount to be agreed covering all of
the Company's U.K. liabilities to Lloyds Bank Plc, in a format and
from a US Bank acceptable to Lloyds Bank Plc.
ACCOUNTS
It is a further condition of the facility that you provide to the Bank as soon
as possible after the end of the period to which they relate copies of: -
a) The monthly Management Accounts of the Company by the end of the
month following the month reported upon.
b) Audited Accounts of the Company generally within 6 months of the
relevant period end.
c) Consolidated Group Audited Accounts of the US Parent generally
within 9 months of the relevant period end.
PERIOD OF OFFER
Please confirm your acceptance of the facilities offered by returning the
attached duplicate of this letter with the acknowledgement signed in accordance
with the bank mandate currently held by the Bank. If such confirmation is not
received by the Bank's Heathrow Commercial Service Office, by one month from
the date of the letter the offer will lapse.
Yours sincerely,
For and on behalf of Lloyds Bank Plc
/s/ BARRY PAVELY
B. Pavely
Senior Manager (Commercial Service).
<PAGE> 5
-4-
SCHEDULE OF FACILITIES
The following additional facilities are available: -
1. BACS facility of 85,000 Pounds to cover computerised sterling
payment instructions that may be delivered direct by the Company to
Bankers Automated Clearing Services Limited. The limit detailed
above is the maximum total value of such instructions for payment on
any one day.
2. A Negotiations facility of 30,000 Pounds to cover the negotiation by
the Bank of cheques and Bills of Exchange payable abroad with
recourse to the company. The limit detailed above is the maximum
total amount of proceeds paid to the company for which the right of
recourse still exists at any one time.
BARRY PAVELY
SENIOR MANAGER
LDCS HEATHROW
<PAGE> 6
-3-
A Standby Letter of Credit in an amount to be agreed covering all of
the Company's U.K. liabilities to Lloyds Bank Plc, in a format and
from a US Bank acceptable to Lloyds Bank Plc.
ACCOUNTS
It is a further condition of the facility that you provide to the Bank as soon
as possible after the end of the period to which they relate copies of: -
a) The monthly Management Accounts of the Company by the end of the
month following the month reported upon.
b) Audited Accounts of the Company generally within 6 months of the
relevant period end.
c) Consolidated Group Audited Accounts of the US Parent generally
within 9 months of the relevant period end.
PERIOD OF OFFER
Please confirm your acceptance of the facilities offered by returning the
attached duplicate of this letter with the acknowledgement signed in accordance
with the bank mandate currently held by the Bank. If such confirmation is not
received by the Bank's Heathrow Commercial Service Office, by one month from
the date of the letter the offer will lapse.
Yours sincerely,
For and on behalf of Lloyds Bank Plc
/s/ BARRY PAVELY
B. Pavely
Senior Manager (Commercial Service).
We hereby acknowledge and accept the terms of your offer dated 30 December 1994
of which this is a duplicate and agree all the terms and conditions therein
contained.
For and on behalf of Scientific Software-Intercomp (UK) Limited
Signed by R.G. PARISH (name)
-----------------------
/s/ R. G. PARISH (signature)*
-----------------------
4th January 1995 (date)
-----------------------
* to be signed in accordance with the account mandate held by the Bank.
<PAGE> 1
EXHIBIT 10.41
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 07-15-1995 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., Lender: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $5,000,000.00 DATE OF Agreement: MAY 31, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $5,000,000.00.
DESCRIPTION OF CHANGE IN TERMS: MATURITY DATE WILL NOW BE JULY 15, 1995.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("Borrower") promises to pay to BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE
MILLION & 00/100 DOLLARS ($5,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING,
TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH
ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL
REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON JULY 15, 1995. Interest on this
Agreement is computed on a 365/360 simple interest basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by
the outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from time to time based on changes in an index which is the LENDER'S PRIME RATE
(the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS ANNOUNCED BY THE
LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN TIME, THE LENDER
MAY MAKE LOANS AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that Lender may
make loans based on other rates as well. The interest rate change will not occur
more often than each DAY. THE INDEX CURRENTLY IS 9.000% PER ANNUM. THE INTEREST
RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT
A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE
OF 9.000% PER ANNUM. NOTICE: Under no circumstances will the interest rate on
this Agreement be more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 5% over Index per annum, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed in
writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will have
no obligation to advance funds under this Agreement if: (a) Borrower or any
guarantor is in default under the terms of this Agreement or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of this
Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
<PAGE> 2
PAGE 2
05-31-1995 CHANGE IN TERMS AGREEMENT
LOAN NO (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit
<PAGE> 3
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 07-15-1995 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, SUITE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (at LENDER'S PRIME RATE, making an
initial rate of 9.000%), Revolving Line of Credit Loan to a Corporation
for $5,000,000.00 due on July 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $5,000,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID ON BORROWERS ACCOUNT: $5,000,000.0
$5,000,000.00 payment on Loan # EXTEND 7679623550/42
-------------
NOTE PRINCIPAL: $5,000,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED MAY 31, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 4
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 07-15-1995 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A Lender: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, SUITE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT: $1,500,000.00 DATE OF AGREEMENT: MAY 31, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994, IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00.
DESCRIPTION OF CHANGE IN TERMS: MATURITY DATE WILL NOW BE JULY 15, 1995.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("Borrower") promises to pay to BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF ONE
MILLION FIVE HUNDRED THOUSAND & 00/100 DOLLARS ($1,500,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON JULY 15, 1995. Interest on this
Agreement is computed on a 365/360 simple interest basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by
the outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 9.000% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 1.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 10.500% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
of loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 5% over Index per annum, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's account with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
<PAGE> 5
PAGE 2
05-31-1995 CHANGE IN TERMS AGREEMENT
LOAN NO (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit
<PAGE> 6
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 07-15-1995 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, SUITE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (1.500% over LENDER'S PRIME RATE, making an
initial rate of 10.500%), Revolving Line of Credit Loan to a corporation for
$1,500,000.00 due on July 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $1,500,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID ON BORROWERS ACCOUNT: $1,500,000.00
1,5000,000.00 Payment on Loan # EXTEND 7679623550/26
-------------
NOTE PRINCIPAL: $1,500,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED MAY 31, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
---------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 1
EXHIBIT 10.42
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 08-15-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., Lender: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $5,000,000.00 DATE OF AGREEMENT: JULY 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $5,000,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE AUGUST 15, 1995.
SEE BELOW FOR NEW INTEREST RATE.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE
MILLION & 00/100 DOLLARS ($5,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING,
TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH
ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL
REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON AUGUST 15, 1995. Interest on this
Agreement is computed on a 365/360 simple interest basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by
the outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 1.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 10.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
of loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 25.000% per annum, and (b) add
any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted
by applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 2
PAGE 2
07-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 42 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By: COPY
------------------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 3
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 08-15-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A Lender: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (1.000% over LENDER'S PRIME RATE, making an
initial rate of 9.750%), Revolving Line of Credit Loan to a Corporation for
$5,000,000.00 due on August 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $5,000,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWERS BEHALF: $5,000,000.00
$5,000,000.00 to EXTEND 7979623550-42
-------------
NOTE PRINCIPAL: $5,000,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED JULY 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By:
--------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 4
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 08-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $1,500,000.00 DATE OF AGREEMENT: JULY 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00.
DESCRIPTION OF CHANGE IN TERMS. THE MATURITY DATE WILL NOW BE AUGUST 15, 1995.
SEE BELOW FOR NEW INTEREST RATE.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("Borrower") promises to pay to BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF ONE
MILLION FIVE HUNDRED THOUSAND & 00/100 DOLLARS ($1,500,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON AUGUST 15, 1995. Interest on this
Agreement is computed on a 365/360 simple interest basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by
the outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 2.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 11.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be more
than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement, or any agreement related to this Agreement, or in any other agreement
of loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 25.000% per annum, and (b) add
any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed in
writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will have
no obligation to advance funds under this Agreement if: (a) Borrower or any
guarantor is in default under the terms of this Agreement or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of this
Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
<PAGE> 5
PAGE 2
07-15-1995 CHANGES IN TERMS AGREEMENT
LOAN NO 26 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY: COPY
--------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit
<PAGE> 6
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 08-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., Lender: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (2.500% over LENDER'S PRIME RATE, making an
initial rate of 11.250%), Revolving Line of Credit Loan to a corporation for
$1,500,000.00 due on August 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $1,500,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWERS BEHALF: $1,500,000.00
$5,000,000.00 to EXTEND 7979623550-26
-------------
NOTE PRINCIPAL: $1,500,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED JULY 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
--------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit
<PAGE> 1
EXHIBIT 10.43
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 09-15-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A Lender: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $4,500,000.00 DATE OF AGREEMENT: AUGUST 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $5,000,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE SEPTEMBER 15,
1995. SEE BELOW FOR NEW PAYMENT SCHEDULE. THIS REVOLVING LINE OF CREDIT IS
HEREBY CAPPED AT $4,500,000.00.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FOUR
MILLION FIVE HUNDRED THOUSAND & 00/100 DOLLARS ($4,500,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON SEPTEMBER 15, 1995. Interest on
this Agreement is computed on a 365/360 simple interest basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 1.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 10.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Agreement, Borrower understands that Lender is
entitled to a MINIMUM INTEREST CHARGE OF $25.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without penalty
all or a portion of the amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Agreement. (h) A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 25.000% per annum, and (b) add
any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any increased
rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 2
PAGE 2
08-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 42 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY: /s/ RONALD J. HOTTOVY
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 3
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 09-15-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (1.500% over LENDER'S PRIME RATE, making an
initial rate of 10.250%), Revolving Line of Credit Loan to a Corporation for
$4,500,000.00 due on SEPTEMBER 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $4,500,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWERS BEHALF: $4,500,000.00
$4,500,000.00 to EXTEND 505-7979623550-42
-------------
NOTE PRINCIPAL: $4,500,000.00
</TABLE>
CHANGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
<TABLE>
<S> <C>
PREPAID FINANCE CHARGES PAID IN CASH: $23,000.00
$23,000.00 LOAN FEE
----------
TOTAL CHARGES PAID IN CASH: $23,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED AUGUST 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
---------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit
<PAGE> 4
AMENDMENT TO BUSINESS LOAN AGREEMENT
BUSINESS LOAN AGREEMENT dated September 10, 1994 between SCIENTIFIC
SOFTWARE-INTERCOMP, INC., A COLORADO CORPORATION ("Borrower") and BANK ONE,
BOULDER, N.A., now known as BANK ONE, COLORADO, N.A., ("Lender"), is herewith
amended as follows:
1. Reference is made to Paragraph entitled "BORROWING BASE" on Page 1 of
said Business Loan Agreement. Sub- paragraph (1) is changed to read as
follows:
(1) $633,000.00 or 75% of Borrower's eligible accounts
receivable (i.e., not more than ninety (90) days after the
customer's acceptance nor more than 150 days after invoice or
shipment, whichever occurs earlier), as calculated on a
monthly Borrowing Base Certificate in the form attached as
Exhibit "A" delivered to Lender within 30 days after month
end.
2. Reference is made to Paragraph entitled "Eligible Accounts" on Page 1
of said Business Loan Agreement. The sentence which now reads:
The words "Eligible Domestic Accounts" mean, at any time, only
those insured by credit insurance acceptance to bank.
is changed to read:
The words "Eligible Domestic Accounts" mean, at any time,
those accounts originating from sales within the United
States.
3. Reference is made to Paragraph entitled "Making Loan Advances" on Page
3 of said Business Loan Agreement. The following sentence is herewith
added:
Advances under the credit facility are restricted solely to the
export revolving line of credit guaranteed by the
Export-Import Bank of the U.S.
4. Reference is made to Paragraph entitled "FINANCIAL COVENANTS AND
RATIOS" on Page 5 of said Business Loan Agreement. Sub-paragraph
entitled "Tangible Net Worth" is changed to read as follows:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of
not less than $8,000,000.00 through December 30, 1995 and not
less than $9,500,000.00 at December 31, 1995 and thereafter.
5. Reference is made to Paragraph entitled "NEGATIVE COVENANTS" on Page 6
of said Business Loan Agreement. Sub-paragraph entitled "Capital
Expenditures" is changed to read as follows:
CAPITAL EXPENDITURES. Make or contract to make capital
expenditures, including leasehold improvements, in excess of
$500,000.00 during fiscal year 1995.
All other terms and conditions of said Business Loan Agreement remain the same.
Executed this 15th day of August, 1995.
BORROWER:
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
by: /s/ RONALD J. HOTTOVY
----------------------------------------------
Ronald J. Hottovy, Vice President/Secretary
LENDER:
BANK ONE, COLORADO, N.A.
by: /s/ ERIC R. LONG
----------------------------------------------
Eric R. Long, Assistant Vice President
<PAGE> 5
(Exhibit A)
BORROWING BASE CERTIFICATE
and
CERTIFICATE OF COMPLIANCE
of
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
("Borrower")
As of the Period Ending _______________
The undersigned hereby certifies to Bank that the following financial
information has been taken from Borrower's books and records which are complete
and accurate and the following calculations of the Borrowing Base aging of
accounts receivable are true and correct:
A. EXPORT LINE BORROWING BASE
<TABLE>
<S> <C> <C>
Total Foreign Accounts Receivable
----------------
Less A/R Greater than 150 days from invoice ( )
----------------
Less Uninsured Foreign A/R ( )
----------------
Less Other ( )
----------------
-----------------
Borrower-Credit Insured (Less than 150 days)
----------------
Borrower-L/C Backed
----------------
Borrower-Int'l Fin. Inst. Account
----------------
SSI-UK-Credit Insured (Less than 150 days)
----------------
SSI-UK-L/C Backed
----------------
SSI-UK-Int'l Fin. Inst. Account
----------------
-----------------
@90% =
AVAILABLE BORROWING BASE
-----------------
Less Export Line Outstandings ( )
----------------
Less Export USD L/C's ( )
----------------
Less For. Currency L/C's (+20%) ( )
----------------
EXCESS/DEFICIT BORROWING BASE
-----------------
B. DOMESTIC LINE BORROWING BASE
Total Domestic Accounts Receivable
----------------
Less A/R over 150 days from invoice ( )
----------------
Less Other ( )
----------------
-----------------
@75% =
AVAILABLE BORROWING BASE
-----------------
Less Domestic L/C's ( )
----------------
EXCESS/DEFICIT BORROWING BASE
-----------------
</TABLE>
<PAGE> 6
(Exhibit A)
FINANCIAL COVENANT COMPLIANCE
<TABLE>
<CAPTION>
Covenant Required Actual
- -------- -------- ------
<S> <C>
1) Current Ratio Greater than 1.3:1
--------
2) Leverage Ratio Less than 1.75:1
--------
3) Tangible Net Worth Greater than $8,000,000
through 12/30/95
--------
Greater than $9,500,000
at 12/31/95 & thereafter
--------
4) Positive Cash Flow Positive each fiscal half
--------
5) Capital Expenditures Less than $500,000 during FY95
--------
</TABLE>
The undersigned further certifies that (a) Borrower is in compliance with all
covenants contained in the Loan Agreement dated September 10, 1994 and
amendments thereof, and (b) there has been no Event of Default under the Loan
Agreement which has not been cured or waived, and no potential Default has
occurred.
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
<PAGE> 7
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$633,000.00 09-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $633,000.00 DATE OF AGREEMENT: AUGUST 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00.
DESCRIPTION OF CHANGE IN TERMS. THE MATURITY DATE WILL NOW BE SEPTEMBER 15,
1995. SEE BELOW FOR NEW PAYMENT SCHEDULE. THIS REVOLVING LINE OF CREDIT IS
HEREBY CAPPED AT $633,000.00.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("Borrower") promises to pay to BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF SIX
HUNDRED THIRTY THREE THOUSAND & 00/100 DOLLARS ($633,000.00) OR SO MUCH AS MAY
BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON AUGUST 15, 1995. Interest on this
Agreement is computed on a 365/360 simple interest basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by
the outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 2.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 11.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
of loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 25.000% per annum, and (b) add
any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Note or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 8
PAGE 2
08-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 26 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY: /s/ RONALD J. HOTTOVY
----------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 9
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$633,000.00 09-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (2.500% over LENDER'S PRIME RATE, making an
initial rate of 11.250%), Revolving Line of Credit Loan to a Corporation for
$633,000.00 due on September 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $633,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF: $633,000.00
$633,000.00 to EXTEND 505-7979623550-26
-----------
NOTE PRINCIPAL: $633,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED AUGUST 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY: /s/ RONALD J. HOTTOVY
----------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 1
EXHIBIT 10.44
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 09-30-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC., Lender: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $4,500,000.00 DATE OF AGREEMENT: SEPTEMBER 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $5,000,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE SEPTEMBER 15,
1995.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FOUR
MILLION FIVE HUNDRED THOUSAND & 00/100 DOLLARS ($4,500,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON SEPTEMBER 15, 1995. Interest on
this Agreement is computed on a 365/360 simple interest basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 1.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 10.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 5.00% over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted
by applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 2
PAGE 2
09-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 26 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY: /s/ RONALD J. HOTTOVY
----------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 3
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 09-30-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST., STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (1.500% over LENDER'S PRIME RATE, making an
initial rate of 10.250%), Revolving Line of Credit Loan to a Corporation for
$4,500,000.00 due on September 30, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $4,500,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF: $4,500,000.00
$4,500,000.00 to EXTEND 505-7979623550-42
-------------
NOTE PRINCIPAL: $4,500,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED SEPTEMBER 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY: /s/ RONALD J. HOTTOVY
----------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 4
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
$633,000.00 09-30-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $633,000.00 DATE OF AGREEMENT: SEPTEMBER 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00.
DESCRIPTION OF CHANGE IN TERMS. THE MATURITY DATE WILL NOW BE SEPTEMBER 30,
1995.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF SIX
HUNDRED THIRTY THREE THOUSAND & 00/100 DOLLARS ($633,000.00) OR SO MUCH AS MAY
BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED UNPAID INTEREST ON SEPTEMBER 30, 1995. Interest on this
Agreement is computed on a 365/360 simple interest basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 2.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 11.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be more
than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 5.00% over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 5
PAGE 2
09-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 42 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By: /s/ RONALD J. HOTTOVY
----------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 6
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$633,000.00 09-30-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (2.500% over LENDER'S PRIME RATE, making an
initial rate of 11.250%), Revolving Line of Credit Loan to a Corporation for
$633,000.00 due on September 30, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $633,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWERS BEHALF: $633,000.00
$633,000.00 to EXTEND 505-7979623550-26
-----------
NOTE PRINCIPAL: $633,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED SEPTEMBER 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY: /s/ RONALD J. HOTTOVY
----------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 7
[BANK ONE LETTERHEAD]
September 15, 1995
Mr. Ronald Hottovy
C/O Margie Paine
Scientific Software-Intercomp, Inc.
1801 California, Suite 295
Denver, CO 80202-2699
Dear Ron:
Enclosed are the documents to extend the credit facilities until September 30,
1995 while EXIMBank completes its review of their guarantee.
Please sign and return then directly to my attention at your earliest
convenience.
Sincerely,
/s/ ERIC R. LONG
- ---------------------------
Eric R. Long
Assistant Vice President
<PAGE> 8
BANK ONE, COLORADO, N.A.
BOULDER BANKING CENTER
1800 BROADWAY
BOULDER, CO 80302
INVOICE
DATE: September 15, 1995
TO: Scientific Software-Intercomp, Inc.
1801 California St., Ste 295
Denver, CO 80202
================================================================================
Line of Credit: $4,500,000.00
Interest due to 9/15/95: $21,287.28
**DUE UPON RECEIPT**
/s/ ERIC R. LONG
- ----------------------------------
Eric R. Long, Asst. Vice President
PLEASE REMIT PAYMENT TO ADDRESS ABOVE
<PAGE> 1
EXHIBIT 10.45
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 10-15-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $4,500,000.00 DATE OF AGREEMENT: SEPTEMBER 30, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $5,000,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE OCTOBER 15, 1995.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FOUR
MILLION FIVE HUNDRED THOUSAND & 00/100 DOLLARS ($4,500,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON OCTOBER 15, 1995. Interest on
this Agreement is computed on a 365/360 simple interest basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 1.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 10.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be more
than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
of loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Agreement. (h) A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 5.00% over the Index per annum,
and (b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Agreement (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Agreement if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgement collection services.
If not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS AGREEMENT HAS BEEN DELIVERED
TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF COLORADO. IF THERE IS A
LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF
THE COURTS OF BOULDER COUNTY, THE STATE OF COLORADO. LENDER AND BORROWER HEREBY
WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 2
PAGE 2
09-30-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 42 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 3
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 10-15-1995 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (1.500% over LENDER'S PRIME RATE, making an
initial rate of 10.250%), Revolving Line of Credit Loan to a corporation for
$4,500,000.00 due on October 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $4,500,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF: $4,500,000.00
$4,500,000.00 to EXTEND 505-7979623550-42
-------------
NOTE PRINCIPAL: $4,500,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED SEPTEMBER 30, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 4
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$633,000.00 10-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $633,000.00 DATE OF AGREEMENT: SEPTEMBER 30, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE OCTOBER 15, 1995.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF SIX
HUNDRED THIRTY THREE THOUSAND & 00/100 DOLLARS ($633,000.00) OR SO MUCH AS MAY
BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON OCTOBER 15, 1995. Interest on
this Agreement is computed on a 365/360 simple interest basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 2.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 11.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be more
than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained in
this Agreement or any agreement related to this Agreement, or in any other
agreement of loan Borrower has with Lender. (c) Borrower defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's ability to repay this
Note or perform Borrower's obligations under this Note or any of the Related
Documents. (d) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any material respect
either now or at the time made or furnished. (e) Borrower becomes insolvent, a
receiver is appointed for any part of Borrower's property, Borrower makes an
assignment for the benefit of creditors, or any proceeding is commenced either
by Borrower or against Borrower under any bankruptcy or insolvency laws. (f) Any
creditor tries to take any of Borrower's property on or in which Lender has a
lien or security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default section
occurs with respect to any guarantor of this Agreement. (h) A material adverse
change occurs in Borrower's financial condition, or Lender believes the prospect
of payment or performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 5.0% over the Index per annum,
and (b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Agreement (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Agreement if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgement collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO
LENDER AND ACCEPTED BY LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF BOULDER COUNTY, THE STATE OF COLORADO. LENDER AND BORROWER HEREBY
WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's account with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 5
PAGE 2
09-30-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 26 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By: COPY
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 6
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$633,000.00 10-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (2.500% over LENDER'S PRIME RATE, making an
initial rate of 11.250%), Revolving Line of Credit Loan to a Corporation for
$633,000.00 due on October 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $633,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWERS BEHALF: $633,000.00
$633,000.00 to EXTEND 505-7979623550-26
-----------
NOTE PRINCIPAL: $633,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED SEPTEMBER 30, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 1
EXHIBIT 10.46
BANK ONE, COLORADO, N.A.
LOAN AGREEMENT
<TABLE>
<S> <C>
Borrower: SCIENTIFIC SOFTWARE - INTERCOMP, INC. Lender: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, SUITE 295 2696 SOUTH COLORADO BOULEVARD
Denver, CO 80202-2699 DENVER, CO 80222
</TABLE>
- --------------------------------------------------------------------------------
THIS LOAN AGREEMENT BETWEEN SCIENTIFIC SOFTWARE-INTERCOMP, INC., A COLORADO
CORPORATION ("BORROWER") AND BANK ONE, COLORADO, N.A. ("LENDER") IS MADE AND
EXECUTED ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR
COMMERCIAL LOANS FROM LENDER OR LOANS AND OTHER FINANCIAL ACCOMMODATIONS,
INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR SCHEDULE ATTACHED TO
THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL ACCOMMODATIONS, TOGETHER WITH ALL
FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM LENDER TO BORROWER, ARE REFERRED
TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE
"LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (A) IN GRANTING, RENEWING, OR
EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS,
WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT, (B) THE GRANTING,
RENEWING, OR EXTENDING OF AN LOAN BY LEADER AT ALL TIMES SHALL BE SUBJECT TO
LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND
SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of OCTOBER 15, 1995 and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All reference
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Loan Agreement, as this Loan
Agreement may be amended or modified from time, together with all exhibits and
schedules attached to this Loan Agreement from time to time.
ACCOUNT. The word "Account" means a trade account, account receivable,
or other right to payment for goods or services rendered owing to borrower (or
to a third party grantor acceptable to Lender).
ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity
obligated upon an Account.
ADJUSTED NET INCOME. The words "Adjusted Net Income" mean net income
after taxes plus depreciation, amortization, lease expense, and interest
expense.
ADVANCE. The word "Advance" means a disbursement of Loan funds under
this Agreement.
BORROWER. The word "Borrower" means SCIENTIFIC SOFTWARE-INTERCOMP,
INC., A COLORADO CORPORATION. The word "Borrower" also includes, as applicable,
all subsidiaries and affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and Affiliates".
BORROWING BASE. The words "Borrowing Base" mean, as determined by
Lender from time to time, the lesser of:
(1) $63,000.00 or 75% of Borrower's eligible domestic accounts
receivable until November 15, 1995; $500,000.00 or 75% of Borrower's eligible
domestic accounts receivable, at November 16, 1995 and thereafter, as calculated
on a monthly Borrowing Base and Compliance Certificate in the form attached as
Exhibit "A".
(2) The lesser of $4,500,000.00, the value of the export working
capital guarantee made by Export-Import Bank of the U.S. or 90% of Borrower's
eligible export accounts receivable, as calculated on a Borrowing Base and
Compliance Certificate in the form attached as Exhibit "A".
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization, less any amounts of R&D capitalized on the balance sheet.
COLLATERAL. The word "Collateral" means and includes without
limitation all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or indirectly,
whether granted now or in the future, and whether granted in the form of a
security interest, mortgage, deed of trust, assignment, pledge chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
trust receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrowers liabilities.
ELIGIBLE ACCOUNTS. The words "Eligible Domestic Accounts" mean, at any
time, those accounts originating from sales within the United States. The words
"Eligible Foreign Accounts" mean,
1
<PAGE> 2
at any time, only those accounts which are insured by export credit insurance
acceptable to Lender, backed by letters of credit or from sales funded by the
Export-Import Bank of the U.S. or the World Bank. The net amount of any Eligible
Account against which Borrower may borrow shall exclude all returns,
discounts,credits, and offsets of any nature. Unless otherwise agreed to by
Lender in writing, Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer,
an employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with or related to Borrower or its shareholders, officers, or
directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the Account
Debtor may be conditional.
(d) Accounts with respect to which Borrower is or may become liable to
the Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower.
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor,
except for fees for maintenance services, and except for partially completed
milestone performance contracts.
(g) Accounts of any Account debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or debtor-in-relief
acts; or who has had appointed a trustee, custodian, or received for the assets
of such Account Debtor; or who has made an assignment for the benefit of
creditors or has become insolvent or fails generally to pay its debts
(including its payrolls) as such debts become due.
(h) Accounts with respect to which the Account Debtor is the United
States Government or any department or agency of the United States.
(i) Accounts which are unpaid more than 90 days after the customer's
acceptance or 150 days after invoice or shipment, whichever occurs earlier.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of
the Events of Default set forth below in the section titled "EVENTS OF
DEFAULT."
GRANTOR. The word "Grantor" means and includes each and all the
persons or entities granting a Security interest in any Collateral for the
Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation,
each and all of the guarantors, sureties, and accommodation parties in
connection with any indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as all
claims by Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be
or hereafter may become barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means BANK ONE, COLORADO, N.A., its
successors and assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand,
plus government obligations with maturities less than 365 days, plus Borrower's
receivables.
LOAN. The word "Loan" or "Loans" means and includes any and all
commercial loans and financial accommodations from Lender to Borrower, whether
now or hereafter existing, and however evidenced, including without limitation:
(1) a $633,000.00 revolving Line of Credit to issue standby letters of credit,
at an interest rate of Bank One, Colorado, N.A. Prime Rate plus 2.50%, which
will reduce to an available amount of $500,000.00 on November 16, 1995; and (2)
a $4,500,000.00 export revolving Line of Credit to finance international related
working capital needs and issue U.S. Dollar and foreign currency standby letters
of credit to support international sales, at an interest rate of Bank One,
Colorado, N.A. Prime plus 1.50%.
NOTE. The word "Note" means Borrower's and any cosigners' promissory
note or notes, if any, evidencing Borrower's Loan obligations in favor of
Lender, as well as any substitute, replacement or refinancing note or notes
therefor.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form of a
lien charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust receipt,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form
2
<PAGE> 3
and substance acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make advances to Borrower and issue standby
letters of credit on Borrower's behalf from time to time from the date of this
Agreement to the maturity date of any line of credit, provided the aggregate
amount of such Advances or issued standby letters of credit outstanding at any
time does not exceed the Borrowing Base. For Borrowing Base purposes, standby
letters of credit denominated in foreign currencies will be marked up by 20% to
cover currency fluctuations unless hedged with a forward option currency
contract. Any letters of credit prior to the date of shipment of the Items
covered by the subject letter of credit are excluded from the borrowing
availability. Disbursements shall not be made to finance the cost of
manufacturing or selling of those Items which are to be sold on terms other
than those set forth in Item (7) the Loan Authorization Agreement (Exhibit B,
and also referred to as Annex A). Disbursements shall not be made (a) except
for the purpose of enabling the Borrower to finance the cost of manufacturing
or selling the Items, and (b) after the Availability Date set forth in item
(10) of the Authorization Agreement. Within the foregoing limits, Borrower may
borrow, partially or wholly prepay, and reborrow under this Agreement as
follows.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any
Advance to or for the account of Borrower and to issue standby letters
of credit under this Agreement is subject to the following conditions
precedent, with all documents, instruments, opinions, reports, and
other items required under this Agreement to be in form and substance
satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.
(b) Lender shall have received such documents, and, if an Event of
Default has occurred, such opinion of counsel or supplemental opinion
as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall
be in full force and effect.
(d) All guaranties required by Lender for the Lines of Credit shall
been executed by each Guarantor, delivered to Lender, and be in full
force and effect.
(e) Lender shall have received a 90% guarantee acceptable to Lender
from the Export-Import Bank of the U.S. for Lender's export revolving
line of credit to Borrower. The lack of this guarantee would also
preclude Lender from extending the domestic revolving line of credit
(Facility #1).
(f) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, Inventory, books, records,
and operations, and Lender shall be satisfied as to their condition.
(g) Borrower shall have paid or will pay to Lender all fees, costs and
expenses specified in this Agreement and the Related Documents as are
then due and payable. Lender will not impose any charge on Borrower in
connection with this Loan Agreement and the Note(s) other than
reasonable fees charged by the Lender in accordance with normal
commercial lending practices.
(h) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement.
MAKING LOAN ADVANCES. Advances under the credit facility are
restricted solely to the export revolving line of credit guaranteed by the
Export-Import Bank of the U.S. Advances, as well as directions for payment from
Borrower's accounts, may be requested orally or in writing by authorized
persons. Lender may, but need not, require that all oral requests be confirmed
in writing. Each Advance shall be conclusively deemed to have been made at the
request of and for the benefit of Borrower (a) when credited to any deposit
account of Borrower maintained with Lender or (b) when advanced in accordance
with the instructions of an authorized person. Lender, at its option, may set a
cutoff time, after which all requests for Advances will be treated as having
been requested on the next succeeding Business Day.
MANDATORY LOAN REPAYMENTS/ADDITIONAL COLLATERAL. If at any time the
aggregate principal amount of the outstanding Advances plus issued
standby letters of credit shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender shall
either (a) pay to Lender an amount equal to the difference between the
outstanding principal balance of the Advances plus issued letters of
credit and the Borrowing Base or (b) furnish additional security to
Lender, in form and amount satisfactory to Lender and the Export-
Import Bank of the U.S.
LOAN ACCOUNT. Lender shall maintain on its books a record of account
in which Lender shall make entries for each Advance and such other
debits and credits as shall be appropriate with the credit facility.
Lender shall provide Borrower with periodic statements of Borrower's
accounts, which statements will be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to
the contrary with thirty (30) days after Borrower's receipt of any
such statement which Borrower deems to be incorrect.
OPERATING ACCOUNT. Borrower shall utilize a regular operating account with
Lender.
COLLATERAL. To secure payment of the Lines of Credit and performance of all
other Loans, obligations and duties owed by Borrower to lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require (the "Collateral"), including without
limitation Borrower's present and future Accounts, contract rights, general
intangibles, proprietary software, equipment, inventory and assignment of
credit insurance. Lender's Security Interests in the Collateral shall be
continuing liens and shall include the proceeds and products of the Collateral,
including without limitation the proceeds of any insurance. With respect to the
Collateral, Borrower agrees and represents and warrants to Lender:
PERFECTION OF SECURITY INTEREST. Borrower agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's Security Interests in the Collateral. Upon request of
Lender, Borrower will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Borrower will note Lender's interest upon
any all chattel paper if not delivered to Lender for possession by Lender.
3
<PAGE> 4
Contemporaneous with the execution of this Agreement, Borrower will execute one
or more UCC financing statements and any similar statements as may be required
by applicable law, and will file such financing statements and all such similar
statements in the appropriate location or locations. Borrower hereby appoints
Lender as its irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue any Security Interest. Lender may,
at any time, and without further authorization from Borrower, file a carbon,
photograph, facsimile, or other reproduction of any financing statement for use
as a financing statement. Borrower will reimburse Lender for all expenses for
the perfection, termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify Lender of any
change in Borrower's name including any change to the assumed business names of
Borrower. Borrower also will promptly notify Lender of any change in Borrower's
Employer Identification Number. Borrower further agrees to notify Lender in
writing prior to any change in address or location of Borrower's principal
governance office or should Borrower merge or consolidate with any other entity.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter
shall, keep correct and accurate records of the Collateral, all of
which records shall be available to Lender or Lender's representative
upon demand for inspection and copying at any reasonable time. With
respect to the Accounts, Borrower agrees to keep and maintain such
records as Lender may require, including without limitation
information concerning Eligible Accounts and Account balances and
agings. With respect to Inventory and Work in Progress, Borrower agrees
to keep and maintain such records as Lender may require, including
without limitation records itemizing and describing the kind, type,
quality and quantity of Inventory and Work in Progress, Borrower's
costs and selling prices, and the monthly withdrawals and additions to
Inventory and Work in Progress. The following is an accurate and
complete list of all locations at which Borrower keeps or maintains
business records concerning Borrower's Accounts, Inventory and Work in
Progress: 1801 CALIFORNIA STREET, SUITE 295, DENVER, COLORADO 80202;
10333 RICHMOND AVENUE, SUITE 1000, HOUSTON, TEXAS 77042.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of
this Agreement, Borrower shall execute and deliver to Lender schedules
of Accounts and Eligible Accounts, in form and substance satisfactory
to the Lender. Thereafter Borrower shall execute and deliver to Lender
such supplemental schedules of Eligible Accounts and such other
matters and information relating to the Accounts as Lender may
request.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to
the Accounts, Borrower represents and warrants to Lender: (a) Each
Account represented by Borrower to be an Eligible Account for purposes
of this Agreement conforms to the requirements of the definition of an
Eligible Account; (b) All Account information listed on schedules
delivered to Lender will be true and correct, subject to immaterial
variance; (c) Borrower has good and marketable title to Accounts due
and collectible outside the United States; such accounts support
exports originating from the United States; and proceeds from the
collection of such accounts are remitted to the United States on a
bi-monthly basis; (d) Lender, its assigns, or agents shall have the
right at any time and at Borrower's expense to inspect, examine, and
audit Borrower's records and to confirm with Account Debtors the
accuracy of such Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as
of the date of this Agreement and as of the date of each disbursement of Loan
proceeds:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing where incorporated. Borrower has the
full power and authority to own its properties and to transact the business in
which it is presently engaged or presently proposes to engage. Borrower also is
duly qualified as a foreign corporation and is in good standing in all states
in which the failure to so qualify would have a material adverse effect on its
businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all necessary
action by Borrower within two (2) days after the date of this Agreement; do not
require the consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation of, or
constitute a default under (a) any provision of its articles of incorporation,
operating agreement, or any other agreement or other instrument binding upon
Borrower or (b) any law, governmental regulation, court decree, or order
applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered will
constitute, legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not presently
due and payable, Borrower owns and has good title to all of Borrower's
properties free and clear of all Security interests, and has not executed any
security documents or financing statements relating to such properties. All of
Borrower's properties are titled in Borrower's legal name, and Borrower has not
used, or filed a financing statement under, any other name for at least the
last five (5) years.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has occurred
which may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that have
been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interest on or affecting any
of the Collateral directly or indirectly securing repayment of Borrower's Loan
and Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
4
<PAGE> 5
BINDING EFFECT. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note are
binding upon Borrower as well as upon Borrower's, successors, representatives
and assigns, and are legally enforceable in accordance with their respective
terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to any
such plan, (ii) Borrower has not withdrawn from any such plan or initiated
steps to do so, and (iii) no steps have been taken to terminate any such plan.
INVESTMENT COMPANY ACT. Borrower is not an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
PUBLIC UTILITY HOLDING COMPANY ACT. Borrower is not a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935 as
amended.
REGULATIONS G, T AND U. Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of the
Regulations G, T and U of the Board of Governors of the Federal Reserve
System).
LOCATION OF BORROWER'S OFFICES AND RECORDS. The chief place of
business of Borrower and the office or offices where Borrower keeps its records
concerning the Collateral is located at 1801 California Street, Suite 295,
Denver, Colorado 80202. Additional records are kept at 10333 Richmond Avenue,
Suite 1000, Houston, Texas 77042.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be true and
accurate in every material respect on the date as of which such information is
dated or certified; and none of such information is or will be incomplete by
omitting to state any material fact necessary to make such information not
misleading.
SURVIVAL OF REPRESENTATION AND WARRANTIES. Borrower understands and
agrees that Lender is relying upon the above representations and warranties in
extending Loan Advances to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and shall remain
in full force and effect until such time as Borrower's Loan and Note shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
DEPOSIT ACCOUNTS. Borrower will maintain all material deposit accounts
with Lender.
EXPORT-IMPORT BANK OF THE U.S. GUARANTY. At the request of Lender,
either orally or in writing, comply with any requirement imposed on Lender by
the Export-Import Bank of the U.S. in connection with their Guaranty.
LITIGATION. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all litigation and
claims and all threatened litigation and claims affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with: (a) as soon as available,
but in no event later than December 31, 1995, Borrower's CPA audited financial
statements for the year ended December 31, 1994; (b) as soon as available, but
no later than 120 days after the end of each fiscal year, Borrower's annual CPA
audited financial statements and Form 10-K for the year ended; (c) within 45
days after the end of each quarter, Borrower's quarterly financial statements
prepared as Form 10-Q; (d) within 30 days after the end of each month,
Borrower's shipment and credit insurance premium paid report. All financial
reports required to be provided under this Agreement shall be prepared in
accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
RECONCILIATION AND OTHER STATEMENTS. The Borrower shall submit to the
Lender monthly written accounts receivable reconciliation statements covering
the collateral.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to Borrower's or
Guarantors' financial condition and business operations as Lender may request
from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants
and ratios:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of not less
than $8,000,000.00 through 12/30/95 and not less than $9,500,000.00 at
12/31/95 and thereafter.
NET WORTH RATIO. Maintain a ratio of Total Liabilities (less deferred
revenue) to Tangible Net Worth of less than 1.75 to 1.00.
CURRENT RATIO. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.3 to 1.00.
CASH FLOW REQUIREMENTS. Maintain a positive cash flow at the end of
each fiscal half.
5
<PAGE> 6
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean Borrower's
total assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt. The term
"Debt" shall mean all of Borrower's liabilities. The term "Working Capital"
shall mean Borrower's current assets, excluding prepaid expenses, less
Borrower's current liabilities. The term "Liquid Assets" shall mean Borrower's
cash on hand plus Borrower's receivables. The term "Cash Flow" shall mean net
income after taxes, plus depreciation and amortization less any amounts of R&D
capitalized on the balance sheet. Except as provided above, all computations
made to determine compliance with the requirements contained in this paragraph
shall be made in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true and
correct.
FEES AND CHARGES. In addition to all other agreed upon fees and
charges, pay the following: 1) any fees charged by the Export-Import Bank of
the U.S. for providing its guarantee to Lender; 2) cost of a semi-annual field
examination, not to exceed $2,000.00 per examination; 3) standard Letter of
Credit fees as established by the International Division of Bank One, Boulder,
N.A.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or certificates
of insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least ten (10) days'
prior written notice to Lender. In connection with all policies covering assets
in which Lender holds or is offered a security for loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the name of
the insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and
(f) the expiration date of the policy.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
creditor and notify Lender immediately in writing of any default in connection
with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's and its
subsidiaries (as defined in the paragraph below entitled Subsidiaries and
Affiliates) business operations, unless specifically consented to the contrary
by Lender in writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the date
on which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrowers properties, income, or profits.
Provided however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the legality of
the same shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall have established on its books adequate reserves with respect to
such contested assessment, tax, charge, levy, lien, or claim in accordance with
generally accepted accounting practices. Borrower, upon demand of Lender, will
furnish to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate governmental
official to deliver to Lender at any time a written statement of any
assessments, taxes, charges, levies, liens and claims against Borrower's
properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in all other instruments and
agreements between Borrower and Lender in a timely manner, and promptly notify
Lender if Borrower learns of the occurrence of any event which constitutes an
Event of Default under this Agreement.
OPERATIONS. Substantially maintain its present executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and
other requirements of ERISA and other laws applicable to Borrower's employee
benefit plans.
INSPECTION. The Borrower shall permit a representative of the Lender
to make reasonable inspections at any time during normal business hours of the
Borrower's facilities, activities, books and records, and cause its officers
and employees to give full cooperation and assistance in connection therewith,
so that Lender can determine whether the Borrower has maintained the Collateral
Value at in accordance with the terms of this Agreement. If Borrower now or at
any time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of Lender,
shall notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense. When any such inspection is characterized
by Lender as a "field examination", Lender will limit such field examination to
two times a year and Borrower will pay Lender a fee related to its costs of any
such field examination in an amount not to exceet $2,000 per examination. Such
information that the Lender obtains shall remain confidential and will not be
disclosed to third parties.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a result
of an intentional or unintentional action or omission on its part or on the
part of any third party, on property owned and or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
6
<PAGE> 7
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
CAPITAL EXPENDITURES. Make or contract to make capital expenditures,
including leasehold improvements, in any fiscal year in excess of $500,000.00.
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money, including
capital leases, except debt to Renaissance Capital Partners II, Ltd. in the
form of convertible debentures, short-term debt up to $300,000.00 incurred by
Scientific Software-Intercomp (U.K.), Ltd. for working capital purposes or
otherwise (b) sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower's assets, except for financing
instruments sold in relation to Grantor sales or licensing of Grantor's
proprietary software, or (c) sell with recourse any of Borrower's accounts,
except to Lender and except liens for taxes not yet due or deposits or pledges
in connection with or to secure payment of workmen's compensation, unemployment
insurance or other social security or in connection with the good faith contest
of any tax lien.
CONTINUITY OF OPERATIONS. (a) Engage or enter into any agreement to
engage in any business activities substantially different than those in which
Borrower is presently engaged, or (b) cease or enter into any agreement to
cease operations, liquidate, merge, transfer, acquire or consolidate with any
other entity, change ownership, dissolve or transfer or sell Collateral out of
the ordinary course of business, or (c) pay any dividends on Borrower's stock
(other than dividends payable in its stock) or purchase or retire any of
Borrower's outstanding shares with cash or (d) change or reduce the role and
responsibilities of the current Chief Executive Officer and Chairman of the
Board (Lender will consider at its discretion eliminating this covenant twelve
months from closing).
LOANS, ACQUISITIONS, INVESTMENTS AND GUARANTIES. (a) Make, or permit
to exist, any investment, by loan, stock or security purchase or otherwise, in
any subsidiary or other entity of any kind except in its existing subsidiaries
as defined below in the paragraph entitled "Subsidiaries and Affiliates", and
except investments in U.S. Government obligations or investment grade
marketable securities, or (b) incur any obligation as surety or guarantor,
except by endorsement of instruments for deposit, endorsement of financing
instruments related to sales on Borrower's behalf or collection in the ordinary
course of business and except for the guaranty of Borrower's Canadian
subsidiary, IRDE, and its financing arrangement with the Export Development
Corporation.
SALE OF ASSETS. Dispose of, sell, lease or transfer all or
substantially all of its assets, other than sales of inventory in the ordinary
course of business.
TRANSFER OF CONTROLLING EQUITY INTEREST. The Borrower shall not
transfer, purchase or redeem, or permit any subsidiary to transfer or purchase,
any shares of the Borrower's capital stock resulting in a controlling equity
interest unless such transfer, purchase or redemption is effected solely from
the proceeds of and within a reasonable time after the issuance to third
parties by the Borrower or its subsidiary of capital stock which is in addition
to the capital stock of the Borrower or its subsidiary, as the case may be,
outstanding on the date of the Loan Agreement.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs
a material adverse change in Borrower's financial condition in the financial
condition of any Guarantor, or in the value of any Collateral securing any
Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such Guarantor's guaranty of the Loan or any other loan with Lender.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law to charge or setoff all sums, owing on the indebtedness against any and all
such accounts. However, the Lender's right of setoff will be limited to
Borrower's pro-rata share of any joint venture equity interest.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or
to perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower to
comply with or to perform any other term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower ten (10) days
after receiving written notice from Lender demanding cure of such default. If
the cure requires more than ten (10) days, Borrower shall immediately initiate
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter shall continue and complete all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's property or Borrower's or
any Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation, or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security interest) at any
time and for any reason.
INSOLVENCY. Any dissolution or termination of Borrower's existence as
a going business, insolvency, appointment of a receiver for any part of
Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDING. Commencement of foreclosure or
forfeiture proceedings,
7
<PAGE> 8
whether by judicial proceeding, self-help, repossession or any other method, by
any creditor of Borrower, any creditor of any Grantor against any collateral
securing the indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit accounts
with Lender.
CHANGE IN OWNERSHIP. Any single change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, all
commitments and obligations of Lender under this agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all Loans immediately will become due and payable except that in the case of an
Event of Default of the type described in the "insolvency" subsection above,
such acceleration shall be automatic and not optional.
NOTICE IN EVENT OF FILING OF ACTION FOR DEBTOR'S RELIEF. The Borrower shall
promptly notify the Lender in writing of the occurrence of any of the
following: (1) the Borrower begins or consents in any manner to any proceeding
or arrangement for its liquidation in whole or in Part or to any other
proceeding or arrangement whereby any of its assets are subject generally to
the payment of its liabilities or whereby any receiver, trustee, liquidator or
the like is appointed for it or any substantial part of its assets (including
without limitation the filing by the Borrower of a petition for appointment as
a debtor-in-possession under Title 11 of the U.S. Code); (2) the Borrower fails
to obtain the dismissal or stay on appeal within thirty (30) calendar days of
the commencement of any proceeding arrangement referred to in (1) above; (3)
the Borrower begins any other procedure for the relief of financially
distressed or insolvent debtors, or such procedure has been commenced against
it, whether voluntarily or involuntarily, and such procedure has not been
effectively terminated, dismissed or stayed within thirty (30) calendar days
after the commencement thereof, or (4) the Borrower begins any procedure for
its dissolution, or a procedure therefore has been commenced against it.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND
ACCEPTED BY LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER
AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
BOULDER COUNTY, THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE
RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
MULTIPLE PARTIES. All obligations of Borrower under this Agreement
shall be joint and several, and all references to Borrower shall mean each and
every Borrower. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including reasonable attorneys' fees, incurred in
connection with the preparation, execution, enforcement and collection of this
Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's attorney's fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorney's fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other sums
provided by law.
NOTICES. All notices required to be given under this Agreement shall
be effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail, first
class, postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address. To
the extent permitted by Applicable law, if there is more than one Borrower,
notice to any Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrower's
current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of the Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries of Borrower, with the exception of its Canadian
subsidiary, IRDE. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not, however,
have the right to assign its rights under this Agreement or any interest
therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument delivered
by Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery to
Lender of the Related Documents, regardless of any investigation made by Lender
or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
8
<PAGE> 9
Waiver. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a provision
of this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other
provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of Borrower
or of any Grantor as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
OCTOBER 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
a Colorado Corporation
By:
-------------------------------------------
Ronald J. Hottovy, Vice President/Secretary
LENDER:
BANK ONE, COLORADO, N.A.
By:
-------------------------------------------
Eric R. Long, Assistant Vice President
9
<PAGE> 10
(Exhibit A)
BORROWING BASE CERTIFICATE
and
CERTIFICATE OF COMPLIANCE
of
SCIENTIFIC SOFTWARE-INTERCOMP, INC.
("Borrower")
As of the Period Ending _______________
The undersigned hereby certifies to Bank that the following financial
information has been taken from Borrower's books and records which are complete
and accurate and the following calculations of the Borrowing Base aging of
accounts receivable are true and correct:
A. EXPORT LINE BORROWING BASE
<TABLE>
<S> <C> <C>
Total Foreign Accounts Receivable
----------------
Less A/R Greater than 150 days from invoice ( )
----------------
Less Uninsured Foreign A/R ( )
----------------
Less Other ( )
----------------
-----------------
Borrower-Credit Insured (Less than 150 days)
----------------
Borrower-L/C Backed
----------------
Borrower-Int'l Fin. Inst. Account
----------------
SSI-UK-Credit Insured (Less than 150 days)
----------------
SSI-UK-L/C Backed
----------------
SSI-UK-Int'l Fin. Inst. Account
----------------
-----------------
@90% =
AVAILABLE BORROWING BASE
-----------------
Less Export Line Outstandings ( )
----------------
Less Export USD L/C's ( )
----------------
Less For. Currency L/C's (+20%) ( )
----------------
EXCESS/DEFICIT BORROWING BASE
-----------------
B. DOMESTIC LINE BORROWING BASE
Total Domestic Accounts Receivable
----------------
Less A/R over 150 days from invoice ( )
----------------
Less Other ( )
----------------
-----------------
@75% =
AVAILABLE BORROWING BASE
-----------------
Less Domestic L/C's ( )
----------------
EXCESS/DEFICIT BORROWING BASE
-----------------
</TABLE>
<PAGE> 11
(Exhibit A)
FINANCIAL COVENANT COMPLIANCE
<TABLE>
<CAPTION>
Covenant Required Actual
- -------- -------- ------
<S> <C>
1) Current Ratio Greater than 1.3:1
--------
2) Leverage Ratio Less than 1.75:1
--------
3) Tangible Net Worth Greater than $8,000,000
through 12/30/95
--------
Greater than $9,500,000
at 12/31/95 & thereafter
--------
4) Positive Cash Flow Positive each fiscal half
--------
5) Capital Expenditures Less than $500,000 during FY95
--------
</TABLE>
The undersigned further certifies that (a) Borrower is in compliance with all
covenants contained in the Loan Agreement dated October 15, 1995 and
amendments thereof, and (b) there has been no Event of Default under the Loan
Agreement which has not been cured or waived, and no potential Default has
occurred.
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
<PAGE> 12
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 03-30-1996 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $4,500,000.00 DATE OF AGREEMENT: OCTOBER 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $5,000,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE MARCH 30, 1996.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FOUR
MILLION FIVE HUNDRED THOUSAND & 00/100 DOLLARS ($4,500,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON MARCH 30, 1996. IN ADDITION,
BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING
NOVEMBER 30, 1995, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY
OF EACH MONTH AFTER THAT. Interest on this Agreement is computed on a 365/360
simple interest basis; that is, by applying the ratio of the annual interest
rate over a year of 360 days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 1.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 10.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrower of Borrower's obligation to continue to make
payments of accrued unpaid interest. Rather, they will reduce the principal
balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, convenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to Prime Rate plus 5% per annum,
and (b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Agreement (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire or pay someone else to help
collect this Agreement if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgement collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO
LENDER AND ACCEPTED BY LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF BOULDER COUNTY, THE STATE OF COLORADO. LENDER AND BORROWER HEREBY
WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers
to Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all IRA, Keogh, and
trust accounts. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Agreement against any
and all such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 13
PAGE 2
10-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 42 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 14
EXHIBIT "B"
ANNEX A
LOAN AUTHORIZATION AGREEMENT
THIS LOAN AUTHORIZATION AGREEMENT (this "Agreement") is made and
entered into by and between the institution identified as the Lender on the
signature page hereof (the "Lender") and the Export-Import Bank of the United
States ("Eximbank"). This Agreement sets forth the specific terms and
conditions of the Loan known as Guaranteed Loan No. AP068039XA which is
guaranteed by Eximbank pursuant to the Master Guarantee Agreement no.
CO-MGA-001 dated SEPTEMBER 21, 1995 between Eximbank and the Lender. The
capitalized terms used herein shall have the meanings set forth in the Master
Guarantee Agreement.
(1) Lender's Name and Address: The full name, address, contact person,
telephone and telefax numbers of the Lender are as follows:
Bank One, Boulder, N.A.
Boulder Banking Center
1800 Broadway
Boulder, CO 80306
Contact: Eric R. Long, Assistant Vice President
Tel: (303) 447-5670
FAX: (303) 447-5820
(2) Borrower's Name and Address: The full name, address, contact person,
telephone and telefax numbers of the Borrower are as follows:
Scientific Software-Intercomp, Inc.
1801 California St. - Suite 295
Denver, CO 80202
Contact: Joseph R. Fisher, Manager - Corporate Finance
Tel: (303) 292-1111
FAX: (303) 295-2235
(3) Guarantors' Names and Addresses (The guarantees shall be valid and
enforceable, or payment and not of collection; if more than one
guarantor, their obligations shall be joint and several):
*Intercomp Resource Development & Engineering, (Canada) Ltd. ("IRDE")
Sandman Center
840 7th Avenue, SW - Suite 1000
Calgary, Alberta T2P 3G2
Canada
*Note: This guarantee of IRDE is a subordinated guarantee. The guarantee of
IRDE is subordinated in payment to the Hong Kong Bank of Canada, which has
extended a line of credit to IRDE. If there
<PAGE> 15
2
are no outstandings under the Hong Kong Bank line of credit, then the guarantee
will be in first place.
Scientific Software Intercomp (U.K.) Ltd.
Monarch House
Crabtree Office Village
Eversly Way, Egham
Surrey TW20 8RY
United Kingdom
Scientific Software - Texas, Inc.
10333 Richmond Ave. - Suite 1000
Houston, TX 77042
SSI - Bethany, Inc.
10333 Richmond Ave. - Suite 1000
Houston, TX 77042
Scientific - Software Intercomp, Inc.
10333 Richmond Ave. - Suite 1000
Houston, TX 77042
(4) The Items to be financed:
A. The Items: Proprietary software, computer hardware and
consulting services.
B. Are Performance Guarantees (e.g. bid bonds, performance bonds,
surety bonds, stand-by letters of credit) to be issued to
foreign Buyers? Yes XX; No .
-- --
(5) Loan Amount, Disbursement Terms and Conditions, and Disbursement
Rates:
A. Loan Amount: $4,500,000
B. Disbursement Terms and Conditions: Disbursements may be made
only against written Export Orders.
C. Disbursement Rates by Categories of Collateral:
(1) Export-related Inventory: Seventy-five (75) percent
of the value of the Borrower's eligible
export-related inventory located in the United
States, valued at the lower of actual cost or market
value (including cost of work-in-process inventory
valued in accordance with Generally Accepted
Accounting Principles). Note: Eligible export-related
inventory shall specifically exclude software.;
(2) Export-related Accounts Receivable: Ninety (90)
percent of the Borrower's
<PAGE> 16
3
eligible export-related accounts receivable; and
(3) Export-related Accounts Receivable of Foreign
Subsidiaries: Ninety (90%) of the eligible
export-related accounts receivable of the Borrower's
subsidiaries in the United Kingdom and Canada,
provided that the receivables are related to an
Export Order of the Borrower.
(6): Security Interests in the Collateral: Valid and enforceable,
perfected security interests in the following Collateral, and the
proceeds thereof.
A. First priority in the following:
1. Export-related Inventory.
2. Export-related Accounts Receivable.
To the extent applicable, "Export-related
inventory" shall mean all of the Borrower's
inventory which is intended to be sold
pursuant to export orders. Unless the Export-
related inventory can be effectively
segregated, for purposes of claim recoveries
under the Master Guarantee Agreement, the
Export-related inventory will be determined
on a pro-rata basis comparing, as of the date
of default, the amount outstanding under the
Revolving Loan and the aggregate amount
outstanding under all other short-term
inventory financing of the Borrower extended
by the Lender.
3. Export-related receivables of Scientific Software
Intercomp (U.K.) Ltd., the Borrower's subsidiary in the United
Kingdom and Intercomp Resource Development & Engineering,
(Canada) Ltd., the Borrower's subsidiary in Canada.
4. Proprietary computer software (Shared with Bank One,
Boulder, N.A.; on a pro-rata basis, based on the respective
outstanding loan balances at the time of default, comparing
the balance on Ex-Im Bank's Guaranteed Revolving Loan versus
the balance on the Lender's domestic working capital credit
line of $633,000 with the Borrower).
B. Second lien in the following:
1. Domestic Inventory
2. Domestic Receivables
C. Junior priority blanket lien in the following:
All of the Borrower's other assets, and the proceeds thereof.
(7): Terms of Sale. Export sales financed under the Loan shall be on one
or more of the following terms:
<PAGE> 17
4
(i) Irrevocable letter of credit issued prior to shipment.
(ii) Open account insured through Eximbank Export Credit
Insurance for comprehensive commercial and political risk;
(iii) Open account insured through Great American Insurance
Companies for comprehensive commercial and political risk;
(iv) Export Orders funded by a multilateral institution,
provided the Export Orders comply with all requirements of
Ex-Im Bank's Country Limitation Schedule.
(8) Lender's Interest Rate: Bank One Boulder, N.A. Prime + 1.50%.
(9) Facility Fee: The Lender shall pay the Facility Fee equal to $33,750
(1.5% per annum of the Loan Amount, pro-rated for 6 months) due
within five (5) Business Days of the Closing Date.
(10) Availability Date: March 31, 1996
(11) Special Conditions: (See attached.)
(12) Country Limitations: (See attached Country Limitation Schedule dated
May 14, 1995)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, in duplicate, as of the 11 day of October, 1995.
BANK ONE, COLORADO, NA EXPORT-IMPORT BANK OF THE
FKA BANK ONE, BOULDER UNITED STATES
- ----------------------------------
(Name of Lender)
By /s/ ERIC R. LONG By /s/ SAM Z. ZYTCER for
----------------------------- --------------------------------
Name ERIC R. LONG Name James W. Crist
--------------------------- ------------------------------
Title Assist. Vice President Title Vice President
-------------------------- -----------------------------
Guaranteed Loan No. AP068039XA
<PAGE> 18
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$633,000.00 11-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded are for Lender's use only and do not limit the applicability of this document to any
particular loan or item
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA STREET, STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $633,000.00 DATE OF AGREEMENT: OCTOBER 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE NOVEMBER 15,
1995.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF SIX
HUNDRED THIRTY THREE THOUSAND & 00/100 DOLLARS ($633,000.00) OR SO MUCH AS MAY
BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON NOVEMBER 15, 1995. Interest on
this Agreement is computed on a 365/360 simple interest basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 2.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 11.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to Prime Rate + 5.0% per annum, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Agreement
(including any increased rate). The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Agreement if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgement collection services.
If not prohibited by applicable law, Borrower also will pay any court costs,
in addition to all other sums provided by law. THIS AGREEMENT HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF COLORADO. IF THERE
IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF BOULDER COUNTY, THE STATE OF COLORADO. LENDER
AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE
OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 19
PAGE 2
10-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 26 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By:
-------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 20
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$633,000.00 11-15-1995 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (2.500% over LENDER'S PRIME RATE, making an
initial rate of 11.250%), Revolving Line of Credit Loan to a Corporation for
$633,000.00 due on November 15, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $633,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWERS BEHALF: $633,000.00
$633,000.00 to EXTEND 505-7979623550-26
-----------
NOTE PRINCIPAL: $633,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED AUGUST 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 21
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$4,500,000.00 03-30-1996 42 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., A LENDER: BANK ONE, COLORADO, N.A.
COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (1.500% over LENDER'S PRIME RATE, making an
initial rate of 10.250%), Revolving Line of Credit Loan to a Corporation for
$4,500,000.00 due on March 30, 1996.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $4,500,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF: $4,500,000.00
$4,500,000.00 to EXTEND 505-7979623550-42
-------------
NOTE PRINCIPAL: $4,500,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED OCTOBER 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
By:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 22
October 1, 1994
EXPORT-IMPORT BANK OF THE UNITED STATES
WORKING CAPITAL GUARANTEE PROGRAM
BORROWER AGREEMENT
THIS BORROWER AGREEMENT (this "Agreement") is made and entered into
by the entity identified as the Borrower on the signature page hereof (the
"Borrower") and is acknowledged by the institution identified as the Lender on
the signature page hereof (the "Lender").
RECITALS
A. The Lender shall make a loan (the "Loan") to the Borrower for the
purpose of providing the Borrower with pre-export working capital to finance
the manufacture of purchase and subsequent export sale of the Items (as
hereinafter defined).
B. The Loan shall be in a principal amount (the "Loan Amount") not
to exceed at any time outstanding the amount specified in item (5)(A) of the
Loan Authorization Agreement between the Lender and the Export-Import Bank of
the United States ("Eximbank") (or Loan Authorization Notice provided to
Eximbank by the Lender in the case of a Loan under Delegated Authority) which
is attached hereto as Annex A and incorporated herein.
C. The Loan shall be evidenced by a valid and enforceable promissory
note payable by the Borrower to the order of the Lender (the "Note") and shall
be made pursuant to a written agreement related solely thereto between the
Borrower and the Lender (the "Loan Agreement").
D. A condition precedent to the making of the Loan by the Lender is
that Eximbank guarantee the payment of ninety percent (90%) of the Loan Amount
and all interest accrued thereon, subject to the terms and conditions of a
master guarantee agreement (the "Master Guarantee Agreement") between Eximbank
and the Lender.
E. In consideration for and as a condition precedent to the Lender's
making the Loan and Eximbank's entering into the Master Guarantee Agreement,
the Borrower shall execute this Agreement for the benefit of the Lender and
Eximbank.
NOW, THEREFORE, the Borrower hereby agrees as follows:
<PAGE> 23
ARTICLE I
DEFINITIONS
"Accounts Receivable" shall mean those trade accounts from the sale
of the Items due and payable to the Borrower in the United States and any
notes, drafts, letters of credit or insurance proceeds supporting payment
thereof.
"Availability Date" shall mean the date set forth in item (10) of
the Loan Authorization Agreement or, if such date is not a Business Day, the
next Business Day thereafter,
"Borrowing Base", shall mean the Collateral Value as discounted by
the applicable Disbursement Rate(s).
"Borrowing Base Certificate" shall mean the certificate in form
provided by the Lender and executed by the Borrower setting forth the Borrowing
Base supporting one or more Disbursements.
"Business Day" shall mean any day on which the Federal Reserve Bank
of New York is open for business.
"Buyer" shall mean an entity which has entered into one or more
Export Orders with the Borrower.
"Closing Date" shall mean the date on which the Loan Documents are
executed by the Borrower.
"Collateral" shall mean the property of the Borrower in which the
Borrower has granted to the Lender a valid and enforceable security interest as
security for the payment of all principal and interest due under the Loan, and
which is identified in item (6) of the Loan Authorization Agreement, including
all proceeds (cash and non-cash) thereof.
"Collateral Value" shall mean at any given time the value of all
Collateral against which Disbursements may be made as set forth in item (5)(C)
of the Loan Authorization Agreement, valued according to Generally Accepted
Accounting Principles.
"Country Limitation Schedule" shall mean the schedule published by
Eximbank and attached to this Agreement as Annex C which sets forth on a
country by country basis whether and under what conditions Eximbank will
provide coverage for the financing of export transactions to countries
listed therein.
"Disbursed Amount" shall mean the aggregate outstanding amount of
the Disbursements.
2
<PAGE> 24
"Disbursement" shall mean an advance of the Loan from the Lender to
the Borrower under the Loan Agreement.
"Disbursement Rate" shall mean the rate specified in item (5)(C) of
the Loan Authorization Agreement for each category of Collateral.
"Dollars" or "$" shall mean the lawful money of the United States of
America.
"Export Certificate" shall mean the certificate in the form of Annex
B to this Agreement executed by the Borrower.
"Export Order" shall mean a written export order or contract for the
purchase by the Buyer from the Borrower of any of the Items.
"Generally Accepted Accounting Principles" shall mean the accounting
principles issued by the American Institute of Certified Public Accountants.
"Guarantors" shall mean those persons or entities, if any,
identified in item (3) of the Loan Authorization Agreement who shall jointly
and severally guarantee the Borrower's obligation to repay all amounts
outstanding under the Note.
"Inventory" shall mean the raw materials, work-in-process and
finished goods purchased or manufactured by the Borrower for resale.
"Items" shall mean the finished goods or services which are intended
for export, as specified in item (4)(A) of the Loan Authorization Agreement.
"Letter of Credit" shall mean an irrevocable letter of credit
subject to UCP 500, payable in the United States or at the issuing bank and
issued for the benefit of the Borrower on behalf of a Buyer in connection with
the purchase of the Items.
"Loan Documents" shall mean the Note, the Loan Agreement, this
Agreement and any other instrument, agreement or document previously,
simultaneously or hereafter executed by the Borrower or any Guarantors
evidencing, securing, guaranteeing or in connection with the Loan.
"Revolving Loan" shall mean a Loan under which amounts disbursed and
repaid may be disbursed again until the Availability Date.
"Transaction Specific Loan" shall mean a Loan under which amounts
disbursed and repaid may not be disbursed again.
3
<PAGE> 25
"U.S." or "United States" shall mean the United States of America
and its territorial possessions.
"U.S. Content" shall mean with respect to any Item all the labor,
materials and services which are of U.S. origin or manufacture, and which are
incorporated into an Item in the United States.
ARTICLE II
OBLIGATIONS OF THE BORROWER
Until payment in full of the Loan, the Borrower agrees to the
following:
Section 2.1 Use of Disbursements. The Borrower shall use
Disbursements only for the purpose of enabling the Borrower to finance the cost
of manufacturing, purchasing or selling the Items. The borrower may not use
Disbursements for the purpose of: (a) servicing any of the Borrower's
pre-existing or future indebtedness unrelated to the Loan; (b) acquiring fixed
assets or capital goods for use in the Borrower's business; (c) acquiring,
equipping or renting commercial space outside of the United States; or (d)
paying the salaries of non-U.S. citizens or non-U.S. permanent residents who
are located in offices outside the United States.
In addition, Disbursements may not be used to finance the
manufacture, purchase or sale of any of the following:
(a) Items to be sold to a Buyer located in a country in which
Eximbank is legally prohibited from doing business as designated in the County
Limitation Schedule;
(b) that part of the cost of the Items which is not U.S. Content
unless such part is not greater than fifty percent (50%) of the cost of the
Items and is incorporated into the Items in the United States;
(c) defense articles or defense services; or
(d) without Eximbank's prior written consent, any Items to be used
in the construction, alteration, operation or maintenance of nuclear power,
enrichment, reprocessing, research or heavy water production facilities.
Section 2.2 Certificates. In order to receive a Disbursement under a
Transaction Specific Loan, the Borrower shall deliver to the Lender a Borrowing
Base Certificate current within the past five (5) calendar days. In order to
receive a Disbursement under a Revolving Loan, the Borrower shall have
delivered to the lender a Borrowing Base Certificate current within the past
thirty (30) calendar days. Additionally, in order to receive the first
Disbursement related to any particular
4
<PAGE> 26
Export Order, the Borrower shall deliver to the Lender an Export Certificate
covering the Items described in such Export Order.
Section 2.3 Exclusions from the Borrowing Base. In determining the
amount of a requested Disbursement, the Borrower shall exclude from the
Borrowing Base the following:
(a) any Inventory which is not located in the United
States;
(b) any demonstration Inventory or Inventory sold on
consignment;
(c) any Inventory consisting of proprietary software;
(d) any Inventory which is damaged, obsolete, returned,
defective, recalled or unfit for further processing;
(e) any Inventory which has been previously exported from
the United States;
(f) any Inventory which constitutes defense articles or
defense services or any Accounts Receivable generated by sales of such
Inventory;
(g) any Inventory which is to be incorporated into Items
destined for shipment to, and any Account Receivable in the name of a Buyer
located in, a country in which Eximbank is legally prohibited from doing
business as designated in the Country Limitation Schedule;
(h) any Inventory which is to be incorporated into Items
destined for shipment to, and any Account Receivable in the name of a Buyer
located in, a country in which Eximbank coverage is not available for
commercial reasons as designated in the Country Limitation Schedule, unless and
only to the extent that such Items are to be sold to such country terms of a
Letter of Credit confirmed by a bank acceptable to Eximbank;
(i) any Inventory which is to be incorporated into Items
whose sale would result in an ineligible Account Receivable;
(j) any Account Receivable with a term in excess of net
one hundred eighty (180) days;
(k) any Account Receivable which is more than one hundred
fifty (150) calendar days past the invoice date or shipment date or against
export related accounts receivable which are more than ninety (90) calendar
days after the customer's acceptance, whichever occurs earlier.
5
<PAGE> 27
(l) any intra-company Account Receivable or any Account
Receivable from a subsidiary of the Borrower, from a person or entity with a
controlling interest in the Borrower or from an entity which shares common
controlling ownership with the Borrower;
(m) any Account Receivable evidenced by a Letter of
Credit, until the date of shipment of the Items covered by the subject Letter
of Credit;
(n) any Account Receivable which the Lender or Eximbank,
in its reasonable judgment, deems uncollectible for any reason;
(o) any Account Receivable payable in a currency other
than Dollars and UK pounds; and
(p) any Account Receivable from a military Buyer, except
as may be approved by Eximbank.
Section 2.4 Schedules, Reports and Other Statements. The Borrower
shall submit to the Lender in writing each month (a) an Inventory schedule for
the preceding month and (b) an Accounts Receivable aging report for the
preceding month detailing the terms of the amounts due from each Buyer. The
Borrower shall also furnish to the Lender promptly upon request such
information, reports, contracts, invoices and other data concerning the
Collateral as the Lender may from time to time specify.
Section 2.5 Additional Security or Payment. The Borrower shall at
all times ensure that the Borrowing Base exceeds the Disbursed Amount. If
informed by the Lender or if the Borrower otherwise has actual knowledge that
the Borrowing Base is at any time less than the Disbursed Amount, the Borrower
shall, within five (5) Business Days, either (a) furnish additional security to
the Lender, in form and amount satisfactory to the Lender and Eximbank, or (b)
pay to the Lender an amount equal to the difference between the Disbursed
Amount and the Borrowing Base.
Section 2.6 Continued Security Interest. The Borrower shall notify
the Lender in writing within five (5) Business Days if (a) the Borrower changes
its name or identity in any manner, (b) the Borrower changes the location of
its principal place of business, (c) the nature of any of the Collateral is
changed or any of the Collateral is transferred to another location or (d) any
of the books or records related to the Collateral are transferred to another
location. The Borrower shall execute such additional financing statements or
other documents as the Lender may reasonably request in order to maintain
perfected security interest in the Collateral.
Section 2.7 Inspection of Collateral. The Borrower shall permit
the representatives of the Lender and Eximbank to make at any time during
normal business hours reasonable inspections of the Collateral and of the
Borrower's facilities, activities, and books and records, and shall cause its
officers and employees to give full cooperation and assistance in connection
therewith.
6
<PAGE> 28
Section 2.8 Notice of Debtor's Relief, Dissolution and Litigation.
The Borrower shall notify the Lender in writing within five (5) Business Days
of the occurrence of any of the following:
(a) a proceeding in bankruptcy or an action for debtor's
relief is filed by, against, or on behalf of the Borrower;
(b) the Borrower fails to obtain the dismissal or
termination within thirty (30) calendar days of the commencement of any
proceeding or action referred to in (a) above;
(c) the Borrower begins any procedure for its dissolution
or liquidation, or a procedure therefore has been commenced against it; or
(d) any material litigation is filed against the Borrower.
Section 2.9 Insurance. The Borrower shall maintain insurance
coverage in the manner and to the extent customary in businesses of similar
character.
Section 2.10 Merger or Consolidation. Without the prior written
consent of Eximbank and the Lender, the Borrower shall not (a) merge or
consolidate with any other entity, (b) sell, lease, transfer or otherwise
dispose of any substantial part of its assets, or any part of its assets which
are essential to the conduct of its business or operations, (c) make any
material change in its organizational structure or identity, or (d) enter into
any agreement to do any of the foregoing.
Section 2.11 Repayment Term and Reborrowings. The Borrower shall
pay in full the outstanding Loan Amount and all accrued and unpaid interest
thereon no later than the first Business Day after the Availability Date. If
the Loan is a Revolving Loan, provided that the Borrower is not in default
under any of the Loan Documents, the Borrower may borrow, repay and reborrow
amounts under the Loan until the close of business on the Availability Date. If
the Loan is a Transaction Specific Loan, the Borrower shall, within two (2)
Business Days of the receipt thereof, pay to the Lender (for application
against the outstanding Loan Amount and accrued and unpaid interest thereon)
all checks, drafts, cash and other remittances it may receive in payment or on
account of the Accounts Receivable or any other Collateral, in precisely the
form received (except for the endorsement of the Borrower where necessary).
Pending such deposit, the Borrower shall not commingle any such items of
payment with any of its other funds or property, but will hold them separate
and apart.
Section 2.12 Cross Default. The Borrower shall be deemed in default
under the Loan if the Borrower fails to pay when due any amount payable to the
Lender under any loan to the Borrower not guaranteed by Eximbank.
7
<PAGE> 29
Section 2.13 Financial Statements. The Borrower shall provide
quarterly financial statements to the Lender no later than ninety (90) days
after the end of each quarter. This is in addition to any other financial
statements that may be required by the Lender under the Loan Agreement.
Section 2.14 Taxes, Judgments and Liens. The Borrower shall remain
current on all of its Federal, state and local tax obligations. In addition,
the Borrower shall notify the Lender in the event of (i) any judgment against
the Borrower, or (ii) any lien is filed against any of the assets of the
Borrower.
ARTICLE III
RIGHTS AND REMEDIES
Section 3.1 Indemnification. Upon Eximbank's payment of a claim to
the Lender in connection with the Loan pursuant to the Master Guarantee
Agreement, Eximbank shall assume all rights and remedies of the Lender under
the Loan Documents and may enforce any such rights or remedies against the
Borrower, the Collateral and any Guarantors. Additionally, the Borrower shall
hold Eximbank and the Lender harmless from and indemnify them against any and
all liabilities, damages, claims, costs and losses incurred or suffered by
either of them resulting from (a) any materially incorrect certification or
statement knowingly made by the Borrower or its agent to Eximbank or the Lender
in connection with the Loan, this Agreement or any of the other Loan Documents
or (b) any material breach by the Borrower of the terms and conditions of this
Agreement or any of the other Loan Documents.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Governing Law. This Agreement is made under the laws
of the State of New York, United States of America, and for all purposes shall
be governed by and construed in accordance with such laws without giving effect
to the conflict of law principles thereof.
Section 4.2 Notification. All notifications required by this
Agreement shall be given in the manner provided in the Loan Agreement.
Section 4.3 Partial Invalidity. If at any time any of the
provisions of this Agreement becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, neither the legality, the validity
nor the enforceability of the remaining provisions hereof shall in any way be
affected or impaired.
8
<PAGE> 30
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be
duly executed as of the ____ day of ______________, 199__.
- ------------------------------
(Name of Borrower)
By
----------------------------
(Signature)
Name
--------------------------
(Print or Type)
Title
-------------------------
ACKNOWLEDGED:
Bank One, Colorado
- ------------------------------
(Name of Lender)
By /s/ ERIC LONG
----------------------------
(Signature)
Name ERIC LONG
--------------------------
(Print or Type)
Title Assistant Vice President
-------------------------
Guaranteed Loan No. AP068039XA
----------
ANNEXES:
A - Loan Authorization Agreement
B - Export Certificate
C - Country Limitation Schedule
9
<PAGE> 31
EXPORT-IMPORT BANK OF THE UNITED STATES
COUNTRY LIMITATION SCHEDULE
Special Conditions Pertaining to
Ex-Im Bank Loan & Guarantee Programs
and Export Credit Insurance
EFFECTIVE May 14, 1995
It is agreed that pursuant to the provisions of Ex-Im Bank loans and guarantees
and Ex-Im Bank export credit insurance policies, the country limitation
schedule has been amended effective May 14, 1995. This revision supersedes the
November 13, 1994 country limitation schedule and any amendments thereto.
Insureds, and brokers will be notified of any amendments to this country
limitation schedule in writing. A full revision is generally completed every
six months to one year. All special conditions should be reviewed as many have
been amended.
GENERAL CONDITIONS
Exceptions to any condition or limitation contained herein must be obtained in
writing from Ex-Im Bank.
Ex-Im Bank reserves the right to set additional conditions for any particular
buyer or issuing bank including the right to set a different percentage of
coverage. Ex-Im Bank also reserves the right to reject any particular
application.
The sector where the risk lies (public or private) and the country of the
obligor, or guarantor if there is one, will generally be used for determining
appropriate country limitations and exposure fee.
- --------------------------------------------------------------------------------
The following insurance policies are affected by this country limitation
schedule:
SHORT-TERM COMPREHENSIVE: CS, EBD, ELC, ENB, ENV, ESC, ESM(ST), ESS, ETM(ST),
FB, FB-E, FV, MSC(ST), MSC-E(ST).
SHORT-TERM POLITICAL RISKS ONLY: ESP, ESSP, FP, MCP(ST).
MEDIUM-TERM: All medium-term and lease-policy types, ESM(MT), ETM(MT),
MCP(MT), MRP, MSC(MT), MSC-E(MT), MTR, MTR-E.
- --------------------------------------------------------------------------------
Effective Date
of this Endorsement May 14, 1995 No. CLS-5/95
--------------- -------------
12:01 A.M. E.T.
<PAGE> 32
Page 2 of 11
================================================================================
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE MAY 14, 1995
<TABLE>
<CAPTION>
---------------------------------------------------------------
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
- -------------------------------------------------------------------------------------------------------------------
COUNTRY ST MT LT ST MT LT NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Afghanistan X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Albania X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Algeria X X X X X #1,#2
- -------------------------------------------------------------------------------------------------------------------
Angola X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Anguilla #7
- -------------------------------------------------------------------------------------------------------------------
Anitqua & Barbuda X X X #2
- -------------------------------------------------------------------------------------------------------------------
Argentina #7b
- -------------------------------------------------------------------------------------------------------------------
Armenia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Aruba #2,#10
- -------------------------------------------------------------------------------------------------------------------
Australia
- -------------------------------------------------------------------------------------------------------------------
Austria
- -------------------------------------------------------------------------------------------------------------------
Azerbaijan X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Bahamas
- -------------------------------------------------------------------------------------------------------------------
Bahrain
- -------------------------------------------------------------------------------------------------------------------
Bangladesh X X X #2
- -------------------------------------------------------------------------------------------------------------------
Barbados #2
- -------------------------------------------------------------------------------------------------------------------
Belarus X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Belgium
- -------------------------------------------------------------------------------------------------------------------
Belize #7a
- -------------------------------------------------------------------------------------------------------------------
Benin X X X X #2,#5
- -------------------------------------------------------------------------------------------------------------------
Bermuda
- -------------------------------------------------------------------------------------------------------------------
Bhutan #2
- -------------------------------------------------------------------------------------------------------------------
Bolivia X #2,#6
- -------------------------------------------------------------------------------------------------------------------
Botswana
- -------------------------------------------------------------------------------------------------------------------
Bosnia-Hercegovina X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Brazil X X X
- -------------------------------------------------------------------------------------------------------------------
British Virgin Is.
- -------------------------------------------------------------------------------------------------------------------
Brunei
- -------------------------------------------------------------------------------------------------------------------
Bulgaria X X X #2,#6
- -------------------------------------------------------------------------------------------------------------------
Burkina Faso X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Burundi X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Cambodia X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Cameroon X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Canada
- -------------------------------------------------------------------------------------------------------------------
Cape Verde Is. X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Cayman Is.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
ST - SHORT TERM, MT - MEDIUM TERM, LT - LONG TERM, X - SUPPORT NOT AVAILABLE
<PAGE> 33
Page 3 of 11
================================================================================
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE MAY 14, 1995
<TABLE>
<CAPTION>
-----------------------------------------------------------------
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
- -------------------------------------------------------------------------------------------------------------------
COUNTRY ST MT LT ST MT LT NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Central African Rep. X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Chad X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Chile
- -------------------------------------------------------------------------------------------------------------------
China, People's Rep. X X X #3
- -------------------------------------------------------------------------------------------------------------------
Columbia
- -------------------------------------------------------------------------------------------------------------------
Comoros X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Congo X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Cook Islands X #2,#5
- -------------------------------------------------------------------------------------------------------------------
Costa Rica X X X #7b
- -------------------------------------------------------------------------------------------------------------------
Cote d'Ivoire X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Croatia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Cuba X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Cyprus
- -------------------------------------------------------------------------------------------------------------------
Czech Republic #2
- -------------------------------------------------------------------------------------------------------------------
Denmark
- -------------------------------------------------------------------------------------------------------------------
Djibouti X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Dominica #2
- -------------------------------------------------------------------------------------------------------------------
Dominican Rep. X #6,#7a
- -------------------------------------------------------------------------------------------------------------------
Ecuador X #6,#7a
- -------------------------------------------------------------------------------------------------------------------
Egypt #2
- -------------------------------------------------------------------------------------------------------------------
El Salvador
- -------------------------------------------------------------------------------------------------------------------
Equatorial Guinea X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Eritrea X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Estonia X #2,#5
- -------------------------------------------------------------------------------------------------------------------
Ethiopia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Fiji #2
- -------------------------------------------------------------------------------------------------------------------
Finland
- -------------------------------------------------------------------------------------------------------------------
France
- -------------------------------------------------------------------------------------------------------------------
Gabon X X X #7a
- -------------------------------------------------------------------------------------------------------------------
Gambia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Georgia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Ghana #6#7a
- -------------------------------------------------------------------------------------------------------------------
Greece
- -------------------------------------------------------------------------------------------------------------------
Grenada #2
- -------------------------------------------------------------------------------------------------------------------
Guatemala #7b
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
ST - SHORT TERM, MT - MEDIUM TERM, LT - LONG TERM, X - SUPPORT NOT AVAILABLE
<PAGE> 34
Page 4 of 11
================================================================================
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE MAY 14, 1995
<TABLE>
<CAPTION>
---------------------------------------------------------------
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
- -------------------------------------------------------------------------------------------------------------------
COUNTRY ST MT LT ST MT LT NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Guinea X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Guinea-Bissau X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Guyana X X X #2
- -------------------------------------------------------------------------------------------------------------------
Haiti X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Honduras X X X X #2,#5
- -------------------------------------------------------------------------------------------------------------------
Hong Kong
- -------------------------------------------------------------------------------------------------------------------
Hungary #2,#5
- -------------------------------------------------------------------------------------------------------------------
Iceland
- -------------------------------------------------------------------------------------------------------------------
India
- -------------------------------------------------------------------------------------------------------------------
Indonesia
- -------------------------------------------------------------------------------------------------------------------
Iran X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Iraq X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Ireland
- -------------------------------------------------------------------------------------------------------------------
Israel
- -------------------------------------------------------------------------------------------------------------------
Italy
- -------------------------------------------------------------------------------------------------------------------
Jamaica X #7a
- -------------------------------------------------------------------------------------------------------------------
Japan
- -------------------------------------------------------------------------------------------------------------------
Jordan #2,#5
- -------------------------------------------------------------------------------------------------------------------
Kazakhstan X X X #2,#4,#6
- -------------------------------------------------------------------------------------------------------------------
Kenya X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Kiribati #2
- -------------------------------------------------------------------------------------------------------------------
Korea, North X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Korea, South
- -------------------------------------------------------------------------------------------------------------------
Kuwait
- -------------------------------------------------------------------------------------------------------------------
Kyrgyzstan X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Laos X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Latvia X #2,#5
- -------------------------------------------------------------------------------------------------------------------
Lebanon X #2,#5,#6
- -------------------------------------------------------------------------------------------------------------------
Lesotho #7b
- -------------------------------------------------------------------------------------------------------------------
Liberia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Libya X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Liechtenstein
- -------------------------------------------------------------------------------------------------------------------
Lithuania X #2,#5
- -------------------------------------------------------------------------------------------------------------------
Luxembourg
- -------------------------------------------------------------------------------------------------------------------
Macao #2
- -------------------------------------------------------------------------------------------------------------------
Macedonia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
ST - SHORT TERM, MT - MEDIUM TERM, LT - LONG TERM, X - SUPPORT NOT AVAILABLE
<PAGE> 35
Page 5 of 11
================================================================================
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE MAY 14, 1995
<TABLE>
<CAPTION>
---------------------------------------------------------------
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
- -------------------------------------------------------------------------------------------------------------------
COUNTRY ST MT LT ST MT LT NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Madagascar X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Malawi X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Malaysia
- -------------------------------------------------------------------------------------------------------------------
Maldive Islands #2
- -------------------------------------------------------------------------------------------------------------------
Mali X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Malta
- -------------------------------------------------------------------------------------------------------------------
Marshall Islands X X #2,#5
- -------------------------------------------------------------------------------------------------------------------
Mauritania X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Mauritius
- -------------------------------------------------------------------------------------------------------------------
Mexico
- -------------------------------------------------------------------------------------------------------------------
Micronosia #2
- -------------------------------------------------------------------------------------------------------------------
Moldova X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Monaco
- -------------------------------------------------------------------------------------------------------------------
Mongolia X X X X #2,#6
- -------------------------------------------------------------------------------------------------------------------
Montserrat #2
- -------------------------------------------------------------------------------------------------------------------
Morocco #7b
- -------------------------------------------------------------------------------------------------------------------
Mozambique X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Myanmar X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Namibia #2
- -------------------------------------------------------------------------------------------------------------------
Nauru #2
- -------------------------------------------------------------------------------------------------------------------
Nepal X #2
- -------------------------------------------------------------------------------------------------------------------
Netherlands
- -------------------------------------------------------------------------------------------------------------------
Neth Antilles
- -------------------------------------------------------------------------------------------------------------------
New Zealand
- -------------------------------------------------------------------------------------------------------------------
Nicaragua X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Niger X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Nigeria X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Norway
- -------------------------------------------------------------------------------------------------------------------
Oman
- -------------------------------------------------------------------------------------------------------------------
Pakistan #7b
- -------------------------------------------------------------------------------------------------------------------
Palau X X X X #2,#6
- -------------------------------------------------------------------------------------------------------------------
Panama #7b
- -------------------------------------------------------------------------------------------------------------------
Papua New Guinea #2
- -------------------------------------------------------------------------------------------------------------------
Paraguay #7a
- -------------------------------------------------------------------------------------------------------------------
Peru X #2
- -------------------------------------------------------------------------------------------------------------------
Philippines
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
ST - SHORT TERM, MT - MEDIUM TERM, LT - LONG TERM, X - SUPPORT NOT AVAILABLE
<PAGE> 36
Page 6 of 11
================================================================================
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE MAY 14, 1995
<TABLE>
<CAPTION>
--------------------------------------------------------------
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
- -------------------------------------------------------------------------------------------------------------------
COUNTRY ST MT LT ST MT LT NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Poland #2
- -------------------------------------------------------------------------------------------------------------------
Portugal
- -------------------------------------------------------------------------------------------------------------------
Qatar
- -------------------------------------------------------------------------------------------------------------------
Romania X X X #2,#6
- -------------------------------------------------------------------------------------------------------------------
Russia X X X X #2,#4,#6
- -------------------------------------------------------------------------------------------------------------------
Rwanda X X X X X X
- -------------------------------------------------------------------------------------------------------------------
St. Kitts-Nevis #2
- -------------------------------------------------------------------------------------------------------------------
St. Lucia #2
- -------------------------------------------------------------------------------------------------------------------
St. Vincent-Gren #2
- -------------------------------------------------------------------------------------------------------------------
Sao Tome & Principe X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Saudi Arabia
- -------------------------------------------------------------------------------------------------------------------
Senegal X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Serbia X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Seychelles #7b
- -------------------------------------------------------------------------------------------------------------------
Sirre Leone X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Singapore
- -------------------------------------------------------------------------------------------------------------------
Slovakia #2,#5
- -------------------------------------------------------------------------------------------------------------------
Slovenia X X #2
- -------------------------------------------------------------------------------------------------------------------
Solomon Islands #2
- -------------------------------------------------------------------------------------------------------------------
Somalia X X X X X X
- -------------------------------------------------------------------------------------------------------------------
South Africa #2
- -------------------------------------------------------------------------------------------------------------------
Spain
- -------------------------------------------------------------------------------------------------------------------
Sri Lanka #2
- -------------------------------------------------------------------------------------------------------------------
Sudan X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Suriname X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Swaziland
- -------------------------------------------------------------------------------------------------------------------
Sweden
- -------------------------------------------------------------------------------------------------------------------
Switzerland
- -------------------------------------------------------------------------------------------------------------------
Syria X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Taiwan
- -------------------------------------------------------------------------------------------------------------------
Tajikstan X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Tanzania X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Thailand
- -------------------------------------------------------------------------------------------------------------------
Togo X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Tonga #2
- -------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago #7a
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
ST - SHORT-TERM, MT - MEDIUM-TERM, LT - LONG-TERM, X - SUPPORT NOT AVAILABLE
<PAGE> 37
Page 7 of 11
================================================================================
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE MAY 14, 1995
<TABLE>
<CAPTION>
---------------------------------------------------------------
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
- -------------------------------------------------------------------------------------------------------------------
COUNTRY ST MT LT ST MT LT NOTES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tunisia
- -------------------------------------------------------------------------------------------------------------------
Turkey
- -------------------------------------------------------------------------------------------------------------------
Turkmenistan X X X X #2,#4,#6
- -------------------------------------------------------------------------------------------------------------------
Turks & Caicos Is. #2
- -------------------------------------------------------------------------------------------------------------------
Uganda X X #2,#5,#6
- -------------------------------------------------------------------------------------------------------------------
Ukraine X X X X #2,#4,#6
- -------------------------------------------------------------------------------------------------------------------
United Arab Emirates #9
- -------------------------------------------------------------------------------------------------------------------
United Kingdom
- -------------------------------------------------------------------------------------------------------------------
Uruguay #7b
- -------------------------------------------------------------------------------------------------------------------
Uzbekistan X X X X #2,#4,#6
- -------------------------------------------------------------------------------------------------------------------
Vanuatu #2
- -------------------------------------------------------------------------------------------------------------------
Vatican City
- -------------------------------------------------------------------------------------------------------------------
Venezuela X X X #2
- -------------------------------------------------------------------------------------------------------------------
Vietnam X X X X X X #8
- -------------------------------------------------------------------------------------------------------------------
Western Samoa #2
- -------------------------------------------------------------------------------------------------------------------
Yemen X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Zaire X X X X X X
- -------------------------------------------------------------------------------------------------------------------
Zimbabwe X X X X X X #7b
===================================================================================================================
</TABLE>
2 May 95
ST - SHORT-TERM, MT - MEDIUM-TERM, LT - LONG-TERM, X - SUPPORT NOT AVAILABLE
<PAGE> 38
Page 8 of 11
Notes:
#1. Short-term cover is limited to government-owned banks and SONATRACH.
#2. Short-term Insurance: Discretionary credit limits are withdrawn.
Cover not available unless specified in a special buyer credit limit
or issuing bank credit limit endorsement. Cover not available under
short-term political risks only policies unless specified in a
country limit of liability endorsement.
#3. Currently, arrangements are in place with the Bank of China, China
International Trust and Investment Corporation, and the Peoples'
Construction Bank of China to serve as obligor or guarantor. The
obligations of any of these institutions is required in connection
with the use of discretionary credit limits and country limits of
liability under short-term multibuyer insurance policies. Ex-Im
Bank is developing arrangements with other Chinese financial
institutions. Ex-Im Bank will consider transactions with other
financial institutions or other entities that are able to provide
detailed financial information sufficient to enable Ex-Im Bank to
reach a credit conclusion.
#4. Letters of Interest are not available. Prior to accepting an
application for a preliminary or final commitment, or for any
insurance, Ex-Im Bank will require an indication of host government
support for the application. Contact Ex-Im Bank for more detailed
information on specific markets.
#5. Ex-Im Bank cover/support for private sector transactions is limited
to transactions with a commercial bank as obligor or guarantor
unless otherwise specified by Ex-Im Bank.
#6. Ex-Im Bank cover/support for public sector transactions is limited
to transactions which commit the full faith and credit of the
government unless otherwise specified by Ex-Im Bank.
#7. Short-term Insurance: Discretionary credit limits and coverage under
short-term political risks only policies shall be the lesser of the
limits authorized in the policy or:
a. $50,000
b. $100,000
Higher limits will be considered upon application for a special
buyer credit limit, issuing bank credit limit, or country limit of
liability.
#8. Support legally prohibited.
#9. Transactions in Sharjah, Furjairah, Ras Al-Khaimah, Umm Al-Qaywayn,
and Ajman require the guarantee of the federal government.
#10. Longer than short-term public sector transactions require the
government of Aruba as the borrower.
<PAGE> 39
Page 9 of 11
INFORMATION SUPPLEMENT ON
MEDIUM- AND LONG-TERM PROGRAMS
"Open for Cover" versus "Off-Cover". The attached Country Limitation Schedule
indicates where Ex-Im Bank is "open for cover" and where Ex-Im Bank is
"off-cover". The Schedule is organized along three dimensions: the country
where the risk lies, sector (public sector or private sector), and term of
total exposure (including both disbursement period and repayment term. Ex-Im
Bank defines "public sector" as including those obligors or guarantors which
are at least 50% owned, directly or indirectly, by the government. Where the
CLS Presents an X Mark, Ex-IM Bank is "off-cover", and is therefore not willing
to consider approval of routine transactions. These "off-cover" determinations
are due to economic and/or political risks associated with the country.
WHERE EX-IM BANK IS OPEN FOR COVER. The "open for cover" designation refers to
the possibility, rather than the certainty, of Ex-Im Bank support in particular
cases. Proposed obligors, guarantors, and transaction structures under medium-
and long-term programs are all subject to case-by-case Bank approval. Approval
depends on the case-by-case application of Bank policies, particularly the
Bank's determination of reasonable assurance of repayment. The following
paragraphs provide very general guidance to the application of policies in
markets where Ex-Im Bank is on-cover.
o IDENTIFICATION OF OBLIGOR OR GUARANTOR. Ex-Im Bank will approve a
final commitment, a preliminary commitment (PC), or a medium-term
insurance policy or commitment (MTIP or MTIC), only if a specific
obligor or guarantor has been identified, Ex-Im Bank may approve an
indicative letter of interest (LI) for a proposed transaction,
subject to the condition that an obligor or guarantor is identified
at the time the LI is converted to a final commitment, PC, MTIP, or
MTIC; an Ex-Im Bank can accept the credit risk of the proposed
obligor or guarantor.
o INFORMATION REQUIREMENTS REGARDING OBLIGORS OR GUARANTORS. Ex-Im
Bank requires that obligors or guarantors offer "reasonable
assurance of repayment." To process applications for final
commitments, PCs, MTIPs, and MTICs, Ex-Im Bank will first require
information on proposed obligors and guarantors. Such information
includes financial statements and credit references. Engineering
data is required for long-term transactions. Generally, Ex-Im Bank
will require more detailed information regarding obligors or
guarantors when processing relatively large transactions, or
transactions with obligors or guarantors with which Ex-Im Bank has
had no favorable direct credit experience. Ex-Im Bank's application
form and program literature specify the Bank's standard information
requirements.
o SOVEREIGN GUARANTEES FOR PUBLIC SECTOR BUYERS OR OBLIGORS. For most
cases involving proposed public sector buyers or obligors, Ex-Im
Bank will routinely require a sovereign guarantee. This is
particularly true when the public sector obligor is dependent on
government budget support or otherwise lacks financial and
operating independence.
o PRIOR-HOST GOVERNMENT REVIEW OF SOVEREIGN CASES IN SOME COUNTRIES.
In some countries, Ex-Im Bank requires prior review of proposed
public sector cases by government authorities responsible for
providing the sovereign guarantee, before Ex-Im Bank will begin
processing action.
<PAGE> 40
Page 10 of 11
o TEMPORARY SUSPENSION OF COVER. In countries where the CLS indicated
that Ex-Im Bank is "open for cover", Ex-Im Bank may, under certain
circumstances, temporally suspend cover. This is most likely to be
the case for public sector obligors and guarantors only, but may
involve all obligors and guarantors. In such an event, Ex-Im Bank
will advise applicants as quickly as possible.
o LARGE TRANSACTIONS IN SMALLER MARKETS. Relatively large transactions
in smaller economies, even when sovereign guaranteed, will be
subject to special Ex-Im Bank review. Ex-Im Bank will review the
potential macroeconomic impacts of the transaction, in terms of
higher debt burden and improved debt repayment capacity.
o PRIVATE COMPANIES. Ex-Im Bank will accept the direct credit risks of
private buyers, if available information suggests that these buyers
offer a "reasonable assurance of repayment." For closely-held
companies, Ex-Im Bank may require financial information from owners.
For holding companies, Ex-Im Bank may require financial information
on operating components, and may require their counter-guarantee.
o COMMERCIAL BANK GUARANTEES. Ex-Im Bank may require the guarantees of
acceptable commercial banks in the event that information available
to Ex-Im Bank on proposed private buyers suggests that these buyers
by themselves do not offer a "reasonable assurance of repayment."
o LIMITED RECOURSE PROJECTS. Ex-Im Bank will consider limited-recourse
project finance structures (those without full recourse to an
acceptable, established obligor or guarantor), but only after a
comprehensive review of project features. These features shall
include the financial commitment of the project's equity
shareholders over the life of the proposed Ex-Im Bank commitment;
the experience and capacity of project participants, including
suppliers and offtakers; project cash flow coverage of foreign
currency debt service; and security structures, including hard
currency external payments arrangements. Ex-Im Bank will review
only well- developed proposals, and will require project sponsors
to fund review of project proposals by consultants retained by the
Bank. Significant changes to proposed structures may be required.
o POLITICAL-ONLY COVER. Ex-Im Bank's standard guarantee and insurance
cover is "comprehensive", under which Ex-Im Bank will pay claims
resulting from both commercial and political perils. Ex-Im Bank also
offers a narrower form of coverage, under "political-only" cover.
Ex-Im Bank's guarantee agreements and insurance policies describe in
detail and or define the specific risks which are subject to this
form of coverage.
THE FOLLOWING IS INTENDED AS A SUMMARY: For long-term transactions,
Ex-Im Bank covers default arising from three "core" perils: transfer
risk; expropriation, and political violence. Transfer risk involves
borrowers' inability to acquire foreign exchange through legal
foreign exchange markets. Expropriation involves the government's
confiscation of assets or ownership, or arbitrary or discriminatory
intervention in business operations. Political violence involves
war, revolution, insurrection, and other such acts. Under
medium-term insurance policies, Ex-Im Bank also covers defaults
arising from other defined risks.
<PAGE> 41
Page 11 of 11
Suppliers and/or lenders choosing political-only cover must be
prepared to assume broad commercial risks associated with the
borrower's capacity. Ex-Im Bank's political-only cover does not
cover defaults arising from the borrower's capacity to withstand
domestic or international commercial market disruptions, or currency
devaluation or depreciation. If suppliers and/or lenders are unable
to assume these and other commercial risks, the Ex-Im Bank
comprehensive cover would be a more appropriate form of coverage.
Political-only cover is offered only for private buyers or
borrowers, those which are not subject to the administration of
government authorities, and for which it is possible to distinguish
between commercial perils and political-risk perils. Political-only
cover is the only form of coverage available from Ex-Im Bank for
borrowers which are effectively controlled by suppliers and/or
lenders participating in transactions. Political-only cover is
available only in those countries where Ex-Im Bank is "open for
cover" for private sector risk.
WHERE EX-IM BANK IS OFF COVER FOR COUNTRY CREDIT REASONS. Ex-Im Bank will not
consider routine transactions in countries and sectors (public or private)
where the country limitation schedule indicates that the Bank is off-cover
(where there is an X). However, four special categories of transactions may be
eligible for Ex-Im Bank support, under restrictive conditions, subject to
additional special review:
o BORROWERS ON INTERNATIONAL CAPITAL MARKETS. Individual borrowers
(either public sector or private sector) with a strong record of
independent access to private international capital markets, absent
external (including sovereign) guarantees. The fee grade assigned,
and the extent of Ex-Im Bank support, will take into account
information related to the borrower's capital market financings and
ratings. For Ex-Im Bank to consider such borrowers, information on
the borrower's internationally-traded securities, including their
credit ratings, face values and coupons, recent market values, and
recent yields, must accompany the application.
o INSULATED PROJECT FINANCE STRUCTURES. Ex-Im Bank's approval in
"off-cover" markets/sectors of limited-recourse structures depends
on the establishment of structures which do not require the
financial or operating commitments of host government agencies and
which are effectively insulated from government involvement.
Furthermore, these structures must involve the channeling of project
foreign exchange earnings through offshore payments and escrow
mechanisms. In some country environments, the only acceptable
limited-recourse structures may be "enclave" projects which are
almost completely insulated from the broader country environment.
The fee grade assigned, and the extent of Ex-Im Bank support, will
take into account project structure and other conditions.
o SECURED LONG-RANGE AIRCRAFT LEASES. Ex-Im Bank approval of
asset-secured long-range aircraft lease transactions requires that
the airline's country of registry become a signatory to
international conventions protecting aircraft property rights. Ex-Im
Bank approval for aircraft transactions in off-cover markets is more
likely for privately-owned airlines with established operating
records. Depending on the nature of transaction participants and
structures, Ex-Im Bank may also require offshore payments and escrow
mechanisms, or may provide a reduced percentage of cover. Aircraft
transactions are subject to special fees and covenants.
o ACCEPTABLE BORROWER OUTSIDE THE COUNTRY. Support may be available if
an acceptable financial institution (e.g. commercial or
multinational bank) outside of the country acts as the obligor.
Because these transactions are subject to individual special review, Ex-Im Bank
will not approve letters of interest (LIs) for them. It should be noted that
these exceptions do not apply in countries where Ex-Im Bank is legally
prohibited form operating.
<PAGE> 1
EXHIBIT 10.47
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000.00 03-30-1996 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
PRINCIPAL AMOUNT: $500,000.00 DATE OF AGREEMENT: NOVEMBER 15, 1995
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED SEPTEMBER 20,
1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $1,500,000.00.
DESCRIPTION OF CHANGE IN TERMS: THE MATURITY DATE WILL NOW BE MARCH 30, 1996.
PROMISE TO PAY. SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
("BORROWER") PROMISES TO PAY TO BANK ONE, COLORADO, N.A. ("LENDER"), OR ORDER,
IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE
HUNDRED THOUSAND & 00/100 DOLLARS ($500,000.00) OR SO MUCH AS MAY BE
OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE
OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE
UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED UNPAID INTEREST ON MARCH 30, 1996. IN ADDITION, BORROWER WILL
PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING NOVEMBER 30,
1995, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH
AFTER THAT. Interest on this Agreement is computed on a 365/360 simple interest
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN
TIME, THE LENDER MAY MAKE LOANS AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each DAY. THE INDEX
CURRENTLY IS 8.750% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 2.500 PERCENTAGE
POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 11.250% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Agreement be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $25.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed to
by Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
of loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (h) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Agreement to 5% over the Index per annum, and
(b) add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Agreement (including any
increased rate). The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF BOULDER COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Agreement against any and all
such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Agreement if: (a) Borrower or
any guarantor is in default under the terms of this Agreement or any agreement
that Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
<PAGE> 2
PAGE 2
11-15-1995 CHANGE IN TERMS AGREEMENT
LOAN NO 26 (CONTINUED)
================================================================================
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 3
[BANK ONE LOGO]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
$500,000.00 03-30-1996 26 7979623550 410
- ------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------
BORROWER: SCIENTIFIC SOFTWARE - INTERCOMP, INC., LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION DOWNTOWN BOULDER BANKING CENTER
1801 CALIFORNIA ST. STE 295 2696 SOUTH COLORADO BLVD.
DENVER, CO 80202-2699 DENVER, CO 80222
========================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (2.500% over LENDER'S PRIME RATE, making an
initial rate of 11.250%), Revolving Line of Credit Loan to a corporation for
$500,000.00 due on March 30, 1996.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL
INVESTMENT.
[X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
SPECIFIC PURPOSE. The specific purpose of this loan is: FPR WORKING CAPITAL.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $500,000.00 as follows:
<TABLE>
<S> <C>
AMOUNT PAID TO OTHERS ON BORROWERS BEHALF: $500,000.00
$500,000.00 to EXTEND 7979623550-26
-----------
NOTE PRINCIPAL: $500,000.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED NOVEMBER 15, 1995.
BORROWER:
SCIENTIFIC SOFTWARE - INTERCOMP, INC., A COLORADO CORPORATION
BY:
------------------------------
RONALD J. HOTTOVY, SECRETARY
================================================================================
Variable Rate. Line of Credit.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE
REGISTRANT
The registrant owns all of the outstanding capital stock of the
following corporations:
<TABLE>
<CAPTION>
CORPORATION STATE OR PROVINCE OF INCORPORATION
<S> <C>
Intercomp Resource Development & Province of Alberta, Canada
Engineering, (Canada) Ltd.
In-Situ Research and Engineering Ltd. Province of Alberta, Canada
Microcomp Management Ltd. Province of Alberta, Canada
IRAD Development Ltd. Province of Alberta, Canada
247011 Alberta Limited Province of Alberta, Canada
Scientific Software-Intercomp (U.K.) Limited United Kingdom
Scientific Software Texas, Inc. Texas
Facilities Warehousing, Inc. Delaware
SSI Bethany, Inc. Texas
Kinesix SARL France
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Scientific Software-Intercomp, Inc. and Subsidiaries
Denver, Colorado
We consent to the incorporation by reference in the Registration Statements
(Form S-8 File No. 33-19509) pertaining to the Incentive Stock Option
Plan/Non-Qualified Stock Option Plan/United Kingdom Stock Option Plan of
Scientific Software-Intercomp, Inc. and (Form S-8 File No. 33-41463)
pertaining to the Stock Purchase Plan of Scientific Software-Intercomp, Inc. of
our report dated February 2, 1996, with respect to the consolidated financial
statements and schedules of Scientific Software-Intercomp, Inc. included in the
amended Annual Report (Form 10-K/A) for the year ended December 31, 1994.
/s/ EHRHARDT KEEFE STEINER & HOTTMAN PC
Ehrhardt Keefe Steiner & Hottman PC
Certified Public Accountants
Denver, Colorado
February 14, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
This report is a copy of a previously issued Hein + Associates LLP audit
report. Hein + Associates LLP resigned as Company auditors on June 30, 1995,
has not withdrawn its opinion for 1993, but has declined to reissue this
report. The 1993 financial statements included in this report are the same as
the audited financial statements previously filed in the Form 10-K for that
year. In the opinion of management, no events have occurred that would require
any change to the financial statements covered by the report.
Hein + Associates LLP declined to reissue its report initially unless it was
paid disputed audit fees for 1994 and subsequently reiterated its decline
without explanation.
We consent to the incorporation by reference in the Registration Statements
(Form S-8 File No. 33-19509) pertaining to the Incentive Stock Option
Plan/Non-Qualified Stock Option Plan/United Kingdom Stock Option Plan of
Scientific Software-Intercomp, Inc. and (Form S-8 File No. 33-41463)
pertaining to the Stock Purchase Plan of Scientific Software-Intercomp, Inc. of
our report dated March 21, 1994, with respect to the consolidated financial
statements and schedules of Scientific Software-Intercomp, Inc. included in the
amended Annual Report (Form 10-K/A) for the year ended December 31, 1993.
/s/ HEIN + ASSOCIATES LLP
Hein + Associates LLP
Certified Public Accountants
Denver, Colorado
June 27, 1994
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
This report is a copy of a previously issued Ernst & Young LLP audit report.
Ernst & Young LLP resigned as Company auditors on August 5, 1993, has not
withdrawn its opinion for 1992, but has declined to reissue this report. The
1992 financial statements included in this report are the same as the audited
financial statements previously filed in the Form 10-K for that year. In the
opinion of management, no events have occurred that would require any change to
the financial statements covered by the report.
The Company's management understands that Ernst & Young LLP has declined to
reissue its report in light of the problems relating to the value added
reseller (VAR) contracts because the reissuance of said report would require an
amount of time and expense so as to make reissuance impracticable.
We consent to the incorporation by reference in the Registration Statements
(Form S-8 File No. 33-19509) pertaining to the Incentive Stock Option
Plan/Non-Qualified Stock Option Plan/United Kingdom Stock Option Plan of
Scientific Software-Intercomp, Inc. and (Form S-8 File No. 33-41463)
pertaining to the Stock Purchase Plan of Scientific Software-Intercomp, Inc. of
our report dated April 14, 1993, with respect to the consolidated financial
statements and schedules of Scientific Software-Intercomp, Inc. included in the
amended Annual Report (Form 10-K/A (As amended June 27, 1994)) for the year
ended December 31, 1993.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Certified Public Accountants
Denver, Colorado
June 27, 1994
