<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1996
Commission File Number 0-26634
LeCROY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-2507777
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
700 CHESTNUT RIDGE ROAD, CHESTNUT RIDGE , NEW YORK 10977
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (914) 425-2000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of Class)
Indicate by check mark ("X") whether the Registrant: (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The number of shares outstanding of the registrant's Common Stock, as of August
15, 1996, was 5,453,062 shares. The aggregate market value on August 15, 1996
of the Common Stock held by non-affiliates of the registrant was $134,963,284.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 1996 Annual Meeting of Stockholders are
incorporated by reference in Part III hereof.
Portions of the Prospectus to Form S-1 Registration Statement No. 33-95620 are
incorporated by reference.
<PAGE> 2
TABLE OF CONTENTS
Page
Part I............................................................ 3
Item 1. Business........................................... 3
Item 2. Properties......................................... 16
Item 3. Legal Proceedings.................................. 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 4A. Executive Officers of the Registrant............... 16
Part II........................................................... 18
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 18
Item 6. Selected Financial Data............................ 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 20
Item 8. Financial Statements and Supplementary Data........ 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 46
Part III.......................................................... 46
Item 10. Directors and Executive Officers of the Registrant. 46
Item 11. Executive Compensation............................. 46
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 46
Item 13. Certain Relationships and Related Transactions..... 46
Part IV........................................................... 46
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K................................ 46
This report contains certain forward-looking statements that are subject to
risks and uncertainties, including without limitation those discussed herein in
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and those discussed in the section
entitled "Risk Factors" in the Prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) on or about October 9, 1996 (which
section is hereby incorporated by reference herein). These risks and
uncertainties could cause the Registrant's actual results in future periods to
differ materially from its historical results and from any opinions or
statements expressed in such forward-looking statements. Such forward-looking
statements speak only as of the date of this report, and the Registrant
cautions readers not to place undue reliance on such statements.
<PAGE> 3
PART I
ITEM 1. BUSINESS
LeCroy Corporation (the "Registrant") was founded and incorporated in the
State of New York in 1964. The Company reincorporated in the State of Delaware
in July, 1995. The New York corporation executed an Agreement and Plan of
Merger with the Registrant, then its wholly owned subsidiary, pursuant to which
the New York Corporation merged with and into the Registrant. The merger did
not result in any change of the Company's Board of Directors, management,
operations or financial condition. The term "Company" used in this report means
the Registrant and its consolidated subsidiaries unless the context indicates
otherwise.
The Company develops, manufactures and sells signal analyzers, principally
high-performance digital oscilloscopes, and related products. Digital
oscilloscopes capture electronic signals, convert them to digital form and
perform sophisticated measurements and analyses. The Company's digital
oscilloscope products are used by design engineers and researchers in a broad
range of industries, including electronics, computers and communications.
The Company's digital oscilloscope technology is derived from its
historical efforts in developing products for scientists engaged in high energy
physics ("HEP") research. Since its founding in 1964, the Company has designed
and manufactured signal analyzers for a number of leading HEP research
laboratories. The Company's signal analyzers were used in Nobel Prize-winning
experiments at CERN (Centre Europeen pour la Recherche Nucleaire) near Geneva,
Switzerland and the Brookhaven National Laboratory in Upton, New York. The
Company believes that it is the leading supplier of signal analyzers to the HEP
market, as measured by both annual shipments and installed base.
In 1985, the Company introduced its first digital oscilloscope product.
Subsequently, the Company expanded its digital oscilloscope product offerings
to include a variety of models with a broad range of capabilities to address
most segments of the digital oscilloscope market. Commencing in fiscal 1994,
the Company began to concentrate its digital oscilloscope product offerings on
a single high-performance product family, its 9300 series. The Company believes
that certain models of its 9300 series offer the highest sampling rate, and
others the longest record length, available to date in the digital oscilloscope
market. The Company's shift toward a single family of high-performance digital
oscilloscopes has resulted in a significant increase in revenues. The Company's
total revenues were $63.8 million, $82.3 million and $101.5 million for the
fiscal years ended June 30, 1994, 1995 and 1996, respectively, and sales of
digital oscilloscopes and related products accounted for approximately 75%, 80%
and 85% of the Company's total revenues for those fiscal years.
Industry Background
Researchers, engineers and field technicians rely on test and measurement
instrumentation such as signal analzers in designing, developing and servicing
electronic equipment. When designing and developing electronic circuits,
researchers and engineers use signal analyzers to ensure that the circuits are
performing as designed. Field technicians use such instruments to diagnose
electronic equipment to determine whether it is performing as intended.
<PAGE> 4
The most general-purpose test and measurement instrument used for signal
analysis is the digital oscilloscope. Digital oscilloscopes are signal
analyzers that, like their earlier analog counterparts, can display a
representation of an electronic signal's "shape," which is essentially a
measure of a signal's voltage as a function of time. Digital oscilloscopes,
however, go beyond the capabilities of analog oscilloscopes in that they
capture a signal in digital form by sampling it over time and storing the data
or measurements in memory. The stored signal can then be viewed later and, more
importantly, the instrument can perform various analyses on the stored data.
During the past few decades, there has been an increasing proliferation of
electronics in general and digital electronics in particular. The growth in
digital electronics has been driven primarily by the growth in stand-alone
computers and related systems, the increase in embedded digital controls within
other electronic and electrical devices and the rapid increase in digital
communications. Combined with the general growth in the quantity of digital
electronics, there has been a substantial increase in processing speed. For
example, processing speeds of personal computers have increased dramatically in
recent years from about 33 MHz to more than 200 MHz and sophisticated
communications equipment transmits data at rates that exceed 1 gigabit per
second.
Signal shape analysis is becoming increasingly important as data rates in
applications such as computers, local area networks (LANs) and
telecommunications systems increase. Within a given digital circuit, it takes a
finite amount of time for a digital signal to change from a "zero" or "off"
state to a "one" or "on" state. As digital data rates increase, signals within
a circuit may not have sufficient time to cleanly change from a "zero" to a
"one" or vice-versa. This distorts, or changes the shape of the digital signal,
which can lead to computation or information errors. To identify such problems,
engineers use digital oscilloscopes to analyze the signal's shape, which is not
generally possible using other measurement and analysis instruments (such as
protocol analyzers or logic analyzers).
Market
The Company believes that the digital oscilloscope market is generally
segmented according to bandwidth, and that with advances in technology, the
bandwidth requirements of each market segment will increase. The low-end or
commodity segment of the market currently requires low bandwidth (less than 200
MHz), low sample rates (of 100 MS/s or less) and short record lengths (less
than 10,000 points). These instruments typically sell for under $5,000. The
high-performance market segment (bandwidth of greater than 200 MHz) is
characterized by instruments with high sample rates (from 100 MS/s to 4 GS/s)
and long record lengths (from 10,000 to 8 million sample points) and greater
processing power to perform more sophisticated analyses. These high-performance
digital oscilloscopes typically range in price from $5,000 to $30,000, although
certain very high bandwidth oscilloscopes for specialized applications are
priced above $30,000.
According to Prime Data, Inc. ("Prime Data"), an independent industry
survey organization, total digital oscilloscope sales, excluding handhelds,
grew from $586.5 million in 1992 to $719.0 million in 1995. Prime Data
estimates that the four largest suppliers of digital oscilloscopes, exclusive
of handheld models, and their approximate respective market shares for
calendar 1995 were Tektronix, Inc. with 44.5%, Hewlett-Packard Company with
17.8%, LeCroy with 10.0% and Fluke Corporation with 5.8%.
<PAGE> 5
The Company's 9300 digital oscilloscope product family is targeted at
customers in the high-performance market segment.
LeCroy Product Advantages
The Company believes that its expertise in signal shape analysis has
enabled it to develop digital oscilloscopes that provide key advantages over
competitive offerings:
- High Sample Rates. The Company's advanced technology, which includes
many sophisticated custom components, enables its digital oscilloscopes
to make measurements at high sample rates. The Company's Model 9362
offers sample rates of up to 10 GS/s, which the Company believes is the
highest sample rate available to date.
- Long Record Lengths. The Company's advanced memory architecture, which
includes many sophisticated custom components, enables its digital
oscilloscope products to have long record capability. The Company's
Models 9350 and 9370 offer record lengths of up to 8 million sample
points at 2 GS/s, which the Company believes is the longest record
length available to date.
- Powerful Processing Capability. The Company's multiprocessor
architecture in each of its 9300 models combines a Motorola 68020 or
68030 main processor with custom processors designed by the Company.
The combination of this advanced multiprocessing technology with the
Company's patented data-compaction techniques enables the rapid and
accurate display of long signals and the performance of complex
analyses.
- Sophisticated Analysis Software. The Company's analysis software
options, available either at the time of purchase or as aftermarket
upgrades, provide a wide range of capabilities customized for specific
end-user applications. By customizing its analysis software, the
Company believes that it can provide a total solution to a particular
customer's measurement and analysis requirements.
The Company believes that the high sample rates, long record lengths and
powerful hardware and software processing capabilities offered by its various
digital oscilloscope products position it to serve industries, such as the
computer disk drive and communications industries, that require the ability to
measure long, high-speed complex data streams. The Company believes that its
ability to offer digital oscilloscope customers products with these advantages
at what it believes are competitive prices permits it to compete favorably in
its target market segment.
Business Strategy
The Company's primary business objective is to become a leading supplier
of high-performance digital oscilloscopes. In addition, the Company intends to
use its core technology to develop dedicated signal analyzers for broader
markets. The Company is pursuing the following strategies to achieve these
objectives:
<PAGE> 6
- Extend High-Performance Technology. The high-performance technology
that the Company originally developed in the technically demanding HEP
market and its continuing investment in research and development have
enabled it to develop a family of high-performance digital oscilloscope
products in the 9300 series, certain models of which feature what the
Company believes is the highest sample rate, and others the longest
record length, available to date. The Company intends to continue to
allocate significant resources to extending these performance
advantages.
- Target High-Growth Industries with Special-Purpose Oscilloscopes. The
Company's experience with users in certain industries has shown that
adding special features and processing capabilities to its digital
oscilloscopes permits it to offer total solutions for special data
measurement and analysis problems. For example, the Company has
developed digital oscilloscopes targeted at the particular data
measurement and analysis problems of the computer disk drive industry.
The Company believes that this strategy was a significant factor in the
growth of its sales to this industry, which accounted for approximately
18% of the Company's sales in its fiscal year ended June 30, 1996. The
Company recently introduced a special purpose oscilloscope for the
optical recording industries. The Company intends to target other high
growth industries that require special purpose oscilloscopes.
- Leverage Core Technology into New Product Markets. The Company believes
that it is well positioned to leverage its core technology to develop
dedicated signal analyzers for broader markets. The Company believes
that market opportunities for such products include the networking and
telecommunications industries. The Company is currently in the
development stage with respect to a product that would analyze
electronic signals in communications networks in order to provide
better monitoring and failure-diagnosis capabilities than can be
achieved using existing products.
There can be no assurance that the Company will be successful in
implementing its strategies, including whether it will be able to leverage its
core technologies into new product markets.
Products and Services
The Company's primary products are its 9300 family of digital
oscilloscopes, which are targeted at users who require high performance at
competitive prices. The Company also offers a complementary line of signal
source products that can be combined with its digital oscilloscopes to create a
complete test and measurement system for certain applications. In addition, the
Company continues to serve the HEP market with a broad line of modular signal
analysis products. The Company offers a full range of aftermarket service and
support for all its products.
Digital Oscilloscopes and Related Products. The Company's 9300 digital
oscilloscope products, which range in list price from approximately $5,000 to
approximately $30,000, offer precise measurement and analysis capability for
applications such as the design, development and testing of electrical and
electronic products. Such applications call for high bandwidths (up to 1,500
MHz), high sample rates (up to 10,000 MS/s), long record lengths (up to 8
million sample points) and require greater processing capability to perform
sophisticated analysis of the input signals.
<PAGE> 7
The Company's 9300 series consists of the following digital oscilloscope
products:
<TABLE>
<CAPTION>
Maximum Record
Maximum Maximum Length Calendar
Bandwidth Sample Rate (number of Year of
Model Number (MHz)^ (MS/s)^ sample points) Introduction
<S> <C> <C> <C> <C>
930x 200 100 200,000 1992
9361 300 2,500 500*/25,000 1993
931x 400 100 1,000,000 1991
935x 500 2,000 8,000,000 1994
937x 1,000 2,000 8,000,000 1995
938x 1,000 4,000 4,000,000 1996
9362 750*/1,500 10,000 1,000*/25,000 1995
</TABLE>
^ 1,000 MHz = 1 GHz
^ 1,000 MS/s = 1 GS/s
* At maximum sample rate.
Most of the models in the table above are available in several
configurations offering varying record lengths. The "x" suffix used in the
table above denotes a particular product number that is based on the product's
configuration. Taking into account all available configurations, the Company
offers a total of 30 different products in the 9300 family.
The Company believes that the following features give its 9300 series
products one of the best user interfaces in the digital oscilloscope market:
- Large, high-resolution amber monochrome display, organized in a manner
that facilitates easy readout and analysis of displayed data.
- User-friendly control panel.
- Main processor with up to 64 MB of random access memory.
- Flexible options for data storage (floppy disk, PCMCIA memory card,
PCMCIA removable hard disk).
- Optional built-in printer that allows users to produce a print-out of
the display at the touch of a button.
- A standard general-purpose interface bus ("GPIB") that enables the
digital oscilloscope to be part of a measurement and analysis system
that uses other GPIB-compatible instruments.
As part of its strategy to focus on its 9300 series product family, the
Company is phasing out its other digital oscilloscope product offerings. The
Company is continuing to sell its current inventory of these products, sales
of which accounted for less than 10% of the Company's total revenues for the
fiscal year ended June 30, 1996.
The Company offers its customers a wide array of post-sale upgrades of
important components, such as memory, processor and analysis software, as well
as optional features such as mass storage capability and built-in printers.
These product upgrades and options allow the Company's customers to add
performance and features to adapt their digital oscilloscopes to new
measurement and analysis requirements as they arise, which the Company believes
reduces the risk of product obsolescence to a certain degree.
<PAGE> 8
To provide its digital oscilloscope customers with what it believes are
total solutions to their data measurement and analysis problems, the Company
develops, manufactures and sells a complementary line of signal source products
that can create input signals so that an electronic circuit can be evaluated
under controlled conditions. Using a digital oscilloscope, an engineer can
analyze the shape of the signal within the circuit, compare it to the shape of
the "ideal" input signal generated by the signal source and thereby identify
problems in the circuit. The Company's signal source products consist of
programmable pulse generators and arbitrary waveform generators. Programmable
pulse generators produce standard analog or digital signals. Arbitrary waveform
generators are more versatile instruments that allow the user to fully program
the shape of the signals generated. For example, an arbitrary waveform
generator can be programmed to produce signals that simulate those produced by
a hard disk drive head. The Company's principal pulse generator product is its
Model 9200, the list price of which is approximately $11,000. Its principal
arbitrary waveform generator is its Model LW4xx, the list price of which is
approximately $19,000.
Sales of digital oscilloscopes and related products accounted for
approximately 85%, 80% and 75% of the Company's total revenues in its fiscal
years ended June 30, 1996, 1995 and 1994, respectively. Sales of products in
the Company's 9300 series (including sales of products in the 9400 series, the
predecessor to the 9300 series) accounted for approximately 79%, 65% and 58% of
the Company's total revenues in those fiscal years.
The following are examples of specific applications involving the
Company's 9300 series digital oscilloscope product family:
Data Storage - The computer disk drive industry is continually seeking
to apply advanced magnetic storage technology to increase data density
and reduce access time. Design engineers in this field require digital
oscilloscopes with high sample rates and long record lengths. The
Company believes that its Model 9354L digital oscilloscope, which
features a maximum sample rate of 2 GS/s and a maximum record length of
8,000,000 sample points, is well suited to such applications. In
addition to providing digital oscilloscopes that meet the disk drive
industry's requirements for high sample rates and long record lengths,
the Company has worked closely with customers in this industry to
develop specialized processing software that incorporates advanced
algorithms designed specifically for their particular measurement and
analysis requirements. The Company believes that the combination of its
high-performance data-acquisition technology with this specialized
processing capability has been a significant factor in the growth of
its sales to this industry, which accounted for approximately 18% of
the Company's revenues in the fiscal year ended June 30, 1996.
Cellular Telephones/Pagers - In contrast to many other applications,
the design of cellular telephones and pagers does not require digital
oscilloscopes with high bandwidths or sample rates. This is due to the
relatively longer and slower electronic signals associated with these
products. It is therefore important that digital oscilloscopes for
these applications have long record lengths and the ability to display
the captured data in a meaningful and usable format. The Company
believes that its Model 9314L digital oscilloscope is particularly well
suited to such applications. The Model 9314L has a medium bandwidth and
sample rate, but features a maximum record length of 1,000,000 sample
points. In addition, the Model 9314L has the ability to simultaneously
<PAGE> 9
display the entire signal as well as an enlarged or "zoomed" view of a
portion of the signal.
Lasers - A typical laser pulse has a duration on the order of two
billionths of a second. To capture and analyze the shape of a laser
pulse, a digital oscilloscope must make measurements of its amplitude
many times during this period. The Company believes that its Model 9362
is well suited to this application as it has the capability to make
precise measurements at the rate of ten billion per second, therefore
permitting this oscilloscope to capture accurately the shape of the
laser pulse so that it can be analyzed.
HEP Products. A typical HEP experiment consists of a large assembly of
electronics that measures particle energy and speed from up to many hundreds of
thousands of particle detectors. These measurements are used to identify
individual particles and to study their interactions.
The Company's HEP product offerings consist of an extensive range of
modular products. These products include analog-to-digital converters, which
measure particle energy, time-to-digital converters, which measure particle
speed, logic triggers and high-voltage power sources. The modular nature of
these products enables experimenters to select products from the Company's HEP
product catalog and combine them in a configuration that provides an overall
solution to their particular data measurement and analysis problems.
Sales of HEP products (including digitizers) accounted for approximately
11%, 15% and 21% of the Company's total revenues in its fiscal years ended
June 30, 1996, 1995 and 1994, respectively.
Service and Aftermarket Products. The Company provides aftermarket
support, repair, maintenance and recalibration of installed Company products,
as well as installation of a variety of post-sale upgrades and optional
features. The Company maintains three major field service centers in Chestnut
Ridge, New York (located at the Company's corporate headquarters), Heidelberg,
Germany and Osaka, Japan. Sophisticated service on certain key components of
the Company's digital oscilloscope products, including on its printed circuit
boards, is performed only at the Company's manufacturing facilities in Geneva,
Switzerland and Chestnut Ridge, New York.
The Company warrants its digital oscilloscopes for three years (two years
for digital oscilloscopes sold prior to December 1, 1994), signal source
products from one to five years, and HEP products for one year.
Service and aftermarket products (including product upgrades) generated
approximately 4%, 5% and 4% of the Company's total revenues in its fiscal years
ended June 30, 1996, 1995 and 1994, respectively.
Customers
During the three fiscal years ended June 30, 1996, the Company shipped a
total of approximately 13,500 digital oscilloscopes worldwide. The largest
group of users of the Company's digital oscilloscopes are electronic product
designers and test engineers. Researchers in many scientific disciplines
including high-energy physics, medicine, geology, ultrasound and mechanics also
use the Company's digital oscilloscopes.
<PAGE> 10
No single customer accounted for more than 4% of the Company's sales in
the fiscal year ended June 30, 1996. No single customer accounted for more than
10% of the Company's consolidated sales in any of the last three fiscal years.
The Company's top 25 customers in 1996, each of which purchased more than
$375,000 of products, and all of which together purchased an aggregate of
approximately $21.1 million of products in such year, consist of the following:
<TABLE>
Computers/Disk Drives/Peripherals Government/Military/Aerospace
<S> <S>
- - - Hitachi - Centre Europeen pour la
- - - International Business Machines Recherche Nucleaire (CERN)
Corporation - Defense Procurement Agency
- - - Iomega - Sandia National Labs
- - - Maxtor Corporation
- - - Quantum Corporation Consumer Electronics
- - - Seagate/Conner - Mitsubishi
- - - Western Digital - Sony
- Toshiba
Telecommunications Industrial
- - - 3COM - Matsushita
- - - Motorola, Inc. - Philips
- - - Thomson - Siemens AG
Other Automotive/Transportation
- - - AT&T Capital Corporation - Bosch
- - - Bruker Instruments - Hyundai Electronics Industries
- - - Fujitsu Limited Co., Ltd
- - - Telogy Incorporated
</TABLE>
Sales, Marketing and Distribution
The Company maintains a direct sales force of highly trained, technically
sophisticated sales engineers who are knowledgeable in the use of signal
analyzers in general and the features and advantages of the Company's products
in particular. In addition, particularly because of the Company's focus on a
single high-performance product family of digital oscilloscopes, the Company
believes that its sales engineers are skilled in performing product
demonstrations for current and prospective customers. The Company believes it
has a competitive advantage in sales situations in which its sales engineers
have the opportunity to demonstrate the advantages of the Company's digital
oscilloscopes; accordingly, such demonstrations are an integral part of the
Company's sales strategy. In connection with its HEP products, the Company's
sales engineers typically consult with customers during the design and
implementation of an experiment to develop customized solutions to particular
data measurement and analysis problems.
In fiscal 1994, the Company began to reorganize its worldwide sales
organization in order to improve management of the sales function. This
reorganization included the centralization of certain support and
administrative functions for the Company's sales engineers and the closure of
certain sales offices in the United States and the centralization of certain
administrative functions for the Company's sales engineers in Europe. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<PAGE> 11
The Company sells its digital oscilloscope products through its own direct
sales force in the United States, Europe and Japan with regional sales
headquarters located in Chestnut Ridge, New York, Heidelberg, Germany and
Osaka, Japan. As of June 30, 1996, the Company's direct digital oscilloscope
sales force consisted of 67 sales engineers directed by eight regional managers
worldwide. The Company also uses manufacturer's representatives in support of
its direct selling efforts and in territories where the sales potential does
not currently justify the maintenance of a direct sales force. In addition, in
Japan the Company maintains a strategic alliance with Iwatsu Electric Co. Ltd.,
a Japanese communications and test-and-measurement company that sells and
distributes some of the Company's products under the "Iwatsu/LeCroy" label.
Eleven HEP sales engineers operate worldwide and report to the Company's
sales headquarters in Chestnut Ridge. The activities of the HEP sales engineers
are supplemented by manufacturer's representatives.
The Company believes that the successful implementation of its
technologies and services requires substantial marketing activities to key
target markets. The Company has reorganized and expanded its marketing
department to pursue the high end of the test and measurement market.
In order to raise market awareness of its products, the Company advertises
in trade publications, distributes promotional materials, conducts marketing
programs and seminars, issues press releases regarding new products, publishes
technical articles and participates in industry trade shows and conferences.
Seasonality
The Company historically has experienced somewhat lower activity during
its first fiscal quarter than in other fiscal quarters due, it believes,
principally to the lower level of orders and market activity during the summer
months, particularly in Europe. The Company believes this seasonable aspect of
its business is likely to continue in the future.
Research and Development
The Company believes that as a result of what it views as a continuing
shift in technology towards higher speed digital signals, users of signal
analyzer products will continue to demand higher bandwidths, higher sample
rates, longer record lengths and more powerful processing capabilities. The
primary objective of the Company's research and development program is to
extend its high performance technology in order to satisfy this demand, while
maintaining ease-of-use qualities and favorable price-to-performance ratios.
There can be no assurance that the Company will achieve this objective.
The Company is continuing to develop its sampling, data storage and
processing technologies using advanced integrated circuit techniques, and is
also working to improve its existing digital oscilloscope platform to provide
display enhancements, higher speed data processing and a broader range of
application-specific hardware and software options. The Company also is engaged
in the development of several new instruments and integrated circuits to
address the needs for precise amplitude and time measurement, and high-voltage
power supplies for a wide variety of particle detectors.
<PAGE> 12
The Company intends to use its core technology to develop dedicated signal
analyzers for broader markets. The Company believes that possible market
opportunities for such products include the networking and communications
industries. The Company is currently in the research and development stage with
respect to a product that would analyze electronic signals in communications
networks in order to provide better monitoring and failure-diagnosis
capabilities than can be achieved using existing products. There can be no
assurance that the Company will be successful in developing such a signal
analyzer.
The Company conducts research and development activities in both its
Geneva, Switzerland and Chestnut Ridge, New York facilities. The Company's
research and development expenses, which are expensed as incurred, were
approximately $12.6 million, $10.3 million and $8.8 million in its fiscal years
ended June 30, 1996, 1995 and 1994, respectively, which expenses represented
12.5%, 12.5% and 13.7% of total revenues, respectively, for such fiscal years.
The Company intends to continue to invest approximately 12% to 13% of revenues
in its research and development efforts.
Manufacturing and Supplies
Prior to the Company's decision to concentrate on a single high-
performance product family of digital oscilloscopes, the Company's digital
oscilloscopes and related products were manufactured at the Company's
facilities in Geneva, Switzerland and Chestnut Ridge, New York, with HEP
products also manufactured at the Chestnut Ridge facility. Following that
decision, and until the first quarter of fiscal 1996, all 9300 series digital
oscilloscopes were manufactured at the Company's Geneva facility, with the
Chestnut Ridge facility principally manufacturing HEP products, signal source
products and hybrid and chip-on-board microcircuit assemblies for Geneva's
digital oscilloscope production. In June 1995, the Company commenced limited
manufacturing of its Model 935x digital oscilloscope in its New York facility,
with the ultimate objectives of satisfying United States demand for this and
other models in the 9300 series product family with units manufactured in New
York and better balancing the manufacturing output of the Geneva and New York
facilities.
This shift in manufacturing was undertaken for a variety of reasons,
including greater utilization of the New York facility in light of the reduced
volume in HEP sales, an expected reduction in certain customs duties resulting
from shipping parts rather than completed units to the United States from
Geneva, closer alignment of manufacturing and development facilities and, to
the extent that the Company is able to source components in the United States
for models assembled and sold in the United States, better currency matching of
revenues and related costs. The Company has established United States vendors
as sources for certain components, including printed circuit board assemblies,
that had previously been shipped from its Geneva facility to its New York
facility. As a result of this shift, the New York facility shipped in excess of
$28.8 million of product in fiscal 1996, including $10.9 million of its Model
935x. In addition, in June 1996 the New York facility commenced initial
manufacturing of the Company's newest oscilloscope, Model 938x, and shipped
$753,000 for worldwide distribution.
<PAGE> 13
The Company obtains certain parts, components and sub-assemblies from
single sources. This has particularly been the case with several key integrated
circuits made by certain single source suppliers (Motorola, Philips, TRW and
LSI Logic). The Company believes that, for the printed circuit board assemblies
and integrated circuits in particular, alternative sources of supply would be
difficult to develop over a short period of time. An interruption in supply or
an increase in price for its parts, components and sub-assemblies would have a
material adverse affect on the Company's business, results of operations and
financial condition.
As of June 30, 1996, the Company's Geneva facility employed 41
manufacturing employees in an area devoted to such tasks of approximately
14,000 square feet and its New York facility employed 90 manufacturing
employees in an area devoted to such tasks of approximately 26,000 square feet.
Backlog
The Company's backlog of unshipped customer orders was approximately $8.0
million and $8.5 million as of June 30, 1996 and 1995, respectively. Customers
may cancel orders at any time. The Company believes that its level of backlog
at any particular time is not necessarily indicative of future operating
performance of the Company.
Foreign Currency Exchange
The Company has manufacturing facilities in both the United States and
Switzerland, purchases parts, components and sub-assemblies from suppliers
around the world in a variety of currencies and sells its products around the
world in a variety of currencies. As a consequence, the Company is exposed to
risks from fluctuations in foreign currency exchange rates with respect to a
number of currencies, changes in government policies and legal and regulatory
requirements, political instability, transportation delays and the imposition
of tariffs and export controls. Among the more significant potential risks to
the Company of relative fluctuations in foreign currency exchange rates is the
relationship among and between the United States dollar, Swiss franc and
Japanese yen, and, to a lesser extent, the German deutschemark, British pound,
French franc and Italian lira. During the fiscal year ended June 30, 1996,
approximately half of the Company's revenues and half of its costs and expenses
were denominated in currencies other than the United States dollars. Local
currency expenses resulting from manufacturing and the worldwide sourcing of
parts, components and sub-assemblies are not generally offset by related local
currency revenues, if any. The Company seeks to mitigate to some degree its
exposure to foreign currency exchange rate fluctuations by borrowing under its
multicurrency revolving credit facility in circumstances in which it is exposed
to significant local currency receivables. The Company does not attempt to
reduce its foreign currency exchange risks by entering into other foreign
currency management programs or hedging transactions and has no plans to do so
in the near term. As a consequence, there can be no assurance that the
Company's results of operations will not be adversely effected by fluctuations
in foreign currency exchange rates in the future, as a result of mismatches
between local currency revenues and expenses, the translation of foreign
currencies into the United States dollar, the Company's financial reporting
currency, or otherwise. Moreover, fluctuations in exchange rates could affect
demand for the Company's products. During the fiscal years ended June 30, 1994
and 1995, foreign currency exchange losses amounted to $512,000 and $684,000,
respectively. During the fiscal year ended June 30, 1996, the Company reported
a foreign currency exchange gain of $539,000.
<PAGE> 14
Competition
The market for signal analyzers is highly competitive and characterized by
rapid and continual advances in technology. Some of the Company's principal
competitors have substantially greater sales and marketing, development and
financial resources than the Company. The Company believes that each of these
companies offers a wide range of products that attempt to address most segments
of the digital oscilloscope market.
The Company believes that the principal bases of competition in the signal
analyzer market are a product's performance (bandwidth, sample rate, record
length and processing power), its price and quality, the vendor's name
recognition, reputation, product availability and the availability and quality
of post-sale support. The Company also believes that its success will depend in
part on its ability to maintain and develop the advanced technology used in its
signal analyzer products and its ability to offer high-performance products at
a favorable price-to-performance ratio. The Company believes that it currently
competes effectively with respect to each of the principal bases of competition
in the signal analyzer market in the general price range ($5,000 to $30,000) in
which its digital oscilloscopes are focused and that it will be able to
continue to do so, but there can be no assurance that this is or will be the
case.
The Company believes that its principal competition in the HEP market
comes from its customers themselves, who are technically sophisticated and
frequently choose to construct their own measurement and analysis systems. The
Company also believes that the rest of this market is highly fragmented and
consists of a number of small firms, no one of which commands a significant
market share.
Patents, Trademarks and Licenses
The Company currently relies on a combination of patents, trade secrets,
technical expertise and continuing technological research and development to
establish and protect proprietary rights in its products. The Company believes,
however, that because of the rapid pace of change and advancement in digital
oscilloscope technology, legal intellectual property protection is and will
continue to be a less significant factor in the Company's success than the
Company's core competency in converting electronic signals to digital form and
the experience and expertise of its personnel.
The Company protects significant technologies, products and processes that
it considers important to its business by, among other things, filing
applications for patent protection. As of June 30, 1996, the Company held a
total of eleven United States patents expiring in the years from 2000 to 2012.
The Company holds one foreign patent. The Company also has pending an
application for one additional United States patent and for six additional
foreign patents. The patent positions of high-technology companies such as the
Company are uncertain, however, and involve complex legal issues and factual
questions. There can be no assurance that any of the Company's pending or
future applications will result in issued patents or that any issued patents
will provide the Company with adequate protection of the covered technologies,
products or processes. Moreover, the laws of foreign countries in which the
Company's products are or may be developed, manufactured or sold may not
protect the Company's intellectual property and other proprietary rights to the
same extent as the laws of the United States.
<PAGE> 15
Although the Company believes that its products and technologies do not
infringe the proprietary rights of third parties, there can be no assurance
that third parties will not assert claims against the Company based on the
infringement or alleged infringement of any such rights. Such claims are
typically costly to defend, regardless of the legal outcome. There can be no
assurance that the Company would prevail with respect to any such claim, or
that a license to third-party rights, if needed, would be available on
acceptable terms. In any event, patent and proprietary rights litigation can
be extremely protracted and expensive.
In February 1994, the Company settled litigation with Tektronix, Inc.
involving allegations that the Company's digital oscilloscope products
infringed patents held by Tektronix. As part of the settlement, the Company
entered into a license agreement with respect to such patents. Pursuant to the
license agreement the Company made an initial payment of approximately $1.5
million. In addition, the Company is required to make future royalty payments
in a minimum aggregate amount of $3.5 million over ten years ending June 30,
2004 and may be required to make up to an additional $3.5 million in contingent
royalty payments depending on its sales of certain products in certain
territories over the life of the patents. Royalty expense approximated $781,000
and $963,000 in fiscal 1995 and 1996, respectively. The settlement agreement
provides that Tektronix may terminate the license in the event that the Company
acquires 20% or more of the stock of, or a controlling interest in, any of a
number of specified companies participating in the oscilloscope market or any
of their respective affiliates (each, a "Restricted Company") or a Restricted
Company acquires 20% or more of the stock of, or a controlling interest in, the
Company or an affiliate of the Company, or any attempt to transfer the
Tektronix license to a Restricted Company is made. This provision of the
settlement could preclude the Company from making an investment in or
acquisition of such companies, and it also could discourage such companies or
another third party from attempting to acquire control of the Company or limit
the price that such a third party might be willing to pay for the Common Stock.
In addition, this provision could limit the price that investors might be
willing to pay in the future for the Common Stock.
Employees
As of June 30, 1996, LeCroy had 476 employees, of whom 270 work in the
Company's New York facility, 119 work in the Company's Geneva facility, and the
remainder work in various other Company offices around the world. None of the
Company's employees is represented by a labor union and the Company has not
experienced any work stoppages. The Company believes that its employee
relations are generally satisfactory. A majority of the Company's senior
managers has over five years of service with the Company.
Regulation
As the Company manufactures its products in the United States and
Switzerland, and sells its products and purchases parts, components and
sub-assemblies in a number of countries, the Company is subject to legal and
regulatory requirements, particularly the imposition of tariffs, customs and
export controls, in a variety of countries. In addition, the export of digital
oscilloscopes from both the United States and Switzerland is subject to
regulation under the Treaty for Nuclear Non-Proliferation by such countries.
<PAGE> 16
ITEM 2. PROPERTIES
The Company's executive offices and one of its manufacturing facilities
are located in a two-story, approximately 88,000 square foot building in
Chestnut Ridge, New York that is owned by the Company. The Company also leases
a three story office and manufacturing building in Geneva, Switzerland pursuant
to a lease expiring December 31, 2004. In addition, the Company leases other
offices around the world on a short-term basis to support its local sales and
service operations.
The Company believes that its facilities are in good working condition and
are suitable for its current operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Walter O. LeCroy, Jr 61 Chairman of the Board of Directors
Lutz P. Henckels 55 President, Chief Executive Officer
and Director
Werner H. Brokatzky 51 Vice President-Operations (Geneva)
Brian V. Cake 53 Vice President-Advanced Development
Raymond Chevalley 57 Vice President-Worldwide T&M Products
Clement R. Confessore 59 Vice President-Operations (United States)
John C. Maag 46 Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
Joseph J. Migliozzi 46 Vice President-High Energy Physics
James J. Mueller 43 Vice President-Worldwide T&M Engineering
Ronald S. Nersesian 36 Vice President-Marketing
Thomas H. Reslewic 37 Vice President-Worldwide Sales
</TABLE>
Walter O. LeCroy, Jr., founder of the Company, has served as the Chairman
of the Board since the Company's inception. Mr. LeCroy was instrumental in the
initial development of the Company's core technology and remains active in the
design of the Company's products. Mr. LeCroy has a Bachelor of Arts degree in
physics from Columbia University.
Lutz P. Henckels has served as the President and the Chief Executive
Officer since July 1993. He served as a consultant for the Company from January
1993 until July 1993. Before joining the Company, Mr. Henckels served as the
President of U.S. Operations of Racal-Redac, Inc., an electronic design
automation company, from May 1989 until January 1993. Prior to 1989,
Mr. Henckels was the founder and Chief Executive Officer of HHB Systems, Inc.,
a public computer-aided design and test company. Mr. Henckels has Bachelor of
<PAGE> 17
Science and Master of Science degrees in electrical engineering, and a Doctor
of Science degree in computer science, from the Massachusetts Institute of
Technology. Mr. Henckels serves as a director of IKOS Corporation.
Werner H. Brokatzky joined the Company in August 1978 as the Manager of
Finance and Administration, served as Vice President-Finance (Geneva) from
March 1990 to December 1995, and has served as Vice President-Operations
(Geneva) since January 1996. Before joining the Company, Mr. Brokatzky served
as an apprentice at Volksbank Schopfheim.
Brian V. Cake has served as Vice President-Advanced Development since
1986. He joined the Company as an engineer in November 1980. Mr. Cake has a
Bachelor of Science degree in electrical and electronic engineering from City
University in London.
Raymond Chevalley has served as Vice President-Worldwide T&M Products
since January 1996. Mr. Chevalley joined the Company as an engineer in
September 1969 and served as Vice President-Operations (Geneva) from January
1973 to December 1995. He established the Company's first European office in
1972. Mr. Chevalley has a degree in engineering from the Geneva Engineering
School.
Clement R. Confessore has served as the Vice President-Operations (United
States) since joining the Company in January 1994. Before joining the Company,
Mr. Confessore was the Senior Vice President of Operations at RasterOps
Corporation, a computer monitor manufacturing company. Mr. Confessore has a
Bachelor of Science degree in mechanical engineering from Norwich University
and a Master of Business Administration degree from Southwest University.
John C. Maag has served as the Vice President-Finance/Chief Financial
Officer, Secretary and Treasurer since December 1995. Before joining the
Company, Mr. Maag was the Corporate Controller of Dynatech Corporation, a
voice, data and video communications company from May 1987 to December 1995.
Mr. Maag has a Bachelor of Science degree in accounting from St. Joseph's
College and is a Certified Public Accountant.
Joseph J. Migliozzi has served as the Vice President-High Energy Physics
since May 1995. Mr. Migliozzi served as Vice President-Finance/Chief Financial
Officer and Treasurer from May 1985 to December 1995. Mr. Migliozzi has a
Bachelor of Business Administration degree in accounting and a Master of
Business Administration degree from Pace University and is a Certified Public
Accountant.
James J. Mueller has served as the Vice President-Worldwide T&M
Engineering since June 1996. Mr. Mueller served as R&D Manager-T&M from April
1992 to May 1996. Mr. Mueller has a Bachelor of Arts degree in physics from
Rutgers University and a Master of Science and Doctor of Science degrees in
physics from Princeton University.
Ronald S. Nersesian has served as the Vice President-Marketing since March
1996. Before joining the Company, Mr. Nersesian was the Division Marketing
Manager for a test & measurement division of Hewlett-Packard Company. Mr.
Nersesian has a Bachelor of Science degree in electrical engineering from
Lehigh University and a Master of Business Administration degree from New York
University.
<PAGE> 18
Thomas H. Reslewic has served as Vice President-Worldwide Sales since
March 1996. He served as Vice President-Sales and Marketing from July 1994
until March 1996, as the General Manager for North American Sales, from 1993
until July 1994 and the Director of Marketing for the Company's Signal
Sources Division from 1990 until 1993. Previously, he spent eight years in
sales and marketing management with Tektronix, Inc., a manufacturer of digital
oscilloscopes and one of the Company's principal competitors. Mr. Reslewic has
a Bachelor of Science degree in physics from The College of the Holy Cross and
a Master of Business Administration degree from the University of Oregon.
Executive officers of the Company are appointed by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive
officers or directors of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
LeCroy's common stock has been traded on the Nasdaq National Market under
the symbol LCRY since the Company's initial public offering on October 5, 1995.
The following table sets forth, for the periods indicated, the range of high
and low sales prices for the Common Stock as reported by Nasdaq.
<TABLE>
<CAPTIONS>
High Low
<S> <C> <C>
1996 (1)
Second Quarter (2) $19.25 $10.50
Third Quarter 19.25 13.50
Fourth Quarter 22.25 14.00
</TABLE>
(1) The Company's stock did not trade publicly in the first quarter of
fiscal year 1996.
(2) From October 5, 1995, the effective date of the Company's initial
public offering.
The Company has never declared or paid cash dividends on its Common Stock
and intends to retain all available funds for use in the operation and
expansion of its business. The Company therefore does not anticipate that any
cash dividends will be declared or paid in the foreseeable future. As of June
30, 1996, there were approximately 230 holders of record of the Common Stock.
<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated Statements of Operations data for the five
years ended June 30, 1996 and the Balance Sheet data at June 30, 1992, 1993,
1994, 1995 and 1996 are derived from the Consolidated Financial Statements of
the Company. The data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Consolidated Financial Statements and related Notes included herein.
<TABLE>
<CAPTION>
Years Ended June 30,
1996 1995 1994 1993 1992
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenues
Digital oscilloscopes and related products...... $ 86,061 $65,785 $47,627 $42,812 $42,486
High energy physics products.................... 10,952 12,277 13,519 15,640 15,428
Service and other (1)........................... 4,478 4,210 2,696 2,835 2,003
------- ------ ------ ------ ------
Total..................................... 101,491 82,272 63,842 61,287 59,917
Cost of sales (2)................................. 45,545 37,777 28,252 26,930 26,568
------- ------ ------ ------ ------
Gross profit.............................. 55,946 44,495 35,590 34,357 33,349
Selling, general and administrative expenses...... 34,623 27,950 22,831 23,029 22,626
Research and development expenses................. 12,639 10,315 8,770 9,736 9,299
Restructuring costs (3)........................... 930
------- ------ ------ ------ ------
Operating income.......................... 8,684 6,230 3,059 1,592 1,424
Technology dispute settlement costs (4)........... 2,073 278
Other expenses.................................... 134 2,212 1,694 1,434 1,100
------- ------ ------ ------ ------
Income (loss) before income taxes and
extraordinary charge.............. 8,550 4,018 (708) (120) 324
Provision for income taxes........................ 2,992 1,408 331 30 124
------- ------ ------ ------ ------
Income (loss) before extraordinary charge. 5,558 2,610 (1,039) (150) 200
Extraordinary charge for early retirement of debt. (1,300)
------- ------ ------ ------ ------
Net income (loss)......................... $ 4,258 $ 2,610 $(1,039) $ (150) $ 200
======= ====== ====== ====== ======
Income (loss) per share before extraordinary charge $ .93 $ .56 $ (.24) $ (.03) $ .04
Extraordinary charge.............................. (.22)
------- ------ ------ ------ ------
Net income (loss) per share....................... $ .71 $ .56 $ (.24) $ (.03) $ .04
======= ====== ====== ====== ======
Weighted average common shares outstanding (5).... 5,953 4,683 4,407 4,418 4,628
June 30,
1996 1995 1994 1993 1992
(in thousands)
Balance Sheet Data:
Working capital................................... $32,041 $21,791 $13,120 $16,818 $16,056
Total assets...................................... 62,400 49,836 39,477 35,252 36,398
Total debt and capitalized leases................. 5,673 18,042 15,235 12,530 12,607
Total stockholders' equity........................ 37,472 17,440 12,820 12,518 13,477
<PAGE> 20
__________
(1) Service and other includes sales and product upgrades.
(2) Included in cost of sales in fiscal 1995 and 1996 are recurring technology license royalties
pursuant to an agreement settling certain litigation.
(3) Restructuring costs were incurred in fiscal 1994 due to a restructuring of the Company's
worldwide sales organization and the closure of its research facility in the United Kingdom.
(4) Included in technology dispute settlement costs in fiscal 1993 and fiscal 1994 are certain
legal fees and related expenses and also in fiscal 1994 a $1.5 million payment related to
the settlement referred to in Note 2 above.
(5) See "Per Share Information" in Note 1 to Consolidated Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Consolidated Financial Statements
and Notes thereto included elsewhere in this Annual Report on Form 10-K.
This section contains certain forward-looking statements that are subject
to risks and uncertainties, including without limitation those discussed in the
section entitled "Risk Factors" in the Prospectus filed by the Registrant with
the Securities and Exchange Commission pursuant to Rule 424(b) on August 9,
1995 (which section is hereby incorporated by reference herein). These risks
and uncertainties could cause the Registrant's actual results in future periods
to differ materially from its historical results and from any opinions or
statements expressed in such forward-looking statements. Such forward-looking
statements speak only as of the date of this report, and the Registrant
cautions readers not to place undue reliance on such statements.
Overview
Since the Company's founding in 1964, the Company has been designing,
manufacturing and selling high performance signal analyzers to scientists
engaged in HEP research. Since calendar year 1983, the Company has applied its
HEP technology to the design and development of digital oscilloscopes, its
principal product. Digital oscilloscopes are signal analyzers that capture
electronic signals, convert them to digital form and perform sophisticated
measurements and analyses. The Company's digital oscilloscope products are used
by design engineers and researchers in a broad range of industries, including
electronics, computers and communications.
In 1985, the Company introduced its first digital oscilloscope product.
Commencing in fiscal 1994, the Company began to focus its digital oscilloscope
product offerings on a single high-performance product family, the 9300 series,
which has resulted in a significant increase in revenues. The Company's total
revenues were $63.8 million, $82.3 million and $101.0 million for the fiscal
years ended June 30, 1994, 1995 and 1996, respectively, and sales of digital
oscilloscopes and related products accounted for approximately 75%, 80% and 85%
of the Company's total revenues for those fiscal years.
In 1993, the Company adopted a performance improvement strategy pursuant
to which the Company hired new managers, including a new Chief Executive
Officer, to supplement the existing management team. As part of the performance
improvement strategy, the Company's worldwide sales organization was
restructured, the Company's United Kingdom research and development facility
was closed and the Company's product offerings were streamlined to focus on a
single family of high-performance digital oscilloscopes, the 9300 series which
<PAGE> 21
is currently composed of 30 models. The focus on a single high-performance
product family, together with management's continued emphasis on operational
improvements, have resulted in efficiency gains in product development,
manufacturing, marketing, sales and service. These factors, together with an
increase in revenues, have contributed to an increase in operating margin from
4.8% for the fiscal year ended June 30, 1994 to 8.5% for the fiscal year ended
June 30, 1996.
The Company has manufacturing facilities in both the United States and
Switzerland and purchases parts, components and sub-assemblies from a variety
of vendors around the world in a variety of currencies and sells its products
around the world in a variety of currencies. This subjects the Company to
certain risks including fluctuations in foreign currency exchange rates,
changes in government policies and legal and regulatory requirements, political
instability, transportation delays and the imposition of tariffs and export
controls. For information with respect to the risks arising from fluctuations
in foreign currency exchange rates and certain measures adopted by the Company
in an effort to mitigate to a degree such risks, see "Business-Foreign Currency
Exchange."
Results of Operations
The following table sets forth for the periods indicated the percentage
of total revenues represented by each line item in the Company's statement of
operations:
<TABLE>
<CAPTION>
Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Revenues
Digital oscilloscopes and related products.... 84.8% 80.0% 74.6%
High energy physics products.................. 10.8 14.9 21.2
Service and other............................. 4.4 5.1 4.2
----- ----- -----
Total.................................... 100.0 100.0 100.0
Cost of sales.................................... 44.9 45.9 44.3
----- ----- -----
Gross profit.................................. 55.1 54.1 55.7
Selling, general and administrative expenses..... 34.1 34.0 35.8
Research and development expenses................ 12.5 12.5 13.7
Restructuring costs.............................. - - 1.4
----- ----- -----
Operating income.............................. 8.5 7.6 4.8
Technology dispute settlement costs.............. - - 3.2
Other expenses, net.............................. 0.1 2.7 2.7
----- ----- -----
Income (loss) before income taxes and
extraordinary charge....................... 8.4 4.9 (1.1)
Provision for income taxes....................... 2.9 1.7 0.5
----- ----- -----
Income (loss) before extraordinary charge..... 5.5 3.2 (1.6)
Extraordinary charge for early retirement of debt (1.3) - -
----- ----- -----
Net income (loss)............................. 4.2% 3.2% (1.6)%
===== ===== =====
</TABLE>
<PAGE> 22
Comparison of Fiscal Years 1996 and 1995
Total revenues increased to $101.5 million in 1996 from $82.3 million in
1995, or 23%, and represented record revenues for the Company. Revenues
increased primarily as a result of an increase in sales of higher margin
digital oscilloscopes and related products. On a geographic basis, total
revenues increased to $42.2 million in 1996 from $35.8 million in 1995, or 18%,
in the United States, to $42.3 million in 1996 from $33.3 million in 1995, or
27%, in Europe and to $17.0 million in 1996 from $13.2 million in 1995, or 29%,
in the rest of the world, principally Japan and the rest of Asia.
Revenues from sales of digital oscilloscopes and related products
increased to $86.1 million in 1996 from $65.8 million in 1995, or 31%. Sales of
digital oscilloscopes and related products, in terms of units, increased to
approximately 6,000 in 1996 from approximately 5,100 in 1995, or 18%. This
increase in revenues and units was primarily attributable to an increase in
sales of the higher-end products in the Company's 9300 family of digital
oscilloscopes which, in terms of units, increased to approximately 5,300 in
1996 from approximately 4,000 in 1995, or 33%. Average selling prices of
digital oscilloscopes and related products increased by 11% as compared to 1995
principally as a result of a continuing change in the Company's product mix
towards higher-end products.
Revenues from sales of HEP products decreased to $11.0 million in 1996
from $12.3 million in 1995, or 11%. The Company in recent years has experienced
a continuing decrease in HEP revenues due to a variety of factors, including a
decline in United States government funding for defense and the phase-out of
the Company's digitizer products. The Company believes that revenues from sales
of HEP products, which represented approximately 11% of total revenues in 1996
as compared to approximately 15% of total revenues in 1995, are likely to
continue to represent a declining portion of its total revenues in the future,
attributable in part to lower anticipated order volumes.
Service and other revenues increased to $4.5 million in 1996 from $4.2
million in 1995, or 6%, due primarily to the continued increase in marketing of
service and support programs for digital oscilloscopes and related products and
increased sales of upgrades for such products.
Gross profit for fiscal 1996 was 55.1% of revenues compared to 54.1% for
the prior year. This growth was due primarily to increased revenues from higher
sales volume of certain higher margin 9300 Series of digital oscilloscopes,
coupled with increased operating efficiencies at the Company's manufacturing
facility in Chestnut Ridge, New York. Approximately $933,000 of the increase in
cost of sales for 1996 was attributable to the weakening of the United States
dollar versus the Swiss franc as compared to the exchange rates prevailing in
1995.
Selling, general and administrative expenses increased to $34.6 million in
1996 from $28.0 million in 1995, or 24%. As a percentage of total revenues,
selling, general and administrative expenses was 34.1% in 1996 compared to
34.0% in 1995. These expenses increased as the Company expanded sales
management and support staff at its European, Asian and United States regional
sales headquarters and incurred additional sales commissions due to higher
sales volume and the hiring of additional administrative support staff.
Approximately $781,000 of the increase in selling, general and administrative
expenses in 1996 was attributable to the weakening of the United States dollar
versus the Swiss franc as compared to the exchange rates prevailing in 1995.
<PAGE> 23
Research and development expenses increased to $12.6 million in 1996 from
$10.3 million in 1995, or 22%. This higher level of research and development
expenses reflects an increase in expenditures for prototype and development
costs of custom integrated circuits for use in digital oscilloscopes and
related products and initial development of an analog LAN network monitor. As
a percentage of total revenues, research and development expenses were 12.5% in
both 1996 and 1995. The Company's objective is to maintain annual research and
development expenses at approximately 12% to 13% of total revenues.
Operating income increased to $8.7 million in 1996 from $6.2 million in
1995, or 39%. As a percentage of total revenues, operating income was 8.6% in
1996 as compared to 7.6% in 1995. The increase in operating income was due
primarily to increased revenues in 1996 as compared to 1995 coupled with
improved operating efficiencies and other factors listed above.
Net interest and financing charges decreased to $672,000 in 1996 from
$1.5 million in 1995, or 56%. The decrease in the current year is due
primarily to reduced levels of debt, paid down from funds received in the
second quarter of fiscal 1996 from the Company's initial public offering.
Average borrowing levels were $7.6 million in 1996 as compared to $16.6 million
in 1995. Operating results in fiscal 1996 and 1995 included currency exchange
gains (losses) of approximately $539,000 and ($684,000), respectively.
The Company's effective income tax rate for 1996 was 35%. Currently, the
Company's Swiss subsidiary operates under a tax agreement with the Canton of
Geneva pursuant to which the effective tax rate on income with respect to such
subsidiary was approximately 15% in 1996. This agreement is in effect through
the fiscal year ended June 30, 2000.
During fiscal 1996, an extraordinary charge of $1.3 million was incurred
relating to the write-off of deferred financing costs associated with the early
retirement of debt paid from the proceeds received from the Company's initial
public offering.
Income before extraordinary charge increased 113% to $5.6 million in 1996,
representing record earnings for the Company, compared to net income of $2.6
million for 1995. Income before extraordinary charge in 1996, as a percentage
of total revenues, was 5.5% compared to 3.2% in 1995. The improvement in 1996
was due primarily to increased revenues, improved operating efficiencies and
operating margins and the gain on currency exchange.
Comparison of Fiscal Years 1995 and 1994
Total revenues increased to $82.3 million in 1995 from $63.8 million in
1994, or 29%, primarily as a result of an increase in sales of digital
oscilloscopes and related products. On a geographic basis, total revenues
increased to $35.8 million in 1995 from $29.4 million in 1994, or 22%, in the
United States, to $33.3 million in 1995 from $26.1 million in 1994, or 28%, in
Europe and to $13.2 million in 1995 from $8.4 million in 1994, or 58%, in the
rest of the world, principally Japan and the rest of Asia.
Revenues from sales of digital oscilloscopes and related products
increased to $65.8 million in 1995 from $47.6 million in 1994, or 38%. Sales of
digital oscilloscopes and related products, in terms of units, increased to
approximately 5,100 in 1995 from approximately 3,900 in 1994, or 30%. This
increase in revenues and units was primarily attributable to an increase in
sales of the Company's 9300 family of digital oscilloscopes which, in terms of
<PAGE> 24
units, increased to approximately 4,000 in 1995 from approximately 2,900 in
1994, or 37%. Average selling prices of digital oscilloscopes and related
products increased by 7% as compared to 1994 principally as a result of a
change in the Company's product mix towards higher-end products.
Revenues from sales of HEP products decreased to $12.3 million in 1995
from $13.5 million in 1994, or 9%. The Company in recent years has experienced
a continuing decrease in HEP revenues due to a variety of factors, including a
decline in United States government funding for defense and the phase-out of
the Company's digitizer products. Revenues from sales of HEP products
represented approximately 15% of total revenues in 1995 as compared to
approximately 21% of total revenues in 1994.
Service and other revenues increased to $4.2 million in 1995 from $2.7
million in 1994, or 56%, due primarily to increased marketing of service and
support programs for digital oscilloscopes and related products and increased
sales of upgrades for such products.
Approximately $3.3 million of the increase in total revenues for 1995 was
attributable to the net impact of the weakening of the United States dollar
versus the Japanese yen, Swiss franc and German deutschemark, offset in part by
the strengthening of the United States dollar versus the Italian lira, in each
case as compared to the exchange rates prevailing in 1994.
Gross profit increased to $44.5 million in 1995 from $35.6 million in
1994, or 25%. This growth was due primarily to increased revenues from sales
of the Company's 9300 family of digital oscilloscopes, manufactured at the
Company's facility in Geneva, Switzerland. The gross profit margin decreased to
54.1% in 1995 from 55.7% in 1994 due principally to the inclusion in 1995 of
technology license royalties of approximately $700,000, or 1% of total revenue,
the under-utilization of the Company's Chestnut Ridge, New York manufacturing
facility resulting from the phase-out of older generation oscilloscopes, the
reduction in sales of digitizer products produced in Chestnut Ridge and a
change in product mix (including service revenues). In an effort to increase
absorption of the fixed costs of the Chestnut Ridge facility, in June 1995 the
Company commenced limited manufacturing at such facility of its Model 935x
digital oscilloscope to supplement its manufacturing operations in Geneva.
Approximately $1.6 million of the increase in cost of sales for 1995 was
attributable to the weakening of the United States dollar versus the Swiss
franc and the Japanese yen as compared to the exchange rates prevailing in
1994.
Selling, general and administrative expenses increased to $28.0 million
in 1995 from $22.8 million in 1994, or 22%. However, as a percentage of total
revenues, selling, general and administrative expenses decreased to 34.0% in
1995 from 35.8% in 1994. Selling expenses increased approximately $2.4 million
as the Company expanded management and support staff at its European, Asian and
United States regional sales headquarters and hired additional sales engineers
in Japan. General and administrative expenses also increased by approximately
$800,000 due principally to the hiring of additional administrative support
staff and improvements made to the Company's information systems. In addition,
selling, general and administrative expenses increased by approximately
$700,000 principally due to higher advertising and promotional expenses
related to the 9300 family of digital oscilloscopes. Approximately $1.3 million
of the increase in selling, general and administrative expenses in 1995 was
attributable principally to the weakening of the United States dollar versus
the Swiss franc and Japanese yen as compared to the exchange rates prevailing
in 1994.
<PAGE> 25
Research and development expenses increased to $10.3 million in 1995 from
$8.8 million in 1994, or 17.0%. This higher level of research and development
expenses reflects an increase in expenditures for the development of custom
integrated circuits for use in digital oscilloscopes and related products to
$1.5 million in 1995 from $700,000 in 1994. As a percentage of total revenues,
research and development expenses decreased to 12.5% in 1995 from 13.7% in
1994. This percentage decrease was due primarily to a significant growth in
revenues and slower growth in overall research and development expenses.
Operating income increased to $6.2 million in 1995 from $3.1 million in
1994, or 104%. As a percentage of total revenues, operating income was 7.6% in
1995 as compared to 4.8% in 1994. The increase in operating income was due
primarily to the factors noted above as well as the absence in 1995 of the
restructuring costs incurred in 1994.
Net interest and financing charges increased to $1.5 million in 1995 from
$1.2 million in 1994, or 29%, due primarily to higher average levels of debt
outstanding. Average borrowing levels were $16.6 million in 1995 as compared
to $13.8 million in 1994. Operating results in fiscal 1995 and 1994 included
currency losses of approximately $684,000 and $512,000, respectively.
The Company's effective income tax rate for 1995 was 35%. The Company's
Swiss subsidiary operates under a tax agreement with the Canton of Geneva
pursuant to which the effective tax rate on income with respect to such
subsidiary was approximately 12% in 1995. This agreement is in effect through
the fiscal year ended June 30, 2000.
Net income increased to $2.6 million in 1995 from a net loss of $1.0
million for 1994. Net income in 1995 as a percentage of total revenues was
3.2%; in 1994, the net loss represented (1.6)% of total revenues. The
improvement in 1995 was due primarily to the factors noted above as well as
the incurrence in 1994 of the $1.5 million initial settlement payment included
under technology dispute settlement costs.
Liquidity and Capital Resources
In October 1995 LeCroy completed an initial public offering of 1,500,000
shares of Common Stock at $12.00 per share, generating net proceeds to the
Company of approximately $15.3 million. These net proceeds, combined with net
cash generated from operating activities of $8.3 million, allowed the Company
to reduce funded debt to 13% of total capital at June 30, 1996. This compares
to a level of funded debt to total capital ranging from 48% to 54% at the end
of fiscal years 1992 through 1995. Working capital, including $10.3 million in
cash, increased to $32.0 million at June 30, 1996, which represented a working
capital ratio of 2.6 to 1, compared to $21.8 million, or 2.2 to 1, at June 30,
1995. Cash balances primarily reflect short-term deposits in Europe.
Cash flows from operating activities were $8.3 million in fiscal 1996, a
significant improvement in comparison to the prior two fiscal years as a result
of increased operating earnings in the current year coupled with improved asset
management. Combined accounts receivable and inventories at year-end were 40%
of fiscal 1996 sales compared to 46% in fiscal 1995 and 49% in fiscal 1994.
Capital expenditures were $3.7 million in fiscal 1996 compared to $2.9
million and $1.5 million in fiscal 1995 and 1994, respectively. These capital
expenditures were primarily for assembly, research, design and test equipment,
<PAGE> 26
facilities improvements and information systems. Average net fixed assets
employed were $8.2 million, or 8.1% of fiscal 1996 sales, compared to $6.9
million or 8.3% of sales in fiscal 1995. LeCroy anticipates that its capital
spending for property and equipment in fiscal 1997 will approximate $7 million,
primarily for design and test equipment, information systems and facilities
improvements. Funding for capital expenditures generally will be provided from
internal sources.
In December 1995 the Company finalized its $15 million unsecured
multicurrency credit agreement with several commercial banks, maturing in
January 1999. At June 30, 1996, $4.6 million was borrowed on this facility. The
Company has met its financial covenants that include maintaining specified
financial ratios and positive levels of net income and limitations on capital
expenditures and lease obligations.
In addition, the Company maintains certain foreign borrowing and overdraft
facilities, principally a three million Swiss franc ($2.4 million using the
U.S. dollar/French franc exchange rate as of June 30, 1996) multicurrency
revolving credit agreement cancelable upon notice by the bank or the Company.
The Company's cash on hand, together with amounts available under its
multicurrency revolving credit agreement, and internally generated cash flow
will be sufficient to fund working capital and capital expenditure requirements
for at least the next twelve months.
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
LeCROY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors........................... 28
Consolidated Balance Sheets as of June 30, 1996 and 1995. 29
Consolidated Statements of Operations for the Years Ended
June 30, 1996, 1995 and 1994 ............................ 31
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1996, 1995 and 1994................. 32
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1996, 1995 and 1994............................. 33
Notes to Consolidated Financial Statements............... 35
<PAGE> 28
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
LeCroy Corporation
We have audited the accompanying consolidated balance sheets of LeCroy
Corporation as of June 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of LeCroy Corporation at June 30, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Hackensack, New Jersey
July 22, 1996
<PAGE> 29
LeCROY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30,
1996 1995
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 10,315 $ 1,408
Accounts receivable, less allowance of $38 in
1996 and $44 in 1995, respectively................ 20,625 17,316
Inventories....................................... 20,104 20,014
Other current assets.............................. 1,278 1,476
------ ------
Total current assets.............................. 52,322 40,214
Property and equipment, at cost:
Land.............................................. 5,202 5,178
Furniture, machinery and equipment................ 25,948 24,583
------ ------
31,150 29,761
Less: Accumulated depreciation and amortization... (22,234) (22,338)
------ ------
8,916 7,423
Other assets......................................... 1,162 2,199
------ ------
$ 62,400 $ 49,836
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current debt...................................... $ 1,026 $ 4,069
Accounts payable.................................. 6,882 7,053
Accrued liabilities............................... 4,803 3,154
Accrued employee compensation and benefits........ 4,066 2,749
Income taxes payable.............................. 3,504 1,398
------ ------
Total current liabilities...................... 20,281 18,423
Long-term debt and capitalized leases................ 4,647 13,973
Contingencies and commitments
Stockholders' Equity:
Preferred stock, $.01 par value (Authorized
2,913,043 shares, none issued and outstanding
Series B Preferred stock, $.01 par value
(Authorized 782,609 shares, 559,131 issued and
outstanding in 1995)............................ - 6
Series C Preferred stock, $.01 par value
(Authorized 1,304,348 shares, 655,774 issued
and outstanding in 1995)........................ - 7
Common stock, $.01 par value (Authorized 45,000,000
shares; 5,877,732 and 2,938,939 issued and
5,426,606 and 2,317,000 outstanding in 1996 and
1995, respectively).............................. 59 29
Additional paid-in capital......................... 22,112 5,419
Less: Treasury stock at cost; (451,126 and 621,939
shares in 1996 and 1995, respectively)........... (2,334) (3,133)
Foreign currency translation adjustment............ 1,662 3,397
Retained earnings.................................. 15,973 11,715
<PAGE> 30
------ ------
Total stockholders' equity...................... 37,472 17,440
------ ------
$ 62,400 $ 49,836
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 31
LeCROY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Digital oscilloscopes and related products $ 86,061 $65,785 $47,627
High energy physics products.............. 10,952 12,277 13,519
Service and other......................... 4,478 4,210 2,696
------- ------ ------
Total.................................. 101,491 82,272 63,842
Cost of sales................................ 45,545 37,777 28,252
------- ------ ------
Gross profit.............................. 55,946 44,495 35,590
Operating expenses:
Selling, general and administrative....... 34,623 27,950 22,831
Research and development.................. 12,639 10,315 8,770
Restructuring costs....................... - - 930
------- ------ ------
Operating income............................. 8,684 6,230 3,059
Technology dispute settlement costs.......... - - 2,073
Other expenses, net.......................... 134 2,212 1,694
------- ------ ------
Income (loss) before income taxes and
extraordinary charge...................... 8,550 4,018 (708)
Provision for income taxes................... 2,992 1,408 331
------- ------ ------
Income (loss) before extraordinary charge.... 5,558 2,610 (1,039)
Extraordinary charge for early retirement
of debt................................... (1,300) - -
------- ------ ------
Net income (loss)............................ $ 4,258 $ 2,610 $(1,039)
======= ====== ======
Income (loss) per common share:
Income (loss) before extraordinary charge. $ 0.93 $ 0.56 $ (0.24)
Extraordinary charge...................... (0.22) - -
----- ---- -----
Net income (loss)......................... $ 0.71 $ 0.56 $ (0.24)
===== ==== =====
Weighted average number of common shares..... 5,953 4,683 4,407
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 32
LeCROY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
<TABLE>
<CAPTION>
Foreign
Series B Series C Additional Currency
Preferred Stock Preferred Stock Common Stock Paid-in Treasury Stock Translation Retained
Shares Amount Shares Amount Shares Amount Capital Shares Amount Adjustment Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1,
1993............... 3,525 $35 $2,102 (20) $ (203) $ 440 $10,144 $12,518
Common shares
repurchased....... (17) (170) (170)
Sale of shares...... 70 1 399 400
Foreign currency
translation....... 1,111 1,111
Net loss............ (1,039) (1,039)
----- -- ----- ---- ----- ----- ------- -------
Balance at June 30,
1994............... 3,595 36 2,501 (37) (373) 1,551 9,105 12,820
Common shares
repurchased....... (585) (2,760) (2,760)
Conversion of shares 656 $ 7 (656) (7) -
Sale of shares...... 559 $ 6 2,502 2,508
Sale of common
stock warrants.... 416 416
Foreign currency
translation....... 1,846 1,846
Net income.......... 2,610 2,610
--- -- --- -- ----- -- ----- --- ----- ----- ------ ------
Balance at June 30,
1995.............. 559 6 656 7 2,939 29 5,419 (622) (3,133) 3,397 11,715 17,440
Public sale of
common stock...... 1,500 15 15,297 15,312
Exercise of stock
rights............ 223 2 912 914
Conversion of
preferred stock... (782) (8) (656) (7) 1,439 15
Stock option and
stock purchase
plans............. 484 171 799 1,283
Foreign currency
translation....... (1,735) (1,735)
Net income.......... 4,258 4,258
----- --- ------- --- ------ ----- ------ ------
Balance at June 30,
1996.............. 5,878 $59 $22,112 (451) $(2,334) $ 1,662 $15,973 $37,472
===== === ======= === ======= ===== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 33
LeCROY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................... $ 4,258 $ 2,610 $(1,039)
Adjustments for noncash items included in
operating activities:
Depreciation and amortization............. 2,221 1,922 2,013
Deferred income taxes..................... 165 799 -
Extraordinary charge and other............ 1,300 (1,192) 128
Change in operating asset and liability
components:
Accounts receivable....................... (3,751) (1,271) (3,460)
Inventories............................... (510) (3,430) 291
Prepaid expenses and other assets......... (409) (273) 377
Accounts payable and accrued liabilities.. 1,536 1,799 796
Accrued employee compensation and benefits 1,415 (281) 532
Income taxes.............................. 2,050 267 197
----- ----- -----
Net cash provided by (used in) operating
activities................................ 8,275 950 (165)
----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........ (3,720) (2,854) (1,537)
Proceeds from disposal of property and
equipment.............................. - 57 46
Due from officers......................... 147 608 (247)
----- ----- -----
Net cash used in investing activities........ (3,573) (2,189) (1,738)
----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt
and capitalized leases................. 4,600 23,676 8,010
Repayment of debt and capitalized leases.. (16,878) (19,534) (7,775)
Technology license payments............... - (1,549) 1,549
Sale of common stock...................... - 2,508 400
Repurchase of common stock................ - (2,760) (170)
Public sale of common stock............... 15,312 - -
Proceeds from sale of warrants............ - 16 -
Proceeds from exercise of stock rights.... 914 - -
Proceeds from exercise of stock options
and issuances.......................... 1,283 - -
----- ----- -----
Net cash provided by financing activities.... 5,231 2,357 2,014
----- ----- -----
Effect of exchange rates on cash............. (1,026) 79 92
----- ----- -----
Increase in cash and cash equivalents..... 8,907 1,197 203
Cash and cash equivalents at beginning of
the year............................... 1,408 211 8
----- ----- -----
Cash and cash equivalents at end of
the year............................... $ 10,315 $ 1,408 $ 211
====== ===== =====
<PAGE> 34
Supplemental Cash Flow Disclosure
Cash paid during the year for:
Interest............................... $ 649 $ 1,336 $ 1,296
Income taxes........................... 731 418 211
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 35
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of LeCroy
Corporation (the "Company") and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. Certain prior year
amounts have been reclassified to conform with the current year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts in the financial statements
and the accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Substantially all revenue is recognized when products are shipped or
services are rendered to customers. Revenues from service contracts are
recognized ratably over the contract period.
Fiscal Year Ending Dates
The operations of the U.S. company, LeCroy Corporation, have a fiscal year
end of the Saturday closest to June 30 (July 2, 1994, July 1, 1995, and June
29, 1996). For each of the fiscal years, the fiscal year represented a 52 week
period. The majority of foreign subsidiaries have a June 30 fiscal year end.
The consolidated financial statements' year end references are stated as of
June 30.
Cash Equivalents
Cash equivalents represent highly liquid debt instruments with a maturity
of three months or less at the time of purchase. Financial instruments, which
potentially subject the Corporation to concentrations of credit risk, consist
primarily of short-term deposits in Europe with major banks located in various
cities with investment levels and debt ratings set to limit exposure with any
one institution.
Concentration of Credit Risks
The Company manufactures and sells electronic equipment to research
facilities, governmental agencies and the test and measurement industry. Sales
are to all regions of the United States as well as to a multitude of foreign
countries. The Company performs periodic credit evaluations of its customers'
financial condition. Credit losses have been minimal and within management's
expectations. There is no significant concentration of the Company's accounts
receivable portfolio in any customer or geographical region that presents a
risk to the Company based on that concentration.
<PAGE> 36
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization
are provided on the straight-line basis. The estimated useful lives are as
follows:
Building 32 years
Furniture, machinery and equipment 3-12 years
Income Taxes
Income taxes are accounted for under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The statement requires that
deferred taxes be established for all temporary differences between book and
tax bases of assets and liabilities, measured using enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
United States income taxes have not been provided on the undistributed net
earnings of foreign subsidiaries which amount approximated $17,700 at June 30,
1996. Determining the tax liability that would arise if these earnings were
remitted is not practicable. The Company plans to reinvest substantially all
of these net earnings in assets located outside of the United States, thus
indefinitely postponing the remittance of such earnings.
Foreign Exchange
The Company's foreign subsidiaries use their local currency as the
functional currency and translate all assets and liabilities at current
exchange rates and all income and expenses at average exchange rates. The
adjustment resulting from this translation is included in a separate component
of stockholders' equity. Gains (losses) in fiscal 1996, 1995 and 1994 resulting
from foreign currency transactions approximated $539, $(684) and $(512),
respectively, and are included in other expenses.
Warranty
Estimated future warranty obligations related to products are provided by
charges to operations in the period that the related revenue is recognized.
Research and Development
Research and development costs are expensed as incurred.
Per Share Information
Net income (loss) per share is computed based upon the weighted average
number of shares of Common Stock and common share equivalents outstanding
during the periods presented. Common share equivalents result from outstanding
rights, options and warrants to purchase Common Stock and the conversion of
Preferred Stock are included to the extent dilutive. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83, shares
issuable upon exercise of stock rights, options and warrants granted during
the twelve months immediately preceding October 6, 1995, the date of the
Company's initial public offering, have been included in the calculation of the
<PAGE> 37
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
shares used in computing net income (loss) per share as if they were
outstanding for all periods presented prior to the initial public offering
(using the treasury stock method), including loss years where the impact
of the incremental shares is anti-dilutive.
Treasury Stock
The Company delivers treasury shares upon the exercise of stock options
and the issuance of shares from the 1995 Employee Stock Purchase Plan. The
difference between the cost of the treasury shares, on a last-in, first-out
basis, and the exercise price of the option or the cost of shares from the
Employee Stock Purchase Plan is reflected in additional paid-in capital.
Hedging and Related Financial Instruments
The Company utilizes foreign currency based borrowings to hedge foreign
exchange risks.
2. Inventories
Inventories, including demonstration units in finished goods, are stated
at the lower of cost (first-in, first-out method) or market.
<TABLE>
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
Raw materials......................... $ 7,398 $ 7,932
Work in process....................... 6,539 3,616
Finished goods........................ 6,167 8,466
------ ------
$20,104 $20,014
====== ======
</TABLE>
The allowance for excess and obsolete inventory, included above, amounted
to $2,459 in 1996 and $2,291 in 1995.
3. Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
Deferred financing costs, net........ $ 282 $1,696
Patents and trademarks, net.......... 191 175
Other................................ 689 328
----- -----
$1,162 $2,199
===== =====
</TABLE>
<PAGE> 38
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Deferred financing costs are being amortized over the term of the related
debt; patents and trademarks are being amortized on the straight-line basis
over 20 years.
4. Income Taxes
Provision for income taxes is comprised of the following charges:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current - Foreign............................. $2,827 $ 609 $331
Deferred - Foreign............................ 165 799 -
----- ----- ---
Total $2,992 $1,408 $331
===== ===== ===
</TABLE>
At June 30, 1996 and 1995, the components of the Company's deferred tax
assets are as follows:
<TABLE>
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
Deferred tax assets:
Revenue recognition.............................. $ 224 $ -
U.S. net operating loss carryforwards............ 1,166 540
Foreign net operating loss carryforwards......... 302 125
Research and development tax credit carryforwards 60 60
State investment tax credit carryforwards........ 300 300
Inventory reserves............................... 587 330
Vacation pay reserves............................ 91 122
Other, net....................................... 185 40
----- -----
Total deferred tax assets........................... 2,915 1,517
Valuation allowance for deferred tax assets......... (2,915) (1,517)
----- -----
Net deferred tax assets............................. $ - $ -
===== =====
</TABLE>
Included in current income taxes payable in 1996 and 1995 is $521 and
$799, respectively, of current deferred income taxes payable associated with
foreign inventory provisions and other foreign tax reserves.
<PAGE> 39
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
A reconciliation of the tax provision computed at the Federal statutory
tax rate to the Company's recorded tax provision is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Tax computed at federal statutory tax rate $2,465 $1,367 $(244)
Officers' life insurance and other permanent
differences 72 102 83
Effect of foreign income (943) (225) (98)
Change in valuation allowance 1,398 157 589
Other, net - 7 1
----- ----- ---
$2,992 $1,408 $ 331
===== ===== ===
</TABLE>
Federal tax net operating losses available for carryforward to future
years total approximately $2.9 million at June 30, 1996 and expire in the years
2009 thru 2011. Foreign tax net operating losses available for carryforward to
future years total approximately $703 at June 30, 1996, expiring at various
dates based on the country of origin.
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Domestic $(1,810) $ (837) $(2,056)
Foreign 10,360 4,855 1,348
------ ----- -----
$ 8,550 $4,018 $ (708)
====== ===== =====
</TABLE>
5. Term Debt
Term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
Revolving credit agreement............... $4,600 $ 6,250
Term loans............................... - 3,825
Subordinated debentures.................. - 4,500
Other.................................... 957 2,666
----- ------
5,557 17,241
Less: Current debt....................... 930 3,516
----- ------
$4,627 $13,725
===== ======
</TABLE>
<PAGE> 40
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
In December 1995, the Company finalized an unsecured $15 million
multicurrency revolving line of credit agreement with several commercial banks
which allows for borrowings in various currencies and provides for interest to
be payable quarterly at the highest of the prime rate, the federal funds rate
(as defined) plus 1/2 % or the Eurocurrency Interest Rate (as defined). This
facility replaced a previous secured agreement. As of June 30, 1996, United
States dollar advances were $4,600 at 8.25% interest, the carrying amount
approximates fair value based upon market rates. A commitment fee is assessed
on the unused line of credit, payable at the end of each calendar quarter, at
a rate of 1/4 of 1% per annum. The credit agreement expires on January 31,
1999. The agreement contains covenants that include maintaining specified
financial ratios and positive levels of net income and limitations on capital
expenditures and lease obligations.
In October 1995 proceeds received from the Company's initial public
offering were used to repay previously outstanding term loans and subordinated
debt. An extraordinary non-cash charge of $1.3 million of deferred financing
costs was taken resulting from the early extinguishment of this debt.
Interest expense, net, included in other expense was $672 in fiscal 1996,
$1,528 in fiscal 1995 and $1,182 in fiscal 1994.
At fiscal year end the Company had short-term unused lines of credit
aggregating $5,447 for foreign operations.
Aggregate maturities of the above term debt for each of the years in the
three year period ending June 30, 1999 are $ 930, $ 0 and $4,627, respectively.
6. Capital Stock and Option Plans
On October 5, 1995, the Company completed an initial public offering of
1,500,000 shares of Common Stock for the net proceeds of $15.3 million, at
which time 782,609 shares of Series B Preferred Stock and 655,774 shares of
Series C Preferred Stock were converted to Common Stock at the rate of one
share for one share.
On March 28, 1995, in conjunction with the issuance of $4.5 million of
subordinated debentures, the Company sold warrants, at $.023 per warrant to
purchase 695,652 shares of Common Stock, which are reserved for future
issuance, at an exercise price of $4.49 per share. The warrants are 100%
exercisable and expire on December 31, 2002. For accounting purposes, the
deemed value of the warrants was treated as additional financing costs and was
being amortized to interest expense over the outstanding period of the
subordinated debentures. As a result of repayments of the subordinated
debentures from the proceeds of the initial public offering, these costs were
written off as part of the extraordinary charge to earnings in the second
quarter of fiscal 1996.
In July 1995, the Board of Directors amended and restated the Incentive
Stock Option Plan of 1993. Under the Amended and Restated 1993 Stock Incentive
Plan, 1,521,739 shares of Common Stock can be issued through the exercise of
Incentive Stock Options, increasing 5% annually each July 1 during the term of
the Plan. At July 1, 1996, a maximum of 1,793,069 shares were reserved for
<PAGE> 41
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
issuance. These options allow full-time employees, including officers, to
purchase shares of Common Stock at prices equal to fair market value at the
date of grant. For individuals who own more than 10% of the Common Stock of the
Company, the option price of the shares may not be less than 110% of the fair
market value on the date of grant. The vesting period and expiration of each
grant will be determined by the Compensation Committee of the Board of
Directors. This limitation does not apply to nonqualified stock options or
restricted stock awards that may be granted under the amended 1993 Plan.
Under the Amended and Restated 1993 Stock Incentive Plan adopted July,
1995, "non-qualified" stock options can be issued to full-time employees,
including officers and non-employee consultants. Options must be granted at an
exercise price of at least 85% of the fair market value on the date of grant.
The vesting period and expiration of each grant will be determined by the
Compensation Committee of the Board of Directors.
Transactions for incentive and "non-qualified" stock options for the Amended
and Restated 1993 Stock Incentive Plan for fiscal year 1996, 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
Option Price Option Price Option Price
Shares Per Share Shares Per Share Shares Per Share
<S> <C> <C> <C> <C> <C> <C>
Outstanding at July 1 1,051,278 $6.33-$10.47 479,659 $6.33-$10.47 44,959 $8.51-$10.47
Granted 327,706 9.20- 19.63 576,956 6.33- 8.05 434,700 6.33
Exercised (128,570) 6.33- 10.47 - - - -
Cancelled (2,202) 6.33- 9.20 (5,337) 6.33 - -
--------- ------------ --------- ------------ ------- ------------
Outstanding at June 30 1,248,282 $6.33-$19.63 1,051,278 $6.33-$10.47 479,659 $6.33-$10.47
========= ============ ========= ============ ======= ============
Options exercisable at
June 30 359,332 $6.33-$10.47 216,647 $6.33-$10.47 106,553 $6.33-$10.47
Stock Options available
for grant at June 30 144,887 382,203 873,387
======= ======= =======
</TABLE>
In July 1995, the Board of Directors and stockholders approved the 1995
Non-Employee Director Stock Option Plan. Under the Non-Employee Director Option
Plan, 217,391 shares of Common Stock can be issued during the term of the Plan.
These options allow non-employee directors to purchase shares of Common Stock
at prices equal to fair market value at the date of grant. As of June 30, 1996,
no shares had been issued upon exercise of options granted under the Director
Option Plan, options for 25,364 shares were outstanding and options to purchase
192,027 shares were available for future grant under the Plan.
At June 30, 1996, the Company has reserved 2,034,734 shares of Common
Stock for the exercise of options.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). As allowable by SFAS 123, the Company will not
<PAGE> 42
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
recognize compensation cost for stock-based employee compensation arrangements,
but rather, commencing in fiscal 1997, will disclose in the notes to the
consolidated financial statements the impact on net income and earnings per
share as if the fair value based compensation cost had been recognized.
7. Employee Benefit Plans
The Company maintains a qualified Employee Stock Ownership Plan ("ESOP"
or the "Plan") which has been established in accordance with the requirements
and provisions of the Employee Retirement Income Security Act of 1974 ("ERISA")
and has been approved by the Internal Revenue Service ("IRS").
Annually, the Board of Directors determines the contribution, if any, to
the Employee Stock Ownership Trust ("ESOT") which trust has been established
under the Plan for the purpose of administering and investing the funds
contributed by the Company. Annual contributions to the ESOP are not to exceed
15% of the aggregate gross payroll of all participants. Payment of benefits
may be satisfied by the Company's stock, cash or a combination thereof. For
each of the years ended June 30, 1994 and 1995, the Company contributed $450
to the ESOP. For the year ended June 30, 1996, the Company did not contribute
to the ESOP. Under the terms of the plan, the Company is required under certain
conditions to fund the repurchase of shares by the ESOP.
The Company has a trusteed employee 401(k) savings plan for eligible U.S.
employees. The Company does not match employee contributions currently.
For the year ended June 30, 1996, the Company intends to contribute $450
to domestic eligible employees who (i) may deposit the funds in the Company's
401(k) plan or (ii) may receive such funds as a direct payment.
The Company's subsidiary in Switzerland maintains a defined contribution
plan which requires employee contributions based upon a percentage of the
employee's earnings currently ranging from 2.0% to 6.5%. The employer makes a
matching contribution based also upon a percentage of the employee's earnings
currently ranging from 3.5% to 11.0%. Company contributions ($737 in 1996,
$549 in 1995 and $430 in 1994) were charged to expense.
In July 1995, the Company adopted the 1995 Employee Stock Purchase Plan
and reserved for issuance an aggregate of 434,783 shares of Common Stock. The
Plan allows eligible employees to purchase Common Stock, through payroll
deductions, at prices equal to 85% of fair market value on the first or last
business day of the offering period, whichever is lower. The option to purchase
Stock will terminate on July 7, 2005. To date, 42,624 shares have been issued
under the Employee Stock Purchase Plan and 392,159 shares were available for
future grant.
<PAGE> 43
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
8. Business Segment
The Company operates in a single industry segment and is engaged in the
design, development, manufacture and sale of high-performance signal analyzers.
The Company's operations by geographic area for the years ended June 30, 1996,
1995 and 1994 are presented below:
<TABLE>
<CAPTION>
Revenue
from Area
Total Interarea Unaffiliated Operating Identifiable
Revenue Revenue Customers Income Assets
<S> <C> <C> <C> <C> <C>
1996
United States........... $ 48,035 $ (5,834) $ 42,201 $ (22) $28,631
Europe.................. 74,216 (31,937) 42,279 10,198 30,357
Other foreign........... 17,011 - 17,011 (65) 3,412
Interarea Eliminations.. (37,771) 37,771 - - -
------- ------ ------- ------ ------
$101,491 $ - $101,491 $10,111 $62,400
======= ====== ======= ====== ======
1995
United States........... $ 44,226 $ (8,466) $ 35,760 $ 290 $26,529
Europe.................. 61,449 (28,109) 33,340 6,707 19,003
Other foreign........... 13,172 - 13,172 226 4,304
Interarea Eliminations.. (36,575) 36,575 - - -
------ ------ ------ ----- ------
$ 82,272 $ - $ 82,272 $ 7,223 $49,836
====== ====== ====== ===== ======
1994
United States........... $ 37,003 $ (7,568) $ 29,435 $(1,436) $21,644
Europe.................. 45,303 (19,247) 26,056 4,798 14,944
Other foreign........... 8,351 - 8,351 383 2,889
Interarea Eliminations.. (26,815) 26,815 - - -
------ ------ ------ ----- ------
$ 63,842 $ - $ 63,842 $ 3,745 $39,477
====== ====== ====== ===== ======
</TABLE>
Unallocated corporate expenses amounting to $1,427, $993 and $686 in 1996, 1995
and 1994, respectively, are excluded from area operating income.
Other foreign revenues consist principally of sales to Japan and Asia.
9. Commitments and Contingencies
Leases
The Company has capitalized leases for certain equipment. The original
cost of equipment under capitalized leases was $794 and $1,798 at June 30, 1996
and 1995, respectively. Accumulated amortization of these assets was $679 and
$985 at June 30, 1996 and 1995, respectively. The capitalized lease obligations
are payable through July, 1998 and bear interest at rates ranging from 7.40% to
7.64%. In addition, the Company leases certain offices, manufacturing
<PAGE> 44
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
facilities and equipment under long-term non-cancelable operating leases. The
leases for facilities provide for all real estate taxes and operating expenses
to be paid by the Company. The following is a schedule by year of future
minimum lease payments, for capital and non-cancelable operating leases,
together with the present value of the net minimum lease payments as of June
30, 1996.
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
<S> <C> <C>
Years Ended June 30,
1997............................. $100 $ 1,938
1998............................. 7 1,831
1999............................. 13 1,604
2000............................. - 1,530
2001............................. - 1,214
2002 and beyond.................. - 4,206
--- ------
Net minimum lease payments....... 120 $12,323
======
Less amount representing interest 4
---
Present value of net minimum lease payments 116
Amounts due within one year 96
---
Long-term portion $ 20
===
</TABLE>
Aggregate rental expense on noncancelable operating leases for the years
ended June 30, 1996, 1995 and 1994 approximated $2,844, $2,559 and $2,364,
respectively.
The Company has a 2,000 Swiss franc credit agreement which serves as
security for the lease on the Geneva facility.
Technology Dispute Settlement
In the normal course of business, the Company and its subsidiaries are
parties to various legal claims, actions and complaints. Included among these
claims in fiscal 1994 was an intellectual property claim in the form of a
lawsuit which alleged patent infringement with respect to some of the Company's
oscilloscope products. In February, 1994, the Company concluded negotiations
to resolve this dispute and avoid extensive litigation. The result was a
settlement and a license agreement requiring an initial payment by the Company
of $1,549 on July 5, 1994, in addition to $524 of related legal costs; legal
costs amounted to $278 in 1993. Minimum annual future royalty payments are $350
for ten years with potential for higher additional amounts annually. These
additional amounts are contingent on future product sales as described in the
settlement agreement and cannot exceed an aggregate of $3,500. Royalty expense,
which approximated $963 in 1996 and $781 in 1995, are included in cost of
sales.
<PAGE> 45
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Restructuring Costs
During 1994, the Company restructured its sales and marketing organization
and also closed its research facility in the United Kingdom; total charges
incurred were $930. The restructuring was accomplished by a combination of
relocation of certain employees, early retirement and severance payments.
10. Quarterly Results of Operations (Unaudited)
Summarized unaudited quarterly operating results for fiscal year 1996 and
1995 is as follows:
<TABLE>
<CAPTION>
Quarters Ended
Fiscal Year 1996 Fiscal Year 1995
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30,
1995 1995 1996 1996 1994 1994 1995 1995
(in thousands, except for per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Digital oscilloscopes and
related products........... $18,392 $21,553 $22,436 $23,680 $13,699 $15,441 $17,639 $19,006
High energy physics products 2,819 2,237 2,972 2,924 2,492 3,267 2,758 3,760
Service and other........... 1,189 1,023 1,132 1,134 839 1,005 1,169 1,197
------ ------ ------ ------ ------ ------ ------ ------
Total..................... 22,400 24,813 26,540 27,738 17,030 19,713 21,566 23,963
Cost of sales................. 10,283 11,156 11,797 12,309 7,634 9,044 9,969 11,130
------ ------ ------ ------ ----- ------ ------ ------
Gross profit................ 12,117 13,657 14,743 15,429 9,396 10,669 11,597 12,833
Selling, general and
administrative expenses...... 7,685 8,321 9,211 9,406 6,066 6,827 7,135 7,922
Research and development
expenses..................... 3,129 3,187 3,155 3,168 2,296 2,487 2,450 3,082
----- ----- ----- ----- ----- ----- ----- -----
Operating income............ 1,303 2,149 2,377 2,855 1,034 1,355 2,012 1,829
Other (income) expense, net... 307 132 47 (352) 601 353 700 558
----- ----- ----- ----- ----- ----- ----- -----
Income before taxes and
extraordinary charge......... 996 2,017 2,330 3,207 433 1,002 1,312 1,271
Provision for income taxes... 349 706 815 1,122 152 351 460 445
----- ----- ----- ----- ----- ----- ----- -----
Income before extraordinary
charge....................... 647 1,311 1,515 2,085 281 651 852 826
Extraordinary charge for early
retirement of debt........... 1,300
----- ----- ----- ----- ----- ----- ----- -----
Net income.................... $ 647 $ 11 $ 1,515 $ 2,085 $ 281 $ 651 $ 852 $ 826
===== ===== ===== ===== ===== ===== ===== =====
Income per share before
extraordinary charge......... $ .14 $ .21 $ .24 $ .32 $ .06 $ .14 $ .18 $ .18
Extraordinary charge.......... (.21)
---- ---- ---- ---- ---- ---- ---- ----
Net income per share.......... $ .14 $ .00 $ .24 $ .32 $ .06 $ .14 $ .18 $ .18
==== ==== ==== ==== ==== ==== ==== ====
<PAGE> 46
LeCROY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(in thousands, except share and per share data)
Weighted average common shares
outstanding.................. 4,632 6,212 6,439 6,544 4,693 4,688 4,679 4,672
</TABLE>
<PAGE> 47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the directors of the Company and with respect
to Item 405 disclosure of delinquent Form 3, 4 or 5 filers will be contained
in the Company's definitive Proxy Statement relating to its 1996 Annual Meeting
of Stockholders, which is scheduled to be held October 28, 1996; said
information is incorporated herein by reference. The discussion of executive
officers of the Company is included in Item 4A in Part I of this report under
"Executive Officers of the Company".
ITEM 11. EXECUTIVE COMPENSATION.
A description of the compensation of the Company's executive officers will
be contained in the section captioned "Executive Compensation" of the Proxy
Statement for the Company's 1996 Annual Meeting of Stockholders which is
scheduled to be held on October 28, 1996; said information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
A description of the security ownership of certain beneficial owners and
management will be contained in the Proxy Statement for the Company's 1996
Annual Meeting of Stockholders which is scheduled to be held on October 28,
1996; said information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Certain relationships and related transactions with management will be
contained in the Proxy Statement for the Company's 1996 Annual Meeting of
Stockholders which is scheduled to be held on October 28, 1996; said
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
(a) (1) Financial Statements - See Index to Financial Statements at Item 8
of this report.
(a) (2) Financial Statement Schedules
Schedule II: Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is included elsewhere
in the financial statements or notes thereto.
(a) (3) Exhibits
The following exhibits are filed with this report:
<PAGE> 48
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of August 3, 1995, between the
Registrant and LeCroy Merger Corporation, filed as Exhibit 2.1 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
3.1 Certificate of Incorporation of the Registrant as of July 24, 1995,
filed as Exhibit 3.1 to Form S-1 Registration Statement No. 33-95620,
and is incorporated herein by reference.
3.2 Current By-Laws of the Registrant, filed as Exhibit 3.3 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.1 Letter of Employment, dated as of August 23, 1993, between the
Registrant and Lutz. P. Henckels, filed as Exhibit 10.15 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.2 Letter of Employment, dated as of August 24, 1995, between the
Registrant and Lutz. P. Henckels, filed as Exhibit 10.30 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.3 Letter of Employment, dated as of May 3, 1995, between the Registrant
and Joseph J. Migliozzi, filed as Exhibit 10.16 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.4 Employee Agreement Regarding Inventions, Confidentiality and Non-
Competition, dated as of March 28, 1995, between the Registrant and
Lutz. P. Henckels, filed as Exhibit 10.12 to Form S-1 Registration
Statement No. 33-95620, and is incorporated herein by reference.
10.5 Employee Agreement Regarding Inventions, Confidentiality and Non-
Competition, dated as of March 28, 1995, between the Registrant and
Walter O. LeCroy, Jr., filed as Exhibit 10.13 to Form S-1 Registration
Statement No. 33-95620, and is incorporated herein by reference.
10.6 Employee Agreement Regarding Inventions, Confidentiality and Non-
Competition, dated as of March 28, 1995, between the Registrant and
Brian V. Cake, filed as Exhibit 10.14 to Form S-1 Registration
Statement No. 33-95620, and is incorporated herein by reference.
10.7 LeCroy Corporation Amended and Restated 1993 Stock Incentive Plan filed
as Exhibit 10.1 to Form S-1 Registration Statement No. 33-95620, and
is incorporated herein by reference.
10.8 LeCroy Corporation 1995 Non-Employee Director Stock Option Plan filed
as Exhibit 10.2 to Form S-1 Registration Statement No. 33-95620 dated
August 9, 1995, and is incorporated herein by reference.
10.9 LeCroy Corporation 1995 Employee Stock Purchase Plan filed as Exhibit
10.3 to Form S-1 Registration Statement No. 33-95620, and is
incorporated herein by reference.
<PAGE> 49
10.10 Settlement and License Agreement, dated as of December 9, 1993, between
the Registrant and Tektronix, Inc. filed as Exhibit 10.11 to Form S-1
Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.11 Multicurrency Credit Agreement, dated as of December 12, 1995, between
the Registrant and The Chase Manhattan Bank, N.A. (as agent for the
lenders named therein).
10.12 Securities Purchase Agreement, dated as of March 28, 1995, between the
Registrant and the purchasers named therein filed as Exhibit 10.7 to
Form S-1 Registration Statement No. 33-95620, and is incorporated
herein by reference.
10.13 Shareholders Agreement, dated as of March 28, 1995, among the
Registrant, Walter O. LeCroy, Jr. and the investors named therein filed
as Exhibit 10.8 to Form S-1 Registration Statement No. 33-95620, and
is incorporated herein by reference.
10.14 Form of Common Stock Purchase Warrant filed as Exhibit 10.10 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.15 Form of Indemnification Agreement, between the Registrant and each of
its executive officers and directors filed as Exhibit 10.29 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.16 Agreement dated as of August 2, 1995, amending the Securities Purchase
Agreement filed as Exhibit 10.12 hereto filed as Exhibit 10.34 to Form
S-1 Registration Statement No. 33-95620, and is incorporated herein by
reference.
10.17 Agreement dated as of September 29, 1995, amending the Securities
Purchase Agreement filed as Exhibit 10.12 hereto filed as Exhibit 10.35
to Form S-1 Registration Statement No. 33-95620, and is incorporated
herein by reference.
10.18 LeCroy Corporation Employee Stock Ownership Trust Agreement, between
the Registrant and Cole Taylor Bank, dated September 13, 1995 filed as
Exhibit 10.36 to Form S-1 Registration Statement No. 33-95620, and is
incorporated herein by reference.
10.19 Amended and Restated LeCroy Corporation Employee Stock Ownership Plan
filed as Exhibit 10.37 to Form S-1 Registration Statement No. 33-95620,
and is incorporated herein by reference.
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP , Independent Auditors
27 Financial Data Schedule for the fiscal year ended June 30, 1996.
(b) Reports on Form 8-K
None.
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LECROY CORPORATION
August 7, 1996 By JOHN C. MAAG
John C. Maag
Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer
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
Registrant and in the capacities and on the dates indicated.
Signature Title Date
WALTER O. LECROY Chairman of the Board and Director August 7, 1996
Walter O. LeCroy
LUTZ P. HENCKELS President, Chief Executive Officer August 7, 1996
Lutz P. Henckels and Director
JOHN C. MAAG Vice President-Finance, Chief August 7, 1996
John C. Maag Financial Officer, Secretary
and Treasurer
ROBERT E. ANDERSON Director August 7, 1996
Robert E. Anderson
DOUGLAS A. KINGSLEY Director August 7, 1996
Douglas A. Kingsley
WILLIAM G. SCHEERER Director August 7, 1996
William G. Scheerer
<PAGE> 51
Schedule II
LeCROY CORPORATION
Valuation and Qualifying Accounts
Years Ended June 30, 1994, 1995 and 1996
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions (A)(B) Balance at
beginning charged to Deductions/ end
Description of period operations Other of period
<S> <C> <C> <C> <C>
Against trade receivables-
Year ended June 30, 1994
Allowance for doubtful
accounts................ $ 25 $ 7 $ (2) $ 30
Year ended June 30, 1995
Allowance for doubtful
accounts................ 30 32 (18) 44
Year ended June 30, 1996
Allowance for doubtful
accounts................ 44 2 (8) 38
Against inventories-
Year ended June 30, 1994
Allowance for excess and
obsolete................ 1,011 733 (120) 1,624
Year ended June 30, 1995
Allowance for excess and
obsolete................ 1,624 595 72 2,291
Year ended June 30, 1996
Allowance for excess and
obsolete................ 2,291 375 (207) 2,459
____________
(A) Accounts written-off.
(B) Merchandise disposals and/or impact of foreign currency.
</TABLE>
<PAGE> 1
EXHIBIT 10.11
MULTICURRENCY CREDIT AGREEMENT
Dated as of December ___, 1995
Among
LECROY CORPORATION
as Borrower
and
THE LENDERS NAMED HEREIN
as Lenders
and
THE CHASE MANHATTAN BANK, N.A.
as Agent
<PAGE> 2
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. 1
SECTION 1.02. Computation of Time Periods. 12
SECTION 1.03. Accounting Terms. 12
SECTION 1.04. Currency Equivalents Generally. 12
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances 12
SECTION 2.02. Making the Advances. 13
SECTION 2.03. Commitment Fee. 16
SECTION 2.04. Reduction of the Commitments. 16
SECTION 2.05. Repayment of the Advances. 16
SECTION 2.06. Interest on the Advances. 16
SECTION 2.07. Intentionally Omitted. 18
SECTION 2.08. Interest Rate Determination. 18
SECTION 2.09. Prepayments. 18
SECTION 2.10. Increased Costs, Etc. 18
SECTION 2.11. Payments and Computations. 19
SECTION 2.12. Taxes. 20
SECTION 2.13. Sharing of Payments, Etc. 23
SECTION 2.14. Evidence of Debt. 24
SECTION 2.15. Currency Equivalents. 24
SECTION 2.16. Voluntary Conversion or Continuation of Advance. 25
SECTION 2.17. Interest Rate Selection. 25
SECTION 2.18. Agent's Fees. 25
SECTION 2.19 Use of Proceeds. 25
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Initial Advances. 26
(a) Note. 26
(b) Certificate of Corporate Action by the
Borrower. 26
(c) Incumbency and Signature Certificate of
the Borrower. 26
(d) Intentionally Omitted. 26
(e) Corporate Charter, Good Standing. 26
(f) Opinion of Counsel for Borrower. 26
SECTION 3.02. Conditions Precedent to Each Borrowing. 27
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. 28
(a) Due Incorporation. 28
(b) Compliance with Other Agreements, Etc. 28
(c) Validity of Obligations. 28
(d) No Pending Litigation. 28
(e) Financial Statements. 29
(f) Title to Assets. 29
(g) Taxes. 29
(h) ERISA. 29
(i) Subsidiaries. 30
(j) Indebtedness. 30
(k) Licenses, Permits. 30
(l) Judgments. 30
(m) Other Agreements. 30
(n) Labor Disputes, Acts of God. 30
(o) Investment Company. 31
(p) Partner in a Partnership. 31
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. Affirmative Covenants. 31
(a) Corporate Existence. 31
(b) Conduct of Business. 31
(c) Preservation of Properties. 31
(d) Maintenance of Records. 32
(e) Maintenance of Insurance. 32
(f) Compliance with Law. 32
(g) Examination of Records. 32
(h) Financial Reporting. 32
(i) Further Acts. 35
(j) Environmental Laws. 35
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. Negative Covenants. 36
(a) Debt. 36
(b) Intentionally Omitted. 37
(c) Liens. 37
(d) Leases. 39
(e) Investments. 39
(f) Restricted Payments. 39
(g) Sale of Assets. 39
(h) Intentionally Omitted. 40
(i) Transactions with Affiliates. 40
(j) Mergers, Acquisitions, Etc. 40
(k) Change In Management. 40
<PAGE> 4
ARTICLE VII
FINANCIAL COVENANTS
SECTION 7.01. Current Ratio. 41
SECTION 7.02. Intentionally omitted.
SECTION 7.03. Intentionally omitted.
SECTION 7.04. Fixed Charge Coverage Ratio. 41
SECTION 7.05. Leverage Ratio. 41
SECTION 7.06. Capital Expenditures. 41
SECTION 7.07. No Net Loss. 41
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. 41
ARTICLE IX
THE AGENT
SECTION 9.01. Authorization and Action. 43
SECTION 9.02. Agent's Reliance, Etc. 44
SECTION 9.03. Chase and Affiliates. 44
SECTION 9.04. Lender Credit Decision 44
SECTION 9.05. Indemnification. 45
SECTION 9.06. Successor Agent. 45
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. 45
SECTION 10.02. Notices, Etc. 46
SECTION 10.03. No Waiver, Remedies 46
SECTION 10.04. Costs, Expenses and Taxes 46
SECTION 10.05. Right of Set-off. 47
SECTION 10.06. Judgment. 48
SECTION 10.07. Binding Effect. 48
SECTION 10.08. Assignments and Participation. 48
SECTION 10.09. Consent to Jurisdiction. 51
SECTION 10.10. Governing Law. 51
SECTION 10.11. Execution in Counterparts. 51
SECTION 10.12. Captions. 51
SECTION 10.13. WAIVER OF JURY TRIAL. 51
SECTION 10.14. Intentionally Omitted. 51
SECTION 10.15. Intentionally Omitted. 52
SECTION 10.16. Application of Required Prepayments. 52
SECTION 10.17. Confidentiality. 52
<PAGE> 5
EXHIBITS
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Reporting Certificate
Exhibit C Form of Note
Exhibit D Intentionally Omitted
Exhibit E Intentionally Omitted
Exhibit F Form of Notice of Borrowing
Exhibit G Form of Opinion of Counsel
SCHEDULES
Schedule 1 Schedule of Lending Offices (Domestic and Eurocurrency)
Schedule 2 Schedule of Pending Litigation
Schedule 3 Schedule of Existing Debt and Guarantees
Schedule 4 Schedule of Existing Liens
Schedule 5 Schedule of Existing Investments
Schedule 6 Schedule of Transactions with Affiliates
Schedule 7 Schedule of Subsidiaries
Schedule 8 Schedule of Payment Offices for Alternative Currencies.
Schedule 9 Schedule of Commitments
<PAGE> 6
MULTICURRENCY CREDIT AGREEMENT (the "Agreement") dated as of December
____, 1995 by and among LECROY CORPORATION, a Delaware corporation (the
"Borrower"), the banks (the "Lenders") listed on the signature pages hereof,
and THE CHASE MANHATTAN BANK, N.A. ("Chase") as agent (the "Agent") for the
Lenders hereunder.
RECITALS
1. The Borrower, the Agent, and certain other lenders are parties to the
Existing Loan Agreement (hereinafter defined);
2. The Borrower has agreed to fully and finally repay all amounts
outstanding under the Existing Revolving Facility (hereinafter defined), and
the parties to the Existing Loan Agreement have agreed to terminate the
Existing Revolving Facility and the Existing Loan Agreement, and to release all
collateral therefor, effective upon the execution and delivery of this
Agreement by all parties;
3. The parties to this Agreement have entered into this Agreement in order
to replace the Existing Loan Agreement;
4. In consideration of the mutual promises set forth in this Agreement,
the parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" shall mean those accounts arising out of the sale or
lease of goods or the rendition of services by the Borrower or any of
its Consolidated Subsidiaries.
"Account Debtor" shall mean the Person who is obligated on or
under an Account.
"Acquisition" means any transaction pursuant to which the
Borrower or any of its Subsidiaries (a) acquires equity securities (or
warrants, options or other rights to acquire such securities) of (i)
any corporation other than the Borrower or (ii) any corporation which
is then a Subsidiary of the Borrower, pursuant to a solicitation of
tenders therefor, or in one or more negotiated block, market or other
transactions not involving a tender offer, or a combination of any of
the foregoing, or (b) makes any corporation a Subsidiary of the
Borrower, or causes any such corporation to be merged into the Borrower
or any of its Subsidiaries, in any case pursuant to a merger, purchase
of assets or any reorganization providing for the delivery or issuance
to the holders of such corporation's then outstanding securities, in
exchange for such securities, of cash or securities of the Borrower or
any of its Subsidiaries, or a combination thereof, or (c) purchases all
or substantially all of the business or assets of any corporation.
"Additional Interest Period" has the meaning assigned to such
term in Section 2.06(c).
<PAGE> 7
"Adjustment Period" has the meaning assigned to such term in
Section 2.06(c).
"Advance" means an advance by a Lender to the Borrower pursuant
to Article II, and refers to a Base Rate Advance or a Eurocurrency
Advance (each of which shall be a "Type" of Advance).
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, the
Borrower or any of its Subsidiaries; (b) which directly or indirectly
beneficially owns or holds 5% or more of any class of voting stock of
the Borrower or any such Subsidiary; or (c) 5% or more of the voting
stock of which is directly or indirectly beneficially owned or held by
the Borrower or such Subsidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise.
"Agent" means Chase, its successors and/or permitted assigns
pursuant to Article IX hereof, as agent for the Lenders hereunder in
accordance with Article IX hereof.
"Alternative Currency" means Swiss Francs, French Francs,
German Deutsche Marks, Italian Lire, British Pounds Sterling, Japanese
Yen, or any lawful currency other than Dollars mutually agreed to by
the Agent and the Borrower which is freely transferable and convertible
into Dollars.
"Applicable Eurocurrency Rate Margin" means, subject to Section
2.06(c), for any period (a) if, as at the end of the preceding fiscal
quarter, the Leverage Ratio is less than 0.5:1.0, seventy-five (75)
basis points; (b) if, as at the end of the preceding fiscal quarter,
the Leverage Ratio is 0.5:1.0, or greater, one hundred (100) basis
points. Adjustments in the Applicable Eurocurrency Rate Margin shall be
effective as of the 10th Business Day following receipt by the Agent of
the Borrower's annual or quarterly financial statements, as applicable.
"Applicable Lending Office" means, with respect to each Lender,
such Lender's Domestic Lending Office in the case of a Base Rate
Advance, and such Lender's Eurocurrency Lending Office in the case of a
Eurocurrency Advance.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit A hereto.
"Base Rate" means, for any Interest Period or any other period,
a fluctuating interest rate per annum as shall be in effect from time
to time which rate per annum shall at all times be equal to the higher
of:
(a) the Prime Rate in effect from time to time; or
(b) for any day, the Federal Funds Rate plus 1/2%.
"Base Rate Advance" means an Advance which bears interest at a
rate per annum determined on the basis of the Base Rate, as provided
in Section 2.06(a)(i).
<PAGE> 8
"Borrowing" means a borrowing consisting of Advances of the
same Type made on the same day by the Lenders.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurocurrency Advances, on which dealings
are carried on in the London interbank market, and on which banks are
open for business in the country of issue of the currency of such
Eurocurrency Advance.
"Capital Expenditures" means for any period, the Dollar amount
of gross capital expenditures determined in accordance with GAAP.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Cash Flow" means, for any accounting period, the sum of (i)
operating profit as reflected in the financial statements prepared in
accordance with the terms of Sections 5.01(h)(i) and (iii), plus (ii)
depreciation, plus (iii) foreign exchange losses, LESS capital
expenditures.
"Chase" means The Chase Manhattan Bank, N.A.
"Closing Date" means the date on which this Agreement shall be
signed and delivered by all parties hereto.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" has the meaning specified in Section 2.01.
"Confidential Information" means information received under
Sections 5.01(g) or 5.01(h) and all other information that the Borrower
furnishes to the Agent or any Lender on a confidential basis, but does
not include any such information that is or becomes generally available
to the public or that is or becomes available to the Agent or such
Lender from a source other than the Borrower other than in violation of
any applicable confidentiality requirements.
"Consolidated Capital Expenditures" means Capital Expenditures
of the Borrower and its Consolidated Subsidiaries on a consolidated
basis, as determined in accordance with GAAP.
"Consolidated Current Assets" means Current Assets of the
Borrower and its Consolidated Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.
"Consolidated Current Liabilities" means Current Liabilities of
the Borrower and its Consolidated Subsidiaries on a consolidated basis,
as determined in accordance with GAAP.
"Consolidated Liabilities" means liabilities of the Borrower
and its Consolidated Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.
"Consolidated Subsidiary" means any Subsidiary whose accounts
are or are required to be consolidated with the accounts of the
Borrower in accordance with GAAP.
<PAGE> 9
"Consolidated Tangible Net Worth" means Tangible Net Worth of
the Borrower and its Consolidated Subsidiaries on a consolidated basis,
as determined in accordance with GAAP.
"Consolidated Total Assets" means Total Assets of the Borrower
and its Consolidated Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.
"Convert", "Conversion", and "Converted" each refers to a
conversion of an Advance of one Type into an Advance of another Type
pursuant to Section 2.16(a).
"Current Assets" means all assets treated as current assets in
accordance with GAAP, excluding, however, from the determination of
current assets: loans to insiders; and amounts due from Subsidiaries
and Affiliates.
"Current Liabilities" means all liabilities treated as current
liabilities in accordance with GAAP, including without limitation (a)
all obligations payable on demand or within one year after the date in
which the determination is made, and (b) installment and sinking fund
payments required to be made within one year after the date on which
determination is made, but excluding: all such liabilities or
obligations which are renewable or extendable at the option of the
Borrower to a date more than one year from the date of determination,
loans owed to insiders, and amounts due to Subsidiaries and Affiliates.
"Current Ratio" means the ratio obtained by dividing (a)
Consolidated Current Assets, by (b) Consolidated Current Liabilities.
"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services, (iv) obligations as lessee under leases which
shall have been or should be, in accordance with GAAP, recorded as
Capital Leases, and (v) obligations under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred
to in clauses (i) through (iv) above.
"Default" means any of the events specified in Sections 8.01(a)
through 8.01(g), whether or not any requirement for the giving of
notice, the lapse of time, or both has been satisfied.
"Dollars" and the sign "$" each means lawful money of the
United States of America.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule 1 hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eligible Assignee" means (i) a commercial bank organized under
the laws of the United States, or any State thereof, having total
assets of not less than $1,000,000,000.00, (ii) a savings and loan
association or savings bank organized under the laws of the United
<PAGE> 10
States, or any State thereof, and having total assets of not less than
$250,000,000.00; and (iii) a commercial bank organized under the laws
of any other country which is a member of the OECD, or a political
subdivision of any such country and having total assets of not less
than $1,000,000,000.00; provided that such bank is acting through a
branch or agency located in the United States.
"Environmental Laws" has the meaning assigned to such term
in Section 5.01(j)(iii). "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any corporation or trade or business
which is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Code) as the Borrower or is under
common control (within the meaning of Section 414(c) of the Code) with
the Borrower.
"ERISA Event" means (i) the occurrence with respect to a Plan
of a reportable event, within the meaning of Section 4043 of ERISA,
unless the 30-day notice requirement with respect thereto has been
waived by the PBGC, (ii) the provision by the administrator of any Plan
of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (iii) the cessation
of operations at a facility of the Borrower or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (iv) the
withdrawal by the Borrower or an ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (v) the conditions
set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a
lien upon property or rights to property of the Borrower or any ERISA
Affiliate for failure to make a required payment to a Plan are
satisfied; (vi) the adoption of an amendment to a Plan requiring the
provision of security to such Plan, pursuant to Section 307 of ERISA;
or (vii) the institution by the PBGC of proceedings to terminate a
Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event
or condition described in Section 4042 of ERISA that constitutes
grounds for the termination of, or the appointment of a trustee to
administer, a Plan.
"Eurocurrency Advance" means an Advance which bears interest at
a rate per annum determined on the basis of the Eurocurrency Rate, as
provided in Section 2.06(a)(ii).
"Eurocurrency Interest Period" means, for any Eurocurrency
Advance, the period commencing on the date such Advance is made,
Converted or continued and ending on the last day of the period
determined for such Advance pursuant to the provisions below and in
Section 2.11(d). The duration of the Eurocurrency Interest Period for
any Eurocurrency Advance shall be one, two, three, or six months, as
the Borrower may, upon notice received by the Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the
first day of such Eurocurrency Interest Period, select in the
applicable Notice of Borrowing provided, however, that whenever the
last day of any Eurocurrency Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Eurocurrency
Interest Period shall be extended to occur on the next succeeding
Business Day, provided, that if such extension would cause the last day
<PAGE> 11
of such Eurocurrency Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day. Whenever the first day of any
Interest Period occurs on a day of an initial calendar month for which
there is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months equal to
the number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar month.
The Agent shall promptly advise the Lenders of the Eurocurrency
Interest Period determined as above provided for the Eurocurrency
Advances comprising each Borrowing.
"Eurocurrency Lending Office" means, with respect to any
Lender, the office of such Lender specified as its "Eurocurrency
Lending Office" opposite its name on Schedule 1 hereto or in the
Assignment and Acceptance pursuant to which it became a Lender (or, if
no such office is specified, its Domestic Lending Office), or such
other office of such Lender as such Lender may from time to time
specify to the Borrower and the Agent.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurocurrency Rate" means, for any Eurocurrency Interest Period
for each Eurocurrency Advance comprising part of the same Borrowing, as
the case may be, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a
multiple thereof) of the rate per annum at which deposits in Dollars or
in the relevant Alternative Currency are offered by the principal
office of each of the Eurocurrency Reference Banks in London, England
to prime banks in the London interbank market at 11:00 A.M. (London
time) two Business Days before the first day of such Eurocurrency
Interest Period in an amount substantially equal to such Reference
Bank's Eurocurrency Advance comprising part of such Borrowing and for a
period equal to such Eurocurrency Interest Period by (b) a percentage
equal to 100% minus the Eurocurrency Reserve Percentage, to the extent
incurred, for such Interest Period. The Eurocurrency Rate for any
Eurocurrency Interest Period for each Eurocurrency Advance comprising
part of the same Borrowing shall be determined by the Agent on the
basis of applicable rates furnished to and received by the Agent from
the Eurocurrency Reference Banks two Business Days before the first day
of such Interest Period, subject, however, to the provisions of Section
2.08.
"Eurocurrency Reference Banks" means initially, Agent, and upon
execution of this Agreement by other Lenders, Agent and such other
Lenders as Agent may deem appropriate.
"Eurocurrency Reserve Percentage" of any Lender for any
Eurocurrency Interest Period for any Eurocurrency Advance means the
reserve percentage applicable two Business Days before the first day of
such Eurocurrency Interest Period (or if more than one such percentage
shall be so applicable, the daily average of such percentages for those
days in such Eurocurrency Interest Period during which any such
percentage shall be so applicable) under regulations issued from time
<PAGE> 12
to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for such Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a
term equal to such Eurocurrency Interest Period.
"Event of Default" means any Default, provided that each
applicable requirement for the giving of notice, the lapse of time, or
both has been satisfied.
"Existing Loan Agreement" means the Multicurrency Credit
Agreement dated as of January 23, 1995 among Borrower, Agent, and the
lenders parties thereto.
"Existing Revolving Facility" means the credit facility
established pursuant to the Existing Loan Agreement.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fiscal Year" means each period of 52 (or 53, as applicable)
consecutive calendar weeks ending on the Saturday closest to June 30 of
each year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio
obtained by dividing (i) Cash Flow by (ii) Fixed Charges.
"Fixed Charges" means, for any period, accrued interest (other
than on Subordinated Indebtedness) and scheduled, required principal
payments (other than of Subordinated Indebtedness), plus, without
duplication, capital lease payments and dividend payments.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect on the applicable reporting date
with respect to any particular set of financial statements.
"General Intangibles" has the meaning assigned to such term in
the Uniform Commercial Code, as adopted in the State of New York, and
shall include, without limitation, patents, trademarks, copyrights and
substantially similar intellectual property rights.
"Hazardous Substance" has the meaning assigned to such term in
Section 5.01(j)(iii).
"Interest Period" means a Eurocurrency Interest Period.
"Lenders" means the lenders listed on the signature pages
hereof and each Eligible Assignee that shall become a party hereto
pursuant to Section 10.08.
<PAGE> 13
"Leverage Ratio" means, at any time of determination, the ratio
obtained by dividing (i) Consolidated Liabilities, by (ii) Consolidated
Tangible Net Worth.
"Lien" means any lien (statutory or otherwise), security
interest, mortgage, deed of trust, priority, pledge, charge,
conditional sale, title retention agreement, financing lease or other
encumbrance or similar right of others, or any agreement to give any of
the foregoing.
"Loan Documents" means this Agreement, each Note, and each
other document executed by the Borrower in connection with this
Agreement.
"Majority Lenders" means at any time (i) Lenders owed at least
75% of the aggregate unpaid principal amounts of the Advances then
outstanding, or, if no Advances are then outstanding, Lenders whose
Commitments aggregate to at least 75% of the aggregate Commitments of
all of the Lenders or (ii) if there are two and only two Lenders, both
of such Lenders.
"Materially Adverse Effect" means (i) with respect to the
Borrower and its Subsidiaries, any materially adverse change in the
business, operations, condition (financial or otherwise), or assets of
the Borrower and its Subsidiaries taken as a whole, or (ii) any fact or
circumstance as to which singly or in the aggregate, the Borrower has
reason to believe there is a reasonable possibility of (a) a materially
adverse change described in clause (i), or (b) the inability of the
Borrower to perform in any material respect its obligations hereunder
or under the other Loan Documents.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions, such plan being maintained pursuant
to one or more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained for
employees of the Borrower or an ERISA Affiliate and at least one Person
other than the Borrower and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Borrower or an ERISA Affiliate
could have liability under Section 4064 or 4069 of ERISA in the event
such plan has been or were to be terminated.
"Note" or "Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit C hereto, payable to the order of
the respective Lenders.
"Notice of Borrowing" has the meaning specified in Section 2.02.
"Obligations" means the obligations of the Borrower arising
under this Agreement or the other Loan Documents.
"OECD" means the Organization for Economic Cooperation and
Development.
"Other Taxes" has the meaning specified in Section 2.12(b).
<PAGE> 14
"Payment Office" means, for Dollars, the principal office of
Agent in New York City, located on the date hereof at 1 Chase Manhattan
Plaza, New York, New York 10081, and, for any Alternative Currency,
such office of Agent as shall be from time to time selected by the
Agent and notified by the Agent in writing to the Borrower and the
Lenders. The Payment Offices of Agent with respect to Alternative
Currencies are set forth on Schedule 8, as such Schedule may be amended
by Agent from time to time on written notice to the Borrower and
Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Permitted Indebtedness" has the meaning assigned to such term
in Section 6.01(a).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company,
or other entity, or a government or any political subdivision or agency
thereof.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrower
or any ERISA Affiliate and which is covered by Title IV of ERISA or to
which Section 412 of the Code applies.
"Previous Subordinated Debt" means all Debt incurred pursuant
to the Securities Purchase Agreement, dated March 28, 1995 evidenced by
(i) the Subordinated Debenture dated March 28, 1995 made by LeCroy
Corporation to Global Private Equity II Limited Partnership; (ii) the
Subordinated Debenture dated March 28, 1995 made by LeCroy Corporation
to Golden Gate Development and Investment Limited Partnership; (iii)
the Subordinated Debenture dated March 28, 1995 made by LeCroy
Corporation to Advent International Investors II Limited Partnership;
(iv) the Subordinated Debenture dated March 28, 1995 made by LeCroy
Corporation to Innovent Capital Limited Partnership; and (v) the
Subordinated Debenture dated March 28, 1995 made by LeCroy Corporation
to Needham Capital Partners, L.P.
"Previous Term Loan" means the loan made pursuant to Term Loan
Agreement dated as of January 23, 1995 among Borrower, Agent, and the
lenders parties thereto.
"Prime Rate" means that rate of interest from time to time
announced by Chase at its principal office as its prime commercial
lending rate.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Real Property" has the meaning assigned to such term in
Section 5.01(j)(i).
"Reference Banks" means the Eurocurrency Reference Banks.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented
from time to time.
<PAGE> 15
"Register" has the meaning specified in Section 10.08(c).
"Remedial Work" has the meaning assigned to such term in
Section 5.01(j)(ii).
"Reporting Certificate" means a completed certificate in the
form of Exhibit B annexed hereto, signed by the Chief Financial Officer
of the Borrower.
"Required Financial Statement" has the meaning assigned to such
term in Section 2.06(c).
"Restricted Payment" means any payment or prepayment of
principal or interest on account of Subordinated Indebtedness or any
purchase, defeasance, redemption, retirement or acquisition of any
principal or interest on such Subordinated Indebtedness except for,
other than during the continuance of an Event of Default, regularly
scheduled payments (or regularly scheduled redemptions, as the case may
be) of principal and interest on account of Subordinated Indebtedness
in accordance with the terms of a subordinated debt indenture or
agreement or substantially similar document previously consented to in
writing by the Majority Lenders.
"Subordinated Indebtedness" means all unsecured Indebtedness of
the Borrower which shall have been subordinated to all Indebtedness of
the Borrower hereunder and under the Notes and to all other
Indebtedness owed to the Lenders pursuant to a subordinated debt
indenture or agreement or substantially similar document signed by the
holder of such Indebtedness upon and otherwise containing terms and
conditions reasonably satisfactory to the Majority Lenders.
"Subsidiary" means, as to any Person, any corporation or other
entity of which at least a majority of the securities or other
ownership interests having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by such
Person.
"Tangible Net Worth" means the excess of total assets over
total liabilities, excluding, however, from the determination of total
assets: goodwill; patents, copyrights and trademarks; trade names;
licenses; organizational expenses; and unamortized debt discount, all
as determined in accordance with GAAP.
"Taxes" has the meaning specified in Section 2.12(a).
"Termination Date" means January 31, 1999, or the earlier date
of termination in whole of the Commitments pursuant to Section 2.04 or
8.01.
"Total Assets" means all assets treated as assets in accordance
with GAAP.
"Type" means, with reference to any Advance, its nature as a
Base Rate Advance or a Eurocurrency Advance.
"Unfunded Vested Liabilities" means, with respect to any Plan,
the amount (if any) by which the present value of all vested benefits
under the Plan exceeds the fair market value of all Plan assets
<PAGE> 16
allocable to such benefits, as determined on the most recent valuation
date of the Plan and in accordance with the provisions of ERISA for
calculating the potential liability of the Borrower or any ERISA
Affiliate to PBGC or the Plan under Title IV of ERISA.
"United States" and "U.S." each means United States of America.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" the words
"to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
SECTION 1.04. Currency Equivalents Generally. For all
purposes of this Agreement other than Article II, the equivalent in any
Alternative Currency of an amount in Dollars shall be determined at the
rate of exchange quoted by Chase in New York City, at 9:00 A.M. (New
York City time) on the date of determination, to prime banks in New
York City for the spot purchase in the New York foreign exchange market
of such amount of Dollars with such Alternative Currency.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the
terms and conditions hereinafter set forth, to make Advances to the Borrower
from time to time on any Business Day during the period from the date hereof
until the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on Schedule 9
hereto or, if such Lender has entered into any Assignment and Acceptance, set
forth as such Lender's Commitment in the Register maintained by the Agent
pursuant to Section 10.08(c) (such Lender's "Commitment"), or the equivalent
thereof, as such amount may be reduced pursuant to Section 2.04. As of the
date hereof, the aggregate of all Lenders' Commitments is $15,000,000. Subject
to the terms of Section 2.02(c), each Borrowing shall be in an aggregate amount
not less than $100,000.00 (or the equivalent thereof in any Alternative
Currency) or an integral multiple of $25,000.00 (or the equivalent thereof in
any Alternative Currency) in excess thereof and shall consist of Advances of
the same Type made in the same currency on the same day by the Lenders ratably
according to their respective Commitments. Within the limits of each Lender's
Commitment, the Borrower may borrow, prepay pursuant to Section 2.09 and
reborrow under this Section 2.01(a). For purposes of this Section 2.01(a) and
all other provisions of this Article II, the equivalent in Dollars of any
Alternative Currency or the equivalent in any Alternative Currency of Dollars
or of any other Alternative Currency shall be determined in accordance with
Section 2.15. Subject to Section 10.08, the parties to this Agreement may make
additional Lenders parties hereto by replacing the initial (or then applicable)
signature page with a substitute signature page executed by the Borrower, the
Agent, and each Lender. The Commitment of each Lender shall be in the amount
set forth on Schedule 9 with respect to each Lender, as such Schedule 9 may be
amended (or replaced by the Agent) from time to time to reflect the Commitment
of each Lender made a party hereof. Any Lender which becomes a signatory to
this Agreement shall be entitled to all of the rights and obligations of a
Lender under this Agreement and the other Loan Documents.
<PAGE> 17
SECTION 2.02. Making the Advances. (a) Subject to the terms of
Section 8.01, each Borrowing shall be made on notice, given:
(x) not later than 11:00 A.M. (New York City time) on the same
Business Day as the proposed Borrowing of a Base Rate Advance in
Dollars,
(y) not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the requested date of a proposed borrowing of a
Eurocurrency Advance in Dollars, and
(z) not later than the fifth Business Day before the requested date
of a proposed Borrowing in an Alternative Currency,
by the Borrower to the Agent, by facsimile, telex or cable, confirmed
immediately in writing, in substantially the form of Exhibit F hereto (each, a
"Notice of Borrowing"), specifying therein the requested (i) Type of Advance
comprising such Borrowing, (ii) date of such Borrowing, (iii) aggregate amount
of such Borrowing, (iv) currency of such Borrowing and (v) Eurocurrency
Interest Period for each Eurocurrency Advance to be made as part of such
Borrowing. Each Advance denominated in an Alternative Currency shall be a
Eurocurrency Advance. The Agent shall promptly notify each Lender of each
request for an Advance.
In the case of a proposed Borrowing comprised of Eurocurrency Advances
in an Alternative Currency, the obligation of each Lender to make its
Eurocurrency Advance in the requested Alternative Currency as part of such
Borrowing is subject to the confirmation by such Lender to the Agent not later
than the fourth Business Day before the requested date of such Borrowing that
such Lender agrees to make its Eurocurrency Advance in the requested
Alternative Currency, which confirmation shall be notified immediately by the
Agent to the Borrower. If any Lender shall not have so provided to the Agent
such confirmation, the Agent shall promptly notify the Borrower and each Lender
that a Lender has not provided such confirmation, whereupon the Borrower may,
by notice to the Agent not later than the third Business Day before the
requested date of such Borrowing, withdraw the Notice of Borrowing relating to
such requested Borrowing. If the Borrower does so withdraw such Notice of
Borrowing, the Borrowing shall not occur and the Agent shall promptly so notify
each Lender. If the Borrower does not so withdraw such Notice of Borrowing,
the Agent shall promptly so notify each Lender and such Notice of Borrowing
shall be deemed to be a Notice of Borrowing which requests a Borrowing
comprised of Eurocurrency Advances in an aggregate amount in Dollars
equivalent, determined in accordance with Section 2.15, to the amount of the
originally requested Borrowing in an Alternative Currency; and in such notice
by the Agent to each Lender the Agent shall state such aggregate equivalent
amount of such Borrowing in Dollars and such Lender's ratable portion of such
Borrowing.
Each Lender shall, before 12:00 Noon (New York City time) on the date
of such Borrowing, make available for the account of its Applicable Lending
Office to the Agent (i) in the case of a Borrowing in Dollars, at such account
maintained at the Payment Office for Dollars as shall have been notified by the
Agent to the Lenders prior thereto and in same day funds, such Lender's ratable
portion of such Borrowing in Dollars, and (ii) in the case of a Borrowing in an
Alternative Currency, at such account maintained at the Payment Office for such
Alternative Currency as shall have been notified by the Agent to the Lenders
prior thereto and in same day funds, such Lender's ratable portion of such
Borrowing in such Alternative Currency. After the Agent's receipt of such
<PAGE> 18
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Agent will make such funds available to the Borrower at the aforesaid
applicable Payment Office.
(b) Anything in subsection (a) above to the contrary
notwithstanding,
(i) if any Lender shall notify the Agent and the Borrower
that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or that any central bank or
other governmental authority asserts that it is unlawful, for such
Lender or its Eurocurrency Lending Office to perform its obligations
hereunder to make or maintain Eurocurrency Advances in Dollars or in
such Alternative Currency, as the case may be, or to fund or maintain
Eurocurrency Advances in Dollars or in such Alternative Currency, as
the case may be, hereunder, the amount of such requested Borrowing
shall be deemed to be reduced by such Lender's ratable share thereof,
the obligation of such Lender to make Eurocurrency Advances in Dollars
or in such Alternative Currency, as the case may be, shall be
terminated and the Borrower shall forthwith upon its receipt of such
notice from such Lender, prepay (either immediately, or, if delay does
not cause any Lender to be in violation of applicable law, at the end
of the then current Eurocurrency Interest Period) the outstanding
principal amount of all Eurocurrency Advances in Dollars or in such
Alternative Currency, as the case may be, of such Lender together with
interest accrued thereon to the date of such prepayment, provided that,
before giving any such notice to the Agent and the Borrower, each
Lender agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different
Eurocurrency Lending Office if the making of such designation would
avoid such unlawfulness or the assertion thereof and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to
such Lender and provided further, subject to the provisions of Sections
2.16(a) and 10.04(b), any amount required to be prepaid may be
converted to a Base Rate Advance;
(ii) if, in the event that there is more than one
Eurocurrency Reference Bank, fewer than two Eurocurrency Reference
Banks furnish timely information to the Agent for determining the
Eurocurrency Rate for any Eurocurrency Advances comprising any
requested Borrowing in Dollars or in any Alternative Currency, the
right of the Borrower to make such Borrowing or any subsequent
Borrowing in Dollars or in such Alternative Currency, as the case may
be, shall be suspended until the Agent shall notify the Borrower and
the Lenders that the circumstances causing such suspension no longer
exist, provided that the Agent agrees to take reasonable steps, at no
expense to Agent, in an attempt to obtain such information from the
requisite number of Eurocurrency Reference Banks; and
(iii) if, at least one Business Day before the date of any
requested Borrowing in Dollars or in any Alternative Currency, either
(A) two or more Eurocurrency Reference Banks notify the Agent, or, if
Chase is the sole Eurocurrency Reference Bank Chase determines, that
deposits are not being offered in the London interbank market in
Dollars or in such Alternative Currency, as the case may be, for the
applicable Eurocurrency Interest Period in amounts substantially equal
to the amount of such Borrowing or (B) the Majority Lenders notify the
Agent that the Eurocurrency Rate for Eurocurrency Advances comprising
such Borrowing will not adequately reflect the cost to such Majority
<PAGE> 19
Lenders of making, funding or maintaining their respective Eurocurrency
Advances for such Borrowing, the right of the Borrower to make such
Borrowing or any subsequent Borrowing in Dollars or in such Alternative
Currency, as the case may be, shall be suspended until the Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer existing.
(c) Anything in subsection (a) above to the contrary
notwithstanding, the Borrower may not select Eurocurrency Advances for any
Borrowing unless the aggregate amount of such Borrowing is at least $500,000
(or the equivalent thereof in any Alternative Currency) and an aggregate
multiple of $250,000 (or the equivalent thereof in any Alternative Currency),
and not more than six separate Borrowings may be outstanding at any time.
(d) Each Notice of Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Borrowing which the related Notice
of Borrowing specifies is to be comprised of Eurocurrency Advances, the
Borrower shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before the date
specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.
(e) Unless the Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Borrowing, the
Agent may assume that such Lender has made such portion available to the Agent
on the date of such Borrowing in accordance with subsection (a) of this Section
2.02 and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the Agent, such
Lender and the Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, at (i) in the case of the Borrower, the interest
rate applicable at the time to Advances comprising such Borrowing and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute
such Lender's Advance as part of such Borrowing for purposes of this Agreement.
(f) The failure of any Lender to make the Advance to be
made by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such
Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on the date of any
Borrowing.
(g) If, on the date of any Borrowing, any principal amount
of any Advances previously made by a Lender participating in such Borrowing
shall be due and payable to such Lender hereunder, such Lender shall, up to an
amount equal to such principal amount and upon fulfillment of the applicable
conditions set forth in Article III, make its Advance on the occasion of such
Borrowing by applying the proceeds of such Advance to the repayment of such
principal amount. The amount, if any, by which the Advance to be made by such
<PAGE> 20
Lender on the occasion of such Borrowing shall exceed such repaid principal
amount shall be made available by such Lender in accordance with subsection (a)
of this Section 2.02.
SECTION 2.03. Commitment Fee. (a) The Borrower agrees to pay to the
Agent for the account of each Lender a commitment fee on the average daily
unused portion of such Lender's Commitment from the date hereof, in the case of
each Lender which is a party to this Agreement on the date hereof and from the
effective date specified in the Assignment and Acceptance pursuant to which it
became a Lender in the case of each other Lender, until the Termination Date,
payable in arrears on the last day of each March, June, September and December
during the term of such Lender's Commitment, such payments commencing
December 31, 1995, and continuing quarterly thereafter and on the Termination
Date, at the rate of 1/4 of 1% per annum.
(b) For purposes of determining the unused portion of each
Lender's Commitment, the equivalent in Dollars of each Eurocurrency Advance
made by such Lender in an Alternative Currency as determined on the date of the
making of such Advance shall be the amount of such Lender's Commitment used in
connection with such Advance, and no further adjustments shall be made with
respect to the unused portion of such Lender's Commitment based upon
fluctuations thereafter in the value of the Alternative Currency of such
Advance.
SECTION 2.04. Reduction of the Commitments. The Borrower shall have
the right, upon at least three Business Days' notice to the Agent, to terminate
in whole or reduce ratably in part the unused portions of the respective
Commitments of the Lenders, provided, however, that each partial reduction
shall be in the aggregate amount of $500,000 or an integral multiple of
$250,000 in excess thereof.
SECTION 2.05. Repayment of the Advances. The Borrower shall repay
the principal amount of all Advances on the Termination Date.
SECTION 2.06. Interest on the Advances. (a) The Borrower shall pay
to each Lender, in arrears, interest on the unpaid principal amount of each
Advance made by such Lender from the date of such Advance until such principal
amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. If such Advance is a Base Rate Advance, a
rate per annum equal at all times to the Base Rate in effect from time to time,
payable quarterly, in arrears, on the last day of each March, June, September
and December and on the date such Base Rate Advance shall be Converted or paid
in full.
(ii) Eurocurrency Advances. If such Advance is a Eurocurrency
Advance, a rate per annum equal at all times during the Interest Period for
such Advance to the sum of (x) the Eurocurrency Rate for such Interest Period
and (y) the Applicable Eurocurrency Rate Margin in effect from time to time,
payable, in arrears, on the last day of such Interest Period and if such
Interest Period has a duration of more than three months, then on each day
which occurs during such Interest Period every three months from the first day
of such Interest Period.
(b) Default Interest. The Borrower shall pay interest on the
unpaid principal amount of each Advance that is not paid on or before the 15th
day following the date when due (with respect to payments due prior to the
Termination Date) and on all Advances not paid on the Termination Date, and on
the unpaid amount of all interest, fees and other amounts payable hereunder
<PAGE> 21
that is not paid on or prior to the 15th day following the date when due,
payable on demand, at a rate per annum equal at all times to (i) in the case of
any amount of principal, 2% per annum above the rate per annum required to be
paid on such Advance immediately prior to the date on which such amount became
due and (ii) in the case of all other amounts, 2% per annum above the Base Rate
in effect from time to time.
(c) Additional and Adjusted Interest. In the event that any
financial statement is not timely delivered to the Agent in all respects in
compliance with Section 5.01(h)(i) or Section 5.01(h)(iii) (each, a "Required
Financial Statement"), and if upon actual receipt of such Required Financial
Statement the Agent shall determine that the Applicable Eurocurrency Rate
Margin in effect with respect to each Eurocurrency Advance outstanding during
the period (the "Additional Interest Period") commencing on the 10th Business
Day following the day when such Required Financial Statement was due and
terminating on the earlier to occur of (i) the 10th Business Day following the
day when such Required Financial Statement is actually received by Agent, or
(ii) the first day of the Adjustment Period (hereinafter defined), would have
been greater than the Applicable Eurocurrency Rate Margin which was actually in
effect during the Additional Interest Period, then, without prejudice to any
other rights of the Agent or Lenders under this Agreement or the other Loan
Documents as a result of Borrower's failure to timely deliver such Required
Financial Statement, Borrower shall pay to the Agent for the account of the
Lenders, promptly after demand by the Agent, but in any event not later than
the next day on which a payment of interest is due under this Agreement, as
additional interest, an amount equal to the additional interest which would
have accrued on each outstanding Eurocurrency Advance during the Additional
Interest Period had each Applicable Margin been adjusted in accordance with the
terms of this Agreement upon timely receipt of such Required Financial
Statement on the date when it was due. In the event that such Required
Financial Statement is not delivered to Agent on or prior to the 30th day after
the same is due (the "Adjustment Date"), then, without prejudice to any other
rights of the Agent or Lenders under this Agreement or the other Loan Documents
as a result of Borrower's failure to timely deliver such Required Financial
Statement, during the period (the "Adjustment Period") commencing on the
Adjustment Date, and terminating on the 10th Business Day following the day
when such Required Financial Statement is actually received by Agent, the
term "Applicable Eurocurrency Rate Margin" as used herein shall mean 1.0%.
Agent shall deliver to the Borrower, a certificate as to any amounts payable
pursuant to this subparagraph, explaining in reasonable detail the computation
thereof, which certificate shall effect a rebuttable presumption as to the
accuracy thereof.
SECTION 2.07. Intentionally Omitted.
SECTION 2.08. Interest Rate Determination. (a) Each Eurocurrency
Reference Bank agrees to furnish to the Agent timely information for the
purpose of determining each Eurocurrency Rate. If any one or more of such
Reference Banks shall not furnish such timely information to the Agent for the
purpose of determining any such interest rate, the Agent shall, subject to
Section 2.02(b)(ii), determine such interest rate on the basis of timely
information furnished by the remaining Eurocurrency Reference Banks, as the
case may be.
(b) The Agent shall give prompt notice to the Borrower and the
Lenders of the applicable interest rate determined by the Agent for purposes of
Section 2.06(a) or (b).
<PAGE> 22
SECTION 2.09. Prepayments. (a) The Borrower may prepay Advances, in
aggregate multiples of $100,000.00 on not less than three (3) Business Days
prior written notice with respect to Eurocurrency Advances, or on notice
provided not later than 11 A.M. New York City time on the day of the prepayment
with respect to Base Rate Advances, (each of which notices may be given by
facsimile transmission), provided that the Borrower shall pay all sums required
to be paid pursuant to Section 10.04(b) together with each such principal
prepayment. Any notice of prepayment shall be binding on the Borrower and
irrevocable, and the Borrower shall make such prepayment on the day set forth
in the notice of prepayment, which shall be a Business Day.
(b) If, on the last day of any Eurocurrency Interest Period for any
Eurocurrency Advances comprising the same Borrowing, the equivalent in Dollars
of the aggregate principal amount of all Advances then outstanding exceeds the
total of the Commitments, the Borrower shall, within two (2) Business Days
after notification from the Agent, prepay an aggregate principal amount of such
Advances ratably to the Lenders in an amount at least equal to such excess,
with accrued interest to the date of such prepayment on the principal amount
prepaid.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements, in the case of Eurocurrency Advances,
included in the Eurocurrency Reserve Percentage) in or in the interpretation of
any law, treaty, official directive or regulation or (ii) the compliance with
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to any Lender (other than Taxes on net income of any Lender) of agreeing
to make or making, funding or maintaining Eurocurrency Advances, then the
Borrower shall (provided that (i) the requirements of this provision or similar
requirements are imposed ratably upon similarly situated customers of such
Lender) from time to time, within two (2) Business Days after demand by such
Lender given within 90 days following such Lender's determination that such
increased cost has been incurred (with a copy of such demand to the Agent),
either (i) pay to the Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost (without
duplication for amounts on account of the same increase of cost to the extent
already payable pursuant to Section 2.10(b)), or (ii) subject to the provisions
of Section 10.04(b), prepay all outstanding Eurocurrency Advances owed to such
Lender; provided that, before making any such demand, each Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending Office or
Payment Office if the making of such a designation would avoid the need for, or
reduce the amount of, such additional cost and would not, in the judgment of
such Lender, be otherwise disadvantageous to such Lender. Agent shall deliver
to Borrower a certificate in reasonable detail as to the amount of such
increased cost, and the delivery of such certificate shall effect a rebuttable
presumption as to the accuracy thereof.
(b) If any Lender determines that compliance with any law,
treaty, official directive or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force
of law) affects or would affect the amount of capital required or expected to
be maintained by such Lender or any corporation controlling such Lender and
that the amount of such capital is increased beyond a level required on the
Closing Date by or based upon the existence of such Lender's commitment to lend
hereunder and other commitments of this type, and provided that any such
increased capital requirement is not reflected in the computation of the Base
Rate or the Eurocurrency Rate, then, within two (2) Business Days after demand
<PAGE> 23
by such Lender (with a copy of such demand to the Agent) given within 90 days
following such Lender's determination that such increased capital requirement
has been imposed, the Borrower shall (provided that the requirements of this
provision or similar requirements are imposed ratably upon similarly situated
customers of such Lender) within two Business Days after notice either (i) pay
to the Agent for the account of such Lender, from time to time, as specified by
such Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder (without duplication for amounts
on account of the same increase in capital to the extent already payable
pursuant to Section 2.10(a)), or (ii) subject to the provisions of Section
10.04(b), prepay all affected Advances owed to such Lender. Agent shall
deliver to Borrower a certificate in reasonable detail as to such amounts
submitted to the Borrower and the delivery of such certificate shall effect a
rebuttable presumption as to the accuracy thereof.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make
each payment hereunder, except with respect to principal of, interest on, and
other amounts relating to, Advances denominated in an Alternative Currency, not
later than 11:00 A.M. (New York City time) on the day when due in Dollars to
the Agent in same day funds by deposit of such funds to the Agent's account
maintained at the Payment Office for Dollars in New York City. The Borrower
shall make each payment hereunder with respect to principal of, interest on,
and other amounts relating to Advances denominated in an Alternative Currency
not later than 11:00 A.M. (at the Payment Office for such Alternative Currency)
on the day when due in such Alternative Currency to the Agent in same day funds
by deposit of such funds to the Agent's account maintained at such Payment
Office. The Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest or commitment fees ratably, in
the proportion that such Lender's Loans to which the payment applies bears to
the total of all Lenders' Loans to which the payment applies, (other than
amounts payable pursuant to Section 2.10 or 2.12) to the Lenders for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Lender to such Lender for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 10.08(d), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) The Borrower hereby authorizes each Lender, if and to
the extent payment owed to such Lender is not made when due hereunder, to
charge from time to time against any or all of the Borrower's accounts with
such Lender any amount so due. Each such Lender shall promptly notify the
Borrower of any such action, provided however, that failure to so notify shall
not affect the validity of such action.
(c) All computations of interest based on the Base Rate,
and all computations of the Eurocurrency Rate with respect to Advances or
portions thereof consisting solely of British Pounds Sterling, shall be made by
the Agent on the basis of a year of 365 days, and all other computations of
interest based on the Eurocurrency Rate, or the Federal Funds Rate and of
commitment fees shall be made by the Agent on the basis of a year of 360 days,
in each case for the actual number of days (including the first day but
<PAGE> 24
excluding the last day) occurring in the period for which such interest or
commitment fees are payable. Each determination by the Agent of an interest
rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) In determining the duration of Interest Periods under
this Agreement, (i) Interest Periods commencing on the same date for Advances
comprising part of the same Borrowing shall be of the same duration, (ii)
whenever the last day of any Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall occur on
the next succeeding Business Day, provided, that if such extension of time
would cause the last day of any Eurocurrency Interest Period to occur in the
next following calendar month, such last day shall occur on the next preceding
Business Day, and (iii) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(e) Whenever any payment hereunder shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be, provided, that, if such extension would cause payment of interest
on or principal of Eurocurrency Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
SECTION 2.12. Taxes. (a) Any and all payments by the
Borrower or the Agent hereunder shall be made, in accordance with Section 2.11,
free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding,
(i) taxes, levies, imposts, duties, charges, deductions or
withholdings imposed on or with respect to the net income of the Agent or any
Lender and (ii) franchise or doing business taxes, levies, imposts, duties,
charges, deductions or withholdings imposed on the Agent or any Lender, in each
case by any jurisdiction under the laws of which the Agent or such Lender or
its Applicable Lending Office is organized, managed, controlled or otherwise
subject to tax other than as a result of the transactions contemplated
hereunder or by any other Loan Document (or any political subdivision of any
such jurisdiction),
(ii) in the case of any assignment by a Lender to an
Eligible Assignee pursuant to Section 10.08, or any change by a Lender of an
Applicable Lending Office in one jurisdiction to an Applicable Lending Office
in another jurisdiction, any excess in the withholding tax applicable to such
Eligible Assignee, or such new Applicable Lending Office, over the withholding
tax (other than any withholding tax excluded from the definition of Taxes under
clause (i) or this clause (ii) of Section 2.12(a)) applicable to the former
Lender, or the former Applicable Lending Office, in each case as determined
under laws (including, without limitation, any treaty, law, rule, regulation or
determination) applicable to the former Lender and such Eligible Assignee, or
the former Applicable Lending Office and such new Applicable Lending Office,
and in effect on the date of such assignment, or such change in Applicable
Lending Office, but not including any increase in withholding tax resulting
from any subsequent change in such laws (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower or the Agent shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, (i) the sum payable by the Borrower shall be increased as
may be necessary so that after the Borrower or the Agent has made all required
<PAGE> 25
deductions (including deductions applicable to additional sums payable under
this Section 2.12) such Lender or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower or the Agent shall make such deductions and (iii) the
Borrower or the Agent shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made by the Borrower or
by the Agent hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement (hereinafter referred to as "Other
Taxes").
(c) The Borrower will within thirty days after demand,
indemnify each Lender and the Agent for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.12) paid by such Lender or
the Agent (as the case may be) and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date such Lender or the Agent (as the
case may be) makes written demand therefor. The applicable Lender shall
furnish to Borrower a certificate, in reasonable detail, setting forth such
Lender's calculation as to the amount of Taxes or Other Taxes paid by such
Lender, which certificate shall effect a rebuttable presumption as to the
accuracy thereof.
(d) Within 30 days after the date of any payment by the
Borrower of Taxes, the Borrower will furnish to the Agent, at its address
referred to in Section 8.02, the original or a certified copy of a receipt
evidencing payment thereof. If no Taxes are payable in respect of payments by
the Borrower hereunder, the Borrower will furnish to the Agent, at such
address, documentary evidence reasonably satisfactory to Agent, demonstrating
that such payment is exempt from or not subject to Taxes. In the event of a
change in circumstances or law affecting the conclusions stated in any such
documentary evidence, further documentary evidence reasonably acceptable to the
Agent shall be delivered to the Agent by the Borrower.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States (a "Non-U.S. Lender"), on or prior to the date of its
execution and delivery of this Agreement in the case of each initial Lender and
on the date of the Assignment and Acceptance pursuant to which it becomes a
Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by the Borrower (but only so long as such Lender remains
lawfully able to do so), shall provide the Borrower with Internal Revenue
Service form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is entitled to
benefits under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or certifying that
the income receivable pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States. If the form provided
by a Lender at the time such Lender first becomes a party to this Agreement
indicates a United States interest withholding tax rate in excess of zero,
withholding tax at such rate shall be considered excluded from "Taxes" as
defined in Section 2.12(a).
(f) For any period with respect to which a Lender has
failed to provide the Borrower with the appropriate form described in Section
<PAGE> 26
2.12(e) (other than if such failure is due to a change in law occurring
subsequent to the date on which a form originally was required to be provided,
or if such form otherwise is not required under the first sentence of
subsection (e) above), such Lender shall not be entitled to indemnification
under Section 2.12(a) with respect to Taxes imposed by the United States;
provided, however, that should a Lender become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such
steps as the Lender shall reasonably request at no expense to the Borrower to
assist the Lender to recover such Taxes.
(g) In the event that a Lender that originally provided
such form as may be required under Section 2.12(e) thereafter ceases to qualify
for complete exemption from United States withholding tax, such Lender may,
subject to Section 10.08, assign its interest under this Agreement to any
assignee and such assignee shall be entitled to the same benefits under this
Section 2.12 (and subject to the terms of Sections 2.12(a)(ii), 2.12(e),
2.12(f), 2.12(i), 2.12(j) and 2.12(k)) as the assignor provided that the rate
of United States withholding tax applicable to such assignee shall not exceed
the rate then applicable to the assignor.
(h) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.12 shall survive the payment in full of
principal and interest hereunder.
(i) Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its Applicable Lending Office or Payment Office)
to avoid the imposition of any Taxes or payments hereunder; provided, however,
that such efforts shall not cause the imposition on such Lender of any
additional costs or legal or regulatory burden or require any change in such
Lender's tax planning and management policies.
(j) If the Borrower makes any additional payment to any
Lender pursuant to this Section 2.12 in respect of any Taxes, and such Lender
determines that it has received (i) a refund of such Taxes or (ii) a credit
against or relief or remission for, or a reduction in the amount of, any tax or
other governmental charge solely as a result of any deduction or credit for any
Taxes with respect to which it has received payments under this Section 2.12,
such Lender shall, to the extent that it can do so without prejudice to the
retention of such refund, credit, relief, remission or reduction, pay to the
Borrower such amount as such Lender shall have determined to be attributable to
the deduction or withholding of such Taxes. If such Lender later determines
that it was not entitled to such refund, credit, relief, remission or reduction
to the full extent of any payment made pursuant to the first sentence of this
Section 2.12(j), the Borrower shall upon demand of such Lender promptly repay
the amount of such overpayment. Any determination made by such Lender pursuant
to this Section 2.12(j) shall in the absence of bad faith or manifest error
effect a rebuttable presumption as to the accuracy thereof, and nothing in this
Section 2.12(j) shall be construed as requiring the Lender to conduct its
business or to arrange or alter in any respect its tax or financial affairs so
that it is entitled to received such a refund, credit or reduction or as
allowing any person to inspect any records, including tax returns, of any
Lender.
(k) The Borrowers shall not be required to pay any
additional amounts to any Non-U.S. Lender in respect of United States Federal
withholding tax pursuant to this Section 2.12 to the extent that (i) the
obligation to withhold amounts with respect to United States Federal
withholding tax existed on the date such Non-U.S. Lender became a party to this
<PAGE> 27
Agreement or, with respect to payments to a different lending office designated
by the Non-U.S. Lender as its applicable lending office (a "New Lending
Office"), the date such Non-U.S. Lender designated such New Lending Office with
respect to any Advance; provided, however, that this clause (k) shall not apply
to any transferee or New Lending Office as a result of an assignment, transfer
or designation made at the request of the Borrower; and provided further,
however, that this clause (k) shall not apply to the extent the indemnity
payment or additional amounts any transferee, or Lender through a New Lending
Office, would be entitled to received without regard to this clause (k) do not
exceed the indemnity payment or additional amounts that the Person making the
assignment or transfer to such transferee, or Lender making the designation of
such New Lending Office, would have been entitled to receive in the absence of
such assignment, transfer or designation; or (ii) the obligation to pay such
additional amounts would not have arisen but for a failure by such Non-U.S.
Lender to comply with the provisions of Section 2.12(e).
SECTION 2.13. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Advances made by it (other
than pursuant to Section 2.10 or 2.12) in excess of its ratable share of
payments on account of the Advances made by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participation in the Advances
owing to them as shall be necessary to cause such purchasing Lender to share
the excess payment ratably, in the proportion that such Lender's aggregate
Advances to which the payment applies bears to the total of all Advances to
which the payment applies, with each of them, provided, however, that if all or
any portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 2.13
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.14. Evidence of Debt. (a) Each Lender shall hold its
respective Note or Notes evidencing the Advances and shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing
to such Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.
(b) The Register maintained by the Agent pursuant to
Section 10.08(c) shall include a control account, and a subsidiary account for
each Lender, in which accounts (taken together) shall be recorded (i) the date
and amount of each Borrowing made hereunder, the Type of Advances comprising
such Borrowing and the Interest Period applicable thereto and, if such Advances
are Eurocurrency Advances, the currency in which such Advances are made, (ii)
the terms of each Assignment and Acceptance delivered to and accepted by it,
(iii) the amount of any principal or interest due and payable or to become due
and payable from the Borrower to each Lender hereunder, and (iv) the amount of
any sum received by the Agent from the Borrower hereunder and each Lender's
share thereof.
<PAGE> 28
(c) The entries made in the Register shall effect a
rebuttable presumption as to the accuracy thereof. Each Lender's account
entries with respect to the Advances shall also effect a rebuttable presumption
as to the accuracy thereof.
SECTION 2.15. Currency Equivalents. For purposes of the provisions of
this Article II, (i) the equivalent in Dollars of any Alternative Currency
shall be determined by using the quoted spot rate at which Chase's (or its
affiliate's) principal office in London offers to exchange Dollars for such
Alternative Currency in London at 11:00 A.M. (London time) two Business Days
prior to the date on which such equivalent is to be determined, (ii) the
equivalent in any Alternative Currency of any other Alternative Currency shall
be determined by using the quoted spot rate at which Chase's (or its
affiliate's) principal office in London offers to exchange such Alternative
Currency for the equivalent in Dollars of such other Alternative Currency in
London at 11:00 A.M. (London time) two Business Days prior to the date on which
such equivalent is to be determined, and (iii) the equivalent in any
Alternative Currency of Dollars shall be determined by using the quoted spot
rate at which Chase's (or its affiliates') principal office in London offers to
exchange such Alternative Currency for Dollars in London at 11:00 A.M. (London
time) two Business Days prior to the date on which such equivalent is to be
determined.
SECTION 2.16. Voluntary Conversion or Continuation of Advance. (a)
Provided that no Event of Default shall have occurred and be continuing, the
Borrower may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.01 and
2.02, Convert an Advance of one Type into an Advance of another Type (provided
that, subject to all of the terms of this Agreement, Conversions to a Base Rate
Advance may be made on the same Business Day as requested not later than
11:00 AM on such Business Day); provided, however, that any Conversion of any
Eurocurrency Advance into an Advance of another Type shall be made on, and only
on, the last day of an Interest Period for such Eurocurrency Advance, and any
Conversion of a Base Rate Advance into a Eurocurrency Advance shall be in an
amount not less than the minimum amount specified in Section 2.02(c). Each
such notice of a Conversion shall,within the restrictions specifie above,
specify (i) the date of such Conversion, (ii) the Advance to be Converted,
(iii) if such Conversion is into a Eurocurrency Advance, the duration of the
Interest Period for such Advance and (iv) the type of currency of which the
Converted Advance shall consist. Each such notice of Conversion shall be
binding on the Borrower and irrevocable.
(b) The Borrower shall have the option to elect a subsequent
Eurocurrency Interest Period to be applicable to any Eurocurrency Advance by
giving notice of such election to the Agent, received no later than 11 A.M.
(New York City time) on the date three Business Days before the end of the then
current Eurocurrency Interest Period. In the event that the Borrower so elects
to continue any Eurocurrency Advance by selecting a subsequent Eurocurrency
Interest Period, all terms set forth in this Agreement applicable to the making
of Eurocurrency Advances shall be applicable to such continued Advance.
SECTION 2.17. Interest Rate Selection. If the Borrower shall fail to
select the duration of any Interest Period for any Eurocurrency Advance in
accordance with the provisions contained in the definition of "Interest
Period", or if the Borrower shall fail to select a subsequent Interest Period
for any Eurocurrency Advance in the manner set forth in Section 2.16(b), the
Agent will forthwith so notify the Borrower and such Advance will
automatically, on the last of the then existing Interest Period therefor,
Convert into a Base Rate Advance.
<PAGE> 29
SECTION 2.18. Agent's Fees. The Borrower shall pay to the Agent for
its own account $15,000.00 per annum, payable in advance on the date of the
initial Advance and on each anniversary thereof until full and final repayment
of the Advances and the termination of the Commitments.
SECTION 2.19 Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) solely to
provide working capital for the Borrower and its Subsidiaries and up to
$7,500,000 at any time outstanding to fund Acquisitions permitted pursuant to
Section 6.01(j).
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Initial Advances. The
obligation of each Lender to make its initial Advance is subject to the
condition precedent that the Agent shall have received on or before the day of
the initial Borrowing the following, each dated such day, in form and substance
reasonably satisfactory to the Agent and in sufficient copies (other than the
Notes, which shall be executed in original only) for each Lender:
(a) Note. Each Note duly executed by the Borrower;
(b) Certificate of Corporate Action by the Borrower. A certificate
of an officer of the Borrower, dated the Closing Date, attesting to all
corporate action taken by the Borrower, including resolutions of its Board of
Directors authorizing the execution, delivery and performance of the Loan
Documents and each other document to be delivered pursuant to this Agreement;
(c) Incumbency and Signature Certificate of the Borrower. A
certificate of an officer of the Borrower, dated the Closing Date, certifying
the names and true signatures of the officers of the Borrower authorized to
sign the Loan Documents and the other documents to be delivered by the Borrower
under this Agreement.
(d) Intentionally Omitted.
(e) Corporate Charter, Good Standing. A copy, certified by the
appropriate authority in the jurisdiction of organization, of the certificate
of incorporation or charter of the Borrower; and a certificate issued by the
appropriate authority as to the good standing of the Borrower in each such
jurisdiction.
(f) Opinion of Counsel for Borrower. Favorable opinion of Bingham,
Dana & Gould and Robinson, Silverman, Pearce, Aronsohn & Berman, counsel for
the Borrower, dated the Closing Date, in substantially the form of Exhibits G-1
and G-2, respectively.
(g) Financial Statement. The audited consolidated and unaudited
consolidating financial statements of the Borrower for the Fiscal Year ending
June 30, 1995, together with the unqualified opinion of Ernst & Young as to the
consolidated financial statements, and financial projections prepared by the
Borrower.
(h) Intentionally Omitted.
<PAGE> 30
(i) Intentionally Omitted.
(j) Intentionally Omitted.
(k) Insurance. Evidence satisfactory to Agent of all risk,
extended coverage insurance and public liability insurance, issued in amounts,
and by carriers, reasonably satisfactory to Agent.
(l) Searches. Lien searches, judgment searches, bankruptcy
searches and similar searches deemed appropriate by Agent's counsel, in form
and substance reasonably satisfactory to Agent.
(m) Fees. Payment of all fees due to the Agent.
(n) Other Documents. The other Loan Documents duly executed, and
such other documents as the Agent may reasonably require.
(o) Intentionally Omitted.
(p) Existing Revolving Facility. The Borrower shall have fully and
finally repaid all outstanding amounts under the Existing Revolving Facility
and terminated the commitments with respect thereto.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation
of each Lender to make an Advance on the occasion of each Borrowing (including
the initial Borrowing) shall be subject to the further conditions precedent
that on the date of such Borrowing (a) the following statements shall be true
(and each of the giving of the applicable Notice of Borrowing and acceptance by
the Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
such statements are true):
(i) The representations and warranties contained in Article
IV are correct on and as of the date of the initial Borrowing, before
and after giving effect to such Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date and with
respect to Borrowings other than the initial Borrowing such
representations and warranties shall be correct in all material
respects, except to the extent contemplated by this Agreement, or
except to the extent any such representation or warranty is no longer
current as of the date of such Borrowing because of reference to a
specific date, and
(ii) No event has occurred and is continuing, or would
result from such Borrowing or from the application of the proceeds
therefrom, which constitutes a Default or Event of Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
<PAGE> 31
(a) Due Incorporation. Each of the Borrower and each Subsidiary
which is a corporation is duly incorporated, validly existing and in corporate
good standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required, except where the failure
to so qualify in such other jurisdiction would not result in a Materially
Adverse Effect.
(b) Compliance with Other Agreements, Etc. The execution, delivery
and performance by the Borrower of the Loan Documents have been duly authorized
by all necessary corporate action and do not and will not: (i) require any
further consent or approval of its stockholders; (ii) contravene its charter or
by-laws; (iii) violate any provision of, or require any filing, registration,
consent or approval under, any law, rule, regulation (including, without
limitation, Regulation U), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the Borrower
or any of its Subsidiaries or affiliates; (iv) result in a material breach of
or constitute a default or require any consent under any material indenture or
loan or credit agreement or any other material agreement, lease or instrument
to which the Borrower is a party or by which it or its properties may be bound
after giving effect to the application of the initial Advances; (v) result in,
or require, the creation or imposition of any Lien, upon or with respect to any
of the properties now owned or hereafter acquired by the Borrower; or (vi)
cause the Borrower (or any Subsidiary or Affiliate, as the case may be) to be
in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or any such material indenture,
agreement, lease or instrument after giving effect to the application of the
initial Advances, except for defaults which would not result in a Materially
Adverse Effect.
(c) Validity of Obligations. Each Loan Document which is executed
by the Borrower is, or when delivered under this Agreement will be, a legal,
valid and binding obligation of the Borrower enforceable against the Borrower
in accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, equitable remedies and other
similar laws affecting creditors' rights generally and except as the
availability of equitable remedies is subject to the discretion of the court
before which such remedies are sought.
(d) No Pending Litigation. Except as set forth on Schedule 2,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened, against or affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator, which may, in
any one case or in the aggregate, result in a Materially Adverse Effect.
(e) Financial Statements. The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at June 30, 1995, and the related
consolidated income statement and statement of cash flows and statement of
changes in stockholders' equity of the Borrower and its Consolidated
Subsidiaries for the Fiscal Year then ended, and the accompanying footnotes,
together with the opinion thereon, of Ernst & Young, independent certified
public accountants, and the interim consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as at September 30, 1995, and the related
consolidated income statement for the fiscal quarter then ended, copies of
which have been furnished to the Agent, are complete and correct and fairly
present the financial condition of the Borrower and its Consolidated
Subsidiaries as at such dates and the results of the operations of the Borrower
<PAGE> 32
and its Consolidated Subsidiaries for the periods covered by such statements,
all in accordance with GAAP consistently applied (subject to year end
adjustments and absence of footnote disclosures in the case of the interim
financial statements). There are no liabilities of the Borrower or any of its
Consolidated Subsidiaries, fixed or contingent, which are material and are
required by GAAP to be reflected but are not reflected in the financial
statements referred to above or in the notes thereto, other than liabilities
arising in the ordinary course of business since June 30, 1995. No material
information, exhibit or report furnished by the Borrower to the Agent in
connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not materially misleading. Since
June 30, 1995, there have been no material adverse changes in the condition
(financial or otherwise), business, or operations of the Borrower or any of its
Subsidiaries.
(f) Title to Assets. Each of the Borrower and its Consolidated
Subsidiaries has title to, or valid leasehold interests in, all of its material
properties and assets, real and personal, including the properties and assets,
and leasehold interests reflected in the financial statements referred to in
Section 4.01(e) (other than any properties or assets disposed of in the
ordinary course of business), and none of the material properties and assets
owned by the Borrower or any of its Subsidiaries and none of its leasehold
interests is subject to any Lien, except as disclosed in such financial
statements or as may be permitted hereunder.
(g) Taxes. Each of the Borrower and its Subsidiaries has filed all
tax returns (federal, state and local) required to be filed as of the date
hereof and has paid all taxes, assessments and governmental charges and levies
shown thereon to be due, including interest and penalties. The federal income
tax liability of the Borrower and its Subsidiaries has been audited by the
Internal Revenue Service and has been finally determined and satisfied for all
taxable years up to and including the taxable year ended June 30, 1991.
(h) ERISA. Each of the Borrower and its Subsidiaries is in
compliance in all material respects with all applicable provisions of ERISA.
Neither an ERISA Event nor a Prohibited Transaction has occurred with respect
to any Plan; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated; no circumstance exists which constitutes grounds under
Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate,
or appoint a trustee to administer, a Plan, nor has the PBGC instituted any
such proceedings; neither the Borrower nor any ERISA Affiliate has completely
or partially withdrawn under Sections 4201 or 4204 of ERISA from a
Multiemployer Plan; each of the Borrower and each of its ERISA Affiliates has
met its minimum funding requirements under ERISA with respect to all of its
Plans and there are no Unfunded Vested Liabilities; and neither the Borrower
nor any ERISA Affiliate has incurred any liability to the PBGC under ERISA.
(i) Subsidiaries. Schedule 7 is a complete and accurate list of the
Subsidiaries of the Borrower, showing the jurisdiction of incorporation or
organization of each Subsidiary and showing the percentage of the Borrower's
ownership of the outstanding stock or other interest of each such Subsidiary.
All of the outstanding capital stock or other interest of each such Subsidiary
has been validly issued, is fully paid and nonassessable and is owned by the
Borrower free and clear of all Liens other than liens permitted by this
Agreement.
(j) Indebtedness. Schedule 3 is a complete and correct list of all
material credit agreements, indentures, purchase agreements, guaranties,
<PAGE> 33
Capital Leases and other material investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit
(including agreements and arrangements for the issuance of letters of credit or
for acceptance financing) in respect of which the Borrower or any of its
Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding and
which can be outstanding, are correctly stated in such Schedule, and all
material Liens of any nature given or agreed to be given as security therefor
are correctly described or indicated in such Schedule.
(k) Licenses, Permits. Each of the Borrower and its Subsidiaries
possesses all material licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
neither the Borrower nor any of its Subsidiaries is in violation of any valid
rights of others with respect to any of the foregoing except to the extent that
any such violation will not result in a Materially Adverse Effect.
(l) Judgments. Each of the Borrower and its Subsidiaries has
satisfied all judgments that may result in a Materially Adverse Effect and
neither the Borrower nor any of its Subsidiaries is in default with respect to
any judgment, writ, injunction, decree, rule or regulation of any court,
arbitrator or federal, state, municipal or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign that
may result in a Materially Adverse Effect.
(m) Other Agreements. Neither the Borrower nor any of its
Subsidiaries is a party to any material indenture, loan or credit agreement or
any material lease or other material agreement or instrument or subject to any
charter or corporate restriction which could have a Materially Adverse Effect.
Neither the Borrower nor any of its Subsidiaries is in default in any respect
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument material to
its business to which it is a party except defaults which would not result in
a Materially Adverse Effect.
(n) Labor Disputes, Acts of God. Neither the business nor the
properties of the Borrower or of any of its Subsidiaries are subject to any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), which could have a Materially
Adverse Effect.
(o) Investment Company. Neither the Borrower nor any of its
Subsidiaries is an "investment company" within the meaning of the United States
Investment Company Act of 1940.
(p) Partner in a Partnership. Neither the Borrower nor any of its
Subsidiaries is a partner in any partnership.
(q) Compliance with Law. The Borrower and its Subsidiaries are in
compliance in all material respects with all applicable laws, rules and
regulations as promulgated or issued by any and all governmental or quasi-
governmental bodies, including, without limitation, all Environmental Laws
except to the extent that any violation shall not result in a Materially
Adverse Effect.
<PAGE> 34
(r) Initial Public Offering. The Borrower has consummated its
initial public offering of common stock, pursuant to which the Borrower has (1)
sold, for its own account, 1,500,000 shares of its common stock, and (2)
received net proceeds in the amount of approximately $16,100,000 on account of
such stock.
(s) Previous Term Loan. The Borrower has fully and finally repaid
all outstanding amounts under the Previous Term Loan.
(t) Previous Subordinated Debt. The Borrower has fully and finally
repaid all Previous Subordinated Debt.
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment under this Agreement, the
Borrower shall, unless the Majority Lenders shall otherwise consent in writing:
(a) Corporate Existence. Preserve and maintain, and cause each of
its Subsidiaries to preserve and maintain, its corporate existence and
corporate good standing in the jurisdiction of its incorporation, except that
the Borrower may dissolve any inactive Subsidiary which has no material assets,
and except as permitted pursuant to Section 6.01(g) or Section 6.01(j), and
qualify and remain qualified, and cause each of its Subsidiaries to qualify and
remain qualified, as a foreign corporation in each jurisdiction in which such
qualification is required except where the failure to so qualify shall not
result in a Materially Adverse Effect.
(b) Conduct of Business. Continue, and cause each of its
Subsidiaries to continue, to engage in lines of business of the same general
type as conducted by it on the date of this Agreement.
(c) Preservation of Properties. Maintain, keep and preserve, and
cause each of its Subsidiaries to maintain, keep and preserve, all of its
material properties (tangible and intangible), necessary or useful in the
proper conduct of its business in good working order and condition, ordinary
wear and tear excepted.
(d) Maintenance of Records. Keep, and cause each of its
Subsidiaries to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP, reflecting all material financial
transactions of the Borrower and its Subsidiaries.
(e) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in the same or a similar business and
similarly situated, which insurance may provide for reasonable deductibility
from coverage thereof.
(f) Compliance with Law. Comply in all material respects, and
cause each of its Subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations and orders, except for noncompliance which
shall not result in a Materially Adverse Effect, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property,
<PAGE> 35
provided that the borrower may, with the exercise of due diligence and through
appropriate proceedings, contest any tax, provided further that such contest
shall not result in the imposition of a lien on any assets of the Borrower and
its Subsidiaries and the Borrower shall maintain adequate reserves against all
such contested taxes.
(g) Examination of Records. At any reasonable time and from time
to time on reasonable prior notice, permit the Agent or any agent or
representative thereof, to examine and make copies and abstracts from the
records and books of account of, and visit the properties of, the Borrower and
any of its Subsidiaries, and to discuss the affairs, finances and accounts of
the Borrower and any such Subsidiary with any of their respective officers and
directors and the Borrower's independent certified public accountants, provided
that any such examinations and discussions shall be conducted subject to the
terms of Section 10.17.
(h) Financial Reporting. Furnish to the Agent:
(i) As soon as available and in any event within 120 days
after the end of each Fiscal Year of the Borrower, a consolidated and
consolidating balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Year and a consolidated and
consolidating income statement and statement of cash flows and
statement of changes in stockholders' equity of the Borrower and its
Consolidated Subsidiaries for such Fiscal Year, all in reasonable
detail and stating in comparative form the respective consolidated and
consolidating figures for the corresponding date and period in the
prior Fiscal Year and all prepared in accordance with GAAP and as to
the consolidated statements accompanied by an unqualified audit
opinion thereon acceptable to the Agent by Ernst & Young or other
independent accountants of national standing selected by the Borrower;
(ii) not later than 60 days following the close of each
Fiscal Year, a copy of the Borrower's annual budget, reasonably
detailed for each fiscal quarter, for the following Fiscal Year.
(iii) As soon as available and in any event within 45 days
after the end of each of the first three quarters of each Fiscal Year
of the Borrower, an unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such
quarter and a consolidated income statement of the Borrower and its
Consolidated Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such quarter, all in
reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the
previous Fiscal Year and all prepared in accordance with GAAP and
certified by the chief financial officer of the Borrower (subject to
year-end adjustments and absence of footnote disclosures);
(iv) Promptly upon receipt thereof, copies of any reports
submitted to the Borrower or any of its Subsidiaries by independent
certified public accountants in connection with examination of the
financial statements of the Borrower or any such Subsidiary made by
such accountants;
(v) Simultaneously with the delivery of the financial
statements referred to in (i) and (iii) above, a certificate of the
Chief Financial Officer or President of Borrower (x) certifying that to
the best of his knowledge no Default or Event of Default has occurred
<PAGE> 36
and is continuing or, if a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto, and (y) with
computations demonstrating compliance with the covenants contained in
Article VII;
(vi) Simultaneously with the delivery of the annual
financial statements referred to in subparagraph 5.01(h)(i) above, a
certificate of the independent public accountants who audited such
statements to the effect that, in making the examination necessary for
the audit of such statements, they have obtained no knowledge of any
condition or event which constitutes a Default or Event of Default, or
if such accountants shall have obtained knowledge of any such condition
or event, specifying in such certificate each such condition or event
of which they have knowledge and the nature and status thereof;
(vii) Promptly after the commencement thereof, notice of all
material actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any of
its Subsidiaries which, if determined adversely to the Borrower or such
Subsidiary, could have a Materially Adverse Effect.
(viii) As soon as possible and in any event within 10 days
after the Borrower or an executive officer thereof becomes aware (or
reasonably should be expected to have become aware of) the occurrence
of each Default or Event of Default a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken by the Borrower with respect thereto;
(ix) Promptly after the filing or receiving thereof, copies
of all reports, including annual reports, and notices which the
Borrower or any Subsidiary files with or receives from the PBGC or the
U.S. Department of Labor under ERISA with respect to a Plan; and as
soon as possible and in any event within 10 days after the Borrower or
any of its Subsidiaries knows or has reason to know that any ERISA
Event or Prohibited Transaction has occurred with respect to any Plan
or that the PBGC or the Borrower or any such Subsidiary has instituted
or will institute proceedings under Title IV of ERISA to terminate any
Plan, the Borrower will deliver to the Agent a certificate of the chief
financial officer of the Borrower setting forth details to the best of
his knowledge as to such ERISA Event or Prohibited Transaction or Plan
termination and the action the Borrower proposes to take with respect
thereto;
(x) Promptly after the furnishing thereof, copies of any
statement or report furnished to any other party pursuant to the terms
of any indenture, loan or credit or similar agreement and not otherwise
required to be furnished to the Lenders pursuant to any other clause of
this Section 5.01(h);
(xi) Promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which the
Borrower or any of its Subsidiaries sends to its stockholders, and
copies of all regular, periodic and special reports, and all
registration statements which the Borrower or any such Subsidiary files
with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or with any national
securities exchange;
<PAGE> 37
(xii) on the date hereof, with respect to the fiscal quarter
ended September 30, 1995, and thereafter as soon as available and in
any event within 45 days after the end of each quarter with respect to
the fiscal quarter then ended, a Reporting Certificate;
(xiii) During the continuance of any Default or Event of
Default, the Agent may require an audit of the Borrower's accounts
receivable and inventory at the Borrower's reasonable expense; for this
purpose the Borrower shall utilize independent accountants or other
qualified professionals reasonably satisfactory to the Majority Lenders;
(xiv) Upon the conclusion of any audit of the type described
in subparagraph (xiii), a detailed report of the results of such audit;
(xv) Such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender, through its Agent, may from time to time
reasonably request;
(i) Further Acts. At its reasonable cost and expense, upon
request of any Lender (upon notice to the Agent), duly execute and
deliver, or cause to be duly executed and delivered, such further
instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of such Lender to carry
out more effectually the provisions and purposes of this Agreement.
(j) Environmental Laws.
(i) Subject to the terms of Section 5.01(j)(ii), keep and
maintain all real property owned or leased by it ("Real Property") in
compliance in all material respects with all Environmental Laws (as
defined below) except where failure to comply would not result in a
Materially Adverse Effect and would not cause any Lender to incur
liability as a result thereof.
(ii) Notwithstanding the foregoing, in the event that any
investigation, site monitoring, containment, cleanup, removal,
restoration or other remedial work of any kind or nature (the "Remedial
Work") with respect to the Real Property is required to be performed by
the Borrower under any applicable local, state or federal law or
regulation, any judicial order, or by any governmental or
nongovernmental entity or Person because of, or in connection with, the
current or future presence, suspected presence, release or suspected
release of a Hazardous Substance (as defined below) in or into the air,
soil, ground-water, surface water or soil vapor at, on, about under or
within the Real Property (or any portion thereof), the Borrower shall
within thirty (30) days after written demand for performance thereof by
the Agent (or such shorter period of time as may be required under any
applicable law, regulation, order or agreement), commence and
thereafter diligently prosecute to completion, all such Remedial Work
in accordance with the requirements of applicable law. Notwithstanding
the foregoing, provided that the Borrower shall deliver to the Agent a
Phase I (and upon the Agent's reasonable request a Phase II)
environmental audit reasonably satisfactory to Agent in all respects,
and provided that Borrower shall deliver to Agent such legal opinions
or other documentary evidence as Agent may reasonably require
demonstrating that any consent delivered by Agent in the manner
hereinafter set forth shall not result in the imposition or potential
imposition of any liability upon Agent or any Lender, and provided
<PAGE> 38
further that Borrower shall maintain adequate reserves for compliance
with all Environmental Laws, Agent shall not unreasonably withhold its
consent to a contest by the Borrower (with the exercise of due
diligence and appropriate proceedings) of any order or governmental
requirement concerning Remedial Work rather than performing such
Remedial Work. Such contest, if instituted, shall be instituted
promptly after the Borrower obtains actual knowledge of an action,
suit, proceeding, or governmental order or directive which asserts any
obligation or liability affecting all or any portion of the Real
Property relating to Hazardous Substances and requiring such Remedial
Work and diligently prosecuted until a final resolution is obtained.
Remedial Work shall be instituted promptly following an unsuccessful
nonappealable completion of the contest and shall be diligently
prosecuted until the Remedial Work is completed.
(iii) As used in this Section 5.01(j) (x) "Environmental Law"
means any federal, state or local law, statute, ordinance, or
regulation pertaining to health, industrial hygiene, or the
environmental conditions on, under or about the Real Property, and (y)
the term "Hazardous Substance" means those substances included within
the definitions of "hazardous substances", "hazardous materials",
"toxic substances", or "solid waste" under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended 42 U.S.C. Sec. 9601 et seq., the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sec. 6901 et seq. and the Hazardous
Materials Transportation Act, 49 U.S.C. Sec. 1801 et seq., and in the
regulations promulgated pursuant to said laws, and such other
substances, materials and wastes which are or become regulated under
applicable local, state or federal law, or which are classified as
hazardous or toxic under federal, state or local laws or regulations.
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment under this Agreement, the
Borrower shall not without the Majority Lenders' prior written consent (or, in
the case of Subsection 6.01(f), not without the prior written consent of all of
the Lenders):
(a) Debt. Create, incur, assume or suffer to exist, or permit any
of its Subsidiaries to create, incur, assume or suffer to exist any Debt,
except (each of the following being referred to herein as "Permitted
Indebtedness"):
(i) Debt of the Borrower under this Agreement or the Notes;
(ii) Subordinated Indebtedness;
(iii) accounts payable to trade creditors for goods or
services whichare not more than 90 days past due and current operating
liabilities (other than for borrowed money) which are not more than 90
days past due, in each case incurred in the ordinary course of business
and paid within the specified time, unless contested in good faith and
by appropriate proceedings;
<PAGE> 39
(iv) Debt of the Borrower or any such Subsidiary secured by
purchase money Liens or pursuant to Capital Leases, in each case as
permitted by Section 6.01(c);
(v) Contingent liabilities which are unsecured (including,
without limitation, obligations in respect of letters of credit) up to
an aggregate amount not to exceed $3,000,000;
(vi) Debt set forth in Schedule 3 (including subsequent
borrowings thereunder up to the maximum facility amount set forth on
Schedule 3), and renewals thereof (but not any increase thereof);
(vii) Intentionally omitted;
(viii) Debt owed by a Subsidiary to the Borrower or another
Subsidiary or Debt owed by the Borrower to a Subsidiary;
(ix) (x) Guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary
course of business, (y) Guaranties set forth in Schedule 3 and (z)
guaranties of Permitted Indebtedness and any replacements thereof.
(b) Intentionally Omitted.
(c) Liens. Create, incur, assume or suffer to exist, or permit any
of its Subsidiaries to create, incur, assume or suffer to exist, any Lien
encumbering Accounts, General Intangibles or inventory, except:
(i) Intentionally omitted.
(ii) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or if due and payable if
they are being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained;
(iii) Liens imposed by law, such as mechanic's materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business
which are not past due for more than 30 days, or which are being
contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;
(iv) Liens under workmen's compensation, unemployment
insurance, social security or similar legislation;
(v) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of
money), leases (permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or other similar obligations arising in the
ordinary course of business;
(vi) judgment and other similar Liens arising in connection
with court proceedings; provided that the execution or other
enforcement of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings;
<PAGE> 40
(vii) easements, rights-of-way, restrictions and other
similar encumbrances which, in the aggregate, do not materially
interfere with the occupation, use and enjoyment by the Borrower or any
such Subsidiary of the property or assets encumbered thereby in the
normal course of its business or materially impair the value of the
property subject thereto;
(viii) Liens securing obligations of such a Subsidiary to the
Borrower or another such Subsidiary or obligations of the Borrower to
any Subsidiary;
(ix) purchase money Liens on any property hereafter acquired
or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale
or other title retention agreement or a Capital Lease; provided that:
a. any property subject to any of the foregoing is
acquired by the Borrower or any such Subsidiary in the ordinary
course of its business and the Lien on any such property is
created contemporaneously or within 180 days after such
acquisition;
b. the obligation secured by any Lien so created,
assumed or existing shall not exceed 100% of the lesser of cost
or fair market value as of the time of acquisition of the
property covered thereby to the Borrower or such Subsidiary
acquiring the same;
c. each such Lien shall attach only to the
property so acquired and fixed improvements thereon;
d. the Debt secured by all such Liens shall not
exceed $7,500,000.00 at any time outstanding in the aggregate;
e. the obligations secured by such Lien are
permitted by the provisions of Section 6.01(a) and the related
expenditure is permitted under Section 7.06.
(x) Liens set forth on Schedule 4 hereto, and renewals
thereof, provided that no additional assets or property are encumbered
as a result of any such renewal;
(xi) Intentionally omitted;
(xii) Intentionally omitted;
(xiii) Licenses and similar rights to use technology, patents
and trademarks granted by the Borrower to customers in the ordinary
course of business, and not for the purpose of securing any obligation.
(d) Leases. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal property,
except: (a) leases existing on the date of this Agreement and any extensions
or renewals thereof; (b) leases (other than Capital Leases) which do not in the
aggregate require the Borrower and its Subsidiaries on a consolidated basis to
make payments (including taxes, insurance, maintenance and similar expense
<PAGE> 41
which the Borrower or any Subsidiary is required to pay under the terms of any
lease) in any Fiscal Year of the Borrower in excess of $7,500,000.00; and (c)
Capital Leases permitted by Section 6.01(c).
(e) Investments. Make, or permit any of its Subsidiaries to make,
any loan or advance to any Person or purchase or otherwise acquire, or permit
any such Subsidiary to purchase or otherwise acquire, any capital stock,
assets, obligations or other securities of, make any capital contribution to,
or otherwise invest in, or acquire any interest in, any Person, in excess of
$750,000.00 in the aggregate at any time outstanding, except: (a) direct
obligations of the United States of America or any agency thereof with
maturities of one year or less from the date of acquisition; (b) commercial
paper of a domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc.; (c) certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank operating within the United States of America having
capital and surplus in excess of $100,000,000.00; (d) for stock, obligations or
securities received in settlement of debts (created in the ordinary course of
business) owing to the Borrower or any such Subsidiary; (e) investments set
forth on Schedule 5, and any renewal thereof (but not any increase thereof);
(f) investments permitted pursuant to Section 6.01(j) or; (g) investments by
the Borrower in any Subsidiary, including, without limitation, a newly formed
Subsidiary, investments by any Subsidiary in the Borrower, or investments by
any Subsidiary in another Subsidiary.
(f) Restricted Payments. Make any Restricted Payment.
(g) Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, assign, transfer
or otherwise dispose of, substantially all (meaning 25% in value or greater at
the time of such sale, lease, assignment, transfer or other disposition) of its
now owned or hereafter acquired material assets (including, without limitation,
shares of stock and indebtedness of such Subsidiaries, receivables and
leasehold interests); except: (i) for inventory disposed of in the ordinary
course of business; (ii) the sale or other disposition of assets no longer used
or useful in the conduct of its business; (iii) the sale, lease, assignment or
transfer of assets by any such Subsidiary to the Borrower or to another
Subsidiary and the sale, lease, assignment or transfer of assets by Borrower to
any Subsidiary; (iv) sales of equipment immediately made subject to a Capital
Lease permitted by Section 6.01(c); and (v) grants to customers, which are not
for the purpose of securing any obligation, of licenses and similar rights to
use technology, patents or trademarks in the ordinary course of business.
(h) Intentionally Omitted.
(i) Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or
the rendering of any service, with any Affiliate or permit any of its
Subsidiaries to enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or the rendering of any service, with
any Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than
would obtain in a comparable arm's length transaction with a Person not an
Affiliate, and except for arrangements set forth on Schedule 6, and except for
payment of management fees to stockholders of Borrower not to exceed in the
aggregate $150,000 per Fiscal Year, and except as permitted pursuant to the
<PAGE> 42
terms of Subsections 6.01(e), (f), (g), and (j) and except for transactions
between the Borrower and one or more of its Subsidiaries or between one or more
of the Borrower's Subsidiaries.
(j) Mergers, Acquisitions, Etc. Except as permitted pursuant to
Section 6.01(g) merge (except for mergers of a Subsidiary into the Borrower or
another Subsidiary) or consolidate with, or acquire all or substantially all of
the assets or the business of any Person (or enter into any agreement to do any
of the foregoing), or permit any of its Subsidiaries to do so, or make any
Acquisition except that, provided that no Event of Default is continuing, the
Borrower may make any Acquisition of an entity engaged in a line of business of
the same general type as conducted by the Borrower on the date of this
Agreement provided that, (1) no Acquisition may be made for a purchase price or
consideration in excess of 15% of Consolidated Total Assets at the time of such
Acquisition, and (2) not more than $7,500,000 of Advances in the aggregate
outstanding at any time shall be permitted for the purpose of financing any
Acquisition or to refinance the cost thereof.
(k) Change In Management. Have any two of the following
individuals, for any reason, cease to be active in the management of the
Borrower: Walter O. LeCroy, Jr., Lutz P. Henckels, Brian V. Cake and
Joseph J. Migliozzi, unless replaced by a successor with substantially similar
qualifications upon the consent of the Majority Lenders, such consent not to
be unreasonably withheld.
ARTICLE VII
FINANCIAL COVENANTS
So long as the Notes shall remain unpaid or any Lender shall have any
Commitment under this Agreement:
SECTION 7.01. Current Ratio. The Borrower and its Consolidated
Subsidiaries shall maintain at all times, on a consolidated basis, a Current
Ratio of not less than 2.25:1.0, to be measured at the end of each fiscal
quarter.
SECTION 7.02. Intentionally omitted.
SECTION 7.03. Intentionally omitted.
SECTION 7.04. Fixed Charge Coverage Ratio. The Borrower and its
Consolidated Subsidiaries shall maintain on a consolidated basis, a Fixed
Charge Coverage Ratio of 2.0:1.00 or greater at all times, measured at the end
of each fiscal quarter on the basis of the period of the four consecutive
fiscal quarters then ended.
SECTION 7.05. Leverage Ratio. The Borrower and its Consolidated
Subsidiaries shall maintain on a consolidated basis, a Leverage Ratio not in
excess of 1.0:1.0, to be measured at the end of each fiscal quarter.
SECTION 7.06. Capital Expenditures. The Borrower and its
Consolidated Subsidiaries, on a consolidated basis, shall not incur Capital
Expenditures in excess of $7,500,000 during any Fiscal Year.
SECTION 7.07. No Net Loss. The Borrower and its Consolidated
Subsidiaries shall not incur a net loss on a consolidated basis for any Fiscal
Year.
<PAGE> 43
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following events
(each, an "Event of Default") shall occur and be continuing:
(a) The Borrower shall: (i) fail to pay the principal of any Note
as and when due and payable; (ii) fail for five Business Days after notice to
pay interest on any Note or pay any fee or other amount due hereunder as and
when due and payable; or (iii) fail to pay interest on any Note or pay any fee
or other amount due hereunder as and when due and payable more than two times
during any period of twelve consecutive months;
(b) Any material representation or warranty made or deemed made by
the Borrower in this Agreement or in any other Loan Document or which is
contained in any certificate, document, opinion, financial or other statement
furnished at any time under or in connection with any Loan Document shall prove
to have been incorrect in any material respect on or as of the date made or
deemed made;
(c) The Borrower shall: (i) fail to perform or observe any term,
covenant or agreement contained in Articles VI or VII; or (ii) fail to perform
or observe any term, covenant or agreement on its part to be performed or
observed (other than the obligations specifically referred to elsewhere in this
Section 8.01) in any Loan Document and such failure shall continue for 30
consecutive days after notice from the Agent;
(d) The Borrower or any of its Subsidiaries shall: (i) fail to pay
any Debt in excess of $500,000 (other than the payment of Obligations described
in Section 8.01(a) above), of the Borrower or such Subsidiary, as the case may
be, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); (ii) fail
to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any Debt in
excess of $500,000 (other than the payment of Obligations described in Section
8.01(a) above), when required to be performed or observed, if the effect of
such failure to perform or observe is to accelerate, or to permit the
acceleration at such time of the maturity of such Debt, unless such failure to
perform or observe shall be permanently waived in writing by the holder of such
Debt; or (iii) have any Debt in excess of $500,000 (other than the payment of
Obligations described in Section 8.01(a) above) be declared due and payable, or
required to be prepaid (other than by a regularly scheduled required prepayment
or, in the case of Permitted Indebtedness other than Subordinated Indebtedness
any prepayment which is or becomes required by the terms thereof other than due
to a default thereunder), prior to the stated maturity thereof in whole;
(e) The Borrower or any of its Subsidiaries: (i) shall generally
not, or be unable to, or shall admit in writing its inability to, pay its debts
as such debts become due as such term is construed from time to time in
accordance with applicable bankruptcy law; or (ii) shall make an assignment for
the benefit of creditors, petition or apply to any tribunal for the appointment
of a custodian, receiver or trustee for it or a substantial part of its assets;
or (iii) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (iv) shall have had
any such petition or application filed or any such proceeding shall have been
commenced, against it, in which such an appointment is made or order for relief
<PAGE> 44
is entered, or which petition, application or proceeding remains undismissed
for a period of 60 days or more; or (v) by any act or omission shall indicate
its consent to, approval of or acquiescence in any such petition, application
or proceeding or order for relief or the appointment of a custodian, receiver
or trustee for all or any substantial part of its property; or (vi) shall
suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of 60 days or more;
(f) One or more judgments, decrees or orders for the payment of
money in excess of $500,000.00 in the aggregate shall be rendered against the
Borrower or any of its Subsidiaries and such judgments, decrees or orders shall
continue unsatisfied and in effect for a period of 60 consecutive days without
being vacated, discharged, satisfied or stayed or bonded pending appeal; or
(g) Any of the following events shall occur or exist with respect
to the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any ERISA Event shall occur with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to terminate
any Plan or the termination of any Plan; (iv) any event or circumstance exists
which would constitute grounds entitling the PBGC to institute proceedings
under Section 4042 of ERISA for the termination of, or for the appointment of a
trustee to administer, any Plan, or the institution by the PBGC of any such
proceedings; (v) complete or partial withdrawal under Section 4201 or 4204 of
ERISA from a Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, could in the
reasonable opinion of the Agent subject the Borrower to any tax, penalty, or
other liability to a Plan, Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceed or may exceed $500,000.00;
Then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of Lenders owed at least 75% (or 100% if at such time there are
two and only two Lenders) of the aggregate unpaid principal amount of the
Advances then outstanding or, if no Advances are then outstanding, Lenders
having at least 75% (or 100% if at such time there are two and only two
Lenders) of the Commitments, by notice to the Borrower, declare the obligation
of each Lender to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
Lenders owed at least 75% (or 100% if at such time there are two and only two
Lenders) of the aggregate unpaid principal amount of the Advances then
outstanding or, if no Advances are then outstanding, Lenders having at least
75% (or 100% if at such time there are two and only two Lenders) of the
Commitments, by notice to the Borrower, declare all the Advances then
outstanding, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances then
outstanding, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that in the event of an Event of Default under Section
8.01(e), (A) the obligation of each Lender to make Advances shall automatically
be terminated, and (B) the Notes, all such interest and such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE IX
THE AGENT
<PAGE> 45
SECTION 9.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the Agent
by the terms hereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the Debt resulting
from the Advances), the Agent shall not be required to exercise any discretion
to take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders, and such instructions shall be binding
upon all Lenders; provided, however, that the Agent shall not be required to
take any action which exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by the borrower pursuant to the
terms of this Agreement.
SECTION 9.02. Agent's Reliance, Etc. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable to any Lender for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the Lender that made any Advance as the holder of the Debt
resulting therefrom until the Agent receives and accepts an Assignment and
Acceptance entered into by such Lender, as assignor, and an Eligible Assignee,
as assignee, as provided in Section 10.08; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Borrower or to inspect the property (including the
books and records) of the Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 9.03. Chase and Affiliates. With respect to any Commitment
or any Advances made by Chase or any of its affiliates, Chase and each such
affiliate shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not the Agent or an
affiliate thereof; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include Chase and each such affiliate in its individual
capacity. Chase and its affiliates may accept deposits from, lend money to,
act as trustee under indentures of, and generally engage in any kind of
business with, the Borrower, any of its subsidiaries and any Person who may do
business with or own securities of the Borrower or any such subsidiary, all as
if Chase were not the Agent and without any duty to account therefor to the
Lenders.
<PAGE> 46
SECTION 9.04. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements referred to in Section 4.01(e) and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this Agreement.
SECTION 9.05. Indemnification. The Lenders agree to
indemnify the Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective aggregate principal amount of Advances then owing
to each of them (or if not such Advances are at the time outstanding or if any
such Advances are then owing to Persons which are not Lenders, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements or any kind of nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
in any way relating to or arising out of this Agreement or any action taken or
omitted by the Agent under this agreement, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 9.06. Successor Agent. The Agent may resign at any
time by giving thirty (30) days prior written notice thereof to the Lenders and
the Borrower. Upon any such resignation, the Majority Lenders shall have the
right to appoint a successor Agent. Such successor Agent shall be reasonably
acceptable to the Borrower. If no successor Agent shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within fifteen
(15) days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a financial institution having a senior ebt rating of not less than A
or its implied equivalent by Standard & Poor's Corporation. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder, except for
accrued obligations to the extent not assumed by the successor Agent. After
any retiring Agent's resignation, the provisions of this Agreement and the
other Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Borrower and the Majority Lenders, and then such
<PAGE> 47
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of
the following: (a) waive any of the conditions specified in Section 3.01 or
3.02, (b) increase the commitments of the Lenders or subject the Lenders to any
additional obligations, (c) reduce the principal of, or interest on, the
Advances or any fees or other amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Advances or any fees
or other amounts payable hereunder, (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Advances, or the
number of Lenders or the percentages of their respective Commitments, which
shall be required for the Lenders or any of them to take any action hereunder,
(f) amend this Section 10.01, (g) reduce any rate of accrual of interest or the
amount of any accrued interest, (h) increase the aggregate of all Lenders'
Commitments beyond $15,000,000, (i) change the definition of the term "Majority
Lenders" or (j) modify or delete any term or provision of this Agreement which
term or provision provides for the vote or consent of all the Lenders; and
provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this
Agreement.
SECTION 10.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including facsimile transmission)
and mailed, sent by facsimile transmission or delivered, if to the Borrower, at
its address at 700 Chestnut Ridge Road, Chestnut Ridge, New York 10977, (or at
facsimile number (914) 425-8967) Attention: Chief Financial Officer; if to any
Lender originally a party hereto, at its Domestic Lending Office specified
opposite its name on Schedule 1 hereto; if to any other Lender, at its Domestic
Lending Office specified in the Assignment and Acceptance pursuant to which it
became a Lender; and if to the Agent, at its address at One Blue Hill Plaza,
Pearl River, New York 10965, (or at facsimile number (914) 627-4025) Attention:
Mr. Dennis McSherry; or, as to the Borrower or the Agent, at such other address
as shall be designated by such party in a written notice to the other parties
and, as to each other party, at such other address as shall be designated by
such party in a written notice to the Borrower and the Agent. All such notices
and communications shall, when mailed, or sent by facsimile transmission, be
effective on the third Business Day after deposited in the mails, or on receipt
of a written confirmation of a completed facsimile transmission, respectively,
except that notices and communications to the Agent pursuant to Article II or V
shall not be effective until received by the Agent and notices to the Borrower
shall not be effective unless actually received by the Borrower in complete,
legible form, provided that a signed return receipt delivered by the U.S.
Postal Service or a signed receipt obtained by an overnight courier of national
standing shall constitute presumptive evidence of such receipt.
SECTION 10.03. No Waiver, Remedies. No failure on the part of any
Lender or the Agent (or, except as expressly provided to the contrary herein,
the Borrower) to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 10.04. Costs, Expenses and Taxes. (a) The Borrower agrees to
pay on demand all reasonable costs and expenses in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement and the other documents to be delivered hereunder (except that
the Borrower shall not pay the costs of Lenders other than Agent with respect
<PAGE> 48
to their review, negotiation or execution of this Agreement and any amendments
hereto except as set forth below), including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent with
respect thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay on
demand all reasonable costs and expenses, if any (including, without
limitation, reasonable counsel fees and expenses) of the Lenders, in connection
with the enforcement (whether through negotiations, legal proceedings or
otherwise) of this Agreement and the other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 10.04(a) and the
reasonable costs of documentation prepared in connection with the
administration, "workout", or modification of this Agreement during the
continuance of an Event of Default.
(b) If any payment of principal of any Eurocurrency Advance or any
Conversion thereof to an Advance of another Type is made by the Borrower to or
for the account of a Lender other than on the last day of the Interest Period
for such Advance, as a result of a payment pursuant to Section 2.02(b)(i),
acceleration of the maturity of the Advances pursuant to Section 8.01 or for
any other reason, the Borrower shall, upon demand by any Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Advance.
(c) The Borrower agrees to indemnify and hold harmless the Agent
and each Lender and their directors, officers, employees and agents (each, an
"Indemnified Party") from and against any and all losses, claims, damages,
liabilities and reasonable costs and expenses incurred by the Indemnified
Party, including, without limitation, reasonable attorneys fees, arising out of
claims made by any Person in any way relating to the transactions contemplated
hereby, but excluding therefrom all costs, expenses, losses, claims, damages
and liabilities arising out of or resulting from the gross negligence or
willful misconduct of an Indemnified Party.
SECTION 10.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 8.01 to authorize
the Agent to declare the Advances due and payable pursuant to the provisions of
Section 8.01, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such lender to or for the
credit or the account of the Borrower against any and all of the obligations of
the Borrower now or hereafter existing under this Agreement, whether or not
such Lender shall have made any demand under this Agreement and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application made by such Lender, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which such Lender may have.
<PAGE> 49
SECTION 10.06. Judgment. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in any currency (the "Original Currency") into another currency (the
"Other Currency") the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase the Original
Currency with the Other Currency at London, England on the first Business Day
preceding that on which final judgment is given.
(b) The obligation of the Borrower in respect of any sum due in the
Original Currency from it to any Lender or the Agent hereunder or under the
Note held by such Lender shall, notwithstanding any judgment in any Other
Currency, be discharged only to the extent that on the Business Day following
receipt by such Lender or the Agent (as the case may be ) of any sum adjudged
to be so due in such Other Currency such Lender or the Agent (as the case may
be) may in accordance with normal banking procedures purchase Dollars with such
Other Currency; if the amount of the Original Currency so purchased is less
than the sum originally due to such Lender or the Agent (as the case may be) in
the Original Currency, the Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the Agent (as
the case may be) against such loss, and if the amount of the Original Currency
so purchased exceeds the sum originally due to any Lender or the Agent (as the
case may be ) in the Original Currency, such Lender or the Agent (as the case
may be) agrees to remit to the Borrower such excess.
SECTION 10.07. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Agent and when the
Agent shall have been notified by each Lender that such Lender has executed it
and thereafter shall be binding upon and inure to the benefit of the Borrower,
the Agent and each Lender and their respective permitted successors and assigns
(but not, except as expressly provided to the contrary herein, to the benefit
of any third party beneficiary), except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.
SECTION 10.08. Assignments and Participation. (a) Upon the prior
consent of the Borrower, such consent not to be unreasonably withheld or
delayed (it being understood that, without limitation, withholding of such
consent to be deemed reasonable if such assignment is to a Non-U.S. Lender and
would subject Borrower to any United States Federal withholding tax as a result
thereof or if such assignment would, at the time thereof, cause additional
expense to Borrower under Sections 2.10(a) or 2.10(b)), each Lender may assign
to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Advances owing to it and the Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of the assigning Lender's rights
and obligations under this Agreement, (ii) the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $1,000,000, (iii) each such assignment shall be
to an Eligible Assignee, (iv) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $2,500, (v) no Assignment
and Acceptance shall result in any increased cost to Borrower and (vi) the
Agent shall, after giving effect to each Assignment and Acceptance, be owed not
less than 50% of the aggregate unpaid principal amounts of the Advances then
outstanding, or if no Advances are outstanding, then the Agent shall, after
<PAGE> 50
giving effect to each Assignment and Acceptance, have a Commitment not less
than 50% of the aggregate Commitments of all of the Lenders. Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least 10 Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its further obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in section 4.01(e) and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by its as a Lender.
(c) The Agent shall maintain at its address referred to in Section
10.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders
and the Commitment of, and principal amount of the Advances owing to, each
Lender from time to time (the "Register"). The entries in the Register shall
effect a rebuttable presumption as to the accuracy thereof, and the Borrower,
the Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Subject to the other terms of this Section 10.08, upon its
receipt of an Assignment and Acceptance executed by an assigning Lender and an
assignee representing that it is an Eligible Assignee, consented to by the
Borrower to the extent required by Section 10.08(a), together with any Note or
Notes subject to such assignment, the Agent shall, if such Assignment and
<PAGE> 51
Acceptance has been completed and is in substantially the form of Exhibit A
hereto, (i) accept such Assignment and Acceptance, and (ii) record the
information contained therein in the Register. Within five Business Days after
the Borrower has consented to the Assignment and Acceptance, the Borrower, at
its own expense, shall execute and deliver to the Agent in exchange for the
surrendered Note or Notes a new Note to the order of such Eligible Assignee in
an amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, a
new Note to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit C
hereto.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (iv) the sale of such
participation shall not result in any increased cost to Borrower.
(f) Subject to Section 10.17, any Lender may, in connection with
any assignment or participation or proposed assignment or participation
pursuant to this Section 10.08, disclose to the assignee or participant or
proposed assignee or participant, any information relating to the Borrower
furnished to such Lender by or on behalf of the Borrower; provided that, prior
to any such disclosure, the assignee or participant or proposed assignee or
participant shall agree, for the benefit of the Borrower, to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender, on the terms set forth in Section 10.17.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 10.09. Consent to Jurisdiction. (a) The Borrower hereby
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in New York City and any appellate court from any thereof in any action
or proceeding arising out of or relating to this Agreement, and the Borrower
hereby irrevocably agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or in such
Federal court. The Borrower hereby irrevocably waives, to the fullest extent
that it may effectively do so, the defense of an inconvenient forum to the
maintenance of any such action or proceeding. The Borrower irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to the Borrower at its address
specified in Section 10.02. The Borrower agrees that a final judgment in any
such action or proceeding shall be conclusive, subject to all applicable rights
of appeal, and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
<PAGE> 52
(b) Nothing in this Section 10.09 shall affect the right of the
Agent or any Lender to serve legal process in any other manner permitted by law
or affect the right of the Agent or any Lender to bring any action or
proceeding against the Borrower or its property in the courts of any other
jurisdictions including the Federal and State courts sitting in the State of
New York.
SECTION 10.10. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 10.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 10.12. Captions. The captions and headings of the various
sections and subsections of this Agreement are provided for convenience only
and shall not be construed to modify the meaning of such sections or
subsections.
SECTION 10.13. WAIVER OF JURY TRIAL. EACH LENDER, THE AGENT
AND THE BORROWER AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR
SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS
AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B)
SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH
A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE LENDERS, THE AGENT AND
THE BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. NEITHER THE LENDERS, THE AGENT NOR THE BORROWER HAS
AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS
PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
SECTION 10.14. Intentionally Omitted.
SECTION 10.15. Intentionally Omitted.
SECTION 10.16. Application of Required Prepayments. The Lenders agree
to apply mandatory principal prepayments first to any outstanding Base Rate
Advances and then to Eurocurrency Advances.
SECTION 10.17. Confidentiality. Neither the Agent nor any Lender
shall disclose any Confidential Information to any Person without the consent
of the Borrower, other than (a) to the Agent's or such Lender's Affiliates and
their officers, directors, employees, agents and advisors and to actual or
prospective Eligible Assignees and participants, and then only on a
confidential basis as provided in Section 10.08(f), (b) as required by any law,
governmental rule or regulation or judicial process and (c) as requested or
required by any state, federal or foreign authority or examiner regulating
banks or banking.
SECTION 10.18. Replacement Agreement. This Agreement replaces the
Existing Loan Agreement, and is not intended to establish a credit facility in
addition to the Existing Revolving Facility.
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
LECROY CORPORATION
By:
Name: Joseph J. Migliozzi
Title: Vice President of Finance,
Chief Financial Officer and Treasurer
THE CHASE MANHATTAN BANK, N.A., as
Agent
By:
Name: Dennis J. McSherry
Title: Vice President
Lenders
THE CHASE MANHATTAN BANK, N.A.
By:
Name: Dennis J. McSherry
Title: Vice President
CHEMICAL BANK
By:
Name:
Title:
BANK OF BOSTON CONNECTICUT
By:
Name:
Title:
<PAGE> 54
SCHEDULE I
LECROY CORPORATION
Credit Agreement dated as of December ____, 1995 among LeCroy Corporation, as
Borrower, and the Lenders named therein, as Lenders, and The Chase Manhattan
Bank, N.A., as Agent
<TABLE>
<CAPTION>
Name of Lender Domestic Lending Office Eurocurrency Lending Office
<S> <S> <S>
The Chase Manhattan Bank, N.A. One Blue Hill Plaza One Blue Hill Plaza
Pearl River, New York 10965 Pearl River, New York 10965
Phone: (914) 627-4000 Phone: (914) 627-4000
Fax: (914) 627-4025 Fax: (914) 627-4025
Attention: Anne McNamara Attention: Anne McNamara
Chemical Bank 4 New York Plaza 4 New York Plaza
17th Floor 17th Floor
New York, New York 10004 New York, New York 10004
Phone:(212) 623-7122 Phone:(212) 623-7122
Fax:(212) 623-0837 Fax: (212) 623-0837
Bank of Boston Connecticut 100 Rustcraft Road 100 Rustcraft Road
Hartford, Connecticut Dedham, Massachusetts 02026 Dedham, Massachustetts 02026
ABA: 011100805 Phone:(617) 467-2275 Phone:(617)467-2087
Zero Balance Acct #551-74538 Fax: (617) 467-2276 Fax: (617) 467-2094
Attn: Jeff Seabron Attn: Jeff Seabron Attn: Cheryl Troy
Ref: LeCroy Corporation
</TABLE>
<PAGE> 55
EXHIBIT A
ASSIGNMENT AND ACCEPTANCE
Dated ______________, 19__
Reference is made to the Multicurrency Credit Agreement dated as of
_____________, 19__ (the "Credit Agreement") among _________________,
a _____________ corporation (the "Borrower"), the Lenders (as defined in the
Credit Agreement) and _________________, as Agent for the Lenders (the
"Agent"). Terms defined in the Credit Agreement are used herein with the same
meaning.
________________________ (the "Assignor") and ___________________ (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, the interest specified on
Schedule 1 hereto in and to all of the Assignor's rights and obligations under
the Credit Agreement as of the date hereof which represents the percentage
interest specified on Schedule 1 of all outstanding rights and obligations
under the Credit Agreement, including, without limitation, such interest in the
Assignor's Commitment, the Advances owing to the Assignor, and the Note held by
the Assignor. After giving effect to such sale and assignment, the Assignee's
Commitment and the amount of Advances owing to the Assignee will be as set
forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim; (ii) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant
thereto; and (iv) attaches the Note referred to in paragraph 1 above and
requests that the Agent exchange such Note for a new Note payable to the order
of the Assignee in an amount equal to the Commitment assumed by the Assignee
pursuant hereto or new Notes payable to the order of the Assignee in an amount
equal to the Commitment assumed by the Assignee pursuant hereto and the
Assignor in an amount equal to the Commitment retained by the Assignor under
the Credit Agreement, respectively, as specified on Schedule 1 hereto.
3. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered to the Agent for acceptance by
the Agent. The effective date of this Assignment and Acceptance shall be the
date of acceptance thereof by the Agent, unless otherwise specified on Schedule
1 hereto (the "Effective Date").
4. Upon such acceptance by the Agent, as of the Effective Date, (i) the
Assignee shall, in addition to the rights and obligations under the Credit
Agreement held by it immediately prior to the Effective Date, have the rights
and obligations under the Credit Agreement that have been assigned to it
<PAGE> 56
pursuant to this Assignment and Acceptance and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its right and be
released from its obligations under the Credit Agreement.
5. Upon such acceptance by the Agent, from and after the Effective Date,
the Agent shall make all payments under the Credit Agreement and the Notes in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto) to
the Assignee. The Assignor and Assignee shall make all appropriate adjustments
in payments under the Credit Agreement and the Notes for periods prior to the
Effective Date directly between themselves.
6. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.
Schedule 1
to
Assignment and Acceptance
Dated _____________, 19__
Section 1.
Percentage Interest:
______________%
Section 2.
Assignee's Commitment:
$______________
Aggregate Outstanding Principal Amount Advances owing to
the Assignee:
$______________
A Note payable to the order of the Assignee
Dated:
Principal amount:
____________, 19__
$______________
A Note payable to the order of the Assignor
Dated:
Principal amount:
____________, 19__
$______________
<PAGE> 57
Section 3.
Effective Date*:
____________, 19__
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
Accepted this _____ day
of ________________, 19___
[NAME OF AGENT]
By:
Title:
AGREED AND CONSENTED TO:
LECROY CORPORATION
By:
Title:
<PAGE> 59
SCHEDULE 8
Payment Offices for Alternative Currencies
Currency
Corresponding Bank
Account Number
Swiss Franc
Union Bank of Switzerland
Zurich, Switzerland
752-8505-R
French Franc
Caisse Nationale Credit Agricole
Paris, France
0995-3045-2000-00
Deutsche Mark
Chase Bank AG Frankfurt
Frankfurt, Germany
623-12-00178
Italian Lira
Chase Bank Milan
Milan, Italy
601-003-5654
British Pound
Chase Bank London
London, England
1200-4677
Japanese Yen
Chase Bank Tokyo
Tokyo, Japan
019-5007-521
SCHEDULE 9
Commitments
Lenders Commitment
THE CHASE MANHATTAN BANK, N.A. $7,500,000
CHEMICAL BANK $3,750,000
BANK OF BOSTON CONNECTICUT $3,750,000
TOTAL $15,000,000
* This date should be no earlier than the date of acceptance by the Agent.
<PAGE> 1
EXHIBIT 21
LeCROY CORPORATION
Subsidiaries of the Company
The following are the subsidiary companies of the Company as of August 7, 1996,
all of which are 100% owned:
Name Jurisdiction of Incorporation
LeCroy, S.A. Switzerland
LeCroy, Ltd. England
LeCroy, G.m.b.H. Germany
LeCroy, S.A.R.L. France
LeCroy, S.R.L. Italy
LeCroy Foreign Sales Corporation U.S. Virgin Islands
LeCroy Japan Corporation, K.K. Japan
LeCroy, Pty. Australia
LeCroy Corporation Hong Kong
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-3144) pertaining to the Amended and Restated 1993 Stock
Incentive Plan, the 1995 Non Employee Director Stock Option Plan and the 1995
Employee Stock Purchase Plan of LeCroy Corporation of our report dated July 22,
1996, with respect to the consolidated financial statements and schedule of
LeCroy Corporation included in the Annual Report (Form 10-K) for the year
ended June 30, 1996.
ERNST & YOUNG LLP
Hackensack, New Jersey
September 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-K for the fiscal year ended June 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 10315
<SECURITIES> 0
<RECEIVABLES> 20625
<ALLOWANCES> 38
<INVENTORY> 20104
<CURRENT-ASSETS> 52322
<PP&E> 31150
<DEPRECIATION> 22234
<TOTAL-ASSETS> 62400
<CURRENT-LIABILITIES> 20281
<BONDS> 4647
0
0
<COMMON> 59
<OTHER-SE> 37413
<TOTAL-LIABILITY-AND-EQUITY> 62400
<SALES> 101491
<TOTAL-REVENUES> 101491
<CGS> 45545
<TOTAL-COSTS> 45545
<OTHER-EXPENSES> 12639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 672
<INCOME-PRETAX> 8550
<INCOME-TAX> 2992
<INCOME-CONTINUING> 5558
<DISCONTINUED> 0
<EXTRAORDINARY> 1300
<CHANGES> 0
<NET-INCOME> 4258
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.70
</TABLE>
