FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
x Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended DECEMBER 31, 1993
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period ended from _____ to _____
Commission File Number 0-10180
COMPUTER ASSOCIATES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2857434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE COMPUTER ASSOCIATES PLAZA
ISLANDIA, NEW YORK 11788-7000
(Address of principal executive offices) (Zip Code)
(516) 342-5224
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date:
TITLE OF CLASS SHARES OUTSTANDING
Common Stock at January 31, 1994
par value $.10 per share 164,332,941
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
PART I. Financial Information: Page No.
Item 1. Consolidated Condensed Balance Sheets -
December 31, 1993 and March 31, 1993 . . . . . . . . . 1
Consolidated Statements of Income -
Three Months Ended December 31, 1993 and 1992. . . . . 2
Nine Months Ended December 31, 1993 and 1992 . . . . . 3
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended December 31, 1993 and 1992 . . . . . 4
Notes to Consolidated Condensed Financial Statements. . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 6
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 9
Item 1:
Part I. FINANCIAL INFORMATION
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
December 31, March 31,
1993 1993
------------- --------------
(Unaudited)
ASSETS:
Cash and cash equivalents . . . . . $ 66,086 $ 79,483
Marketable securities . . . . . . . 251,154 149,017
Trade and installment accounts
receivable - net . . . . . . . . . 527,107 596,608
Inventories and other current
assets . . . . . . . . . . . . . . 41,573 43,812
TOTAL CURRENT ASSETS 885,920 868,920
Installment accounts receivable,
due after one year - net . . . . 533,017 410,009
Property and equipment - net . . . . 306,653 310,592
Purchased software products - net. . 291,627 404,106
Excess of cost over net assets
acquired - net . . . . . . . . . . 232,791 243,085
Investments and other noncurrent
assets . . . . . . . . . . . . . 111,362 112,107
TOTAL ASSETS $2,361,370 $2,348,819
LIABILITIES AND STOCKHOLDERS' EQUITY:
Loans payable - banks . . . . . . . $ 50,000 $ 25,000
Other current liabilities . . . . . 494,550 503,226
Long-term debt and other . . . . . 82,104 166,714
Deferred income taxes . . . . . . . 287,544 256,577
Deferred maintenance revenue . . . 310,775 342,772
Stockholders' equity . . . . . . . . 1,136,397 1,054,530
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,361,370 $2,348,819
See Notes to Consolidated Condensed Financial Statements.
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share amounts)
For the Three Months
Ended December 31,
--------------------
1993 1992
---- ----
Product revenue and other related income . . . $ 399,326 $ 326,984
Maintenance fees . . . . . . . . . . . . . . . 175,054 174,541
TOTAL REVENUE 574,380 501,525
Costs and expenses:
Selling, marketing and administrative . . . 257,964 246,415
Product development and enhancements . . . . 52,132 51,738
Commissions and royalties . . . . . . . . . 27,295 27,035
Depreciation and amortization . . . . . . . 42,884 52,098
Interest (income) expense - net . . . . . . ( 51) 2,710
TOTAL COSTS AND EXPENSES 380,224 379,996
Income before income taxes . . . . . . . . . . 194,156 121,529
Provision for income taxes . . . . . . . . . . 69,968 41,320
NET INCOME $ 124,188 $ 80,209
Net income per share of Common Stock . . . . . $ .72 $ .48
Weighted average number of shares used in
computation . . . . . . . . . . . . . . . . . 171,936 167,661
See Notes to Consolidated Condensed Financial Statements.
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share amounts)
For the Nine Months
Ended December 31,
-------------------
1993 1992
---- ----
Product revenue and other related income . . . $ 994,235 $ 798,132
Maintenance fees . . . . . . . . . . . . . . . 520,495 502,815
TOTAL REVENUE 1,514,730 1,300,947
Costs and expenses:
Selling, marketing and administrative . . . . 745,293 698,064
Product development and enhancements . . . . 153,706 148,541
Commissions and royalties . . . . . . . . . . 70,505 68,922
Depreciation and amortization . . . . . . . . 164,080 153,186
Interest expense - net . . . . . . . . . . . 2,166 3,877
TOTAL COSTS AND EXPENSES 1,135,750 1,072,590
Income before income taxes . . . . . . . . . . 378,980 228,357
Provision for income taxes . . . . . . . . . . 136,505 81,915
NET INCOME $ 242,475 $ 146,442
Net income per share of Common Stock . . . . . $ 1.41 $ .86
Weighted average number of shares used in
computation . . . . . . . . . . . . . . . . . 171,907 171,191
See Notes to Consolidated Condensed Financial Statements.
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Nine Months
Ended December 31,
--------------------
1993 1992
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $ 242,475 $146,442
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . 164,080 153,186
Provision for deferred income taxes . . . . . . 25,464 33,706
Increase in noncurrent installment accounts
receivable - net . . . . . . . . . . . . . . . (152,657) ( 92,393)
(Decrease) increase in deferred maintenance
revenue . . . . . . . . . . . . . . . . . . . . ( 26,486) 4,405
Foreign currency transaction loss
before taxes . . . . . . . . . . . . . . . . . 19,188 8,898
Changes in other operating assets and
liabilities, excludes effects of acquisitions . 39,811 16,885
NET CASH PROVIDED BY OPERATING ACTIVITIES 311,875 271,129
INVESTING ACTIVITIES:
Acquisitions, primarily purchased software,
marketing rights and intangibles . . . . . . . . ( 3,092) ( 61,809)
Purchase of property and equipment . . . . . . . . ( 15,148) (220,692)
Purchase of noncurrent marketable securities . . . ( 317) ( 386)
(Increase) decrease in current marketable
securities . . . . . . . . . . . . . . . . . . . (102,137) 61,890
Capitalized development costs . . . . . . . . . . ( 11,370) ( 13,378)
NET CASH USED IN INVESTING ACTIVITIES (132,064) (234,375)
FINANCING ACTIVITIES:
(Decrease) increase in long-term debt - net . . . ( 99,400) 186,362
Increase (decrease) in loans payable - banks . . . 25,000 (100,000)
Dividends Paid . . . . . . . . . . . . . . . . . . ( 11,643) ( 8,765)
Exercise of common stock options/other . . . . . . 20,162 3,231
Purchases of treasury stock . . . . . . . . . . . (121,524) (132,229)
NET CASH USED IN FINANCING ACTIVITIES (187,405) ( 51,401)
DECREASE IN CASH AND CASH EQUIVALENTS
BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 7,594) ( 14,647)
Effect of exchange rate changes on cash . . . . . . ( 5,803) ( 4,219)
DECREASE IN CASH AND CASH EQUIVALENTS ( 13,397) ( 18,866)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 79,483 74,281
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 66,086 $ 55,415
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended December 31, 1993 are not necessarily indicative of the results
that may be expected for the year ending March 31, 1994. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Computer Associates International, Inc.'s (the
"Registrant" or the "Company") Annual Report on Form 10-K for the fiscal
year ended March 31, 1993.
Net Income per Share: Net income per share of Common Stock is computed by
dividing net income by the weighted average number of common shares and any
dilutive common share equivalents outstanding. Fully diluted net income per
share is the same or not materially different from net income per share.
Statements of Cash Flows: For the nine months ended December 31, 1993,
interest paid was approximately $10 million, and income taxes paid were
approximately $93 million. For the nine months ended December 31, 1992,
interest paid was approximately $9 million and income taxes paid were
approximately $30 million. In December 1993, the Company's Board of
Directors declared its semi-annual cash dividend of $.07 per share. The
dividend was paid on January 6, 1994 to stockholders of record on December
20, 1993.
Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue:
The Company's total revenue in the third quarter ended December 31, 1993
increased by 15%, or $73 million, over the comparable prior year's quarter.
The increase was attributable to product revenue growth in the mainframe and
midrange platforms of $82 million, offset by a decrease of $9 million in
micro and other product related revenue. Maintenance revenues rose by $1
million primarily due to the additional prior year product sales. This
increase was net of normal attrition, consolidation of client sites and
foreign currency translation. Price changes did not have a material impact
during either quarter.
Costs and Expenses:
Selling, marketing and administrative expenses increased from $246 million
in the third fiscal quarter of 1993 to $258 million for the third fiscal
quarter of 1994. The growth in selling, marketing and administrative
expenses between the two comparable quarters is largely a function of
continued investments in enhanced service and support personnel as well as
incremental value-added reseller training costs; only partially offset by
the strengthening of the US dollar against foreign currencies. Development
expenditures in the December 1993 quarter on a year-over-year basis were
virtually unchanged. Development expenditures capitalized during the fiscal
1994 quarter totaled $4 million, and a like amount of previously capitalized
software development expenditures was amortized. Commissions and royalties
as a percentage of revenue decreased in the December 1993 quarter over the
prior year's comparable period, primarily as a result of the shift from
direct marketing specialists to client service representatives. The
latter's compensation is more heavily weighted to a fixed salary than the
marketing specialists. Depreciation and amortization expense in the
December 1993 quarter decreased by $9 million over the December 1992 quarter
due to the expiration of the five year amortization period related to the
Company's ADR acquisition, and the reassessment of the current carrying
value of certain purchased software products, both of which occurred in
September 1993. In the quarter ended December 1993, net interest expense
decreased by $3 million as a result of decreases in long-term debt and
increases in investments in marketable securities.
Item 2: (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating Margins:
Pre-tax income for the quarter ended December 1993 exceeded the prior year's
comparable quarter by $73 million due to the higher revenue achievement and
with virtually unchanged total costs and expenses. Similarly, pre-tax and
after-tax margins as a percentage of total revenue increased to 34% and 22%,
respectively, from 24% and 16%. The consolidated effective tax rate
increased from 34% in the December 1992 quarter to 36% in the current
quarter due to the recognition of foreign tax credits on a year-to-date
basis during the December 1992 quarter.
Operations:
The Company has traditionally reported lower profit margins for the first
two quarters of each fiscal year than those experienced in the third and
fourth quarters. As part of the annual budget process, management
establishes higher discretionary expense levels in relation to revenue for
the first half of the year. Historically, the Company's combined third and
fourth quarter revenues have been greater than the first half of the year,
as these two quarters coincide with the clients' calendar year budget
periods and the culmination of the Company's annual sales plan. These
historically higher second half revenues have resulted in significantly
higher profit margins since total expenses have not increased in proportion
to revenue. However, past financial performance should not be considered
to be a reliable indicator of future performance.
The Company's near term operating results may be affected by a number of
factors, including, but not limited to: uncertainties relative to global
economic conditions; industry factors; the availability and cost of new
products; the Company's ability to develop, manufacture, and license its
products profitably; the Company's ability to successfully increase its
market share in its core business while expanding its product base into
other markets; the strength of its distribution channels; and the Company's
ability to effectively manage expense growth relative to revenue growth.
Item 2: (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term marketable securities
increased by $28 million, or 10%, to $317 million during the quarter ended
December 1993. This increase was primarily attributable to cash generated
from operations of $122 million offset by purchases of approximately $53
million of treasury stock and $45 million of reductions in long-term debt
and loans payable. In connection with the net reduction of $45 million in
long-term debt and loans payable during the quarter, the Company repaid its
4-year collateralized term loan ($142 million) and replaced it with a $51
million 2-year unsecured term loan and drawings of $50 million against its
credit facility. The 2-year term loan is subject to interest primarily at
the prevailing London interbank rate plus 3/8% and is payable in quarterly
installments. The Company has a committed credit facility with a group of
banks providing for borrowings of up to $250 million. As noted above, $50
million was drawn against this facility at December 31, 1993. It is
expected that existing cash, cash equivalents, short-term marketable
securities, the availability of short-term borrowings under committed and
uncommitted credit lines as well as cash provided from operations will be
sufficient to meet anticipated cash requirements.
During the quarter ended December 31, 1993, the Company repurchased 1.4
million shares of Common Stock for its treasury in open market transactions.
The Company's Board of Directors has authorized it to repurchase an
additional 16 million shares.
The Company's capital resource requirements as of the end of December 1993
consisted of lease obligations for office space, computer equipment,
mortgage or loan obligations and amounts due as a result of product and
company acquisitions. The Company intends to meet these commitments and
other foreseeable needs from its available cash as outlined above.
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits.
Unsecured Term Loan Agreement dated
December 20, 1993.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
Dated: February 9, 1994 By: Charles B. Wang
---------------------
Charles B. Wang, Chairman
and Chief Executive Officer
Dated: February 9, 1994 By: Peter Schwartz
---------------------
Peter Schwartz
Sr. Vice President - Finance
(Chief Financial and
Accounting Officer)
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits.
Unsecured Term Loan Agreement dated
December 20, 1993.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
Dated: February 9, 1994 By: s/ Charles B. Wang
---------------------
Charles B. Wang, Chairman
and Chief Executive Officer
Dated: February 9, 1994 By: s/ Peter Schwartz
---------------------
Peter Schwartz
Sr. Vice President - Finance
(Chief Financial and
Accounting Officer)
December 20, 1993
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11788-7000
Ladies and Gentlemen:
Credit Suisse, New York Branch (the "Bank"), is pleased to confirm to
Computer Associates International, Inc. (the "Company"), by this letter
agreement (the "Agreement") that an unsecured term loan facility has been
placed at the Company's disposal for general corporate purposes under the
following terms and conditions:
1. THE LOAN
1.1 Amount and General Terms: Subject to the terms hereof, the Bank will
make loans to the Company as the Company may request from time to time until
December 31, 1993 (the "Commitment Termination Date"), up to but not
exceeding $55,000,000 in the aggregate principal amount outstanding (the
"Commitment"). The Company may borrow hereunder, from the date of its
acceptance of this Agreement until the Commitment Termination Date, the full
amount of the Commitment or any lesser sum which is $1,000,000 or a multiple
thereof, by means of Base Rate Loans, or Libor Rate Loans, or any other type
of loan as the Bank, from time to time or upon request, may offer to the
Company. During such period and thereafter until the last repayment date,
as provided for in 2.3, the Company may convert loans of one type into loans
of another type, provided that, from and after the Commitment Termination
Date, only one type of loan shall be outstanding at any time.
1.2 Note: The loans shall be evidenced by, and repayable in accordance
with, a single promissory note (the "Note") in substantially the form of
Exhibit A hereto, dated the date of the initial borrowing under this
Agreement, and payable to the Bank's order in a principal amount equal to
the Commitment as originally in effect and otherwise duly completed. All
loans made by the Bank, all payments and prepayments made on account of the
principal thereof, and all conversions of the loans shall be recorded by the
Bank on the schedule attached to the Note or any continuation thereof
(provided that any failure by the Bank to make any such endorsement shall
not affect the obligations of the Company hereunder or under the Note in
respect of such loans). The aggregate unpaid amount of loan advances as
reflected on the schedule attached to the Note shall be presumptive evidence
of the entire outstanding loan amount.
1.3 Reduction of Commitment: The Company may, at any time or from
time to time, reduce or terminate the Commitment hereunder, provided that:
(i) the Company shall give notice of each such termination or reduction to
the Bank as provided in 3.3 hereof; and (ii) each partial reduction shall be
in an amount not less than $ 10,000,000 unless repaid in full. The
Commitment, once reduced, may not be reinstated without the Bank's approval.
1.4 Interest Rate and Payment of Interest: The Company hereby
promises to pay to the Bank interest on the unpaid principal amount of each
loan made by the Bank. Interest on the principal balance of the loan, from
time to time outstanding, will be payable at the Company's
option at the following rates per annum:
(a) During such periods such a loan is a Base Rate Loan, the
Base Rate.
(b) During such periods such loan is a Libor Rate Loan, for each
interest period relating thereto, the Libor Rate for such loan for such
Interest Period plus the Applicable Libor Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to
the Bank interest on any principal of any loan made by the Bank, and on any
other amount payable by the Company under this Agreement or the Note (other
than interest), which shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing on the due
date thereof until the same is paid in full, at a rate equal to 2% above the
Base Rate as in effect from time to time. If such amount in default is
principal of a Libor Rate Loan, and the due date is a day other than the
last day of an Interest Period, the rate for such principal shall be, for
the period commencing on the due date and ending on the then current
Interest Period 2% above the interest rate for such loan for such Interest
Period, and, the rate provided for above thereafter.
Accrued interest on each loan shall be payable: (i) in the case of a
Base Rate Loan, quarterly on the Quarterly Dates; (ii) in the case of a
Libor Rate Loan, on the last day of each Interest period for such loan (and,
if such Interest period exceeds three months duration, quarterly, commencing
on the first quarterly anniversary of the first day of such Interest Period);
and (iii) upon the payment of the loan or the conversion thereof into a loan
of another type (but only on the principal so paid or converted).
1.5 Additional Interest Options: In addition to the foregoing
provisions, the Bank may from time to time offer to have loans bear interest
at rates other than such rates provided for in 1.4, but, instead, at such
rates and having such duration, terms of repayment, and other terms
as the Bank may specify in its offer (which the Company must accept within
the time specified by the Bank at the time of such offer in order to be
entitled to the same). If any offer is accepted, then, on the date
specified in such offer, the loan shall be made or converted to a type of
loan bearing interest at the rate, and subject to such other terms, as is
specified in such offer, but otherwise the loan shall remain subject to the
provisions of this Agreement.
2. BORROWINGS, CONVERSION, PAYMENT OF PRINCIPAL AND
PREPAYMENT
2.1 Borrowings: The Company shall give the Bank notice of each
borrowing to be made hereunder as provided in 3.3 hereof, specifying the
date, duration, type of loan, and amount thereof. On the date specified for
each borrowing, the Bank will make the proceeds of the loan available to the
Company at the Bank's address in immediately available funds.
2.2 Repayment of Loans: The Company hereby promises to repay the
principal of the loans outstanding at the close of business on December 20,
1993 in eight equal quarterly installments, payable on each Quarterly Date,
the first of which shall be on March 20, 1994, and the last of which shall
be on December 20, 1995, by wire transfer in immediately available funds to
the Bank's Loan Clearing Account #90499602 at Credit Suisse, New York
Branch, 12 East 49th Street, New York, New York 10017.
2.3 Prepayments and Conversions: The Company shall have the right to
prepay loans, or to convert loans of one type into loans of another type, at
any time or from time to time, provided that: (a) the Company shall give the
Bank notice of each such prepayment or conversion as provided in 3.3 hereof;
and (b) Libor Rate Loans may be prepaid or converted only on the last day of
an Interest Period for such loans, unless compensation as provided in 4.5(a)
is paid; and (c) prepayments shall be applied to the installments of the
loans in the inverse order of their maturities. Loans prepaid may not be
reborrowed.
3. PAYMENTS, COMPUTATION, NOTICES, ETC.
3.1 Payments: All payments of principal, interest, and other amounts
to be made by the Company to the Bank under this Agreement or the Note shall
be made by wire transfer as specified in 2.2, such wire transfer to be
commenced not later than 11:00 A.M. New York time on the date on which such
payment shall become due. If any payment to be made hereunder or under the
Note falls due on a Saturday, Sunday, or public holiday at the place of
payment, such payment shall be made on the next succeeding Business Day, and
such extension of time in such case shall be included in the computation of
payment of interest or commitment fee, as the case may be. The Bank shall
send the Company statements of all amounts due hereunder, which statements
shall be considered correct and conclusively binding on the Company unless
the Company notifies the Bank to the contrary within 30 days of the
Company's receipt of any statement which the Company deems to be incorrect.
Alternatively, at its sole discretion, the Bank may charge against any
deposit account all or any part of any amount due hereunder according to its
right of setoff in 3.5.
3.2 Computation: Interest based on the Base Rate shall be computed on
the basis of a year of 365 or 366 days, as the case may be and actual days
elapsed. Interest based on the Libor Rate and commitment fees shall be
computed on the basis of a year of 360 days and actual days elapsed.
3.3 Notices: Notices by the Company to the Bank of termination or
reductions of the Commitment, of borrowing, conversions or prepayments of
loans, and of the duration of Interest Periods, shall be irrevocable and
shall be effective only if received by the Bank not later than 12:00 P.M.
New York time (i) one Business Day in the case of a Base Rate Loan or (ii)
three Business Days in the case of a Libor Rate Loan, prior to the date of
the relevant termination, reduction, borrowing, conversion, prepayment, or
the first day of such Interest Period.
All notices, instructions, and other communications under this Agreement
shall be given to or made upon the respective parties hereto at their
respective addresses or to their respective telex, telecopier or telephone
numbers indicated below.
3.4 Failure to Exercise Option: In the event that the Company fails
to select the type of a loan or a duration of any Interest Period for any
Libor Rate Loans within the time period, such loans will automatically be
made as Base Rate Loans, or converted into Base Rate Loans, on the last day
of the then-current Interest Period for such loans.
3.5 Setoff: The Company agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien, or counterclaim the Bank
may otherwise have, the Bank shall be entitled, at its option, to offset
balances held by the Bank for the Company's account at any Credit Suisse
branch worldwide, in Dollars or in any other currency, against any principal
of, or interest on, any of its loans or any other amount payable by the
Company to the Bank under this Agreement or the Note which is not paid when
due (regardless of whether such balances are then due to the Company), in
which case the Bank shall promptly notify the Company thereof, provided that
the Bank's failure to give the notice shall not affect the validity thereof.
4. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES
4.1 Additional Costs: The Company shall pay to the Bank from time to
time such amounts as the Bank may determine to be necessary to compensate
the Bank for any costs incurred by the Bank which the Bank determines are
attributable to its making or maintaining any Libor Rate Loans hereunder or
its obligation to make any such Loans hereunder, or any reduction in any
amount receivable by the Bank under this Agreement or the Note in respect of
any such Loans or such obligation (such increases in costs and reductions in
amounts receivable being herein called "Additional Costs"), resulting from
any change after the date of this Agreement in U.S. federal, state,
municipal, or foreign laws or regulations (including but not limited to
Regulation D of the Board of Governors of the Federal Reserve System), or
the adoption or making after such date of any interpretations, directives,
or requirements applying to a class of banks including the Bank under any
U.S. federal, state, municipal, or any foreign laws or regulations (whether
or not having the force of law) by any court or monetary authority charged
with the interpretation or administration thereof ("Regulatory Change"),
which: (1) changes the basis of taxation of any amounts payable to the Bank
under this Agreement or the Note in respect of any such Loans (other than
taxes imposed on the overall net income of the Bank for any of such Loans by
the jurisdiction where the principal office or such lending office is
located); or (2) imposes or modifies any reserve, special deposit,
compulsory loan, or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities, of the
Bank (including any such Loans or any deposits referred to in the definition
of Libor Interest Rate); or (3) imposes any other condition affecting this
Agreement or the Notes (or any such extensions of credit or liabilities).
The Bank will notify the Company of any event occurring after the date of
this Agreement that will entitle the Bank to compensation pursuant to this
4.1 as promptly as practicable after the Bank obtains knowledge thereof and
determines to request such compensation.
Determinations by the Bank for purposes of this 4.1 of the effect of
any Regulatory Change on the Bank's costs of making or maintaining Loans or
on amounts receivable by the Bank in respect of loans, and of the additional
amounts required to compensate the Bank in respect of loans, and of the
additional amounts required to compensate the Bank in respect of any
Additional Costs, shall be conclusive, provided that such determinations are
made by the Bank in good faith.
4.2 Capital Adequacy: In the event that the Bank determines that the
applicability of any law, rule, regulation, agreement or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the adoption
after the date hereof of any other law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change in any of the foregoing
or in the interpretation or administration of any of the foregoing by any
governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by the Bank (or
any lending office of the Bank) or the Bank's holding company with any
request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on the Bank's
capital or on the capital of the Bank's holding company, if any, as a
consequence of this Agreement or any loans or commitment to make any loans
made by the Bank pursuant hereto to a level below that which the Bank or the
Bank's holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration the Bank's
policies and the policies of the Bank's holding company with respect to
capital adequacy) by an amount deemed by the Bank to be material, then from
time to time the Company shall pay to the Bank such additional amount or
amounts as will compensate the Bank or the Bank's holding company for any
such reduction suffered. The Bank will notify the Company of any event
occurring after the date of this Agreement that will entitle the Bank to
compensation pursuant to this 4.2 as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation.
Determinations by the Bank for purposes of this 4.2 of the effect of any
increase in the amount of capital required to be maintained by the Bank and
of the amount allocable to the Bank's obligations to the Company hereunder
shall be conclusive, provided that such determinations are made by the Bank
in good faith.
4.3 Limitation on Types of Loans: Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate
for any type of loan under this Agreement except Base Rate Loans, the Bank
determines that quotations of interest rates for the relevant deposit
referred to in the definition of "Libor Rate" are not being provided in the
relevant amount for the relevant maturities for purposes of determining the
rate of interest for such loan as provided in this Agreement, or such
interest rates do not accurately reflect the Bank's costs of making or
maintaining such loan for such Interest Period, then the Bank shall give the
Company prompt notice thereof, and so long as such condition remains in
effect the Bank shall be under no obligation to make loans of such type.
4.4 Illegality: Notwithstanding any other provision in this
Agreement, if the Bank determines that any applicable law, rule, or
regulation or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Bank (or its Lending Office) with any request or
directive (whether or not having the force of law) of any authority, central
bank, or comparable agency shall make it unlawful or impossible for the Bank
(or its Lending Office) to (1) maintain the Bank's commitment, then upon the
Bank's notice to the Company the Bank's commitment shall terminate; or (2)
maintain or fund the Bank's Libor Rate Loans, then upon the Bank's notice to
the Company the outstanding principal amount of the Libor Rate Loans,
together with interest accrued thereon, and any other amounts payable to the
Bank under this Agreement shall be repaid (a) immediately upon demand by the
Bank if such change or compliance with such request, in the Bank's
judgement, requires immediate repayment; or (b) at the expiration of the
last Interest Period to expire before the effective date of any such change
or request.
4.5 Compensation: The Company shall pay to the Bank, upon the prior
request of the Bank, such amount or amounts as shall be sufficient in the
reasonable opinion of the Bank, to compensate the Bank for any loss, cost,
or expense incurred as a result of:
(a) any payment, prepayment, or conversion of a Libor Rate Loan on a
date other than the last day of an Interest Period for such loan; or
(b) any failure by the Company to borrow a Libor Rate Loan on the date
for such borrowing;
such compensation to include, without limitation, any amount equal to
the excess, if any, of (i) the Bank's cost of obtaining the funds for the
loan being paid, prepaid, converted, or not borrowed, for the period from
the date of such payment, prepayment, conversion, or failure to borrow, to
the last day of the then-current Interest Period for such loan (or, in the
case of the failure to borrow, the Interest Period for such loan which would
have commenced on the dates scheduled for such borrowing), over (ii) the
amount of interest (as reasonably determined by the Bank) that would be
realized by the Bank in reemploying the funds so paid, prepaid, converted,
or not borrowed, for such period, as the case may be.
5. CONDITIONS OF LENDING.
5.1 Initial Loan: The Bank's obligation to make the initial loan is
subject to the following conditions precedent and to the receipt of the
following documents, each of which shall be satisfactory to the Bank in form
and substance:
(a) Certified copies of the charter and by-laws of the Company.
(b) A certificate of the Company in respect of each of the officers
(i) who is authorized to sign the predecessor agreement and note dated
as of November 13, 1992 between the Company and the Bank as Agent, now
being replaced by this Agreement and Note, on the Company's behalf, and
(ii) who will, until replaced by other officers duly authorized for
this purpose, act as the Company's representative for the purposes of
signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated
hereby. The Bank may conclusively rely on such certificate until the
Bank receives notice in writing from the Company to the contrary.
(c) The Note, duly completed and executed.
(d) A signed opinion of Counsel to the Company, addressed to the Bank,
as to the matters referred to in 7.1, 7.2 and 7.5 hereof, and to the
effect that this Agreement and the Note have been duly authorized,
executed and delivered, and are legal, valid, and binding obligations
of the Company in accordance with their terms.
(e) Such other documents as the Bank may reasonably request.
5.2 Initial and Subsequent Loans: The Bank's obligation to make each
loan hereunder is subject to the conditions precedent that, after giving
effect to the making of such loan and the application of the proceeds
thereof, all representations and warranties stated in 7 hereof or made by
the Company in any certificate furnished to the Bank pursuant hereto shall
be true and unbreached on the date of the making of such loan, with the same
effect as though such representations and warranties had been made on and as
of such date, and no Event of Default defined in 8 and no event which under
8 with lapse of time would become an Event of Default, shall have occurred
and be continuing. Each notice of borrowing shall be deemed to be a
confirmation that all those conditions are met.
6 COVENANTS.
So long as the Bank's commitment shall continue hereunder, and until
the payment in full of the Note and of all other amounts payable by the
Company under this Agreement, unless the Bank shall otherwise consent in
writing:
6.1 Reporting Requirements: The Company will furnish to the Bank:
(a) As soon as possible after becoming aware of the occurrence of any
Event of Default, or that any of the representations and warranties
contained in 7 hereof have ceased to be true and correct, immediate
telephone advice (confirmed in writing within three Business Days) by
a statement of the President, a Vice President, or the Treasurer of the
Company setting forth the details thereof and the action which the
Company proposes to take with respect thereto;
(b) Within 120 days after the end of each fiscal year, consolidated
balance sheet of the Company and its Subsidiaries, (if any), as at the
close of such fiscal year, consolidated statement of income and
retained earnings, and a consolidated statement of source and
application of funds of the Company and its Subsidiaries (if any), for
such year, certified by independent public accountants of recognized
national standing;
(c) Within 60 days after the end of each quarter of each fiscal year
of the Company, copies of such financial statements as the Company may
prepare for its own use as at the end of, and for, such period,
certified by an authorized financial accounting officer of the company;
(d) As soon as available, any financial or other information
distributed to the Company's other creditors and/or to its
stockholders, if in addition to (b) and (c) above; and
(e) From time to time, such further information regarding the
financial condition of the Company and its Subsidiaries (if any), as
the Bank may reasonably request by reason of the materiality of such
information to the Bank's Commitment and the loans hereunder.
All financial statements delivered hereunder shall be prepared on the
basis of generally accepted accounting principles and practices consistently
applied.
6.2 Capital Leases: The Company will not create, incur, assume or
suffer to exist, or permit any Subsidiary to incur, create, assume or suffer
to exist, any lease of property, real or personal, the obligations under
which would be capitalized on a balance sheet of the Company in accordance
with generally accepted accounting principles if, after giving effect to
such lease, the aggregate rentals payable by the Company and the
Subsidiaries under all such leases would exceed $50,000,000 in any one
fiscal year of the Company; provided, however, that this 6.2 shall not
apply to those capital leases assumed as a result of mergers and
consolidations permitted by 6.14 hereof.
6.3 Maintenance of Consolidated Net Worth: The Company will not at
any time permit its Consolidated Net Worth to be less than $500,000,000.
6.4 Limitation on Consolidated Net Debt to Consolidated Net Worth: The
Company will not at any time permit the ratio of Consolidated Net Debt to
Consolidated Net Worth to exceed 1.5 to 1.
6.5 Negative Pledge: So long as the Note shall remain unpaid or the
Bank shall have any Commitment under this Agreement, the Company will not,
without written consent of the Bank, create, incur, assume, or suffer to
exist, any mortgage, deed of trust, pledge, lien, security interest,
hypothecation, assignment, deposit arrangement, charge, or encumbrance
(including, without limitation, any conditional sale, or other retention
agreement, or finance lease) of any nature, upon or with respect to any of
its properties, now owned or hereafter acquired, or sign or file, or permit
any Subsidiary to sign or file, under the Uniform Commercial Code of any
jurisdiction a financing statement which names the Company or any
Subsidiary as a debtor, or sign, or permit any Subsidiary to sign, any
security agreement authorizing any secured party thereunder to file such
financing statement, except:
(a) liens existing on the date of this Agreement and disclosed in the
financial statements referred to in 6.1 or the notes thereto and liens
securing obligations arising out of the extension or refinancing of the
obligations referred to above, provided that such obligations are not
increased and are not secured by any additional property;
(b) mortgages, deeds of trust, pledges, liens, security interests,
assignments, deposit arrangements, or other preferential arrangements,
charges, or encumbrances in favor of the Bank;
(c) 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;
(d) liens imposed by law, such as mechanics', materialmen's, and
carriers' 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;
(e) liens, pledges, or deposits under workers' compensation,
unemployment insurance, Social Security, or similar legislation;
(f) liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than for 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;
(g) purchase-money mortgages, liens, or security interests on any
property hereafter acquired or the assumption of any mortgage, lien, or
security interest on property existing at the time of such acquisition
(and not created in contemplation of such acquisition), or a mortgage,
lien, or security interest incurred in connection with any
conditional sale or other title retention agreement or a capital lease;
(h) judgment and other similar liens arising in connection with court
proceedings, provided the execution or other enforcement of such liens
is effectively stayed and the claims secured thereby are actively
contested in good faith by appropriate proceedings;
(i) 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 Company or any 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;
(j) mortgages, pledges, liens, or security interests securing
obligations of a Subsidiary to the Company or another Subsidiary;
(k) liens incurred in connection with the issuance of bankers'
acceptances and letters of credit; and
(l) liens not otherwise permitted by this covenant, securing Debt in
the aggregate (at the time such liens are created) not in excess of
$10,000,000.
6.6 Contingent Liabilities: The Company will not (and will not permit
any Subsidiary) to be, or become, liable directly or indirectly (whether by
way of guaranty, contingent agreement to purchase, income or working capital
maintenance agreement, or otherwise) with respect to any obligation of any
person, firm or corporation, except (i) for indorsements of negotiable
instruments for deposit or collection, and other similar transactions, in
the ordinary course of business, (ii) guaranties and other contingent
liabilities which do not exceed $50,000,000 in the aggregate and which are
disclosed in the financial statements referred to in 6.1, (iii) treasury
stock transactions, and (iv) guaranties and other contingent liabilities in
connection with the Islandia Project including those in favor of the Suffolk
County Industrial Development Agency, the Suffolk County Sewer Agency and the
Prudential Insurance Company of America and its assigns.
6.7 Transactions with Affiliates: The Company will not (and will not
permit any Subsidiary to), enter into any contract or agreement, or any
sale, purchase, lease, sublease or assignment of any property of any
character with any Subsidiary of the Company except in the ordinary course
of business and pursuant to the reasonable requirements of business as
presently conducted, and upon fair and reasonable terms not less favorable
to the Company (or such Subsidiary) than which obtain in a comparable
arms-length transaction with a person not an affiliate.
6.8 Maintenance of Properties: The Company will maintain and keep its
properties in good repair, working order, and condition.
6.9 Insurance: The Company will (and will cause each Subsidiary to)
maintain insurance in such amounts, and against such risks, as is usually
carried by owners of similar businesses and properties in the same general
areas in which the Company (or such Subsidiary) operates, and as shall be
satisfactory to the Bank. The Company will promptly provide detailed
notification to the Bank of any material change in such insurance coverage.
6.10 Taxes, etc.: The Company will (and will cause each Subsidiary to)
pay, or cause to be paid when due, all taxes, assessments, and charges or
levies imposed on it or on any of its property, or which it is required to
withhold and pay over, except where contested in good faith by appropriate
proceedings and with adequate reserves therefor having been set aside on
its books.
6.11 Maintenance of Existence; Conduct of Business; Compliance with
Applicable Laws: The Company shall (and shall cause each Subsidiary to)
preserve and maintain its corporate existence and each of the material
rights, privileges, licenses and franchises, which are necessary or
desirable in the normal conduct of its business in a regular manner. The
Company shall (and shall cause each Subsidiary to) comply with all
applicable laws, rules, regulations, and orders of any governmental or
regulatory body or authority, a breach of which would have a material
adverse effect on the consolidated financial condition or business (taken as
a whole) of the Company and its Subsidiaries, except where contested in good
faith and in the applicable judicial or administrative forum.
6.12 ERISA: As soon as possible, and within 30 days after the Company
knows or has reason to know that any circumstances exist that constitute
grounds entitling the Pension Benefit Guaranty Corporation (the "PBGC") to
institute proceedings to terminate a plan subject to ERISA, and the
regulations promulgated thereunder, with respect to the Company or any
Subsidiary, and promptly but in any event within two Business Days of
receipt of notice by the Company or any Subsidiary of notice that the PBGC
intends to terminate a plan or appoint a trustee to administer same, and
promptly but in any event within five Business Days of the receipt of notice
concerning the imposition of withdrawal liability with respect to the
Company or any Subsidiary, the Company will deliver to the Bank a
certificate of the chief financial officer of the Company setting forth all
relevant details and action which the Company proposes to take with respect
thereto.
6.13 Fundamental Changes: Mergers, Consolidations, and the Purchase
and Sale of Assets: The Company shall not wind up, liquidate, or dissolve
itself, reorganize, merge or consolidate with or into, or convey, sell,
assign, transfer, lease, or otherwise dispose of (whether in one transaction
or a series of transactions) all or substantially all of its assets,
(whether now owned or hereafter acquired) to any Person, or acquire all or
substantially all of the assets or the business of any Person, or permit any
Subsidiary to do so, except that the Company or any Subsidiary may merge
into, consolidate with, or may purchase substantially all the assets of, any
other person provided in each case that immediately after giving effect
thereto, no event shall occur and be continuing which constitutes a Default
or an Event of Default and in the case of any such merger with another person
to which the Company is a party, the Company is the surviving corporation.
7. REPRESENTATIONS.
The Company hereby represents to the Bank that:
7.1 Corporate Organization and Authority: The Company and its
Subsidiaries are duly and validly organized and existing corporations in
good standing under the laws of their respective jurisdictions of
incorporation, and each is in good standing and duly licensed or qualified
to transact business in each other jurisdiction where failure to so qualify
would materially adversely affect its financial condition.
The Company has full corporate power to execute, deliver, and perform
this Agreement and to borrow hereunder. Its execution and performance of
this Agreement and each borrowing hereunder do not, and as of the time of
each borrowing will not, violate any provision of law or of its charter or
by-laws, or result in the breach of or constitute a default under, or
require any consent under, any indenture or other agreement or instrument to
which the Company is a party, or by which the company or its property is
bound or affected. No consent or approval of any state or federal agency or
regulatory authority is required in order to permit the company to enter
into this Agreement and borrow hereunder.
7.2 Subsidiaries: Exhibit B to this Agreement correctly sets forth:
(i) the state in which the Company and its Subsidiaries listed thereon are
incorporated; and (ii) the percentage of the outstanding shares of stock of
each Subsidiary owned, of record or beneficially, as of the date hereof by
the Company. The shares of stock listed in Exhibit B as owned by the Company
have been duly issued and are fully paid and nonassessable, and are so owned
as of the date of this Agreement free and clear of any mortgage, lien,
pledge, charge, security interest, or other encumbrance.
7.3 Financial Condition: The consolidated balance sheet, the related
consolidated statement of operations and retained earnings, and changes in
financial position, of the Company and its consolidated Subsidiaries (if
any), of the last three fiscal years, and such quarterly financial
statements of the current fiscal or not-yet audited fiscal year, as
available, heretofore furnished to the Bank, are complete and correct, have
been prepared in accordance with generally accepted accounting principles,
and fairly present the financial position as at the dates thereof and for
the periods covered thereby. As of March 31, 1993, the Company did not have
any contingent obligations, liabilities for taxes, unusual forward or
long-term commitments, or unrealized or anticipated losses from any
unfavorable commitment, which are not disclosed by, or reserved against, in
said balance sheet or the notes thereto, and which are material to the
consolidated financial position of the Company and its consolidated
Subsidiaries (if any); and at the present time, except as disclosed to the
Bank in writing, there are no material unrealized or anticipated losses from
any unfavorable commitments of the Company or any consolidated Subsidiary
(if any). Said financial statements were prepared in accordance with
generally accepted principles and practices of accounting, consistently
maintained throughout the periods involved. Since March 31, 1993, there has
been no material adverse change in the consolidated financial condition of
the Company and its consolidated Subsidiaries (if any), from that set forth
in said balance sheet as of that date.
7.4 Full Disclosure: The financial statements referred to in 7.3 do
not, nor does this Agreement, nor any written statement furnished by the
Company to the Bank in connection with negotiations of this Agreement,
contain any untrue statement of a material fact, or omit a material fact,
necessary to make the disclosures contained therein or herein not misleading.
There is no fact which the Company has not disclosed to the Bank in writing
which materially and adversely affects, or might affect, so far as the
Company can now foresee, its condition (financially or otherwise ) or its
ability to perform under this Agreement.
7.5 Litigation: Except as disclosed to the Bank in writing, there are
no suits or proceedings pending, or to the knowledge or the Company
threatened, against or affecting the Company or its Subsidiaries (if any)
which, if adversely determined, would have a material adverse effect on the
consolidated financial condition or the business of the Company and its
Subsidiaries (if any).
7.6 Environmental Liability: The Company and each of its Subsidiaries
are in material compliance with all Environmental Laws which are material
with respect to the conduct of their business or operations and have no
Knowledge or notice of the existence of any Hazardous Materials on their
properties the result of which is to cause a material adverse condition in
respect of such property nor has any lien been filed in connection
therewith. As used herein, "Environmental Laws" means any and all applicable
federal, state and local environmental, health or safety statutes, laws,
regulations, rules, and ordinances, and "Hazardous Material" means any
substance that is or becomes defined as a "hazardous material" or "hazardous
waste" under any Environmental Law.
7.7 Use of Proceeds: No part of the proceeds of any loan hereunder
will be used for the purpose of purchasing or carrying any "margin stock"
within the meaning of Federal Reserve Regulation U.
8. DEFAULT
Each of the following is an "Event of Default":
8.1 Any representation or warranty made by the Company herein, or in
any certificate furnished to the Bank pursuant hereto, shall prove to have
been incorrect in any material respect: or
8.2 The Company shall default in the payment of (i) any principal of
any loan when due, or (ii) any interest on any loan, or any other amount
payable by the Company under this Agreement, when due and payable, whether
at stated maturity, by acceleration, by notice of prepayment, or otherwise;
or
8.3 The Company shall default in the performance of any of the
covenants set forth in 6.5 or 6.6 hereof, or shall default in the performance
of any other covenant or agreement contained in this Agreement for a period
of fourteen days after such default shall have become known to the Company;
or
8.4 The Company (a) shall generally not pay , or shall be unable to
pay, or shall admit in writing its inability to pay its debts as such debts
become due; or (b) shall make an assignment for the benefit of creditors, or
petition or apply to any tribunal for the appointment of a custodian,
receiver, or trustee for it or for a substantial part of its assets; or (c)
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 (d)
shall have had any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or an
adjudication or appointment is made, and which remains undismissed for a
period of 60 days or more; or (e) shall take any corporate action indicating
its consent to, approval of, or acquiescence in any such petition,
application, proceeding, or order for relief or the appointment of a
custodian, receiver, or trustee for all or any substantial part of its
properties; or (f) shall suffer any such custodianship, receivership, or
trusteeship to continue undischarged for a period of 60 days or more; or
8.5 The Company shall (a) fail to pay any indebtedness for borrowed
money (other than the Note) of the Company, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such indebtedness, or (b) fail to perform or observe in any
material respect any term, covenant or condition on its part to be performed
or observed under any agreement or instrument relating to any such
indebtedness when required to be performed or observed, and such failure
shall not be waived and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
failure to perform or observe is to accelerate, or permit the acceleration
of, with the giving of notice required, the maturity of such indebtedness
shall be declared to be due and payable or be required to be prepaid (other
than by a regularly scheduled prepayment), prior to the stated maturity
thereof; or
8.6 The Company shall suffer final judgment for payment of money
aggregating in excess of $5,000,000 and shall not discharge the same within
a period of 30 days unless, pending further proceedings, execution has not
been commenced or, if commenced, has been effectively stayed; or
8.7 There shall have occurred a Change in Control.
If an Event of Default occurs and is continuing, the Bank may, by notice to
the Company, (i) terminate its Commitment, and/or (ii) declare the principal
of, and interest accrued on, the Note and all other obligations of the
Company to be due and payable; and in any event with respect to the Company
described in 8.4 above, the note shall automatically become due and
payable, both as to principal and interest, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by the Company, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
9. MISCELLANEOUS
9.1 This Agreement is governed by New York State law, and may not
be amended except in writing signed by the Company and the Bank.
9.2 TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY OR THE ACTIONS OF THE BANK IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.
9.3 The Company agrees to pay all reasonable costs and expenses in
connection with the matters herein provided for, including the reasonable
fees and disbursements of special counsel to the Bank, and if default is
made in the payment of the Note the Company will pay the costs of collection
(including reasonable counsel fees).
9.4 This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns, except that
the Company may not assign its rights or obligations hereunder or under the
Note without the Bank's prior consent.
9.5 The Bank may assign and pledge all or any portion of the Loans
owing to us to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of
the Federal Reserve Bank, provided that any payment in respect of such
assigned Loans made by the Company to the assigning and/or pledging Bank in
accordance with the terms of this Agreement shall satisfy the Company's
obligations hereunder in respect of such assigned Loan to the extent of such
payment. No such assignment shall release the assigning Bank from its
obligations hereunder.
9.6 As used herein:
"Applicable Libor Margin" shall mean three eighths of one percent
(3/8%).
"Base Rate" means the higher of (1) the base commercial lending rate
announced from time to time by the Bank, or (2) the rate quoted by the Bank,
at approximately 11:00 a.m., New York City time, to dealers in the New York
Federal Funds Market for the overnight offering of dollars by the Bank, for
deposit, plus one-quarter of one percent (1/4%).
"Base Rate Loan" shall mean a loan which bears interest at a rate based
upon the Base Rate.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day when banks are authorized by law to close in New York, New York and, if
the applicable Business Day relates to any Libor Rate Loans, any day on
which dealings in Dollar deposits are carried on in the London interbank
market.
"Change in Control" shall mean (i) the acquisition by any person, or
two or more persons acting in concert, without the approval of the board of
directors of the Company, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
and Exchange Act of 1934, as amended) of 35% or more of the outstanding
shares of voting stock of the Company, or (ii) during any period of
twenty-five consecutive months, commencing on or after the date hereof,
individuals who at the beginning of such twenty-five month period were
directors of the Company (together with any replacement or additional
directors whose election was recommended by incumbent management of the
Company or were elected by a majority of directors then in office) cease to
constitute a majority of the board of directors of the Company.
"Company" shall mean the company to which this letter agreement is
addressed and which is entitled to borrow under the terms and conditions of
this Agreement.
"Consolidated Assets" and "Consolidated Liabilities" shall mean the
respective amounts thereof determined on a consolidated basis for the
Company and its Subsidiaries in accordance with GAAP.
"Consolidated Net Debt" shall mean Consolidated Liabilities, plus
Contingent Obligations, minus (i) deferred income taxes and (ii) deferred
maintenance revenue, as reflected on the financial statements furnished to
the Bank pursuant to 6.1 of this Agreement.
"Consolidated Net Worth" shall mean at any date of determination
thereof, all amounts that would, in conformity with generally accepted
accounting principles, be included as shareholders' equity on a consolidated
balance sheet of the Company and its Subsidiaries as of such date.
"Contingent Obligation" shall mean, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person: (a)
with respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements thereto will be complied with, or that the holders of
such liability will be protected (in whole or in part) against loss with
respect thereto; (b) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; or (c) under Interest Rate Agreements.
Contingent Obligations shall include, without limitation, (i) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in
the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of another, (ii) the
obligation to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, and (iii)
any liability of such Person for the obligations of another through any
agreement to purchase, repurchase or otherwise acquire such obligation or
any property constituting security therefor, to provide funds for the
payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guarantied or otherwise supported or, if a fixed and
determined amount, the maximum amount so guarantied less any amount of the
obligation already included in Consolidated Liabilities.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D issued by the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Total Indebtedness" means: (a) indebtedness for borrowed money, or
for the deferred purchase price of property or services, for which the
Company or any Subsidiary shall be liable as primary obligor or under any
guaranty; (b) non-current accounts payable; and (c) capitalized
lease obligations.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in interest rates.
"Interest Period" shall mean:
(a) With respect to any Libor Rate Loan, each period commencing on the
date such loan is made or converted from a loan of another type, or the
last day of the next preceding Interest Period with respect to such
loan, and ending on the same day in the first, second, third, and sixth
calendar month thereafter, as the Company may select as provided in 3.3
hereof. Absent such notification, the relevant Interest Period shall
end on the date which is three months thereafter.
(b) With respect to any other type of loan offered by the Bank
pursuant to 1.5, such period as defined in the Bank's offer.
Notwithstanding the foregoing: (i) no Interest Period may extend
beyond December 20, 1995: (ii) each Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (or in the case of an Interest Period for a Libor Rate Loan, if
such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) notwithstanding clause
(i) above, no Interest Period shall have a duration of less than one month
(in the case of Libor Rate Loans) or as stated in the Bank's offer.
"Libor Rate Loan" shall mean a loan the interest on which is
determined on the basis of rates in the London Interbank Market as referred
to in the definition of "Libor Rate" in this Section.
"Libor Rate" shall mean, with respect to any Libor Rate Loan for any
Interest Period therefor, the rate per annum equal to (a)(i) the average
(rounded to the nearest 1/16 of 1%) of the offered rates which appear on the
Telerate Page 3750, British Bankers Association Interest Settlement Rates
(or such other system for the purpose of displaying rates of leading
reference banks in the London interbank market, as designated by the Bank)
as of 11:00 a.m. London time for deposits in Dollars on the date two
Business Days prior to the first day of such Interest Period, or other
period, or (ii) if fewer than two such offered rates appear which are
relevant to such Interest Period or other period, the average (rounded to
the nearest 1/16 of 1%) of the rates at which the Bank at approximately
11:00 a.m. London time on the date two Business Days preceding such Interest
Period or other period which are offered by prime banks in the London
interbank market for deposits in Dollars for a period comparable to such
Interest Period or other period and in an amount approximately equal to the
principal amount of the Loan scheduled to be outstanding during such
Interest Period or other period, divided by (b) one minus the Libor
Reserve Percentage in effect at the commencement of such Interest Period.
"Libor Reserve Percentage" shall mean, for the Interest Period for any
Libor Rate Loan, the reserve percentage applicable during such Interest
Period (or if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such Interest Period
during which any such percentage shall be so applicable) under regulations
issued from time 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) applicable to the Bank with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Loan" shall mean a loan made in accordance with 1.1 of this Agreement.
"Note" shall mean the promissory note provided for by 1.2 hereof.
"Person" shall mean an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Quarterly Dates" shall mean the 20th day of each March, June,
September, and December.
"Subsidiary" shall mean (to the extent listed on Exhibit B hereto) any
corporation, association, joint stock company, business trust or other
similar organization of which more than 50% of the ordinary voting power for
the election of the members of the board of directors or other governing
body of such entity is held or controlled by the Company or a Subsidiary of
the Company; or any other such organization the management of which is
directly or indirectly controlled by the Company or a Subsidiary of the
Company through the exercise of voting power or otherwise; or any joint
venture, whether incorporated or not, in which the Company has a 50%
ownership interest and in each case whose land, buildings, machinery and
equipment and leasehold interests and improvements would be reflected on a
consolidated balance sheet of the Company and its consolidated Subsidiaries
prepared in accordance with generally accepted accounting principles.
Except as otherwise expressly stated herein, all computations required
hereunder shall be made by application of generally accepted accounting
principles and practices applied on a basis consistent with that used in the
preparation of the audited financial statements of the Company referred to
herein.
If the foregoing meets with the Company's approval, please sign and
return to the Bank the enclosed copy of this letter agreement to signify the
Company's agreement with the terms and conditions stipulated therein. The
Bank's offer to extend this facility shall be valid for thirty
days and is contingent upon the return of this signed letter agreement.
Very Truly Yours,
C R E D I T S U I S S E
By Scott E. Zoellner By Michael C. Mast
Title: Associate Title: Member of
Senior Management
Credit Suisse
New York Branch
Tower 49
12 East 49th Street
New York, New York 10017
Attention: Scott E. Zoellner
Telephone No.: (212) 238-5406
Telecopier No.: (212) 238-5439
ACCEPTED:
Computer Associates International, Inc.
By Ira Zar Computer Associates International, Inc.
Title: Vice President One Computer Associates Plaza
- Finance Islandia, New York 11788-7000
Attention: Ira Zar
Telephone No.: (516) 342-5224
Telecopier No.: (516) 342-4854
Exhibit A
PROMISSORY NOTE
December 20,1993
New York, New York
FOR VALUE RECEIVED, Computer Associates International, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of Credit
Suisse, New York Branch (the "Bank"), at the office of the Bank at 12 East
49th Street, New York, New York 10017 the principal sum of Fifty five
Million Dollars, or such lesser amount as shall equal the aggregate unpaid
principal amount of the loans made by the Bank to the Company under the
letter credit agreement dated as of December 20, 1993 between the Company
and the Bank (the "Agreement"), in lawful money of the United States of
America and in immediately available funds, on the dates and in the
principal amounts provided in the Agreement, and to pay interest on the
unpaid principal amount of each such loan, at such office, in like money and
funds, for the period commencing on the date of such loan until such loan
shall be paid in full, at the rates per annum and on the dates provided in
the Agreement.
The Bank is hereby authorized by the Company to endorse on the schedule
attached to this Note (or any continuation thereof) the amount and type of,
and the duration of each Interest Period (if applicable) for, each loan made
by the Bank to the Company under the Agreement, the date such loan is made
or converted from a loan of another type, and the amount of each payment of
prepayment of principal of such loan received by the Bank, provided that any
failure by the Bank to make any such endorsement shall not affect the
obligations of the Company hereunder or under the Agreement in respect of
such loans. The aggregate unpaid amount of loan advances as reflected on
the schedule attached to this note shall be presumptive evidence of the
entire outstanding loan amount.
This Note is the Note referred to in 1.2 of the Agreement and evidences
loans made by the Bank thereunder. Capitalized terms used in this Note have
the respective meanings assigned to them in the Agreement.
Upon the occurrence of an Event of Default, the principal hereof and
accrued interest hereon shall become, or may be declared to be, forthwith
due and payable in the manner, upon the conditions, and with the effect
provided in the Agreement.
The Company may at its option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Agreement.
This Note shall be governed by and construed in accordance with the
laws of the State of New York.
By Ira Zar
Title: V.P. - Finance
Exhibit B
SUBSIDIARIES
To be provided by Company
Exhibit C
ENVIRONMENTAL LIABILITIES
To be provided by Company
Exhibit D
EXISTING LIENS
To be provided by Company
